Elevator companies are being urged to work with farmers on grain contracts
Saskatchewan producer organizations are calling on the Western Grain Elevator Association and its members to work with farmers who are struggling to pay fines and administrative fees
on contracted but undelivered grain.
Bernie McClean, chairman of SaskCanola, says farmers simply do not have access to the grain this year due to the drought and there is no âforce majeureâ clause in some contracts, prices have continued to rise and the cost of buying them up Contracts now are significantly higher.
“Buying out comes with a cost, usually the cost or the difference in price between what you got in a contract and what the price might be. For example, you know $ 13 rapeseed this spring versus $ 20 now. It there is $ 7 a bushel cost of this contract that the breeder would have to pay. In addition, some companies have the administration fee as well. Completely acceptable, I get it again, we sign these contracts in good faith knowing that these costs are there. But The cost is really meant, the management fee is really meant to deter farmers from getting out of a contract or trying to get out of a contract when they actually have the physical grain and to keep them from doing so at a slightly higher price To achieve that, farmers won’t have any grain this year, it’s a slightly different story, so yes, we still have to do that Buy up contracts. You know the difference in my example of 7 USD per bushel with 13 USD and 20 USD rapeseed as an example. But then there may be an administration fee that can be $ 10- $ 20. This fee varies from company to company and some companies do not charge a fee. And that is what we, as producer organizations on the prairies, are looking for here for the grain elevator association to recognize. Look, we’re not trying to get out of these contracts because we’re trying to catch the extra $ 7 with rape we have. We don’t have the rape or the wheat or the barley or the peas or whatever it is. “
He notes that the producers are in a difficult situation.
“Even small ones, you know 10-20% prices and delivery contracts with delayed delivery. A lot of growers will not be able to fulfill those contracts this year simply because the grain is not there.”
McClean says they’d love to see grain companies work with farmers to come up with a workable solution for everyone, possibly by eliminating management fees and moving those contracts to 2022.
He notes that, with the cost of penalties and administrative fees, this would mean a lot of red pencil for some farmers that could actually put them out of business.