What Do I Need to Know about Changes to the Canada Grain Act?

[shaney]

<img class="alignleft size-thumbnail wp-image-16200" title="Ask FarmLink Logo" src="http://www.realagriculture.com/wp-content/uploads/2012/11/Ask-FarmLink-Logo-150x150.png" alt="" width="150" height="150" />There are only a few days left for farmers to weigh in on impending changes to the <a href="http://laws-lois.justice.gc.ca/eng/acts/G-10/index.html">Canada Grain Act.</a> If all you've heard about so far are changes to user fees, you're not alone. Much of the media attention has centered on the costs of running the Canadian Grain Commission, because, for the most part that's what parliament seems most interested in talking about. In a case of missing the forest for the trees, there are far bigger changes afoot within the act and, what's more, far greater potential for changes to the act that aren't receiving the attention that they should.

<a href="http://www.realagriculture.com/2012/11/coming-soon-new-series-connects-farmers-marketing-specialists/">Find out More about Ask FarmLink Series</a>

There are three key areas where the Grain Act could be shaped to better protect and serve farmers. They are: enhanced payment security from all types of buyers of grain (including feed mills); maintained or improved data collection and management of grain volumes; and, correcting imbalances between buyers and sellers of grain.

Now is the time for farmers to speak up and shape the Act into something that protects their interests. In this first episode of the Ask FarmLink series, Brenda Tjaden Lepp, co-founder and chief analyst of <a href="http://www.farmlinksolutions.ca/">FarmLink Marketing Solutions</a>, highlights three key areas where the Grain Commission, if given the latitude to do so, could significantly level the playing field for the grain industry.

For more on proposed changes to user fees of the Canadian Grain Commission and to have your say, <a href="http://www.grainscanada.gc.ca/consultations/2012/fees-frais/ufcpn-eng.htm">click here</a>.

If you cannot see the embedded video, <a href="http://youtu.be/uuRS8RQIybg">click here.</a>

<iframe src="http://www.youtube.com/embed/uuRS8RQIybg" frameborder="0" width="560" height="315"></iframe>

[sumdumguy]

Theres a lot on the table. Theres insuring
security, theres payment resolution, theres
grading standards, increased fees for service and
imbalance of power when it comes to demand
and delivery... And probably lots more.

Think there will be consensus? i dont think so
but one thing we can all see coming is increased
costs to the producer. Hopefully the costs will
spawn an effective system

One obvious problem that I see is the statement
made where all buyers will be insured. Ever hear
of moral hazard? The insurance companies are
not that dumb. There is no way that all buyers
are equal and worthy of insurance. There are
crooks out there, always have been and always
will be. Producers dont want to pay exhorbetant
rates so that these guys can rob the system.

[wmoebis]

Interesting to hear from a marketers perspective. The producers, the ones who will be affected most and have cash in the game, may have a different perspective.

Does anyone know who these insurance companies are and what the premiums will be? Hard to tell if it will be less costly if we don't know what the new costs will be, and premiums will trickle back down to producers.

[sumdumguy]

I would like your perspective. If you were an
insurance company, who would you insure?

[hobbyfrmr]

Market Power Assurance program is Accounts
receivable insurance the farmer can take on new
buyers. I have used this program for 2 new buyers
so far. The cost is $100.00 to qualify a buyer and
the premium is .0004 per dollar. So, it would cost
the farmer $500.00 to cover a $100,000
transaction. I am also using this tool on buyers
that I work with on regular basis but I am deferring
payment.
Atradius is the insurance company behind Market
Power Assurance. They are the #2 (or 3
depending on the day) insurance provider in the
world.
I fill out the forms online, and pay my premium via
PayPal. I do not know of anything easier that I can
do to protect my self/ farm from bad transactions
I personally do not trust the Licencing and
bonding of the CGC. Examples are described
above posts. Naber and Newco are two case
studies. So instead of learning all the details
about how it could go wrong, I spend some
money and work to make things to right.

http://mpa.fna.ca/

[wmoebis]

I think a big problem is farmers have been too complacent and don't understand thier rights and responibilities. I'm not sure this is going to change.

For a simple small farmer like me (in the 80% of farmers) that sells small amounts at a time to numerous buyers. I believed that 45(b) of the Grain Act (as it stands) covered my risk. Grain companies carried the bond, surety or insurance. The bonds were covered by interest, surety was covered by invetory and assets and the insurance premiums were likely passed back to me through bases or figured into price.

Now it is going to be all down loaded to me so if I want to sell a 10 or 15 tonne load to a company like Nabors I will have to buy insurance against them. Then same for next company etc.

If there is 100 small farmers want to sell to the same company we each have to pay $100 to insurance company to register them then the .0004 on top? Next time the same thing again. Do I have this right? Maybe I'm understanding wrong!

Also As in the cases like Nabers or Newco I was under the belief that the CGC was monitoring and would implement 49(1) when needed. Apparently not!

When we had active assisstant commissioners they worked hard to stay on top and address these issues. In my mind the CGC should have increased the number and increased their role, not get rid of them. Farmers advocate!

If the new act is going to down load assurance to farmers and inspection to 3rd parties, why do they need to increase fees? Let them go by way of the CWB and Assistant Commissioners and let the INDUSTRY self regulate.
Remember this gov't believes that farmers are a supplier to the industry, not part of it.

Seems to me that it is going to end up like the CFIA where regulators sit around waiting for the mail, while the industry self imploads.

[Burbert]

More fnnnnnnnn insurance, thats what
framers need. Fram policies ain't high
enough. Butt its a good time to pitch
more insurance, when framers actually have
2 cents in their pockets ta rub tagether.
They'd like ta by MORE INSURANCE, i'm sure
boot that!!!

[wmoebis]

http://www.grainscanada.gc.ca/legislation-legislation/cga-lgc/qa-qr-eng.htm

#3 Could someone explain the $20 mill unneccesary costs?

#3 Moving the inward inspection fron CGC to private would remove unnessary costs? Are they going to do it for nothing? More like they will add or increase charges. The CGC doesn't set charges anymore they just report charges and see that companies don't charge more than they say they will.

You can correct me, but from what I am told up to 20% of the cars unloaded at port are off grade. This is not going to make us money when we pay all the demerage because of it. Oh ya grain elevators pay a penalty when they ship off grade. Fallow the money where does that penalty end up? Guarenteed none goes to pay the dumerage because of wrong shipment. That cost all comes back to us.

How are they going to train shippers and terminal staff to grade to CGC standards. Could it be that maybe they are going to make graders go through the rigorous training and pass annual certified exams just like CGC inspectors? So we are dealing with certified professionals? Don't get me wrong there are a lot of really good graders out there but 20% off grade on shipment where they know they are going to be inspected by 3rd party.. Gives me lots of assurance when I sell my grain or under the new system where no 3rd party will be checking. Thank goodness I know how to assess my quality and know my rights and responsilities when I deliver.

#9 So if I didn't know how to assess my own quality before I load a producer car to ship through a broker or grain company I would have to send a sample to the CGC or 3rd party so I knew what quality I was loading. Cost near $50. Then buy insurance on my broker $100 plus $.0004 Then if the unload elevator happens to be in this 20% missgrade I have to pay CGC or 3rd party whom ever the elevator selects another $50 to grade it again. I don't have a say in who grades it and then the changes to the re-inspect program if I don't agree.

[wmoebis]

http://www.agcanada.com/manitobacooperator/2012/11/15/cgc-fees-to-jump-%E2%80%A844-per-cent%E2%80%A9/

Read this and if the CGC thinks that those fees are going to be absorbed and not passed back to producers I say think again. Unlike Brenda I think the fees are going to have a huge impact on producers bottom line and are a real issue.

How do you know if terminal/elevator is giving you the right grade or assessing dockage properly? It is funny that producer cars assessed by the CGC are almost always lower dockage and often higher grade.. Many producer cars are shipped and assessed at 0% dock saving freight and cleaning charges on whole car.

WGEA is questioning $149.99 inspection charge on a rail car, 90t min. That, would somehow come back to producers. Producers on the other hand could pay almost $50 on a truck load. No matter how big or small your truck is 10t - 15t. So 6 samples = $300 for 90t.

When I questioned the CGC they say Farmers will use it. $50 bucks is nothing for what they could save. I disagree. Farmers would be best to educate themselves on what they grow and the CGC would be best to see that our buyers were grading and following the Guide.

We need a watch dog with a bite not water it down. For the most part grain companies and brokers etc. are darn good at what they do, Making money for their companies, shareholders and the industry. We are suppliers to the industry.

The CGC could protect farmers a lot better by enforcing the Grain Grading Guide at the elevators and having monitary penalties (to cover costs) for those that don't comply. You would be amazed at how much might come back to your pocket as a producer if the Guide was followed on every truck load and you knew what the elevators could/should do for you.

I beleive Mallee said on here, that in Australia all grain was third party assessed on delivery. In most of the States, buyers, brokers and agents have to have a ticket certifying that they had taken training. In Quebec there is a law on the books where all staff has to pass a training course in order to get a liscence. http://www.rmaaq.gouv.qc.ca/fileadmin/DocuCentre/Documents/RMAAQ/Lois/RRMG_english__web_version.pdf

Why don't we implement this kind of a system and enforce it. Money won't fix everything or teach quality control.

[oneoff]

Yah... Atradius is apparently exactly who provides the current CGC bonds. Other forms of security such as bank letters of credit may also be accepable CGC bond back stops.

I ran acroos a Barley producers newsletter today and one of its articles was an Atradius proposal to charge a 1% insurance premium in exchange for a 90% guaranteed payout.

Now I'll bet that the common assumption is that you would get ALL money due. Apparently the bonding company knows how to save themselves an extra 10%
Check out the recent Newco post too. It has some details that I doubt anyone else in the world is voluntarily sharing with those directly affected.
It also discusses some general ag product payment problems and potential workable solutions that could serve producers interests.