FPC,s and DPC's Sudsidizing Pool accounts

[craig]

Just went through last years Annual CWB report. The producers using FPC's and DPC's contributed a net surplus of $35 million. Of this $7.5 Million went into pool accounts and $27.5 went to the contingency fund. Contingency fund is now over 48 million and cannot exceed $50. million. If this surplus had been returned to producers who used the PPO's it would have represented an additional $.8o per bushel or about $30. per tonne. We now have a situation where the surplus from these accounts this year will likely all be dumped into the pool account because contingency cannot exceed $50. million. Notice how the CWB makes sure that the FPC's and DPC's don't jeopardize the pool accounts and producers are not entitled to any additional payments from the pool account but it's quite alright to dump the millions of surplus into the general pool account. They wonder why producers want a voluntary wheat board. Also can't understand how you can claim a contingency fund is a liability and not an asset.

[charliep]

When I just look at the $7 mln transfer from the wheat ex durum class, all farmers who use the program (just under 1.2 mln tonnes), each farmer contributed about $6/tonne over and above the other costs they paid to the overall pool account. Unless the contingency fund is increased quickly (maybe too late given the 2005/06 pools have been closed for along time), substantially more money will be transferred from farmers who used the programs to the overall pool.

I note these programs have been toted as symbols of change/a new CWB. The results show something different.

[WRAPper]

I wonder if the program couldn't be changed the board needs to be doing a few different things with these ppo's , but the producer has to to be responsible for thir marketing decisions in using these programs too exactly like they would be in non board grains. I would look at whether or not it makes sense to increase to cap to 60-65 million(or not) then at that point begin a program where the overage(if any) is returned to the producers and the pool using the PPO's on a sliding scale over time . starting at 75% to the pool 25% back to the ppo participants as a a"basis" adjustment payment. within 3 years 50-50. 6 years out I would do something a little different in that I would drop the number from 50 -50 to where the pool and the producer share in 75% evenly and the remaining 25% be used either for an investment in cereals research through the wgrf.OR the post secondary route for students. This money would be credited to the producer as a taxable deduction for income tax purposes less a administration fee.
These numbers can be played with, perhaps all the money(overage) should go to WGRF eventually or students.

By putting the overage in the pool it makes the pool sales look stronger which it shouldn't and conversely the free market wouldn't give the producer your money back. niether party here is really "entitled" to this money. Personally this year as it stands on the ppo thus far I'm ahead on some CWRS but behind on some CPS. So I see it as a saw off so far.

[craig]

WRAPper
I do not understand your logic.This is why the CWB continues to make Producers Mad. It is clearly stated that producers who use Producer Payment Options are not allowed to participate or receive further payments from the pool account. Under that senario I do not understand how you can suggest producers in the pool account should be entitled to any overage gained from PPO's. I guess the question that needs to be asked is where is this surplus coming from. It is my understanding that the contingency fund may now be capped at 60 million. If surpluses are created because of ridiculus basis levels then producers who use the PPO's should be entitled to that overage. This years annual report (05-06)should be interesting because with increased use of PPO's and the little room to the cap we could be creating a huge surplus with no where to go but the pool accounts.

[WRAPper]

I am agreeing with you the pools shouldn't get the funds but neither should the producer. There are no "do overs" in Canola basis's what is your solution then? I offered a solution you don't like it. Lets hear yours and it can't include giving all the money back to the ppo participants as they made that business decision.

[WRAPper]

read my first post more carefully you'll note in there I said perhaps all the overgae should be directed into the WGRF or bursaries with the produces getting the taxable benifit of their share. So I don't in fact think the monies should go to the pools because it distorts their performance and they need to stand on their own too.
Offer solutions Craig don't just offer problems only.

[TOM4CWB]

WRAPper;

THe CWB has NO Statutory mandate to steal money from any grower... the Contingency Fund can as easily operate at a ZERO fund level... as at a $50million level.

The CWB building a capital base at the expence of PPO growers... is not equitable, fair, and was never the intent of the CWB Act.

Transfer of PPO monies to the pool accounts is totally out of line...

Didn't the CWB claim for years the PPO's did NOT affect the Pool accounts?

[craig]

WRAPper
I asked a simple question of what has created all the surplus in these Accounts. Until we determine that I think it is difficult to determine where the funds should go. We should also make sure that we understand that FPC's and DPC's have some marked differences from the open market. In the open market you have competition when basis is offered, under the CWB there is only one game in Town. The Contract Programs are somewhat tied to the PRO's and not totally to the open market. In an open market you would have a hard time selling the basis levels the board is using. If you don't believe me fiqure the total basis you pay to get to Vancouver under the FPC. and then Compare that to an American Farmer whose grain ends up in Portland.The basis argument is even more out of line when you likely have 60 million dollars in contingency to backstop unforseen circumstances. I think the CWB has the tools and expertise to operate both PPO's and pool accounts and keep them totally seperate. I honestly believe they don't want to do that because there would then be a benchmark with which to judge their performance.

[WRAPper]

I don't disagree

[chaffmeister]

I was about to write something here - but then I read the postings. Craig has already said what I was going to say anyway.

WRAPper - there's no adjustments on canola because the grain comapnies are profit maximizers - the CWB's mandate is to pass all revenues above expenses back to producers.

I like the idea of all overages going back to the contract participants. Certainly shouldn't go to the pools, and the contingency fund seems more like 'retained earnings' to me.