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In the past when grain was sold it was simply priced on delivery. Nowadays, farmers can divide the sale of grain into a pricing function and a delivery function, thereby allowing them to set the price of their grain before, at or following harvest.
The National Agricultural Commodities Marketing Association Limited (NACMA) has produced a guide to taking out contracts to supply grain. The guide provides useful information and tips relating to negotiating grain contracts and performance under grain contracts. Readers should beware, however, that the guide should be treated as a general overview only and it is important to obtain legal advice when entering into a grain contract.
For example, the guide does not deal with the question of which might be claimed if a grain contract is breached. In particular, the guide does not address the issue of consequential damages. Consequential damages include loss of profit or revenue. For example, if a grower sells grain on a forward basis under a contract and is later unable to supply due to a drought-related crop failure, it is possible the buyer might seek to recover from the grower the lost profit margin the buyer would have achieved in on-selling the grain as consequential damages. Appropriate clauses may be included in any grain contract to limit the scope of damages an might seek to recover from the other party; a particularly important issue for growers.
