DePape/Morris Comment on Open Market

[parsley]

I will attempt to summarize some of their comments in Yorkton.

What are the Outcomes of an Open Market?

1. Increased trade with U.S.A.
2. Increased arbitrage between U.S. and Canadian markets.
3. Increased contracting with farmers.
4. Accurate and timely price signals.
5. Improved farm returns.
6. Lower cost marketing.
7. Increased investment in value-added on Prairies.

Parsley

[parsley]

What are some Producer Opportunities in an Open Market?

1. Higher selection rate.
2. Producers will be paid for what they grow.
3. Mor malt barley being shipped premium to feed.
4. Shipping spread out over year.
5. More transparency in pricing.
6. Contracting directly with enduser.
7. Long-term contracting.

Morris will source for GunnarSpeck-Interbrau...He presently has 100,00 tonne minimum request, and it could go to 1.5M tonnes.

Parsley

[parsley]

Likely Outcomes of An Open Market

1. Increased demands on grain companies to finance inventories and manage risk.
2. Increased private investment in plant breeding and varietal development.
3. More niche marketing.
4. Greater demand for risk amanagement tools, improved liquidity in WCE futures.

Parsley

[Burbert]

parsley, You are talking to yourself now. Does this mean, you are a legend in your own mind????????????????

[parsley]

What are some of the Concerns with an Open Market?

1. Where are we going to get our price signals?
a). Winnipeg Commodity Exchange
b). Maltsters
c). Grain Companies
d). Private Service Providers

2. Contracts will have to have teeth on both sides or it won't work!

a)Representative sample is so very important. Good condition grain relative to sample.
b) Malsters have to accept barley if it fits the contracted specs.
c) Farmer must deliver or pay penalties related to covering the short.

Presntly, inventory control governs selections and this leads to rejections. We need specs governing selections.

3. What about Storing Barley for Later Delivery only to have it Rejected?

a) Need contracts specs deliver at certain dates at agreed upon prices.
b)Greater premiums for deferred months.

Parsley

[parsley]

Just relaying some information provided at the Yorkton meeting that is pertinent. I should have had this posted last week. It's not my information; rather,it is the information that Al Morris and John Depape provided.

Parsley

[parsley]

What kind of Contracts would be useful in an Open Market?

1.Pre-Seeding Contracts
2. Post-Harvest Contracts
3, Forward Contract

1. Pre-Seeding Contracts

-Production sets standards
-Discounts for food
-Differnet levels of malt quality
-Unpriced Contracts(forward contracts with just a basis attached)
-minimum price contracts

2. Post Harvest Contracts
-Forward contracts (set volume, grade, specs, storage)
-Unpriced contracts
-Minimum priced contracts


3. Forward Contract

- High end malt barley contract at $40 over WCE futures delivery
-Discounts
#2 malt applicable at $30 over
#3 malt applicable at #20 over
High end feed applicable at $10 over

Futures allow you to store grain.

Sept delivery $40 over Oct
Oct/Nov $40 over Dec
Jan/Feb $45 over March
$47 over May


Parsley

[parsley]

How do we move forward into an open market?

1. Develop good relationships.
2. Value for quality production.
3. Representative samples.
4. Negotiate firm delivery schedules.
5. Negotiate storage payments.
6. No altering.
7. Penalties defined.
8. Negotiate a schedule for lower malt and/feed option.


Other Mentionables:

The Western Barley Grower's Association Ag Clearing House secures transactions. Defines delivery rules for both including ways of soritn out grade/quality disputes.


Malt barley buyers give incentives to contract.

Different companies may require different agronomic requirements and different varieties.

In China, a small malthouse requires 20,000 tonnes in a batch.A large malthouse requires 550 tonnes of malt in one batch!

There is a 14.8%/growth per year in China!

Vietnam has a 14-16% annual increase of beer consumption They have a young population.


Parsley

If I've made errors in my notes, for those attending the Yorkton meeting, feel free to correct them

[cropduster]

I see by those Asian numbers it is completly understandable why Cargill is upset with changes to our system.Long term supplies at $2 bushel, to the farmers here,would have me unhappy too!! NOW,there I go.....thinking it`s about marketing!!!!!

[wd9]

Parsely, do you know of the status of the Clearing House project that Carmen and crew were working on?

[JohnKenneth]

I think the clearinghouse people have gone to the government for an extension of funding. pretty sure it's still proceeding but slowly. an interesting and useful initiative imo.

[parsley]

Interesting Diddledaddles:

400 brewries in China.

Top three brewers in China have 38% of the market share.

3 Top Brewers:
1. Tsingdao Brewry
2. CRC-SAB Miller
3. Yanjing Brewry-fully integrated 200,000 tonne/yr


China's 5 Top Maltsters:
1. Supertime Devel Ltd.
2. COFCO Malting Ltd.(200,000T malt)
3. BeDiafong Malt Ltd.
4. Harbing Malting Ltd.
5. Chengde Sui Hai Malting

410,000 year average
13% to China from Canada

[chaffmeister]

I think the gist of the message is this: even without the CWB, the malt industry will continue to succeed and actually, there are an abundance of opportunities:
- Europe with serious weather problems (drought making them short barley and even malt
- Aussie weather not much better although seems to be improving
- Chinese demand growing - constantly
- cash pricing in Western Canada will provide real-time price signals

My guesstimate is that WITHOUT the CWB we could very likely see well over 3 mmt of malt barley selected this year – if it goes in the ground, that is. Some of this may actually go to Europe – even with a €130/tonne import tariff – that’s how dire their situation is. And you know, in Europe, they really want to make sure they have their beer. (Just think of this - if they're that short, will they be exporting? And if not, who is in a position to make up their shortfalls? Australia? Or Canada?

Already Rahr Malting and P&H are offering new crop contracts. Others seem to want to wait until they are sure there is really and truly an open market before they begin to price new crop (some are offering production contracts without price).

Shaping up to be a unique year....

[nakodo]

hmm yes with Xena, Vivar and Trochu feed varieities yielding 10 - 30 % more per acre than a malt variety.......

[Burbert]

Unique year, with many challenges ahead! @#$#@@!@# malt barley, to much uncertainty, I am going to buy some racing pigeons, and really make big money. In first just like ostriches, breed them, sell them. Pigeons are the next big AB Ag push, if they don't fly fast and win races, you can eat them, wow. Right up there with pond carp, or is it crap????