Index
Implications of Ontario's APF IA
In an exchange of letters in November between Minister Peters and
Minister Vanclief, the outline of Ontario's Agricultural Policy Framework Implementation Agreement
(IA) began to take shape. The Ontario Agricultural Commodity Council (OACC) had previously developed
a list of "preconditions" to be achieved in negotiations between the province and AAFC. Among other
issues, OACC asked for:
One key issue is that the new elements introduced in an Ontario Implementation
Agreement, such as those listed above, will have to be adopted as amendments
in all other provincial Implementation Agreements previously signed. In order
for these new elements to be incorporated, 7 provinces representing 50% of
production must agree to the inclusion of these new elements in their Implementation
Agreements. What happens if this criteria is not achieved? If this level of
acceptance is not achieved, what does Ontario's Implementation Agreement actually
look like?
The wind-down phase for the NISA program begins when Implementation Agreements have been signed with a minimum of 7 provinces representing 50% of production. The balances in NISA Fund 1 (producer contributions) and Fund 2 (matching government deposits and interest earned) will be pegged as of March 31, 2004. There is a one-time opportunity to move Fund 1 dollars into the new CAIS Program to cover the producer deposit requirement under the new program. Account balances in Fund 1 and Fund 2 can be withdrawn in full or over a 5-year period on a dollar-for-dollar basis with a 20% minimum annual withdrawl required. The first withdrawl must be made by March 31,2005 and all accounts closed by March 31, 2009. Withdrawls from Fund 2 remain as investment income (not farm income) and will not be included as income under the CAIS Program nor reduce program payments. As a further note, Transition Year 2 payments (i.e., first Federal cheque for 3.5% of 5-year average Eligible Net Sales received in December 2003, second Federal cheque expected early in February) will not be included as income in calculation for the CAIS Program.
U.S. Bioterrorism Rules Affect Cross-Border Food and Feed Shipments
On December 12, 2003, two new regulations designed to bolster the safety and security of the U.S.'s food supply came into effect. The new regulations implement provisions of the U.S. Public Health Security and Bioterrorism Preparedness and Response Act of 2002. This Act provides the U.S. Food and Drug Administration (PDA) new authority to protect that nation's food supply against actual, or perceived, terrorist acts and other food-related emergencies. Under the new regulations, U.S. food and feed importers must provide the PDA with advance notice of human and animal food shipments imported or offered for import on or after December 12, 2003. The PDA says that foreknowledge of when specific shipments will arrive at U.S. ports of entry and what those shipments contain permit the agency to target inspections and ensure the safety of imported foods. The PDA expects to receive about 25,000 notifications concerning incoming shipments each day!
The second regulation required U.S. and foreign food facilities that manufacture, process, pack or hold food for human or animal consumption in the United States to register with the agency by December 12, 2003. As a result, the PDA will have for the first time a complete roster of foreign and domestic food facilities. These requirements will enable food processors and other facilities to be quickly identified and located in the event of deliberate or accidental contamination of food. The PDA expects that eventually 420,000 facilities will register under these requirements.
These regulations impact shipments of Ontario wheat, soybeans, corn, corn gluten feed, gluten meal, DDGs, corn sweeteners, corn oil, and any number of other foods and food ingredients. Gone are the days, for example, when a distiller with wet distillers grains to move in a hurry could simply ship into Michigan with little impediment. Now, documentation requirements alone will take long enough that the wet DDGs could rot.
Canadian Policy Research Institute Announced
On December 5, 2003, Agriculture and Agri-Food Canada announced the formation of the Canadian Agricultural Policy Research Institute, an arm's length organization to advise government and participate as an independent voice in policy debates. Gaetan Lussier, former president of Weston Bakeries, Quebec and current chair of the federal government's external advisory committee on smart regulation, chairs the Institute's Board of Directors. Combining a cross-section of academic and industry experts, the Institute will address multiple areas of interest including the agricultural economy, business management, and science and technology. The U.S.-based Foreign Agricultural Policy Research Institute (FAPRI), a Congressionally (USDA) sponsored and supported arms-length agricultural policy research facility located at the land-grant University of Missouri, would seem to have served as a model. It would also seem that the Canadian Institute is being positioned as the potential "independent 3rd party" for annual review of the APF Indeed, as Minister Vanclief stated "We are on the right track with the Agricultural Policy Framework (APF), but to achieve our full potential under this new direction, we need to continue to analyze the big picture, to look at the latest global trends and to consider the many interconnected interests inside our diverse industry." For example, in the Ontario Implementation Agreement, Minister Vanclief proposes that the annual review of the APF be conducted by an independent review panel and industry working group. This working group would be composed of 8 members, including up to 6 experts, selected "based on expertise, not representation, with an emphasis on the ability to provide independent, objective advice, and an ability to work well with industry."
Europe Calis Biotech Corn Safe
In a significant move, the European Food Safety Authority commented December 4 that Monsanto's Roundup Ready corn "is as safe as conventional corn and unlikely to have any negative health effects." This determination should clear the way for the European Commission to draft proposals for allowing the sale of the herbicide-tolerant corn for food or feed, but perhaps not cultivation. The proposal would then go to EU governments for approval. There is, however, the view that the Authority is merely posturing to show movement on the lifting of the 5-year-old moratorium on approving biotech products because of pressure from the U.S. which has commenced legal action against the EU at the WTO.
Also of interest, in a statement which very clearly shows the real reason for 'green group' opposition to GMOs, a prominent environmental group GeneWatch UK said, "public health, not the profits of the biotech industry, should be given the benefit of the doubt" and lobbied that the Authority should take a "precautionary approach" regarding the declaration of Roundup Ready corn as safe. In other words, regardless of actual scientific evidence, reject in the interest of the anti-corporate agenda of many environmental groups. Perhaps a more significant outcome to us of the European Food Safety Authority's comment is the potential for loosening of restrictions against Roundup Ready corn imposed by some major processors in Ontario who ship products into Europe.
On December 4, the Canadian dollar moved above the 77-cent mark (against the U.S. dollar) for the first time since November 1993. Our currency has gained more than 20% against the U.S. dollar so far in 2003, an enormous surge higher driven by the persistently higher interest rates on this side of the border. The gap between higher Canadian versus lower U.S. interest rates has been a very consistent 1.5% or more for some time and has been attracting investors in financial markets. A stronger loonie means that our exports are more expensive to foreign buyers; while their products are cheaper to import into Ontario. Cheaper U.S. corn coming into Ontario has been one result. Here is another.
Hog numbers have been expanding across Canada, and Ontario is no exception. The number of slaughter hogs shipped each week to the U.S. from Ontario has grown to about 20,000 versus only about 3,000 per week last year. Pork News" says that inventories have continued to run much above previous year levels, but processing capacity in the province has been reduced with the closure of West Perth Packers and other small packing plants. The price for hogs shipped to Quebec from Ontario has also dropped. However, thanks to the strength of the loonie, the price paid for Ontario slaughter hogs shipped to the U.S. has dropped sharply relative to where it would have been without the 20% escalation in the exchange rate. Little wonder returns in the pork sector have been under pressure for some time.
The stronger loonie has also had an impact on the number of pigs shipped south for feeding. As Dr. Chris Hurt, Purdue University Extension marketing specialist, states, "the incentive to have sows in Canada and ship pigs to the U.S. for finishing was enhanced by the increasing value of the U.S. dollar in the 1997 to 2002 time period. However, the tide has turned in the past year as the U.S. dollar has dropped about 19% relative to the Canadian dollar. While this will not immediately divert the flow of segregated early weaning pigs since most are on long-term contracts, it greatly reduces the incentive to sign new or to renew old contracts."
Bottom line is that either the pigs that would have been shipped south for fattening will now be fed in Ontario and then head south for slaughter at lower prices because of the stronger loonie and reduced packing capacity here; or the number of pigs born in Ontario will be reduced over time. Economics would suggest that the hog inventory in Ontario will be under pressure to shrink because of lower market returns. That suggests reduced corn feed demand in the future thanks to the impact of the stronger loonie on the hog sector.
Consumers' Association's Position on GM Labeling
The Consumers' Association's of Canada recently released results of a poll they commissioned that shows 91% of Canadians want GM labeling. These results have caused the Association to reconsider its previous position supporting voluntary labeling. The Association now says Canadians want mandatory labeling of GM foods and will ask the federal government to introduce legislation making labeling mandatory.
2001 Census of Agriculture Results Disturbing
Statistics Canada data from the 2001 Census of Agriculture released December 2 detail a disturbing snapshot of Canadian agriculture that farmers will recognize all too well. Of the 346,200 farm operators, average total family income in 2000 of $64,160 was about $2,000 less than average family income in the general population of $66,263. Only 5 years earlier, the 1995 Census showed average total family income of both farmers and the general population about equal at $59,515 and $59,614 respectively.
The average farm family has been falling behind the average Canadian family even though they are working harder. StatsCan said Canada's farmers are relying ever more heavily on off-farm income to keep the farm afloat. For example, in 1981, net farm income was 31% of total family income, fell to 19% by 1995, and dropped to 18% by 2000. On average, less than one dollar in five of Canadian farm family income is now generated by the farm.
Retro-Canada Extends logen Investment
On December 1, Petro-Canada extended its investment in logen's EcoEthanol program after logen successfully met technical and economic milestones at its demonstration cellulose-to-
ethanol plant in Ottawa. A collaborator in the project since 1997, Petro-Canada has invested $15.8 million in the development of logen's technology to date. A second major oil company, Shell Global Solutions division of Royal Dutch Shell (Netherlands) is also an investor with a $46 million stake committed to date. The Canadian government has invested approximately $11.6 million to date. Press releases state that the project is in the final phase of full commercialization of the EcoEthanol technology, but no timeline or schedule for completion was given. EcoEthanol, made from renewable feedstocks such as corn stalks and cereal stubble, is claimed by logen to reduce carbon dioxide emissions by greater than 90% compared to gasoline while conventional ethanol reduces these emissions by 40%.
Cypress Agri Energy Inc Wheat Ethanol Project
A group in southwestern Saskatchewan announced plans to build a 225 million litre (60 million gallon) low-grade wheat ethanol facility. The group has raised $2 million of the $66 million capital investment required, but the project depends on obtaining funding from the the Federal government's Ethanol Expansion Program. If successful in obtaining federal grants from the EEP, the group says construction could commence in the spring of 2004.
Projects for three 80 million litre ethanol facilities to be built in Saskatchewan by Broe Company of Denver, Colorado in partnership with the provincial government appear to have fallen through due to equity financing difficulties. This setback caused the Saskatchewan government to delay the scheduled introduction of its planned ethanol mandate.
Manitoba Introduces Ethanol Mandate Legislation
On Friday, November 21, Manitoba introduced its "Biofuels Act" legislation that:
In making the announcement, Tim Sale, Manitoba Minister of Energy, Science & Technology very clearly pointed to ethanol export market opportunities in the U.S. and Ontario. He stated, "There's also an excess demand in Ontario, a fairly significant demand that they can't meet. They're actually importing American ethanol into Ontario right now. We'd rather sell them Canadian ethanol cheaper frankly."
In the announcement, ethanol was touted as reducing greenhouse gas emissions, protecting the environment, and acts as a stimulus to rural economic development since Manitoba claims to be one of the lowest cost producers of grain-based ethanol in all of North America.
Re-evaluation of AtrazineAs outlined in Regulatory Directive DIR2001-03, PMRA Re-evaluation Program, the Pest Management Regulatory Agency (PMRA) is re-evaluating older active ingredients that were registered prior to 1995. Products containing the herbicide atrazine were first registered in 1960. Atrazine is a broad spectrum triazine herbicide registered in Canada for the control of broadleaf and grassy weeds in corn. A re-evaluation of atrazine was first announced in June 1988 by AAFC. An outcome of that re-evaluation was a Label Improvement Program launched in the early 1990s that reduced application rates and deleted some uses. For corn, the use rates were reduced from 4.5 kg a.i./ha to a maximum of 1.5 kg a.i./ha. Post-emergent use on corn was restricted to application prior to corn reaching 30 cm in height. The use of atrazine to control perennial weeds (Canada thistle, quack grass and nutsedge) was also discontinued. All these measures drastically reduced the amount of atrazine usage.
In late November, the PMRA announced the findings of another re-evaluation. The PMRA carried out an assessment of available information and found it sufficient, pursuant to Section 20 of the Pest Control Products Regulations, to allow a determination of the safety to human health of atrazine and associated end-use products used in corn (all other uses for atrazine such as low-bush blueberries and atrazine-tolerant canola will be phased out). The PMRA concluded that the use of atrazine does not entail an unacceptable risk to human health pursuant to Section 20, provided that the proposed mitigation measures described in the document are implemented. A full environmental assessment is underway, but has not yet been completed. It is this environmental re-evaluation that appears to be of more concern.
Monsanto's YieldGard Pius Insect-Protected Corn
On November 25, Monsanto Canada announced that it has received full regulator clearance for YieldGard Plus corn technology in the U.S. following recent similar clearance in Canada. This is the first biotech corn technology to provide in-plant protection against both the Western and Northern corn rootworm larvae and the European corn borer.
As with other Bt technology, growers must implement an Insect Resistance Management strategy: growers must maintain a refuge of at least 20% of their corn as a structured refuge in hybrids that are of similar maturity and do not contain any Bt, the refuge must be planted within the same field or adjacent to the Bt field, and under similar agronomic conditions. Growers must also ensure that harvested grain is channeled to approved markets.
Pending regulatory import approval in Japan, DEKALB expects to have four YieldGard Plus hybrids available for 2004 planting in 2800 - 3300 CHU areas. DEKALB dealers will take orders for these hybrids, but seed will not be shipped to growers for planting until receipt of the necessary Japanese import approvals.
U.S. Energy Bill Stalls In The Senate
Late in November, after three months of intense negotiations, the U.S. Congress abandoned efforts to reconcile Senate and House versions of the proposed Energy Bill. The Bill contained the Renewable Fuel Standard (RFS) which requires 5 billion gallons of ethanol be used in gasoline by 2012. Falling 2 votes short in the Senate, the Bill stumbled on a provision to provide protection from product liability lawsuits to manufacturers of Methly Tertiary Butyl Ether (MTBE) an oxygenate additive made from petroleum. MTBE contamination of water has been found in at least 28 states and estimates of cleanup costs range upward to US$29 billion. The unique coalition of ethanol supporters and Big Oil supporting the Energy Bill grew out of a political horse-trading agreement which included the ethanol mandate and elimination of MTBE in exchange for the waiver of the oxygenate mandate and the inclusion of the product liability protection for MTBE producers. The risk to ethanol supporters now is that if the MTBE liability protection falls flat, the coalition with the petroleum industry will likely disintegrate making passage of the RFS in the Energy Bill in January or February 2004 problematic."
Canadian Canola Growers Granted Intervener
The western-based Canadian Canola Growers' Association (CCGA) has been granted intervener status in the Supreme Court appeal by Saskatchewan farmer Percy Schmeiser against a lower-court ruling concerning violations of Monsanto Roundup Ready patents. Schmeiser has lost previous cases in which he claimed he did not illegally save Roundup Ready canola seed and replant the following year, but rather that his fields (more than 90% RR when tested) were contaminated by pollen and seed trespass. The issue before the Supreme Court is not the question of saving seed for replanting, but rather the question of whether biotech-derived plant cells or genes are patentable. CCGA is concerned an outcome striking down patent protection could cause Monsanto and others to stop or slow down biotechnology development in Canada.
Distribution of Year 2 Transition Funds in Quebec
In mid-December, Quebec announced details of the distribution of it's share of Federal Year 2 Transition Program funding. The $60.5 million is Quebec's share of the second installment of the $600 million in Federal APF transition funds allocated in 2002 and 2003. La Financiere agricole du Quebec, the provincial farm finance agency, says transition payments will be made before the end of March 2004. Funds will flow to Quebec farmers as cash payments based on their average eligible net sales which is similar to the protocol for distribution of the Federal portion of Year 2 Transition payments in Ontario (which amounted to $115 million in Ontario). $11 million will flow to farms that currently participate in Quebec's Agricultural Revenue Stabilization Account (CSRA) program, while $5.5 million will flow to the small number of Quebec farmers who participate in the old NISA program (primarily in the edible horticulture sector). The balance of $44 million will flow to farmers enrolled in Quebec's primary income support program, Farm Income Stabilization Insurance (ASRA).
AAFC Announces $15 m Private Sector Risk Management
On December 10, Agriculture and Agri-Food Canada announced a $15 million initiative to "help producer organizations build custom-made business risk solutions for their members". This funding comes from the Business Risk Management component of the Agricultural Policy Framework (APF). The Private Sector Risk Management Partnerships program will connect producer organizations "with the private sector financial community to build customized risk management tools. Producer groups can apply under the initiative for funding to help them develop solid business proposals to take to private sector providers of risk management tools and services." The aim is to assist organizations in assessing the risks to be addressed, evaluate the adequacy of current programs, develop options for new risk management tools, and better prepare producer organizations to negotiate with companies interested in providing insurance and other risk management solutions. "Minister Vanclief noted that the initiative is a complement of the Canadian Agricultural Income Assistance (CAIS) program and other business risk management programs that will be funded by federal and provincial governments for the next five years under the APF" The launch of this Private Sector Risk Management Partnership initiative "follows a successful pilot initiative - a $90,000 contribution that helped the Canadian Broiler Hatching Egg Marketing Agency develop a new insurance initiative for producers in Ontario."
Europe Proceeding With Ag Support Changes
In two announcements December 10, the European Union clearly demonstrated that it is moving quickly to implement components of its proposal for providing support to agriculture as outlined in its negotiating position at stalled WTO talks. The EU's proposal essentially "de-couples" support from production by providing approximately the same amount of support to farmers but for different reasons; primarily environmental, animal welfare, rural economic stability and development reasons. In trade jargon, the EU wants to expand the definition of allowable supports within the "green box" of agricultural support programs. "Green box" programs and funding are exempt from negotiated reductions and limitations because they supposedly do not distort production or trade.
To facilitate such a change, one new regulation allows Member States to grant various types of agricultural state aid without having to seek the European Commission's prior clearance. This block exemption will speed up the implementation of new agricultural state aids. This will "facilitate national programmes aiming at the improvement of environmental, animal welfare and hygiene standards in the agricultural sector." This regulation would permit various states to provide dissimilar levels of support provided funds were given for non-production distorting reasons.
The second regulation concerns "de minimis" aid for the agriculture sector. The regulation would exempt national aid of up to EUR 3,000 per farmer over 3 years from the requirement of prior notification (ie. prior reporting and clearance). The EU's explanation of the program goes on to say "this may seem low at a first glance, but it must be born in mind that one in two farmers receives less than EUR 2,000 in direct EU payments each year, and that the average annual output per farmer is EUR 42,500 (in 2001)." "To avoid large-scale support operations, Member States granting such aid would have to respect an overall ceiling roughly equal to 0.3% of agricultural output." Essentially, what this new regulation permits is a base support level per farmer that would vary by Member State and which would be exempt from eventual WTO negotiated constraints.