Farmers who sold grain to a bankrupt elevator company and were never paid will likely receive 10 to 15 percent of what they were owed.
Naber Specialty Grains Ltd. (NSGL) of Melfort, Sask., was placed in receivership last year.
The company had posted a $150,000 security bond with the Canadian Grain Commission before it ran into financial difficulty.
However, CGC spokesperson Remi Gosselin said the size of NSGL’s security bond was too small to ensure full compensation to all eligible claimants.
“At this point in time, it’s clear that the security that was posted by the company (NSGL) to compensate grain producers will be insufficient,” Gosselin said.
The commission has also referred the matter to the RCMP, after uncovering what Gosselin called “apparent irregularities.”
“We’ve referred the matter to the RCMP because of the magnitude of the company’s outstanding liabilities to producers at the time of receivership and also the extent to which those liabilities may have been under-reported in reports to the grain commission,” he said.
The grain commission’s payment protection program requires all licensed elevator companies in Canada to post a security bond with the commission.
The bond is aimed at protecting farmers in the event that the grain company becomes insolvent.
NSGL posted a bond, but it now appears it was significantly undersized, based on the value of grain deliveries to NSGL and unsettled accounts with farmers.
Total eligible farm claims against NSGL are estimated to be $1 to $1.5 million, although Gosselin declined to provide a specific number.
The payment protection program requires licensed elevator companies to submit monthly reports to the commission, summarizing the value grain receipts and inventories.
The commission uses the reports to ensure that the company’s security bond is of an adequate size.
Lee Egland, a producer from Eastend, Sask., said someone at the commission dropped the ball.
Egland sold near $90,000 worth of flax to NSGL in March 2015 but didn’t receive a penny in payment.
He said the grain commission must do a better job of managing its payment protection program if it hopes to provide a reasonable level of security to farmers.
“The CGC or the government is not looking after producers when they’ve got a … bond that size,” he said.
“The total bond that they made Naber pay was 150 grand, (but) my loss alone is half of that. That’s not a very good deal.”
Gosselin said the grain commission audits licensed grain companies when financial irregularities come to light.
Random audits are also conducted.
The grain commission conducted an audit of NSGL’s operations in March 2015 after receiving complaints from farmers about late payments and difficulties getting grain tickets.
The commission instructed NSGL in April to settle outstanding accounts with farmers. Later the same month, it instructed NSGL to stop taking deliveries of farmers’ grain.
NSGL’s elevator was not renewed after May 8, 2015.
Gosselin said the commission’s payment protection program and audit procedures have generally served the industry well.
It is currently in the process of expanding its audit capacity, he added.
“As long as the companies play by the rules, this (system) works well, and most companies play by the rules,” he said.
“We are working with producers to get all the claims in and to determine which claims are eligible and which ones aren’t eligible.”