Canada: durum spat raises questions

Statistics Canada now expects durum production to be 3.545 million tonnes, down nearly 500,000 tonnes from the Aug. 30 estimate and the lowest production since 2010. | File photo
Viterra is eliminating a controversial new fee related to its No. 5 durum contracts.

On Sept. 4, Viterra introduced a new $500 per tonne “property discount” for delivering wheat of other classes on the contracts.

The Canadian Grain Commission spotted the unusual item on the Elevator Charge Summaries report that it publishes on its website and contacted the grain company for clarification.

CGC spokesperson Remi Gosselin said the commission was told on Sept. 17 that the fee was an administrative blunder.

“It appears it was a mistake and is going to be removed,” he said.

“It seems to me like (Viterra’s) executive office was not fully aware that this had been published.”

Viterra acknowledged in an email to The Western Producer Sept. 20 that it is getting rid of the new fee.

It said that going forward, it will make changes to the specifications for No. 5 durum to “protect the integrity of destination markets” for the commodity.

The CGC specifications for No. 5 durum state that it can include up to 49 percent of wheat from other classes. Viterra said that would make it only eligible for feed wheat markets.

“Food millers can’t use durum that contains a significant amount of other wheat and this would limit sales opportunities and premiums for our many farm customers who are able to meet our revised attribute specifications of no more than 4.25 percent of other wheat in their No. 5 durum,” said the Viterra spokesperson.

Two southern Saskatchewan farmers, who requested anonymity for fear of reprisal, allege the property discount fee was an attempt by Viterra to “weasel” its way out of a bad contract.

They say the grain company signed a bunch of No. 5 durum contracts with producers in the Moose Jaw, Sask., area during the height of the wet weather in late August.

Growers said they were told they had to meet the specifications for No. 5 Canada Western Amber Durum as set out by the CGC. Those specifications include the ability to supply up to 49 percent of wheat from other classes.

Viterra contracted the No. 5 durum at around $20 per bushel. Feed wheat was selling for about half of that amount at that time.

So in theory, a farmer could buy feed wheat for $10 per bu. and turn around and sell it to Viterra for double the price.

It was a “no brainer” to sign the contract, said the first farmer.

“Even reps from other grain companies were saying to producers, ‘you know, you should sign that,’ ” he said.

“None of the other companies were doing this because they’re aware of the No. 5 durum spec.”

The grower says the company later created the new $500 per tonne fee, which he suspects was to act as a disincentive for supplying large amounts of wheat of other classes.

“They essentially retroactively changed the grade standard on No. 5 durum,” said the grower.

“From a producer standpoint, I’m very concerned about the precedent that something like that sets.”

He has no problem with Viterra including that clause in future spec-based contracts, but believes it is wrong to change the terms on existing contracts by introducing additional fees.

“Viterra is getting caught on their trader’s mistake and now they’re retroactively trying to weasel their way out of it,” he said.

“We don’t have that option when we make mistakes.”

Another farmer from southern Saskatchewan agreed that grain companies appear to have the ability to wriggle their way out of sticky situations at a time when many farmers would like to do the same.

“It’s not right,” he said.

“They just change the playing field in their favour.”

The second grower signed one of Viterra’s durum contracts and said he was happy to have the upper hand for once.

He went so far as to tell his Viterra representative that he would deliver the feed wheat in a separate truck from the durum because he didn’t want to wreck good durum.

“They didn’t seem to like that very much,” he said with a laugh.

The grower thinks the grain commission should have a bigger role to play in ensuring companies can’t use newly created fees to get off the hook when contracts don’t work in their favour.

“It is their mismanagement that has got them into this position and when it doesn’t work out for them they just go and change the rules,” he said.

Prior to 1995 the CGC established maximum handling fees, but the Canada Grain Act was amended then and the agency no longer has the authority to vet or approve grain company fees.

Gosselin said the commission’s only role is to publish the fees. But he added that the CGC will occasionally contact a company when it sees an unusual new fee and that it still has “the power of suasion” even though it lacks any true enforcement clout.

Doug Chorney, chief commissioner of the CGC, said Viterra was pushing the boundaries when it comes to publishing this type of fee change.

“The unfortunate thing in this situation is they used this tariff posting cost change in a way that I don’t think it was ever intended to be used,” he said.

Chorney said published tariffs are supposed to detail the handling charges of various grain companies rather than discounts on certain specifications.

He would not comment on what he believes the CGC’s role should be with respect to regulating grain company fees. He said that is the purview of the next federal agriculture minister.

To his knowledge, the issue has not come up in any submissions regarding the ongoing review of the Canada Grain Act.

“I can’t think of an example of someone wanting us to intervene on fees and handling charges,” he said.

Chorney encouraged growers to contact the agency if they feel grain company fees are unfair.

Even though the commission has no authority to regulate the fees it still has substantial influence with grain companies.

“Fairness in the grain industry is a tenet at the CGC and that’s something we try to stand up for farmers on,” he said.

“Always come forward to the CGC even if you’re not sure this is a situation where we can help.”

The Western Producer

Tags: Canada, durum spat