CWB now a part of Freedom of Information

[craig]

Adam you make valid points but your concept of basis and what the CWB uses in the FPC and DPC contracts are two different things. If as you state the board should be charging an open market basis on these contracts( cost of getting it to port, admin, risk etc) then I'm sure producers could live with that. The problem is basis under these contracts is a charge levied to bring your price back to something near the Pool return outlook. Go and look at historic pricing info, basis only changes when a new PRO comes out. So if you sign a contract early in the crop year and the PRO climbs considerably you would assume that these accounts would show a surplus because the basis you were charged is not reflective of what the grain was sold at. This opens up a whole can of worms. I have asked the wheat board if they have done a proper risk assessment to determine what is an acceptable cap for the contingency fund. If the contingency is at the cap and that is enough to backstop the programs then why are we still being charged a risk premium. I also asked the board to give me a historic example of of where the CWB was in a position of being exposed to a high level of Basis risk. Again I have not received that information. From What I can find the programs are far more likely to show a surplus than a deficiet. Correspondence with the board also shows that their answer to the surpluses is to just let the contingency fund continue to grow. I thought that the CWB was to return as much money as possible to the producers. The reason that they want to let the contingency grow is because the only other option left is to dump the surplus into the pool accounts. So that leads to the next Problem. The CWB will claim that when you sign basis as part of your contract you are moving risk from the producer to the CWB. I would suggest that this is not true. You are moving basis risk to the contingency fund. The real moral question then who in reality should own the contingency fund. If you assume that surpluses accrue to those who have the risk then who is that. The pool accounts have no risk and therefore in my option should have no right to these funds. The CWB also should not have legal claim to these funds because the entity CWB was not at risk in these tranactions. If you claim they do then you are also suggesting they have the right to reward those who administer the programs. This then leads to the question is basis a legitimate cost to producers or is it just a tax on producers who use these contracts. This year I would suggest is where the problem is going to rear it's ugly head. If we assume the CWB is selling grain at present world values there is only one conclusion. This years accounts will show a massive surplus. Even if they are selling below that I would suggest there will still be a large surplus. Your CWB already has a solution for this: they are going to take over the fund and use it to manage payments to the pool accounts. How else can you be Santa Claus. If you step back and take a serious look you can see why the CWB is so happy with these Producer payment Options. It allows the CWB to play in the American Wheat Futures market with absolutely no risk to the Board( that's where you come in it's your risk). The fact that they have no risk does not preclude the ability for them to charge a very high premium (basis)to the users of the program. In the end they lay claim to those surplus funds and distribute to their friends in the pool accounts.How could anyone question this as fair and equal treatment of all producers.