Friday, July 5, 2013

Independent poultry processors appeal to Wynne

President Betty Dikeos of the Ontario Independent Poultry Processors (OIPP) association has sent an open letter to Premier and Agriculture Minister Kathleen Wynne begging her to intervene to shake up the chicken industry.

A common thread runs through her long list of issues: Ontario is not getting enough production rights from the national agency, so the market is short of enough chicken to meet demand.

That list of issues includes:

-       Not enough chicken for further processors who are being squeezed because the largest processors are doing more of their own further processing. Ontario has about 65 per cent of Canada’s further processors.

-       Not enough chicken for niche markets, such as Hong Kong dressed (head and feet on) birds and the kosher market.

-       Reluctance from Ontario to demand more chicken from the national agency, partly because the largest processors don’t want to be left holding inventory they can’t sell immediately.

-       A plant supply allocation system that is too rigid, making it nearly impossible for the industry to adapt to shifts in market demand unless and until the biggest processors make a move.

The open letter is the latest tactic in a long push for more chicken for members of the Ontario Independent Poultry Processors association.

They tried to gain membership on a Chicken Industry Advisory Committee, but were denied. That committee was hailed as the answer to the industry’s challenges and a new era of increased chicken supplies and competitiveness. It has failed to deliver.

One of the key members of the OIPP association, CAMI International Poultry Inc., had its chicken supplies decimated when Ontario and Quebec marketing boards and processor associations made a deal to cut off inter-provincial trade in live chicken. 

Ironically, Cericola Farms, after it left the OIPP association to become a member of the Association of Ontario Chicken Processors (AOCP) was given enough Ontario chicken to replace what it lost because of the inter-provincial ban. The big guys who dominate the AOCP reward those they like and punish those they don't like.

CAMI has filed court action challenging the inter-provincial trading ban. So far no court date has been set.

CAMI has also filed court action against the Department of Foreign Affairs and International Trade (DFAIT). The issue is a policy developed jointly by DFAIT and the Chicken Farmers of Canada (CFC) national supply-management agency to allow demand for chicken to be met by any processed chicken available in Canada. 

That denied CAMI its request for supplementary import permits so it could process chicken for the Asian market which wants Hong Kong dressed birds that have head and feet left on. 

The chicken provided to CAMI under the joint DFAIT-DFC policy was already processed without heads or feet.

The Chicken Farmers of Ontario marketing board has developed a proposal to supply chicken to processors who develop new products and markets. 

The Association of Ontario Chicken Processors has filed an appeal against that policy, but then asked for the appeal date to be shelved indefinitely.

The chicken board and AOCP are negotiating, but in the meantime processors are left without chicken to develop markets.

The fact of an appeal has meant that the chicken board can’t implement the policy because the tribunal has ordered a "stay" until the issue is resolved.

Even more damaging, a number of members of the Ontario Independent Poultry Processors association lined up markets with customers on the basis of the new policy, but now they have left those customers stranded. It has, they say, damaged their credibility with customers.

The independent processors argue that Ontario doesn’t need a specialty-products policy, nor does it need to ask the national agency to accept that policy as the basis to allocate more chicken to Ontario. Ontario could simply ask the national agency for more chicken and then allocate it to processors.

The AOCP members have, however, insisted that any chicken the national agency allows Ontario to produce must be shared with all processors on a pro rata basis, determined by the percentage of Ontario’s “plant supply quota” they hold.

The OIPP says the marketing board does have the authority to allocate chicken to any processor it chooses and does not have to be rigidly bound by the plant supply quota system.

By the same token, the Ontario board could satisfy the demand for chickens for the kosher and Hong Kong dressed markets by allocating chicken for those markets. The board apparently is afraid of alienating the large-volume processors who are members of the AOCP.

The board could, for example, deny Sargent Farms the right to plant supply quota it bought from a couple of months ago from Chai Kosher Poultry Ltd. in Toronto. After that deal, Chai Poultry shut down, leaving Ontario short of kosher chicken.

There is a proposal to re-open Chai to meet the demand, but the principals behind that proposal need to be able to buy chicken.

Wynne has refused to meet with the OIPP on the basis that the issues are involved in court challenges and an appeal to her ministry’s Appeal Tribunal.

Ironically, the Ontario Farm Products Marketing Commission whose members she appoints continue to meet regularly with the AOCP and the Ontario chicken marketing board to discuss  the same issues.

Dikeos says Wynne could get involved to try to mediate solutions that would settle the issues whenever she wants, and she is using the court cases and appeal to the tribunal as an excuse to duck the responsibility to get the chicken industry straightened out.

To demonstrate good faith, the OIPP association has offered to submit to binding arbitration by an independent party.

The association is also asking Wynne to settle the request of small-flock owners that they be allowed to increase the number of birds they can raise without having to buy quota. The limit now is 300 birds per six-week quota period; two groups have been lobbying to have that increased to 2,000 birds to match the policy in some other provinces.

John Slot, who has acted as a consultant for the association, said “enough it enough! It’s time for the minister to get involved . . . to move the industry into the second generation of supply management.”

From where I sit, what the AOCP members are doing is a blatant violation of competition rules as governed by the Bureau of Competition Policy. They get away with it by co-opting the Ontario chicken marketing board to do their dirty work.

This is supply-chain management gone amuck! If the politicians, including more than just Wynne, refuse to fix things, they deserve to lose their seats.