Monday, December 21, 2015

Egg farmers appeal for leasing program change

Daryl Phoenix of Sunderland, Ont., with support from John Van Aert and George Pilgrim, asked the appeal tribunal to convert the egg marketing board’s hen-leasing program from a flat number for each quota holder to a percentage of their quota.

The day-long hearing left the tribunal with about a month to decide, including an egg board challenge that the whole appeal ought to be dismissed because it was filed more than a year after the policy took effect.

Lawyer Herman Turkstra may have fallen short of the expectations of his three farmer-clients who may have been hoping that the tribunal would be asked to stop leasing production rights and instead simply issue them more quota on a percentage (pro rata) basis.

Under the leasing program, as board general manager Henry “Harry” Pelissero testified, the board could simply stop leasing rather than reduce quotas to prompt a cut in production.

Pelissero said that flexibility was important to board directors when they introduced the leasing program three years ago and in the midst of Trans-Pacific Partnership and European Union trade negotiations that might have forced Canadian egg producers to give up a chunk of their domestic market to imports.

Van Aert testified that because eligibility to rent production rights from the board is limited to 6,630 hens per quota holder this year, and will probably be limited in similar fashion in the future, he decided to split his quota and to build a new barn on a separate premises.

Each quota holding must be located on its own property owned by the applicant for at least five years before filing an application to have quota located there.

Van Aert said by splitting his quota, he now has space in his big barn to add 6,630 hens, space that he did not have before and therefore made him ineligible to rent hens from the board.

And his new barn makes him eligible to rent another 6,630 hens for it. He uses that barn to meet organic production standards, including an aviary housing design instead of cages.

Were the production rights distributed pro rata, he said he would have simply built a much less expensive addition to his main barn.

That would have also saved the expense of a second egg-collection piece of machinery, a second well, a second building and laneway, etc.

He said others are doing the same as he has done and the net result is an increase in industry-wide production costs that will be captured in new cost-of-production data that is used to price eggs to consumers. He said it makes the system inefficient.

Phoenix and Pilgrim agreed.

All three testified that they would personally benefit if the current policy remains in place – Phoenix and Pilgrim by gaining more hens under the 6,630-per-producer approach than by getting an 11.5 per cent increase on their quota under the percentage approach and Van Aert by being able to increase production at a lower investment cost.

All three said they want the policy change to make the system more sensible and the overall industry more efficient.

Pelissero testified that small-scale producers benefit more under the 6,630 for each quota holder approach.

He said the board of directors considers it important to keep as many quota holders as possible to satisfy politicians.

The board also offers a new-entrant program under which two people per year can qualify for the use of 5,000 board-owned hens for up to 10 years on condition that they buy quota for another 2,500. 

They also qualify to rent 6,630 hens per year. The rent is $7.30 per bird which everyone agreed leaves a substantial profit margin.

Effective Jan. 1, every Ontario quota holder will get a three per cent quota increase. That’s part of a national agency policy to cancel a requirement to hold three per cent of annual allocations out of production.

The Canadian market has been consistently short of eggs for three years, so the three per cent margin is no longer deemed necessary.

It remains to be seen how many hens Ontario will have available for rent for the 2017 production year. That decision would normally come in July so hatcheries and pullet growers would have enough time to provide the required birds.