Mitchell scratches deferred payment ban

Friday, December 17, 2010

by SUSAN MANN

Ontario Agriculture Minister Carol Mitchell implemented a regulatory change this week that enables farmers to continue using deferred payments for their grain crops for the time being.

And that means its “business as usual,” she says in a telephone interview.

Agriculture Ministry spokesperson Sarah Petrevan says a deferred payment agreement has to be voluntary between all parties, must be put in writing, and it clearly has to define when the grain dealer or elevator operator will pay the producer. In addition, the dealer or elevator operator can’t extend payment to a farmer beyond July 1, 2012.

The need for the agreements to be voluntary is “protecting the farmer’s choice to enter into a deferred payment agreement,” she says.

On November 29 Agricorp issued a notice saying it would be cracking down and enforcing the ‘no deferred payment’ rule in the Grains Act. But Barry Senft, Grain Farmers of Ontario CEO, says farmers have been using the practice of deferred payments for more than 20 years.

Dave Buttenham, CEO of the Ontario Agri-Business Association, says the ministry recently determined that deferred payments weren’t permitted after completing a legal review of Grains Act regulations.

Buttenham says Agricorp’s move to crack down on the practice “in the mid stream of harvest was nothing short of a nightmare.”

Grain elevator operators, dealers and farmers were confused and frustrated both by Agricorp’s notice to implement the ‘no deferred payment’ rule and the timing of the announcement. Senft says they were getting 25 calls a day from concerned farmers, while Buttenham says the agri-business association was also getting lots of calls from dealers and elevator operators.

Both groups asked the agriculture minister and Agricorp to clearly outline how they planned to implement the change.

Buttenham says they are pleased with Mitchell’s decision to continue allowing deferred payments for now. The bigger question is “how do we deal with this moving forward?”

He says dealers and elevator operators view deferred payments as a producer issue. “If the producers say this is something that they need our primary role is to ensure elevator and dealer interests are covered.”

Senft says they don’t know how many farmers use deferred payment arrangements. But many producers use the tool to manage tax, especially in years like this one when there are both good crops and good prices. “This year would have been a year when it might have been used even more so than in an average year.”

Senft explains “it’s a tool that’s used to level off income from one year to a next.”

Both Grain Farmers and the agri-business association are breathing a sign of relief that they don’t have to scramble and cancel current deferred payment arrangements by the end of this year.

Grain Farmers and the agri-business association will be meeting with Agricorp and the provincial agriculture ministry early next year to determine how deferred payment arrangements can be incorporated into the Act along with what type and size of fund is needed to pay farmers in the event of elevator bankruptcies.

Senft says the minister’s regulatory change gives the industry time to thoroughly review the practice of deferred payments and come up with a long-term solution.

“It seems that since this has come into question we’re finding this is a well-used practice,” he explains, noting Grain Farmers would look favourably on having it continue.

If an elevator went bankrupt it would be up to the Grain Financial Protection program board to decide if a farmer with a deferred payment arrangement would be covered and they’d decide that on a case-by-case basis, Senft says.

In the longer term, a decision must be made to determine if deferred payment arrangements will be excluded or included in the Grain Financial Protection Fund.

Senft explains that currently the Grains Act stipulates payment to farmers must be made within 10 trading days after the grain is delivered, while sales from storage must be made by 2 p.m. of the next trading day after the day of sale. For basis or delayed price contracts, 75 per cent of the current market price must be paid by 2 p.m. of the next trading day after the day of sale with the balance being payable when the producer prices the grain to close out the contract. BF