Ritz Wrong On CGC Security Performance

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“We need to make sure security actually provides security for farmers.”

– Gerry Ritz

Farmers were fully compensated in most cases

Agriculture Minister Gerry Ritz told a radio interviewer earlier this month that existing Canadian Grain Commission security provisions for grain companies that fail don’t work and should be scrapped.

In an interview with Golden West Radio’s farm broadcaster Kelvin Heppner, Ritz said the government plans to do just that with Bill C-13.

“What I’ve been able to ascertain when there has been a hiccup in the grain industry and a (grain) company has gone down, the best that has ever been paid out is some 30 cents on the dollar,” Ritz said. “That’s not good enough. That doesn’t protect producers with valuable commodities, you know, pulse crops and canolas that are worth tens of thousands of dollars in a B train.”

He was wrong – again. Actually, 30 cents on the dollar was the worst performance for the program, not the best. CGC figures show that between 2002 and 2008 thanks to the CGC program farmers received 77 per cent of their money after a buyer failed to pay them. In fact, of the nine cases where a company’s security held by the CGC was distributed to farmers, farmers were 100 per cent compensated in six and in one they received 99.8 per cent or virtually 100 per cent.

In two cases farmers were not fully covered. Twenty-seven farmers owed money by Venture Seeds Ltd. received just 28 cents on the dollar taking an average loss of of $14,323.18.

The 112 farmers owed money by Naber Seeds & Grain Co. Ltd. received 51.4 per cent of what they were owed, leaving them out an an average of $8,448.60.

When an official in Ritz’s office was asked via e-mail why the minister was citing incorrect information, the official wrote the minister had meant to say coverage has been “as low as 30 per cent.”

Even though 204 farmers during the period received 100 per cent of the $3.35 million they were owed for an average payment of $16,435.32, Ritz still maintains the CGC’s security program “has done poorly.”

“We need to find a better way and we are open to suggestions at committee (where C-13 will be reviewed),” Ritz said in an e-mail March 6. “We need to make sure security actually provides security for farmers.”

Ritz says farmers can develop their own voluntary security program. Alternatives include establishing a clearinghouse or an insurance-type program.

Under the current program licensed grain buyers who purchase grain from Western farmer by grade name, are obliged to post security to cover the value of grain farmers have delivered. But it’s a limited time offer. Farmers have 90 days to get paid, but only 30 days’ coverage after getting a cash purchase ticket or cheque for their grain.

According to the federal government the CGC security program is also expensive. But CGC figures appear to refute that. As of January 2009 the program cost around $9 million a year. Posting security costs licensed elevators and grain buyers about $7.6 million annually, while the CGC’s administration cost is around $1.4 million. And the cost fluctuates with the price of grain and interest rates. It’s generally agreed most of that cost – especially that of grain companies’ – is passed onto farmers.

Last crop Western elevators received almost 30 million tonnes of just five major grains – wheat (including durum), canola, barley, oats and flax. If only those crops were covered, the cost of CGC security would average just 25 cents a tonne or less than a penny a bushel on wheat. But 16 other crops, and therefore millions of tonnes more, are covered under the program reducing the cost of coverage even more. [email protected]

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