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News Roundup – for Nov. 14, 2011

HEALTH

SASKATCHEWAN BVD PROJECT UNDERWAY

The Saskatchewan Stock Growers Association (SSGA), in response to direction from members at its 2011 AGM, has launched an initiative to demonstrate the advantage of implementing bovine viral diarrhea (BVD) control measures in cow-calf operations.

The two-year project began in October with funding from the Saskatchewan Ministry of Agriculture s (SMA) Agriculture Demonstration of Practices and Technologies (ADOPT) program. It is being led by Dr. Wendy Wilkins of the SMA s animal health unit, with input from SMA livestock specialists and SSGA s veterinary advisor, Dr. Andy Acton of the Deep South Animal Clinic at Ogema.

The first step will involve screening herds for eligibility from now through calving next spring. Participating veterinary clinics will take skin samples for BVD testing from aborted fetuses, sick animals and dead animals through the course of their everyday work with producers. The samples will be submitted for testing to Prairie Diagnostic Services lab in Saskatoon to identify persistently-infected (PI) animals. A limited number of herds with confirmed PI animals will be offered the opportunity to participate in the project.

Even though BVD may not be the apparent cause of illness or death, it is often an underlying cause, Acton explains. BVD PI animals are born from unprotected cows that contract the BVD virus during pregnancy. The fetus accepts BVD as part of its body and, therefore, will never be able to mount an immune response to the virus after birth. Most PI calves are poor-doers that die before or shortly after weaning, but some appear normal and live to become part of the breeding herd, in which case, their offspring will be PI.

The concern in cow-calf operations and feedlots is that PI calves perpetuate the disease cycle by continuously shedding large amounts of the BVD virus through their saliva, nasal secretions, feces and even their hides. It is believed that the virus can weaken the immune response to other infections in normal cattle.

Step number two will see further testing of the 2012 calves, replacement heifers and breeding bulls in participating herds before the start of the breeding season. Timing is of the essence, says Acton. If a newborn calf tests negative, then it is guaranteed that the mother is not a PI animal. Testing open animals, such as replacement heifers and breeding bulls, at the same time would complete a whole-herd screening test without having to sample all the mother cows. After breeding, all bets are off because you don t know the status of the unborn calves.

The veterinarians will work with the producers to establish BVD control measures by identifying the risk factors on each operation and looking at changes in management practices to reduce the risk. Some common risk factors include not vaccinating the breeding herd against BVD prior to breeding, buying bred cows and heifers of unknown BVD status because they could be carrying a Trojan BVD PI calf, buying in calves to background or yearlings to grass without effectively separating them from the breeding herd (including having separate watering bowls), and communal grazing.

Feedback from people involved in BVD control programs in the U.S. is that you can t test your way out or vaccinate your way out of BVD both have to work together, Acton says. Even if you do vaccinate regularly, it will be worthwhile to routinely test animals that get sick or die because that s where you will be most likely to find PI animals. Testing can help to validate the effectiveness of your control program.

The final phase of the project will be to test all 2013 calves and aborted fetuses for PI animals.

A cost-benefit analysis of the BVD control measures will be calculated for each participating herd. The producers will also offer their opinions as to the benefits and practicality of implementing a BVD control program.

A video and printed material highlighting the findings will be presented at industry meetings and made available to other industry groups and media.

FINANCES

TAX TIPS

When farmers are experiencing good crop yields at a time when both grain and livestock prices are historically high, their thoughts just naturally turn to taxes.

Alberta Agriculture tax specialist Merle Good recently offered several strategies farmers can employ to better manage their income tax liability in a higher than average income year. These include:

Prepaying for supplies A farmer may make a payment on account at one of his suppliers and leave this payment as a credit towards purchases to be made in the subsequent year. For the Canada Revenue Agency (CRA) to consider a pre-payment as a deductible expense in the year it is made, actual supplies should be purchased. This may be as simple as transferring title to the purchased inventory to the farmer, with delivery to take place at a later date, says Good.

Deferring agricultural commodity sales It is relatively common for farmers who report income on a cash basis to request a deferral of income from the sale of various commodities to the next fiscal period by way of a post-dated cheque. The CRA has expressed concern with these kinds of transactions when the purchaser was clearly in the position to pay for the products, cautions Good.

Increasing inventory Cash expenses can be increased (and farm income reduced) in a fiscal year by purchasing additional farm inventory. Farm inventory may include items such as crop inputs, machinery parts, and livestock.

Payment of wages Paying wages to family members is tax deductible and may be one of the best strategies for offsetting farm income. The first $10,000 of wages paid to a child is not taxable. In some instances the child can then lend a portion of the money back to the business to sustain working capital, provided there is an adequate paper trail for the wage and loan transactions.

There are also a couple of possible tax-planning and management strategies specific to the livestock producer, says Good. First, livestock producers may defer livestock sales through a public auction mart to a subsequent taxation year. Second, feedlots or purchasers of cattle who place their cattle in a custom feedlot, are required to own cattle for at least 60 days and/or increase their weight by 200 pounds to be considered by CRA to be in the business of farming. If you purchase cattle before your year-end, the 60 day holding period or 200 pound weight rule does not have to be met in the year of purchase, but can straddle two fiscal years. Good suggests Alberta producers considering year-end cattle purchases should also look at the new Cattle Price Insurance Program (CPIP) offered by Alberta Financial Services Corporation (AFSC) to manage risk.

Grain farmers also have a number of potential tax planning strategies specific to their operations.

Deferred cash grain tickets The use of a deferred cash grain ticket allows crop inventories to be sold in one year but not taxed until the subsequent year. When grain is delivered to a licensed public elevator or process elevator, a storage ticket, cash purchase ticket or a deferred purchase ticket may be issued. If a storage ticket is issued, no sale has taken place; therefore, income has not been received at that time. If a cash ticket is received, the sale has taken place, and the farmer is considered to have received payment at that time regardless of when the ticket is presented for payment. If a deferred cash purchase ticket is issued, and the ticket provides for a payment date after the end of the fiscal year in which the grain is delivered. The income for a deferred ticket may be reported in the following fiscal period.

Using deferred cash grain tickets to pay for expenses In some situations, a farmer may transfer a deferred cash grain ticket ( DCGT ) to a supplier, and the supplier accepts the DCGT as a payment on a purchase. In this situation, the CRA will still allow the deferral of income under the DCGT to the following fiscal period. This creates a tax advantage as the farmer could deduct the expense for the supplies purchased with the DCGT in the current year, yet not report the income under the DCGT until the following year.

CWB advances Cash advances received from the Canadian Wheat Board in this tax year are not taxable receipts and are treated as loans. The sale of grain to repay the advance should be reported in farm income at the gross amount before the reduction for the repayment of the advance.

These are just a few strategies that farmers should be considering prior to December 31, 2011, to make sure they celebrate a Happy New Fiscal Year at midnight!

MARKETING

CAB SALES UP FOR FIFTH STRAIGHT YEAR

Certified Angus Beef LLC, for the fifth consecutive year, reported record sales for its signature brand of beef reaching 807 million pounds by September, an increase of four per cent over the previous record in 2010 of 777 million pounds.

The brand s sustained growth, particularly during a period of significant economic downturn and rising costs across all segments of the industry, shows its value to consumers and producers, said company president John Stika.

A new Kansas State University study indicates demand for the CAB product has risen 56 per cent since 2002 compared to a 20 per cent increase for commodity Choice beef.

Stika noted the brand s growth was balanced, with increased sales of steaks, end meats and ground beef. Sales surpassed the 70 million pound mark each month during June, July and August of this year.

In the U.S. the brand s nearly 8,000 licensed restaurants enjoyed an 11 per cent increase in food-service division sales totalling 250 million pounds through September while 5,900 licensed retailers posted sales of more than 395 million pounds 49 per cent of the total.

Licensed CAB partners outside the U.S. netted record international sales of 90 million pounds a increase of 13 per cent over last year. Canada and Mexico are the strongest foreign markets.

Sales of branded value-added product including cooked, frozen sliced steak for fajitas, and meatloaf sliders, also set a sales record of 18.5 million pounds.

On the supply side the acceptance rate for CAB beef rose to 24 per cent in the U.S., the highest in 24 years, supplying 3.4 million head for the program.

MANAGEMENT

BIXS IS OFFICIAL

The Beef InfoXchange System (BIXS) is officially live nationwide for cow-calf producers to use heading into this year s fall calf run.

The system was created by the Canadian Cattlemen s Association as a means of improving the flow of performance and carcass information between producers and packers in hopes of making the industry more competitive on the world stage.

BIXS allows cow-calf producers to use individual animal ID numbers from the Canadian Cattle Identification Agency (CCIA) to record herd health management protocols, vaccination records and other data, and later, to call up detailed carcass information.

This type of information will help producers refine production methods to produce cattle with specific attributes that the market demands, the CCA said in a release.

The program is voluntary. To take part cow-calf producers need to keep records of their animals CCIA tag numbers and birthdates, either a calving start date or an actual birthdate, even if the cattle are sold.

That information is required at BIXS s cow-calf level for the animals producers to take part and, in turn, get carcass data later as the cattle move through the system.

Producer Judy Madden of Dawson Creek, B.C. said the system will give her a more complete picture of how her animals measure up by providing data on weaned calves. She can then add that to individual animal records already kept on birth, weaning and sale weights.

What we re missing is information on how those calves feed out and how they slaughter, Madden said in the CCA release. If we have that information to put with the rest of our information, then we could see what work we need to do on our breeding program.

Madden also noted the system s ease of use for any producer who wishes to take part. Those who don t have ready access to the Internet can have a third party enter their data in the BIXS system, she said.

The CCA has previously said it s working on tools for use within BIXS tailored to auction markets use. The association also has tentative plans to allow markets to provide strategic messaging on pending sales and events to producers who have specific animals and protocols, or are in specified geographical areas.

A feedlot interface with BIXS is also in development.

MARKETING

CHOICE-SELECT SPREAD MAY BE A WAL-MART ISSUE

Wal-Mart could be responsible for the unusual spread between Choice and Select cuts that has recently shown up in the U.S. market, according to Kevin Grier, the livestock and meat industry analyst for the Guelph-based George Morris Centre.

Writing in his Canadian Cattle Buyer newsletter, Grier noted that while the widening Choice/Select is not at record levels, it is unusual for the time of year.

Choice cattle should be more abundant relative to Select and demand for Choice should be seasonally easing, says Grier. Furthermore, the spread was behaving according to seasonal norms until August. Not only that, but over the summer, the spread was less than last year and less than average. The change therefore was dramatic and surprising.

The spread cannot be explained by any change in carcass weights as weights appear to be trending right around the average for this time of year.

Instead, he says, it appears to be a Wal-Mart issue. The company has begun to focus more on a Choice beef program, buying large quantities of upper two-thirds Choice beef. Packers are scrambling to meet demand, and at the same time, there is now relatively more Select product on the market than normal. This has not yet appeared to have much impact in Canada, but it should eventually result in a wider AAA-AA spread here. Choice product will be less available for food service purveyors, which should increase domestic packer pricing on AAA product. In addition there should be more Select product looking for a home that will be more available for Canadian grocery distributors.

TRADE

WE NEED AN FTA WITH SOUTH KOREA

The Canadian Red Meat Industry is calling on Ottawa to resume free trade agreement (FTA) talks with South Korea.

The move was not unexpected after the U. S Congress ratified three FTAs with South Korea, Colombia and Panama. The Canadian industry made its request to Ottawa on October 21, the same day President Obama signed the three agreements bringing them into force.

Canada s attention, however, is centered on South Korea.

The red meat industry, represented by the Canadian Cattlemen s Association, Canadian Pork Council, Canada Pork International, and Canadian Meat Council warned the majority Conservative government that any further delay in concluding a free trade agreement (FTA) with South Korea is likely to seriously affect the competitiveness of their industry.

Pork producers in particular have immediate concerns now that they must compete against duty-reduced U.S. pork. Canadian Pork Council chair Jurgen Preugschas says, An American study evaluated the benefits for the U.S. pork sector of an FTA between the U.S. and South Korea at US$10 per hog. Canadian producers will be foregoing a similar benefit and risk losing their existing position in the Korean market.

He says Canada s current pork trade with South Korea, projected at $300 million in 2011 could disappear, lost to competitors who enjoy FTA preferences.

South Korea has had a ban on Canadian beef since 2003 but there are signs it could be removed by the end of this year. At least that is the date Canada s agriculture minister Gerry Ritz has set for imports to resume if the South Korean government does not want Canada to reopen its case against the beef ban at the World Trade Organization. A WTO panel was about to rule on the case when both sides agreed to try for a negotiated settlement.

That makes the need for an FTA agreement all the more important to beef producers, says Canadian Cattlemen s Association president Travis Toews. Almost at the very moment we hope Korea lifts its prohibition on Canadian beef, they will be reducing the tariff on U.S. beef which could well negate our market access gain.

Canada began negotiating an FTA with South Korea, a market of 50 million people, in 2005.

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