CWB answers misleading public statements with their own misleading statements

[craig]

Recent comments from both CEO Ian White and Chairman Larry Hill would lead us to ask the question of just who is trying to mislead who?
"It is not true that a $130-million loss exists that has been repaid directly from farmers' pockets." Reality. The loss exists and it will come out of farmer's pockets at some time. This will be higher basis to rebuild contingency and likely repay money taken from pool accounts.
" A total of $38.7 million in other CWB revenue was transferred into the contingency fund, including $25.5 million on non-sales revenue from the CWB pool accounts that would not otherwise have been transferred." This statement implies that non sales revenue is really not producer money and cares not to share with producers a definition. This brings up a scary point that has been evident for some time. The CWB seems to be able to claim ownership of certain revenues within the board as if it were their own and not that of producers. We contribute dollars through unrealistic basis levels on PPO's yet that seems to be just classed as general revenue with free disgression on it's use. Maybe the government should be hiring CWB staff to convince the general public that the current deficits we are incurring really don't have to be paid back. Time to ask some serious questions at the farm forums.What impact will the current losses have on future basis levels in the PPO's? Will the non sales revenue taken from the pool accounts be repaid from the contingency fund? Does this shift of money from pool accounts impact the current returns to this years pool accounts? Will the surplus from the contingency fund a number of years ago that was dumped into the pool accounts be taken into consideration? If the losses in the contingency fund are not coming from farmers pockets could someone explain where it is coming from ? Feel free to add your own.

[chaffmeister]

The bottom line is the CWB lost a lot of your money. (We really don't know how much but let's just say it is so much that they couldn't completely contain it.) This talk about "re-paying" with future revenue is totally disingenuous.

Think about it.

EVERYTHING - and I mean EVERYTHING the CWB makes in the process of marketing grain is your money. What they are saying is they will pay future PPO participants less in order to pay back the pool accounts.

BUT ITS FARMERS' MONEY IN THE FIRST PLACE.

This is nothing more than a shell game with your money. Last year they took from Paul to pay Peter. Next year they will take from Peter to pay Paul. BUT PETER AND PAUL ARE THE SAME GUY!!

I think the easiest way to look at this is the CWB screwed up so badly it couldn't pay farmers everything that was coming to them. And they want to "repay it" with your future income.

I can't for the life of me figure out why people aren't saying:

"I'm fed up and I'm not going to take it anymore!"

[parsley]

I proposed an action plan for farmers on Parsley's Notebook, they can veer from it, or incorporate their own strategy into it, I have done it with less than ten, and it is effective.

At least it will help to pinpoint the cancer. Pars

[charliep]

While you are asking questions, you might also ask where the $29.47/tonne CWB malt barley benefit came from. See page 45 annual report.

The average price basis prairie (excluding trucking premium, VIP, etc) was about $5/bu. $290/tonne from page 52 minus $60 to put back to an elevator.

The average price for malt barley basis Minneapolis (USDA) for a June to May crop year was $6.14/bu. Did the calculation and the loonie was close enough to par to call it so.

http://www.ers.usda.gov/Data/FeedGrains/StandardReports/YBtable14.htm

The feed barley pools were $331/tonne port A pool (37,000 tonnes) with $35/tonne magically arriving from something other than revenue ($297 real revenue) and $287/tonne on the B series (real revenue $299). I note the impact limited access to guarteed delivery contracts on access to the market and ability to deliver. pages 55 to 59.

The average price an Red Deer area farmer got for domestic feed August 2007 to July 2008 was $171/tonne.

Leaving the issue of control over delivery opportunities via GDC feed barley contracts, the market signals the CWB provided farmers via PRO releases far lagged the actual values in the market place and were way below final values. See the historical price charts below. Farmers and feedlots reacted to the PRO values by keeping domestic prices relatively low. See slides 14 and 15.

http://www.cwb.ca/public/en/farmers/producer/historical/pdf/2007-08/0708fpcbpccharts.pdf

The CWB made $20 mln in cash trading (realizing they control access to the pooling system via GDC controls) and transferred from feed barley to the contingency to look after their wheat futures trading incompetance. TO HIGHLIGHT, NONE OF THIS BENEFIT SHOWED UP IN BARLEY POOLS. IF ANYTHING, THEY USED THE LACK OF MARKET INFORMATION TO SCALP THE DOMESTIC FEED MARKET. BOUGHT CHEAP DOMESTICALLY/SOLD EXPENSIVE EXPORT AND TRANSFERRED MONEY TO THE CONTINGENCY FUND.

Sorry got off course. The only basis I can see the arguement about $35/tonne benefit is the assumption is that farmers are stupid and would have sold malt barley for feed prices. By the way, I have not highlighted how high international malt barley price were in 2007/08 or the fact the CWB was likely trying to protect the lower prices malt contracts they had signed barley with maltsters/exporters in early 2007.

Sorry for ranting too/too many numbers. I haven't seen anyone talk about barley so I raise the issue.

[charliep]

Mistake alert on the last paragraph. The benefit was $29.47/tonne with the CWB apologizing because they didn't hit their of $33.70/tonne.

[charliep]

Chaffmeister will also remind me that the feed barley interest earnings are basically what has funded the contingency fund since day - a board of directors decision.

[charliep]

Incorrect on the A series feed barley. I neglected to look at the bottom of the note the undistributed earning (also called a transfer to the contingency fund).

[charliep]

craig

Apologize for taking over the thread but here is a question I don't understand.

When the losses on the fpc and dpc contracts almost exclusively are allocated to wheat ex durum, why is the bail out distributed across all the pricing pools?

From the bottom of the pool statements, wheat ex durum contributes $21.4 mln to the contingency fund versus a combined PPO loss of $90.7 mln.

Durum was allocated pain of $3.1 mln from a loss of $100,000. I would put a question on this loss given durum PPO products generally had a discount of over $2/bu - would check for slippage/having the adminstration costs on the wheat ex dur transferred to durum.

Malt barley put $680,000 into the contingency fund transfer versus a net profit of $396,000 on the PPO products.

Feed barley (combined) put $2.5 mln into the contingency fund transfer with a profit of $895,000 on the PPO products.

Isn't this a transfer of revenue between pools?

[Kodiak]

Question for Jeff - or any other CWB director who may post on this site.

Does the CWB have a corporate, or internal auditor, who reports directly to the Audit Committee?

[stubblejumper]

Editor:
Agriculture Minister Ritz is sanctimoniously outraged over the fact the Canadian Wheat Board (CWB) reported a miniscule loss in their contingency fund due to the global market meltdown. Of the record $8.418 billion in gross sales, the contingency fund loss was less than one per cent. The contingency fund was established to backstop CWB producer payment options and it was envisioned that it could be in either a surplus or deficit position depending on the volatility of the markets.

Ritz is demanding the CWB Board invite the Auditor General (AG) to do a review of all aspects of the CWB operations. In 2001, at the invitation of the farmer elected Board of Directors, the AG did a complete review of the CWB. Obviously Ritz and his Parliamentary Secretary David Anderson either failed to read or to understand the previous AG’s audit. If they did, they would not be attempting to publicly undermine the financial credibility of the CWB. If their irresponsible attacks increase the CWB’s borrowing costs, this would cost farmers hundreds of millions of dollars. We can only hope that investors remember the AG gave high praise to the CWB just a few years ago and that Ritz’s comments have no credibility. In the 2001 audit, Auditor General Sheila Fraser stated:

"all revenues from the sale of grain, less operating costs were distributed to producers in accordance with the requirements of the Canadian Wheat Board Act and the CWB's price pooling policies."

"the CWB has a solid reputation as a strong and capable marketer of quality grains. Its key strengths include very good intelligence and market information, well-developed annual sales strategies and plans, competent and tough negotiators and good relations with customers…."

As a brand new board we invited her office to do a comprehensive audit of all areas of CWB operations including finances. During the 2001 review, the AG was confident that the CWB’s external auditors were doing a proper job. However the CWB Board and management insisted that the AG investigate all areas of CWB operations, including its finances.
Consequently her office spent about 11,000 person hours in the review. This required at least the same amount and in many cases double the time from CWB staff to supply the information. It was a very expensive and disruptive undertaking.
Ritz’s demand for another audit would simply be taking money from farmer’s pockets to find out what everyone in the real world knows: when the global market crashes, pricing option programs are risky.
Ritz should be thankful the farmer run CWB is such a prudent manager and competent marketer; and in fact returned record net revenue of $7.2 billion to farmers this last crop year. The taxes from this will help to pay for the multi-billion dollar Harper government bailouts to the private banks and auto companies. That is obviously an area of incompetence and greed where Ritz could mount his high horse and charge.

Art Macklin - Grande Prairie

[silverback]

I take it you agree with Macklin stubby?

Miniscule loss?

This is not only about poor trading activities, it is also about their lack of ability to achieve average world prices.

How much did they fail to capture Chaff? 1 billion? 2 ?

Glad to know losing money is ok to you zombies and your children.

[LWeber]

Stubble:

The CWB wrote that for Macklin. How gullible are you?

Here is more from your hero:

http://www.calverley.ca/Part08-Agriculture/BN08-51.htm

March 14, 2000

By Mark Nielsen, Daily News Staff

Grain farmers will have two new ways to sell their product this coming crop year.

The Canadian Wheat Board (CWB) board of directors gave the green light earlier this month to allowing fixed price contracts and basis contracts as an alternative to the traditional price pooling.

Those who attended a CWB members meeting in Dawson Creek Monday evening got a closer look at schemes designed to allow members to better manage their cash flow.

The primary reason most will participate is so they will be able to get their money faster instead of relying on an initial payment from the CWB for much of the year.

"But what they are doing is that they are taking more risk on themselves in terms of the time that they actually sell," said CWB district one director Art Macklin.

Fixed price contracts allow producers to take a price at a particular point in time and basis contracts allow them to play the futures market.

Fixed price contracts will be based on the pool return outlook which in turn is based on the CWB’s best estimate the final price the for that marketing year. It’s generally given in a range of $20-$30 per tonne.

"So what the wheat board is saying is we will relate the fixed price contract to the mid-point of that range," Macklin said.

For five days from the date the pool return outlook is announced, farmers will also have the option of using basis contracts. based on the Minneapolis futures market. The underlying futures will be December futures for April and May contracts, and March futures for June and July contracts.

The two new schemes will be limited to mill-quality Canadian Western Red Spring Wheat, but it’s the largest class of wheat that is produced in Canada.

"So this does allow producers right across the whole prairie region to participate in this program right off the bat," Macklin said.

Staying with a single class of wheat also reduces administrative costs, and the plan is expected to go through a one- or two-year trial period before it’s expanded.

"So we’re going to walk before we run on this one," Macklin said.

Macklin, who ran on a platform of orderly marketing during the elections in 1998, said the moves are not a step towards dual marketing.

"It’s giving producers some pricing options, but you’ll notice that the options are based off the pool return outlook," he said. "And the Canadian Wheat Board is still the single marketer to export positions and for domestic human consumption."

Macklin also stressed that those who stick with pool accounts won’t be paying for any of the administrative costs for the other two methods.

CWB members will also get a mail-out in April explaining the two schemes more fully.

[Kodiak]

Are we all in agreement with Mr. Macklin that an audit by the Auditor General in 2001 addresses the questions with respect to the contingency fund balance, transfers from pool accounts, and discretionary trading results in 2007/08?

Mr. Macklin is hanging his hat on an audit that was done, in his words, just "a few years ago" when he was on the Board. But Mr. Macklin is no longer on the board. So unless someone is leaking information to him, he has no knowledge of current operational or financial matters. I have to wonder what basis he has to form this opinion.

[charliep]

As an interesting note, the $90 mln got turned into a loan on the CWB books of
$29 mln (how is was done is documented in the audited statements.

stubblejumper - are you comfortable with where the other $60 mln came from that
financed the deficit on the 2007/08 contingency fund - this includes cash selling
feed barley at extreme profits? Can you guarantee the $18 mln direct from the
pool accounts (no where to be found in the financial statements other than the
reconciliation note (I think 22)? Note I am not including the surplus transfered to
the pooling system in 2004/05 ($7.5 mln). How will the $29 be distributed down
given the allocation provided at the end of each pool statement? Should it be kept
corporately when repaid or returned to the farmers who delivered to the 2007/08
pooling year?

[charliep]

On the $18 mln, the board needs to be clear whether the loss has been
incurred by the pool and a commitment this liability will not be transferred
forward. If the BofD does expect this debt to be repaid, then it should
show up on the 2007/08 balance sheet and not some internal transfer
approved at some point in time by in camera BofD decision outside any
type of external review.

I find it interesting that most corporations with shareholders would have
to present financial information at an annual meeting with the auditors
present to answer questions and where this the report would be debated
and passed. Farmers are provided an opportunity to read the financial and
maybe ask a question at a district meeting but little else. Even the federal
government does seem to be able to ask for more detailed information.
This in an organization transfers money here, there and everywhere with
little process or documentation.

If you want to do some interesting math, look at the real pool returns to
the wheat pool accounts ($3.1 bln) not including PPO portion ($1.8 bln)
and compare that to the losses on both the discretionary trading of $226
bln and losses on PPO trading (exclusively wheat) of which $25.5 mln has
been written off and $29 mln is on the books as debt to be repaid) and
this would suggest the CWB lost 10 % of the value of value for farmers who
delivered wheat to the 2007/08 crop year. May your numbers are
different.