"Farmers owe wheat board $29M in overpayments"

[chaffmeister]

There are really only two issues here.

1. The CWB dropped the ball with respect to the administration of these contracts.

2. The Free Press did a lousy job of reporting the story.

The fact that farmers need to return over payments is not a big deal, even though the Free Press would like you to think it is. The contracts didn’t backfire on farmers – poor program administration backfired on the CWB.

The fact that the CWB didn’t make provisions for this potential is a big deal.

The Free Press article quotes Heather Frayne from the CWB:

“Frayne said nobody foresaw the huge run-up in prices that occurred late last fall and early in 2008. " If the farmers had seen that coming they wouldn't have locked in their prices early on and the situation would never have arisen," she said.

If the farmers had seen that coming….!!??? So it’s the farmers’ fault they were overpaid?!

The people who designed these contracts and then administered them should have considered this potential. What Frayne should be saying is “If the CWB had seen this coming, we would have prepared for it. But we didn’t see it foresee the huge run-up in prices so we were caught off-guard.”

Free Press also wrote:

“She added it would have been logistically difficult -- and expensive -- to pay out lower initial payments to the thousands of farmers enrolled in the fixed-price contracts, thereby preventing the overpayments.”

What a crock. Before you roll out a program like this you get your agents (the grain companies) onside. You set down provisions that allow them to (1) pay the initial payment (apparently this is administratively the easiest approach), (2) deduct the conventional deductions (freight, handling, etc) and then (3) make a payment adjustment (addition or deduction) so that the net is the contract price.

This is just one of many, many ways to administer this kind of contract. The way the CWB has done it is certainly not one of them.

What a mess.

According to the Free Press, “Doug Chorney, an East Selkirk farmer, said "it's kind of ironic" that farmers who have demanded greater marketing options from the wheat board should now be upset when using these sales tools backfires on them.”

BACKFIRE? Chorney, get a grip. The contracts didn’t backfire on farmers. The CWB administration of the program backfired on the CWB.

Also from the Free Press: "It's too bad that this is turning into a negative for the board because the board's responding to what farmers have wanted,".

Of course it’s a negative for the board – the CWB SCREWED UP.

Also from the Free Press:

“Wheat board officials say this is a unique situation, and nobody could have predicted the dramatic run-up in prices last fall and earlier this year. Certainly, the farmers who now owe the CWB money didn't.”

There they go again – pointing a finger at farmers. A more correct way to write this would be:

“Certainly, the CWB designers and administrators of this program didn’t.”


I now have absolutely no confidence in anything the CWB does. Makes me wonder if the CWB is capable of providing any program properly and efficiently.

There should be a complete audit of all these PPO programs.

[Kodiak]

I agree - the CWB screwed up. If it were well managed and efficiently run, this would not have happened. The CWB by and large has a bureaucratic mindset, not a commercial one. If a commercial grain company had overpaid their farmer customers $29 million, heads would roll. Probably the whole accounting department would get a shake-up. There would be a report to, and an investigation by the Board of Director Risk Committee. The CEO would have to account for the sorry mess and put in procedures to prevent a further occurrence. Management would be under intense scrutiny for quite a while until the Board’s confidence in management was restored.

$29 million?? Wow - what if the CWB were shareholder owned - how much would have the shares collapsed as the owners lost confidence in the Board and management's ability to run their company and safeguard their capital?

Instead of real accountability and a management overhaul, over at the CWB the communications/spin staff blames the farmers. What a gong show.

[Fransisco]

And what is the final cost on this little administration error going to be?

The interest on $29 million is not a small number. If it's for a year that gets you over the $1 million dollar mark.

[dirtgirl]

I often read the posts on this site with interest but have never posted. Nothing like a discussion about the ineptness of the CWB to get my blood boiling!

We had a similar thing happen to us, except that the CWB shorted us on money. We delivered grain last fall. The grain company issued cheques which we decided to defer until the new year. However, over that time initial payments were raised and when we subsequently priced out DPC and FPC contracts we were shorted the difference between the original IP and the new IP. When I contacted the CWB about the short fall they issued the remaining payment but the CWB rep told me that from then on I should ask for him or put reference to him on any pricing phone calls or faxes. I did this on the faxes, but of course the info never made it to this rep and every time that we priced using a PPO we were shorted the difference. I asked the CWB what would have happened if I had not caught the shortfall and they said that they would have found if at the end of the year when they reconciled their accounts. Maybe they would have or maybe they wouldn’t have ( I am a little cynical), but they obviously did find it earlier than year end when it was in their favour.

The comment by Heather Frayne saying that if farmers had foreseen the huge run-up in prices that occurred late last fall this never would have happened, makes me furious. WTF? That is absolutely irrelevant. The problem is with how these contracts are administered. I am sure many farmers sold canola before the huge run-up as well and I doubt that many were overpaid for it!

It is time for a change.

[agstar77]

There is no pooling for Canola, no initial price thus no overpayment, Duhhh!! Nothing like appeasing the free marketers and then getting called down for it.

[parsley]

Oh how soon we forget::

1. The CWB has abandoned pooling anyhow.The CWB ONLY POOLS SELECTIVELY AND AT WHIM.


2. OVERPAYMENTS ARE A DIRECT CONSEQUENCE OF THE ACCOUNTING DEPARTMENT"S INCOMPETENCE.

[parsley]

dirtgirl,

Glad you took the time to comment.

Farming is your business and the agstars of the CWB have been more than happy to run it into the ground.


This morning, it's the humiliation trick agstar is trying to play on you, dirtgirl.

He'll try to play the alienation and intimidation cards, too.

All single desker tricks.

He'd sooner word fight than acknowledge there is a CWB licensing problem or try to put a solution on the table.

Agstar's solution? Jail the bastards.

Parsley

[chaffmeister]

agstar:

I really doubt any free marketers asked for incompetent contract administration.

[dirtgirl]

Agstar - obviously there is no pooling for canola - duh. However, wheat contracted under FPC/DPC contracts is not pooled either. The CWB doesn't have the foresight to see problems with how these contracts are paid out when initial prices change? Scary.

[Fransisco]

What we asked for is choice agstar.

A choice other than just the CWB. The CWB has just proven again why we need that choice, if one company is incompetent you can always go to another.

Its amazing how that simple little thing, competition, smartens everybody up.

[TOM4CWB]

Agstar77;

This CWB pooling/PPO system... the way the CWB set this up... was/is a mistake.

ADMIT IT. It cannot work.

Risk management via the CWB pool kills both pricing systems.

2003 all over again!

[d-45]

Agstar:
The CWB is not appeasing farmers with the ppo's. They are simply showing their incompetence in administering these programs.
It is disgusting that you would mock the farmers that you represent.