WESTERN PRODUCER — A prairie farm organization says it is time for the federal agriculture minister to “weigh in” on grain contract protections for farmers.
The Agricultural Producers Association of Saskatchewan wants Marie-Claude Bibeau to instruct the Canadian Grain Commission to facilitate a meeting between farmers and grain companies with a goal of producing a fairer contract.
“It seems that grain contracts are very one-sided and actually represent a fairly significant financial risk to producers,” said APAS president Ian Boxall.
But grain companies don’t appear willing to chat.
“It’s an issue that is settled in our minds,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.
His member companies are happy with the current commercial system where contracts are tailored to meet the needs and marketing strategies of each individual business.
Agriculture Canada shed little light on where it stands. It said it is modernizing the Canada Grain Act (CGA) to ensure the legislation is fair and responsive to the grain sector.
“The CGA already provides scope for contract arbitration and we are committed to ensuring a level playing field for farmers through the CGA review process,” it said in an email.
But APAS insisted that the playing field is lopsided.
It estimated Saskatchewan growers lost about $60 million when Purely Canada Foods informed 26 farmers in March that it was voiding their gluten-free oat contracts because a processor could not take them.
That incident follows “hundreds of millions” of dollars lost on buyouts, administration fees and legal costs when farmers experienced drought in 2021 and were unable to deliver their contracted production.
Boxall doesn’t want contracts to be so restrictive that buyers and sellers cannot negotiate terms, but he would like to see some standardization in terms of penalties, administration fees and the general layout of contracts.
He wants a contract from Viterra to look the same as one offered by Parrish and Heimbecker, so farmers know what they are signing and do not have to consult a lawyer.
Australia and other countries have adopted standardized grain contracts.
Boxall said producers will always take on some risks when signing contracts, but it has become far too unbalanced.
“Right now, it’s probably 99 percent of the risk to the farmer and one percent risk to the buyer,” he said.
“It seems to be a little bit offside.”
He hopes producers and grain companies can come to terms on a contract where the risk split is more like 80-20 or 70-30, or something similar.
Sobkowich said the APAS suggestion sounds like an attempt to transfer crop production risks to grain companies.
“It (is) a risk that farmers assume, and we think that’s where it rightly stays,” he said.
He rejected notions that farmers take all the risk in grain transactions.
“The producer that made that comment doesn’t understand the risk associated with moving grain through the rest of the system,” said Sobkowich.
He encouraged growers to think about what happens when China bans Canadian canola when ships are en route to that destination, or when there is a washout or blockade of a rail line, or a strike at the port.
“There’s a ton of risk in the supply chain,” he said.
“When there’s a hit down the road with that cargo, you don’t see the grain companies coming back to the farmer.”
Sobkowich said if grain companies are forced to take on some of the production risks of growing a crop, it will result in discounted prices.
Boxall said he is simply asking for a dialogue. He does not want to “ramrod” anything down anybody’s throats.
He believes grain companies will benefit from increased contract transparency because farmers are shying away from forward contracting after the 2021 problems.
“It’s time to find a solution to this longstanding problem,” he said.
Sobkowich said the grain industry is one of the most heavily regulated sectors in the Canadian economy and it doesn’t need further constraints.
He said the existing commercial system for contracting allows companies to be more flexible and responsive to the needs of their customers.
He said the contracting issue has not been the subject of much debate around the WGEA board table despite a series of resolutions passed by Saskatchewan crop organizations calling for fairer contracts.
“Grain companies can’t get together and talk about their contracts with each other,” said Sobkowich.
“That would be collusion.”
