WINNIPEG (Reuters) - The Canadian Wheat Board should request an independent audit to explain the loss of $128 million over the past two years, the federal agriculture minister said on Thursday.
The minister, Gerry Ritz, is calling for an audit by the country’s auditor-general to account for the loss by the board. The CWB has a government-granted monopoly on wheat and barley sales from western Canada, the country’s main grain growing region.
“That’s money that comes directly out of farmers’ pockets,” Ritz said in a news release. “There cannot be any half-measures. The Canadian Wheat Board must not limit the scope of the auditor-general’s investigation in any way.”
The loss cited by Ritz breaks down to a $38.6 million deficit in 2007 and an $86.4 million deficit in 2008 in the board’s contingency fund, which underwrites the risk of price hedging. The fund’s deficit sits at $28.9 million after the wheat board transferred in other funds not including sales revenue.
The contingency fund is meant to absorb losses when the markets are unpredictable, said CWB Chairman Larry Hill. The loss doesn’t affect payments to farmers, he said, adding that the contingency fund showed a $35 million surplus in 2005.
“We know this isn’t something you take lightly but we did ask for (the audit) if it was necessary to assure producers of the integrity of our contingency fund,” Hill said in an interview.
Last year’s loss is a result of “bizarre conditions” in the markets that showed the CWB it needed more strict risk management. It has since made changes and had them reviewed by an external consultant.
The CWB board of directors wants to meet with Ritz and his officials face to face, Hill said. The board will discuss Ritz’s call for an audit at its next meeting in late March, Hill said.
The board has previously invited federal agriculture and finance officials to review its risk-management practices and said it’s willing to be audited.
There’s no need for an audit of the CWB since it releases audited statements annually, said Richard Gray, an agricultural economist at University of Saskatchewan.
“That’s pure politics,” he said.
The minority Conservative government has said it would like to remove the board’s monopoly on barley but doesn’t have the votes to do so.
There’s a legitimate discussion to be had on how the CWB manages risk, Gray said.
Ritz said Wednesday that he had spoken with Auditor-General Sheila Fraser and believed it would take a couple of years before she could audit the wheat board.
Reporting by Rod Nickel; Editing by Frank McGurty