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Beef Cattle Check-off Increase Approved with Broad Support from Delegates

Results from BFO's 57th Annual General Meeting

In Feburary, delegates attending the Beef Farmers of Ontario (BFO) 57th Annual General Meeting in Toronto approved an increase ($1.50) to the provincial portion of the beef cattle check-off in Ontario with strong support and a vote of 87 per cent in favour of the increase. BFO will begin the formal process of requesting that the Ontario Farm Products Marketing Commission amend Regulation 54 of the Beef Cattle Marketing Act. Upon approval, combined with the existing mandatory $1.00 per head federal agency levy, total Ontario check-off per head will be increased from $4.00 to $5.50 per head.

Of the approved increase, $1.25 will be dedicated to support a new joint venture between BFO and the Ontario Cattle Feeders’ Association (OCFA) and the development of a marketing committee that will be focused on increasing market penetration of Ontario-branded beef, both at home and abroad. The committee will provide support and promotion for all Ontario beef brands in regional, domestic and international markets by working with farmers and partners in the processing, retail and foodservice sectors. The remaining $0.25 will be directed to BFO for continued support of producer and consumer engagement activities. 

"We thank our membership for recognizing the importance of the increase. While we have a lot of work ahead of us, we believe the more focused efforts and dollars spent on increasing the demand and availability of Ontario beef in the marketplace will begin to improve all of our margins from the cow-calf sector through to the feedlot,” said Joe Hill, BFO President. “As an industry, rather than riding the unpredictable waves of the cattle market, we now have a plan to help change our path and to create more stability in our sector. The increased investment from our membership will benefit many farmers, both existing and beginning, for many years to come.” 

At the meeting this week, the Board of Directors of BFO elected their 2019 president and vice president. Joe Hill will continue to lead the association in the year ahead as president with Rob Lipsett continuing his role as vice president. 

Joining the BFO Board in 2019 are Don Badour, Mert Schneider and Ron Stevenson who will all serve three-year terms. Badour, who will represent the cow-calf sector on the board, resides in Perth, Ontario where he operates a cow-calf operation with his family. Schneider will serve as feedlot director, and will replace Tom Wilson who completed three terms on the board. Schneider and his family operate a feedlot and cash crop operation in Palmerston, Ontario. Lastly, Ron Stevenson was acclaimed to the position of southern director, and will replace Cory Van Groningen who completed two terms on the board. Ron and his family live in Walton, Ontario and operate a cow-calf and feedlot operation.

Returning to the BFO Board is Dave Cavanagh of Ennismore, Ontario who was elected by voting delegates to represent the eastern region of Ontario, and Dan Darling of Castleton, Ontario was elected to the position of at-large. Darling will replace Kim Sytsma who completed one term on the BFO Board. 

BFO Board of Directors and staff welcomed over 400 attendees at this year's AGM, including a number of Members of Provincial Parliament who attended the evening banquet. BFO was pleased to have the Honourable Ernie Hardeman, Minister of Agriculture, Food and Rural Affairs meet with delegates at the banquet. During Minister Hardeman’s address, he announced changes to the Ontario Feeder Cattle Loan Guarantee Program. The changes will reduce unnecessary and costly credit checks to better align with lender and borrower business practices and expectations. The revisions will also streamline the transfer of ownership of livestock once a loan is paid off, which will directly benefit beef farmers who are members of the program. 

“BFO has been working with the province for quite some time to address guidelines within the Ontario Feeder Cattle Loan Guarantee Program that didn’t align with current business practices of the program co-ops,” said Hill. “The changes will address many of the concerns we’ve outlined with respect to the operation of the program, and we appreciate the Minister’s continued efforts to reduce regulatory burden for our farmers.” 
 
BACKGROUND

Under Regulation 54 of the Beef Cattle Marketing Act, a compulsory check-off on per head sold by cattle farmers is payable to BFO to fund the Association. Packing plant operators, auction market operators and livestock dealers are required to deduct the check-off from the proceeds payable to the seller and remit check-off fees to BFO. Breeding stock, cull dairy cows and beef calves are included. Exemptions only exist for cattle sold for the production of milk and veal.

BFO's Board of Directors consists of 12 elected officials - three from the cow-calf sector, three from the feedlot sector, one from the backgrounder sector, one each representing the southern, northern and eastern regions of Ontario, and two elected at-large. Directors are elected for three-year terms on a rotating basis, serving a maximum of three consecutive terms. 

The Ontario Feeder Cattle Loan Guarantee Program was established in 1990 to provide low-interest loans to beef farmers in the province through 16 local co-operatives. The program is backed by a 25% provincial government guarantee which has never been drawn on in the program's history, which speaks to the strength of the program.  Since its inception, the program has provided young, beginning and expanding farmers a reliable source of credit at affordable rates with favourable repayment terms.   

 

 

Q. An increase in check-off from $4.00 to $5.50 seems like a big jump.

The board appreciates that this is a significant request. The main components of the new spending are the joint marketing committee, consumer engagement, and producer engagement. These activities, to be effective, need to be carried out on a larger scale than we have the current resources to cover.  

Q. Can BFO decrease its operating costs, but still establish this new joint marketing committee?

No. There are no operating costs that are large enough to cover the expense of this joint marketing committee by reallocation of resources without completely abandoning current activities that producers have told us in the past they want us to be engaged with. The board has looked at areas to cut which include payments to national associations, lobbying expense, response to government regulations and defending safety net programs, and support for other Ontario associations, and reduced expenses where they could, but the board believes that continued funding for these activities is supported by the broad membership.

If the provincial check-off increase is not passed at this year’s AGM, the board will have no choice but to abandon the joint marketing committee and continue to scale back operational costs.

Q. When would the increase in provincial check-off be implemented if it is approved at the 2019 AGM?

The last time we implemented a provincial check-off increase it took 10 months after approval at the AGM.  We anticipate a similar timeframe in 2019.  

Q. If the check-off increase is approved at the AGM, but will take 10 months to be implemented, how will the work of the joint marketing committee be funded in 2019?

Initially, OCFA has agreed to fully fund the committee with marketing funding they have been able to secure. This should cover the bulk of expenses in the first year. If additional funds are required in the last quarter, BFO will fund the committee through reserves. The latest we would expect the increase to be implemented would be January 1, 2020.

Q. Should BFO members expect another provincial increase in two years again?

No. The BFO board does not expect to ask for another increase in the foreseeable future.

Q. Will an increase in staffing be required by BFO to support the new committee?

No. BFO will not be increasing staff to support the joint marketing committee. However, some BFO employees may have responsibilities with the committee.

Q. How will this increase, if dedicated largely to marketing, improve BFO’s financial health?

Twenty-five cents of the increase will be dedicated to support BFO’s consumer and producer engagement efforts. If we do our job well through the work of the new joint marketing committee, our industry will expand and we will be able to generate more dollars through increased check-off collection.

Q. How does supporting the development of Ontario beef brands support producers who are not enrolled in an Ontario brand?

A rising tide floats all boats. By growing the market for Ontario-branded beef we should also see the market prices for all Ontario beef improve. An increase in consumer demand for Ontario beef will tighten the flexibility within the Ontario market and reduce the volatility of pricing for all animals, thus decreasing the impact of market volatility for all producers. Through improved market reporting and price transparency, we believe that producers will have the information to show them the benefits of being involved in a value-added Ontario brand.

Q. How are producers whose business structure exempts them from paying check-off contributing to BFO’s marketing efforts?

Check-off is paid by sellers of cattle. Producers who raise their animals from birth-to-finish, then market the beef, are legally exempt from paying check-off under the Beef Cattle Marketing Act but that doesn’t mean they’re not contributing to the greater industry, or strengthening our bond with consumers. We encourage those producers who do fall into the category of being exempt from paying check-off to pay a membership fee to support the association activities. 

BFO is in the process of investigating the feasibility of collecting check-off on all finished animals where a change in ownership does not occur. This is a fundamental shift in Regulation 54 of the Beef Cattle Marketing Act and would require consent of the Ontario Cabinet, which means that this will not happen quickly. Based on the analysis of data captured so far, this change would result in a one to two percent increase in cattle numbers where a check-off event would be triggered, but more work needs to be done to better understand the costs and benefits of this proposal.

With regards to access to Collaborative Partnership Program (CPP) funding, dollars are only granted to successful producer applicants who are check-off paying members and who have been vetted through BFO’s membership database. This practice will continue under the new joint marketing committee. 

Q. As farmers and business owners, we need to see the market level out. Will the joint marketing committee help create stability in our margins?

Volatility in the marketplace exists not just in Ontario but around the world.  We will not completely eliminate it, but by strengthening the consumer’s relationship with Ontario beef products we expect to decrease the impact of market volatility through increased demand for Ontario beef. During any recession, you may have observed that pricing of generic products is driven down. However, higher-end products are less likely to be discounted or are discounted less significantly and thus exhibit more price stability. This is what we’re intending to do with Ontario beef. We want to present to consumers a higher value proposition so that they will continue to support our local products at a stronger price.  

There is also a strong correlation between an increase in the price of finished animals and an increase in calf prices. If we can raise the price of finished animals, we will also raise the price of calves.

Q. How does imported beef hurt Ontario farmers?

Unfortunately, only 58% of the beef on our shelves here in the province is Ontario or Canadian beef with the balance of the market filled by imported beef, which is significantly affecting our industry’s competitiveness.  Although some of it is premium beef, largely it comes into the province as commodity beef based on low prices. These low prices then set the standard for what processors will pay day-to-day for your animals.  Because of our higher cost of production here in Ontario, due to factors beyond our control, we cannot be financially sustainable at the lowest available world price.  

This is why, when we talk about our strategy, we refer to the price ladder and say that we need to add more attributes to our product that consumers value. In turn, this will allow us to engage Ontario consumers so they will ask for Ontario beef.  This will enable us to climb the price ladder enough that our farms can be sustainable and so that we can build businesses that our children will want and be able to carry on.

Q. As a cow-calf producer, how will this improve the bottom line of my farm business?

If we can lift the price for finished beef animals, we have the historical data to support that there is a very close correlation between a rise in finished prices and a rise in calf prices. More stability in the finished animal price will lead to more stability in the calf price.  Our strategy is designed to support the Ontario beef industry across all sectors.


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