When the weather gods curse prairie farmers, crop contractors have to offer act of God clauses, it seems.
That’s how farmers are looking at contracts like the new Archer Daniels Midland Nexera canola contract that contains an act of God clause.
“On the Prairies, we’ve seen such wild variability (in the weather) for the past three years that the act of God clause is something that guys will probably jump on,” said Canadia n Canola Growers Association president Ed Schafer.
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“We’re in a time of really good prices, and you can lock in nice prices, and this’ll take the risk out.”
Agri-Trend Marketing manager Derek Squair said farmers in many areas wouldn’t dare grow contracted canola next season without an act of God clause.
“With wet fields, that would be hard to contract,” said Squair, who is based in Moosomin, Sask., where farmers have had trouble with flooding.
“They’d have trouble signing those guys up without an (act of God clause). Farmers are getting more risk averse, especially on the production side after the last couple of years.”
The ADM contracts were introduced Oct. 31 to farmers on both sides of the Canada-U. S. border. The clause covers 100 percent of the contracted production.
The ADM contracts will be available through its offices in Carberry, Man., and Watson, Sask.
Squair said act of God clauses in specialty canola contracts will be popular, but the contracts will have to have big premiums to make up for the yield drag farmers generally see when they grow the varieties.
Squair said contract premiums per bushel range from $40 to $70 over common commercial canola, but some of that is eaten up by lower yields.
“You’re not getting $70 an acre more. It’s more like $20 or $30 because we expect yield drag,” said Squair.
The overall premium is also needed to convince farmers to grow a crop that requires extra marketing and management, he said.
