A national beef levy of $1 could shore up the industry’s flagging promotion and research budgets, but not all participants are willing to contribute.
Beef processing companies say the proposed mandatory checkoff on animal sales is a tax grab that strikes an industry already struggling with thin margins.
“It is a further tax on raw material with no apparent value to the processor or consumer,” said Bob Kalef of Centennial Foods Corp. at a hearing set up by the national farm products council in Calgary.
The hearing was to decide on the merits of establishing a Canadian beef cattle research, market development and promotion agency funded by the beef industry. Two other meetings were held in Ontario and Quebec.
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The agency requires processors to pay about half a cent per pound of beef based on a carcass equivalent formula used in the United States.
The processors’ total contribution amounts to about $800,000 per year, said Wayne Holland who represents 12 processing companies in the Alliance for Fair Trade in Beef.
These companies buy domestic and offshore manufacturing quality beef. The meat is blended and processed into products like burgers for fast food outlets and beef entrees for whole meal replacement packages.
The processors said this levy is difficult to pass on as an added cost. They already face expenses to implement new food safety standards, the rising cost of labor and energy as well as higher prices for meat.
“Business is tough in spite of the strong economy,” Kalef said. “We spend time in our 80-hour weeks trying to save fractions of a cent.”
His company argues that it makes about a quarter of a cent profit on a pound of imported beef.
Processors also argued that private industry can promote beef and initiate new product development better than an agency.
However, exporters under the umbrella of the Canada Beef Export Federation argue the checkoff is necessary to support overseas marketing plans.
The checkoff does not increase the budget for the federation. Instead, it stabilizes the budget that is being eroded because fewer matching grants are available from government, said federation manager Ted Haney.
He argues the federation has provided value to producers by finding markets for beef outside the U.S. In 1999, Canada exported $336 million worth of beef to Asia and Mexico. That is up from $24 million worth in 1990 when the federation opened its first sales promotion office in Japan.
Enabling legislation to collect a levy on a national basis was passed in 1993. The beef industry is the first commodity group to actively pursue this.
In most provinces, checkoff money is already deducted every time an animal is sold. An average animal is sold 2.5 times.
The money is collected by the provincial cattle organizations and remitted to an interim agency administered by the Canadian Cattlemen’s Association in Calgary.
The proposed national checkoff is non-refundable and is applied to Canadian beef cattle sold domestically, imported beef cattle and to the carcass equivalent of imported beef and beef products.
Total agency revenue could be more than $8 million annually under the checkoff. It would be shared by the Canada Beef Export Federation and the Beef Information Centre, which handles generic promotions, new product development and research requests.
The membership of the board of directors is still under consideration.
Once the agency is established it is subject to a five-year performance review and provinces may withdraw with one year’s notice.
