The majority of grain industry respondents to a recent Canadian Grain Commission consultation wants western Canadian feed mills to be licensed and required to post security covering grain purchased from farmers.
“Most stakeholders agreed there should be some kind of licensing of facilities to provide some kind of producer protection,” Rémi Gosselin, manager of CGC corporate information services said in an interview June 12.
“Our priority now is to work on some licensing requirements and get some feedback from the sector.”
The CGC’s ultimate goal is to license western feed mills and include them in the CGC’s farmer protection scheme.
“It’s certainly the government’s desire to license feed mills and we’re working towards that,” Gosselin said. “The minister (Gerry Ritz) has been quite clear in that he wants to have it done and we’re following through on that.”
While feed mill licensing is a top priority, the CGC isn’t sure how long it will take, Gosselin added.
Keystone Agricultural Producers (KAP) president Dan Mazier welcomed the news.
Feed mills are currently exempt from the Canada Grain Act, which means unlike grain elevators, feed mills are not licensed by the CGC nor required to post security to cover what farmers are owed when they deliver grain. KAP has lobbied for the CGC to license and provide producer protection since Puratone, a Manitoba feed mill and hog-producing company, went into creditor protection in September 2012. Grain farmers were owed an estimated $1.5 million for their grain.
“This is a good step,” Mazier, who farms near Justice, said in an interview last week. “We want this to happen quickly.”
The CGC released a summary of the findings from its consultations June 12 and will share them with Ritz.
Forty-three formal submissions were received from a diverse range of stakeholders, including 53 feed mills, commodity and producer organizations, the CGC said.
A majority of respondents, with the exception of some commercial feed mills, supports licensing “large commercial feed mills, recognizing small and on-farm feed mills operate differently than large commercial mills,” the CGC said.
“Payment protection is seen as an advantage by some feed mills in encouraging producers to deliver grain to them. Some stakeholders advocate that all businesses that purchase grain on or off farm and/or handle grain as part of their business model be licensed. This would foster fairness and create a level playing field.”
The CGC said many commercial feed mills say licensing is unnecessary. Some respondents said licensing would constrain already tight profit margins. Instead of buying grain directly from farmers, feed mills might buy from grain companies to avoid licensing and farmer protection requirements.
Several respondents suggested the CGC conduct a cost-benefit analysis of licensing feed mills.
The producer protection proposals the CGC prepares will be based on what’s currently in place for grain elevators, Gosselin said. Grain companies are required to post security to cover farmer liabilities. That can be done by posting a bond, a letter of credit, insurance or even cash.
If Bill C-48, which is currently before Parliament, becomes law, the CGC would be allowed to replace the protection program with a fund companies would contribute to based on their risk of failing to pay farmers. However, C-48 might not pass before the fall election. That means the current plan would continue until it is replaced by future legislation.