Dispute over value of malting barley leaves Alberta farmer searching for answers; grain commission warns against ‘literal interpretation’ of grain act
Is the Canada Grain Act adequately protecting grain farmers?
Are provisions in the act being properly enforced?
Those are two questions Alberta barley producer Mike Greeno is asking after a contract dispute with a major Canadian grain company.
Greeno, who farms near Lethbridge, delivered a sample of barley to a well-known Canadian elevator company in the fall of 2016.
The company’s name is not included in this article at Greeno’s request.
Greeno’s sample was accepted for malt, so he delivered about 8,000 bushels to the company’s Lethbridge-area elevator in October 2016.
Almost three weeks later, after his barley had been mixed with other malt barley deliveries and shipped out of the area by rail, Greeno was told that the barley he delivered had failed to meet malting specs.
The company offered to buy his grain, but the payment would be based on feed barley prices.
The grower and the grain company have since reached an out-of-court settlement, but the experience has tainted Greeno’s view of the grain handling system and the laws that he thought were in place to protect farmers from unfair buying practices.
“(The grain company) accepted my sample for malt.”
“They took delivery of my barley. They mixed … (my barley) with other barley deliveries and they sold it before they told me it didn’t meet malting specs,” Greeno said.
“They’re supposed to keep the integrity of everyone’s grain separate until the buyer and the seller agree on a final grade. As soon as they mix it with other deliveries, it’s theirs. It’s not mine anymore.”
Before he reached a settlement with the grain company, Greeno took his case to the Canadian Grain Commission, hoping staff at the commission would investigate and make sure that the company was complying with regulations contained in the Canada Grain Act.
After explaining the circumstances to a CGC compliance officer, Greeno was told that the commission does not get involved in disputes involving malt barley.
The commission will settle grading disputes through its Subject to Inspector’s Grade and Dockage service, but it doesn’t get involved in disputes that involve grain sold on “industry specifications.”
Greeno eventually took matters in his own hands and launched a civil lawsuit.
He recovered most of the value that would have been lost had he accepted the grain company’s offer to pay at feed barley values.
However, legal bills and the personal time that he spent resolving the dispute were unexpected costs that will not be recovered.
Efforts to get help from the grain commission were equally frustrating, Greeno said.
In fact, the response he received from commission staff produced more questions than answers.
For example, what are the obligations of a licensed primary elevator when it comes to collecting and retaining grain samples? What is the commission’s role in resolving disputes between farmers and grain buyers that involve malt barley sales? And are the day-to-day practices of grain companies being properly monitored?
“The laws are written in black and white and they’re there to protect the producer,” Greeno said. “But if there’s no one there to enforce the rules, what good are they?”
Greeno said the elevator company that took delivery of his barley didn’t inform him until Nov. 9 that his barley had failed to meet specs. That was 19 days after the last load was delivered.
When Greeno suggested sending his samples away to a third party, he was told that the elevator didn’t have any samples on the premises.
“They told me that all the samples they had were at head office,” he said.
Greeno then suggested that the company come out to his farm and take a sample from another bin that contained barley from the same field.
The company declined.
Staff at the elevator eventually produced a sample that they claimed was taken from the barley Greeno delivered.
That sample was contained in an unsealed 300 gram pill bottle.
According to the company, germination was 78 percent.
Greeno contends the germination on the barley he delivered was 95 percent, based on tests conducted before delivery.
Greeno also maintains the barley he delivered was mixed with other malt deliveries and shipped as malt, even though the company refused to pay him a malt premium.
“The company sold my barley for malt and claimed that they have the right to mix my grain and do whatever they want with it because it theirs upon delivery,” he said.
“If it doesn’t make the specs, the producer gets paid feed.”
Doug Chorney, assistant chief commissioner at the grain commission, said cases like Greeno’s highlight the risks that growers face when negotiating a malt barley contract.
Despite numerous references to prescribed sampling procedures in the Canada Grain Act, licensed grain elevators are not obliged to collect and maintain samples at the point of delivery, he added.
The only time an elevator is required to take a sample is when a producer requests that one be collected for the purpose of settling a grading dispute.
“The Canadian Grain Act makes reference to sample retention, but the use of that terminology is really related back to when (the CGC) had authority over inward inspection,” said Chorney, a farmer from East Selkirk, Man.
He conceded that wording in the act can be confusing.
Growers who take a “literal interpretation” of the act might assume that elevators are required to take and retain samples, he added.
But in fact, grain companies are not obliged to do so.
“It does seem that way when you read the act, but in fact the only time there’s a requirement for sample retention is when a grade is disputed upon delivery and a Subject to (Inspector’s Grade and Dockage) request to the Canadian Grain Commission is made,” said Chorney.
When that happens, a one-kilogram sample is taken, sealed in an appropriate package and sent to the grain commission for a binding decision on grade.
Many grain companies collect samples as a condition of internal food safety or quality management systems, he added.
“I think that practice is ongoing, but that doesn’t mean the grain company is obligated to share those samples with other parties, including the farmer,” he said.
“We (the CGC) have no authority over those samples.”
Adding to the complexity of Greeno’s dispute is the fact that malting barley contracts are based on industry specifications such as germination rather than on official grading criteria that fall under the purview of the grain commission.
“There are terms and conditions in those contracts that cover off all the specification factors that relate to malt barley quality, but (they) are not grading factors, per se, under the jurisdiction of the CGC,” Chorney said.
Added Remi Gosselin, the commission’s manager of corporate information services: “When it comes to grain grading disputes, our record is quite good in terms of settling disputes for most commodities.… The only commodity that’s a bit of a challenge is malting barley … because the main determinant of quality in (malt) barley is germination, and the CGC doesn’t do germination because it’s not part of the grain grading system.”
Chorney’s advice to growers is seller beware.
“My best advice would be to read your contracts, understand them and look at all the options available to you in selling your malt barley,” he said.
“Another good idea would be to use sample-and-seal bags, so that when loads are taken off your farm, you have a sealed sample that can’t be tampered with, that legally obliges (the grower) and the grain company to respect (test) results.”