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Discussion Starter · #1 ·
We sold canola to Richardson back in July and locked in favourable basis levels and fixed prices on target price las well. We delivered on these contracts this fall. We received our cheque and found price differences from prices contracted. We checked into it further and apparently Richardson contracts done prior to July 31 2014 were based on an estimated freight. That freight estimate was 5.52 less then current freight levels. In total ended up costing us $7000. They are unwilling to do anything about it. There is not much point in locking in price with Richardson if there contracts are not worth the paper there printed on. I just thought I would check if this a new thing for Richardson or something they have always done. They are new to this area from the Viterra mergers so only been dealing with Richardson for the past year.
 

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That is Richardson in general I believe. You are charged the freight what it is the day of delivery. For the contracts after July 31 are they freight locked in or does it still get priced on delivery with contracts after that date?
 

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If you use their trucks or trucks organized by their dispatcher that is how it works. The local guy I use will usually haul for less, and his price quotes stand. Richardson is doing freight similar to what the meat packing plants do, it's in the favour of the truck companies because they don't get stiffed, but it is rarely more economical for the producer or feedlot where the raw product originated
 

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Discussion Starter · #4 ·
They are saying that they have a locked in rail freight rate now as of July 31 on Canola. I believe the other commodities are still on the estimated freight cost. I have never heard of such a ridiculous contract. If you are not spot delivering there is almost no point in contracting grain with them as the contract is worthless.
 

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Most, if not all, new crop contracts with line companies are subject to freight-rate adjustments. This is not unusual and will likely be on the contract, I have dealt with this before. What is unusual is a $5.50/tonne increase, that seems like a lot. I didn't have any new crop basis locked in that wasn't direct with a crusher so I am surprised to see that big of a jump. What I find odd is the freight rate at a line elevator seems to always go up at the new year(I only remember it going down once), yet the ultimate basis levels are fairly steady over time. I think it's a bit of a money-grab....:rolleyes:
 

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Discussion Starter · #11 ·
I'm honestly not quite sure why the freight estimate is so different then actual rail freight. I am going to do a bit more investigating on CP freight rates at this location for contract and delivery dates after harvest. I find it hard to believe as well that the freight rate has changed this much in three months. I am confident this is nothing but a Richardson money grab. I am thinking this happened company wide so may be worth looking into at different delivery locations if others have done similar contracts.
 

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He's talking rail freight Ben. Not trucking. The farmer gets the grain to the elevator how ever he wants at his cost. But a contracted price should be the price you receive when you haul in the commodity.
Ok. So locking in a fixed price or a basis contract isn't supposed to be secure? I find that difficult to accept. Basis should be the cost of handling and getting the product to port position, historically anyway. If they expect those costs may not remain static then that portion of the risk component needs to increase in order to compensate.

What this equates to is offering a basis for 'best case' shipping, and then tacking on the surcharges from unforseen difficulties later. This would be similar to the fuel/baggage/etc charges airlines got in the habit of adding on before things became a bit more streamlined again, except you at least knew what the charges would be before you paid. The risk remains with the producer, even though I enter a contract to secure delivery and eliminate price risk.

Under this scenario could demurrage charges be levied back to the producer too?
 

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They did something similar to me, sold wheat through the wheat board last year. Texted my local Richardson rep to haul it, got the freight amount on a text, hauled it, got the check and all this took less than a week and a half but the freight amount on my check was way more than agreed on. After getting the local bosses involved it felt like just short of the supreme court atmosphere they said they would not change it that if indeed this was the amount agreed upon that the Rep made an error and would not make things right.
 

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I know when I brought up the point with my elevator. They pointed out that my check/statement pays me, the futures price then charges me the full freight/bases , so the net amount for me was actually higher than the contracted net price, because the freight cost had gone down. at the time I too was shocked at the total freight cost, not realizing I had been paid for the full futures price.
 

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Was there something similar to my picture(where it says comments) on the contract? This new-crop canola contract was at Paterson but the freight rate change is right on there. Like Ed Hunter said I remember it going down one year but mostly small increases. If they are going to change it then it should be on the contract they gave you. I would note that the local Pioneer elevator here used to print contracts and then give a photocopy to producer that did not have the rear of the page. On the back was all the stipulations that included the fact that they did not actually have to take your grain for the contracted period...
 

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Discussion Starter · #18 ·
Here is what the contract looked like this was our pricing portion I priced out the other day. I can't trust them to be rolling to Jan so bought back calls on these tons. The original contract was identical to photo. The actual rail freight charged on cash ticket was $46.86 mt. I will attach file hopefully it works.
 

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