CWB

[bucket]

Jeff

Who picked up the tab for the losses in 07/08 in discretionary trading?

Can farmers see the report on those changes? I think it was a couple of ex cwb employees that did the report. Goff said at a meeting back then that farmers couldn't see the report even though we paid for it.

[Tom4Wildrose]

Dear Jeff,

We had a good discussion on Monday... the Contingency Fund should be converted into shares that are owned by those PPO growers that donated this money to the CWB.

If you look closely at the present contingency fund and its function in the old CWB Act... it was actually meant to function with a zero balance with both positive and negative fund balances envisioned. When the new voluntary CWB starts functioning... truly the confiscated funds from growers should be a part of the capital base along with the rail cars and other capital assets rolled into the new CWB. Saying that PPO sellers 'voluntarily' contributed to the CWB 'contingency fund' is simply NOT true. When I sold milling wheat to the CWB... with futures only transactions... there was only the slightest glimmer of faint hope that there would be a voluntary CWB in the near future.

If you look at the basis being charged... on these PPO contracts... it didn't go truly berzerk till the vote was over in August 2011.

There needs to be some recognition for those growers who have donated tens of thousands of dollars to the contingency fund since it went positive after the last trading fiasco!!! If there ends up to be $100M in the contingency fund... it came from PPO holders/sellers... NOT pool pricers!

[bucket]

Not to argue with you on this Tom but who, then, would/should have been responsible for that huge loss a few years ago???

Maybe you are just paying back the loss you incurred?

Just an unbiased question not being argumentative.

[charliep]

The issue of who paid is in the 2007/08 annual report. The readers
digest version would be farmers who used both producer payment
options and the pooling system. In 2008/09, about $19 mln were
transferred back to the pooling system from the contingency fund of that
year to pay off the supposed debt of the 2007/08 crop year (a board of
director decision/policy). Again, documented in the 2008/09 annual
report. Since then, the contingency fund has built to $______ at the end
of the 2010/11 crop year (not public until the annual report) and so far
this year (2011/12) the contingency fund has built to $________. I would
hope there will be disclosure about the amount of money in the
contingency fund on January 1 or whenever so farmers know where the
new organization is starting from.

[bucket]

So the pools paid back some of the 250 million loss. Then the contigency fund belongs to everyone?

Even with a surplus of 60 million it would take the fund a number of years to pay back the loss considering interest, time value of money(ha) etc.

[Tom4Wildrose]

Bucket,

My understanding is that the management took the money it borrowed from the contingency fund and paid it back.

The 250M in losses was much much more than just PPO losses in the first place.

The CWB runs positions together and trades a package... NOT PPO trades and pool trades together. Hence the reasons I am told positive hedge balances cannot be returned to PPO holders. This is way more complex than it first appears.

I stand by my statements.

[Tom4Wildrose]

Bucket,

When the Contingency fund was positive in the first year after the fiasco... from then on it was a tax.
(the positive balance) and became an asset of the CWB that I was taxed to create.

The objective SHOULD have been a ZERO balance... not a buffer to cover mistakes.

Grainco's are not allowed this luxury in large part because a mistake only can be sucked back through the basis... if everyone makes that same mistake.

Otherwise the grower business will flow straight to those who didn't mess up... to a large extent!

The CWB has much to learn... and Chairman Oberg has done a massive dis=service to our grain industry in western Canada.

He helped reck AWpool... then Agricore... now finishes off the CWB with his worse performance ever.

A perfect record.

[charliep]

To highlight Tom's point, the $250 mln was for all trading losses that
year - producer payment options and the pricing pace model. It quite
right should have been covered by the 2007/08 pool returns (which
were extremely high to remind you). The losses were not a good
situation but maybe a reality of the high priced/volatile trading
situationn that occurred in 2007/08.

A challenge to everyone is to actually spend time in the offices you are
discussing reading the CWB annual reports and understanding the
financial reporting in them. They are the CWB accountability statement.
Also understanding the annual are divided in half. The first part a
corporate statement of affairs for stateholders and the second the
audited financial statements. Both are very different in terms of
purpose. No different than any other annual report.

[charliep]

I note Jeff's comments are a record of decision making. The board
recognized the need to increase the contingency fund this spring to
look after the risk associated with 6 mln tonnes of PPO contracts in
2010/11. From a risk standpoint, $60 mln is effectively $10/tonne of
contingency fund/tonne when spread over 6 mln tonnes. I would
question whether enough but not my call.

Again, it is farmers who participated in the producer payment options
plus various transfers into the system from other activities like profits
on cash trading and various transfers from the things like interest
earning on old barley sales.

If you want to allocate this money to farmers, it should be given back
the farmers who used the producer payment options. Open to
anyones ideas as to how this would be done fairly and inexpensively.

[Kodiak]

A question for those who have some knowledge of how things work in the trading rooms of the grain companies. Charlie, yes $60Million is $10 on 6 million tonnes. Doesn't maybe sound like much put that way.

But - would a commecial company leave its trading room untouched if it lost $60Million?

Or would some heads roll? I don't think that they would even contemplate that kind of a loss. Someone would pay with his job LONG BEFORE even $6Million was hit. I may be wrong on this, but I doubt it.