ILTA Grain had $12 million in security to cover what it owed farmers for grain, but the Canadian Grain Commission (CGC) hasn’t finished calculating if it’s enough.
“It could take several weeks or even several months to complete the process,” assistant chief commissioner Doug Chorney said in an interview July 30.
According to court documents, ILTA, which went into creditor protection July 8, owes creditors $148.8 million, including what appears to be several million to farmers.
The creditors’ list shows one farm company alone is owed $1.3 million, but it doesn’t say for what.
Meanwhile, Chorney is repeating the CGC’s decades-old message to farmers: when you deliver grain get paid right away and if the buyer drags their feet report it immediately to the CGC.
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“That’s important for farmers to know,” said Chorney, who also farms at East Selkirk. “We can’t stop talking about that enough.”
Why it matters: CGC-licensed companies are required to post security to cover what’s owed to farmers but sometimes when companies encounter financial problems the security falls short. The CGC’s protection is also time limited. If expired the farmer is ineligible for any of the security.
The CGC’s payment protection plan only applies when farmers deliver the 20 grains covered under the Canada Grain Act to CGC-licensed grain companies.
And while the CGC monitors licensees to ensure they have enough security, there are no guarantees, Chorney said.
Farmers also have to have proper documents such as a primary elevator receipt or cheque proving they delivered grain.
Once a receipt is issued the clock starts ticking down on the time farmers have access to security held by the CGC.
To qualify for security farmers have 90 days to get paid after getting a receipt for delivered grain and 30 days to cash a cheque. But Chorney stressed the CGC protection clock starts as soon as a receipt is issued.
For example, if a farmer had a receipt for 89 days and then received a cheque, he or she would have only one day of eligibility if the cheque bounced, he said.
“As a producer myself I understand why sometimes producers want to get deferred cheques, but it does come with risk,” Chorney said. “I think it’s important for producers to be aware of that risk so they aren’t caught up in an unfortunate outcome.”
Chorney said he recently spoke with some of the farmers owed money by ILTA.
“Every failure is devastating for producers and no one can afford to lose 100 per cent of their delivery grain value,” he said.
The CGC licenses more than 150 companies with more than 500 facilities.
“Each month the licensees are obligated to provide us an indication of their procurement activity and stocks in store,” Chorney said. “We ensure that their security is adequate to meet those requirements. We had no complaints from producers leading up to this event. We want to convey the message to producers if they do have any concern about slow payment or failure to pay that they notify the CGC as soon as possible.”
The CGC defines ‘failure to pay’ as a company asking a farmer to delay cashing a cheque, refusing to issue a cheque and cheques that bounce.
ILTA sought and received court-approved creditor protection July 8. Atradius, ILTA’s security provider, withdrew its $12 million in credit July 10. The CGC suspended ILTA’s licence July 11.
“All deliveries made up to July 10 are covered by security that was in place at that time,” Chorney said.
The CGC doesn’t believe any farmers delivered grain to ILTA after July 10, he said.
Documents filed by ILTA making the case for credit protection say the firm wants to resume operations. But since then the court has granted a request by one of ILTA’s directors asking to give ILTA’s monitor, PwC more authority over the operation with the goal of resuming operations or selling the company to get the best return for secured creditors, which in most cases does not include farmers.Click here to see more...