Back to the Contingency Fund

One of my first articles was on the Contingency Fund and how the CWB has lost a lot of money in the fund over the years, particularly in 2007-08.  The CWB has recently posted a comment on its website addressing what it refers to as “confusion” about the fund.

The CWB states:

Resulting program losses put the contingency fund into a deficit, which necessitated a transfer of funds from other CWB revenue sources.

This did not result in a loss to producers. Producers received every penny they contracted through the CWB’s Producer Payment Options, and also received near-record net returns.

To be clear:

• The CWB says it transferred funds from other CWB revenue sources, specifically, $27.6 million from the pool accounts.  The following year, the CWB repaid most of this money ($18 million) back to the pool accounts.   Therefore, farmers in the pool accounts were without the benefit of this money for a full year; at the very least, there is an interest expense (loss) borne by farmers.

• Producers did indeed receive every penny owed to them through PPOs; that was never in dispute.

• The fact that producers received near-record net returns that year was also never in dispute.  But think about it – in 2007-08 the CWB lost $90 million in PPOs (coming out of the Contingency Fund) as well as $226 million in “discretionary trading” in the wheat pool account.  Whether the total revenues of the CWB were $7 billion or $7.3 billion isn’t a factor here.  The size of the total revenues is not an effective argument to try to explain that farmers did not lose money.  They did.  The near record revenues, as good as that sounds, would have been even a little better if it weren’t for the CWB’s ineffective hedging strategy and discretionary trading losses.

Everything the CWB does is supposed to be for farmers.  So, when the CWB loses money in the Contingency Fund (as it has stated), who’s money is it, if not farmers’?

CWB Commentary on Contingency Fund