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Relief on delayed delivery grain contracts

But the regulations 
do not state 
the penalty amounts

Delayed acceptance of grain contracted for delivery by farmers to grain buyers has become increasingly common. Sometimes the delays beyond the delivery period stated in the contract have been justified. Grain movement delays caused by weather are understandable, but delays of several weeks or months are hard to justify. Grain companies often blame the railways and the railways tend to blame grain companies and weather. Meanwhile, farmers waiting to deliver are frustrated by having their grain tied up by the contract and their cashflow plans impaired. While waiting to deliver contracted grain, the farmer deals with risk of the grain going out of deliverable condition and the cost and inconvenience of storage.

The federal government included in Bill C-30 (amendment to the Canada Grain Act) a measure to address concern around the issue of delayed acceptance of grain under contract. Early this crop year, the Canadian Grain Commission, which has the responsibility to “regulate grain handling in Canada,” sent all licensed grain companies a letter outlining the amendments. The letter states that “as of August 1, 2014, all grain contracts between a licensed company and a producer that contain a defined delivery period must include provisions for a penalty to be paid in respect of failure to accept the contracted grain during the stated delivery period.” The regulations do not state the penalty amounts or types, with the intention to “allow licensees and producers the opportunity to negotiate transparent, flexible and balanced agreements that set out the contractual obligations for both parties.”

On reading the statement from the Canada Grain Commission, a farmer might cheer the prospect of relief on this matter of delayed acceptance. However, few companies have actually amended their contracts yet. Grain companies’ lawyers have been working on the new clauses to be incorporated into contracts, but most local agents have not seen a revised contract. Note that the penalty only applies to CGC-licensed companies so, for example, contracts for direct sales to cattle feedlots will be excluded, unless these buyers choose to include such a clause.

Also, the penalty applies only to contracts with a stated delivery period. Could the stated delivery periods in standard contracts become even wider, or somehow be excluded on some contracts? Will a penalty be included in contracts to charge a producer for late or non-delivery?

Rather than speculate on what the contract clauses might be, it is best to wait and see how those contracts are written. As before these contract changes took place, it is necessary to read and understand the contract. Discuss with the company agent any uncertainties that you may have about contract clauses, and try to resolve any concerns before signing. If, on a contract with a defined delivery period, the producer’s grain is not accepted in the delivery period and a solution cannot be found, you may contact the Canadian Grain Commission to have the dispute arbitrated.

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