SASKATOON – Farmers shouldn’t be the only ones who have to pay a penalty for failing to live up to barley contracts, says the Alberta government.
Agriculture minister Walter Paszkowski wants the Canadian Wheat Board to compensate farmers when it doesn’t take all of the feed barley they’ve offered for delivery.
He criticized the board’s decision to increase non-compliance penalties next crop year, while at the same time taking just 50 percent of the barley offered by farmers under the recent Series C contract.
“The message from the board is clear,” said Paszkowski. “Fairness, contracts and penalties are a one-way street, with the direction running clearly in the board’s favor.”
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
The same suggestion has come from barley industry officials like Ted Cawkwell, past president of the Western Barley Growers Association.
“I think the board should be required to take the grain or pay the guy out for the amount they didn’t take,” he said.
But a wheat board official defended the contracting system.
“There is a tremendous amount of flexibility for the farmer in our contracts, except when we take 100 percent,” said information officer Deanna Allen.
She said the contract should be seen as an offer and counter-offer, with the farmer having the last word. The board puts out a contract, the farmer offers to deliver a certain amount of grain and the board makes a counter-offer when it announces how much of the contract it will take, whether that’s 25 percent, 50 percent or all of it.
If the board calls less than 100 percent, the farmer has 14 days in which to cancel his contract and deliver all of his grain elsewhere. Or he can have the uncalled-for portion rolled over into the next contract series.
Paszkowski’s criticisms were triggered by the board’s recent announcement that farmers who fail to deliver at least 85 percent of the feed barley committed to the board next crop year will be assessed penalties of anywhere from $6 to $25 a tonne, depending on actual losses to the pool accounts. The current penalty is $6 a tonne.
In 1994-95, high domestic prices prompted many farmers to renege on their wheat board delivery commitments. They paid the $6 penalty and sold their feed barley to local markets. The board received only about two-thirds of the barley committed for delivery that year.
Paszkowski said when the board takes only a portion of the contract, it can depress local prices and result in financial losses for farmers.
He said domestic markets dropped by 50 cents a bushel following the Series C announcement and left farmers facing “potential losses up to $70 million.”
John Clair, chair of the CWB’s producer advisory committee, said since nobody knows how much tonnage is involved in each contract call, it shouldn’t have that much impact on the market.
And he added that if prices did drop when the board took 50 percent of the Series C contract, then they should have risen when the board takes 100 percent, as it did in Series A and B: “I didn’t hear anyone hollering then.”
