Drawing the Line for Feed Mill Licensing

Feed companies, farmers and other stakeholders in the feed industry in Western Canada have until April 9th to share their thoughts on the proposed mandatory licensing of feed mills with the Canadian Grain Commission (CGC.)

So why is the CGC looking at licensing feed mills? In 2012, two major hog producers — Puratone and Big Sky Farms — entered creditor protection while owing producers millions of dollars for grain they had already delivered. These events led Agriculture Minister Gerry Ritz to ask the CGC to investigate cancelling the licensing exemption for feed mills in Western Canada. In becoming licensed, feed mills would be required to participate in the CGC’s producer payment security program.

If the CGC proceeds with the proposal, one of the main decisions will be to determine where to draw the line on who needs to be licensed and who doesn’t, explain Jim Smolik and Murdoch MacKay, the CGC’s assistant chief commissioner and commissioner, respectively, in the video below.

“The range of feed mills includes everyone from mom and pops who feed their own cattle to very large feed mills. The first thing we’re going to have to decide is what the threshold is, where we start licensing feed mills,” says MacKay. (continued below)

Under the current licensing program for grain companies, the fee for a full one-year licence is $280 per month, and $358 per month for a short-term license. This doesn’t include the cost of posting the required security to cover liabilities. So there will be an additional cost for feed mills to become licensed, but it’s a cost that until now took the form of additional risk for the producers delivering grain.

“It is a cost, but we had two major bankruptcies two years ago with Puratone and Big Sky and we hear it cost producers about $3 million dollars. So yes, there is a cost to having security and for those companies to be licensed, but the big thing is producers will have some form of protection,” notes MacKay.

The proposal suggests feed mills could be subject to some of the requirements currently in place for process elevators, but Smolik says they realize feed mills are unique.

“We are cognizant that feed mills and grain companies are certainly different, and we’ve had some preliminary discussions with insurance companies to get a sense of where and how we could implement it,” he says.

The feedback received during the consultation period will be used to develop a plan for proceeding, which MacKay notes would include further consultation with the feed industry, as well as the main insurance company involved. As Smolik explains in the video, should the CGC decide to proceed, the change would not require new legislation, but a regulatory amendment to remove the exemption for feed mill licensing from the Canada Grain Regulations.

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