WBGA

[TOM4CWB]

Charlie,

You will have to explain the margining requirements to me:

So

If I see 500t of Canola for fall 08 to someone/grain co/processor... I must margin the sale as a grower?

And if I want a grain buyer to buy my produce... and they refuse to be a part of the Clearing House... what exactly do I do then?

I must put up security... and the buyer must put up security... double the security required that we deal with currently.

And people think the present CGC bonding requirements are too problematic... and costly!

The Clearing House will cost 4X as much... with 4X the paperwork.

They projected 16mmt to make the Clearing house work @ $1/t plus security.

Then there is all the extra work on paper work. Then all the legal fees to fix problems when they occur.

I project western Canada would be fortunate to have 4mmt secured through this system... and at least $2.50/t.

The grain co's can bond through the present system... for less than 1/10th of this cost... and we have mediators t the CGC on staff... without extra cost to either farmer or Grain Co's ... to mediate and resolve security and payment issues.

Then there is the need for a backstop and start up funding... that is needed from Government... to even start the Clearing House.

This is NOT free enterprise.

This is re-regulation that is going to give a different group o people jobs... paid by the taxpayer... and many times more cost... being paid by growers and grain buyers.

Or the most likely case...

NO security at all.

Throw the 49th open... I will deal with bonded US grain co's/warehouses... if CDN's will not provide decent services.

[charliep]

Will leave for the moment for others to step in and try move to the discussion thread on the clearinghouse. Will note the Ontario model and see what peoples comments are on it.

http://agricorp.com/en-ca/programs/gfpp.asp

[parsley]

Sometimes, in organics, if a farmer is unsure of his buyer's ability to pay, a full cash payment is required, upfront.

Different accomodation by the clearing house? fees?

Parsley

[charliep]

Cost likely about $1/tonne but needs to be determined. There also will be interest costs for maitaining margin.

Not compulsory and not necessary a replacement for bonding. There are are models for covering transactions such as Agricorp in Ontario and Economic Development Corp. for exports. If you can get paid prior to delivery, all the more to you but then the risk in on the buyer side.

[TOM4CWB]

Charlie,

The Cost of $1/t is on the basis of 16mmt out of 50mmt of grain produced in western Canada.

I would suggest 4mmt is much more likely, and a likely cost would be much more than $1/t on 16mmt. That is why I projected $2.50/t.

We have been around this bush 101 times... without some kind of legislative teeth... like Ontario or the US have... the grain buying system will be unsecured.

[padron]

I’m going to respond to some of the comments and questions regarding the clearinghouse in this thread and another but before I do that I’ll come clean on my identity. “Padron” is Russ Crawford, the WBGA’s consultant on the clearinghouse project. I’ve been working on this project since its inception, and well before that time on this concept, as well as other electronic exchange and clearinghouse projects – including AgraLink. As much as I believe in the value of these tools I’ll try to confine my comments to facts we have discovered as part of this project’s process and leave my opinion out of my responses.

[padron]

Re Clearing organics

Charlie has done an excellent job covering the upside and downside of clearing this smaller volume, but highly sensitive, commodity sector. Many other IP type products or markets fall into the same general category.

One further comment needs to address the cost of adding new contracts to an existing clearinghouse. Once it is up and running the incremental cost to add new commodities is not large but it must have core capacity to begin with or it won’t succeed. There will be many opportunities to investigate the opportunities and value of adding new commodities once the entity has been developed but initial focus has to be on higher volume crops to 1) attract investors and 2) make a profit.

In respect to settlement, the amount of margin and timing of the settlement will depend on the credit worthiness of the buyer in the eyes of the clearinghouse. They “own” the credit function. If they feel full payment in advance is required they will ask for that. This could be true for feedlots and ethanol plants too. This is part of the value a clearinghouse brings to the seller – guaranteed payment. In a clearinghouse world I’d be nervous about a buyer who refused to clear trades. Where there’s smoke there’s fire and farmers are tired of getting “burned”.

[TOM4CWB]

Dear Russ,

Thanks for the Comments!

I am simply putting forward logical ideas.

The Companies who won't use the Ag-Clearing Security... will still buy grain. AND grain growers will STILL be at risk.

We have watched as companies have come and gone... Car Dealers... Machinery Dealers... Society has deemed it proper and reasonable for these folks... when they are a certain size... to be bonded. Auctions have a security system.

To throw our western Canadian Interprovincial Export Grain System... into a Total Unregulated Security System... today worth some $15B; brings memories of Enron, Worldcom, Brex, and 101 other scams that have cost 10's of Billions.

If we deregulate now... we will re-regulate... just like US Securities have.

Please... lets do this right the first time... and not go through the loss of billions like other industries have... that failed to take logical steps to protect trusting people who work very hard for their assets!

[parsley]

Press release

Quote:



GROWING FORWARD WITH BARLEY



February 25, 2008 - Airdrie, AB:

Recently, at the Western Barley Growers Association’s (WBGA) annual convention in Calgary delegates heard how progressive growing barley forward will be in the near future.

The Keynote speaker was Mr. Tim Stonehouse, Group Malt Sale Director for Muntons Malt in the United Kingdom.

He clearly stated the need for complete price transparency, and true market signals to the malt barley producer to ensure strong contractual relationships to prosper between farmer and maltster.

Mr. Stonehouse stressed how long term contracts and strong relationships between grower and buyer were a priority for them.

Need for malt barley is growing, and the ability for the maltsters to deal one on one with the producer will be more important growing forward.

Global demand is seeing the need to increase production by 500,000 tonnes of malted barley per year, with no end to this need for growth in the foreseeable future.

Mr. Stonehouse’s presentation is available upon request from the WBGA's office.

"Hearing Mr. Stonehouse’s presentation brings it back to western Canada the need to grow forward with changes to how we as producers market our malt barley" states Jeff Nielsen, President of WBGA.

"The growth of our malting industry is in jeopardy and in dire need of change.

We have lost over four new malt houses that could have been built here in western Canada, using our high quality barley, and clean water. Yet due to the continued interference of the Canadian Wheat Board, we see our industry suffer".


Prior to this year’s convention the Canadian Wheat Board (CWB) broke off any further "negotiations" with Minister Ritz.

In its inability to work with producers, industry, provincial governments and its own Minister, the CWB has widened the distance between itself and reality.

Although a US maltster, circumventing the Canadian malting sector, has now used CashPlus, sources say that this player won’t use CashPlus again.


"Producers that were offered CashPlus contracts can’t understand why the contract is directly with the CWB and not the Maltster" comments Doug McBain, Past President of WBGA. “Without providing clear market signals or transparency, the producer is selling his malt barley into a system that is an abomination of pooling and cash, it is neither and it is both. The only function of the CWB is to arbitrarily set the price for farmers and maltsters. Then maltsters have three weeks to fill that contract directly with producers or it expires. We will be operating in a rotating 3 week dysfunctional program that has no relationship or connection to the barley market”.



WBGA looks forward to this week.

Tuesday has WBGA members in Winnipeg for the CWB vs. the Attorney General of Canada in the Appellant Court regarding the July 31/07 ruling where changes by regulation with barley were ultra vires.

WBGA also looks forward to the introduction of legislative changes to the CWB Act regarding barley, as stated by Minister Ritz on February 13.

"Growing forward with these legislative changes will open the doors for greater expansion in barley development, variety research, innovation, value added and stronger net returns to all barley producers.

It will maintain our strong livestock sector, and this new environment will allow producers to be in full control of their barley, just as we are with our canola, pulses, oats and flax. Growing (barley) forward will benefit more than just the producer - it will also build the value added side, causing growth in malting, fractionation, and perhaps ethanol production as just a few examples.

Today’s barley producer is looking to a strong profitable future, one that is good for all of Canada as well” concludes Nielsen.

[hoppsing]

Come of age? You mean the WBGA has reached the 200 (or should that be 100) member milestone? Congratulations!