Making the case for modernized crop contracts

Dan Mazier, president of Keystone Agricultural Producers, says farmers are still exposed to grain firms’ power

Farmers have survived the super-concentration of the prairie grain elevator system, but how much has been an evolution of a less combative industry and how much has been luck is hard to tell.

Farmers have found new ways to work with grain companies. Grain companies have accepted new ways of working with farmers.

But farmers are still exposed to the grain companies’ power to overturn their expectations.

“I think these contracts really need to be modernized,” said Dan Mazier, a Brandon-area farmer and president of Keystone Agricultural Producers, referring to contemporary crop contracts.

“Transportation is a big issue that we hear about all the time. But getting into these contracts is another we don’t hear about as much.”

More farmers are signing contracts with grain companies in the post-CWB world, with pricing and delivery of cereal grains now a less predictable and riskier business. Those contracts are almost never written by farmers, but by the companies that ensure their needs and concerns are covered.

However, by working together and with professionals, some farmers have found ways to turn the farmer-grain company relationship into a less adversarial one than might have been expected, say some.

“We’re not even primary producers, and we’ve got great relationships with all the elevator companies we deal with,” said Brian Voth of Intellifarm, a marketing advisory firm.

In the post-CWB world, many advisory firms have expanded and completely new ones have formed. Outfits like FarmLink Marketing and Agritrend have grown to represent much more grain than just a few years ago.

So too have online marketplaces been founded or expanded, with FarmLead and the Ag Exchange Group notable examples.

Voth said grain company buyers were often hostile to marketing firms a few years ago.

“There were a lot that looked at us as competition,” said Voth.

“They didn’t like that we were making things a little more transparent.”

However, with the modern elevator system developing into just-in-time operations and a need for high throughput as opposed to storing grain, the companies discovered that being able to contact a big number of farmers through advisory firms made it easier to get their needs filled fast.

As opposed to being unwelcome middlemen, market advisers have sometimes developed into welcomed facilitators, getting farmers offers they might not have known about and getting companies the grain they needed.

Grain companies have also developed ways of keeping in better and faster contact with farmers, with email, other internet services and text messages being used to fire out specials, regular offers and questions.

However, many farmers still market on their own and that’s where the problem with contracts can come in. Many farmers embrace contracts as a risk management tool, getting what they think is a guarantee, whether it’s a fixed price, a fixed basis, or a secure ability to deliver grain when they need.

But with the grain companies writing the contracts, it is possible for farmers to end up less protected than they believed, Mazier said.

Finding ways to clarify or regulate contracts is likely to become a bigger issue as they cover an increasing share of western Canadian crops, Mazier said.

“If we addressed these contracts, I think we’d put other issues to rest,” said Mazier.

It can and has been done in other highly concentrated farm industries, Mazier said.

Manitoba has only two major potato processors, but producers have worked hard to understand the risks and liabilities of the contracts the companies offer.

“We’re kind of headed down the same path,” Mazier said.

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