malsters are going to get what they deserve

[craig]

Over the last year or maybe even before that, malsters have shown that they prefer to operate much like the railways. We make the contracts, we have no obligations, your rules are not our rules. The crap they pulled this year has left a sour taste in the mouths of a lot of farmers. The feeling is why should we ( producers)play your game when you make all the rules. So like we have seen before more producers are going to shy away from malt barley acres because it would seem the malsters can't be trusted.Where in this is the CWB who claimed it had to be part of the process. When malsters break contracts turn around and buy barley as feed and then malt it, the board sits by idly doing nothing. It would seem there are double standards on grade, moisture and quality based on what price the grain was contracted at. Instead of this industry moving in the right direction, it seems it is going the other way. I quit growing malt quite a few years ago, and see no reason to return. It would seem the malt industry although it claims different is prepared to go down with he ship. Don't expect farmers to be throwing you any life rafts.

[Fransisco]

From this past weeks Agriweek...

CASH PLUS: HOW NOT TO TRADE IN BARLEY

The domestic malting barley market in the west has been in complete chaos since the Canadian Wheat Board decided to close the 2008-09 pools and direct all trade through its quirky Cash Plus program. There are increasingly frequent and believable reports that malt companies are cancelling Cash Plus contracts by refusing to accept barley because of real or alleged quality issues. With the pools shut down, there is no other outlet for malting barley except the feed market, where prices have recently been declining. Barley prices have dropped since many of these contracts were signed.

Older Cash Plus prices are in the $325-a-tonne range. The latest Wheat Board pool return outlook price for two-row barley for 2008-09 is equal to $252 a tonne in Saskatchewan. The Board sets minimum prices for Cash Plus contracts, now completely out of line with the Board’s own pool return outlook price predictions. The Board has unilaterally created a two-price market for malting barley, at a time when it is the only buyer and the only seller. It is not surprising if domestic malt companies are unwilling to pay the higher of two prices.

The Cash Plus scheme involves three agreements per transaction: one between the Board and the grower, one between the Board and the buyer, and a third between the buyer and the grower. The contracts were written by the Board, and in order to be acceptable at all to the malting trade had to be very favourable to the buyer.

The malting company solely determines whether a given lot of barley meets is quality specifications, which it can set and change with minimal reference to statutory grades. Delivery can be declined by the company without incurring a penalty on quality grounds even if all other contract terms have been met.

Many growers complain that Cash Plus barley previously accepted for malting is not accepted when delivered because of quality problems. Undoubtedly in many cases these are legitimate and originate with growers. However the conditions of purchase and sale, complicated by the presence of the Wheat Board in the equation as well as contract terms, make it much easier for buyers to get out of paying prices which have become uncompetitive. The Cash Plus scheme also violates the principle that the Board should be supplying barley to the domestic malt trade at prices that are competitive with export prices and with what U.S. maltsters are paying.

It is highly probable that many domestic Cash Plus prices are not competitive by this measure. The only kind of contract that works in this business is one between one buyer and one seller. No intermediary need apply.

[parsley]

One good malt barley contract, posted on a website for all farmers to run off and tuck in his briefcase,, that is sensitive to the needs of the producer-farmer, that the farmer can take with him and say bluntly that no other contract will be signed, and mean it, will bring about changes.

And besides,there is one player here that is dispensible.

The grower is crucial.
The buyer is crucial.

The Wheat Board is dispensible. Pars

[tipsy]

don't put all the blame,for all thats wrong in the malting industry on the malting companies. A overwhelming majority of producers have told the industry that we want a volunteer or no cwb involvement in this industry. Where I cast most or all of the blame is at 423 main street Winnipeg.The 8 single desk directors that continually think the cwb should,at any and all cost,be involved the malting industry,has a bigger impact then anything else.Infact the cwb's mission seems to be, its all cwb or the malt business can die!Then we can import beer I guess?

[Burbert]

Don't put the blame on the CWB either! The malties that aren't honouring the contracts that they've signed, are the SCUM in this case, since the contract isn't worth the paper its written on. Production contracts seem to all be that way too, (they give the right of first refusal, in most cases to a grain company), yet farmers continue to sign this type of excrete. A contract can be enforced by the Courts, lawsuits are in order, fellas!!!

[charliep]

Perhaps the point needs to be made the CWB is not involved in selection, grading or contract inforcement. The CWB's only role is in pricing and marginally (and I highlight marginally) on logistics for the off shore markets. They are not representatives of either malt barley growers or maltsters/exporters although I would argue they do a better job of looking after the latter interests.

I always like to look for solutions rather than simply highlight problems. I note that a lot of farmers grown malt varieties on spec (plant and hope) given the potential reward of selection so in the past, maltsters have had the volume to select from with caveat of Mother nature in some years. Implicatins is the maltsters have not had to change behavior to get supplies although some years they have had to drop selection standards.

If we move forward into a world of more contracts, what needs to happen to provide more security around grading and contract dispute resolution? Does the cash clearinghouse concept have merit? How comfortable are farmers in signing contracts that cut both ways - i.e. no act of god clause?

[charliep]

E-malt newsletter always has good "Quote of the Week". This week version.

Quote of the week

"All human wisdom is summed up in two words - wait and hope"
Alexandre Dumas Père

[charliep]

Two things I picked up on malt barley.

From sources, the CWB allows maltsters to over select contract volumes by 25 % on the assumption some will not make grade/selection standards.

When there have been selection disputes, the maltster has been the one who have made arrangements and paid for an outside arbitrator with in many cases the final report only available to maltster (they paid after all). In the dispute section of the cash plus contract, it is the malt barley growers responsibility to hire the outside grader with compensation from the maltster is the malt barley is found to meet the original specifications in the contract and therefore selectible.

[charliep]

Burbert

I find interesting to see who the CWB looks after in a dispute. From clauses 6b and 7.

PRODUCER OBLIGATIONS
b. If the Producer is in default, the CWB may cancel the Contract and any other delivery contract between the CWB and the
Producer. The Producer shall pay to the CWB the damages suffered by the CWB and the Selecting Party as a result of the
default. The CWB will collect the damages owing from the Producer as a result of the default and will forward to the
Selecting Party their pro rata share of the damages collected.

CHARLIE'S NOTE: THE CWB WILL CHASE A FARMER WHO STIFFS A MALTSTER AND POTENTIALLY TAKE AWAY PRIVELEGES FROM OTHER CWB ACTIVITIES.

SELECTING PARTY ACCEPTANCE OBLIGATION
The Selecting Party agrees to accept the Net Tonnes contracted pursuant to this Agreement within the Delivery Period specified on the Contract Form provided that the Minimum Quality Specifications have been met. The Selecting Party acknowledges and agrees that settlement must be on or before July 31, 2009. If the Selecting Party refuses, for whatever reason, to accept all of the Net Tonnes offered pursuant to this Agreement within the Delivery Period agreed upon with the Producer, provided that the grain meets the Minimum Quality Specifications or such other quality specifications as is
acceptable to the Selecting Party, the Selecting Party shall be in default and shall pay to the Producer the net price per tonne, as indicated on the Contract Form, on the total defaulted quantity.

CHARLIE'S NOTE: NO MENTION IS MADE OF THE CWB ROLE IN SECURING OR ENSURING THE FARMER CAN COLLECT DAMAGES.

10. DISPUTE RESOLUTION
If the Selecting Party rejects the Net Tonnes on account of the grain not meeting the Minimum Quality Specifications or
such other quality specifications as are acceptable to the Selecting Party, the Producer shall have the right to engage an independent third party, as agreed to between the Producer and the Selecting Party, to take a representative sample and test the grain against the Minimum Quality Specifications or such other quality specifications as are acceptable to the Selecting Party . If the third party determines that the grain meets the Minimum Quality Specifications or such other quality specifications as are acceptable to the Selecting Party, the Selecting Party shall accept the Net Tonnes or shall be in default pursuant to Section 8 above. The Producer shall pay for the costs associated with the third party testing but shallbe reimbursed by the Selecting Party should the third party determine that the grain tested meets or exceeds the Minimum Quality Specifications.

[broker]

At the risk of offending those who want to rip on the maltsters, I will offer this.
My clients who had production contracts with maltsters this year had their barley accepted for malt even though it didn't meet specs in about half the cases.
Most argue that it is because there was a shortage of good malt, and that simply is not true. Alot of these guys had the CashPlus contracts at a high price, and the malt companies could have just rejected their barley and been done with it as it didn't meet spec (and in some cases wasn't even close). But, because of the evil "production contracts", these guys are getting well over $5 a bushel at the bin instead of $2.50 for feed. Our grading was all done by 3rd party, and though the maltster paid for this, I received all of my clients' specs. The rechecks were also done by an independent 3rd party. I guess one could argue that they could fudge the results for the maltster, but I would highly doubt that.
My clients got a very good deal on their barley for the most part, as a lot of it was feed that ended up still as malt. How can you argue with that!?

[charliep]

forgot to source the cash plus contracts. also interesting to read the regular CWB contracts.

http://www.cwb.ca/public/en/forms/farmers/cp/08-09/0809cp_tc_preharvest.pdf

http://www.cwb.ca/public/en/forms/farmers/cp/08-09/0809cp_tc_postharvest.pdf

http://www.cwb.ca/public/en/forms/farmers/sb/0809sb_tc_sbarley.pdf

[broker]

I would also like to point out that I submitted a large quantity of barley that was not on production contract, some of which would have met the highest malt specs, yet it was turned down due to no market.
Just goes to show that they didn't have to accept sub-par barley from producers but did so to keep good relationships with production contract clients.

[charliep]

My experience and feedback from farmers is the same as yours broker by the way with a caveat happy people don't call me - just the ones that are mad and vocal. The system does work reasonably well with a note there is 4 MMT of selectible barley in western Canada this year and 2.6 mln tonnes of market.

[broker]

just curious...what is 4mmt of "selectable" barley? I maybe should know how this number is derived, but at this point I am not sure.
I know what there is for market, and I know the tonnes that I get selected and what is rejected, and how much of the non-selected could have been....but who tallies this for western Canada??

[charliep]

That was a number the CWB used at the District meeting in Wetaskwin. Seems like I have also heard them use it elsewhere.

Selectible barley is always a matter of definition. The highlight is this past years crop was generally good quality and a high portion suitable for selection (or at least within the quality specifications a maltster can use).