Index
DISASTER
RELIEF - PROGRAM DESIGNS
OCPA congratulates the Ontario Ministry of Agriculture, Food
and Rural Affairs (OMAFRA) on the speed with which it has implemented the new Whole Farm Relief Program. Forms
were distributed in January and the first cheques went out in early February. The design of the provincial program
is about as good as is possible, given the restraints imposed by the requirement that support be provided at 70
per cent of the previous three-year average gross margin, as measured by NISA calculations. OMAFRA was also correct
in insisting that gross margins be adjusted for changes in farm produce inventory (so that a relief payment could
not be triggered simply by shifting marketings between taxation years), and for deducting one year of government
contributions to NISA (or deemed contributions for those not in the program) from payouts. In addition, we support
the decision not to cover negative margins in payout calculations; doing so could have meant a serious undermining
of the Ontario crop insurance program.
The negative gross margin issue is confusing because the term “gross margin” includes more than net farm profit.
It includes net profit plus all expenses for interest, rentals and leasing costs, as well as wage costs for which
T4 slips are not issued. For most commercial crop farmers, gross margin is unlikely to be negative except in the
event of crop failure - and that is what crop insurance is for.
To totally ignore NISA in relief program calculations would have been to risk undermining government and public
support for a farm income program which has served Ontario and Canadian agriculture well since its introduction
with the 1990 taxation year.
It is difficult to be critical of Agriculture and Agri-Food Canada (AAFC), either, on its handling of the disaster
program issue – again, given the restraints imposed on overall program design. The Government of Canada was correct
to insist that provinces cover 40 per cent of the cost, with no special deals for any province. Games played by
the Governments of Saskatchewan and Manitoba have seriously delayed the process. OCPA is pleased Ottawa has chosen
to adopt the same rules as Ontario re: the recognition of NISA program benefits and of the need to not undermine
crop insurance.
DISASTER
RELIEF - PROGRAM FLAWS
AAFC has agreed it should compensate provinces for the reduced
amount of federal disaster support which they will receive because of the benefits provided by existing provincial
farm income support programs. To not do so would be to reward the negligence of those provinces which abandoned
their Gross Revenue Insurance Program (GRIP) without providing replacements.
However, there is major concern how this will be done. In the case of Alberta, British Columbia, and Prince Edward
Island, the process will be relatively simple because of the similarity between existing disaster relief programs
in those provinces and the new federal program. But this not the case for Ontario with its Market Revenue Insurance
(MRI) program and the “ASRA” program in Quebec.
The federal government plans to ask Ontario and Quebec producers to file applications for federal disaster relief
and to do the calculations as if there had been no payouts with MRI and ASRA. If a payout is triggered this way,
then checks will be made as to whether calculated payouts exceed monies extended through MRI and ASRA. Each producer
will receive a cheque only if this occurs. Otherwise, all disaster funds extended will go to reimburse the MRI
and ASRA accounts.
On the surface, this sounds reasonable. It avoids double compensation and uses the new money to help support the
existing provincial programs – MRI in Ontario, ASRA in Quebec and comparable programs in other provinces. But in
practice it will not work. Are farmers going to be willing to do the paper work of completing the forms (generally
by paying an accountant to do so), and paying Ottawa an application fee (expected to be about $100) simply to transfer
federal money to the Ontario MRI account?
We repeat: It won’t work.
And Ontario and Quebec can be expected to be short-changed in this process – penalized for their foresight in maintaining
income support programs which have reduced the need for so-called “disaster” support.
OCPA and other Ontario farm organizations have made representations to AAFC asking that an alternative means be
found to compensate the MRI account for federal disaster monies not needed because of the existence of the provincial
program. As of early February, such representations have been without success. This may not be a big deal for the
1998 taxation year – when MRI payouts were small for most Ontario farmers – but it will be a major issue (another
equity issue) for 1999 when MRI payouts are likely to be far larger.
Of course, all this ignores the fundamental flaws with the 70 per cent-of-three-year-gross margin disaster relief
program formula – flaws which OCPA has highlighted for many months. The program discriminates against farmers and
provinces which are more diversified in their agricultural base. And it discriminates against those who farm high-value
land (i.e., for whom land rents and ownership costs represent a high percentage of gross margins). Relatively few
Ontario farmers may benefit from this program...not even hog farmers, especially if they have any non-pork sources
of farm income. The biggest benefits can be expected to go to those farmers without crop insurance who had crop
failures. However, for most grain and oilseed producers, this program is likely to be of marginal benefit compared
to the existing combination of Market Revenue Insurance, crop insurance and NISA.
Interestingly, Manitoba farmers and politicians are now questioning the benefit of this program for provinces (such
as Manitoba) with a diversified agricultural base. Manitobans are worried the federal money will all go to Saskatchewan!
Curiously, the Keystone Agricultural Producers was one of the strongest voices within CFA pressing for the 70 per
cent program design.
MARKET REVENUE
INSURANCE (MRI)
Though there has not yet been an official response to the OCPA request for an interim 1998/99 MRI corn payment
this spring – perhaps for about 13 cents/bu ($5.12/tonne) – we’re optimistic that this will indeed occur. Perhaps
we’ll get an announcement at our 1999 annual meeting and convention March 2-3.
A potential problem in 1998/99 involves those who have dropped out of the Market Revenue Insurance program – some
by serving direct notice of their intention to leave, and others by neglecting to return final acreage forms. Some
farmers are out because of their failure to repay an interim advance made in April 1994. GRIP rules state that
these farmers can only re-enter if they repay any amounts owing and if they have been out for at least two years,
and, then, only on a phased re-entry schedule (50 per cent benefits in year one; 75 per cent benefits in year two
and 100 per cent benefits thereafter). However, the rules also state new growers can be eligible for full benefits
if they enrol in their first year of growing MRI-eligible crops.
Although Agricorp has done a good job of alerting farmers as to the consequences of leaving the program through
reasons of non repayment, non submission of final acreage reports, or direct departure, this has not been the case
for new farmers. The same criticism applies to efforts by OMAFRA, and to OCPA and other farm organizations. Consequently,
OCPA has written the Ontario Minister of Agriculture, Food and Rural Affairs to ask that an independent appeal
process be instituted to deal with producer appeals, and that the process be lenient in the case of new farmers.
The longer-term status for Market Revenue Insurance (beyond 1998/99 or, perhaps, 1999/00) remains in doubt. The
Government of Canada is threatening to pull $112 million out of the Ontario MRI account on March 31, 1999. If this
occurs, the Province of Ontario may also withdraw $70 million. The combined loss in money would be devastating
in two ways: by the loss in reserves to handle expected large payouts in future years, and by the loss in interest
which this reserve would generate.
Ontario grain and oilseed groups have asked that the MRI program be allotted $25 million per year in new funding
from future Canada-Ontario safety net budgets, with larger payouts being funded out of interest earned and a draw-down
on program reserves. Projected annual payments are expected to be much larger than $25 million in the near future;
for example, an estimated $60 million in payouts in 1999/00 (this assumes prices do not drop further in 1998/99!).
The $25 million contrasts with annual government contributions to the Ontario MRI (GRIP) program in excess of $150
million per year in the early 1990s.
The loss of $112 million in federal funds and $70 million for Queen’s Park would mean MRI can only be sustained
with a much larger annual government contribution, and the source of this extra money is unknown. Certainly other
farm groups in Ontario would protect any attempt to increase annual support for the MRI account at the expense
of other farm income support programs.
We’re pleased at the support which we have received on this issue from the Honourable Noble Villeneuve, Ontario
Minister of Agriculture, Food and Rural Affairs, as well as from the provincial agriculture critics and other rural
MPPs, many Ontario backbench MPs in Ottawa, other Ontario grain and oilseed groups, and members of the Ontario
Agricultural Commodity Council. OCPA appreciates the support for MRI given by delegates at the 1998 annual convention
of the Ontario Federation of Agriculture and will welcome support from the OFA executive.
AAFC staff has given mixed signals about its support of the Ontario MRI program. Some Policy Branch staff members
have stated their understanding of the merits of this (GRIP) program. However, some AAFC trade staffers have attempted
to undermine MRI/GRIP by telling anyone who will listen that this program is not consistent with international
trade rules. To be blunt, such statements are totally RIDICULOUS. The WTO agreement signed in 1994 permits countries
to offer so-called “amber” income support programs provided that total support does not exceed 80 per cent of a
three-year base average, for years 1986 through 1989. In fact, total Canadian amber support is now down to about
20 per cent of the base. Ottawa has skillfully used half-truth statements about reduced amber support obligations
to drop farm income support far below what is required under international rules – and far below the cuts (if any)
which have occurred in Europe and the U.S.
As an amber program, Market Revenue Insurance is fully consistent with international trade obligations. NISA and
crop insurance are also amber programs. Programs which are “green” (such as Alberta’s Farm Income Disaster Program)
are supposed to be immune from countervailing duty threats. But this does not appear to have made much difference
to the U.S., judging by a recent U.S. Commerce Department ruling on Canadian beef imports. And the U.S. and other
countries are seeking to have international rules changed during the next WTO negotiating round so as to make so-called
“green” subsidy programs countervailable as well.
The Honourable Lyle Vanclief, Minister of Agriculture and Agri-Food, has voiced some public support for the retention
of MRI, but we’ll know better where he stands when the Government of Canada announces its decision on the $112
million.
NISA
NISA administrators within AAFC – supported by some Western Canadian farm NISA reps – are continuing their efforts
to force farmers to deduct the costs of hired transport to local elevators, and of commercial drying and storage
costs, from net crop sales in calculating “net eligible” sales for purposes of making government contributions
to NISA. This is being vigorously opposed by Ontario grain and oilseed groups. We understand it will also be opposed
by elevator operators and dealers who – like OCPA – see this as discrimination against services provided by them
as compared to on-farm drying and storage and producer-owned trucking.
Curiously, one part of government is attempting to limit farmer-owned trucking (see Brian Doidge’s article elsewhere
in this issue) while another (NISA) attempts to promote it.
CROP INSURANCE
The good news is that the optional unit coverage pilot project is a go for 1999. Federal officials have agreed
on the terms by which this program can proceed - i.e., that the maximum premium cost to governments for participants
cannot exceed the cost of 90 per cent coverage for participants without optional unit coverage. This seems fair.
The Crop Insurance Committee of Agricorp has given its approval for a pilot project in 1999 involving about 100
farmers from across the province. Those who participate in the pilot will be allowed to insure crops on separate
farms independently – provided a number of other conditions, not detailed here, are met. (The conditions include
minimum sizes and the ability to measure yields from different farms.) Participants will get coverage at the 85
per cent level and will be charged premiums at the 90 per cent rate.
However OCPA is disappointed that some of components of the program – which OCPA and other grain and oilseed groups
had asked to be included in the 1999 pilot – have been largely ignored. OCPA had recommended that farmers be given
the choice of 80 or 85 per cent coverage under the new plan. In practice, pilot project participants will be able
to choose only the higher-priced “option.” More important is a failure by Agricorp to consider a request from OCPA
that the enhanced premium costs for optional unit coverage be linked to recognition that risks may be lower for
those who partially “self-insure” by growing their crops across a wide geographical area. If premium costs go up
when farmers want to break larger units into smaller units for crop insurance purposes, why shouldn’t the reverse
occur? There is a sizable adjustment (maximum of more than 30 per cent) in crop insurance premiums related to size
in the Ontario tobacco crop insurance program. We’ve asked (since last spring) that an analysis be completed using
all farmers – not just those in crop insurance – on the relationship between acres or bushels of production, and
crop insurance risk. The OCPA final position will await the results of such an analysis.
If the analysis does show the merit of such an adjustment, the ultimate premium setting process might be as follows:
A base Ontario rate would be set for each crop, which would be adjusted based on scale. The resulting size-adjusted
premium would be further adjusted (upward) for those wanting optional unit coverage. And finally, each producer’s
premium would be adjusted for a surcharge or discount depending on personal claim history. The present surcharge/discount
schedule (for 1999) is +15 per cent/-30 per cent. This could be increased, if coupled with the total process suggested
here.
Despite these limitations, we urge eligible growers to participate in the 1999 pilot project. It’s a big step in
the right direction, and results of the pilot will be used to develop a more complete plan for 2000.
The planned introduction of completely distinct crop insurance contracts for sharecrop arrangements has been delayed
to 2000. The reason is computer limitations in 1999.
OCPA and the Crop Insurance Committee of Agricorp (formerly the Ontario Crop Insurance Commission) have worked
hard on improvements over the years, with the result being a much better corn crop insurance program compared to
a decade ago. Corn farmers should seriously consider including crop insurance in their cropping plans for 1999
– especially this year with average premium costs down more than 30 per cent, and with new participants being potentially
eligible for large premium discounts based on yield history available through the Market Revenue Insurance program
records.
CASCO NEWS
Congratulations to Jim Grey on his appointment as president of Casco. Jim, a Montreal native, is no stranger to
Casco or Ontario, having served recently as general manager at the Casco headquarters in Etobicoke, Ontario. Mike
Pyatt, former president, continues in his other position as executive vice-president of Corn Products International
(CPI), the sole owner of Casco, headquartered near Chicago.
OCPA directors and staff have met several times with Jim Grey and have been pleased at his interest in expanding
Casco’s wet corn milling operations and in seeking new business opportunities for CPI in this province. OCPA has
suggested that Ontario would be a good place for CPI to experiment with some new initiatives – such as the manufacture
of bioplastics from corn. We have reason to believe CPI is clearly in an expansionary mode, but the Ontario-based
Casco must compete with other CPI potential projects around the globe. CPI is also known to be interested in a
stronger presence in Europe. However, the three Casco plants in Ontario have been a good source of profit for the
parent company.
As one of its 1999 special initiatives, OCPA is eager to find ways Casco can further reduce its dependence on U.S.
corn. Historically, the problem has been difficulties in ensuring a year-round, consistent supply of Ontario-grown
corn. The solution for the company – which must ensure that plants operate continuously, and with limited on-site
corn storage – has been to order in U.S. corn – by the boat load, in the case of plants at Port Colborne and Cardinal,
and by truck into London – anytime there is a concern about supply. Of course, some of the corn going into London
is back-haul for trucks shipping Ontario-grown sugar beets to Michigan, but the Ontario industrial usage of U.S.
corn is usually much larger than that – even in months when there is lots of corn on farms or commercial storage
in southern Ontario.
The problem is not Casco’s. That company’s responsibility is to generate a profit for shareholders and to keep
the plant running. The responsibility is for Ontario farmers to make sure it’s always in the company’s interest
to use Ontario corn. The trick is to find ways of ensuring there is a steady supply of Ontario-grown corn at a
competitive price, while still giving farmers adequate flexibility in their pricing options.
Brian Doidge of Ridgetown College, University of Guelph has initiated some discussions on the concept of a voluntary
Industrial Corn Contract through which farmers could supply corn to Casco (and other industrial buyers) while receiving
the average weighted price for the crop year. The process would have to also include some mechanism by which the
risks and higher costs of storing corn for late-season delivery would be covered, as well as transportation costs
for delivery to the plant.
Perhaps what’s needed is a process which permits greater pricing flexibility, with producers making commitments
to deliver at precise times – so as to meet plant needs – but having the right to price the corn (futures, basis,
or both) either before, during, or well after delivery. The question is how. The OCPA Grain Trade and Marketing
Committee, chaired by Region 2 director Don Kenny from Stittsville (near Ottawa), would welcome suggestions.
UPDATE - GREENHOUSE
GAS EMISSIONS AND AGRICULTURE
As regular readers of this newsletter know, OCPA has played an active role in efforts to have the potential of
agricultural soils to store carbon (organic matter) included as part of Canada’s international commitments for
net greenhouse gas emissions. There are also other opportunities in agriculture to reduce net emissions of carbon
dioxide, nitrous oxide and methane (the three principal greenhouse gases) while enhancing net farm income and addressing
other farm environmental goals. Terry Daynard of the OCPA staff chairs a working group on agriculture and climate
change of the National Agriculture Environment Committee (NAEC). Several members of NAEC serve on government advisory
tables (one on “sinks” and one on agriculture) organized as part of the Canadian government’s strategy on how to
meet obligations agreed to in Kyoto, Japan, in late 1997.
A major effort is underway in the Prairie provinces to enhance carbon levels in farm soils using techniques such
as no tillage and better crop rotations. This is funded by several electric power companies, the Government of
Alberta, Agriculture and Agri-Food Canada, the Canadian Cattlemen’s Association and others, and in good cooperation
with the Saskatchewan Soil Conservation Association, the Alberta Conservation Tillage Society, and the Manitoba/North
Dakota Zero Tillage Association. We are pleased at the leadership which is being provided in this area, on a national
basis, by Soil Conservation Canada (SCS) based in Saskatoon. SCS held a major workshop on soil carbon sequestration
in December, which was attended by representatives of the Innovative Farmers of Ontario and the Ontario Soil and
Crop Improvement Association.
Plans are underway, under the leadership of a subcommittee chaired by Prof. Bev Kay, Land Resource Science, University
of Guelph, to develop a related research and development program for Ontario. More research is needed on how much
additional carbon can be stored in Ontario farm soils using measures such as no tillage and different crop rotations,
and how the use of no tillage – especially no-till corn – can be increased in Ontario. Kay, OCPA and others believe
the emphasis must be on solid research designed to better understand why corn yields are erratic with no tillage,
and to learn how to correct the problems...rather than simple field demonstration plots which have been the dominant
component of a lot of previous no-till developmental efforts.
OCPA is excited about the potential for benefit from this initiative – both in our ability to reduce tillage needs
and costs, and to build soil organic matter levels simultaneously. And if this results in reduced net greenhouse
gas emissions, so much the better.
As for the Ottawa process, an awful lot of money is being spent these days on committees, civil servant traveling
and consultants – especially consultants. And only those who are on special (closed) lists of federally approved
consultants need apply. The civil servants involved are dedicated to their mission, but there is some unease about
what all this spending will accomplish. OCPA is devoting its attention to those farm groups and agricultural researchers
who are likely to find the answers needed to make progress in this area, rather than those specialized in getting
consulting money out of Ottawa.
UPDATE - FUEL
ETHANOL
The Commercial Alcohols Inc. (CAI) plant at Chatham continues to operate at essentially full capacity. Efforts
are continuing to find means to reduce the odour coming from the plant - a problem which must be addressed, especially
if the planned expansion is to occur. OCPA understands the odour problem is linked to start-up difficulties CAI
had with the dryers used to handle the feed byproduct (“distillers dry grains,” commonly called “DDGs”). The original
dryers did not meet design capacity specifications and the replacement ones continue to let too many aromatic compounds
escape into the air. CAI is working on this problem.
Bud Atkins, chair of Seaway Valley Farmers’ Energy Cooperative, and his board of directors continue to persevere
in their efforts to finalize the financing needed for construction of the Cornwall plant. The challenge has been
to secure adequate financing while ensuring that majority ownership is held by members of the cooperative.
The global price of DDGs is soft right now, which is affecting the profitability of all North American ethanol
producers. This is largely but not fully offset by low corn prices. Ontario continues to import fuel ethanol, despite
output from the CAI Chatham plant and the CAI plant at Tiverton, a significant portion of which goes for industrial
(i.e., non fuel - ethanol usage). U.S. fuel ethanol output is now at record high levels. And if some states are
successful in their efforts to ban the use of MTBE (an oil-based “oxygenate” used to enhance octane levels in gasoline,
as an alternative to ethanol and MMT), demand for fuel ethanol could jump further. (There are concerns about MTBE
is groundwater in both California and New England.)
We’re pleased at a decision by the Government of Canada to provide significant
financial support for the Ottawa-area construction of a pilot project by the company Iogen, to manufacture fuel
ethanol from high-cellulosic materials such as wood, straw, and corn stover. The project is being co-funded by
Petro Canada, which is good news for the environment (and corn farmers) because it represents acknowledgement by
this company of the benefits of ethanol-enhanced gasoline. Our guess is that Petro Canada is where Sunoco was a
few years ago; present activities should lead to increased fuel ethanol gasoline marketing in Ontario and throughout
Canada. And efforts by Iogen notwithstanding, we expect a lot of Petro Canada’s future ethanol needs are likely
to be made from corn grain, as well as from corn stover and other such byproducts.
CORN RESEARCH NEWS
Those seed companies cooperating in the implementation of a voluntary research contribution of 50 cents per unit
on 1999 corn seed sales have reported process is occurring with few hitches. Some companies have identified the
contribution on seed sale invoices. Others have simply included it in the price of corn seed. OCPA reminds producers
that 100 per cent of this money will go to support research (none for OCPA administration). This money is refundable
upon request to OCPA.
OCPA expresses its deep appreciation, once again, to those companies cooperating with this initiative. They are:
Agventure Seeds Inc., Cargill Hybrid Seeds, Direct Seeds Inc., Growmark Inc., Hyland Seeds (W.G. Thompson &
Sons Inc.), Maizex Inc., Mycogen Canada Inc., Novartis Seeds Inc., Pride Seeds (King Agro Inc.), Renk Seed Company
of Canada Ltd., and Zeneca Seeds. The following companies have also agreed to match the 50 cents per unit contributions
paid by producers with 50 cents from their own funds (to max. of $500): Agventure Seeds Inc. and Renk Seed Company
of Canada Ltd. Remember that when you buy seed corn from one of these companies, you will be helping farmers help
themselves – through support of research designed to increase the economic well–being and competitiveness of Ontario
corn farmers. The money raised by this route will be multiplied several times in securing total support for these
research initiatives.
Regular readers of the Ontario Corn Producer magazine will be familiar with the projects supported by corn producer
funds. OCPA directors express their appreciation to the following farm organizations who have supported the association
by publishing information on the corn seed research contribution in their respective magazines or newsletters:
Dairy Farmers of Ontario, Ontario Egg Producers’ Marketing Board, Ontario Cattlemen’s Association, Chicken Farmers
of Ontario and Ontario Broiler Hatching Egg and Chick Commission.
In February, the OCPA Research and Technology Committee met with representatives of seed companies supporting the
seed research contribution initiative to discuss research needs and priorities for 1999/2000. This process will
be repeated on a regular basis.
Seed company reps were also present for a special meeting of the research and development committee and public
researchers from the Eastern Cereal and Oilseed Research Centre (Ottawa) of Agriculture and Agri-Food Canada, and
the Department of Plant Agriculture, University of Guelph, to discuss a potential new initiative in the area of
cold and frost hardiness in corn. The researchers will be developing a more complete research proposal and OCPA
will play a leading role in the search for funding.
There was agreement at the meeting that the focus should be on tolerance to cool conditions during the grain filling
period. Ontario-based research has shown that cool night conditions during this period (i.e., late August and September)
can cause grain-filling processes to shut down for several days, even if the plants are not frozen. This can be
devastating to both yield and quality. (The lack of cool night temperatures during the early fall of 1999 is considered
to be a key reason for resulting high yields, on most farms.) Tolerance of corn seedlings to cool spring temperatures
is considered to be much less of a barrier to high yields – the experience of early 1997 notwithstanding. Commercial
corn breeders have done an excellent job of developing corn hybrids which are much more tolerant to cool spring
conditions, than hybrids from a few decades ago.
THANKS TO JIM
JOHNSON
OCPA expresses its appreciation to Jim Johnson who ends his term as OCPA director at the end of the 1999 annual
meeting. Jim joined the OCPA board in 1985 and has served as Lambton County’s only resident director. (Prior to
1985, there were two directors elected to represent three counties of Essex, Kent and Lambton.)
Jim served for three years, 1993/94 through 1995/96, as president of OCPA, and for many more years as chair of
the OCPA Market Development Committee. Since 1989, Jim has also been president of the Canadian Renewable Fuels
Association (CRFA), a position which he continues to fill, as one of the two OCPA representatives on the CRFA board
of directors. (The other is Doug Eadie, chair of the OCPA Market Development Committee.)
Jim will be missed around the OCPA board table, both for his leadership and ability, and for his unfailing sense
of humour.
OCPA directors are pleased to welcome Don McCabe to their midst as the new Lambton director.
CORN
PRICES (February 8, 1999)
| Period: Oct. 1 - Dec. 31 |
Approximate Tonnes Marketed |
Average Weighted Price |
| 1998-99 |
1,074,900 |
$117.11/tonne |
| 1997-98 |
760,900 |
$154.51/tonne |
|
1996-97 |
890,400 |
$154.24/tonne |
| The above figures are based on levies received by OCPA for commercial sales. | ||
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