Thank you, and good morning. My remarks have been given to the committee; however, I will make a few additional comments.
A significant area of the CWB's competitiveness for farmers is the marketing system we operate. With over 80% of the wheat exported overseas, to over 70 countries, not to domestic or U.S.A. customers--the U.S.A. actually accounts for about 5% of the total sales book--the CWB provides the farmers with what is regarded as the best of both worlds. We market the physical grain to what is the best long-term customer base in the world where we can provide market development and regularly gain premiums over other competitors. We then offer farmers a range of pricing options, including pool and/or a range of producer payment options for wheat, and the new CashPlus barley contract that allows them to have control over their pricing by using current market values through the year. The CWB is able to brand the grain as Canadian quality and use all of the deliveries to meet customer quality and logistical needs.
With respect to the producer payment options, a lot has been said about the CWB's management of these in 2007-08. This was a year of unprecedented volatility in wheat markets. While this was excellent for grain prices overall, it did play havoc with price risk management for many participants in the grain industry. The CWB was not immune from this.
When farmers use the PPO products to lock in prices with the CWB, we take action to hedge that in the futures markets. While these activities should net to zero over time, there were risks and particular market circumstances during periods of 2007-08 that did not allow that. Once the CWB realized that there were issues, we moved quickly to correct them. We did, however, have a loss to the contingency fund, as reported and documented in our annual report. Basically, the loss was caused by the lack of liquidity in wheat markets and never-seen-before large market inverses between nearby futures markets and further-out markets. The contingency fund is a separate fund set up specifically to absorb the inevitable pluses and minuses from operating such hedging programs.
As CEO, I have reviewed what happened and agree with the changes made. I've also had independent experts review the circumstances of the risk management of 2007-08 and have extensively discussed this with farmers and the government. In the main, the farmers particularly are satisfied with the explanations that have been given. I should add that the management of the PPO products for 2008-09 is going well and we expect the balance of the contingency fund to be around zero by the end of the financial year.
Thank you.