Monday, June 29, 2009
Paul Beingesner Obituary
PAUL JOSEPH BEINGESSNER of Truax, Saskatchewan, passed away suddenly on June 25, 2009 at the age of 55 years. Paul was born April 26, 1954 in Moose Jaw and spent most of his life on the family farm at Truax. He is predeceased by his father, Herbert, and survived by his mother, Agnes, his wife Faye, his sisters Dolores (Ken), Rita (Bill), Cathy (Lawrence), and Virginia, his children Naomi (Dan), Chris (Brenda), Kate, and their mother Laura, and his sons James (Carolyn), and David. He doted on his grandchildren, Vincent, Norah and Edith. After getting a B.A. (Hon) in Psychology from the University of Regina in 1976, he worked with at-risk youth at the Roy Wilson Centre in Sedley. The patience and compassion he exhibited with these youth characterized all of his interactions with people and animals throughout his life. Returning to the farm full-time in 1981, Paul farmed alongside his father and raised grain, cattle, chickens, turkeys and a formidable army of cats. Never one to sit idly, in addition to farming Paul served as a Saskatchewan Wheat Pool Delegate from 1996 to 1998. He was instrumental in the founding of Saskatchewan's first short-line railway, Southern Rails Co-operative, and served as general manager from 1991 to 1997. When he left Southern Rails, he stayed on as a board member, and worked with the Ministry of Highways Short Line Advisory Unit supporting other efforts of farmers to start short-line railways. Since 1991, Paul wrote a weekly column on farming and transportation issues with a social justice focus featured in papers across Western Canada. After leaving the government in 1999, his expertise on transportation issues resulted in consulting work across Western Canada and the United States, which he continued up until his untimely passing. He was named an honorary lifetime member of the Saskatchewan Institute of Agrologists in 2008. Though he was active with his work off the farm, his true passion was farming, the land, and community. He loved everything to do with the outdoors hunting, bird-watching, camping, gardening, and searching for rocks with fossils while walking countless miles of railroad track and fence. Paul's compassion stretched to all living things; he often doctored sick cats, lambs, and even wildlife he came across, in an effort to save a life. He loved to organize drama for the children in the area and produced an annual Christmas play with them that brought the community together. Paul was thirsty for knowledge, and there was hardly anything that he couldn't do or wouldn't try. If he didn't know how to do something, he would find out. No matter how serious life and politics became, Paul never lost his trademark sense of humour; it was a pleasure to endure his teasing or fall victim to one of his practical jokes. Above all, Paul was a man of faith, and served as a liturgical coordinator in his parish. Vigil for Paul will be held at 7:30 pm on Wednesday, July 1st at St. Anne's Catholic Parish in Truax, Saskatchewan. A Funeral Mass celebrating his life will be held at 1:00 p.m. on Thursday, July 2nd, at St. Joseph's Catholic Parish in Claybank. Interment will follow at the Truax CemeteryCatholic Section. In lieu of flowers, donations in Paul's memory can be made to Amnesty International or Development and Peace.
Friday, June 26, 2009
A Terrible Loss to All of Us
I was imformed today by Faye Beingesner of the tragic death of her husband Paul in an agricultural accident on June 25. The article below is his last. It seems to me in character of this great caring man that his last two articles were of the plight of the worlds impoverished and starving peoples.
At this time I'm unable to write more since I'm full of an immense sorrow, and anger, that such a towering figure is lost to us all. He will be sorely missed.
Little Muddy
At this time I'm unable to write more since I'm full of an immense sorrow, and anger, that such a towering figure is lost to us all. He will be sorely missed.
Little Muddy
First World Economic Policies Increase Hunger
Column # 725 22/06/09
The World Food Program, an agency of the United Nations, announced
last week that the number of hungry people in the world rose this year
to over one billion. It is a startling number. It says that, though
the world continues to grow richer in many senses and for many people,
it is growing poorer at supplying more of its citizens with food. This
is not the way it was supposed to be, not the way it was from 1990 to
2005. In that time period, poverty (extreme poverty) in developing
countries fell steadily. Around 2005, this reversed, and poverty, and
with it hunger, began to rise again. This has continued unabated.
The large increase in hunger in the first half of 2009 has been blamed
by the World Food Program on continuing high food prices, but it has
been much longer in the making than the commodity boom that arose from
the banking crisis in the U.S. last year. Like the market crash and
sub-prime mortgage mess, hunger in poor countries has been caused in
many cases by actions taken in rich ones.
Until recently, international agencies like the World Bank, the
International Monetary Fund and the U.S. Treasury Department promoted
policies that came to be known as the Washington Consensus. These
policies became requirements for countries that wanted loans from the
World Bank and IMF. The American government and governments in Europe
also demanded that countries wanting to receive aid follow the
prescriptions of the Washington Consensus. Key among these were trade
liberalization, privatization of state enterprises and deregulation.
One of the results of the Washington Consensus was that spending on
agriculture by poor countries declined. This was often demanded as a
condition for aid and loans. Meanwhile, the amount of money given by
rich countries for the development of agriculture in poor countries
also declined. While imposing these restrictions on underdeveloped
nations, the U.S. and the European Union continued to provide ample
subsidies to their own agriculture sectors. It was fully expected that
poor countries would be able to buy their food needs on international
markets while switching their economies over to export oriented
agriculture and industries. They would export flowers to us and we
would export food to them.
The result was that the food producing capacity of many poor countries
declined. Agricultural research and infrastructure were neglected and
subsistence farmers were pushed aside for oilseed plantations and
other export crops.
In 2007/2008, food prices began to rise as a long period of declining
food stocks world-wide suddenly got noticed. On top of that, the
economic collapse in many developed countries reduced markets for the
production of the poor. They could no longer afford to eat.
Some world governments continue to prescribe more of the same as the
cure for hunger and poverty - more trade, more deregulation and more
privatization. But here is the odd thing. Two of the largest and
poorest countries in the world have reduced poverty to a greater
extent than any, and they did it while violating most of the
principles of the Washington Consensus. I'm talking, of course, about
India and China. Both countries resisted privatization of government
services, continued to protect their own economies with tariffs and
did not make deregulation the be-all-and-end-all of political policy.
So what's to be done? We have rapidly increasing hunger at a time when
rich countries are preoccupied with their own economic troubles, like
whether we'll be able to keep all the Hummers on the road. With
troubles like that, how will they have time to think about the hungry
in far-off lands?
Various international agencies have proposed some solutions. These
include
* Increasing aid to agriculture in poor countries and targeting it at
appropriate production that will meet the needs of rural and urban
poor.
* Building food reserves, like India and China did, that can be
released at times when supply is low and prices high. This will
prevent price volatility.
* Tighten regulations on stock exchanges that trade in commodities to
prevent excessive speculation.
* Negotiate trade agreements that allow poor countries to protect
their economies in times of crisis and exploitation.
* Control the market power of massive corporations that can cause
markets to swing on their whim.
Of course these measures run counter to the laissez-faire economic
policies promoted by the world's major powers. But in the current
economic crisis, they are precisely what is needed. Having caused the
problem to a great extent with the failed policies of the Washington
Consensus, rich nations bear some responsibility toward the poor.
In the short term we need to alleviate the hunger that is pressing
down on one billion people. Nor is the cost significant compared to
what we are currently showering on our own economies. Less than one
percent of the global stimulus package would fund the current deficit
in the World Food Program.
We should not underestimate the value of living in a world where
hunger is eliminated. As someone pointed out, any country is only four
missed meals away from anarchy. And anarchy that strikes in one
country often has ramifications for another half a world away.
© Paul Beingessner beingessner@sasktel.net
The World Food Program, an agency of the United Nations, announced
last week that the number of hungry people in the world rose this year
to over one billion. It is a startling number. It says that, though
the world continues to grow richer in many senses and for many people,
it is growing poorer at supplying more of its citizens with food. This
is not the way it was supposed to be, not the way it was from 1990 to
2005. In that time period, poverty (extreme poverty) in developing
countries fell steadily. Around 2005, this reversed, and poverty, and
with it hunger, began to rise again. This has continued unabated.
The large increase in hunger in the first half of 2009 has been blamed
by the World Food Program on continuing high food prices, but it has
been much longer in the making than the commodity boom that arose from
the banking crisis in the U.S. last year. Like the market crash and
sub-prime mortgage mess, hunger in poor countries has been caused in
many cases by actions taken in rich ones.
Until recently, international agencies like the World Bank, the
International Monetary Fund and the U.S. Treasury Department promoted
policies that came to be known as the Washington Consensus. These
policies became requirements for countries that wanted loans from the
World Bank and IMF. The American government and governments in Europe
also demanded that countries wanting to receive aid follow the
prescriptions of the Washington Consensus. Key among these were trade
liberalization, privatization of state enterprises and deregulation.
One of the results of the Washington Consensus was that spending on
agriculture by poor countries declined. This was often demanded as a
condition for aid and loans. Meanwhile, the amount of money given by
rich countries for the development of agriculture in poor countries
also declined. While imposing these restrictions on underdeveloped
nations, the U.S. and the European Union continued to provide ample
subsidies to their own agriculture sectors. It was fully expected that
poor countries would be able to buy their food needs on international
markets while switching their economies over to export oriented
agriculture and industries. They would export flowers to us and we
would export food to them.
The result was that the food producing capacity of many poor countries
declined. Agricultural research and infrastructure were neglected and
subsistence farmers were pushed aside for oilseed plantations and
other export crops.
In 2007/2008, food prices began to rise as a long period of declining
food stocks world-wide suddenly got noticed. On top of that, the
economic collapse in many developed countries reduced markets for the
production of the poor. They could no longer afford to eat.
Some world governments continue to prescribe more of the same as the
cure for hunger and poverty - more trade, more deregulation and more
privatization. But here is the odd thing. Two of the largest and
poorest countries in the world have reduced poverty to a greater
extent than any, and they did it while violating most of the
principles of the Washington Consensus. I'm talking, of course, about
India and China. Both countries resisted privatization of government
services, continued to protect their own economies with tariffs and
did not make deregulation the be-all-and-end-all of political policy.
So what's to be done? We have rapidly increasing hunger at a time when
rich countries are preoccupied with their own economic troubles, like
whether we'll be able to keep all the Hummers on the road. With
troubles like that, how will they have time to think about the hungry
in far-off lands?
Various international agencies have proposed some solutions. These
include
* Increasing aid to agriculture in poor countries and targeting it at
appropriate production that will meet the needs of rural and urban
poor.
* Building food reserves, like India and China did, that can be
released at times when supply is low and prices high. This will
prevent price volatility.
* Tighten regulations on stock exchanges that trade in commodities to
prevent excessive speculation.
* Negotiate trade agreements that allow poor countries to protect
their economies in times of crisis and exploitation.
* Control the market power of massive corporations that can cause
markets to swing on their whim.
Of course these measures run counter to the laissez-faire economic
policies promoted by the world's major powers. But in the current
economic crisis, they are precisely what is needed. Having caused the
problem to a great extent with the failed policies of the Washington
Consensus, rich nations bear some responsibility toward the poor.
In the short term we need to alleviate the hunger that is pressing
down on one billion people. Nor is the cost significant compared to
what we are currently showering on our own economies. Less than one
percent of the global stimulus package would fund the current deficit
in the World Food Program.
We should not underestimate the value of living in a world where
hunger is eliminated. As someone pointed out, any country is only four
missed meals away from anarchy. And anarchy that strikes in one
country often has ramifications for another half a world away.
© Paul Beingessner beingessner@sasktel.net
Thursday, June 18, 2009
Cheap Food Not Much of an Answer
Column # 724 15/06/09
I recently saw a story about farmers reducing fertilizer use, in response to high prices. The story warned that this was dangerous, as farmers should not be reducing inputs in an age of food shortages. It went on to argue that farmers will benefit from maximizing production. Another news report the same day pointed out that the food crisis was far from over, despite being overshadowed by the world economic crisis. While farm products have declined in value, they are still priced beyond what many in poor countries can afford. As if to reinforce the point, we are now being told that the number of malnourished citizens of Earth has topped one billion.
While the American Declaration of Independence may have declared that all men are created equal, the same can no longer be said of all hungry people. The hungry, it seems, can be divided into two classes - those with money and those without. That you can be hungry without money is self-explanatory. But being hungry with money requires some elaboration. It is the fate, or at least the fate they anticipate for themselves, of people who don't have enough arable land or perhaps water to grow sufficient food for their needs. The obvious examples are the Arab Gulf states, swimming in oil but singularly lacking water. Saudi Arabia, for example, used to grow a great deal of barley and wheat. It stopped doing that when it became apparent it would thereby consume all its fresh water. Other countries in the same boat include Japan and China.
Wealthy but hungry countries have a solution to their problems. They are buying land in poor countries that are willing to sell or lease land to produce food, which then belongs to the wealthy country, or at least to the company that represents that country. A ludicrous example of this is Sudan, a country that relies on food aid to feed its people, but which is willing to allow its land to be taken over and food to be exported.
In the end, this technique simply takes food out of international markets, and will likely result in lower prices for all foods, as demand is reduced in importing countries. Prices to the farmer will decline, and this will undoubtedly be seen as positive by folks concerned with world hunger.
You don't need to be a farmer, with a whole lot of skin in the wringer, to see that this isn't a good thing.(It does help, though.) Farmers, the few that remain, know full well they do not receive enough for their products to make farming sustainable over the long run. They also know the conundrum food producers and consumers face. Without more money, farmers will reduce fertilizer use, limit other inputs, and production will fall.
The result will be catastrophic for poor people. So, what to do?
First of all, international agencies and governments should quit using the simple argument that food prices are too high. Opponents of ethanol argue, for example, that using feed grains to produce ethanol has raised the price of food in the U.S. and around the world. This, apparently, is a strike against ethanol.
Bad argument. (There are lots better ones to use.) What it says is that farmers should produce cheap food. That is the way to combat hunger. As I argued earlier, farmers can't and won't produce crops for inadequate returns forever. That ethanol production is a better deal for farmers than selling to food markets is simply an indictment of the international economic system.
Those who care about the hungry should be glad for higher food prices in one sense. These ought to insure farmers will continue to produce food. The real question is not how high food prices should be. They should be high enough to ensure farmers a reasonable living. The real question is, how will the hungry be fed? That leads to a different set of answers than simply eliminating the things that keep food prices high.
Now, to head off the critics I can already hear in my head, let me be clear that I don't think higher crop prices necessarily lead to more income for farmers. In most cases, that greater value is simply eaten up by input makers and service providers. Just as those concerned with the poor need to reframe the question of how people will be fed, farmers and politicians need to reframe the question of how farmers can be sustained. Good prices alone will not do it, in a system when market power is concentrated in a few hands. The temptation is to forget this when times are good. Times will not be good forever.
© Paul Beingessner beingessner@sasktel.net
I recently saw a story about farmers reducing fertilizer use, in response to high prices. The story warned that this was dangerous, as farmers should not be reducing inputs in an age of food shortages. It went on to argue that farmers will benefit from maximizing production. Another news report the same day pointed out that the food crisis was far from over, despite being overshadowed by the world economic crisis. While farm products have declined in value, they are still priced beyond what many in poor countries can afford. As if to reinforce the point, we are now being told that the number of malnourished citizens of Earth has topped one billion.
While the American Declaration of Independence may have declared that all men are created equal, the same can no longer be said of all hungry people. The hungry, it seems, can be divided into two classes - those with money and those without. That you can be hungry without money is self-explanatory. But being hungry with money requires some elaboration. It is the fate, or at least the fate they anticipate for themselves, of people who don't have enough arable land or perhaps water to grow sufficient food for their needs. The obvious examples are the Arab Gulf states, swimming in oil but singularly lacking water. Saudi Arabia, for example, used to grow a great deal of barley and wheat. It stopped doing that when it became apparent it would thereby consume all its fresh water. Other countries in the same boat include Japan and China.
Wealthy but hungry countries have a solution to their problems. They are buying land in poor countries that are willing to sell or lease land to produce food, which then belongs to the wealthy country, or at least to the company that represents that country. A ludicrous example of this is Sudan, a country that relies on food aid to feed its people, but which is willing to allow its land to be taken over and food to be exported.
In the end, this technique simply takes food out of international markets, and will likely result in lower prices for all foods, as demand is reduced in importing countries. Prices to the farmer will decline, and this will undoubtedly be seen as positive by folks concerned with world hunger.
You don't need to be a farmer, with a whole lot of skin in the wringer, to see that this isn't a good thing.(It does help, though.) Farmers, the few that remain, know full well they do not receive enough for their products to make farming sustainable over the long run. They also know the conundrum food producers and consumers face. Without more money, farmers will reduce fertilizer use, limit other inputs, and production will fall.
The result will be catastrophic for poor people. So, what to do?
First of all, international agencies and governments should quit using the simple argument that food prices are too high. Opponents of ethanol argue, for example, that using feed grains to produce ethanol has raised the price of food in the U.S. and around the world. This, apparently, is a strike against ethanol.
Bad argument. (There are lots better ones to use.) What it says is that farmers should produce cheap food. That is the way to combat hunger. As I argued earlier, farmers can't and won't produce crops for inadequate returns forever. That ethanol production is a better deal for farmers than selling to food markets is simply an indictment of the international economic system.
Those who care about the hungry should be glad for higher food prices in one sense. These ought to insure farmers will continue to produce food. The real question is not how high food prices should be. They should be high enough to ensure farmers a reasonable living. The real question is, how will the hungry be fed? That leads to a different set of answers than simply eliminating the things that keep food prices high.
Now, to head off the critics I can already hear in my head, let me be clear that I don't think higher crop prices necessarily lead to more income for farmers. In most cases, that greater value is simply eaten up by input makers and service providers. Just as those concerned with the poor need to reframe the question of how people will be fed, farmers and politicians need to reframe the question of how farmers can be sustained. Good prices alone will not do it, in a system when market power is concentrated in a few hands. The temptation is to forget this when times are good. Times will not be good forever.
© Paul Beingessner beingessner@sasktel.net
Monday, June 08, 2009
Rushing Madly Off in All Directions
Column # 723 08/06/09
When mad cow disease hit western Canada in May, 2003, farmers got a
lesson in basic economics. The lesson wasn't so much that prices went
down in Canada. Take away the market for something like 50 percent of
the cattle produced in Canada, and prices will take a gut-wrenching
tumble. That was a given.
The real lesson came in what happened in the United States. Canadian
beef constituted a small amount of the beef consumed in the U.S.,
something less than 3 percent. To Canada, obviously, the amount was
huge. To the U.S., not so much. But cattle prices in the U.S.
skyrocketed. Farmers were getting record high prices for their calves,
and this continued for some time. The lesson was in the major impact a
small change in supply could have on a market fairly well balanced.
It is a lesson that has apparently been forgotten (if it was ever
learned) by some Canadian grain producers. These are the people
moaning that prices for durum wheat at elevators in the United States
in the 2008/09 crop year have been higher than the CWB Pool Return
Outlook for durum western Canada. So we have the vice-president of the
Western Canadian Wheat Growers berating the CWB, claiming it is
"costing farmers a bundle".
No doubt there is such a thing as willful ignorance, but it is hard to
believe that Stephen Vandervalk actually believes his own rhetoric. He
should know, for example, that the CWB sells only a small proportion
of western Canadian durum to the United States in any given year. This
crop year, the U.S. has taken about one-sixth of our durum. The entire
U.S. durum market amounts to about half of our production. So if
Vandervalk could have his way, and start madly trucking his durum
across the border to those American elevators, and if all, or even a
significant number of Canadian farmers did the same, it would be mad
cow in reverse. The huge increase in supply would cause prices to
crash faster than you could say, "Geez, how dumb was that?"
Of course, comparing American elevator prices to the pooled CWB price
is screwy logic to begin with. Five-sixths of our durum goes to
countries other than the U.S. Freight costs to get it there are much
higher, involving both domestic rail and ocean shipping. Countries
like Morocco and Algeria typically don't pay what richer countries do,
so the pooled price reflects a mix of these low and high prices.
To top it off, the CWB has been selling to the U.S. at prices that are
higher than the elevator prices Vandervalk is so determined he could
get. If he had his way, and crashed the U.S. price, everyone would be
a loser.
The other major complaint from the Wheat Growers is that the CWB has
not taken all the durum farmers have grown. This crop year, it will be
about 80 percent. This reflects that fact that the market for durum
worldwide is finite. Humans only consume so much pasta, couscous,
chapati and bulgar. Push more durum onto world markets than the world
will consume and it will be sold at feed prices. The problem with this
is that durum customers will see durum selling as feed and will reduce
their expectations of what they must pay.
American farmers should actually be quite happy with the CWB. By
refusing to flood world markets with cheap durum, it has held the
price up for farmers on both sides of the border. In a completely open
market, price signals for planting durum would come from the dropping
prices as farmers pushed too much durum onto the market. With the CWB,
the price signal is the fact that we can't sell all our production.
Farmers in my area know this. Durum has been a profitable crop with
price premiums over red spring wheat virtually every year. But we also
know we can't plant every acre to durum. In the case of durum, the
Wheat Growers seem to lack fundamental understanding of how markets
work.
© Paul Beingessner beingessner@sasktel.net
When mad cow disease hit western Canada in May, 2003, farmers got a
lesson in basic economics. The lesson wasn't so much that prices went
down in Canada. Take away the market for something like 50 percent of
the cattle produced in Canada, and prices will take a gut-wrenching
tumble. That was a given.
The real lesson came in what happened in the United States. Canadian
beef constituted a small amount of the beef consumed in the U.S.,
something less than 3 percent. To Canada, obviously, the amount was
huge. To the U.S., not so much. But cattle prices in the U.S.
skyrocketed. Farmers were getting record high prices for their calves,
and this continued for some time. The lesson was in the major impact a
small change in supply could have on a market fairly well balanced.
It is a lesson that has apparently been forgotten (if it was ever
learned) by some Canadian grain producers. These are the people
moaning that prices for durum wheat at elevators in the United States
in the 2008/09 crop year have been higher than the CWB Pool Return
Outlook for durum western Canada. So we have the vice-president of the
Western Canadian Wheat Growers berating the CWB, claiming it is
"costing farmers a bundle".
No doubt there is such a thing as willful ignorance, but it is hard to
believe that Stephen Vandervalk actually believes his own rhetoric. He
should know, for example, that the CWB sells only a small proportion
of western Canadian durum to the United States in any given year. This
crop year, the U.S. has taken about one-sixth of our durum. The entire
U.S. durum market amounts to about half of our production. So if
Vandervalk could have his way, and start madly trucking his durum
across the border to those American elevators, and if all, or even a
significant number of Canadian farmers did the same, it would be mad
cow in reverse. The huge increase in supply would cause prices to
crash faster than you could say, "Geez, how dumb was that?"
Of course, comparing American elevator prices to the pooled CWB price
is screwy logic to begin with. Five-sixths of our durum goes to
countries other than the U.S. Freight costs to get it there are much
higher, involving both domestic rail and ocean shipping. Countries
like Morocco and Algeria typically don't pay what richer countries do,
so the pooled price reflects a mix of these low and high prices.
To top it off, the CWB has been selling to the U.S. at prices that are
higher than the elevator prices Vandervalk is so determined he could
get. If he had his way, and crashed the U.S. price, everyone would be
a loser.
The other major complaint from the Wheat Growers is that the CWB has
not taken all the durum farmers have grown. This crop year, it will be
about 80 percent. This reflects that fact that the market for durum
worldwide is finite. Humans only consume so much pasta, couscous,
chapati and bulgar. Push more durum onto world markets than the world
will consume and it will be sold at feed prices. The problem with this
is that durum customers will see durum selling as feed and will reduce
their expectations of what they must pay.
American farmers should actually be quite happy with the CWB. By
refusing to flood world markets with cheap durum, it has held the
price up for farmers on both sides of the border. In a completely open
market, price signals for planting durum would come from the dropping
prices as farmers pushed too much durum onto the market. With the CWB,
the price signal is the fact that we can't sell all our production.
Farmers in my area know this. Durum has been a profitable crop with
price premiums over red spring wheat virtually every year. But we also
know we can't plant every acre to durum. In the case of durum, the
Wheat Growers seem to lack fundamental understanding of how markets
work.
© Paul Beingessner beingessner@sasktel.net
Monday, June 01, 2009
Potential to Profit From Pollution
Column # 722 01/06/09
A lot of farmers don't really believe in global warming. Or, if you push them on it a bit, they don't believe humans are responsible for global warming. The warming of the earth itself is hard to deny when robins are seen north of the Arctic Circle and polar ice is melting at an unprecedented rate.
I'm no expert on climate, but you can't doubt that, despite the cool spring we are experiencing, the climate is getting warmer. This is particularly true in polar regions, which is what the models predict. And the speed of the changes in this area makes it difficult to believe it is just a normal cycle. Unless you have a massive volcano somewhere on earth, natural forces just don't act this fast.
All that aside, the global scientific community overwhelmingly believes that burning fossil fuels is the major cause of global warming, that its effects are irreversible in our lifetimes, and that they will not be a good thing. Governments around the world have been convinced by this as well, and there are international initiatives claiming to try to reduce emissions of greenhouse gases.
Coupled with the problem of global warming is the issue of declining stocks of oil and gas. In many ways they are two heads of the same monster. As hugely populated countries like China and India increase their standard of living, and as people in rich countries like Canada build bigger houses and drive more and bigger cars, use of fossil fuels is increasing dramatically each year. Most scientists agree we are reaching a point where production of conventional oil will not keep up with demand. The situation is even more critical with natural gas, despite new sources such as coalbed methane. Natural gas demand in Canada is increasing quickly, mostly for production of oil from the tar sands.
So, if you believe humans are responsible for global warming, or if you worry about the eventual real shortages of fossil fuels, it makes sense to reduce consumption of oil, gas and other non-renewable forms of energy.
Reduction of greenhouse gases has become a priority for governments – at least in terms of lip service. The reality is something different, as most governments, including ours, continually weaken and push back targets. However, the issue is not going away, and governments will continue to be pressured by the public and the scientific community to reduce greenhouse gas emissions.
Enter the cap-and-trade system for carbon emissions. (Carbon dioxide is a major greenhouse gas.) This concept says governments should introduce a cap on total emissions, then allow emitters to trade in a market for permits to pollute. So if a company wants to increase its emissions of carbon dioxide by, for example, opening up a new tar sand development, it would have to find someone who is willing to reduce their emissions, and then buy these surplus emission "credits".
Farmers and farm groups like the Canadian Federation of Agriculture have been quick to jump on this carbon credit bandwagon. Some agricultural practices have the ability to take carbon dioxide from the air and sequester it in the soil. Converting cropland to grassland is a good example. Of course, if the grass is re-broken, much of the carbon is again given off to the atmosphere. Agriculture is, in fact, all about taking and giving of carbon. Plants take carbon dioxide from the air to form their cellular structure, then release it again as the plant decays.
When farmers discuss carbon sequestration it is seldom about decreasing global warming. It is usually in the context of getting some money into the hands of farmers. Farmers argue that current practices like reduced tillage sequester more carbon so farmers should benefit from providing this "service" to society.
The problem with cap-and-trade is that it largely looks like a shell game. Farmers have adopted reduced tillage systems because they worked to improve the bottom line, not to reduce greenhouse gases. With or without a carbon market, they will not change what they are doing. For a company to then purchase carbon credits from farmers makes no real difference to what would happen anyway as far as the farmer is concerned. For the polluter, it is a low-cost license to pollute. You can't blame farmers for wanting to cash in – it appears everyone wants to cash in somehow. But to reduce greenhouse gases and stretch out the life of our oil supplies we need to reduce consumption.
In this regard, farmers can do a lot. We are major users of fossil fuels and there are many ways we can reduce this. I recently had a conversation with a farmer about energy use. He admitted that in winter you could readily find three tractors idling on their farm, even with only two operators around. They just don't like getting into a cold tractor, he told me.
Farmers can get an energy audit done for their farm. This is a real eye-opener and can show lots of ways to reduce energy consumption, and hence save money. This will have a greater effect on the bottom line than selling a carbon credit for something you do anyway. It will also have a real effect on greenhouse gas production, not just give the illusion something is being done.
© Paul Beingessner beingessner@sasktel.net
A lot of farmers don't really believe in global warming. Or, if you push them on it a bit, they don't believe humans are responsible for global warming. The warming of the earth itself is hard to deny when robins are seen north of the Arctic Circle and polar ice is melting at an unprecedented rate.
I'm no expert on climate, but you can't doubt that, despite the cool spring we are experiencing, the climate is getting warmer. This is particularly true in polar regions, which is what the models predict. And the speed of the changes in this area makes it difficult to believe it is just a normal cycle. Unless you have a massive volcano somewhere on earth, natural forces just don't act this fast.
All that aside, the global scientific community overwhelmingly believes that burning fossil fuels is the major cause of global warming, that its effects are irreversible in our lifetimes, and that they will not be a good thing. Governments around the world have been convinced by this as well, and there are international initiatives claiming to try to reduce emissions of greenhouse gases.
Coupled with the problem of global warming is the issue of declining stocks of oil and gas. In many ways they are two heads of the same monster. As hugely populated countries like China and India increase their standard of living, and as people in rich countries like Canada build bigger houses and drive more and bigger cars, use of fossil fuels is increasing dramatically each year. Most scientists agree we are reaching a point where production of conventional oil will not keep up with demand. The situation is even more critical with natural gas, despite new sources such as coalbed methane. Natural gas demand in Canada is increasing quickly, mostly for production of oil from the tar sands.
So, if you believe humans are responsible for global warming, or if you worry about the eventual real shortages of fossil fuels, it makes sense to reduce consumption of oil, gas and other non-renewable forms of energy.
Reduction of greenhouse gases has become a priority for governments – at least in terms of lip service. The reality is something different, as most governments, including ours, continually weaken and push back targets. However, the issue is not going away, and governments will continue to be pressured by the public and the scientific community to reduce greenhouse gas emissions.
Enter the cap-and-trade system for carbon emissions. (Carbon dioxide is a major greenhouse gas.) This concept says governments should introduce a cap on total emissions, then allow emitters to trade in a market for permits to pollute. So if a company wants to increase its emissions of carbon dioxide by, for example, opening up a new tar sand development, it would have to find someone who is willing to reduce their emissions, and then buy these surplus emission "credits".
Farmers and farm groups like the Canadian Federation of Agriculture have been quick to jump on this carbon credit bandwagon. Some agricultural practices have the ability to take carbon dioxide from the air and sequester it in the soil. Converting cropland to grassland is a good example. Of course, if the grass is re-broken, much of the carbon is again given off to the atmosphere. Agriculture is, in fact, all about taking and giving of carbon. Plants take carbon dioxide from the air to form their cellular structure, then release it again as the plant decays.
When farmers discuss carbon sequestration it is seldom about decreasing global warming. It is usually in the context of getting some money into the hands of farmers. Farmers argue that current practices like reduced tillage sequester more carbon so farmers should benefit from providing this "service" to society.
The problem with cap-and-trade is that it largely looks like a shell game. Farmers have adopted reduced tillage systems because they worked to improve the bottom line, not to reduce greenhouse gases. With or without a carbon market, they will not change what they are doing. For a company to then purchase carbon credits from farmers makes no real difference to what would happen anyway as far as the farmer is concerned. For the polluter, it is a low-cost license to pollute. You can't blame farmers for wanting to cash in – it appears everyone wants to cash in somehow. But to reduce greenhouse gases and stretch out the life of our oil supplies we need to reduce consumption.
In this regard, farmers can do a lot. We are major users of fossil fuels and there are many ways we can reduce this. I recently had a conversation with a farmer about energy use. He admitted that in winter you could readily find three tractors idling on their farm, even with only two operators around. They just don't like getting into a cold tractor, he told me.
Farmers can get an energy audit done for their farm. This is a real eye-opener and can show lots of ways to reduce energy consumption, and hence save money. This will have a greater effect on the bottom line than selling a carbon credit for something you do anyway. It will also have a real effect on greenhouse gas production, not just give the illusion something is being done.
© Paul Beingessner beingessner@sasktel.net
Monday, May 25, 2009
Dying Hog Industry Asks for a Billion
Column # 721 25/05/09
It might not make me very popular in some circles, but the imminent
demise of the hog industry in Canada leaves me kind of cold. Oh, I'm
as worried as anyone about the job losses in communities that rely on
hog barns for local jobs. But the industry itself isn't one that I
brood over.
I thought about this the other day when I was discussing farm animals
with my three-year-old grandson. He had seen cows, he told me, and
horses and dogs, cats, chickens and sheep. But he had never seen a
pig. Pictures yes, and the little piggies on the ends of his feet, but
not a real live hog. And, living in Saskatchewan, I reminded his
parents, he wouldn't be likely to see one. I couldn't think of anyone
in this area who raises hogs the way my father, and most of his
neighbours did four decades ago. The closest thing to a hog around
here is the odour that drifts in occasionally on the south wind from
the huge complex of barns 20-odd miles south of here. And if I did
want to take him there to see a pig, we would be unlikely to make it
past the bio-security layer around the barns.
As I said, there used to be lots of hogs raised on diversified farms
in the prairie region. Pigs had the title of mortgage lifters. Many
farmers were in and out of pigs frequently. It was easy to ramp up
numbers when prices were high, since pigs reproduce early, often and
with large litters. It was just as easy to reduce numbers to a minimum
when prices were low. Hence the notion of the four-year hog cycle.
When factory hog farms came along, the dynamic changed. Instead of
reducing production in times of low prices, they doggedly kept on
churning out pigs. They had to do something to cover their huge fixed
costs. Prices responded by sinking and remaining low. Toss in the
occasional closed border due to real or imagined disease threats, and
hog farms have lost vast sums of money for over a decade. Of course,
the low prices that battered the huge hog barns destroyed the little
ones. Hogs disappeared from the prairie landscape, to be sequestered
in massive, sealed complexes.
No doubt the state of the industry is a surprise to many in government
and elsewhere who saw factory hog production as another tool in the
belt of rural development. Fifteen to twenty years ago, government
bureaucrats and agricultural economists were lauding the development
of the massive hog operation. Saskatchewan, we were told, would soon
be producing three million hogs per year. Markets were expanding world
wide. Canada, especially the prairies, had the lowest production costs
in the world. We only had to build them, fill them, and prosperity
would come.
The early barns looked good. What the public seldom knew was that they
were propped up by government subsidies for everything from water
development to building construction. Almost all of those early barns
are gone now, and gone are the community dollars that poured into the
pockets of the early entrepreneurs. The government of Saskatchewan
still owns huge hunks of one hog empire, and loans from many years ago
remain unpaid for many barns. These loans were to be repaid when
profitability returned. Profitability remains elusive.
The truth is, we were never a particularly low cost producer. American
corn always had us beat. And every hog added to our inventory had to
be exported, with most of these going to the U.S., to a country
already a huge exporter itself. Other countries, with cheaper and more
plentiful labour, were also increasing production. It isn't surprising
then, that it took the bubble only a decade and a half to burst.
Now, hog farmers across Canada have asked the government for a billion
dollars in ad hoc payments to drag them through the worst crisis
they've faced. What urban Canadians won't know is just how few people
actually raise hogs. They also won't know that there is no light at
the end of the hog tunnel, only a lot of desperate people hoping for a
miracle.
Driving twenty-five miles south of Regina last week, I got a huge
surprise. Rooting around by some wooden granaries near the road was a
herd of footloose pigs, older sows by the look of them. I have no idea
where they came from, or where they went. But as I went by, I gave
them the thumbs up. At least for a short while, they were the only
lucky ones in a sad industry.
© Paul Beingessner beingessner@sasktel.net
It might not make me very popular in some circles, but the imminent
demise of the hog industry in Canada leaves me kind of cold. Oh, I'm
as worried as anyone about the job losses in communities that rely on
hog barns for local jobs. But the industry itself isn't one that I
brood over.
I thought about this the other day when I was discussing farm animals
with my three-year-old grandson. He had seen cows, he told me, and
horses and dogs, cats, chickens and sheep. But he had never seen a
pig. Pictures yes, and the little piggies on the ends of his feet, but
not a real live hog. And, living in Saskatchewan, I reminded his
parents, he wouldn't be likely to see one. I couldn't think of anyone
in this area who raises hogs the way my father, and most of his
neighbours did four decades ago. The closest thing to a hog around
here is the odour that drifts in occasionally on the south wind from
the huge complex of barns 20-odd miles south of here. And if I did
want to take him there to see a pig, we would be unlikely to make it
past the bio-security layer around the barns.
As I said, there used to be lots of hogs raised on diversified farms
in the prairie region. Pigs had the title of mortgage lifters. Many
farmers were in and out of pigs frequently. It was easy to ramp up
numbers when prices were high, since pigs reproduce early, often and
with large litters. It was just as easy to reduce numbers to a minimum
when prices were low. Hence the notion of the four-year hog cycle.
When factory hog farms came along, the dynamic changed. Instead of
reducing production in times of low prices, they doggedly kept on
churning out pigs. They had to do something to cover their huge fixed
costs. Prices responded by sinking and remaining low. Toss in the
occasional closed border due to real or imagined disease threats, and
hog farms have lost vast sums of money for over a decade. Of course,
the low prices that battered the huge hog barns destroyed the little
ones. Hogs disappeared from the prairie landscape, to be sequestered
in massive, sealed complexes.
No doubt the state of the industry is a surprise to many in government
and elsewhere who saw factory hog production as another tool in the
belt of rural development. Fifteen to twenty years ago, government
bureaucrats and agricultural economists were lauding the development
of the massive hog operation. Saskatchewan, we were told, would soon
be producing three million hogs per year. Markets were expanding world
wide. Canada, especially the prairies, had the lowest production costs
in the world. We only had to build them, fill them, and prosperity
would come.
The early barns looked good. What the public seldom knew was that they
were propped up by government subsidies for everything from water
development to building construction. Almost all of those early barns
are gone now, and gone are the community dollars that poured into the
pockets of the early entrepreneurs. The government of Saskatchewan
still owns huge hunks of one hog empire, and loans from many years ago
remain unpaid for many barns. These loans were to be repaid when
profitability returned. Profitability remains elusive.
The truth is, we were never a particularly low cost producer. American
corn always had us beat. And every hog added to our inventory had to
be exported, with most of these going to the U.S., to a country
already a huge exporter itself. Other countries, with cheaper and more
plentiful labour, were also increasing production. It isn't surprising
then, that it took the bubble only a decade and a half to burst.
Now, hog farmers across Canada have asked the government for a billion
dollars in ad hoc payments to drag them through the worst crisis
they've faced. What urban Canadians won't know is just how few people
actually raise hogs. They also won't know that there is no light at
the end of the hog tunnel, only a lot of desperate people hoping for a
miracle.
Driving twenty-five miles south of Regina last week, I got a huge
surprise. Rooting around by some wooden granaries near the road was a
herd of footloose pigs, older sows by the look of them. I have no idea
where they came from, or where they went. But as I went by, I gave
them the thumbs up. At least for a short while, they were the only
lucky ones in a sad industry.
© Paul Beingessner beingessner@sasktel.net
Monday, May 18, 2009
Deer Populations Reach Epidemic Numbers
Column # 720 18/05/09
Hay was pretty scarce in my part of southern Saskatchewan last fall. Then came a cold winter that went on forever. Hay supplies were stretched to the limit, and many farmers fed extra grain and purchased hay. This spring looks better, with lots of rain, following a winter with more snow than we've seen for a while. Now, if it would just warm up, the grass might even start to grow in earnest.
As I was seeding a field tonight, I noticed the great potential in a low-lying hay field that provides one of my neighbours with a good deal of his winter feed. As dusk approached, I also saw the herd of whitetail deer that began to swarm out of the surrounding chokecherry and Saskatoon bushes. Well before the sun set, they covered the field and were spilling out onto my wheat stubble. It began to look doubtful if there will be any hay there come summer.
Saskatchewan Environment says whitetail deer populations are near the all-time high for the province. Milder winters and lower hunting pressure mean numbers are still increasing. My own experience bears this out. In the 40-odd years I've hunted around my home, I have never seen so many whitetail deer. It was easy to go out for a half-hour toward evening in late winter and count hundreds of deer without going more than a few miles from our place. In addition to the whitetails, we also have an ample number of mule deer, and moose have even begun to populate this farming district!
While deer have increased, the number of hunters has gone the other way. In the late 1960s and early 1970s, Saskatchewan regularly saw 70,000 to 80,000 hunters take to the field for whitetail deer. By 2004, this had declined to 30,000. Only in the last couple of years have the numbers slowly begun to increase. Though it might be tempting to attribute the reduced number of hunters to the fervent anti-hunting segment of the animal rights lobby, it is more likely that the decline in rural population and the increasing age of those that remain have played a larger part.
Bourgeoning wildlife numbers, while nice to look at, are creating increasing conflict with farmers and ranchers. Our herds of deer did some real damage to neighbours' feed stacks this winter. Coyotes have been pruning our sheep flock with great regularity. The vast numbers of geese that pass through each fall are just waiting for the late harvest that will eventually, inevitably come. Vehicle accidents involving deer and larger ungulates cost Saskatchewan taxpayers millions each year. The situation is much the same in Alberta and Manitoba.
Hunting has an important role to play in mitigating this damage, but there is little indication that hunting will increase as a pastime. One new measure by Saskatchewan's government is to open up hunting on Sundays, which will begin this fall. If urban hunters can look forward to two days when they can hunt on the weekend, more might return to the sport they abandoned to the pressures of Monday to Friday jobs.
A hopeful sign in our area has been the increasing number of girls taking hunter safety courses. When I was a kid, girls who hunted were scarcer than hen's teeth. Not any more.
While many of my urban friends simply can't see the allure in killing animals for sport, it is usually not that simple. Hunting is a way to spend time with family and to learn to appreciate nature. Hunters generally enjoy wild meat, and sausage making is a family event at our house, and many others. It's also a way to get some benefit out of these animals that farmers feed for free. And if you can't find time yourself to process a deer, many food banks are more than glad for the donation.
© Paul Beingessner beingessner@sasktel.net
Hay was pretty scarce in my part of southern Saskatchewan last fall. Then came a cold winter that went on forever. Hay supplies were stretched to the limit, and many farmers fed extra grain and purchased hay. This spring looks better, with lots of rain, following a winter with more snow than we've seen for a while. Now, if it would just warm up, the grass might even start to grow in earnest.
As I was seeding a field tonight, I noticed the great potential in a low-lying hay field that provides one of my neighbours with a good deal of his winter feed. As dusk approached, I also saw the herd of whitetail deer that began to swarm out of the surrounding chokecherry and Saskatoon bushes. Well before the sun set, they covered the field and were spilling out onto my wheat stubble. It began to look doubtful if there will be any hay there come summer.
Saskatchewan Environment says whitetail deer populations are near the all-time high for the province. Milder winters and lower hunting pressure mean numbers are still increasing. My own experience bears this out. In the 40-odd years I've hunted around my home, I have never seen so many whitetail deer. It was easy to go out for a half-hour toward evening in late winter and count hundreds of deer without going more than a few miles from our place. In addition to the whitetails, we also have an ample number of mule deer, and moose have even begun to populate this farming district!
While deer have increased, the number of hunters has gone the other way. In the late 1960s and early 1970s, Saskatchewan regularly saw 70,000 to 80,000 hunters take to the field for whitetail deer. By 2004, this had declined to 30,000. Only in the last couple of years have the numbers slowly begun to increase. Though it might be tempting to attribute the reduced number of hunters to the fervent anti-hunting segment of the animal rights lobby, it is more likely that the decline in rural population and the increasing age of those that remain have played a larger part.
Bourgeoning wildlife numbers, while nice to look at, are creating increasing conflict with farmers and ranchers. Our herds of deer did some real damage to neighbours' feed stacks this winter. Coyotes have been pruning our sheep flock with great regularity. The vast numbers of geese that pass through each fall are just waiting for the late harvest that will eventually, inevitably come. Vehicle accidents involving deer and larger ungulates cost Saskatchewan taxpayers millions each year. The situation is much the same in Alberta and Manitoba.
Hunting has an important role to play in mitigating this damage, but there is little indication that hunting will increase as a pastime. One new measure by Saskatchewan's government is to open up hunting on Sundays, which will begin this fall. If urban hunters can look forward to two days when they can hunt on the weekend, more might return to the sport they abandoned to the pressures of Monday to Friday jobs.
A hopeful sign in our area has been the increasing number of girls taking hunter safety courses. When I was a kid, girls who hunted were scarcer than hen's teeth. Not any more.
While many of my urban friends simply can't see the allure in killing animals for sport, it is usually not that simple. Hunting is a way to spend time with family and to learn to appreciate nature. Hunters generally enjoy wild meat, and sausage making is a family event at our house, and many others. It's also a way to get some benefit out of these animals that farmers feed for free. And if you can't find time yourself to process a deer, many food banks are more than glad for the donation.
© Paul Beingessner beingessner@sasktel.net
Wednesday, May 13, 2009
Raining on the Railway
Column # 719 11/05/09
Nobody likes rain on the day of a parade. And so the metaphor about raining on someone's parade is pretty apt. You don't get to be the crowd favorite if you're disrespecting an idea the crowd cherishes.
So I write this column with some hesitation, because the parade I am going to sprinkle on is getting lots of positive press right now. And no one seems too concerned about the implications.
Short line railways haven't been too far from the news since they had their western Canadian beginnings in 1986. That was when colorful and outspoken Alberta entrepreneur Tom Payne began Central Western Railway in, well, central western Alberta. Three years later Saskatchewan had a humble start in the short line business when Southern Rails Cooperative took over short sections of CN and CP track in southern Saskatchewan.
While Southern Rails is still operating, though not with all its original track, Central Western has gone the way of the dinosaur. The difference? Central Western was privately owned and failed to return enough to its investors to justify its continued operation. Southern Rails is community owned, and its owners benefit by its operation, not from a return on investment.
The story has repeated itself several times in western Canada. Perhaps the worst and most striking example came when a company from Salt Lake City purchased the Miami and Hartney subdivisions in southern Manitoba in 1999. Local governments and farmers had organized tentatively to look at buying the line but never coalesced into anything substantial. The Tulare Valley Railway, owned by rail salvager A&K Railroad Materials, convinced CN it could run the lines as a short line. By 2007, the track was gone and customers on the line were crying the blues.
It's an interesting truth that neither Manitoba nor Alberta has a short line railway operating on a grain dependent branch line at this time, while Saskatchewan has many, and the numbers increase yearly. As in the early beginnings, the difference is in ownership. Saskatchewan's successful short lines are all community based. None are seen as investment vehicles. All are rather a means to an end - the end being the continuation of rail service for the benefit of the farmers and communities involved.
I won't dwell on the lack of entrepreneurial spirit displayed by farmers in Saskatchewan's sister provinces. That would be a cheap shot. And I won't mention the failure of governments in either Alberta or Manitoba to support community-based short line ownership, compared to Saskatchewan's many efforts in this regards. That would simply be taunting the less fortunate. Besides, if recent news is any indication, that may be changing, at least in Manitoba.
The newly formed Boundary Trails Railway Company is the first short line in Manitoba to be largely owned by producers. It also received substantial aid from the provincial government, in the form on a $615,000 forgivable loan. Everyone involved, from farmers to the province have waxed eloquent about the benefits of a producer owned short line.
All this is good. And it's about time Manitoba farmers followed the successful model from Saskatchewan. But now for the rain. The railway will be operated by another company, cited in press stories as the Central Canadian Railway, which will provide "car hauler, maintenance services, links with major railroads on traffic and delivery issues, snow clearing and basic administrative services".
Most Saskatchewan short lines do this work themselves. Not all mind you, but where a Saskatchewan short line contracts outside work, it is generally done by a short line that has an immediate presence in the area, and is another producer-owned entity.
The simple fact is that there is seldom enough money available in moving grain on branch lines to afford extensive services from outside contractors. Many Saskatchewan railways learned this the hard way. It is a bit of an odd way for farmers to do things. Few would consider hiring custom operators to carry out every bit of their farm operation, from seeding to bookkeeping. There would be very little left over if they did. The short line railway isn't much different from a farm, and requires similar management. If times are tough, you watch every penny. Outside contractors have a different expectation, and often simply want to maximize their involvement and return.
I hope the new and optimistic owners of the Boundary Trails Railway have considered this. It may work for them, and I wish them many days of sunshine.
One a related note, rumour has it the same company that consumed the Miami and Hartney subdivisions is poking around the Alliance subdivision in Alberta, and wants to talk to producers on that line, which CN has up for sale. Now that's a parade that deserves a thunder storm.
© Paul Beingessner beingessner@sasktel.net
Nobody likes rain on the day of a parade. And so the metaphor about raining on someone's parade is pretty apt. You don't get to be the crowd favorite if you're disrespecting an idea the crowd cherishes.
So I write this column with some hesitation, because the parade I am going to sprinkle on is getting lots of positive press right now. And no one seems too concerned about the implications.
Short line railways haven't been too far from the news since they had their western Canadian beginnings in 1986. That was when colorful and outspoken Alberta entrepreneur Tom Payne began Central Western Railway in, well, central western Alberta. Three years later Saskatchewan had a humble start in the short line business when Southern Rails Cooperative took over short sections of CN and CP track in southern Saskatchewan.
While Southern Rails is still operating, though not with all its original track, Central Western has gone the way of the dinosaur. The difference? Central Western was privately owned and failed to return enough to its investors to justify its continued operation. Southern Rails is community owned, and its owners benefit by its operation, not from a return on investment.
The story has repeated itself several times in western Canada. Perhaps the worst and most striking example came when a company from Salt Lake City purchased the Miami and Hartney subdivisions in southern Manitoba in 1999. Local governments and farmers had organized tentatively to look at buying the line but never coalesced into anything substantial. The Tulare Valley Railway, owned by rail salvager A&K Railroad Materials, convinced CN it could run the lines as a short line. By 2007, the track was gone and customers on the line were crying the blues.
It's an interesting truth that neither Manitoba nor Alberta has a short line railway operating on a grain dependent branch line at this time, while Saskatchewan has many, and the numbers increase yearly. As in the early beginnings, the difference is in ownership. Saskatchewan's successful short lines are all community based. None are seen as investment vehicles. All are rather a means to an end - the end being the continuation of rail service for the benefit of the farmers and communities involved.
I won't dwell on the lack of entrepreneurial spirit displayed by farmers in Saskatchewan's sister provinces. That would be a cheap shot. And I won't mention the failure of governments in either Alberta or Manitoba to support community-based short line ownership, compared to Saskatchewan's many efforts in this regards. That would simply be taunting the less fortunate. Besides, if recent news is any indication, that may be changing, at least in Manitoba.
The newly formed Boundary Trails Railway Company is the first short line in Manitoba to be largely owned by producers. It also received substantial aid from the provincial government, in the form on a $615,000 forgivable loan. Everyone involved, from farmers to the province have waxed eloquent about the benefits of a producer owned short line.
All this is good. And it's about time Manitoba farmers followed the successful model from Saskatchewan. But now for the rain. The railway will be operated by another company, cited in press stories as the Central Canadian Railway, which will provide "car hauler, maintenance services, links with major railroads on traffic and delivery issues, snow clearing and basic administrative services".
Most Saskatchewan short lines do this work themselves. Not all mind you, but where a Saskatchewan short line contracts outside work, it is generally done by a short line that has an immediate presence in the area, and is another producer-owned entity.
The simple fact is that there is seldom enough money available in moving grain on branch lines to afford extensive services from outside contractors. Many Saskatchewan railways learned this the hard way. It is a bit of an odd way for farmers to do things. Few would consider hiring custom operators to carry out every bit of their farm operation, from seeding to bookkeeping. There would be very little left over if they did. The short line railway isn't much different from a farm, and requires similar management. If times are tough, you watch every penny. Outside contractors have a different expectation, and often simply want to maximize their involvement and return.
I hope the new and optimistic owners of the Boundary Trails Railway have considered this. It may work for them, and I wish them many days of sunshine.
One a related note, rumour has it the same company that consumed the Miami and Hartney subdivisions is poking around the Alliance subdivision in Alberta, and wants to talk to producers on that line, which CN has up for sale. Now that's a parade that deserves a thunder storm.
© Paul Beingessner beingessner@sasktel.net
Wednesday, May 06, 2009
XL Closure Predicted By Smart Cattle Guy
Column # 718 04/05/09
Regular readers of this column will know I wasn't too enthused about
the sale of Lakeside Packers to XL Beef. The Competition Bureau
decided that Canadian farmers would be well enough served by having
two companies controlling 95% of beef packing in Canada. It blessed
the sale with the proviso that it would "watch" and if competition
wasn't sufficient in the future it would have to act. (What the bureau
could possibly do a few years down the road, other than wring its
hands, is beyond me.)
Readers will also know that I lambasted some of the groups claiming to
represent cattle producers for their unwillingness to oppose the
consolidation in the industry. One such representative defended this
by saying that the packers (XL and Cargill) write good cheques, so why
would we criticize them? (They may be good but they are so darn
small!)
The columns I wrote about this brought me probably the largest
response since I began writing, more than 700 columns ago. While some
of it was negative, most was positive. There are a lot of angry cattle
farmers out there. Angry at governments, and angry at the leadership
of farm organizations.
One large cow-calf producer who phoned me surprised me a bit when he
said that now that XL was going to own Lakeside Packers, it would soon
close XL Beef in Moose Jaw, and likely its plant in Calgary. Even for
someone as jaded as me, that seemed a bit much. "Of course," he said.
"Lakeside is operating below capacity, so why would they keep the
other two plants open?"
Geez, what a cynic, I thought. But, of course, it turns out he was
right. XL announced on April 24 that it is "temporarily" shutting the
Moose Jaw plant down, with a likely resumption of operations in
September. One employee was less optimistic, saying the September
re-opening was more a wish than a likelihood.
The Western Producer reported the reactions of the Canadian Cattlemens
Association and the Saskatchewan Stock Growers Association. Neither
appeared upset with Nilsson Bros., owners of XL. CCA president Brad
Wildeman said, "If there's nothing to slaughter, you can't expect to
keep it open". SSGA president Ed Bothner was equally sympathetic.
"It's out of their control." Even the head of the union at XL bought
the argument. "Who would think in Saskatchewan we'd have no cows?"
Since the plant at Brooks has been operating at about 75% capacity,
and Moose Jaw has had a reduced kill lately, the logical assumption is
there just aren't enough cattle to go around. Of course, during BSE,
with the border closed, prices were low because there wasn't enough
slaughter capacity in Canada to kill all the animals available. Now,
that the border is open (at least for now) cattle are again heading to
the U.S. and Canadian plants are short.
The thing about this is that cattle are being shipped to the U.S. In
other words, there are more cattle available to kill, but someone
else, in the U.S. is willing to pay more for them than the Canadian
plants. So there is something to slaughter, and it isn't out of XL's
control. Just pay more and you'll have more cattle. And the cow
numbers in Saskatchewan are down, alright, but only a bit over two
percent from six months ago. There are still cows in Saskatchewan.
And, if there are less cattle overall, it is because farmers stopped
raising them, and began to sell off their cows because there was no
money in it. Let's face it. The packers made a killing during BSE. If
they had passed more of that back to the farmer, there would be more
cows now, and no one would be talking about shortages of animals. So
the packers are victims of a problem of their own making.
Now, I know that the market doesn't work that way. The packers will
never pay more than they have to, because they are business people,
not charitable institutions, and they mainly think short term. To get
money out of them, we need to have competition. That is the nature of
our economic system. Rob Leslie, senior analyst at Canfax, knows that.
The Western Producer article quotes him saying the closure will mean
lower prices for feeders and fat cattle. "We're reducing capacity and
the plants don't have to go out there and be quite as aggressive on
their bids to procure cattle."
Of course, that will reduce cattle producers' profitability even more,
leading to fewer of them raising cows. Which may lead to more plant
closures, or fewer re-openings.
Now if XL had not been allowed to buy Lakeside, and another buyer had
been found, would Moose Jaw have closed anyway? Maybe. Or maybe not,
since it is expected there will be more cattle available in the fall.
So tell me again why the cattle organizations figure consolidation in
the packing industry is okay. I haven't had a good laugh in quite a
while.
© Paul Beingessner beingessner@sasktel.net
Regular readers of this column will know I wasn't too enthused about
the sale of Lakeside Packers to XL Beef. The Competition Bureau
decided that Canadian farmers would be well enough served by having
two companies controlling 95% of beef packing in Canada. It blessed
the sale with the proviso that it would "watch" and if competition
wasn't sufficient in the future it would have to act. (What the bureau
could possibly do a few years down the road, other than wring its
hands, is beyond me.)
Readers will also know that I lambasted some of the groups claiming to
represent cattle producers for their unwillingness to oppose the
consolidation in the industry. One such representative defended this
by saying that the packers (XL and Cargill) write good cheques, so why
would we criticize them? (They may be good but they are so darn
small!)
The columns I wrote about this brought me probably the largest
response since I began writing, more than 700 columns ago. While some
of it was negative, most was positive. There are a lot of angry cattle
farmers out there. Angry at governments, and angry at the leadership
of farm organizations.
One large cow-calf producer who phoned me surprised me a bit when he
said that now that XL was going to own Lakeside Packers, it would soon
close XL Beef in Moose Jaw, and likely its plant in Calgary. Even for
someone as jaded as me, that seemed a bit much. "Of course," he said.
"Lakeside is operating below capacity, so why would they keep the
other two plants open?"
Geez, what a cynic, I thought. But, of course, it turns out he was
right. XL announced on April 24 that it is "temporarily" shutting the
Moose Jaw plant down, with a likely resumption of operations in
September. One employee was less optimistic, saying the September
re-opening was more a wish than a likelihood.
The Western Producer reported the reactions of the Canadian Cattlemens
Association and the Saskatchewan Stock Growers Association. Neither
appeared upset with Nilsson Bros., owners of XL. CCA president Brad
Wildeman said, "If there's nothing to slaughter, you can't expect to
keep it open". SSGA president Ed Bothner was equally sympathetic.
"It's out of their control." Even the head of the union at XL bought
the argument. "Who would think in Saskatchewan we'd have no cows?"
Since the plant at Brooks has been operating at about 75% capacity,
and Moose Jaw has had a reduced kill lately, the logical assumption is
there just aren't enough cattle to go around. Of course, during BSE,
with the border closed, prices were low because there wasn't enough
slaughter capacity in Canada to kill all the animals available. Now,
that the border is open (at least for now) cattle are again heading to
the U.S. and Canadian plants are short.
The thing about this is that cattle are being shipped to the U.S. In
other words, there are more cattle available to kill, but someone
else, in the U.S. is willing to pay more for them than the Canadian
plants. So there is something to slaughter, and it isn't out of XL's
control. Just pay more and you'll have more cattle. And the cow
numbers in Saskatchewan are down, alright, but only a bit over two
percent from six months ago. There are still cows in Saskatchewan.
And, if there are less cattle overall, it is because farmers stopped
raising them, and began to sell off their cows because there was no
money in it. Let's face it. The packers made a killing during BSE. If
they had passed more of that back to the farmer, there would be more
cows now, and no one would be talking about shortages of animals. So
the packers are victims of a problem of their own making.
Now, I know that the market doesn't work that way. The packers will
never pay more than they have to, because they are business people,
not charitable institutions, and they mainly think short term. To get
money out of them, we need to have competition. That is the nature of
our economic system. Rob Leslie, senior analyst at Canfax, knows that.
The Western Producer article quotes him saying the closure will mean
lower prices for feeders and fat cattle. "We're reducing capacity and
the plants don't have to go out there and be quite as aggressive on
their bids to procure cattle."
Of course, that will reduce cattle producers' profitability even more,
leading to fewer of them raising cows. Which may lead to more plant
closures, or fewer re-openings.
Now if XL had not been allowed to buy Lakeside, and another buyer had
been found, would Moose Jaw have closed anyway? Maybe. Or maybe not,
since it is expected there will be more cattle available in the fall.
So tell me again why the cattle organizations figure consolidation in
the packing industry is okay. I haven't had a good laugh in quite a
while.
© Paul Beingessner beingessner@sasktel.net
Tuesday, April 28, 2009
Cosmetic Pesticide Ban Not So Frightening
Column # 717 27/04/09
I recently read an article that declared farmers should be frightened by the recent bans on cosmetic herbicides in Quebec and Ontario. These laws, in place in Quebec since 2006 and implemented this month in Ontario limit the use of pesticides, including herbicides and some insecticides for "cosmetic" reasons. The bans include using herbicides to produce weed-free lawns and even spraying of insects where there is no essential health-related reason to do so.
These laws have their basis in some recent scientific discoveries. One of these is that pesticides that breakdown fairly quickly with exposure to sunlight and air are much slower to break down in the absence of these. So the 2,4-D that Joe Urban applies to his lawn to get rid of dandelions gets carried into the house on Joe's shoes. Joe doesn't know it, but in the house, the 2,4-D persists for weeks or even months, exposing Joe's kids to continuous small doses of the chemical.
The idea behind a cosmetic pesticide ban is predicated on the word "cosmetic". Cosmetic pesticides are used only to improve the appearance of something. They are unnecessary from an economic or health point of view, and there are other options that can be used, like pulling your weeds. Nevertheless, the bans are fairly far reaching and apply to parks, public areas, and even home lawns and gardens.
Similar legislation is being investigated by other provinces including New Brunswick and Nova Scotia and by many municipal authorities.
While there are many detractors of such a ban, including of course the companies that sell lawn-care chemicals, there are many supporters. The Canadian Cancer Society is strongly supporting and promoting cosmetic pesticide bans. It claims that "there is suggestive, but growing, evidence linking pesticide exposure with non-Hodgkin’s lymphoma, adult and childhood leukemia, brain cancer, kidney cancer, pancreatic cancer, prostate cancer, and some lung cancers." The Cancer Society says such bans have widespread public support, citing surveys showing 76 % of British Columbians are in favor of these measures.
Farm groups worried about cosmetic pesticide bans see them as the thin edge of the wedge – can bans on all pesticide use be far behind? They also point to what they consider to be the unscientific nature of such bans – if pesticides are safe for farmers to use, how can they be unsafe for anyone else?
As a farmer, I don't buy the thin-edge-of-the-wedge argument. I didn't buy the same argument about gun registration either – that registration was the first step toward confiscation. I am sure that there were automobile owners who claimed the same thing one hundred years ago when told they would have to license their cars. American gun enthusiasts (read lunatics) are saying the same about giving up their Kalashnikov assault rifles and rocket launchers.
As to the safety of chemicals, farmers have become increasingly aware of the danger of their careless use. I vividly remember coming across a local farmer with his disker hung up on a railway crossing thirty-odd years ago. I got out of my truck to go help when I saw his entire face, arms and hands were a bright pink, the result of applying lindane seed treatment. I haven't seen something like that for a while but there are still too many farmers not properly using respirators, goggles and safety suits.
Governments in Canada do have the right to impose cosmetic pesticide bans. That right was upheld by the Supreme Court of Canada in 2005. One would think that would be the end of the story, but governments are no longer so sovereign in this day of treaties and trade agreements. The chemical companies have one more hand to play. Dow Chemical, maker of 2,4-D, the most commonly used lawn herbicide, has launched a challenge to the Quebec ban under Chapter 11 of the North American Free Trade Agreement. Chapter 11 allows private companies to sue the Government of Canada if it does anything that interferes with a company's ability to make a profit. Dow claims the ban is an unfair expropriation of its business.
Under NAFTA, the complaint may be heard in secret, by a panel of arbitrators, one picked by Dow, one by the government of Canada and one by mutual agreement of the two parties. If the secret decision by the secret panel goes against Canada, taxpayers will be on the hook for millions. It has happened many times before. In the first seven years of NAFTA, the Canadian government was sued for over 11 billion dollars. NAFTA panels have even declared it a violation of a company's rights if it is "rudely treated by government officials" even when the complaint the company is lodging has no merit!
Chapter 11 is one example where governments have willingly given up their sovereign rights to unelected, unrepresentative panels which citizens do not control. Frankly, I am way more afraid of Chapter 11 of NAFTA than I am of any ban on cosmetic pesticides.
© Paul Beingessner beingessner@sasktel.net
I recently read an article that declared farmers should be frightened by the recent bans on cosmetic herbicides in Quebec and Ontario. These laws, in place in Quebec since 2006 and implemented this month in Ontario limit the use of pesticides, including herbicides and some insecticides for "cosmetic" reasons. The bans include using herbicides to produce weed-free lawns and even spraying of insects where there is no essential health-related reason to do so.
These laws have their basis in some recent scientific discoveries. One of these is that pesticides that breakdown fairly quickly with exposure to sunlight and air are much slower to break down in the absence of these. So the 2,4-D that Joe Urban applies to his lawn to get rid of dandelions gets carried into the house on Joe's shoes. Joe doesn't know it, but in the house, the 2,4-D persists for weeks or even months, exposing Joe's kids to continuous small doses of the chemical.
The idea behind a cosmetic pesticide ban is predicated on the word "cosmetic". Cosmetic pesticides are used only to improve the appearance of something. They are unnecessary from an economic or health point of view, and there are other options that can be used, like pulling your weeds. Nevertheless, the bans are fairly far reaching and apply to parks, public areas, and even home lawns and gardens.
Similar legislation is being investigated by other provinces including New Brunswick and Nova Scotia and by many municipal authorities.
While there are many detractors of such a ban, including of course the companies that sell lawn-care chemicals, there are many supporters. The Canadian Cancer Society is strongly supporting and promoting cosmetic pesticide bans. It claims that "there is suggestive, but growing, evidence linking pesticide exposure with non-Hodgkin’s lymphoma, adult and childhood leukemia, brain cancer, kidney cancer, pancreatic cancer, prostate cancer, and some lung cancers." The Cancer Society says such bans have widespread public support, citing surveys showing 76 % of British Columbians are in favor of these measures.
Farm groups worried about cosmetic pesticide bans see them as the thin edge of the wedge – can bans on all pesticide use be far behind? They also point to what they consider to be the unscientific nature of such bans – if pesticides are safe for farmers to use, how can they be unsafe for anyone else?
As a farmer, I don't buy the thin-edge-of-the-wedge argument. I didn't buy the same argument about gun registration either – that registration was the first step toward confiscation. I am sure that there were automobile owners who claimed the same thing one hundred years ago when told they would have to license their cars. American gun enthusiasts (read lunatics) are saying the same about giving up their Kalashnikov assault rifles and rocket launchers.
As to the safety of chemicals, farmers have become increasingly aware of the danger of their careless use. I vividly remember coming across a local farmer with his disker hung up on a railway crossing thirty-odd years ago. I got out of my truck to go help when I saw his entire face, arms and hands were a bright pink, the result of applying lindane seed treatment. I haven't seen something like that for a while but there are still too many farmers not properly using respirators, goggles and safety suits.
Governments in Canada do have the right to impose cosmetic pesticide bans. That right was upheld by the Supreme Court of Canada in 2005. One would think that would be the end of the story, but governments are no longer so sovereign in this day of treaties and trade agreements. The chemical companies have one more hand to play. Dow Chemical, maker of 2,4-D, the most commonly used lawn herbicide, has launched a challenge to the Quebec ban under Chapter 11 of the North American Free Trade Agreement. Chapter 11 allows private companies to sue the Government of Canada if it does anything that interferes with a company's ability to make a profit. Dow claims the ban is an unfair expropriation of its business.
Under NAFTA, the complaint may be heard in secret, by a panel of arbitrators, one picked by Dow, one by the government of Canada and one by mutual agreement of the two parties. If the secret decision by the secret panel goes against Canada, taxpayers will be on the hook for millions. It has happened many times before. In the first seven years of NAFTA, the Canadian government was sued for over 11 billion dollars. NAFTA panels have even declared it a violation of a company's rights if it is "rudely treated by government officials" even when the complaint the company is lodging has no merit!
Chapter 11 is one example where governments have willingly given up their sovereign rights to unelected, unrepresentative panels which citizens do not control. Frankly, I am way more afraid of Chapter 11 of NAFTA than I am of any ban on cosmetic pesticides.
© Paul Beingessner beingessner@sasktel.net
Wednesday, April 22, 2009
Creative Ways to Break a Contract
Column # 716 20/04/09
2009 was a tough year in the grain markets. Prices began relatively
low at year's beginning, rose to great heights in mid year, and fell
back dramatically at year's end. If you sold or priced your grain at
the peak, you were a genius. At any other time, you were just another
of the also-rans.
With wildly gyrating markets, the CWB suffered some losses in hedging
its producer payment options. It took heavy criticism from folks who
don't like the CWB, but the impact on individual farmers was
relatively small.
Some grain companies had a different way of dealing with their
mistakes. When prices were high mid-year, grain dealers were signing
contracts with farmers that yielded some very lucrative values. When
prices fell at year end and into 2009, grain dealers found themselves
with a lot of signed contracts that no longer reflected world prices.
Of course, those who had properly hedged their purchases could escape
with less damage. For those who hadn't, things were not so good.
No farmer likes to have sold too early in a rising market or too late
in one that is falling. But farmers in this situation generally honor
their contracts. Not to do so leaves you open to legal action. But
some grain dealers discovered this year that there are creative ways
to break a contract without actually doing so.
I've been hearing stories about this for some time, but a recent phone
call from a farmer near Riverhurst confirmed how serious this issue
can be. These folks had priced green lentils in the fall at 40 cents a
pound for number ones and 38 cents for number twos. Their samples to
the Canadian Grain Commission came back grading number one, with
around 6% dockage. When the grain dealer finally called for their
grain in the winter, he told them the grade was really a number three.
And not a number three at the high prices when the contract was
signed, but a number three at the current, much lower prices. And the
dockage had now gone to 14%. No amount of arguing would budge the
company.
Now had this been a licensed grain elevator, the producer could have
demanded an inspection of the unload sample by the CGC. This grade and
dockage determination would have been binding on both parties. But
grain dealers are exempt from this provision of the Canada Grain Act.
Nor was this the only company this farmer dealt with. Two other grain
dealers wreaked similar havoc on the farmer's bottom line. In all, he
was short $20,000. Pleas to the CGC for assistance met with no result.
Not in our mandate, they were told.
I told this story to several farmers and a barrage of similar stories
emerged. If you haven't had this problem, you aren't growing green
lentils, one told me. It appears some grain dealers found creative
ways to break contracts that were not in their favor.
Donna Welke, former Assistant Commissioner for Saskatchewan to the
CGC, advised farmers to approach the grain dealer this way: "We have a
disagreement and I'd like to submit it to an independent third body
for an assessment of grade." If the dealer refuses, she suggested
asking "Why? Are you trying to cheat me?" Of course, there are no more
Donna Welke's to advise farmers. The Conservative government has
failed to appoint new Assistant Commissioners, though the Act calls
for them to do so.
The bottom line is that farmers need to read their contracts very
carefully, and know what they are signing. Contracts are written by
grain companies so they reflect the needs and wishes of the company,
not the farmer. They should outline a method of settling disagreements
between the parties, with the logical arbitrar of grade and dockage
disputes being the CGC.
Farmers also should understand the need to take mutually agreed upon
unload samples at the elevator. These would become the basis for any
dispute resolution. It also would be wise to spell out the method for
testing dockage. Use of a number 9 round hole sieve can yield dockage
many percent higher than the number 8 hole sieve that most dealers
use. Several farmers I spoke with ended up being shafted by this
method.
Bill C-13, the bill to amend the Canada Grain Act, contained measures
to make grain dealers subject to the same provisions that apply to
licensed grain elevators. This would give farmers automatic recourse
to the CGC in cases of disputes over grade and dockage. C-13, with
this exception, was a bad bill. It failed to make it through the House
of Commons, and this is good, but there is still a pressing need for
this change. There is also a pressing need for the government to
recognize that farmers need protection via the act, that this is the
reason for the act's existence. That fact hasn't changed in the
century it has been in place.
© Paul Beingessner beingessner@sasktel.net
2009 was a tough year in the grain markets. Prices began relatively
low at year's beginning, rose to great heights in mid year, and fell
back dramatically at year's end. If you sold or priced your grain at
the peak, you were a genius. At any other time, you were just another
of the also-rans.
With wildly gyrating markets, the CWB suffered some losses in hedging
its producer payment options. It took heavy criticism from folks who
don't like the CWB, but the impact on individual farmers was
relatively small.
Some grain companies had a different way of dealing with their
mistakes. When prices were high mid-year, grain dealers were signing
contracts with farmers that yielded some very lucrative values. When
prices fell at year end and into 2009, grain dealers found themselves
with a lot of signed contracts that no longer reflected world prices.
Of course, those who had properly hedged their purchases could escape
with less damage. For those who hadn't, things were not so good.
No farmer likes to have sold too early in a rising market or too late
in one that is falling. But farmers in this situation generally honor
their contracts. Not to do so leaves you open to legal action. But
some grain dealers discovered this year that there are creative ways
to break a contract without actually doing so.
I've been hearing stories about this for some time, but a recent phone
call from a farmer near Riverhurst confirmed how serious this issue
can be. These folks had priced green lentils in the fall at 40 cents a
pound for number ones and 38 cents for number twos. Their samples to
the Canadian Grain Commission came back grading number one, with
around 6% dockage. When the grain dealer finally called for their
grain in the winter, he told them the grade was really a number three.
And not a number three at the high prices when the contract was
signed, but a number three at the current, much lower prices. And the
dockage had now gone to 14%. No amount of arguing would budge the
company.
Now had this been a licensed grain elevator, the producer could have
demanded an inspection of the unload sample by the CGC. This grade and
dockage determination would have been binding on both parties. But
grain dealers are exempt from this provision of the Canada Grain Act.
Nor was this the only company this farmer dealt with. Two other grain
dealers wreaked similar havoc on the farmer's bottom line. In all, he
was short $20,000. Pleas to the CGC for assistance met with no result.
Not in our mandate, they were told.
I told this story to several farmers and a barrage of similar stories
emerged. If you haven't had this problem, you aren't growing green
lentils, one told me. It appears some grain dealers found creative
ways to break contracts that were not in their favor.
Donna Welke, former Assistant Commissioner for Saskatchewan to the
CGC, advised farmers to approach the grain dealer this way: "We have a
disagreement and I'd like to submit it to an independent third body
for an assessment of grade." If the dealer refuses, she suggested
asking "Why? Are you trying to cheat me?" Of course, there are no more
Donna Welke's to advise farmers. The Conservative government has
failed to appoint new Assistant Commissioners, though the Act calls
for them to do so.
The bottom line is that farmers need to read their contracts very
carefully, and know what they are signing. Contracts are written by
grain companies so they reflect the needs and wishes of the company,
not the farmer. They should outline a method of settling disagreements
between the parties, with the logical arbitrar of grade and dockage
disputes being the CGC.
Farmers also should understand the need to take mutually agreed upon
unload samples at the elevator. These would become the basis for any
dispute resolution. It also would be wise to spell out the method for
testing dockage. Use of a number 9 round hole sieve can yield dockage
many percent higher than the number 8 hole sieve that most dealers
use. Several farmers I spoke with ended up being shafted by this
method.
Bill C-13, the bill to amend the Canada Grain Act, contained measures
to make grain dealers subject to the same provisions that apply to
licensed grain elevators. This would give farmers automatic recourse
to the CGC in cases of disputes over grade and dockage. C-13, with
this exception, was a bad bill. It failed to make it through the House
of Commons, and this is good, but there is still a pressing need for
this change. There is also a pressing need for the government to
recognize that farmers need protection via the act, that this is the
reason for the act's existence. That fact hasn't changed in the
century it has been in place.
© Paul Beingessner beingessner@sasktel.net
Monday, April 13, 2009
Corporate Farm Takes in First Nations Land
Column # 715 13/04/09
Some farmers are sure to be concerned about the news that a huge
corporate farm is coming to western Canada in time for the 2009
planting season. Conceived by an eastern investment firm, One Earth
Farms will be a collaboration between Sprott Resource Corp. and
several First Nations bands in Saskatchewan and Alberta. Starting with
50,000 acres the first year, One Earth Farms intends to amass one
million acres in all. The land will mostly come from First Nations,
many of whom purchased farmland using money from Treaty Land
Entitlements.
Despite the usual concerns that arise in a country dominated by
moderately sized family-owned farms, there are good reasons to be
hopeful about One Earth Farms. There are also some reasons for
skepticism about the success of the venture.
On the positive side, One Earth Farms hopes to train young aboriginal
people to act as workers on its farms. To that end, the founder of
Sprott Resource Corp. intends to donate $1-million to the University
of Saskatchewan to create a scholarship fund for aboriginal students
studying agriculture. If this idea is successful, it will provide some
much needed employment for aboriginal people while giving them skills
that might be useful in many other types of work. Anything that can
help to lift aboriginal people out of poverty is something that should
inspire hope.
But will the whole idea work? Corporate farms have been tried before
and have had limited success. Eric Sprott, founder of the now-publicly
traded Sprott Resource Corp. thinks the time is right for money to be
made in agriculture. Sprott gained a lot of wealth by playing the
commodity boom of recent years. One Earth Farms expects agriculture to
present significant opportunities for wealth creation in the near
future. Kevin Bambrough, CEO of the new entity said recently, "We
believe that the opportunities associated with this new venture are
unprecedented in the agricultural industry."
Perhaps the biggest barrier to success lies in the nature of the
company itself. One Earth Farms will be the actual farming company,
but in the world of corporate finance, nothing is ever simple. So
there will be One Earth Farms, but also One Earth Resources Corp., and
One Earth Farms GP Corp. The last two companies appear to be vehicles
for managing the land First Nations will commit to the project. Each
of these companies will have Chief Executive Officers and Chief
Operating Officers and Chief Financial Officers, each raking in
hundreds of thousands of dollars, or, if Wall Street is their model,
perhaps millions. There will be boards of directors that will have to
be compensated and managers for each company. There will also be high
profit expectations from the shareholders of Sprott Resource Corp.
All this will have to be sustained on the backs of farmland and
livestock. (One Earth Farms plans on purchasing one thousand cows in
the first year.) Neither of these has much of a history of success in
recent years.
Admittedly, there are advantages to large farms, and One Earth Farms
feels it can take advantage of them by negotiating preferential prices
for inputs and crop outputs. There is some likelihood of that. On farm
supplies, large farmers already receive price discounts not available
to smaller farmers. Interestingly, One Earth Farms feels there will be
marketing benefits to commanding large amounts of production. In this,
it runs contrary to the prevailing notion of some farmers who feel
that collectively marketing their products, as with the CWB, provides
no advantage at all. One Earth Farms may have something to teach
established farmers here.
The Achilles heel of One Earth Farms may well be management and
labour. Companies that start with grandiose plans often attract
management with a flair of extravagance. The Saskatchewan Wheat Pool
springs to mind. And few grain farms function with all hired labour.
Not many wage labourers want to put in the hours that farmers do or
have the same commitment to survival that has kept farmers on the land
through the thinnest of times.
It will be interesting to watch. Will One Earth Farms be the wave of
the future, or will it simply be another case of non-farmers trying to
extract wealth from the farm?
© Paul Beingessner beingessner@sasktel.net
Some farmers are sure to be concerned about the news that a huge
corporate farm is coming to western Canada in time for the 2009
planting season. Conceived by an eastern investment firm, One Earth
Farms will be a collaboration between Sprott Resource Corp. and
several First Nations bands in Saskatchewan and Alberta. Starting with
50,000 acres the first year, One Earth Farms intends to amass one
million acres in all. The land will mostly come from First Nations,
many of whom purchased farmland using money from Treaty Land
Entitlements.
Despite the usual concerns that arise in a country dominated by
moderately sized family-owned farms, there are good reasons to be
hopeful about One Earth Farms. There are also some reasons for
skepticism about the success of the venture.
On the positive side, One Earth Farms hopes to train young aboriginal
people to act as workers on its farms. To that end, the founder of
Sprott Resource Corp. intends to donate $1-million to the University
of Saskatchewan to create a scholarship fund for aboriginal students
studying agriculture. If this idea is successful, it will provide some
much needed employment for aboriginal people while giving them skills
that might be useful in many other types of work. Anything that can
help to lift aboriginal people out of poverty is something that should
inspire hope.
But will the whole idea work? Corporate farms have been tried before
and have had limited success. Eric Sprott, founder of the now-publicly
traded Sprott Resource Corp. thinks the time is right for money to be
made in agriculture. Sprott gained a lot of wealth by playing the
commodity boom of recent years. One Earth Farms expects agriculture to
present significant opportunities for wealth creation in the near
future. Kevin Bambrough, CEO of the new entity said recently, "We
believe that the opportunities associated with this new venture are
unprecedented in the agricultural industry."
Perhaps the biggest barrier to success lies in the nature of the
company itself. One Earth Farms will be the actual farming company,
but in the world of corporate finance, nothing is ever simple. So
there will be One Earth Farms, but also One Earth Resources Corp., and
One Earth Farms GP Corp. The last two companies appear to be vehicles
for managing the land First Nations will commit to the project. Each
of these companies will have Chief Executive Officers and Chief
Operating Officers and Chief Financial Officers, each raking in
hundreds of thousands of dollars, or, if Wall Street is their model,
perhaps millions. There will be boards of directors that will have to
be compensated and managers for each company. There will also be high
profit expectations from the shareholders of Sprott Resource Corp.
All this will have to be sustained on the backs of farmland and
livestock. (One Earth Farms plans on purchasing one thousand cows in
the first year.) Neither of these has much of a history of success in
recent years.
Admittedly, there are advantages to large farms, and One Earth Farms
feels it can take advantage of them by negotiating preferential prices
for inputs and crop outputs. There is some likelihood of that. On farm
supplies, large farmers already receive price discounts not available
to smaller farmers. Interestingly, One Earth Farms feels there will be
marketing benefits to commanding large amounts of production. In this,
it runs contrary to the prevailing notion of some farmers who feel
that collectively marketing their products, as with the CWB, provides
no advantage at all. One Earth Farms may have something to teach
established farmers here.
The Achilles heel of One Earth Farms may well be management and
labour. Companies that start with grandiose plans often attract
management with a flair of extravagance. The Saskatchewan Wheat Pool
springs to mind. And few grain farms function with all hired labour.
Not many wage labourers want to put in the hours that farmers do or
have the same commitment to survival that has kept farmers on the land
through the thinnest of times.
It will be interesting to watch. Will One Earth Farms be the wave of
the future, or will it simply be another case of non-farmers trying to
extract wealth from the farm?
© Paul Beingessner beingessner@sasktel.net
Tuesday, April 07, 2009
Good Riddance to C-13
Column # 714 06/04/09
Farmers should be grateful that Bill C-13, a bill to amend the Canada
Grain Act, failed to make it through Parliament. The Bill was removed
from consideration for second reading last week by a motion supported
by all three Opposition parties. The motion called for the bill to be
brought back to Parliament in six months, but the likelihood is that
this session of Parliament will be terminated before then, thus ending
the path of this bill for now.
Bill C-13 has had a long history. It began as C-39, in December, 2007.
It failed to make it through that Parliament and was re-introduced, in
identical form, as C-13 in early 2009. Since re-introduction, it has
been criticized by farm groups across Canada. That criticism arose, in
part, because the government failed to change the bill at all, despite
opposition from the ag community.
Throughout debate over the bill, the Conservative government has tried
to sell it as an effort to "modernize" the Canadian Grain Commission.
The Agriculture Minister, and others, have repeatedly said that the
act hasn't been amended for decades, but agriculture itself has
changed immensely in that time. Hence, the act must be out of date.
The talk about modernization is clearly an attempt to influence
farmers by using jargon. Modern is good after all. What farmers would
not want to be modern? The government also talks about eliminating
"unnecessary and costly regulations". Sound good, eh? Farmers can ill
afford anything unnecessary and costly.
But the bill fails dramatically to live up to its hype. Its proposed
modernization includes ending the focus on furthering the interests of
farmers. Rather than a regulator, the CGC becomes a service provider,
working happily in the best interests of everyone. The bill ignores
the fact that not everyone's interests are the same, and not everyone
has equal power. The Canada Grain Act has traditionally focused on
producer interests for a reason - producers typically lack power as
they face massive grain companies.
The unnecessary and costly regulation the bill intended to end
consists of two things. One is getting rid of bonding for grain
companies. This part of the act ensures farmers will get paid in case
a grain company goes bankrupt. Despite Gerry Ritz's comments that this
hasn't worked well, it has worked quite well for the most part. The
government move to get rid of this requirement is based on the
ideology of privatization, since there is no practical replacement for
this bonding. The Western Barley Growers Association was given huge
sums of money by the government to develop an alternate mechanism, but
has produced nothing concrete. Ritz appears not to understand the
nature of laws when he says his government would not remove bonding
until there was a substitute available. If C-13 had passed, bonding
would be gone.
The second part of "unnecessary regulation" would have been the
elimination of inward weighing and inspection at port. It is true that
much of the grain that begins at an inland elevator ends at a terminal
of the same ownership, but certainly not all. Take Prince Rupert for
example. The terminal is owned by five grain companies. Do they trust
each other enough to mingle their grain without independent
inspection? Of course, there will be a need for inspection for things
like producer cars. The bill contemplated private inspectors. Would
both sides accept the verdict? The CGC would still do inspections on
outbound shipments, but the force of inspectors would be greatly
reduced and much expertise lost. The CWB would still require inward
inspection for several reasons. It allows it to know what stocks are
in the terminal, and allows it to capture a portion of the blending
gains for farmers. Since CWB grain still constitute the majority of
grain exported, inward inspection would still be needed. Only the
faces would change, with privatized inspection being the order of the
day. Not much streamlining there!
Both COMPAS, the company that studied the issue for the feds, and the
Standing Committee on Agriculture recommended the government set up an
office of farmer advocacy, since the CGC would no longer have farmer
protection as its main mandate, and since the government has
apparently eliminated the Assistant Commissioners to the CGC by
refusing to appoint any. The failure to set up this office has much to
do with Opposition party condemnation of the bill.
The Conservatives believe that getting rid of bonding, limiting farmer
protections and reducing the scope of the CGC means they are
modernizing it. Instead, it is just more of the same. Leave farmers to
deal with the market, in an environment where they are divided and
ultimately conquered. This might be the modern way, but it is hardly
one we should aspire to.
© Paul Beingessner beingessner@sasktel.net
Farmers should be grateful that Bill C-13, a bill to amend the Canada
Grain Act, failed to make it through Parliament. The Bill was removed
from consideration for second reading last week by a motion supported
by all three Opposition parties. The motion called for the bill to be
brought back to Parliament in six months, but the likelihood is that
this session of Parliament will be terminated before then, thus ending
the path of this bill for now.
Bill C-13 has had a long history. It began as C-39, in December, 2007.
It failed to make it through that Parliament and was re-introduced, in
identical form, as C-13 in early 2009. Since re-introduction, it has
been criticized by farm groups across Canada. That criticism arose, in
part, because the government failed to change the bill at all, despite
opposition from the ag community.
Throughout debate over the bill, the Conservative government has tried
to sell it as an effort to "modernize" the Canadian Grain Commission.
The Agriculture Minister, and others, have repeatedly said that the
act hasn't been amended for decades, but agriculture itself has
changed immensely in that time. Hence, the act must be out of date.
The talk about modernization is clearly an attempt to influence
farmers by using jargon. Modern is good after all. What farmers would
not want to be modern? The government also talks about eliminating
"unnecessary and costly regulations". Sound good, eh? Farmers can ill
afford anything unnecessary and costly.
But the bill fails dramatically to live up to its hype. Its proposed
modernization includes ending the focus on furthering the interests of
farmers. Rather than a regulator, the CGC becomes a service provider,
working happily in the best interests of everyone. The bill ignores
the fact that not everyone's interests are the same, and not everyone
has equal power. The Canada Grain Act has traditionally focused on
producer interests for a reason - producers typically lack power as
they face massive grain companies.
The unnecessary and costly regulation the bill intended to end
consists of two things. One is getting rid of bonding for grain
companies. This part of the act ensures farmers will get paid in case
a grain company goes bankrupt. Despite Gerry Ritz's comments that this
hasn't worked well, it has worked quite well for the most part. The
government move to get rid of this requirement is based on the
ideology of privatization, since there is no practical replacement for
this bonding. The Western Barley Growers Association was given huge
sums of money by the government to develop an alternate mechanism, but
has produced nothing concrete. Ritz appears not to understand the
nature of laws when he says his government would not remove bonding
until there was a substitute available. If C-13 had passed, bonding
would be gone.
The second part of "unnecessary regulation" would have been the
elimination of inward weighing and inspection at port. It is true that
much of the grain that begins at an inland elevator ends at a terminal
of the same ownership, but certainly not all. Take Prince Rupert for
example. The terminal is owned by five grain companies. Do they trust
each other enough to mingle their grain without independent
inspection? Of course, there will be a need for inspection for things
like producer cars. The bill contemplated private inspectors. Would
both sides accept the verdict? The CGC would still do inspections on
outbound shipments, but the force of inspectors would be greatly
reduced and much expertise lost. The CWB would still require inward
inspection for several reasons. It allows it to know what stocks are
in the terminal, and allows it to capture a portion of the blending
gains for farmers. Since CWB grain still constitute the majority of
grain exported, inward inspection would still be needed. Only the
faces would change, with privatized inspection being the order of the
day. Not much streamlining there!
Both COMPAS, the company that studied the issue for the feds, and the
Standing Committee on Agriculture recommended the government set up an
office of farmer advocacy, since the CGC would no longer have farmer
protection as its main mandate, and since the government has
apparently eliminated the Assistant Commissioners to the CGC by
refusing to appoint any. The failure to set up this office has much to
do with Opposition party condemnation of the bill.
The Conservatives believe that getting rid of bonding, limiting farmer
protections and reducing the scope of the CGC means they are
modernizing it. Instead, it is just more of the same. Leave farmers to
deal with the market, in an environment where they are divided and
ultimately conquered. This might be the modern way, but it is hardly
one we should aspire to.
© Paul Beingessner beingessner@sasktel.net
Wednesday, April 01, 2009
Dump the Little Guy to Solve the Cattle Crisis
Column # 713 30/03/09
The railways must love the coal industry. It has everything they want
- steady business, large facilities with high load-out capacity, no
real competition from trucks. And most coal mines have access to only
one railway so there is no pesky competitor to worry about. Take the
Elk River Valley in British Columbia for example. About 25 million
tonnes of metallurgical coal are produced in a small area here, mostly
for export to Asia.
CP Rail is the sole rail carrier in and around the Elk River Valley.
Given the volumes that are produced and the mountainous terrain, the
coal companies have no option but the railway to move their product.
The marketing and transportation environment for coal is simple, much
simpler, for example, than for cattle. With coal, there is a mining
company that produces the coal, the railway to transport it to port, a
terminal to handle it, an ocean carrier and a customer at the other
end. The party with the most power in this situation is the railway.
Railways spend a lot of time studying the coal company's costs and
prices. One observer said the railways know the coal company's costs
better than the coal companies themselves.
Why? Because the railways want to know how much they can charge the
coal companies without putting them out of business. In a competitive
environment, the railway would set its freight rates based on its
costs, and what it needed to charge to get the business. As a
monopoly, the railway can charge what the market will bear, so it
needs to know just how tight it can squeeze.
I was thinking about this when I went to a meeting on the crisis in
the livestock industry last week. Cattle production and marketing is
more complex than that of coal. There is a cow/calf producer, an
auction mart, maybe a backgrounder, a feedlot, a packer, a wholesaler
and a retailer. There are varying levels of power in this system. The
speaker at the meeting talked about the problems with consolidation in
the beef packing industry in Canada. With the purchase of Lakeside
Packers in Brooks, Alberta by XL Beef, two companies now control 95%
of the slaughter capacity for fat cattle. He also focused on the
problems caused by packers owning cattle - captive supply - which
allows them to influence cash market prices.
The speaker suggested farmers might find it useful to lobby
governments to implement measures to increase competition in the
packing industry and end the packers' use of captive supply.
After the meeting, we stood around for a bit drinking coffee. A couple
of ranchers, substantial operators, stood off from the group a bit. I
was close enough to them to shamelessly eavesdrop on the conversation.
Their solution to the cattle crisis was simpler than the meeting's
speaker had proposed. They decided the best thing was for them to hold
on to their herds, and wait until the small producers were all driven
out of business. Then the price of calves would go up and things would
be rosy again.
It seemed a reasonable solution. After all, farmers are leaving the
cattle business in droves, and cattle numbers are falling in response.
And it's so much less risky to go the waiting route than to actually
place a bounty on small producers.
But what the ranchers were proposing was troubling for a couple
reasons. For one, they displayed a singular lack of solidarity with
their fellow farmers. Their mindset, common also to agriculture
departments, was that other farmers are the problem. Just get rid of a
few more farmers and things will be fine.
The second problem with their line of thinking is that it shows a
profound ignorance of the current market environment. In the chain of
players that gets a steak from the farm to the face, farmers have the
least power of all. There is very little competition in the packing
industry, and packers determine the price feedlots are able to pay the
farmer. The retail sector is also shrinking. For example, one company,
Wal-Mart, controls over 30% of grocery sales in the U.S. Farmers, by
contrast, are many in number.
If there are extra dollars in the system, it is not the farmer who
will be in line to take them. Grain producers know that only too well,
as they watched input costs rise in lock step with grain prices last
year. Cattle farmers seem to be living in the past, a time when there
were many retailers and many packers, all vying for their business.
The fellows at the meeting clearly didn't understand the difference of
living in an environment with only a couple buyers. If supply does
drop substantially, and demand drives prices up, it may well improve
the price for butcher cattle somewhat, but the farmer will see few of
those dollars.
As if to prove my point, when I got home from that sobering meeting, I
had received an email. It was from a farmer who told me he had located
some receipts from butcher steers he sold in the 1970s. He took the
price he received and ran it through the inflation calculator on the
Bank of Canada's website. The calculator told him an equivalent price
today would be $2000 per steer. Today, a fat steer would do well to
bring just over half that amount. The big cattle guys should consider
the implications of that before they go gunning for the small
producers.
© Paul Beingessner beingessner@sasktel.net
The railways must love the coal industry. It has everything they want
- steady business, large facilities with high load-out capacity, no
real competition from trucks. And most coal mines have access to only
one railway so there is no pesky competitor to worry about. Take the
Elk River Valley in British Columbia for example. About 25 million
tonnes of metallurgical coal are produced in a small area here, mostly
for export to Asia.
CP Rail is the sole rail carrier in and around the Elk River Valley.
Given the volumes that are produced and the mountainous terrain, the
coal companies have no option but the railway to move their product.
The marketing and transportation environment for coal is simple, much
simpler, for example, than for cattle. With coal, there is a mining
company that produces the coal, the railway to transport it to port, a
terminal to handle it, an ocean carrier and a customer at the other
end. The party with the most power in this situation is the railway.
Railways spend a lot of time studying the coal company's costs and
prices. One observer said the railways know the coal company's costs
better than the coal companies themselves.
Why? Because the railways want to know how much they can charge the
coal companies without putting them out of business. In a competitive
environment, the railway would set its freight rates based on its
costs, and what it needed to charge to get the business. As a
monopoly, the railway can charge what the market will bear, so it
needs to know just how tight it can squeeze.
I was thinking about this when I went to a meeting on the crisis in
the livestock industry last week. Cattle production and marketing is
more complex than that of coal. There is a cow/calf producer, an
auction mart, maybe a backgrounder, a feedlot, a packer, a wholesaler
and a retailer. There are varying levels of power in this system. The
speaker at the meeting talked about the problems with consolidation in
the beef packing industry in Canada. With the purchase of Lakeside
Packers in Brooks, Alberta by XL Beef, two companies now control 95%
of the slaughter capacity for fat cattle. He also focused on the
problems caused by packers owning cattle - captive supply - which
allows them to influence cash market prices.
The speaker suggested farmers might find it useful to lobby
governments to implement measures to increase competition in the
packing industry and end the packers' use of captive supply.
After the meeting, we stood around for a bit drinking coffee. A couple
of ranchers, substantial operators, stood off from the group a bit. I
was close enough to them to shamelessly eavesdrop on the conversation.
Their solution to the cattle crisis was simpler than the meeting's
speaker had proposed. They decided the best thing was for them to hold
on to their herds, and wait until the small producers were all driven
out of business. Then the price of calves would go up and things would
be rosy again.
It seemed a reasonable solution. After all, farmers are leaving the
cattle business in droves, and cattle numbers are falling in response.
And it's so much less risky to go the waiting route than to actually
place a bounty on small producers.
But what the ranchers were proposing was troubling for a couple
reasons. For one, they displayed a singular lack of solidarity with
their fellow farmers. Their mindset, common also to agriculture
departments, was that other farmers are the problem. Just get rid of a
few more farmers and things will be fine.
The second problem with their line of thinking is that it shows a
profound ignorance of the current market environment. In the chain of
players that gets a steak from the farm to the face, farmers have the
least power of all. There is very little competition in the packing
industry, and packers determine the price feedlots are able to pay the
farmer. The retail sector is also shrinking. For example, one company,
Wal-Mart, controls over 30% of grocery sales in the U.S. Farmers, by
contrast, are many in number.
If there are extra dollars in the system, it is not the farmer who
will be in line to take them. Grain producers know that only too well,
as they watched input costs rise in lock step with grain prices last
year. Cattle farmers seem to be living in the past, a time when there
were many retailers and many packers, all vying for their business.
The fellows at the meeting clearly didn't understand the difference of
living in an environment with only a couple buyers. If supply does
drop substantially, and demand drives prices up, it may well improve
the price for butcher cattle somewhat, but the farmer will see few of
those dollars.
As if to prove my point, when I got home from that sobering meeting, I
had received an email. It was from a farmer who told me he had located
some receipts from butcher steers he sold in the 1970s. He took the
price he received and ran it through the inflation calculator on the
Bank of Canada's website. The calculator told him an equivalent price
today would be $2000 per steer. Today, a fat steer would do well to
bring just over half that amount. The big cattle guys should consider
the implications of that before they go gunning for the small
producers.
© Paul Beingessner beingessner@sasktel.net
Monday, March 23, 2009
Collecting Money Implies Representation
Column # 712 23/03/09
Canadian farmers pay out a lot of money in checkoffs. There are
checkoffs on beef cattle, hogs and sheep, on grains ranging from wheat
to peas to canola. Most of these checkoffs are designed to provide
funding for research or to promote the commodity. Some provinces have
checkoffs requiring farmers to support farm organizations. The
checkoff is mandatory, but the farmer gets to choose where the money
goes.
Some checkoffs are refundable, if the farmer requests it. One of these
is the wheat and barley checkoff administered by the Canadian Wheat
Board. The money collected here is used mainly for varietal and
agronomic research. There are only a few farmers who request a refund
of their deductions, but, oddly enough, these are usually very large
farmers. Obviously they pay the most, but they also stand to benefit
the most.
Some checkoffs annoy me. The wheat and barley checkoff is one. While
the premise behind it is good - we need all the research of this sort
we can get - the outcomes are less than they could be. When new
varieties are developed with farmers' money, the licensing system
employed by the Western Grains Research Foundation allows licensees to
place many restrictions on how farmers can use the crops they paid to
develop.
The Saskatchewan Pulse Growers also have a checkoff, and it is largely
used for similar purposes. But the Pulse Growers have the wisdom to
keep their varieties freely available to farmers by not allowing Plant
Breeders Rights for the varieties their breeding program develops. I
have never been able to understand how this can work so well for pulse
crops while the Western Grains Research Foundation can't see the logic
of it for wheat and barley.
Cattle producers pay a $2 checkoff in most provinces, and $3 in
Alberta. In Saskatchewan, one dollar is mandated provincially and one
federally. The federal portion goes to the Canadian Cattlemens
Association (CCA) to fund its activities. It is not refundable. In
Saskatchewan, the provincial portion is refundable on request. The
federal dollar is what enables the CCA to claim, as it frequently
does, that it represents 90,000 cattle producers across Canada.
Recent statements by the CCA have angered some cattle folk. The CCA
did not oppose further consolidation in the meat packing industry when
Tyson Foods sold its Brooks, Alberta plant and feedlot to XL Beef. It
also has no problem with packers owning beef cattle, known as captive
supply. The U.S. Department of Agriculture has found that captive
supply has the effect of reducing prices paid for cattle. The CCA says
captive supply helps the packers to be efficient. This led one farmer
to comment that the CCA represents farmers in the same way that
Revenue Canada represents taxpayers - by using the force of law to
collect money from them.
The trouble for farmers who don't agree with the CCA positions is that
it really does represent them when talking to governments re
legislation and policy. At least, it does in the eyes of government.
It doesn't help much when governments are on the same page as the CCA
regarding competition. If you believe the CCA, competition is working
well in the beef industry. In responding to the National Farmers Union
paper regarding competition in the beef sector, the CCA says "Cattle
prices will only increase when consumer demand increases and consumers
are willing to consume more beef at a higher price."
That statement presupposes that packers and retailers will pass back
increased revenues to producers as an inducement to produce more. And
that is what would happen in a competitive environment. The trouble
is, nobody really believes that two packers creates a competitive
environment. At least, no reputable economist would support that idea.
The CCA logic on captive supply is worth examining. John Gillespie,
CCA Board member from Ontario, told the House of Commons Agriculture
Committee that packer ownership of cattle makes the industry run more
smoothly. He argues that having access to captive supply allows
packers to "smooth out the ups and downs as far as capacity is
concerned".
The flaw in this logic is that, if packers were not allowed to own
cattle, the same number of cattle would still be available, but the
packers would have to get them from the market. In those "down" times,
they would have to pay more to get the cattle to keep their kill lines
full. Captive cattle "smooth" things out alright. They prevent the
price spikes that would benefit farmers.
The CCA's statements would make sense if they represented the
interests of the beef packers. The CCA fails to acknowledge that, in a
market economy, the interests of buyers and sellers do not always
converge. In that failure, it doesn't represent this cattle producer,
no matter what it claims.
© Paul Beingessner beingessner@sasktel.net
Canadian farmers pay out a lot of money in checkoffs. There are
checkoffs on beef cattle, hogs and sheep, on grains ranging from wheat
to peas to canola. Most of these checkoffs are designed to provide
funding for research or to promote the commodity. Some provinces have
checkoffs requiring farmers to support farm organizations. The
checkoff is mandatory, but the farmer gets to choose where the money
goes.
Some checkoffs are refundable, if the farmer requests it. One of these
is the wheat and barley checkoff administered by the Canadian Wheat
Board. The money collected here is used mainly for varietal and
agronomic research. There are only a few farmers who request a refund
of their deductions, but, oddly enough, these are usually very large
farmers. Obviously they pay the most, but they also stand to benefit
the most.
Some checkoffs annoy me. The wheat and barley checkoff is one. While
the premise behind it is good - we need all the research of this sort
we can get - the outcomes are less than they could be. When new
varieties are developed with farmers' money, the licensing system
employed by the Western Grains Research Foundation allows licensees to
place many restrictions on how farmers can use the crops they paid to
develop.
The Saskatchewan Pulse Growers also have a checkoff, and it is largely
used for similar purposes. But the Pulse Growers have the wisdom to
keep their varieties freely available to farmers by not allowing Plant
Breeders Rights for the varieties their breeding program develops. I
have never been able to understand how this can work so well for pulse
crops while the Western Grains Research Foundation can't see the logic
of it for wheat and barley.
Cattle producers pay a $2 checkoff in most provinces, and $3 in
Alberta. In Saskatchewan, one dollar is mandated provincially and one
federally. The federal portion goes to the Canadian Cattlemens
Association (CCA) to fund its activities. It is not refundable. In
Saskatchewan, the provincial portion is refundable on request. The
federal dollar is what enables the CCA to claim, as it frequently
does, that it represents 90,000 cattle producers across Canada.
Recent statements by the CCA have angered some cattle folk. The CCA
did not oppose further consolidation in the meat packing industry when
Tyson Foods sold its Brooks, Alberta plant and feedlot to XL Beef. It
also has no problem with packers owning beef cattle, known as captive
supply. The U.S. Department of Agriculture has found that captive
supply has the effect of reducing prices paid for cattle. The CCA says
captive supply helps the packers to be efficient. This led one farmer
to comment that the CCA represents farmers in the same way that
Revenue Canada represents taxpayers - by using the force of law to
collect money from them.
The trouble for farmers who don't agree with the CCA positions is that
it really does represent them when talking to governments re
legislation and policy. At least, it does in the eyes of government.
It doesn't help much when governments are on the same page as the CCA
regarding competition. If you believe the CCA, competition is working
well in the beef industry. In responding to the National Farmers Union
paper regarding competition in the beef sector, the CCA says "Cattle
prices will only increase when consumer demand increases and consumers
are willing to consume more beef at a higher price."
That statement presupposes that packers and retailers will pass back
increased revenues to producers as an inducement to produce more. And
that is what would happen in a competitive environment. The trouble
is, nobody really believes that two packers creates a competitive
environment. At least, no reputable economist would support that idea.
The CCA logic on captive supply is worth examining. John Gillespie,
CCA Board member from Ontario, told the House of Commons Agriculture
Committee that packer ownership of cattle makes the industry run more
smoothly. He argues that having access to captive supply allows
packers to "smooth out the ups and downs as far as capacity is
concerned".
The flaw in this logic is that, if packers were not allowed to own
cattle, the same number of cattle would still be available, but the
packers would have to get them from the market. In those "down" times,
they would have to pay more to get the cattle to keep their kill lines
full. Captive cattle "smooth" things out alright. They prevent the
price spikes that would benefit farmers.
The CCA's statements would make sense if they represented the
interests of the beef packers. The CCA fails to acknowledge that, in a
market economy, the interests of buyers and sellers do not always
converge. In that failure, it doesn't represent this cattle producer,
no matter what it claims.
© Paul Beingessner beingessner@sasktel.net
Monday, March 16, 2009
What is Capitalism Without Competiton?
Column # 711 16/03/09
When farmers worry about their industry, pretty much a full time job
in the last decade, they tend to look for solutions in the areas of
production and marketing. In production, they look at using the latest
technologies and maximizing the value they get from the inputs they
use. They do the latter by trying to use inputs efficiently and by
trying to purchase them at as cheaply as possible. In marketing, they
obviously try to achieve the best price they can with the options
available.
They have a couple problems in both areas. In production, most new
technologies come at a cost. That cost sometimes erases the value of
the gain in production. An example would be the cost of growing
genetically modified crops. In this case, there often is no cost
reduction and no yield gain over conventional varieties. The ability
to use cheaper herbicides, for example, is offset by the cost of
having to buy new seed each year. But at some point, all new varieties
contain the GM traits, so if you want the advantages that might come
from new varieties - increased yield or better agronomic properties -
you have to accept the inability to use your own seed.
When buying inputs, farmers again face the fact that while there might
still be a fair number of retailers, they all sell products from the
same few manufacturers. This is true for machinery and parts,
fertilizers, fuels and chemicals.
Marketing runs into problems as well. On the prairies, we have a grain
industry that has consolidated into just a few firms. Delivery points
have been sharply reduced. Farmers' choices are sometimes limited by
proximity to handling facilities. Livestock producers are even worse
off. All auction barns in Saskatchewan, for example, are controlled by
a single firm, which has raised fees and added new charges since
consolidating its grip on the auction market. The number of feedlots
for cattle is declining. The packing industry in all of Canada is
overwhelmingly dominated by two firms. Cattle prices reflect the lack
of competition.
When farm organizations look at the problems with agriculture, they
tend to have two solutions. The first is the notion that we will be
better off if we can just expand market access. We try to convince
countries to take our GM crops. We look for trade agreements that will
give us market access in other countries. We fight to gain an
advantage in global trade agreements like the WTO. Sometimes these
efforts are successful for a while. After the NAFTA was signed, cattle
numbers soared in Canada because of better access to U.S. markets.
When market access doesn't happen, or doesn't solve the problem, farm
groups have one last solution. They turn to government to fill the
gap. Governments in Canada have done precious little in this area for
some time.
Governments themselves, when faced with the agriculture crisis, seem
to pin all their hopes on the market access side of things. Financial
aid to farmers is always given late and begrudgingly.
But there's something I don't get. We live in a capitalist economy.
Capitalism says the marketplace works when it consists of a reasonable
number of buyers and sellers. A reasonable number of buyers insures
sellers will get a fair price. A reasonable number of sellers means
buyers are not held hostage. In this ideal situation, the system works
pretty good.
The trouble is we don't have that in agriculture. Oh, we have lots of
sellers - eighty or ninety thousand farmers on the prairies. But we
have an ever-decreasing number of buyers. While bad in many
industries, it is likely worst in the cattle industry. When it comes
to inputs, we have lots of buyers, those same farmers, and only a few
sellers. Farmers are on the wrong end of the stick in both cases.
So, here's the part I can't figure out. Why do so many farm
organizations, steeped as they are in the free market, worry so little
about this lack of competition? Without competition, all other
solutions simply don't work. You can expand market access, but if
there are only three companies buying from the farmer and selling to
those markets, they will simply absorb the increased revenues.
The Canadian Cattlemen's Association is an example of this problem. As
I said before, there is no industry as consolidated as meat packing.
Yet, the CCA never seems to worry about this. It had nary a concern
about the recent reduction in meat packers from three to two in
Canada. Nope. If you can believe the Competition Bureau, farm groups
were only concerned about market access. And when confronted with the
anti-competitive aspect of captive supply, the CCA defended the
packers! It said they needed this to ensure they could operate
efficiently. Yet if you search the literature, you can find lots of
studies by economists who document the decrease in cattle prices as a
result of captive supply. Why doesn't the CCA get this?
I don't know an easy way to increase competition in these areas. But I
do know we should at least fight further consolidation. And unless we
recognize the value of competition, make it a top priority, and
pressure governments to recognize this as well, any other gains will
simply be taken from us.
© Paul Beingessner beingessner@sasktel.net
When farmers worry about their industry, pretty much a full time job
in the last decade, they tend to look for solutions in the areas of
production and marketing. In production, they look at using the latest
technologies and maximizing the value they get from the inputs they
use. They do the latter by trying to use inputs efficiently and by
trying to purchase them at as cheaply as possible. In marketing, they
obviously try to achieve the best price they can with the options
available.
They have a couple problems in both areas. In production, most new
technologies come at a cost. That cost sometimes erases the value of
the gain in production. An example would be the cost of growing
genetically modified crops. In this case, there often is no cost
reduction and no yield gain over conventional varieties. The ability
to use cheaper herbicides, for example, is offset by the cost of
having to buy new seed each year. But at some point, all new varieties
contain the GM traits, so if you want the advantages that might come
from new varieties - increased yield or better agronomic properties -
you have to accept the inability to use your own seed.
When buying inputs, farmers again face the fact that while there might
still be a fair number of retailers, they all sell products from the
same few manufacturers. This is true for machinery and parts,
fertilizers, fuels and chemicals.
Marketing runs into problems as well. On the prairies, we have a grain
industry that has consolidated into just a few firms. Delivery points
have been sharply reduced. Farmers' choices are sometimes limited by
proximity to handling facilities. Livestock producers are even worse
off. All auction barns in Saskatchewan, for example, are controlled by
a single firm, which has raised fees and added new charges since
consolidating its grip on the auction market. The number of feedlots
for cattle is declining. The packing industry in all of Canada is
overwhelmingly dominated by two firms. Cattle prices reflect the lack
of competition.
When farm organizations look at the problems with agriculture, they
tend to have two solutions. The first is the notion that we will be
better off if we can just expand market access. We try to convince
countries to take our GM crops. We look for trade agreements that will
give us market access in other countries. We fight to gain an
advantage in global trade agreements like the WTO. Sometimes these
efforts are successful for a while. After the NAFTA was signed, cattle
numbers soared in Canada because of better access to U.S. markets.
When market access doesn't happen, or doesn't solve the problem, farm
groups have one last solution. They turn to government to fill the
gap. Governments in Canada have done precious little in this area for
some time.
Governments themselves, when faced with the agriculture crisis, seem
to pin all their hopes on the market access side of things. Financial
aid to farmers is always given late and begrudgingly.
But there's something I don't get. We live in a capitalist economy.
Capitalism says the marketplace works when it consists of a reasonable
number of buyers and sellers. A reasonable number of buyers insures
sellers will get a fair price. A reasonable number of sellers means
buyers are not held hostage. In this ideal situation, the system works
pretty good.
The trouble is we don't have that in agriculture. Oh, we have lots of
sellers - eighty or ninety thousand farmers on the prairies. But we
have an ever-decreasing number of buyers. While bad in many
industries, it is likely worst in the cattle industry. When it comes
to inputs, we have lots of buyers, those same farmers, and only a few
sellers. Farmers are on the wrong end of the stick in both cases.
So, here's the part I can't figure out. Why do so many farm
organizations, steeped as they are in the free market, worry so little
about this lack of competition? Without competition, all other
solutions simply don't work. You can expand market access, but if
there are only three companies buying from the farmer and selling to
those markets, they will simply absorb the increased revenues.
The Canadian Cattlemen's Association is an example of this problem. As
I said before, there is no industry as consolidated as meat packing.
Yet, the CCA never seems to worry about this. It had nary a concern
about the recent reduction in meat packers from three to two in
Canada. Nope. If you can believe the Competition Bureau, farm groups
were only concerned about market access. And when confronted with the
anti-competitive aspect of captive supply, the CCA defended the
packers! It said they needed this to ensure they could operate
efficiently. Yet if you search the literature, you can find lots of
studies by economists who document the decrease in cattle prices as a
result of captive supply. Why doesn't the CCA get this?
I don't know an easy way to increase competition in these areas. But I
do know we should at least fight further consolidation. And unless we
recognize the value of competition, make it a top priority, and
pressure governments to recognize this as well, any other gains will
simply be taken from us.
© Paul Beingessner beingessner@sasktel.net
Tuesday, March 10, 2009
Grain Commission Changes Motivated by Misinformation
Column # 710 09/03/09
Writing a newspaper column is all about words, obviously. If you write regularly, you learn something about the power words can have to influence people. Politicians know this very well, as does anyone who uses the media to get out a message. When politicians communicate with the public, it is often disrespectfully called "spin". This means taking a situation or event and twisting the message so it communicates what you want it to communicate. We used to call it propaganda, but we only seem to use that word now to refer to things done in other countries. Tin-pot dictators use propaganda. Leaders of upstanding democratic countries use spin.
Some politicians are better at this than others. Some are smooth, some are clumsy. Some mix their spin with half-truths and outright fabrications. Gerry Ritz would fall into this category. He doesn't seem to let the facts get in the way of the issues.
His attempts to defend the changes he is proposing to the Canada Grain Act and hence the Canadian Grain Commission show once again that Gerry went to the Goebbels School of Communication.
Changes to the Canadian Grain Commission have been on the agenda of the Harper government for some time. Bill C-39 was introduced in December, 2007, but died on the order paper when Parliament ended with the election call. Bill C-13, introduced in late February, appears identical to C-39. It calls for an end to mandatory inward weighing and inspection at port, changes the CGC mandate away from its focus on protecting producers and eliminates the need for grain companies to post security with the CGC to cover potential defaults on payments.
These proposals have come under scrutiny from many quarters. Removing the bonding requirement for grain companies has raised red flags with producers, especially in the current unstable economic environment. In defending his legislation, Ritz has played fast and easy with the truth. In an interview with a reporter from Golden West Radio in Altona, Manitoba, Ritz declared that the best that has ever been paid out through the Payment Security Program was 30 cents on the dollar. Because of this, he can easily declare the program is not working.
The only trouble is, he's wrong. The Payment Security Program has actually been quite successful. Over the last ten years, the CGC has issued payments to producers in nine cases of default by grain companies. In six of these, the payment was 100 % of claims. In one, it was 99.8 %. In one, the bankruptcy of Naber Seeds in 2002, payout reached 51.4 % of claims and in the case of Venture Seeds Ltd in 2004, payment was just 28 % of claims. Total payments from the bonding required by the CGC were $4,503,000 to 343 producers, for an average of $13,127 per claimant. The total payouts were actually 77.15 % of claims, not 30 % as Ritz claimed.
In the interview with the Golden West reporter, Ritz also claimed that this protection would only be removed when something better was in place. Again, this is not true. Bill C-13 removes the bonding requirement. Full stop. It does not propose any alternatives and no viable alternatives are on the table.
Ritz went on to claim that the CGC has been under a moratorium for more than a decade (he was likely referring to a moratorium on fee increases) and as a result it is not offering the services it could be. When I consulted an official at the CGC he told me he was not aware of any new services that would be facilitated by C-13. In fact, the recent decision by the CGC to end optional inspection at inland terminals for grain bound for the U.S. came about because the Minister has ordered the CGC to focus on its mandate, and not to perform optional services. The mandate is found in the act and C-13 diminishes, not expands the mandate. The services the Minister is referring to appear to exist only in the Minister's head.
I want to be charitable to Minister of Agriculture Gerry Ritz. He has a reputation for saying things to reporters that, to put it kindly, are creative. I don't think he lies intentionally, as in his claim that payouts through the CGC Payment Security Program have never reached 30 %. But if the Minister doesn't know the facts of the situation, if he hasn't figured out that passing C-13 ends payment security, that there is no alternative waiting in the wings, where does he get his information? If the aides responsible for briefing him are that ignorant of the facts, he should find some new ones. If the Minister himself follows the industry so little that he doesn't remember any of the bankruptcy cases but one, what is he doing in the position?
So, where does Gerry get his information? The Grain Growers of Canada might be one source. In a February 1, 2008 letter to Ritz, the group claimed that "The termination of bonding system, although controversial, will ultimately be a step in the right direction as the bonds to date have not provided proper coverage anyway." Perhaps Ritz took this vague bit of misinformation and simply applied his creative juices. He should try to hang with a better informed class of people.
© Paul Beingessner beingessner@sasktel.net
Writing a newspaper column is all about words, obviously. If you write regularly, you learn something about the power words can have to influence people. Politicians know this very well, as does anyone who uses the media to get out a message. When politicians communicate with the public, it is often disrespectfully called "spin". This means taking a situation or event and twisting the message so it communicates what you want it to communicate. We used to call it propaganda, but we only seem to use that word now to refer to things done in other countries. Tin-pot dictators use propaganda. Leaders of upstanding democratic countries use spin.
Some politicians are better at this than others. Some are smooth, some are clumsy. Some mix their spin with half-truths and outright fabrications. Gerry Ritz would fall into this category. He doesn't seem to let the facts get in the way of the issues.
His attempts to defend the changes he is proposing to the Canada Grain Act and hence the Canadian Grain Commission show once again that Gerry went to the Goebbels School of Communication.
Changes to the Canadian Grain Commission have been on the agenda of the Harper government for some time. Bill C-39 was introduced in December, 2007, but died on the order paper when Parliament ended with the election call. Bill C-13, introduced in late February, appears identical to C-39. It calls for an end to mandatory inward weighing and inspection at port, changes the CGC mandate away from its focus on protecting producers and eliminates the need for grain companies to post security with the CGC to cover potential defaults on payments.
These proposals have come under scrutiny from many quarters. Removing the bonding requirement for grain companies has raised red flags with producers, especially in the current unstable economic environment. In defending his legislation, Ritz has played fast and easy with the truth. In an interview with a reporter from Golden West Radio in Altona, Manitoba, Ritz declared that the best that has ever been paid out through the Payment Security Program was 30 cents on the dollar. Because of this, he can easily declare the program is not working.
The only trouble is, he's wrong. The Payment Security Program has actually been quite successful. Over the last ten years, the CGC has issued payments to producers in nine cases of default by grain companies. In six of these, the payment was 100 % of claims. In one, it was 99.8 %. In one, the bankruptcy of Naber Seeds in 2002, payout reached 51.4 % of claims and in the case of Venture Seeds Ltd in 2004, payment was just 28 % of claims. Total payments from the bonding required by the CGC were $4,503,000 to 343 producers, for an average of $13,127 per claimant. The total payouts were actually 77.15 % of claims, not 30 % as Ritz claimed.
In the interview with the Golden West reporter, Ritz also claimed that this protection would only be removed when something better was in place. Again, this is not true. Bill C-13 removes the bonding requirement. Full stop. It does not propose any alternatives and no viable alternatives are on the table.
Ritz went on to claim that the CGC has been under a moratorium for more than a decade (he was likely referring to a moratorium on fee increases) and as a result it is not offering the services it could be. When I consulted an official at the CGC he told me he was not aware of any new services that would be facilitated by C-13. In fact, the recent decision by the CGC to end optional inspection at inland terminals for grain bound for the U.S. came about because the Minister has ordered the CGC to focus on its mandate, and not to perform optional services. The mandate is found in the act and C-13 diminishes, not expands the mandate. The services the Minister is referring to appear to exist only in the Minister's head.
I want to be charitable to Minister of Agriculture Gerry Ritz. He has a reputation for saying things to reporters that, to put it kindly, are creative. I don't think he lies intentionally, as in his claim that payouts through the CGC Payment Security Program have never reached 30 %. But if the Minister doesn't know the facts of the situation, if he hasn't figured out that passing C-13 ends payment security, that there is no alternative waiting in the wings, where does he get his information? If the aides responsible for briefing him are that ignorant of the facts, he should find some new ones. If the Minister himself follows the industry so little that he doesn't remember any of the bankruptcy cases but one, what is he doing in the position?
So, where does Gerry get his information? The Grain Growers of Canada might be one source. In a February 1, 2008 letter to Ritz, the group claimed that "The termination of bonding system, although controversial, will ultimately be a step in the right direction as the bonds to date have not provided proper coverage anyway." Perhaps Ritz took this vague bit of misinformation and simply applied his creative juices. He should try to hang with a better informed class of people.
© Paul Beingessner beingessner@sasktel.net
Monday, March 09, 2009
Waiting for a Miracle
Column # 709 02/03/09
"All things come to those who wait." I think that saying was meant to
produce patience. Wait long enough, and you'll get what you want. But
it doesn't actually say that. It says all things come, so it could as
easily mean the bad as the good.
Farmers, though, generally take the usual meaning of that expression
to heart. That's why they never tire of referring to their place,
wherever it may be, as "next year country". It implies an eternal
waiting for the bumper crop that evaded them yet another year.
But lest you think that next year country refers to an environmental
or economic condition, I will let you in on a little secret: the
eternal waiting that farmers are fixated on actually arises from their
dealings with government. Farmers are waiting, patiently, for
governments to hear them.
And farmers' patience is admirable. Take cattle farmers for instance.
They've been waiting for the government, any government, to notice
their plight and take action. Some, in fact, have waited themselves to
death, finally leaving an industry they embraced their entire lives
when it became apparent that government also was waiting.
Now, what government is waiting for is anyone's guess. Here's mine:
the province of Saskatchewan was waiting for the problem to go away on
its own, or for the federal government to take the lead. The feds were
waiting for the clock to miraculously wind back to the time before
COOL and Mad Cow, or perhaps for the cattle organizations to come, cap
in hand, begging for help. Both appeared to be waiting for enough
farmers to fall off the bandwagon, that governments built in the first
place, to reduce the number of cattlefolk to a quantity that could no
longer be heard.
Well, the waiting is over. Sort of, anyway. This past weekend, farmers
received two things they were waiting for. One was the Saskatchewan
government's response to the livestock crisis, which came in the form
of a payment of $40 per head for breeding cows and heifers and $20
apiece for market hogs. The second was a ruling from the federal
government's competition watchdog concerning the proposed takeover of
Lakeside Packers by XL Foods.
While the provincial contribution was a feeble imitation of Alberta's
assistance to cattle farmers, it was welcome. Forty bucks doesn't go
very far toward covering the losses cattle farmers are enduring, but
it has to be better than a kick in the head from a cranky cow that you
can't afford to feed. The Competition Bureau ruling, on the other
hand, was a kick in the head from a cow we really can't afford to feed
any longer, since it hasn't produced a calf in years.
The Bureau, you see, decided to allow XL Foods to purchase Tyson-owned
Lakeside Packers. The Bureau's press release provided little detail,
but then, what can you say when you allow a consolidation that sees
two companies controlling virtually the entire beef packing industry
in Canada? As when it allowed Cargill to buy Better Beef in Ontario in
2005, the Bureau seems to believe that access to packers in the U.S.
means competition in Canada is not an issue. The Bureau appeared not
to notice that Cargill is the second largest packer in the U.S. and
unlikely to compete vigorously with itself.
Contrast the ruling by the Competition Bureau with a story from the
U.S. that appeared almost the same day. The Antitrust Division of the
Department of Justice was opposing a merger between two of the four
largest beef packers in the U.S. because it felt that allowing only
three companies to control more than 80% of cattle slaughter would
reduce competition in the industry to unacceptable levels. The
Antitrust division had a lawsuit in progress to stop the merger. The
merger was called off by the companies involved, in the face of
opposition from the Department of Justice and the Attorneys General of
sixteen cattle-producing states.
So how does the competition watchdog in Canada not feel concern about
two packers controlling 95% of beef slaughter here while its American
counterpart has a cow over the notion that three companies would
control 80%?
While you are pondering that, you might ask yourself why both state
and federal governments in the U.S. fought the idea, when provincial
governments in Canada have been absolutely silent. Or why did
organizations like the Canadian Cattlemen's Association and the
Saskatchewan Stock Growers and Alberta Beef Producers appear
unconcerned (silence means acquiescence) when American farm groups
were up in arms?
While you grow old waiting for answers to these questions, consider
one more thing. In a free market economy, you rely on one of two
things to make the economy work. You either must have competition,
real competition, or, where this isn't possible (think railways or
utility companies, for example) you must have regulation to control
anti-competitive behavior. The federal government, and its provincial
counterparts, appears to have abandoned both notions. In the packing
industry, like so many others, we will have neither competition nor
regulation. What we have instead is promises. The Competition Bureau
promises to watch the marketplace and if there is a "substantial
lessening of competition" it says it will take remedial action. It
will, presumably, try at some point in the future to put Humpty-Dumpty
back together again.
Meanwhile, farmers can go back to waiting. It's what they do best.
© Paul Beingessner beingessner@sasktel.net
"All things come to those who wait." I think that saying was meant to
produce patience. Wait long enough, and you'll get what you want. But
it doesn't actually say that. It says all things come, so it could as
easily mean the bad as the good.
Farmers, though, generally take the usual meaning of that expression
to heart. That's why they never tire of referring to their place,
wherever it may be, as "next year country". It implies an eternal
waiting for the bumper crop that evaded them yet another year.
But lest you think that next year country refers to an environmental
or economic condition, I will let you in on a little secret: the
eternal waiting that farmers are fixated on actually arises from their
dealings with government. Farmers are waiting, patiently, for
governments to hear them.
And farmers' patience is admirable. Take cattle farmers for instance.
They've been waiting for the government, any government, to notice
their plight and take action. Some, in fact, have waited themselves to
death, finally leaving an industry they embraced their entire lives
when it became apparent that government also was waiting.
Now, what government is waiting for is anyone's guess. Here's mine:
the province of Saskatchewan was waiting for the problem to go away on
its own, or for the federal government to take the lead. The feds were
waiting for the clock to miraculously wind back to the time before
COOL and Mad Cow, or perhaps for the cattle organizations to come, cap
in hand, begging for help. Both appeared to be waiting for enough
farmers to fall off the bandwagon, that governments built in the first
place, to reduce the number of cattlefolk to a quantity that could no
longer be heard.
Well, the waiting is over. Sort of, anyway. This past weekend, farmers
received two things they were waiting for. One was the Saskatchewan
government's response to the livestock crisis, which came in the form
of a payment of $40 per head for breeding cows and heifers and $20
apiece for market hogs. The second was a ruling from the federal
government's competition watchdog concerning the proposed takeover of
Lakeside Packers by XL Foods.
While the provincial contribution was a feeble imitation of Alberta's
assistance to cattle farmers, it was welcome. Forty bucks doesn't go
very far toward covering the losses cattle farmers are enduring, but
it has to be better than a kick in the head from a cranky cow that you
can't afford to feed. The Competition Bureau ruling, on the other
hand, was a kick in the head from a cow we really can't afford to feed
any longer, since it hasn't produced a calf in years.
The Bureau, you see, decided to allow XL Foods to purchase Tyson-owned
Lakeside Packers. The Bureau's press release provided little detail,
but then, what can you say when you allow a consolidation that sees
two companies controlling virtually the entire beef packing industry
in Canada? As when it allowed Cargill to buy Better Beef in Ontario in
2005, the Bureau seems to believe that access to packers in the U.S.
means competition in Canada is not an issue. The Bureau appeared not
to notice that Cargill is the second largest packer in the U.S. and
unlikely to compete vigorously with itself.
Contrast the ruling by the Competition Bureau with a story from the
U.S. that appeared almost the same day. The Antitrust Division of the
Department of Justice was opposing a merger between two of the four
largest beef packers in the U.S. because it felt that allowing only
three companies to control more than 80% of cattle slaughter would
reduce competition in the industry to unacceptable levels. The
Antitrust division had a lawsuit in progress to stop the merger. The
merger was called off by the companies involved, in the face of
opposition from the Department of Justice and the Attorneys General of
sixteen cattle-producing states.
So how does the competition watchdog in Canada not feel concern about
two packers controlling 95% of beef slaughter here while its American
counterpart has a cow over the notion that three companies would
control 80%?
While you are pondering that, you might ask yourself why both state
and federal governments in the U.S. fought the idea, when provincial
governments in Canada have been absolutely silent. Or why did
organizations like the Canadian Cattlemen's Association and the
Saskatchewan Stock Growers and Alberta Beef Producers appear
unconcerned (silence means acquiescence) when American farm groups
were up in arms?
While you grow old waiting for answers to these questions, consider
one more thing. In a free market economy, you rely on one of two
things to make the economy work. You either must have competition,
real competition, or, where this isn't possible (think railways or
utility companies, for example) you must have regulation to control
anti-competitive behavior. The federal government, and its provincial
counterparts, appears to have abandoned both notions. In the packing
industry, like so many others, we will have neither competition nor
regulation. What we have instead is promises. The Competition Bureau
promises to watch the marketplace and if there is a "substantial
lessening of competition" it says it will take remedial action. It
will, presumably, try at some point in the future to put Humpty-Dumpty
back together again.
Meanwhile, farmers can go back to waiting. It's what they do best.
© Paul Beingessner beingessner@sasktel.net
Thursday, February 26, 2009
I'd Laugh If I Could Stop Crying
Column # 708 23/02/09
It is widely known that the Canadian public has a low opinion of
politicians. The best evidence of this comes not from surveys or
coffee shops but from the low turnout in Canadian elections. Of
course, politicians always try to spin this to suit their purposes.
The winning party claims it is because people are satisfied with them
and see no need to change. The losing party sees it as proof that
people are so fed up with the government they won't stoop to
participating in the process that elects it.
Rhetoric aside, people don't vote because they increasingly don't
think what governments do is relevant to their lives. They are wrong,
but it may be that what governments do today is not as important as
what they don't do. In the last couple decades, governments have
steadily and continuously eroded their own ability to intervene in the
economic and social fabric.
Let me give you a couple of examples. In the United States, a drug
manufacturer is asking to be allowed to use the drug cefquinome
against respiratory infections in beef cattle. Cefquinome is from the
family of cephalosporins, a relatively new family of antibiotics that
is used in humans as a last line of defense against certain
infections. Many medical groups in the U.S., including the American
Medical Association, have urged the U.S. Department of Agriculture not
to license the drug for animal use. The fear is that resistance to
this class of antibiotics could be hastened by using them in
livestock. The response of the USDA has been that the rules do not
allow it to turn down the drug company's request, no matter how
well-founded these fears might be.
The second example is also American. Last year, the Peanut Corporation
of America continued to sell peanuts after salmonella contamination
was found in its processing plant. It did not report this
contamination to health authorities. It seems the Food and Drug
Administration in the U.S. does not have the authority to compel such
plants to turn over their inspection data. One bureaucrat though it
would not be wise to enact such a law because then companies might
simply stop testing!
In Canada, governments have also been quick to limit their own powers.
The issue of competition is a glaring example. Competition is
essential to the working of a capitalist economy. Competition ensures
that no one is gouged and that companies continue to seek out ways to
be more efficient. You would thing that competition would be
absolutely sacred to a free enterprise government. Yet governments
claiming to be devoted to that ideology seem to care little if
effective competition in the marketplace exists.
For example, what farmer would deny that competition in the beef
packing industry is insufficient? With the consolidation of the
packing industry into only three hands in Canada, the farmers' share
of the beef dollar has shrunken dramatically. The National Farmers
Union pointed out the degree of this in a carefully researched study.
Presently, the Competition Bureau is examining a proposed sale that
would reduce the number of major beef processors in Canada to two. The
proposal would allow the sale of Tyson's beef slaughter plant in
Brooks, Alberta to XL Foods. XL already has a significant presence in
Canada in cattle feeding and slaughter, and owns all the major
livestock auction facilities in Saskatchewan. If the sale proceeds,
Cargill and XL would control the slaughter of 95 % of the fed cattle
in Canada. Few reputable economists believe you can have vigorous
competition when there are only two competing firms in the market.
It is likely, however, that the Competition Bureau will allow the sale
to go ahead, if its past track record is any indication of future
actions. It had no qualms about allowing Cargill to buy Better Beef in
Ontario. As a result, Ontario is now the lowest priced market for
cattle in Canada.
The National Farmers Union has insisted that the Bureau make public
its full analysis of the situation so that Canadians can see if the
Bureau's analysis stands up to scrutiny. This too is unlikely if past
behavior at the Bureau is any indication.
Lest you think the Competition Bureau is useless, however, rest easy.
If you are hiring a school bus in Newfoundland, the Bureau is right
there at your side. In a recent ruling, the Bureau found evidence of
price fixing among school bus drivers and companies in Newfoundland.
Other than that, since 2005 the Bureau has never failed to give its
blessing to all and any mergers and acquisitions that came before it.
It allowed appliance manufacturers, drug companies, steel makers,
newspapers, cell phone companies, all and sundry who came before it,
to buy out their competitors. In all cases, the Bureau's response was
the same: "Based on the information available, the Bureau determined
that the proposed transaction would not likely result in a substantial
lessening or prevention of competition in any of the relevant
markets."
There was one exception. In 2005, the Competition Bureau decided that
Johnson and Johnson could not buy out the consumer healthcare business
of Pfizer Inc. without some remedial measures. The reason? Diaper rash
ointment. Johnson and Johnson would have had too big a share of the
diaper rash ointment market. So, farmers need not despair. They will
never be subject to market dominance should there be an outbreak of
diaper rash among their cattle.
© Paul Beingessner beingessner@sasktel.net
It is widely known that the Canadian public has a low opinion of
politicians. The best evidence of this comes not from surveys or
coffee shops but from the low turnout in Canadian elections. Of
course, politicians always try to spin this to suit their purposes.
The winning party claims it is because people are satisfied with them
and see no need to change. The losing party sees it as proof that
people are so fed up with the government they won't stoop to
participating in the process that elects it.
Rhetoric aside, people don't vote because they increasingly don't
think what governments do is relevant to their lives. They are wrong,
but it may be that what governments do today is not as important as
what they don't do. In the last couple decades, governments have
steadily and continuously eroded their own ability to intervene in the
economic and social fabric.
Let me give you a couple of examples. In the United States, a drug
manufacturer is asking to be allowed to use the drug cefquinome
against respiratory infections in beef cattle. Cefquinome is from the
family of cephalosporins, a relatively new family of antibiotics that
is used in humans as a last line of defense against certain
infections. Many medical groups in the U.S., including the American
Medical Association, have urged the U.S. Department of Agriculture not
to license the drug for animal use. The fear is that resistance to
this class of antibiotics could be hastened by using them in
livestock. The response of the USDA has been that the rules do not
allow it to turn down the drug company's request, no matter how
well-founded these fears might be.
The second example is also American. Last year, the Peanut Corporation
of America continued to sell peanuts after salmonella contamination
was found in its processing plant. It did not report this
contamination to health authorities. It seems the Food and Drug
Administration in the U.S. does not have the authority to compel such
plants to turn over their inspection data. One bureaucrat though it
would not be wise to enact such a law because then companies might
simply stop testing!
In Canada, governments have also been quick to limit their own powers.
The issue of competition is a glaring example. Competition is
essential to the working of a capitalist economy. Competition ensures
that no one is gouged and that companies continue to seek out ways to
be more efficient. You would thing that competition would be
absolutely sacred to a free enterprise government. Yet governments
claiming to be devoted to that ideology seem to care little if
effective competition in the marketplace exists.
For example, what farmer would deny that competition in the beef
packing industry is insufficient? With the consolidation of the
packing industry into only three hands in Canada, the farmers' share
of the beef dollar has shrunken dramatically. The National Farmers
Union pointed out the degree of this in a carefully researched study.
Presently, the Competition Bureau is examining a proposed sale that
would reduce the number of major beef processors in Canada to two. The
proposal would allow the sale of Tyson's beef slaughter plant in
Brooks, Alberta to XL Foods. XL already has a significant presence in
Canada in cattle feeding and slaughter, and owns all the major
livestock auction facilities in Saskatchewan. If the sale proceeds,
Cargill and XL would control the slaughter of 95 % of the fed cattle
in Canada. Few reputable economists believe you can have vigorous
competition when there are only two competing firms in the market.
It is likely, however, that the Competition Bureau will allow the sale
to go ahead, if its past track record is any indication of future
actions. It had no qualms about allowing Cargill to buy Better Beef in
Ontario. As a result, Ontario is now the lowest priced market for
cattle in Canada.
The National Farmers Union has insisted that the Bureau make public
its full analysis of the situation so that Canadians can see if the
Bureau's analysis stands up to scrutiny. This too is unlikely if past
behavior at the Bureau is any indication.
Lest you think the Competition Bureau is useless, however, rest easy.
If you are hiring a school bus in Newfoundland, the Bureau is right
there at your side. In a recent ruling, the Bureau found evidence of
price fixing among school bus drivers and companies in Newfoundland.
Other than that, since 2005 the Bureau has never failed to give its
blessing to all and any mergers and acquisitions that came before it.
It allowed appliance manufacturers, drug companies, steel makers,
newspapers, cell phone companies, all and sundry who came before it,
to buy out their competitors. In all cases, the Bureau's response was
the same: "Based on the information available, the Bureau determined
that the proposed transaction would not likely result in a substantial
lessening or prevention of competition in any of the relevant
markets."
There was one exception. In 2005, the Competition Bureau decided that
Johnson and Johnson could not buy out the consumer healthcare business
of Pfizer Inc. without some remedial measures. The reason? Diaper rash
ointment. Johnson and Johnson would have had too big a share of the
diaper rash ointment market. So, farmers need not despair. They will
never be subject to market dominance should there be an outbreak of
diaper rash among their cattle.
© Paul Beingessner beingessner@sasktel.net
Tuesday, February 17, 2009
Government's Role in Fixing the Mess
Column # 707 16/02/09
You don't need to be really sophisticated to see that we've messed up
bad as a species. 2008 provided the ultimate proof, if it was needed.
The financial crisis engulfing the world didn't happen by accident. It
was caused by human stupidity, primarily the stupidity of elected
officials who fell for the line that the financial industry was quite
capable of regulating itself into good behavior. Self-regulation. Now
there's an oxymoron if ever there was one. It wasn't so much a case of
the fox guarding the henhouse, as one of expecting the fox to slap his
own paw when he came near the henhouse.
Of course, the financial sector isn't the only one that is
inadequately policed by the people who are supposed to be guarding the
public interest. Consider the case of food safety regulators. Corrupt
and stupid bankers can leave you penniless if left to their own
devices, but corrupt and stupid food processors can leave you dead.
And so it was for the folks who imbibed peanuts in the United States
last fall. Eight of them died, and 19,000 across 43 states became ill
after eating peanut butter and processed foods containing peanuts
contaminated with salmonella. Just as the financial collapse stemmed
from a variety of causes, the peanut debacle points to a host of
structural problems within the industrial food sector.
The most obvious is the lack of adequate regulations. In a twist that
could only have been conceived by a peanut-brained politician, food
safety rules in the U.S. require plants to test for contaminants like
salmonella, but do not require them to inform the Food and Drug
Administration (FDA) or the public if they find them.
In 2004, for example, food processing giant ConAgra found salmonella
in peanut butter from a plant in Georgia. ConAgra was exposed by a
whistleblower from within the plant, but when the FDA asked for the
inspection records, ConAgra refused. The FDA did nothing more, until
three years later when hundreds of people became sick from tainted
peanut butter made at the facility. It then demanded the records,
which ConAgra insisted not be made public.
The peanut scandal in late 2008 came from a plant in Blakely, Georgia
owned by the Peanut Corporation of America. Its abysmal safety record
and failure to disclose again highlights the lack of proper regulation
in the food industry, and the lack of resources to enforce the rules
that do exist.
But it isn't just health regulations that we've messed up royally. The
Peanut Corporation of America only processes one percent of the
peanuts used in the U.S., yet its criminal carelessness affected
people across the continent and around the world. The highly
integrated industrial system that supplies us with food is in itself
part of the problem. Many American companies obtained peanut paste
from Peanut Corp for use in foods of all sorts. The scale of such
plants means that food borne contaminants from a single facility can
reach thousands of miles and affect millions of people. It is the same
with meat processing plants, as people across the world have
discovered. When contaminated hamburger was found to originate from a
ConAgra slaughter facility in Greeley, Colorado in 2002, hundreds were
sickened and 19 million pounds of ground beef were recalled from
across the continent.
At least in the era when packing plants were local, a problem would be
confined to a limited area. Today's massive food processing facilities
can spread a problem around the world in a few weeks.
The financial mess and ongoing food safety issues are two areas that
indicate a sophisticated, highly technological society cannot afford
to push government to a peripheral role. Even the Grain Growers of
Canada finally appear to understand that. In a recent press release,
they called for the federal government to increase its investment in
plant research.
The GGC has never been one to promote government involvement in
anything. Its members are the first to complain about government
"interference" in the marketplace. To its credit in this case, the GGC
recognizes that private companies do varietal and crop research for
their own benefit, not specifically for the benefit of farmers. Thus,
private research is not much interested in diseases or insect pests
that are restricted to certain areas. Not do agronomic questions like
how to reduce input costs concern the agribusiness giants.
Now, if the GGC could see that we've also messed up the system that
transfers publicly generated knowledge into the public sphere. When
crop varieties are developed with public money, we then license them
to companies that restrict their use by prohibiting seed saving and
restrict farmers' marketing options by tying the variety to exclusive
contracts. Fixing this mess-up would ensure that public money really
does benefit farmers.
Fixing the mess we are in means we need to elect politicians who
understand the role governments have to play. We haven't done such a
good job on that either.
© Paul Beingessner beingessner@sasktel.net
You don't need to be really sophisticated to see that we've messed up
bad as a species. 2008 provided the ultimate proof, if it was needed.
The financial crisis engulfing the world didn't happen by accident. It
was caused by human stupidity, primarily the stupidity of elected
officials who fell for the line that the financial industry was quite
capable of regulating itself into good behavior. Self-regulation. Now
there's an oxymoron if ever there was one. It wasn't so much a case of
the fox guarding the henhouse, as one of expecting the fox to slap his
own paw when he came near the henhouse.
Of course, the financial sector isn't the only one that is
inadequately policed by the people who are supposed to be guarding the
public interest. Consider the case of food safety regulators. Corrupt
and stupid bankers can leave you penniless if left to their own
devices, but corrupt and stupid food processors can leave you dead.
And so it was for the folks who imbibed peanuts in the United States
last fall. Eight of them died, and 19,000 across 43 states became ill
after eating peanut butter and processed foods containing peanuts
contaminated with salmonella. Just as the financial collapse stemmed
from a variety of causes, the peanut debacle points to a host of
structural problems within the industrial food sector.
The most obvious is the lack of adequate regulations. In a twist that
could only have been conceived by a peanut-brained politician, food
safety rules in the U.S. require plants to test for contaminants like
salmonella, but do not require them to inform the Food and Drug
Administration (FDA) or the public if they find them.
In 2004, for example, food processing giant ConAgra found salmonella
in peanut butter from a plant in Georgia. ConAgra was exposed by a
whistleblower from within the plant, but when the FDA asked for the
inspection records, ConAgra refused. The FDA did nothing more, until
three years later when hundreds of people became sick from tainted
peanut butter made at the facility. It then demanded the records,
which ConAgra insisted not be made public.
The peanut scandal in late 2008 came from a plant in Blakely, Georgia
owned by the Peanut Corporation of America. Its abysmal safety record
and failure to disclose again highlights the lack of proper regulation
in the food industry, and the lack of resources to enforce the rules
that do exist.
But it isn't just health regulations that we've messed up royally. The
Peanut Corporation of America only processes one percent of the
peanuts used in the U.S., yet its criminal carelessness affected
people across the continent and around the world. The highly
integrated industrial system that supplies us with food is in itself
part of the problem. Many American companies obtained peanut paste
from Peanut Corp for use in foods of all sorts. The scale of such
plants means that food borne contaminants from a single facility can
reach thousands of miles and affect millions of people. It is the same
with meat processing plants, as people across the world have
discovered. When contaminated hamburger was found to originate from a
ConAgra slaughter facility in Greeley, Colorado in 2002, hundreds were
sickened and 19 million pounds of ground beef were recalled from
across the continent.
At least in the era when packing plants were local, a problem would be
confined to a limited area. Today's massive food processing facilities
can spread a problem around the world in a few weeks.
The financial mess and ongoing food safety issues are two areas that
indicate a sophisticated, highly technological society cannot afford
to push government to a peripheral role. Even the Grain Growers of
Canada finally appear to understand that. In a recent press release,
they called for the federal government to increase its investment in
plant research.
The GGC has never been one to promote government involvement in
anything. Its members are the first to complain about government
"interference" in the marketplace. To its credit in this case, the GGC
recognizes that private companies do varietal and crop research for
their own benefit, not specifically for the benefit of farmers. Thus,
private research is not much interested in diseases or insect pests
that are restricted to certain areas. Not do agronomic questions like
how to reduce input costs concern the agribusiness giants.
Now, if the GGC could see that we've also messed up the system that
transfers publicly generated knowledge into the public sphere. When
crop varieties are developed with public money, we then license them
to companies that restrict their use by prohibiting seed saving and
restrict farmers' marketing options by tying the variety to exclusive
contracts. Fixing this mess-up would ensure that public money really
does benefit farmers.
Fixing the mess we are in means we need to elect politicians who
understand the role governments have to play. We haven't done such a
good job on that either.
© Paul Beingessner beingessner@sasktel.net
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