Grain Contracts
RYAN McNALLY | BRENT KOBES
“We developed this survey to get more information about producers' individual experiences with the grain companies, so we can develop ideas around improving provisions in future contracts. It's in the mutual interest of both producers and grain companies to develop a more workable system."
- APAS Past President Todd Lewis
75% of the more than 200 respondents were unable to fulfill their grain contracts because of the drought.
For Saskatchewan producers, 2021 will be remembered as one of the worst droughts for many years. Throughout the year APAS called on both the federal and provincial governments and businesses in the agriculture sector to support farmers during difficult growing conditions.
In June, APAS called on the province to increase AgriStability compensation. In August, the provincial and the federal governments reached a deal to increase the interim benefit payment percentage to 75%. That same month, APAS also welcomed the news of $100 million in federal dollars toward the AgriRecovery program to help ranchers and farmers facing extraordinary expenses and loss of breeding herds because of the drought.
Starting in July, APAS started getting calls from members concerned that they would not be able to meet their grain contracts due to major production and quality shortfalls. Over the course of the summer, as prices rose dramatically, the cost of making up those shortfalls increased as well.
In September, APAS issued a news release urging the Western Grain Elevator Association and its members to work with farmers by eliminating administration fees and reducing penalties for the 2021-22 season in response to the drought conditions. Later that month, APAS started an online survey to gain information from producers about their experiences with grain contracts during the drought year.
The first results of the survey were released in late November, and 75% of the more than 200 respondents saying they were unable to fulfill their grain contracts because of the drought. Producers also indicated the administrative fees to fulfill their contracts ranged between $20,000 to $300,000. Interest on unpaid contracts was as high as 19%. Other issues producers raised include the lack of transparency in calculating buyout and administrative fees and wide disparities in settlement costs between different companies.
"The drought has resulted in unprecedented losses for producers in Saskatchewan. It's going to take years for some farms to financially recover from this year, but also to build up their breeding herd that had to be sold because of lack of feed. Any additional money going to help this struggling sector is appreciated."
- Todd Lewis
Twenty-five per cent of respondents said they had trouble contacting the grain buyers to resolve issues arising from production shortfalls. Many producers indicated they would not be working with the same grain company in the future, and some even indicated they wouldn’t sign a contract again.
To further support producers managing their contracts APAS hosted a panel of legal experts at our 2022 General Meeting. Three lawyers discussed key legal concepts found in contracts and what producers would best be able to manage and protect themselves in circumstances if they were to occur. Some concept included force majeure, frustration, and Act of God.
In 2022, APAS will be working with other producer organizations to research grain contract provisions and work towards improvements for buyers and sellers.
APAS is still accepting input on contracts from producers. Those interested in taking part in the survey can visit apas.ca/graincontracts.
APAS continues to advise Saskatchewan producers to seek legal advice if needed. If anyone is experiencing significant stress, reach out to the Farm Stress Line at 1-800-667-4442 or help@farmstressline.ca.