Decision on what to do with the $90 million surplus was delayed first by legislative review and now by COVID-19
A decision on what to do with the remainder of a $130 million operating surplus at the Canadian Grain Commission has been delayed again, this time by the COVID-19 pandemic.
Sources in the Canadian grain industry told The Western Producer last week that the fate of the CGC operating surplus will not be fully determined until a federal review of the Canada Grain Act and modernization of the grain commission has been completed.
That review and modernization process has been put on hold indefinitely due to COVID-19.
“Agriculture and Agri-Food Canada, with support from the Canadian Grain Commission (CGC), started leading a review and analysis of the Canada Grain Act last year,” said James Watson, media relations officer at Agriculture Canada’s public affairs branch.
“During this review, AAFC and the CGC were to engage with stakeholders to gather information to help identify areas of potential modernization with the publication of a consultation paper this spring. Due to the ongoing COVID-19 pandemic, the timelines for this consultation process have not been finalized.”
Meanwhile, user fees for a range of CGC services increased earlier this month by about two percent. The fee increases — the second fee adjustment in as many years — is meant to cover the increase in the CGC’s cost of conducting business and is not expected to result in additional operating surpluses.
The CGC surplus — initially calculated at around $130 million — was accumulated from 2013-17 and was the result of higher-than-expected Canadian grain export volumes.
About $40 million of the $130 million surplus was retained in a CGC contingency fund, which will be used to cover unexpected costs and future operating shortfalls, the commission has confirmed.
The remaining $90 million is still waiting to be allocated, despite a previous indication in early 2018 that the CGC would use the money over a five-year period to expand commission programming.
So far, the only CGC program to be enhanced was the commission’s popular Harvest Sample Program, which now includes tests for falling number values and DON accumulations.
Those program enhancements are expected to cost the commission an estimated $4 million over five years.
“We continue to hold on to approximately $90 million worth of surplus,” CGC spokesperson Remi Gosselin confirmed last week.
“Of that $90 million, only $4 million has been spoken for so far.”
The fate of the CGC surplus was a contentious issue a few years ago. At the time, some farm groups, including the Western Canadian Wheat Growers Association, had demanded that the full surplus amount be returned to farmers.
However, the grain commission said at the time that refunding the CGC surplus to farmers was not an option under current regulations governing the commission.
The CGC launched a consultation in late 2017 seeking input on what to do with the surplus funds.
Based on that, about $90 million was to be allocated to CGC programming over a five-year period. However, allocation and program enhancement decisions were put on hold in early 2019 when Ottawa announced that it intended to conduct a comprehensive review of the Canada Grain Act and the Canadian Grain Commission.
That review process is now in limbo due to the global COVID-19 pandemic.
The grain commission did reduce user fees in 2017 and 2018 to “mitigate the risk of further accumulation of surplus funds and … align fees with operational costs.”
Since then, user CGC fees have increased twice — once on April 1, 2019, and again on April 1, 2020.
Those annual increases, both amounting to about two percent per year, are linked to inflation.
Western Canadian Wheat Growers Association president Gunter Jochum said his organization supports efforts to review the Canadian Grain Act and modernize the grain commission.
However, the organization still wants the unallocated $90 million either returned to farmers or spent on projects that benefit grain growers.
“Let’s complete the review and the modernization because we need to figure out what kind of system we need to market our grain effectively in the future … and then we need to figure out the best use of those funds in support of that system,” Jochum said.
“Trust me. It doesn’t sit very well with us that we’re out nearly $140 million by now because that pot is still growing….
“In the end, it’s farmers’ money and if the government isn’t going to return it to us, it needs to be spent on something that benefits us.
“We urge the government to get going on the compete review (of the Grain Act) and the modernization of the CGC.”