Comments in Old Crop Barley PRO Commentary

[charliep]

Could someone help me understand this statement taken for the old crop feed barley commentary.

"Interest earnings to the 2001-02 feed barley pool comprise a significant
portion of the current PRO value."

How can a small pool like feed barley accumulate a lot of interest payments (particularly when interest rates are 3 to 4 %)? Was interest from the wheat and malt barley pools slipped into the feed barley pool?

[TOM4CWB]

Charlie,

As we discussed on other topics earlier this year, (Rodbradshaw asked the same question) the interest income is from previous barley sales that are in essence bad debts that have not been written off yet.

The former Soviet Union countries owe millions upon millions, and the CWB borrows at preferred government of Canada rates, the lends to these countries at commercial rates keeping the interest spread.

Now when such a small amount of feed barley, for example just say 100,000t for the 2001-02 crop year, has CWB churning interest earnings of say 5 million dollars, then the interest portion contribution to the pooling accout would be $50/t.

This is an example, but if you look at interest earnings in last years feed barley pool, you will see they are significant... and the CWB has a duty to attribute interest earnings from past pools that sold feed barley, to return it to the present feed barley pool.

There is some talk the CWB will divert some of this cash to the feed barley contingency fund, maybe thalpenny would like to speak to this issue...

Does this help Charlie?

[charliep]

Still confused. Is the FSU still making payments on these loans? Haven't these loans be transferred to the federal government and all monies flowing to taxpayers? It seems funny to me to be adding in money to the pool on debts that have effectly been written off at the tax payers expense.

[TOM4CWB]

Charlie,

It does seem wrong, to add bad debt to bad debt, as the CWB churning income creating has done, hence the reason for Director Jim Chatenay and his crew asking all the hard questions... like if the CWB makes millions on this debt, how much are the brokers doing all the churning for the CWB making... and is this an ethical practice to begin with...

I believe the CWB's stand is that the Canadian Gov. allows this churning... so it is a proper way to create income to add to the pooling accounts...

Thalpenny, could add to this if he would like?

Charlie, Brenda B. can fill you in more if you want a third opinion...

[chaffmeister]

Tom's got it right as I understand it. I asked the question two years ago when the barley pool had a $5 final after $17 interest earnings were included. It alarmed me because it appeared that without the interest earnings the barley pool would have been deficit that year - it looked like the CWB was playing games with interest earnings to avoid a deficit. When I asked, the CWB told me that the fed govt is paying the interest on outstanding credit sales to the CWB and the CWB places that revenue into the appropriate pool. The outstanding amount owed each year is about the same, but the barley pool is much smaller than it used to be so the interest component is now quite large on a per tonne basis.

I admit I am not clear on the detailed mechanism concerning who (CWB or fed govt) is carrying the debt. But I have heard that these old debts are starting to get paid back and the CWB is concerned (because they won't have that interest revenue anymore?) Perhaps thalpenny can make a comment about why (or if) the CWB is concerned that these debts are being paid.

Charlie, from the comments with the PRO announcement it sounds like the old crop pool is very small indeed if interest is a large component of the pool.

My beef about this scenario is this: When I asked about the barley pool a couple of years ago and the potential of pool deficit, I was also told that the CWB knew ahead of time roughly how much interest income would be going into the pool, so it was always factored into initial payments and the PRO. In other words, it's not something that gets slapped on at the end.

This tells me that as a pricing signal for farmers the PRO is not to be trusted, especially for barley.

On page 8 of the most recent Grain Matters there is a piece on PROs where the CWB writes:

"The PRO is designed to give you better market signals. Prior to the creation of the PRO, the only seeding decision signal the CWB could give you was the initial payment.

A second reason for creating the PRO was to provide a signal on cash flow expectations. You needed a clearer signal of what future adjustment, interim and final payments would be.

You were also looking for a way of knowing when to take advantage of off-board markets. The PRO gave you the tool to make these decisions."

In my humble opinion the CWB is failing farmers with the PRO - the CWB cannot possibly achieve these stated goals as long as these interest payments skew the PRO.

The CWB is impotent in the export barley market because the pooling concept does not allow it to compete with the much larger domestic feed market - even with this "interest boost". Without the interest revenue, the CWB would have had an even tougher time originating export feed barley over the last 5 to 7 years, perhaps shutting it out altogether.

What happens to the feed barley pool if the CWB originates NO feed barley? (which could happen this year) A quick look at the feed barley pool shows that interest revenue each year is in the neighbourhood of $6 million (in 2000/01, on 454,073 tonnes interest revenue was $6,4 million which works out to $14.11 per tonne. (In 98/99 interest revenue was $22.34 per tonne, on a pool of 277,100 tonnes.)

If the feed barley pool drops to say, 100,000 tonnes (could it even be this large?), interest earnings should be expected to be in the neighbourhood of $60 per tonne; at 50,000 tonnes, that component of the PRO would go to $120 per tonne. You get the idea.

What would the PRO become if the pool was zero? (What would likely happen is the the CWB would need to make a decision about where to put this revenue, which then makes it discretionary. (No component of the PRO or pool payment should be discretionary.) My fear is that the CWB would use this interest revenue to boost the PRO enough to get at least a token amount of barley to avoid the embarassment of not having a feed barley pool at all. Again, this would be discretionary.

Not a good way to run a market signal.

[charliep]

I can't explain so I can only paste.

Directors look to farmers to determine distribution of interest
earnings

Winnipeg - In the coming months, the CWB board of directors will
consult with farmers on how to use excess interest earnings in
the 2001-02 feed barley pool. The board decided to apply approximately
$2.5 million out of a potential $8 million in total interest earnings
to the returns that will go to farmers who delivered feed barley to
the CWB during this crop year. The remaining amount, approximately
$5.5 million, will be placed in a contingency fund.

Net interest earnings relating to feed barley are currently estimated
at $8 million. This revenue is being earned by the CWB on credit
sales of feed barley to offshore customers in the late 1970's and
early 1980's. Across the four pool accounts, total interest earnings
were $75.2 million in 2000-01 and are expected to be about the same
in the current crop year.

"This money is farmers' money and we intend to consult with farmers
on what to do with it," stated Ken Ritter, Chair of the board.
"Some possible uses could include dedicating the money to develop
new varieties with improved agronomics, pursuing additional
research on disease resistance and drought tolerance or pursuing
market development activities that could increase returns to farmers."
Ritter noted that all options would require a change to the
Canadian Wheat Board Act.

Ritter said this situation exists because high domestic feed prices
are limiting deliveries to the CWB. Deliveries to the feed barley
pool in 2001-02 are estimated to be 56 000 tonnes, down from a
four-year average of 416 000 tonnes. Given this situation, the board
decided to assign enough interest earnings to the feed barley pool
to maintain the return at approximately $180 per tonne.

"This value places producers who farm in areas where the CWB
traditionally draws much of the feed barley it sells on a relatively
equal footing with farmers who sold barley on the open domestic market,"
said Ritter. "The value is consistent with the price signal farmers
were given earlier in the year and also ensures the feed and malting
barley markets are not distorted."

Ritter also referred to the Auditor General's special audit of the
CWB. In her February 2002 report, Auditor General Sheila Fraser noted
that assigning net interest earnings to the pool accounts to which
the original credit sale related may result in a significant
variation in the amount of interest earnings allocated to each of
the pool accounts. Ms. Fraser suggested that the CWB should
consider sharing total interest earnings equally among all pool
accounts so that farmers get the same amount of interest earnings
per tonne regardless of the pool account into which they deliver.
The CWB will consider requesting a change to the Canadian Wheat
Board Act to allow for changes in the way interest earnings are
distributed.

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

For more information, please contact:

Ken Ritter
Chair, CWB Board of Directors
Telephone: 306-463-5943
Cell: 306-463-9287

Louise Waldman
Manager, Media Relations
Telephone: 204-983-3101
Cell: 204-227-0623

[charliep]

Just some interesting math on this.

2001/02 PRO - $180/t basis port

Ave. CWB deductions - $42/t

Alberta payments - $138/t or $3/bu.

Average interest payment/t (based on 56,000 t of 2001/2002 and $2.5 mln interest allocation) - $45/t or about $1/bu. (As a note, the interest contribution if they would have used $8 mln in total would have been $143/t.)

Average feed barley revenue from actual sales - $93/t or $2/bu.

[chaffmeister]

Let me try an AdamSmith trick on this press release...my comments are in BOLD...

Directors look to farmers to determine distribution of interest
earnings

Winnipeg - In the coming months, the CWB board of directors will
consult with farmers on how to use excess interest earnings in
the 2001-02 feed barley pool. SO THE INTEREST IS A PROBLEM JUST AS I HAD SAID ABOVE. The board decided to apply approximately $2.5 million out of a potential $8 million in total interest earnings to the returns that will go to farmers who delivered feed barley to
the CWB during this crop year. DECIDED?! SO IT'S DISCRETIONARY! The remaining amount, approximately
$5.5 million, will be placed in a contingency fund.

Net interest earnings relating to feed barley are currently estimated at $8 million. THIS IS UP FROM THE ROUGHLY $6 MILLION IN THE MOST RECENT YEARS I WONDER WHY? This revenue is being earned by the CWB on credit sales of feed barley to offshore customers in the late 1970's and early 1980's. Across the four pool accounts, total interest earnings were $75.2 million in 2000-01 and are expected to be about the same in the current crop year.

"This money is farmers' money and we intend to consult with farmers
on what to do with it," stated Ken Ritter, Chair of the board.
"Some possible uses could include dedicating the money to develop
new varieties with improved agronomics, pursuing additional research on disease resistance and drought tolerance or pursuing market development activities that could increase returns to farmers." Ritter noted that all options would require a change to the
Canadian Wheat Board Act. EXCEPT THE OPTION OF PLACING THE MONEY IN A CONTINGENCY FUND INSTEAD OF IN THE POOL, I GUESS. WHY?

Ritter said this situation exists because high domestic feed prices
are limiting deliveries to the CWB. (AS I SAID ABOVE, THE CWB IS IMPOTENT IN THE FEED BARLEY MARKET.) Deliveries to the feed barley pool in 2001-02 are estimated to be 56,000 tonnes, down from a four-year average of 416,000 tonnes. Given this situation, the board
decided to assign enough interest earnings to the feed barley pool
to maintain the return at approximately $180 per tonne. THIS IS WHAT THE OPEN MARKET WOULD CALL MARKET MANIPULATION. FARMERS SHOULD TAKE NOTE THAT THIS $180 PRO IS TOTALLY ARBITRARY - IT IS NOT A MARKET SIGNAL - IT HAS ABSOLUTELY NOTHING TO DO WITH WHAT OCCURED IN THE FEED BARLEY MARKET AT AT. ADDING $2.5 MILLION INTO A POOL OF 56,000 TONNES EQUALS ABOUT $45.00 PER TONNE. TAKE THIS AWAY FROM THE PRO OF $180 AND YOU GET $135 PER TONNE (AT THE PORT) - THIS IS CLOSER TO THE REAL POOL RETURN FROM SALES.

"This value places producers who farm in areas where the CWB traditionally draws much of the feed barley it sells on a relatively equal footing with farmers who sold barley on the open domestic market," said Ritter. "The value is consistent with the price signal farmers were given earlier in the year and also ensures the feed and malting barley markets are not distorted."

OF COURSE THIS DISTORTS THESE OTHER MARKETS! THIS INTEREST BEING IN THE POOL IN THE FIRST PLACE MAKES IT ARTIFICIAL AND A LOUSY PRICE SIGNAL AND THEREFORE A BLATANT DISTORTION. PLAYING WITH THE INTEREST AMOUNT BEING PLACED IN A PARTICULAR POOL MAKES IT MANIPULATION. THE FACT THAT SOMEONE WITHIN THE CWB BELEIVES THAT THIS IS AN ACCEPTABLE PRACTICE IS ABSOLUTELY SHAMEFUL. (I'M LEFT WONDERING IF THEY DO THEY DO THIS ALL THE TIME - MOVE INTEREST MONEY IN AND/OR OUT OF POOLS? THIS TIME IT'S TALKED ABOUT OPENLY BECAUSE ITS SO BIG A MOVE...)

Ritter also referred to the Auditor General's special audit of the CWB. In her February 2002 report, Auditor general Sheila Fraser noted that assigning net interest earnings to the pool accounts to which the original credit sale related may result in a significant variation in the amount of interest earnings allocated to each of
the pool accounts. Ms. Fraser suggested that the CWB should consider sharing total interest earnings equally among all pool accounts so that farmers get the same amount of interest earnings
per tonne regardless of the pool account into which they deliver. EVEN THIS IS FLAWED - IT WOULD STILL ALLOW THE INTEREST TO CONTRIBUTE TO THE PROS (PAYMENT PER TONNE) BEING SKEWED, MAKING THEM MEANINGLESS AS MARKET SIGNALS. GOD HELP US IF THE AUDITOR GENERAL DIDN'T UNDERSTAND THIS!

The CWB will consider requesting a change to the Canadian Wheat Board Act to allow for changes in the way interest earnings are distributed. BUT THEY ARE ALREADY CHANGING THE DISTRIBUTION BY HOLDING BACK $5.5 MILLION - WITHOUT A CHANGE TO THE ACT. HOW CAN THEY DO THAT?

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

For more information, please contact:

Ken Ritter
Chair, CWB Board of Directors
Telephone: 306-463-5943
Cell: 306-463-9287

Louise Waldman
Manager, Media Relations
Telephone: 204-983-3101
Cell: 204-227-0623

WHY SHOULD FARMERS WHO DELIVERED TO THE CWB THIS YEAR GET THIS PAYMENT? I'M NOT SUGGESTING TAKING ANY MONEY AWAY FROM FARMERS BUT IF THIS IS FROM SALES MADE IN THE LATE 70'S AND EARLEY 80'S SHOULDN'T THIS MONEY GO TO THOSE FARMERS THAT DELIVERED BACK THEN? I'M SURE THERE ARE SOME FARMERS OUT THERE WHO DELIVERED FEED BARLEY TO THE CWB BACK THEN BUT DIDN'T THIS YEAR. THIS IS INTEREST ON THEIR BARLEY SALES - NOT ON THE 56,000 TONNES SOLD THIS YEAR. HOW IS IT EQUITABLE THAT THESE FEW FARMERS GET A $45/TONNE KISS WHILE THE GUYS WHO ACTUALLY SOLD THE BARLEY THAT IS EARNING THAT INTEREST GET NOTHING?

AND WHERE DOES IT SAY THAT THE CWB HAS A MANDATE TO MAKE THE EXPORT BARLEY MARKET "EQUITABLE" WITH THE DOMESTIC MARKET?

WHO IS THE CWB SERVING? WITHHOLDING $5.5 MILLION FROM FARMERS AT A TIME WHEN THEY NEED IT DEARLY, AND PLACING IT IN A CONTINGENCY FUND?! MAKE NO MISTAKE ABOUT IT - THE ONLY REASON THAT THIS MAKES SENSE FROM A CWB BOARD PERSPECTIVE IS THAT PAYING THE WHOLE AMOUNT INTO THE FEED BARLEY POOL THIS YEAR (LIKE THEY HAVE ALL ALONG) WOULD BRING THE WRONG KIND OF ATTENTION. IMAGINE, $8 MILLION ON 56,000 TONNES IS $142.85 PER TONNE - IF THE CWB DID NO MANIPULATION OF THE INTEREST IN THE POOL, THIS IS THE AMOUNT THAT WOULD BE ADDED TO THE POOL. AS MENTIONED ABOVE, THE "REAL" POOL RETURN (WITHOUT INTEREST) IS ABOUT $135. ADD $142.85 TO THIS AND YOU GET A FEED BARLEY PRO OF $278 PER TONNE. WOULDN'T THAT ATTRACT A LOT OF ATTENTION FROM THE US, THE EU, AUSTRALIA, WTO, ETC?

AND WHAT DOES THIS MEAN FOR THE PRICING OPTIONS BASED ON THE PROS?

THIS UPCOMING YEAR I AM GOING TO GET A PERMIT BOOK AND DELIVER ONE TONNE OF FEED BARLEY TO THE CWB. HOPEFULLY I WILL BE THE ONLY ONE DELIVERING FEED BARLEY TO THE CWB AND SO THE POOL WILL BE BASED ON ONLY MY ONE TONNE. BASED ON HOW THE CWB HANDLES INTEREST, I SHOULD GET A CHEQUE FOR AT LEAST $2.5 MILLION FOR MY ONE TONNE OF FEED BARLEY, (MAYBE AS MUCH AS $8 MILLION, WHO KNOWS...)

[Kasro]

Here is news story not likely to appear in the Farmers Independent Weekly or the Western Producer.

Whew, it been a hot day!



CWB ADMITS TO MARKETING SCANDAL

Winnipeg – Chairman Ken Lay of the Canadian Wheat Board was forced to admit today, that the former alleged single desk premiums achieved by the Board in marketing is really just an illusion. Said Chairman Lay, “We are now investigating the flim-flamery that has been exposed in the corporate world, as exemplified by the Enron/Arthur Anderson incident and more recently WorldCom. We are suspicious that a new computer virus, named $pooling.bs.repeat, that has been found in the CWB marketing and accounting department computers is at fault here.” Anonymous sources say the CWB public relations department computers also have the virus. Reportedly, it is actually transferring expenses from the department, and is including them in the Bull Durum Pool as revenues. According to Chairman Lay, the virus may have entered the CWB through an exchange of computer disks with the University of Saskatchewan, who he said have recently been asked to write a program for the CWB to justify previously unsubstantiated claims about the value of the single desk. Just whose desk is being referred to though, Chairman Lay would not say. Sources say it could be the desk of the Minister Responsible for Government Cover-ups, the Honorable Ralph Badbooks. It was reportedly a gift from a Liberal supporter, and has one drawer for concealing any CWB sales contracts that are less than 50 years old, and another one for storing blank government contracts with Quebec ad agencies. People who have peered inside it, say it looks like it may also have a built in document shredder. With all this technology, say CWB appraisers, and because the desk is a single facsimile of the one once used by Lenin, it should be worth more than market value.

Not clear, is just how all this is going affect the nearby CWB elections for directors. It is just possible, that in today’s world of rapid computer assisted data transmission, that the computers used by the Mired In Scores of Money accounting firm, paid for by the CWB to administer the election process also has the virus. Just how many votes would need to be transferred to the incumbent directors from those challenging the illusion, no one would say. However after the elections have been duly influenced to achieve the desired results, the allegations would be buried under tonnes of information from the public relations department said Chairman Lay and election coordinator Pete Slickersly.

Prominent farmer, Tom4CWB, when interviewed by this paper, was left scratching his head over just how all this would affect the pool account in crop year 2003-06. He is particularly concerned with the market distortions the virus has caused. Because of the marketing and risk management expertise developed by Mr. 4CWB, he has a large following of astute managers. He said, “ I really think that this scandal has caused the drought here in Alberta.” “Who knows” he said, “maybe the heat created by all telephone lines burning up all over western Canada as Chairman Lay and his directors try and cover up this scandal has altered the ocean currents, and we are now in a pre- El Nino shadow, causing even the normal clear thinkers over at the Crop Insurance Corporation to loose focus on the risks they are supposed to insure.”

Even AdamSmith, the world-renowned economist, was astounded by the news. “A scandal of this proportion could actually invalidate all my theories,” he is reported to have said. “I may actually have to support the single market concept of a dual desk benefit. After all, if Perfesser Graythinker of the U of S has a plastic model that converts CWB interest revenues to public relations expenses, and from there allocates them to the revenue column in all the pools, deflating the understanding of anything about them, I’ll be a monkey’s uncle.”

In further news, at the end of a long day in the rubber room at the Head Office of the CWB, Chairman Lay could not say just when all this would be explained. “One thing I do know though,” he said, exasperated, “ that now that the corporation has been associated with Enron, Worldcom, Liberals, and is infected with Terminal Grain Beetles, we may not last through the next pool year. I hope this can all be swept under the rug, and won’t diminish my chances to be Prime Minister.” But he added, “all Prime Minister Chretibility did is write himself a cheque for $700,000, transferred over from a fund raiser in Winnipeg which I attended, to cover-up a little bit of $green on a golf course. Since this is a scandal of about ten times the magnitude in dollar terms, though, it may actually help.”

Both Chaffmiester and Charlie Pearson, (no relation of the former Liberal Prime Minister) say they don’t believe the virus story. They have conspired to believe it is really a result of a dis-orientation session conducted in the hallway outside the Board Room of the CWB on director Jim Chutney, the flavourful director from Alberta who has been asking questions about all of this. They think it is just another example of the CWB’s world-renowned ability to expose their shortcomings in marketing ability, combined with their now famous ability to put their foot in their mouth through the public relations department.

No one at the office of the Auditor General could be reached for comment.

[TOM4CWB]

Charlie and Chaffmiester,

I could have saved my barley, instead of delivering it to the CWB pool, and sold it for $4/bu, I am MAD!!!

This is the height of insanity...

I still have some seed barley stocks to deliver to the CWB under contract, how can the CWB break the law, and not pay me for my pooled barley???

Is this just normal, the CWB breaks the law whenever it just suits them??

How can we have any confecence in CWB numbers from PRO's, when they just turn out to be ficticious political manipulations?

When I play the CWB game and deliver to the pool, they still rip me off...

At least they should pay the highest price anyone could have recieved from the open market...

[parsley]

These are the Questions that CWB Director Mr. Chatenay sububmitted to the CWB on behalf of District #2 farmers. District #2 farmers want the CWB to put the answers down on paper so they can be looked at in detail.

QUOTE:
"To the Canadian Wheat Board
For many years farmers across the designated area have been questioning the efficiency, transparency and accountability of the Canadian Wheat Board. They are asking for enhanced documented financial information that is detailed, accurate, complete and readily available in the annual reports. Only when this is achieved will farmers be prepared to make informed decisions on the many controversial issues that arise concerning the monopoly that they are required to be a part of. The public is told that farmers are in control at the CWB but in reality without complete and detailed financial information farmers can‘t be expected to make intelligent decisions that will enhance and support the Boards performance. To that end we are submitting some questions and suggestions that we hope will clear up concerns on several issues.
To better understand the results stated in the annual reports of the CWB we would ask to access the financial records used to determine the audited financial reports. A breakdown of netted out numbers and a person to explain the accounting methods used, would be very beneficial. The Statement of Pool Operations- Combined Pool Accounts is a starting place. We would like to see the interest earnings broken down into separate gross amounts for each entry as well as separate gross amounts for each entry of interest paid. This also holds true for any other netted out number in the financial statements. By doing this you would be carrying out one of the suggestions for improvement put forth in the special audit report done by the Auditor General of Canada. In the Auditor Generals Report on page three under “areas where improvement can be made” the auditor general states “we did note a number of revenues and costs that are netted or grouped in the presentation of the final results of operations by pool account. To improve accountability and transparency, the CWB should provide details in its financial statements of all the significant revenues and costs associated with its operation of pool accounts.”

Questions Specific to Pool Operations-Combined Pool Accounts

1) What was the breakdown of the categories used in determining total interest earnings in 1998 for the Statement of Pool Operations - Combined Pool Accounts and what are the total $ amounts of each entry?

2) What percent of the total interest earnings from these entries are represented by investment interest?

3) What was the breakdown of the categories used in determining interest paid in 1998 for the Statement of Pool Operations - Combined Pool Accounts and what are the total $ amounts of each entry?

4) What was the total cost of demurrage for 1998?

5) What was the total cost of despatch for 1998?

6 )What are the categories used for positive freight rate changes and what are the total $ amounts for each entry?

7) What are the categories used for negative freight rate changes and what are the total $ amounts for each entry?

8) Will the CWB continue to present this breakdown of netted out numbers on a yearly basis and show the results in the annual report? Please specify the time frame involved in accomplishing this change."
UNQUOTE


District # 2 farmers submitted these questions respectfully and as you can see, without angry comments . The only possible reason that the CWB could have for not answering these questions in written form is if Anderson's Enron kind of auditing has been done. Farmers will, for now at least, presume that the accounting procedures are explainable and above board. But the answers must be on paper.

Parsley

[parsley]

These are the questions District #2 wants answered and they relate to the Credit Grain Sales:

Quote

"Credit Grain Sales

Questions

9) What was the breakdown of principal & interest payments on the total $ amount paid by the government of Canada each year from 1991-2001 in respect of Paris Club and/or Canadian Debt Initiative debt reduction for Poland and Egypt?

10) What was the breakdown of principal & interest payments on the total $ amount paid by the government of Canada each year from 1991-2001 in respect of Paris Club and /or Canadian Debt Initiative debt reduction for any other countries? Please specify the names of the other countries?

11) What was the total $ amount of principal and interest paid by individual countries that are repaying their debts from the credit grain sales on time from 1991-2001 and please specify the names of these countries?

12) What was the total $ amount of principal payments generated from the repayment of Credit Grain Sales and put towards the reduction of the balance on borrowings for each year between 1991-2001? Please indicate whether the principal payment was received from the Government of Canada or from specified countries.

13) Have any countries that owe money to the CWB through Credit Grain Sales ever formally repudiated their debts and gone into default? If so please identify the countries and the amounts defaulted?

14) How many countries dealing with the CWB that have their debts rescheduled through the Paris Club/or Canadian Debt Initiative have been given interest free loans for any period of years? Please identify the countries and the period of years involved.

15) What $ amount borrowing limit has the government of Canada set for the CWB?

16) Considering the track record of the Credit Grain Sales Program and the fact that the credit grain sales in the Agri-Food Credit Facility are on the rise, what legal safeguards have the directors and senior management of the CWB put in place to insure that the Canadian Government does not issue credit through the Agri-Food Credit Facility to countries that will leave the pool accounts directly responsible for 2% of the principal and interest? Please explain in detail."
UNQUOTE


Parsley

[parsley]

More DFistrict Two Miscellaneous Questions needing answering

QUOTE

"Misc Questions

17) What is the exact area of the NAFTA agreement that some CWB directors say does not allow for a monopoly to be reinstated after a trial period of dual marketing? Please explain in detail your concerns.

18) On page seven of the Special Audit report done by the Auditor General of Canada’s office it states that the CWB is changing from the “OLD exempt crown corporation closely associated with the federal government; with a reputation for secrecy…….. to a NEW Shared-Governance organization; no longer an agent of the Crown with separation from the government.” However in the Population Affiliation Report; Summary of Additions, Modifications and Proposed Organizations (copy attached) which is put out by the Treasury Board of Canada Secretariat, it shows that the status of the CWB has not changed in any way. The CWB is still exempt from Part X of the Financial Administration Act that deals specifically with Crown Corporations; and the Canadian Wheat Board is still not subject to the Access to Information Act. Will the directors move forward and change the status of CWB with regards to these Acts so that the CWB becomes subject to the Access to Information Act and is no longer exempt from Part X of the Financial Administration Act? Please state a time frame for this decision.

19) What is the total $ amount that has been taken out of the Pool Accounts for the administration costs associated with the Export Licenses issued by the CWB between 1991-2001? Please include Export Manufactured Feed Agreement licensing costs.

20) Is there now or will there be anytime in the near future, plans to create a capital ventures contingency fund? If there has please explain it in detail.

21) If there needs to be a consensus for disclosure on any of the above questions could you please make public the way each director voted so their constituents can decide whether or not their directors are voting in their districts best interests?

Thank you for your willingness to respond and acknowledge the concerns of farmers. Some of the questions are very detailed and we understand that it will take time to gather all the information you need to respond with complete accuracy. Your co-operation in answering these detailed questions shows your willingness to bring the CWB to a new level of openness and accountability.

Yours truly
Jim Chatenay"

UNQUOTE

When you read this, ask yourselves why are the other Directors not working as hard for farmers as James Chatenay is?

Parsley

[parsley]

This addendum to the Questions sent is very interesting for farmers to read.
QUOTE

"Background for Questions to the CWB

When the Canadian Wheat Board makes a credit sale it borrows the money for the sale and puts that money into the appropriate pool accounts for the farmers. The fact that the Government of Canada guarantees payment of principal and interest on all credit receivables under the Credit Grain Sales Program seems to be a no lose scenario for the CWB. In reality, the guarantee is not that straight forward. The accounting policy set up by the Canadian Government states that each time a sovereign debt is deemed non-performing, the principal and interest can be rescheduled and no payment has to be paid by the Government of Canada to the CWB until the particular country formally admits to default. Unfortunately formal repudiation of debts by debtor countries very seldom happen because why would they repudiate their debts when a rescheduling agreement can be obtained that spreads out loan payments over an extended period and sometimes includes a grace period of several years. As loans come due, if the country can’t pay, the loans are rescheduled. This can go on indefinitely. This gives the government the loophole it needs to pay only a token payment to the CWB in regards to Credit Grain Sales interest. This is how it works.
To calculate the net interest that is returned to the farmers, the CWB takes the total amount of interest due from the credit grain sales (as opposed to what is actually received), subtracts the total interest paid on borrowings and comes up with a positive amount which is paid to the farmers. When the CWB works out the interest due from the credit grain sales they base the interest rate for debtor countries on the rate agreed to at the Paris Club. This rate is little more than 1% above what Canada pays for borrowing. This is considerably lower than what the rate would normally be for countries with less than desirable credit ratings. The normal interest rates for the majority of the countries dealing with the CWB range from 6-17% on the Moody’s rating list that was worked out in the year 2000 when world interest rates were fairly low. In the 80s when the countries started having trouble servicing their debts to the Board the interest rates were much higher. The results of rescheduling interest rates of debtor countries so that they are paying approx 1% more than what Canada’s pays on its borrowings, has an incredible impact on what the pools receive for interest earnings. For the last few years the spread between interest paid by the CWB on borrowings and interest that was due on credit sales was approx 4% (before rescheduling) as opposed to the 1% (after rescheduling) we are now receiving from the Government of Canada. In the years of high interest rates the spread could have been anywhere up to 8% (before rescheduling). When you are dealing in billions of dollars of credit grain sales you are talking about a great deal of money. As we sit now the spread of 1% gives us approx $75 million dollars (this is what pool accounts receive). The spread of 4% (before rescheduling) would have given farmers accounts close to $300 million. In the 1980’s the spread of up to 8% could have earned the pool accounts anywhere up to 2 times that amount. This becomes very significant over the years. To make things worse, the Paris Club and the government also rescheduled loans with 0% interest over a number of years and principal owed to the CWB by the government of Canada was often rescheduled along with the loans. When the CWB was asked about this method of doing business they stated that if the CWB did not go along with what the Government and the Paris Club decided, then the accounts would go into default and the CWB would lose all the money from the defaulted credit grain sales. This of course is not correct because the government would never allow that to happen. A formal admission of default by the debtor country would mean the government would have to repay the entire amount of principal and interest due to the CWB from the debtor country in accordance to the rules of the Government of Canada Guarantee. Rescheduling puts off the need to tackle this problem. This then brings up the question of why the CWB and the government of Canada continually deal with these countries that have questionable means of repaying their debts. Why do they continually extend their credit limit and then forgive or reschedule the loans? The answer to this is political. The government of Canada, through the CWB is keeping a guaranteed supply of credit grain sales to offer up to the G-8 as proof of their commitment to reduce poverty and satisfy their obligations to the Enhanced HIPC (Heavily Indebted Poor Country) Debt Initiative. On March 25, 1999 Prime Minister Jean Chretien announced the Canadian proposals to enhance debt relief and, in so doing, Canada emerged as a leader amongst the G-8 on the debt issue. Moreover Canada pledged to provide 100% debt relief to the poorest countries. The February 2000 budget expanded the 100-per-cent debt forgiveness to all eligible HIPC’s that are making a real effort to improve the well being of their citizens.
The most troubling part of all this is the fact that in 1995 the CWB, with the Government of Canada, set up the Agri-Food Credit Facility which allows the CWB to sell grain either directly or through accredited exporters on credit to private importers where the importer cannot provide a sovereign guarantee of repayment. Since the transactions involve private buyers and their foreign banks, country credit ceilings do not apply but instead the Government of Canada evaluates each transaction on a case by case basis. The government of Canada guarantees a declining percentage of the receivables under this program based on the repayment terms of the credit, with the Canadian Wheat Board assuming the risk not covered. This risk amounts to approximately 2% of the total and this money comes directly out of the pool accounts. The total amount of credit in this account is starting to rise dramatically and considering the track record of the Credit Grain Sales Program there should be some major concern on the part of the farmers concerning this facility.

Sources for Background & Questions

1989 & 1992 Reports of the Auditor General
2002 Special Audit Report of the Auditor General of Canada
Moody’s Investors Service Ratings List
Treasury Board of Canada Secretariat - Population Affiliation Report on Crown Corporations - Section 4
Department of Finance
Report on Operations Under the Bretton Woods Related Agreements Act: 3 Joint Issues - Multilateral Debt Relief
CWB Annual Reports 1991-2001"
UNQUOTE

The Canadian Wheat Board has some explaining to do.

Parsley

[cowman]

So when you take out the interest payments and shipping the actual return is $2/bu.? Incredible! Meanwhile the Alberta feedlot owner and hog farmer are crying for barley and we are giving it away to Aba Daba or whereever to feed their pet camels? I guess the question is why? Is it only to keep the railroads in business? To keep the ports in the black? To keep the government workers employed? So in comes the subsidized corn and the Canadian government cries foul while they are doing the exact same thing with barley?
I'm not sure just when it was, probably in the late eighties, that there was a hard frost over most of the western grainbelt. The wheat crop was badly damaged but still a very large crop. The CWB announced it had made a very large sale to the USSR at a very large premium. Going to save the wheat farmers! Credit sale of course! The Russians insisted on top notch wheat so nothing but the best went to them. Of course they had no intention of ever paying for it so could offer a big premium and the CWB knew that! Made the CWB look real good, single desk extracting a premium for all the poor wheat farmers! So there was nothing left to sell to the Canadian millers but the frozen pig feed(at an even higher price!). Of course no one knew about this at the time but I sure wondered why bread would fall all apart in the toaster. So the Russians had free quality bread from the Canadian government and the people of Canada got to eat pig feed at high prices! The CWB is rotten to the core and should be abolished.