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CWB .... dog!

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    CWB .... dog!

    Soon Nuthin' but a Hound Dog
    Will Verboven - Monday,18 December 2006


    It seems that big old dog, the Canadian Wheat Board (CWB), has been muzzled by the Conservative government. And as a hound accustomed to ruling the neighbourhood, the CWB doesn't like it one bit. It has even yelped for friendly mongrels like NDP provincial governments, federal Liberals and leftish farm groups. These are desperate times, as a new owner has landed a few good kicks on this mighty grain-yard boss dog.

    The CWB and its supporters seem stunned by how quick the Conservative government has moved to end the board's monopoly powers to market export wheat and barley. What must be even more annoying is that the government is using the Canada Wheat Board Act itself to shorten the board's leash. That legislation was designed to enshrine the monopoly powers of the CWB and to protect it from pesky grain growers with the audacity to challenge the confiscation of their wheat and barley for sale into export markets.

    Federal Agriculture Minister Chuck Strahl used the legislation to prevent CWB spin doctors from unleashing a torrent of subliminal advertising to defend the board's powers. He then appointed a couple of new directors to the board who were attuned to the minister's intentions. These new-attitude pups are bound to disrupt the CWB comfy couch. The government appoints five directors to the organization's board, but their traditional job has been to be trained management lapdogs.

    The minister decided to throw more rocks at the CWB doghouse by cutting the voting list used to elect the grower-elected directors to the board. He then put a timeline for changing the board from a monopoly to a voluntary, grower-owned grain-marketing corporation. And on top of that, he set up a task force to create a business transition plan. It's becoming too hard for the CWB to scratch away all these irritating new fleas.

    Minister Strahl has shown some courage, considering the bureaucratic opposition he must have faced. A cozy relationship with both senior bureaucrats and friendly Liberal governments has usually guaranteed the CWB's top-dog rule. To be fair, the board has over the years thrown a few bones to the yapping curs who wanted into the yard to retrieve their own grain. But CWB watchdogs have always jealously guarded the keys to the gate. Grain growers have even been thrown in jail for selling their own grain across the border without export permits controlled by the CWB.

    In its entire existence, the CWB has never faced such a challenge. It's left the board and its friends howling in desperation. Political pals in the Opposition have tried to defend the CWB at committee meetings and with political hijinks in Parliament. That resulted in the ludicrous sight of eastern Liberals and Quebec Blocistes defending an institution that uses its monopoly powers only on Prairie-grown grain. Clearly those self-righteous defenders of monopoly would revolt if the CWB powers ever were extended to Ontario and Quebec.

    CWB defenders insist that the future of the institution must be decided by a democratic vote of grain growers. That might have some validity, had the CWB been created by a growers referendum--but it was not. The federal government imperiously decreed the CWB monopoly in 1943. To defuse the referendum issue (and divide and conquer), the federal minister announced that he would hold a plebiscite only on barley, but not wheat. Outfoxed, the NDP governments of Manitoba and Saskatchewan sniffed that they would hold their own referendum--a futile exercise having no bearing on federal legislation.

    Some describe the CWB issue as the first step in the dismantling of marketing boards across Canada. Well, not quite. The CWB is a very different breed that operates regionally under a federal mandate. Poultry and dairy marketing boards operate nationally under joint provincial mandates, and they were created by producer referendums.

    The CWB debate has always been a dog's breakfast of ideology, control, freedom, marketing, trade policy and other political scraps. After all this time, perhaps this mangy cur needs to be cut loose to fend for itself. The CWB has had 80 years to learn how to survive in the marketplace, so it shouldn't need a fence anymore.

    #2
    The world trade body, including our
    customers and competitors, have stated
    in no uncertain terms that government
    guarantees to the Canadian Wheat Board
    (CWB) borrowings and initial payments will
    end. In the World Trade Organization (WTO)
    framework agreement, signed by all
    members at the end of July in Geneva,
    section 18 states:
    The following will be eliminated by the
    end date to be agreed:
    Trade distorting practices with
    respect to exporting STEs (State
    Trading Enterprises) including
    eliminating export subsidies provided
    to or by them, government financing,
    and the underwriting of losses. The
    issue of the future use of monopoly
    powers will be subject to further
    negotiation.
    The CWB is the only grain-trading agency
    in the world that has the ability to issue
    its own bonds. These bonds are sold to
    institutional investors and the money is used
    to pay farmers for grain that is sold to other
    countries on credit. For every dollar in bonds
    there is a dollar in credit sale or recapitalized
    interest from a credit sale. The problem for
    the CWB is that the bonds are rated on the
    basis that they are 100% guaranteed by
    the Canadian Government. When the
    government is forced to end the guarantee on
    the bonds, then the bonds will be rated on the
    CWB’s assets alone. The only asset the CWB
    has is the value of the grain credit sales
    and interest, some from countries that no
    longer exist and is questionable at best,
    uncollectible at worst, but absolutely not
    transferable to the bond debt.
    This will make CWB bonds worth about
    the same as an old Air Canada share.
    IIf the Canadian government refuses to take
    responsibility for the CWB bonds, then the
    CWB becomes insolvent. There won’t be any
    need to negotiate the end of monopoly
    powers of the board, because it will cease to
    exist.
    This puts the CWB in a very untenable
    situation. The government has signed
    a framework agreement with the WTO
    agreeing to end government guarantees on
    borrowings of STEs, namely the CWB, but
    has given no indication whatsoever as to how
    it can do that without sacrificing the board.
    IIt can be done, but the government will
    have to come to terms with its own use of
    the CWB as a foreign policy instrument over
    the last sixty years. It has been politically
    convenient to use the grain sales by the CWB
    and credit from the CWB, as bargaining
    power in other foreign policy areas. It was
    also very beneficial to the government at
    home to use the CWB to extend credit rather
    than the government, that way it has never
    had to show this expense on the government
    books. There is no provision in the
    government’s accounting for a default in the
    CWB bonds. So any cost now to cover these
    bonds will be a six billion-dollar hit to the
    government of the day. In the present
    minority situation that would require the BQ
    to pass a Liberal budget with a six billiondollar
    buyout to CWB bond holders and
    the government would get six billion in
    credit sales and capitalized interest. The
    government can collect the debt to pay the
    bonds or write it down over time just as they
    are doing through the Paris Club agreement
    anyway.
    Money markets are very fickle and have
    no loyalty whatsoever. Rumour and
    perception are the basis for market reaction.
    Right now the CWB is on their own; the
    government has signed the agreement that
    they will end the guarantees, at some point.
    The CWB bond-trading department still has
    to flog hundreds of millions of dollars in
    bonds everyday. Markets hate uncertainty.
    Buyers could start discounting the bonds or
    avoiding them altogether. All the market has
    to go on is the agreement to end the
    guarantees, nothing else.
    So for as much as the supporters of the
    board like to think that it is western
    Canadian farmers that will decide the fate of
    the CWB, it is the 146 countries of the WTO
    and the bond holders of the CWB that are
    making the real decisions.
    The CWB is beginning to look like the
    Titanic. The ones that built it said it was
    unsinkable, but the captain refused to change
    course and drove it into the iceberg, saving
    the monopoly, but sinking the ship.
    Farmers can decide on the position of the
    deck chairs and the board of directors
    can tell the band to keep playing and telling
    the farmers that everything is fine, we just
    have a dent in the hull, nothing a lot of
    lobbying can’t fix. The reality is the good
    ship CWB has hit the WTO iceberg, and
    made a huge gash in the side, right at the
    waterline. All it takes is one ripple and it will
    start to take on water, and unless the
    government starts to use its massive pumps,
    the ship is going down.
    Western Canadian farmers and grain
    industries, our domestic and
    international customers and competitors are
    all coming to the same conclusion. The CWB
    must change. It is in everyone’s best interest
    that the CWB quit the posturing and make
    real changes.
    The complete agreement, updates and
    meeting schedules are on the WTO web
    site www.wto.org
    To the WTO the CWB claimed it was “in
    essence a farmer co-operative… subject
    to no direction, supervision or influence by
    the Government of Canada.”
    IIn the Federal Court of Canada the CWB
    states, “the Board was not and is not
    accountable to individual producers. Rather,
    the Board is accountable only to parliament.
    Therefore, neither the Board of the Crown
    own any legal duty to the plaintiffs.”
    (farmers)
    Douglas McBain
    President
    Western Barley Growers Association

    Comment


      #3
      isnt it great to see that companies such as AWB must fully disclose their business ventures to the public, whereas the private trade only needs to answer to it's share holders?

      Tom: what say you about Halliburton... Since you seem to be the expert on AWB-IRAQ contracts?

      Referring to your posts last year on this site, you used to hold the AWB in high regard, and wanted the CWB to adopt their business model?????????????????????

      Comment


        #4
        BennyHin,

        I have had this simple PHILOSOPHY:

        Do unto others as you would have done unto you,

        And;

        Do not do unto others as you would not have others do unto you;



        2. *Do not infringe upon the Rights, Freedoms or Property of others,

        And:

        *Keep all contracts willingly, knowingly and intentionally.


        I have stated numerous times over the years:

        3a) That for every wrong there is a remedy,

        b) The end does not justify the means,

        c) Fundamental principals cannot be set aside to meet the demands of convenience or to prevent apparent hardship in a particular case,

        d) Ignorance of the law is no excuse for breaking the law,

        e) Two wrongs do not make a right, and

        f) One can enlarge the rights of the people, however they cannot be taken away without their informed consent.




        BennyHin;

        USE the best HONEST IDEAS that have been proven sucessful... and dump the rest!

        Clearly Western Australia growers have a much better example of co-operative spirit and prosperity building... that is proven by the Billions of assets and good risk management that they have attained... at Wheat Australia and CBH.

        Now these are some models we should look up to and emulate!

        Wouldn't you agree?

        Comment


          #5
          FWIW, the CWB has never been proven or demonstrated to be trade distorting.

          Also does anyone know what was gotten from other countries for the government guarantee given up?

          Comment


            #6
            WD9,

            When the CWB forward sell millions of tonnes of grain, without having that grain contracted such as with our malt barley contracts... obviously is market distorting.

            Winter Wheat and CPS are no different... take a look at PNW wheat prices over the past 3 months... we are being taken for a massive bath and loss on these grains as well. CWRS losses are much less... but even there the CWB only offering to take 80% alone is market distorting in this market.

            How much proof do you need WD9... just try to get an CWB export license...

            See if the $40/t it costs to get to a alternative market, plus the loss of another $15/t by bypassing the more efficient Canadian west coast port facilities... doesn't get the CWB a free ride to sell anywhere in the world at a 20% discount.

            What more proof do we need that the CWB refuses to be competitive and sell our grain at Fair Market Value! What about the Adjustment Factor on FPC... have you ever seen this in the Ontario or AWB systems? Of course not.

            What about a transparent cash price today?

            No way... that would mean the CWB respected us enough to ask our permission BEFORE selling our grain.

            Every one of these actions is market distorting... isn't it WD9?

            Comment

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