Brian Kaufman, Manager, Risk Mitigation and Trading, Ontario Corn Fed Beef Inc., explains the new risk management program that begins March 3.
The Ontario Corn Fed Beef Program was initially launched in 2001 by the Ontario Cattle Feeders’ Association as a branded beef program, with the intent of increasing consumer demand for Ontario raised cattle.
The success of those efforts led in 2007 to the formation of Ontario Corn Fed Beef, Inc., to separate the marketing of cattle under the Corn Fed label from the producer association activities of the OCFA.
The directors of Ontario Corn Fed Beef, Inc. recognized that there was a need for a price protection program for fed cattle if the Corn Fed program was to be sustained over the long-term.
In 2010, before the announcement of the provincial Risk Management Program, the directors and staff petitioned the provincial government for funding to implement this type of undertaking.
The intention behind the creation of the Ledger Account was to increase market-ready cattle numbers in the months where there is historically a shortage of fed cattle; as traditionally producers avoid marketing during these time periods due to higher risk and poorer prices.
In March of 2013, the province agreed to fund Ontario Corn Fed Beef, Inc. with $10 million to implement a two-year pilot project to allow OCFB to develop a cost-of-production style risk management program for the beef producers who are members of the Corn Fed program.
This funding is not a subsidy, but is instead to be used as a line of credit to cover margin costs for commodity futures contracts and for cattle purchase payments.
After several months of meetings and consultation with industry and government a formula was developed to give producers a fixed forward price for their cattle, available from four months to eight months into the future, depending on when the cattle will be ready for market.
Every day OCFB Inc. will have a price available for producers who have signed a marketing agreement with OCFB. The price will be a fixed price, for a set of specified months in the future, on a dressed weight basis, for the number of head of cattle the producer wishes to forward sell.
Once that delivery month arrives, the producer ships their cattle as normal, but before shipment, informs the processor that these cattle are contracted to OCFB, and OCFB is the entity who receives payment from the processor.
After shipment, the grading sheets are sent to OCFB who then sends the producer payment based on the forward price, the dressed weight of the load, plus or minus any grade premiums or discounts.
This program will commence on March 3rd and will be open to any beef producer in the province who is enrolled in the Corn Fed Beef program and who will ship cattle under the program.
Producers who are enrolled in the Province of Ontario’s Risk Management Program can also participate in this program but cattle that the producer owns cannot be enrolled in both RMP and this fixed forward program. Cattle can only be in one of the two programs.
The annual cost to participate in this program is $500 per individual or corporation, due when the first load of cattle are booked. There will be an additional fee of $10 per head, deducted at settlement, to help cover the costs of administering the program.
For questions about the program, or to request more information, please call Brian Kaufman at 855-775-2333.