NFU pleased with decision to maintain bond system for Producer Payment Protection

Saskatoon) -The National Farmers Union (NFU) supports the decision by the Canadian Grain Commission (CGC) to abandon pursuit of an insurance-based system for producer payment protection and to continue using the long-standing bond-based system. The proposed shift to an insurance system was initiated by the federal government, supported by Agriculture Minister Gerry Ritz and enabled through the 2012 omnibus budget implementation bill.

The existing bond based system provides 100% coverage to farmers, guaranteeing payment as long as they sell to licensed grain companies. Grain companies must hold bonds to cover any shortfall that might occur if they are unable to meet their commitments to producers. The CGC monitors grain company performance and ensures that adequate security is in place. The system has operated successfully for decades.

“The proposed insurance system would have provided only 95% coverage, eliminated the CGC’s oversight of licensed grain company performance, and given Atradius, a foreign multi-national insurance company, de facto power over the terms of Canadian grain companies’ contracts with farmers -- to name a few of the problems identified by the NFU,” said Terry Boehm, Chair of the NFU Seed and Trade Committee. “The insurance proposal had a 45-day time limit for submitting non-payment claims. Considering that farmers are often not paid until 30 days after delivery, they would have had only about 2 weeks to complete the paper work and submit a claim before the deadline under the proposed system. Clearly that was not workable.”

The NFU supports continuing the current bond-based system that provides security to farmers and directly disciplines companies that have poor payment performance records.

“We encourage the CGC to work on improving the reporting requirements so that the time-lag between company reports and CGC review of their bond security can be tightened up,” said Boehm. “By going to weekly mandatory reporting along with rolling security assessments for companies, the CGC could ensure there are no gaps in protection. The problems with the status quo were overstated and are minor when compared to the implications of the now-abandoned credit insurance system.”

“It is a shame that the federal government sent the CGC on a wild goose chase,” concluded Boehm. “Kudos to Chief Commissioner Hermanson for calling off negotiations that were never going to result in the best interests of Canadian farmers being served.”

Source: NFU