Representatives of dealer and grower associations are confident the release of two new producer contract templates will help calm the chaotic seas swelling in the lentil trade.
In unveiling the new contracts at Pulse Days 2005, Agricore United pulse division manager Rob Tisdale said the relationship between Canadian lentil growers and buyers has deteriorated to the point where some foreign customers no longer view Canada as a reliable supplier.
Tisdale didn’t fully comprehend the extent of the problem until an Italian buyer told a fellow AU trader he was willing to pay $50 per tonne more to buy exactly the same product from the United States.
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That is part of the reason why Canada’s largest grain company decided to decrease its involvement in the lentil trade, shifting its focus to the more mature bean industry where three-year production contracts are not uncommon.
The unease among foreign buyers stems from a culture of mistrust between Canada’s producers and processors, who have a history of backing out of poorly constructed contracts with one another.
“There was a mutual loss of respect between Canadian dealers and Canadian growers,” said Tisdale.
That unhealthy business environment contributed to the demise of more than a dozen firms in the pulse industry in the last three years and millions of dollars in lost sales, he added.
The new deferred delivery and production contract templates are designed to bridge the divide that has fractured the industry by setting out specific grower and buyer obligations in deals involving pulses and other special crops and by outlining what to do when circumstances change.
The new contracts mirror what is used by major pulse contracting firms and should be a vast improvement over some of the iffy documents circulating around the pulse trade, said Tisdale.
“They are fairer than some of the contracts I have seen from some of the smaller and less experienced companies,” he said.
The templates have received endorsement of the Canadian Special Crops Association and Saskatchewan Pulse Growers, two groups that joined forces for the first time to work on the project.
Saskatchewan Pulse Growers executive director Garth Patterson said something had to be done to repair the “erosion of trust” plaguing the pulse industry and the lentil trade in particular.
“This certainly won’t resolve all of that but at least now there’s a standard set of rules as a starting point,” he said.
Patterson expects the templates to prompt an evolution rather than a revolution in the way things are done. He suggested they would improve communication between growers and buyers and clarify penalty options when things don’t work out as planned.
The templates detail the essential ingredients that should be contained in all typical deferred delivery and production contracts.
Growers and buyers can use the documents as is, insert their own specific clauses or refer to them as guidelines when creating their own agreements.
“It’s a fabulous checklist for the grower and the dealer to make sure they’ve put together what should be a reasonable contract,” said Tisdale, who chaired the industry committee that created the contracts.
The templates will be posted on the Saskatchewan Pulse Grower website and will be made available to all CSCA members, although some have already indicated they have no interest in them.
“We’ve had some CSCA members say that the whole exercise is useless, that every company should be able to work on their own,” said Tisdale.
The contracts are supposed to be “living documents” that will evolve over time as changes need to be made.
