CGC Bonding On Block

OTTAWA - Dec 13/07 - SNS -- Proposed amendments to the Canada Grain Act would no longer require licenses grain dealers in western Canada to post bonds with the Canadian Grain Commission, putting them on an equal footing with their counterparts in eastern Canada, and freeing up capital for trading and other operational costs.

Security bonds have been a controversial aspect of grain policy in Canada, particularly the fact federal law implicitly sates that eastern Canadian farmers are more sophisticated than their western counterparts. While eastern farmers are capable of finding our whether prospective buyers have the financial capacity to handle the business, federal politicians have historically assumed western Canadian farmers were too naive to do credit checks on companies seeking to buy from them.

Agriculture Canada argues the change will reduce grain handling costs in western Canada. "Costs of such programs have ultimately been borne by producers. Ending the producer payment security program will reduce system costs, and remove a barrier to new entrants into the grain merchandising industry. With the federal government ending this mandatory program, the way will be clear for producer groups to develop a commodity clearing house or other ideas to help manage risk in a cost-effective way, if they so wish."

Gerry Ritz, the federal minister of agriculture, said, "This will bring the Western Canadian grain industry in line with other agricultural sectors, and with the grain industry in Eastern Canada where the federal government does not require the industry to participate in similar security programs."

Another key change will be making inward inspection and weighing of grain being delivered to terminal or transfer elevators optional.

"Shippers will have the right to request weighing and inspection," Agriculture Canada explained. "Terminal and transfer elevator operators will be required to allow access to service providers who will do the weighing and inspection.

"While the CGC will no longer be involved in the delivery of this optional service, both shippers and elevator operators will have access to binding CGC arbitration in the event of dispute over a grain grade. The Canadian grain quality assurance system will remain effective, maintaining Canada’s reputation as a consistent supplier of quality grain. The CGC will continue to conduct its quality monitoring programs and export shipments will continue to be weighed, inspected and certified by the CGC."