CWB loss of Gov. Support

[TOM4CWB]

Charlie;

Maybe this change will force the CWB into a cash based system... instead of pool pricing all our Board grains.

What is this?

"The loss of the government guarantees on borrowing is even more significant, as the CWB borrows between C$4 billion and C$6 billion at any given time to cover its cash flow needs,...said CWB spokeswoman Maureen Fitzhenry".

If the CWB is paying interest on all this money, year round... we have a much larger problem than I ever knew about!

What about this... "The government
guarantees are there to protect farmers in the unlikely event that the final pool price comes in below initial payments.
Without the guarantee, farmers will take on greater risk of their own, said Fitzhenry. While government payouts have been rare in the, "there's always the potential for unforseen things in the market," she added."

Charlie, one of the biggest problems the CWB system has is Initials starting the crop year at 60% of fair market value!

What a relief it would be to receive 100% of a cash price... instead of the CWB speculating with government money!

Does this CWB Lady-Fitzhenry, actually have any idea what she is talking about?

What is the truth?

[charliep]

Good question for the CWB. I don't think this has anything to do with CWB initial payments except for the difference in timing between when the farmer recieves the initial payment and the grain is sold to the customer/money is deposited in the pool. Given the low initial payments relative to sales, this would only apply early in the crop year.

What they are talking about is the spread on interest rates if their bond rating were decreased. If they average $5 bln and interest rates increase by 1%, the cost to the pool would be $50 mln.

What is interesting is if you take the $5 bln of debt and divide by the current commericial stocks of grain. Lets assume commercial stocks of CWB grains are about 5 mln tonnes. See the CGC grain stats weekly.

http://www.grainscanada.gc.ca/pubs/grainstats/gsw_2-e.asp

Some of this will be non board. Work the math and the debt to inventory ratio is $1000/tonne. Not realistic. What is in the debt described is all the old debt from prior sales that is being paid off at higher interest rates with the spread between government guaranteed borrowing and this interest rate deposited in the pools. When the smoke all clears, this is the issue.

With no government guarantees, interest costs will increase. There will be a need for a contingency fund with questions of how this fund will be built up yet to be answered. Old debt and the interest spread are also ticklish items.

[TOM4CWB]

Charlie;

Good Points.

I want the CWB to be H O N E S T.

Obviously article this is not a true representation of CWB operations.

Took me a while but I found it.

CWB Directors Duties:
http://www.cwb.ca/en/about/our_people/code_of_ethics.jsp

"III. DUTIES

Duties for corporate directors emanate from common law obligations and the provisions of the statute or instrument under which the company is incorporated...
B. Duty of care

Directors owe a duty of care to the CWB and must exercise the degree of skill and diligence reasonably expected from an ordinary person of his or her knowledge and experience. This means:

(c) being vigilant to ensure CWB is being properly managed and is complying with laws affecting the CWB; and
(d) Ensuring their activities and actions do not undermine the reputation or integrity of the Corporation.
(e) Engaging in activities that demonstrate the accountability of the CWB and the director to all Western Canadian wheat and barley farmers."

IMHO the recent CWB news releases on the WTO fail to meet these standards...

[wd9]

Does anyone have a firm understanding of the CWB debt and whether it is a future producer problem or is the governments? Who co-signed it?

[wmoebis]

How does independant companies in other countries handle debt. Do they carry it within the company or does their govt's have some sort of trading bonds?

[craig]

Here we go again. Canada gives something away on a slim hope other countries will reciprecate. Offers to do something in 2010 doesn't help me if I'm out of business. By continuing to force farmers to do business through the board while continually stripping away the benefits doesn't seem like any progress to me. Maybe this is the easy way out for the Liberals. Remove more farm support but place the blame somewhere else. And I thought Captain Canada( Paul Martin) would defend us to the bitter end.

[charliep]

It is a government guarantee. The taxpayer is on the line if it is a government/international decision to write down debt or a country renegs on a payment commitment.

US offers credit through the GSM program. Information can be found at:

http://www.fas.usda.gov/excredits/exp-cred-guar.html

Not sure on Europe. My understanding is any market support is provided through export subsidies versus credit guarantees/other benefits (transactions are commercial). Will seek others knowledge.

Not sure on Australia.

[charliep]

This is the article referred to in this thread if you want to see the source document.

http://www.cbc.ca/manitoba/story/mb_wto-20051219.html

[charliep]

Still didn't find answer on the Australian credit programs but did find their website interesting.

http://www.awb.com.au/customers/

[carebear300]

This morning as I once again sit here amazed at the knowledge of the contributors to this thread a sort of related question comes to mind? The government provides a quarantee to Bombardier for the sales off Jet aircraft and transit cars so I wonder how those transactions are handled? Can Bombardier sell for a set minimum price set by the government? Can Bombardier only sell to certain markets? Are there restrictions on the amount of foreign content in the parts used to assemble these different machines to be eligible? Maybe once again I should be replying to a different thread(due to irrelevance in this particular case)