Unfulfilled grain contracts are pinching Saskatchewan farmers' pocket books.
Farmers losing grain revenue are in "dire straits" as they face penalties and administrative costs while attempting to leave contracts they have no hope of fulfilling, said Agricultural Producers Association vice president Bill Prybylski.
"Farmers are facing, in some cases, very significant financial penalties (for) contracts that — through no fault of their own — they're not able to fulfil due to the unprecedented drought," Prybylski said, adding that rising fertilize costs will only tighten the squeeze.
Many farmers are wrapping up their harvest after a drought baked their fields. Eighty-nine per cent of the province's crop is in the bin — far above the five-year average of 63 per cent for this time of year, last week's crop report noted.
“A lot of farmers simply don't have the grain this year due to the drought and with no 'Act of God' clause in some of the contracts, prices have continued to climb and the cost to buy out those contracts is now substantially higher,” Saskatchewan Association of Rural Municipalities president Ray Orb said in a prepared statement.
He wants the Western Grain Elevator Association (WGEA) to work with producers to reduce penalties and eliminate administration fees — which typically aim to prevent farmers from ducking out of a contract to capture a slightly higher price, a SARM statement said.
Early in the season, optimistic farmers eyeing high prices forward sold their contracts; grain companies did the same in domestic and international markets, said Wade Sobkowich, executive director of WGEA.
"The damage to the crop which occurred in late June and July has caused everyone to be short — farmers on contracts and grain companies on export commitments."
Grain companies see contracts as a competitive issue, so the WGEA can't influence how they price producer buybacks, he said.
Sobkowich said there's some cases where farmers oversold their production levels, but others where they oversold their "comfort level." In those cases, the grain company will ask the farm to send as many tonnes as it can before determining if it's short, he said.
"If there is any notion that the current scenario is a windfall for grain companies, I can say with certainty that no company is interested in receiving a farmer payment in lieu of a delivery."
That may not be enough for NDP agriculture critic Trent Wotherspoon, who has called on the province to pass emergency legislation allowing farmers to carry over their obligations to future years without incurring "unreasonable penalties."
He also wants an independent grain contract arbitration board, with farmers comprising at least 75 per cent of its members, to resolve grain contract disputes, he said.
Agriculture Minister David Marit wrote in a prepared statement that the province is contacting major grain companies to discuss the seriousness of the drought, asking them to be "lenient with producers and (to) consider scaling back their administration fees and penalties."
We won’t be overreacting with wholesale changes to how our producers market their grain in this province," he said.
Nick Pearce, Local Journalism Initiative Reporter, The StarPhoenix