The federal government continues to move towards mandatory livestock traceability by 2011, but questions are being raised about the approach for tracking Canada's cattle herd.

"Everyone recognizes we have to go there," says Agriculture Minister Gerry Ritz. "As the U.S. pushes to the next level of BSE, we have to have something else to sell to our trading partners out there."

Ritz says countries such as Japan and South Korea are demanding greater traceability of livestock. He notes for cattle over 30 months of age, having a database of the exact age and locations of the cattle will make a huge difference.

He says producers are losing out because current dentition practices -- using the makeup of an animal’s set of teeth to determine its age -- aren't always right. Ritz says 10 per cent of the cows classified as over 30 months of age probably aren't, simply because the animal's teeth came in earlier than normal.

"It's a difference of 80,000 to 100,000 animals a year that end up classed as over 30 months that shouldn't be. So, a trace system and age verification will take them back in and make them more market available."

The federal government has put up $25 million dollars to help the cattle industry adapt and prepare for the new regulations that are coming in a year's time. Some funding has gone into the purchase and testing of radio frequency identification tag readers at auction marts across the country. The purpose is to see how well the livestock can be traced as they move through the auction mart and whether it can be done without slowing down business.

But Brad Wildeman, president of the Canadian Cattlemen's Association, believes tracing cattle through the auction marts is not the right approach. 

"If we believe that we're going to open up international markets and use it (traceability) to facilitate trade and increase our sales in some of these countries, then we need to change our focus," says Wildeman.

Instead, he says traceability needs to occur at the production sites.

"A Japanese consumer cares about where those animals were fed and cared for, not whether they got sold in Yorkton, Sask. or Kelvington, Sask.," Wildeman states.

The CCA is also worried about the reliability of the RFID tag reading technology. 

"This technology today isn't fool proof. We know there are lost tags, we know there are tags that don't read," he says. "This idea that we're going to have mandatory traceability of 100 per cent of the cattle, 100 per cent of the time, simply isn't achievable with the technology we have today."

Wildeman notes Canada already has a world leading traceability system that the cattle industry has been implementing without a mandate from government. He says that will continue as the industry evolves and does what it needs to stay competitive.

"I think a little more common sense is needed," Wildeman says. "The fact some politicians have decided that mandatory traceability should happen in 2011, they need to realize that this industry is struggling with regulation, it's struggling with a lot of costs. How much more do they think they can throw on this business before we simply collapse?"

Changes to Alberta's animal health and food safety legislation come into effect March 1.

New regulations under the Traceability Cattle Identification Regulation introduce several changes to tagging for cattle identification and cattle move in reporting for feedlots.

Also, the deadline has been extended for applying approved radio frequency identification tags and registering the cattle's birth date with the Canadian Cattle Identification Agency. The deadline has moved from eight months of age to 10 months.

Producers who use actual birth dates are required to identify the animal by three months of age. The new regulations allow the option of first using a cattle identifier -- like a tattoo or production dangle tag -- and keeping appropriate records. A RFID would be required by ten months of age and producers would submit the information to the CCIA.

Retagging provisions for cattle that have lost their ear tags have also been clarified. When an animal is retagged, on-farm records must be created or updated with the new tag number, the date of application and the old tag number if possible.

The new rules specify the retagging process for cattle aged under and over 18 months.

Feedlots also face reporting changes. They will now be required to report move-in information to the CCIA if they feed 1,000 or more head a year. The previous cut-off was feedlots with 5,000 or more head.

For more information on the changes, go to the CCIA website at www.canadaid.ca.

Tax assistance as been announced for livestock producers in British Columbia, Alberta, Saskatchewan and Manitoba.

Most producers in those provinces dealt with either too much or too little moisture in 2009.

Producers in the central interior of British Columbia, parts of Alberta and west central Saskatchewan experienced drought conditions in 2009, while the Interlake region of central Manitoba was hit by flooding and excessive moisture last year.

Producers in these provinces who reduced their breeding herds by at least 15 per cent are eligible for the tax assistance. Thirty per cent of income from net sales can be deferred if the herd has been reduced by at least 15 per cent, but less than 30 per cent. Where the herd has been reduced by 30 per cent or more, 90 per cent of income from net sales can be deferred.

Eligible producers will be able to request this deferral when filing their 2009 income tax returns. Livestock producers can contact their local Canada Revenue Agency tax services office for details on the income tax provisions.

Some details, including a list of eligible areas, are located at http://www.agr.gc.ca/drought.

The new year began with a bang for the organization representing 28,000 corn, soybean and wheat producers in Ontario -- it officially started business this week in Guelph as the Grain Farmers of Ontario.

The new organization, legally called a marketing board by the province, has been in the works since 2004.

The province was adamant that producer members of the three organizations the GFO would replace -- the Ontario Corn Producers' Association, Ontario Soybean Growers and Ontario Wheat Producers' Marketing Board – must completely support the amalgamation led by the three boards.

A producers' vote in September 2009 revealed 72 per cent favoured the merger. The province was convinced the required support indeed existed, and that the amalgamation could proceed.

The new organization represents the three biggest crops in Ontario. It is empowered to collect licence fees from growers so it can work collectively on their behalf.

Structurally, GFO will have 15 districts covering the province, with each district electing at least eight delegates. Delegates in each district will elect one director to represent them on the board, for a total of 15 directors. Regional elections are being held this month to establish the board, which should be functional by March.

The board's first order of business is policy development and business planning. Other priorities for the organization include research and innovation, wheat marketing (corn and soy are not marketed through the board) and market development, production information and public outreach and advocacy.

"Getting the planning and regulatory framework right is essential to the successful operation of Grain Farmers of Ontario," says Geri Kamenz, chair of the Ontario Farm Products Marketing Commission. "Now producers can steer their new marketing board to capture market development, research and innovation opportunities."

The GFO represents five million acres of Ontario farmland and $2.6 billion in sales.

An aggressive campaign is expected to begin in the United States in an effort to regain a lost market for Canadian oats.

Randy Strychar, a grain market analyst specializing in oats, has just finished a report on Canadian oat sales to the U.S.

"The U.S. equine market was about 1.1 million tonnes," he says. "It has since dropped back to about half a million tonnes."

Strychar says the drop in demand for Canadian oats goes back to 2001 and 2002 when drought was a big issue across North America.

"Oat prices shot through the roof, relative to corn and other feed grains, and that really had a negative impact on demand for oats down there," he says.

The oats in horse rations were replaced by commercial pelletized products.

One recommendation in Strychar's report includes developing new rations that include oats. This has lead to an equine feed project with the University of Kentucky.

"We need to know more about the makeup of those pellets and whether there is an opportunity for oats to be part of the formulation," says Dwayne Anderson, chair of the Saskatchewan Oat Development Commission.

Once the research is complete, the Prairie Oat Grower Association is expected to launch an aggressive campaign to get American horse owners buying oats again.

"Re-capturing even a percentage of that market could be crucial to our challenge of creating or finding increased markets for Canadian grown oats," Anderson says.

Strychar agrees. Increasing demand for another 500,000 tonnes of oats would be a major support factor for prices, considering the entire annual amount of milling oats to the United States is 1.1 million tonnes.

"This has the potential to lead to increased production. With more consumption comes more production," Strychar says.

And he's encouraged that research into the health benefits of oats for horses will also drive up demand.

"Every nutritionist and researcher I've spoken to in the last 12 months has told me without fail that oats are one of the best feeds for equine," Strychar says.

Eight Nova Scotia agriculture producers and processors are receiving help to expand their businesses.

Agriculture Minister John MacDonell says the businesses received the provincial funding because they have strong business plans and goals that will benefit the entire industry.

The eight businesses applied for funding under the strategic infrastructure investment fund. So far, $4.25 million has been committed from the $6 million, four-year fund.

- Foxhill Cheese House, Port Williams, Kings Co., will expand its processing capacity to respond to opportunities to produce new, specialty dairy products.

- 2M Farms Ltd., of Berwick, Kings Co. will expand its seed potato operation, making way for the province's potato industry to expand into specialty, export markets.

- Nova Agri. Inc., Centreville, Kings Co., will invest in the commercialization of innovative greenhouse technology that will provide opportunities for the Nova Scotia agriculture industry to meet increasing consumer demand for fresh horticulture products.

- Holmestead Cheese Sales Inc., of Aylesford, Kings Co., will invest in its business to meet growing demand for existing cheese products and to develop new product lines.

- MacMaster Choice Meats, Antigonish, Antigonish Co., will develop production and processing systems to increase opportunities for Nova Scotia's beef sector to respond to consumer demand for beef products.

- Eyking Brothers, Millville, Cape Breton Regional Municipality, will build a value-added vegetable facility.

- Cogmagun Poultry Processing Co. Ltd., Centre Burlington, Hants Co., will add an enhanced, value-added processing line to service Nova Scotia's specialty poultry industry.

- Northumberlamb Cooperative Ltd./Brookside Abattoir, of Truro, Colchester Co., will begin processing high-quality, provincially-inspected lamb and other meat products for existing and new markets.

Last fall's warm weather did more than help producers harvest their field crops -- it saved the honey crop.

Dr. Rob Currie, entomology professor with the University of Manitoba's Faculty of Agricultural and Food Sciences, says the cool, damp spring and summer in 2009 slowed population growth in bee colonies, as well as crop maturation.

But the late flowering canola crop coincided with some exceptionally warm fall weather. According to Currie, it was unusual that the bulk of the honey crop was produced at the end of summer instead of in July.

Statistics Canada reports that despite the late start, beekeepers across the country produced 64.8 million pounds of honey in 2009, just slightly below the 64.9 million pounds produced in 2008. Honey production in 2008 of 116 pounds per colony was an increase of almost 24 per cent from the previous year. Despite cool weather and late population growth, 2009 production showed only a drop of one pound per colony from 2008. 

The results could have been much worse.

A spokesperson for the Canadian Honey Council says without the late run of warm weather, it's likely many colonies would have starved to death over the winter.

The warm weather allowed the bee population time to catch up, forage and store food for the winter. It's time they wouldn't have had in a normal fall.

It also gave bees a chance to make a late cleansing flight, resulting in fewer wastes and toxins in their bodies over the winter. And as long as spring arrives on time, they'll emerge strong and healthy, ready to reproduce.

The opportunity to forage for additional food reduces the risk of starvation in the hives and boosts winter survival rates. Although an extremely cold winter could impact that gain, as bees huddle together to stay warm and fail to move through the hive to the additional food. 

Statistics Canada indicates the three Prairie provinces produce between 70 and 80 per cent of Canada's $105.2 million annual honey crop (2008), with Alberta leading the pack. But bees are valued for more than the honey they produce -- a strong bee population is essential for the pollination of field crops.

Bees provide over $1 billion in added value to Canadian agriculture through pollination, and according to the CHC spokesman, the pollination industry is growing across Canada.

The Alberta Livestock and Meat Agency is investing $8 million in a feeding initiative to improve competitiveness within the livestock industry.

The initiative is based on a working document called the Feed Grain Strategy. The strategy was developed over the past year with input from industry stakeholders and Alberta Agriculture and Rural Development, says Clint Dobson, an ALMA market analyst.

Feed accounts for the largest single input cost faced by all producers, including cattle, hogs, chicken, dairy and lamb, making it a key profitability issue.

According to Dobson, "The strategy looked at the main drivers and steps to improve competitiveness, identified opportunities and charted out the results of analysis and discussions."

A call for projects will be issued in early 2010 with funds distributed over the next three to five years.

"We are looking for new and ongoing projects that focus on improving feeding and using new technology and practices to better utilize and increase the efficiency of feed," Dobson says. "All types of feed including pulses, barley, feed wheat and canola meal will qualify."

Public and private sector projects will be eligible.

Near infrared spectroscopy is an example of a promising new technology. It identifies digestible energy, protein and fibre content of a particular feed.

Dobson notes this technology adds value to attributes that are not visibly obvious. Producers benefit from receiving a premium for high digestible energy content while the buyer gets a better product, directly affecting the bottom of line of both.

Terry Young, chair of the Alberta Barley Commission, is optimistic about the results that could come from the projects.

"This initiative has the potential to transform the feed crop sector, through research and investment in better feed grain more suited for the livestock sector."

For more information, visit the ALMA website at www.alma.alberta.ca.

Commodity markets generally started 2010 high, although the grain/oilseed component markets after Monday have a sluggish, consolidative feel to them.

Oddly enough, the grain market with the weakest fundamentals -- wheat -- managed the best gains so far this week (as of Wednesday morning). Go figure.

Fundamentals remain very much a matter of importance for the grain/oilseed markets, but money flow will be the key as the new year starts.

Closing out 2009, there was a high level of anticipation about funds reallocating commodity positions to begin the new year. So far, that has carried into this week's trading.

There isn't much in terms of fresh fundamental news for the grain markets to digest at this time, not much has changed over the past week or three. But the turn of the calendar will put more attention on demand, South American crop conditions and the looming 2010 North American acreage debate.

Also noteworthy, the global economic situation, which dominated headlines much of last year, remains a focal point.

The economic outlook does appear to have improved relative to the panicked crisis of one year ago, but the United States and global economies are still far from recovered from the recent recession.

So with the start of the new month and year, investment fund activity, is at the top of traders' watch-list, especially index funds. Who will rebalance their portfolios?

According to our U.S. Pro Farmer colleagues, here is how the funds (traditional and index) currently stand in grains:

CBOT Corn

Traditional commodity funds hold a sizable net long position, which accounts for 16.6 per cent of open interest. The long position held by index funds is even more aggressive at 30.8 per cent of open interest.

CBOT Soybeans

Index funds account for 30.8 per cent of open interest in soybeans, while traditional commodity funds are long 11.8 per cent of open interest.

CBOT Wheat

Traditional funds are holding a small net short position in Chicago wheat, but long positions held by index funds account for 40.8 per cent of open interest.

When index funds rebalance their portfolios over the next couple weeks, the greatest impact is expected to be on corn, where index funds are anticipated to be big buyers.

Index funds are also expected to buy soybeans, soyoil, Chicago wheat and Kansas City wheat, but on a smaller scale than corn. The index fund money will enter the market, but other traders front-loaded their long positions in late 2009 in anticipation of the index fund buying, which could limit the "shock" factor.

Outside market factors remain the key market moving influence for grain/oilseed markets at this time, led firstly by the U.S. dollar trend, which moves generally opposite to that of commodity/stock markets. When U.S. dollar index is down, stocks, energy, metals and the ag sectors are generally up, and vice versa. Nothing the markets do is ever explained simply, but at this time, this remains the dominant correlation.

Other more specific big picture ag sector supply/demand issues on the radar include:

1. Record South American crops reduce the need for additional U.S. planted acres in 2010, yet there will be more acres available, with two or three million acres of U.S. Conservation Reserve Program contracts expiring. Plus, South American crops at this time, though still in development, have the potential of a record output. South American crops will enter their key yield determining period this calendar quarter.

Strong demand will likely continue to support soy prices, but it will be increasingly balanced out by the looming huge South American bean crop, which creeps closer to fruition each week. Much of Brazil is in a position to post record yields. Total South American production appears headed for an increase of 32 million tonnes over last year, which would be the largest year-to-year increase in that continent's history.

2. Energy markets will continue to be the primary commodity providing direction for most commodities. Of special consideration for corn is whether the U.S. Environmental Protection Agency will decide if it's raising the U.S. blending rate for ethanol. Currently set at 10 per cent of U.S. gasoline consumption, it's expected to be legislated to 12 to 15 per cent some time in 2010. If or when that occurs, it could really encourage the demand dynamic for the corn market.

3. Where is U.S. meat consumption headed? Can it rebound in a jobless recovery?

4. Weather: El Nino rules right now. If it lasts through summer, it could mean another season of favourable central United States crop weather.

One thing is for certain, there are numerous factors that can push prices up or down in 2010. It will be an interesting year ahead, with a multitude of very powerful and diverse influences, likely resulting in erratic price action.

Fundamentally, without new crop production problems, it is difficult to expect extended oilseed price strength (soybeans or canola), but spec fund activity and volatile currency action could still provide some periods of support in the evolving sideways trend.

While growers need to manage margins by pricing as opportunities arise, strategies that keep your options open -- such as options or minimum price contracts -- may have special appeal this year.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.