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What to do with a $107.2-million surplus?

The CGC wants grain sector feedback on options, but sending cheques back to farmers is not one of them

The Canadian Grain Commission proposes to cut grain industry user fees 23 per cent to lower its operating surplus of $107.2 million and rising.

The surplus as of Sept. 30, 2016 is almost $45 million more than the $62.5 million CGC projects it needs to operate in 2018-19.

“So with an average volume of 34.4 million tonnes (of grain exported in 2018-19) it will result in savings of a bit over $15 million — 44 cents a tonne,” Remi Gosselin, the CGC’s manager of corporate information services said in an interview.

The CGC is also revamping how it estimates future grain exports to which the fees apply, and wants to set fees using a formula instead of being fixed.

If implemented as proposed, total CGC fees in 2018-19 would average $1.50 a tonne, based on an estimated 34.4 million tonnes of grain exports inspected by the CGC.

However, as things stand, lower fees won’t come into force until April 1, 2018. To reduce them earlier, as demanded by some farm groups, is up to Agriculture Minister Lawrence MacAulay. But as of last week he was non-committal.

“Minister MacAulay looks forward to working together with the grain commissioners to review the feedback received during these consultations and explore possible options to best address the needs of Canadian grain farmers,” an official in his office said.

Although many CGC fees are paid by grain companies, it’s generally thought most of the cost is passed back to farmers.

The CGC’s whopping surplus is a result of underestimating exports and higher user fees.

In 2013 the government ordered the CGC to become self-sufficient. To that end it boosted average user fees by 44 per cent, tripling the cost of ship inspections to $1.60 a tonne and sparking widespread industry criticism.

Details of the fee proposal and the CGC’s ideas for spending the surplus are in the discussion papers it issued Mar. 1 as part of its 60-day consultation with the grain sector. The paper is available on the CGC website.

The CGC says it needs a $36-million fund to cover unforeseen increases in costs or drops in revenue, which would leave a $71.6-million surplus to deal with. The Western Canadian Wheat Growers Association (WCWGA) wants the surplus paid to farmers.

Who would get the money?

Gosselin said the CGC has looked at the possibility of refunds or rebates, but the grain act doesn’t provide for them. And even if it did, the CGC doesn’t know which farmers exported grain or how much.

The CGC wants to end fixed user fees and make them formula based to streamline changes.

“Every time we propose to update fees, the Canada grain regulations have to be updated and we need to consult about the impact of the proposed fee updates and the requirements are exactly the same under the user fees act,” Gosselin said. “The duplication significantly increases the amount of time and resources we must allow for updating our fees.”

The CGC based its 23.3-million grain export estimate for the current five-year fee period from 2013-14 to 2018-19, on a simple 15-year average. But in 2013-14 exports hit 30.4 million, resulting in a $10-million surplus, the CGC consultation document says. Exports were higher the next two years at 37.6 million and 38.4 million tonnes resulting in surpluses of $24.2 million and $26.9 million, respectively.

Exports totalling 106.4 million tonnes were 52 per cent more than the CGC’s estimates.

The CGC is now using time series forecasting, Gosselin said.

“It captures non-obvious trends — seasonality and cycles in the data,” he said.

Four options

The CGC can’t spend the surplus without approval from the federal government’s treasury board. And while the CGC is asking the grain sector for ideas, its surplus consultation paper lists four options for some of the money:

  1. A compensation fund to pay farmers when grain companies fail to pay them. The CGC has proposed such a fund be financed by grain companies to replace the current producer protection program based on licensed grain elevators posting security.
  2. A predetermined portion of the surplus could be used to reduce user fees over a set time. For example, the CGC says $25 million could be committed for use during the upcoming 2018-23 user-fee cycle, cutting fees by $5 million per year.
  3. Some of the surplus could be used as a capital investment in science, innovation, infrastructure and laboratory services. The CGC’s facilities are old and inefficient, the CGC consultation paper says.
  4. Some of the money could be used so the CGC can deliver real-time analytical testing at licensed terminal elevators or other locations.

To satisfy grain sales contracts, grain handlers and producers frequently require CGC testing for things such as mycotoxins, pesticides, heavy metals, falling number and genetically modified organisms.

The Keystone Agricultural Producers supports exploring the compensation fund option.

The National Farmers Union is still developing its position, but last week the Manitoba co-ordinator Ian Robson said he’s uneasy about farmers bankrolling what grain companies have traditionally paid for.

The WCWGA has said it wants the surplus returned to farmers. In an email last week executive director Robin Speer said the organization is getting feedback from its members to help prepare a submission to the CGC.

“I believe many members will provide their own individual submission,” Speer wrote.

About the author

Reporter

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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