- In 2001-02 the CWB transferred $7.1 million in interest revenue from the feed barley pool into the Contingency Fund.
o It now has a policy that allows it to arbitrarily transfer whatever amount of the feed barley interest revenue it believes it should so that interest revenue doesn’t distort the feed barley price.
o The drivers here are (1) what the Contingency Fund needs and (2) what the CWB believes is the “right” price for farmers selling feed barley. In any other world, this would be considered manipulation.
o CWB staff has told me that the interest revenue isn’t being taken out of the feed barley pool; rather, they say it goes directly into the Contingency Fund. This is convenient for them because this way it doesn’t look like the CWB is taking from feed barley producers and artificially setting the feed barley price. BUT – check out the annual reports; in 2007-08, there was $948,000 in interest revenue reported in Pool A and $1.236 million transferred out to the Contingency Fund.
- In 2002-03, domestic maltsters in Alberta imported malt barley from Denmark because of price signal failure by the CWB.
o This is from Bob Sutton, President of Rahr Malting in Alix Alberta:
The CWB was overly cautious about increasing the PRO while feed barley prices rose sharply due to the drought, leading farmers to avoid CWB pool contracts for malt barley. The malt industry first took the drastic step of guaranteeing the PRO to inspire some confidence in the price. Meantime, we needed to make sure we had low protein barley and the EU hadn’t figured out yet how bad our crop was, so we made the purchase and when the news hit that Canada’s crop was so bad that we were importing from the EU, prices jumped.
o The CWB argued that the quality of the barley crop that year didn’t meet malt specifications, forcing the maltsters to import. Ask the maltsters and farmers in the area – the quality was there, but the CWB malt PRO wasn’t competitive to domestic feed prices.
o At 891,000 tonnes, it was the smallest malt barley pool in recent memory.
o With proper price signals, there would be no imports and malt prices to farmers would have been higher
o Estimated cost: $40/tonne on about a million tonnes = $40 million lost revenue for farmers
o Worth considering – the quality of the crop this year is about as bad as it’s ever been, yet no one is importing barley from offshore.
- In 2007-08, the CWB lost about $90 million in the PPOs due to inappropriate hedging and $226 million in the wheat pool account due to “discretionary trading” (speculating)
o It’s likely the CWB used the same “hedging” strategy in the pool account as in the PPOs and so it’s equally likely that the CWB took similar losses in the pool account (on top of the “discretionary trading losses”) – but there is no way to find out.
o Estimated cost to producers: in excess of $300 million
- In 2009-10 and 2010-11, the durum market at the farm level was in total disarray
o CWB accepted only 52% of the 09-10 crop
o Poor deliveries combined with low Initial Payments, farmers began selling high quality durum into the domestic feed market
o Vessels on demurrage because the CWB couldn’t get the durum
o Cost to farmers: many millions
- In 2010-11, the CWB initiated a feed barley export program that hid much of the export value from farmers
o A more fluid program providing good price signals back to the prairies would have increased domestic barley prices
o Estimated cost to farmers: in the hundreds of millions.
- Over the years there has been higher handling costs for regulated CWB crops
o In 2008-09, Western Canadian average “net-backs” (handling, cleaning, CWB expenses, etc - excluding freight):
CWRS = 28.91
Durum = 48.47
Canola = 5.65
(The reason canola is lower – competition and no CWB costs.)
CWRS = 28.91
Durum = 48.47
Canola = 5.65
(The reason canola is lower – competition and no CWB costs.)
o Even a $20/ tonne difference is worth about $400 million annually
- Every year, non-CWB crops are sold in the fall to pay for input costs, including those for CWB crops.
o It has been estimated that canola farmers receive in excess of $60 million LESS annually due to this excess selling pressure. Include all non-CWB crops, and the cost to farmers is closer to $100 million annually.
o Add to that the cost of additional on farm storage required for CWB crops that can’t be delivered, and the cost is even higher.
- CWB pool prices net to farmers are consistently below crop year average farmgate prices in the US northern plains
o Considering the last 7 years, the pool returns on spring wheat and durum have consistently been below the US average street price.
o Applied to the whole pool, this totals over $3 billion in revenue below what average US prices would have provided.
All these “situations” occurred under the status quo with the single desk. However, not one director candidate that is running on protecting the single desk has addressed any of these – or any other unfavourable situations that the single desk is responsible for. Instead, they argue about what they believe will happen if the single desk is lost; curiously, they never talk about how problems like these will be avoided.
There are candidates that are running on platforms that are focused on changing the way the CWB does business. They recognize that there are problems with the CWB that are costing farmers a great deal and are willing to address them.
Considering these “situations” listed above, which candidates make more sense? The ones that want to correct these costly episodes, or the ones that are turning a blind eye to them and perhaps even believe that nothing is wrong? Once they're at the board table, which ones will work at improving these situations?
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