'How can the farmers force somebody to pay them on time?'

Saturday, February 5, 2011

by BETTER FARMING STAFF

The beef industry has changed and the old Beef Financial Protection Program rules just don’t cut it, says the bookkeeper of five beef feeder finance cooperatives.

Requiring producers to enforce the terms of the program is not realistic, says Mary Stephenson, who manages the books for feeder finance cooperatives in Bruce and Grey Counties.

The program maintains a financial protection fund that compensates producers when a provincially licensed dealer defaults on payment. The program can compensate producers for 90 per cent of their losses when a licensed dealer defaults on payment. A five cent per head deduction from the sale of all cattle in the province finances the fund. 

To qualify for compensation, producers must not extend credit to a dealer. That means a producer must report a dealer if no payment is made within a certain number of days, depending on how the payment is issued. Otherwise, if the dealer defaults, a producer’s claim to compensation from the financial protection fund may be refused.
 
Stephenson says if a producer reports a dealer for paying late but ships another load of cattle through the dealer, “that negates that claim because they say we’re extending credit.” Producers ship again because “there’s a limited number” of plants that take cattle, she says. “How can the farmers force somebody to pay them on time?”

The beef feeder finance cooperatives, with a combined membership of 300 producers, want Ontario’s Livestock Financial Protection Board to take action. The board is responsible for the program.

“All we’re asking them to do is make the dealers and the packers follow the rules,” Stephenson says, noting she wrote a letter outlining the cooperatives’ concerns in September to the program’s manager, Jim Wideman. Wideman is also the board’s secretary and administrator.

A response, received in October, expressed concern “producers were letting the packers get away with it,” she says. Stephenson wrote another letter to the board last week and has copied her first letter to local MPPs, including provincial Agriculture Minister Carol Mitchell.

Late payments cause a “vicious cycle,” Stephenson says. “If we’re not getting paid four, six, now up to 10 weeks for cattle, it’s putting a lot of the producers in a bad spot but also the coops because these guys are wanting to borrow money again but they can’t until their other loans are cleared.”

Beef feeder finance cooperatives provide their members with loans of up to $250,000 for acquiring home-produced calves or for purchased feeder cattle. Loans must be repaid within a year.
 
Stephenson says the problem mostly affects veal producers but the 2010 failure of the Central Ontario Cattle Company reflects the risks to other producers as well.

“They were notoriously slow in paying,” she says, noting Central Ontario did not owe money to members of the Grey and Bruce cooperatives.

The Elmira livestock dealer lost its license in August 2010. Susan Murray, a spokesperson with the Ontario Ministry of Agriculture, Food and Rural Affairs, says in a Feb. 4 email the license was suspended because the financial protection program had received non-payment claims against the company and Central Ontario had told the program it could not pay.

The financial protection program received 27 claims concerning the company, of which 13 were from producers. The dollar value of the claims received was more than $2 million and as of January 26, the board had approved a little more than $400,000 of the claims. Some decisions are still pending.
 
Producers aren't telling the Ontario Cattlemen’s Association head office that the financial protection program should be reformed, says assistant manager Paul Stiles. A resolution to the annual general meeting later in February recommends that efforts be made to make producers more aware of the rules.

Stiles says "educated people" he has spoken to indicate that if the financial protection system pays out more easily, the five cent a head premium per head will go up. If the rules on paying producers are made stricter, there will be fewer licensed dealers.

"The unintended consequences could be lower prices for cattle and higher premiums," he says. BF