For the most part, the Canadian Wheat Board’s 2002-03 financial statements are worse than the year before, reflecting the impact of the small, poor quality crop grown in 2002.
Not surprisingly, sales revenue was down, interest earnings were down and less money was distributed to farmers.
But there was one area where the 2002-03 numbers showed a marked growth.
The board’s contingency fund stood at $17.2 million when the board closed its books July 31, representing an increase of 51 percent from $11.4 million at the end of the previous year.
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Some farmers might wonder why that $17.2 million is sitting untouched in a contingency fund rather than being distributed to cash-starved farmers or spent in some other beneficial way.
But CWB chair Ken Ritter says the board’s hands are legally tied.
Under the CWB Act, money in the contingency fund can be used for only two purposes: cash buying of grain or financing losses incurred in the board’s producer payment options program.
“There are any number of good uses in the agricultural sector that money could be used for, but we’re simply not able to invest in those given the legislative position we’re in,” he said.
He acknowledged that when the fund was set up, the board said it would consult with producers about how to spend surplus funds, including funding research or market development.
Unfortunately, given the law, that’s not possible.
“We’ve been given pretty good signals (from the federal government) that the act is not likely to be amended in the near future, so in the interim we’re simply investing this money on behalf of farmers and keeping it in what amounts to a trust account pending future discussions with farmers,” said Ritter.
The contingency fund was created in 2000 in conjunction with the introduction of the PPO. Any surplus or deficit associated with the program is transferred into the fund to avoid any impact on the pool accounts.
However, the main source of revenue for the fund in the past few years has been interest from credit sales of feed barley made 10 or 15 years ago.
Because the volumes of feed barley sold then were much greater than today, applying those interest earnings to today’s pool accounts would result in inappropriately high payments.
Federal auditor general Sheila Fraser recommended two years ago that all producers share those earnings. The board decided to transfer $7.1 million of feed barley interest earnings to the contingency fund; last year it transferred another $5.1 million.
Also going into the contingency fund was a $588,000 surplus from the 2002-03 operations of the PPO and $148,000 of interest.
The financial statements show that the wheat PPO, including the fixed price and basis contracts and the early payment options, generated a surplus of $591,000, reflecting revenue of $2.6 million and expenses of $2 million. That’s down from a net surplus of $3.9 million last year, reflecting smaller volumes and the collapse of the world wheat market mid-way through the 2002-03 crop year.
The durum fixed price contract (the only PPO for durum) registered a loss of $10,000, while the barley early payment option produced a surplus of $7,000.
