Twenty-seven prairie farmers say they are advancing their Court action in the Saskatchewan King’s Bench after Purely Canada Foods informed the farmers it was voiding their contracts for gluten-free oats grown in 2022. The farmers completed mandatory mediation with Purely and its parent company Above Food in late 2023 but the action remains unresolved.
Purely alleged that oat processing machinery failed in the fall of 2022. In the initial letter to the farmers that voided the contract in early March 2023, Purely said it was invoking the force majeure clause. Force majeure is a contractual clause intended to protect the parties from events outside normal business risk. It is sometimes referred to as an “Act of God” clause. Examples of force majeure events or “Acts of God” include an epidemic, flood, earthquake, or fire.
The letter to farmers stated: “The certified gluten-free oat conversion processor had a very unfortunate and disappointing process, equipment and system failure due to no fault of ours. The buyer (Purely) gives you immediate notice that the Gluten-Free supply contract is void in respect to purchase of the oats…. Please consider that the force majeure clause applies.”
Lionel Kambeitz, the Executive Chairperson for Purely, and Tyler West, the CEO, spoke with several of the farmers after the March 1 letter and confirmed Purely’s reliance on the force majeure clause.
Melfort, Saskatchewan farmer Dylan Szakacs says it is shocking that Purely appears to have made no genuine attempt to find alternatives for processing their oats, instead invoking force majeure, a clause that is usually reserved for catastrophic events.
“Grain companies often experience equipment difficulties, but they still honour their contracts with farmers – this is why farmers invest millions of dollars every spring planting their crops. Purely’s actions will make it difficult for other companies to do business with farmers. No grower wants to take a chance that they won’t get paid,” says Szakacs.
Brad Boettger, President of the Prairie Oat Growers Association and a farmer from Alberta, similarly notes that it is very surprising that Purely Canada used an equipment failure to justify a force majeure and terminate the contracts.
“Producers are astonished and bewildered on how equipment challenges equals a force majeure. 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."
Many of the farmers’ contracts were priced between $8.00 - $8.75 per bushel. Gluten free oats sell at a premium and cost more to grow than conventional oats because of crop rotation considerations and the extra time and care required for equipment and storage to avoid contamination.
Once farmers received letters from Purely cancelling their contracts, they were forced to consider a sale into the conventional oats market at approx. $3.50 - $4.50 per bushel, resulting in significant losses.
When Purely cancelled the oat contracts it resulted in an estimated $18 - $20 million loss for the 2022 crop, and nearly $58 million in losses over the five-year contracts.
A press release from May 1, 2023 indicated that Purely and its parent company Above Food had projected fiscal year through January 2024 revenue of $482 million (USD), but there has been no resolution in this dispute. Above Food and Purely continue to deny the farmers’ claim, insisting that the failure of Purely to procure processing capacity should relieve them of their obligations to the farmers.
