Fee for Ontario Beef Cattle Financial Protection Plan is slated for an increase

Thursday, November 5, 2015

by JIM ALGIE

Record-high cattle prices and rising administrative costs require the doubling of a current five-cents-per-head fee for the Ontario Beef Cattle Financial Protection Plan, a proposal posted to the provincial government’s regulatory registry says.

“The request initially came from Beef Farmers of Ontario,” livestock protection program manager Jim Wideman said in an interview, Friday. “Their concern was with the doubling of the price of cattle over the last five years that there could be a large claim,” he said.

“Basically, it’s driven by the value of cattle,” Wideman said of the proposal.

It would be the first increase in the fee charged for buyer protection on cattle sales in the province in 16 years. It basically returns the fee to levels in place during the protection plan’s third year of operation, 1984, the regulatory posting says.

“If you look back to the program’s history there never has been an increase to that per head levy,” Beef Farmers of Ontario policy manager Richard Horne said in an interview, Friday. A change now reflects the high cost of cattle these days, he said.

“It would have to be a significant wreck to draw the program down to such an extent where it couldn’t cover the payments; we’re talking about a very small level of risk,” he said. “At the same time, just given the amount of money that’s being dealt per transaction, we felt it was time to increase it just modestly,” Horne said.

Fees collected under the Farm Products Payments Act support the fund which compensates beef cattle sellers in the event of purchasers’ payment defaults. Introduced in 1982 with a $25,000 provincial start-up grant following the bankruptcy of a major southwestern Ontario livestock dealer, the fund has experienced wide variations in claims during 25 years of operation, judging by data published in the Beef Farmers of Ontario’s 2015 annual report.

Claims paid, less recoveries, were highest in 2000/01 with a total payout of $2 million. Fund records also indicate six years when recoveries exceeded payouts.

The current fund balance at $7.36 million is higher than ever. However, an actuarial review in September warned of gradual depletion of the fund over five years without a fee increase, the regulation registry notice says.

The fee proposal was posted on the registry in late October and is open for public comment until Dec. 7, 2015.

The Ontario Livestock Financial Protection Board administers the fund as a trustee. “Key stakeholder groups,” including Beef Farmers of Ontario, the Ontario Livestock Auction Markets Association and the Ontario Livestock Dealer’s Association “are supportive of the increase,” the regulatory notice says.

“The fee was requested because of industry concerns with regard to the impact of record high cattle prices and increasing administrative costs of the fund,” the notice says.

The five cents per head fee charged in recent years is a quarter of the 20 cent check-off used to help establish the fund in 1982 and during its first two years of operation. Administrative expenses have gradually grown over the past 25 years from $29,468 in 1990/91 to $179,348 in 2013/14, Beef Farmers annual report data show.

In addition to the cost of claims work, administrative charges against the fund include the annual licensing and regulation of 200 cattle dealers in Ontario, Wideman said. As well, the fund has in recent years picked up some government costs associated with fund operations, he said. BF