What’s the right amount of oversight in Canada’s grain quality assurance system?
That’s the fundamental question at the heart of an ongoing review of the Canadian Grain Commission and Canada Grain Act.
As our Allan Dawson reports, many in the grain trade want to see the regulatory burden lighten.
The Western Grain Elevator Association, which represents the interests of the largest grain-handling and merchandising firms, says there’s a lot of duplication and unnecessary expense built into the system.
In some ways they have a point. As it stands the commission currently has a ‘coming-and-going’ inspection role that exceeds anything we’re aware of in any other sector.
They are the final arbiter of grades and dockage between the grain companies and grain producers. That’s a worthy role, and one where the commission can help ensure the little guys and gals get a fair shake when they are dealing with big companies.
Their second point of intervention, however, is a bit muddier. The commission is also charged with what’s known as outbound inspection, where it certifies the volume and quality of grain being shipped out of Canada.
At one point this service was seen as a key part of the ‘brand Canada’ approach to marketing Canadian grain globally. But these days it’s unclear whether such a brand even truly exists anymore, and whether all parties in the grain sector agree to its value.
At least that’s one of the points that former CWB executive Ward Weisensel makes in a report he authored on behalf of the Saskatchewan Wheat Development Commission last fall. In particular, he honed in on the competing interests of farmers and grain companies on this particular point.
“Farmers commonly focus in on the importance of the quality of our products and that this allows Canadian grain to earn premiums relative to our competitors in world markets,” Weisensel wrote.
But that understanding shifts when grain companies consider the value of that brand, as it’s a brand every exporter of Canadian grain can tap into, making it useless as a point of differentiation from their perspective.
“Every company takes the brand identity of the grain or oilseed they are trading as a given, and while it may give Canada an edge in particular markets, this product brand is not something that can be used to create additional value for any individual company,” he notes.
And that, in a nutshell is the dynamic that farmers, and their producer organizations, are going to have to manage throughout this review process. While they and the grain trade may have many common interests, they are not perfectly aligned.
On the issue of outward inspection, grain companies clearly want to do away with the CGC’s role, and move to a system of third-party private inspectors. They say the costs will be lower, and that in the international marketplace, the domestic grades issued by the commission are meaningless anyway, as most contracts are specification-based rather than grade-based.
That is to say that quality parameters such as oil content or protein levels, moisture levels, dockage and so forth are contained in the contract itself, and the question of the grading system doesn’t really enter into it. This is a world where functionality is king, and the grain companies want the maximum flexibility to meet those specifications and the least hassle and expense possible.
And to that end they’ve engaged in de-marketing Canada’s grain quality assurance system, the report contends, and instead actively upsold the private inspection option, which has grown rapidly in recent years.
“This is not an indication that buyers have lost confidence or do not want to use the CGC as the determination of quality on the grain they buy from Canada. Rather, it is a reflection of the fact that grain companies have been pushing customers for the addition of this option for many years,” Weisensel wrote.
In another very interesting section of the Sask Wheat report, Mercantile Consulting Ventures delves into the “Data Requirements for a Transparent Market” and finds a number of opportunities to make the at-times opaque Canadian grain market far clearer for producers.
While there’s a lot of detail in their section of the report, worth noting is the system they’re recommending appears to more closely resemble some of the U.S. data-reporting requirements that would help ensure fewer nasty market surprises.
The consultations have wrapped up as of April 30, but there’s still plenty of wrangling left before any final decisions are made.
It’s going to be in the best interests of farmers to keep a very close eye on this file and ensure that any future changes to the system serve them well.