The 2021 growing season is testing farmers' resilience prairie-wide and leaving many with tough decisions on the state of their crop. Below-average moisture and unrelenting hot temperatures in July have created widespread damage, leaving farmers with the dilemma of protecting existing yields or abandoning their crop altogether and seeking alternative options.
For those with contracts, being short on volume and quality is increasingly a reality. CCGA has engaged both the Western Grain Elevators Association and the Canadian Oilseed Processors Association to express the real challenges facing the 2021 canola crop and widespread concern of potential contract shortfalls.
With tight old crop supplies and the lowest production expected since 2014, grain elevators and processors are also concerned with sourcing adequate supplies to fulfill contract obligations to their customers and maintaining their relationships with their farmer-clients.
Farmers are advised to contact their grain buyer as soon as possible, should they have concerns meeting their contract. In fact, many contracts require the seller to provide advance notification. Companies can then take actions to mitigate damages and can work with impacted farmers on a case-by-case basis. Depending on the buyer and geographic area, a company will start with an assessment of the situation and may require a farm visit to determine the status of the crop firsthand. Companies will work with the affected farm to determine a buy-out.
Open communication and dialogue are pivotal, as well as a good relationship with your grain buyer. Company contracts are different, with variability in language and policies. In preparing for your conversation, evaluate your options and ensure you understand your contract terms around volume, cancellation, liquidated damages, and force majeure. Seek a legal opinion, if required. Questions to consider could include:
- Will I be short or will there simply be no canola to deliver? Carefully scout fields so as to have a clear understanding of potential yields and evaluate the management options for bringing the crop to harvest.
- How will lesser quantities be treated?
- Does the buy-out clause reflect the true cost of replacement?
- How will my decisions impact other open contracts or company accounts?
- Can I source canola elsewhere to fulfill my contract?
More largely, efforts are underway to expedite provincial crop insurance claims to provide management options, including conversion to animal feed (where it makes sense to do so). Farmers enrolled in AgriStability can also apply for interim payments to address immediate financial challenges.
More information is available in
A Practical Guide to Navigate Grain Contracts.