Elbert van Donkersgoed

January 29, 1999 January 22, 1999 January 15, 1999 January 8, 1999

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Farm Commentary by Elbert van Donkersgoed

January 29, 1999

Hindsight is 20/20. That was the theme of a panel discussion at the Agriculture Finance Conference in Guelph earlier this week. Staff from banks and credit unions explored staying power for the down cycles in agriculture, particularly the unprecedented collapse in pork prices.

My contributions included three lessons learned the hard way from the farm crisis of the early 80s. We should not have to relearn them every time producer prices flounder.

Do good reality therapy. You don't have to like how the world works but you had better understand how it does. Coming out of the inflationary 70s the first instinct of many--caught in the crisis--was to plead for inflation to return. It couldn't. It shouldn't. We had to overcome reaching back for the past before we could move on to real solutions for the 80s.

Even today it's still tough for us to accept a key part of our reality--it is not governments that have a cheap food policy, farmers do. Our entrepreneurial spirit sets the stage for these-sometimes-dramatic-price cycles.

With every new season a vast majority of farmers are targeting--a little more per acre, a little faster to market. Each year we produce about 1% more physical agricultural products in Ontario--1% more food from our farms to our cities-whether or not our consumers have indicated a need or desire for more. More production without an identified demand equals lower prices.

When bankers lend dollars for the latest technology--they need to keep this in mind: If we all do a little better we all take a little less.

Give family farmers a second chance. We learn from our mistakes. Once burned by too much debt, we'll make sure that the present set-up is profitable before we plan the next expansion. Many farm families learned that the hard way-through debt review and other initiatives--and thrive today.

But, let's not assume that the second chance has to be in production agriculture. It took much too long in the early 80s to recognize that assistance programs were as necessary for those families who were ready to move on to other challenges. There is life after farming.

A colleague culture is essential. When the crisis of the 80s struck, farmers did not see their bankers as colleagues. Nor did loan officers see entrepreneurs as peers. That had to change. Trust has grown in the past two decades. There is no substitute for those who need each other to build their businesses to work with each other as colleagues.

The lessons of the early 80s make Ontario agriculture a much stronger sector today.

-- 30 --
Elbert van Donkersgoed is Executive Director of the Christian Farmers Federation of Ontario and Publisher of Earthkeeping Ontario. The original version of this Corner Post was prepared for CFCO Radio in Chatham.




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Farm Commentary by Elbert van Donkersgoed

January 22, 1999

There is a silver lining, after all, to that most unprecedented mutation in the economics of pork production of the past four months. Producer prices have crashed but producer interest in their industry has not. Producers are keen to discuss the future direction of the sector. There's a renewed interest in knowing how pork producers can influence their unfolding destination.

On Wednesday evening the Exeter Community Centre was filled with pork producers. They came to explore some refreshing ideas designed to strengthen the pork sector. Ideas that will depend-if they are to succeed-primarily on themselves.

The evening included:
1. An update from Ontario Pork: there is an encouraging improvement in the price of pigs. They've jumped back up to where they meet the feed bill.
2. An overview of the Disaster Relief Program: the application forms are in the mail and the details resemble the pre-Christmas draft.
3. A disturbing video where the president of the National Pork Council of the US addresses US pork producers. His message: one US solutions pork crisis: send hogs to Canada for slaughter ASAP.
4. An introduction to the concept of making Ontario Pork the sole deal-maker for all contracts for market hogs-as proposed by the pork producers think tank of the Christian Farmers Federation.

The main subject was a proposal to establish a pork producers investment corporation.

Kenpal Farm Products of Exeter organized the information evening. Ken Palen is enthusiastic about creating an investment corporation with the voluntary support of pork producers. He proposes to invest in the many small abattoirs across Ontario and to upgrade and increase the capacity of these independent processing firms to the mutual benefit of these small firms and pork producers.

A strong Ontario pork sector needs more processing capacity. We should not be exporting live hogs. The jobs and investment involved in processing all of our hogs should be right here. That would give the sector more stability. Trucking costs would be lower. Our exports to the US might attract a little less of their negative attention. Our major processors may even have to improve their market contracts to hold all the pigs that are committed to them.

Wednesday evening kick-started the exploration of this concept. It has the right goal: build our processing capacity so that all our pigs can be slaughtered in Ontario. It has an excellent target---the smaller processors. Projects supporting them will not require mega millions all at once. One small but significant investment each year will change the dynamics of the pork sector dramatically in the next decade.

-- 30 -

Elbert van Donkersgoed is Executive Director of the Christian Farmers Federation of Ontario and Publisher of Earthkeeping Ontario. The original version of this Corner Post was prepared for CFCO Radio in Chatham.

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Farm Commentary by Elbert van Donkersgoed

January 15, 1999

Three years ago marketing hogs by contracts negotiated one on one between farmers and processors received an official blessing from the Ontario Farm Products Marketing Commission. That decision was made after a hearing that explored the changing role of the Ontario Pork Producers' Marketing Board.

We now have three years of experience with these contracts negotiated one on one. The results are not good.
* Producers are competing for contracts.
* Packers are not competing for our hogs.
* Producers competing among themselves drives the price down.
* Producers know less about the market for hogs than the processors.
* Contract renewals come with strings attached.
* Inequities between contract hogs and non-contract hogs have ballooned.
* Processors are in a position to expand their grip on the assets of pork production.
* Producers have lost clout in the market place.

Contracting hogs is here to stay. One on one negotiation need not be. There is a way to return clout to producers. Make the Ontario Pork Producers' Marketing Board the sole deal-maker for all contracts.

Ontario Pork will have all our pigs in hand when it negotiates contracts. This is not the electronic single-desk selling system used in the past. That was characterized by waiting for a processor to pick his price: it assumed competition between processors.

This is about vigorous negotiations with processors--real give and take. There will be a variety of contracts, both short and long-term, with the differences based on real value hanging on the rail.

This approach will create new challenges for producers and Ontario Pork. The Board will need to develop a role in maintaining the quality of the hogs sold. Producers will need to report regularly on their production intentions. Ontario Pork will have to track these intentions in order to negotiate effectively.

It also means asking the Farm Products Marketing Commission for withdrawal of the order that says "parties must be free to negotiate the details of their contract one on one."

For this to work, producers have to have full confidence in Ontario Pork as the sole deal-maker for all contracts. And they can. During the Maple Leaf strike and now again with the Quality Meat strike, Ontario Pork has moved hogs around and out of province effectively.

Last Thursday 54 pork producing members of the Christian Farmers Federation met in Woodstock to evaluate this concept. They were asked: "Are you ready to see CFFO endorse the basic principles of this strategy?" Two (2) abstained. Three (3) said no. Twelve (12) said yes with reservations. Thirty-seven (37) gave it a firm yes!

CFFO will be putting its confidence in Ontario Pork to regain some control for family farmers over the future of the pork sector.

I'm Elbert van Donkersgoed with the Christian Farmers Federation.

Elbert van Donkersgoed is Executive Director of the Christian Farmers Federation of Ontario and Publisher of Earthkeeping Ontario. The original version of this Corner Post was prepared for CFCO Radio in Chatham.

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Farm Commentary by Elbert van Donkersgoed

January 8, 1999


On Thursday, the Christian Farmers Federation organised a workshop for its pork-producing members. Fifty-five gathered in Woodstock to discuss marketing, disaster relief and mutual self-help.

It was a meeting born of disastrous pork prices. This is not just a typical cyclical low in the pork sector. We've learned how to respond to those--just wait for better times to return.

This is about pouring feed in front of pigs and knowing that the price they will bring next week will be dramatically less than the cost of the feed they devoured. Borrowing--eroding equity-is necessary just to pay the feed bill.

There was much scepticism about the coming disaster relief program. The planned Whole Farm Disaster Relief Program is decoupled from production. Decoupled from production is my way of emphasizing that the financial help this new concept will provide is not directly linked to how many pigs anyone produces. Because farms are so very different, support will be individualized to each farm. Two farms that are identical in every way, except for their choice of yearend for the purpose of calculating income taxes, will get very different levels of support.

We've learned that producers applying for assistance will need to do a modified accrual financial statement for 1998.

If the methodology used in Alberta is adopted, inventory will be valued at the average value of the last month of the year-the lowest price month for pork during 1998. There will be no accounting for the dramatic slump in inventory value from the beginning to the end of the year. That's why it is being called a modified accrual statement.

Only if a farmer actually reduces inventory levels will the new program provide some relief linked to these much lower values. But in these circumstances the chances are good that the inventory was actually sold off at a price better than the yearend evaluations. Result, a producers eligibility for disaster relief will be reduced if he has cut back production.

There was a grudging consensus on Thursday that the program-warts and all-needs to proceed on an interim basis-without delay. The need for immediate support arises from the looming forced restructuring on a number of farms to purchase inputs for spring planting.

We should learn from the interim program just how well this new approach to assistance will work in Ontario. We are sceptical that a concept devised for agriculture in Alberta is the right one for the diversified agriculture of Ontario.

We fully expect that the experience with the coming interim payment will cause us to ask for a number of significant changes before the full program is finalized.

For that we want the provincial and the federal officials to take all the time they need to make, this new approach to assistance, work for Ontario farm circumstances.

-- 30 --

Elbert van Donkersgoed is Executive Director of the Christian Farmers Federation of Ontario and Publisher of Earthkeeping Ontario. The original version of this Corner Post was prepared for CFCO Radio in Chatham.

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