If good things come to those who wait, then someone owes Cory Schell an explanation.
The grain farmer from Richmound, Sask., waited nearly 18 months to get paid for a 540 tonne wheat delivery that he made to CWB in the summer of 2014.
When his final payment arrived in April 2016, the cheque was thousands of dollars less than what he was expecting, based on pool return outlooks (PROs) for the CWB’s 2014-15 pool programs.
A second wheat delivery in early 2015 yielded similarly disappointing returns.
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Schell delivered another 1,388 tonnes of No. 2 red spring wheat, 11 percent protein. The wheat was contracted into CWB’s 2014-15 annual pool and was delivered in late May or early June, before the pool’s July 31, 2015 delivery deadline.
Final payments for that delivery were also well below expectations, based on PROs throughout the pooling period.
By Schell’s calculations, the total payments he received for nearly 1,930 tonnes of wheat were roughly $40,000 less than what they should have been and possibly as much as $75,000 short.
Schell reckons he netted roughly $4.50 a bushel, about $1 a bushel less than he’d thought.
“It’s ridiculous,” he said in a recent interview.
“The cash price of spring wheat never ever fell below $5 in 2015 and I’ve proved that to them.”
“In fact, even the price of feed wheat barely ever fell below $5 that year, so how they came up with $4.50 a bushel net for No. 2 CWRS, I’ll never know.”
When the post single-desk CWB began offering pool pricing in the newly de-regulated wheat market in 2012, it promoted its voluntary pooling programs as “an excellent risk management tool that provides a solid return from the entire pooling period.”
Promotional materials distributed by CWB stated that farmers who used voluntary pooling would “never be left chasing an elusive market high or settling for the bottom.”
In the summer of 2014, Schell was anticipating a good harvest and was looking for an opportunity to move some spring wheat quickly.
CWB’s early delivery pool seemed like a good option.
Schell sat down with a CWB agent and together, they determined that the net price — after deductions for freight and elevation — would be around $5.50 a bushel.
PROs are not price guarantees but they are intended as a reasonably accurate estimate of gross returns.
During the pooling period, the PROs for No. 2 Canada Western Red Spring (CWRS) wheat, 11 percent protein, delivered to CWB’s early delivery pool ranged from a low of roughly $230 a tonne (approximately $6.26 a bushel), up to a high of roughly $287 a tonne in late March, 2014 (approximately $7.81 a bushel).
Deductions for freight and handling were estimated by the CWB in the range of $1.40 to $1.50 a bushel.
Comfortable that his farmgate returns — after all deductions — would be in the neighbourhood of $5.50 a bushel, Schell delivered roughly 540 tonnes to the CWB’s early delivery pool in August 2014 and another 1,388 tonnes to the CWB’s annual pool in the spring of 2015.
Schell hauled his grain to the Great Sandhills Terminal in Leader, Sask.
At the time, that facility had an agreement to handle CWB grain but was still controlled by local shareholders.
As per usual practice, Schell received an initial payment for a portion of his grain’s value upon delivery.
The remaining value was supposed to be paid out in interim payments with a final payment to be issued when the actual pool returns were known.
According to Schell, that’s when things started to go south.
Within a few months of making his spring 2015 delivery, the Great Sandhills facility was sold to CWB in a deal valued at approximately $17.5 million.
A few months later, the voluntary CWB was taken over by G3 Global Grain Group, a joint venture involving Bunge Canada and the Saudi Agriculture and Land Investment Company (SALIC).
Schell’s grain was contracted to the CWB but by the time his final payments were issued, the CWB no longer existed.
After waiting more than a year for his final payments, Schell began to grow curious about the status of his contracts.
Needing the additional cashflow, he called G3 pool managers several times in late 2015 and early 2016.
When he asked why he hadn’t received a final payment for grain that was delivered more than a year earlier, he was told that the CWB pool accounts were taking longer than expected to settle.
G3 officials indicated there were some complications related to the transition of CWB pool accounts to G3, he said.
In retrospect, Schell said his decision to sell grain into the CWB’s voluntary pool programs was a costly mistake.
The final payments were a huge disappointment, but Schell felt he has no option but to accept the payments and absorb the lost value.
The only other alternative, he said, was to initiate a lawsuit against CWB — an organization that no longer exists — or against G3.
“They took our pooled grain, got the money for it, and built all of these new elevators,” said Schell.
“Even if I’d have sold that grain into the feed market, I’d have made more money.”
“I don’t know where the missing dollars went, but obviously they’re gone.”
Dave Simonot, manager of pool accounts with G3 Global Grain Group, acknowledged that there were delays in settling the 2014-15 pool accounts.
He said it took longer than expected to get pooled CWB grain into sales position, due to CWB’s commercial handling agreements as well as other factors beyond G3’s control.
“We didn’t achieve completion as quickly as we’d like ourselves but some of it (was due to) the movement of the grain,” he said.
Simonot said that the process used to settle CWB pool accounts did not change after the G3 takeover.
Delays in settling the 2014-15 pool accounts would not have significantly affected final returns for producers, he added.
“In terms of how they (the pool accounts) were settled, I would … start by saying there wasn’t anything unusual about how they were settled, other than they were later than typical.”
Simonot said global grain markets softened throughout the 2014-15 pooling periods.
In a declining market, farmers should recaclulate their expected net returns based on the most recent PRO issued, he added.
But that doesn’t always happen.
Simonot said farmers often raise concerns over smaller-than-expected pool returns in a declining market.
But net returns from CWB’s 2014-15 pool programs were very close to what one would expect, based on changing market conditions, he said.
“I believe our final returns were pretty close to what our last PROs were,” Simonot said.
“It would certainly be nowhere close to $1 a bushel (less).”
G3 also offered a pool cashout option that allows farmers to take a cash settlement for pooled grain rather than waiting for their final payments.
“We did issue a number of payments through that program earlier than the final payment so we were trying to remedy that situation as much as we could for those farmers to ensure that they had their cash flow.”
This is not the first time that concerns have been raised about the settlement of CWB pool accounts.
A group of western Canadian farmers is currently seeking certification for a class action lawsuit that alleges money from CWB pool accounts was not properly accounted for during the 2011-12 crop year.
A certification hearing in that case is expected to take place in October.
Complaints have also been leveled about the lack of transparency surrounding CWB business that took place during a three year-period between Aug. 1, 2012 — the date that CWB lost its single-desk marketing mandate — and August 1, 2015 — the day the marketing agency was taken over by G3 Canada.
During that three-year period, CWB was no longer operating as single desk entity, but it was still operating with financial backing from the federal government and was still obligated to submit annual reports to the Parliament of Canada.
Despite that, none of the CWB’s annual reports during the three-year period have been made public.
Prior to the last federal election, the former Conservative government in Ottawa refused to share any financial details of the CWB’s business dealings, citing the need for commercial confidentiality at a time when the agency’s top managers were seeking a buyer or commercial partner.
