Most prairie grain dealers would apparently rather get licensed by the Canadian Grain Commission than spend time in the slammer.
A new get-tough policy adopted by the CGC last year threatened possible criminal prosecution of any grain company or dealer buying or selling grain without a licence after Aug. 1, 2006. The penalties for violating the rules could include fines or jail time.
The message seems to have been taken to heart.
As of last week, of more than 80 companies that operated last year without a licence, nine had obtained a licence.
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That brought the total number of licenced companies to 113.
Another 20 were close to being licensed and 50 more had applied and were being consideration for licensing, pending a CGC review of their operations.
The backlog occurred because most companies didn’t apply until near the deadline.
Producers are eligible for financial compensation through the CGC in the event a company goes bankrupt only if the company is licensed and bonded by the federal regulator.
Reg Gosselin, the grain commission’s director of corporate service, said the agency is pleased with the response.
“A very small number seem to be ignoring our request to provide information and become licensed,” he said, adding they could be considering changing their operations in order to be exempt from licensing requirements.
Companies can gain an exemption if they are not involved in buying and selling grain. That could include seed cleaners, producer car loading companies and certain classes of grain businesses such as feed mills, in which quality assurance and producer protection are not major issues.
Gosselin said it’s difficult for the commission to know for certain if someone is operating in a manner that requires a licence, but he said the agency will be rigorous in ensuring the rules are being followed.
“We have been in contact with them repeatedly and will continue to in the future,” he said.
While fear of prosecution may be a significant motivation to comply with the rules, Gosselin said there is also a consensus in the industry that companies have a responsibility to become licensed and carry security.
The commission had previously relied on a policy of friendly persuasion to encourage companies to meet the requirement to be licensed and bonded.
Jim Moen, vice-chair of the Saskatchewan Pulse Growers Association, welcomed the commission’s new approach.
“We definitely want more security built into the system,” he said from his farm at Cabri, Sask. “So much is invested in producing these crops and we want to be sure we’re protected at the end of the day.”
The issue is of special interest to special crop producers, many of whom have in the past sold their grain through small unlicensed companies. A number of those companies have gone bankrupt in recent years and left individual farmers thousands of dollars out of pocket.
A licence guarantees that farmers will receive some compensation, but the amount may be limited based on the amount of security put up by the company.
A grain dealer’s licence costs $1,200 a year, while a primary elevator licence costs $60. The amount of security depends on a company’s financial stability and degree of risk associated with its operations, as well as the value of grain in its possession.
Gosselin said there’s no doubt farmers will face some higher costs, either through higher handling fees or lower prices, as a result of the new requirements, but said most producer groups told the commission the added protection was worth the extra cost.
The commission has estimated that the additional costs to unlicensed special crop dealers who obtain a licence works out to about $1.30 a tonne.
While the pulse growers welcomed the CGC’s new policy, one farm group was less than enthusiastic. When the new system was unveiled last year, the Western Canadian Wheat Growers Association said companies should have a choice whether to be licensed and bonded and farmers should be free to deal with those companies if they wish.
The association warned that costs associated with the new rules could force some small grain dealers to go out of business, thus reducing competition. However, that doesn’t seem to be happening.
