Hands in my pocket

[craig]

I have become perplexed by the lack of concern shown by producers over the CWB contingency fund. We seem to be upset over paying CWB employees a $1000. stress bonus yet we ignore the millions and millions of dollars being sucked out of your pockets to build this contingency fund. Please think about it and asked yourself these questions.Why do the PPO accounts continue to build huge surpluses? What was the original purpose of the contingency fund? Who benefits from the new proposed contingency fund? What checks and balances are in play in the operation of the PPO's? Why is this not an issue for those who are promoting an open market? Why was there unanimous support for the new contingency fund among board directors? In conclusion the whole country was outraged when it was discovered that the Liberals were funnelling money out of general revenues to support the Liberal party.At the same time we remain quiet when millions of dollars are being taken out of the pockets of some producers and given totally to other producers. If the CWB motto is to share equally among all producers then they should abide by their own rules.

[northfarmer]

I too share your concerns and have voiced them to my director candidate during the elections....i will be asking for an update now that he is on the BOD....

I find it curious as to why the pro monposony board supporters are mum on their defence on this matter...but are quick to suggest his money could be used for other purposes including becoming the financial backstop for initial....this is a contingency fund set up to back stop any losses that mioght occue from their pricing options made available to growers..

....what is clear from the rapid and excessive growth of this fund (last year millions were moved to the pooled accts as it was overfunded) tell us all they are skimming way too much off the payments we producers who use these options should recieve......fact is we have been way ahead of pool returns when using these pricing activities and to further increase these returns to the rightful beneficiaries makes the pool pricing look even worse....

look back now on your final payments for the past crop year....and compare to where you rpiced using these options....im my case damn sure glad i used the pricing oiptions, but how much better should it have been?

....whether the board stays in its current form or goes is one thing.;;;I want marketing freedom and will stand by that position .....though in the meantime and maybe longer....the proper and equitable function of the board as it exists today should still be a key focus.....and this contingency fund and working of these pricing options is by far the most important issue to me!!!!

[TOM4CWB]

Northfarmer & Craig;

The "contingency fund" is a taxation tool the CWB has been given... and I believe the politicians are expecting the CWB to use it to build itself up like any business would... who had this power to "profit".

Goodale/Alcock expected the CWB to do much more than the "single desk" directors allowed in contingency fund management of capital.

Obviously there is two sides to this issue... the short term "pain" for long term stability for the CWB Corp is front and centre.

But how can we actually complain... if we truly expect the CWB to survive in the long term perspective of our system?

Minister Strahl would have wanted to do many things that respected individual property rights... but how could he & PM Harper? Wouldn't they be kicked out on short order... if they don't allow the CWB to build itself into a strong entity? The Liberals, Bloc, and NDP all would approve the CWB increasing the contingency fund... wouldn't you agree?

Since the basis & contingency fund are all controlled by the CWB... why should we complain about something we have no say about... anyway?

It is clear with Strahl's stand wheat marketing (remaining single desk for some time to come)... and the conservative attitude that many agree with even amongst "choice" supporters who frequent Agri-ville...

That taxpayer funds to make the CWB viable in the long term is not an option. The Alternative is the "contingency fund" a taxing tool much like the Ausies used to build their AWB. I would say we are getting exactly what we have asked for!

That this distorts the domestic feed market... is a given... it is skewed lower for a longer period of time... than if some other method like a general checkoff were used to build this fund.

[JohnKenneth]

craig, i have been madder at the contingency fund and the cwb's use of it than anything else in the past few years. it drives me nuts how they flow money back and forth at the expense of adventurous risk-taking farmers, and pad the pool accounts with it.

i hate to say this, and i don't mean to generalize, but the problem i always encounter in trying to complain or discuss this, is that so few people understand the issue. for the most part farmers and the general public are unaware of how and why it was introduced in the act, they never bother to read the annual report, nor calculate what it's worth on a per-tonne basis and what that means to their bottom lines. they don't even realize the government is transferring $70mln or whatever it is now in interest earnings, i.e. taxpayer money, into this fund and the pool accounts.

just one example of how debating the cwb issue is so difficult. those who don't have the brains, skills or background to see the real math just fall back on the old philosophy of co-operation, trying to make those of us who care about economics look like greedy jerks. and with everyone else in the crowd understanding the latter point much better than the former, the dummies keep the upper hand in most debates.

sorry again if this sounds rude. don't mean to diss my colleagues but it's frustrating.

[charliep]

JohnKenneth

Not to pick on you but I will differ with you on this comment -"expense of adventurous risk-taking farmers". The programs were put into place to help managers manage risk/capture pricing opportunities. Certain elements of program design and actual execution (inability to lock in spreads, lack of visibility in pricing, etc) are an impediment to this and in some cases increase risk. From there, I would agree with comments - PPO programs should not be a profit center for the overall pool accounts or transferred to a different type of contingency fund in the new world.

The only other question is the true cost of running the PPO programs. Relative to how other organizations, they would seem to be extremely complicated and expensive. Managing risk/activity in the PPO transactions relative to the entire pooling year (current situation) versus separating these things from the pool altogether and simply running a effective program (allowing a certain percentage to be priced totally outside the pooling system).

[craig]

Tom4cwb
I have no problem with a contingency fund if it fulfills the role it was set out to do. The contingency fund was not set out to backstop the pool accounts. The other issue is who has built this fund and whether they have potential to benefit from the fund. The new contingency fund legitimizes the ability to use the PPO's as a cash cow for this fund,by continuing to charge risk premiums and their ridiculous basis.
Charlie
I would argue that the orginal goal of the PPo's is totally lost because of tying basis to the PRO's. In fact if you look at in reality, the Board should thank all participants of PPo contracts because it allows the board to play the futures market with very little risk to the board. The basis, adjustment factor in reality almost become a brokerage fee. They claim there is a large basis risk in operating the program but that has never been shown to be the case. Besides what is the contingency fund for if not to deal with risk.

[TOM4CWB]

Craig,

I agree neither Goodale, nor the "single desk" directors for so many years... were honest about what goes on with PPO's and the contingency fund.

There is still another large problem with risk management and PPO contracts.

If my PPO contract that is a hedge... and has lost money because the futures market rises... and the basis is constant... just like in Canola I should be responsible for the difference.

However if my hedge is profitable, and all other things remain equal, I should be paid the PPO profit less expenses like they did in 2004 during the CWB directors elections.

For the CWB to charge on one hand... and keep the positive benefit when that occurs shows a contempt for the growers using the PPO contracts... and again pads the contingency fund.

All growers selling CWB grains should equally contribute to a capital fund... if this is what the CWB needs to build. The "contingency fund" as defined in the CWB Act... as you accurately point out Craig... is NOT a capital fund. It does not even need to have a positive fund balance.

Yet the reality is and always has been... used as a capital fund!

This has distorted domestic grain prices DOWN... of this there can be no reasonable doubt.

[northfarmer]

Tom, you posted:

Minister Strahl would have wanted to do many things that respected individual property rights... but how could he & PM Harper? Wouldn't they be kicked out on short order... if they don't allow the CWB to build itself into a strong entity? The Liberals, Bloc, and NDP all would approve the CWB increasing the contingency fund... wouldn't you agree?

Harper and Strahl can and should do the right thing. It may not be scrapping the monsopsony power of the CWB in short order..though this would be my preference...but they can surely make sure that things like the PPO's truly act and behave like market pricing activities and that the coningency fund established to manage some of the market risk of this is used for what it is intended and no more....not a capital fund or pool profit sharing arrangement...the growth in the use of PPO's in sheer tonnage will likely boost this fund immensely, but since it is capped it will likely flow back into pool accounts...

as for a capital fund they are right now backstopped and guaranteed by the Feds, what more financial security do you need.....why would anyone vote to increase the contingency fund for what is was intended to do when they are not using it as such...this is not a debate on financing CWB2...if it was then yeah, truly farmer controlled and voluntary, then yes build a capital fund to get it going...but alas it is not...we are talking about what is in effet a fed crown corp or hybrid of that still takes it's marching orders from the feds....this is not a bank run by a charter, owned by shareholders, and traded on the equity markets...it is governed by a political instrument...an act of parliament...

I also follow the political scene enough that i predict that action on the CWB is not going to be the issue that unseats Harper......the seats in the DA area are the only ones truly affected by this issue and I honestly cannot see the them sufferring for it to any great extent at the polls....Harpers cabinet shuffle and recent liberal defection to his party are already poositioning him to rebound in the pools from some the post liberal convention bounce that dion benefitted from.....have the pollsters ever talked about the CWB effecting...never...iyt the environemnt, health care, foreign policy...taxation etc....his moves in Ontario and Que are more key to the next vote than the CWB ever will be....and frankly i cannot see an election any time soon..unless harper himself decides th time is right..

Harper/Strahl need to do the right things for grain farmers....if we must live with this monopsony on wheat...then fix the damn thing or simply get rid of it or make it voluntary!!!!...IMHO

[wd9]

Northfarmer, nationally the hot potato is if the CWB is gone when will supply management be gone next. Theoretically unrelated, but not politically.

[northfarmer]

granted, if the debate includes supply mgmt than there becoems more farm votes at stake in ON and Que....Harpers official policy on supply mgmt is to keep the status quo...if that is possible with GATT and other trade deals I assume...the players and producers in that industry overhwhelmingly support supplu mgmt, definitely not the cae in the DA are of the CWB...

but i still do not think you would find any major agriculture issue in the top 5 (if not 10) public policy issues affecting the polls....with only 3% of the population as farmers and declining....I am not suggesting that ag issues are unimportant, just the next election will be fought on environment, trust, helath care and foriegn policy...not on ag policy and certainly not on the freedom of marketing choice for grain producers in the west....

[TOM4CWB]

Northfarmer,

The possible down side for the CWB COrp is clear...

THe CWB has been calling chicken little "the sky is falling" for months... and most urban folks are actually thinking the CWB is about to end... from the perspective of our city cousins through news reports.

It may in fact be irreversible damage to the CWB... as the humpty dumpty "can't be put back together again" perception is really confusing urban people.

I have been congratulated numerous times... as having won the "choice" battle... only to then have to explain to them nothing has happened as far as marketing choice for selling our wheat and barley.