Farmer overpayment to CWB

[Choice2U]

First post so not sure what this will look like....

Correct me if I'm wrong but if these farmers owe $29M because their FPC is less than the initial, what happens in the event that the final payment is lower than the initial? It's happened before. Let's say the wheat markets crater this year with lots of world production, these same farmers could actually still be ahead of the game given the final payment should dictate whether they owe money or not....or am I wrong?

[TOM4CWB]

Choice2U,

The Minister of Agriculture is responsible for any shortfall... if the CWB 'risk management' dept messes up and shorts the pool.

The real point here is this:

It very well could be... that a settle out at the end of July, could mean LESS is owed... and the pool would return more to the grower than delivering the PPO contract. This is a reasonable option... and one the CWB actually has tended to encourage in the past.

Next,if the folks with PPO's that owe money... and have not yet delivered... choose to deliver in the next crop year... on a 08-09 FPC... they would be miles ahead to do this and pay the buyout fee... as things are; if a hedge was done in Jan/Feb 08... and wheat prices keep falling.

I suggest this is what has the CWB's gonch in a knot. They don't risk manage the PPO's properly... and could easily be loosing millions as the price of wheat drops... and the liability to growers falls as well.

Finally, the CWB has overpaid the CWB... because as I pointed out before... the CWB has shafted us on the BASIS. It is $3.00/bu ABOVE the futures at the May 2/08 price report from US Wheat associates.

THe CWB was par... to a discount below the futures... which also means the farmer is definately overpaying the CWB... if the $29 million is collected from growers. On 3mmt that is ONLY $10/t. Growers are out/shorted by the CWB closer to $150/t... especially if they waited till after Aug 1/07 to lock up the basis.

I am VERY 'pleased' the CWB brought our attention to this matter... they did us a very great service by rubbing salt in the wound they themselves are responsible for creating in the first place!

[TOM4CWB]

OOPS!

'Finally, the CWB has overpaid the CWB... because as I pointed out before... the CWB has shafted us on the BASIS. It is $3.00/bu ABOVE the futures at the May 2/08 price report from US Wheat associates.'

Should be:

Finally, the grower has overpaid the CWB... because as I pointed out before... the CWB has shafted us on the BASIS. It is $3.00/bu ABOVE the futures at the May 2/08 price report from US Wheat associates.

[Ron]

Sorry Tom, I still dont get it.
A FPC locked in a price, lets us 7.00/bushel less 1.00 in elevation/cleaning/freight nets you 6.00 That was the FPC you agreed to.

Now when you deliver the initial payment is 8.00/bu less 1.00 in elevation/cleaning/freight nets you 7.00 That is 1.00 over what you should have got. This 1.00 is owed back to the CWB.

If you want to talk about a shitty contract, unrealistic basis or anything else that is a separate issue.

You agreed to a FPC that was stacked in favour of the CWB, we all know we are getting screwed. That is why it is a great option to be able to lock in a definate cash value for our grain. BUT you got overpaid, a bad mistake but still a mistake.
If you got your numbers crossed and sent 2 cheques to viterra for your fertilizer bill would you expect 1/2 the money back? What if they said sure but no interest and the cheque will be here in the fall?

The CWB is screwing us but not in this case.
The grade spread, basis, limited DPC tonnes, now no DPC, delivery calls set by CWB, organic buybacks, sweet deals for warburton, special freight for Churchill catchment areas, accredited agents exporting our grain, and countless others are valid problems.
But this was an overpayment on a contract.

What am I missing?

SCREW THE CWB

[charliep]

Have to admit it is a strange time to be asking for the money. As indicated by tom4cwb, the final payments will not exactly equal current PRO forecasts. There is also likely some uncertainty as to the exact grade and protein spreads used in the final payments - there is still 5 months of sales that will go into the pool. So why ask for money now versus in the summer or fall?

Perhaps this is an indication of the problems occurring in the producer pricing options risk management and impact on an almost non existent contingency fund. As asked by Chaffmeister, would be interesting to know how any copntingency fund deficit (a likely case) is being financed in the 2007/08 crop year.

The fixed price contracts have had a number of different problems over time which the CWB appears to have made no attempts to fix. That would start with using initial payment spreads versus ones used in the PRO or markets based as in the DPC.

I also note a lot more adjustment payments this year (heavan forbid, a sign of cooperation between the CWB and the federal government). Good for farmers to improve cash flow but adds costs to sending money out more often and creates problems for the producer pricing options (overpayments in the case of FPC and less reliance on the EPO programs). Do farmers really know the true costs of these programs both to the individuals who use and the overall pool for those that don't?

[charliep]

I find out through the g**** vine the letter was a preliminary warning with the actual invoice going out later and an October 31 deadline for returning money (hopefully I have right).

The issue does raise the question of complexity of processes and cost to the system.

[TOM4CWB]

Ron,

You said:

"If you want to talk about a shitty contract, unrealistic basis or anything else that is a separate issue.

You agreed to a FPC that was stacked in favour of the CWB, we all know we are getting screwed."

Until the CWB is not allowed to throw me in jail... for selling my own wheat and barley for human consumption purposes... I HAVE EVERY RIGHT to OBJECT to the CWB's handling of basis that forced the shortfall of revenue below the initial in the first place!

Why wouldn't I clearly identify, object to, and refuse to play the CWB's game... with whatever leverage possible?

If the CWB doesn't feel a world of hurt... they will never change and deliver fair contracts!

AS Identified by you... WHAT I AM supposedly OWED for my FPC grains... is a farce ($50-$100/t short) in the first place. How can you say this is in any way 'unrelated'!

How can the CWB claim to extract a premium price FOR me... when it is ripping me off?

[charliep]

What is in the contract between the farmer and the CWB on PPO contracts?

I note 4 alternatives in the letter that Fransisco posted but their is only one alternative (effectively 4 in the letter) in the information posted in the CWB website.

Quote from page 16. "The producer will always receive initial payment on delivery, even though their FPC/BPC is at a lower value. The CWB will deduct the overpayment from any future CWB payment made to the producer".

http://www.cwb.ca/public/en/farmers/producer/fixed/pdf/07-08/guide/0708fpcbpc_part3.pdf

I agree with Ron the overpayment needs to be returned. Just wouldn't be using working capital/operating credit to do it in the middle of spring seeding.

[charliep]

The description of how overpayment on DPC contracts is below - page 5/last page (same as FPC ones).

http://www.cwb.ca/public/en/farmers/producer/daily/pdf/07-08/guide/0708dpc_part6.pdf