Sask. oat farmers seek nearly $60 million after buyer voided contracts

A group of 27 oat farmers say they are out millions of dollars after a company voided its contract for gluten free oats.

Dylan Szakacs says he entered into an exclusive supply agreement with Purely Canada Foods in early 2022 to provide the company with gluten free oats at the end of the growing season.

But in March of 2023 he says the suppliers found out their contracts had been voided.

“Our first communication was on March 1, when the company notified us that they were releasing us out of the contract due to force majeure for various reasons on their part,” said Szakacs.

A force majeure clause removes liability in contracts because of catastrophic unforeseen events or circumstances.

In an email to CTV News, Purely Canada Foods CEO Tyler West says a specialized third-party processor would convert the gluten free oats to sale-ready condition.

“This processor experienced significant equipment failure and equipment commissioning problems that caused the delays and eventually the force majeure,” West said, adding that the clause specifically identified “breakdown or failure of equipment of the affected party or others.”

Szakacs and the other farmers had to find another buyer for their gluten free oats, but the prices they were getting on the conventional market were about half what they negotiated with Purely Canada.

“A lot of these contracts are $8 to $8.75 a bushel and the market dropped off considerably,” he said. “The conventional market sales were made in the next few months at $3.50 to $4.50 per bushel.”

According to a statement of claim filed at Court of King’s Bench in Regina, the 27 producers have suffered losses of more than $59 million through storage, lost premium and transportation costs.

Even in drought years, Szakacs says farmers are expected to fulfill their agreements. But without these contracts, the individual farmers had to make some tough decisions.

“There will be different scenarios on each farm,” he said, “But I have no doubt individual producers had to take some serious decision making and stressful decisions to rebound.”

Purely Canada Foods says the two parties came together for mediation in November 2023, and that both parties came to understand one another’s position.

“It is Purely Canada’s intention to resume formal mediation in February or March,” said West. “We are hopeful during that mediation that an outcome is agreed upon.”

While a statement of claim by the group of 27 farmers has been filed, none of the allegations have been proven in court.