CWB Premium Myth Shattered...$226M losses proof.

[charliep]

Yes. CWB customers can lock in a cash price on any day as well as using basis contracts, futures only, etc. These custmers (including domestic as indicated by increased use of US wheat in domestic flour mills) can lever prices/terms as a result of competition from other buyers. Farmers as CWB stakeholders (farmers are not customers) must accept a single desk derived producer payment with no reference to a real sale/basis with futures or competition from other service providers.

[agriman]

Look, guys. Nobody is going to know any more about this than the mighty CWB wants you to know, which is nil. Speculate and add up all you want. You will never prove anything. Bits and pieces come out pointing to the high probability that the CWB was big short in March 2008 Minneqapolis futures and long holders, guessing who the short was and realizing that the short had no way to cover its positions by delivery, squeezed the shit out of it. That cost the CWB, and eventually western Canadian wheat growers, $90 million. The CWB's trading adventure and its incompetence is the sole reason why Minneapolis March 2008 futures hit $25 a bushel, a stunning $900 a tonne. Long holders must have had a helluva party. Some guys made enough to retire on at Fisher Island thanks to our good ol' CWB. The crazy thing is that wheat growers who were in the alternative pricing schemes actually got more for their wheat than the CWB did. Talk about crazy.

[TOM4CWB]

Agriman;

And then there were the 'Freinds of the CWB'... who the CWB cash traded and paid $846/t.

We should know EXACTLY who was given this gift. Want to make a bet it was the most vocal CWB 'single desk' supporters! this program was put together at the last moment... to pay big time for these folks. No year ahead booking... no contributions to the pool.

And those Organic export licenses... at under $10/t... when I was required to pay $500/t?

How is this any where near fair... and anything but a conflict of interest... for organic directors of the CWB?

THis is criminal.

[charliep]

tom4cwb

On your question on how much wheat was priced in the January to March 08 period, the answer is likely not a lot. The CWB posted prices that farmers sold at in the year presentation and I assume the DPC decision wouldn't be a lot different than the FPC ones. From CWB information, 87 % of farmers who used PPO contracts sold for under $7/bu (similar to the what the CWB says the US farmer sold for in the next slide), 8 % for $7 to $10/bu, $2 % for $10 to $15/bu and 1 % for over $15/bu. The implication is very little of the higher price was distributed to farmers but rather the process showed the DPC as a loss because the CWB hedging strategy carries risk across a whole pooling period (with all the risk associated with it).

See slides 7 to 9 of the yearend report. Will note the $560 mln better price than what the US farmer got. Won't start a new thread but can anyone demonstrate this in the annual report.

http://www.cwb.ca/public/en/newsroom/releases/pdf/webcast_073108.pdf

[Fransisco]

Moral hazard: is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. For example, an individual with insurance against automobile theft may be less vigilant about locking his or her car, because the negative consequences of automobile theft are (partially) borne by the insurance company. Morale hazard is sometimes used to refer to moral hazard which occurs without conscious action.

Moral hazard is related to information asymmetry, a situation in which one party in a transaction has more information than another. The party that is insulated from risk generally has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information.