Regulation - LGIC

Proposed Enhancements to the Beef Cattle Financial Protection Program to Include Breeder Co-Operatives and Improve Alignment with the Feeder Cattle Loan Guarantee Program

Regulation Number(s):
Ontario Regulation 560/93 (Fund for Livestock Producers)
Bill or Act:
Farm Products Payment Act
Summary of Proposal:
OMAFRA is proposing amendments to Regulation 560/93 (Fund for Livestock Producers) which is made pursuant to the Farm Products Payment Act (FPPA).

The proposed amendments would, if approved:

1. Allow sales by Co-operatives to be designated as sales by individual Co-operative members for the purposes of the Beef Cattle Financial Protection Program (BCFPP). The Co-operatives would maintain ownership. This would mean that individual members of the Co-operatives, as opposed to the Co-operative itself, would be responsible for following the rules of the BCFPP, such as prompt notification of late payment, submitting claims within prescribed timeframes, and to not extend credit. The amendment would also reduce the risk of a Co-operative being in a default situation because a Co-operative claim is denied by the Board for not following the BCFPP rules.

2. Provide the same rights of the Feeder Cattle Co-operatives for Breeder Co-operatives to make claims for compensation from the Fund for Livestock Producers in the case of a default by a licensed dealer. Beef Breeder Co-operatives mirror the operations of the Feeder Co-operatives, and currently pay the ten cent per head check-off fee to the Fund. The proposed amendment would ensure consistency between how Breeder Co-operatives and Feeder Co-operatives are treated under the BCFPP.

The amendments will help address industry concerns that a situation may arise where the Co-operatives, as cattle owner, may not be able to comply with the rules of the BCFPP, and thereby jeopardize a claim under the BCFPP. They are concerned that one major default could have serious financial implications for individuals that market cattle through the cattle co-operatives.

Background:
The BCFPP provides compensation to producers in the event that a licensed livestock dealer defaults on a payment to a producer. The BCFPP has two components the annual licensing of dealers under the Livestock and Livestock Products Act ; and the administration of the compensation fund established under the FPPA.

The Livestock Financial Protection Board (the Board) is established by provincial legislation to administer the Fund. Under O. Reg. 321/11 a compulsory fee of ten cents per head of cattle sold is payable to the Board. Every cattle seller, including co-operatives, is required to pay the ten cent fee. The Board also adjudicates claims made under the FPPA. The Board has discretion to refuse payment from the Funds based on grounds enumerated in O. Reg. 560/93.

Timelines for payment and early notification are key program designs. The timelines, in addition to ensuring that producers sellers do not extend credit or operate as a "bank" for dealers, also act as an early warning system if a dealer is in trouble, reducing the impact on other producers sellers and on the number and size of claims on the producer Funds. Reg. 725 under the LLPA sets out the payment timelines. The payment deadline is six or nine days depending on the total value of the cattle that were sold.

The FCLGP provides Co-Operative cattle producers access to competitive interest rates. The Ontario government guarantees 25 per cent of individual loans, which in turn allows Co-Operatives to negotiate lower interest rates and then provide those funds to its members at a reduced interest rate.

The Beef Breeder Co-operative Program is supported by the Beef Farmers of Ontario it provides members with loans to purchase breeding heifers.
Further Information:
Proposal Number:
17-MAFRA004
Posting Date:
August 25, 2017
Comments Due Date:
October 10, 2017
Contact Address:
Shain Cameron
Policy Advisor
Farm Finance Branch
1 Stone Road, West, 2nd Floor
Guelph, Ontario N1G 4Y2
519-826-3959