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News Roundup – for Jan. 10, 2011

TRADE

EU IS OPEN BUT NOT EASY TO ACCESS

After decades of wrangling with the EU over its refusal to import hormone-treated beef Canadian beef producers finally gained access to a 20,000-tonne annual duty-free quota in late November.

The quota was negotiated by the U.S. in 2009 as compensation for retaining the ban on hormones after it was overturned by the WTO. Both the U.S. and Canada brought the case against the EU but it was the U.S. that negotiated the duty-free quota. Under WTO rules once a MFN (most favoured nation) quota has been established by one country, others who meet the import requirements can apply for a share. Australia already has access to it and Argentina and Uruguay are negotiating for a piece of it as well.

The agreement provides the key to the EU market for beef producers but there are still plenty of hurdles to overcome before the trade can become anything more than a trickle.

The first item that needs to be addressed in Canada’s restrictive import protocol. It was negotiated in 1996 to cover shipments under the old 11,500-tonne quota available with a 20 per cent duty to North America producers.

An industry/government committee has been working on a proposed new Canadian protocol for the last year and a half in parallel with negotiations on the U.S. quota and it should be submitted to the EU early in the New Year. In brief it asks that Canadians be treated like Americans.

Under the current rules every load of Canadian cattle raised for the EU must be checked by a government-approved vet to certify they were raised without hormones. Americans need only have their records and paperwork audited once or maybe twice a year by a vet.

All Canadian cattle must carry a RFID identity ear tag but those bound for the EU require a separate $6 tag to mark them as free of synthetic hormones.

The Europeans’ distrust of carcass pasteurization and antimicrobial washes is another sore point with North American packing plants. Most plants of any size routinely rely on these measures to reduce the number ofE. coli 0157organisms that could end up in the trim. The EU quota basically covers cuts so any plant dealing with that market will have to dispense with these precautions on lots bound for Europe and find some other market for the trim left behind.

Cattle raised for the EU must be raised without implants from birth, tagged no later than six months of age and raised and processed together. The paperwork burden is also significant.

There is a reason why Canada only has two small plants and three producers certified to ship beef to the EU. Others have signed up but most dropped out after a year or two.

Still, as Canadian Cattlelmen’s Association president Travis Toews put it, “The European Union is a high-income market willing to pay the higher cost of beef produced from cattle without growth implants.” So there are bound to be some Canadian operations willing to deal with the hassle of going after that market.

Those that start now will have a year or so to start building a name for their product with European buyers before they ship their first load. The burden of remaining a certified supplier should be lowered by then.

Further steps to come include increasing the original 20,000-tonne quota to 45,000 tonnes in 2012 and a staged addition of a further 3,200 tonnes for a total MFN quota of 48,200 tonnes.

POLICY

ONTARIO BEEF PRODUCERS WANT THEIR OWN INSURANCE PROGRAM

Ontario Cattlemen’s Association president Curtis Royal led a telephone town hall meeting of 1,700 beef producers in December to drum up support for the association’s proposed new risk management program.

Beef and hog producers recently joined forces to lobby the federal and provincial governments to partner with them to create separate hog and cattle price risk insurance programs (CPRIP) similar to the provincial plan recently implemented for grains and oilseeds.

Despite the recent turnaround in cattle prices, the OCA is seeking an insurance program to stabilize the industry. As Royal noted to his party-line audience Ontario’s beef cow herd has declined 18.4 per cent since 2003, battered by BSE and a strong Canadian dollar that increased competition from imported beef. The current AgriStability program alone won’t sustain the industry.

The proposed insurance program would see Ontario farmers in the beef and pork industries pay premiums to the government representing 30 per cent of the long-term cost of the insurance program on a voluntary basis with government sharing the rest on a traditional 60/40 federal/provincial split.

The OCA presented its proposal to the provincial agriculture minister in September. It calls for three separate voluntary insurance programs aimed at the cow/calf, backgrounding and feedlot sector.

The cow-calf payment will be calculated twice yearly May 31 and November 30 to cover spring and fall calving dates, based on a target 550-pound calf. Baseline support is the difference between the Keady market average price for a special-sale 550-pound steer or heifer, and the support price with a slide for calves below and above the target up to 700 pounds, on a per-pound basis.

Backgrounder payments would be calculated weekly as the difference between the weekly average price for eight-weight steers and the support price established the week the cattle were placed on feed, times the weight sold up to a maximum 1,000 pounds.

Feedlot payments would be calculated weekly by the difference between the provincial weekly average price for finished steers and the support price established the week the cattle were placed on feed, times the weight sold.

No specific coverage is offered on mortalities.

Support prices are to be set by committees drawn from industry and government but few details were available on how they would be calculated.

Coverage would be restricted to beef breeds and cattle owned by an applicant for a minimum 75 days.

CPRIP is voluntary but eligible producers must attend a Verified Beef Production workshop, establish a client relationship with their veterinarian, and register a premise ID. Feedlot operators must also take a course on hedging using options while cow-calf producers must vaccinate the cow herd annually with modified live vaccine and age verify, castrate and dehorn their calves.

The OCA favors retaining the Agri-Stability program with payouts tied to the better of the provincial portion of AgriStability or CPRIP.

HISTORY

OH RANCH ON THE BLOCK

By December, representatives of the estate of the late Daryl K. (Doc) Seaman had sold two of the four Alberta holdings of the historic OH Ranch headquartered at Longview, Alta. The asking price for all four — OH Longview, OH Pekisko, OH Bassano and OH Dorothy — was $49.2 million.

The OH Pekisko winter range, eight miles south of the home ranch, was sold in September, with possession in November. The sale of OH Bassano ranch land and cattle closed October 1.

The new owners of OH Bassano, operating under the name of OH Ranch Bassano Division, held a complete dispersal of the herd of 500 ranch-raised bred females and 200 bred heifers at the Bow Slope Shipping Association market in Brooks Dec. 15.

OH Ranch manager Todd Snodgrass says the herds at Longview and Dorothy remain intact and OH will continue ranching operations at those locations until such time as they are sold.

The conservation easements on the deeded land and designations to protect the Crown land will remain in effect upon sale of the properties. A conservation easement is registered against the land title to limit the amount and type of development that can occur on the property from that time forward. Activities that conflict with the management plan and grazing activities are not permitted.

Within the two years prior to his passing in January, 2009, Doc Seaman had placed conservation easements with The Nature Conservancy of Canada and the Southern Alberta Land Trust Society on more than 10,000 acres of the Longview and Peskiko deeded properties. A conservation easement on 1,865 deeded acres and a special areas grazing lease on 16,687 acres of Crown land at OH Dorothy is held by Ducks Unlimited Canada, with another special areas grazing lease on 1,149 acres subject to the requirements of the Hand Hills ecological reserve management plan.

Some 10,200 acres of Crown lands surrounding OH Longview that have been leased continuously by OH Ranches’ various owners throughout its 127-year history were officially designated and named OH Ranch Heritage Rangeland by the Province of Alberta in September, 2008. It was the second protected heritage rangeland site in the province and the first to couple the protection of Crown land with private land under conservation easements to be managed together.

Doc Seaman’s impetus for creating the conservation easements and seeking ways to protect the Crown land was his desire to preserve the unique ecosystems and the traditional ranching way of life for generations to come.

For more information about OH Ranch and the sale conditions with the schedules of equipment and stock, visit www.ohranch.com or call the listing agent, Barry Black, at 403-601-6679.

POLICY

FEED ASSISTANCE FOR WET MANITOBA PRODUCERS

Flooded Manitoba cattle producers can now claim AgriRecovery payments for feed and freight under the long-delayed Canada-Manitoba feed and transportation assistance program signed in mid-December.

The program covers breeding herds of beef cattle, bison, elk, sheep, goats, llamas, alpacas and horses owned or leased for urine or meat production.

Feed purchased to replace drowned out forage stands is covered up to $30 per ton with a 10 per cent deductible to account for “normal variability in forage production.”

Payments to offset freight costs for hauling feed to a herd range from 22 cents per tonne/mile for straw, hay and green feed to 16 cents for silage and 12 cents for concentrate. Those who hauled livestock to feed can claim 10 cents per head per loaded mile for breeding cattle, bison, elk and horses, six cents for calves and feeder cattle and four cents for sheep, goats, llamas and alpacas.

Payments are capped for trips between 25 and 350 kilometres.

There was nothing announced for feedlot owners who had to haul feed or rebuild pens ruined by excessive rain.

The payments are eligible revenues when calculating program margins under the AgriStability program

For information or forms go online to www.gov.mb.ca/agriculture.

LEGAL

B.C. CITIZENS WEIGH IN ON ANIMAL HEALTH LEGISLATION

British Columbians have been invited to participate in a review of the province’s animal health policy and legislation during a 60-day web-based consultation, announced by Agriculture Minister Ben Stewart last month. The deadline for feedback is Jan. 23, 2011.

“It’s essential that B.C.’s animal health management system is responsive and that it safeguards both animal and human health, and the economic well-being of farmers and ranchers,” said Stewart. “I’m really encouraging members of the general public and anyone with an interest in animal health to take part in this review.”

The review focuses primarily on the 50-year-old Animal Disease Control Act and related legislation, regulation, and policy. The Animal Disease Control Act which is B.C.’s central animal health statute is over 50 years old.

For more information visit: www.agf.gov.bc.ca/ahb.

PACKERS

SASK. SHEDS MELFORT MEAT PROCESSING FIRM

The Saskatchewan government’s two-year search for a buyer for its cash-losing Thomson Meats plant at Melfort has ended in the company’s head office.

A company led by current Thomson CEO Paul Kowdrysh will pay $246,972.05 for the meat packer and assume all debt and liabilities.

The province slowly became Thomson’s owner between 1996 and 2007, investing about $11.9 million through grants, debentures and share purchases by various provincial agencies and programs. In that time the province never recorded a profit, collected any dividends, or repayments on its debentures.

Thomson Meats opened the facility at Melfort in 1982 and upgraded it to a federally inspected meat plant in 1991 but by 1995 it became weighed down by debt. The province became the majority owner in 1998.

In announcement the sale the province reported an overall write-down of assets of $2.075 million.

ASSOCIATIONS

WSGA SETS OUT ITS POSITIION

Concerned about a loss of infrastructure brought on by the continuing drop in cattle numbers the Western Stock Grower’s Association (WSGA) has put out a position paper proposing six solutions to help encourage a turnaround for the industry.

“What we have now is sort of a good news/ bad news scenario,” says the WSGA document. “As Canadian cattle numbers shrink, cow-calf producers will receive more for their calves. Unfortunately our industry may have overshot the critical mass mark in terms of numbers of cattle needed for a vibrant industry. As cow-calf producers exit the industry a ripple effect continues further down the chain causing a reduced need for truckers, suppliers and medium-size feedlots. Some western Canadian auction markets may be the next to go with significantly reduced cattle numbers.

“Fewer numbers will mean harder start up conditions for new value chains and value added beef processors. What we don’t want to see is Canada continuing to lose critical infrastructure and becoming a big pasture producing feeders for the U.S. market.”

Facing these conditions the WSGA recommends:

Governments reduce the regulatory costs imposed on the industry that now run in excess of $150 per head.

“Instead the federal government is drafting legislation for a national traceability framework. High regulatory costs make it very difficult to compete globally, and so these costs must be reduced in order for Canada to be competitive.”

Deal with Canada’s protectionism of the auto industry and supply-managed agriculture.

“Both industries have severely hampered potential trade deals for fed beef. On Dec. 3, 2010, the U.S. announced a negotiated reduction in tariffs for South Korean trucks and cars in return for greater beef, chicken, and pork access. We, as producers, need to ask ourselves if the Canadian Cattlemen’s Association has pushed our federal government hard enough on these issues.”

The industry itself needs to stop being self-adsorbed.

“Last week the big news in Alberta was the reinstatement of non-refundable provision for the one dollar per head national checkoff. The big news globally was the U.S./South Korea trade deal which will see the elimination of a 40 per cent tariff on imported U.S. beef. That Korean duty is calculated on the import value of the processed beef and could easily equate to $1,000 per head on a carcass equivalent basis. Canada spent the summer focused on reorganizing our marketing tool chest (BIC and CBEF) while the Americans simply went out and made a deal — what appears to be a good one at that.”

Realize that you gain new markets only by incremental access.

“Not all beef from every Canadian animal will qualify for every market, and that is okay. That is how we have achieved access in the markets we have regained since 2003.”

Participate in diversified or niche markets that are critical to the future survival of our industry.

“These markets may vary from Halal, hormone free, organic, grass fed, all the way to a value chain’s ability to provide full traceability for the latest Canada/China deal that Canadian commodity beef was shut out of.”

Value chains have been severely hindered by the lack of co-operative processing facilities.

“Our two major packers are focused on north/south commodity beef trade in North America, and are unable to respond to new emerging markets. What may be needed is an incubator type of kill and processing plant capable of handling varied small product runs, but with enough capacity to sell left over beef cuts into the domestic commodity market.”

The paper says cattle producers have responded appropriately to market signals by reducing supply in the face of ongoing losses that have eroded equity beyond a tipping point. “Excluding breeding cows from the CAIS Inventory Transition Initiative, long-list SRM policy, and stronger Canadian dollar haven’t helped. However, markets are also forward looking. Producers’ response to the lower cow herd will be, in part, determined by government and industry initiatives that implement the proposed solutions.”

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