Saturday, November 22, 2014

Ontario chicken gains under new formula

Ontario is finally gaining the right to produce more chicken under a new formula adopted by the national agency after six years of negotiations.

It's not yet clear, however, how much Ontario is gaining under a new market-sharing agreement.

In the past after the partners in the national agency decided how much to produce, they would carve that into provincial shares which always stayed the same.

Now the carving will be under a formula that reduces historic shares to 45 per cent of the formula.

The other 55 per cent will take into account such factors as population growth.

But this formula only applies to any increases from base production. In other words, if the national agency thinks there’s enough demand to warrant a two per cent production increase, this formula will apply to that two per cent. All of the rest will continue to be carved up in historical market shares.

Given this modest degree of change, it’s likely that Ontario will continue to need chicken from other provinces to keep its market supplied.

There’s also little chance that Ontario’s small-volume processors will be granted more chicken to develop niche markets and specialty markets.

So far the national agency and the Ontario board only allow specialty-market production for Dual Purpose and Silkie-breed birds from Frey’s Hatchery in St. Jacobs.

Mike Dungate, general manager for the national agency, said there's going to be a 3.5 per cent increase in national production for quota period A-126.

He said Ontario's allocation will be 53.5 million kilograms compared with 51.4 million for the same late-winter period earlier this year, which works out to a four per cent increase. A-129 runs from Feb. 22 to April 18 next year.

There has been no word from either the national agency or Alberta whether this new formula will entice Alberta back into the national agency. It left on Jan. 1 because it couldn't get enough production rights to satisfy its farmers and processors.

Other factors in the new formula are:

1. The return-on-labour component of the national gross domestic product figure as measured by Statistics Canada. 
What this has to do with market-sharing for chicken is beyond me.

2. The Consumer Price Index; provinces where the index rises more than average have their production allocation reduced. 
That also seems like a red herring.

3. The Farm Input Price Index that measures changes in feed costs. If a province’s costs rise more than average, it loses allocation and vice versa. 
I think a much simpler and more transparent measure would be changes in the prices of feed grains and oilseeds commonly used in the different regions - e.g. corn and soybeans for Ontario, Quebec and the Maritimes, barley and/or feed wheat and canola meal for the West. Using the Farm Input Price Index means feed mills can continue to provide misleading price quotes.

4. Quota use. A province that fails to produce enough to fill its allocation will lose in future allocations. It makes sense that if a province fails to use allocation, it should lose allocation. But the losses should be immediate, not delayed for a year as is currently the case.

5. Additional production for provinces that need more chicken to supply further-processing facilities. This will work strongly in Ontario’s favour because its further processors, such as Elmira Poultry Products, have needed to import chicken from other provinces to meet demand. Some Ontario processors, such as those supply McDonald’s Restaurants, need enough chicken for nation-wide customer demand.
This factor deserves a lot more weight.

6. A measure of the ratio between provincial chicken production and population. It sounds like a measure of self-sufficiency, but if that's what it means, why not simply say so. Methinks it's meant to dissemble - i.e. mislead the public while not outright lying.

“I am proud of us all for the efforts that have been made to ratify this new allocation agreement, and to modernize the allocation process for the coming years,” said national agency chairman David Janzen.

“You have shown tenacity and perseverance in making these changes to show that supply management is indeed a modern, evolving system,” the agency quoted him in a news release.

This is balderdash. The truth is that six years is an unconscionable delay.

Why doesn't the new formula apply to a big chunk of total production? 

It might be argued that big changes are disruptive, so if that's the case, the national agency could apply its new formula to 10 per cent of total production, not just the teensie-weensie national increase.

Start with 10 per cent and every six months or year, increase it by another 10 per cent to 20, then 30, then 40 per cent of total production, etc.

That way the national agency might actually do a better job of serving the Canadian public.

Which brings me to the Farm Products Council of Canada which supervises the national supply-management agencies for chicken, eggs, turkey and hatching eggs.

It's supposed to look out for the public interest.

So far it's mainly governed in the interests of the Canadian farmers who hold poultry quotas and has ignored the public.

But we can always hope for change. It's like trusting in the tooth fairy.