#ChickenMafia Lies and Moral Hazard

Truth or lie? The SM5 (Supply Management 5) say they are totally self-funding, and not a burden on the public purse.

SM5 is:

• Chicken Farmers of Canada,
• Turkey Farmers of Canada,
• Dairy Farmers of Canada,
• Egg Farmers of Canada, and the 
• Canadian Hatching Egg Producers 

We now have a wonderful thing called Open Government.  This is where the government makes its data readily available to everybody in the world, without needing a Freedom of Information Request and the patience of Job.

I decided to give it a try for determining the correct answer to the above question about the SM5.  I found the database of transfer payments for the Public Accounts.  Transfer Payments are when the government pays out money or other benefit and doesn't get full value in return (eg. grant, subsidy, forgivable loan, etc.).  The database is for $10,000 or more; amounts smaller than this are hidden from view.

I couldn't get the search function to work, so I had to manually scan each data file. I searched for "chicken", "poultry", "dairy", "milk", "hatchery", "broiler", and "turkey" for the first 2 available data files.  I soon hit pay dirt, as follows:

2003/2004    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    Dewest Poultry Abbotsford BC    $227,057.00

2003/2004    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    Misty Acres Poultry Ltd Abbotsford BC    $191,753.00

2004/2005    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    Praire Chicken Farms Ltd Abbotsford BC    $152,787.00

2004/2005    AGRICULTURE AND AGRI-FOOD    AGRICULTURE AND AGRI-FOOD    Contributions for Agriculture and Agri-Food Sector Assistance - Food safety and Food Quality    Canadian Poultry and Egg Processors Council Ottawa Ont   $23,016.00

2004/2005    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    A & M Poultry Farms Ltd Abbotsford BC    $823,036.00

2004/2005    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    Ancor Poultry Farms Ltd Abbotsford BC    $402,607.00

2004/2005    AGRICULTURE AND AGRI-FOOD    Canadian Food Inspection Agency    Compensation payments in accordance with requirements established by regulations under the Health of Animals Act and the Plant Protection Act, and authorized pursuant to the Canadian Food Inspection Agency Act    Apperloo Poultry Farms Abbotsford BC    $722,405.00

I hope this is a sufficient number of hits to make the point.  There are 11 data files there (2003 - 2013).  I searched the first two files and got more than enough examples of large payments of taxpayer's money going to poultry farms.

I cannot confirm that these farms are #ChickenMafia members for that is a top secret list, but it seems impossible that small flock operations would be getting that type of payout from the Federal Government.

A quick search of news items show that Fraser Valley of BC (ie. Abbotsford BC and surrounding areas) had a major outbreak of bird flu around that time.  See Oct. 20, 2005, CBC News: Canada's poultry industry faces avian flu

The methods used by #ChickenMafia factories are a hotbed, ready for disease breakout at any time.  In this case, the predictable disaster occurred on numerous farms due to cross-contamination between nearby chicken factories.

The news article outlines how one chicken farm became infected, the flock was condemned, the birds were killed and disposed of, I assume a half-baked clean-up was performed (ie. inadequate precautions to protect against re-infection), and the replacement flock subsequently became infected, and it also had to be destroyed.  I can only assume that Canadian taxpayers compensated this #ChickenMafia farmer not once, but twice for his sloppy methods and cavalier attitude.

If this #ChickenMafia farmer had paid the full cost of his mistakes and his risky operation, somehow I think he might have done a better job at ensuring the second flock didn't get infected.  If the Canadian taxpayers are picking up 100% of the tab for his risky behaviours, would he be less willing to adequately learn from prior mistakes?  Why would the #ChickenMafia farmer be worried if he is spared the consequences from his actions?  There is no cost nor inconvenience to him whatsoever.

Does the #ChickenMafia pay any insurance premiums for these insurance compensations from the Federal Government?  Not as far as I know.  If you have info to the contrary, let me know.

This is out-and-out Moral Hazard.

Definition of moral hazard

In insurance, the chance that the insured will be more careless and take greater risks because he or she is protected, thus increasing the potential of claims on the provider.

The concept can be extended to any contract..that by its existence could prompt a signatory to take unnecessary risks.  Moral hazard arises when a contract or financial arrangement creates incentives for the parties involved to behave against the interest of others.

What this means is the #ChickenMafia gets all the profits and benefits, but Canadian taxpayers assume all the risk if something goes horribly wrong.

This Moral Hazard tends to cause more frequent claims, bigger claims, minimal prevention efforts, minimal mitigation of risks, and slower or no learning from prior mistakes.

This same Moral Hazard is what caused or contributed to the 2008 global financial meltdown with Wallstreet and the "Too Big To Fail" banks.  We saw how that worked out.  Million dollar bonuses for the bankers and a shrug of the shoulders for taxpayers and homeowners who are stuck with the consequences when the brown stuff hits the fan.

No wonder Canadians pay so much for chicken and the other SM5 commodities.

I therefore conclude that the SM5 is misleading the public with their "self-funded" propaganda; par for the course with the #ChickenMafia

If private insurance companies are unwilling or unable to provide the necessary farm insurance contracts for the #ChickenMafia, then I have no problem with the formation of a stand-alone Crown Corporation for providing agriculture insurance; provided the farmers pay the full cost of the risk resulting insurance premiums, and a reasonable return on the capital provided by the Federal Government.

Until that happens, we Canadians pay 300% more for the chicken we buy at retail, and we pay again for the "devil may care" risky behaviours of the #ChickenMafia.