Monday, December 17, 2012

Egg farmers leasing quota

Ontario’s egg farmers are able to lease 45,000 units of quota, beginning Jan. 1.

Next Jan. 1 another 60,000 units are up for lease at $7.30 per unit per year.

The revenues flow into the coffers of the Egg Farmers on Ontario marketing board which uses them to meet its budgets, said general manager Harry Pelissero.

The 45,000 units for 2013 and 60,000 for 2014 come from the Egg Farmers of Canada, the national supply-management agency. They gave the quota to Ontario to reflect increases in table-egg-market sales the previous year – i.e. the 45,000 increase is based on sales in 2011.

The board has been leasing quota it gains from the national agency since it changed its policy three years ago. Before the change, the increases were distributed to quota holders, the same number of units for each member, no matter how large or small their operation.

The last distribution three years ago was 30,000 units of quota, although the increase from the national agency was 80,000 units. The board is using the 50,000 difference to run its program for new entrants, and program which provides quota for newcomers who qualify, but on condition that they pay back the quota so a new round of entrants can be accommodated.

The revolving quota will eventually make that program self-sustaining.

The board also runs another leasing program under which farmers who have more quota than barn space can lend the extra to the board for $7.30 per bird.

The board distributes that quota to members who have space they want to use, also at $7.30 per bird.

That quota used to be distributed on a quarterly basis. Some quarters there was far more available to lend than other quarters and Pelissero said the board felt that was unfair. The quarterly differences sometimes were as high as 100 units per borrower.

To make it fairer, the quota distribution for that leasing program has become annual for 2013.

Farmers need to let the board know by the end of June if they have quota they want to lend or borrow.
Once the list of borrowers is known, the quota available is divided with the same amount for every borrower, no matter how big of small their operation. They must, of course, have adequate space to house the birds they can place under borrowed quota.

At a current market price of $250 per unit to buy quota, 45,000 units of quota would have a market value of $11,250,000 and 60,000 units of quota a market value of $15 million.

At a lease rate of $7.30 per unit per year, 45,000 units rented out adds $328,500 to the board's revenues for 3013 and 60,000 units will add $438,000 to the board’s revenues for 2014.
The board might need the money to pay legal fees and court judgements from the lawsuit filed by Svante Lind and his Best Choice Eggs business.