Canada’s Harvest Bust Leaves Grain Companies Scrambling to Meet Sales

(Bloomberg) -- A dearth of grain in Canada has left companies scrambling for supplies.

Grain companies are scouring Canada’s prairies for replacement crops to fulfill their export commitments after drought withered output, leaving many farmers unable to deliver pre-sold supplies, said Wade Sobkowich, executive director of the Western Grain Elevator Association that represents major grain handlers such as Viterra Inc.

Barley and canola are particularly difficult to find and companies are paying “much higher” prices than the export value to convince farmers to sell, he said. 

“They’re definitely taking a loss,” Sobkowich said Friday by phone, noting no company has been forced to default on sales contracts. “If they’re short they now have to figure out how much is it going to take to get the tons.”

Western Canadian grain production plunged this year as drought engulfed swaths of major growing regions. The canola harvest is the smallest in 13 years and wheat production fell by 35%, according to Statistics Canada. 

There are a lot of farmers who are “really short on what they forward contracted” and companies are billing them for the cost of replacing the grain so they are “sharing in the loss,” Sobkowich said.

“We’ve sort of grown accustomed to a higher level of production for the last eight or nine years,” Sobkowich said. “We haven’t seen so many forward contracts that were in question as far as being able to be fulfilled.”

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