CGC producer protection being revamped, may include feed mills

The Canadian Grain Commission (CGC) is considering adding feed mills to its producer protection program, as part of an overhaul of the program proposed in the federal government’s Bill C-48.

C-48, dubbed the Modernization of Canada’s Grain Industry Act, got its first reading Tuesday in the House of Commons.

Adding feed mills to the mix “would involve extensive consultations to determine what that would look like in terms of bringing feedmills under the producer protection program area,” CGC chief operating officer Gordon Miles told reporters Tuesday during a briefing on the legislation.

The new legislation proposes to amend the Canada Grain Act and change some of what the grain regulatory agency does.

C-48 would extend farmer access to CGC binding determination of grade and dockage on grain deliveries to all CGC licensed facilities, instead of just primary and terminal elevators.

“Extending this right would remove an inconsistency in producer treatment across the licensed grain handling system,” the CGC said in a background paper.

The legislation will change the CGC’s statutory mandate to operate for the good of Canada, not just farmers, which is essentially how the CGC operates now, assistant chief commissioner Jim Smolik said.

“There’s certainly not going to be any decrease in producer protection,” he said. “The Act is structured to look specifically at things for producer protection like producer cars, security and also subject to inspector’s grade and dockage.

“The Act also looks after all Canadians, for example in grain safety. When you look at the change to the mandate it more aligns us with the intent of what the act is and really it ensures that we are viewed as an unbiased regulator as well.”

Fund contributions

The legislation proposes to create a new class of license called container loading elevators.

The bill also proposes that CGC licensed grain companies contribute to a fund to pay farmers when grain companies fail to pay them for their grain.

“We anticipate that the costs would be lower than the cost of our current security regime,” Miles said.

Grain companies today must post security to cover what they owe farmers — an expensive system, the CGC said, because it ties up companies’ working capital. It’s also costly for the commission to monitor the companies to ensure they post enough security to cover their liabilities. And despite the CGC’s efforts, sometimes failing grain companies don’t have enough security to cover what farmers are owed.

Feed mills today aren’t CGC-licensed operations and therefore don’t have to post security. Manitoba farm group Keystone Agricultural Producers (KAP) started lobbying for the mills to be included after Puratone, a Manitoba feed mill and hog producing company went into creditor protection in September 2012. Farmers were owed an estimated $1.5 million for grain they delivered.

KAP would support adding feed mills under the CGC’s protection program, the group’s president Doug Chorney texted Tuesday.

Farmers and grain companies will be consulted on the new fund, expected to reach between $5 million and $10 million, Miles said. What companies contribute will be based on the volume of grain they buy and their risk of failing to pay farmers, he added.

It’s likely companies will pass that cost back to farmers — but it’s believed they do that with the cost of the existing program, he said.

In the meantime the current security program will continue to operate.

Container use has grown significantly since the 1970s, the last time the Act was updated, Miles said.

“Licensing these container loading facilities would allow the CGC to respond effectively to quality complaints, license the grain industry consistently and improve statistical reporting,” he said.

The CGC will consult with the industry to determine which facilities meet the container loading elevator definition, Miles added.

Review panel

Penalties for breaching the Act will be introduced through the Agriculture Administrative Monetary Act. Smolik likened it to a speeding ticket, for some violations.

In some cases today the CGC has little choice other than to pull a company’s license, which Miles described as “draconian.”

“It’s really meant to encourage people to comply with the legislative requirements,” he said.

A non-binding decision review panel is also proposed for companies to appeal CGC rulings without having to go to court, “but it wouldn’t preclude the other party from going to court if they want to challenge a grain commission ruling,” Miles said.

The legislation also proposes to repeal the CGC’s authority to license primary and terminal elevators in Eastern Canada, regulated today by provincial authorities and not the CGC. C-48, however, would also give the CGC the power to collect grain samples from eastern elevators to ensure grain is safe.

“This would create a consistent approach to grain safety across the country and assist with market access issues,” Miles said.

— Allan Dawson is a reporter with the Manitoba Co-operator at Miami, Man. Watch for more details on C-48 in the Dec. 18 issue.