The Canadian Grain Commission is on the federal government’s radar — again.
Last month the commission announced its latest proposals for “modernizing” itself, and the Canada Grain Act it administers. The public has until March 23 to respond.
The commission, established in 1912, is Canada’s grain industry watchdog, ensuring the quality of grain exports, arbitrating grade disputes between farmers and buyers, licensing grain companies and ensuring buyers post security to cover what farmers are owed. The commission’s list of “key areas under consideration” (http://www.grainscanada.gc.ca/legislation-legislation/cga-lgc/2012-eng.htm) doesn’t mention the doubling of user fees, which the commission proposed in December 2010.
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“Our projections are that new user fees, at whatever level they happen to be — whether they are fully cost recovered or whether there is some public good included — would come into effect most likely at the beginning of the 2013 crop year,” chief commissioner Elwin Hermanson said in an interview March 1. “It’s all subject to adjustment and change.”
Agriculture Minister Gerry Ritz says a decision on fees will be decided after reviewing feedback on the other proposed changes.
New governance
Most are similar to those previously announced in failed bills C-39 and C-13. However, there are some new ones, including how the commission is governed.
Currently it’s overseen by three commissioners, including a chief and an assistant. Traditionally, there’s a commissioner from each Prairie province, with one or two being farmers and one from the grain trade. The commission is proposing a single president-CEO replace the commissioners.
The commission wants its mandate changed. The current grain act says “… in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export.”
The commission says its mandate should take the interests of the country as a whole, including grain producers, into account.
Ritz has said the commission should drop its producer security program. Most farm groups reject that and that is reflected in the commission’s latest proposal. However, instead of continuing the program with companies posting security, the commission wants an insurance program.
As in previous proposals, the commission suggested eliminating mandatory inward inspection and weighing at licensed terminal and transfer elevators.
“A lot of grain is (moved) intra-company,” Hermanson said.
It’s hard to justify mandatory inward inspection when a company is shipping its own grain from one of its facilities to another, he said. However, inward inspection makes sense when one company is shipping grain to another’s facilities. In such cases companies could request inward inspection, Hermanson said. But the commission wants the inspections done by parties accredited by the commission.
Drop role
The commission says it will maintain official grain commission outward inspection from licensed terminal and transfer elevators, except for grain destined to the United States.
The commission wants to drop its role as the official weigher of outward-bound grain and have commission-accredited parties do it.
The commission wants more options, such as levying fines, to enforce legislation, Hermanson said. Currently, the commission has to go to court or suspend or pull a company’s licence.
Currently licensed grain companies must post security to cover what they owe farmers. The commission monitors the companies, trying to ensure security matches farmer liabilities. Still, sometimes farmers aren’t fully reimbursed when companies fail. Hermanson said insurance is easier to administer and cheaper.
In 2010, consulting firm Scott Wolfe Management estimated the commission’s security program cost the industry a total of $9 million a year — $1.4 million for commission 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 cost of 23 cents a tonne.
“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,” Scott Wolfe’s report said. “Differences in costs between the varying tools and mechanisms to be considered would be not significant. Cost is not likely to be the key decision factor in determining viable options.”
Another consulting firm, COMPAS Inc., concluded in a 2006 report since grain is Canada’s third-largest export the government should cover all the commission’s basic costs.
The grain commission is supposed to be self-funding over time, but user fees have been frozen since 1991. Currently only about half of its $80-million budget comes from fees. Ottawa covers the rest.
In a discussion paper released in December 2010, the commission said it expects its annual budget will soon hit $90 million and it wants to get all of it — $50 million a year more — from user fees.
To do that fees will have to more than double to an average of $1.80 a tonne from 70 cents.
In 1999, the commission proposed fee increases to cover 90 per cent of its costs. The Liberal government rejected the idea.
“In these financially troubled times, the government could not ask grain producers to pay more than they are already paying,” said then agriculture minister Lyle Vanclief. “A competitive grain sector benefits all Canadians and I believe it is incumbent on Canadians to assist in this process of restoring the CGC to financial self-sufficiency.”
Since then grain prices have risen dramatically and so has the government’s deficit.
