Special crops growers and processors are, for the most part, embracing a Canadian Grain Commission crackdown on unlicensed operators.
“It’s a good day for the industry because it is going to be a level playing field now,” said Garth Patterson, executive director of Saskatchewan Pulse Growers.
“Everyone will be licensed and have security and growers will know that.”
The changes resolve a long-standing irritant that moved to the front burner in 2002 with the demise of Naber Seed and Grain Co. Ltd. That debacle left unsecured and secured farmer creditors on the hook for $3.4 million.
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Lloyd Affleck, co-chair of the special crops industry security committee, said the new rules should help settle a pulse sector rocked by a series of business failures resulting from overcapacity and poor crop conditions.
“This is positive for the industry. I think we’re heading into a more stable period,” he said.
Under the strict new compliance rules, an estimated 50 unlicensed western Canadian grain companies have until Aug. 1, 2006, to adhere to producer security stipulations outlined in the Canada Grain Act.
The changes are intended to give growers the peace of mind that no matter where they deliver their grain, they will be protected, unless it is an exempted operation like producer loading facilities.
There is also something in the new policy to appease special crops processors that have long complained about the CGC’s onerous bonding requirements.
Firms now have the option of securing bonds through Export Development Canada, eliminating the need to post collateral with chartered banks, or conversely they can insure producer liabilities through a program offered by AON Reed Stenhouse.
The two new security options will free up an estimated $200 million in working capital tied up in bonds, said Greg Simpson, president of the Western Canadian Processors and Marketers Association.
“It strengthens the industry because you’re able to fund sales … this is a big step forward,” he said.
Processors need working capital to finance the gap between the time they pay growers for their crops and when they receive payment from overseas banks, which can be weeks.
The new CGC rules free up that capital, giving the special crops trade more buying clout, said Simpson.
Not everybody is overjoyed with the changes.
Ken Clancy, who operates one of the 50 unlicensed processing firms that collectively handle five to 10 percent of Western Canada’s special crops, said he will grudgingly be in compliance come Aug. 1, 2006.
“I imagine we’re going to be forced into it but it’s not necessarily by choice,” he said.
Clancy has avoided becoming licensed because it wasn’t practical for his small Carrot River, Sask., operation, which processes peas and canaryseed.
“It adds an awful bill of expense to a small processor because you’ve got to be bonded like you were the (Saskatchewan) Wheat Pool or something.”
While the new insurance option may be more palatable than the existing bonding requirement, Clancy still resents the idea of processors picking up the entire producer security tab.
He preferred an idea floated by the Western Canadian Processors and Marketers Association where the system would be funded through a grower checkoff, a concept that was trounced by producers.
Other critics of the new CGC policy complain it is too lax.
National Farmers Union spokesperson Fred Tait said better enforcement of the Canada Grain Act is badly needed, which is why the 14-month compliance deadline extended to grain handlers is far too generous.
“In the meantime, it is in farmers’ own best interests to deal only with licensed elevators and grain companies or exempted producer car loading facilities,” said Tait.
Patterson said the new system isn’t 100 percent foolproof, pointing out that Naber was fully licensed when it went under, leaving dozens of unpaid farmers in its wake.
But with the CGC planning to increase its monitoring activities, that risk should be minimal, he said.
