Sunday, February 2, 2014

Egg quota exchange launched

The Egg Farmers of Ontario marketing board has gathered sale offers for 21,407 units of egg quota and 78,058 units of pullet quota for its first quota exchange auction.
Buyers have until Feb. 27 to register their bids and the results of the auction will be announced Mar. 12.
Egg board chairman Scott Graham said that after three years of consultations, the board of directors is satisfied that the 440 quota holders wanted an auction system for buying and selling quota.
Until now, buyers and sellers shopped to find each other, often via feed-company or egg-grading-station staff. Some, such as Mennonites in Waterloo, Wellington and Perth, tended to learn through family or community connections and are not happy that all of their transactions must now go through the marketing board’s central system.
Maurice Doyon
The system was first implemented in Quebec. It was developed by economist Maurice Doyon of the Université Laval and Daniel Rondeau of Victoria University.
Daniel Rondeau
On his website, Rondeau says he “created a new market allocation mechanism designed to provide efficient trading, but also to steer the uniform auction price to the lower end of the theoretically predicted range and limit the market power of sellers in these thin markets.”
Egg board leaders have, for decades, worried about the high and rising prices for quota. None has been willing to adopt the obvious solution: lowering profit margins for eggs.

There has been a ban on trading egg and pullet quota since June, leading up to a board decision on the auction system and its implementation.

Despite the seven-month ban, the amount of quota offered for sale is “about average” for monthly trading before June.

There will be auctions quarterly. This year the results will be announced in March, June 11, Sept. 10 and Dec. 10.

The Dairy Farmers of Ontario marketing board was the first in Canada to adopt a quota auction. Under its system, after all offers and bids have been collected, a computer calculates the price at which the maximum volume of quota would change hands. That, then, is the price for all transactions that month.

However, when the Ontario board put a $25,000-per-kilogram cap on prices, offers to sell have declined to almost nothing, leaving farmers who want to expand their business with no way to acquire quota.

The board has also banned the purchase of an entire farm with the intention of merging the quota to the home farm.

There are some in the egg business who fear the marketing board may also end up with a similar policy to cap prices.