The concern in his voice was palpable. He had been waiting weeks for payment on a load of canaryseed and every time he phoned the company to inquire, he got the runaround.
He was worried that he was never going to see his $20,000. Luckily, it was only one load.
“Never dealt with this buyer before,” admitted the producer. “But their price was a touch better than the company I normally deal with, plus they were paying the trucking. Now, I wish that I’d never dealt with them.”
Canaryseed is one of the few crops not covered by the Canadian Grain Commission’s licensing and bonding provisions.
While bonding doesn’t guarantee full payment and collecting is a long process if a buyer becomes insolvent, the provisions do provide some piece of mind.
Bonding is likely to be replaced with a form of insurance coverage in upcoming changes to the Canada Grain Act, but whether the crop is canaryseed, lentils, field peas, chickpeas, beans, oats, canola or mustard, producers have to put a lot of trust in buyers for fair grading, accurate weights and timely payment. After Aug. 1, you can add wheat, durum and barley to this list.
In the end, this canaryseed producer did finally get his money, but it was a bad experience and he’ll be more careful next time.
So how do you protect yourself? Do you just deal with the big, well-known companies or companies with which you have experience?
It’s great to have a competitive marketplace with numerous buyers, but before you deal with a buyer you don’t know, ask around. Talk to other producers. Farmers are generally happy to provide a straight forward assessment. If a buyer is bad news, they’ll tell you.
In this case, a few inquiries would have revealed a buyer with a questionable reputation. Obviously, though, the buyer is still in business so someone is selling him product.
A contract typically stipulates how quickly payment is to be made. For instance, it may say that the cheque will be sent within 10 business days following delivery.
Unfortunately, there’s little re-course if payment takes much longer. And if a company won’t live up to its contractual commitment for payment timing, it makes you wonder about other aspects of its business.
A more common problem is failure to take delivery. Let’s say a producer signs a contract selling lentils, and delivery is supposed to occur before Dec. 1. Five months past the deadline, the lentils are still sitting on the farm.
In this case, the farmer still has possession of the product, but the market price may have dropped well below the contract value.
Personally, I do a lot of my specialty crop sales through a broker. The broker should know who is paying the best price as well as which companies are meeting their contractual obligations. It’s bad business for the broker to line you up with a buyer who’s trouble.
A broker can’t force buyer performance, but the broker likes to see both parties end up satisfied. A good broker should also be among the first to smell trouble if a buyer is running into financial trouble.
I’m happy to cut a buyer a bit of slack as long as he is upfront and keeps the lines of communication open. He can run into transportation bottlenecks and have sales go sour.
But there are buyers I won’t deal with no matter what sort of price they’re offering.