Maple Leaf financials disappoint

Kenneth Zaslow of BMO World Markets is not impressed by the performance of Maple Leaf Foods Inc.

He says the recent announcement of second-quarter financial results indicates the company isn’t doing as well as anticipated.

He listed several challenges – high costs to commission three plant expansions; higher raw material costs, particularly pork bellies; a weak Japanese yen; increased hog production losses, and lower earnings in rendering because of a cost-price squeeze of higher costs for raw material and lower prices for biodiesel.

However, sales volumes increased during the second quarter.

But the company made no profit in the second quarter compared with $26 million in the same quarter last year.

Palmer amaranth weeds on Ontario’s doorstep

 A bad weed that started in the southern United States is spreading north, showing up recently in Michigan.

Weed specialists started warning about Palmer amaranth five years ago when it was in Arkansas.

It’s aggressive and appears to be resistant to glyphosate (Roundup and Liberty).

It’s so aggressive that it can overwhelm a crop such as soybeans.

It zoomed from Arkansas in 2010 to Illinois, Indiana and Michigan last year.

Cornering the market on aluminum

Goldman Sachs has 1.5 million tons of aluminum ingots in storage,  enough to drive up the price of aluminum, says David Kocieniewski of the New York Times.

It’s what used to be called “cornering the market” to pocket profits.

It’s what farmers suspected grain traders were doing, prompting them to lobby for creation of the Canadian Wheat Board.

In the United States, it prompted politicians to enact the Bank Holding Company Act, designed to keep banks from owning commodities.

That act and other regulations that curbed the banks are gone, swept aside in the rush to deregulation and reduced taxation in the 1990s.

But even with relaxed regulation, it seems that Goldman Sachs stepped over the line.

Global trading rules say banks can only hold minerals for a certain length of time – a regulation designed to keep them from stockpiling so much that the market is short and prices rise.

Goldman Sachs, says Kocieniewski, skirted around this regulation by paying truckers to move its aluminum ingots among warehouses near Detroit.

JP Morgan Chase, another big bank, is facing a $500-million fine for manipulating the electricity markets in California and Michigan.

Barclay’s Bank was recently fined $435 million for manipulating the energy market in California.

So far there is no indication that there are any current investigations into cornering markets for farm commodities.

Greed results in these kinds of abuses; it’s why regulations are required to keep greed in check.

Who's keeping watch on the greed of Canada's marketing boards? It seems to me that Glenn Black out there on Manitoulin Island got a better handle on the greed involved in combining cost-of-production pricing in the poultry industry and inflated feed costs than years of regulatory neglect by the likes of the Ontario Farm Products Marketing Commission and the Farm Products Council of Canada.

Milk producers are leaving some clout on the table

Canada’s dairy farmers are leaving some of their political and economic power on the table, according to a study by economists at the University of Guelph.

Dr.Alan Ker

If the national supply management powers were exercised to their full extent, milk prices would be $103.34 per hectoliter, considerably higher than the current blend price of $72.94.

Doctoral student Na Li and Dr. Alan Ker, chairman of the department of food agricultural and resource economics, calculate that the marketing boards are using only 57 per cent of their potential clout to control production volumes and 40 per cent of their pricing clout.

The highly-academic research paper is posted on the university’s website.

CFIA refuses to reveal details of budget cuts

The Canadian Food Inspection Agency is among a group of federal government departments and agencies that’s refusing to reveal details about how it’s implementing a new round of budget cuts announced in the March 12 budget.

Gerry Ritz is not telling

The Parliamentary Budget Officer set two deadlines – July 3, then July 19 - and the CFIA has failed to provide the information to Sonia L’Hereux, the interim Parliamentary Budget Officer and also head of the Library of Parliament.

NDP leader Thomas Mulcair has tried to press the case by filing court action, but Justice Sean Harrington ruled that the complaint needed to be filed by the Parliamentary Budget Officer, not by the NDP trying to act on her behalf.

The budget cut is $3.1 billion this year and $5.1 billion next year.

Agriculture Minister Gerry Ritz has insisted that food safety will not be compromised by the cuts, but has not spelled out any details to back that claim.

What is known so far is that the CFIA no longer checks the efficacy of fertilizers and soil amendments, opening the door to what critics call “foo-foo dust” products. Farmers can still file civil lawsuits if products fail to live up to their advertised claims, but they will need to gather proof and pay legal and professional consultant costs.

There are also industry consultations underway to reduce regulation of feeds and feed additives.

                        

Gray loses challenge

Lawyer Alison Webster has failed in her bid to persuade the court to throw out some of the charges that Sweda Farms has filed against her client, L.H. Gray and Son Ltd.

Justice Carol J. Brown in fact wrote that the motion by Webster is “doubtful practice.”

She said it’s premature to make any decisions such as this while Webster continues to hide evidence Sweda has been seeking for at least a couple of years.

Webster and L.H. Gray & Sons Ltd. have failed to produce electronic records, including information about egg grading and e-mails between Bill Gray and his staff, with competitor Burnbrae Farms Ltd. and with Harry Pelissero, general manager of Egg Farmers of Ontario.

A copy of the electronic data was made and taken by whistleblower Norman Bourdeau and has been under court protection for several years, awaiting either an agreement between the lawyers for Sweda and Gray or a court order to determine what can be included as evidence in the lawsuit which claims $33 million in damages from the three – Gray, Burnbrae and the egg board, and another $16 million from them and some of their employees, from the estate of Joseph Klei, who left employment at Sweda, and Maple Leaf Foods.

There is another court date in December to deal with the electronic files under court protection.

Gray, Burnbrae and the egg board are supposed to file any documents with the court that pertain to the allegations made by Sweda.

Those allegations, which the defendants deny, are that they:

-            - conspired to drive Sweda out of the egg-grading business;

-            - they shipped eggs to Sweda that fell far short of grading standards;

-             - Gray and Burnbrae routinely markets eggs that fail to meet Grade A standards;

-            

              - Gray and Burnbrae conspired to fix prices and market shares;

-       

          -the three – Burnbrae, Gray and the egg board - conspired to keep Sweda from importing eggs to meet demand and knowingly provided substandard eggs.

Most of the court hearing in Toronto was closed to the public and reporters because Webster said the information to be discussed would harm her client’s reputation.

There was apparently a lot of talk about the settings on automatic egg-grading equipment, but Brown said neither Webster nor lawyers Donald Good and Robert Morrow, acting for Sweda, filed any evidence or facts to back their opinions.

Webster referred to an affidavit from Scott Brookshaw of Gray. He argued that the automatic egg-grading machinery was set to comply with industry standards.

Morrow argued the settings Gray used allow cracks into Grade A cartons and said the Canadian law does not provide for any tolerances. 

Webster has argued that the Canadian Food Inspection Agency has a tolerance, an argument that seems to be accurate because the reports of CFIA random-sample checks on Burnbrae and Gray grading indicate a tolerance of 1.77 per cent.

Those reports, obtained via Access to Information, indicate that there were times when both companies had more than 11 per cent of the eggs in Grade A cartons that failed to meet the standards.

Most of the random-sample test results showed two per cent or more cracks in the cartons.

Cracks are not only fraud on consumers, but also a health risk because eggs are washed to remove dirt and feces and as cracked eggs pass through that washwater, harmful bacteria could enter the cracked eggs.

Hatching egg ranks increase

 And now there are six.

Saskatchewan and Alberta have joined the Canadian Hatching Egg Producers (CHEP), a national agency for those who keep hens and roosters to supply fertilized eggs to hatcheries marketing to broiler growers.

 “We have always worked closely with the Alberta and Saskatchewan boards. With the addition of these two provinces, CHEP has created a more streamlined and responsive organization,” says Jack Greydanus, chairman of CHEP. 

“Looking ahead, talks are already underway with the remaining two provinces that produce broiler hatching eggs, Nova Scotia and New Brunswick,” he said.

Under the system of supply management, CHEP works closely with 245 broiler hatching egg farmers across Canada to manage the production of more than 665 million broiler hatching eggs. CHEP also ensures all farmers meet stringent food safety requirements, part of the Canadian poultry industry’s comprehensive “gate to plate” standards.

The six provincial boards –British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec– work with the chicken industry and governments to set optimal production levels to meet the needs of the chicken industry. 

During the meeting, CHEP also announced that the Canadian Hatchery Federation (CHF) will have a second director on the board.

The CHEP board of directors now includes nine members.

Schlegel and Cuddy buy Maple Leaf's turkey business

Ernald Enterprise, which is controlled by the Ronald Schlegel family, and Cuddy Farms are buying the turkey farms and hatchery owned by Maple Leaf Foods Inc.

The business was formerly Cold Spring Farms Ltd. which was built by the late Harvey Beaty while he was confined to a wheelchair.

Schneider Corp. bought the business, then Maple Leaf bought Schneider.

The business employs more than 100 people, many of them in the Thamesford area.

Ernald is buying the commercial turkey farms which at one time constituted the largest turkey-farming business in Canada, holding about a quarter of the Ontario market.

Cuddy is buying the hatchery and six breeding farms.

"Divesting our turkey growing operations will allow us to focus on, and direct capital to, growth and innovation in our valued added turkey processing business," said Michael H. McCain, President and CEO, Maple Leaf Foods. 

"The transaction ensures a long-term supply of high quality turkeys at competitive prices. I'd like to thank our people who work in these operations for their dedication to our business. They are joining two organizations who are leaders in Canada's turkey growing industry."

Cuddy Farms is a leading producer and distributor of commercial turkey eggs and poults in Canada. The Company distributes products nationally and to more than twenty countries including Germany, Mexico, Russia, Italy, Turkey, Poland, Austria, Holland, Hungary and the Baltic States.

Errnald Enterprises Ltd. owns 1,200 acres of agricultural land and operates five commercial turkey and chicken growing operations in southern Ontario. They are a current supplier to Maple Leaf Foods' turkey processing operations.

Rob Schlegel said this is the third purchase the family has made from Maple Leaf. It bought chicken farms and quota in the New Dundee area, west of Kitchener, and then about 10 years some turkey farms and quota.

The Ronald Schlegel family will be the largest turkey-farming business in Canada. One of the family members, Tyson Schlegel, is a member of the executive committee of the board of directors of the Turkey Farmers of Ontario marketing board.

"Moe" Freeman dead at 80

Dr. Morris “Moe” Freeman, for 17 years the manager of Semex Canada, has died. He was 80.

He left the University of Guelph, where he was an assistant professor specializing in genetics since 1969, to join Semex in 1974. Two years later he was promoted to general manager and took the export business from $1 million to $47 million in annual sales by 1991.

He was athletic, popular among Holstein breeders, staff and clients, and a staunch supporter and fund-raiser for the University of Guelph.

He suffered Alzheimer’s disease for 10 years. He is survived by his wife, Ruth, and three sons, David, Michael and Paul.

There will be a memorial service in September. More information is available at Moe@SkyePlace.com .

CFA presses for help for young farmers

The Canadian Federation of Agriculture is asking federal and provincial governments to provide more help for young farmers.

The federation asked for support such as “access to affordable land, risk-tolerant financing, training support and extension services.”

The CFA made its pitch during a roundtable discussion that’s part of this year’s annual gathering of federal, provincial and territorial agriculture ministers at Halifax.

This is so like the Canadian Federation of Agriculture which believes that for every challenge, there should be a government subsidy.

Sure, start them out with subsidies so they'll be skilled in collecting them all their lives.

And just exactly why do we need more farmers? Of the ones we have, 80 per cent are struggling to produce a mere 20 per cent of Canada's annual production.

Albertans develop black box test

Researchers at the University of Alberta have developed a faster and cheaper test to detect E. coli bacteria in meat-packing plants.

The black-box kit is small enough to fit in a shoe box.

The development comes only months after the nation’s largest and financially-crippling recall of beef by XL Foods Inc. of Brooks, Alta.

The company is now owned by JBS USA which is, in turn, controlled by JBS of Brazil.

The research teams says meat samples can be put inside the box, a button is pushed and results are available in less than an hour.

The test involves multiplying genes in a device about the size of a postage stamp.

The research team also says the test can be run by ordinary staff who won’t need a lot of academic or technical training.

Genome Alberta is investing $500,000 to bring the device to market, but the team provided no estimate of when it will be available.

Stop worrying about increased European cheeses

Matthias Brinkmann, the European Union’s ambassador to Canada, says dairy farmers should stop worrying about an increase of European cheese imports that’s part of a trade deal nearing completion.

He says Canadians will simply be eating more cheese when they have the choice of cheeses from Europe.

Canada is widely believed to be willing to grant Europe increased access to the Canadian cheese market in return for European concessions for Canadian exporters, including beef and pork farmers.

But there are worries that after four years, the negotiations may stall out.

In fact, Brinkmann, who is leaving soon, said it may be next year before a deal is reached.

The Europeans opened negotiations with the United States this week, diverting attention away from Canada.

The same thing happened to Canadian negotiations with South Korea when trade talks began with the United States.

They got a deal by 2007. Canada still hasn’t got a deal, dashing the hopes of Canada’s beef and pork industries.

Brinkmann tried to assuage concerns about the U.S. trade talks during a news conference in Ottawa, noting that Europe’s chief negotiator is still in Ottawa negotiating with Steve Verheul, the head honcho of Canada’s negotiating team and a veteran chief negotiator on agricultural issues.

Canada is still not satisfied with the European offer on improved access for Canadian beef and the Europeans are pressing Canada to extend the term of patent protection for pharmaceuticals to the global norm.

That would increase Canada’s health costs at a time when provinces are pressing hard to reduce spending on health care.

Chicken processors stalling

It's more than four months since Laurent Pellerin, chairman of the National Farm Products Council, warned the national chicken marketing agency that STATUS QUO IS NOT AN OPTION.

The capitals for emphasis are Pellerin's, taken from his notes to address the annual meeting of Chicken Farmers of Canada.

Since then I see no evidence of any change from status quo.

Yes, there are plenty of proposals for change, but the large-scale processors seem determined to block change.

For example, Pellerin called for allocations so the provinces can grow chicken to meet demand for specialty markets. The Ontario board developed a proposal for specialty markets.

The processors have blocked that proposal by filing an appeal with the Ontario Ministry of Agriculture and Food Appeal Tribunal. And then they said they wanted time for further negotiations with the chicken board, so the appeal is sitting on the shelf. Meanwhile, specialty markets are not being served.

That would, of course, include the Ontario kosher and Hong Kong dressed markets, to mention only two big ones.

It seems the chicken industry is more worried about some processor-competitors gaming the system than they are about meeting consumer demand. That's a lovely way to treat customers!

Then there's Pellerin's mention of negotiations for "differential growth" and "comparative advantage".
Both are important proposals. Neither seems to be going anywhere fast.

Alberta has served notice it's leaving the national agency. Pellerin sees that as a challenge.

The real challenge will be to keep other provinces in a national system that no longer serves either the public or chicken farmers. It's large-volume processors who seems to be putting the clamps on both production volumes and change.

Now we have a revolt by chicken farmers in Quebec underway. Will that unravel the ban the Ontario and Quebec chicken boards have implemented on inter-provincial trade in live chicken? 

Pellerin also suggested the chicken industry take advantage of legislation to set up a national agency that can garner funds for research and promotion. He suggested everyone could benefit from research into market potentials.

Is it the big processors who are also blocking this proposal? After all, they don't seem to be spending any of their own money on market development and research, so it's reasonable to assume they oppose any proposal to force them to contribute to this type of national agency.

When it comes to genuine ideas about how to reform the system, the only common sense ones I've seen have come from the Ontario Independent Poultry Processors association.

But the chicken-industry establishment seems to automatically oppose any and all ideas that come from John Slot, who is the driving force in that organization.

It is, as I learned in Philosophy 101, a glaring example of an ad hominem argument. 

C'mon guys! Shoot the messenger, if you must, but at least examine the messages to determine their merit.

As for Pellerin,  he might as well stop speaking to the chicken industry and start drafting a advice to Agriculture Minister Gerry Ritz to terminate this agency.

Consumers are passing on spuds

The Ontario Potato Board wants to know why shoppers are buying fewer potatoes, so has hired Dr. Martin Gooch of the Value Chain Management Centre and George Mitges and Associates of Vineland to interview 1,000 shoppers.

They have already interviewed 210 and find that most know there are many different potato varieties, but 64 per cent couldn’t identify the ones that are best for baking, boiling or mashing.

The potato board wants the consultants to help them identify the attributes or products that shoppers are willing to pay premium prices to purchase.

Their challenge is that fresh potato consumption has declined by 40 per cent per capita over the last 20 years.

The Canadian Agricultural Adaptation Council is helping to fund the project which involves Loblaws Companies Limited and Downey Farms.

I can tell them what annoys my wife about fresh potatoes grown in Ontario. The quality is poor.

She paid a premium for Green Giant brand fresh potatoes when they were imported from the United States because the quality was excellent. There were no cuts, no bruises, no brown-rot areas when she cut them open.

Then Green Giant began sourcing potatoes in Ontario, and the quality plunged.

There are, no doubt, many other discoveries the consultants will make during their research, but unless  and until the Ontario Potato Board is willing and able to vastly improve the quality of fresh potatoes its members market, the gains will be small and ephemeral.

Loblaws-Shoppers deal will hurt farmers

Loblaws purchase of Shoppers Drug Mart chain for $12.5 billion is winning rave reviews from market analysts, but it’s bad news for farmers.

The market analysts predict that Loblaws will use its increased purchasing power to squeeze suppliers even harder.

And when the squeeze is put on suppliers, they will pass that squeeze down to the weakest link in the supply chain. That’s obviously farmers.

There will be lots of other unintended consequences.

One will be the demise of a number of medium-scale food processors, ones that are able to barely meet Loblaws’ requirements for volume, but won’t be able to produce enough for the combination of Canada’s largest drug-store and supermarket chains.

There will be suppliers of food products sold in Shoppers Drug Mart stores who will find their products squeezed off the shelves to make way for President’s Choice and No-name products from Loblaws distribution centres.

And I fail to see any gains for Canadian shoppers. They will face reduced choices and all of the many benefits that flow from competition.

Some say prices will be lowered. I don’t think so. Why would Loblaws lower prices unless it has to? In fact, prices might go up because it has one less competitor to pressure it to lower prices.

This is not a merger that makes any sense for either suppliers or consumers. It only makes sense for shareholders who either own Loblaws stock or are selling Shoppers.

Agropur recalls risky cheese

The Canadian Food Inspection Agency (CFIA) and Agropur are warning the public not to consume the Il Villaggio brand Gorgonzola Dolce Cheese because it may be contaminated with Listeria monocytogenes.

There have been no reported illnesses associated with the consumption of this product.

  There is no explanation about why a co-operative owned by Canadian dairy farmers who are paranoid about protecting their market from imports was itself importing this cheese.

Beking Poultry Farm shut down

The Canadian Food Inspection Agency has yanked the egg-grading licence from Beking Poultry Farm at Oxford Station in Eastern Ontario.

Officials say there were too many cracks included in Grade A cartons.

The grading station will remain closed until CFIA inspectors are satisfied that the business can accurately grade eggs.

On its website, the CFIA says “Licences and registrations of federally registered establishments or companies can be suspended or cancelled for failing to comply with relevant CFIA Acts and Regulations.”

The CFIA does not say on its website, where it posted the information about Beking Poultry, how many cracks it takes to prompt a licence suspension.

I guess it's more than the 11 per cent undergrades that have been identified by CFIA inspectors conducting random-sample checks at Grayridge and Burnbrae which together account for more than 90 per cent of the eggs graded in Ontario.

It's a certainty that the total number of cracks and undergrades those two giants market is thousands of times more than the cracks marketed by Beking Poultry.

CFIA nabs Johne's vaccine

   Why is the CFIA prosecuting (more like persecuting) Alvin Boyce and Steven Witmer over Johne's vaccine?

   As Dr. Anne Godkin of the University of Guelph told reporter Ian Cumming of Ontario Farmer, any farmer can ask his veterinarian to obtain the vaccine which is on the market in the United States, but not yet approved for sale in Canada.

   Boyce and Witmer have been charged because border officials found 24 bottles of the undeclared vaccine when Boyce was bringing some expensive Holsteins from New York State to Witmer's farm near Woodstock on June 14.

   Cumming writes that "Witmer has been charged with smuggling in the vaccine, but is totally innocent, having neither paid for, nor ordered the product, says his lawyer Ed Morwick. The seized product is being held under detention by CFIA. The head investigating officer is Roger Weber. 

    Boyce had been handed the box of vaccine down at the New York farm, says Morwick. As of early July, CFIA investigators still had not talked to the New York farmer, he said. 

    "You'd think that is where they would start, you might solve it in 15 minutes," said Morwick. 

    Cumming says the vaccine is popular among dairy farmers because treated cattle will not give a false positive reading for Johne's disease. 

    It 's worth a lot of money to owners of the best Holsteins to be sure their heifers won't test positive for Johne's because they need disease-free cattle to market embryos to the highest-paying customers in other countries.