Investor ​G3 Global Grain Group taking over former Canadian Wheat Board

A newly established agribusiness partnership based in Winnipeg has been selected as the majority investor for the former Canadian Wheat Board. 

CWB's search process concluded early, with a $250-million investment from G3 Global Grain Group.

Gerry Ritz, the federal agriculture minister, and representatives from G3 will discuss the deal with reporters at 10:30 a.m. ET. CBCnews.ca will carry the event live.

A press release from G3 says it has acquired a majority interest, of 50.1 per cent, in CWB, with the minority ownership interest to be held in trust for the benefit of farmers.

The transaction is expected to close in July 2015, it says.

G3 was formed through a partnership between:

• Bunge Canada, a subsidiary of Bunge Limited.
• SALIC Canada Limited, a wholly owned subsidiary of Riyadh-based Saudi Agricultural and Livestock Investment Company.

The legislation that ended the CWB's monopoly over marketing Prairie wheat and barley gave the revamped wheat board — purged of farmer-elected directors and now run by a board of Harper government appointees — until 2016 to come up with a privatization plan and until 2017 to implement it. Otherwise, it would be dissolved.

CWB spoke openly of wanting to beat that deadline in order to end uncertainty about its future as quickly as possible.

Parties involved in the talks are bound by confidentiality agreements, so it's unclear exactly which multinational grain companies were in the running or how much they'd offered.

Agriculture and Agri-Food Canada tendered a third-party study of the value of CWB's assets but has refused to release that report. It has also refused to release any financial details of CWB's operating results since the market opened up in 2012, citing competitiveness concerns.

A Canadian farmer-investor bid for the CWB by the Farmers of North America group was based on a valuation of the CWB's assets at between $250 and $300 million. That bid was rejected last fall.

CWB now operates seven grain elevators in Western Canada and port terminals in Thunder Bay, Ont. and Trois Rivieres, Que. Four more grain facilities are under construction in Manitoba and Saskatchewan. 

Bunge Canada's terminal in Quebec City and its four elevators in Quebec are part of this deal, according to the press release.

Todd Bastean, the CEO of Bunge North America, said in the release this investment "complements our existing Canadian footprint" and acquiring what remains of the marketing expertise that once sold all of Western Canada's wheat abroad strengthens the company's export capabilities.

"SALIC is committed to infrastructure investment in countries such as Canada, which are exporters of surplus supplies of high quality grain. The launch of G3 will enable us to invest in infrastructure across Canada, providing more market choices for Canadian producers," said Abdullah Al-Rubaian, SALIC's chairman, who also said Canada was poised to capture a larger share of the international market demand.

"G3 brings substantial financial strength and extensive operational experience... and we are pleased that the farmers will be able to continue to participate in the commercialized CWB," said Ian White, CEO of CWB in the G3 press release.

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Narendra Modi visit: Why India matters to Canada

Canada welcomes Indian Prime Minister Narendra Modi for a three-day visit. CBCNews.ca will have live coverage throughout the day, including events in Ottawa and a major Modi speech before a large crowd in Toronto at 7:30 p.m. 

For two countries that Prime Minister Stephen Harper calls "natural partners" in a new global economy, Canada and India might appear to share a rather meek business relationship.

Not even one per cent of Canadian exports currently ship to India, with goods exports around $3.1 billion in 2014 — less than one-sixth what Canada exports to China.

Promising to open India to global commerce, Indian Prime Minister Narendra Modi's historic three-day Canadian tour this week seeks to change that.

His trip ends a 42-year dry spell since a head of state from the world's largest democracy visited to talk bilateral relations.

As Harper pushes for a free-trade pact with Modi, Canadian economists and business leaders representing South Asian professionals lay out their case for why India is a social, political, cultural and economic force that matters.

1. A hot opportunity

"Let's not forget there's a race to get to India's door," says Jaswinder Kaur, director of the Canada-India Centre of Excellence in Ottawa.

"We're competing against Japan, the French, the Australians, and this is an opportunity for Canada to demonstrate how we can contribute and make a true partnership."

India's Prime Minister Narendra Modi was elected partially on the promise that he would open India up to global commerce. (Toru Hanai/Reuters)

Canada's Global Markets Action Plan identified India as a priority market, with a burgeoning economy and roughly 11 million people under 30 entering the workforce each year.

India has for years remained the largest market for Canada's pulses (grain legumes such as lentils and peas), and Canada also supplies lumber and potash.

"But are Canadian companies ready to do business?" Kaur says. "That's where the real work is going to begin."

The International Monetary Fund projects that by 2016, India's GDP growth will outpace that of China's becoming the fastest-growing major economy in the world.

In the meantime, two-way bilateral trade has grown to $6 billion, up 47 per cent since 2010, when trade was around $4.09 billion.

2. Energy demands

Much has been made, Kaur notes, of Modi "shopping for uranium" as part of this Canadian tour.

India needs the radioactive element to feed its nuclear reactors, and Canada has a vast supply.

'Mr. Modi will be looking for a signed contract for Canada to be a supplier of uranium, as India desperately needs energy as it expands.'- Elliot Tepper, Carleton University South Asian studies professor

If Ottawa allows, Saskatchewan-based Cameco Corp. could resume uranium exports to India following a ban 40 years ago, when India was accused of testing a nuclear weapon in 1974, and then again in 1998, using Candu technology supplied by Canada.

"Since then, our relations have slowly climbed back up to the point where we have a nuclear agreement," said Elliot Tepper, a South Asian studies professor at Carleton University.

"Mr. Modi will be looking for a signed contract for Canada to be a supplier of uranium, as India desperately needs energy as it expands, and wants to rely more on nuclear power."

Meanwhile, Canadian natural gas and oil will continue to be useful resources to India.

3. Young population

The under-35 demographic represents more than 65 per cent of India's population, and many of them are migrating from rural areas to cities searching for education and employment, both of which Canada can help supply.

Open for business. India's Prime Minister Narendra Modi addresses the world's largest industrial technology fair, the Hannover Messe, in Hanover, Germany, earlier this month. He has been on something of a world tour, trying to drum up industrial investment in job-hungry India. (Reuters)

Modi's "Make in India" initiative is encouraging international firms to set up manufacturing plants in India to spur job creation at home and become a low-cost alternative to China.

Flipping the saying that China will grow old before it grows rich, Gary Comerford, president of the Canadian Indian Business Council, believes "India will grow wealthy before it grows old."

Over the last decade, he says, a large number of Indians have "pulled themselves out of poverty" and into a rising middle class.

"And that means they're consuming," Comerford says of the next generation of big spenders. "They're getting a fridge, a TV, a cellphone.

"If you take that sheer population of 1.2 billion and convert it into a consuming group, as well as being an economic powerhouse, it will be a political powerhouse as well."

4. Cross-cultural understanding

India remains a democracy with a "remarkably pluralistic society," which Canada can appreciate as a state that welcomes diversity as a foundation of the country, says Tepper.

Two business-friendly PMs, India's Narendra Modi and Canada's Stephen Harper chat at the G20 summit in Australia in November. (The Canadian Press)

"That makes our two countries both natural allies and rather special in terms of the states of the world," he says, adding that the two countries have worked together quietly for years on such things as counter-terrorism and sharing concerns about violent extremists.

University of Toronto professor Kanta Murali, who analyzes Indian politics at the Centre for South Asian Studies, points to a 1.2 million-strong Indian diaspora in Canada as "central to the excitement surrounding Modi's visit."

A shared history under British colonial rule, a broadly English-speaking population and a democratic system add to a sense of kinship, adds Comerford.

5. A knowledge economy

According to Dherma Jain, president of the Indo-Canada Chamber of Commerce, more than 15,000 Indian students have decided to pursue foreign studies at universities and colleges in Canada.

Modi's visit is expected to seal some educational co-operation agreements such as twinning programs, Tepper said.

"Canada will be providing expertise that India invites as it wants to upscale its own capacity, from technology to agriculture, and attracting people to come to Canada instead of going elsewhere," he said.

India is interested in harnessing green tech as well, notes Karunakar Papala, chairman of the Indo-Canada Ottawa Business Chamber, which represents some 600 business owners in the capital.

Modi's plan for India to develop 100 high-tech "smart cities" that are more energy and resource efficient, could benefit from Canadian know-how. (The Indian prime minister made a similar pitch when he visited Germany recently.)

"Solar technologies, green technologies, Canada has got a lot to offer there," Papala said.

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Average Canadian house price climbs 9% to $439,144 in March from year earlier

The average price of a Canadian home sold in March increased by nine per cent compared with the same month a year earlier, rising to almost $440,000.

The average house price was $439,144, and actual home sales activity rose 9.5 per cent above March 2014 levels.

While the spring home buying season is off to a hot start, the two big markets of Toronto and Vancouver continue to skew the numbers higher, the Canadian Real Estate Association said Wednesday.

If sales in those two markets are stripped out, the average price for Canadian resale homes drops to $332,711, with an annual increase of just 2.4 per cent.

"Price gains in these two markets are being fuelled by a shortage of single family homes for sale in the face of strong demand," the realtor group's chief economist Gregory Klump said.

House prices were up 7.1 per cent in Greater Vancouver and 7.8 per cent in Greater Toronto, as low mortgage rates lured buyers into the market.

There was a shortage of new listings, especially for detached homes. Meanwhile, the number of sales of all residential properties rose 50 per cent in Vancouver and 10 per cent in Toronto, indicating further pressure on prices.

The number of sales in Calgary was down 30 per cent since last March, but prices continued to climb — although at a lower rate than in the past. CREA estimated Calgary home prices are up 4.3 per cent from last year.

Only two cities marked a decline compared to March 2014, with prices falling 4.6 per cent in Regina and 0.4 per cent in Moncton.

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Adios, Canadian-made Corolla: it's going to Mexico

Toyota will spend $1 billion to invest in an assembly plant in Guanajuato, Mexico, and move production of its popular Corolla sedan there from another plant in Cambridge, Ont.

The Mexican factory will have the capacity to crank out 200,000 cars a year, bringing an end to the production of the Corolla in Canada. It is one of the best-selling cars in the country and had been built here since the plant opened in the 1980s.

Toyota has made more than three million Corollas in Ontario since opening its first plant, but from now on, they will all be built either in the Mexican plant, or an existing one in Mississippi.

Toyota says Wednesday's news doesn't mean the end for the Cambridge plant, however. It will "switch from producing Corollas to mid-sized, higher-value vehicles," although a release Wednesday doesn't specify which ones.

"We are thrilled to invest further in North America so we can better meet the needs of our customers for decades to come," said Jim Lentz, chief executive officer of Toyota's North American unit.

A worker at Toyota's Mississippi plant. After Wednesday's move, the plant will be one of the two places where the company builds its popular Corolla sedan. (The Associated Press)

"Transforming our Canadian vehicle assembly plants is an equally important part of our strategic plan to position the North America region for sustainable long-term growth."

Toyota recently invested $100 million into the Cambridge-area facilities, which the company says should add about 400 new jobs and introduce hybrid production and increase capacity at the plants.

The Woodstock plant will continue to manufacture the RAV4, a vehicle competing in a rapidly growing segment. The Cambridge South Plant will continue to build the Lexus RX 350 and 450h, the newest models of which were recently unveiled.

The first Corollas from the 2020 model year will start rolling off the line in Mexico some time in 2019.

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Bank of Canada stands pat at 0.75% rate, saying growth has stalled

The economic pain inflicted by plunging oil prices is hurting the country more than expected right now, but that pain should start to ease in the next few months, the Bank of Canada said in its latest forecast.

Unlike what the bank did in January with a surprise cut, the bank opted Wednesday not to change its overnight lending rate, leaving it at 0.75 per cent.

The Canadian dollar gained almost a full cent to 80.60 cents US on the news, as currency traders seemingly focused on the lure of stability as opposed to a rate cut which would have made the loonie less attractive as an investment.

Canada's economic ills are acute right now. Poloz, famously predicted GDP growth in the first quarter of 2015 would be "atrocious." Now the numbers are in and show the economy effectively stalled, with zero economic growth in the first three months of 2015. The bank had previously estimated growth of 1.5 per cent for the same period.

"The Canadian economy is estimated to have stalled in the first quarter of 2015," is how the bank bluntly put it in its statement.

Bank of Canada Governor Stephen Poloz announced a bank rate cut in January, after the bank's gloomy forecast for the start of 2015. Wednesday's monetary policy report said growth was at zero for the first quarter, but is expected to pick up later this year. (Adrian Wyld/Canadian Press)

The central bank says the economic strife caused by oil prices is proving to be more "front-loaded" than predicted, but not larger. It anticipates non-energy exports will start to improve and investments will increase around mid-2015. By the end of 2016, the bank estimates the economy will have reached full capacity.

Some say that optimistic view borders on implausible, however. The bank's reasoning expressed "confidence that the January cut was enough and that the economy … will rebound strongly in the second quarter and never look back thereafter," said David Madani, an economist with Capital Economics in Toronto.

"We think this is pure fantasy and expect the oil price shock to hit the economy hard this year."

The bank has also shifted its prediction for overall economic growth in 2015 to 1.9 per cent.

That's roughly in line with the average of the private-sector economists Finance Minister Joe Oliver with last week. They predicted two per cent growth for 2015, which is the number Oliver says he plans to use when making his planning assumptions for the budget he intends to table next week.

 Further rate cuts are off the table- Scotiabank on Wednesday's interest rate news

Add it all up, and Wednesday's bank statement is one of the gloomier ones in recent memory.

With the bank seemingly leaning toward another cut at some point, Madani figures that will only fuel more borrowing as mortgage and other lending rates get dragged even lower. He thinks the bank could cut the rate two more times by the end of the year, to a microscopic 0.25 per cent — the level it dropped to during the depths of the credit crisis in 2009 and 2010.

By its very mandate, the bank has to walk a fine line between stimulating the overall economy with lower interest rates, without encouraging reckless debt. But "as we have said before," Madani said, "this is a gamble the Bank of Canada has gone on record saying it's willing to take."

Others think the bank may have found its sweet spot on rates, and be in no hurry to move them. 

"Pulling all of this together, it is our view that the economic forecasts in today's MPR … point to a central bank that is comfortable with its current monetary policy stance," TD Bank economist Randall Bartlett said. "Given our expectation that the economic impact of lower oil prices is mostly behind us, we expect that the Bank of Canada will keep interest rates on hold until the end of 2016."

Scotiabank agreed, saying in a note that "The main message from the Bank of Canada — for now — is that further rate cuts are off the table."

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Ottawa's latest wireless spectrum auction kicks off today

The federal government's auction of 2500 Mhz wireless spectrum started at 10 o'clock eastern time on Tuesday, and some of Canada's wireless companies could be poised to buy the building blocks to expand and improve their networks.

Wireless spectrum is the network over which wireless devices like cellphones and tablets send and receive data. Wireless companies need more and more spectrum to keep up with the growing demand for data transmission, so the government auctions off new stretches of airwaves at periodic intervals under certain rules.

The auction is for spectrum in the 2500 Mhz band. Two of Canada's biggest wireless companies, Rogers and Bell, aren't expected to be very active in this round of spectrum sales because the government imposes caps on the amount of spectrum that any one company can own in any given market — and both companies are already at or near that limit in some of Canada's biggest cities.

That's good news for Telus, one wireless analyst says, because the company is now poised to hoover up valuable spectrum at a discounted rate, if Bell and Rogers aren't bidding on many of the biggest blocks. "As Telus has no 2500 MHz spectrum at this time, we assume that it will win in all major markets," Canaccord analyst David Ghose says.

Another company that could be poised to improve its network is Toronto-based Wind Mobile, a company that Ghose expects will pick up 2500 Mhz spectrum in the big cities where it already operates, such as its densely populated home base in Ontario.

As well, Ghose says he will be looking to see whether or not Quebec-based Videotron picks up spectrum outside of Quebec and Eastern Ontario, as that would be another sign that the company could be planning to offer cell service across the country.

The 2500 Mhz band of spectrum has the potential to improve cell transmission in urban places that currently get spotty coverage, such as elevators and parking garages. But it's also viable to rural companies for transmitting internet connections where wired services aren't practical. It's also deemed to be a valuable brand because it's used internationally, in the U.S., Europe and China. Phones like the iPhone 6 and the Motorola Nexus 6 can operate on the 2500 Mhz band, Ghose notes.

The auction won't end until a complicated, multi-level bidding process ends, which could take days. But the federal government says it will reveal the results of the auction within five business days of the end of bidding.

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Kim Dotcom Megaupload case falters over sharing Canadian data

More than three years have passed since Canadian police seized 32 Megaupload-related servers on behalf of U.S. authorities seeking to prosecute company founder Kim Dotcom in one of the world's largest copyright infringement cases.

Still, no one — except perhaps officials with the file-sharing company itself — knows what's on the servers. 

At issue now is how much of this seized Canadian data can be shared with the U.S. Department of Justice, which is very eager to press its case against Dotcom, who is currently fighting extradition from New Zealand, where he's a permanent resident. 

In a Toronto court on Monday, Crown attorney Moiz Rahman, acting on behalf of the U.S., recommended bringing in a U.S. "clean team" — an American term for a group of forensic examiners independent of the case — to sift through the 25 terabytes of data on the servers to pick out relevant files and separate them from personal information. 

But Megaupload's lawyer argued that the Ontario court can only ask the U.S. police officials on the so-called clean team to "double pinky promise" that they won't share information not relevant to the case, since there's no way to enforce the court's decision south of the border.

"Once they return to the United States, that's nothing more than a promise," said Scott Hutchison.

U.S. regulators shut down Megaupload, founded by the notorious Kim Dotcom, in January 2012. At the time, it was one of the world's largest file-sharing sites. (Dotcom, a German-Finnish entrepreneur who was born Kim Schmitz, changed his name in 2005.)

Dotcom and others face charges related to copyright infringement, racketeering and money laundering. Prosecutors argue the company essentially rewarded users for uploading popular content such as stolen movies and TV shows.

The three-year-old case has been mired in complications and delays, including here in Canada.

On Jan. 18, 2012, an Ontario judge granted a search warrant to seize 32 servers in Canada — equivalent to the amount of data stored on 100 laptops, according to Megaupload lawyers.

A year later, a different Ontario judge rejected a request to send mirror copies of what was on those servers to the U.S, saying such a request might be overly broad.

Instead, the justice ordered both parties to find a way to filter out and share only the relevant data.

The "vast majority" of the data, argues Megaupload lawyer Hutchison, is likely everyday files uploaded by innocent users of the file-sharing service, which allowed users to upload and share large files such as photos, videos and documents.

"We don't know what we're turning this clean team loose on," said Hutchison at Monday's motion hearing.

Even if the court assumed half of Megaupload's daily users — estimated to be 50 million at the time of the site's shutdown — were innocent, that's a lot of irrelevant files in the hands of U.S. officials, he said.

Instead, Hutchison proposed that an independent Canadian examiner be hired to review the content.

Crown attorney Rahman argued that having a U.S. clean team do the sorting posed no greater risk than the practice of allowing U.S. police to come into the country to witness evidence

He says the clean team would review the materials without delving too deeply. It would then present an index of what's contained on the servers to the court, which would decide what gets turned over to the U.S.

Rahman noted that the treaty guiding U.S.-Canada information exchange allows for the Ontario court to place restrictions on how the evidence is used. 

"That's a little bit of cold comfort to me," said Justice Michael Quigley.

Beyond that, Rahman said this data pales in comparison to other information shared easily with the U.S., such as wiretaps.

"What's being proposed here looks very, very minor in terms of what we're exposing foreign officials to," said Rahman.

Ultimately, however, the issue comes down to cost. Rahman said the price tag to hire an independent Canadian examiner would be "prohibitive."

The judge ordered both parties to do a cost comparison between the U.S. clean team versus. hiring Canadian experts before a decision will be made.

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CanJet Airlines to lay off most of its staff, as European routes dropped

​CanJet Airlines will lay off 47 pilots and 68 permanent and seasonal flight attendants by May, after cancelling its European routes, CBC News has learned.

The cuts total more than 70 per cent of the charter airline's flying staff. CanJet currently employs about 62 pilots and 100 flight attendants.

The airline has ceased its Europe operations, because the venture "is simply not profitable," company president Stephen Rowe said in an email to CBC News

"It is disappointing we have to realign our employee group today to a much smaller group," he said.

CanJet, a subsidiary of Halifax-based IMP Group, launched its own vacation package deals last year. It also provides charter flights on behalf of Transat Holidays, but that partnership will soon come to an end, resulting in more lost business.

Rowe said the company is exploring its options and that "everything is on the table," including possibly adding scheduled flights in Canada and internationally.

Constant layoffs

CanJet has been plagued over the past few years by shrinking business and layoffs.

This past winter, it cancelled 40 per cent of its planned flights and laid off 21 pilots. Rowe said the company had to make the cuts because it overestimated sales for its first winter season offering vacation packages.

The union representing the airline's pilots is suggesting CanJet Vacations could also be doomed.

In a memo to members obtained by CBC News, Air Line Pilots Association representatives with CanJet wrote:

"We have been advised that the fate of CanJet Vacations is not entirely clear, however, from our perspective it is. It appears that the desire to continue past this summer has unfortunately been lost after only nine months of selling."

But Rowe maintained that CanJet Vacations could live on, "as we had as we had great support during our first year of operation." But he also admitted that "pricing in this business segment is a challenge."

Feelings of deception

The union memo also criticized how CanJet is managing the cuts.

"It is unfortunate that we have been put in this situation," the memo said, adding that the union representatives share members' "feelings of being deceived and disrespected.

"It is unfortunate that we sit here now with layoff notices given after our own president issued a memo in the past telling us not to worry, not to go anywhere," said the memo, issued by Capt. Jon Mason, Capt. Mike Power, and Capt. Bruce Dandurand.

Rowe sent a letter to employees on April 7, obtained by CBC News.

CanJet's president told staff the airline will continue to focus on "profitable flying" and additional opportunities.

He also said CanJet's Europe flights "fell short of our financial requirements" and that the airline was decreasing the number of aircraft it would be staffing with crews.

The letter didn't mention layoffs, however. Instead, Rowe talked about realigning employee resources and said, "This year will be a transformational year for the organization."

The union memo also criticized CanJet's timing of the layoff announcement, saying some pilots will have to work with the additional stress of knowing they will soon be losing their jobs.

It said this will result in fatigue and illness.

"It is obvious that decisions are being made based on dollar signs rather than good judgment."

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Almond backlash tied to California drought

Health advocates have been extolling the benefits of almonds for years. And, increasingly, products like almond milk and almond butter are taking up space on kitchen shelves.

But there is a movement in California discouraging almond consumption, thanks to that state's massive, years-long drought. It's affecting almost everyone in the state and has compelled state governor Jerry Brown to announce unprecedented water conservation measures last month.

Critics, though, say officials aren't targeting the right people: farmers.

Farmers account for a biggest share of water use in California, and almonds are a major crop in the state.

A movement in California discouraging almond consumption is on the rise, due to high water use on almond farms. (Mike Mozart/Flickr)

According to the Almond Hullers and Processors Association, group that represents the industry, each single nut requires about a gallon of water to grow.

Adam Keats, director of the California Water Law Project at the non-profit Center for Biological Diversity, is among those who say that's too much.

"On a personal level, I have reduced and nearly eliminated my consumption of California almonds," he said. "Everyone consuming California almonds should recognize that right now, at the stage of the drought that we're in, they're consuming a disproportionate amount of a state resource — that is, California water."

But the Almond Hullers and Processors Association suggests Keats and other environmentalists are overreacting. It says the amount of water consumed by almond growers per acre has declined over the past two decades, is comparable to other California crops, and is lower per ounce than for some other sources of protein, including peas, lentils and beef. It says agriculture, as a whole, is water-intensive but is critical to the state economy.

In any case, if you're eating almonds, they're probably from California. That state is responsible for producing the vast majority, or more than 80 per cent, of the global supply.

The nuts are sold not only here in Canada, but in countries like India and China. Last year, the Almond Board of California estimated the state would produce 1.85 billion pounds of almonds.

At a gallon of water per nut, that's a lot of water.

When it comes down to it, almonds are lucrative, and Keats worries the nut industry has successfully lobbied to be exempt from water conservation measures.

"All the expansion of the almond, pistachio and other nut tree cropland in California is in places that have historically and geographically extremely low amounts of rain," he explained.

"So they require extreme amounts of imported water to create these tree farms for these water-intensive crops."

The solutions, Keats said, are simple, but tough.

He said almonds should no longer be grown in desert regions of the state, but they should be restricted to a handful of valleys that get enough rain for almond trees to flourish without irrigation. That would mean entire orchards would have to be dug up.

"I think that there will be a time when California almonds and pistachios will be socially unacceptable in a lot of circles.  A lot of people will shun those crops. I hope that happens," Keats said.

"And I hope that other parts of the world that have a natural ability to grow those crops will step up and provide an alternative."

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Hackers get lots of help from careless victims, studies show

When a cyber security breach hits the news, those most closely involved often have incentive to play up the sophistication of the attack.

If hackers are portrayed as well-funded geniuses, victims look less vulnerable, security firms can flog their products and services, and government officials can push for tougher regulation or seek more money for cyber defenses.

But two deeply researched reports being released this week underscore the less-heralded truth: the vast majority of hacking attacks are successful because employees click on links in tainted emails, companies fail to apply available patches to known software flaws, or technicians do not configure systems properly.

These conclusions will be in the minds of executives attending the world's largest technology security conference next week in San Francisco, a conference named after lead sponsor RSA, the security division of EMC Corp.

In the best-known annual study of data breaches, a report from Verizon Communications Inc to be released on Wednesday found that more than two-thirds of the 290 electronic espionage cases it learned about in 2014 involved phishing, the security industry's term for trick emails.

Because so many people click on tainted links or attachments, sending phishing emails to just 10 employees will get hackers inside corporate gates 90 percent of the time, Verizon found.

"There's an overarching pattern," said Verizon scientist Bob Rudis. Attackers use phishing to install malware and steal credentials from employees, then they use those credentials to roam through networks and access programs and files, he said.

Old, unpatched vulnerabilities exploited

Verizon's report includes its own business investigations and data from 70 other contributors, including law enforcement. It found that while major new vulnerabilities such as Heartbleed are being used by hackers within hours of their announcement, more attacks last year exploited patchable vulnerabilities dating from 2007, 2010, 2011, 2012 and 2013.

Another annual cyber report, to be released on Tuesday by Symantec Corp, found that state-sponsored spies also used phishing techniques because they work and because the less-sophisticated approach drew less scrutiny from defenders.

Once inside a system, however, the spies turned fancy, writing customized software to evade detection by whatever security programs the target has installed, Symantec said.

"Once I'm in, I can do what I need to," said Robert Shaker, an incident response manager at Symantec. The report drew on data from 57 million sensors in 157 countries and territories.

Troubling trends in ransomware

Another troubling trend Symantec found involves the use of "ransomware," in which hackers encrypt a computer's files and promise to release them only if the user pays a ransom. (Some 80 per cent of the time, they do not decrypt the files even then.)

The new twist comes from hackers who encrypt files, including those inside critical infrastructure facilities, but do not ask for anything. The mystery is why: Shaker said it is not clear whether the attackers are securing the information for resale to other spies or potential saboteurs, or whether they plan on making their own demands in the future.

At next week's RSA Conference, protecting critical infrastructure systems under increasing attack will be a major theme. Another theme will be the need for more sharing of "intelligence" about emerging threats - between the public and private sectors, within the security industry, and within certain industries.

While many of the biggest breaches of the past two years involved retailers, the healthcare industry has figured heavily in recent months. Former FBI futurist Marc Goodman said that both spies and organized criminals are likely at work, the former seeking leverage to use in recruiting informants and the latter looking to cash in on medical and insurance fraud.

Verizon's researchers said that to be most effective, information-sharing would have to be essentially in real time, from machine to machine, and cross multiple sectors, a daunting proposition.

Another section of the Verizon report could help security executives make the case for bigger budgets. The researchers produced the first analysis of the actual costs of breaches derived from insurance claims, instead of survey data.

Verizon said the best indicator of the cost of an incident is the number of records compromised, and that the cost rises logarithmically, flattening as the size of the breach rises.

According to the new Verizon model, the loss of 100,000 records should cost roughly $475,000 on average, while 100 million lost records should cost about $8.85 million.

Though the harder data will be welcome to number-crunchers, spending more money cannot guarantee complete protection against attacks.

The RSA Conference floor will feature vendors touting next-generation security products and anomaly-spotting big-data analytics. But few will actually promise that they can stop someone from clicking on a tainted email and letting a hacker in.

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