what does this mean?

[charliep]

On the issues of quality/delivery, what changes in the new world.

Fact - western Canada plants about 5 to 6 mln acres of malt varieties for production of 6 to 7 mln tonnes.

Fact - the CWB sells about 2 MMT of malt barley (this market has not grown).

Fact - Malt barley is selection based - not grade based like in wheat. Maltsters/grain companies are the ones doing selections - not the CWB - in the current system. Nothing changes here.

Fact - Selection is a lottery game today. What will change in an open is the move to more contracting/value chain relationship. If a farmer is not comfortable with this, grow feed barley and target the 10 to 20 % better yields available here.

[kamichel]

I think the contracts that I heard was for higher than usual specs so if a farmer cannot meet those specs then it would not be unusual for the barley to not be accepted resubmitted and accepted again for a malt market less fussy. Broker would the 4 dollar price still hold? Broker is there any guarantee the delivery date will be in 07 08 crop year?
Sawfly my production contracts all worked well in the past. Whenever I contracted it was still good at harvest.
I did not contract in the last few years on grounds that the production contracts didn't seem to offer much if anything.

[broker]

the $4 price is not for any higher spec malt, just malt.
Sawfly, in a free malt market, the maltsters are not going to intentionally screw farmers over, they need farmers. They need malt barley, and in my opinion, if anything they will be willing to pay even more for the better quality barley. The past has made everyone very pessimistic about how this industry works. You need to remember that the malt buyers are actually the end users, not like dealing with a line grain company. They are out to make as much money as they can, and yes, the scenario you supposed ,could happen if your contracts are with those buyers. The malt co's have told us that they feel that malt barley has been underpriced, but they pay what they have to from the CWB. With them out of the picture, you are now looking at the same situation. The malt buyers will pay what they have to to get the barley. If that is $4, or $3, whatever the market says, they will pay.

[kamichel]

So broker do these min. price contracts have anything to do with the CWB? Is just that if the CWB pool price in the end(if we have one)ends up higher then more is paid to the farmer?

[kamichel]

Back to the origional post of What does this mean? Looking at the markets today everything is up. Chicago Board wheat up over 20 cents. Could there also be such an upsurge in malt prices that the CWB refuses to post them on grounds that current deliveries from farmers must be made in this crop year?

[Mightymouse]

2 things in play
1 CWB has gave away the 2006/07 crop last summer and needs famers to deliver there barley to fill these existing contracts. HIgher new crop prices would have farmers hold back malt to the new crop year
2. If they post the pro for the next crop year it will be subject to comparison. It would show how there future sales are so price poor that it is politically important they don`t reveal how poor of a job they have been doing in this market

[poorboy]

Is 4.00 new crop malt price a good deal? I would think that most of the malt companies are expecting to pay a lot more than that, and if they can get away that cheaply they will. I would bet that most farmers would hold off that 4.50-5.00/bushel for malt barley would be very attainable.

Just because it is looking like an open market, don't be giving it away. World supplies are very tight and the Canadian harvest is going to be one of the first to fill that world wide shortage of malt.

[kamichel]

I don't remember when malt was over 4 dollars net to me. And in the past we had crow freight rates. 4 dollar malt is great, I would not expect much more. Holding out for 4.5 dollars could turn into 3 dollars. 4 dollars in most cases is profit.

[Burbert]

Uncertainty means just that, a confused malt market, will ultimately benefit the big grain companies and the cow guys! But that was the plan all along wasn't it? Screw the stupid farmers some more, they all lay down easy. Contracts Smontracts, what a crop of bull!! Cheap feed and lots of it that has been the name of the game for a long time here in Alberta.

[TOM4CWB]

Burbert,

At least now the baseline is $4/bu...

The CWB will be offering a better deals later on... unless they were really sleeping at the switch.

My gut feeling is they have some good priced contracts salted away...

[kamichel]

The CWB fixed prices for new crop malt sucked , so no one will miss them prices.
Why ever were they posting them prices anyway when they are so low that they are below feed contracting prices for new crop?

[broker]

Kamichel,
the min price of $4 also has a clause that the producer is paid any upside in the PRO between time of signing and the last 07-08 PRO, if there is such a thing. If no CWB, then $4 is what you get.

[poorboy]

We used to often receive over 4/bus for malt barley, when it was primarily a domestic only market. The problem was that it was based on an allocation of 2 rail cars per permit book. Once the CWB started expanding the malt sales overseas, the pool prices dropped a bunch, because the overseas sales were much lower than the domestic market.

I would have to assume that with the extreme shortage of malt barley worldwide, that there will be some good opportunities for export malt barley at very competive prices.

An ideal malt barley contract would have an option on feed barley prices included as a backup plan. It would not be very good to have a malt barley contract for 4/bushel and then in the fall have it not make the malt specs and find out the feed market is at 2.50/bushel. Then it would have been much better to have priced it all as feed barley to begin with at 3.25/bus.

Our perception of a good malt barley price tends to be how much premium it has over the feed barley price. If grain companies start to make more sales of feed barley to Japan, Saudi Arabia, US, etc. it could push feed barley prices higher. This in turn would make a persons malt price expectations higher.

[charliep]

poorboy

Just curious how the program you suggest would operate.

Would a basis contract with the new western barley futures work? $50/tonne over for premium barley with well defined/contracts specifications for a domestic malt plant? $30/tonne over for malt barley destined for an export market/blended with other barley to achieve specification (specifications/quality characturistics identified in the contract)? $10/tonne if doesnt't achieve malt barley but still good quality feed. All the above are Alberta based.

Not suggesting to use. Just presenting as an idea.

[poorboy]

Charlie,

I had not thought of how it would happen, but I am liking your ideas of basis levels based off of a futures contract. It would establish a premium for the type of malt desired by the end user and default to a feed price. I am not sure of how to do this though, as the basis changes are quite large depending if there are lots of people wanting to sell or not.

Having the maltsters, grain companies and feedlots all using a futures contract for barley would be great. The more action on the contract, the more liquidity and reasons to use it.

I was initially thinking of a contract for malt with a option for barley if it was to go for feed. This would not totally lock in your price, because the feed barley basis would not be fixed, but it would still be better than nothing.

Or perhaps the maltsters could just resell the barley to a feedlot. They would pay slightly less than the going rate for feed barley, to the contract holders who produce barley that does not malt. This would encourage higher malt premiums and producers who think they have a very good chance of getting malt barley, and discourage those who do not often produce malt barley. In this case, it would be a production contract, and the maltster would get your barley feed or malt. The slightly lower price than the market is at, would be the incentive to do everything in the farmers best interest to get malt quality.

A basis on malt barley from a futures contract, just like canola would allow the malsters to fill different time slots with malt, and allow producers to price it when they want based on the futures price just like canola. As a producer, I would know exactly how much of a premium I would be getting over the feed market, by my basis value.