butocpah.gif (2019 bytes)

Index

Crop Situation
As this newsletter is being written (late October) only about 20 per cent of the Ontario grain corn crop has been harvested - versus a normal 50 per cent, or so, by October 31. Farmers say that it is difficult to say exactly what quality and yields they will have until the combines enter the fields, but some patterns are emerging.

For those able to plant their corn before about May 8 this spring, the corn has generally matured in most of the province. Yields are not spectacular, but not disastrous either. In fact, weather specialists say that the total number of crop heat units accumulated between May 1 and October 1 was about average for most corn-growing areas of Ontario.

The trouble is that most corn could not be planted by May 8 because of excessive rainfall, and some of the hottest days occurred in early May. And the problem was compounded by continuous summer rainfall, soil erosion, soil nitrogen losses, corn diseases, white grub damage to young corn plants, and more.

There are corn crop problems in all areas of the province, but the worst appear to be in Eastern Ontario - all areas east of Toronto, but especially the Trenton-to-Napanee area and the Ottawa Valley. Both areas will have a large percentage of grades 4 and 5 and sample grade corn - even for corn planted early in the case of counties next to Quebec.

European corn borer and stalk rot organisms - especially at ground level - caused many plants to die prematurely in September - even before they were killed by frosts, and this affected grain filling, resulting in lower test weights and lower yields. The plus from this - if there is any - is that it caused grain dry-down to occur more quickly than would otherwise be expected. This, coupled with good drying conditions throughout October, has meant that many crops are lower in moisture percentages than would have been expected.

The downside of the borer and crown (stalk) rot problems is that many plants were rendered vulnerable to lodging; hence, many farmers could not delay harvesting to take advantage of the good drying conditions in late October.

It’s too early to say what corn grain fusarium and mycotoxin levels are going to be in the 2000 crop, though there are no indications yet of abnormal problems.

Regardless of the difficult crop conditions, we have crop insurance for this - and the biggest frustration for most Ontario corn farmers is not yield, but prices. That was made abundantly clear during the eleven producer meetings held across Ontario in August, and has been the dominant focus of OCPA activities for the entire 2000 calendar year.

Income Support for Grain and Oilseed Farmers
As this is being written (late October), Ontario grain and oilseed producer groups and the Ontario Federation of Agriculture still have little to show for their marathon campaign to secure a continuation of the Ontario Market Revenue Insurance program beyond 2000/01 to enhance support levels to eliminate the huge gap in per-bu (tonne) support provided to grain and oilseed farmers in Ontario and the rest of Canada versus their counterparts in the United States.

We’ve met with many Members of Parliament (MPs), usually several times, in Ottawa, in their ridings, and at campaign meetings, and we’ve done the same with Members of the Ontario Legislature.

We’ve been told that our case is reasonable and legitimate.

(Our request is for $300 million per year in new money into Market Revenue Insurance in Ontario - or about $1.5 billion to $2 billion per year, nationally, for all Canadian grain and oilseed farmers. Officials within Agriculture and Agri-Food Canada suggest that a figure of $4 billion or more might be necessary to achieve full equity. The difference appears to be that the Ontario farm organizations’ estimate includes only direct income payments to farmers, as calculated by Brian Doidge, Ridgetown College, University of Guelph, while the AAFC number includes all government programs which affect farm income.)

We understand that many federal Liberal backbench MPs have supported our cause strongly, as have several cabinet ministers. Agriculture Minister Vanclief also seems supportive of new funding, though he has remained cool to the Ontario Market Revenue Insurance program.

But, as this is written, the federal Liberal response has been nothing. The reason appears to be Prime Minister Chrétien, who is apparently not yet convinced that Canadian grain and oilseed farmers are important enough politically to merit this commitment of money.

It’s very possible that the logjam may have broken by the time this magazine is printed and mailed. If so, we’ll be pleased to eat crow. But in the event that such is not the case, it is critical that Ontario’s (and Canada’s) grain farmers raise their voices where they count - at election meetings and via letters to editors, statements on call-in radio shows, etc. And there is a distinct possibility that any positive announcement will be for only a small fraction of the amount needed to restore equity.

The Prime Minister needs to hear more from farmers. Lots of farmers.

Opposition Parties
The Prime Minister’s intransigence is helped, no doubt, by the fact that Stockwell Day, leader of the Canadian Alliance Party, also refuses to make specific commitments about the need to provide more funds to restore equity in public support for Canadian grain and oilseed farmers. Mr. Day has talked a lot about agriculture during his early campaign - much more so than has Jean Chrétien - but Day’s words are vague. “We’ll stand by the Canadian farmer,” and “We’ll make support programs more effective.” Mr. Day has spoken of the need to reduce U.S. subsidy levels, but not to raise ours if the U.S. refuses to comply. This is disappointing and could affect his electoral chances in rural Ontario.

The New Democratic Party has called for additional farm income support, but only for prairie farmers.

Policies of the Progressive Conservative Party, and its leader, Joe Clark, are most favourable. Clark and the PCs have promised to restore the national Gross Revenue Insurance Program (GRIP), of which Market Revenue Insurance is the Ontario equivalent. Mr. Clark has since promised $1.7 billion over five years in additional money for farmers - about 20% of what is needed, but it’s a start.

But, as this being written, it is early in the campaign. A lot of things may change between now and election day - or by the time OCPA members read this.

Bottom line: If we’re to succeed in this campaign, we’ll need the active support of individual members. Please get out to meetings, write letters, make phone calls, let your needs be known.

Provincial Front
Ernie Hardeman, Ontario Minister of Agriculture, Food and Rural Affairs, has promised to match, in a 40:60 (provincial:federal) ratio, any new monies provided by Ottawa. But nothing more. The Ontario response stands in weak contrast to that of Alberta, which recently announced another $233 million in new money for crop producers in that province. The Alberta announcement is in addition to $130 million announced by the Alberta government last March. And, as shown in the October issue of the Ontario Corn Producer, Quebec also supports its grain and oilseed farmers to a far greater extent than is the case in Ontario.

Ontario grain and oilseed farm groups believe that the primary responsibility for addressing the income needs of all Canadian grain and oilseed farmers lies with the Government of Canada. But Queen’s Park is shirking its responsibilities as well.

We’ll have more to say about this in months ahead.

Trade Issues
One of the more frustrating responses from Ottawa (AAFC staff, Mr. Vanclief) is that because the Market Revenue Insurance program is not ‘green’ by World Trade Organization rules, it is somehow ‘bad’ and to be avoided. Market Revenue Insurance is a WTO-compliant amber subsidy program - just as are NISA, crop insurance, Quebec’s ‘ASRA’ program, the Farm Income Disaster Program in Alberta, and many others. Major grain and oilseed support programs in the United States and European Union are not ‘green’ programs either.

Canada’s AIDA program has been declared by the Government of Canada to be WTO-green, but this cannot be established until Canada successfully defends a challenge to WTO by another country as to whether this is, in fact, true. No such challenge has occurred to date.

If programs are green, they are not countervailable under current WTO rules; if they are amber, they are. But this only applies through the year 2003, when a so-called ‘Peace Clause’ provision ends under WTO agricultural subsidy rules. After 2003, green subsidy programs will become countervailable as well, unless changes occur as a result of new international trade negotiations.

But more is needed than the existence of amber subsidies in order to trigger countervailable duties; if such was the case, almost every country would have countervailing duties on almost all agricultural imports. Before importing countries can impose countervailing duties, they must prove injury - something which would be extremely difficult for the U.S. to do with grain and oilseed imports from Ontario. This is because of the minute size of these imports compared to total U.S. production, and the magnitude of matching U.S. exports to Ontario.

This issue may be of a greater concern to producers of some grains in some other provinces, but the MRI program applies only to Ontario. Other program designs may be more appropriate for grain and oilseed producers in other provinces. The Ontario grain and oilseed position is that provincial grain and oilseed producer groups and provincial governments should decide on the most appropriate vehicle for each respective province.

In the United States, protectionist interests are as likely to seek antidumping as countervailing duties in their attempts to restrict imports. Under current WTO rules, dumping can be interpreted as occurring any time that market prices drop below calculated costs of production (including a margin for profit). That being the case, dumping occurs much of the time in international agricultural trade. Why go through the hassle of proving the presence of injurious and trade-distorting subsidies when dumping is easier to prove?

The limited potential for countervailing duties on exports is not a valid reason to kill the Market Revenue Insurance program in Ontario, comments from some Ottawa-based government staff notwithstanding.

Drying Costs
Dramatically higher energy costs have meant higher corn drying costs for farmers this year. This applies whether the corn is dried on the farm or customer-dried. The setting of a common drying fee schedule for all dealers across Ontario ended in 1992 when it became apparent that this practice may have constituted price fixing - a criminal offense under Canadian law. Until this year, many dealers have continued to use the 1992 chart. However, drying rates have been raised by many, though not all, grain handlers this fall, and a quick survey by OCPA indicates that competition is occurring, at least in most areas. Indeed, if you see signs that drying rate charges are identical for all dealers in your area, please notify us.

The net result of this competition is that there are deals to be made, especially since the quantity of corn to be handled by elevators/dealers this fall will be down significantly from the last two years - and they make their money on volume. Don’t be afraid to bargain, even if your corn is grade four, or worse.

At the same time, don’t be unrealistic about increased costs. Energy costs are up dramatically, and dealers have to pay the bills too.

An analysis by the Ontario Agri Business Association (the amalgamation of the former Ontario Grain and Feed Association and the Ontario Fertilizer Institute) shows that per cent increase in costs is higher for grain at higher moisture percentages (30% or more) than at lower levels (18-25%). This is because energy costs represent a higher percentage of total drying costs when grain is wetter. (The overhead cost is about the same, regardless of per cent moisture.)

Corn normally increases in test weight after it is dried, and, as a result, the Canadian Grain Commission has provided a chart for adjusting (increasing) the test weight of wet corn for grading purposes. In 1992/93, it was observed by both dealers and researchers at the University of Guelph that the test weight of immature corn did not always increase after drying. The same problem may exist this year. As this newsletter is being written, we understand that dealers were still sorting out their test-weight adjustment policies. Some, for example, are drying small samples overnight to measure the changes in test weight. Others are using the standard CGC chart. Anyway, this is something to check before dumping wet corn into the dealer’s pit. It could mean a difference in grade, and in the price received.

Casco
The OCPA Grain Trade and Marketing Committee has spent a lot of time talking to Casco this fall. On the plus side, we are pleased that Casco is accepting delivery of grade four corn. They didn’t in the past, but the policy this year may reflect the experience gained in 1992/93 that showed low test-weight corn is not necessarily lower in per cent starch. In fact, Casco is increasing the grade of corn by one grade this fall - i.e, grade four becomes grade three, grade three becomes grade two - when the lower grade is entirely the result of low test weight. This does not apply if low grade is caused by other factors. This change in policy is welcomed.

But there are some negatives as well. Research done cooperatively by Casco, the Canadian Grain Commission and OCPA has shown that the Casco grain sampling equipment (tubing by which grain moves from automatic probes to the grade-grading room) can create an additional 0.75% fines, on average. The same occurs at the Commercial Alcohol (CAI) plant in Chatham. It is OCPA’s view that corresponding adjustment is needed in lab measurements of per cent fines before calculating grades and/or weights-to-count. This error during sampling costs farmers money, with the benefit going directly to Casco and CAI. (A similar error probably occurs at other locations where corn moves through long tubes at high speeds before grading - and it is probably a worse problem with corn kernels, which tend to break more easily than most other grains and seeds.)

A bigger problem is the discount which Casco applies to wet corn deliveries. In the past, Casco called this a drying charge, which angered farmers who knew that Casco does not dry the corn. Indeed, the first major step in wet milling involves adding steep water. (In simplest terms, wet milling involves turning corn into a slurry and separating components by screening and centrifugation.) This year, Casco renamed the drying deduction a ‘moisture adjustment’ factor, but the net effect is the same.

Casco states that handling wet corn, especially above some unspecified percentage, means some added costs and the need to remove additional water at final stages of processing (excess water must be purified or evaporated). And skills are involved in plant operation when blends of wet and dry corn are processed (at the same time, or on successive days). But wet milling experts tell us that the quality of starch-protein separation is better in milling corn which has not been artificially dried. (Some ‘heat damage’ always occurs with hot-air drying, regardless of initial moisture percentage or temperature.)

This has been a bone of contention between Casco and OCPA for many years and has impeded efforts by OCPA to encourage greater deliveries of undried corn to Casco - perhaps into the late winter using good quality ventilation for corn in the 18-25% moisture range. But there is little incentive for farmers to do this if the economic benefit goes mainly or completely to Casco. Those farmers with efficient on-farm drying systems say that it makes more economic sense to dry corn and deliver it to Casco, even if they live near Casco plants, than it does to deliver damp corn. The real beneficiaries appear to be the companies selling propane and natural gas. It’s such a wasted opportunity.

The problem was complicated this fall when Casco jacked up its moisture adjustment fees - indeed, increased them by a greater percentage in many cases than did the elevators/dealers who are actually drying corn. The Casco increases range from at least 30% higher at moisture percentages below 20%, to 40% increases for corn near 30% moisture. Casco promised to provide OCPA with calculations justifying this increase, but to date we’ve received nothing. As a result, OCPA asked Dr. Ralph Brown, School of Engineering, University of Guelph, to estimate the additional costs to Casco, even if the extra water in damp corn needed to be evaporated 100%, and the energy efficiency in water evaporation was not high. Brown’s calculations also indicate that the Casco charges appear to be excessive.

The bottom line seems to be that Casco is seeking to improve its profit picture (which is not all that rosy at the present time because of a surplus of corn wet milling capacity in the United States and Canada) at the expense of farmers delivering wet corn at harvest time.

Perhaps this can be still be resolved before the 2000 harvest season proceeds too far, but to date we’ve had no success.

Manitoba Corn Growers’ Association and Countervailing Duty Suit
The Canadian International Trade Tribunal (CITT) has concluded that the U.S. Government subsidizes corn exported to Canada - hardly a big surprise, despite politically motivated blustering by U.S. trade officials. (There’s an election there too!) This means that the request made by the Manitoba Corn Growers’ Association (MCGA) for a countervailing duty on U.S. corn imports into Western Canada has been judged legitimate, and further steps will follow. The next steps will include extensive research on the size and nature of U.S. corn subsidies: U.S. exporters and the U.S. government will be asked to provide lots of data and complete lengthy questionnaires. This may be followed by an interim duty.

If an interim duty is imposed, the subsequent step will include CITT hearings on the question of whether, and the extent to which, imports of subsidized U.S. corn have hurt Manitoba corn growers. Judging by the OCPA actions of 15 years ago, this step could be arduous and expensive. If injury is proven, a permanent duty will be imposed for five years. It can be expected that such an imposition would be followed by court challenges, subsequent CITT hearings on the issue of ‘public interest,’ and perhaps, challenges to World Trade or NAFTA panels.

OCPA continues to monitor the issue but to make few comments on merit. Any comments and statements of judgement by OCPA could prejudice the MCGA case.

The OCPA position is that pursuit of a countervailing duty is not an appropriate approach for Eastern Canada at this time because of its effect on efforts to expand the industrial processing of corn in Ontario. In addition, our argument is with the Governments of Canada and Ontario, which refuse to use the scope which they have under WTO rules to provide equitable support for Canadian grain farmers compared to those in the United States.

Biotech Issues
Canadian interest, including media interest, in agri-food biotechnology continues to wane, despite gallant efforts by activist groups to foment dissension.

To date, biotechnology has not been an election issue.

The effort by the Canadian General Standards Board to develop voluntary labels for foods derived from, or not derived from, genetic modification continues, but at a slow pace. The political pressure for a solution has waned, and the participants remain divided. (See earlier newsletters for details.)

A vote occurred in the House of Commons, in the closing hours before the election call, on a Bloc Québécois motion calling for the mandatory labelling of all genetically modified foods. The vote was defeated by more than a 2:1 margin, but was supported by Bloc and NDP Members and by several Liberal and Alliance backbenchers. In rural Ontario, Ovid Jackson, MP for Bruce-Grey-Owen Sound and Roger Gallaway, MP for Sarnia-Lambton supported the motion, as did several Liberal MPs from Toronto. Most Liberal and Alliance votes, and all Progressive Conservative votes, were in opposition.

AGCare continues to respond to requests for information, and continues to write letters to editors on biotech issues, but, interestingly, AGCare efforts seem to have shifted back into the traditional debate over the use of pesticides.

The biggest issue by far in recent months has been the finding that Aventis CropSciences’ StarLink biotech event (more properly called the Cry9c event, which is another Bt gene for insect resistance) has been found in food products in the United States - and perhaps in foods exported from the U.S. as well. StarLink has been approved for production in the United States for animal feed (an approval which was recently withdrawn by the U.S. Environmental Protection Agency), but not for human foods. The chance of any health effects from StarLink on human health seems extremely remote, but the facts are that all of the EPA approvals have not been completed, and StarLink corn should not be in human food.

StarLink is not approved for use in Canadian corn and, as a result, this has not been a significant issue in this country. It has mostly been ignored by Canadian media. But it has received major attention in the U.S. and Japan (a major importer of U.S. corn).

Decisions by large food manufacturers and retailers to withdraw food from grocery stores, fast-food outlets, etc. will have more lasting effects. A food biotech miscue has cost them money, and they are not likely to be pleased.

In Canada, most major food manufacturers and retailers have been neutral to supportive of agri-food biotechnology, an attitude which seems to have actually been strengthened by the antics of Greenpeace, the Council of Canadians and other activist groups. Hopefully this will continue, but the StarLink problem will not help.

Alan Rock Responds to Caccia Committee’s Anti-Pesticide Recommendations
Federal Health Minister Alan Rock submitted a formal government response to the report of the House of Commons Standing Committee on Environment and Sustainable Development, submitted in May 2000, which was strongly anti-pesticide in nature, calling for major restrictions and, in some cases, bans on their usage. The Rock response rejected almost all of the committee’s recommendations and supported the continued, closely regulated approach to pesticide usage which has characterized the Canadian pesticide registration to date. The minister’s response does call for a review of the mandate of the Economic Management Advisory Committee created to advise him on economic and competitive issues related to pesticide usage.

Mr. Caccia will not be happy.

AGCare has written a critique on Minister Rock’s response. This appears on the AGCare web site (www.agcare.org), or can be obtained by contacting AGCare at 519-837-1326.

Research Tax Credit
OCPA and other members of the Ontario Agricultural Research Coalition (OARC) are continuing their struggle to convince the federal government to allow agricultural organizations to receive scientific research tax credits from checkoff money spent on agricultural research on behalf of their members.

Under current legislation, individual farmers are eligible to apply for the ‘scientific research & experimental development’ (SR&ED) tax credit based on that portion of commodity group checkoff funds invested in eligible research. (This is the same tax credit available to any business/taxpayer, for eligible research investment in Canada.) However, the application process is administratively burdensome; individual farmers need to secure documentation from their commodity group(s) listing individual expenditures on research projects eligible for the tax credit, and proving that these projects are, indeed, eligible.

Because of this, few Canadian farmers have ever attempted to make application for the SR&ED tax credit. Further, even if they were to apply, the individual tax credit received would be far too small to justify the effort in most cases. For example, based on 1998/99 OCPA data, the ‘average OCPA member marketed 240 tonnes of grain corn. Checkoff fees paid to OCPA on this corn would be $96 per producer. OCPA invests an equivalent of about 1/3 of our total checkoff income in research, and, assuming that all of the OCPA-supported research would qualify as eligible, and that the average grower was able to access the tax credit at the highest eligibility rate of about 40%, the average tax credit received would be about $12.80. (In fact, most farmers would likely be limited to a tax credit of about 20%, based on business ownership/size considerations.) Most farmers could justify a slightly greater claim than this, given that they also contribute 50 cents/unit for research support when they purchase seed corn (from all but one major seed company).

And further, if all farmers were to submit applications for the SR&ED tax credit, the federal bureaucracy would be deluged with paperwork (i.e., about 21,000 applications from Ontario corn producers alone).

Though individual research tax credit claims are, therefore, impractical, farmers do have a legitimate right to receive the SR&ED tax credit, for moneys spent via checkoffs on eligible research projects. This is why OCPA and other farm commodity groups in Ontario and elsewhere in Canada are proposing that commodity organizations be allowed to apply for, and receive, the SR&ED tax credit on behalf of their members. This would simplify the process substantially, in that a single application could be submitted and assessed by Revenue Canada, in place of the tens of thousands of individual applications noted above.

Research tax credit funds received by commodity groups could be reinvested in additional research on behalf of their members.

Given the $400,000 - $450,000 which OCPA invests in research potentially eligible for the 40% SR&ED tax credit, the benefit could be an additional $160,000 - $180,000 annually, for additional research investment.

The OARC plans to continue meeting with federal officials to discuss how our goal can be achieved, and to determine those alterations needed to the tax legislation. The coalition will be continuing to seek support from other national and provincial farm organizations. Updates will be provided in future newsletters.

Grain Growers of Canada
The founding annual meeting and convention of the Grain Growers of Canada occurs in Ottawa on November 13-15. Much time will be spent discussing and developing common policy positions. OCPA will be well represented.

Canadian grain growers desperately need this organization.

Corn Prices (October 18, 2000)

Period: Oct. 1 - August 31

Approximate Tonnes Marketed

Average Weighted Price

1999-00

3,455,400

$112.25/tonne

1998-99

3,692,200

$117.69/tonne

1997-98

2,278,400

$143.96/tonne

     
The above figures are based on levies received by OCPA for commercial sales.

butocpah.gif (2019 bytes)

1