What happens if you contract to sell 5,000 bushels of soybeans at an attractive price, on top of what you've already sold, and come fall, you can't deliver that 5,000 bushels due to a horrible farm growing season? It's a worst case scenario, but it's happened before. John J. Schwarz, II, Stroh, a farm lawyer, thinks it's a situation you should consider every time you pick up the phone or dial your cell phone and sell grain on forward contract to your local elevator.
Most of the time things go smoothly on the farm. But what happens if they don't? Schwarz will go into depth on this subject in the upcoming June issue of Indiana Prairie Farmer magazine. In the meantime, here's a preview. This information is provided for information purposes only, and does not constitute an attorney-client relationship, Schwarz clarifies.
While you can contract over the phone and not put anything in writing at that point, the elevator handling the sale is required to send you a written contract in a reasonable time. Once you get it, if you're the farmer doing the contracting, you have 10 days to object to the terms in the contract.
Most people would be tempted to throw it on the farm office desk or in a file and not read it. Legal jargon makes up a good part of most of these contracts. However, Schwarz says that it's worth your time to read through it. The contract will specify what happens if you're unable to fulfill the contract. Often, it may depend on why you can't fulfill it.
Schwarz has seen some contracts that highly favor the elevator in these situations should something go wrong, instead of being beneficial to the farmer. If you did not read it and object within the allotted period, then you're obligated to live by the rules within the contract.
There are federal rules that govern these contracts. Look for more information in the upcoming issue.