Do you read your grain contracts from front to back? If so, you’re one of the few who do.
A University of Manitoba study found only 17 per cent of Canadian farmers read their whole grain contracts — and that’s a mistake, says a grain industry expert.
“For every grain buyer out there, the terms can vary substantially,” said Janelle Whitley, manager of policy development for the Canadian Canola Growers Association.
“There isn’t just one company offering the same thing across the board. There’s a lot of variability.”
Most farmers are just too quick to sign a contract without understanding what it means, she said.
“Your signature essentially means that you have read and understand it, and once you sign, it’s very difficult to back out or cancel a contract. It is a legal, binding document, and you are locked into it.”
So what should you look for?
That’s the question Whitley’s association tried to answer during a review of grain contracts it undertook last year.
The first potential pitfall is that the document you’ve been handed to sign may not be the entire contract.
“Often there are two parts to the contract,” said Whitley, adding the second part typically lists with terms and conditions.
“You see language such as, ‘This contract incorporates the terms that are available on request.’ There may be another part of your contract that you’re not seeing when you go in and sign it.”
Delivery terms were another frustration for farmers.
“This is not so much an issue this year, but last year with the rail transportation issues, delivery was a huge problem, and there were lots of complaints,” she said, adding delivery terms “vary substantially” between grain companies.
In some cases, contracts give grain companies the right to change delivery location, so producers need to be prepared for that by asking the right questions.
“You might want to ask questions like, ‘How much notice am I going to get if I change locations? How far am I going to have to go? Can I get some compensation for that if I have to haul to a different location?’”
But companies being able to extend the delivery period is the “most common frustration that we hear,” said Whitley.
“Almost every single grain company does have the right to extend the delivery period,” she said.
“When you sign the first page of your contract, you’ll have a delivery month normally, and in the fine print on the back of the page, the contract will say that the buyer has the right to extend the delivery period if the grain cannot be accepted within the original period.
“There’s a lot of variability out there, right from 30 days extension to 180 days extension. That’s quite different in terms of how you manage your time and how you manage your storage.”
Last August, the federal government ruled grain companies must pay farmers to store their grain as protection against unaccepted grain deliveries.
“Every grain company has to offer storage or receive a penalty if they do not accept your grain within the original or extended delivery period,” said Whitley, adding the provision only applies to companies licensed under the Canadian Grain Commission.
“If you happen to have a contract where it doesn’t offer storage payments, I would recommend contacting the Canadian Grain Commission.”
Producers must negotiate their own storage payment, however.
“The way the bill was written was to allow flexibility in terms of being able to negotiate what works best for you, but also flexibility for some of the commercial buyers to be able to manage their storage.”
But, again, you won’t be able to raise these types of matters if you haven’t read that contract.
“The devil’s in the details,” said Whitley. “It is important for you to read your contract from start to finish.”
If you ask for changes and the grain company rep agrees, then put it in writing, she added.
So why is someone’s word not good enough? That’s in the contract, too.
“Every single grain contract out there contains language that says the company is not bound by anything their representative says,” said Whitley.
“If your elevator manager or the person you’re dealing with on the phone offers you special delivery terms, get it in writing, because if there’s a conflict, they’re not bound by what is said on the ground.”