Major farm groups are diametrically opposed on the issue of outward inspection, a key issue of Canadian Grain Commission reform. In some ways, it’s reminiscent of the philosophical fault line in the debate over the Canadian Wheat Board.
Sask Wheat and SaskBarley, along with the Agricultural Producers Association of Saskatchewan, say outward inspection should be left alone. Meanwhile, the Alberta Wheat and Barley Commissions believe the CGC should relinquish mandatory outward inspection.
Outward inspection at ports is a high-cost service most exporters and importers don’t want or need, but it’s the cash cow providing about 80 percent of CGC’s operating revenues.
With higher grain volumes than anticipated, a large surplus has accumulated and the CGC has been in the embarrassing position of trying to find worthy projects to spend millions of dollars in extra money collected from grain companies and by extension grain producers. As of March 31, 2020, the accumulated surplus was $137.3 million and growing.
The CGC’s mandatory inspection and weighing fees were a combined $1.48 per tonne for the 2020-21 fiscal year. The revenue supports many other CGC activities such as the Grain Research Laboratory and administration. Therefore, the fee for outward inspection is approximately $1 per tonne higher than what private grain inspection services charge.
Most grain companies and importers prefer to use third-party inspectors, typically from companies with a worldwide reputation. Since CGC inspection and weighing is mandatory, there’s a duplication of service and grain companies are paying $1.48 per tonne for no apparent benefit.
Grain exporters have long recommended that the CGC withdraw from being a service provider for outward inspection and instead oversee private sector assurance providers or accredit third party inspection companies. The CGC could still retain the authority to access data, grain samples and the information required to support regulatory standards as well as market access.
As well, the CGC would still develop and maintain the grain standards and have a mechanism and authorities in place to resolve disputes that may arise between exporters and importers.
Groups such as Sask Wheat believe a CGC withdrawal from mandatory outward inspection would harm quality control and tarnish Canada’s brand. However, mandatory CGC weighing and inspection does not apply to sales by rail to the United States and Mexico. Nor does the CGC have a role in the growing export of grain by container. That business seems to be fine without CGC involvement.
Without fees from outward inspection, the CGC would have a large revenue shortfall and an alternative funding model would be needed. The annual appropriation from government of roughly $6 million covers only about 10 percent of CGC costs. It doesn’t even cover the full cost of grain quality research.
The public good of the CGC in quality assurance and safety should be worthy of a larger public investment. Failing that, the money has to come from somewhere.
No painless way exists to extract money, but a more equitable way than the outward inspection cash cow might be based on producer deliveries. All buyers benefiting from CGC quality assurance would pay a fee per tonne that corresponds to their annual grain handle.
The cost would still ultimately be borne by producers, but it would be more equitable and logical than the current reliance on outward inspection.
With farm groups divided on how the CGC should be modernized, expect the status quo to prevail. A rare opportunity for substantial improvements is likely to be missed.
Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at firstname.lastname@example.org.