For immediate release: August 8, 2002 CWB Marketing Costs Barley Farmers up to $3.7 million The Canadian Wheat Board1s (CWB) marketing of barley has cost farmers up to a total of $3.7 million in lost revenue, according to a statement released today by the Alberta Barley Commission, the Western Barley Growers and the Western Canadian Wheat Growers. The three organizations were commenting on the CWB1s decision to allocate $2.5 million in interest income to the feed barley pool in order to bring the Board1s final price more into line with returns in the domestic feed market. They have also addressed a joint letter to CWB Chairman, Ken Ritter, in which they say that the Board siphoned 56,000 tonnes of barley out of the domestic market by artificially inflating the "Pool Return Outlook" (PRO) and then "dumping" the barley into the export market at a depressed price. "The CWB PRO is supposed to be a price signal to farmers to tell them what their grain is worth if they sell it to the Board," said Alberta Barley Commission Chairman, Ken Sackett. "Instead, the PRO was inflated by $45 per tonne above the prices the CWB was actually getting, and was attracting grain that should have stayed home." The Western Barley Growers issued a news release on Tuesday (August 6) on this same subject. "Using farmers' money to cover up poor CWB sales returns is a clear distortion of market signals, and leaves the impression the Board actually sold feed barley for more than it did," WBGA president said in the release. According to Wagner, the entire episode shows "that the CWB is selling for less, therefore it is time the monopoly be removed." The letter asks the CWB how dumping 56,000 tonnes of barley, at a net loss of as much as $3.7 million below what that grain would have commanded in the domestic market, is consistent with its claim to maximize returns for farmers? "The CWB must be accountable to farmers for its actions," said Wheat Grower President, Art Enns. "Selling at a discount and attempting to hide the results with interest income is totally inconsistent with the CWB1s claims that prices would fall if the Board1s monopoly is broken. In this case, farmers would clearly have been better off by as much as $3.7 million." The three organizations released their letter to Mr. Ritter publicly and say they are awaiting a reply. -30- For further information contact: Brian Kriz, Vice Chair Alberta Barley Commission 403-943-6581 or 403-588-0749 Albert Wagner, President Western Barley Growers Association 780-963-7753 Art Enns, President Western Canadian Wheat Growers Association 204-746-8522 or 204-746-5037 August 8, 2002 Mr. Ken Ritter, Chair Board of Directors Canadian Wheat Board 423 Main Street Winnipeg, Manitoba Dear Mr. Ritter: We are writing in regard to the actions you have taken on the allocation of interest earnings to the 2001-02 barley pool. It gives us considerable concern that the CWB, in fact, distorted the PRO by including as much as $45 per tonne from the distribution of interest earnings. The implications of this are that the Canadian Wheat Board reduced farmers1 returns by as much as $3.7 million against what they might have been, and calls into serious question the value of single desk marketing. It is now apparent, from the figures the CWB itself has published, that the following occurred during the 2001-02 crop year: The CWB was selling barley into the export market at an average return to farmers (after handling and transportation from Lethbridge) of $88 per tonne, when the domestic market (Lethbridge) was returning between $150 and $160 per tonne all year. During the 01-02 crop year, the CWB sold a total of 56,000 tonnes of barley into the export market, at an average discount to the domestic market of $67 per tonne, incurring a $3.7 million loss in income to farmers. The CWB was able to attract this barley because the PRO was inflated artificially by interest earnings. In the words of the July-August edition of Grain Matters, the PRO is "based on confirmed sales and projected sales and prices," and is supposed to be a price signal telling farmers "when to take advantage of off-board markets." In fact it was neither of these things. The barley PRO gave no indication that the export price actually generated a return to farmers that was as much as $67 under the domestic market, and gave a totally erroneous signal to farmers. We realize that this effect would vary a little between different sources within the Prairies but would hardly account for this unbelievable difference. Now you are proposing to cover up these losses in the barley pool by taking $2.5 million of its interest earnings and bringing the final price up to a level approximately equal to the returns from the feed market. This kind of manipulation of prices and returns is completely unacceptable. At the same time, the entire sequence of events undermines the credibility of your argument that the single desk price secures premiums for farmers. By your own publicity in the July-August Grain Matters, you portrayed the PRO as a price signal reflecting the values in the export market that would allow farmers to choose whether to deliver to the CWB or the domestic market. However the PRO sat at $180 (Port price) throughout most of the year, and well past the time when you would have known that export port prices were averaging only $135/tonne. At the same time, by setting the PRO at a totally artificial and arbitrary level, you siphoned off 56,000 tonnes of farmers1 barley and sold it at a loss into the export barley market, costing farmers a total of $3.7 million. The $2.5 million of interest income that you are now saying you are allocating to the barley pool was totally independent of the actual sales made in 2001-02, and would have flowed to farmers regardless of sales, as you well know. The "allocation" of $45 per tonne of interest into the barley pool, we would conclude, is little more than a financial sleight of hand designed to camouflage the CWB1s poor marketing results. Given the above, we the undersigned organizations formally request a response to the following questions: When was the 56,000 tonnes of barley in the 2001-02 pool actually sold, and when was it delivered to customers? Why was the PRO kept at $180 when you were well aware that the actual prices in the export market were averaging $45 per tonne below this? How is dumping 56,000 tonnes of barley, at a net loss of up to $3.7 million below what that grain would have commanded in the domestic market, consistent with your claim that the CWB maximizes returns for farmers? When the CWB is selling barley for $67 less per tonne than farmers could get directly in the domestic market, how can the CWB continue to claim that prices would fall if the CWB1s monopoly were terminated? We believe that farmers deserve straight answers to these valid questions and await a prompt response Sincerely, Ken Sackett Alberta Barley Commission Albert Wagner Western Barley Growers Association Art Enns Western Canadian Wheat Growers Association