It is a fact that Canadian grain farmers bear the majority of the costs of the Canadian Grain Commission’s regulatory operations, but that fact is being hidden from farmers.
It’s a fact that surprised many farmers during the conversations leading up to the review of the Canada Grain Act. Some farmers thought the CGC was fully funded by the federal government.
Most farmers were surprised to find out that the majority of the CGC’s regulatory costs are covered by revenue obtained from fees charged for the mandatory inspection of export vessels of grain.
Because the inspection fees on grain exports cannot be easily passed onto international buyers in the price-competitive grain markets, the inspection fees are instead passed back to farmers through a wider grain basis.
Having the farmer cover the costs of the CGC through the grain basis is creating two major problems. The current funding system hides the level of farmer support that the CGC relies on for regulatory operations, limiting farmers’ awareness of this government department’s direct impact on their farm business.
The current funding system is also not very accurate because the CGC has reported consecutive surpluses in revenues. The surplus has accumulated to more than $130 million to date and is likely to grow in light of the record grain volumes being shipped during the current crop year. These are fees that were unnecessarily charged to farmers for regulatory operations, and according to the Surplus Investment Framework, the funds are earmarked for infrastructure investments.
Using farmers’ money on investments that are historically the responsibility of the federal government is a concern for farmers, and this action is only the latest in a concerning trend.
The federal funding that is annually provided to the CGC is insufficient and accounts for less than 10 percent of the department’s total revenues.
This amount is not enough to cover the cost of the Grain Research Laboratory, a service that benefits all Canadians. This amount is not enough to cover the infrastructure costs required to maintain the commission’s building in downtown Winnipeg. This current funding system hides the fact that consecutive federal governments have been shifting an unfair amount of the costs of the CGC on to Canadian farmers.
The Alberta Wheat and Barley Commissions have put forward a recommendation that the cost of the regulatory operations of the CGC must step into the light. Transparency for farmers requires that the CGC move to a funding system where its regulatory fees are listed as a separate line item deduction on farmers’ payments, rather than being hidden in the grain basis.
Through this change, farmers would be provided complete transparency on the amount of support that they are already providing to the CGC’s regulatory operations.
This Canadian Grain Commission regulatory fee would allow for improved management of surplus revenues through the annual adjustment of these fees. Because the fee would be placed directly on the farmer, any reduction in the fee would directly benefit the farmer.
This is an important improvement because the CGC has stated that its current funding system cannot guarantee a benefit to farmers from fee reductions because it cannot be sure the reductions will be passed on by grain companies through the basis.
This proposal is only part of a larger response from farmers demanding that the CGC provide greater transparency in both its regulatory operations and in general information provision on Canada’s grain markets.
More information on the Alberta Wheat and Barley Commissions’ submission can be found at www.albertawheatbarley.com.
Geoff Backman is business development and markets manager for the Alberta Wheat and Barley Commissions.