Response to 17-09 - Beneficial Ownership - Feeder Finance
Firstly, BFO would like to state that the Board fully supports the creation of the Feeder Executive Committee to act as an intermediary between the BFO Board and the feeder co-op boards. Both parties had the opportunity to discuss feeder finance issues, including beneficial ownership and other Order-in-Council (OIC) concerns at the June meeting of the BFO Board. Based on the direction of the Feeder Executive Committee, the Board has committed resources to address the following issues:
1) Feeder Finance alignment with the Financial Protection Program
In June, BFO sent a letter to Minister Leal requesting changes to the Farm Products Payments Act to better align feeder finance with the Financial Protection Program. We are pleased to report that our recommended revisions to the Act have been put forward by the Minister for public comment. If approved, sales of financed cattle would be viewed as sales by individuals to ensure co-op members are eligible under the Financial Protection Program. We anticipate this change will be implemented on January 1st.
2) Concerns regarding the feeder finance OIC
In July, BFO submitted a list of concerns with the new OIC to OMAFRA, based on discussions with the Feeder Executive Committee. OMAFRA then presented a version of that list for consideration by the Minister in August. It is our understanding that the Minister’s office is still reviewing the issues that have been submitted for his consideration. Below, I’ve provided a brief summary of the main issues under review:
I. Credit Check Policy: the new credit check policy has been criticized as being too frequent, costly, and negatively impacts members’ credit ratings.
II. Cleared Residual Cattle: the new policy requires a fair market value transaction to move cattle ownership from a co-op to a member when there is no remaining debt. This has been criticized as being redundant and onerous.
III. Producer Cattle Ownership: without an ownership stake in the cattle, members are concerned with potential Canada Revenue Agency tax implications should they be deemed service providers.
IV. Custom Feeding: OMAFRA may wish to reconsider custom feeding eligibility in light of the Innkeepers Act rules, which guarantees payment to a custom feeder above the co-op and government’s security interests.
V. Use of Security Deposits: the new requirements for quick, top-up of assurance funds by members recently created a secondary crises and member hardship. Clarification on the use and replenishment of assurance funds is needed.
VI. Minimum Co-op Participation: the program requires a minimum of 20 active members. Participation is often dependent on season and market prices; several co-ops have fallen below this threshold. This needs to be clarified.
VII. Housekeeping: this includes revisions to correct a number of formatting issues, providing added clarity through the creation of new definitions for things like “fair market value”, “custom feeder”, etc., and developing clearer rules for custom feeding, corporate participation and member transition.
While we’re pleased that a number of the concerns that were raised have been put on the Minister’s agenda for consideration, we will continue to push the Province until changes are enacted that reflect the wishes of the feeder co-ops.
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