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Under a new Canadian Wheat Board (CWB) program, farmers will be offered the option of cash-price contracts for their malting barley, plus the benefits of single-desk selling through the CWB.

If these contracts were available through selecting companies today, the upfront cash price for malting barley producers would be over $5 per bushel, backed off to west central Saskatchewan, with flexibility to negotiate additional terms directly with the companies.

“We’ve developed an innovative program that delivers the options farmers are looking for in barley marketing,” said Allen Oberg, CWB farmer-elected director from Forestburg, Alberta. “Farmers have indicated that they want a strong, viable CWB as well as more choice. Under this program, they will have both.”

The program announced by the CWB today is called CashPlus and is designed to suit farmer needs and add flexibility in malting barley pricing. It also responds to the malting industry’s desire for improved operational certainty in the aftermath of upheavals in the Canadian malting barley industry during 2007.

Under CashPlus, the CWB will establish a guaranteed cash price for farmers that reflects market values. Participating selectors will then contract directly with farmers. The CWB will also pay a potential additional premium to farmers at the end of the crop year based on spreads between the guaranteed price and actual CWB sales returns for malting barley.

In addition to responding to producers’ desire for maximum returns from their barley, CashPlus provides a solid market-driven price signal to producers, buyers and other selectors. The attached backgounder provides some highlights of the CashPlus program. “As farmers elected to lead the CWB, it is our priority to ensure producers get the right mix of options for their business needs,” Oberg said. “This has been our focus since we took over leadership of our marketing organization in 1998. CashPlus is the latest example.”

Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. One of Canada's biggest exporters, the Winnipeg-based organization sells grain to over 70 countries and returns all sales revenue, less marketing costs, to farmers.

Backgrounder

• CashPlus enables farmers to lock in a cash price for their malting barley without giving up the marketing strength of the single desk.
• Under CashPlus, a three-way transaction occurs between the farmer, the selecting company and the CWB. The CWB negotiates sales price and volume with the selecting company and establishes a guaranteed price for producers. The selecting company and the producer then directly negotiate a contract. These contracts will be available both pre-harvest and post-harvest.
• The CashPlus price will be responsive to prevailing market conditions. The guaranteed price will not change on a set schedule, but in response to sales and market conditions. 
• The CWB will pay a potential additional premium to producers, derived from any spreads between the guaranteed cash price and actual CWB sales returns for malting barley. 
• The CWB will continue to negotiate all sales of malting barley from Western Canada through its single desk, which is a marketing system designed to ensure that producers maximize returns from their grain.
• The term “single desk” means that all buyers of malting barley source it from one seller the CWB. This allows a strategic view of sales opportunities and grain supply, allowing a sales plan to be executed with the goal of maximizing producer returns. A single seller is able to command a higher price than multiple, competing sellers.
• In addition to adding value to the sales equation for farmers (establishing a guaranteed cash price and capturing market premiums by leveraging the single desk), the CWB will continue to assist barley producers through product and market development work. 

About malting barley

• Between 10 million and 12 million tonnes of feed barley and malting barley is produced in Canada each year, with 95 per cent grown in Western Canada. Over the past three years, on average, Prairie farmers have sown more than four million hectares of crop land to barley. Together, Saskatchewan and Alberta sow approximately 90 per cent of the total western Canadian barley hectares. Barley is mainly used for animal feed and as malting barley for beer. 
• Of the total Canadian barley crop, between two million and 2.5 million tonnes are typically selected each year for sale as malting barley to domestic malting companies or for export. To be selected for malting, grain must pass strict quality criteria for grade and protein level. To grow selectable malting barley, farmers often need to use advanced management practices, including specialized inputs and careful storage.
• The CWB markets all western Canadian malting barley. This includes about 1.1 million tonnes sold to domestic maltsters, of which 350 000 tonnes are for domestic beer consumption and the remainder exported as malt. The CWB also exports about 1.2 million tonnes of malting barley to countries around the world.
• The CWB is a major player in the world barley market. It is among the top three exporters of malting barley in the world. At times, total exports of both feed and malting barley from the European Union, Canada and Australia have been in excess of 78 per cent of total world barley exports. Canada and Australia together have had more than 50 per cent market share of barley exports. For malting barley, Canada's export market share has been as high as 40 per cent. 
• The top five customers for western Canadian malting barley in 2006-07 were Canada, China, the United States, Colombia and South Africa.

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