Checkoff refunds cost beef producers: Study

Every dollar per head going to Canada’s national beef checkoff (NCO) earns around $9 in benefits for cattle producers, but those benefits and more disappear if that checkoff dollar must be refunded, a new study warns.

The NCO, a mandatory $1 per head levy collected when beef cattle producers market their cattle, funds Canada’s national-level beef marketing and research programs, including the Beef Cattle Research Council, Beef Information Centre and Canada Beef Export Federation.

The checkoff study was released Monday by the Canadian Beef Cattle Research, Market Development and Promotion Agency (NCO Agency).

It pegs the benefit:cost ratio (BCR) tied to the investment of a producer checkoff dollar in marketing and research work as rising from 7:1 to 11:1 over 2005-08, with an average BCR of 9:1.

Also, study author John Cranfield wrote, “by 2008, the return to the average dollar invested slightly exceeded the return to the average dollar invested prior to the BSE crisis.”

The NCO Agency said its study was already underway when Alberta, which accounts for over 65 per cent of Canada’s beef production, announced in April 2009 it would make its beef checkoff refundable effective this month.

This study wasn’t commissioned to address that change, the agency wrote, but “given the sizable number of Alberta cattle marketings, the NCO Agency requested that analysis be included on the potential impact” of Alberta’s refund option.

Given that the NCO is leveraged 6:1 to obtain supplementary funding to cover program costs, less checkoff means less leveraging in obtaining matching funds from other sources, the study said.

Thus, “assuming the refund requests made by Alberta cattle producers are not channeled into other marketing and research activities, results showed that every dollar refunded will cost Canadian cattle producers $11 in economic benefits,” Cranfield, a University of Guelph ag economist, wrote.

Depending on the size of the refund, he wrote, the cut in Canadian cattle producer benefits could range anywhere from $13 million (assuming a 40 per cent refund rate) to $23 million (given a 70 per cent refund rate).

National check-offs are non-refundable in Australia, New Zealand and the U.S., the study said. Alberta is the only province in Canada that has not exempted the national check-off from being refunded.

The study also noted Canadian producers’ 9:1 return on investment from the NCO is higher than the checkoff returns for beef producers in Australia (5:1) and the U.S (5.50:1, although the U.S. return is focused on domestic marketing, as opposed to export markets).

“Under-investment”

All that said, the study still found significant “under-investment” of Canadian checkoff dollars in research and marketing work.

Investment in these activities should increase to make the most of the checkoff dollar, the study said. Also, it noted, “the extent of this under-investment has been larger for research activities than for marketing activities.”

Ignoring NCO administration costs, the study said, the historic ratio of investment in such work runs around 93 per cent to marketing and seven per cent to research.

“While both marketing and research suffer from under-investment, reallocating check-off funds from marketing to research would increase Canadian cattle producer benefits,” Cranfield wrote.

The NCO Agency emphasized that the purpose of the study was to get an “independent evaluation” of the NCO’s benefits, not to make the case for an increase in the checkoff rate on beef cattle.

“The NCO Agency wanted to provide a comprehensive independent evaluation that will be a benchmark for future check-off effectiveness studies and will also hopefully assist cattle producers with future check-off planning,” agency chairman Marlin Beever said in the agency’s release.

The agency said its communications plan is already underway to make sure cattle producers who pay the national checkoff get this information and are aware of the value from their investment in research and marketing.

About the author

Glacier FarmMedia Feed

GFM Network News

Glacier FarmMedia, a division of Glacier Media, is Canada's largest publisher of agricultural news in print and online.

explore

Stories from our other publications