Canada: Maltsters want Ottawa to delay barley monopoly end

Ottawa should wait until August 1, 2008, to put its new barley marketing regulations into effect to give maltsters time to fill or unwind existing contracts, Canada's two largest malting companies said, according to Reuters, April 23.

Maltsters have made significant sales based on contracts for barley supplies with the Canadian Wheat Board beyond August 1, 2007 -- the date Canada's agriculture minister has set for the agency to lose its sales monopoly, said Robert Meijer, spokesman for Prairie Malt Ltd., owned jointly by Saskatchewan Wheat Pool and Cargill Ltd.

"We can push (the date) back, or the wheat board and the government, I suspect, will be held fully accountable for the liability this is going to create in terms of costs," Meijer said.

Maltsters have told government officials, including Agriculture Minister Chuck Strahl, that the liability would be in the "high tens of millions" of dollars, Meijer said.

Farmers' barley deliveries have already slowed because of market uncertainty about the August 1 change, and all players in the industry stand to be harmed, said Steven Gorst, president of privately held Canada Malting Co. Ltd., the country's largest maltster.

"Currently it does not seem the government has fully grasped the problems an abrupt change will generate," Gorst said in an e-mail response to questions.

The government, the CWB and maltsters need to "sit down and work through a sensible transition" and postpone the change by a year, Gorst said.

Officials were not available for comment from Canada's two other maltsters, Rahr Malting Canada Ltd. and International Malting Co. Canada Ltd.

Canadian maltsters export more than C$200 million ($179 million) of malt per year and buy about half the CWB's malting barley supplies annually. Canada is the world's second-largest exporter of malt, which is used to make beer.

The government published its draft regulations on Saturday to end the CWB's monopoly on sales of barley from Canada's main Prairie growing region to maltsters and export markets, which would give farmers the option of selling directly to buyers.

A government analysis accompanying the regulations acknowledged the CWB might not be able to attract enough barley to fill its sales contracts.

"Some companies may have to pay higher prices to obtain barley from grain companies or directly from farmers, as barley prices have increased recently," the government's regulatory impact analysis statement said.

There is a 30-day comment period for the regulations, after which time the department and cabinet will consider whether changes are required before bringing them into effect.

The CWB has not yet determined whether it will continue to sell barley past August 1, and has told farmers it can longer provide an outlook for returns for the crop because of the uncertainty.

The CWB and other groups have also said they may challenge the government's plans in court.

In an interview last week, Strahl insisted he would not delay the August 1 start date.

Maltsters knew the government intended to make changes to the CWB's monopoly, Meijer said, but did not know how plans would unfold, and had no legal alternative but to secure supplies from the CWB.

Prairie Malt would like to see the regulations specify an August 1, 2008, change date to allow time for any court challenges as well as to give maltsters enough lead time to adjust contracts and secure future supplies, Meijer said. "We're talking about a year to get it right," he said.

25 April, 2007