Quebec quota price sky high
Generous provincial loan program enables Quebec farmers to pay up to $22,000 per kg of butterfatBY DON STONEMAN
Last month, dairy quota in Ontario hit $16,050 a kg on the May quota exchange.That's about as high as the price ever gets here in Ontario, observers note. They believe that lenders' tolerance for risk is a limiting factor.
Lenders don't want to lend money for quota for more than a seven-year term. And even the best-managed dairy operations can pay no more than $16,000 for a kg of butterfat without suffering a reduction in cash flow that could be crippling. Still, $16,000 a kg is a far cry from the dizzying price across the Ottawa River in Quebec, where farmers paid as much as $22,000 a kg in April. (See Quota pricing.)
So why do Quebec farmers pay those exorbitant prices for quota? A Quebec-government backed lending program is a source of concern for some in the Ontario dairy industry. The newly renamed and Quebec-based Société de Financement Agricole (SDFA) backs farmers going to the bank to take out loans for any type of agricultural business.
Quota isn't the only thing that the provincial crown corporation finances. Just about all aspects of all agricultural industries are eligible, says Normand Johnston, Quebec City-based SDFA information officer. The SDFA finances loan guarantees for all farm needs - land, quota, and buildings - guaranteeing the loans that are made by banks and caisse populaires. It protects farmers from interest rates that exceed eight per cent. If rates on loans go beyond that threshold, the SDFA covers the difference for five years. For 10 years after that, "we pay half of the interest over eight per cent," Johnston says.
And it offers a "start-up" program for young farmers. Depending on their level of agricultural-specific education, qualifying young farmers get a grant of between $20,000 and $30,000 when they apply for loan guarantee from the Société.
As well, the SDFA guarantees the loan when an ex-owner holds the mortgage on a farm he or she has sold.
The prices that Quebec farmers are willing to pay for quota is a source of wonder here in Ontario, and it was a sore point when this province was involved in a quota pool with Quebec and the other eastern Canadian provinces.
Ontario pulled out of the interprovincial quota system 13 months ago, when Quebec and Nova Scotia producers outbid Ontario farmers month after month and took two per cent of the dairy production capability out of the province.
Quebec farmers are getting the kind of help that the provincial agriculture ministry no longer makes available in Ontario.
Critics point to the loan guarantee as one of the reasons that the price of quota zoomed upwards as soon as Ontario, New Brunswick, Nova Scotia and Quebec joined into a single quota pool almost two years ago. Doug Murphy, Milford, Prince Edward county, an ardent critic of the milk board's decision to go with a single quota pool for eastern Canada, says just doing away with the SDFA programs won't be enough to provide a level playing field. "They have a lot of good programs there," he says. "No one seems to be able to find out what they are.
"They've always looked after the dairy industry in Quebec," Murphy says. "There was a time when we were in the program business," says Dennis Martin, Clinton-based OMAFRA dairy cattle specialist. He wonders if farmers really benefit from a loan guarantee program. "Who are the winners and who are the losers if the government starts to bail out to cover bad loans....Are we doing anyone a favour when we do that?" He thinks bankers "would be pretty quick to jump on the bandwagon" if loans are being guaranteed. The guarantee is "a backup clause" if a farmer defaults, he notes.
The Quebec government guarantee of loans through the SDFA helps private lenders only, says Farm Credit Corporation's Quebec City-based marketing manager Denis Brissette: "We are out of the ball game.
"It's quite difficult" to compete, he says. Loans are made at a half percentage point less than the FCC on an average basis. "But still, we are doing good business" because of the service the FCC provides, he adds. Last year the FCC made 328 loans for dairy quota in Quebec, totaling $52.1 million.
© copyright 1999 Agricultural Publishing Company Limited.
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DFO surveys quota attitudes
Just found a Dairy Farmers of Ontario (DFO) survey form that came in the mail when you were busy planting the spring crop? Don't throw it away.Filling it out will help DFO make decisions about taking part again in an Eastern Canada interprovincial quota exchange, says George MacNaughton, DFO's farm policy and field services manager.
This spring DFO sent forms to a random sampling of farmers who bought or sold quota on the provincial exchange in the previous dairy year, as well as to farmers who didn't make changes to their quota holdings. About 1,200 surveys were sent out to Ontario farmers; 800 more went to Quebec and Nova Scotia. Results are trickling back to the DFO office and are being forwarded to George Brinkman at the University of Guelph, who is collecting Ontario data for the three-province study.
Buyers, sellers and farmers who held tight to their holdings received different surveys, results of which DFO promised to hold as confidential. The questionnaire for quota buyers involves 41 questions over six pages.
The buyer is asked to describe the operation, then provide answers to a wide range of questions, such as why the purchaser bought quota; over what term the purchase was financed and at what price; and whether off-farm revenues would help cover its cost.
Another key question is whether farmers expect to be reimbursed by government for lost investment if quota values are devalued because of changes in the world trade environment.
The DFO hopes the study will provide answers to why two per cent of Ontario's quota moved to other provinces in the interprovincial exchange. One of the things that is being looked at is attitude, which MacNaughton says "could be based on information."
Perhaps producers in other provinces aren't warned as strongly that values may fall at some time in the near future. That might explain why farmers in Quebec and Nova Scotia are willing to pay a 33 per cent premium to buy quota to produce milk for about the same price as farmers in Ontario. The survey will likely be wrapped up in the fall, MacNaughton says. - Don Stoneman
© copyright 1999 Agricultural Publishing Company Limited.
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The manure storage that dairy farming brothers Keith and Larry Jantzi have built on their farm west of the village of Wellesley will help ensure that urbanites miles away have clean drinking water.Last fall a contractor built a 14x110-foot concrete storage, with a capacity of 880,000 gallons of semi-solid manure, replacing a horseshoe-shaped wall that had caught runoff water from the manure pile. The new tank will collect milk house waste water and hold the manure scraped from the 66 Holstein tie barn, as well as 40 smaller heifers in a pack barn.
There is over a year's storage in the tank, more than enough for their operation, and it will handle any likely expansion, points out Keith as he stands behind the barn, which is only 300 feet from an open ditch that runs into the Nith River in the extreme southwest corner of Wellesley township.
Tracey Ryan, Grand River Conservation Authority, says the funding to help the Jantzis with their construction project came from the Rural Water Quality Program, unique to some parts of the Grand River watershed.
The grant pays up to 50 per cent of costs of new manure storage construction to a maximum of $15,000. The Jantzis' storage exceeded the grant ceiling, Ryan says.
There is also funding to a maximum of $5,000 to treat milk house waste, $2,000 to divert water from barn yards, and up to $10,000 to restrict livestock from creeks.
Grants are funded from a number of sources, including the water bills of ratepayers in Waterloo Region. Over five years, area farmers will have access to a share of $1.5 million to promote best management practices, build manure storages, perform conservation tillage, retire farmland deemed fragile, and fence livestock out of waterways, among other projects.
Some of the money, about $225,000, comes from the National Soil and Water Conservation Program, through the Agricultural Adaptation Council. Last year, 50 programs were funded. Not all were completed, but she expects they will be wrapped up this spring.
Before a manure storage can be considered, a nutrient management plan is required. The Jantzis over-built their structure's capacity. The management plan called for a tank that was only 100 feet in diameter. Keith says they wanted to be safe rather than sorry in planning for the future. Farms in two watershed areas in the Grand River Conservation Authority area are now eligible - those in the Upper Nith (north of Highway 7, including parts of Perth county); those that drain into Canagagigue Creek, which flows through Elmira; those on the lower Conestogo River, from Conestogo Lake to the Grand River; and those in the ground water recharge area near New Dundee.
"We'd like to see the program expanded," Ryan says. She suspects parts of Wellington county will likely be included in 2000. "Hopefully we will see it as a watershed program. The whole Grand can benefit." There are 380,000 urbanites in the fast-growing Kitchener, Waterloo and Cambridge area who drink water from the Grand River after it is dumped into the recharge area west of the cities.
Municipalities recognize how important agriculture is to the region and want to see it remain sustainable, Ryan says, one reason money is being kicked into the project from water rates.
© copyright 1999 Agricultural Publishing Company Limited.
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The sun and the shade of it
Study of summer grazing habits inconclusive on benefits of eitherBY DON STONEMAN
You can make a cow stand in the sun on a hot day, but you can't make her eat. Nor does the opportunity to lounge in the shade keep cattle from grazing on hot days, says University of Guelph animal scientist Tina Widowski, who has been leading a team studying beef cattle's behaviour on pasture for the last two years at the university's North Fork research farm at Elora.Shade on pasture for cattle has been a controversial topic for graziers.
Some farmers believe that shade should be provided for cattle. Others believe that shaded animals waste their time flicking flies away with their tails when they should be out on the pasture munching down. Cattle in Widowski's study were separated into two groups, cows and calves with shade on pasture, and those without. Two years ago the summer wasn't hot enough to give Widowski's research team good data on cattle behaviour on pasture. But last year temperatures went up, and Widowski gathered 26 days of data on a large range of animal activities and heat levels from May through July.
The level of heat experienced by cattle was measured using a "black globe humidity index," Widowski says. The index is measured by a combination of air temperature, humidity and the temperature recorded by a thermometer placed inside a black toilet valve float exposed to the sun. As the globe heats up, the temperature inside the globe increases, an indication of the stress from direct exposure to the radiant heat from the sun. Cattle on pastures with shade were able to shelter under structures 16 feet square made of lattice work and shade cloth supported 9.5 feet off the ground.
Widowski's conclusion from those observations is that cattle without shade spend no more time eating than those lounging out of the sun's rays. "When it feels hot because of sun, temperature and humidity, cows with shade go to shade," Widowski says. Cattle without shade head for the water trough and tend to stay there.
They don't spend more time grazing, she says.
"We don't know if they drink more or just lounge around the water trough more," she says. Water consumption was measured, but the figures haven't been analyzed yet.
Some farmers are concerned that, because cows tend to manure near where they lie, too many nutrients will be gathered in locations where the cattle are prone to gather.
"If you are worried about manure being spread, there's probably a benefit to not having shade" on pasture, Widowski says.
The hottest day of the pasture season last year was May 15, when the maximum temperature recorded was 31.1C degrees. The relative humidity was 52 per cent and the black globe temperature was a scorching 49C degrees. That was the only day that observers saw signs of heat stress, Widowski says. Cattle were panting with their mouths open. "The sun was beating down," she says.
Cattle seemed to be particularly affected because it was early in the season "and they still had their winter coats.
"That's obviously when they are most vulnerable" to heat stress, she says. On the hottest day, cattle with shade spent 60 per cent of the day out of the sun. Those without shade spent 70 per cent of their time near the water trough, "and they spent very little time grazing that day," Widowski says, "much less than most days."
Widowski had distributed cows into shaded and unshaded groups according to their colour as well. Cows with black coats tended to spend a little more time in the shade than cows with red or white coats, but they spent no more time around the water trough.
Surprisingly, in general the time spent grazing doesn't seem to be affected by the air temperature or the black globe humidity index.
When the air temperature was less than 25C degrees, cows with no shade spent 39 per cent of their time grazing, while shaded cows grazed 41 per cent of the time. When the temperature went up to between 25 and 28C degrees, cows spent 42 and 43 per cent of their time grazing; when the temperature went above 28C, both groups of cows spent even more time grazing.
© copyright 1999 Agricultural Publishing Company Limited.
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Breeder clubs set for take-off
With the immediate threat of U.S. countervail thwarted, cattlemen say they now need some political will to launch programBY DON STONEMAN
Feeder finance clubs are a big boost to the Ontario cattle industry.Proponents think breeder clubs could do the same thing for the cow-calf industry.
The province refused to discuss increased support to the beef industry earlier this spring because feeder finance clubs were under the scrutiny of American trade officials looking to put a countervail against Canadian beef. But the preliminary report from the U.S. Trade Commission found that Canadian governments weren't propping up the industry.
With the threat of countervail eased, there's little beyond lack of political will to prevent government from going ahead with the program. "It would require a new regulation," says Graeme Hedley, Ontario Cattlemen's Association executive director.
An Ontario breeder program has been developed, but it was put on hold in 1995 when the beef industry went into its regular downturn. With the change in the cattle cycle, the program is being dusted off. When beef prices take an upward turn again, cow-calf operators want to be in a position to meet market demands. Feedlot operators are already fearful that a shortfall in feeder cattle will drive prices out of sight and make it difficult to fill their yards.
In brief, a breeder finance club would finance the purchase of females over five years, with the farmer paying off 20 per cent of the loan yearly from proceeds of calf sales. Breeder clubs would be based on the model of similar feeder finance groups.
Feeder finance clubs have been in existence in Ontario since pilot projects were started in 1990. They received full acceptance two years later. There are now 18 co-ops across Ontario with another one aiming to start this fall in the Renfrew-Carleton-Lanark area. Last year, farmer members used the co-ops to purchase 55,000 head of cattle. Banks had committed more than $35 million in loans at the end of March on the strength of the provincial government guarantee.
The provincial government provides a 25 per cent loan guarantee, and regulates co-op operations. Otherwise, the banks would not provide the loans, says Carm Hamilton, OCA feeder co-op supervisor. B.C., Alberta, Saskatchewan, Manitoba, Ontario and Quebec each have their own feeder programs, Hamilton says. Alberta has 60 years experience. Other provinces have had programs for 15 years or less.
Saskatchewan has a breeder program, and Quebec has a type of breeder program in its beef subsidization plan. "I don't know enough about it to really comment," Hamilton says.
In Ontario, the feeder program has offered loans up to $50,000 to buy feeder cattle for a first-time feeder and up to $100,000 for more experienced operators. The local club - in deciding who gets the loans - has a vested interest in keeping the operator on track, and provides training for new operators. If something goes wrong, and a farmer can't pay back his loan, the local group is first tapped to pay the difference from a fund to which all members have contributed five per cent of the value of their loan.
Fans of the feeder finance program don't understand the American trade challenge.
"It is certainly something that has support across the province," says Murray Clark, president, Bruce County Federation of Agriculture. "The [provincial] government has never paid out a cent" on a loan guarantee, points out Ron Bonnett, a Bruce Mines, Algoma district, cattleman and Ontario Federation of Agriculture vice-president. The program isn't a subsidy, he asserts. It is just assistance in getting people the capital to start up operations. The only government money spent on the program is the administration costs.
Bonnett watches trucks full of feeder cattle roll from Western Canada into Ontario on the Trans-Canada highway. Ontario farmers could raise those cattle, he says. "With the availability of credit we could see expansion in the [beef cow] herd.
"Quite a few guys here and in Bruce county are looking for innovative ways of getting financing," he says.
Bonnett hopes that with the provincial election over, the program to support calf raisers can go ahead full speed.
© copyright 1999 Agricultural Publishing Company Limited.
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