Response to 17-01 - National Check-off Negotiations
For more than two years, BFO directors and staff have engaged in discussions surrounding the National Beef Strategy and the proposed increase to national check-off. While we believe in the need for a National Beef Strategy, we also believe that the governance and legal structures established under the Canadian Beef Cattle Research, Market Development and Promotion Agency (National Check-off Agency) need to be positioned in a way that provides assurance to our Board of Directors and members that Ontario’s interests will be well served and represented by our national organizations.
Legal representatives, directors and staff from the provincial cattle organizations and the National Check-off Agency have been working on a legal framework for national check-off for more than a year. It is expected that additional revisions will be made in the coming months before all parties and their legal representatives could be in a position to support the proposed agreement.
Although we believe we are getting closer to an agreement with the National Check-off Agency that could be viewed as workable by the BFO Board of Directors, we also believe that we can’t wait for national consensus before pursuing new initiatives that are aggressively aimed at promoting and ensuring industry growth and sustainability in Ontario. In light of this, the BFO Board of Directors came together in the spring of this year for a strategic planning session.
In that session, the Board of Directors looked back at the Ontario beef industry situation from four to five years ago. At that time, there was growing global demand for high-quality beef, especially in China and other emerging economies, and a supply shortage due to drought in the U.S. and Australia. Here at home, producers displayed growing optimism with the Ontario Corn Fed beef program, which was outstripping supply, and supporting price and export development. This optimism was evident by the number of new feeding barns that were built in Ontario. We had confidence that the Risk Management Program would be a permanent program and that it was supported by our Premier. The Board of Directors also took stock of some of BFO’s successes, as well as current and future challenges facing beef production in Ontario.
Through this discovery process, and with intensive thought and thorough examination, the Board of Directors determined that an aggressive approach toward building sustainability in the Ontario beef industry was necessary and could be achieved through the creation and implementation of a new strategic plan focused on diversity of markets and margins, young people and new entrants, and herd expansion.
This strategy can be broken down into three areas of initiatives to be taken: develop Ontario’s regional brands to expand Ontario’s share of our own beef market; expand the cow herd in Ontario by focusing on genetically superior animals capable of producing premium beef; attract young producers and entice existing producers to expand into a vibrant, sustainable industry.
When we look at the current pricing of beef in the Ontario industry, the floor price is set by imported product primarily being cleared into Canada from the U.S. There is simply not enough money for all levels of production to share profitably when this product is put on special discount to increase volume at retail. Therefore, we believe that Ontario producers, if they want to, should move up the price ladder to secure more of the consumer dollar. Ontario consumers support Ontario Corn Fed Beef, and it is our belief that they will continue to do so. We need to continue to grow and expand Ontario Corn Fed Beef product consumption. At the same time, we need to develop more brands so that the processors and retailers have less latitude to drop our prices.
We believe that if Ontario brands offer the value that Ontario consumers want, they will be supported. As part of the implementation of BFO’s strategy, we will commit to engaging in open, transparent conversations with our consumers. We will commission research that supports and defines our brands, and we will communicate with urban audiences at the level and in the medium that they want to be engaged. Building a strong bond with consumers is a key commitment to be achieved.
When we have the defined brands, we need to expand the cow herd with animals that exhibit superior performance, and are targeted to a premium brand. We must have these animals in large enough numbers to fill the brand demand, and provide the lot sizes that feedlots require. When there is confidence that cow-calf profitability is possible, young producers will be attracted and they will be proud to raise Ontario beef. Part of the strategy is to identify and support early adopters, providing resources, mentors and peer support as they move forward.
We have been laying the groundwork for this strategy for the past seven years. BFO began investing in Ontario Corn Fed Beef 14 years ago, and we will continue this investment. Ontario Corn Fed Beef positively affects the Ontario price. We want to use Ontario Corn Fed Beef as a template for other brands, so consumers can always choose superior Ontario beef. This strategy will involve a 10-year or longer commitment of our combined efforts. However, we see it as the only economically sustainable path forward.
Your Board of Directors is committed to and believes in the direction they have struck, and we are asking for your support to get the job done. To support the activities of BFO’s strategic plan, the Board of Directors is recommending a provincial increase in check-off.
Pursuing a provincial check-off increase in lieu of an increase to national check-off provides several important benefits for Ontario. Firstly, it will provide the level of funding required to implement the components of the BFO strategic plan. In the absence of a signed agreement for national check-off, an increase to the provincial levy will also allow the BFO Board of Directors to provide increased funding for some of the national priority initiatives outlined in the National Beef Strategy, which calls for increased investment in national research, marketing and issues management. Moreover, allowing the Ontario industry to control the level and direction of funds sent nationally will help ensure that the investments made by Ontario beef producers are directed to initiatives and organizations that align with the needs and interests of the Ontario industry.
In order to recommend to the Ontario government that the provincial levy be increased, two-thirds of BFO delegates at the AGM must vote in favour of the proposal, as per the terms of our constitution. Additionally, notice of the vote must be published at least 14 days prior to the AGM, along with the notice of the meeting.
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