Newco Front...Just because it's quiet doesn't mean that producers means other parties are deciding f

[oneoff]

Larry: What might be said is that last spring Newco was looking at sourcing large volumes of feed winter wheat from anywhere they could get it. Just about every other feed mill, broker and livestock feeder was in the same bind; particularly after Newco's trouble. Even the bigger boys wanted the remaining scraps; and they literally didn't know what they would be invoving themselves in. At least one of the most respected and largest firms of grain buyers in Western Canada; backed out of initally agreeing to take over a firm commitment.

Its safe to say that almost everything that happened in the last 6 months is new territory for everyone. And none of the outcomes have been predictable; which is all in the definition of a true "CF". I prefer to call such situations a complete lack of foresight and planning. And failure.

And I predict grain buying is headed for much more of the same until we get down to instant weights; agreement on price for whatever the quality required; payment on delivery, and the return of good reputations, full integrity and faith in personal responsibility as the foundation of every business deal.

Nothing else is good enough; and settling on 90% of debts (months or years later) is an invitation to getting pennies on the dollar in the long haul.
I know that Newco also engaged "third party brokers" to line up some of that grain. At that time; Manitoba firms were driving trucks all the way to Alberta to get the last loads of feed grains available; and Alberta firms such as Newco were forced to haul from any province they could find a seller willing to contract.
I know that at least some Sask producers were initially contacted by "third party brokers " who reommended Newco as a licenced, bonded firm with a solid reecord. In at least some of those cases; all future contract signing and logistics were through the Newco firm.

Larry, please tell us what thought prompted this request for info on how the various contracts may have been negotiated. Now I'm interested in this excellent question.

[LWeber]

1) Their bonding requirement was predicated on what type of business they were operating. There are different classifications with different bonding requirements. If they were using third parties to source grain for them and they had storage and thier own trucks, they were acting as a more than a grain dealer.

2) My question was aimed at their classification and how they were operating versus what their bond stated. If they had their own trucks, a good lawyer would call that storage, and should have been classified as a primary elevator. That would have changed the bonding requirement greatly. I don't see the CGC as lily white in this instance; however, you have much more info than I do.

3) Before a company goes tits up, the industry knows long before farmers they are in trouble. Bad trades - l/c problems with other shipments; slow payments. It really is a small industry. That info is rarely passed back to farmers and is why farmers ultimately get bent over. That was the second half of my question.

There was a legitimate reason that major company backed out of the sale. You may or may not know what it was - I sure don't. There are trading rules to follow with GAFTA as a resolution. The moment they backed out - your grain was at a higher risk.

If you knew that before you signed your contract, you should have been prepared for it. If you didn't, the risk was shifted from the grain company that backed out to you. And that is the part that is bullshit.

[oneoff]

Sometimes a real life story contains a better story line than any soap opera or Oscar (or is it Emmy winning) Hollywood movie.
And sometimes the guys running governments or the biggest business or the most important positions in the world just aren't that smart; and seemingly don't have any or all the answers.

Maybe its common sense; and the rare ability to throw 20 angles in a pot and still keep the root and basic issues straight; while attempting to move forward with a reasonable set of policies and decisions. But we have probably all run across a very few people who are usually capable of that task. Why aren't they used more often; and consulted more frequently?


So Larry.... I believe that there were several ways used to source grain for their customers (at the same time).

And know that when one is fulfilling their end of a producer contract you obviously desire immmediate payment; but that is impossible when there is no legal weight immediately obtainable; and the truckers don't get their paperwork in before the end of the week to their dispatcher; (or sometimes the next week I have been told; or it gets lost altogether); and it takes time for the truckig company to submit paperwork, and time for the broker and time for the cheaue to be cut and then Canada Post and then a 5 day clearing period for the bank to permanently put the money owed into your account. Now thats what any reasonable producer is expected to put up with.

Not to mention having to wait 6 months for a bond payout to be processed. And that is where the CGC apparatus and Federal Government and Atradius are anything but 100% efficient and trustworthy.

When was the last time there was so little coverage of a ponzi scheme needed to pay off last months deliveries with proceeds from more recent deliveries until some word leaked out to CGC who latched onto their "letter of credit" (or something along that line)?
Google "Newco" and all you get is a company not in receivership or bankruptcy; and some references to Agriville comments. Look a little harder and you find one refernce to the fact that they are no longer licenced or bonded; but then lots of other companies and feed purchasers never have been; and are operating exactly the same as Newco.

The sad truth is that if you aren't willing to forward contract; or agree to common industry payment periods that give enough time for the producer to act as the banker till the "broker" gets paid by his customer; then you have few other sales options.

Now for the major "line company" who wanted badly to assume that totally separate other contract that was still outstanding. (the only problem being that it was held by the company that had just said "sorry our bank account was just shut down; we can't pay you; but you know we still have this other contract from a couple days ago and we're shopping it around and would act as brokers and you'd be paid directly by a certain "line company".

So its late in the year; winter wheat prices are even better than a few days ago; and you did sign a valid contract for several additional loads.

Well it turned out just as I said; the "line company" said the wanted it; then phoned a couple of days later and said they had decided to pass because of legal uncertainties; but through other middlemen they ended up getting it shortly thereafter. The cheques cleared months ago; and I guess that a small "broker fee" was probably applied against a debt that was owed to the other middleman that saw it as a way to recover at least something from what he was similarly legitimately owed on three loads of some other grain not covered by bonding.

And now I have some sympathy for an auditor's job.

And I also know that "prepayment" or immediate payment or at least a substantial down payment would have prevented any possibility of a $3M or so shortfall in these cases.

And I predict that that remedy will never be a commonly acceptable way for farmers to receive payment in the future.

We will be insuring even more financially unstable buyers; and the premiums will increase proportionately

Common sense; with more than one factor in the mix.

[oneoff]

Sometimes a real life story contains a better story line than any soap opera or Oscar (or is it Emmy winning) Hollywood movie.
And sometimes the guys running governments or the biggest business or the most important positions in the world just aren't that smart; and seemingly don't have any or all the answers.

Maybe its common sense; and the rare ability to throw 20 angles in a pot and still keep the root and basic issues straight; while attempting to move forward with a reasonable set of policies and decisions. But we have probably all run across a very few people who are usually capable of that task. Why aren't they used more often; and consulted more frequently?


So Larry.... I believe that there were several ways used to source grain for their customers (at the same time).

And know that when one is fulfilling their end of a producer contract you obviously desire immmediate payment; but that is impossible when there is no legal weight immediately obtainable; and the truckers don't get their paperwork in before the end of the week to their dispatcher; (or sometimes the next week I have been told; or it gets lost altogether); and it takes time for the truckig company to submit paperwork, and time for the broker and time for the cheaue to be cut and then Canada Post and then a 5 day clearing period for the bank to permanently put the money owed into your account. Now thats what any reasonable producer is expected to put up with.

Not to mention having to wait 6 months for a bond payout to be processed. And that is where the CGC apparatus and Federal Government and Atradius are anything but 100% efficient and trustworthy.

When was the last time there was so little coverage of a ponzi scheme needed to pay off last months deliveries with proceeds from more recent deliveries until some word leaked out to CGC who latched onto their "letter of credit" (or something along that line)?
Google "Newco" and all you get is a company not in receivership or bankruptcy; and some references to Agriville comments. Look a little harder and you find one refernce to the fact that they are no longer licenced or bonded; but then lots of other companies and feed purchasers never have been; and are operating exactly the same as Newco.

The sad truth is that if you aren't willing to forward contract; or agree to common industry payment periods that give enough time for the producer to act as the banker till the "broker" gets paid by his customer; then you have few other sales options.

Now for the major "line company" who wanted badly to assume that totally separate other contract that was still outstanding. (the only problem being that it was held by the company that had just said "sorry our bank account was just shut down; we can't pay you; but you know we still have this other contract from a couple days ago and we're shopping it around and would act as brokers and you'd be paid directly by a certain "line company".

So its late in the year; winter wheat prices are even better than a few days ago; and you did sign a valid contract for several additional loads.

Well it turned out just as I said; the "line company" said the wanted it; then phoned a couple of days later and said they had decided to pass because of legal uncertainties; but through other middlemen they ended up getting it shortly thereafter. The cheques cleared months ago; and I guess that a small "broker fee" was probably applied against a debt that was owed to the other middleman that saw it as a way to recover at least something from what he was similarly legitimately owed on three loads of some other grain not covered by bonding.

And now I have some sympathy for an auditor's job.

And I also know that "prepayment" or immediate payment or at least a substantial down payment would have prevented any possibility of a $3M or so shortfall in these cases.

And I predict that that remedy will never be a commonly acceptable way for farmers to receive payment in the future.

We will be insuring even more financially unstable buyers; and the premiums will increase proportionately

Common sense; with more than one factor in the mix.

[oneoff]

Larry.. reread your last post.

I had concentrated on the truckers destinations and have all the feedlots,feed mills and colonies that the loads each went too.
Perhaps what was totally overlooked was that there might have been another middleman; bigger player. Also have the trucking company licence numbers and the firms names. Simple matter to see what the patterns are...a little later.
Now that is an very interesting possibility, and I appreciate and value information that every producer might use to be become better informed.

[oneoff]

Further rearch reveals no common correlation between contracts and any othe business's trucking firm. Well worth checking out though. Thanks

[TOM4CWB]

LarryW.

A 'Primary Elevator' is REQUIRED to buy using CGC grades and proceedures. They also must have approved facilities that meet standards for safe storage and handle of these grain products. A primary elevator as specified in the Canada Grain Act can use inventory as assets to the amount specified by the CGC. Grain Dealers Can't... BECAUSE of the very reasons you relate to. Feed Mills are NOT Primary Elevators... NOR are trucks... or farmers/feed lots bins that receive growers grain. These facilities are not generally 'Works for the General Advantage of Canada' which must grade and handle according to CGC Regulation.

IF you do NOT see a 'Primary Elevator License' and proper graded grain receipts Using Canada Grain Act grade names... there is NO security. Never was the intent of the present system... nor any future system.

Just like CIDC does not insure loans that are private; but coverage only comes though approved banks. Same in the Credit Union Financial Assurance systems.

Domestic sales of grain to domestic consumers... have NOT been covered by CGC bonding/security... for generations.

[oneoff]

"Domestic sales of grain to domestic consumers... have NOT been covered by CGC bonding/security... for generations"

If I interpret this analysis; it is being said that firms such as the way Newco was operating till last May; could not be bonded.

That is obviously not true; as the proof is that it cost a bonding company a couple million of their own money; and the CGC was mistakenly assuming that this company was fully compliant with bonding requirements for grain puchases from many more than 120 producers.

Someone is misinformed about the current bonding process. And it may very well be myself. Please enlighten persons such as myself. Thanks

[oneoff]

The Chief Commissioner of the CGC is quoted as saying “While we license primary, process, terminal and transfer elevators and grain dealers, we do not license companies such as feed lots. Deliveries made to unlicensed companies are not covered by our Payment Protection Program.”

Seems to me that "grain dealers" involves a much bigger class than "licenced primary elevators". And I think we all have an idea of the scopeof a feedlot or market hog enterprise would cover.

Similarly; any grain purchasing business (any kind whatsoever) or its customers; which is not licenced by the CGC; nor putting up its bond requirement is understandably not going to be able to expect to be covered in any way by CGC bonding.

Maybe just tell us what you think is included in the "feedlot" class that Hermansen refers to.

[TOM4CWB]

Oneoff,

The coverage times mentioned below and correct official CGC sales papers provide the basis for the CGC Security. Brokers often match a feed grain grower with a feed buyer... which then mean there is NO security if the buyer isn't CGC Licensed.

http://www.grainscanada.gc.ca/licensee-licence/licensed-agreees-eng.htm#w

This Shows who is covered. I see NO domestic feed lots or mills with CGC Security.

"Canadian Grain Commission concludes Payment Protection Program review for Newco Grain Ltd.

WINNIPEG, Nov. 23, 2012 /CNW/ - Producers who did not receive payment for grain sold to Newco Grain Ltd. have received compensation for their eligible claims through the Canadian Grain Commission's Payment Protection Program.

Newco Grain Ltd. was a licensed grain dealer located in Coaldale, Alberta, until May 11, 2012.

"When a licensed company is unable to pay producers, we work to ensure producers receive compensation," said Elwin Hermanson, Chief Commissioner of the Canadian Grain Commission. "While we license primary, process, terminal and transfer elevators and grain dealers, we do not license companies such as feed lots. Deliveries made to unlicensed companies are not covered by our Payment Protection Program."

Rules for compensation

The Canadian Grain Commission reminds producers that they must follow and meet certain rules for compensation under the Payment Protection Program. Producers are only covered by a licensed company's security for 90 days from the date they delivered their grain, or 30 days from the date they received a cash purchase ticket.

Compensation of 100% can not be guaranteed, and in the case of Newco Grain Ltd., eligible producers only received 95% of the amount they were owed.

About the Canadian Grain Commission

The Canadian Grain Commission is the federal agency responsible for establishing and maintaining Canada's grain quality standards. Its programs result in shipments of grain that consistently meet specifications for quality, safety and quantity. The Canadian Grain Commission regulates the grain industry to protect producers' rights and ensure the integrity of grain transactions.

Related information
• Licensed companies
• Financial protection for grain deliveries

SOURCE: Canadian Grain Commission


http://www.newswire.ca/en/story/1077299/canadian-grain-commission-concludes-payment-protection-program-review-for-newco-grain-ltd

[oneoff]

Still trying to condense this down to a laymen`s language and two sentences.

Is it agreed that:

Whoever cuts the cheques for CGC described and graded grains are the one`s can who become bonded (for producer repayment purposes in the case of payment defaults. And further feedmills and (registered) seed growers are specifically exempted from the Act from those provisions. And that licencing and bonding could considered two seperate transactions.



Continuing the arguments further:

We are talking about CGC grades (eg. Canada No.1 Feed) and not feed grain. If your production is described as feed grain; is it not outside CGC juridiction; which would be an important distinction.

And as for brokers; we must be cognisant of the principles of ``estoppel`` which is defined by Wiki as

Estoppel in its broadest sense is a legal term referring to a series of legal and equitable[1] doctrines that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied`.

I could refer everyone to a court proceeding where once a producer ``talks`` to a a broker; that one can not later argue that the broker does not have the full authority to act on your behalf.

Now while a broker may be engaged to shop your grain around; there is the possibly he is buying for their own account as an unlicenced and unbonded business.

Thus is a producers only remedy to stipulate that their grain must be sold to a licenced and bonded company where

AT BEST YOU MIGHT expect a 95 payout after months of wondering; and at worst you could still get pennies on the dollar.

No wonder the industry (and particularly the Federal Government)wants to change systems.

I put to you that the proposed solutions are red herrings designed to distact from the real solution which is to require any businessman to exchange immediate payment for received goods .

Sure in most cases that requires adequate reserves; financing; credit arrangements, secured loans and lines of credit. Now those are preferably handled as their own business arrangements and responsibility. But if those important terms are not looked after within the purchasers business; and deliberately not disclosed; then the producer is being used as the banker; without any consultation.
And thats what producers are up against and that`s what poorly finanaced business`s are avoiding talking about.


I think it could be a case that many grain purchasers would be forced into receivership or bankruptcy if they had to come up with

PROVIDING IMMEDIATE PAYMENT FOR EXCHANGED GOODS

But why would producers be keen to backstop every business without knowing the business details of any one of them. Further,
Is it not patently obvious that todays insurance premium is open ended; and an all sure agreement to pay whatever the insurance companies decides to raise those premiums to in the future.

[oneoff]

Tom... I'm not disputing much of the information you provide; but I do believe comments like


"IF you do NOT see a 'Primary Elevator License' and proper graded grain receipts Using Canada Grain Act grade names... there is NO security. Never was the intent of the present system... nor any future system"

This is indeed missing some key facts when jumping to the conclusion above. There are also grain dealers, transfer elevators and process elevators etc; and then those who conduct business involving various combinations of the above. All may be bonded and licenced and that is the itent of the present system although it might not always be so for very long.

If there is some thing to insure (other than feedlot and seed grain exemptions) or if for whatever reason you wished to be licenced (although even the CGC might wonder why); then I am told that you may apply away.

I you are "cutting the cheque" then you can be apply to be bonded. If there is nothing to bond; then obviously not.
That would apparently include those wearing multiple hats; and especially within the all encompassing CGC definition of a grain dealer which is

Grain dealer
"Grain dealer's licence to carry on business as a grain dealer. Grain dealer means a person, who for reward, on their own behalf or on behalf of another person, deals in or handles western grain"