Raging on rent
As low corn prices squeeze per-acre margins, farmers wonder where profit lies in high rental ratesBY TOM BUTTON
Every farmer can tell you that land rents are priced way too high. Fewer recognize they wouldn't be that high if farmers didn't pay them. It's going to be a tough winter for those who depend on rented land. And that's just about everybody. Survey after survey shows that whether cash croppers farm big acreage or small, and whether they're profit makers or losers, they all rent just over half the acres they farm.Typical land rents across the province are in the range of 90 cents to $1.25 per bushel of expected corn yield. With new crop corn at $3.25, that leaves roughly $2 per bushel to pay all the cash production costs plus wear and tear on machinery and drying and elevation costs. The only way it pencils out, says Colin Reesor, who farms near Walkerton and doubles as a farm business adviser for OMAFRA, is if crop prices take an unexpected jump, or if yields are phenomenal.
"A lot of rent is going to be paid on some pretty slim hopes," Reesor says.
While many land watchers expect rental prices to fall, Reesor expects them to cling near their current historic highs. Low corn prices are squeezing per-acre margins, Reesor explains. Many growers, therefore, will decide their only hope of earning a decent net income is to increase the number of acres that earn that margin.
"Everybody's waiting for land rentals to fall," Reesor says. "It ain't going to happen."
So what's a farmer to do? Where's the safe middle ground between refusing to pay high rents, which means fewer acres and lower income, and paying the high rents and hoping against the odds that the bet will pay off? St. Mary's farmer Jim Tyler is on the front lines as a farm adviser with the federal government's Farm Debt Mediation Program. Despite all the focus on high land rents, few if any of Tyler's clients were pushed into mediation simply because of high land rent.
If land rent seems way too high, it may mean there's a deeper problem. Tyler says growers who believe they have to farm more acres to optimize their machinery use, and then find that land rents are unprofitable, should ask themselves whether they're over capitalized for machinery. "It's the tail wagging the dog," Tyler says. "The fatal flaw there isn't the renting of the land; it's the step before that when they acquired all that expensive machinery."
Tyler says if high rents put a strain on the farm, farmers shouldn't simply try to spread equipment costs over a larger or smaller acreage, but compare the larger acreage and larger equipment inventory to smaller acreage and reduced equipment.
If the operation needs extra acres - perhaps to fit in the next generation, or to get enough land to rotate high-value crops - renting is almost always cheaper than buying, even at today's rates. In the Mitchell area this past year, for instance, excellent land sold for close to $5,000 per workable acre, for an annual carrying cost of at least $400 per acre by the time interest and farm improvements are totalled. Yet similar land can be rented for about $200 per year.
"They've locked themselves into $400 a year for the next 20 years - figure that one out." Tyler says. "You can pay dearly for the pride of ownership." Growers, he adds, should start with an honest look at the costs and benefits of land purchases and rentals, and a clear picture of short- and long-term objectives for their farm operations.
Peter Mantel, OMAFRA farm management specialist at Ridgetown, believes every corn and soybean grower should look at every rental opportunity with a cold eye turned to cost of production. It may be nice to rent the farm across the road, Mantel says, but it's unlikely the reduced transportation costs will justify the extra $25 to $50 an acre that growers may bid for it.
And though he recognizes it's not easy, Mantel urges growers not to focus on how much other farmers are paying. "Everyone has their own costs and their own reasons for renting," he explains. A livestock farmer may bid up the price of a nearby parcel in order to have a large enough land base for manure management.
Farms with substantial equity can bid more for rental land than farms that are labouring under high debt loads, Mantel adds. To the farmer with little equity it may not seem fair, but it's true nonetheless.
© copyright 1999 Agricultural Publishing Company Limited.
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Soybean growers thinking about saving some of last year's crop to plant this spring will be gambling that Robinson Investigations isn't very good at its job.Monsanto has hired the private eye company to find growers who are planting Roundup Ready seed without paying the $8 per bag fee, says Jim Inksetter, Eastern Canada manager for Monsanto, which makes Roundup and developed the Roundup Ready gene.
Growers who get caught will face tough penalties. They'll pay the fee, plus be fined for the total value of the harvest from the illegal acres. Alternatively, they could pay the fee and plow the crop under. "We don't want to seem like we're Big Brother, looking over the farmer's shoulder," Inksetter says. "We think that most farmers know this is something we have to do."
One of those farmers is Tom Lassaline, chairman of the Ontario soybean marketing board. "It will be a temptation to growers, I realize that," Lassaline says. "On the other hand, if Monsanto can't recoup its costs, they aren't going to keep working on new traits.
"The fee is part of the cost. If you feel the cost savings aren't there because you have to pay the fee, then don't use the system," says Lassaline. The technology use agreement (TUA) that growers signed last year contained a promise to allow Monsanto "reasonable access" to their crops the year following planting. In most cases, that means investigators will call the farmer and set up a time for field inspection.
Investigators can collect seed. But more often, they'll spray a small patch of each field with Roundup to see whether the crop is Roundup Ready. Monsanto is also setting up a toll-free number for anonymous tips. While farmers may be unlikely to point the finger at each other, competitive herbicide companies and crop input suppliers who are losing profits because of Roundup sales have lots of reason to call.
Inksetter says most growers want to be sure everyone pays the fees. "The vast majority of people are honest, but you still put a lock on the door." For Ontario soybean growers, the Roundup Ready situation is unique. Other varieties are protected by Ottawa's Plant Breeders' Rights legislation. It prohibits growers from selling the seed from protected varieties, but lets them keep the seed for their own use.
Roundup Ready, by contrast, is protected by patent legislation that makes it illegal to keep any of the crop for sale. In two Prairie cases involving Roundup Ready canola last year, it was clear Monsanto had the legal upper hand.
If Ontario growers are caught and fined, Inksetter says, the company will give the money to agricultural groups and ag-related charities. He says the company wants to avoid any charge that it is prosecuting farmers to fatten its wallet.
Inksetter says the company also believes that Roundup Ready technology is making farmers enough extra money to justify the $8 per bag fee. He cites a study of 87 on-farm side-by-side trials showing that when Roundup Ready varieties were sprayed with Roundup they yielded 2.2 more bushels than when sprayed with other herbicides. Inksetter credits better weed control and reduced crop stress from the weed killer. After all costs were factored in - including herbicide costs, seed costs compared to the grower's normal program, plus the TUA fee - growers saved an average $8 per acre, Inksetter says.
About 1,700 Ontario growers planted 100,000 acres in 1998, and the company expects a boom in sales this year. One new grower may be Lassaline. "We haven't decided yet," he says. "Like a lot of growers we're taking a very hard look at it."
© copyright 1999 Agricultural Publishing Company Limited.
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Retailers, processors and restaurant owners all complain that they are losing money on the cheese they sell to consumers. They want to pass their pain back onto farmers.Dairy product users lobbied in Ottawa last month, trying to stave off a dairy farmer request for a $2.88 per hectolitre increase in the price of industrial milk that would be effective Feb. 1.
The war against a price increase was being fought on two fronts. The Food and Consumer Product Manufacturers of Canada (FCPMC), representing companies making products that are sold in grocery stores, lined up with franchise and independent grocery owners and also with the restaurant owners' lobby to make their point to the Canadian Dairy Commission, which considers increases to milk prices.
George Fleischmann, president of the FCPMC, says the price of industrial milk has risen 16.6 per cent in five years while the retail price of cheese hasn't budged. The industry, he says, can't take any more price increases.
Retailers shouldn't be asked to increase the price by five per cent in one year when inflation is less than two per cent, says Nick Jennery, president of the Canadian Federation of Independent Grocers. "Rising dairy prices are defeating our best efforts...to cut costs and provide greater value to consumers," says Doug Needham, president of the Canadian Restaurant and Foodservices Association. Further processors also complain that imports are threatening the pizza business.
Meanwhile, the National Dairy Council says processors have been taking the hit as much as retailers and restaurant operators.
"We made a strong pitch for a freeze. The markets are very tender at the moment," saysNDC president Kempton Matte, adding that NDC doesn't believe the growth picture is as rosy as producers say it is: "It's not a very healthy scene." Most of the growth in cheese demand is in the Italian cheeses, he says.
Matte blames a quirk in the new allotment system be-tween provinces for allowing over-quota milk to go into domestic markets, so more cheese is produced than is really needed. Matte says milk is being produced outside of quota and being turned into cheese and sold into the domestic market rather than being declared as surplus and sold outside of Canada for an export price. Farmers are encouraged to keep the milk in the province where it is produced, Matte charges, because a technicality allows provinces their share of the proceeds of the milk sale within the province rather than sharing it with other provincial partners in the pool as with milk destined for export. This raises the blend price returns for the province's dairy farmers.
John Core, chairman of Dairy Farmers of Ontario, and vice-chairman of Dairy Farmers of Canada, says that doesn't occur. Producers don't get any more for the milk regardless of how it is declared, Core says, and processors shouldn't be complaining.
The DFO offers over-quota milk to plants according to their share of the province's production, but they don't have to take it, Core insists. "If they don't want the milk they can ask that it not be sent to them. They're out fighting for market share. That's their problem." Core also adamantly defends the increase in the price of industrial milk.
He says that the same coalition, without the processors alongside, fought DFC unsuccessfully last year when farmers sought to get back from the marketplace money that used to be paid for their milk by the federal dairy subsidy that is being phased out. Recent increases processors have been paying and passing on to retailers have occurred, says Core, as the federal government backs away from the long-standing dairy subsidy. He maintains that farmers' income has stayed the same as increases were passed on to grocery stores and consumers. A three-year agreement to share increases between producers and processors ran out last year.
"If we don't get the subsidy back [from the consumer] it is the same as cutting the price" for milk, Core says.
Cheese consumption is on the rise in Canada and the U.S. Dairy market watchers note that on both sides of the border consumers are "eating" their milk rather than drinking it. Whether cheese consumption will hold up with higher retail prices remains to be seen.
© copyright 1999 Agricultural Publishing Company Limited.
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Over-quota or more quota?
Have stall space in your barn, but can't justify buying quota to put in more cows? You aren't alone.More farmers are now considering "the global net revenue from their enterprise" rather than just the price received per litre within quota milk sold, says Guy Jacob, chairman of the Canadian Dairy Commission (CDC). After crunching numbers for their operations, many farmers have decided they're better off producing over-quota milk than investing in additional quota. But the industry hasn't caught up on this trend yet, Jacob says.
Over-quota milk is still going at surplus prices, which barely covers feed costs. Farmers could do better, he believes.
A clear distinction must be made between market development and mere surplus removal, Jacob says. Developing overseas markets requires committing production. But provincial marketing boards are thinking about their own producers first, he says. They aren't pooling their optional export program (OEP) revenues. As a result, plants still crank out surplus butter and powder on a sporadic basis.
Jacob and Dairy Farmers of Ontario chairman John Core agree that a national pool for optional export milk would be the best way to develop an export strategy, but two pools - one in the east and one in the west - will do for now. Core says Ontario is in agreement with Jacob. Quebec, however, doesn't want to make producers commit to the plan.
Ontario had been asking farmers to sign up to produce optional export milk. It would be the first milk out of the tank. Quebec, on the other hand, takes actual overproduction as a signal that farmers want to take part in the program. The Quebec board estimates how much extra milk there will be every six months and then signs contracts with processors to make products for sales overseas. Core wants Quebec to come on side with Ontario in the optional export issue, but admits, "we're not there yet."
Currently, it's CDC's job to get surplus onto world markets. But that role will change as a better optional export program comes into place. Jacob says CDC now issues permits to export a variety of dairy products. If a true optional export program were in place, all products other than country-to-country contracts and butter and powder sales would be sourced through the pools. CDC's role would be limited mostly to getting rid of what Jacob calls "non-committed" surplus milk. It would sell the cheap products; the pools would sell value-added products.
If a World Trade Organization panel requested by the U.S. and New Zealand rules that Canada's special classes for export milk don't comply with trade obligations, CDC will have a much smaller role in marketing dairy products on export markets. "It would be quite unfortunate if a panel based in Geneva" determined the future of our industry, Jacob says. But even if Canada wins, producers shouldn't expect external pressures on the system to subside, he warns.
It is likely that after the next trade round is finished some concessions will have to be accepted, but likely not for 10 or 15 years. In the meantime, producers and processors need to quit bickering, Jacob says, and failing to pool provincial export revenues is undermining the national good of the industry.
© copyright 1999 Agricultural Publishing Company Limited.
backby Richard Charteris
Hardy, indomitable, tough.They're words you'd use to describe Canada's first immigrants, scratching a life from a rough land. They also apply to the livestock that shipped out of France for Samuel de Champlain's settlements along the St. Lawrence River early in the 17th century, according to Thurso, Que., dairyman Claude Brunet.Examples of the better dairy breeds from Normandy and Brittany - the brune de Guinguamp, Normande and Bretonne - were common entries on the early ships' manifests. By the mid-1600s that mostly closed stock had been blended and selected for hardiness and productivity, creating the Canadienne breed, says Brunet.
Small-framed (cows weigh about 1,000 pounds), long-lived and capable of subsisting on poor pasture, the breed served well the milking needs of Lower Canadian farmers, delivering good volume in relation to body size and feed conversion. Carrying a high percentage of usable meat in relation to its total body weight, the Canadienne was an ideal dual-purpose breed.
By the mid-1800s, though, newly imported, single-purpose breeds such as the Ayrshire and Jersey began to be crossbred with the Canadienne. In 1985, 90 years after the Canadienne Cattle Breeders Association was formed, registrations numbered 559. Today, full-blood North American registrations - those of animals born to parents whose pedigree can be traced back to the closing of Quebec's Foundation Herd Book in 1896 - total about 250, says Brunet.
If Brunet has his way, those numbers will soon be increasing. Among his 80-head herd, he has three bulls that are collected at Centre d'insemination artificial du Quebec in Saint-Hyacinthe and eight cows that are being flushed for embryo sales. There's demand for Canadiennes in France, he says, because of the breed's ancestry, and in Mexico and South and Central America, where it's valued for its dual-purpose nature and rough-pasturing ability.
Brunet used to milk Holsteins and Ayrshires, but wasn't really happy with them. He'd seen a few Canadiennes over the years and one day, "thinking I wanted to be a little different looked into them more." On discovering their relative scarcity, "a bit of patriotism took over," he says. "These cattle represent the country's early history; I wouldn't want to see that pa ss," so he spent a few weeks over the next couple of years criss-crossing Quebec seeking the best examples of the breed. That was four years ago.
Today, he's milking 30 head of Canadiennes twice daily, averaging 5,500 kg per lactation with four per cent protein and between five and six per cent butterfat. His best producer topped out at 8,200 kg, he's still milking a 14-year-old and, best of all, he says, his cows need about half the feed of Holsteins to produce a pound of "better quality milk."
His Canadiennes pasture for six months in fair years like 1998, says Brunet, roaming 75 acres that he has planted with alfalfa, timothy and clover. He grows all the forage he needs on his 150 owned and 100 rented acres. Herd health is excellent, he says.
Brunet - a widower- and his son, Louis, 21, are currently taking a cheese-making course in hope of making a go of an on-farm raw cheese operation. (Daughter Caroline, 18, is studying horticulture at college).
The farm's located in a high-demand recreation area both winter and summer, so Brunet reckons he'll have plenty of drive-by customers for the proteinous high-fat fromage - and, of course, a glimpse at Canadian livestock history.
© copyright 1999 Agricultural Publishing Company Limited.
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Soy pushing milk in dairy cases
BY DON STONEMAN
Milk has been running a tough race in the highly competitive beverage derby, a market leader based at least partly on nutritional benefits. But jockeying for position in the pack are soy-based products making as many "healthful benefit" claims as regulations allow.As a consequence, farmers may have to consider putting some money into re-establishing milk's nutritional position, says Helen Bishop-MacDonald, director of nutrition, Dairy Farmers of Canada. The popularity of soy drinks is on the rise, says Bishop-MacDonald, citing "increased hype" in magazines such as Chatelaine, which are widely read by primary shoppers - homemakers and women. The soy beverages are fortified with calcium and vitamins, and while health claims aren't permitted in advertising foods in Canada, media do refer to nutritional benefits.
Georgetown-based Neilsons straddles both sides of the fence now following the launch last year of a soybean-based beverage last year. Beatrice quickly followed.
Both companies market their products fresh and in gable-top cartons, just like milk. Neilson's Soy Delight sells in the dairy case and is fortified with vitamins D3, B12 and riboflavin. Beatrice soy drinks come in two-litre packages. The fresh products are good for about a month in the refrigerator.
Grocers also sell soy drinks in aseptic tetrapaks that have a shelf life of more than a year, Carob Eden Soy, for example, which is sold at Zehrs. The Ontario Soybean Growers Marketing Board considers soy drinks a niche market product for vegetarians and people who are lactose intolerant or allergic to milk, says communications assistant Janet Nauta. About six-tenths of one per cent of all soybean sales wind up being processed into soy foods. Soy drink sales would be a tiny portion of that, Nauta says.
Soy food makers got a big boost when federal permission was granted 14 months ago for their products to be fortified with vitamin D and calcium, says Nauta.
Women were looking to soy drinks to provide dietary isoflavines, which are said to mimic estrogen. Nauta says isoflavines are sought by post-menopausal women who don't want to take estrogen-replacement therapy because of concerns about breast cancer, but also want to get the calcium that is in milk because of concerns about osteoporosis.
By drinking calcium-supplemented soy drinks they get calcium and isoflavines - "the best of both worlds," Nauta says. Bishop-MacDonald begs to differ. You can cram all the calcium you want into some soy-based products, she says. Depending on how they are processed, the soy drinks and yogurts may contain phytic acid, which binds the calcium, making the nutrients inactive. "Consumers can't tell," Bishop-MacDonald says.
© copyright 1999 Agricultural Publishing Company Limited.
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