CAIS Program

[rsomer]

If there is a valid criticism of CAISP it is that we are now in 2004 and details of the program for 2003 have not yet been finalized. We were told that these safety net programs were to be bankable and as such the program should either have been finalized by mid 2003 or the existing safety net programs held in place for one more year. I can’t do my budget predictions for 2004 without knowing important details of CAISP that are simply not worked out yet. In this time of uncertainty in the beef industry, further uncertainty around CAISP is not helpful.
CAISP, FIDP and AIDA are not suited to industry crises such as BSE. Although the various industry sector participants are all affected by BSE the response they will receive from CAISP will differ. For example, a typical cow calf operator who had a terrible year in 2002 and was forced to sell his herd due to drought would have finished 2002 with no feed or grain inventory and no or reduced cow herd. This farmer would have collected FIDP or AIDA based on the 2002 disaster. Bear in mind however that the farmer may have sustained negative margin loses which the programs did not support, leaving him short of cash flow in 2003.
BSE comes along in 2003 and what happens. The farmer has had to buy cows back to avoid income tax, in many parts of Alberta feed, straw and grain inventories are up. Yes the farmer sold his calves in the fall of 2003 for more money than he expected to receive in May but the fall calf prices are still way down considering feed and interest costs and American market prices. This farmer will not collect CAISP. He is going to run out of cash in mid to late 2004.
Over ½ billion dollars went to a relatively few feedlots and the province’s two large packing plants. These same feedlots and the packer owned cattle will realize further benefits from CAISP because they crystallized their losses by selling cattle inventories in the 2003 fiscal year. The cow calf operator is in a different boat.
In effect CAISP is picking winners and losers. The feedlot and value added industry are the winners and have received much more support from government than the primary cow calf producer. The cow calf operator was not supported at 90% of the U.S. price for feeder calves like the feedlot operators were for fat calves. The government is saving billions of dollars by telling the cow calf operator he has to cash flow the BSE crises himself because his inventories of hay, straw and cattle were higher year end of 2003 than 2002. The cow calf operators are the loosers in the 2003 BSE crisis.
In addition, the payment ceilings of CAISP have been significantly raised so that scarce government support dollars are now being directed towards huge operations and packer owned cattle and away from the family farms that are needed to support rural agriculture and the rural ecomony of the prairie provinces.

[frustrated1]

one of the MANY things i never new about the FIDP program and thus never collected a penny on. but, which also applies to CAIS: when you put down your inventory of 100cows, list them as 92cows and 8 cull cows, they will value those differently. doesn't make a big difference but it all adds up. my accountant agrees the programs certainly aren't perfect as far as inventory value goes but when you DO take the actual loss on your calves it should apply. if they paid out strictly on inventory value and our calf prices should skyrocket then we'll all keep those old cows once more(which we're forced to anyway), they've become worth more before we sell them and then what? we pay back the difference from what we valued them at?

[rsomer]

I think what is missed by many is how CAISP is not going to protect many producers from the BSE crisis. The problem is not as much that CAISP or the previous programs, FIDP or AIDA, doesn’t protect producers from the loss in the value of their beef herd. The problem is that the program is not going to protect producers from the effect of the BSE crisis on their cash flows. It is like this.

Many producers, especially in Alberta, ended 2002 with the lowest inventory levels of hay, grain, straw that they have had in many years. For the typical cow calf producer these represent non cash inventories that were normally on hand for feeding the cow herd. Although 2003 had its challenges, more areas of the province had near average hay crops, the combines did come out of the shed in 2003 and some straw was baled. As a result, ending 2003 non cash inventories of hay, silage, straw and barley were closer to normal levels. These inventories are not for sale but are needed to feed the cow herd.

Even though fall 2003 calf prices were not as bad as some feared, they were well below the average of the last five years, much lower than prices would have been if there had not been a BSE crisis. In normal circumstances FIDP, AIDA or CAISP would have protected producers from this disaster and producer cash flows would have been restored up to 70% of the 5 year average.

However for many producers in 2003 the non-cash inventories of hay, silage, straw and barley which have merely returned to normal levels with no surplus available for sale will reduce or eliminate the payout the producer would have otherwise received from CAISP. How many producers would be in this situation is hard to say but I would venture a guess that it is the majority of Alberta’s 38,000 cow calf producers who are left facing a cash crisis. The effects of this crisis will be felt throughout Alberta by mid 2004.

Alberta’s cow calf producers are being told to look to CAISP for relief from the BSE crisis. But producers will find the CAISP program is not there for them. To be fair to all, there should have been a direct BSE payment to cow calf producers just like the support the feedlot operators received. The BSE crisis should have handled as the national crisis it was and let CAISP handle the disasters it was meant to take care of, drought, hail and production losses.