There’s an easy way for the world’s maltsters to persuade prairie farmers to plant a malting barley crop this spring: pay for it.
That’s what a number of farmer advisers are saying about brewing industry fears that Canadian farmers may not bother trying to grow malting barley this spring.
“There needs to be a real premium (in the Canadian Wheat Board malting barley Pool Return Outlook), and that’s a premium compared to domestic feed barley, not the (lower) board feed barley pool,” said Brenda Tjaden Lepp of FarmLink Marketing Solutions in Winnipeg.
Read Also
Canada-U.S. trade relationship called complex
Trade issues existed long before U.S. president Donald Trump and his on-again, off-again tariffs came along, said panelists at a policy summit last month.
“For right now, three bucks in Saskatchewan is a hell of a price. It’s hard to beat.”
Tjaden Lepp said new crop 2007 bids for feed barley are $3 per bushel in some Saskatchewan locations, so maltsters need to beat that substantially.
One appears to be doing so, she said. While she was unable to confirm it, she has heard that a grain company is offering about $3 per bushel in Saskatchewan for barley that is grown for malt. If the barley is selected, the grower will receive a substantial premium, and the buyer is virtually guaranteeing the barley will be selected.
“I’ve never seen a contract like that before,” she said.
But it’s needed, she added, because farmers could plant easy-to-grow-and-market feed barley and probably pocket a good price in the fall without any of the hassles that come with signing a wheat board malting barley contract.
“Related to other crop options, it’s a pain,” said Tjaden Lepp.
“It’s a pain to market it, and it’s a pain to deal with the farm’s internal operations when malting barley is a large part of the portfolio.
“With feed barley there’s the flexibility, there’s the fact that you can get your cash flow early, the fact that you can deliver it whenever you want to, and there’s a fairly friendly outlook.”
Analyst Errol Anderson of ProMarket Communications said farmers will need to see a big premium in wheat board designated barley PROs before seeding or they won’t want to sign contracts.
The wheat board said it expects malting barley in 2007-08 will return to the usual $25 per tonne premium to feed.
“The grower has to go through hoops and the grower should be paid for going through those hoops, and you have the risk of rejection on top of it all,” Anderson said.
“The board contract places all the liability on the grower.”
Domestic malting barley buyers have been adding incentives to their offers, but Anderson said the rigours of the board contracts mean they have to offer about $1 per bushel more than feed barley to entice growers.
It’s difficult for domestic maltsters to lure acres when pool prices are averaged down by expected offshore sales, he added.
“The system we have right now doesn’t work real well.”
However, most analysts say that malting barley should see strong prices next year – strong enough to reward growers who embrace it.
John Duvenaud of the Wild Oats marketing newsletter in Winnipeg said the current inversion in barley prices, in which cash feed prices are better than wheat board malting barley prices, is an anomaly that won’t likely last into 2007-08.
“It could only happen in 2006,” Duvenaud said.
“It was a unique set of circumstances to get such a huge shift in the useage of grain. That’s never happened before.”
Duvenaud said the inversion of barley prices is the bad side of pooling, which by its very nature doesn’t immediately capture spikes in the market.
“There are good things about pooling and bad things about pooling, and one of the bad things about pooling is that when you get a rising market … then the pool is dragged down by the earlier sales in the year,” said Duvenaud.
“How do you fix that? You can’t, until the next crop comes along.”
As long as the new crop PRO for malting barley this spring shows a good premium to domestic feed barley, farmers will probably grow the crop, most analysts say.
Whether those prices appear in the PRO is up to the malting and brewing industry.
