Grain gets poor grades

Commentary, Mary-Jane Bennett

Canada’s grading system has made it a laggard and laughingstock.

In heralding the end of the Canadian Wheat Board in 2012, former Agriculture Minister Gerry Ritz proclaimed that Canadian farmers finally had the right to sell their wheat and barley on the open market to buyers of their choice. Despite the promises made by the Harper government regarding what farmers could expect with the end of the Wheat Board, Canada’s farmers continue to struggle under a rigid and antiquated grain grading system – one of the only such systems still standing in the Western world.

Canadian wheat considered low value, “feed quality” by the Canadian Grain Commission (CGC) was, in many countries, rated top, “milling quality,” and priced accordingly, with a loss to a prairie farmer $500,000 in potential earnings. The system also allowed global grain buyers to snap up downgraded Canadian grain and turn around and sell it – at a much higher price – to millers around the world.

In response, a new farmers’ association has formed to lobby for the harmonization of Canada’s system with international grain grading standards. On November 3, 2015, the North American Grain Grading Group (NAGGG) launched a written demand to the federal government to consider replacing the current grading system with one focused on buyer specifications.

Rather than trying to divine quality and segregate on the basis of variety, the new system would grade grain based on what the buyer wants, like protein content or end-use characteristics, such as tortillas or cake. Roughly 80 per cent of the world grain market operates this way and in Canada some grain products, like canola is already effectively operating outside the grading system. The NAGGG believes the country’s entire grain market should operate in this way. It believes the current system is unfair, costs farmers billions in price reductions, creates uncertainty in planting decisions, and deters plant breeders from new product research. It says the CGC’s mandate under the Canada Grain Act — to act in “the interests of producers” — is not being met.

The recent tinkering of grain grades serves to highlight the problem. In July, the regulatory body announced it was “modernizing” grain grading by putting two “gold standard” grains, prairie spring and hard red, under a two-year review to determine whether they meet new gluten strength requirements. This effectively put the country’s top-selling grains in limbo until after August 2017, creating confusion in crop decisions. After all, a downgrade could also carry a reduction in value – of up to 50 per cent. It created an interim class until the review could be completed.

On November 4, 2015, the CGC backtracked from its July “modernization,” collapsing the interim class as well as the distinction between milling and feed classes. It created a brand new milling class and decided to review its former “gold standard” varieties a year earlier.

All of this is unnecessary. Rather than the current complex and arbitrary system, the grain market should be driven by opportunity and price, by what buyers and sellers want and are able to deliver. After all, about 30 million tonnes of Canadian grain go through the system each year. The role of the CGC should be confined to ensuring the specifications between buyer and seller are met, thus enhancing Canada’s reputation. A change to this model would ensure certainty, value and an innovative market place for producers.

Canada’s grading system has made it a laggard and laughingstock. The CWB’s demise was meant to create a freer and more open market for Canada’s grain. It took us halfway there. The time has now come to take the next step and reform grain grading, to usher in a truly competitive and commercial market for Canada’s grain farmers. A nascent farm group has a vision for a way forward. Grain growers are listening. Whether Ottawa will too is another matter altogether.

This op ed was originally published by The Financial Post on Friday, November 20, 2015: http://business.financialpost.com/fp-comment/grain-gets-poor-grades