Continued volatility in grain prices may lead to farmers not getting paid full value for grain delivered to licensed companies that go out of business, the Canadian Grain Commission warned Wednesday.
The warning came along with the CGC’s announcement that 15 farmers who submitted claims against security posted by Alexander Grain will get full compensation.
The company, based at Alexander, Man., about 30 km west of Brandon, had its CGC primary elevator license cancelled in February when it announced it was going out of business. Its licensing agreement called for $150,000 in security to be posted with CGC to cover payments to farmers for grain delivered in the 90 days before the business shut down.
Of the 15, 14 claims were eligible for compensation totalling $129,214.96. Of those, 13 were eligible for 100 per cent compensation totalling $117,200.32. The 14th claim is eligible for 85 per cent compensation; 15 per cent of that claim was not eligible as the related grain delivery occurred beyond the 90-day coverage period. The 15th is for interest and a price adjustment only, which are not eligible amounts, the CGC said.
Alexander Grain’s elevator has since been sold to Winnipeg-based Mission Terminal.
“It is unfortunate when a member of the grain industry encounters difficulties like this,” CGC chief commissioner Elwin Hermanson said in a release. “I am glad to report that in this situation, all eligible claims were fully covered, but that is not always the case.”
In the same release, the CGC reminded farmers that recourse for non-payment under the Canada Grain Act is “limited.”
“The amount available for compensation depends on the amount of security posted by the licensee. There is no guarantee of full payment,” the CGC wrote.
“Security protection only covers a maximum of 90 days from the date of delivery. Once a cash purchase ticket or cheque is issued, producers are only covered for the lesser of 30 days from the issuance of the settlement or 90 days from the date of grain delivery.
“Producers are required to contact the Canadian Grain Commission within 30 days once they are aware of a non-payment situation. If producers wait longer than 90 days to get paid or do not advise the Canadian Grain Commission of the non-payment issue within 30 days, they are not eligible for compensation.”
The federal government introduced a bill late last year that would end mandatory bonding as a CGC licensing requirement for grain companies.
By ending the producer payment security program, the government said in December, it can reduce grain system costs that are ultimately borne by farmers, and may also remove a “barrier” for new entrants into the grain marketing industry.
The provincial pulse growers’ and general farmers’ organizations in Alberta, Saskatchewan and Manitoba, along with the Canadian Federation of Agriculture and Canadian Special Crops Association, hired a consultant last month to help them review other options “so that farmers are not exposed to serious financial risks when delivering grains, oilseeds, pulses and special crops to elevators and other purchasers.”