SASKATOON – The government’s decision on how to slice up the Crow adjustment pie has left alfalfa processors feeling a little hungry.
While no formal announcement has been made, industry sources say Ottawa has decided to give $40 million of the $300 million Crow adjustment fund to the dehydrated hay industry over the next five years.
“It’s a disappointment,” said Garry Benoit, executive director of the Canadian Dehydrators Association. “The way we calculated it, our fair share should have been about $70 million.”
The lower than hoped for payment will make it all the more difficult for processors to adjust to life without transportation subsidies.
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“Just how the industry will fare with that kind of a loss is certainly a concern,” said Benoit. “Even $70 million was still a huge hit on our industry.”
The dehydrators had based their request on the fact that in 1992-93, the last year for which exact figures were available, subsidies paid to the railways to haul processed alfalfa products to export position totaled $14.1 million. That works out to about $70 million over five years.
The $40 million is expected to be paid out in gradually reduced annual amounts, from $10 million the first year to $9 million the second, and so on, ending with a $6 million payment in the fifth year. For budgetary reasons, payments can’t begin until April 1996.
Benoit said money will be divided among the Prairies’ 25 individual processing plants according to their share of total 1994-95 production of dehydrated hay products. There are 16 plants in Alberta, six in Sask-atchewan and three in Manitoba.
In 1993-94, the industry produced 742,000 tonnes of alfalfa pellets and cubes, of which 640,000 tonnes were exported, mainly to Japan.
Although he expects some guidelines will be imposed by the federal government, Benoit said he hopes individual pro-cessors will be given flexibility in deciding how to spend their share of the money.
“Every plant is at a different place with respect to what they have already invested and what they would need to adjust to the sudden change in their cost structure.”
Some may want to relocate their plants on better rail lines. Some may want to increase production or start new product lines. Others may invest in new rail sidings or storage at Vancouver, while some may want to spend it on market development.
“There’s such an array of needs,” said Benoit. “Each plant has a different situation.”
While the $40 million will help, losing the Crow Benefit still represents a major blow to the dehydrating industry, which had developed in the last few years on the basis of low transportation costs.
Benoit expressed doubts whether increased shipping costs could be passed on to customers, especially since some European competitors subsidize their forage industry by as much as $125 a tonne.
