Wednesday, September 24, 2014

Milk board pondering quota policy reforms

The Dairy Farmers of Ontario milk marketing board is consulting its members on policies governing quota sales.

The most controversial option is to make 5.161 per cent of quota non-saleable and an associated option is to reduce the price cap from $25,000 to $23,710 per unit to take into account the non-saleable 5.161 per cent.

The consultations come five years after the board banned farmer-to-farmer quota sales, including deals to buy entire farms and merge operations on one of them.

It also capped quota transfer prices at $25,000 per unit, which is roughly equivalent to the year-long production of one cow.

All quota transfers must go through the monthly exchange run by the milk board. Since the price cap began, hardly any quota has been offered for sale.

That has made it extremely difficult for families that want to expand operations, such as to bring a child into the company or partnership.

It has even made life difficult for the new entrants, undermining a board policy to encourage newcomers to dairy farming. 

A select few get top priority for quota from the board, but what they get is not enough to generate a comfortable family income. And because so few farmers are selling quota over the exchange, these newcomers can't get any to expand.

The milk board has developed a questionnaire for its members to register their preferences for a variety of policy options, such as a wide-open market for quota sales, a continuation of the existing policies, allowing whole farm purchases to be merged to one location and putting any quota increases from the national supply management system through the exchange rather than distributing it on a pro rata basis among all existing quota holders.

Al Mussel, senior policy analyst at the George Morris Centre, has been critical of the cap on quota prices because he says it has frozen the dairy-farming industry into a position that will become progressively less competitive.

He argues that the most efficient farmers ought to be able to bid whatever they wish to acquire more quota to become even more efficient and that as prices rise, the least efficient and least profitable farmers will sell.