Some provincial pulse organizations are being forced to reduce expenditures and draw down reserves as levy dollars dwindle.
Saskatchewan Pulse Growers made the decision in 2016 to reduce its mandatory levy to 0.67 percent of sales from one percent.
Growers were upset that the organization’s accumulated reserves had reached $26.2 million in 2016-17 during an era of rising prices and pulse production.
One year after reducing its levy Canada lost its top pulse market when India produced back-to-back bumper crops and put in place duties and quotas to keep imports out of the country.
“That’s a fundamental game changer situation,” said SPG executive director Carl Potts.
Pulse prices plummeted and growers responded by reducing pea and lentil acres.
That caused levy revenue to fall $7.5 million or 44 percent below what was budgeted for 2017-18.
The organization responded by reducing expenses by $3.5 million below budget with cuts to research and development and market promotion.
Potts said they couldn’t cut further because research and development projects are often multi-year commitments and they account for the vast majority of the budget.
“Our ability to quickly adjust and reduce expenditures is somewhat limited,” he said.
The result was that expenses exceeded revenues by $6.8 million, a loss that was covered by dipping into the reserves.
Levy revenues for 2018-19 are expected to be about the same as the previous year’s $9.7 million, so it will be another year of belt-tightening.
SPG is reducing total expenditures by 25 percent compared to the 2016-17 budget, including further cuts to research and development, market promotion and communication.
The organization has also reduced one staff position by not filling a vacancy and it is pausing new research commitments. However, it wants to fulfill existing ones, although some projects may be delayed.
Potts said some expenditures are unavoidable and that means the association will draw down its reserves by another $5 million.
That will leave about $10 million in reserves by the end of 2018-19, $6.5 million of which is internally restricted.
“The organization just doesn’t want to plan to chew in and draw assets down below that,” he said.
Leanne Fischbuch, executive director of Alberta Pulse Growers, said they are feeling the pinch as well.
The organization has collected $1.5 million in levy revenue so far in 2018-19, which is 25 percent below last year and way off the high point of 2016-17.
Alberta also recently lowered its levy. It started collecting 0.75 percent on sales as of Aug. 1, 2018, down from one percent.
Fischbuch said the board made a prudent decision in 2016-17 to set aside excess revenue to pay for five years of expenses like science cluster funding and Pulse Canada funding.
However, it is reducing expenditures on things like the newsletter, travel and meeting costs.
Francois Labelle, executive director of Manitoba Pulse and Soybean Growers, said the organization has escaped unscathed from the loss of the Indian market.
“In Manitoba, most of our revenue comes from soybeans, so we’re not affected nearly as much with pulse crops as Saskatchewan and Alberta,” he said.
Potts said in retrospect it was “unfortunate timing” to reduce the levy just prior to the collapse in pulse markets. It caused a double-whammy blow to the organization’s finances.
But there are no plans to increase the levy any time soon. The 0.67 percent levy will stay in place at least through 2019-20.