Studies have found that only 46 percent of prairie grain farmers feel they are being treated fairly within today’s standard grain contracts.
Recent reports have also found that grain contracts are heavily tilted in favour of grain buyers.
For many grain farmers, these findings are not a surprise.
SaskCrops (an alliance of Saskatchewan producer commissions comprising SaskBarley, SaskCanola, SaskFlax, SaskOats, SaskPulse and Sask Wheat) and the Agricultural Producers Association of Saskatchewan (APAS), have heard rising farmer concerns around lack of transparency of grain purchase contract terms and conditions between farmers and grain buyers.
Our organization is attempting to bring more balance into grain contracts and improve the clarity of terms and conditions. We commissioned a report from Mercantile Consulting Venture Inc.
The full report was released publicly and is available through our member organization websites.
The report confirmed many farmers are not comfortable with grain contract terms and conditions. Farmer concerns are related to a lack of transparency in calculating buyout and administrative fees. There are also major discrepancies in settlement costs among different companies and difficulties with timing of a buyout.
According to the report, a key complaint of farmers was inconsistency in handling contract shortfalls among companies.
“In addition, while many producers showed an interest in standard grain contracts and standard contract resolution procedures, many stated they will not use any forward contracts in the future because of the lack of protection in contract arrangements,” the report states.
SaskCrops and APAS believe that grain contracts are important tools to manage market and price risk.
This report also suggests that improving grain contracts for Saskatchewan grain farmers will benefit not only farmers, but also grain companies and the entire industry.
We believe this issue should continue to be a top priority.
Our groups believe that contract terms should not transfer an unfair amount of risk to farmers.
The report outlines several examples of these risks being reallocated through contracts, including how rail car availability can impact farmers through expanded or delayed delivery windows, even though farmers are not involved in those commercial negotiations and the risks are out of their control.
We aren’t looking to reallocate production risk from farmers to grain companies. We want to clearly define contract terms and conditions so farmers understand their responsibilities and buyers have set timelines and requirements to provide options if farmers are unable to fulfil a contract.
The Mercantile report outlines potential solutions for improving clarity by enhancing elements of fairness and balance in the contracts.
Chief among these solutions is a commitment between farmers and buyers to collaborate on simplifying contract terms, achieving more clarity and transparency, and more clearly include both parties’ responsibilities to achieve better balance.
Further suggestions involve adopting a standardized contract that is fair and balanced to the buyer and the producer, and relying on the Canadian Grain Commission for education for farmers on grain contracts, as well as facilitating contract arbitrations.
Our organization plans to initiate discussions with stakeholders and government bodies to move this issue forward.
The smooth workings of the grain supply chain depend on trust and co-operation between partners along the value chain. Improvements to grain contracts remains a top priority for our organizations and we are committed to working on this issue.
This article from Sask Crops was supplied by Agricultural Producers Association of Saskatchewan president Ian Boxall, SaskBarley chair Keith Rueve, SaskCanola chair Charlene Bradley, SaskFlax chair Greg Sundquist, SaskOats chair Chris Rundel, Saskatchewan Pulse Growers chair Shaun Dyrland and Sask Wheat chair Brett Halstead.
