CashPlus has quietly secured a place in the barley marketing system.
The malting barley contracting program was adamantly rejected by malting and grain companies when it was introduced by the Canadian Wheat Board last winter.
The program became a lightning rod in the political debate over barley marketing as the federal government campaigned to end the board’s single desk.
Trade associations representing both groups remain opposed to CashPlus in its present form.
But a number of companies have used the program in both the 2007-08 and 2008-09 marketing years.
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A CWB official says about 20 percent of the board’s malting barley sales have been made through CashPlus, and he expects that trend will continue in the coming year.
“We anticipate all four maltsters and Anheuser-Busch to participate next year, as they did for this year,” said Bob Cuthbert, senior marketing manager for barley.
The line elevator companies have been more reluctant, he said, although two did participate as agents for other buyers.
Cuthbert added the board will be “quite cautious” in selling out of the pool for 2008-09, given world price trends, and CashPlus will offer farmers a good way to lock in a price.
The contracts provide a guaranteed minimum cash price, reflecting at least 90 percent of the price at which the board is selling to domestic and international buyers.
Farmers and selectors are free to negotiate premiums and discounts, and any revenue above the contracted price is returned to contract holders at the end of the marketing year.
Maltsters and grain companies say their main complaint is that the contract doesn’t provide 100 percent of the market value of the malting barley up front.
“We want a CashPlus that puts as much into the farmer’s pocket up front as possible and reflects a fully accurate market price to the industry,” said Wade Sobkowich of the Western Grain Elevators Association.
Phil de Kemp of the Malting Industry Association of Canada agreed.
“We have to compete with the feed market some years and to do that we have to be able to show our real price to farmers, not 90 percent,” he said.
He estimated maltsters have made transactions totalling 300,000 to 400,000 tonnes using CashPlus contracts.
“I think some are using it grudgingly and others are not using it at all, depending on their position in the marketplace,” he said. “Some had to book into it because the board would only forward contract through CashPlus, so if they didn’t, they’d lose contracts.”
Grains analyst Brenda Tjaden-Lepp of FarmLink Marketing Solutions said it’s ironic that some of the companies that denounced CashPlus in the spring are now trying to get as much of it as they can.
“Very few farmers were able to participate,” she said, adding those who did probably fared better financially than those who did business outside CashPlus.
Sobkowich said it’s important to differentiate between “old crop” or post-harvest contracts, and “new crop” or pre-harvest contracts.
For post-harvest contracts, the quality and volume of the barley crop is known; that’s not the case for new-crop contracts, which creates unacceptable risk for the buyer.
Malting and grain company officials said their groups would like to meet with the board to talk about ways to make CashPlus more acceptable.
Cuthbert said the board is willing to talk to other stakeholders about CashPlus, but he doesn’t think the request for 100 percent up front can be accommodated.
“I don’t see any major changes along that line,” he said.
Greg Kostal of Kostal Ag Consulting said the future of CashPlus will depend on whether it can provide what the industry wants.
