Producer car shipper worries licensing loaders could drive some out of business

The Canadian Grain Commission has launched consultations that will also consider licences 
for feed mills and agents working for grain companies

A new proposal to license producer car loading facilities could shut some down.

The move comes as part of a Canadian Grain Commission licensing review and it’s already causing concern, says Manitou-area farmer Don McLean.

He is also a director with the Boundary Trails Railway Company, which operates a short line between Manitou and Morden, and is one of eight farmer-shareholders in Boundary Loading Group, which fills 120 to 130 producer cars a year at Darlingford.

Don McLean

Don McLean
photo: Allan Dawson

“From my point of view it looks like it could be fairly burdensome,” he said in an interview April 21. “It could potentially remove some facilities from the system. They’ll just say ‘it’s not worth the hassle.’ I think that would be detrimental to the producer car system itself.”

In March CGC commissioner Murdoch MacKay said the CGC would consult about licensing producer loading facilities. The CGC posted a consultation paper online last week.

Citizens have until June 6 to comment on the proposals, which also include licensing feed mills that buy more than 5,000 tonnes of grain a year and agents (companies that work on behalf of licensed grain companies).

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grain cars

Producer cars are one of the few historic Prairie institutions remaining after the removal of the Crow Rate and the single-desk marketing system. But loading them has evolved from individual farmers filling cars with an auger and truck to permanent handling facilities with track-side storage and, in some cases, employees. Some offer their services for a fee, making car loading safer and more efficient.

Security

The CGC already licenses primary country elevators, whose owners are required to post security to cover what is owed to farmers for their grain. There are other CGC farmer protections, including the option for the CGC to determine the grade and dockage and checks to ensure weigh scales are accurate.

Producer cars, enshrined through an amendment in 1902 to the Manitoba Grain Act, which later became the Canada Grain Act, were a hard-won right, allowing farmers to bypass elevators and their fees.

Then, as now, farmers can order their own “producer” car, but to qualify, they must fill it with just their grain and ship it to a buyer. The grain is weighed and graded at unload and then the farmer is paid.

That’s key. If grain is weighed, graded, commingled with other grain and ownership changes before being loaded in a car, the buyer is deemed an elevator and must be licensed as such.

McLean agrees with that, but doesn’t see the need to create a subclass to license producer car loaders.

Remi Gosselin, the CGC’s manager of corporate information services says the grain-handling landscape has changed significantly over the past four years. “We want to have a better handle on what’s happening out there in the country,” he said.

“We are just conducting a routine review, and based on our early assessments there may be some activities out there that merit licensing. But we are keeping an open mind to this and we just want to find out what’s going on and see how stakeholders react to this potential.

“If we get feedback that says this is not appropriate we would certainly listen to that. It’s not a done deal.”

Review needed

The CGC paper says the review is needed because more grain is being delivered through producer cars and it “could adversely affect the grain quality assurance system and producer protection.”

Moreover, the CGC is not capturing the amount of grain being moved through this method.

However, what the paper doesn’t say is that the CGC used to capture producer grain data before it abolished mandatory inward inspection at Canadian grain terminals.

Producer car loading facilities are also moving more grain in so-called dealer or lease cars, supplied by grain companies, further adding to gap in the data.

The CGC’s interest in licensing producer car loaders as a subclass under primary elevators might have been sparked by the purchase of a short line railway with producer car facilities, McLean said. (Saskatchewan’s West Central Road and Rail was recently purchased by AGT Food and Ingredients.)

“Let’s not paint the entire industry with one brush,” McLean said. “If there are companies that have sold out and are purchasing grain from farmers… then let’s treat them like primary elevators.”

Inconsistent

The CGC says producer car shippers receive “inconsistent treatment” compared to those delivering to a licensed elevator. The CGC, which has a statutory mandate to protect grain farmers and ensure grain quality, has no oversight of producer car loading facilities, including their scales.

But McLean noted the CGC has no oversight of farmer-loaded cars. Scales used at loading facilities give farmers an idea of what they loaded. The official weight is taken at unload.

The CGC says if producer car loaders were licensed they would not have to do what primarily elevators must do, such as post security, submit monthly reports, issue receipts for delivered grain, agree to binding CGC grading and dockage upon farmer request and submit an annual financial statement.

However, the CGC proposes producer car loaders be compelled to document and report the type and weight of grain they take in, only handle grain that’s loaded in cars and not deal in, or purchase grain from farmers.

The CGC has not determined the cost of licences for producer car loaders. But McLean fears the bigger expense will be maintaining “legal” scales and the additional paperwork.

Resistance

The CGC’s proposal to license producer car loaders in 2001-02 met with fierce resistance from farmers. Many lobbied the agriculture minister not to reappoint then chief commissioner Barry Senft.

There is however, lots of support among farmers, including the Keystone Agricultural Producers, for licensing feed mills.

“If there’s a rock-solid argument for licensing, it’s feed mills,” Gosselin said.

“Since 2006 eight feed mills have restructured their operations, filed for creditor protection, receivership or bankruptcy, in Canada. So when a feed mill defaults, unable to pay grain farmers, producers are left with virtually no recourse for the lost revenue.”

Two of them, Puratone and Big Sky Farms, went under in 2012 leaving many grain farmers without payment.

Agents — companies that work for licensed grain companies by taking in grain for them — are becoming more common, Gosselin said.

“What we know about agents is they have the capacity to incur producer liabilities,” he said. “We feel by regulating these companies the CGC would be better able to monitor their purchases and better assess the risk of payment failure.

“If they are paying for grain we would like to license them either as primary or processing elevators. We want to get a better idea of how they are operating currently.”

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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