Grainswest - Winter 2022

Winter 2022 grainswest.com 15 BY GEOFF GEDDES • PHOTO BY SHUTTERSTOCK these funds added to the surplus of the CGC, to the point where they now amount to over $100 million. This is even harder to jus- tify when you consider we aren’t seeing CGC provide any testing that third parties cannot also supply; in fact, it’s just the opposite.” From the CGC perspective, there are additional factors to consider. A DOLLAR DILEMMA “One challenge is that CGC costs in general are recovered largely through our inspection services,” said Rémi Gosselin, CGC manager, corporate information services. “If you change our operating model, you will need a new funding mechanism for the organization. I know this change has been thrown out there for consideration, but from a government policy perspective there must be a well-thought-out alternative for supporting CGC activi- ties in the absence of revenue from inspections.” In Gosselin’s view, a robust cost analysis is needed to deter- mine whether the elimination of CGC inspections would create any cost savings for the grain sector. “We have some buyers of grain who still demand government inspections, as well as other buyers who may not be aware that our government offers such inspections,” said Gosselin. “There are also certain countries that don’t require as high a quality of grain and thus lack the need for the level of assurance provided by a government test. It comes Many in the industry, suggest a logical approach to outward inspection would be to have CGC accredit and oversee third-party inspection companies, rather than perform the inspections directly. down to an awareness of CGC services and determining exactly what buyers require.” At present, the CGC draws on two main sources of funding aside from inspection driven revenue: appropriation by federal vote for the organization’s Grain Research Laboratory, and a funding allowance also provided by the taxpayer. “We understand that inspection fees help fund the Grain Re- search Laboratory, and that those fees are ultimately passed on to producers,” said Backman. “We would like to see federal funding increased to fully fund the lab, rather than have it subsidized by Canadian farmers.” Backman also envisions a model where farmers directly fund CGC operations in a more transparent manner. This would contrast with the current method of indirect funding where costs are hidden in the grain basis (the difference between a local cash price and the futures market price for that commodity) or in the prices that farmers are paid for their grain. “This more direct approach would allow the CGC to incorpo- rate any accumulated surpluses from previous years in its annual funding and stop the continual accumulation of surpluses of farmer funds,” said Backman. Whatever the ultimate strategy may be to support the CGC while providing inspection solutions for grain buyers and sellers, industry can’t wait to put it to the test.