Ensuring farmers have the best possible producer payment protection is one of CCGA’s longstanding priorities. So when Agriculture and Agri-Food Canada launched a review of Canada’s Grain Act and asked stakeholders whether the Canadian Grain Commission’s
Producer Payment Security program (known as the Safeguards for Grain Farmers Program) met the sector’s needs, we decided to take a deeper look.
Canola farmers told us they strongly support a mandatory program, but they also wanted to explore ways to improve the coverage predictability, cost, and transparency. The current program provides an important risk management function, protecting farmers against the risk of non-payment when a licensed grain company fails to pay for grain deliveries (often due to bankruptcy).
What enhancements are possible? Over the years, many have discussed how to enhance the program. The last legislative attempt to modernize the Canada Grain Act in 2015 proposed creating a producer compensation fund like Ontario’s where rather than individual security (like the current system), a fund would be used to cover instances of non-payment. So, while a fund has been raised as an option, it was not well understood.
CCGA, with the goals of enriching discussions on potential improvements and informing future policy development, commissioned an independent risk analysis and feasibility assessment of a fund as an alternative to the current security-based program.
So, is a fund model feasible? The report demonstrates a fund is a feasible alternative. It could offer increased payment predictability and transparency depending on design features relevant to size, coverage, actuarial soundness, and transparency.
Here are three highlights from the report:
- A fund can provide 100% coverage using the same eligibility criteria as the existing program. The initial fund size decreases with lesser coverage.
- A fund can respond to repeat defaults and catastrophic loss through reinsurance or government back-stopping.
- An initial fund size varies from $12 to $53 million depending on design features related to coverage level, investment strategy, premium, and available backstop.
Read more in the final report:
Risk Assessment and Feasibility Analysis of a Fund Model
This report is a base for further analysis and is the start of a larger exploration of improvements to producer payment protection for producers, grain buyers, and the government.
Learn more about the
policy development work CCGA does on behalf of 43,000 Canadian canola farmers.