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Editorial: Fair fees

There’s an acronym long popular with right-of-centre thinkers from the late economist Milton Friedman to the science fiction author Robert Heinlein: TANSTAAFL.

It’s an abbreviation of the concept, ‘there ain’t no such thing as a free lunch,’ and has been used to convey the impossibility of getting something for nothing.

One wonders if that’s what was behind the Harper government’s move to increase fees for services rendered by the Canadian Grain Commission in 2013. Fees climbed at that time by around 44 per cent, prompting some outrage.

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However, it’s worth noting that those increases were the first in 22 years, and feeding the numbers through the Bank of Canada online inflation calculator suggests the move didn’t even keep pace with inflation.

Had the fees simply increased annually at that pace, the rise would have been around the 48 per cent mark.

In that light, it seems less like a hidden tax hike in the form of user fees than an attempt to keep the fees in line with the actual costs.

So how did the organization amass the $90-million fees surplus that’s become such a lightning rod for discontent in some circles? The simple answer is that it — along with many other players in the grain industry — was taken by surprise by big crops.

At the time the new fees were set, the average exports over the previous 15 years had been 23.3 million tonnes. But in 2013 farmers started a long run of good crops and robust exports.

In the just-ended 2017-18 crop year Canadian grain exports hit a new record at 41.927 million tonnes. That’s up over the previous year’s 41.570 million tonnes, and the five-year average of 39.1 million tonnes.

A few things have come together to fuel these exports. A low Canadian dollar, relative to the U.S. greenback, made our grain attractive to the global market. Better genetics and improved agronomic practices also played a role.

What at first seemed like an anomaly is now widely becoming viewed as the ‘new normal’ for the industry. With fees being charged on a per-tonne basis, the result was dollars flowing into the CGC.

The CGC hasn’t just ignored the problem. On the contrary, it has been quite transparent in its efforts to understand and address the underlying issues.

By 2016, the CGC was already engaged in a thorough review of its fee structure and it was widely accepted the fees would be coming down. For the start of the 2017-18 crop year two crucial fees were lowered.

The official export inspection charge was reduced from $1.70 to $1.35 a tonne and the weighing charge fell from 16 cents a tonne to seven cents a tonne. On average that translated into 44 cents per tonne less fees and a total reduction in fees of about 22 per cent.

The move came eight months earlier than expected, something that indicated just how seriously CGC took the issue. It would be hard to imagine many private companies voluntarily reducing any fee at all, much less ahead of schedule.

Now of course the challenge is what to do with the accumulated funds and here the CGC is once again running into controversy.

As Allan Dawson reported last week, the CGC plans to “strengthen safeguards for producers, improve grain quality assurance programs and enhance grain quality science and innovation.”

The first step in the CGC Surplus Investment Framework Aug. 1, includes spending $4 million over the next five years to enhance its Harvest Sample Program.

Under that program farmers have been getting a free unofficial grade and for wheat, protein content. The CGC benefits by getting new crop quality information it shares with exporters and their customers.

Under the enhanced program it will also now provide the falling number and DON (deoxynivalenol) levels on wheat samples and dockage in canola.

As well, it has promised to consult with the grain industry on how the remaining $86 million will be spent.

Grain handlers and some farm organizations are calling for a full refund. They say the CGC is using a windfall to undertake a round of empire building.

Others have noted a refund is impossible since the fees are paid to the CGC by grain companies, not farmers, though farmers ultimately foot the bill. It’s unlikely, they say, that any of those funds would ever find their way back to farmers.

Just as likely is the fact the overhead required to track, process and distribute excess fees would eat much if not all of that benefit.

Detractors of the CGC model do have one point — there’s not really any incentive built in there to keep costs at the ‘cost-recovery’ level.

Perhaps a better model would be similar to the maximum revenue entitlement, where freight overages are used to fund varietal breeding efforts that benefit all.

About the author

Editor

Gord Gilmour

Gord Gilmour is Editor of the Manitoba Co-operator.

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