"Farmers owe wheat board $29M in overpayments"

[TOM4CWB]

Charlie,

Isn't it Ironic... that none of this is owed... until at least July 31 and damages have been assessed? We are no where near valuation day!

The CWB is creating all sorts of new rules... to pad a point... when they have absolutely no Idea what the settlement prices will be.

Talk about releasing confidential information... for what good purpose?

Grind my nose in an offensive mess the CWB created in the first place?

[TOM4CWB]

Just had a call from PPO Mel.

I had the professional opinion of the likes of INFORMA...

Any one with any common sense...

Would have to admit that upon close examination...the Fixed Price Contracts have neither a commercial basis determination... nor fairly pay growers a cash price that in any way produces a premium that the CWB portrays as their bench-mark for survival of the 'single desk'.

The FPC is a one sided contract... that the CWB writes... and governs... that is neither commercial, fair, or ethical... it does not live up to the standards and 'Core Values' the CWB claims to aspire to... or the Code of Conduct the CWB Directors claim to uphold. The Daily Price Contract was a farce... unfair, it proves by its disappearance that the CWB is not willing to be in any way commercial or transparent... for a program as poorly representing US prices... it tells a huge story.

AND now the CWB attack... Farmers owe the CWB... obviously "Stupid" farmers... who didn't POOL!

RIGHT BACK to the POOL.

PROOF the CWB has HUGE problems... and has a massive risk management issue;
That it (the CWB) has chosen to grow into a BORG CUBE the size of the moon!

[melvill]

I have to confess I'm not quite certain why there is such a furor that producers are being asked to return over-payment funds to the Board.

I wasn't even aware of this issue so I did a little investigating. I read an article printed today in the Winnipeg Free Press. The article is at: http://www.winnipegfreepress.com/subscriber/business/local/story/4168223p-4755934c.html

Apparently there is also an article in the Manitoba Co-operator but I couldn't find it on that web site.

This is what seems to have happened. Apparently there are a number of producers who priced their 08 wheat using a fixed price contract before the big run-up in wheat prices last fall. By the time the wheat was delivered to the local elevator, the initial price the producer received at delivery was higher than the price these producers had locked in their wheat using the FPC. So, basically, they were overpaid for their wheat when it was delivered to the elevator.

These producers have until October 31 to return the overpayment to the Board.

[Ron]

I hate to say it but the board isnt doing anything wrong? That was tough to type.
It would have been easier if the overpayment was deducted from the first cheque BUT that would be a pain in the ass for the elevator (and why make them take the grief from the farmer). Also, when the initial is less than the FPC it comes in the mail, not from the elevator so I understand why overpayments are treated the same.
I assume no interest or penalties are being applied untill fall? If so thats a gift from the board. They are pooling the interest cost into other producers? Pooling benefits FPC users? Wow, another tough one to type.

When the FPC was signed the producer accepted the price, his problem for the overpayment. He could have hedged off KC or Minni futures (kind of what FPC's are loosely tied to). Delivery late in the year sucks ass though.

Still, my feelings havent changed

SCREW THE CWB
SCREW THE CWB
SCREW THE CWB

[TOM4CWB]

Lee,

I would not be surprised that the CWB has totally messed up on risk management around the PPO program.

If they did not hedge the new crop 08-09 PPO's properly... and I wait till August to deliver my grain... and the futures fall... they (the CWB PPO/Sales DEPT)are in a real pickle.

I have the option to wait... buy options... whatever... deliver my wheat into the 08-09 crop year at a tidy premium... and cash pay my CWB Basis THeft racket off.

THese turkeys have all these hedge premiums sitting there! RIGHT?

What if they don't... then what?

PUSH growers NOW... to deliver... and pay up.

June 13 arbitrary deadline to switch between FPC and pool deliveries... we have switched well into October in past years... to settle these accounts!

And these jokers have all our final payment money from pooled sales in any event!

Who are they trying to kid?

THis is a CWB strong ARm tactic... to get a Media win for the 'Single Desk' Pool... and antagonise progressive growers who got stung by a bad program... (FPC/DPC's)that are a rip off and not either commercial or ethical!

What choice do we have?

Participate... or GO TO JAIL.

AGAIN F.Y.I.:

STATEMENT OF CORE VALUES
Our commitment is to add value for Prairie farmers in every aspect of our business.

OUR CORE VALUES:
Create value for farmers
Build a results-oriented enterprise accountable to the farmer.

Deliver service excellence
Be dedicated to a customer focus in all we do.

Develop great people
Respect, develop and recognize people our most valuable resource.

Demonstrate integrity
Maintain the highest standards of ethical business conduct.

Be world class
Demonstrate an uncompromising commitment to excellence.

Embrace innovation and change
Create and implement new and better solutions from winning ideas.
Vision
Canadian farmers innovatively leading the way in the global grain market.

Mission
Creating a sustainable competitive advantage for farmers and customers through our unique business structure, innovative marketing, superior service, profitable investments and effective partnerships."

"Goals
-To be viewed by customers as a reliable supplier of consistently high-quality products and services

-To be flexible and responsive - able to take advantage of market opportunities that emerge

-To have legal authority to operate within our existing CWB mandate in international trade agreements and recognition internationally that we operate on a fully commercial basis

-To manage corporate and financial risk in the best interests of the CWB

http://www.cwb.ca/public/en/about/vision/


PLEASE explain how the CWB has done this for me... with the 07-08 FPC basis?

THEY HAVE NOT LIVED UP to THEIR end OF the Commitment!!!

[stubblejumper]

Tom I for one am getting tired of your crying. Get over it and move on.

[parsley]

Stubblejumper,

You just used the same line on Tom, regarding paying tariffs on salt, that the English used on Ghandi.

"Get over it. Pay the bloody tariff. Shut up. Go away."

Isn't it amazing how that same argument is used by you in 2008?


Parsley

[Fransisco]

I'm going to disagree with you Ron.

It's the stupid way the CWB is administering these PPO's that's the problem. They still have the initial payment, interm payment, final payment mindset.

When I drop off my contracted grain I should get a cheque for what I contracted, just like I do for canola,oats and the rest of the crops.

One cheque, that's it, done, settled.

This is what happens when you let government bureaucrats(and that's what the folks at the CWB are) manage things. It doesn't matter how simple it could be, they are going to make it as complicated and as painful as possible for you to get your money.

And here is a message to Doug Chorney. The wheat board is not the only entity capable of selling "incrementally". Farmers can and do, do it too, using the PPO's.

[TOM4CWB]

Fransisco,

Excelent points.

Here are some 'innovative' constructive... solutions that will prevent this from happening again!

1. The CWB must be run in a commercial manner...

2.For Risk Management to meet commercial industry standards:
i.) losses caused by growers are paid by those same growers... conversely;
ii.) if a futures hedge position has a profit & a grower has a legitimate production shortfall... that profit is the entitlement of the grower who took the position (as in all other commercial hedge transactions I contract, often even the small fee to be held back is waved)... NOT kept in total by the CWB.

3. The Fixed Price Contract Basis, to be commercial, must be fairly based on some benchmark/visible standard; not a formula based on the PRO which is 'a thin air' projection... until the main share/portion of the Pool is priced. This same basis has risk involved... that can be forward contracted... or cash settled.

a) US Pacific North West prices are easily bench-marked... and closely represent/mirror/proportionally... commercial trading values... An innovative CWB management team SHOULD be able to put together a basis for Vancouver B.C./Prince Rupert CWB sales of our wheat based on market reality. Thunder Bay should be bench mark-able against Great Lakes US prices.

b) The Basis must be open till the day of delivery... not an arbitrary point in time like Oct 31.

c) The grower who wants to pool, must sign into a pool... and have a contractual obligation to deliver... for that pool to keep itself whole.

d) The grower who has uncommitted stocks of grain, needs the opportunity to innovate and fill market gaps when they exist... and also to be responsible to take the risk of not making a commitment... by having a pool sign-up cutoff. Past that cutoff... the grower who wants to pool signs into the next pool period.

e) Producer Direct Sales... need a different contracting/delivery allocation system than regular CWB pool and PPO contracting programs. Right now... the Pool/PPO contracts are not kept whole... when the Producer Direct Sale is triggered/done... as the CWB has lost the ability to deliver that grain against outstanding sales commitments. This must end... if the CWB system is to operate actually using commercial standards.

f) i.) Seed Stocks of "Registered Varieties" exported for planting purposes;
ii.) Organic Production using "Registered Varieties";
iii.) Manufactured Feed (25% Ingredient board grains or higher); are not more entitled to no cost export licenses more than any other commercial Board produce... grown in the 'designated area'. This problem must be rectified one way or the other for the CWB to have integrity and meet the Core Values & Code of Conduct it claims to uphold.

g) Unregistered varieties grown by producers in the ‘designated area’ are the rightfully entitled recipients of no-cost export licenses... and should not be allowed in CGC Licensed elevators handling Board grains; or be handled by 'Agents of the Board' in the 'designated area'.

What do you think Fransisco?

[Steve_Winkler]

Yeah, I got one of these letters in the mail too. Being one of the "stupid" farmers who incrementally priced some grain last fall. I agree with both Fransisco and Ron. I do owe them the money ( if I EVER get to deliver) but why can't they just cut you a check for what you contracted it for?? Seems pretty simple, but then many things that should be simple get all f'ed up when dealing with the CWB.

Cheers all,

Steve

[TOM4CWB]

Steve,

The CWB made us wait for our money all these years, and were to lazy to put together a decent cash pricing system... with a FAIR basis on the FPC... it sure won't hurt them to wait a little bit for their money this year!

BESIDES... if the cash price KEEPS going down...like 2003... you will want to 'cash settle' the FPC... and take to pool price instead!

That is your option... a part of the FPC contract as your choice... and totally within the expectations of the contract. JULY 31 is settlement date... NOT June 13! If you have 08-09 contracts on the books... why not deliver to those instead... the CWB can then subtract the amount owed and settle the account that way... if the futures keeps dropping!

[TOM4CWB]

Ron;

Check out US Wheat Associates web site on the cash basis over the past year:

US PNW markets reflect a fair indication of Vancouver B.C. and Prince Rupert CWB Port pricing points.

THis is the basis the CWB forces me to price from... I pay the freight and handle to port position and land it there for the CWB.

07-08 PNW basis:

May 07 approx. $1/bu over the MGE futures DNS 14px

Sept 07 approx. $.90/bu over...

Nov. 07 approx. $1.60/bu over...

Feb. 08 peaked $6.50/bu over...

May 2/08 approx. $3/bu over...

The 07-08 CWB FPC West Coast 'basis' in no way reflects the commercial PNW market values; I am assured the CWB would/are supposed to respect commercial values... of which CWB claims to offer a premium to.

I am tired of the CWB deception and fruit cake tactics... that took my wheat on a basis at Nov. 1... their arbitary date to close the basis calculation... at a basis level that assured the CWB of padding the pool with over $70/t out of FPC PPO grain...

The CWB took my grain at over $13/t BELOW the futures value!

Let alone the $6.50/bu the CWB got in February 08... and the $3/bu the CWB is still getting now... over the MGE DNS 14 futures... PNW delivery.

AND i am supposed to swallow this April 24 letter and send them a visa payment?

I WOULD RATHER GO TO JAIL F I R S T ! ! !

[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.