Raising cattle just got a little less risky.
Unlike their crop-growing counterparts, cattle and hog producers have long had to make do without the benefit of a comprehensive insurance program in case of price declines.
"Cattle producers have been at the whim of the markets for over a century," said Norm Hall, president of the Agricultural Producers Association of Saskatchewan (APAS).
With the recent introduction of the Western Livestock Price Insurance Program (WLPIP), a four-year pilot project, that's about to change.
A collaborative project between the federal and provincial governments, the WLPIP will launch this spring in Saskatchewan, Alberta and British Columbia, with the goal of reducing risk for cattle and hog producers across Western Canada.
Based on a similar program that has been in place in Alberta since 2009, WLPIP will pay producers if the price of their livestock falls below the insured price. Producers will be able to choose from a variety of coverage options and will still be able to take advantage of any price increase for livestock.
Hall expects the program could be popular with cattle producers in Saskatchewan, but is unlikely to catch on with those raising hogs, as there are only about 100 hog producers in the province and many have contracting arrangements with slaughterhouses that lock them into a price and supply chain.
The WLPIP pilot project was announced at the Canadian Bull Congress in Camrose, Alta. on Jan. 24. Among those present for the announcement were federal Agriculture Minister Gerry Ritz and Lyle Stewart, agriculture minister for Saskatchewan.
"This historic initiative is a great example of collaboration among federal and provincial governments and industry to strengthen risk management options for producers," Ritz said in a release. "Our government will continue to work closely with the provinces and industry to ensure producers have access to the tools they need to grow their businesses and overall economy."
According to Hall, several factors over the past decade have conspired to push down cattle prices: a mad cow scare in 2003, the increased value of the Canadian dollar and recent Country of Origin Labelling (COOL) rules in the U.S. that have made it more expensive for American processors to import Canadian beef.
"For the last eight to nine years there has been sustained pressure pushing prices down," Hall said. "There is still some financial risk by using this program, but not as much as on the open market."
Up to 30 per cent of cattle producers in Alberta use that province's program. Hall said he doubts it will reach those levels in Saskatchewan, at least for the first year.
"There are two possibilities," he said. "Guys will either jump on it right away or they'll wait and see how their neighbours do with it. It could be five per cent the first year, it could be 15."
While there are high hopes for the cattle industry, Saskatchewan's hog industry is approaching WLPIP with a bit more skepticism. According to Florian Possberg, chairman of the Saskatchewan Pork Development Board (Sask Pork), the economics of the program don't make much sense for hog producers.
"If you want the hog industry to buy in, it needs to be affordable," he said. "I don't think it will get uptake from producers based on value."
Possberg's analysis indicated that insuring hogs could be nearly four times as expensive as insuring cattle.
"There's no reason why the cost to insure shouldn't be at least similar between the two," Possberg said.
Possberg also speculated that the program was designed more with cattle in mind; Saskatchewan holds nearly 20 per cent of Canada's cattle herd, but less than 10 per cent of the country's hogs, according to government statistics.
"This was certainly designed for cattle, but since they've called it livestock insurance they're including hogs as well," Hall said.
While Hall couldn't speak to specifics, he did agree that WLPIP would be comparably more expensive for hogs than cattle."For hog producers this insurance would be more expensive than the options they're currently using," he said.
Alberta's Agriculture Financial Services Corporation, which has been administering that province's livestock insurance program since 2009, will be the central administrative body for WLPIP. In Saskatchewan, the Saskatchewan Crop Insurance Corporation will handle customer service for the program, though it remains to be seen how popular this program will be or whether it will last beyond the four-year pilot stage.
