Should elevators deduct shrinkage?

[bbrindle]

The Canadian Grain Commission is reviewing federal regulations governing the maximum weight primary elevator operators may deduct from producers’ grain deliveries. The weight deductions, commonly known as 'shrinkage allowances,' have been permitted since 1912 to compensate elevators for the normal loss in weight that occurs during grain handling. The CGC is reviewing shrinkage allowances to see if they are still needed, and if so, if they are set at the right levels. The CGC is meeting with producer and industry organizations, and inviting written submissions. Or, you can participate in an online discussion by posting comments and receiving the comments of others via email. You can find the CGC press release and other information, as well as the link to the discussion area, here: http://www.cgc.ca/Views/NewsRel/2000/shrinkage-e.htm You could also post your thoughts here, on Agri-ville.

[rockpile]

Response to Brenda's *****ie on 'shrinkage'. Looks like things have been slow for awhile. So I'll throw in my two cents worth (or 2%). The history of shrinkage goes back to the days of the horse and buggy, when elevators were less sophisticated and when grain was loaded into boxcars - a process called 'coopering'. Grain was literally shovelled in while the sliding door was covered over with wood, which was then removed for unload. This was, as you can imagine, a sloppy process, and a lot of grain was lost during handling. That was covered by the grain companies through deduction of shrinkage. With todays modern computer controlled facilities, the wrong push of a button can result in 50 tons of canola being dumped on the ground before the car rolls into place. This is also covered by 'shrinkage'. The real scary thought is, with terminals now being allowed to dump grain on the ground, will the grain companies be willing to give up the 'shrinkage' (tookage) deduction, or are they going to create a pursuasive new argument to up it? Let's watch the review carefully. Personally, I think the whole concept is disgraceful. There is no shrinkage, just bad management, but the producer, once again, picks up the bill.

[bblackwell]

I guess when I think of shrinkage I assume they don't want to lose money because the grain is drying out? If that's what its based on then my 2% would be to say that water is free, if you don't like the fact that my grain is losing water then put a little back.

[danm]

Is the shinkage on all products? That is cleaned product. In Manitoba it may start paying to clean all your product before going to elevator so there is no dockage or maybe no shrinkage? Is the shinkage more on some products? Why is the producer footing the bill? Should it not be the middle guy? If we buy an apple from the store who pays for the shrinkage? Can someone explain why it is up to the producer to get charged such things as shrink,transportation? You get the product there & they grade it.That is where the buck should stop. If the terminal/company decides to hold the grain for a year thats there business. I guess my answer is no,especially after the note about the shrink in the early days. Looking forward to the replies.

[bbrindle]

I'm not with the CGC, but I can provide a bit more background. Shrinkage is defined in the Canada Grain Act as 'the loss in weight of grain that occurs in the handling or treating of grain.' Shrinkage Allowance is the maximum weight primary elevator operators may deduct from producers' grain deliveries. Terminal elevator (at the ports) shrinkage allowances are set at 0.0 percent. Shrinkage allowances do not apply to transfer elevators or to process elevators (e.g. crushing, milling and malting plants etc.) Current shrinkage levels at primary elevators are: 0.1% for wheat, oats, barley and rye; 0.35% for flax and canola; and 1.00 for other grains (such as peas). Tough or damp cereals are 0.2%; tough or damp oilseeds are .52% and other tough grains are the same as dry at 1%. Maybe its worth a closer look at those cash tickets/grain receipts. Has anyone noticed whether process elevators charge shrinkage (e.g. look on a crusher's cash ticket)? I'm not sure whether, because shrinkage allowances 'do not apply' to processors that means they can't charge shrinkage or whether that means there is no maximum that they can charge. Do feedlots charge anything for shrinkage? (They aren't licensed CGC facilities, so they don't fall under this issue, but I'm curious). On the question of whether to clean or not, dockage is generally the bigger issue because it is a larger percentage. So, a cleaning decision would be made on that basis. However, its a good point. Remember, these are maximum allowances, so farmers can try and negotiate no shrinkage, even now. Keep in mind that shrinkage allowances not only allow elevators to deduct some weight off their tickets, but there is also a maximum shrinkage allowance that they can deduct. I guess the intent of the maximum was to protect producers from too much shrinkage being deducted. Its also about balancing books between weight in and the weight that eventually gets to the coast. I'm not suggesting that it should continue or not, just trying to give a little more background. I'm very interested in hearing more of your views, so keep talking!

[pgluca]

The idea that shrinkage should be the expense of the seller is probably debatable, and being a seller I would rather not see it deducted. However the whole issue of grain moisture and being paid on a dry matter basis concerns me a whole lot more, we are worrying about .1% levels of protien but selling wheat at 10% moisture for the same price as 13.5% moisture is a lot more costly. Comments??

[jwright]

bbrindle asked: 'Do feedlots charge anything for shrinkage? (They aren't licensed CGC facilities, so they don't fall under this issue, but I'm curious).' I've been charged shrinkage and also had a buyer point out that he didn't charge shrinkage. I assume it's one of those negotiating tools that clever traders use to confuse the final price of the product, sort of like the 'administration charge' that car dealers try to charge on car sales.