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
Tuesday, April 28, 2009
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
Subscribe to:
Posts (Atom)
