It’s official — Canadian Grain Commission (CGC) fees will drop substantially at the start of the new crop year.
Effective Aug. 1 the CGC will cut its fees for official export inspection charge from $1.70 per tonne to $1.35, and the weighing charge to seven cents per tonne from 16 cents, the CGC said in a news release July 12.
Most of the CGC’s revenue comes from those two fees — a saving, when combined, of 44 cents a tonne or 24 per cent versus the current charges.
The CGC proposed the reduction following industry consultations this spring. Implementing it Aug. 1 brings in reduced fees eight months sooner than scheduled, capping the CGC’s budgetary surplus and saving farmers millions of dollars.
Two supplementary fees for overtime related to official grain inspection services are being eliminated, at least until the fees are reviewed for the next five-year fee period starting April 1, 2018.
“We (grain) commissioners are pleased because the new fees are set at a level that shouldn’t result in any excessive surplus from this time forward,” CGC assistant chief commissioner Doug Chorney said in an interview. “Pure cost recovery is the intent of this fee level.”
Changes to the CGC’s user fees, implemented April 1, 2013, after the federal government ordered it to be self-sufficient, were not scheduled to occur until the current five-year fee schedule expired April 1, 2018. However, the federal government decided to act sooner in the wake the CGC’s growing operating surplus, which as of December 2016 was $114.5 million and is currently $121.8 million — nearly double the $63.5 million the CGC needs to operate annually.
Assuming the CGC inspects 34.4 million tonnes of grain, the lower fees will save the grain industry $10 million for the 2017-18 fiscal year and $15 million in 2018-19 fiscal year. (The difference is the reduced fees start Aug. 1, 2017 and the current fiscal year started April 1, 2017.)
Although grain companies pay the CGC’s inspection and weighing fees, it’s widely believed the cost is passed back to farmers.
More flexibility in future
The CGC has already consulted with the grain sector on new user fees to take effect April 1, 2018 and is recommending they start with the new, reduced levels, Chorney said.
“But in the future we are hoping to have a formula approach, year by year, so we will be able to adapt to the changing production and exports in real time or an annual basis,” he said.
“If there’s a drought… or if there is a bumper crop we’d like to be able to adjust our fees to reflect that.”
When the CGC implemented higher fees it expected to inspect, on average, 23.3 million tonnes of grain exports a year, which had been the 15-year average. But following bumper crops, grain exports reached 30.4 million, 37.6 million and 38.4 million in the last three crop years.
Meanwhile, the CGC is assessing industry suggestions on what to do with the surplus, Chorney said.
“We are coming to the point where we can start considering scenarios,” he said. “Some scenarios are straightforward and could be done with proper approvals through the federal authorities and others may require the Canada Grain Act to be opened up.”
That would be the case if the money were used to set up a fund to compensate farmers when grain companies fail to pay them for their grain, replacing the current “bonding” system, which requires grain companies to post security to cover what they owe farmers.
“That is not something under our control as commissioners,” Chorney said. “That’s something the federal government would have to initiate. There is a lot to consider in the surplus discussion and not something that will be done quickly.”
The CGC says it needs a $36 million fund to cover unforeseen increases in costs or drops in revenue.
At their annual meeting in January, Keystone Agricultural Producers’ (KAP) delegates asked leadership to investigate using the CGC surplus to set up a compensation fund.
KAP’s Grain and Oilseeds Committee is also exploring whether the surplus should be used to provide more analytical grain testing in elevators, including vomitoxin and falling number levels.
The Alberta Wheat Commission also supports that idea. And the CGC itself has suggested it as a possibility, along with refurbishing its laboratories.
The Western Canadian Wheat Growers Association wants the surplus refunded to farmers, but CGC spokesman Remi Gosselin has said in several interviews the CGC doesn’t have the authority to do so.
“The Canada Grain Act and the Canada Grain Act regulations do not provide for refunds or rebates,” he said in an interview April 28.
“The Canadian Grain Commission does not have the authority to spend the accumulated surplus without approval from the Treasury Board of Canada.”