Farmers with malting barley to sell are getting a boost to their cash
flow.
It’s all part of a plan by Canada’s maltsters to ensure they can
compete with the red-hot feed barley market for the limited supplies
available this year.
Under the new payment scheme, farmers will be paid 95 percent of the
September pool return outlook price for malting barley at time of
delivery.
With the PRO at $243 a tonne for special select two-row barley, that
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means a farmer will be paid $230.85 a tonne (minus the usual local
freight and handling charges of around $50 a tonne.)
That’s $40 a tonne more than the initial payment of $190 (less freight
and handling) they would normally get.
“It’s just another tool to try to attract barley, particularly in areas
where farmers are looking at what they can get for feed barley versus
the initial payment on malting barley,” said Phil de Kemp, president of
the Malting Industry Association of Canada.
The Canadian Wheat Board will continue to pay farmers the initial
payment. Maltsters will kick in the rest to bring the total up to 95
percent of the PRO.
If the final realized price for the crop year is more than 95 percent,
farmers will still get a final payment from the board.
If it ends up below that level, the maltsters will swallow the loss.
“We’re guaranteeing it, not the government,” said de Kemp. “Farmers are
getting more money in their pockets and we’re taking the risk.”
Barley grower Ted Cawkwell of Nut Mountain, Sask., said the program is
a step in the right direction.
“I need cash flow,” he said, adding that only about 10 percent of his
barley will be malting quality this year, compared with 80-90 percent
most years.
A self-described critic of the CWB marketing system, Cawkwell said it’s
about time someone besides farmers assumed some of the marketing risk.
If maltsters don’t want to pay up front, farmers should be free to
search out other buyers, he said.
The new payment scheme was proposed to the board by the malting
industry, which is facing a challenging year given the small, poor
quality barley crop produced in 2002.
Tight supplies have driven up the feed barley market, pushing prices up
to levels equal to or even above the CWB initial payment for designated
barley, depending on the region.
Usually about 2.2 million tonnes of barley are delivered into the
board’s designated barley pool, with about half of that sold to
domestic maltsters and half exported.
This year, with a western Canadian barley crop of less than seven
million tonnes and a wet autumn taking a toll on quality, malting
barley supplies are expected to be down to 650,000 tonnes.
“We’re shutting down easily 40 percent of our capacity and we’re just
concentrating on specific longtime customers, like the domestic North
American brewing industry and Japan,” said de Kemp.
He said 90-95 percent of this year’s malting barley will be consumed by
the domestic market.
Market analyst Charlie Pearson of Alberta Agriculture said the program
clearly puts the malting companies on a more even footing with the feed
market.
As farmers decide how to market their barley, they should think about
where feed barley prices might go during the winter, considering the
impact of feed wheat and American corn.
They should compare that with the total return they can get from the
malting market, after taking into account other premiums that might be
offered by maltsters, along with the fact that the wheat board pays
interest and storage on contracted malt barley.
“Everyone has to make their own management decision,” said Pearson.
