CWB Annual Report Sales Price Comparison

[charliep]

Haven't waded through the annual report but note the comments previously about page 43/Sales price comparison.

For the CWB directors/others:

How were prices collected for these comparisons? Externally generated or internally generally by CWB staff? What processes of due diligence does the CWB board of directors use to ensure their accuracy/relevance to the market/measuring the performance of the CWB operations side? Have these numbers (or perhaps will these numbers) be submitted to some outside varification process (perhaps similar to that of an audit process)?

I would perhaps ask the same thing of the processes around the contingency fund? Is there an operational plan around the producer pricing options? How is performance measured around the operations with regards to their ability to manage the risk of these programs? I again note the $40 mln loss on the contingency fund.

[liberty]

Excellent questions, Charliep. After reading Vader's statements and/or rants, I was thinking exactly the same thing. I've often wondered how the CWB collects prices for comparison purposes. Do they phone up Cargill and ask? I think it unlikely they would get an answer. By the same token, don't hold your breath waiting for an answer from Vader.

On a similar vein, what about the cost of these CWB sales? Is that noted in the ledger presented to the directors? I know that in many businesses, sometimes a deal is not worth going after if its cost, in terms of transportation, volume, middleman fees, or some other condition makes the margin either negative or just too low to bother with. In other words, is there any attempt to analyze the benefit of a premium in a sale by comparing it to the cost of obtaining that premium? Or do the CWB staff ignore these issues and just "cherry-pick" only the data that makes their case more favourably?

[Fransisco]

Rod/Vaders answer was that these are the numbers from the "binder" that directors get. No one else is allowed to see it or know what the methodology is. We are supposed to "trust" the directors. Apparently the directors are never wrong as they are woven from a finer cloth than the rest of us.

And anyone who asks questions like these will not get answers because as Rod said,"You might be some schill paid by some Multinational grain company to raise shit and promote lies."

-By the way Rod, it is spelled 'shill' not 'schill'.

[charliep]

I will individuals out of the discussion. Because I suspect that many people don't read the fine print, I will post footnote.

Quote bottom page 43: "The wheat pricing model establishes the pace for pricing the wheat pool. The pace is denoted as the target price pace. Pricing with the model is a combination of actual sales activity and derivative trades. Pricing is more or less than the daily "target" amount is regarded as the discretionary sales activity. Daily sales and derivative transactions are benchmarked to the current futures market prices at the end of each day. In a rising market, as was the case in the summer and fall of 2007, results will be negative if the actual amount of the wheat priced exceeded the amount to be priced by the target pricing pace. Tonnage priced at earlier price levels will produce negative results when these positions are closed out at the market price above the level at which they were initiated."

Without going into the prices themselves, the benchmark is based on CWB actual and derivative sales over time period - likely from March 2006 to September 2007 or 18 months. Using wheat ex durum as an example (15.5 MMT pool size), the benchmark assumes the 28,700 tonnes every day over a 540 day period were priced at the market over the whole. This could be weighted but will let someone else fill in the gaps.

I will look to CWB representatives to confirm this and potentially fill in the gaps.

Will note there is nothing in the footnotes to indicate whether the benchmark benefits include or don't include CWB costs. If the numbers don't these costs, then the CWB will show up as a net cost.

[charliep]

Just for interest, everyone should look at page 90 (footnotes to the financial tables).

The deficit from the 2006/07 in wheat ex durum is $14.5 MMT. There is a $20 MMT surplus which is carried over from something called other. You might want to look at the fine print - does mention barley. The CWB did make $78 profit on 5,906 tonnes sold during the barley open market period.

Some snide comments come to mind how farmers who are using producer pricing options in 2007/08 are helping bring the contingency fund back up to reasonable levels but the trading losses on PPO accounts might make me look pretty bad in a years time.

[charliep]

Error alert. where you see $___ MMT. that should be million dollars. $___ mln. Words left out as well. Hopefully is clear. Ask questions if not.

[charliep]

Apologize for posting 4 times but if someone has to buyout of a CWB PPO contract, where does the money go? If the farmer can't find and neighbor to fill the contract/share benefits when the contracted price is above the market price when they are forced to exit their contract, where does the money go. Excess interest earnings from feed barley are one contribution.

[just_wondering]

Are farmer directors qualified to run this type of organization,
I was at the final AU delegates meeting in Calgary last year, where it seemed a very capable ex banker recruited by the current board was not elected because public speaking was not his deal.
If Directors are only elected on their positions on the single desk, this is what we get.
Time to take this entity public and get on some professional directors, who know how to direct, they can then get the CEO to fire dead weight staff.
I wish this new CEO White from Australia the best in dealing with the quagmire that is the CWB.

[Fransisco]

Thanks for trying to make sense of this Charlie.

I did read the fine print the first time round and it looked like greek to me. You have made it a little clearer.

Let's see if I got this straight it is a 'model'. That to me means that it is not a real world comparison.

They use futures to benchmark against. Okay, but what basis do they use?

What are the CWB derivative sales?

[just_wondering]

I am NOT saying any farmers are qualified, just that this 5 billion $ organization needs some real skills.
And that micro managing directors are NOT what it needs. Who ever heard of week long director meetings 10 times a year.
I also realize that the director collage is a step forward. but wow

To get elected one should have other skill sets than being able to raise your hand when the question of the single desk comes up.

[TOM4CWB]

Charlie,

It is interesting that the CWB can sell wheat they do not own, & that has not even been grown yet.

It is convenient to start pricing earlier... the natural economic inflationary drive of currency... in today's policy environment... means pre-pricing is cost minimization.

I fail to see how the CWB benefits growers by pre-pricing our pooled grain before it exists. All this does... is to lower the long term value of our crop...

I need an easy way, to reverse engineer the CWB pricing policy... so I can transparently understand CWB actions... and mitigate CWB pricing actions when needed.

I do NOT see how this is possible.

PPO's in no way transparently mirror what the Cash PRice the CWB gets for my grain. This is all I have ever demanded... a cash price. Todays price.

Where is it?

[chaffmeister]

charlie:
On the non-pool transactions where the CWB indicated it made $78 on 5,906 tonnes, I assume that is $78/tonne.

Do you agree? (It's actually pretty sloppy reporting if it is $78/tonne. If its not - if its actually just $78, why bother reporting it?

[charliep]

The $78 is in the notes for the financial and I assume placed there by the auditor. don't know why.

[winwin]

What are you guys trying to do?The high priests of our monopoly church have seen the SCRIPTURES-----THE BINDER!
It is for them-not you to understand and interpret.You must trust and BELIEVE.
Otherwise the inquisition may have to put more of you heretics in jail.That is how we make believers out of you:the fear of torture and excommunication.
If our church had to compete and you could chose then you would have to think.A reformation means the end of the glory of the Vatican on Main str.

[charliep]

chaffmeister

Have reviewed the statements and still have an answer about barley. They refer to the following in the last paragraph contingency fund section (page 81).

Quote: "Interest earning on feed barley totalling $1.9 mln were transfered to the fund (contingency - other review page 90. Finally, the profits on non pool barley transactions totallying $.08 mln (I assume $80,000) were transferred as well."

I apologize for confusion/a dumb question.

Liquidated damages are accounted for in the PPO statements. Pricing damages were $2.5 mln (page 73) on wheat.

EPO is also a net contributor to the contingency (page 73). Using wheat as an example, the users of the EPO paid $1.6 mln and the CWB cost was $1.1 mln. They propped up the contingency up to the tune of $500,000.

Will let CWB clients/owners review pages 74 for the results of the other pools. This can be compared to the notes on page 90.