Volatile grain markets have put the Canadian Wheat Board in the embarrassing position of having to claw back $29 million from prairie farmers.
An April 17 adjustment to initial payments, which saw the price for No. 1 Canada Western Red Spring Wheat jump by $53 per tonne, created the “unique and unprecedented” situation, said the board. Farmers who locked in prices through the CWB’s producer payment options during the winter are getting overpaid for their grain at their local elevators because the initial payment has risen above what farmers contracted for earlier.
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“It’s a function of the fact that the markets have run up so dramatically in such a short amount of time,” said CWB spokesperson Maureen Fitzhenry.
About 5,600 farmers have received or will receive more money through the initial payment they get at their elevator than what they locked in by contract.
It’s the first time since the producer payment options were introduced in 2001 that this has happened.
The board estimates it is owed $29 million, which works out to an average overpayment of $5,179 per farmer, but amounts will vary based on how much grain was contracted and at what price.
Some growers have already been overpaid and others will be upon their next delivery.
A lot of growers locked in wheat before Dec. 1 at prices of $6 to $7 per bushel, which looked attractive considering the history of $4 to $5 per bu. wheat.
“Very few people would have ever imagined it would get to the heights that it did in the new year,” said Fitzhenry.
Most years the board tops off the initial payment with a subsequent cheque or deposit to bring the total up to the contracted price.
This time around it is up to farmers to settle their debt.
Viterra and a few other grain companies are giving producers the option of taking deductions on future deliveries, including non-board grains.
Alternatively, growers can settle directly with the board by cheque or credit card.
“We want to be as flexible as possible because we understand the situation this puts some farmers in,” said Fitzhenry.
Those growers who have not repaid the outstanding balance by Oct. 31 will not be able to participate in future producer payment programs until they are fully paid up.
Fitzhenry said some of the 5,600 growers were confused by a letter they received from the board advising them of the overpayment. She acknowledged it wasn’t as clear as it should have been.
“We had quite a few calls requesting clarification on that,” said Fitzhenry.
No organization wants to be in the position of having to claw back money from its customers, she said.
Serious consideration was given to revising the payment terms so this won’t happen again, but the board decided to stick with the current contracts because the circumstances that led to the overpayment were so unusual.
“We just don’t think the cost-benefit is there to go through designing and implementing a whole new payment system for something that may never happen again,” said Fitzhenry.
