economic impact analysis - cattlemen · final report 2 november 13, 2012 1. final report submission...

BRITISH COLUMBIA’S BEEF CATTLE INDUSTRY

FINAL REPORT Table of Contents

1. Final Report Submission Letter....................................... 2

2. Glossary of Economic Terms .......................................... 4

3. Executive Summary ........................................................ 5

4. Introduction .................................................................. 11

5. Definition of the Cattle And Beef Industry ................... 14

6. Economic Impact Analysis ............................................ 32

7. Economic, Social and Environmental Benefits ............. 36

8. Next Steps ..................................................................... 51

9. Appendices ................................................................... 53

Appendix A – Data Sources ..................................................... 54

Appendix B – Economic Impact Analysis Approach................. 57

Appendix C – About MNP ........................................................ 60

ECONOMIC IMPACT ANALYSIS:

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This project is supported by the Canada-BC Ranching Task Force Funding Initiative; delivered by the Investment Agriculture Foundation of BC with funding from the federal and provincial governments.

Agriculture and Agri-Food Canada (AAFC) and the Ministry of Agriculture are committed to working with industry partners. Opinions expressed in this document are those of the BC Cattlemen’s Association and not necessarily those of AAFC or the Ministry of Agriculture.

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November 13, 2012

1. FINAL REPORT SUBMISSION LETTER

The British Columbia (BC) cattle and beef industry commissioned MNP LLP (MNP) to carry out an economic impact study with funding from the Ranching Task Force Funding Initiative. A Committee with representation from the BC Cattlemen‟s Association, the BC Association of Cattle Feeders, the BC Association of Abattoirs and the BC Dairy Association advised MNP on this important initiative.

As part of the study, MNP reviewed publicly available industry data and reports and conducted interviews with representatives from across the industry value chain and with municipalities across the Province. Based on the information gathered, economic impacts were estimated using relevant statistical methodologies and economic multipliers. The economic impact study in this report provides:

A glossary of economic terms

A definition and profile of the BC cattle and beef industry and its value chain

An industry value chain

Estimated direct and multiplier impacts on provincial GDP, taxes and job creation

An overview of the community, social and environmental contributions of the industry

Identification of data sources

In 2014, MNP will conduct a second study and report the economic impacts two years after the initial assessment to measure change.

We would like to acknowledge and thank all interview respondents and the following industry representatives and organizations for their support, expertise, insights and guidance:

The Ranching Task Force

Kevin Boon, Alana Palmer and Elaine Stovin from the BC Cattlemen‟s Association

Bill Freding from the BC Association of Cattle Feeders

Robin Smith and Rehanni Khaseipoul from the BC Dairy Association

Dennis Gunter from the BC Association of Abattoirs

Trish Laugharne and Don Low from the Ministry of Agriculture and Lands

CanFax

Agriculture and Agri-Food Canada

The BC Centre for Disease Control

The Canadian Food Inspection Agency

Statistics Canada

MNP would also like to thank the following industry representatives who provided pictures included in this report:

Larry Garrett and Karen Markle from Garrett Ranches Ltd., pages 49 (right hand side), 51 and 53

Ian and Annie Van Metre from Double Box Ranch, page 47 (right hand side)

Rob Larson from Clover Farms Ltd., page 49 (left hand side)

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On behalf of MNP, thank you for the opportunity to undertake this important assignment which will assist BC's cattle and beef sector to assess its impacts and plan for its successful future.

Sincerely,

Andrew J Raphael, Director Food and Ag Processing 604.637.1567 [email protected] CC: MNP: Nina Jauernig Maria Gonzalez

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2. GLOSSARY OF ECONOMIC TERMS

Term Definition

Direct Impacts

Direct impacts are the economic impacts of an industry that are due to changes to front end businesses that receive expenses or operating revenue as a direct consequence of an industry. Direct impacts are related to original purchases or “direct sales” from primary suppliers.

Example: In the case of cattle production, direct impacts are related to the spending that cattle producers make when purchasing goods and services from their suppliers; for example, purchasing veterinary services or farm tools.

FTE FTE means full-time equivalent employee.

GDP GDP is the “value added” to the economy (the unduplicated total value of goods and services).

Government Tax Revenue

Government tax revenue is the total amount of tax revenues generated for different levels of government, including municipal, provincial and federal taxes.

Indirect Impacts

Indirect impacts are due to changes in the activity of an industry‟s suppliers. Indirect impacts include the spending that cattle producers‟ suppliers make when purchasing goods and services from their own suppliers (i.e. secondary suppliers) in order to meet the demand generated by the cattle industry.

Example: When cattle producers spend money on veterinary consultations, veterinarians purchase medicine, veterinary equipment and veterinary supplies to meet producers’ demand. This spending by veterinarians reflects the indirect impacts of cattle production spending on veterinary services.

Induced Impacts

Induced impacts are due to shifts in spending on goods and services as a consequence of the payroll of the directly and indirectly affected businesses. In the case of cattle production, induced impacts reflect the additional spending by the employees of the cattle producers‟ suppliers (primary suppliers) and their suppliers‟ suppliers (secondary suppliers).

Example: Using the veterinary consultation example from above, the additional wages received by veterinary employees, veterinary pharmaceutical company employees and veterinary equipment employees “induce” spending. For example, these employees make consumer purchases (e.g. at the grocery store or gas station). The jobs and income that result from these consumer purchases are considered induced impacts.

Nominal GDP Nominal GDP is the “value added” to the economy (the unduplicated total value of goods and services) that has not been adjusted for inflation.

Output Output is the total gross value of all business revenue. This is the broadest measure of economic activity.

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ECONOMIC IMPACT ANALYSIS: BRITISH COLUMBIA’S BEEF CATTLE INDUSTRY

3. EXECUTIVE SUMMARY

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INDUSTRY PROFILE

In this report, we have examined the impacts of British Columbia‟s (BC‟s) cattle and beef industry and its associated value chain. The industry value chain includes the flow of production of cattle from the farm gate of ranching operations and dairy operations, through backgrounding and feedlot operations to processing activities that result in beef products that are ready for consumption through retail and wholesale channels.

Highlights

In 2011, farm cash receipts from the sale of cattle and calves totalled $206 million or 3% of the total cash receipts from the sale of cattle and calves in Canada.

1

In 2011, the cattle and beef industry accounted for 8% of all farm cash receipts and 15% of all livestock farm cash receipts in the Province.

2

In July 2011, the cattle herd in BC consisted of about 193,000 beef cows, 72,000 dairy cows, 13,000 bulls and 372,000 additional cattle being fed on pasture or grain.

3

On July 1st, 2011 there were 366,900 head of cattle on BC cow calf operations.

4

There were 112,900 head of cattle in backgrounding operations as of July 1st, 2011.

5

There were about 30,000 head of cattle in feedlot operations as of July 1st, 2011.

6

In 2011, there were approximately 2,579 farms in BC predominantly farming beef cattle,7 making up 5%

of Canada‟s national beef cow herd.8 The total number of beef cattle farms, including those whose

primary operations are not beef cattle, was higher at about 4,848 in 2011.9

There are currently 34 provincially licensed red meat plants in BC that process small volumes of cattle

and calves (38,100 head) which are typically sold into local markets.10,11

There are an estimated 8,700 people employed in the BC cattle and beef industry, including in ranching operations, backgrounding operations, feedlot operations and abattoir operations.

12

BC ranches occupy over 5 million acres of private land, and tenure on a further 21 million acres of Crown range land.

13 The average size of a cattle ranch in BC is 1,074 acres.

14

1 Statistics Canada, Farm Cash Receipts, 2011

2 Ibid

3 Statistics Canada, Cattle Statistics 2011

4 Ibid

5 Ibid

6 Ibid

7 Please note that this Census estimate includes only farms that predominantly farm cattle. For example, a ranch that farms 51% hay

and 49% cattle would be excluded from the Census estimate 8 Statistics Canada, Census Agriculture 2011

9 Estimate based on Statistics Canada‟s 2011 Semi Annual Livestock Survey. For more information please see Appendix B

10 Ministry of Agriculture and Lands, Fast Stats 2010

11 BC Centre for Disease Control, Website: www.bccdc.ca

12 BC Ranching Task Force, Report to Government, 2009

13 Ibid

14 BC Cattlemen‟s Association, Website: www.cattlemen.bc.ca

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ECONOMIC IMPACTS

Cattle Production Impacts

The cattle and beef value chain affects the BC economy through direct expenditures on goods and services, the employment of workers, and the generation of tax revenues for federal, provincial and municipal governments. Indirect and induced impacts arise from the linkages that exist with suppliers and other sectors. Please note that we have rounded figures where appropriate. For a glossary of economic terms, please see Section 2 of this report.

MNP estimated economic impacts using relevant statistical methodologies and economic multipliers. We found the following:

Total output generated by cattle producers in the BC economy is estimated to be $606 million. Direct output is estimated to be $351 million. Direct output supports a further $193 million in indirect impacts and $62 million in induced impacts.

Total nominal GDP generated by cattle producers in the BC economy is estimated to be $316 million. Direct nominal GDP is estimated to be $190 million. Direct GDP supports a further $89 million in indirect impacts and $36 million in induced impacts.

Approximately 4,242 full-time equivalent employee (FTE) positions are generated by cattle producers in the BC economy including 2,349 in direct FTEs and another 1,893 in indirect and induced FTEs.

Finally, we estimated that cattle production generated $52 million in taxation revenue including $27 million, $20 million and $5 million in revenues to the federal, provincial and municipal governments respectively.

The economic impacts of BC cattle producers are summarized in the table below.

Economic Impacts of BC Cattle Production

Cattle production is an important contributor to the BC economy. Economic contribution supported by cattle ranching operations, backgrounding operations and feedlot operations is estimated to be $316 million in nominal GDP. The Province‟s total nominal GDP in 2010 was $203 billion.

15 The estimated

cattle production GDP contribution therefore accounts for 0.2% of the provincial economy.

15

Statistics Canada, GDP Expenditure Based, Current Prices, 2010

Cattle Producers

Output

GDP

Employment (FTEs)

Federal Tax

Provincial Tax

Municipal Tax

Direct $350,968,349 $190,146,456 2,349 $13,321,429 $8,677,392 $3,369,295

Indirect and Induced

$255,480,802 $125,480,815 1,893 $13,728,909 $11,186,195 $1,572,589

Total $606,449,151 $315,627,271 4,242 $27,050,338 $19,863,588 $4,941,884

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ECONOMIC, SOCIAL AND ENVIRONMENTAL BENEFITS

The BC cattle and beef industry also generates economic, social and environmental benefits that are often qualitative in nature.

Economic impact measures are consistent across industries. Usually GDP, employment and taxation impacts are reported. Economic benefits and their accompanying measures, on the other hand, may vary greatly from industry to industry.

Specific economic benefits stemming from the BC cattle and beef industry include:

Partnerships with research and educational institutions. Strong partnerships have been developed with local universities and research institutions to better understand emerging issues and trends affecting the cattle and beef industry in BC. For example, a multidisciplinary research team at Thompson Rivers University has been engaged to develop new techniques and technologies to make the industry more sustainable – both economically, through new product offerings; and environmentally, by reducing the amount of methane produced by cattle.

16

Development of technology and innovation. There are many examples that exist of new product designed for farm activity such as pivot technology used for irrigation. New products have also been developed within supporting industries. For example, a small BC manufacturer developed custom work boxes that can be easily inserted on truck beds, providing a transportation solution for ranchers and loggers in his community. Other examples of innovations generated by the cattle industry are crop testing trials and pasture fertilization testing (with support from the Smithers Farmers‟ Institute).

Opportunities for Employment, Training and Education Programs. The majority of cattle ranchers and feedlot operators surveyed by MNP (73%) indicated that the industry creates opportunities for unemployed workers, trainees and interns. According to the municipalities surveyed by MNP, the industry generates opportunities for employment in local communities. Such opportunities exist through local forage clubs, cattle farms and family-run operations. One farmer noted that he hires many students, including those with disabilities who may have a difficult time competing for employment in other industries.

Support of Local Companies and Industries. The majority of municipality representatives surveyed by MNP (80%) feel that the cattle industry contributes to retaining support service companies or industries such as agriculture, transportation, distribution or veterinarian services in a region. Several respondents noted that the local cattle industry spurred the establishment of local abattoirs and co-op and business programs to serve the agriculture industry.

Opportunities for Dairy Farmers. The BC cattle and beef industry generates additional economic value by providing dairy farmers the opportunity to sell retired dairy cows and excess animals from their operations.

Opportunities for Abattoirs. BC cattle production also provides a unique opportunity for abattoirs to market locally produced beef to customers. Some municipality representatives, who agree that the cattle industry contributes to attracting new support service companies or industries, noted that the cattle industry attracted local abattoirs in their regions.

16

British Columbia News Release, New Research Chair will Support Cattle Industry, January 14, 2009

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Benefits Related to Check Offs. Cattle Industry Development Council (CIDC) check off funds are collected by producers, livestock dealers, stockyards and agents on behalf of the CIDC when cattle are slaughtered or sold in BC. In total, $3 per head slaughtered or sold within the province17

is collected and remitted to the CIDC - $1 per head represents the national check off used to support domestic and international marketing, research and promotion; and $2 per head represents the provincial check off, which becomes the CIDC check off (levy) fund, used to support industry development work through provincial cattle organizations.

Social and community benefits of the BC cattle and beef industry include:

Rural Community Development and Sustainability. A recurring theme in the survey responses of cattle ranchers and feedlots was their overall desire and commitment to support local businesses. In many rural communities in BC, cattle production is the foundation of the local economy supporting local feed stores, equipment dealers, repair shops, abattoirs and transportation services.

18 As one rancher commented, “cattle dollars stay in the local community”,

with many producers putting the bulk of their earnings right back into their operations. The majority of cattle farms are small family run operations that have other sources of revenue to supplement their cattle related income, including other farming operations and off farm employment. Cattle producers‟ non-cattle operations and off farm employment contribute to local economies as well.

Community Involvement and Volunteerism. The majority (89%) of cattle ranchers and feedlots surveyed by MNP indicated that they contribute to the development of their community by participating in school activities, volunteer activities or local community events. Some examples of community involvement include: helping out at local fairs and bull sales; taking leadership roles and other committee positions; coaching local sports teams; and contributing to activities with local schools, churches, food banks and community halls.

Recreational Areas and Opportunities for Tourism. Some cattle ranches, such as those that are members of the BC Guest Ranchers‟ Association (BCGRA), offer authentic western vacation experiences for visitors. In many rural communities, ranches provide valuable open spaces for recreation and tourism.

19 Some of the cattle ranchers interviewed by MNP encourage locals and

tourists to interact with the scenery and wildlife on their ranch. This provides an opportunity for the urban population to experience rural communities and regions in BC. Seventy percent of municipality representatives interviewed by MNP indicated that recreational areas and tourism opportunities are generated by the cattle industry in their regions. They noted that local farmers markets, cattle ranches, forage clubs, cattle auctions and the annual Fall Fair all generate recreational and tourism opportunities.

Food Safety and Consumer Health. The cattle industry has a reputation for acting responsibly in terms of on farm food safety. There are a number of programs and initiatives that exist to protect consumer health and uphold consumer confidence in the practices and products of BC‟s cattle industry. Heightened consumer confidence results in a stronger, more competitive BC cattle industry, as food safety has become an increasingly important factor in consumer buying decisions. The BC cattle and beef industry also learned an important food safety related lesson from the BSE crisis and has significantly improved and tightened their food safety processes and protocols since.

17

As of July 1, 2010 18

British Columbia Ranching Task Force Report to Government, 2009 19

Ministry of Sustainable Resource Management, Beef Production – An Economic Profile, 2003

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Farm Safety. Farm safety in BC is organized by the Farm and Ranch Safety and Health Association (FARSHA). Improved farm safety produces a number of benefits, including reduced worker fatalities, injuries and illnesses. Farm safety can also save employers and employees costs related to lost production, medical expenses and workers‟ compensation insurance premiums.

20 Municipality representatives surveyed by MNP generally felt that the BC cattle

industry contributes to food and farm safety and consumer health in their region, for example, by contributing to local food production and investing in on farm food safety programs.

Risk Management Programs. The cattle and beef industry in BC is faced with a number of ongoing risks which are often interconnected, including production risks, price and market risks, regulatory risks and financial risks. Risk management programs are important in reducing the level of risk borne by the producer and decreasing the reliance on social safety net programs. There is a perceived need amongst BC industry representatives for additional programming similar to that offered in Alberta.

Environmental benefits of the BC cattle and beef industry include:

Environmental and land stewardship. All ranchers and feedlot operators who participated in MNP‟s survey agreed that their activities support the environment and stewardship of the land. Examples provided of land stewardship activities include moving cattle through a series of pastures; ensuring proper fencing around wetlands and lakes; planting grass seeds to improve disturbed areas; planting trees to prevent erosion; allocating sections of land for wildlife movement; using solar panels to reduce environmental impacts on surrounding regions; utilizing weed control to maintain and improve range conditions; and opting out of using fertilizers or pesticides. BC cattle ranchers have also restored and enhanced substantial fish and wildlife habitat across the Province by their own initiative and as part of the BC Cattlemen Association‟s Farmland-Riparian Interface Stewardship Program.

21 The individuals surveyed agreed that their

land supports wildlife such as deer, elk, bears, moose, beavers, ducks and geese. Examples provided by feedlot operators of environmental stewardship include protecting groundwater quality, using pivot irrigation systems for soil and water preservation and maximizing soil nutrients using compost and manure management.

Contributions to Sustainability. Cattle farms in BC use grazing land that is generally not suited for other agricultural activities to support cow calf and yearling operations. This sustainable utilization of marginal land produces protein for human consumption with very little fossil fuel input.

22 Of the cattle ranchers and feedlots surveyed by MNP, 89% indicated that the industry

contributes to sustainability. Sample practices include ground and weed control, sustaining water for irrigation purposes, selective planting and grazing management. The majority of municipality representatives surveyed by MNP (80%) also feel that local cattle ranching operations have contributed to an increase in, or retention of, local, sustainable farm production, such as farmers markets and food co-ops that in turn provide local, fresh meat products to the community.

Fire Hazard Reduction. Ranches also have the potential to diminish fire hazards by reducing decadent growth,

23 which may pose fuel loads in the event of a fire. Livestock grazing has the

ability to lower fire hazards by reducing the amount of potential fuel loads. Studies have shown that livestock grazing has potential to affect fire characteristics

24 and decrease the severity,

continuity and size of the damage.

20

OSHA Factsheet, Farm Safety, Website: http://www.osha.gov/OshDoc/data_General_Facts/FarmFactS2.pd 21



BC Ministry of Sustainable Research Management, Economic Development Branch, Beef Production - An Economic Profile, March 2003 24

Davies et al. Effects of Long-Term Livestock Grazing on Fuel Characteristics in Rangelands: An Example From the Sagebrush Steppe. Rangeland Ecology and Management 63:662–669. November 2010 http://oregonstate.edu/dept/EOARC/sites/default/files/672.pdf

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4. INTRODUCTION

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The cattle and beef industry is comprised of various associations, producers and businesses. The industry value chain spans from inputs such as feed and fuel, over production, processing, value added processing and distribution, to retail.

STUDY PURPOSE

The BC cattle and beef industry commissioned MNP to carry out an economic impact study with funding from the Ranching Task Force Funding Initiative. A Committee with representation from the BC Cattlemen‟s Association, the BC Association of Cattle Feeders, the BC Association of Abattoirs and the BC Dairy Association advised MNP on this important initiative.

The scope of the study included:

Economic impacts – analysis of the economic impacts and benefits produced by the industry. The analysis quantified output, GDP, tax revenues and employment.

Other economic, social and environmental contributions – a description of how the industry segments and its members contribute to development within the Province through activities such as strategic partnerships, community involvement and commitment to the environment.

OUR APPROACH

In preparing this report, MNP carried out the following activities:

Conducted research through publicly available articles and reports

Gathered industry data and statistics through agencies and sources such as Statistics Canada and BC Stats

Conducted 48 telephone interviews with representatives from across the industry value chain, including 36 cattle ranchers, five feedlots, three dairy operations and four abattoirs

MNP conducted 13 telephone interviews with representatives from BC municipalities and other relevant organizations, including mayors and economic development officials

Developed an economic impact model using the data collected through secondary research of published information and statistics, and through the telephone interviews with industry representatives

Analyzed and summarized economic, social and environmental contributions based on the telephone interviews and research of available statistics, articles and reports

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ORGANIZATION OF THE REPORT

The remaining sections of the report are organized as follows:

Section 5 provides an overview and definition of the cattle and beef industry in BC with key industry statistics

Section 6 provides a description of the economic impact methodology and provides aggregate results for the economic impacts of members of the industry

Section 7 describes other economic, social and environmental contributions of the industry value chain

Section 8 summarizes next steps and additional analyses

The appendices include a list of data sources that informed the study; a summary of the methodology used to estimate the economic impacts of the industry along with relevant definitions; and some background information about MNP.

LEGAL MATTERS

This report is not intended for general circulation, nor is it to be published in whole or in part without the prior written consent of MNP. The report is provided for information purposes and is intended for general guidance only. It should not be regarded as comprehensive or a substitute for personalized, professional advice.

We have relied upon the completeness, accuracy and fair presentation of all information and data obtained from industry associations and public sources. The accuracy and reliability of the findings and opinions expressed in the presentation are conditional upon the completeness, accuracy and fair presentation of the information underlying them. As a result, we caution readers not to rely upon any findings or opinions expressed as accurate or complete and disclaim any liability to any party who relies upon them as such.

Additionally, the findings and opinions expressed in the presentation constitute judgments as of the date of the presentation, and are subject to change without notice. MNP is under no obligation to advise of any change brought to its attention which would alter those findings or opinions.

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5. DEFINITION OF THE CATTLE

AND BEEF INDUSTRY

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This chapter presents a profile of the BC cattle industry. We examined publically available data from organizations such as Industry Canada, Statistics Canada, Agriculture and Agri-Food Canada and cattle related associations and federations to draft this section of the report. For a full list of our data sources, please see Appendix A. The profile presented in this chapter provides a baseline for tracking changes in the industry in future years.

Please note that we have rounded figures where appropriate. For a glossary of economic terms, please see Section 2 of this report.

Highlights

In 2011, farm cash receipts from the sale of cattle and calves totalled $206 million or 3% of the total cash receipts from the sale of cattle and calves in Canada.

25

In 2011, the cattle and beef industry accounted for 8% of all farm cash receipts and 15% of all livestock farm cash receipts in the Province.

26

In July 2011, the cattle herd in BC consisted of about 193,000 beef cows, 72,000 dairy cows, 13,000 bulls and 372,000 additional cattle being fed on pasture or grain.

27

On July 1st, 2011, there were 366,900 cattle on BC cow calf operations.

28

There were 112,900 head of cattle in backgrounding operations as of July 1st, 2011.

29

There were about 30,000 head of cattle in feedlot operations as of July 1st, 2011.

30

In 2011, there were approximately 2,579 farms in BC predominantly farming beef cattle,31

making up 5% of Canada‟s national beef cow herd.

32 The total number of beef cattle farms, including those whose

primary operations are not beef cattle, was higher at about 4,848 in 2011.33

There are currently 34 provincially licensed red meat plants in BC that process small volumes of

(38,100 head) cattle and calves, which are typically sold into local markets.34,35

There are an estimated 8,700 people employed in the BC cattle and beef industry, including in ranching operations, backgrounding operations, feedlot operations and abattoir operations.

36

BC ranches occupy over 5 million acres of private land, and tenure on a further 21 million acres of Crown range land.

37 The average size of a cattle ranch in BC is 1,074 acres.

38

25

Statistics Canada, Farm Cash Receipts, 2011 26

Ibid 27

Statistics Canada, Cattle Statistics 2011 28

Ibid 29

Ibid 30

Ibid 31

Please note that this Census estimate includes only farms that predominantly farm cattle. For example, a ranch that farms 51% hay and 49% cattle would be excluded from the Census estimate 32

Statistics Canada, Census Agriculture 2011 33

Estimate based on Statistics Canada‟s 2011 Semi Annual Livestock Survey. For more information please see Appendix B 34

Ministry of Agriculture and Lands, Fast Stats 2010 35

BC Centre for Disease Control, Website: www.bccdc.ca 36

BC Ranching Task Force, Report to Government, 2009 37

Ibid 38

BC Cattlemen‟s Association, Website: www.cattlemen.bc.ca

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INDUSTRY OVERVIEW

Overview

The following are the four primary segments in the BC cattle industry:

1. Ranching Operations

2. Backgrounding and Feedlot Operations

3. Processing Operations

4. Dairy Beef Operations

Ranching Operations

The cow calf operation is the most common type of cattle-raising enterprise in BC. Nearly 56% of the cattle farms in BC produce beef cattle, and nearly all of these operations are cow calf operations.

39 Cow

calf operations are the farms and ranches that raise calves for the first 8 to 10 months. The calves graze with their mothers through BC pastures, grasslands and forested ranges through the spring, summer and fall seasons. In the fall, when the calves reach a weight of about 250 kilograms, calves are weaned from their mothers. If the rancher has abundant feed, the rancher may choose to keep the calves to yearlings, adding weight with available forage. In BC, cow calf farming is founded on an extensive grazing base that utilizes land unsuitable for other more intensive agriculture activities. BC ranches occupy over 5 million acres of private land and have tenure on a further 21 million acres of crown range land.

40

According to First Nations Agricultural Association, in 2010 First Nations in BC had an estimated 300 agriculture and agri-food businesses, of which 200 were cattle farms with an average head size of 30.

41

There are a number of opportunities for farmers to market their cattle. These include live market auction markets, electronic (internet or video) auction markets, farm gate sales and cattle dealers who specialize in purchasing cattle for specific customers such as feedlots and backgrounders. Smaller cow calf operators mainly sell their weaned calves to the highest bidder at livestock auction markets where they are purchased by feedlots or backgrounders. Larger ranchers often sell through electronic auction markets.

Cattle also enter into interprovincial and international trade. The major export destinations for BC live cattle are Alberta and Washington State.

Backgrounding and Feedlot Operations

Backgrounding is the process where operators put additional weight on young and weaned calves, either on pasture or in a feedlot. Backgrounding feeder operations confine the cattle and put on additional weight by feeding hay, cereal or corn silage or other forage, and in some cases small amounts of grain. The backgrounding phase usually brings cattle up to 350 to 400 kilograms, and then cattle are shipped to a feedlot to be finished for the processing market.

Feedlot operations involve a multi-stage feeding system where cattle are fed high-energy grain feed rations for at least 120 days. Depending on when the cattle enter the feedlot, some animals can be ready for processing from 12 to 24 months of age. Usually, steers are processed at 520 to 600 kilograms, and heifers at 475 to 525 kilograms.

42 Feedlot operators typically either buy calves from cow calf operations or

backgrounding operations mainly through live auction markets, or they custom feed cattle for clients on a

39

Statistics Canada, Cattle Statistics, 2010 40

BC Cattlemen‟s Association, Website: www.cattlemen.bc.ca 41

First Nations Agricultural Association, Carving a Niche for Aboriginal Foods in 2010 42

Alberta Beef Producers, www.albertabeef.org

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fee-for-service basis. Custom feedlots charge their customers for the feed and health inspection services they provide to the cattle.

Most of BC cattle are sent to Alberta and Washington State to be finished before processing. This can be explained by the constraint of BC feedlots in accessing grains used to finish cattle and a lack of federally inspected abattoirs.

Processing Operations

BC's beef processing operations comprise cattle and calf slaughtering operations, secondary processors who manufacture and package beef products for retail sale, and purveyors who prepare portion-ready cuts for hotel, restaurant and other food service establishments.

In BC, all red meat plants are provincially licensed with the Province. Due to the seasonal nature of cattle production in BC, most red meat plants are operating at full capacity during fall season, whereas in the summer most plants are operating at about half of their capacity. This is one of the major challenges facing provincially licensed red meat plants, given that seasonality reduces labour force retention and accessibility to large-sale commercial markets that look for consistent supply of products.

In BC, most processing operations are multi-species facilities, so their processing capacity is used to slaughter cattle and other livestock species such as bison, lamb, goats and other food animals. Prior to being processed, cattle are inspected for clinical signs of disease to determine their suitability. The degree of processing conducted will vary depending on the local market. When the cattle are slaughtered, the majority of the carcasses are directed to boxing operations where they are broken into primal and sub primal cuts, which are vacuum-packed and shipped to further processors and retailers. In addition, small local processing plants sell sides or cuts and wrapped products, which are typically sold into local markets.

Dairy Operations

Dairy cows‟ primary function is to produce milk. However, when dairy cows are no longer able to provide sufficient quantities of milk, they are periodically culled to be replaced by bred heifers. Dairy herds have a high culling rate with up to a third of the cows being replaced on an annual basis. Dairy cows generally are culled at around 5 or 6 years of age. By culling animals at the end of their productive life, dairy producers ensure the renewal and rotation of their herd. This process improves dairy farms‟ productivity and herds‟ genetic characteristics.

Most dairy cull cows along with male cattle are sent to Alberta and Washington State to be processed into beef products and cuts. Culled cows are usually processed into ground beef, which is destined for food service and retail sale. Because of the size of the dairy sector in the Province, a significant number of dairy cull cows and excess animals (which include calves and heifers) are finished and processed for human consumption.

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PROFILE OF THE INDUSTRY

Overview

In July 2011, the industry had 650,000 head of cattle, 27% in the Thompson Okanagan, 20% in the Lower Mainland, 18% in the Cariboo, 18% in the Peace River, 8% in the Nechako and a further 9% spread between the Vancouver Island and Kootenay Regions.

43

As shown in the figure below, in July 2011 the cattle herd in BC consisted of about 193,000 beef cows, 72,000 dairy cows, 13,000 bulls and 372,000 additional cattle being fed on pasture or grain.

Figure 1: BC Cattle by Type

Source: Statistics Canada, Cattle Statistics 2011

BC cattle production can be divided into different farm types including ranching operations (cow calf and yearling operations), backgrounding operations, feedlot operations and dairy operations.

43

Statistics Canada, Cattle Statistics, 2011

13.0

193.0

72.0

35.0

33.0

25.3

50.0

228.7

Bulls, 1 year and over

Beef cows

Dairy cows

Heifers, dairy replacement

Heifers, beef replacement

Heifers, slaughter

Steers, 1 year and over

Calves, under 1 year

Head ('000)

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19


As shown in the figure below, the bulk of BC cattle inventories are found on cow calf operations. In July 2011, the cow calf and cow yearling operations herd was approximately 366,900 accounting for 56% of total cattle head count in BC.

44 In addition, 22% of the cattle are in dairy operations, 17% in

backgrounding operations and the remaining 5% in feeder operations.45

Figure 2: BC Cattle by Farm Type


44

Ibid 45


Dairy Operations

22%

Cow-Calf Operations

56%

Back-grounding

17%

Feedlot Operations

5%

FINAL REPORT

20


Geography

As can be seen in the map on the right, the Thompson-Okanagan, Lower Mainland and Cariboo Regions contain 65% of the total cattle farms, backgrounding and feedlot operations in the Province. The Thompson-Okanagan and the Lower Mainland-Southwest Regions contain 29% and 18% respectively.

46 Smaller operations are dominant

in the Southwest Region of the Province, whereas larger operations are generally in the Northern and Interior Regions.

According to the BC Centre for Disease and Control, there are 34 provincially licensed red meat plants located throughout the Province. The majority of red meat plants are located in the Lower Mainland-Southwest Region, while the rest are spread throughout Vancouver Island, the Kootenays, Thompson-Okanagan and the Northern Regions.

There are currently no federally inspected red meat slaughtering plants in BC.

47 Two plants are currently in

the process of becoming federally licensed.

For more information on the location of dairy operations, please see the “Dairy Operations" section below.

46

Statistics Canada Census Agriculture 2011 47

BC Centre for Disease Control, Red Meat Plants as of March, 2012, Website: www.bccdc.ca

Figure 3: Map of BC Beef Cattle Producers and Processors

Legend:

Thompson-OkanaganLower Mainland-

Southwest

Peace River

Cariboo

North Coast

Nechako

Kootenay

Vancouver Island

10%

9%

1%

17%

29%

8%

8% 18%

Beef Cattle Farms and Feedlots

Meat Plants

FINAL REPORT

21


Ranching Operations

In 2011, there were approximately 2,579 farms in BC predominantly farming beef cattle,48

making up 5% of Canada‟s national beef cow herd.

49 The total number of beef cattle farms, including those whose

primary operations are not beef cattle, is higher at about 4,848 in 2011.50

As shown in the figure below, according to Statistics Canada, the Thompson Okanagan Region was home to 29% of BC cattle and feedlot operations, 18% were located in the Lower-Mainland Southern Region, 17% were located in the Cariboo Region and 10% were located in the Peace River Region.

51

Figure 4: BC Cattle Farm Distribution by Region

Source: Statistics Canada, Agricultural Census 2011

48

Please note that this Census estimate includes only farms that predominantly farm cattle. For example, a ranch that farms 51% hay and 49% cattle would be excluded from the Census estimate 49


Estimate based on Statistics Canada‟s 2011 Semi Annual Livestock Survey. For more information please see Appendix B 51

Statistics Canada, Census Agriculture, 2011

Vancouver Island - Coast

8%

Lower Mainland-Southwest

18%

Thompson-Okanagan

29%

Kootenay8%

Cariboo17%

North Coast1%

Nechako9%

Peace River10%

FINAL REPORT

22


In July 2006, the average beef cow herd in BC was 40 head, with the majority being small, family run operations.

52 In 2006, the average herd size of beef cows in BC was 55 compared to the national average

of 61 beef cows.53

For the most part, the BC industry is compromised of a large number of relatively small cattle farms. As shown in the figure below, in 2006 approximately 84% of beef cattle farms had fewer than 100 beef cows, 9% of cattle farms had between 100 and 199 beef cows and only 7% of cattle farms had more than 200 beef cows.

54

Figure 5: Beef Cattle Distribution by Farm

Source: Statistics Canada, Census Agriculture 2006

Please note that 2011 Census farm data by cow beef cattle size is not readily available.

52


Statistics Canada, Census Agriculture, 2006 54

Ibid

Small 84%

Medium 9%

Large 7%

Small (1-99 beef cows)

Medium (100-199 beef cows)

Large (200 beef cows and over)

FINAL REPORT

23


Backgrounding and Feedlot Operations

As of July 1st, 2011 there were 112,900 head of cattle in backgrounding operations.

55 The average feedlot

in BC holds about 400 head of cattle, but there are some large feedlots which hold up to 5,000 animals.56

The large commercial feedlots are generally concentrated in the Southern Interior Region. As of July 2011, BC feedlot operations‟ cattle inventories were approximately 30,000 head and accounted for 5% of the total cattle herd in BC.

57

Processing Operations

Provincially licensed red meat plants are found throughout the Province, including the Lower Mainland, Vancouver Island, the Kootenays, the Okanagan and Northern BC. There are currently 34 provincially inspected red meat plants in the Province that process relatively small volumes of cattle which are typically sold into local markets.

58 Provincially licensed processors are permitted to sell their product only

within the Province. According to the BC Centre for Control Disease, there are two red meat plants in the process of becoming federally licensed operations. This will enable them to sell their products across Canada and to the export market.

59

55


BC Ministry of Land and Agriculture, Website: www.agf.gov.bc.ca 57


BC Centre for Disease Control, Website: www.bccdc.ca 59

BC Association of Abattoirs, Website: www.bcabattoirs.org

FINAL REPORT

24


In 2010, BC had just over 4% of the national beef cow herd and accounted for 1% of Canada‟s cattle processing.

60 In 2010, total BC processing of cattle and calves was 38,100 head.

61 As shown in the figure

below, the number of cattle and calves processed in provincially and federally inspected plants increased 26% from 28,300 head in 2009 to 38,100 head in 2010.

62

Figure 6: BC Inspected Cattle and Calf Slaughter

Source: Ministry of Agriculture and Lands, Fast Stats 2010 Note: Includes federally and provincially inspected processing,

other commercial processing and on farm processing.

A new statistic from Agriculture and Agri-Food Canada states that in 2011, 22,915 head of cattle (without calves) were slaughtered in BC.

63

Dairy Operations

In 2011, there were 587 dairy farms in BC and, according to Statistics Canada, the Lower Mainland-Southwest Region is home to 63% of dairy farms; 17% are located in the Thompson and Okanagan Region, 11% are located in the Vancouver Island-Coast Region, with the remaining spread in the Northwest Regions.

64 In July 2011, the BC dairy industry had 72,000 dairy cows plus 66,400 additional

replacement calves and heifers.65

About $100 million in municipal, provincial, and federal taxes are generated directly and indirectly by the dairy industry value chain.

66

60

Statistics Canada and Canadian Food Inspection Agency, Website: www.inspection.gc.ca 61

Ministry of Agriculture and Lands, Fast Stats, 2010 62

Canadian Food Inspection Agency, Website: www.inspection.gc.ca 63

Estimate from Agriculture and Agri-Food Canada 64


Statistics Canada, Cattle Statistics 2011 66

PWC, BC Dairy, Egg and Poultry Industries – Socio-Economic Impact of British Columbia‟s Dairy, Chicken, Turkey, Hatching Egg and Table Egg Industries, April 2009.

2,600 2,500

25,700

35,600

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2009 2010

Head

Cattle

Calves

FINAL REPORT

25


Dairy cows are periodically culled and sold for beef. Dairy beef represents about 20% to 25% of the cattle and beef production in BC annually.

67 Dairy herds have a fairly high culling rate with up to a third of the

cows replaced on an annual basis.

Exports and Inter-Provincial Trade

At any phase of production, cattle can enter into interprovincial and international trade. Most cattle are shipped to feedlots for finishing in Washington State and Alberta. This is explained by the fact that BC‟s trading partners have a more reliable supply of feed grain. Trade with the US in live cattle has increased the importance of the BC cattle industry as an export industry. US proximity to BC generates cost advantages for transportation and shipping compared to other international export markets. As shown in the graphic below, in 2010 total live cattle and calf exports to all countries represented 2% of the value of all agricultural exports in BC.

68

Figure 7: Cattle and Calf Exports to Other Countries

Source: Ministry of Agriculture and Lands, Fast Stats, 2010

BC is a net importer of beef. BC produced beef accounts for less than 20% of the beef consumed in BC.69

In 2011, 776,715 kg of beef and veal with a total value of over $3 million was exported from BC with 78% destined for the US, 10% going to Russia, and 3% for each of Japan, Indonesia and Senegal. Imports of beef and veal products into BC in 2011 amounted approximately to 18 million kg, valued at $89 million. This is in relation to 206 million kg imported into all of Canada, with a value of over $1 billion.

70

67

Estimate from The BC Dairy Association 68

Ministry of Agriculture and Lands, Fast Stats, 2010 69

Ministry of Agriculture and Lands, Website: www.agf.gov.bc.ca 70

Estimates provided by Agriculture and Agri-Food Canada

2%

5%

0%

1%

2%

3%

4%

5%

6%

Total cattle and calf exports over total

agricultural exports in BC

Total cattle and calf exports over total cattle

and calf exports in Canada

Perc

en

t

FINAL REPORT

26


As shown in the figure below, in 2011 live cattle exports from BC ports of exit totalled 53,192 head of cattle, of which 45% were cows, 10% were bulls, 7% were steers, 2% were heifers and 36% were feeders.

Figure 8: Live Cattle Exports from BC Ports of Exit

Source: CanFax Note: Compiled from HS Codes on Trade Data, 2011

To balance the supply and demand for cattle, feeder and slaughter cattle and calves are traded interprovincially. As of July, 2011, out of the total supply of beef in BC, 70% was from the beginning inventory. As of January 1, 2011, 26% was from new calf production, 3% was from interprovincial supply, and only 0.2% was from international supply.

BC Cattle Supply and Demand

Supply and Demand (‘000 head)

Total supply 738.2

Beginning inventory 520

Calves born 196

Interprovincial imports 21

International imports 1.2


23,781

5,103 3,893

1,006

19,409

Cows Bulls Steers Heifers Feeders

Head

FINAL REPORT

27


Employment

In 2009, it was estimated that 8,700 people were employed in the BC cattle and beef industry, including in ranching operations, backgrounding operations, feedlot operations and beef processing operations.

71

In 2009, the meat processing sector, including beef processing, employed 5,847 people or 27% of all food manufacturing employment in BC.

72

Revenues / Farm Cash Receipts

BC ranching, backgrounding and feedlot operations raise about 509,800 head of cattle and calves annually. In 2011, beef ranked seventh among the top agricultural commodities in BC in terms of sales.

73

Farm cash receipts from the sale of cattle and calves in 2011 totalled $206 million or 3% of the total cash receipts from the sale of cattle and calves in Canada.

74 As shown in the figure below, in 2011, the cattle

industry accounted for 8% of all farm cash receipts and 15% of all livestock farm cash receipts in the Province.

75 According to the Ministry of Agriculture, the cattle industry produced 260 million pounds of

beef at a farm-gate value of $205 million.76,77

Figure 9: Size of the Cattle Industry in BC

Source: Statistics Canada, Farm Cash Receipts, 2011

The beef processing industry represents a portion of the estimated $2 billion meat processing industry in BC. The total meat processing industry‟s value added from own manufacturing in 2009 was $45 million.

78

Overall, farm cash receipts from the sale of dairy products in 2011 totalled $523 million or 9% of the total cash receipts from the sale of dairy products in Canada.

79 According to the BC Dairy Association, 2.5% of

71

BC Cattlemen‟s Association, Website: www.cattlemen.bc.ca 72

Statistics Canada, Annual Survey of Manufacturing and Logging, 2009 73


Ibid 75

Ibid 76

Ministry of Agriculture, British Columbia Agri-Food Industry 2010 Year in Review Report 77

Please note that this estimate includes processed products and live animals 78

Statistics Canada, Annual Survey of Manufacturing and Logging, 2009

8%

15%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Cattle and calves farm cash receipts over total agriculture

farm cash receipts in BC

Cattle and calves farm cash receipts over total livestock

farm cash receipts in BC

Perc

en

t

FINAL REPORT

28


dairy farms' revenue comes from dairy cow and male cattle sales for beef. It is therefore estimated that dairy cow and male cattle sales for beef represent approximately 2.5% or $13 million of cash receipts of the dairy industry.

80

As part of this study, MNP surveyed dairy farmers. Respondents in our interviews indicated that although the animal sales for beef are small compared to the sales of dairy products, beef sales are important to the financial wellbeing of their operations.

Expenses81

In 2010, BC ranching, backgrounding and feedlot operations spent about $127 million on livestock purchases; $38 million on feed, supplement, straw and bedding expenses; $7 million on veterinary and breeding fees; $45 million on machinery expenses and $30 million on salaries, including pension plans and employment insurance. In 2010, the total expenses of a ranching, backgrounding and feedlot operations in BC were therefore approximately $351 million dollars.

82,83

In the beef processing industry, the three most important categories for manufacturing costs include: costs of materials and supplies; cost of energy, water and vehicle fuel; and worker wages. Over the years, waste disposal, payroll deduction costs, labour costs and costs of regulatory administration have caused significant increase in processing costs.

84

In 2010, BC dairy operations spent about $520 million in total.85

This included but was not limited to $42 million on dairy cattle purchases; $138 million on feed, supplement, straw and bedding expenses; $18 million on veterinary and breeding fees; $33 million on machinery expenses; and $73 million on salaries, including pension plans and employment insurance. In 2010, the average total expenses of a dairy farm in BC were approximately $921 thousand dollars.

86 An assumption has been made that since 2.5% of

dairy revenues are attributable to animal sales for beef, the same percentage (2.5%) is attributed to dairy operations‟ expenses for animal sales for beef. Beef related expenses would therefore equal $13 million.

79



Please note that operational expenses data is only available for the year 2010 82

Statistics Canada, Detailed Average Farm Expenses and Revenues, Fall 2010 83

Estimates for ranching, backgrounding and feedlot operations operational expenses include unincorporated farms and communal farming operations with revenues of less than $10,000 and over and incorporated operations with revenues of less than $25,000 and over. For more information on operational expenses data and related assumptions please see Appendix B 84

Expense estimates (in dollars) are not available 85

Estimates for expenses include unincorporated farms and communal farming organizations with total revenues of $10,000 and over and incorporated farms with total revenues of $25,000 and over

86 Statistics Canada, Detailed Average Farm Expenses and Revenues, Fall 2010

FINAL REPORT

29


VALUE CHAIN

A value chain is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and distribute finished products to customers. The BC cattle and beef industry value chain is shown in the following figures:

Figure 10: Industry Value Chain

Inputs Production Processing Retail

• Machinery and

equipment

• Fuel

• Feed

• Bedding and litter• Medicine

• Genetics and breeding

• Fertilizer

• Agricultural supplements

• Utilities • Tools

• Land taxes

• Range fees

• Forage

• Roughage

• Operational functions:

• Procurement

• Inventory

• Packaging

• Quality control • Labeling control

• Waste disposal

• Administrative functions:

• Sales

• Customer service• Management and

administration

• Human resources

• Processing innovation:

• Product research and development (R&D)

• Environmental /

sustainability

• Energy efficiency

• Packaging innovation• Further processing

• Specialized distribution

for:

• Retail

• Food service

• Institutional• Exports

• Specialized storage

services

• Brokerage services

• Exports controls and licensing

• Road infrastructure

• Transportation services:

• Rail transportation

• Trucking

• Veterinary Services

• Financial services:

• Accounting

• Insurance

• Other financial services• Legal and professional

services

• Consulting services

• Policy support

Service and Support

Cattle Industry Value Chain

Distribution

• Retail

• Food service

• Wholesale

• Institutional

• Exports

Dairy Beef

Stockers and

Back-

grounders

Feedlots

Cow-Calf

Operations

and

Cow-

YearlingOperations

TRANSPORTATION , HANDLING AND TRACKING

Marketing*

Mark

etin

g*

Marketing*:

• Live auction markets

• Electronic auction markets

• Direct marketing to

backgrounders• Direct marketing to feedlots

• Farm gate sales

FINAL REPORT

30


Figure 11: Industry Value Chain – Production

Production

Cow - Calf and Cow - Yearlings Operations: • Management and

administration • Land stewardship • Crown land tenures • Livestock grazing • Animal and

environmental welfare • Winter feed production • Infrastructure

management: • Livestock watering

systems • Fencing • Corrals • Storage sheds

• Traceability and trackability services

Stocking and Backgrounding Operations : • Management and

administration • Manure management • Feeding systems • Forage production • Infrastructure

management: • Construction • Renovation • Rentals • Maintenance


Marketing*

Dairy Beef: • Management and

administration • Manure management • Infrastructure



Feedlots: • Management and

administration • Manure management • Feeding systems • Forage production • Infrastructure



Marketing*

Marketing*: • Live auction markets • Electronic auction markets • Direct marketing to

backgrounders • Direct marketing to feedlots • Farm gate sales

Cattle Industry Value Chain - Production

FINAL REPORT

31


For cattle and beef production, direct impacts arise from the industries‟ core activities, while the indirect and induced impacts arise from the linkages that exist with suppliers and other sectors. These related and ancillary sectors include packaging, further processing, specialized storage, refrigeration, transportation food inspection, food safety, research and development and others. Value chains display these linkages by illustrating the components of the sector and the individuals and organizations with which it interacts.

The value chain for the BC cattle and beef industry is divided into a number of important primary activities.

Inputs involve the main products and services that cattle farmers need in order to raise beef cattle, including bedding and litter, seeds, fertilizer, fuel, feed and genetics.

Production refers to the various stages of beef cattle farming, representing the different types of operations: cow calf operations, backgrounding operations, feedlot operations and dairy operations. It is important to note that cattle are moved from farm to farm according to the production operations, in many cases crossing provincial lines to the Alberta and Washington State markets.

Processing refers to slaughtering and packaging operations, which transform beef products into value-added products such as boxed beef, sausages or ground beef. Many of these operations also perform further processing into more elaborate beef products.

Distribution includes activities required to get the finished product to the customer and, in the case of beef, involves the delivery of the processed beef products to the customer through the use of roads and specialized storage services (i.e. refrigeration).

Marketing involves activities associated with getting wholesalers, supermarkets and food service operators to purchase the product.

Service and support can happen both before and after production takes place. Support services may include scientists and specialists that are involved in every level of production, including veterinarians, specialized nutrition and feedlot advisors, researchers and government inspectors.

FINAL REPORT

32


6. ECONOMIC IMPACT ANALYSIS

FINAL REPORT

33


ECONOMIC IMPACTS OF CATTLE PRODUCERS

To estimate the economic impacts generated by the cattle and beef industry, MNP followed an input-output methodology using economic multipliers published by Statistics Canada and BC Stats. Input-output modeling is a widely-used and widely-accepted economic impact approach, making it recognizable by many different stakeholders and audiences.

Economic impacts of cattle producers arise from direct expenditures on goods and services (e.g. machinery purchases, feed expenses, veterinary expenses), the employment of support staff and the generation of tax revenues for local, provincial and federal governments. Indirect and induced impacts arise from the linkages that exist with suppliers and other sectors.

Statistics Canada provided preliminary estimates of the revenues and expenditures for cattle ranching, backgrounding and feedlot operations for 2010. We also interviewed cattle operations from across BC to verify revenues and expenditures. Based on our interviews and Statistics Canada data, we estimated total cattle production expenditures to be $351 million in 2010.

87

Please see Appendix B for an overview of our analysis methodology and relevant definitions.

87

Statistics Canada, Detailed Average Farm Expenses and Revenues, Fall 2010

FINAL REPORT

34


The table below outlines the financial data that was used to estimate ranching operation, backgrounding operation and feedlot operation impacts:

Table 1: Cattle Production Expenditures (‘000, 2010)88

Expenses

Total crop expenses $11,088,335

Fertilizer and lime expenses $6,271,728

Pesticide expenses $1,085,004

Seed and plant expenses $2,745,466

Other crop expenses $988,672

Total livestock expenses $172,241,838

Livestock purchases $126,750,260

Feed, supplement, straw and bedding expenses $38,401,027

Veterinary fees, medicine and breeding fees $6,707,758

Other livestock expenses $344,768

Total machinery expenses $44,936,401

Small tool expenses $1,267,528

Net fuel expenses, machinery, truck, auto $22,189,344

Repair, license and insurance expenses $21,482,064

Total general expenses $122,729,661

Salaries and wages $30,205,191

Rent expenses $7,394,758

Insurance expenses $6,890,282

Utility expenses $7,042,385

Custom work and machine rental expenses $12,921,180

Net interest expenses $16,343,505

Net property taxes $3,934,407

Building and fence repairs $6,849,721

Marketing expenses $9,123,666

Miscellaneous expenses $22,029,636

Total expenses $350,968,349

Source: Statistics Canada and MNP Interview Data

88

MNP has rounded figures where appropriate.

FINAL REPORT

35


MNP estimated economic impacts using relevant statistical methodologies and economic multipliers. We found the following:

Total output generated by cattle producers in the BC economy is estimated to be $606 million. Direct output is estimated to be $351 million. Direct output supports a further $193 million in indirect impacts and $62 million in induced impacts.

Total nominal GDP generated by cattle producers in the BC economy is estimated to be $316 million. Direct nominal GDP is estimated to be $190 million. Direct GDP supports a further $89 million in indirect impacts and $36 million in induced impacts.

Approximately 4,242 FTE positions are generated by cattle producers in the BC economy including 2,349 in direct FTEs and another 1,893 in indirect and induced FTEs.

Finally, we estimated that cattle production generated $52 million in taxation revenue including $27 million, $20 million and $5 million in revenues to the federal, provincial and municipal governments respectively.

The economic impacts of BC cattle producers are summarized in the table below.

Table 2: Economic Impacts of BC Cattle Production

Cattle production is an important contributor to the BC economy. Economic impacts supported by cattle ranching operations, backgrounding operations and feedlot operations is estimated to be $316 million in nominal GDP. The Province‟s total nominal GDP in 2010 was $203 billion.

89 The estimated cattle

production GDP contribution therefore accounts for 0.2% of the provincial economy.

89

Statistics Canada, GDP expenditure based, current prices, 2010

Cattle Producers

Output

GDP

Employment (FTEs)

Federal Tax

Provincial Tax

Municipal Tax

Direct $350,968,349 $190,146,456 2,349 $13,321,429 $8,677,392 $3,369,295

Indirect and Induced

$255,480,802 $125,480,815 1,893 $13,728,909 $11,186,195 $1,572,589

Total $606,449,151 $315,627,271 4,242 $27,050,338 $19,863,588 $4,941,884

FINAL REPORT

36


7. ECONOMIC, SOCIAL AND

ENVIRONMENTAL BENEFITS

FINAL REPORT

37


This section outlines the economic, social and environmental benefits that arise from the cattle and beef industry‟s activities in BC.

To gather the relevant input and data, we interviewed 48 key informants, including cattle ranchers, feedlot operators, dairy farmers, abattoir operators and 13 representatives from BC municipalities, and reviewed relevant secondary research and articles. For more information on the interviews conducted please see Appendix A.

When municipality representatives in MNP‟s telephone interviews were asked to rate the importance of the cattle industry for the local economy and community on a scale of 1 to 5, where 1 is not at all important and 5 is very important, respondents provided an average rating of 3.4.

ECONOMIC BENEFITS

Economic benefits and their accompanying measures may vary greatly from industry to industry. Specific economic benefits stemming from the BC cattle and beef industry include:

Partnerships with research and educational institutions

Opportunities for employment, training and education programs

Support of local companies and industries

Development of technology and innovation

Opportunities for dairy farmers

Opportunities for abattoirs

Benefits related to check offs

Partnerships with Research and Educational Institutions

Strong partnerships have been developed with local universities and research institutions to better understand emerging issues and trends affecting the cattle and beef industry in BC. For example, a multidisciplinary research team at Thompson Rivers University has been engaged to develop new techniques and technologies to make the industry more sustainable – both economically, through new product offerings, and environmentally, by reducing the amount of methane produced by cattle.

90

The majority of cattle ranchers and feedlot operators surveyed by MNP (84%) indicated that the industry creates partnerships with research and educational institutions, citing examples of projects currently underway with support from the Investment Agriculture Foundation of BC, Agriculture and Agri-Food Canada, Pfizer Canada, Thompson Rivers University and the University of Northern BC.

In addition, seventy percent of municipality representatives surveyed by MNP agree that partnership opportunities are generated by the cattle industry in their regions, noting bursary and scholarship opportunities offered by the cattle industry to local students. The BC Cattlemen‟s Association awards Thompson Rivers University students with the “BC Cattlemen's Association Bursary”, valued at $1,000, which assists students, especially those from rural areas where cattle are raised, to further their education in any field. Applicants must be the son, daughter, grandson or

90

British Columbia News Release, New Research Chair will Support Cattle Industry, January 14, 2009

For the past 19 years, School District 91 has offered 24 students the opportunity to gain hands-on exposure to careers in agriculture in the Nechako Valley through a program called Project Agriculture. The four-day course teaches students about the importance of agriculture to the region while providing valuable insight into careers in veterinary science, food inspection, range land management, livestock auctioning, fertilizing and modern farm operations/management. The program is supported by local farms in the region.

Source: http://www.sd91.bc.ca/node/207

http://www.sd91.bc.ca/node/207

FINAL REPORT

38


granddaughter of a BC Cattlemen's Association member. Other bursaries, scholarships and grants for students living in rural areas where cattle are raised include the Martin Riedemann Annual Bursary (valued at $1,000); the Gung Loy Jim Scholarship (valued at $2,000); and the RBC Dominion Securities Bursary (valued at $1,000).

91 The Brigadier W.N. Bostock Memorial Research Grant (valued at $2,000)

awards two grants per year to assist research which will be of practical value to the beef cattle industry in BC.

The industry also partners with local schools to educate students on the importance of agriculture in BC. One respondent in MNP‟s interviews commented on the Smithers Farmers‟ Institute‟s close work with, and contribution to, the cattle industry. Smithers Farmers‟ Institute acted as one of the funding sponsors for the BC Forage Council‟s 2004-2006 forage and cereal variety evaluation. This event sought to increase yield and improve survivability of forage for the hay, pasture and livestock industry, and create seasonal employment opportunities and technical training for producers and student technicians.

92

Opportunities for Employment, Training and Education Programs

The majority of cattle ranchers and feedlot operators surveyed by MNP (73%) indicated that the industry creates opportunities for unemployed workers, trainees and interns. One farmer noted that he hires many students, including those with disabilities who may have a difficult time competing for employment in other industries. The producers that disagreed with the statement indicated that while producers may need the extra help, they can no longer afford to pay the wages. An opportunity exists to connect the need for extra help with unemployed workers in the community.

The majority (80%) of municipality representatives surveyed by MNP indicated that the cattle industry generates employment and training opportunities in local communities. The industry contributes through local forage clubs, cattle farms and family-run operations. One respondent noted that employment opportunities in the cattle industry are compromised due to higher wages in other industries.

91

Thompson Rivers University Website, www.tru.ca/finaid/awards/external/cattlemen.html 92

The Farmwest Website, http://www.farmwest.com/node/217

FINAL REPORT

39


Support of Local Companies and Industries

The majority of municipality representatives surveyed by MNP (80%) indicated that the cattle industry contributes to retaining support service companies or industries such as agriculture, transportation, distribution and veterinarian services. Several respondents noted that the cattle industry in their municipalities spurred the creation of local abattoirs. One respondent noted that the industry helped establish co-op and business programs to serve the local agriculture industry.

When asked whether existing businesses are dependent on activities associated with cattle ranching operations, all municipality representatives said yes. They noted that the cattle industry and its operations help maintain existing services and businesses, such as auction marts, veterinary clinics, feed and equipment stores, processing plants, transportation services and trading companies. The Vold, Jones and Vold Auction Co. Ltd. in Dawson Creek is an example of such a local company. It hosts the largest internet auction in the world and catalogues all cattle a day prior to the sale, thus providing buyers and sellers with better marketing options and reduced selling time and stress on cattle.

93

Municipalities benefit directly from the cattle industry, according to municipality representatives surveyed by MNP. When asked what the direct community benefits of the cattle industry are, municipality representatives provided the following responses:

Production of local products

Creation of local farmers markets

Employment through spin off services

Support for the retail and service sector

Development of Technology and Innovation

Ninety-five percent of cattle ranchers and feedlots surveyed by MNP agree that the BC cattle and beef industry contributes in the area of innovation. They commented that efforts to reduce costs have led to technology developments and process improvements. There are examples that exist of new products designed for farm activity, such as pivot technology used for irrigation. In addition, new products have been developed for supporting industries. For example, a small BC manufacturer developed custom work boxes that can be easily inserted on truck beds, providing a transportation solution for ranchers and loggers in his community.

Fifty percent of municipality representatives surveyed by MNP felt that innovations are generated by the cattle industry in their regions. For example, crop testing trials as well as pasture fertilization testing have been supported through the Smithers Farmers‟ Institute.

Opportunities for Dairy Farmers

The BC cattle and beef industry generates additional economic value by providing dairy farmers the opportunity and avenue to sell and generate revenue from retired dairy cows and excess animals.

Dairy cows are periodically culled for older heifers and are sold as beef cattle. Cull dairy cows are an important source of food in BC, and dairy beef represents about 20% to 25% of the cattle and beef production in BC annually.

94

93

Dawson Creek Auction „Mile Zero City‟ Website, www.vjvauction.com/Web2010/VJVDawson/VJVDawson.html 94

Estimate from BC Dairy Association.

The partnership between First Nations and the cattle industry in Burns Lake is very strong and important to the community, according to a local rancher interviewed by MNP. The rancher commented that there is a great amount of potential for First Nations who are willing to become ranchers.

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Dairy operators who participated in our interviews indicated that although the animal sales for beef are small compared to the sales of milk, beef sales are important to the financial wellbeing of their operations.

Opportunities for Abattoirs

Fifteen percent of cattle ranchers and feedlot operators in our interviews reported using local abattoirs to market a portion of their cattle, providing direct opportunities for additional economic activity throughout BC. Both abattoir operators interviewed by MNP indicated that the industry is an important aspect of the financial wellbeing of their operation, with approximately 20% and 80% of their annual revenue being generated from the processing of beef.

BC cattle production also provides a unique opportunity for abattoirs to market locally produced beef to customers. The majority of producers interviewed in MNP‟s survey were interested in exploring local marketing opportunities and suggested that producers‟ associations could support the industry by educating consumers on the quality of locally produced or grass fed beef.

Benefits Related to Check Offs

Overseen by the Cattle Industry Development Council (CIDC), CIDC check off funds are collected by producers, livestock dealers, stockyards and agents on behalf of the CIDC when cattle are slaughtered or sold in British Columbia. In total, $3 per head slaughtered or sold within the province

95 is collected and

remitted to the CIDC. 96

Of those $3:97

$1 per head represents the national check off used to support domestic and international marketing, research and promotion; and

$2 per head represents the provincial check off, which becomes the CIDC check off (levy) fund, used to support industry development work through provincial cattle organizations.

The Market Development and Promotion Agency (National Check Off Agency) is responsible for the national check off, which generates about $8.2 million annually.

98 Funding is distributed to the divisions

that manage beef cattle marketing and research activities. It is anticipated that increased sales of beef will be attained through marketing and promotion and that more efficient ways of beef production will be explored through research and development.

99

A recent research report100

which evaluated the impact of check off funded marketing and research activities on the economic well-being of Canadian beef cattle producers revealed that:

On average from 2005 to 2008, every check off dollar invested in marketing and research activities earned $9 for Canadian cattle producers.

A marginal investment of one additional dollar in marketing and research activities would yield between $9 and $15 in additional producer benefits.

A 90:10 split in marketing-to-research investment can generate an additional $17 million in producer benefits, while a 50:50 split can generate $76 million in additional producer benefits.

95

As of July 1, 2010. 96

As of July 1, 2010. 97

Cattle Industry Development Council, Summary of Funds. 98

John Cranfield, Evaluating the Economic Benefits From the Canadian Beef Check-Off, March 17, 2010 99

Cattle Industry Development Council Website, http://www.cattlefund.net/checkoff.htm 100

John Cranfield, Evaluating the Economic Benefits From the Canadian Beef Check-Off, March 17, 2010

The town of Creston is a valley stretching about 30,000 acres of agriculture land. The town‟s cattle industry contributed to food and farm safety and consumer health with the creation of several abattoirs in the region. Without its cattle industry's contribution to food and farm safety, the town would not have had the opportunity to have local abattoirs operating.

http://www.cattlefund.net/checkoff.htm

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The provincial check off is a producer-managed fund supporting provincial awareness, research, education, marketing, development and promotion projects that assist and promote BC‟s cattle beef industry. Funds are available upon application from provincial cattle organizations.

The provincial check off supports the Beef and Cattle Industry Development Fund (and Trust). The Trust was established to enable the CIDC to trigger matching funds from the earning of the Trust to match funds for the four provincial cattle associations and their annual project applications.

Since 1995, over $10.5 billion have been triggered from the Trust for projects to benefit the industry. Since that time, 271 different projects have been approved with total project costs of $26.3 million.

Sample projects funded by the Beef and Cattle Industry Development Fund (and Trust) include:

Market development projects such as product promotion, new product development, niche markets, cooperative initiatives and market alternatives.

Agricultural awareness projects such as media promotions, improvement of industry perceptions and agriculture in the classroom.

Association support and development projects such as communication, education, young producers‟ development and succession.

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SOCIAL AND COMMUNITY BENEFITS

This section of the report outlines the social and community benefits of the BC cattle and beef industry. These effects address contributions such as:

Rural community development and sustainability

Community involvement and volunteerism

Recreational areas and opportunities for tourism

Food safety and the protection of consumer health

Farm safety

Risk management programs

Rural Community Development and Sustainability

One of the greatest social benefits that BC producers provide is the development and sustainment of rural communities. A recurring theme in the survey responses of cattle ranchers was their overall desire and commitment to support local businesses. In many rural communities in BC, cattle production is the foundation of the local economy supporting local feed stores, equipment dealers, repair shops, abattoirs and transportation services.

101 As one rancher commented, “cattle dollars stay in the local community”,

with many producers putting the bulk of their earnings right back into their operations.

One example is the community of Dawson Creek located in the Peace Region of BC, where agriculture is the most significant contributor to the local economy. According to the community‟s website, there are more businesses located in the city directly servicing the agricultural community than any other single industry. The cattle industry in particular is expected to hold the greatest potential in the region, benefiting from abundant, low priced land and close proximity to quality feed.

102

As mentioned above, the majority of cattle businesses are small, family run operations.103

Many ranchers and feedlot operators therefore have other sources of revenue. This may be by choice, but more often is a necessity because cattle businesses are not profitable enough. In our interviews, about two thirds of ranchers and feedlot operators stated that they manage other operations beside cattle. Sample operations included hay sales, sales of other livestock and forestry operations. In addition, about 68% of interviewees have off farm sources of income. Cattle producers‟ non-cattle operations and off farm employment contribute to local economies as well.

101


Dawson Creek, Website: http://www.dawsoncreek.ca/business/agriculture/ 103


http://www.dawsoncreek.ca/business/agriculture/

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Community Involvement and Volunteerism

The majority (89%) of cattle ranchers and feedlots surveyed by MNP indicated that they contribute to the development of their community by participating in school activities, volunteer activities or local community events. Some examples of community involvement include: helping out at local fairs and bull sales; taking leadership roles and other committee positions; giving school scholarships to students; donating to various charity organizations; organizing fundraising activities; coaching local sports teams; and contributing to activities with local schools, churches, food banks and community halls.

One farmer indicated being very active with forage clubs and working diligently to bring agriculture-related concepts to local schools. As Director of a BC association, he works with the BC Cattlemen‟s Association to educate children about agriculture-related issues.

Another farmer who we interviewed has served in a leadership role of the Rural Ranch Patrol in his area for over 20 years, where he is responsible for responding to radio calls, establishing road signs and looking after the environment and any damages that may have occurred on rural land. These activities require the support of between 50 and 60 volunteers. According to the farmer, as a result of the dedication and resources committed to this program, the organization is recognized for being one of the best across BC, Alberta and Saskatchewan.

Seventy percent of municipality representatives surveyed by MNP indicated that there are social contributions generated by local cattle ranchers. Such activities include bursary contributions and field trips offered to local students.

With the main intent of increasing awareness and education of BC agricultural industry, the BC Association of Agricultural Fairs and Exhibitions hosts an array of annual events such as fairs, exhibitions and festivals. Local cattlemen near Smithers, BC participate in the 5-day fall fair each year by sponsoring trophies and prizes, promoting farm sales and providing a large volunteer base to run the fair. The three-day event requires months of preparation and planning and is largely supported by the local cattle community.

For the past 26 years, a local rancher in Peace River has offered students the opportunity to gain exposure to his/her farm through organized school agriculture field trips. This enables students to experience agriculture in a fun and educational way. The local rancher also grants school scholarships to students.

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Recreational Areas and Opportunities for Tourism

Some cattle ranches, such as those that are members of the BC Guest Ranchers‟ Association (BCGRA), offer authentic western vacation experiences for visitors. While guest ranches can vary greatly in terms of type of accommodation (i.e. star luxury suites versus log cabins), they all provide approved accommodation, quality dining and the chance to experience the true western ranching lifestyle. Working cattle ranches that are members of the BCGRA provide opportunities for guests to take part in horseback riding, cattle drives and cattle branding, horse drives and a variety of other outdoor activities.

104

In many rural communities, ranches provide valuable open spaces for recreation, hunting and tourism.105

Some of the cattle ranchers interviewed by MNP encourage locals and tourists to interact with the scenery and wildlife on their ranch. This provides an opportunity for the urban population to experience rural communities and regions in BC.

Seventy percent of municipality representatives interviewed by MNP indicated that recreational areas and tourism opportunities are generated by the cattle industry in their regions.

The film and tourism industries benefit from BC‟s ranching land. When production films on a ranch, nearby communities and their businesses not only benefit from increased awareness of the issues surrounding the cattle industry, but also from the cast and crew staying at hotels and renting equipment or vehicles. In the Thompson-Nicola Regional District, for example, cast and crew may stay at a hotel owned by a ranch such as the Quilchena Cattle Company and Quilchena Hotel. Some ranches also offer tourism products that are utilized when cast and crew are in town, and may return with their families while on vacation.

104

BC Adventure, Website: http://www.bcadventure.com/bcguestranches/ 105

Ministry of Sustainable Resource Management, Beef Production – An Economic Profile, 2003

The Thompson-Nicola Regional District Film Commission has provided locations and services for filming of movies and TV shows, including a Chinese Agriculture TV show, on ranch land. Within the Thompson-Nicola Regional District, Cactus Country Farms ranch land in Ashcroft has attracted major productions, including The A-Team, The Sisterhood of the Travelling Pants, Shooter and many others. Consequently, cast and crews have filled the hotels in Ashcroft and Cache Creek, and some stay in Kamloops and Clinton.

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Food Safety and Consumer Health

The cattle industry has a reputation for acting responsibly in terms of on farm food safety. There are a number of programs and initiatives that exist to protect consumer health and uphold consumer confidence in the practices and products of BC‟s cattle industry. Heightened consumer confidence results in a stronger, more competitive BC cattle industry, as food safety has become an increasingly important factor in consumer buying decisions.

BC cattle producers also use Canada‟s industry system, the Canadian Cattle Identification Agency, to identify individual animals using ear tags and electronic records. Cattle are tagged with an approved Radio Frequency Identification (RFID) tag prior to moving locations or leaving their farm of origin.

106 The

system is being used to verify cattle ages, as major trading partners have placed trade restrictions on the allowable age of imported cattle and beef as a result of recent Bovine Spongiform Encephalopathy (BSE) cases in Canada.

107 Strong traceability systems not only track animals, but also assist producers in

securing premium prices for their products and improving their competitive advantage in the marketplace.

108

The impact of the international trade ban on Canadian farm families operating beef cattle farms due to the discovery of BSE in May 2003 was significant. In 2003, Canadian farm cash receipts from cattle and calves were estimated at just over $5 billion, a sharp drop of $2.5 billion (33%) from 2002. BC farms, especially small family farms, saw significant income losses following the BSE crisis.

109 The BC cattle

industry learned an important food safety related lesson from the BSE crisis and has significantly improved and tightened their food safety processes and protocols since.

Over half (51%) of cattle ranchers and feedlots surveyed by MNP felt that the industry as a whole is taking appropriate measures to protect herd and consumer health. Some cattle ranchers and feedlots surveyed (22%), however, noted that more could be done in the area of prevention. About a sixth (16%) indicated that the industry is too involved in the area of food safety and consumer health. While those surveyed understand the need for, and significance of, these programs, some indicated that the programs have created more work for producers and that systems could be streamlined to ease the process.

It is only in the preliminary stages, but the beef industry is looking at biosecurity protocols to aid in disease prevention.

All cattle ranchers and feedlots interviewed indicated that they would consider utilizing production programs like Verified Beef Production (VBP) or Beef Information Exchange (BIXS) if these programs made it more profitable to sell products with specific attributes. The VBP program is a grassroots driven and industry-led program that works to ensure farm food safety, while BIXS is an information exchange system that aims to improve communication and information sharing across market participants.

110,111

106

Canadian Cattle Identification Agency, News Release - Canada‟s Advances System for Cattle Traceability Bar-Coded Identification Tags De-Listed, July 2010. 107

BC Ministry of Agriculture, Age Verification of Cattle, Website: http://www.agf.gov.bc.ca/foodsafety/age_verif_cattle.htm 108

Canadian Cattle Identification Agency, News Release - Canada‟s Advances System for Cattle Traceability Bar-Coded Identification Tags De-Listed, July 2010. 109

Statistics Canada, Agriculture Division, Agriculture and Rural Working Paper Series Working Paper No. 69, Canada‟s Beef Cattle Sector and the Impact of BSE on Farm Family Income 2000-2003, June 2004 110

Verified Beef Production, Website: http://www.verifiedbeef.org/about_us.htm 111

The Canadian Cattlemen‟s Association, Website: http://www.cattle.ca/what-is-bixs

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Farm Safety

Farm safety in BC is organized by the Farm and Ranch Safety and Health Association (FARSHA). FARSHA works to develop and provide health and safety services to BC agriculture through a number of activities including: training programs for employers, supervisors and workers; booklets, brochures and other information materials; site evaluations; consultations and guidance; programs for farm workplaces; and promotion activities (e.g. displays and information tables at agriculture-related events).

112

Improved farm safety produces a number of benefits, including reduced worker fatalities, injuries and illnesses, as well as associated costs to employers and employees such as lost production, medical costs and workers‟ compensation insurance premiums. Furthermore, a safer workplace creates improved morale and productivity.

113

Eighty percent of municipality representatives surveyed by MNP indicated that the cattle industry has contributed to food and farm safety and consumer health in their region. According to respondents, the cattle industry contributes to the latter through local food production and continuous investments in on farm food safety programs.

Risk Management Programs

The cattle and beef industry in BC is faced with a number of ongoing risks which are often interconnected, including production risks, price and market risks, regulatory risks and financial risks. Risk management programs are important in reducing the level of risk borne by the producer and decreasing the reliance on social safety net programs.

The BC government offers risk management programs under the present Growing Forward federal-provincial agreement.

114 Industry representatives told us that there have been concerns regarding the

effectiveness of the Agristability program during the prolonged downturn in the industry, which started with the discovery of BSE in May 2003. The Alberta government supplemented the federal-provincial program with two other risk management related programs:

115

Cattle Price Insurance Program (CPIP) is an insurance program available in Alberta through the Agriculture Financial Services Corporation (AFSC). The program is designed to provide a tool for Alberta beef producers to manage risk they face feeding cattle by providing protection against a drop in Alberta beef cattle prices over a distinct period of time. Through the program, three tailored products are offered to satisfy all aspects of the beef production chain: CPIP-Fed, CPIP-Feeder and CPIP-Calf.

Alberta Farm Recovery Plan II (AFRP II) was launched in 2008 when the Alberta Government announced $300 million in disaster funding to be distributed in two instalments. The objective of the provision of funds is to provide ongoing support to assist the livestock industry while “The Alberta Livestock and Meat Strategy” takes effect.

There is a perceived need amongst BC industry representatives for additional programming similar to that offered in Alberta.

112

BC Cattlemen‟s Association, Ranch Safety, Website: http://www.cattlemen.bc.ca/ranchsafety.htm 113

OSHA Factsheet, Farm Safety, Website: http://www.osha.gov/OshDoc/data_General_Facts/FarmFactS2.pdf 114

Agriculture and Agri-Food Canada, The Business Risk Management Suite, Website: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1200408916804&lang=eng 115

Government of Alberta, Agriculture and Rural Development, Traceability: Funding and Programs, Website: http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/trace12972

http://www.cattlemen.bc.ca/ranchsafety.htm

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ENVIRONMENTAL BENEFITS

This section of the report outlines the environmental benefits of the BC cattle industry. Environmental benefits provided include:

Environmental and land stewardship

Predator related benefits

Contributions to sustainability

Fire hazard reduction

Environmental and Land Stewardship

All ranchers and feedlot operators who participated in MNP‟s survey felt that their activities support the environment and stewardship of the land. Examples provided of land stewardship activities include:

Applying good range management practices to private and public grazing lands to ensure their sustainability

Ensuring proper fencing around wetlands and lakes

Planting grass seeds to improve disturbed areas

Planting trees to prevent erosion

Allocating sections of land for wildlife movement

Using solar panels to reduce environmental impacts on surrounding regions

Utilizing weed control to maintain and improve range conditions

Opting out of using fertilizers or pesticides

BC cattle ranchers have also restored and enhanced substantial fish and wildlife habitat across the Province, both by their own initiative and as part of the BC Cattlemen‟s Association‟s Farmland-Riparian Interface Stewardship Program.

116 The individuals surveyed felt that their land supports wildlife such as

deer, elk, bears, moose, beavers, ducks and geese. One municipality representative cautioned that cattle ranch fences may obstruct wildlife passages.

One cattle rancher indicated operating under BC‟s Environmental Farm Plan Program,117

a partnership between Agriculture and Agri-food Canada (AAFC), the BC Ministry of Agriculture (AGRI) and the BC Agriculture Research and Development Corporation (ARDCorp). The Program assists farmers and ranchers in developing environmentally-friendly farm practices to enhance natural resources and reduce possible damage to biodiversity.

116


The BC Agriculture Council Website, www.bcac.bc.ca/ardcorp?page_id=14

To encourage the maintenance and conservation of the natural diversity of the ecosystems in the area, a local ranch in Nechako Valley employs an environmental stewardship plan. Within their region, the ranchers identified about 800 different species. Of those, 14 were identified as blue endangered species and 5 as red endangered species. The ranchers also belong to a number of programs, such as the “egg bird program”, that encourage the protection of wildlife species and their habitats.

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Examples provided by feedlot operators of environmental stewardship include protecting groundwater quality, using pivot irrigation systems for soil and water preservation and maximizing soil nutrients using compost and manure management.

The Canadian Cattlemen‟s Association encourages environmental stewardship among cattle producers by presenting The Environmental Stewardship Award (TESA) each year to cattle ranchers and feedlot operators that have surpassed standard industry conservation practices by making significant contributions and improvements to environmental stewardship in their operations.

118

The BC Cattlemen‟s Association awards an Environmental Stewardship Award each year and the winner then competes against the representatives from the other provinces for the national award. BC producers have won the national award on several occasions.

118

Canadian Cattlemen‟s Association, CCA Environmental Stewardship Award, Website: http://www.businessbiodiversity.ca/documents/1-Canadian_Cattlemen_Association.pdf

In the early 1980s there was a crash in an oil patch in the North Peace region of BC that affected the surrounding communities. The farmer we interviewed noted that the local ranching and farming community contributed to the area‟s recovery, leading to the economic revitalization of the land.

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Contributions to Sustainability

Cattle farms in BC use grazing land that is generally not suited for other agricultural activities to support cow calf and yearling operations and produce protein for human consumption with very little fossil fuel input.

119

As identified during our interviews with producers, the land used for grazing is generally not suitable for growing high valued crops, disadvantaged by a short growing season, rough terrain and/or a lack of sufficient rainfall. Grazing can contribute to healthy grassland and soil ecosystems that encourage biodiversity by providing a natural habitat for native plants, insects, birds and wildlife to live and thrive alongside cattle.

120

Of the cattle ranchers and feedlots surveyed by MNP, 89% agreed with the assessment that the industry contributes to the area of sustainability. As one cattleman noted, “resources are the backbone of our industry; if we are not sustainable, we cannot exist”. Some sustainable practices utilized by cattle ranchers include ground and weed control, sustaining of water for irrigation purposes, selective planting and grazing management techniques.

In addition, the majority of municipality representatives surveyed by MNP (70%) indicated that local cattle ranching operations have contributed to an increase in, or retention of, local, sustainable farm production. They noted that local cattle operations have spurred farmers markets and food co-ops that in turn provide local, fresh meat products to the community. Some local cattle operations also work to assess crop turnover and offer workshops on how to achieve sustainable farm production. One respondent, however, noted that his/her region is unable to sustain its agriculture and is thus importing grain from other provinces.

119


Canada Beef Inc, Sustainability in Canada‟s Cattle Production, Website: http://www.canadianbeef.info/ca/en/rt/industry/CCPS/sustainability.aspx

Many farmers maintain healthy grasslands by increasing the level of organic matter in the soil, providing an effective means of carbon sequestration and carbon storage. Source: “British Columbia Ranching Task Force Report to Government”, 2009

Practicing sustainability and reducing environmental impacts on its surrounding regions, Clover Farms uses existing area resources and land. The farm uses solar panels (indicated in the above picture) to make more effective use of the sun's energy to produce electricity and hot water.

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Fire Hazard Reduction

Ranches also have the potential to reduce fire hazards by reducing decadent growth,

121 which may pose fuel loads in

the event of a fire. Grazing has the ability to lower fire hazards by reducing the amount of potential fuel loads.

A 2010 study investigated the effects of livestock grazing on fuel accumulations, continuity, gaps and heights in shrub-grassland rangelands. The study concluded that livestock grazing has potential to affect fire characteristics.

122 More

specifically, “wildfires in moderately grazed sagebrush rangelands have decreased severity, continuity and size of the burn, compared to long-term non-grazed sagebrush rangelands.”

Fuel management studies have also revealed that there is a direct relationship between spread rates, flame lengths and dry grass fuel loads; thus, as fuel loads decrease, so do spread rates and flame lengths.

123

121

BC Ministry of Sustainable Research Management, Economic Development Branch, Beef Production - An Economic Profile, March 2003 122

Davies et al. Effects of Long-Term Livestock Grazing on Fuel Characteristics in Rangelands: An Example From the Sagebrush Steppe. Rangeland Ecology and Management 63:662–669. November 2010 http://oregonstate.edu/dept/EOARC/sites/default/files/672.pdf 123

John M. Harper. Benefits of Grazing & Wildfire Risk. UCCE Livestock & Range Topics. August 5, 2011. http://ucanr.org/blogs/blogcore/postdetail.cfm?postnum=5463

A controlled study which evaluated the effectiveness of using targeted livestock grazing to reduce the flame length and rate of spread of fires on cheat grass (Bromus tectorum) dominated rangeland in northern Nevada revealed that “targeted grazing reduced B. tectorum biomass and cover, which resulted in reductions in flame length and rate of spread.” Source: Diamond, J. M., C. A. Call, and N. Devoe. 2009. Effects of targeted cattle grazing on fire behavior of cheatgrass-dominated rangeland in the northern Great Basin, USA. International Journal of Wildland Fire, v. 18, no. 8, p. 944-950. 10.1071/.

http://ucanr.org/blogs/blogcore/postdetail.cfm?postnum=5463

http://www.everystockphoto.com/photo.php?imageId=242591&searchId=b877cdd0bfe4f8a4d0077d08c9ea26e4&npos=18

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8. NEXT STEPS

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Updated Economic Impact Analysis (2014) MNP will be updating BC‟s beef cattle industry economic impact analysis in 2014. The deliverables for the updated economic impact analysis will be:

An updated economic overview which highlights impact changes from the 2012 report

A PowerPoint version of the executive summary

An update of the BC beef cattle industry‟s economic impacts will allow members of the cattle beef value chain to compare the updated impacts to the original impact baselines to clearly identify issues, trends and changes over time. Additionally, it will provide the BC beef cattle industry with greater effectiveness around decision making and establishing strategic priorities.

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9. APPENDICES

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APPENDIX A – DATA SOURCES

This appendix lists the data sources that we consulted as part of our industry and economic impact analysis and provides a profile of the interviewees in our primary research.

SECONDARY RESEARCH

Provincial Websites:

Ministry of Agriculture and Lands, www.gov.bc.ca

Federal Websites:

Statistics Canada, www.statcan.gc.ca

Agriculture and Agri-Food Canada, www.agr.gc.ca

Industry Canada, www.ic.gc.ca

Other Sources:

BC Agriculture Council, www.bcac.bc.ca

British Columbia‟s Ranching Task Force, www.ranchingtaskforce.gov.bc.ca

BC Cattlemen‟s Association, www.cattlemen.bc.ca

BC Association of Cattle Feeders, www.bcacf.com

BC Association of Abattoirs, www.bcabattoirs.org

BC Milk Producers Association, www.bcmilkproducers.ca

BC Centre for Disease Control, www.bccdc.ca

Canadian Food Inspection Agency, www.inspection.gc.ca

CanFax, www.canfax.ca

Canadian Cattle Identification Agency, www.canadaid.com

Cattle Industry Development Council, www.cattlefund.net

Ownership Identification Inc., www.ownership-id.com

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PRIMARY RESEARCH

MNP conducted 48 interviews with representatives from across the cattle and beef value chain. The survey population included 36 cattle ranchers, 5 feedlots and backgrounders, 4 abattoirs and 3 dairy operations. The table below summarizes the interviewee profile.

Number of Cattle Ranchers Interviewed 36

Regions Kootenay

Nechako

Peace River

Thompson/Okanagan

Cariboo

Mainland/Southwest

North Coast

Sizes of Operation 6 Small (0 to 99 head of cattle)

8 Medium (100 to 200 head of cattle)

22 Large (201 and over head of cattle)

Number of Feedlots and Backgrounders Interviewed

5

Regions Nechako

Thompson/Okanagan

Mainland/Southwest

Sizes of Operation Capacity from 300 to 3600 head of cattle

Number of Dairy Farms Interviewed 3

Regions Nechako

Thompson/Okanagan

Vancouver Island/Coast

Sizes of Operation Capacity from 250 to 450 head of cattle

Number of Abattoirs Interviewed 4

Region Thompson Okanagan

Nechako

Vancouver Island/Coast

Peace River

Size of Operation Capacity from 1500 to 6500 head of cattle

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MNP conducted 13 telephone interviews with representatives from BC municipalities and other relevant organizations, including mayors and economic development officials. The table below summarizes the interviewee profile.

Municipality/Organization Interviewee Title

1. Town of Smithers Allan Stroet Economic Development Officer

2. City of Dawson Creek Mike Bernier Mayor

3. City of Prince George Tara Bogh Economic Development Officer

4. South Peace Economic Development Commission

Sue Kenny Economic Development Coordinator

5. North Peace Economic Development Commission

Sandra Lemmon North Peace Economic Development Officer

6. Fort St. John Dan Davis Councillor

7. City of Williams Lake Alan Madrigga Manager, Economic Development

8. City of Cranbook Kevin Weaver Economic Development Officer

9. Town of Creston Ron Toyota Mayor

10. City of Kamloops Anita Grover Manager, Economic Development

11. Thompson- Nicola Regional District

Regina Sadilkova Development Services

12. Thompson Nicola Film Commission

Victoria Weller Executive Director of Film for the Thompson Nicola Regional District Film Commission

13. District of Logan Lake Derek de Candole Economic Development Officer

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APPENDIX B – ECONOMIC IMPACT ANALYSIS APPROACH

The main goal of an economic impact study is to quantify the economic contributions that an industry or project makes to a region. To augment the economic impacts, the study may also include a description of the broader economic, social or environmental benefits produced by the industry or organization. The types of economic impacts and economic, social and environmental benefits that may be contained in an economic impact study are summarized in the table below.

Economic Impacts

Economic Benefits

Social Benefits

Environmental

Benefits

- Gross Domestic Product (GDP)

- Employment

- Government Tax Revenues

- Value Chain Impacts

- Innovation Opportunities

- Training Opportunities

- Contributions to Community Groups

- Community Involvement

- Support for Local Development Industries

- Animal Welfare

- Sustainability

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In general, economic impacts are viewed as being restricted to quantitative, well-established measures of economic activity. The most commonly used of these measures are output, GDP, government tax revenue and employment:

Output – the total gross value of all business revenue. This is the broadest measure of economic activity

GDP – the “value added” to the economy (the unduplicated total value of goods and services)

Government Tax Revenue – the total amount of tax revenues generated for different levels of government

Employment – the number of additional jobs created

We estimated quantitative economic impacts of BC‟s cattle and beef industry using an input-output model with BC Stats and Statistics Canada multipliers. Input-output models are based on statistical information about the flow of goods and services among various industries. To estimate the economic impacts of the cattle and beef industry, we applied the model and the relevant multipliers to the expenditures ranching operations, backgrounding operations and feedlot operations in BC. We estimated direct, indirect and induced impacts:

Direct impacts are due to changes to front end businesses that receive expenses or operating revenue as a direct consequence of an industry

Indirect impacts are due to changes in the activity of suppliers

Induced impacts are due to shifts in spending on goods and services as a consequence of the payroll of the directly and indirectly affected businesses

For more detailed definitions of direct, indirect and induced impacts, please see the glossary in Section 2 of this report.

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ASSUMPTIONS

To create an input-output model to estimate the economic impacts of the cattle and beef industry in BC, we had to identify ranching, backgrounding and feedlot expenses by category (e.g. feed expenses, bedding expenses, fuel expenses, livestock expenses, etc.)

Statistics Canada‟s “Canadian Farm Financial Database” provides fall estimates for average revenues and expenses for unincorporated farms and communal farming organizations with total revenues of $10,000 and over, and incorporated farms with total revenues of $25,000 and over. Statistics Canada reports revenues and expenses for “large” but not for “small” cattle producers.

For the purpose of the study, we needed to estimate the revenues and expenses for the total number of cattle producers, including small ranchers, backgrounders and feedlots (i.e. unincorporated and communal operations with revenues of less than $10,000 and incorporated operations with revenues of less than $25,000), to measure total impacts and not just impacts for large producers.

We estimated total expenses using a four-step process and the following assumptions:

1. We estimated the number of small producers. According to Statistics Canada‟s “Semi Annual Livestock Survey”, in 2011 there were 4,848 cattle and beef producers reporting cattle and beef, which include small ranchers, backgrounders and feedlots. We assumed that the number of producers did not significantly change between 2010 and 2011. In 2010, Statistics Canada reported 2,355 large producers, including ranchers, backgrounders and feedlots. Hence, we assumed that there were 4,848 minus 2,355 or 2,493 small producers in 2010.

2. We estimated the average expenses of small producers. We assumed that the proportion of expenditures per line item was the same for small producers as for large producers. For small producers, we assumed that their average revenues in 2010 were $10,000. We further assumed that, on average, these producers break even and that expenses equalled $10,000 also.

3. We estimated the total expenditures of all producers. We then calculated total expenses for all producers by adding the estimated expenses of small producers to the expenses of large producers. Based on our assumption, we estimated total expenditures to be $351 million in 2010.

4. We verified total expenses of cattle producers. We interviewed producers from across BC to verify revenues and expenditures. Our interviews included both ranchers and feedlots of different sizes and spread across the Province. After analyzing the interview data, we extrapolated the results to the entire population of 4,848 cattle producers. We then compared our extrapolated results with the estimated expenditures (as described in Steps 1 to 3 above) to verify the accuracy of our calculations.

FINAL REPORT

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APPENDIX C – ABOUT MNP

MNP is the fastest growing chartered accountancy and business advisory firm in Canada. Founded in 1945, MNP has grown from a single office in Manitoba to more than 75 offices and 3,000 team members across Canada. MNP is a member of Praxity AISBL, a global alliance of independent firms, which enables us to access a broad range of industry specific expertise worldwide.

At MNP, our professionals are the driving force behind our success. They continue to demonstrate our culture and values which is integral to the way we conduct business, both internally and externally. As such, MNP is proud to be recognized for the third year in a row as one of the 50 Best Employers in Canada by Maclean’s magazine.

MNP provides a wide range of accounting, finance and business advisory services to clients. These include:

Assurance Taxation

Corporate Finance Mergers and Acquisitions

Enterprise Risk Services Forensic Accounting

Consulting Insolvency and Corporate Recovery

Succession Valuations and Litigation Support

economic impact analysis - cattlemen · final report 2 november 13, 2012 1. final report submission...

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