When the grain company does not take the specialty canola on time

[Hopperbin]

Parsley I moved rotated all this grain in June. Now I have another 4000 bushels of rotated stuff heat damaged. This is Cargils canola and of course the policy is to let you out of the contract if it is heated no penalty. I would also take a 30,000 dollar hit to tell them it is all heated so I can deliver to ADM which will take my canola now. Parsley I am talking to people at Cargil that are new to their jobs and don't seem to have much sense of taking the canola in or working with the farmer, its all about policy. I think they have much more to lose than me. Mind you if they are sitting on an extra 3 months supply that they cannot handle, they also don't know yet about the crop to come off yet. But for me to take another hit on a heated bin or a couple truck loads of heat damage. I may as well sell as generic.

[btjadenlepp]

One of my favorite topics. This is a
letter to the editor I wrote in May/June
when the situation was terrible for
delivery.

*****

More on the Request for Transparency in
Specialty-Oil Canola Contract Pricing

Our phones started ringing shortly after
my quotes appeared in the May 14th issue
questioning the health of the
marketplace for specialty-oil canola, so
I am writing to clarify what I meant in
saying that ‘there needs to be more
transparency about the value at the end
of the line.’

In the early days, our impression was
that the premiums for specialty-oil
canola were calculated to just offset
the yield drag that growers experienced
compared to conventional canola. The
incremental value wasn’t being ‘backed
off’ from the premiums that the handlers
might have been able to capture in their
end-use markets, it was just whatever it
needed to be to get the seed in the
ground.

That was an annoyance to me in trying to
analyze the relative opportunities from
new vs. traditional canola marketing
programs, but I wouldn’t say it was an
unfair or particularly surprising
approach for the grain companies to
take. Now however we have had one major
handler indicate that poorer-than-
expected demand and pricing for Nexera
was the reason for significant and
problematic delays in delivery and
payment to growers, which makes me
question how this market is going to
perform going forward.

Since the contracts have never reflected
the marginal value of specialty-oil over
conventional canola to end users, I
can’t compare the current situation to
the past. But I can see that the health
of the economies the canola industry has
targeted are suffering (Japan and the
U.S., for example), hurting consumptive
demand for high-end luxury goods
overall. I would be more inclined to
recommend growing specialty-oil canola
if I had the opportunity to see actual
numbers reflecting its value in end use
markets over the years, and then assess
how the premiums in the contracts that
our clients are being offered for 2010
stack up.

We are not discouraging clients from
contracting Nexera with established
canola crushers in western Canada who
haven’t struggled to manage their
specialty-oil pipelines. Certainly the
product seems good enough to have
captured a core demand base and we
always encourage participation in supply
chains that reflect reliable, premium
returns and solid growth prospects. But
based on Mr. Conn’s comments in the
original WP article that users of the
innovative cooking oil are coming on
line more slowly than expected, coupled
with everything else going on in world
economies these days, amidst the cloudy
pricing that has always characterized
these programs, I think we’re right to
proceed with caution in contracting more
specialty-oil canola in 2010.

Brenda Tjaden Lepp
Co-founder and Chief Analyst
FarmLink Marketing Solutions

[Barleyman]

We quit growing specialty canola. The last time we grew nexera it yielded 26.5, across the fence our bayer 5030 netted 48. That was it, no more, ever.

[Hopperbin]

In June when they want you to roll basis from July to Nov. month. on these contracts with the amount of tons on the contract I am not sure why they want you to do that and when I asked why I would ever sign that contract they could not give me a reason other than they did wanted me to do it. So me being me I refuse to sign those with no ill effects. Perhaps they would bind you to some something you don't know.

[parsley]

The point is this:

If you present the revised contract that is written by YOU, to protect FARMER interests, you have nothing to worry about.

The company will either:
1. sign it,
2.refuse it,
3. or re-negotiate a few conditions, and initial them.

Farmers don't have to be VICTIMS unless we choose to be. Be proactive.

You have sat back, let the companies chart their conditions, and then moan when the conditions bite you.

I really don't understand the inertia and the lack of will to improve your contracting requirements.

Pars

[btjadenlepp]

parsley, you're absolutely right but in
this case the farmer would have been
fine with contract specs, it was the
grain company who was totally outside
their contractual obligations. they even
admitted it in a letter and suggested
growers use the cash advance program to
deal with any issues caused by them not
taking delivery or making payment for
months after the contract delivery
window. infuriatingly unfair, and no
recourse available to growers except the
courts.

[Hopperbin]

Parsley when I deal with a grain company many times I have just put something extra verbally like moisture, grade, green, sprout, I am as honest as they come and my samples are what is in the bin and on delivery which I hope works in my favor. Well honest not counting my heated that is really not heated. Do I come off as a victim? I didn't think so. I will agree I sit back to much.

[parsley]

What about a clause in the primary contract which states:

delivery:

1. ....will occur before (ie) November 1st
2. .... means at the farmgate. FOB)

3.... penalties will come into effect five days following a default.. at the rate of 12% per month, Canadian dollars plus a straight flat default fine based upon 1% of the contract value of the grain.

4. ...

Take your pick.

Let the grain the company bought from you by contract become their transportation problem. Their delivery problem.

You have lots of choices at your means. Wringing your hands is not an effective solution. Pars

[sewen]

I'm the same as barleyman never again, the last time I grew it nexera was a whopping 23bu/ac invigour 5070 50bu/ac, the premium isn't anywhere near high enough.

[wmoebis]

Your right parsley. I heard a commissioner from the CGC tell us farmers that exatally same thing years ago. A contract is worthless unless there is penalties and rewards on both sides.