A contract is supposed to be a contract, except, it seems, when it involves the sale of pulses or special crops.
There have been no recent, high profile cases of a grain company collapse leaving farmers unpaid or at the mercy of bonding provisions enforced by the Canadian Grain Commission.
But you certainly hear lots of cases where producers feel they’ve been badly treated.
Often the problem is with the sale of lentils, but there are contracting problems in canaryseed, mustard and many other crops too.
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The farmer strikes a deal with a company and is asked to sign a contract. The contract stipulates the price and a time frame for delivery. There may also be provisions for how to handle disagreements over grade and dockage and how long the company has to pay for the crop after it takes delivery. Contracts are often faxed or emailed back and forth.
One of the biggest complaints comes from farmers who are still storing the crop months past the stipulated delivery deadline. There are even cases of companies walking away from the agreement when the market price has moved against them.
Say a company contracted a No. 3 lentil for 20 cents a pound for delivery by Dec. 31, 2010. March rolls around and despite repeated calls by the farmer, the product still hasn’t moved.
The farmer wants the contract honoured because those lentils are now worth only 18 cents in the marketplace. Despite having a contract, the farmer seems powerless to have it enforced.
The price change can work the other way too. When the price increases from 20 to 22 cents a pound and the company hasn’t taken delivery as promised, the producer may believe he can sell the product to someone else. Not so fast. In those instances, the fine print in the contract usually prevents a sale to another buyer.
The contracts are constructed by the buyers and seem to be designed to protect the buyer when you wade into the details. Good luck at trying to introduce your own contract provisions. Good luck trying to enforce a contract even if the company is offside.
There are also many stories of unexplained downgrading or high dockage. After a product leaves your farm, how do you disprove a company’s claim that the dockage was 12 percent, even though all the other loads had only five percent?
It’s important to point out that most companies are good to deal with and do their best to fulfill contract obligations. It’s also important to note that a percentage of farmers are difficult to deal with and there are some bad apples who try to weasel out of contracts when the price goes against them.
In the majority of cases, farmers and buying companies work through any glitches. If rail movement has been a problem and a company needs a bit more time, most farmers understand, especially if the company is up front and communicates.
Similarly, if a farmyard is too wet or too snow filled to move grain in the desired time frame, companies are usually good about making alternative arrangements.
The pulse and special crop industry still has lots of buyers big and small. That’s a good thing. It helps ensure competition.
But farmers must be wary. In years with grading problems or price volatility or demand shocks, some companies won’t deliver on their commitments.
Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.
