GRANDE PRAIRIE, ALTA – Drought conditions of the past year have put strain on grain and wheat farmers across the South Peace.
Long-time farmer and former county councillor Richard Harpe of the Valhalla area said drought may be the least of it.
Harpe told Town & Country News many farmers are running aground with grain contracts that are resulting in bills of up to $200,000 for some producers.
A producer may enter into a contract in the spring with a grain company to sell their crops at a specific price and volume at a delivery date.
Farmers who cannot deliver on their contracts are expected to pay the difference at the current market value of that product.
The upside of the contract is that it guarantees a price — in a good year, it works out well. Harpe said many farmers sign contracts based on 80-90 per cent of their average yield. But in a year where the yield sits at only 40-60 per cent, the shortfall means the producer – obligated under the contract – has to pay the grain company the difference.
Richard’s son Andre is chair of Grain Growers of Canada.
“Crops are down to half of what they should be,” said Andre.
“There are no good crops. It’s just varying degrees of bad,” he said.
“There’s a lot of frustration because we had this super-hot dry summer and the harvest was early, and then we got some late rains, and that’s caused a lot of problems with second growth in the crops both in the barley and the canola,” said Greg Sears, second vice-chair of the Alberta Wheat Commission and Sexsmith-area farmer.
A second growth makes the harvest harder as it mixes with the original growth having drier kernels. The new growth will provide a higher moisture level which creates difficulties with gathering the crop you want, and mechanically, it can plug up equipment, said Sears.
Either way, harvest must continue.
“To get movement for your grain, you have to contract. You have no choice,” said Andre.
He said that if he were to pull off a load of canola and phone an elevator to sell it, the first question would be if he had a contract.
“If you said no, they would just kind of laugh at you and say, ‘well good luck with that.’”
Richard said financial institutions are also pressuring producers to sign grain contracts.
He said he believes the banks have their own interests at heart.
Richard says some farmers do not fully understand the grain contracts.
He cites crop hedging as an example. Some producers are starting to look into the practice, advised by many, but he said financials can then become complicated. Still, he adds, “that’s the only protection that’s available against contracts.”
Grain companies are caught in the middle as they also contract grain for export and have their own legal obligations to fulfill, notes Sears.
Still, producers face more challenges.
“(Farmers) have asked grain companies not to charge administrative fees or cancellation fees of any sort,” said Andre.
“A lot of contracts farmers would have signed include provisions for additional charges and fees in fairly vague references,” said Sears.
“I think producers are certainly looking at grain companies and will remember the ones that treated them fairly and will remember the ones that they feel perhaps exploited the situation.
“Farmers have long memories for things like that.”
Producers are looking for help from the government, but Richard Harpe says it’s not so simple.
“How do you help somebody out who basically signs a contract for selling something of a certain price?” said Richard.
As Andre runs his combine through the acres, the thought persists: “Am I going to produce what I actually thought would be a very conservative estimate?”
He hopes those figures are accurate.
“I think it’s important that we all recognize the stresses and fatigue that a regular harvest puts on, let alone one that ends up being drawn out,” added Sears.
The mental and physical stress due to financial concerns should not be overlooked, he said.
“We all have to recognize that those situations exist and seek help if we need it.”