Beef: Loopholes need to be fixed in beef marketing scheme

Thursday, April 2, 2009

More protection is needed both for producers and innovators, say beef producers who were left out of pocket after All County Feed & Grain's local beef marketing scheme went under

by MARY BAXTER & DON STONEMAN

Some Grey and Bruce County beef producers' recent woes with a local beef marketing scheme reveal loopholes in the system intended to safeguard producers, says a Ravenna-area beef farmer.

Joan McKinlay and her husband James were among 10-15 producers who found themselves out of pocket after failing to receive full payment for cattle sold to All County Feed & Grain Ltd. and its marketing program, called Grey-Bruce Beef Marketing Ltd.

All County offered premium prices for cattle raised on "an all-natural diet," free of antibiotics and growth hormones. On Sept. 22, the province revoked its cattle-dealing licence for failing to pay producers. By January, All County had permanently closed the doors of its Markdale-area location, where it sold cattle and horse feeds and supplements.  

McKinlay says that there's a growing demand for producers to become involved in value chains. But, for these to work, innovators need more time to pay bills than is allowed under the beef financial protection program. In Grey-Bruce Beef's case, the payment period was extended to 30 days, which meant producers were excluded from the program's protection.

Moreover, while All County's licence was suspended in September, it wasn't until December that cattle producers received notice in print from the Ontario Cattlemen's Association.

People didn't know there were problems, she says. "If there had been more red flags out, they might have been saved from getting involved in the program."

With interest in value chains growing, these loopholes in the system need to be addressed, she maintains. Value-chain innovators need flexibility to help cash flow but producers need assurance of payment. "What is out there to protect the producer and the innovators that start the program, too?"

Larry Martin, senior research fellow at the George Morris Centre in Guelph, speculates that undercapitalization, a common problem with start-up businesses, might have been behind All County's decision to extend the producer payment period.

Should rules be changed to offer producers more protection in value-chains? "That would be my first hypothesis," he says, stressing that he doesn't know enough about the Grey-Bruce Beef situation to generalize.

"If you are going to have a policy encouraging value chains, then maybe we should change our rules a little bit to encourage value chains."

The Grey-Bruce Beef producer losses range from $15,000 to more than $100,000.
Gord Hardy, president of the Ontario Cattlemen's Association, says that the requirement for prompt payment under the Financial Protection Program "was put there for a reason."
"We always said, 'Make sure you know who you are dealing with.'"

The principals in All County Feeds were known in the area. Darryl Williams briefly leased the general store in Walters Falls in Grey County and Mark Kuglin sold livestock feed.

The Ontario Beef Cattle Financial Protection Program was put into place, along with dealer licensing, after a drover in southwestern Ontario went under in the early 1980s. Several stock yards got into financial difficulties because of their losses and Hardy points out that some producers never recovered. The drover was convicted on fraud charges and sentenced to time in jail.

The Ontario Provincial Police are investigating All County and the Ontario Ministry of Agriculture, Food and Rural Affairs is also looking into the matter.

McKinlay says that producers filing claims to the Livestock Financial Protection Board, which oversees the Ontario Beef Cattle Financial Protection Program, sparked ministry involvement. BF