Grain commission modernization is too timid

There’s a great deal of agreement among farm groups and grain companies that proposed changes to the Canadian Grain Commission don’t go far enough. Producers are going to be needlessly saddled with extra costs.

There are two positive attributes to the Canada Grain Act changes now being rushed through Parliament as part of the massive budget bill:

  • elimination of mandatory inward inspection

When inward inspection is needed, it will still be there. Making it mandatory was putting an unneeded $20 million cost on the system. There’s just no reason why rail cars leaving a Viterra elevator need to be inspected again when they arrive at a Viterra port facility.

  • changes in producer payment protection

Producers want to know that they will be paid when they deliver to a company. However, requiring all grain companies to post bonds is tying up $600 million in working capital, and producers still haven’t always had full protection when a company fails.

The government plans to replace bonding with an insurance-based system that will hopefully provide greater certainty at a lower cost. Details are still pending.

While these two efforts are positive, the modernization doesn’t go far enough. Outward inspection and weighing by the grain commission will continue to be mandatory. Why not provide the option of inspection by private companies accredited by the commission?

There are many cases where an overseas customer may want a private grade by an internationally recognized company. The grain commission is duty bound to provide its own grade at its own cost on top of the private grade. That’s just wasteful.

The commission is proposing an increase in its user fees starting Aug. 1 that will see the cost of outward inspection go to $1.60 a tonne. Private companies charge about one-quarter of that amount.

The unnecessary extra cost reduces what farmers receive from the export market. However, the cost doesn’t stop there. Market analyst John DePape argues that domestic prices drop by a comparable amount. For example, a canola crushing facility competes directly with the export price when buying canola.

Grain commission user fees are going to be much higher than necessary because there’s a bunch of overhead costs that need to be covered. The commission’s Grain Research Lab in Winnipeg, its policy development work and its food safety function should be considered a public good paid for with taxpayer dollars rather than being tacked onto user fees.

Although not part of this bill, user fees are set to rise dramatically to the entire industry starting Aug. 1. Only $5.45 million worth of grain commission activities will be paid by the government each year, and that payment will be static.

System costs would be dramatically reduced if more activities were deemed to be a public good and if outward weighing and inspection were no longer mandatory,

Most observers realize there’s little chance the current bill will be altered in any substantial way. It’s part of much larger budgetary legislation that’s going to be pushed through come hell or high water.

However, there’s an urgent need to reopen the Canada Grain Act and complete the modernization process at the earliest possible option. This sounds easy, but will it happen?

Two previous attempts at changing the act were unsuccessful. This current bill will pass, but it goes only part way in the modernization that’s so badly required.

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