Issues
Lack of primary elevator accountability for weight, grade and dockage assigned to producers
Until 2012 final determination of weight, grade and dockage was assigned by the Canadian Grain Commission through inward inspection and CGC official weighing at the terminals. CGC inspectors also conducted terminal weigh-overs – regular audits to assure inventory integrity. Primary elevator employees undertook periodic weigh-overs as well, with the results forwarded to the CGC along with the elevator’s grain purchase records since its last weigh-over. The Commission then reviewed these results to compare total elevator weights, grades and dockage with the official inward inspection and weighing data for that time period at terminal. Firms were entitled to a small “shrinkage’ allowance to cover losses which occurred naturally during handling; anything more was deemed “overage”. If the elevator had shipped more grain than it had purchased since the last weigh-over or there were substantial grade gains or dockage discrepancies, the assistant commissioner would visit and the elevator was answerable for the difference. This system was not only comprehensive – it was auditable – but, sadly, it no longer exists. Even the terms overage, shrinkage, weigh-over and assistant commissioner have been removed from the Act. Instead, weight, grade and dockage assigned by private elevator staff are in practice now final and binding.
Limited effectiveness of CGC’s Subject to Inspector’s Grade and Dockage (STIGAD)
provision for independent arbitration of disputes as a regulatory tool
Though essential, STIGAD is inadequate as a system-wide guarantee of equitable grading and dockage because it’s so rarely used – on average only 150-250 times per year – an average inspection rate of only 1 in 5,000-6,000 primary elevator deliveries.
Threat to CGC’s historic primary vs. terminal grading standards
CGC terminal standards have always been more exacting because they’re based on country elevator blending of the grain farmers have delivered. But there are ongoing industry efforts to eliminate this longstanding differentiation between primary and export grading standards in favour of a single port standard that would oblige producers to meet higher – unremunerated – grading requirements at delivery. Policy change here would also have serious implications for quality assurance as the port standard has long been a CGC bulwark against grain company adulteration of exports with surplus dockage.
Excess basis
Record crops combined with winter conditions and systemic service failures by CN and CP cost producers between $3.5 and $6.5 billion in excess basis during the two-year grain backlog 2013-14 and 2014-15. This money was almost certainly pocketed by grain companies as basis levels rose from an average of $70 MT to over $130 MT. These losses comprise the greatest market failure in Canadian grain since the Great Depression collapse of 1929. But they’re also its greatest regulatory failure, revealing serious gaps in the oversight system producers confront at point of sale. These gaps still exist, and will continue to threaten farm income until some form of re-regulation to police contracts and limit basis losses is restored. The only logical vehicle for such regulation is the Canada Grain Act.
One-sided grain contracts
Many contracts are heavily tilted in favour of grain companies. Some firms have begun specifying private companies, rather than CGC-mandated STIGAD as binding arbitrator in disputes with farmers over grade and dockage. This is wrong: industry agreements with producers should never be permitted to contract out of the Canada Grain Act through the introduction of inferior standards. There is also wild inconsistency in grain company treatment of farmers unable to deliver contracted grain for weather or other unforeseen reasons with some producers facing huge fines and outrageous interest costs. APAS has called for a standardized grain contracts and the National Farmers Union has urged the federal government to create regulations under the Canada Grain Act that would require an Act of God clause that would allow farmers to deliver grain owing at the contract price the following year. The CGC should initiate discussion and explore options for resolving these issues.
Primary elevator grain tickets should provide an itemized list of all deductions
Under the Canadian Wheat Board, every grain ticket deduction was a separate item – rail freight, company handling, for example. These costs are now all lumped together as “basis” and farmers have no way of telling what’s what. Co-mingling these deductions is analogous to an employer issuing paycheques with only a single line for all money withheld and no detailing of rate of pay, hours worked, taxes, CPP, EI or pension withholds. In neither case does the recipient have a means of verifying errors or cheating.
No CGC oversight of instruments used to determine grade and dockage
Primary elevator weigh-scale certification remains overseen by Measurement Canada but there is no CGC scrutiny of screens and sieves, moisture meters, protein or any of the other instruments used to determine grain quality, including DON and falling number devices and, by extension, farmer incomes.
Reduced CGC quality assurance
- End of outward inspection of rail shipments to the US and Mexico: The CGC is responsible for outward inspection and provision of a Certificate Final for export grain. The Commission used to undertake outward inspection of all rail shipments to the U.S. and Mexico but, citing staffing and logistical difficulties, made these exports exempt from the Certificate Final process. This inspection role has been taken up by private inspection firms paid by the grain companies. These rail exports to the US and Mexico comprise some 5-10% of Canada’s annual exports.
- Loss of the CGC’s longstanding incremental loading protocol: prior to 2012 the CGC’s ship loading practise required that each 2,000 MT increment taken aboard
meet quality specifications, regardless of whether other increments exceed requirements. Since 2012 CGC incremental loading has been replaced by a composite loading protocol, similar to that used in the US, in which only the average of 2,000 MT loading increments are required to meet grade requirements. This lowering of the quality required to obtain the CGC’s Certificate Final has reportedly been the cause of numerous complaints by Canada’s export customers in in recent years. - Ongoing threat to replace CGC outward inspection with private inspectors paid by the grain companies: The Western Grain Elevator Association and other pro-industry voices have long encouraged privatization of CGC outward inspection, proposing that the CGC instead be reduced to a licensing body, testing and approving inspectors who would then be paid by the same companies whose grain they’re inspecting – a sure-fire recipe for reduced quality assurance.