Majority of Prairie grain farmers don’t feel grain contracts treat them fairly
Studies have found that only 46% of Prairie grain farmers feel that they are being treated fairly within today’s standard grain contracts. Recent reports have also found that grain contracts are heavily tilted in favour of the grain buyers.
For many Canadian grain farmers, these findings are not a surprise.
SaskCrops (an alliance of Saskatchewan producer commissions comprising SaskBarley, SaskCanola, SaskFlax, SaskOats, SaskPulse and Sask Wheat) and the Agricultural Producers Association of Saskatchewan (APAS) have heard rising farmer concerns in recent years around lack of transparency of grain purchase contract terms and conditions in grain purchase contracts between farmers and grain buyers. These concerns were heightened by the events of the 2021 growing season and were also raised through resolutions at the groups’ annual general meetings in 2021/22.
This has been a very active file for all our organizations since last year, as we attempt to bring more balance into grain contracts and improve clarity of terms and conditions. Our groups had a number of meetings last year bringing farmer voices to stakeholders but also realized we needed to quantify and substantiate the concerns we were hearing.
To achieve this, we commissioned a report from Mercantile Consulting Venture Inc. which identified the common issues voiced by farmers, clarified concepts of fairness, clarity and spheres of control within grain contracts, and suggested potential solutions. The full report was released publicly this week (and is available through all of our websites).
The report confirmed that there is indeed a problem, according to Prairie farmers, when it comes to their comfort with grain contract terms and conditions. Specifically, farmer concerns are related to a lack of transparency in calculating buyout and administrative fees. There are also major discrepancies in settlement costs amongst different companies, and difficulties with timing of a buyout.
According to the report, one of the key complaints of farmers was inconsistency in handling contract shortfalls amongst companies. “In addition, while many producers showed an interest in standard grain contracts and standard contract resolution procedures, many stated they will not use any forward contracts in the future because of the lack of protection in contract arrangements,” the report goes on to say.
SaskCrops and APAS believe that grain contracts are important tools to manage market and price risk, allowing farmers to reduce price risks and develop strategic marketing plans and allowing grain companies to more easily sign and fill future grain contracts.
This report also suggests, quite strongly, that improving grain contracts for Saskatchewan grain farmers will benefit not only farmers, but also grain companies and the entire industry.
Therefore, we believe that this issue should continue to be a top priority for our industry.
Our groups believe that contract terms should not transfer an unfair amount of risk – in terms of grain handling and transportation and market risk — to farmers. The report outlines several examples of these risks being reallocated through contracts, including how railcar availability can impact farmers through expanded or delayed delivery windows, even though farmers are not involved in those commercial negotiations and the risks are out of their control.
We aren’t looking to reallocate production risk from farmers to grain companies. Instead we want to clearly define contract terms and conditions so farmers understand their responsibilities and buyers have set timelines and requirements to provide options if farmers are unable to fulfill a contract.
The Mercantile report outlines several potential solutions for improving clarity between farmers and grain buyers, by enhancing elements of fairness and balance within the contracts. Chief amongst these solutions is a commitment between farmers and buyers to collaborate on: simplifying contract terms, achieving more clarity and transparency, and more clearly include both parties’ responsibilities to achieve better balance.
Further suggested solutions involve adopting a standardized contract that is fair and balanced to both the buyer and the producer and relying on the Canadian Grain Commission for education for farmers on grain contracts, as well as facilitating contract arbitrations.
Recently, our coalition has met with staff of the Western Grain Elevator Association (WGEA) and will be further looking to hold meetings with individual members to discuss collaboration. Going forward, we plan to initiate discussions with stakeholders and government bodies to move this issue, and our recommendations, forward.
The smooth workings of the grain supply chain depend on trust and cooperation between partners along the value chain. Improvements to grain contracts remains a top priority for our organizations and we are committed to working on this issue on behalf of Saskatchewan farmers.
For more information, visit any of our partner organizations or read the media release here.
Sask Wheat Chair