An ongoing drought in many areas resulted in lower crop yields this year, to the point where many producers were unable to fulfill their grain contracts.
A producer survey by the Agricultural Producers Association of Saskatchewan shows 75% of respondents were unable to meet their contract requirements.
President Todd Lewis says the survey was an opportunity to get an idea of what's happening out there, and for producers to talk about their experience.
The survey found producers who were unable to fulfill their contracts were paying penalties and administrative fees between $20,000 and $300,000 to grain companies, leaving some producers facing bankruptcy.
He notes these contracts in many cases are very complicated and quite confusing.
"At this point now, producers and grain companies have to settle up those contracts. It's a two-way street, the grain companies also have made commitments, and they don't have the grain to meet their commitments. So it's difficult on both sides. But at the same time producers, you know, have lots of questions around transparency, and timing. Many producers wanted to settle these contracts up earlier, before commodity prices started to rise. In some cases, they weren't able to do that."
Many of the respondents also said the interest on their unpaid contracts was as high as 19%, while 25% of respondents also said they had trouble contacting the grain buyers resolving issues arising from production shortfalls.
He notes many of the respondents said they will not be working with the same grain company in the future or will not be signing a contract again.
The survey collected results from August 26 to December 1, and more than 200 Saskatchewan producers completed the survey.
The survey is still open for Saskatchewan producers to participate and can be found here.
APAS GRAIN CONTRACT SURVEY PRELIMINARY RESULTS ARE AS FOLLOWS.....
Issues raised by producers:
- A lack of transparency in calculating buyout and administrative fees.
- Wide disparities in settlement costs between different companies.
- Interest rates on unpaid amounts as high as 19% reported
- Expenses for buying out provisions ranged from $20,000- $30,000 to over $300,000.
Difficulties with Grain Companies:
- 25% of respondents have had difficulty establishing contact with their grain buyers when they knew they would experience a production shortfall.
- Those that could act early reduced their pay-out expenses substantially.
- Some companies did not allow early buyout, and costs for settling contracts increased with rising commodity prices.
- Some frontline company workers lacked information about resolving contract issues.
- Many producers noted that they would not be contracting with companies again because of the negative experience.
- Many producers will not be contracting any of their crops in the future because of the lack of protection in contract arrangements.
- Many respondents indicated that contract settlements will impact their viability and will lead to bankruptcy in some cases.
- Producers indicated an interest in moving towards standard contract resolution procedures and or a standard grain contract format.
- Smaller companies that are not able to supply from the international market appear to be more aggressive towards producers, while some larger companies have been providing producers with extensions and options.