Stakeholder feedback on proposals to license producer railway car loading facilities, agents and feed mills

The Canadian Grain Commission held a consultation from April 19, 2016 to August 31, 2016 on proposals to license producer railway car loading facilities, agents, and feed mills.

The consultation document was accessed over 1600 times on our external website during the consultation period. It was also posted on Service Canada’s Consulting with Canadians website. The Canadian Grain Commission received 41 written submissions. We held 12 meetings with stakeholders representing producers, producer organizations, industry, short line railways and provincial governments. There were 260 people who participated in the meetings, representing 49 organizations.

The Canadian Grain Commission is currently reviewing the results of this consultation. We will report the feedback received to the Minister of Agriculture and Agri-Food. We thank all stakeholders who submitted their comments to us. Your feedback is appreciated.

The majority of stakeholders opposed the proposals. Stakeholders felt the proposals introduced too much red tape and administrative burden to their businesses. They felt that licensing producer railway car loading facilities, agents, and feed mills would increase their operating costs, erode profit margins and reduce competition in the industry without providing much benefit.

Some stakeholders suggested that the Canadian Grain Commission explore the use of alternative policy tools, such as exemption orders or enforcement. Others supported the introduction of an improved producer payment protection model, such as a producer compensation fund or another alternative lower cost model. Some stakeholders recommended that the proposals be put on hold until the Canadian Grain Commission is able to implement a producer compensation fund as part of legislative changes to the Canada Grain Act.

Most stakeholders felt that the proposals could further limit producers’ marketing options. They wanted to ensure that future proposals wouldn’t further limit producers marketing choices.

A group of stakeholders explained that their industries worked well without the Canadian Grain Commission’s oversight. Groups representing producer railway car loading facilities explained that their operations don’t pose a risk to producers because they don’t purchase grain. They provide a service for a fee. Feed mill stakeholders noted that because commercial feed mills have consistently paid grain producers for their grain, payment protection isn’t required.

Producer railway car loading facilities

  1. Producer’s right to bypass grain companies
    • Many stakeholders noted that it’s a producer’s right to bypass grain companies. Stakeholders felt the additional risk to producers is rewarded by a higher price for their grain.
    • Because primary elevator locations are few and far between, producers can transport grain via producer railway car loading facilities as a cost-effective alternative. Stakeholders felt that licensing these facilities could further deter investment in producer railway car infrastructure.
  2. Role and impact on local economies
    • Stakeholders noted that producer railway car loading facilities provide additional marketing opportunities for producers, create local competition and contribute to the local economy.
    • They also noted that their use reduces grain truck traffic on highways and that these facilities provide flexible delivery windows that help ensure that grain is safely loaded.
      • Stakeholders said the proposed changes would:
        • impose higher operating costs on producer railway car loading facilities
        • impact profit margins
        • erode the benefits of using producer railway cars over trucking grain to primary elevators
  3. Concerns about rationale
    • Producer groups and industry stakeholders highlighted that the benefits outlined in the proposal were limited and didn’t justify the need for additional oversight.
    • They also questioned applying Canadian Grain Commission requirements to source data and certify weigh scales at public loading sites.
  4. Alternate proposals
    • A few stakeholders agree producer railway car loading facilities that load dealer cars and producer railway cars should be subject to licensing.
    • Some stakeholders proposed establishing a producer car receiver who would monitor car allocation and take temporary ownership of grain until the grain is delivered and the producer has been paid.
    • They also proposed a tiered licensing system where facilities only loading producer railway cars would be subject to limited requirements. Facilities that load dealer cars and producer railway cars and take ownership of grain would be licensed as primary elevators.
  5. Canadian Transportation Agency’s review
    • Several stakeholders suggested that the Canadian Grain Commission should wait for the outcome of the Canadian Transportation Agency’s review before implementing any changes that may affect the grain transportation system.
  6. Concerns about transparency
    • Stakeholders explained that information provided by Canadian Grain Commission officials in meetings varied from statements made in the initial consultation document. They suggested that the Canadian Grain Commission consider holding a new consultation process with a revised consultation document and rationale.
    • Stakeholders felt a clearer, more detailed proposal outlining the specifics of licensing producer railway car loading facilities would help generate better feedback.

Agents

We received limited feedback on the proposal to license agents with facilities. Stakeholders felt that the rationale, purpose, and objectives of the proposal were unclear.

Feed mills

  1. Concerns about the rationale
    • Many stakeholders expressed reservations about the proposal and its impact on the feed industry. They explained that the proposal didn’t provide appropriate cause for licensing nor would it benefit the feed mill industry.
    • Stakeholders also explained that the proposal must mutually benefit grain producers and feed mills.
    • Some stakeholders highlighted that information presented in consultation meetings varied from information that was provided in the proposal document. These stakeholders raised questions about as to which facilities would be affected and how thresholds would be applied.
  2. Intent of proposal
    • Some stakeholders noted that the previous two failures involved vertically integrated hog processors rather than commercial feed mills.
  3. Threshold
    • Some stakeholders opposed the idea of a threshold. They felt that setting a threshold would create a tax on larger operations, further dividing small and large feed mills. Others noted that smaller feed mill operations had a higher risk of failure than the larger operations that would be licensed under the proposal.
    • Respondents felt a threshold wasn’t fair to producers manufacturing feed on farm. They also felt a threshold was incompatible with the principle of risk-based payment protection.
    • Stakeholders did not agree with the proposed threshold. Many stakeholders noted that the proposed threshold was too low. Stakeholders also explained that the consultation document didn't clearly identify how the threshold would be applied.
    • Other stakeholders asked for further research on feed mill risk factors and that the impact of licensing be assessed before they could comment on the proposal.
      • Alternative thresholds proposed by stakeholders included:
        • 10,000 tonnes monthly grain purchases
        • purchases over $1.8 million
        • average dollar value purchased
    • Some stakeholders suggested licensing alternatives such as reducing licensing requirements and security requirements for on-farm mills. They also suggested only licensing commercial feed mills.
    • Other stakeholders proposed a three-tiered system where small operations under the threshold would be exempt. Feed mills purchasing $5 to $10 million of grain would be licensed but would be subject to fewer reporting requirements than in the current proposal. Only feed mills purchasing over $10 million of grain would be licensed as process elevators.
  4. Impact on producer marketing options
    • Should the proposal move forward as described, stakeholders consistently noted that feed mills may choose to source their grain solely from licensed companies. This would allow them to continue to be exempt from licensing and it would impact marketing options available to grain producers.
  5. Licensing duplication with Canadian Food Inspection Agency
    • Stakeholders are concerned about being subjected to two licensing schemes. They noted that two sets of licensing fees, administrative requirements and compliance requirements would be detrimental to their industry.
    • Some stakeholders suggested that further collaboration is required to reduce potential burdens to feed mills should this proposal move forward.
  6. Feedback from 2015 feed mill consultation
    • Some stakeholders expressed concern that the Canadian Grain Commission ignored their feedback from the first round of consultations.
  7. Support for licensing feed mills
    • Those in favour of licensing explained that any facility engaged in the grain trade should be required to be licensed.
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