Dear President/CEO White;
After the Informa attack you are reported as having made... a few hard questions need to be asked!
1.) CWB Risk Management. How does the CWB handle futures positions... PPO growers assume the CWB hold... on contracted wheat through the Fixed Price COntract.
I have a letter (Dated 01/28/2003 03:40PM)from CWB manager Mr. Lawrence Klusa, forwarded at the request of Adrian Measner.
This is the paragraph about CWB risk management... that explains why (in my opinion at least) the CWB appears to have lost a massive sum of money on the PPO program.
I Quote from page 2 paragraph 2:
"The CWB hedges the producer pricing options by selling the futures when producers lock-in a FPC or when they lock-in the futures component of a Basis Price Contract (BPC)."
OK... THAT IS WHAT 'DESIGNATED AREA' GROWERS EXPECTED THE CWB TO DO.
2.) NOW... WHAT SHOULD THE CWB DO WITH THAT FUTURES POSITION?
THE CWB SHOULD HOLD IT (THE SOLD FUTURES POSITION)UNTIL THE GROWER DELIVERS THE WHEAT... AND THE CWB CAN THEN SELL THAT WHEAT AT THE SAME TIME LIFTING THE FUTURES THEY SOLD.
THIS WOULD BE A NORMAL RISK MANGEMENT STRATEGY TO MITIGATE THE RISK TAKEN ON WHEN THE GROWER LOCKED IN.
3.) HERE IS WHAT THE CWB ACTUALLY DOES:
" The CWB unwinds this hedge by buying back the futures as the CWB puts sales on the books (essentially the CWB is buying these producers out of the pool account or out of all sales)."
NOW THE CWB EXPLAINS WHY MY HEDGE COST THE CWB... INSTEAD OF ADDING VALUE AND MITIGATING RISK:
"Therefore, most of the futures bought back to date would have been purchased at values higher than the Kansas March 2003 wheat futures value on the day Mr. Jackson locked in his contract."
OK, I MR. JACKSON... HAVE UNDELIVERED WHEAT... WHICH THE CWB HAS PULLED THE HEDGE LONG BEFORE DELIVERY.
DOES THE POOL THEREFORE TAKE THE RISK... IF THE SALE OF MR. JACKSON'S DOES NOT EQUAL THE PPO CONTRACTED PRICE?
oR
DOES THE CWB INCREASE THE BASIS TO COUNTERACT THE RISK THE PPO CREATES?
oR
DOES THE CWB TAKE THE MONEY OUT OF THE CONTINGENCY FUND... TO PAY MR. JACKSON HIS PPO CONTRACT VALUE?
oR
A COMBINATION OF ALL OF THE ABOVE!
dOES ANYONE REMEMBER HOW MUCH THE CWB lost in the 2002-03 pool?
AND
Does anyone remember how much the CWB contingency fund... lost?
The 02-03 pool lost $84.4 Million;
THE CONTINGENCY FUND IN 02-03 LOST NOTHING. INSTEAD THE 02-03 CONTINGENCY FUND MADE MONEY.
PAGE 38-39 CWB 02-03 ANNUAL REPORT:
PPO FINANCIAL RESULTS
Wheat made $20,166
Durum lost $9,806
EPO's made $570,253
SO why the huge PPO loss in pool year 06-07, and the massive overcharge on CWB basis in 07-08 & 08-09?
WHERE IS ALL THIS MONEY GOING... PRESIDENT WHITE?
How can the CWB defy economic principals... in risk management... and not financially hurt every grower in the 'designated area' forced to use CWB marketing services?
After the Informa attack you are reported as having made... a few hard questions need to be asked!
1.) CWB Risk Management. How does the CWB handle futures positions... PPO growers assume the CWB hold... on contracted wheat through the Fixed Price COntract.
I have a letter (Dated 01/28/2003 03:40PM)from CWB manager Mr. Lawrence Klusa, forwarded at the request of Adrian Measner.
This is the paragraph about CWB risk management... that explains why (in my opinion at least) the CWB appears to have lost a massive sum of money on the PPO program.
I Quote from page 2 paragraph 2:
"The CWB hedges the producer pricing options by selling the futures when producers lock-in a FPC or when they lock-in the futures component of a Basis Price Contract (BPC)."
OK... THAT IS WHAT 'DESIGNATED AREA' GROWERS EXPECTED THE CWB TO DO.
2.) NOW... WHAT SHOULD THE CWB DO WITH THAT FUTURES POSITION?
THE CWB SHOULD HOLD IT (THE SOLD FUTURES POSITION)UNTIL THE GROWER DELIVERS THE WHEAT... AND THE CWB CAN THEN SELL THAT WHEAT AT THE SAME TIME LIFTING THE FUTURES THEY SOLD.
THIS WOULD BE A NORMAL RISK MANGEMENT STRATEGY TO MITIGATE THE RISK TAKEN ON WHEN THE GROWER LOCKED IN.
3.) HERE IS WHAT THE CWB ACTUALLY DOES:
" The CWB unwinds this hedge by buying back the futures as the CWB puts sales on the books (essentially the CWB is buying these producers out of the pool account or out of all sales)."
NOW THE CWB EXPLAINS WHY MY HEDGE COST THE CWB... INSTEAD OF ADDING VALUE AND MITIGATING RISK:
"Therefore, most of the futures bought back to date would have been purchased at values higher than the Kansas March 2003 wheat futures value on the day Mr. Jackson locked in his contract."
OK, I MR. JACKSON... HAVE UNDELIVERED WHEAT... WHICH THE CWB HAS PULLED THE HEDGE LONG BEFORE DELIVERY.
DOES THE POOL THEREFORE TAKE THE RISK... IF THE SALE OF MR. JACKSON'S DOES NOT EQUAL THE PPO CONTRACTED PRICE?
oR
DOES THE CWB INCREASE THE BASIS TO COUNTERACT THE RISK THE PPO CREATES?
oR
DOES THE CWB TAKE THE MONEY OUT OF THE CONTINGENCY FUND... TO PAY MR. JACKSON HIS PPO CONTRACT VALUE?
oR
A COMBINATION OF ALL OF THE ABOVE!
dOES ANYONE REMEMBER HOW MUCH THE CWB lost in the 2002-03 pool?
AND
Does anyone remember how much the CWB contingency fund... lost?
The 02-03 pool lost $84.4 Million;
THE CONTINGENCY FUND IN 02-03 LOST NOTHING. INSTEAD THE 02-03 CONTINGENCY FUND MADE MONEY.
PAGE 38-39 CWB 02-03 ANNUAL REPORT:
PPO FINANCIAL RESULTS
Wheat made $20,166
Durum lost $9,806
EPO's made $570,253
SO why the huge PPO loss in pool year 06-07, and the massive overcharge on CWB basis in 07-08 & 08-09?
WHERE IS ALL THIS MONEY GOING... PRESIDENT WHITE?
How can the CWB defy economic principals... in risk management... and not financially hurt every grower in the 'designated area' forced to use CWB marketing services?
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