Saskatchewan grower organizations are urging the Western Grain Elevator Association and its members to work with farmers struggling to pay penalties and administration fees on contracted but undelivered grain.
Bernie McClean, Chair of SaskCanola says farmers simply don't have the grain this year with the drought and with no "Act of God" clause in some of the contracts, prices have continued to climb and the cost to buyout those contracts is now substantially higher.
"There's a cost to buy out, it's usually the cost or the price difference between what you contracted out and what the price may be. You know, as an example, $13 canola in the spring, versus $20 now. There's a $7 a bushel cost to that contract that the grower would have to pay. On top of that cost, some companies also have the administrative fee. Completely acceptable, I get it again, we sign these contracts in good faith knowing that those costs are there. But the costs are really meant, the administrative fee is really meant to deter growers from getting out or trying to get out of a contract when they actually have the physical grain and deter them from trying to do that to capture a slightly higher price. Now, again, growers aren't going to have the grain this year, it's a little different story. So yes, we're still going to have to buy out the contracts. You know that difference in my example of $7 a bushel with $13 and $20 canola as an example. But then there may be an administrative fee that can be $10 - $20. That fee varies from company to company, some companies don't actually have a fee. And that's what we're looking for as grower organizations across the prairies here is for the grain elevator association to recognize that. Look, we're not trying to get out of these contracts, because we're trying to capture that extra $7 with canola that we have. We don't have the canola, or the wheat, or the barley, or the peas, or whatever it might be."
He notes growers are finding themselves in a difficult situation.
"Even small, you know 10 to 20% pricing and deferred delivery contracts. Many growers aren't going to be able to fill those contracts this year, simply because the grain is not going to be there."
McClean says they'd like to see grain companies work with farmers to find a workable solution for everyone by possibly eliminating the administration fees and rolling those contracts over to 2022.
He notes with the costs associated with the contract penalties and administration fees, it's going to mean a lot of red-ink for some farmers that could actually put them out of business.
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