Friday, April 4, 2014

Egg quota transfer issues

The new Egg Farmers of Ontario policy for transferring quota is a huge failure.

Very little quota is changing hands, leaving buyers short of what they need to justify building new barns or additions.

In the meantime, they are leasing quota via the egg board, a development that further increases the power and influence exercised by board manager Harry Pelissero.

There are now indications that farmers are lining up private deals in which they agree on a price they will submit for an upcoming monthly exchange.

Given that they both entering the same price, the chances of their deal gaining approval is increased.

But they make a secret side deal involving a premium that the board and the public will never discover.

It's precisely what happened in Quebec where a similar quota transfer system, one that served as a model for Ontario, has been scrapped.

As Quebec experience demonstrates, there is a good reason for side deals to develop. 

Buyers who wanted a large volume of quota were not able to get it over the exchange, so they entered these private deals. 

But, because the system eliminates high and low prices, they realized that they had to submit relatively low bids on the exchange.

Potential sellers with large volumes to offer want a better price than the auction is offering. And so side deals were made.

Ah, but after the auction was over, and their rigged price arrangement resulted in a transfer, the buyers reneged on the side deal. The sellers were furious, but had no leg to stand on.

The word, of course, got around. And so sellers were not taking any chances on the auction.  So quota buyers and sellers were frustrated.  And the Quebec system collapsed.

Maybe this is yet another item that could be added to the calls for a public inquiry into the Ontario egg industry.

I could add yet another - an investigation into feed prices.

Are there volume rebates to egg farmers at the end of the year, ones that never show up in the official cost-of-production surveys?  Is it true that a large-volume customer even got a free pickup truck from a feed company?

Is it too much to ask that the Ontario Farm Products Marketing Commission "get cracking!"

Apparently so.