Industry proposed changes to the Grain Financial Protection Program
O. Reg. 260/97 (General)
Reg. 447 (Fund for Producers of Canola)
Reg. 448 (Fund for Producers of Grain Corn)
Reg. 450 (Fund for Producers of Soybeans)
Reg. 390/04 (Fund for Producers of Wheat)
Regulation - LGIC
Bill or Act:
Grains Act and the Farm Products Payment Act
Summary of Decision:
O. Reg 69/11 and O. Reg 70/11 were filed on May 4, 2012 with the Registrar of Regulations. These regulations will be amending O. Reg. 260/97 - (General) and the four regulations established under the FPPA. The regulations under the FPPA were revoked and the terms and conditions consolidated into one regulation.
The amendments to O. Reg. 260/97 will: (1) allow deferred payments of any duration under the Grains Act; (2) extend the payment requirement for dealers on sales from storage from 2 p.m. the next day to 5 days; and (3) reduce the percentage payment amount from dealers to producers on basis contracts from 75% to 60%.
The amendments to the regulations under the FPPA will: (1) increase the coverage level for canola and soybean producers from 90% to 95 %; and (2) allow producers entering into deferred payment arrangements to be paid on a sliding scale, based on the length of deferral. There would be no compensation for deferrals over 180 days
These regulations will be effective on July 1, 2012.
January 30, 2012
Summary of Proposal:
The changes were requested by the Grain Farmers of Ontario (GFO) and the Ontario Agri Business Association (OABA) and are supported by the other stakeholders groups that will be affected by the amendments.
Three of the proposed changes apply to Regulation 260/97 (General) and would allow deferred payment of any duration; change the payment timelines for sales from storage and change the basis contract.
Specifically, the proposed changes to O. Reg. 260/97 would:
- allow deferred payments of any duration under the Grains Act. This makes permanent the conditions put in place December 2010 which are scheduled to expire on July 1, 2012.
- extend the payment requirement for dealers on sales from storage from 2 p.m. the next day to 5 days to better reflect current industry payment practice; and
- reduce the initial payment amount from dealers to producers on basis contracts from 75% to 60% to better mange the risks and volatility in the current marketplace.
The additional requests apply to the regulations under the Farm Products Payment Act and refer to payment from the compensation funds. The amendments would:
- allow producers entering into deferred payment arrangements to be paid on a sliding scale, based on the length of deferral. As an example, producers that do not defer would receive 100% of eligible coverage in the event of a successful claim. Those that deferred for up to 45 days would receive 50% coverage. There would be no compensation for deferrals over 180 days; and
- increase the coverage level for canola and soybean producers from 90% to 95 % to be consistent with grain corn and wheat.
The purpose of the GFPP is to reduce the risk of producer loss in the event that a licensed buyer defaults on payment as well as protect owners of grain who store their grain in licenced grain elevators. It was established by OMAFRA in 1984. The GFPP consists of two parts. They are:
- The annual licensing of grain dealers and elevator operators under the Grains Act. In order to receive a license, dealers must prove financial responsibility and/or post security.
- The Grain Financial Protection Board (Board) is responsible for the administration of the compensation funds (Funds), which are supported by a mandatory 'check-off fee'. As at March 31, 2011 the combined fund balances stood at $13.2 million. The Board is also responsible for adjudicating the validity of any claim(s) as well as determining how much a producer is eligible to receive. Should a claim be deemed valid, the Board will pay the claim to the producer. The Board is also responsible for trying to recover any payments it makes to a producer from the defaulting dealer. The Board includes representation from the grain industry. Members of the Board are appointed by the Minister.
The proposed changes to the GFPP represent no additional cost to the government. An actuarial study completed in August 2011 determined that the regulatory changes proposed would have no measurable impact on the actuarial soundness of the Funds.
Farm Finance Branch
1 Stone Road, West, 2nd Floor,
Guelph, Ontario N1G 4Y2
Fax: 519-826- 3170
July 1, 2012