WGEA will not step in between farmers and elevators on admin fees, penalties


The Western Grain Elevator Association (WGEA) is responding to a request by Saskatchewan farm groups to intervene on producers’ behalf regarding contract fees and penalties incurred during the 2021 marketing year.

The Agricultural Producers Association of Saskatchewan (APAS), SaskBarley, SaskCanola, SaskFlax, SaskOats, Saskatchewan Pulse Growers, and SaskWheat released a joint statement this week, calling on the grain elevator association to work with its members to reduce the costs passed down to farmers who are unable to fill contracts due to the widespread drought.

Wade Sobkowich, executive director of WGEA says in an email to RealAgriculture that the association “does not and should not have influence on (member companies’) decision making,” as members view contract fees and penalties as a competitive issue. Any attempt to coordinate how companies handle unfilled contracts could be viewed as anti-competitive, he notes.

That said, Sobkowich acknowledges the letter sent by the producer groups represents a significant effort by a large group of farmers and their organizations.

“The letter is currently being considered by each company with serious weight. We hope, in the end, that individual outcomes will be considered fair and reasonable under the circumstances,” he says.

Each grain company has a slate of contracts they are required to fulfill with their domestic and international customers. Each one wants to be the company that acquires the limited quantities of grain out there over their competitors. “If a grower has a forward contract with two or more elevators, each of those elevators wants to be the one to take the grain and wants their competitor to offer the buy-back,” notes Sobkowich.

He adds that the “administrative fee” that many farmers are paying is unfortunately named, explaining that it is not necessarily a fee for administration, but a fee used to bridge the amount between posted price and replacement value.

Prices have also risen dramatically since the time of contracting and the environment is therefore conducive to speculative activity, he adds. “For all these reasons, grain companies are motivated to be very diligent and very careful.  This is, in part, governing their decision-making which really comes down to an individual farmer, crop type and even field-by-field basis,” Sobkowich says.

The difficult position farmers find themselves stems from a “perfect storm” of sorts, he adds.

Early optimism during the growing season and historically high prices meant that many farmers forward sold crop, he notes. In turn, grain companies forward sold into domestic and international markets in order to create movement.

The damage to the crop which occurred in late June and July has not only caused farmers to be short on contracts, but companies may also be short on export commitments. In more “normal” conditions, this would not have been the case, he says.

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