The Canadian Grain Commission will invest surplus funds in programs and services that strengthen safeguards for producers, improve grain quality assurance and enhance scientific research and innovation in grain quality. These strategic investments will benefit grain producers and the entire Canadian grain sector.
When we set our fees for services in 2013, we based our calculations on an expected level of grain delivery volumes. However, grain volumes in the years following were higher than anticipated and, as a result, we now have a surplus of approximately $130 million.
In 2017, we published a Potential Use of Accumulated Surplus document, which gave several high-level proposals for using the surplus and also asked stakeholders to contribute their ideas. We also surveyed producers and the grain industry to find out how they thought we should use the surplus.
Following the information-gathering period, we took time to review all of the input we received in detail and to analyze the benefits and implications of various options. After careful consideration, we decided to keep $40 million in a contingency operating reserve to guard against the possibility of future declines in grain delivery volumes and to invest $90 million in three key areas through a Surplus Investment Framework:
- strengthening safeguards for producers
- investing in grain quality assurance
- enhancing grain quality science and innovation
These investments will deliver clear benefits to producers and add value to the grain sector into the future.
The infographic below shows how the surplus will be divided between the contingency operating reserve and strategic investments. It also outlines the main areas of focus for investment within each pillar as we move forward with initiatives under the Framework.
Initiatives and next steps
As initiatives are ready to be carried out, we’ll add details here. Moving forward, we’ll continue to consult with stakeholders as we develop initiatives.
Added quality results for Harvest Sample Program participants
Producers who take part in the Harvest Sample Program receive a personalized crop quality report at no charge in exchange for samples of grain from their current harvest. Producers can use this quality information to help them make marketing and delivery decisions for their crop. Starting for the 2018 crop year, we’ll also provide DON (deoxynivalenol) content and falling number results for wheat samples at no additional charge, adding to the information producers will have about their crop as they deliver or market it.
Questions and answers
1. Who decided on this approach?
We developed the Strategic Investment Framework based on feedback gathered from our stakeholders. We considered how each option put forward aligned with our mandate, and whether they would benefit all parts of the grain sector. Based on this evaluation, we determined that a Surplus Investment Framework was the best approach. It will allow for surplus investments across the value chain, while ensuring initiatives remain within our legislative authority under the Canada Grain Act.
2. Many stakeholders want a refund. Why is that not possible?
We looked carefully at the option of refunding money to the grain sector and directly to producers. However, the Canada Grain Act doesn’t allow us to refund the fees we’ve collected from grain companies to producers. At the same time, returning the money to the companies that paid fees may not result in direct benefits to producers. In the end, we concluded that producers and the grain sector would see the most benefit if we invested the surplus in strengthening and enhancing our programs directed at producers and the grain sector as a whole.
3. Why doesn’t the Canadian Grain Commission offer a temporary fee reduction?
In our initial discussion paper, we outlined an option to reduce fees below the cost of providing services for a fixed period. However, a number of stakeholders didn’t support this proposal. They said fee reductions likely wouldn’t translate into benefits for producers.
Our main objective in deciding how to use the surplus was to make sure it delivered clear benefits to the grain sector as a whole, including producers. We concluded that producers would see the greatest benefit if the surplus was used to strengthen and enhance our programs to the sector.
4. Why doesn’t the Surplus Investment Framework include a producer compensation fund?
The Canada Grain Act doesn’t allow us to set up a producer compensation fund at this time. We remain committed to safeguarding producers and this is one of the investment pillars in the Framework. If changes to the Canada Grain Act are considered in the future, we’ll revisit a producer compensation fund.
5. Why are you using money from producers and the industry to fund your operations?
Our operations are funded by the grain sector. Since 2013, over 90% of our budget has been based on fees we collect for services we provide, including official inspection, weighing and analysis. We will use surplus funds to enhance existing programs and activities that deliver clear benefits to producers and that add value to the grain sector into the future.
6. Will you report on how you use the surplus?
Yes, we report on how we use our resources every year through the Departmental Results Report, and through financial statements and reports. We will track and report on the initiatives funded through the Surplus Investment Framework through these documents as well.
7. Why do you need a contingency operating reserve and how will you use it?
We fund over 90% of our operations on a cost-recovery basis, through service fees. The amount of fees we collect fluctuates year to year based on the volume of grain for which we provide inspection and weighing services. This means that there could be years where the amount of fees collected falls below the cost of operating. We based the total amount of the reserve on the potential shortfall that would occur in the case of a significant downturn in grain delivery volumes, such as during a severe Prairie drought.
We would draw on the reserve in years when grain volumes are lower than the expected level we used to set our fees (currently 34.4 MMT) and revenues fall short as a result. In this way, the contingency operating reserve will ensure our service levels and fees remain stable through fluctuations in grain volumes.
8. Why do your fees increase each year if you already have a surplus?
We adjusted our fees to align with the Service Fees Act. The Services Fee Act establishes an annual fee adjustment based on the Consumer Price Index. This annual increase ensures funding and service levels remain sustainable as operating costs increase due to inflation.
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