April 12, 2010 - New Economic Study Provides Comprehensive Evaluation of National Check-off

An independent study evaluating economic benefits from the national check-off (NCO) shows that Canadian beef cattle producers’ funding of research and marketing activities has delivered strong return on investment − and compared to other commodities falls squarely within the range of values reported for other regions and commodities and is higher in some cases.

The NCO is the mandatory $1 per head levy collected from beef cattle producers when they market their cattle. It solely funds research and marketing programs, providing revenue for the Beef Cattle Research Council responsible for the industry’s national research program; the Beef Information Centre which handles domestic and U.S. marketing; and the Canada Beef Export Federation which develops export markets in Mexico, Asia and more recently, Russia and the Middle East. The NCO does not provide any funding to the Canadian Cattlemen’s Association which is funded separately through provincial organizations.

The first of its kind study was initiated by the Canadian Beef Cattle Research, Market Development and Promotion Agency, also known as the NCO Agency, to obtain relevant, current analysis of the effectiveness of NCO-funded expenditures on producers’ economic well being. In addition to providing core funding for research and marketing, the NCO is leveraged to attract on average, $6 for every one dollar of producer check-off funds in supplementary funding from other sources.

Marlin Beever, chairman of the NCO Agency said the study was timely given the many changes and external pressures that have occurred in Canada’s beef cattle industry during the past decade. There were other benefits to the study too he noted. The study brings Canada in line with other major beef-producing countries which routinely conduct check-off reviews and effectiveness studies. The study addressed key questions including producer return on investment, impact on industry competiveness and demand for Canadian beef, and optimal allocation of funds.

Key findings include:

• On average from 2005 and 2008, every check-off dollar invested in national research and marketing activities earned back $9 for Canadian cattle producers.
• Canada’s beef cattle check-off return on investment of 9:1 is higher than Australia (5:1) and the United States (5.5:1). Note the U.S. return is focused on domestic promotion and did not consider foreign marketing activities.
• Further analysis looked specifically at the two areas funded by the NCO: research and marketing.
• Research delivered an average return of $46 in producer benefits for every check-off dollar invested.
• Marketing delivered an average return of $7.55 in producer benefits for every check-off dollar invested.

Study researcher and author Dr. John Cranfield, University of Guelph said, “These benefit-cost ratios clearly confirm that beef cattle producers have gained net economic benefits from investing check-off dollars in research and marketing activities.” Benefit-cost ratios indicate how much has been earned at a market (or broad industry level) for what was spent.

“As well, by 2008 the return to the average dollar invested slightly exceeded the return to the average dollar invested prior to the BSE-crisis,” added Cranfield. The study also reported that despite positive benefits, there has been under-investment in research and marketing activities for the Canadian beef cattle industry. The extent of this under-investment has been larger for research activities than for marketing activities.

While the study was underway, the Government of Alberta announced that it was amending legislation to make the check-off refundable effective April 1, 2010. Given the sizable number of Alberta cattle marketings, the NCO Agency requested that analysis be included on the potential impact. Alberta accounts for over 65 per cent of beef production in Canada. National check- offs are non-refundable in Australia, New Zealand and the U.S., and Alberta is the only province in Canada that has not exempted the NCO from being refunded. The study reports that for every NCO refund in Alberta, Canadian beef cattle producers lose $11 in economic benefits keeping in mind the NCO is leveraged six to one to obtain supplementary funding to cover program costs. Less check-off means less leveraging in obtaining matching funds from other sources.

“The NCO Agency wanted to provide a comprehensive independent evaluation that will be a benchmark for future check-off effectiveness studies and will also hopefully assist cattle producers with future check-off planning,” said Beever. The Agency has undertaken a communications plan to ensure cattle producers who pay the check-off receive the information and are aware of the value from their investment in research and marketing.

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