Glacier FarmMedia — More than two dozen farmers are moving ahead with legal action against Purely Canada Foods after it failed to honour contracts for gluten-free oats.
A Jan. 8 news release said the 27 farmers had completed mandatory mediation with Purely Canada, and its parent company Above Foods, in late 2023 but the matter had not been resolved.
Melfort, Sask., farmer Dylan Szakacs said that process is confidential and he could only say that it had been done.
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The dispute centres on 2022 gluten-free oat contracts. On March 1, 2023, the company sent a letter to the farmers saying it was voiding the contracts because oat processing machinery had failed the previous fall and it couldn’t accept the crop.
“The buyer (Purely) gives you immediate notice that the gluten-free supply contract is void in respect to purchase of the oats,” said the letter.
“Please consider that the force majeure clause applies.”
A force majeure clause allows parties to get out of a contract if an unforeseen or unavoidable catastrophe prevents them from fulfilling the agreement.
Brad Boettger, president of the Prairie Oat Growers Association, said last spring farmers were surprised the company would use force majeure rather than find working equipment.
“Producers are astonished and bewildered on how equipment challenges equals a force majeure,” he said at the time.
“But something like in 2021, when western Canada had the worst drought in history, farmers were not able to get out of (production) contracts without penalties.”
The farmers filed their statement of claim in May 2023, outlining the terms of the exclusive supply agreements. The documents indicate an oat price of $4.99 to $5.26 per bushel plus a premium of $3.50 per bu. for the level of gluten free purity; that rose to $4.50 per bu. in one case.
The company was also to pay 18 cents per bu. for storage if the oats were not picked up by the set date.
The producers claim losses of about $18 to $20 million for 2022, and nearly $60 million over what they expected would be five-year contracts. They had to sell their oats in the cheaper conventional market.
In its statement of defense, Purely Canada said it is not responsible because a third party had been contracted to process the oats but couldn’t due to equipment failure.
It said the claimed damages were excessive.
“A number of the plaintiffs may have overstated their oats production volumes, specifically those that meet the required specifications, and production records are subject to audit by Purely,” the statement said.
The company put the quantity at less than two million bushels and said that about 30 percent of the oats would have failed to meet specifications.
—Karen Briere writes for the Western Producer from Saskatchewan.
