Producer concerns | Separate study finds that only a small minority of growers actually read contracts with grain companies
EDMONTON — Concerns over one-sided grain company contracts have prompted industry officials to study grain contracts, says Cheryl Mayer, a policy analyst with the Canadian Canola Growers Association.
She hopes the initiative will encourage companies to make contracts easy to read, understand and less one sided.
“We wanted to better understand the frustrations and concerns of farmers,” Mayer told a session at FarmTech 2014.
Mayer said the association will study contracts from a variety of grain companies, compare the differences, similarities and concerns in the fine print and discuss some of the concerns with the companies.
She hopes they will be receptive to their customer’s concerns.
Raymond Blanchette of the Alberta Canola Producers Commission said the study came out of a meeting last year where farmers felt like they were treated unfairly by grain companies.
“We as producer directors had concerns. We have dealings with the way the grain companies work,” said Blanchette.
Mayer encouraged farmers to read their contracts as the first step to understanding what recourses they have, especially when grain isn’t moving.
A recent study by University of Manitoba’s Jared Carlberg showed only 17 percent of Manitoba farmers read their entire grain contract.
“If only 17 percent of Manitoba farmers have read the contract, I am sure it is the same in Alberta,” said Blanchette.
“Personally, I have never read one entirely to the end. I have read certain clauses. I am just happy when they take my grain.”
He said he hopes contracts become standardized, or at least easier to read.
“A lot of farmers don’t know how far they can push back,” he said.
The same study found that only 12 percent of farmers agreed or strongly agreed that their rights were protected in the contracts.
“That really speaks to some of the concerns. They are written in favour of the grain companies,” said Mayer.
She said reading the entire contract is one of the easiest things farmers can do to help themselves.
“There is nothing wrong with asking questions how the contracts work and make suggestions how they can be improved in your eyes.”
She said the local elevator manager may be a farmer’s good friend, but a special deal carries little legal weight unless it is written down and agreed upon by both parties.
“Get it in writing. Hand shakes are risky,” she said.
“While they might be legally enforceable, they are really risky and may not hold up. Most of the contracts contain some kind of clause that says this contract contains all the information.”
If a contract has two parts, one dealing with pricing and a second with conditions, then farmers need to have copies of both contracts.
“This is common. We found a lot of examples of two part contracts. Our message is to ask for the entire contract.”
Contracts usually require companies to accept only the exact grade specified. Farmers must know how grade differences will be treated and know the discounts up front.
Mayer said grading is the most common area where disputes arise, and farmers should have a good understanding of grading practices and their rights.
Farmers have a legislated right to ask for an official Canadian Grain Commission grade at a primary elevator if they don’t agree with the elevator grade.
Mayer said delivery times have caused frustration across the Prairies this year.
“It is a huge issue this year. This was a main point of contention or concern.”
Grain companies can extend delivery contracts 30, 60 or 90 days, but farmers don’t have the right to cancel the contract.
“It is a one sided clause for sure, and I know farmers are frustrated with that.”
Mayer said that when a grain company delays delivery, farmers should calculate their carrying, storage and interest charges and see if they can receive compensation for the delays.
Farmers have no issues this year about ability to fill their contracts, but it has caused problems in the past. Mayer recommended that farmers let elevators know as soon as possible if they have a short crop and can’t deliver. A farmer who calls the elevator first may be treated more favourably than the 30th person that calls.
Mayer said almost half of the farmers in the study believed that their contracts contained an act of God clause. They might, she said, but it is for the elevator’s benefit and not the farmer.
“They are rare for growers. They are out there, just not on the side of the farmer.”