Horticulture: Tighter rules on the way to make produce buyers pay up

Thursday, June 10, 2010

At present, farmers are at the end of the line when it comes to getting paid for perishable produce. Now a task force is looking at ways to protect them

by SUSAN MANN

When vegetable packer Top of the Hill Produce went bankrupt two years ago, grower George Hoving lost $80,000 that he could never recover.

Hoving, who grows carrots and onions in the Holland Marsh near Bradford, says he had been selling to the same packing house for 13 years. The company ran into financial difficulties two years ago, but Hoving had been dealing with them for years without problems and he extended the company's 30-day time frame for payment.

"Finally our crop was sold and I didn't get any more money out of them," he says. "Six months later, they were bankrupt."

Hoving says there isn't a mechanism in Canada for growers to recover money they're owed. Banks, other lenders and employees all come before farmers. "We're at the bottom of the list of creditors."

That could all change if the produce industry and government develop legislation similar to the Perishable Agricultural Commodities Act in the United States. There, farmers who are owed money move to the front of the creditors' line.

"These unpaid produce suppliers actually jump in front of the secured, preferred creditors," explains Ian MacKenzie, executive vice-president of the Ontario Produce Marketing Association.

Under the U.S. law, in situations without a bankruptcy but where a company refuses to pay a farmer, the matter gets sent to court "within a number of days," says fruit and vegetable grower Ken Forth, who's on a task force working to implement a similar system here. In the United States, the judge has the power to freeze the non-paying company's bank accounts. "It makes them pay," Forth says.

Similar legislation here is long overdue, says Hoving, noting that farmers can sell a whole year's crop to one buyer and not get paid.

Hoving says he recovered from the financial loss by just continuing on.

"We were in debt pretty deep for a year and then we managed to get ourselves out of it."
Both Canada and the United States currently have regulations requiring licenses for produce buyers, sellers, wholesalers and brokers. Here, the regulations are part of the Canada Agricultural Products Act. In the United States, they're within the Perishable Agricultural Commodities Act.

The licensing system is set up to ensure that people are reliable enough to pay their bills and that they understand how to deal in produce. There's also a dispute resolution process within the legislation in both countries, says MacKenzie.

But the legislation is more stringent in the United States than Canada. "The Canadian industry is working with the Canadian Food Inspection Agency to improve their regulations (under the Canada Agricultural Products Act) and bring them in line with the regulations in the United States," MacKenzie says.

A task force made up of representatives from Agriculture Canada, the Ontario, Quebec and British Columbia agriculture ministries, growers and wholesalers was established to recommend a mechanism to protect unpaid produce suppliers. The task force is to make its recommendation this fall.

MacKenzie says sellers can do all the due diligence in the world to ensure a buyer will pay "but, in this produce industry, it is so fast paced and it is so easy to get in and out of this business."

Horticulture industry officials have been saying there needs to be fair and ethical trading practices for about four years, but until now governments weren't willing to take the matter seriously.

What made governments take notice? "Maybe governments are saying we should be trying to protect our food supply," says Mackenzie. "It starts with the farmer. The farmer should be paid."

Sarah Petrevan, spokesperson for Ontario Agriculture Minister Carol Mitchell, says the previous ministers within the McGuinty government have always taken the matter seriously and the current minister is happy to continue working with the industry.
A spokesperson for the federal government couldn't be reached for comment. BF