Industry proposed changes to the Beef Cattle Financial Protection Program
O. Reg. 560/93 – (Fund for Livestock Producers)
O. Reg. 725 – (Livestock)
O. Reg 328/11
Regulation - LGIC
Bill or Act:
Farm Products Payments Act and the Livestock and Livestock Products Act
Summary of Decision:
O. Reg 327/11 and O. Reg 328/11 were filed on June 28 2011 with the Registrar of Regulations. These regulations will be amending O. Reg. 560/93 - (Fund for Livestock Producers) and O. Reg. 725 - (Livestock). The amendments to O. Reg. 560/93 will expand coverage and provide greater protection to those involved in private treaty sales in the same manner as current sales by public auction. The amendments will also increase the level of compensation for losses that is available to:
- Livestock producers where a livestock dealer defaults on a payment; and,
- Licensed dealers or feeder cattle finance co-operatives when a producer defaults on payment for sales made through public auction.
The amendments to O. Reg. 725 will change the payment deadline and update payment requirement in line with current banking methods. These amendments will be effective on July 1, 2011.
August 27, 2010
Summary of Proposal:
The Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA) is proposing amendments to O. Reg. 560/93 (Fund for Livestock Producers) established under the Farm Products Payment Act and R.R.O. 1990, Reg. 725 (Livestock), established under the Livestock and Livestock Products Act.
The Board of Directors of Beef Cattle Financial Protection Program Inc. has requested these changes. This organization has representation from industry. Beef Cattle Financial Protection Program Inc. is under contract with the ministry to determine financial responsibility of livestock dealers.
The proposed changes would:
• Increase the amount payable from the compensation fund on a claim;
• Provide financial protection coverage on private treaty sales between a dealer and a producer in the same manner as current sales by public auction; and
• Align payment requirements with current banking methods. As an example, the current regulation does not provide for the use of Electronic Funds Transfer despite this being the preferred form for transactions.
Four of the proposed changes apply to Regulation 560/93 (Fund for Livestock Producers) and refer to the amount payable from the fund in the event of a successful claim. The two additional change requests apply to R.R.O. 1990, Reg. 725 (Livestock) and refer to payment methods.
The purpose of the Beef Cattle Financial Protection Program is to reduce the risk of producer loss in the event that a licensed buyer defaults on payment. It was established in 1982 by OMAFRA at the request of the Ontario Cattlemen’s Association and the Ontario Livestock Auction Market Association.
The program consists of two parts. They are:
• The annual licencing of livestock dealers under the Livestock and Livestock Products Act. In order to receive a license, dealers must prove financial responsibility and/or post security.
• The compensation funds which is supported by mandatory “check-off fee”. As at March 31, 2009 the fund balance stood at $6.8 million. Administration of the compensation fund is undertaken by the Livestock Financial Protection Board (a Trust Agency established under the Agency Establishment and Accountability Directive and independent of Beef Cattle Financial Protection Program Inc.). The Board is also responsible for adjudicating the validity of any claim(s) as well as determining how much a producer is eligible to receive. Should a claim be deemed valid, the Board will pay the claim to the producer. The Board is also responsible for trying to recover any payments it makes to a producer from the defaulting dealer. The Board includes representation from beef industry organizations and is appointed by the minister.
The proposed changes to the program represent no additional cost to the government. An actuarial study completed in July 2010 determined that the regulatory changes proposed would have no measurable impact on the health of the fund. To date, all net claims have been paid by interest on the fund only.
Farm Finance Branch
1 Stone Road, West, 2nd Floor,
Guelph, Ontario N1G 4Y2
July 1, 2011