FPC,s and DPC's Sudsidizing Pool accounts

[craig]

Just went through last years Annual CWB report. The producers using FPC's and DPC's contributed a net surplus of $35 million. Of this $7.5 Million went into pool accounts and $27.5 went to the contingency fund. Contingency fund is now over 48 million and cannot exceed $50. million. If this surplus had been returned to producers who used the PPO's it would have represented an additional $.8o per bushel or about $30. per tonne. We now have a situation where the surplus from these accounts this year will likely all be dumped into the pool account because contingency cannot exceed $50. million. Notice how the CWB makes sure that the FPC's and DPC's don't jeopardize the pool accounts and producers are not entitled to any additional payments from the pool account but it's quite alright to dump the millions of surplus into the general pool account. They wonder why producers want a voluntary wheat board. Also can't understand how you can claim a contingency fund is a liability and not an asset.

[charliep]

When I just look at the $7 mln transfer from the wheat ex durum class, all farmers who use the program (just under 1.2 mln tonnes), each farmer contributed about $6/tonne over and above the other costs they paid to the overall pool account. Unless the contingency fund is increased quickly (maybe too late given the 2005/06 pools have been closed for along time), substantially more money will be transferred from farmers who used the programs to the overall pool.

I note these programs have been toted as symbols of change/a new CWB. The results show something different.

[WRAPper]

I wonder if the program couldn't be changed the board needs to be doing a few different things with these ppo's , but the producer has to to be responsible for thir marketing decisions in using these programs too exactly like they would be in non board grains. I would look at whether or not it makes sense to increase to cap to 60-65 million(or not) then at that point begin a program where the overage(if any) is returned to the producers and the pool using the PPO's on a sliding scale over time . starting at 75% to the pool 25% back to the ppo participants as a a"basis" adjustment payment. within 3 years 50-50. 6 years out I would do something a little different in that I would drop the number from 50 -50 to where the pool and the producer share in 75% evenly and the remaining 25% be used either for an investment in cereals research through the wgrf.OR the post secondary route for students. This money would be credited to the producer as a taxable deduction for income tax purposes less a administration fee.
These numbers can be played with, perhaps all the money(overage) should go to WGRF eventually or students.

By putting the overage in the pool it makes the pool sales look stronger which it shouldn't and conversely the free market wouldn't give the producer your money back. niether party here is really "entitled" to this money. Personally this year as it stands on the ppo thus far I'm ahead on some CWRS but behind on some CPS. So I see it as a saw off so far.

[craig]

WRAPper
I do not understand your logic.This is why the CWB continues to make Producers Mad. It is clearly stated that producers who use Producer Payment Options are not allowed to participate or receive further payments from the pool account. Under that senario I do not understand how you can suggest producers in the pool account should be entitled to any overage gained from PPO's. I guess the question that needs to be asked is where is this surplus coming from. It is my understanding that the contingency fund may now be capped at 60 million. If surpluses are created because of ridiculus basis levels then producers who use the PPO's should be entitled to that overage. This years annual report (05-06)should be interesting because with increased use of PPO's and the little room to the cap we could be creating a huge surplus with no where to go but the pool accounts.

[WRAPper]

I am agreeing with you the pools shouldn't get the funds but neither should the producer. There are no "do overs" in Canola basis's what is your solution then? I offered a solution you don't like it. Lets hear yours and it can't include giving all the money back to the ppo participants as they made that business decision.

[WRAPper]

read my first post more carefully you'll note in there I said perhaps all the overgae should be directed into the WGRF or bursaries with the produces getting the taxable benifit of their share. So I don't in fact think the monies should go to the pools because it distorts their performance and they need to stand on their own too.
Offer solutions Craig don't just offer problems only.

[TOM4CWB]

WRAPper;

THe CWB has NO Statutory mandate to steal money from any grower... the Contingency Fund can as easily operate at a ZERO fund level... as at a $50million level.

The CWB building a capital base at the expence of PPO growers... is not equitable, fair, and was never the intent of the CWB Act.

Transfer of PPO monies to the pool accounts is totally out of line...

Didn't the CWB claim for years the PPO's did NOT affect the Pool accounts?

[craig]

WRAPper
I asked a simple question of what has created all the surplus in these Accounts. Until we determine that I think it is difficult to determine where the funds should go. We should also make sure that we understand that FPC's and DPC's have some marked differences from the open market. In the open market you have competition when basis is offered, under the CWB there is only one game in Town. The Contract Programs are somewhat tied to the PRO's and not totally to the open market. In an open market you would have a hard time selling the basis levels the board is using. If you don't believe me fiqure the total basis you pay to get to Vancouver under the FPC. and then Compare that to an American Farmer whose grain ends up in Portland.The basis argument is even more out of line when you likely have 60 million dollars in contingency to backstop unforseen circumstances. I think the CWB has the tools and expertise to operate both PPO's and pool accounts and keep them totally seperate. I honestly believe they don't want to do that because there would then be a benchmark with which to judge their performance.

[WRAPper]

I don't disagree

[chaffmeister]

I was about to write something here - but then I read the postings. Craig has already said what I was going to say anyway.

WRAPper - there's no adjustments on canola because the grain comapnies are profit maximizers - the CWB's mandate is to pass all revenues above expenses back to producers.

I like the idea of all overages going back to the contract participants. Certainly shouldn't go to the pools, and the contingency fund seems more like 'retained earnings' to me.

[WRAPper]

I've been feeling a little sheepish outside working today so thought I'd come back in a come clean , I misread craigs question and misunderstood his intent this morning thus gave him acouple answers to a question he never asked in the first place , sorry Craig you are right they do have to address that overage issue somehow. I hereby bequeath that beer CP owes me to you. (but I'm not apologising to Tom because it would make him happy lol) But he did look purdy on TV,

[craig]

This was a reply from someone regarding this issue so thought I would post it here for discussion.
Was this surplus created solely by the basis or did the CWB also sell the
grain for more than what the 6,782 farmers had pegged as their (open market)
price. My understanding is that in the open market the price that the
producer contracts is the price that he ends up with, there is no price
pooling. So why would the CWB divide the surplus amongst these producers,
they entered into those pricing options believing that the price that they
chose would be greater than the CWB pooled price. We are fortunate that
this surplus stayed with the CWB and will be distributed back to producers.
If we lose the CWB would not such surpluses stay with the grain companies?
Would the grain companies share the surplus with producers? I know that I
have yet to receive a cheque from any company for any open market grains
(canola, lentils, field peas and chickpeas) that I have sold over the years
and I know I have not sold my production at the top price. Larry, if you
know how I can receive my share of these surpluses from the grain companies
please advise. Thank You

[craig]

Just wanted to make a couple of quick points about above thread. This producer is saying that it is quite acceptable for him( her) to profit from these tranactions(PPO's) but when a grain company does this it is morally wrong. By allowing this to happen you are not treating producers on an equal and level playing field. You are also setting up the opportunity for staff of the CWB to manipulate the program for there own gain( propping up the pool accounts). If these programs(PPO's) were more open and transparent then we would likely not have this problem. Until we get to that stage we are just in reality taxing one farmer for the gain of another.

[craig]

Please someone talk to me. Just kidding. Wanted to let people know if they haven't already seen it. Another press release from the CWB concerning Producer Payment options. http://www.cwb.ca/public/en/news/releases/2006/110206.jsp
Excellent information regarding participation, tonnage etc.. You may want to file these numbers for future reference. As I do more research on this issue more things are starting to fall in place. However they aren't the same story you are hearing from the CWB. Will fill you in as a understand this more.

[TOM4CWB]

Craig,

I note the CWB didn't say a word about the "adjustment factor" in the press release... or about the millions taxed from PPO growers building the CWB capital fund for the future.

The arrogance of the CWB management to directly take funds off my PPO; and admit they are cross subsidising the pool.... is simply dumbfounding!

There is nothing in the CWB Act or regulations... that allows the CWB this ability... that I can see...

What have I missed?

And I do remember the CWB say many times that the PPO's didn't affect the pools... which is absolute nonsense because of the deductions through the "adjustment factor".

It sure would be nice if the CWB management would be honest with us.... for just one minute!

There was no need to change anything in the CWB Act, barley, or anything... if the CWB had just respected the right of the grower to recieve a true... undistorted... cash price on a daily basis throughout the year!

A pool can easily follow after a cash market that is undistorted operates with fluid transparency.

But NO; the CWB must hide everything in the pools.

It is like the CWB KNOWS we will be disappointed with the sales values... if transparent prices are visible!

Now that 20,000 producers all know the CWB is ripping them off... through the FPC's... what do they expect?

A thankyou card?