Sask. producers owing thousands of dollars in unfulfilled contracts is 'unprecedented territory'
Despite having a much smaller yield after harvest than usual, Saskatoon area farmer Blair Cummins was still able to fulfill his canola contract—with a little help.
“I was a little bit short on my generic contract, but a neighbor grew generic and he was looking to move it off the combine at a price that he was happy with, and that gave me enough canola to fulfill my contract,” he said.
“It was a win-win situation for both of us, but that's not an option for a lot of farmers.”
Like Kyle area farmer Shaun Dyrland, who was forced to buy out a canola contract and a barley contract.
“Both the barley and the canola was just about $100,000,” he said.
A new survey by the Agricultural Producers Association of Saskatchewan (APAS) shows how Saskatchewan's summer drought affected many grain farmers.
It found that 75 per cent of respondents were unable to fulfill their grain contracts "due to historically low yields."
“What it does speak to is how widespread the drought was,” said APAS president Todd Lewis.
“Certainly for producers this would be a record year as far as the number of producers that weren’t able to meet their commitments.”
Farmers were left paying penalties and fees ranging between $20,000 and $300,000 to grain companies, according to APAS.
Some of the farmers were left paying interest on their unpaid contracts at rates as high as 19 per cent, APAS said.
Some respondents have been pushed to the brink of bankruptcy, according to the organization.
Dyrland is also a board member with Saskatchewan Pulse Growers.
“We've partnered with other crop commissions to kind of advocate for grain companies to be lenient with guys,” he said.
“But at the same time I don't think anybody would suggest that a farmer wants to get out of their contract or to reduce the amount of the of the contract at all.
“In some cases, it'll have been a real bad business decision, and some guys are going to just have to live with it.”
Lewis says it could lead producers to be hesitant to sign new contracts - and that could be a bad sign for the industry.
“We need some certainty in the industry about what grain is going to be available come next fall, and so when it's contracted, that puts some certainty towards grain companies, and what they'll have available,” he said.
“We're kind of in unprecedented territory a little bit,” said Dyrland.
“To my knowledge this hasn't happened before, that there's been this many people offside on contracts.
“I think guys are going to have to maybe take a little more time to get comfortable with it again.”
Twenty-five per cent of producers also said they had trouble contacting grain buyers to resolve issues related to their shortfalls, APAS said.
“The grain companies are well within their right to expect to see that grain, but in the case where it's not produced, producers are very dissatisfied. They're not trying to get out of anything, they just actually don't have the crop,” said Lewis.
“It’s a difficult situation, and a lot of those penalties and administration fees especially, there's no clarity or transparency around how [grain companies] arrived at those numbers, so farmers get very dissatisfied when these fees are put on there, and there's really no rhyme or reason as to how those numbers were arrived at.”
“What I've been hearing is farmers are just upset with the wording and that the contracts are heavily weighted towards the grain companies,” said Cummins.
“But then again you know that going in, most contracts are always weighted towards the grain companies. That’s what we have to be aware of as a farmers when we're putting our name on the dotted line. So it has to be something that we're comfortable with and that we can live with.”
The survey, which is still accepting submissions, has seen more than 200 farmers respond since Aug. 26.
On Monday, the Saskatchewan government revealed that the summer drought is largely responsible for the bulk of a projected deficit and is expected to cost the province $2.4 billion.
Cummins says he wouldn’t be surprised if some producers go under because of having to pay penalties and fees.
“I'm sure there's some they're going to be in trouble now, hopefully the last number of good years that we had maybe guys can cushion it a little bit,” he said.
Dyrland says AgriStability, a federal government program, should be able to cover his losses.
Lewis says many producers in the province will be relying on crop insurance.
“Our premiums are based on losses and so we may see some increase,” said Lewis.
“But overall crop insurance has been profitable for the province for the last number of years, so that's just part of the cycle.”