Northern ranchers are experiencing sticker shock over new lease rates.
The price of Crown grazing land is rising this year, as part of a larger plan to revamp how that land is allocated and managed.
The new rental formula ties rates to the beef market. Under the new system, rates are calculated by multiplying the parcel’s annual forage capacity (measured in animal unit months) with the three-year average price of 500- to 600-pound heifers and steers.
That is then multiplied by a 3.5 per cent rate of return, a number the province says will capture things like land access, environmental factors and tax burden. The province says it will revisit that number periodically to, “ensure ongoing relevance.”
The province has argued that the new system will be more transparent, since market prices are readily available through Canfax.
The previous system was based on a survey of rental rates every three years prior to being frozen in 2013, according to provincial documents.
The province says 2020 is a ‘transitional’ year, with rates being pegged at the midpoint between the old rates and the full rate in 2021.
Even so those affected are told to expect a jump from $2.13 per animal unit per month to over $7.
Manitoba Beef Producers discussed this and other Crown land issues in detail at its annual general meeting in Brandon earlier this month.
Members generally agreed that MBP should be lobbying for a longer transition period. Ranchers argued that a more incremental increase would help lessen the financial blow.
“I’m really hopeful that they’ll come around on that and give people a little more time because the increases are really dramatic,” Shelley Dyck of Ste. Rose du Lac said. “They really are; the bills are dramatic. Most people have large, large, Crown land lease operations. It’s a big, big change.”
The province says the jump is needed, since those previously frozen rates have not moved for years. The government also argues that Manitoba ranchers enjoyed easily the lowest rates in Western Canada under the old system.
Ranchers, meanwhile, argue that the increased rental rates threaten their viability, especially with the double hit of a feed shortage. Manitoba’s second year of short hay hit particularly hard in Crown land heavy areas of the Interlake and Parkland.
Debate over direction
Crown lands made up half of the resolutions during the Manitoba Beef Producers (MBP) annual meeting. Of those, four revolved around rental formula changes.
A more regional approach to rental rates also got general support. Producers argued that provinces like Alberta apply different rent formulas to different parts of the province in order to capture differences in productive capacity. Beef producers generally agreed they would like to see a similar system in place here.
Other suggestions, however, were less popular. Producers west of Lake Manitoba’s south basin suggested that the formula fold in 10 years of cattle price information, rather than the rolling three-year average currently outlined.
Proponents argued that the longer period would spread out the average, although critics argued that a 10-year average would create a financial hit if the industry was ever embroiled again in a crises like BSE, and that volatility would be felt for a longer period.
“I don’t think that 10-year formula would work at all because you’re not being consistent with what’s happening today,” Martin Unrau of MacGregor said.
Another motion, which would get MBP to push for a “reasonable cap on the market price of beef,” was also defeated.
“What’s a reasonable price?” Dyck said. “We don’t want any government employees coming up with any numbers. It’s not in their realm of expertise. The market is the market and that’s just what it is.”
Cost of production also created a stir. Producers out of District 9 (an area stretching along the east side of the province and into the area north of Winnipeg towards the southern Interlake) suggested the province should include cost of production in the rental formula, not just market price.
The suggestion met stout resistance from several corners.
“Cost of production, I don’t think, should play any part into the rental of the property,” Unrau said. “The rental amounts on all properties in Manitoba, in Canada as a whole, regardless of what you’re renting, is based on who wants to rent it, not what the cost of production is.”
Unrau argued that folding in cost of production would add, “another level of confusion to this whole discussion,” rather than streamlining and clarifying it.
Former MBP president Tom Teichroeb, of Langruth, agreed.
“Any time that you add more variables to any formula, it becomes more complex,” he said. “And then, cost of production based on what? Is it based on southern Alberta rates? Is it based on northern Alberta rates where you might have completely different inputs? Is it based on management style?”
The province has said that it is reopening Agricultural Crown Land regulations in order to add a right of renewal for existing “legacy” leases. That announcement was made shortly after regulations were released in September 2019, following rancher anger.
The province has so far shown little movement on other changes.
In November, Agriculture and Resource Development Minister Blaine Pedersen reiterated the province’s promise for legacy renewals, but held firm on the other points of contention.
Manitoba Beef Producers is still pushing for a reintroduction of unit transfers, as well as rental changes and an extension to apply the promised renewal to all leases.