Farmers who sell grain to feed mills might be protected if the company can’t pay its bills under sweeping changes proposed to the Canada Grain Act introduced to Parliament Dec. 9.
The CGC will consult the industry about the proposed changes designed “to enhance producer protection, enhance producer quality and safety insurance and further modernize the Canada Grain Act,” said CGC chief operating officer Gordon Miles.
The CGC’s current farmer protection program requires licensed grain companies to post security to cover what they owe farmers for grain. C-48 proposes to replace that with a fund of $5 million to $10 million. Companies would pay into the fund based on how much they buy and their risk of failing to pay, Miles said.
The current program will remain until the fund is established.
“We anticipate that the costs would be lower than the cost of our current security regime,” he said.
In a 2009 study, Scott Wolfe Management put the cost of the current plan at $9 million — $1.4 million for CGC administration, $1 million for grain buyer administration and $6.6 million for companies to post security.
Part of the CGC’s costs include monitoring grain companies’ liabilities. Despite its efforts, sometimes failing grain companies don’t have enough security.
The Scott Wolfe report said based on 40 million tonnes of grain being covered annually, the average cost of protection was 23 cents a tonne.
Farmers don’t pay anything directly for that, but they pay indirectly to offset the $7.6 million in grain company costs (19 cents a tonne).
“Under the current system, the CGC’s cost to administer the program is approximately $1.4 million, or $8,400 per licensee, or one-tenth of one cent per $1 of average total farm cash receipts,” the report said.
Last year the CGC and Atradius Credit Insurance N.V. failed to reach a deal on setting up an insurance-based protection program.
The new compensation fund would not cover 100 per cent of farmer losses, Miles said.
Feed mills are currently not licensed by the CGC and don’t have to post security. But it’s something the Keystone Agricultural Producers (KAP) started lobbying for after Puratone, a Manitoba feed mill and hog-producing company, went into creditor protection in September 2012. Farmers were owed an estimated $1.5 million for unpaid-for grain.
“We are looking to do consultations around bringing feed mills under the producer protection program,” Miles said.
Other changes proposed by Bill C-48, the Modernization of Canada’s Grain Industry Act, include:
- Create a new class of licence for container-loading elevators.
- Extend farmer access to CGC binding determination of grade and dockage on grain deliveries to all CGC licensed facilities, including processors and grain dealers.
- Clarify the CGC’s mandate.
- Make provisions for variety declarations at elevators.
- Increase fines for breaching the grain act, including for misrepresenting the variety of grain delivered.
- Create a non-binding Decision Review Panel.
- Repeal parts of the act not used in Eastern Canada.
- Make it easier to collect grain samples from across the country to monitor grain safety.
CGC officials briefed reporters on the legislation they hope will be in effect Aug. 1, 2015, last week via telephone.
Industry and farm reaction has been mostly positive.
Now farmers can only get the CGC to determine grade and dockage on grain deliveries to primary and terminal elevators.
“Extending this right would remove an inconsistency in producer treatment across the licensed grain-handling system,” the CGC said in a background paper.
The legislation will change the CGC’s statutory mandate to operate for the good of Canada, not just farmers, which is essentially how the CGC operates now, assistant chief CGC commissioner Jim Smolik said.
“There’s certainly not going to be any decrease in producer protection,” he said.
There are a number of reasons to license container loaders, said Rémi Gosselin, the CGC’s manager of corporate information.
“Number 1, they are purchasing grain from producers, so producers should have protections in place,” he said in an interview. “Also historically there were much smaller volumes of grain shipped by container, but their use has grown significantly.”
Now around 18 per cent of the grain exported from Vancouver is in a container compared to just eight per cent 10 years ago, he said.
“We need to be able to capture information related to that grain movement,” Gosselin said. “The fact that the industry is not licensed has left a gap in CGC oversight as it relates to the grain quality assurance system.”
The CGC will consult with the industry to determine which facilities meet the container-loading elevator definition, Miles added.
Penalties for breaking the grain act will be introduced through the Agriculture Administrative Monetary Act. Smolik likened it to a speeding ticket for some breaches of the act.
In some cases now, the CGC has little choice other than to pull a company’s licence, which Miles described as “draconian.”
“It’s really meant to encourage people to comply with the legislative requirements,” he said.
A non-binding Decision Review Panel is also proposed for companies to appeal CGC rulings without having to go to court “but it wouldn’t preclude the other party from going to court if it wants to challenge a grain commission ruling,” Miles said.
The legislation proposes to repeal the CGC’s authority to license primary and terminal elevators in Eastern Canada, which are currently regulated by provincial authorities and not the CGC. However, the bill would give the CGC the power to collect grain samples from eastern elevators to ensure grain is safe.
“This would create a consistent approach to grain safety across the country and assist with market access issues,” Miles said.