Contingency Fund Fox-trot

[parsley]

I'm having a time with the tempo, but I'm getting old.

CWB website:
Contingency Fund Balances July 31:
2005 was $48.612M
2006 was $44.312M
Added money and.......yet
Goin' down?

Then, July 24, 2006, the CWB gets another Order in Council to get more cash:

Here it is from PCO webpage:

"2006-0732 2006-07-24
Canadian Wheat Board Act
Regulations Amending the CANADIAN WHEAT BOARD CONTINGENCY FUND REGULATIONS by increasing the limit of the balance of the contingency fund to $60,000,000.

Are we investing in some diamond mines in Indonesia?

Parsley

[Vader]

you are so sad and old parsnik,

read what you wrote:

REGULATIONS by increasing the limit of the balance of the contingency fund

no cash here - only changing a limit

The diamond mine allegations are complete obfuscation. But that is what you do best since you have no facts to work with.

[parsley]

Vader,

You sound like you're run-ragged. Delegate. Use winwin.

I just noted that the amount of cash that can be heaped into the CFund was upped to $60M. That was a hefty upper-limit increase.

Meantime, the cash already squirreled away in the fund, under that existing upper-limit rule
...er ..dropped. ...unusual....

Just wondering why the B of D's applied for a higher upper-limit during the same period the nest-egg was a'dropping.

(the diamond mine was just a little humor, Vader.)

Going out for dinner, but you'll dependably have an answer a-waiting.

Parsley

[kamichel]

I watched parlament that day. The CWB origionally asked to have the limit put at 100 million. My best guess is that they were hoping to put the 30 dollar per ton fines for non delivery into there.

[kamichel]

Actually I was one week late for the deadline of exitting the A series wheat CWRS contract. while talking to the CWB rep I asked how much of the wheat was sold. He said less than 40 percent. Then I asked why the purpose of the fines when only less than 40 percent of the grain was sold. He told me that the money is needed for the contingency fund. Since that time I became convinced that the CWB should not have a monopoly.

[TOM4CWB]

Vader,

It WAS clear the CWB wanted the expanded Contingency Fund to pocket profits... or would not have asked for the increase to $60m.

What happened that caused the losses, the first time since 1998?

Please explain.

[Vader]

same thing that caused the increase in the fund - changing markets - hedging gains - hedging losses - it's a double sided coin

[TOM4CWB]

Vader,

Interesting answer.

Please tell us what "Risk Management" means, and "hedging losses".

I thought the past management system set up a system that gives the risk to the futures markets that apply to the hedge... and the other side of that risk to the grower who hedges...

If there are "Hedging losses" it is an admission that the CWB risk management system failed.

What is the CWB going to do, to correct these management failures... that are obviously in the 10's of millions of $$$?

[parsley]

What is the current value of the contingency fund?

[parsley]

Evader:
Interest from the feed barley pool was diverted into the contingency fund in 01-02, then again in 02-03.

Big numbers too.

01-02 saw $130.85 per tonne (just over $7 million) diverted to the C-Fund.

02-03 saw $127.89 per tonne (just over $5 million) diverted to the C-fund.

According to the 01-02 CWB Annual report, "This was done to avoid distorting the price relationship between feed and designated barley."

Gotta admit that there was some logic to this - the CWB couldn't have left that amount of money in the pool - the price would've been so terribly out of whack. I can see that. But it shows just how bad the pool account is at providing price signals. It's dysfunctional.

But I'm wondering about the logic in latter years. Take Pool A of 04-05 for example. Total interest "earnings" allocated to Pool A was $85.55 per tonne, but $51.34 per tonne was diverted to the C-Fund, leaving $34.21 per tonne in the pool account.

That's much more interest than usually left in the pool account - typically it's been less than $10 per tonne, even when the CWB diverted interest out before.

But Pool B is even stranger.

Total interest allocated to the B Pool was $4.83 per tonne. $4.83 is quite small and can be argued has little if any distortion effect on the pool price.

Here's the question: Why then did the CWB divert $1.69 per tonne (about $794,000) to the C-Fund, leaving $3.14 per tonne?

Remember the original reason to divert money from the feed barley pool into the C-Fund was to avoid price distortions.

Did the CWB think that $4.83 was distorting but $3.14 wasn't?

Now fast forward to 04-05. Same kinda thing in Pool B.

$10.60 allocated to feed barley - but $6.19 per tonne diverted to the C-Fund, leaving $4.41 in the pool account.

Why divert anything at these levels? What is the current strategy or policy. There was no mention of it in the last couple of annual reports.

Evader? Agstar77? Any comments?

[chaffmeister]

Evader:
Interest from the feed barley pool was diverted into the contingency fund in 01-02, then again in 02-03.

Big numbers too.

01-02 saw $130.85 per tonne (just over $7 million) diverted to the C-Fund.

02-03 saw $127.89 per tonne (just over $5 million) diverted to the C-fund.

According to the 01-02 CWB Annual report, "This was done to avoid distorting the price relationship between feed and designated barley."

Gotta admit that there was some logic to this - the CWB couldn't have left that amount of money in the pool - the price would've been so terribly out of whack. I can see that. But it shows just how bad the pool account is at providing price signals. It's dysfunctional.

But I'm wondering about the logic in latter years. Take Pool A of 04-05 for example. Total interest "earnings" allocated to Pool A was $85.55 per tonne, but $51.34 per tonne was diverted to the C-Fund, leaving $34.21 per tonne in the pool account.

That's much more interest than usually left in the pool account - typically it's been less than $10 per tonne, even when the CWB diverted interest out before.

But Pool B is even stranger.

Total interest allocated to the B Pool was $4.83 per tonne. $4.83 is quite small and can be argued has little if any distortion effect on the pool price.

Here's the question: Why then did the CWB divert $1.69 per tonne (about $794,000) to the C-Fund, leaving $3.14 per tonne?

Remember the original reason to divert money from the feed barley pool into the C-Fund was to avoid price distortions.

Did the CWB think that $4.83 was distorting but $3.14 wasn't?

Now fast forward to 04-05. Same kinda thing in Pool B.

$10.60 allocated to feed barley - but $6.19 per tonne diverted to the C-Fund, leaving $4.41 in the pool account.

Why divert anything at these levels? What is the current strategy or policy. There was no mention of it in the last couple of annual reports.

Evader? Agstar77? Any comments?

[parsley]

Good questions chaffmeister.

This $60M slush fund of farmers' money is doing the chicken-dance right now.

Farmers should be mulling:

WHO makes the decision to jig with $60M ?
What determines the reason for jigging the $60M ?
Who is accountable for losses in the $60M?

Parsley