Extending
Market Revenue beyond 2003
A primary objective for the OCPA is to extend the
MRI program for as long as possible. However, neither level of government is willing
to continue to fund the MRI program. Commodity specific programs triggered by
price such as MRI are viewed by both levels of government as not in compliance
with WTO, as production distorting (thus exposing Canadian agricultural sectors
to countervail action), and as too costly and unpredictable (thus very hard for
Treasury to budget).
The OCPA's objective has been to introduce a joint Federal-Provincial-producer
funded Revenue Assurance component under the new Crop Insurance within the BRM/APF
Quite similar to the MRI in end result, such a similar (but much more complex)
Revenue Assurance option was introduced in Alberta in January 2003. The Federal
government has, thus far, refused to fund such a program saying that if the province
of Ontario wants to introduce such a program, the province can fund it by itself.
The Provincial government has shown no enthusiasm for introducing such a price
insurance program in Ontario. However, under the Implementation Agreement signed
December 11, 2003, both levels of government agreed to consider investigating
such a Revenue Assurance model. The OCPA has been working with other grain and
oilseed groups, OMAF, and AGRICORP exploring options and implications of such
a price insurance option. Little of substance has been developed to date, but
analysis of the concept is continuing.
However, AGRICORP commissioned the George Morris Centre last fall to complete
a study of possible options offering price insurance under Crop Insurance. The
study recommended a spring price protection option (similar to Alberta's Spring
Price Endorsement) in which a participant would be protected from a decline in
price of the relevant Chicago Board of Trade harvest futures contract (i.e., the
November contract for soybeans, the December contract for corn, etc.) between
a fixed period in February and a fixed period in the fall. The proposal envisioned
the option as 100% producer funded. No government funding would be forthcoming.
The OCPA, and other grains and oilseed groups, rejected this proposal as even
remotely resembling a MRI replacement program.
"Wedge
Funding"Distribution
As part of the Ontario Agricultural Commodity Council
(OACC), OCPA participated in discussions on distribution of the $173 million (60%
federal funding, 40% provincial funding) earmarked under the APF agreement for
distribution over the first three years of the APE This funding, referred to as
"wedge funding", is described by governments as meant to transition Ontario agriculture
from the previous safety net environment, (which included funding for companion
programs such as MRI, Self-Directed Risk Management (SDRM), etc.) into the new
safety net environment, where only CAIS and Crop Insurance will be funded by governments.
The three-year "wedge" period covers the 2003, 2004, and 2005 crops and ends March
31, 2006, yet no "wedge funding" proposal has been submitted to the provincial
Cabinet by OMAF to date.
Regardless, the OACC recommendation to OMAF for distribution of "wedge funding"
included allocations for continuation of companion programs such as SDRM, plum
pox offset programs, wildlife damage offset programs, funding for Research & Development
programs. The OACC is still considering options for distribution of the balance
of "wedge funding", but has agreed that the balance of "wedge funding" (approximately
$99-$ 108m) be distributed, based on "need", with "need" defined as CAIS participants
who trigger a payment in 2003, or 2004, or 2005. Under such a distribution proposal,
early analysis for the 2003 tax year suggests the largest individual payments
would go to beef and dairy producers hammered by the border closure, resulting
from BSE, but the grain and oilseed sector would receive the largest proportion
of payments (simply because there are so many cash crop producers relative to
other sectors). But, until OMAF submits MRI and "wedge funding" expenditure
requests to Cabinet, and Cabinet approves, and OMAF submits proposals to the Federal
government, and the Federal government agrees, no payments will be forthcoming.
Canadian
Agricultural Income Stabilization Program (CAIS)
In order for an Ontario producer to be eligible to participate for the 2003 and
2004 CAIS program, they must have completed the following by June 30, 2004:
deposited at least the minimum required amount, as identified on their Deposit
Options Notice (DON), into their CAIS account by the date indicated on the DON;
completed and submitted the CAIS application forms;
submitted their 2003 farming income (or loss) to CRA by June 15, 2004 for individuals
or June 30, 2004 for business entities.
As of September 8, 2004, 21,781 participants had met all three requirements in
Ontario. There were 36,006 participants in 2002 NISA. CAIS administration projects
that there may eventually be approximately 42,000 CAIS participants in Ontario.
However, it must be noted that financial institutions had not submitted all data
as yet for July and August, that CRA has not yet completed T1163 (tax form) data
entry for 2003, and that CAIS administration is still processing applications
and data from the massive influx of applications and inventory forms, received
just prior to the June 30 deadline (17,000 in the last 4 days alone). CAIS administration
is planning a communications effort before the end of September, to verify the
status of those who have submitted one or more of the three pieces of documentation
required, but not all three. "Watch your mail". CAIS administration in Ontario
reports that as of September 8, 5,335 participants have been fully processed with
payments made to 1,815 totaling $22.8 million (government funds only) averaging
$12,565. These numbers are obviously very preliminary given the volume yet to
be processed and the outstanding data still required. However, 3,032 of the 5,335
processed to September 8 were field crop producers, with 867 triggering CAIS payments
for 2003 averaging $3,415 (government funds only).
CAIS
Deposit Option Discussions
OCPA, as part of the OACC Technical Committee, participated in the one session
scheduled in Ontario to suggest options for the required CAIS deposit. The Federal
government is reviewing the CAIS deposit requirement, primarily because of the
heavy administrative burden and cost (and a cynic would also suggest because the
previous Deputy Minister has left). CAIS deposit administrative costs are significant,
the budgeted administration costs for CAIS are about $70 million, of which $14
million are due to deposit administration. Thus, Agriculture Canada would like
to shift to another less administratively difficult option.
The #1 option proposed by the OACC Tech Committee, and also the #1 option proposed
by all the other similar meetings across Canada (one in each province), was to
dispense with a deposit requirement, totally. There were a number of other possibilities
explored. It is expected that the CAIS deposit option question will be resolved
at the September Agriculture Ministers conference. OCPA expects an announcement
shortly thereafter and expects that at the least, the 1/3 deposit requirement
(as in Ontario for both 2003 and 2004 participation) will be extended for 2004,
for all of Canada and perhaps for 2005 as well.
Cash
Advance Payment Program
OCPA has just received notification that the Advance Payment rate for
the 2004 crop this fall will be $67/metric tonne which is similar to last
year. All other aspects of the program also remain unchanged (i.e., maximum
loan $250,000 per producer with the first $50,000 interest-free). The
OCPA is participating in consultation sessions conducted by Agriculture
and Agri-Food Canada (AAFC) aimed at possible design changes to the Cash
Advance Program, which includes both the Advance Payments Program (AAP
- the fall cash advance) and the Spring Credit Advance Program (SCAP -
the spring cash advance). AAFC is considering modifying the Cash Advance
Programs because it views them as inconsistent with the Business Risk
Management principles of the APF requiring:
a) equitable treatment of producers,
b) whole farm approach,
c) targeted to need.
In its reviews, AAFC has found that while there is ongoing need for cash
advance programs (i.e. access to credit), it feels that:
there is a need to improve program targeting,
the rationale for the interest-free provision is weak,
there is a need to review the advance amounts which 'have not kept pace with growth of farm size,
there is a need to integrate the fall and spring advance programs into one program,
there is agreement in using CAIS and CI as security,
program delivery should be broadened to include more delivery agents such as banks and other lenders,
there is a need to broaden the availability of cash advances to all sectors including
livestock, but excluding supply management sectors.
AAFC will seek Ministerial
discussion and approval on the proposed changes at the September meeting
of Agriculture Ministers.
Grain Financial
Protection Program
OCPA continues to work closely with the Ontario Soybean
Growers, the Ontario Canola Growers Association, the Ontario AgriBusiness Association,
AGRICORP, and OMAF assessing changes to the Grain Financial Protection Program
(GFPP) requested by government and industry. Having worked exceptionally well
for the 19 years of its existence, the OCPA is quite reluctant to accept substantial
changes to the GFPP merely for the sake of change. Industry and government are
seeking relaxation in the methodology used to calculate the size of the Letter
of Credit (LOC) requested of worrisome applicants. A lower LOC represents increased
risk to the GFPP fund which is 100% grower money. Increased risk to the fund without
offsetting increased accountability and sharing of risk by the provincial government
is not attractive to the OCPA.
GRAIN
TRADE & MARKET DEVELOPMENT POLICY COMMITTEE
Nacan
Products, Collingwood
The announcement by U.S.-based
National Starch & Chemical to close its Nacan corn wet milling facility in Collingwood
at the end of December 2004, is of concern because Ontario producers would lose
demand for about 3.5 million bushels of grain corn (approximately 2 million yellow
dent, 1.5 million waxy). The closure is of concern also because the Nacan facility
is the only processor of waxy corn in the province. Waxy corn provides a 35-60
cent/bushel premium to contracting growers. The OCPA is part of a team with Nacan,
the Municipality of Collingwood, OMAF, other Ministries, several provincial and
federal politicians, and others to develop options for the continuation of the
facility. One potential option being explored is to re-tool the plant into a dual
purpose corn wet-mill fuel ethanol (producing about 50 million litres annually
grinding 5.1 million bushels) and starch processing facility. Such a dual-purpose
facility would certainly be unique in Canada if not all of North America. One
major hurdle, in the view of OCPA, is the insistence by U.S. parent National Starch
& Chemical to prohibit any potential buyer from continuing to produce and market
starch.
Lorama
Chemicals Inc., Milton
The closure of the
Nacan plant would jeopardize OCPA's research and market development initiative
at Lorama Chemicals (which is partially based on waxy corn starch from Nacan).
The OCPA entered into a unique and innovative 5-year market development initiative
with Lorama Chemicals, to partially fund development of corn starch-based products
such as paints, inks, and other products. The project funds research and development
personnel and projects at Lorama and includes an innovative "return on investment"
potential. OCPA's investment is renewable annually and contingent on achievement
of benchmark performance criteria. Some initial product developments in the project
utilize waxy corn starch. If the Nacan facility does close, OCPA will terminate
this joint commercialization project with Lorama because National Starch & Chemical's
intention is to fulfill its waxy corn starch requirements from its Indianapolis
facility.
Ethanol
The main market development
thrust for the OCPA continues to be corn-based fuel ethanol. Prime Minister Chretien's
August, 2003 announcement of $1 billion in investments to implement a portion
of the Climate Change Plan for Canada contained $100 million to encourage construction
of new ethanol plants. This Ethanol Expansion Program has two phases: $78 million
was awarded in Phase 1 in February 2004 to 7 projects (including $22 million to
the Suncor Energy Products Inc. 200 million litre project at Sarnia, and $10.5
million to the Seaway Grain Processors Inc. 68 million litre project at Cornwall),
with the balance expected to be available for award under Phase 2 perhaps as early
as this fall. To our knowledge, Seaway and Suncor are the only two projects to
have submitted all required documentation, and both projects are currently finalizing
environmental Certificates of Approval, the last step before turning sod.Virtually
all the other projects under Phase 1 may have already defaulted. OCPA believes
the federal government should ensure that additional funding (i.e. the balance
of the original $100 million plus awards not utilized under Phase 1) should be
made available for applicants when Phase 2 is released. OCPA is hopeful that the
Integrated Grain Processors Co-operative's 115 million litre project at Brantford
is in a position to successfully participate in Phase 2.
Platforms of all 3 parties in the September 2003 provincial election contained
promises that 5% of the gasoline sold in Ontario by 2007 would contain ethanol.
That will require about 750 million litres of ethanol by 2007. The provincial
Liberal Party's ethanol promise was their key commitment to agriculture and rural
economic development. To help the McGuinty government implement their promise,
the OCPA has been working in a coalition with essentially all but one of the other
ethanol industry participants, including the Canadian Petroleum Products Institute
(representing all major refiners and retailers in Ontario) and the Canadian Independent
Petroleum Marketers' Association (representing the smaller independent retailers,
who sell 25% of the gasoline in Ontario). Components of our coalition's market-oriented
plan for implementing this 5% ethanol promise, have received the support of the
Ontario Federation of Agriculture, and the three ethanol projects underway in
Ontario (Suncor, Seaway, and IGPC).
The OCPA's prime interest has always been to have new ethanol plants constructed
in Ontario and purchasing
Ontario corn. Studies show that $1 in rural economic development spin-off results
from every 1 litre of corn-based ethanol produced in this province, using local
corn. Studies also show that grain corn basis offers should increase about $0.12-$0.20/bushel
for corn from within the "supply area" of a new Ontario-based ethanol
plant. Corn-based ethanol is good for the environment, good for your health, good
for rural economic development, and good for corn producers. It is time for the
McGuinty government to implement its ethanol promise.
However, potential economic development benefits depend on the OCPA's incentive
program being implemented to encourage expansion of domestic production. If the
government chooses instead to mandate the use of ethanol, or introduce a Renewable
Fuel Standard (virtually the same as a mandate), and not at the same time introduce
incentives for plant construction as OCPA is suggesting, the end result will be
that imports of U.S. and Brazilian ethanol skyrocket. Imported ethanol provides
no economic development benefits in rural Ontario and no benefits to Ontario corn
producers at all. The OCPA anticipates an announcement by the Ontario government
by the end of September concerning its strategy to fulfill its ethanol election
promise.
Imports of U.S
Corn
Imports of corn for the 2003/04 crop
year (i.e. Sept. 1, 2003-Aug. 31, 2004) from the U.S. into Ontario by vessel are higher than last
year into Sarnia, lower into Port Colborne, and sharply lower into Cardinal. Imports from the U.S.
into Ontario of approximately 48 million bushels by all transportation modes, are lower than last
year (51.5 million bu) and, continuing a trend downward, are the lowest in the last four years.
Imports
of Western Feed Grain
Imports of western feed wheat and feed
barley into the Eastern Canadian feed market have doubled this crop year, versus last, and exceed
the prior crop year (2001/02) as well. Western feed wheat imports are higher, but western feed
barley imports are more than three times the volume of last year to date.
Exports
Exports of Canadian
corn (at 11.17 million bushels) are roughly equivalent to each of the two previous
crop years, but exports to the U.S. are off slightly, while exports overseas are
up. Interestingly, we made an export shipment of corn to Iceland for the first
time ever, and continued a string of annual shipments to Puerto Rico that began
with the turn of the millennium.
Marketing Education
The OCPA has been exploring options for
presenting educational seminars this coming winter, possibly using one or more experts on the subject
from the U.S., in conjunction with the Ontario Soybean Growers and the Ontario Wheat Producers
Marketing Board. Options could range from conducting a marketing education needs survey, to presenting
marketing psychology/ marketing awareness seminars, to presenting marketing skill development courses.
ENVIRONMENT, TECHNOLOGY AND
RESEARCH POLICY COMMITTEE
OCPA Research
A significant amount of time has been spent in this area over the past few
months. There is a thought that OCPA needs to objectively analyze its current
research situation, and decide whether they are to continue on this course or
re-define their objectives. The conclusion we came to is to take a slightly
different path than the historic one. In the month of July, a research roundtable
was coordinated by OCPA at Ridgetown College. The guest list included various
government personnel, research scientists, industry players and other association
members. The objective was to get all these people together, present the history
of research at OCPA, present the current research environment and how it is
changing and finally, obtain feedback from the audience as to the direction
research will be taking in the future. Unfortunately, there seemed to be no
clear message as to where research is headed in the future. Some interesting
facts that you may be interested in; Over the past 15 years, OCPA has budgeted
$3.8 million from membership fees to be spent in the research area. Of that
total amount, $1.8 million was targeted specifically to research projects. Once
government and industry contributions are added in, OCPA has spent roughly $10
million in the past 15 years, with roughly $8.3 going directly towards research
projects. As you can see from these numbers, OCPA has been extremely successful
in making sure the bulk of the funding has not been tied up in infrastructure.
Combining all of the numbers that have been presented, approximately 22% of
the research project funding has been budgeted directly from corn check-off.
For the past 8 years, research spending has been directed into 9 categories.
Upon further analyses by this OCPA committee, it was decided to consolidate
these 9 categories into 5. Please refer to Table 1.
TABLE
1. Refocused Research Priority Areas of OCPA |
Category |
Old
System (%) |
Proposed
System (%) |
Germplasm |
37 |
19 |
Agronomic |
46 |
23 |
Handling |
11 |
11 |
Market
Development |
0 |
26 |
Business
Development |
3 |
21 |
|
|
|
The 'Old System' category takes the 9 category system, used in the past and
places the amount spent into the new proposed system. One can see that the primary
production areas will be trimmed back to spend more money in the market development
and business environment areas. Recently, there have been rumours around the
countryside that OCPA has abandoned their research effort. From the previous
discussion, it is obvious this is not the case. We remain committed to the effort
and are in the process of resetting our goals in moving forward. In saying this,
OCPA is not taking on any new research projects. This has been the situation
for the past two years, and the reason is simple, OCPA has a funding shortfall.
Many of the projects we have been involved with contains matching government
and industry funding. Safety net programs have expired and have yet to be renewed.
As well, there have been shortfalls in receipts of budgeted seed levy funds.
Combining this information, it means that OCPA has financial commitments to
researchers that exceed their budget by approximately $250,000. This issue was
taken to the OCPA board of directors and it was decided to honour our outstanding
commitments at the sacrifice of new projects. Earlier, it was mentioned that
the research environment is changing. As part of the roundtable at Ridgetown
College, Ken Hough of the University of Guelph, spoke about the changing dynamics
of the OMAF/University of Guelph contract. The bottom line from this presentation
was that costing for infrastructure is being complied and realigned because
OMAF feels their profile is not public enough when it comes to research. There
is also a structural change for the researchers, in that collaboration between
many researchers will be necessary for accessing future funding. OCPA believes
that applied research is where its membership gets the most value. We have concerns
with where the future funding will come from. As shown earlier, approximately
$6.5 million was accessed from government and industry by, in most cases, leveraging
the membership's funds. Will the new research forum attempt to direct research
dollars into areas that do not help our 'grass roots?' Will the dollars even
exist at all? There is another concern with this system. The new OMAF/University
of Guelph research structure is not all that conducive to extension type research
and OCPA knows our membership gains value from it. Depending on how the funding
structure changes, OCPA could conceivably end up directly funding these researchers
in order for them to survive under the new rules.
Corn Hybrid
Registration
OCPA has been receiving
information that there is an initiative reviving the issue around mandatory
corn hybrid registration. At one time back a few years ago, this was the process
that companies had to endure to make their products available to producers.
OCPA is working with the Grain Growers of Canada to push hard against this initiative.
We strongly feel that a registration process would slow hybrid and technology
availability to farmers and put them at a competitive disadvantage to their
U.S. neighbours. To summarize, we feel this works against the successful system
currently in place and is essentially, a step backwards.
Municipal Tile Drainage
Issue
As you are probably
aware, this issue was as much of a surprise to OCPA as it was to a multitude of
other groups. Although it falls under the 'whole farm' blanket, OCPA decided to
voice its concerns with the demise of the program to the Liberal government. A
letter was written to the Premier and other cabinet ministers announcing our disappointment
with this decision, and made aware OCPA's support for the OFA position. One of
our primary arguments, with the province's dedication to nutrient management and
water source protection, the phase-out of such a program, negatively affects the
very infrastructure which supports the Liberal government's mandate.
Farming Definition
Early in the year,
OCPA was notified that the Municipal Property Assessment Corporation (MPAC)
was increasing some of the farm tax assessments. One of the areas that directly
affected corn producers was the assessment of corn dryers. OCPA strongly opposed
this potential 'reclassification,' our reason being that corn drying is a necessary
practice in making the product marketable. It in no way should be defined as
a Value-adding' process. In addition, OCPA is working closely with OFA to update
this farm definition. It needs to recognize that agriculture is continually
evolving and that the system needs to be fluid, so that additions to update
this definition are easily performed. Right now, corn drying is being added
as primary agriculture and a necessity to access normal agriculture markets.
OFA is seeking legal review of the proposed changes which include the corn dryer
issue and other industry concerns. They hope to meet with the finance department
soon to try to legislate these changes.
| Corn
Prices
- Sept./Oct. 2004 |
| Period:
to July 31 |
Approximate
Tonnes Marketed |
Average
Weighted Price |
| 2003-04 |
2,897,300 |
$142.35/tonne |
| 2002-03 |
2,909,600 |
$154.72/tonne |
| 2001-02 |
2,739,100 |
$135.51/tonne |
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