KAP Endorses “Plan B” If CGC Security Goes – for Aug. 5, 2010

If the Canadian Grain Commission’s (CGC) security program against grain payment defaults is ever removed, KAP has a “Plan B.”

Delegates at tending the Keystone Agricultural Producers’ general council meeting here July 22 passed a resolution to support a mandatory farmer-financed fund, kick-started by Ottawa, that will operate similar to the current program.

However, several delegates said KAP’s first choice is maintaining the current system where grain companies post security with the CGC to cover what farmers are owed for the grain they’ve delivered.

The CGC also monitors grain companies to try to ensure the security covers what farmers are owed.

The CGC also decides who qualifies when a grain company runs into money problems and distributes the security.

Butch Harder, a Lowe Farm-area farmer representing the Manitoba Canola Growers Association, opposed the resolution.

“Passing this resolution could mean that we support the grain commission to get out of everything,” he said. “It’s the only organization that we have that really protects farmers at the regulatory level.”

But Chuck Fossay, a District 6 representative from Starbuck, said while KAP supports the current program, it needs an alternate plan should the government end the current program, as it has twice tried to do since 2007. Both bills, which proposed other changes to the CGC and the Canada Grain Act, were never passed into law.

According to Agriculture Minister Gerry Ritz, the current system doesn’t work well because farmers aren’t always fully compensated for their losses when financially troubled grain buyers fail to pay.

Ritz has said if farmers want security against defaults they can come up with their own program.

KAP and its counterparts in Saskatchewan and Alberta, along with a number of commodity groups, hired a consulting firm to help them assess several options, including insurance-and fund-based programs. After nearly two years of study, KAP’s grain and oilseeds committee reached a consensus in support of the fund-based approach, said committee member Dow Dewar, who farms near Dauphin.

“To put it in perspective, this is the lesser of the two evils as determined by the grains committee,” he said.

A similar program, administered by farm organizations, operates in Ontario, he said. It stared with government funding, but has grown with a mandatory checkoff on delivered grain, which all grain buyers must remit. Enough money has been collected in Ontario and the checkoff was reduced.

Consulting firm Scott Wolfe Management estimates the current CGC security program costs $9 million a year – $1.4 million for CGC administration, $1 million for grain buyer administration and $6.6 million for companies to post security. Based on 40 million tonnes of grain, that’s an average of 23 cents a tonne.

Presumably, the costs are passed on to farmers. But Scott Wolfe Management said in a report eliminating the security system wouldn’t likely save farmers money.

“Payment security is considered a minor cost to most grain companies, recognizing that it is relatively a more significant cost to individual small grain companies participating in large transactions.”

Under the current system farmers are only protected if they sell to CGC-licensed grain buyers and get the proper receipts.

Farmers must get paid within 90 days of delivery and cash grain payment cheques within 30-days to be protected.

However, even then there’s no guarantee. In some cases, the security held by the CGC doesn’t cover all the money owed to farmers. In those cases, payments are prorated.

The CGC says the best protection for farmers is to be paid upon delivery and cash the cheque immediately.

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perspective,this isthelesserof thetwoevilsas determinedbythe grainscommittee.”

– DON DEWAR

About the author

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Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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