Malting Barley Up $31 to $35/tonne in 2007/08 PRO

[charliep]

Get the rest of the out early. Widened wheat spreads (including durum) back to normal levels on high quality/protein wheat. Mid quality prices same as this year with upper quality/protein higher.

Malt barley. Following the philosophy "if you can't say anything nice, don't say anything at all", I will note the $31 to $35/tonne premium in the new crop PRO. Perhaps I will put on my maltster hat. Can't get out a competitive bid in 2006/07 to attract deliveries already. Your single desk agent (the CWB) has just put out a signal to the customer you are tryint to get delivery from that is worthwhile to store grain into the 2007/08 for the higher total payments. Your (both CWB and the maltster) mutual customer (the farmer) will now be negotiating how long they can put their malt barley on a storage ticket with the ultimate threat of deliver to the feed market in the current crop year.

All this in the backdrop of a world malt barley shortage in the current crop year and likely better Aussie/European crops this summer/fall.

Only in Canada.

[charliep]

FPC basis levels are also interesting. 2007/08 CWRS 13.5 basis - about $10/tonne under MGE Dec. Someone quessed this far closer than I did. CPSR basis $35/tonne under the KCBT Dec futures. CWSWS basis $20 under the CBT Dec. wheat futures. Will let you have the pleasure of comparing opening basis to the levels announce last year. See the historical pricing site on the CWB web.

[charliep]

JUST A CHALLENGE TO ANYONE FROM THE CWB TO PROVIDE THE BACKGROUND/DATA FOR THIS QUOTE. KNOW WHERE THE NUMBERS COME FROM. I FIRSTLY QUESTION WHETHER THE SPOT MARKET REFLECTS THE SPECIALTY MALT BARLEY VARIETIES THAT COORS AND ANHEUSER BUSCH CONTRACT AND THE QUALITY SPECIFICATIONS. YOU CAN NEVER COMPARE A SPOT MARKET TO ANYTHING UNLESS YOU HAVE THE FACTS. THE SECOND QUESTION IS WHERE THE 75 % FROM. CAN THE CWB VALIDATE THIS WITH A SOURCE?

David Anderson, Parliamentary Secretary to the Minister for the Canadian Wheat Board, claimed Feb. 14 in the House of Commons that western Canadian producers are receiving $1 per bushel less for malting barley than U.S. producers. The Feb. 2 issue of Barley Country, published by the Alberta Barley Commission, makes similar price comparisons.

In fact, this is not the case. About 75 per cent of the malting barley in the U.S. is contracted before seeding. This means that the vast majority of American malting barley producers are not benefiting from current higher prices for malting barley.

As well, Mr. Anderson’s price comparison relates a spot price to a pool value. This is not a valid comparison. A pool value is an average of prices achieved over an entire crop year, while a spot price is a price on a particular day. In a rising market, a spot price is by definition higher than a pooled price.

The relevant question is whether the CWB is capturing the current higher spot prices for malting barley. The answer is yes. Recent higher-priced malting barley sales will be reflected in the 2007-08 pool. In its first Pool Return Outlook for 2007-08, the CWB predicts returns to farmers of $35 per tonne higher than the current malting barley PRO for 2006-07.

A U.S. comparison: three-quarters of U.S. malting barley is contracted in the spring. The yellow line indicates the price at which most two-row malting barley was contracted in Montana.

[Riley]

Charlie....Where are you getting the new crop basis levels from? The CWB website is still showing Feb 23 data. No Feb 26 at all. Thanks.

[charliep]

Used Feb. 23 and compared to the PRO.

[TOM4CWB]

Charlie;

The real point here is the right to say no.

If the CWB is preselling the pool months, or years, before the barley is planted or harvested... they should have both the supply & sale booked back to back... a reasonable expectation... those responsible for the risk ("designated area" growers)... should have the transparent right to know what the risk incurred is.

[bgmb]

FPC basis will be about $6/tonne.

[kamichel]

Where are you getting this malting barley up?????
When I look at the 07 08 pros on the CWB web site I see drops , not increases in the pros. Fixed prices are slightly better than this years pros but the pros for new crop are down.

[charliep]

I'll eat my words - should have waited for the actual numbers. FPC 1CWRS 13.5 $236.36/tonne port ($20.36/tonne above the PRO). Actual basis $5.88/tonne - still below where the fpc basis started last year.

CPS red fpc $208.07/tonne port ($14.07/tonne above the PRO). Actual basis $17.80/tonne under. Similar to last last year with the comment the basis weakened from February 2006 on.

CWSWS fpc $217.03/tonne port ($16.03/tonne above the PRO). Basis $3.55/tonne under. Basis started about $14 over a year ago.

Malt barley (standard select 2 row). The CWB announces a decent basis ($58.62/tonne over which is close to where the previous basis levels have been when adjusted for the Saskatoon par region). What is confusing to me is they use the old PRO in the calculation ($200/tonne instead of $235/tonne forecast in the 2007/08 PRO). If basis was related to the new crop PRO, it would be $83.62 in which case I would tell you to book all this basis you could within your comfort zone on quality. I am confused.

durum 1cwad 13 fixed price $216.65/tonne or $3.35/tonne under the PRO. No comment.

Wheat - Which numbers are more relevant for decision makkng - the PRO or the FPC. I am really confused by malt barley.

[charliep]

kamichel

I am confused. The PRO on the FPC is different than the PRO in the press release. Either there has been a mistake or the CWB is playing games. If the latter, the indication is the CWB is not very confident in their malt PRO and they are playing political games with their forecasts.

[kamichel]

I see now wheat is up, I did not look at that before. Barley pro is down though. Fixed barley is up very little.