Dear Premier Selinger...

[Fransisco]

http://cwbmonitor.blogspot.com/2011/06/manitoba-government-steps-in-it.html

<b>Manitoba Government steps in it</b>

Since Manitoba Premier Greg Selinger wants to get in on the Canadian Wheat Board debate, paying for an ad campaign with public money, I sincerely hope he looks at the issue with his eyes wide open and reviews all the facts, not just the rhetoric from the CWB. So far, it seems he’s not paying attention. Consider these facts:

In 2002-03, domestic maltsters in Alberta imported malt barley from Denmark because of price signal failure by the CWB, costing Canadian farmers an estimated $40 million.

In 2007-08, the CWB lost about $90 million in the Producer Pricing Options due to inappropriate hedging in addition to losing $226 million in the wheat pool account due to “discretionary trading” – what most people call speculating.

In 2009-10 the CWB accepted only 52% of the durum crop. Facing poor delivery opportunities and low Initial Payments, farmers began selling high quality milling durum into the domestic feed market. Cost to farmers: many millions.

In 2010-11, the CWB initiated a feed barley export program that hid much of the export value from farmers. Cost to farmers: in the hundreds of millions.

In 2008-09, Western Canadian average “net-backs” (handling, cleaning, CWB expenses, etc - excluding freight) were reported to be $28.91/tonne on wheat and $5.65/tonne on canola. (The reason canola is lower – competition and no CWB costs.) Even a $20/ tonne difference is worth about $400 million annually.
Every year, non-CWB crops are sold in the fall to pay for input costs, including those for CWB crops. It has been estimated that canola farmers receive in excess of $60 million LESS annually due to this excess selling pressure. Include all non-CWB crops, and the cost to farmers is closer to $100 million annually.

Add to that the cost of additional on farm storage required for CWB crops that can’t be delivered, and the cost is even higher.

CWB pool prices net to farmers are consistently below crop year average farmgate prices in the US northern plains. Considering the last 7 years, the pool returns on spring wheat and durum have consistently been below the lowest US street price. Applied to the whole pool, this totals over $3 billion in revenue below what average US prices would have provided.

PWC Study


In 2005 Price Waterhouse Coopers was commissioned by the CWB to study the impact of the CWB on the economies of Winnipeg, Manitoba and Western Canada. Its report stated that the CWB contributed “a $1.6 billion annual gross output impact on Canada’s economy” and an $86 million impact on the City of Winnipeg.


The study has some serious flaws.


First, the study included “premiums” as reported to it by the CWB. As much public data and information has refuted the idea of the CWB earning premiums, this part of the study is highly suspect as well.


The study included in its analysis, economic activity that would take place even without the CWB. Looking at the CWB’s “direct costs” – things like freight, storage payments, terminal handling, inventory financing, and “other grain purchases” – PWC estimated over $800 million in “gross output impacts”. I don’t dispute the calculations, but PWC failed to recognize that all this activity would happen without the CWB. About 20 million tonnes of grain goes through the CWB annually; that grain will get shipped and handled even without the CWB. As a result, this study is a gross exaggeration of the CWB’s impact on the economy.


Rather than give the CWB credit, it would be preferable for the authors to simply say thank you to all Western Canadian farmers.


According to PWC, the CWB is a “very large user of commodity hedging and foreign exchange hedging instruments offered through major exchanges and highly rated financial institutions”. What PWC – and therefore the CWB and Premier Selinger – fail to note is that very little (if any) of this activity takes place in Winnipeg. The CWB has chosen to favour hedging in US markets as opposed to the Winnipeg Commodity Exchange (now ICE Futures). In fact, history shows that it was the establishment of the CWB that started the decline of the grain trade in Winnipeg. Where Winnipeg was once host to the largest wheat market in the world – Chicago of the north, some called it – once the CWB came to town, the multitude of grain-related businesses in Winnipeg shrivelled in size and importance. Just think of the economic activity of all those companies that no longer exist or left town.


The idea of Winnipeg losing over 400 CWB jobs and possibly many other jobs with the loss of the single desk is nothing more than fear-mongering; logic suggests quite the opposite impact.


Saying that the CWB is responsible for all the economic activity reported in the PWC study grossly exaggerates the impact of the CWB and insults the contribution made by Manitoba’s farmers and the remaining supporting industries.


Are you saying farmers should vote on the future of Winnipeg?


Selinger argues that the CWB should be preserved because of its alleged importance to the Winnipeg and Manitoba economies. But then he argues that farmers should get to vote on the future of the CWB – including farmers in Alberta and Saskatchewan. Perhaps he doesn’t realize it, but what he’s really saying is that the fate of Winnipeg and Manitoba should be left up to Western Canadian farmers, of which 80% live outside of Manitoba.


Let’s face it. The economic impact of the CWB on Winnipeg, even if they were right (which they’re not) is an absurd argument in support of a farmer vote. Particularly when most of the farmers that would be voting live outside the province.


What Selinger should be looking at protecting and supporting is the health of one of the largest economic engines in Manitoba – agriculture. His focus on the CWB and a farmer vote indicates a lack of understanding and leadership. Not knowing the facts is inexcusable.

[jdepape]

Just submitted the following to the Free Press as a letter to the editor. Don't know if they'll publish it so here it is:

<b>Selinger and the CWB</b>

When Premier Selinger stepped in to promote the Canadian Wheat Board it was painfully obvious that he hadn’t done his homework. If he had, he would have noticed that the CWB has cost Manitoba farmers and rural communities millions in excess costs, poor grain movement, sub-standard returns and lost opportunities.

He would have seen that the establishment of the single desk in 1943 was responsible for the loss of an estimated 500 jobs in Winnipeg as many companies closed up shop and entrepreneurs left town. Now, in anticipation of the removal of the single desk, we’re seeing increased interest in Winnipeg and the grain trade – even from outside of Winnipeg.

The CWB should remain in some form, likely with fewer staff; many positions not needed by the CWB will be replaced by private sector jobs, and if Selinger promoted Winnipeg as a great place to do business, even more jobs could be created.

Selinger is suggesting the future of Winnipeg is tied to the future of the CWB. So when he says farmers should get to vote on the future of the CWB, isn’t he saying they would be voting on the future of Winnipeg? Does he realize that 80% of those farmers live in Saskatchewan and Alberta?

Be careful what you ask for, Mr. Premier. Especially when you don’t do your homework.

[jdepape]

I just got this as a comment on my blog. Comes from an old friend from the grain trade. Although I though I knew what to expect, the end of the story blew my mind.

-- John De Pape

From Kerry Swartz...

My grandfather, Charles Swartz (along with his brother Bill) started Northern Sales after World War 2. They were soon joined by my father Clifford and over the years, as an accredited export agent for the CWB, became the largest privately held wholly Canadian grain company. Anyone familiar with the history of the grain business in Winnipeg has heard of the Northern Sales and know that much of Canada's wheat and barley export business began and was developed, not by the CWB, but by our family and other private grain firms.

Over the years, much of Canada's export grain business became the sole domain of the CWB who, departing from their original mandate, squeezed out, stole or simply stopped supporting the very companies and individuals who single-handedly developed export markets for Canada's grain. Instead of working with those who made Canada a leader, the CWB just swept them aside by insisting on direct relationships with other countries; when foreign markets came to accredited agencies like Northern Sales for a price and supply of Canadian wheat, we were told, again and again, market after market, that the CWB would no longer make wheat available for the trade. Instead, they pursued direct contact with the same people we introduced them to in previous pieces of business.

By the time I joined Northern Sales in 1981, there were very few export markets grain traders in Winnipeg could actually sell to. Whatever markets did exist, the buying process was usually by means of a tender and/or the political/financial situations associated with those markets required tremendous risk and expense on the part of the private trade. All the while knowing that if you succeeded, the CWB was likely going to try and take the market away from your firm.

The classic example of this - and how low senior members and Commissioners of the CWB could stoop - is Syria. Our firm was approached in the mid 1970s by the Syrian government about the long term supply of Canadian wheat. We approached the Board and, through hard work and long negotiations, signed a long term sales contract with the Syrian government. This was the first time they had ever purchased Canadian wheat. We shipped several hundred thousand tonnes to them over a two to three year period.

When the contract was drawing to a close, we resumed negotiations with Syria and the CWB about price, supply and delivery schedules, but learned that the Board had been in direct contact and had visited with representatives of the Syrian government about supplying them wheat directly. Syria did not buy any Canadian wheat that year, or the next.

A delegation from Syria was visiting Winnipeg during this time and the CWB held a reception for them at their offices. No doubt this was a means to display their prominence as western Canada’s wheat marketing board and that Syria should really be dealing with them, not small fry like Northern Sales.

Whether it was by obligation, or the insistence of the Syrians, the CWB invited members of the trade, including Northern Sales to the reception. During the affair, my grandfather, my father and I were having a friendly discussion with one of the Syrian representatives (who also happened to be one of the people we negotiated our original contract with) when we were approached and interrupted by one of the CWB Commissioners. Paying our family no attention, he looked directly at the Syrian official and said, “I know you want to buy Canadian wheat, but I don’t understand why you’d want to do business with a Jew.”

It was at that moment I realized that the Canadian grain trade, as I had known it growing up, was over.

Kerry Swartz
Victoria BC

[TOM4CWB]

Dear John,

Northern Sales was one of the best grain co's in western Canada to arbitage the grain markets for growers.

I wondered why they left...

Thanks for telling... THE REST OF THE STORY.

[Braveheart]

What an outrageous racist comment. Nowadays, a hate crime would have been committed. There really are no words

I believe that Cliff Swartz wrote a book called "Death of a Canadian Grain Salesman".

They made a fine name for themselves in the mustard business.