A widespread drought on the prairies in 2021 resulted in producers taking a financial hit when they couldn't fulfill their grain contracts.
The Federal Agriculture Minister is being asked to move ahead with regulations to provide more protection for farmers signing grain contracts.
APAS President Ian Boxall says their calling on the minister to act after news that one company unilaterally canceled contracts involving gluten-free oats when its buyer pulled out of the deal.
He says with oat prices much lower now than when the contracts were signed, those producers are looking at substantial losses and have launched a class-action lawsuit.
"I think the lawsuit is in the 10s of millions of dollars, upwards of $60 million at least producers are out. This is the second year in a row with the drought of 2021 and then this issue in 2022 where farmers have faced issues with contracts, that really needs fixed."
In 2021, APAS surveyed producers, in which 75% of respondents reported difficulties fulfilling the grain contracts. Respondents reported various discrepancies in how these shortfalls were handled, with
some having to pay interest of 19% on replacement costs and administrative fees.
A further 25% of those who were short could not get in touch with the grain buyers during the growing season to discuss buy-out and cancellation terms.
Boxall says there needs to be clear and consistent terms governing grain contracts.
"It seems that grain contracts are very one-sided and actually represent a fairly significant financial risk to producers. Producers can incur additional costs when contracts are canceled by buyers, such as added trucking and storage costs and foregone market opportunities. As we have often pointed out, Canada seems to be an outlier in its lack of clear and consistent terms governing grain contracts."
In 2022, APAS and SaskCrops (which includes SaskOats, SaskWheat, SaskCanola, SaskFlax, Saskatchewan Pulse Growers, and SaskBarley) commissioned the Producer Contract Review undertaken by Mercantile Consulting Ventures Inc., which analyzed areas of concern with contracts and identified alternatives to help bring greater balance and predictability to grain contracts.
APAS is working to engage with partners and levels of government to have grain contract improvements identified.
Boxall says at the end of the day, making business transactions more transparent and predictable benefits everyone in the supply chain. It’s time to find a solution to this longstanding problem.