In the post-monopoly wheat board era many new, unfamiliar grain buyers, often American, are offering to buy western Canadian grain. The Keystone Agricultural Producers (KAP) says farmers should do their homework before striking deals to avoid getting burned.
“People will spend two weeks researching which cultivator shovel to buy so it doesn’t wear out, but they’ll sell $400,000 worth of grain based on a phone call and a handshake,” KAP president Doug Chorney said in an interview May 8.
And it’s not only about ensuring payment. It’s also knowing what grades, dockage and specifications are expected and how disputes will be resolved.
“If you don’t have that spelled out you could be in for a helluva surprise when your cheque comes,” Chorney warned.
Seventeen American grain buyers are licensed as grain dealers by the Canadian Grain Commission (CGC), commission spokesman Remi Gosselin said last week. That means they must post security to cover what they owe Canadian farmers for the grain they buy.
However, not all American buyers are licensed and bonded by the CGC. Moreover, CGC safeguards such as ‘subject to inspectors’ grade and dockage’ don’t apply to American companies, even if they are licensed and bonded grain dealers.
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“Contracts are really important when dealing with producer cars and delivering grain to the U.S., even using a truck,” said Don McLean, a KAP member at Manitou involved with the short line Boundary Trails Railway Company (BTRC). “You’ve got to make sure you’ve got yourself covered. Contracts are the easiest way to cover yourself. If you don’t have a contract, regardless of whether the company is bonded the CGC won’t help you out if you have disputes over what you thought you delivered.”
The BTRC has eight companies vying to buy grain shipped in producer cars. Four of those are American with no Canadian handling facilities, but all are bonded by the CGC.
Farmers shipping on the BTRC haven’t had a problem, McLean said. But there are a lot of companies in the market now farmers have never heard of.
“It’s just good practice to know the world of marketing grain is different and you need to make sure you’ve got yourself covered,” he added.
Chorney, who for the first time recently sold grain to an American buyer using producer cars, agrees.
“Assured payment was top of mind for me,” he said.
Several companies wanted to make a deal. Chorney used the CGC’s website to see which were bonded. The company he selected wasn’t offering the highest price, but seemed less risky.
“I sold my grain to a company I never dealt with in my life and I think I will again because it all went really well,” Chorney said. “I was happy with it. We aren’t against small dealers or small companies. We think there are opportunities out there but farmers need to keep their eyes open and do their homework. Make sure you have a contract that spells out your grades and deductions.”
When it comes to getting paid for delivered grain, there are no guarantees. For example, in 2011 Puratone, which as a feed mill wasn’t bonded by the CGC, went down owing farmers around $1 million.
Over the years a number of CGC-bonded grain companies have had insufficient security to cover all what farmers were owed. That’s why the CGC recommends farmers get paid when they deliver and cash the cheque right away.
Farmers who deliver grain to a CGC-licensed buyer have 90 days to make a claim for non-payment. After that there’s no protection.
After a cash purchase ticket or cheque is issued farmers have just 30 days to make a claim if they bounce. If the cheque is cashed on the 31st day and bounces the farmer is out of luck.