The relatively common practice of grain and oilseed dealers deferring payments to growers is expected to end next month in Ontario. following a stricter reading of that province’s Grains Act.
Ontario’s ag ministry (OMAFRA) and provincial farm program delivery agency Agricorp have warned grain dealers that the province’s 1990 Grains Act expressly requires dealers to pay growers for grain within 10 business days of delivery, or by 2 p.m. the next trading day if the grain is sold out of storage.
Deferred payment agreements thus aren’t allowed, and the Act requires grain growers to let Agricorp know right away if payment isn’t received within those specified timelines, the province said.
The Ontario Agri Business Association, in a recent memo to its grain dealer members on the matter, noted that such deferrals of payment have become a relatively common practice, usually at the farmer’s request, for tax or other business reasons.
Growers are making a conscious decision when they ask or agree to defer payment, OABA said in its memo, and “it would appear that ‘protecting producers’ from a practice that producers themselves are requesting is somewhat misdirected.”
But nevertheless, Guelph-based OABA told its members, “when communicating with your farmer-customers on this issue, it should be made abundantly clear that the decision to ‘outlaw’ deferred payments has been made by OMAFRA.”
Customers who have any complaints or comments on the matter, OABA said, should be directed to OMAFRA, Agricorp, or “the appropriate producer association” such as Grain Farmers of Ontario or the province’s bean or canola grower groups.
“Could be changed”
The province said its review of the Act was launched after the issue of deferred payments came to the attention of Agricorp’s chief inspector last year.
And the province acknowledged in its memo to dealers that the current timing requirements for grain payments “could be changed, provided there is broad-based support within the industry and the government moves to amend the relevant regulations.”
In the meantime, however, once the province’s plans to step up this enforcement of its Grains Act are well known, OMAFRA said it plans to “work with dealers, elevators and producers to clear all existing deferred payment arrangements” off grain dealers’ books.
Then, starting in January, the province said it will “progressively enforce this action” through follow-up audits and inspections, and issue “written compliance directives” to licensed dealers, elevators and farmers not meeting the Act’s requirements.
Producers who accepted deferred payment last year but cannot do so now will want to talk to their tax advisors about how best to deal with any potential fallout on their income tax bills, the province said.
Dealers and elevators who’ve received the written directive stand to lose their licenses if they’re later found in non-compliance, the province said. Any ongoing non-compliance issues, the province said, could be reported to the natural resources ministry for investigation.
If a case has to go as far as charges and prosecution, the province warned, a conviction on a first offence can carry a fine of up to $10,000, while a second or further offence can carry up to a year in prison and/or a fine of up to $25,000.