A TOUGHER approach to regulation of grain dealers by the Canadian Grain Commission is likely to provide more protection for farmers against financial losses.
And in this economic climate, more security in grain deals is highly desirable.
Last week the commission announced plans to abandon its approach of “friendly persuasion” to ensure that all grain companies and grain dealers are either licensed and secured, or legally exempt from licensing. It now plans to fine or close operations that refuse to become licensed.
The new plan sounds heavy handed when baldly stated, but farmers who have lost money in recent years over deals with unlicensed dealers and companies applaud the move. The initiative also has support from various grain industry and farm groups, as well as the special crops industry, which has been rocked by business failures that cost farmers thousands of dollars.
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Licensing requires companies and dealers to obtain an appropriate level of security through banks or insurance providers. This ensures farmer-sellers will be paid for their product if a company is unable to meet its obligations.
The need for better enforcement of CGC licensing has been a matter of much debate, but onerous bonding requirements have been a stumbling block to higher compliance.
This time around, the CGC says there are more affordable options for securing bonds, which should make it easier for smaller processors and dealers. That remains to be seen once unlicensed firms begin complying with the new requirement.
Extra costs incurred in licensing will likely be passed to farmers through either higher charges or reduced grain prices, but that applies only to producers who have been delivering to previously unlicensed companies.
The enforced requirement for licensing will level the playing field, eliminating the competitive advantage available through reduced costs at unlicensed operations. It was a question of risk tolerance for farmers; a trade-off between a potential better selling price and improved payment security. The new policy at least guarantees the latter if the CGC also steps up monitoring of the bond amount.
The other advantage to licensing enforcement is quality control. Only licensed companies are subject to the requirements of the CGC’s quality and quantity assurance system, which is designed to protect the reputation and integrity of Canadian product.
In a perfect system, increased regulation and enforcement wouldn’t be needed. Yet farmer losses at the hands of unlicensed companies have shown the need for change.
Comments on the changes are being accepted until September and other ideas may emerge. At is stands, the new plan depends on the CGC’s ability to make good on its plans to get tough with licensing.
