Grain Act changes leave questions unanswered

(Resource News International) — The federal government’s recent announcement
that it plans to modernize both the Canada Grain Act (CGA) and the
Canadian Grain Commission (CGC) is being met with scepticism
among farmers, who say there are too many unanswered questions
as to what the amendments will mean for producers.

Agriculture Minister Gerry Ritz recently announced the Conservative government is
tabling Bill C-39 before the House of Commons. The proposed
legislation would end some of the services currently provided
by the CGC.

As part of the changes, inward inspection and weighing of
grain being delivered to terminal or transfer elevators would
be optional. The CGC would act as an arbiter in the event that
a grain grade dispute developed and would offer grading,
weighing and inspection services to grain companies on a fee-
for-service basis.

The mandatory producer payment security program will also
end as a result of Bill C-39. The bonding requirement
currently ensures farmers receive payment for delivered grain
in the event that the receiving company experiences financial
difficulty.

According to Ritz’s new release, “The costs of
such programs have ultimately been borne by producers. Ending
the producer payment security program will reduce system
costs, and remove a barrier to new entrants into the grain
merchandising industry.”

Ritz had little to say, however, as to what type
of program would be an acceptable alternative.

Rod Scarlett of Wild Rose
Agricultural Producers, an Alberta farmers’ group, said, “There are a lot of questions that were raised as a
result of the announcement, particularly on the bonding
component. How do we get assurances for farmers that they’re
not going to be abandoned if companies fail?”

At any given point in time, he said, farmers have a
number of contracts to manage. Without the bonding
requirement, it may be difficult for farmers to carry the
additional burden of assuring that the companies they sell to
have the finances to pay them.

In a press release, the National Farmer’s Union stated,
“This provision was put in place to protect farmers who would
be left holding the bag if the grain company goes bankrupt.”

“Eliminating this requirement will not save farmers any
money,” NFU president Stewart Wells wrote. “It will, however,
greatly increase their risk.”

David Rolfe, president of Manitoba’s Keystone Agricultural
Producers, said it appears the CGC will not provide leadership
in terms of developing alternatives to the bonding program.
One concern, he said, is that commodity groups may not be able
to develop an alternative program before the legislation
passes.

Cash up front

Rolfe also said a situation might develop in which
farmers begin to insist on cash upon delivery.

“What this may lead to, and this may not be a bad thing,
is producers insisting on cash upon delivery. That may cause
problems for smaller grain companies but if a producer wants
to make sure that he gets paid, then that is the other
alternative,” he said.

Another possibility may be to introduce a protection
service similar to that in Ontario. Alan Kerkhof, chairman
of the Ontario Wheat Board, said Ontario producers rely on
the Grain Financial Protection Program (GFPP) for protection
against payment defaults.

The GFPP is administered through Agricorp, an Ontario
government agency, and protects the financial interests of
producers who sell their crops to licensed dealers. It
also protects owners who store grains and oilseeds with
licensed elevator operators.

Kerkhof said the producer-built fund began roughly 10
years ago when an Ontario grain elevator defaulted on a number
of payments and farmers were left unpaid.

According to Agricorp, annual grain sales covered by the
program are in excess of $1.1 billion.

Scarlett expressed some reservations, however, about a
program from Eastern Canada working for western producers.

“You have to take into account that in Eastern Canada
grain is not necessarily the primary agricultural commodity.
It’s like comparing the Canadian Wheat Board with the Ontario
Wheat Board. They’re not even remotely similar in size and
scope. You can’t compare apples and oranges.

“Just because Eastern Canada doesn’t have it, doesn’t
mean that we can’t,” he added.

Bill C-39 is the result of a review undertaken in 2006 by
consulting firm Compas Inc., who reported their findings to
the Commons standing committee on agriculture and agri-food.

According to a new release from Ritz’s office, the proposed reforms “will contribute to building a
competitive and innovative grain sector by reducing costs,
improving competitiveness, reducing regulation, and providing
choice.”

As part of the streamlining process, 200 jobs will be cut
at the CGC, the Winnipeg Free Press reported. Roughly 20
of those positions are said to be in Winnipeg, where the CGC
is based.