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92 DECEMBER 13, 2012 | WWW.PRODUCER.COM | THE WESTERN PRODUCER AGFINANCE CDN. BOND RATE: 1.2854% 1.10% 11/5 11/9 11/19 11/26 12/3 12/10 AGFINANCE EDITOR: D’ARCE MCMILLAN | Ph: 306-665-3519 F: 306-934-2401 | E-MAIL: DARCE.MCMILLAN@PRODUCER.COM | TWITTER: @DARCEMCMILLAN A think-tank report claims Canada’s food industry is hampered by outdated federal food policies and suggests phasing out supply management and farm income programs. | FILE PHOTO FOOD POLICY | BUSINESS ORIENTED Food industry growth hampered New food policy needed | Conference Board of Canada says changes needed for increased trade BY BARRY WILSON OTTAWA BUREAU The Conference Board of Canada says “the sky is the limit” for Canada’s food industry because of growing world demand, but only if major policy reforms are made. Reforms include a move away from government support in the farm and food sectors and toward a more market driven sector, including phasing out supply management. “There is a potential to move business risk management away from government interventions and toward companies, where it currently resides in the processing and retailing subsectors,” said the business-oriented think-tank’s report on the viability of Canada’s food economy, which was published last week. “A new business and innovation model … will be needed to capture additional value and capitalization. Enhanced viability resides in investments.” The report from the research organization, done under the auspices of its recently created Centre for Food in Canada, joins a growing body of business-oriented arguments that agriculture and food policy is stuck in a past when the role of government A new business and innovation model … will be needed to capture additional value and capitalization. CONFERENCE BOARD REPORT was to insulate the sector from market forces and to compensate when market returns fall. Its external reviewers were from the free enterprise Winnipeg-based Frontier Centre for Public Policy and Guelph’s George Morris Centre. The report said the new model would include phasing out supply management production control and tariff protection and shifting away from AgriStability farm income support. A board report on how to move dairy, poultry and egg sectors beyond supply management will be issued soon, possibly this winter. “The process of change would likely involve transitional payments and budgetary support to supply-managed farms and away from consumer transfers,” the report said. “It would likely entail a shift away from Growing Forward’s current (business risk management) support, notably AgriStability, to a new business model.” The report didn’t analyze the effect of sharp cuts in government contributions to AgriStability and Agri- Invest that federal and provincial ministers agreed to in September and are slated to take effect April 1. However, it said a credible study on “the economic costs of the termination of supply management” is needed. It said the agriculture sector should be subjected to the “creative destruction” that faces most business sectors that either adapt to market forces or go out of business. “The scale of public support programs is such that they have a powerful influence on the organization of agricultural firms,” said report authors Michael Burt, Michael Grant, Jean-Charles Le Vallée and Erin Butler. “Current state supports are sufficient to make non-viable operators viable. Large parts of the primary sector are, in effect, insured against the vagaries of the creative destruction processes that are very much alive in the processing and retailing sectors of the industry.” The report included a favourable 1.50% 1.40% 1.30% 1.20% snapshot of the end of the Crow rate prairie grain transportation subsidy in 1995, which ended more than half a billion dollars in annual transportation help to land-locked wheat farmers. It argued that the move encouraged diversification of the farm economy at the expense of a decline in wheat. The report was also scathing in its review of Quebec’s farm income support programs that it says limit diversification, growth and risk-taking. “A transition period is needed along with financial support so farmers can adapt to changes,” the board said. “It will be difficult and painful and will require an entrepreneurial attitude (among Quebec farmers).” The report supported its claim that agriculture is protected by arguing consumers and taxpayers contributed $82 billion to agriculture between 2003 and 2010 through higher prices and government support. It said these support levels and protections are under threat as Canada increasingly looks for a role in broader free trade agreements. Domestic policy and subsidy reform is needed if Canada is to succeed in more trade and businessoriented international environments, the report added. 1.030 1.020 1.010 1.000 Bank of Canada 5-yr rate Dec. 10 AG STOCKS FOR DEC. 3-7 Canadian and U.S. November job creation topped expectations. The U.S. unemployment rate fell to 7.7 percent and Canada’s fell to 7.2 percent from 7.4. For the week, the TSX dipped 0.65 percent, the Dow rose one percent, the S&P 500 was up 0.1 percent and the Nasdaq fell 1.1 percent. Cdn. exchanges in $Cdn. U.S. exchanges in $U.S. GRAIN TRADERS NAME EXCH CLOSE LAST WK ADM NY 27.18 26.70 Alliance Grain TSX 11.26 11.35 Bunge Ltd. NY 72.89 73.16 ConAgra Foods NY 29.75 29.86 Legumex Walker TSX 5.78 5.93 Viterra Inc. TSX 16.20 15.55 W.I.T. OTC 13.15 13.25 PRAIRIE PORTFOLIO NAME EXCH CLOSE LAST WK Assiniboia FLP OTC 50.545 50.545 Ceapro Inc. TSXV 0.050 0.050 Cervus Equip. TSX 18.28 18.36 Ridley Canada TSX 9.14 9.59 Rocky Mtn D’ship TSX 11.60 11.13 FOOD PROCESSORS NAME EXCH CLOSE LAST WK BioExx TSX 0.080 0.085 Hormel Foods NY 31.03 31.01 Maple Leaf TSX 11.14 11.00 Premium Brands TSX 17.50 17.60 Smithfield NY 22.93 22.37 Sun-Rype TSX 6.00 5.76 Tyson Foods NY 19.63 19.17 FARM EQUIPMENT MFG. NAME EXCH CLOSE LAST WK AGCO Corp. NY 46.60 46.15 Buhler Ind. TSX 5.57 5.55 Caterpillar Inc. NY 86.99 85.24 CNH Global NY 48.00 47.61 Deere and Co. NY 85.43 84.05 Vicwest Fund TSX 12.53 12.00 FARM INPUT SUPPLIERS NAME EXCH CLOSE LAST WK Agrium TSX 98.74 101.44 BASF OTC 90.60 89.89 Bayer Ag OTC 92.77 90.60 Dow Chemical NY 30.30 30.19 Dupont NY 43.18 43.14 BioSyent Inc. TSXV 0.91 0.93 Monsanto NY 90.69 91.59 Mosaic NY 53.60 54.06 PotashCorp TSX 39.04 38.43 Syngenta ADR 80.23 79.97 TRANSPORTATION CDN. DOLLAR: $1.0119 0.990 11/5 11/9 11/19 11/26 12/3 12/10 NAME EXCH CLOSE LAST WK CN Rail TSX 90.67 89.34 CPR TSX 97.70 92.70 Toronto Stock Exchange is TSX. Canadian Venture Exchange is TSX Venture or TSXV. NAS: Nasdaq Stock Exchange. NY: New York Stock Exchange. ADR: New York/American Depository Receipt. OTC: Over the counter. List courtesy of Ian Morrison, financial advisor with Raymond James Ltd. in Calgary. Member of CIPF. Equity prices are from Thomson Reuters and OTC prices from Union Securities Ltd, Assiniboia Farmland LP. Sources are believed to be reliable, but accuracy cannot be guaranteed. Within the last year, Raymond James provided paid advice regarding securities of Cervus Equip. Contact Morrison at 877-264-0333. U.S. farm bill may see cut in budget U.S. lawmakers are battling out disputes over a new farm bill. Cuts in crop subsidies and reductions in food stamps are major stumbling points. Farm spending cuts of $23 billion to $35 billion have been floated. A new farm bill would now likely be absorbed into an overall budgetcutting designed to avert the looming “fiscal cliff.”
MANAGING THE FARM ANDREW RAPHAEL Farmers are often advised to add value to the livestock and crops they produce, which can mean looking at value-added food processing. It can be a profitable strategic move, but many issues must be considered when producing prepared food. As we’ve seen with XL Foods, food safety is one of the most critical. However, all the costs related to small-scale food processing mean investing in food safety can be a challenge, particularly when the money could be used to adhere to new changes in federal packaging regulations, improve efficiencies, strengthen sales margins and increase market share. Food safety should always be a priority. It’s the right thing to do. However, the reality is that consumers are often not aware of this investment and therefore it’s not always top of mind for food processors that may have many competing challenges requiring investment of scarce resources. The federal government has established programs under the Canadian Integrated Food Safety Initiative to help national organizations. However, these programs do not directly help processors buy the equipment they need, train staff or get certified against customer requirements. Provincial programs vary greatly across the country in terms of scope and eligibility criteria. They are also AGFINANCE THE WESTERN PRODUCER | WWW.PRODUCER.COM | DECEMBER 13 , 2012 FOOD SAFETY | INDUSTRY INCENTIVE Time to introduce tax credit to upgrade food safety Tax credit would encourage processors to invest in food safety FINANCE NOTES RIDLEY EXPANDS Feed maker Ridley Inc. of Winnipeg has bought Stockade Brands Inc., a Kansas maker of mineral blocks, loose minerals and dried molasses for livestock. The deal was handled through Ridley Block Operations, a division of Ridley. Established in 1946, Stockade operates from a single production facility in Pittsburg, Kansas, centrally located within one of the most dense cowcalf areas in the United States, Ridley said in a news release. The purchase price was not released. BASF BUYS UNDERWOOD BASF has completed its purchase of Becker Underwood, a maker of biological plant health products including inoculants and seed treatments. The deal, announced in September, is worth $1.02 billion. Becker Underwood has Canadian connections. In 2000, it bought MicroBio Group, which owned Saskatoon inoculant FILE PHOTO administratively cumbersome for small businesses and offer minimal assistance. Government and businesses need to work more closely to enact practical food safety regulatory oversight matched by industry investment in the infrastructure, equipment and technology required to meet the rising expectations of customers, regulators and consumers. Implementing a time-limited federal food safety tax credit would provide a simple, uniform, national financial incentive for food processors of all sizes, in all commodity sectors and in all regions. A food safety tax credit could adopt the best aspects of the current Scientific Research and Experimental Development tax credit (SR&ED), allowing eligible companies to earn a credit of 35 percent on the first $3 million of qualified expenditures for food safety investments and 20 percent on any excess amount. A food processor with a taxable income in the immediately preceding year that does not exceed the business limit ($500,000 in taxable income) would receive a portion of the investment tax credits (ITCs) earned as a refund, after applying these tax credits against taxes payable. As with SR&ED, unused tax credits maker MicroBio RhizoGen Corp. Becker Underwood has 10 production sites around the world and employs 479 people. BASF’s crop protection division will create a new business unit called Functional Crop Care, which will incorporate BASF’s activities in seed treatment, biological crop protection, plant health and water resource management with those of Becker Underwood. Becker Underwood’s animal nutrition business will go into BASF’s nutrition and health division. CWB SHIPS CANOLA OVERSEAS WINNIPEG (Reuters) — CWB said it has made its first overseas shipment of canola, marking its first diversification into crops outside of wheat and barley. CWB dispatched 42,000 tonnes of canola to Japanese customers via Prince Rupert, B.C. It said it bought the canola from grain companies and farmers on the cash market, as well as through its pooling program for farmers. could be carried back for three years and forward for up to 20 years. Tax credits are an effective way to influence the economic choices of businesses and individuals in support of government policy objectives. Tax credits reduce the cost of investment without limiting the choice of technology or services. It also applies regardless of which jurisdiction has regulatory responsibility for the plant and doesn’t have the limiting and bureaucratic features of grant programs. The cost in foregone taxes is difficult to determine because the program will be demand driven. However, using the costs of the SR&ED program as a guide, 2004 government data shows that 19,600 corporations took advantage of SR&ED tax credits at a total cost of $3.4 billion. This suggests an average cost of $170,000 for each participating firm. Based on this, the annual cost would be $170 million if 2,000 firms took advantage of the program and received 50 percent of the average SR&ED benefit. This proposed food safety initiative could also help reduce government’s health care costs associated with food-borne illnesses while assisting the Canadian Food Inspection Agency to streamline its operations. Inspection will succeed only if matched by more investment by industry to prevent problems rather than react to them after the fact. Canadian food processors of all sizes are under enormous financial pressure, urgently trying to comply with government regulations and 93 reduce operating costs to survive in the short-term while modernizing and scaling up operations to grow over the long term. At this time, a food safety tax credit would provide a simple, uniform incentive to help companies keep food safety a high priority as critical business decisions are made. Trust is like a mirror. Once it’s broken, you can never look at it the same again. A food safety tax credit would help reinforce the sacred trust between the Canadian agri-food chain and consumers, a trust that processors need to think about every day. Andrew Raphael is director of food and ag manufacturing with MNP. Contact Raphael at andrew.raphael@mnp.ca We’ve built a better midge trap. AC ® AC Shaw VB MIDGE TOLERANT WHEAT ® Shaw VB MIDGE TOLERANT WHEAT Best midge tolerance Highest yielding CWRS in Sask Seed Guide Get AC ® Shaw VB today, only from SeCan. Developed by Agriculture & Agri-Food Canada, Winnipeg. ‘AC’ is an official mark used under license from Agriculture & Agri-Food Canada. Genes that fit your farm® is a registered trademark of SeCan. *Based on the economic threshold of one midge per 4 to 5 wheat heads at flowering = estimated 15% yield loss if not controlled. Higher midge levels can lead to greater losses. 15% X 40 bu/acre X $6.00/bu wheat = $36.00. Genes that fit your farm. ® 866-665-7333 www.secan.com
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NEWS THE WESTERN PRODUCER | WWW.PRO
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POLY & FIBREGLASS TANKS ��
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CHRISTMAS TRADITION | HOLY EVE MEAL
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PASTIMES | COLLECTING BY CHRISTALEE
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What I really hate is when people d
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David Suzuki talks to a farmer abou
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6060 RR REALIZE YOUR YIELD POTENTIA
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