CWB Contract Buy Out

[charliep]

For those of you that are not on the CWB news release email, the following may be of interest to you.

http://www.cwb.ca/en/news/releases/2004/101304.jsp

Long and short, this year only farmers can get out of their fixed price/basis contracts and capture any gains on either (depending on when you signed your basis contract, you are still likely in a buyout situation that will cost you money). No mention is made as to whether you have to provide proof of feed wheat only or other documentation.

What are your thoughts on this? How is this handled for non board crops? Could you capture the futures gains on a canola contract (eg. 2/3 CW or sample and don't like the spreads)? What documentation would be needed?

I am not necessarily pro or anti this. My concerns would be around it being a one year program (an election year) and that it follows generally accepted practices used in non board crops.

[charliep]

Just a note is that the process is not as easy as indicated in the press release. You need a reason to get out of the contract (i.e. feed wheat only) and get a CWB farm business reps signoff. Everyone has signed a CWB contract/only has feed quality needs to work the numbers to determine whether to get out of the contract, deliver the feed wheat to the CWB even with the discount or work a deal with a neighbor who has higher quality wheat/share the benefit. The latter could potentially be outside your community (i.e. I can see someone from northern areas working deals with southern farmers).

The contract that could have the most financial pain is the basis contracts. Your pencil will have to be extra sharp here to compare alternatives.

[boone]

Incognito: I can't believe you have nothing to say about this generosity of spirit, or has "COLD TURKEY" (fumer)
got your tongue? [:<{)

[craig]

The only problem with the contract buyout is that this should not be a one year deal. This reeks of politics where we offer lots of goodies pre election. First the suggestion is made that this will not impact pool accounts so are we to surmise that if they had not implemented this program that the board would have loaded up their contingency fund at the expense of farmers using CWB fixed and basis contracts. A farmer does not sign into this contract as a speculative tool. These options allow farmers to forward price at what to them makes business sense. If a producer is liable for futures loses if he is on the wrong side of the market then he should also be rewarded if he made the correct decision. Producers should not be penalized if unforseen circumstances (hail, drought frost) make it impossible to deliver the grade required.There still seems to be this desire to penalize producers who want to operate outside the pool account and given the opportunity the CWB will act accordingly. If the CWB wasn't the only game in town then maybe the CWB would be required to operate in a more business like fashion.

[Incognito]

Smoking is what will be happening in 2-3 weeks to the crop that is written off.

My friends at the CWB think i'm on vacation....shhhh, you will wake em up

how do u spell election pandering n e ways?

[boone]

Incognito: If they didn't do as well pre-hedging this crop as obviously enough individuals have, so as to take this policy direction, it will take more than this to wake them up!!!!!!!!!!!!!!!!!!!!!!!! I keep hoping and praying as I see the Minn.HRS or Kansas HRW getting beat up through the summer that it is the CWB risk management, (excuse me for a minute sensing some nausea here) division locking in a profitable position. Or Sept. 20th A.M. locking in feed wheat on the behalf of the piteous few that still trust them.

[boone]

Post: Should be Aug. 20th I apoligize for this inacurate pronouncement. Would have sure been nice though.

[Incognito]

The whole hedging mechanism needs to be addressed. Not only grain, how bout currency? Did they learn anything from last year's fiasco?

When they publish a PRO and farmers make planting/selling decisions based on the PRO, what is done to protect it?

The Aussies seem to have it under control...we don't. If they want to be the sole provider in the wheat market, there needs to be an attitude adjustment. Once half of the Butch Cassidy show is leaving, that may help.

And what say you of your crop, Mr. Raccoon Top aka Daniel, aka Boone?

[TOM4CWB]

Incognito;

The CWB pretends this is a one time, once in a life time problem with PPO contracts?

Serious analysis from the start showed CWB contracts are seriously one sided... in the favour of the CWB.

What prairie (Designated Area)farmer had any serious input?

CWB Directors cannot even use these risk management tools; why should they care one iota?

PPO's are a hassle for the CWB, and they have made it worth their while... building a significant Contingency fund on the backs of the few who would venture into PPO country... and not trust the pool.

OH YA... we have no right to complain about the pool prices falling apart... farmers could have used those one sided PPO's to hedge... this spring. The PPO profits all going to the CWB... riskier than not taking a PPO at all...

Yet the poolers will be sharing the benefits of the Contingency Fund in the future... any time they wish to partake... on the blood sweat and tears of the backs of those who built that fund!

Feed Wheat could be a profit centre for the CWB and farmers... with just a little planning ahead!

BUT the CWB is too proud to seriously consider a realistic feed wheat program... unlike the AWB who beats the CWB by $40/t on feed wheat returns!

Why exactly do we put up with this?

Do we really have a choice?

Only in Canada you say!

PITY

[boone]

Tom4cwb: Poolers? You make it sound so dirty! Try consortium, bund, group sellers, combine, stinking little monopoly, but not poolers. You are 90% right here but no one not even us dyed in the wool types are all right all the time. Incognito, what sayest thou about my hat? I liked you better when you dripped nicotine on the restaurant tables of Lombard, Portage,Main,and Rue de St. Boniface. I think you guys are showing the signs of a stressfull year, I may retire to write the next biography of Tommy Douglas and do a little hail adjusting, like others of my trade.LOL

[TOM4CWB]

Boone;

If "Poolers" like this method (POOLING)of selling their grain... just fine with me... if we work on a level playing field in the CWB sales dept.

This would require significant reform to present CWB selling practice... that in the present form puts all CWB sales including PPO sales into the pool... then sells PPO grain back to the contingency fund... to then create a profit or loss on PPO grain for CWB sales through these PPO programs.

The effective result is a filtering of the PPO basis, that makes it near impossible to determine how much PPO sales revenue ends up in the pools. Or possibly how much pool money ends up in the contingency fund, or possibly in the hands of PPO Contract holders.

I understand that Ontario found that it was basically impossible to draw a cash price out of a pooled sales system... and keep everything straight... significant risk accrued to the pool for them... as proper hedges were difficult to maintain for a sales dept. used to leaving all the risk with the farmer in the pool.

I understand these issues finally broke the OWPMB apart... as they actually reported in financial statements a lack of risk management (Extremely unlikely the CWB will do the same mistake)... as cash/flat pricing increased as a % total of sales... reducing the ability to cover up the visibility of the weakness of selling cash grain out of a pooled sales methodology system.

The same will happen now that the CWB is returning actual hedge returns to farmers... instead of to the pool accounts.

As it stands the whole mind set of the CWB must change to a cash sales strategy... with a pooled price drawn out of cash prices... rather than the way it is now (cash prices drawn out of the pool) for the CWB to survive in the long run.

These changes would force transparency at the CWB... accountability... and liability for cross subsidisation of sales between different markets as well.

Now Boone;

How much do you think Chairman Ritter or any present "Pooler" director understands of these issues?

Do you think Adrian Measner even understands this?


If a cash sales system is adopted... then WTO rules can be adopted that prove cross subsidisation... ruled illegal in Canadian Dairy and just now EU sugar programs.

SO the CWB is in a squeeze for it's very life... and present directors haven't the aptitude (save maybe Anderson) to deal with these issues. Futher the CWB sales Dept simply does not want to face up to these issues.

So a gift to PPO contract holders holders on election year is given... but at the expence or cost of who?

Do you think the CWB sales dept actually keeps track of PPO Hedges now (?)... as it was clear the did not in recent years according to Measner's letter to me.

Will we be smart enough as farmers to understand a culture change and mindset change MUST happen at the CWB for it to survive?

[boone]

Tom4cwb: I have been thinking about what you have said here and didn't just hear rhetoric, and you know what else, you could be one heck of a big part of the solution, if you were locked in a room for a couple of days with Anderson & Co. Now don't start shaking your head, it could work. When I ask the question what would happen if the board was totally out of the price discovery portion and involved in only logistics, and market development, it is damn hard to know what other negatives this would cause, but problems would show up and be solved if the interest was there to proceed. It is self interest from each polarized group, which destroys this option. Incognito; you should be in that room too if for nothing else but to translate gobleygook in to straight talk. And by the way my crop was pretty decent thanks.

[Incognito]

adding "translation services" to my CV...as we speak...LOL

i can be the grain geek go between like the computer geek that cant speak Englishese.

Congrats on the crop.

There is NO WAY that realized net income is going up in this province, unless they punch 20 oil wells on each and every farm.

[TOM4CWB]

Boone;

Going to a meeting to collect more nomination signatures in a few minutes. I am all for turning the CWB into our (farmer's) agent... before it is destroyed. Ritter does not care to strain his brain... and wrap his mind around what must happen to turn the CWB into a world class marketing system... that will extract measurable premiums in the future.

Guess this is why I must run against him...

Incognito;

Can you give me a hand out here in district 4?

[boone]

Tom4cwb: "Stand therefore, having girded your loins with truth, and having put on the breastplate of righteousness, and having shod your feet with the equipment of the gospel of peace; above all taking the shield of faith, Ephesians 6.14,15,16
good luck to you