Cranston grain, Trevor Schulz, screws farmers

[farmaholic]

Accounts Receivable Insurance equals
downloading moral responsibility on
others. I have a problem with it. When
some of these companies sense they are
going to have trouble meeting their
accounts payable, why do they continue to
do business?

[farmaholic]

Naive at my age, TSK TSK!!

[agstar77]

Here we go again , more offloading of costs. The Harper master plan at work.

[agstar77]

Why should it not be the responsibility of a licensed grain dealer to have adequate bonding? Am I crazy or does anyone else see the problem with the cgc system?

[charliep]

As indicated by TOM4CWB, the new Canada Grain Act
will replace current bonding requirements with an
insurance program with premiums paid for by the
buyer side. Likely will only apply to licensed
elevators/dealers as defined by the Act. There is
some talk of extending this insurance programs to
non-licensed grain buyers.

The Canada Grains Act was included with the bigger
Bill. Final details are being worked out so still time to
influence decisions. Won't help in this case but there
are things that could be done to improve payment
security.

[agstar77]

So which is it , the buyer or seller has insurance?

[wd9]

Tom, any guesses as to why Shelley
started doing that?

We all get hurt, brokers didn't get paid.
truckers didn't get paid. You bet brokers
are changing now too. Don't be surprised
if truckers change too, although that may
be limited to greater numbers of loads.

[grainboy]

who is the broker you sold it through?

[grainboy]

part of the problem is brokers trying too get you the "best" price so they are pushing guys and when the good buyer cant get it they go to there second bests then thirds bests untill they have someone will to pay that magic price that we will sell at ... when in the long run its usally best to sell to guys you know and are comfortable with. take the ten cents less or whatever it is..

[TOM4CWB]

Wd9,

I heard Shelly talking to another grower about the risk
transaction when selling grain.

Shelly said she thought the risk had increased
significantly.

1. Futures contracts in domestic transactions is not
liquid; and risk management therefore tends to be a
buy sell transaction... back to back... to contain the
transaction risk. If not back to back... then a Spec
position... and guess what if things go sideways!

2.A margin business is harder than ever to maintain.
Like in pulses... no futures... if enduser pulls the plug
on the sale... When grain dealer has a grower backing
the transaction... BIG PROBLEM. This almost NEVER
happens when the prices are rising. ONLY when they
fall.
3. Volatility has increased... political unrest; ie. like in
Mideast countries... Basis risk has also increased.
Droughts and surpluses change values/demand
quickly.

Perhaps one can excuse this all as an excuse for
problems; which is not my point at all. New markets
and end users/consumers mean higher risk. Long
Term Established relationships of trust bring a lower
cost of doing business.

For the vast majority of trade in grain done in the
future... NOTHING will change with the major
grainco's... they can NOT afford to mess growers up.
Too much bricks and mortar/(Billions in value) to mess
with reputation over a minuscule percent owed a
grower. Small end users and dealers have been... and
will continue to be... the high risk transactions. They
do not have established brands worth billions to worry
about being lost.

Cheers

[charliep]

Under the changes to the Canada Grain Act, buyers
who are licensed facilities under the act will carry the
insurance. If you are not dealing with a CGC licensed
company, then the seller could consider receivable
insurance.

[TOM4CWB]

Charlie,

The 'Producer Security Program' is the risk
management tool close to being available.

Surprises are not fun... when it comes to getting paid.
ESPECIALLY for those of us who crop share and are at
risk for others financially.

It will be great comfort to have this security issue dealt
with... after decades of Goodale's inaction.

It took Minister Ritz three tries... great that he did
eventually learn what growers expected of the CGC
and security.

Looks like a good forward move for growers!

[farmaholic]

Charlie: Can I pass the cost of the
insurance on the the buyer? Wait for
it...hahahahahahaha. Isn't that the way
business is done in just about any other
industry except primary Ag? Cost
recovery.

[charliep]

I suspect that costs of insurance will get built into
basis. There were also costs of carrying a bond/letter
of credit under the CGC security system.

I would be curious how many farmers are aware of
the new Canada Grains Act/changes that are
occurring. Have been to at least 6 meetings in the
past year where general direction of changes were
being discussed in the past year including some
pretty specific ideas in the last 3 months.

Since the problem described is not with a CGC
bonded/licensed grain company/dealer, none of this
is relevant (isn't currently and not in the current
proposal). Again, there at least is some discussion of
expansion of buyers to include domestic feed market.

[charliep]

Not on the topic at hand but I will be curious how the
insurance based payment security system.

1) Acceptance by buyers from the largest grain
company to smaller players.

2) How buyer financial stability/relative risk of
default is measured and impact on premiums. It is an
insurance product.

3) Moving from a companies financial ability to pay
farmers to some process of measuring sales value
and from there, collecting premiums to cover this
risk.

4) I think will be a better program for farmers. No
more worrying about adequate bonding but rather
simply an insurance payout. Will have to see how the
program works however.