The fate of a new insurance plan for special crops growers could hinge on the difficult economic conditions plaguing prairie farmers.
“This will represent a cost for them and some may have other uses for their money,” said Canadian Grain Commission spokesperson Paul Graham.
The commission last week published draft regulations for a voluntary insurance program that would protect producers against non-payment for special crop deliveries to licensed companies.
A 30-day period for comment expires June 28. The program will go into effect Aug. 1 unless the comments indicate a desire for delay.
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The insurance scheme, authorized by Parliament last year, will be financed by producers through a refundable checkoff of 38 cents per $100 of special crops sales. That includes 20 cents for the insurance premium and 18 cents to cover administration costs.
The commission estimates it will cost special crops growers $54 a year to participate in the insurance program. Under the current system, their costs are approximately $5.57 a year.
The regulations are based on consultations with producers and others in the grain industry during the last few years.
According to a background paper released by the commission, most producers said they would be willing to pay 38 cents to get security on a voluntary basis.
But Graham said those consultations took place a couple of years ago, when commodity prices were higher and the economic outlook was more optimistic.
“So it’s really difficult to be absolutely certain, two years later, that producers will feel the same way.”
The commission says a participation rate of 60 to 65 percent is needed for the program to be viable. If that’s not achieved, it would likely be suspended, although no formal process is in place for doing so.
“We think we will get what we need, but nothing is certain,” said Graham.
Numbers involved
Ken Tjaden, executive manager of the Manitoba Pulse Growers Association, said it’s difficult to predict how many producers will participate, although he noted 65 percent seems high.
While the cash squeeze facing farmers may make them reluctant to pay the checkoff, it may also make them more interested in getting insurance against non-payment for crops they have delivered.
“We’ll certainly recommend that producers give a very good look at it,” he said. “We just want to make sure that they understand the risks involved, that they’ll have no protection at all if they’re not in this.”
Producers who are growing peas or lentils and selling them to a major line elevator company may not feel the need to be insured, he said, while those who sell smaller volume crops like spices or chickpeas to a small dealer or processor may want more protection.
Licensed special crops buyers will no longer be required to post security to cover their liabilities to producers, although they will have to pay $2,000 for an annual licence. The commission says the new system could open the door for as many as 125 new dealers to be licensed, more than doubling the current total of 99.
“Security has been a barrier to many potential entrants into the industry,” said Graham.
Tjaden said such a development would clearly be a benefit for growers.
“I think any time we have more buyers and more competition, it’s got to be good for producers,” he said.
