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An Explanation on how Act of God works!
What is Act of God? Act of God (AOG) is a contract that provides the farmer with some coverage in the act of weather events. Most AOG contracts do have provisions that provide the buyer with some benefits too.
What commodities do we find AOG contracts on? Mostly it’s specialty grains such as Flax, Peas and Malt. These contracts may exist on any grain out there though. Just ask, you never know.
What to look for in an AOG contract. Buyers should be stating how many bushels to the acre you are contracting, state that amount, eg: “5 bushels to the acre”. Why is this important? Because some buyers have terms that they have the first right of refusal on overage and how do they decide at what point overage starts?
Tonnage, again make sure that you know what the actual amount of tonnes you are expected to deliver.
The actual acres that you are contracting and the number of acres that you are doing. If you read through the terms of some of the contracts you may notice that they do have the rights to come and inspect the acres if there is an Act of God. As well, this also limits other fields that you can contract out.
Do the buyers require you to have crop insurance to sign up for an AOG contract? Some buyers have this as a term to ensure they can capture all the information they need for production.
Most buyers want to know if any incidents have occurred within a certain time frame, usually 7 days. Make sure you document this and keep documentation.
Now we get into the parts of how this can benefit the buyers. Every contract is different, make sure you read the terms. Buyers will have terms that they will have first rights to overage. With this they also have to match current market value. Make sure you know what the terms are about and how to navigate selling your additional tonnage.
What happens if your grain doesn’t meet the specifications that were contracted? Are you discounted? Released from the contract? Are you required to do all things possible to bring it to spec? At what cost?
I hope this helps you to navigate the muddy waters of Act of God contracting. The most important thing to remember is make sure to read all the terms of your contract. If you have questions that’s what we’re here for.
Susanne Leclerc
