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Shrinkage Has Not Completely Shrunk

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alberta farmer | winkler, manitoba

Some farmers called it “tookage” – the deduction primary elevators used to take from farmers to cover grain lost during handling known as “shrinkage.”

The Canadian Grain Commission (CGC) set the shrinkage deduction at terminal elevators at zero in 1990 and did the same at primary elevators in 2003. Now it’s proposing the same for process and transfer elevators and grain dealers who are really operating primary or process elevators but licensed as such, CGC commissioner Cam Dahl told farmers attending Winter Cereals Manitoba’s annual meeting here March 10.

Allowing some grain buyers and not others to deduct for shrinkage – grain and grain dust lost during handling – creates a disparity, Dahl said later in an interview.

For example, in one town there might be a canola crusher which is licensed as a process elevator and a primary elevator. Each could pay the same price for canola but the farmer delivering to the crusher might receive less because of the allowed deduction for shrinkage.

“Transparency is a big reason for doing this (change),” Dahl said.

After the CGC ended shrinkage at primary elevators, it was assumed process and transfer elevators would do so on their own, but it didn’t happen, Dahl said. Meanwhile, farmers and farm groups have been lobbying the CGC to make the change.

Shrinkage regulations under the Canada Grain Act do not apply to licensed grain dealers. But it turns out some are operating primary or process elevators, but aren’t licensed for it, Dahl said.

The CGC will do a comprehensive licensing review starting Aug. 1 as licences come up for renewal, making sure those operating primary and process elevators are licensed as such. When that occurs, grain dealers operating elevators won’t be deducting shrinkage either, Dahl said.

What’s happened is some individuals, especially in the special crops business, started out as grain dealers but over time their operations evolved into primary or process elevators, he said.

It’s important for grain buyers to be properly licensed. Each licence comes with its own regulations and obligations with respect to dealing with farmers, Dahl said.

For example, farmers dealing with grain dealers don’t have the option to ask the CGC to establish the grade and dockage if there’s a disagreement. That option is available when delivering to a licensed elevator.

Each class of licence requires that security be posted with the CGC to protect producer payments. Primary elevators may use the value of their “stocks in store” on outstanding receipts to reduce their security calculations, but grain dealers may not.

Primary elevators may lease condominium storage to producers, while dealers may not.

Under the Canada Grain Act “a grain dealer is a person who, for reward, on his own behalf or on the behalf of another person, deals in or handles western grain.” Anyone trading in grain, whether on their own account or as an agent, is required to be licensed unless acting as agents of licensees.

“Pure grain dealers do not operate elevators, or if they do operate an elevator, they also require an elevator licence,” the CGC says.

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