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Alberta Brings Back A Mandatory National Checkoff

Shotgun marriages seldom last so it will be interesting to see how long the Alberta Beef Producers (ABP) and the Alberta Cattle Feeders Association (ACFA) will continue to agree on a mandatory national checkoff in Alberta.

An agreement the two signed last month under the watchful eye of matchmaker, Jack Hayden, Alberta’s agriculture minister, has a sunset date of Mar. 31, 2013. Until then Alberta Beef Producers will collect a $1-per-head national checkoff on every head marketed in the province and turn the money over to the national agency that funds the marketing, promotion and research organizations set up by beef producers.

What happens after that date is uncertain. The agreement says the performance of the organizations funded by the National Checkoff Agency will be reviewed annually by both groups but in 2013 they must agree to extend the agreement, “or provide alternative options to meet Alberta industry’s research promotion and market development goals and objectives.” In other words, the checkoff at that point will once again be the subject of negotiations.

We are told this agreement was the result of some difficult and intense negotiations. Both parties were reluctant participants so both had to get something out of it to come to the table in the first place.

The ABP gets a non-refundable $1 on every head marketed to support the national producer-funded organizations although the provincial $2 levy remains refundable. The ABP estimates a refundable national checkoff would cost the industry close to $22 million a year in lost funding due to the smaller number of matching dollars that could be leveraged out of government. That reduced level of spending on research, promotion and marketing would cost the industry a further $22 million in lost economic activity, says the ABP.

The ACFA gets a permanent seat on the National Checkoff Agency board, which disburses the money and a veto on the use of national funds for lobbying activities. Both groups also want to be represented on the working group looking into merging the Canada Beef Export Federation and the Beef Information Centre into a single marketing agency for domestic and overseas markets.

The agreement won’t mean anything until the province amends the ABP regulation. And that’s not expected to happen until later this month at the earliest so the entire Alberta checkoff will remain refundable for at least the first six months of this fiscal year.

The levy can be reclaimed twice a year in July and January. It only became refundable on April 1 so only the dollars deducted on cattle sold in the second quarter were claimed this July. In this first kick at the cat 393 producers claimed 38 per cent of the $2.7 million collected or a little over $1 million in total. Eleven big feedlots took half of it and the top 35 took two-thirds, so it is fair to say that feedlots are the biggest believers in refundable checkoffs.

The rest shared up an average $2,500 apiece but a few of those received a cheque for a much larger slice of the pie since the largest number of them sold fewer than 50 head which amounts to a $150 refund.

Of course, Minister Hayden doesn’t require any agreement to make this change, but he seems more interested in healing the rifts this issue has opened up within the industry than just dealing with the checkoff. He’s spent that last several months trying to convince the industry to agree on what needs to be done.

I suppose we could watch the refund rate on the provincial levy in future to see how well his plan worked out. A 38 per cent refund rate would be considered devastating in other provinces but the ABP seems to think it is livable. Their worst-case scenario was 50 per cent. If this 38 per cent rate holds they will be able to maintain their $5 million provincial budget for next year. This is well down from the $6.3 million spent in 2008- 09. The declining number of cattle around to market will also pare down the final number.

It is the provincial levy that pays for the lobbying efforts of the Canadian Cattlemen’s Association (CCA) at home and abroad, the legal fees to have lawyers fight off trade actions in Washington and services like Canfax and Alberta-only promotion campaigns. These are the things that now must be sized to fit the refund rate in Alberta.

I suppose some feedlots may use the refund as a way to make a statement about the performance of the CCA and ABP in recent years. In that event some of this money may find its way to the AFAC to enhance its lobbying muscle. If not, then I suppose it’s just good businesses to take the money while you can. Times are tough, after all.

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Cattlefeeders agreetoa three-year deal

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