AGRI-BUSINESS
Nuts & bolts
Warranty war
Forget seven-year, 115,000 km. Tractor and combine warranties are
one year
at best. Farmers in Manitoba are fighting to retain a two-year
farm
equipment warranty provision in their Farm Implements Act.
Manitoba farmers
group Keystone Agricultural Producers is opposing proposed
amendments that
would bring it down to one year, in keeping with Ontario
legislation.
Manufacturers, however, argue that the cost of a two-year
warranty will
have to be passed onto producers, reports Agriweek newsletter.
KAP counters
that Manitoba farm equipment prices are no different from
neighbouring
provinces.
Co-operators cash
Co-operators General Insurance Company reported second quarter
net income
of $28.8 million, exceeding by $2.9 million net income earned in
the same
quarter in 1997. Earnings per common share, the company reported,
were
$1.29 for the quarter, a slight increase over the previous year's
reporting
period.
Needle no-nos
Don't blue box those used syringes on the farm. Workers at the
Northumberland County recycling plant are discovering syringes
and lancets,
and in the interests of safety county officials urge farmers to
keep these
items out of the advanced wet-dry recycling program. The items
should be
stored in a "sharps container," available at pharmacies, or in
empty
containers such as Javex jugs or two-litre pop bottles. Full
bottles can be
dropped off at the household Hazardous Waste event in Cobourg,
Sept. 26.
Some pharmacies have established a syringe exchange. For list of
pharmacies
and drop-off dates: 1-800-354-7050, ext. 316.
Growmark dips
Overcapacity in the fertilizer business was blamed for lower
returns at
regional farm co-operative Growmark. Year-end estimates delivered
at
Growmark's annual meeting in Chicago early September pegged
profits down 30
per cent to US$37 million. Sales dropped US$300 million to US$1.3
billion.
Much of the drop was attributed to lower patronage from CF
Industries
fertilizer supplier, down 30 per cent to US$33 million. Energy
and feed
sales were down, and so was grain volume, due to lower Asian corn
buying.
Growmark also announced a three-way alliance with two other
co-ops, the
US$4-billion, Minnesota-based Land 'O Lakes, and Indiana-based
Countrymark.
Under the new alliance, Growmark's 33 Ontario member co-ops will
now be
sourcing feed and seed from Land 'O Lakes instead of Countrymark.
Energy
products would continue to come from Countrymark's Mt. Vernon,
Ind.,
refinery.
More money
Got an agricultural project that needs funding? Try the Ontario
Agricultural Adaptation Council, which recently secured funding
beyond
2000. Federal Agriculture Minister Lyle Vanclief announced early
September
that he is continuing funding the $60-million national Canadian
Adaptation
and Rural Development (CARD) fund to help farmers "respond to the
forces of
change." Recently receiving $150,000 in CARD funding was the
Ontario Rural
Council, formed last April to promote rural community
development.
Ontario's CARD portion over the four years beginning in 1995 was
$28
million. A wide variety of projects have been supported by the
Adaptation
Council.
(519) 822-7554.
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Like farmers, ag stocks, USDA bleeding
Just as the Dow Jones Industrial Average was peaking in mid-July,
one
clear-eyed stock analyst informed CNN viewers that the total
stock value of
internet service provider America Online was greater than the
entire stock
value of giant General Motors.
"Does it make any sense," he asked televisionland, "that AOL, which makes nothing, has a greater market capitalization than GM, one of the five largest manufacturers in the world?"
No, it doesn't, and August knocked the testosterone out of the macho stock market faster than ranchers turn bulls into steers. "Bloody stuff," intoned one of television's many talking heads during the carnage.
Maybe. But real blood - by the bucket - had been draining from the market capitalization of major ag corporations for months before the Dow took its August dive. For example, the share price for Deere & Co. hit $64 in April, its 52-week high. On Aug. 31, Deere shares finished near $32.50, a 49 per cent crack-up that sucked $7.7 billion from Big Green's market cap.
Likewise, past months of global woe showed Archer Daniels Midland the world doesn't need such a large supermarket. ADM's stock sank from an April high of $24.62 to an August low of $14.82 - a $5.8 billion drop in overall stock equity. Always steady ConAgra has been rocked, also. Its stock value tumbled 42 per cent, or $7.7 billion, between last December and late August.
Even Midas-like Monsanto saw its recent 52-week high of nearly $64 stumble to $53.50 on Aug. 31. That relatively small 16-per cent hit took $6.3 billion off Monsanto's books.
Stock analysts who watch ag companies are leery to suggest the washout is over - even if the general stock market holds at current reduced levels - because of still-growing farm problems. They are quick to point out that while the stock market is down about 21 per cent from its July top, commodity prices now sit at gut-spilling 21-year lows. USDA, too, is bleeding money. During the 1997/98 marketing year, its Commodity Credit Corporation shelled out about $150 million in farmer payments under new crop loan schemes enacted with the 1996 Farm Bill. For the upcoming marketing year, however, loan program costs likely will rise by a factor of 20, maybe even 30, over 1997/98.
USDA's working estimates for 1998/99 Loan Deficiency Payments peg costs at "$2.5 billion now and rising every week," says one knowledgeable source. Total LDP exposure for the about-to-be-harvested 9.5-billion bushel corn crop alone could total more than $3 billion.
This once-unexpected but now all-too-real LDP cost packs some very potent realities for steadfast Freedom to Farm supporters. The first centres on today's historically low loan rates, which, despite their very low levels, will be used by farmers to LDP grain more massively than ever envisioned by farm bill writers. The clear implication to this widespread usage is loan rates are still too high to deter farmers from planting already abundant crops.
As such, farmers will take 1999 planting signals from the loan price, not Freedom to Farm's ballyhooed market price mechanism; shave input costs (which will slam ag stocks even harder); plant fencerow-to-fencerow; and, given good weather, add to the already-burdensome stocks of corn, soybeans and wheat. Which, in turn, will keep the lid on 1999 grain prices or force them even lower.
"I think that's a virtual certainty under this program and these market conditions," says Otto Doering, an ag policy analyst at Purdue University. Key members of Congress arrived at the same bleak conclusion last week during initial farm crisis talks.
And what does that mean? Either loan rates must be lowered for Freedom to Farm to force farmers to switch crops or voluntarily idle land, or Congress will write even bigger cheques to floundering farmers.
The best guess is Congress will add $1 billion or more to the
early
transition payments or disaster payments to paper over this farm
bill's
flaws, because lowering loan rates would force them to admit
Freedom to
Farm was built on the same soft sand Wall Street recently sank
in, and not
the solid, productive black dirt farmers will never, never
voluntarily
idle.
Alan Guebert writes from the U.S. Corn Belt
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OFA vision report creates division
BY BERNARD TOBIN
The winds of change are blowing at the good ship OFA, but many directors feel the farm lobby could stray off course if it adopts a proposed plan to restructure the organization.The OFA has been wrestling with the restructuring question for some time. Its board of directors, which is currently made up of 124 regional, commodity and affiliated organization representatives, has been criticized for its sheer size, and the costs associated with maintaining such a large group.
Later this month, directors will begin debating the finer points of a proposal to radically overhaul OFA's current structure. In August, directors got their first look at a report tabled by the organization's vision team, which was asked to study the structure of farm organizations throughout Canada and other countries and recommend the best administrative fit for a more efficient OFA.
The vision team proposed that the current OFA board be broken into two administrative bodies: a 20-member board of directors and a 124-member general council that would serve as an advisory body to OFA and make recommendations to the board of directors.
Fourteen directors would be elected from seven regions of the province that would be determined by membership numbers. Each director would represent a geographic area comprising about 3,000 OFA members.
Five directors would represent commodity groups and different commodity sectors - for example, grains and oilseeds, red meats, and supply managed commodities.
The final seat on the revamped board would be occupied by the president, who would be elected by delegates at the annual convention. Two vice-presidents would then be elected by members of the board.
Both directors and the president would be elected for terms ranging from one to three years and would be permitted to sit on the board for a maximum of six consecutive years.
Vision team member Murray Porteous, Norfolk county, said the terms were proposed to give elected directors time to work toward longer-term goals rather than having to worry about being re-elected every year. "Quite often, the second and third year, you get things done," Porteous said.
The general council would look much like the current OFA board. One hundred and twenty-four members would be elected by county federations, commodity groups and affiliated organizations. The council would elect a chairperson from within the ranks and meet on a quarterlybasis.
Directors were asked to take the report to their local organizations and discuss the pros and cons of the proposal, but many directors chose to air their views rather than wait for the September debate.
Dundas' Alvin Runnalls questioned the cost efficiency of the new administration. Vision team member Peter Connell said it was not within the team's mandate to carry out a detailed financial study, but a preliminary analysis showed the changes would cost "somewhat less."
Several directors questioned whether the federation would lose touch with the organization's grass roots. County federations would have a "tenuous" link with the board of directors, said Frontenac's Keith Walton: "The grass roots are much too far away from the board."
But Porteous argued that OFA should be formulating policy on a regional basis. "That's how government is formulating policy. On a regional basis you have more clout."
Leeds county's Ellie Renaud noted that the new structure resembles the Rural Ontario Municipal Association. "That's not a grass roots organization," she said. "The council only meets four times a year; that's not enough grass roots input."
Niagara's Mary Lou Garr wondered whether the general council would become irrelevant. She pointed out that the council would have no representation on the board of directors, and questioned how both groups would interact.
The Ontario Farm Women's Network's Bette Jean Crews questioned whether the new OFA would be able to deal quickly with issues. She noted that resolutions from counties could take months to get to the board of directors because they would first have to go through the general council, which would meet only every three months.
Niagara's Gary Davison said he liked the idea of a 20-member
board, but
believes more attention should be given to determining directors'
roles and
how much time they should spend on the job.
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