Farm Credit Canada - March 14, 2008

Note from Editor Kevin Hursh & Associate Editor Allison Finnamore

Last week, AgriSuccess Express carried an article about the British Columbia berry season holding promise for the upcoming growing season. We regret that we incorrectly identified the place of work of Jesse Brar, one of the sources quoted in the story. Brar is employed by Pacific Coast Fruit Products.

Looking at this weeks edition, Market Focus is taking a one week break. Mike Jubinvilles column will return next week.

Your comments are always welcome. Email us at kevin@hursh.ca.

The federal government has extended the deadline for applications to the $600 million kickstart to the AgriInvest program. The new deadline is April 14.

To assist producers in the transition to the new suite of business risk management programs, the federal government is providing a one time contribution of $600 million to kickstart AgriInvest accounts.

The majority of producers do not need to apply to the program and have already received a letter explaining their benefit. Producers who have not received a letter need to apply by the April 14 deadline.

For more information or to obtain program forms, producers can call, toll free, 1-866-367-8506 from 7 a.m. to 6 p.m. CST, Monday to Friday, or visit www.agr.gc.ca/agriinvest.

In Quebec, the program is delivered by La Financière agricole du Québec. For more information, producers can contact La Financière agricole at 1-800-749-3646 or visit www.fadq.qc.ca.

Manitoba, with funding from the federal government's new Community Development Trust, is investing $14.7 million to support cattle producers dealing with a range of challenges including high feed costs, a decline in livestock prices and a high Canadian dollar.

The province is contributing $7.35 million in support while an equal amount has been allocated under Manitoba's share of the new federal program, designed to help provinces and territories assist communities and workers suffering economic hardship caused by the current volatility in global financial and commodities markets.

Under the assistance program, Manitoba cattle producers will receive a direct payment of up to three per cent of historical net sales. The payment, to be administered by the Manitoba Agricultural Services Corporation, will be provided to all ruminant producers.

Nova Scotia’s beef industry will develop a long-term vision and strategy. In P.E.I., funding will help producers adjust to current market conditions and develop improved genetic quality in their herds.

The Nova Scotia funding goes directly to producers through the provincial Department of Agriculture's Programs and Business Risk Management Division. In P.E.I., beef producers will receive $3 million.

Nova Scotia Cattle Producers (NSCP) presented the Department of Agriculture with a number of priorities necessary for a revitalized beef industry in Nova Scotia.

“This financial support . . . will help put the Nova Scotia cattle sector on a path to economic self-sustainability,” says Greg Sheffer, president of NSCP. “Nova Scotia Cattle Producers is committed to working on the development of a solid strategic plan that we expect to have ready in June.”

The province will also help NSCP implement the priorities identified in the strategic plan. One priority is to support Atlantic Stockyards Limited in Truro, where beef and other livestock are sold.

In Prince Edward Island, support will be provided for producers over three years to improve the genetic quality of their herds. The provincial agriculture minister points out that this will increase the quality of cattle for feedlots and the grade of cattle marketed through Atlantic Beef Products, the region’s only federally inspected beef processing plant.

Livestock breeders forced to sell all or part of their herd in 2007 due to drought conditions in parts of Ontario, southern Saskatchewan, southern Alberta and southern British Columbia are eligible for a one-year tax deferral on 2007 income from these sales.

The deferral was made after the federal government reviewed the forage yield, precipitation, soil moisture and water supply data for the 2007 growing season. In the case of consecutive years of drought designation, producers may defer sales income to the first year in which the area is no longer designated.

Thirty per cent of income from net sales can be deferred if the breeding herd has been reduced by at least 15 per cent, but less than 30 per cent. Where the herd has been reduced by 30 per cent or more, 90 per cent of income from net sales can be deferred. This will help replenish breeding stock in the coming year.

Eligible producers will be able to request this deferral when filing their 2007 income tax returns. Livestock producers are advised to contact their local Canada Revenue Agency tax services office for details on the income tax provisions.

Feed barley price prospects have improved due to a large import subsidy initiated on March 5 by the government of Saudi Arabia. That country is the world’s top importer of feed barley.

According to the Canadian Wheat Board, Saudi consumers had been using wheat flour and other grains as substitutes for feed barley, but the 71 per cent increase in the import subsidy should restore the demand for feed barley and increase the price in global markets.

On Feb. 28, the CWB dropped the Pool B feed barley Pool Return Outlook for the current crop year by $7 a tonne. Now, due to the move by Saudi Arabia, the CWB has taken the rare action of a mid-month PRO increase of $23 a tonne for Pool B, which covers the second half of this crop year.

After deducting average freight and handling for each province, the expected price is now $4.41 a bushel in Manitoba, $4.60 a bushel in Saskatchewan and $4.76 a bushel in Alberta.

A Guaranteed Delivery Contract is available with 100 per cent acceptance and delivery call by May 2. The sign-up deadline is May 2 or until sufficient tonnage is committed.

The PRO is only an estimate of the total return and producers with feed barley to sell will have to weigh that against prices that are available for off-board domestic sales.

The Saskatchewan Pork Development Board has issued a release to let producers know the progress of the Cull Breeding Swine Program announced on Feb. 25 by the federal government. It is expected the $50 million program will support a 10 per cent reduction in the number of sows across the country. However details are still being finalized.

Sask Pork advises the producers who intend to take part in the program to continue marketing animals through regular commercial channels, but to retain all records.

That was producer Ernie Mutch’s reaction to an announcement that the Prince Edward Island government plans to slow down an ethanol plant slated to be built this year. Atlantic BioEnergy wants to build an $85 million facility that would convert sugar beets to ethanol.

Mutch took part in a pilot project for the company last year, growing an acre of sugar beets. He was prepared to expand his acreage this year. Mutch, and other growers who participated in the pilot project, formed an association and were in the process of negotiating a price with the company when the government decision was announced.

Atlantic BioEnergy selected a site near the Confederation Bridge in Borden-Carleton for the plant. They intended to start construction this summer with commercial production beginning in the fall.

Instead, Premier Robert Ghiz has scheduled the public consultations for this spring and summer, with a decision on whether to allow Atlantic BioEnergy to proceed being made before the end of the year.

Mutch is worried the issue may be a moot point by then. He’s no longer planning to grow sugar beets this year and doesn’t expect anyone else will either. That will probably mean federal funding available to help producers convert to biofuel crops will disappear. He says he wouldn’t be surprised if Atlantic BioEnergy starts looking for a new home.

“This held great opportunity for producers,” he said. “If we can’t make money raising crops for food, why can’t we have the chance to raise crops for energy?” Mutch wonders.

The premier announced the consultations following a meeting with the Council of Canadians, a lobby group against the project. He says the meeting raised several issues like the impact on the environment and groundwater and he would like answers before giving the green light to proceed.

Mutch worries the government decision to delay the project will put he and his fellow Island producers at a disadvantage, especially when more fuel-based crops are being produced around the world. Growers are now trying to arrange a meeting with Premier Ghiz and Agriculture Minister Neil LeClair to tell their side of the story.

“I also want to hear their reasoning for delaying the project,” Mutch says. “This was a project that was to be built entirely with private money – that doesn’t happen very often in P.E.I. for a project of this magnitude.”

Opposition Energy Critic Michael Currie says the province is putting agriculture producers behind the eight ball by making the announcement just weeks before spring planting.

James Richardson International Limited (JRI) is expanding its facility in Hamilton, Ont.

The facility will increase its capacity by almost 55 per cent with the addition of 15,000 tonnes of storage space. Once construction is complete, the facility will have a total storage capacity of 43,500 metric tonnes.

“The Hamilton facility is vital to our Eastern Canadian operations,” says JRI President Curt Vossen. “Its strategic location allows us to source a variety of agricultural commodities from Eastern Canada and deliver grain to global destinations.”

JRI, a subsidiary of James Richardson & Sons, Limited, says it is Canada’s largest privately owned agribusiness. It handles all major grains, oilseeds and special crops, and sells crop inputs and related services through farm service centres throughout Canada. JRI, which has 1,300 employees, is also involved in food processing through its subsidiary, Canbra Foods Ltd. The announcement to expand the Hamilton facility follows notices in February of expansions to seven of its Pioneer Grain facilities in Western Canada. Construction at the Hamilton facility is underway and is scheduled to be completed in July 2008.

Quebec maple syrup producers are hoping for a sweet harvest this spring to cash in on high prices and restock record-low reserves, says the head of their federation.

“We need -- we’re due -- for a good year,” says Serge Beaulieu, president of the Fédération des producteurs acéricoles du Québec. Production last year was at 23 million kilograms of maple syrup – 17 million kilograms less than the amount of syrup sold on domestic and international markets in 2007.

According to Beaulieu, last year was the second consecutive year that Quebec producers had poor harvests. That led to a drying up of reserves early this month, a first in the Quebec industry since 2002.

Normally, reserves are around 30 million kilograms, or the equivalent of a year’s production. Although maple syrup accounts for just two per cent of agricultural activity in Quebec, the province accounts for roughly 80 per cent of the world's maple syrup supply and more than 90 per cent of Canadian production.

Beaulieu says both a 15 per cent jump in export sales and a 50 per cent increase in sales in Quebec last year are to blame for what is essentially a sweet problem.

This year’s maple syrup harvest will soon be in full swing across the province and producers feel the odds are in their favour.

One reason is that industry has never experienced three bad years in a row. Also, most areas of the province have received record amounts of snow this winter. While adding a burden to producers, who have to clear snow away from trees in order to install their sap lines, it has kept the ground well insulated, meaning that sap should begin running sooner and stay running longer.

Canadian pulse producers continue to face market access challenges, according to Carl Potts, director of market development with Pulse Canada. Potts recently spoke to the Alberta Pulse Growers, and noted there are two main market issues facing Alberta growers.

The first is the export of yellow peas to fill what seems to be an insatiable demand in India. Potts says there is a gap between Indian production, which has remained relatively flat over the last five years, and a growing population that continues to push consumer demand well beyond domestic supply levels.

“Canada is coming to the forefront to deliver,” says Potts. In fact, Canada has become the world’s largest exporter of peas and lentils and India currently the largest importer, followed by China, Bangladesh and Pakistan. An estimated 96 per cent of Canadian pulses are produced on the Prairies.

But Potts says a technical barrier to trade with India currently costs the industry about $30 million a year. The issue revolves around India’s phyto-sanitary requirements to protect their plant health and environment from pests that could potentially arrive with imported pulses.

New rules came into effect in 2004 requiring Canada to test shipments to ensure they are pest-free as well as to fumigate each load. Potts says these requirements are adding a risk premium into the supply chain.

Pulse Canada worked successfully with India to have the fumigation done in India. This helps reduce costs, since the fumigations cannot be done in Canada year round because the temperatures are too low for a good part of the year, Potts explains.

“We are working to find a permanent solution that will assure India there are no pests being imported but without unnecessary risk and cost in the system,” he says.

The second issue concerns the market for beans in Mexico. In 1994, the North American Free Trade Agreement imposed a tariff rate quota, which has gradually been reduced to the point where it was eliminated as of Jan. 1, 2008. Industry remains concerned that the tariffs could be renegotiated.

Potts says now that the market is completely open, they are expecting to see a rebalancing effect in Canada. With bean consumption declining in Mexico, Pulse Canada is working directly with growers and government to look at ways to increase the demand for beans.

For more information, check out the Pulse Industry in Western Canada report at www.agric.gov.ab.ca.

Ontario’s fresh market vegetable producers have a new production insurance (PI) program available for the 2008 crop year.

Agricorp announced the Fresh Market Vegetable-Acreage Loss (FMV-AL) program. It is modeled after a similar program available in Quebec and was offered last year as a pilot project.

It has been an ongoing challenge for the province's horticulture industry and government to develop effective programs for Ontario’s fresh market vegetable producers. Part of the difficulty is the variety of crops and the fact a handful of growers may grow a certain crop.

Debbie Brander, an account lead of product management and industry relations with Agricorp, says producer premiums for PI programs would not be stable because there is only a small pool of liability.

“By basketing vegetables according to agronomic similarities, it is offering a chance to have a larger liability pool and more stable premium rates,” she says.

New crops, such as garlic, sweet potatoes and green peas have also been added to the 2008 model.

Brander says an important distinction between traditional PI plans and the new offering is that FMV-AL isn't based on guarantee of average farm yield, but on acreage.

“These plans are comparing your crop to a predetermined threshold that is set and it is basically covering severe loss to get you back to meet your cost of production,” she says.

Claims are paid if crop is damaged because of an insured peril and yield does not meet the threshold level – key, she says because of the uniqueness of the horticulture industry. Damage to an acre of fresh market vegetables could have impact based on the small acreage.

Brander says the program allows producers to market the salvageable crop, even if a claim has been granted by an adjuster.

Although the horticulture industry is pleased they have another tool at their disposal, some producers are disappointed that this program will replace the Self-Directed Risk Management program. The horticulture industry considered it to be effective for their unique needs.

There are only 400 spots available for FMV-AL for 2008, on a first-come, first-serve basis. The application deadline is May 1.

Agricorp is offering a series of kitchen-style meetings throughout the province where the new program will be available. More information about the program, including crop plan fact sheets are available from Agricorp at 1-888-247-4999.

Farmers searching for ways to satisfy Canada’s highly segmented but hungry meat-consuming public are a big step closer to understanding what those buyers want.

The first of three comprehensive reports from an Ipsos-Reid study of consumers’ meat purchase habits was released last week, showing the most influential buying factor is broad acceptance at the dinner table.

The study says those who prepare meals are more likely to buy something everyone will eat.

And while that sounds straightforward, the challenge to the meat industry – and farmers who supply it – is determining who is seated at the dinner table. It’s no longer the conventional nuclear family, nor is it a racially homogenized demographic.

Rather, many of those consumers are new Canadians who are eating more foods that are traditional to them, such as lamb.

Their preference is showing in the ledgers of Canada’s 11,000 sheep producers. New Canadians helped lamb consumption soar eight per cent from 2006 to 2007, especially in British Columbia, Ontario and Quebec, which coincidentally are Canada’s hotbeds for immigration.

That consumption pattern is likely to continue into this year, says Jennifer Fleming, executive director of the Canadian Sheep Federation.

“Right now, we have such a shortage of product,” she says. “We can only fill about half of the domestic market.”

So she and other commodity managers must concentrate their efforts on where they’ll get the most return. In Fleming’s case, that means focusing on those people who already eat lamb, enticing them to eat more, rather than embarking on a whole new campaign to bring along fledgling lamb consumers.

“We’re trying to focus on being market driven, and we believe our market consists of people who already eat lamb,” she says. “This study has helped us identify what people want.”

The study, co-ordinated by the George Morris Centre, also noted that price and value drive consumers’ decisions. But those factors took a backseat to preference-based decisions.

“This information is critically important for meat producers to understand,” says Colin Siren of Ipsos-Reid. “It illustrates how [farmers’] products are positioned in the minds of consumers.”

Four Alberta-based beef industry groups have collaborated to launch a new beef market concept.

“Canada Gold Beef is a value chain that will pass profit and information up and down the chain,” says Cam Ostercamp, president of the Beef Initiative Group.

Canada Gold is based on the core principles of age and source verification and full traceability, combined with verified production practices structured to guarantee food safety, humane treatment of animals and environmental stewardship.

Ostercamp acknowledges that producers have been reluctant to invest in the age verification process to date.

“There has been no clear market signal that there is any benefit,” he says. But Ostercamp believes CG beef has the potential to demand a premium since extensive market research has shown an international market for age and source verified beef.

Ostercamp feels the Canadian beef marketing policy is currently aligned too closely with the United States Department of Agriculture, which does not want age restrictions on its exports.

According to Ostercamp, the CG concept provides an opportunity to pre-empt the U.S. marketing approach and move further into Asian and European markets that are looking at age verification.

“Beef producers are currently hindered by domestic policy,” Ostercamp says. “If Canada is serious, we need to decouple from the U.S. and stop being a clearing-house for cattle to the U.S. Why should we tie ourselves to one market when we can diversify to Asia and European Union?”

The CG system includes all levels of the production chain. Auction markets could have special CG sales or sell CG lots. Producers would be able to participate in CG lots at the feedlot level. Feedlots would have access to vaccination histories and could even separate lots with no hormone or implant treatments.

Ostercamp says the concept is designed around a custom kill approach where CG beef would be traced and identifiable. He believes that once there is a critical mass of CG beef, processors will vie for the product. He points out that the price won’t be set by the processor, but by a premium paid by willing foreign markets. The key to the concept is the sharing of carcass and other data all the way up and down the value chain to help build a better herd and respond to the needs of the international market.

Representatives of Alberta Cattle Feeders Association, Beef Initiative Group, Feeders Association of Alberta and Western Stock Growers Association have developed the initiative. For more information, check out the website at www.canadagoldbeef.ca

AgriSuccess Forums

They’re the biggest agriculture event of the year – do you have your ticket yet? These complimentary events feature industry leaders and inspiring speakers including Bernard Voyer, and Pierre Gingras. Join us in St-Hyacinthe, QC on March 19th. For a complete list of forum dates please click here.