The Canadian Grain Commission (CGC) is proposing to replace its current security program with an insurance scheme as early as Dec. 1.
Citizens have until Nov. 4 to submit their views on the regulatory changes the federal government says will save the CGC and grain sector money.
“While the current model has been relatively successful, it is expensive for both licensees and the CGC to administer,” the government says in the Canada Gazette.
Now grain companies are supposed to post bonds or letters of credit to cover money owed to farmers for the grain they’ve delivered. But sometimes when companies go broke their security falls short.
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Farmers are also covered by the CGC plan for up to 90 days after delivering to a licensed grain company. They have 30 days to cash grain company cheques before being ineligible for protection.
Under the new proposal farmers who aren’t paid would have to notify the CGC within 45 days to qualify for coverage and will have 30 days to submit a claim to the CGC for what they were owed.
There would also be a five per cent deductible, which the government says will encourage farmers to protect themselves.
“The purpose of this change is to transfer the concept of moral hazard found in the current model in each business transaction to the aggregate structure of the proposed new model.”
The government says the CGC has consulted with grain companies and farmers and they generally support the proposal.
The current security plan will remain in place until the new one takes effect.
The program has paid an annual average of about $723,000 (inflation adjusted) in losses from failures to pay farmers during the last 32 years, the government says.
