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Refundable Anxiety

The Alberta Beef Producers annual meeting last month was all about money, or more properly, the lack of it. Right when prices are rising across the industry, ABP is tightening its belt in anticipation of what producers will decide to do with their checkoff this month.

Producers have until the end of January to apply for a refund of the $2 provincial checkoff. With the agreement of ABP and the Alberta Cattle Feeders Association (ACFA), the province passed a regulation in late November that split the province’s new $3 refundable checkoff into a non-refundable $1 national levy to pay for marketing and research, and a refundable $2 service charge to pay for the lobbying efforts of ABP and the Canadian Cattlemen’s Association (CCA).

It would be easy to say that the refund serves as something of a vote on the performance of ABP and the CCA. But that would be unfair. The dynamics of this decision are much more complex than a simple vote.

It is both an economic and an emotional decision. Do you leave your money in to support the work of these industry groups or take it out? This is the second round of refunds since the Alberta checkoff was opened up last April. In the first go-round 400 producers took back $1 million or just over 38 per cent of the checkoff collected from April 1 to June 30. Larger operations over 1,000 head took a little better than $800,000 of it. In that round producers received the full $3. This compares to a refund rate of 19 per cent in Manitoba last year and four to five per cent in Saskatchewan in recent years.

In this second round producers can still claim a refund of $3 per head from July 1 to the end of November when the new regulation came into force, and $2 from December onward. This is also the time when we will find out how Alberta cow-calf producers are seeing this issue since this refund period covers the second half of 2010 when most of the calves are marketed.

The stakes are high. Alberta’s checkoff brought in $13.4 million in the fiscal year ending March 31, 2010. Of that about $4.5 million went to pay national marketing programs and research and another 1.8 million for the CCA and trade advocacy programs in Ottawa, Washington and the WTO, including $200,000 for a legal contingency fund.

This year, 2010-11, the ABP adopted its first pay-it-forward budget of $5.6 million, an amount they already had in the bank. The legal contingency fund went to zero and trade advocacy funds were trimmed but not the CCA allotment.

Now jump ahead to 2011-12. The national marketing and research funds are non-refundable but the CCA’s allotment is cut to $1 million from $1.5 million to help get the ABP budget down to $5 million. Two million of that is paid forward from previous years, and the ABP is confident that the other $3 million will easily come from this year’s checkoff. That would be a refund rate of roughly 50 per cent but nobody knows what that amount will be until sometime in March when the refunds are mailed out.

The ABP isn’t the only group that is looking for refundable checkoff funds. The Alberta Cattle Feeders Association and Western Stock Growers’ Association (WSGA) have been encouraging producers to direct at least some of the $2 per head refund their way.

ACFA is asking producers to contribute to its positive basis fund. The cattle feeders kicked the fund off in October with $250,000 in seed money. It is designed to help producer-driven value chains develop offshore markets by chipping in on the freight. The goal is to tighten the basis by reducing the number of cattle going to the U.S. ACFA pays 50 cents per kilogram on the beef up to $50,000 in year one and $25,000 in year two. Some of the refund money could go to setting up ways to connect branded-beef producers with processors and potential clients.

The WSGA recently put out a policy paper on solutions to deal with the declining inventory numbers as a way of raising its own profile.

In response to this competition, ABP created a loyalty program for beef producers in the form of a card that entitles the holder to discounts from suppliers Dow AgroSciences, Unigroup, UFA, ATB Financial and possibly John Deere in the future. The card is available to all producers in the province but will eventually be restricted to those who don’t request a refund.

With cattle numbers falling the total amount of levy being collected will go down in any event, but that will be a fairly small change compared to the adjustments that will have to be made if refund requests are sizeable.

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TheAlberta BeefProducers willbewatching themailin January

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Gren Winslow

Gren Winslow is a past editor of Canadian Cattlemen.

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