Risk Management

There’s a lot at stake for livestock producers

By Jana Manolakos

In 2008, Guelph student Catherine McCorquodale – who today practices agriculture law – gave a hard-hitting speech at the Royal Agriculture Winter Fair in Toronto. It painted a brutal picture of the cost to the Canadian cattle and beef industry hit by mad cow disease.

“What do you do when in one day, you lose over $100,000 and your 15-year plan is thrown out the window?” she asked the audience, describing the impact on her family’s dairy farm in Embro, Ontario.

From diseases like mad cow to tariffs and climate change – to the impacts of the current pandemic – Canadian livestock farmers are fighting a seemingly never-ending battle to fend off risks to their operations, in an industry that had annual shipments worth $22.3B in 2019.

On the day of McCorquodale’s speech, five years had passed since a lone black Angus cow in Alberta had tested positive for bovine spongiform encephalopathy (BSE), also known as mad cow disease. This triggered an unprecedented crisis in the Canadian beef and cattle industry, which still today is engaged in a legal battle with the government. While her family struggled with the reality that their cattle business was facing ruin, further difficult news followed. Canada was almost immediately banned from exporting its cattle to over 40 countries. According to a BMO report, between 2003 and 2004, Canadian cattle producers lost $5B.

A month after mad cow disease appeared in Alberta, the federal agriculture ministry introduced a $460M beef industry compensation package, cost-shared with the provinces. The program included new slaughterhouse processes aimed at stemming the disease, along with millions of dollars invested in aggressive testing and disease tracking.

Buffering financial losses brought on by disease

Today in the Canadian pork industry, producers are watching closely for the after-effects of African swine fever (ASF), which ripped across China in 2018. They are bracing for a potential outbreak here at home, while seeing the impact on global pork prices. The loss of millions of pigs in China bumped up global pork prices, which was good news for Canada, as the world’s third-largest exporter of pork. That’s also why experts worry that an ASF outbreak could cost as much as $50B across the entire Canadian value chain.

For Canadian poultry farmers affected by avian influenza in 2014, the damage was equally as devastating to some, as the highly infectious H5N2 strain tore through more than 17 million birds. Farmers sprang into action, reporting cases to the Canadian Food Inspection Agency and initiating biosecurity measures that included cleaning and disinfection, quarantines and humane destruction of poultry. The disease, nonetheless, led to export restrictions on Canadian poultry and cost the Canadian economy $380M.

A few years later, the federal government announced funding support to develop new insurance tools to protect poultry and egg producers against the financial impact of poultry disease. This was welcome news for Martin Adema, chair of the Poultry Insurance Exchange Reciprocal of Canada, a specialty provider of insurance products for losses caused by disease. He explains, “For years, our subscribers have asked for a policy that protects them from financial losses due to avian influenza.”

Meanwhile, pork farmers in Manitoba recently launched into a two-year project to build their own risk management program. Similar to the one developed earlier by the chicken and egg famers, it would help them manage periods of financial instability and aid with the costs of cleaning and disinfection. By expanding the program to pork producers across Canada, they hope to make it more affordable for individual producers.

The project is funded through the AgriRisk Initiatives (ARI), a five-year program under the Canadian Agricultural Partnership that supports the development of new risk management tools. AgriRisk is one of two federal programs, including AgriRecover, that help reduce economic hardships of outbreaks and support efforts to manage risk. The programs were key in helping B.C.’s poultry producers with a $1.58M investment to recover from the impact of avian flu in 2015, get operations up and running and prepare against future outbreaks.

A perfect storm: The cost of COVID-19 and market volatility

Last year, Ontario beef producers, who contribute $2.8B annually to the provincial economy, were already dealing with market volatility when COVID-19 hit. The president of Beef Farmers of Ontario (BFO), Rob Lipsett explains, “A perfect storm of market and trade disruptions caused average weekly losses of $2M over the past year in the Ontario beef industry.”

His group is among many agricultural associations that have asked federal and provincial governments to boost business risk management programs. For one thing, BFO wants to see a $100M cap removed on the federal/provincial cost-shared Risk Management Program, so more farmers have financial protection against downturns in commodity market prices. The risk management program supports the Ontario beef sector, and bridges gaps with federal programs.

Disruptions caused by the pandemic became painfully apparent this past December, when Guelph-based Cargill Meat Solutions, Canada’s largest federal beef processing plant, temporarily closed because a large number of its employees fell ill. The shutdown dramatically reduced processing capacity and left barns sitting idle.

Within days, the governments of Canada and Ontario offered $5M to help the province’s beef farmers manage costs associated with the impacts of the pandemic, accessible through Agricorp, the crown organization that supports risk management programs in the sector.

Bob Lowe, president of the Canadian Cattlemen’s Association, suggests, “We must look at and support all actions that can assist our current situation. This could include increases in processing capacity at provincial packing plants and holding back cows so that we can focus slaughter on fed cattle – everything must be considered.”

Working with public health officials, beef processing plants have stepped up measures to prevent the spread of illness. They are taking temperatures of employees before the start of work each day, have added cleaning and disinfection for high-touch surfaces, their quality assurance personnel are monitoring hand washing and the use of hand sanitizers, and they have asked employees to self-monitor and to stay home if unwell.

The past year was volatile for the Canadian pork industry, as well. Swine fever in China toward the end of 2018, a ban on Canadian pork by China in 2019 and the beginning of the COVID-19 pandemic have impacted Canadian pork prices and the Canadian pork market. As processing plants sit idle, hog farmers are faced with feeding stock that typically would move to market; by some estimates, the cost of feeding can run as much as $300,000 a month for a farm with 1,600 hogs.

“Pork producers are expected to lose more than $500M due to COVID-19, losses that are expected to continue well into 2021,” warns Rick Bergman, chair of the Canadian Pork Council. This is where government programs like AgriStability come in; it’s a margin-based program designed to help producers manage large income declines.

When it comes to trade issues, Canadian dairy, egg and poultry farmers also have found themselves fighting to survive. Two recent free-trade agreements, the Comprehensive Economic and Trade Agreement with Europe (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), cut into the sector’s domestic market share. According to the Chicken Farmers of Canada, the CPTPP – which came into force last December – alone cost billions in net operating costs for poultry and egg farmers.

The losses triggered $691M in federal funding, announced in December. Roger Pelissero, chair of Egg Farmers of Canada, explains, “This investment in our sector will provide new opportunities for our farmers to reinvest in their operations and plan for the future as they navigate the market losses as a result of the CPTPP agreement.”

And then there’s climate change…

With Canada’s winter season predicted to shorten, and longer, hotter summers, Canadian farmers are looking for ways to overcome risks associated with inclement weather patterns. From drought resistant feed production to mitigating heat stress, Canadian farmers have teamed up with scientists to resolve the potential for catastrophes, like the one in Quebec in 2002, when a heat wave killed half a million poultry, despite modern shelters and ventilation systems; or the heat wave in Ontario in 2012, when hundreds of dairy cattle died.

Last year, the federal government announced a new cooperative called the Living Laboratory, a nation-wide network of sites where farmers work with scientists and government on designing new practices or technologies to help with issues of climate change, water contamination, soil conservation and boosting capacity and biodiversity in agricultural settings.

At the launch of Living Lab’s Manitoba site last December, the Minister of Agriculture and Agri-Food, Marie-Claude Bibeau explained, “For Prairie farmers to keep feeding Canadians and people around the world sustainably, they need to get their hands on the right tools as quickly as possible. This innovative, collaborative research approach will help Manitoban farmers get the tailored tools they need to drive productivity in a sustainable manner.”

Back in 2008, as McCorquodale finished her speech, she reminded her audience, “Canada has worked hard to gain the confidence of nations around the world by showing that we will face the problem head on. Our willingness to spend the time and money to ensure any problems are minimized for the future has revealed to the rest of the world that Canada prides itself on being a world leader in food safety and providing people with a reliable food supply.”

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