Beef: Beef producers' claims rejected in the wake of All County's collapse

Tuesday, February 16, 2010

With the Livestock Financial Protection Board rejecting 15 of 16 claims for compensation, some producers are asking for a more liberal interpretation of the rules

by MARY BAXTER

Last year, several Ontario beef producers learned the hard way that they must follow the rules if they want the security of a provincial financial protection program. But do these rules need to be changed to provide coverage for new beef marketing ventures?

Producers stung by the 2009 failure of All County Feed and Grain Ltd. are raising the question after the Ontario Beef Financial Protection Program refused their claims for compensation.

All County Feed and Grain and its marketing arm, Grey-Bruce Beef Marketing Ltd., planned to sell locally produced beef to Ontario outlets. It promised producers big prices for cattle raised free of antibiotics and growth hormones.

But after All County's collapse in January 2009, producers discovered the only big item on offer was debt. Fifteen of their claims totalled more than $560,000 and ranged from $5,688 to $129,960. The Livestock Financial Protection Board, which adjudicated the claims, denied 15 of 16 claims submitted. Details of the sixteenth claim, still before the Board, have not yet been made public.

Three reasons became a common theme in the Board's decisions. Producers had extended the payment period with All County beyond the two business days of sale permitted under the program (producers had agreed to payment within 30 days). They did not file a claim within 30 days of when payment was due. And they did not immediately notify the program's manager of All County's failure to pay.

That most of the claimants agreed to a 30-day payment term is what makes the All County situation a first for the Board, says its chair, Robert Brander.

Brander says the idea of deferring payment is not appealing because it puts the $6.5 million fund at more risk. Brian and Angela Tulloch, who farm near Meaford and claim All County owes them $39,120, say they understand the board's reasoning.

Yet, Brian is disappointed. The beef industry faces a crisis almost as deep as the hog industry, he observes. His family's farm lost about $100,000 during the BSE crisis. The promotion of the Grey-Bruce beef scheme renewed, and then dashed, hope for the beef industry in his area.

James and Joan McKinlay argue that the board should extend payment periods for value chain ventures. Joan says both industry and government have encouraged producers to form value chains, yet "once you get into one, there's no financial protection."

The couple farm near Ravenna in Grey County and claim All County owes them $18,028 They have also produced cattle for Kerr Farms, a niche market venture that extended its payment period to producers and faltered on payments in 2008. After producers complained to the Ontario Beef Cattle Financial Protection Program, the company changed its payment period to meet the program's requirements and negotiated an agreement with its debtor cattlemen. Joan McKinlay says that, so far, the venture is working for them although they are approaching it with "our eyes open."

McKinlay and Tulloch suggest higher premiums could be charged for ventures that pose a greater risk to the fund. Five cents per head of every sale help fund the program; licensed dealers also contribute.

Value chains are a different type of system, explains McKinlay, who has tried pitching the idea to the Ontario Cattlemen's Association and the Ontario Ministry of Agriculture, Food and Rural Affairs. So far, there are no takers.

Brander, who farms cattle and cash crops in Caledon and is also the president of the Ontario Cattle Feeders' Association, says he doesn't think legislative change is the way to go. Extending credit is "how you get into problems." With the industry's current struggles, there's a possibility of the All County situation recurring. "That's why we have to keep stringent controls that people get paid and not to extend credit."

In the meantime, All County's former owners, Darryl Williams and Mark Kuglin, each face 13 counts of fraud of more than $5,000. They were expected to appear in an Owen Sound court on Jan. 7 to set a trial date. BF