Chicken Quota Prices

The data for the chart shown above comes from the Alberta Chicken Producer's Annual Report for 2012.  They provide some interesting data on the cost of buying chicken quota in the Wild Rose Country.

The price of chicken quota has been going up at a consistent rate of 29.5% per year for the last 4 years. That means quota prices double every 2.4 years.

Exponential growth is never sustainable.  For example, the pressure wave created by a stick of dynamite exploding is an exponential increase; and we know how destructive that can be.  It's no different here.  It's only a matter of time.

More recently, as the Alberta economy has started to tank, the quota pricing has dropped from its peak.  Is this the beginning of the end of Supply Management?

There are 235 quota holding chicken producers in Alberta.  They get to produce 3.2 kg of chicken for each unit of quota they hold.  As of Dec. 2012, chicken quota was $166.66 per Quota Unit.  There is a total of 6.05 Million units of outstanding chicken quota, so that has a total capitalized value of $1 Billion.

I wonder why someone would pay that kind of money to be a chicken producer?  It must be a very profitable business to attract that kind of entrance fee.

Draft Plan for Ending Canada's Supply Management, Revision #2

In a previous posting, I proposed 4 Principles for ensuring that we can get out of our current SM frying pan, without falling into the fires of hell.

For those who don't fully understand how SM (Supply Management) quota system works (I include myself in that category), there are two sides to every quota.  There is a Producer Quota for the farmer to produce the commodity (ie. milk, eggs, hatchery chicks, turkeys, and chicken), and a separate Processing Quota for those interested in buying the commodities produced (ie. the processors, distributors, and retail sellers of those commodities).  The farmers, who produce under the Production Quota, need steady customers, and to get enough for their production to earn a fair living.  The buyers, who buy the produced commodities under their Processing Quota of the commodities need a steady supply of quality products at a reasonable price. 

I'm not totally satisfied with my rough outline of an idea, but I wanted to share it now, so we can get other ideas to further improve it.  Assuming that those 4 Principles previously proposed (see link above) are correct and sufficient, here is my 14 step plan for removing SM from Canada:

*** Start of Draft Plan ***

1. Legislation is passed, both federally and provincially, or on a stand-alone basis by one or more sane and brave provinces willing to go it alone.  The date that the legislation passes is called "D-Day".  The SM production and processing quotas as they existed on D-Day will be defined as "Base Quota".
   
2. From D-Day to D-Day plus 1 year, the new systems described below will be built and tested, to ensure they are ready for their launch as of D-Day plus 1 year.
   
   Some vertically integrated supply chains exist (ie. same or related companies own the hatchery, the grower, the slaughter plant, and may have a long term contract with a major grocery chain).  There may also be some producers and processors who are best of buds, know exactly what the other one wants and consistently delivers it at a fair price.  All of these should be able to opt-out of the supply management system as of D-Day + 1 year, except for the maximum quota production that they are authorized to produce.  As the SM system slowly disappears and the new system come into play, they will have to deal on the new system to retain, add, or subtract the amount of chicken they will produce, same as all other quota holders, as quota becomes extinct. 
   
3. As of D-Day plus 1 year, there will be no more supplemental quota given to the current SM producers and processors.  If there is a contraction of SM market needs after D-Day, those holding Base Quota will all be reduced on a shared-pain basis, reducing their Base Quota for production and/or processing levels similar to the mechanism in the current SM system.
    
4. As of D-Day plus 1 year, any supplemental production and processing quantities needed to serve domestic markets beyond the Base Quota will be auctioned off to the highest bidder. This new supplemental quota will be limited in quantity, but has no minimum Cost of Production ("COP") associated with it, and a sub-set of current SM rules (the minimum rules necessary to achieve fairness and stability), and the resulting SM products (ie. milk, eggs, hatchery, chicken, turkey) are sold on the open market to those who choose to buy it, or sold through the Canada Commodity Auction system.
    
5. From D-Day to D-Day plus 1 year, a Canada Commodity Auction system will be designed, tested, and made ready for launching on D-Day plus 1 year.  It will be a standardized commodity auction system for all of Canada, but each commodity in each province will be done separately (ie. 10 provinces times 5 commodities= 50 separate auctions done each quota period), plus the special auctions described herein.  If there are specialty grades within a commodity (eg. free range organic chicken vs. regular factory chicken), then this can be a separate auction as well.   So as to minimize the auction sale prices, the auction will use a truncated k-double auction (see here and here), similar to that proposed for the Quebec Egg Marketing Board quota.  Initially, just the holders of SM Base Quota will be allowed to participate in these commodity auctions.  For a commodity auction for producer and processors, the participants (both producers and processors) will submit their bid for the quantity of the commodity (eg. kg of chicken) they are interested in, and the price they are bidding at (eg. $/kg).  The maximum quantity that can be entered as a bid will be the "proven capacity" of that producer or processor, based on historical proven capabilities or recent changes to their processes; all which will have to be carefully defined and managed so as to minimize strategic bidding and other gamesmanship that would disrupt the auction.
   
6. Everybody who submits a bid or ask will pay/receive the same price if cleared (ie. cleared is when a bid or ask is accepted by a counter-party, and it closes successfully).  With this same clearing price for every successful party in the auction, for somebody who was willing to pay a lot more than the strike  price, they end up getting it cheaper than they hoped for (Yea!).  If someone bid too low, their bid won't be accepted as it was below the strike price that everybody enjoys, so no deal, better luck next time.  If someone was asking for a low price, they may end up getting a lot more $ than what they had asked for (Yea!).  If they asked for too high a price, their asking may be above the strike price, and they won't be selling their commodity during this auction, so no deal, better luck next time.  This system minimizes the need for guessing what everybody else is bidding (ie. avoids strategic bidding).
   
7. I suggest there will be multiple auctions for each quota period.  This enables producers and processors to make a recovery play if their bid was way off in the previous round.  There can be a problem with multiple auctions.  If everybody plays nicely, there won't be a problem, they just re-set their bids (if they so choose), and they can get their commodity bought or sold in the next round.  However, some people may think they have the other side over a barrel. For example, a producer might figure than he can leave his chicken barn empty if he has to, but thinks that the processing plant absolutely MUST have a supply of chicken, so the producer significantly jacks up his asking price for a second round of auctions, trying to price gouge the processor.  If this was allowed to occur, it would tend to polarize the remaining bids to the extremes of the pole (ie. all bid are too low, all asks are too high, no sales will occur, everybody gets upset), rather than bringing buyers and sellers together in a reasonable manner.
   
   I therefore suggest that the first auction is only for those producers and processors within their home district.  If you are not located in that District (buyer or seller alike), you cannot put in an offer for Auction #1.  For Chicken Farmers of Ontario, there are 9 Districts, and each producer and processor would submit their bid/ask to the auction for their home district.
   
   

   

   District Map for Chicken Farmers of Ontario

   If they were not totally successful in buying/selling all that they needed, they would have a second chance in the province-wide auction, Auction #2.  With more players who can participate in Auction #2, if they wish to play games with their bids, they will most likely be left sitting on the sidelines with no transactions in the next quota period.
   
   Auction #3 can be held for those who still want to sell/buy, adding in additional buyers/sellers from other province within Canada (ie. inter-provincial bids and asks).
   
   Auction #4, the final auction for each production period can be held for those who still want to buy/sell that would include local, provincial, inter-provincial as well as foreign bidders.
   
   For transportation purposes, all winning bids/asks will be matched as to which producer will ship to which processor, so as to minimize transportation costs.  It matters not that the strike prices of the one shipping and the one receiving that shipment do not match, as there is a match somewhere in the auction system.
   
   If someone failed in all 4 rounds of auctions, they weren't trying hard enough, or they need to find a new career.
   
   Automated by software on-line, each auction could be done in 15 minutes.  Time would be allowed between auctions for people to reconsider their positions, seek advice, and to type in their chosen bids.
   
   This auction system will give preference to domestic production, if the buyers & sellers so choose.  If the local suppliers or producers become arrogant, and become bad actors, the other side will skip that auction and go to the next.  If somebody delivers sub-standard product, there will be a complaint mechanism, the shipment will be inspected, and if the defect is verified, damages and fines will be assessed.  In the end, the customer gets what they want.
   
8. Some commodities are done in batches (eg. broilers, turkeys).  Other SM-commodities have a semi-continuous flow (eg. milk, table eggs) for 1 to 3 years which is the animals natural lifecycle, which cannot be easily shut off and re-started.  This could cause a market bargaining power imbalance between producers and processors (ie. producers MUST sell, as the product keeps coming, whether or not a willing buyer and an affordable price can be negotiated).  As compared to a dairy farmer, a milk plant can more easily clean out the plant, lay everybody off, and wait for better milk prices, or better auction results.  The farmer isn't so lucky.
   
   To make each side have more equal bargaining power, it is suggested that long term "take-or-pay" contracts could be auctioned for each commodity and grade, for example a 1 to 5 year production quantity, auctioned well in advance of the start of the start of delivery.  Upon winning a reasonable auction for his milk, the farmer knows his budget and cash flow, and has time to grow his own or buy a good producer for his herd, and move one or more of his cull cows to the Hamburger Department.  When that long term contract is close to expiry, the farmer can decide to retire that cow, or continue milking her and sell her milk on the more lucrative spot market (ie. month by month).
    
9. This auction system used to sell the commodities (ie. eggs, milk, chicken, turkey, pullets), can be similar for selling the remaining quota for those commodities (ie. farmer retiring & wants to sell his quota).  Beginning on D-Day plus 1 year, Canada Quota Auctions will be held on a regular basis via Internet system with maximum openness, transparency, disclosure, and accountability.  The strike price will be determined by the bids and asks from SM quota holders and from non-SM quota holders (if any are in the auction).  Once each auction is completed, the holders of SM Base Quota who participated in the auction will be offered to purchase this supplemental quota on a right of first refusal basis at the price of the winning auction bid, starting at the person who bid the lowest amount but still above the strike price, continuing up the list of bidders until all the supplemental quota has been sold (ie. the truncated basis of quota assignment).  Once non-SM Base Quota holders are allowed to enter the auctions (see Step #13 below), then if the holders of SM Base Quota don't buy all of the supplemental quota at the auction's winning bid price, then non-SM Base Quota holders are allowed to purchase the remaining supplemental quota, starting at the person with the lowest auction bid that was still above the strike price, going up the list until all the supplemental quota has been taken up.
   
10. For the period from D-Day plus 2 years to D-Day plus 10 years, Canada Commodity Auctions will hold a special auction where 10% per year of the then-current SM Base Quota and non-SM supplemental quota can be removed from the Canada Commodity Auctions monopoly for trading on alternative systems (ie. competing auctions, private deals, vertical integrations, etc.).  All producer and processor SM Base Quota and supplemental non-SM quota must trade through Canada Commodity Auctions unless it has been removed from this mandatory system through the auction method described here.  This special auction will continue each year until the Canada Commodity Auction is defunct from lack of customers who wish to use their service, or they have proven their worth to the industry (ie. less and less monopoly, more and more voluntary participants assuming the Canada Commodity Auction remains a better system than the alternative systems that have sprouted up, if any).  This step helps ensure stability during the transition period, minimizing the damage to Canada and consumers caused by half-baked ideas by the various SM participants.
    
11. Starting from D-Day plus 5 years, the SM Base Quota for each commodity (ie. milk, eggs, chicken, turkey, hatchery) will be reduced by 1% on a Canada-wide basis, and that 1% will be added to the Canada Quota Auction system for sale to the highest bidder.  On D-Day plus 6 years, an additional 5% of SM Base Quota will be removed from total outstanding SM Base Quota, and transferred to the Canada Quota Auction system.  Similarly, between D-Day plus 7 years and D-Day plus 10 years, each year thereafter 10%, 20%, 30%, and 34% will be extinguished from SM Base Quota and transferred to the Canada Quota Auction system, until all SM Base Quota is fully extinguished by D-Day plus 10 years.
    
    As Base Quota is reduced, there may be dynamic surging or fluctuations due to multiple players simultaneously adjusting their business response to the publicly viewed stimulus seen by all.  In this case, a mechanism is required to dampen or eliminate these oscillations.  It is suggested we need a mechanism to efficiently allocate the available demand to those who value it the most.  Ausubel's Efficient Ascending Bid for Multiple Objects is recommended for consideration.
     
12. Between D-Day and D-Day plus 10 years, any holder of SM Base Quota can choose at any time to:   a) sell their SM Base Quota privately to others who already own SM Base Quota;   or   b) Sell their SM Base Quota to someone who currently doesn't own any SM Base Quota;   or   c) After D-Day plus 1 year, sell their SM Base Quota via a special auction using the Canada Quota Auction system.
    
13. As of D-Day plus 5 years, new industry entrants who do not own SM Base Quota can begin to participate in the Canada Commodity Auction system, bidding for either Production quota or Producer quota, or both.  For the one year period after D-Day plus 5 years, the number of new entrants will be restricted to just 10% of the number of holders of SM Base Quota as of D-Day plus 5 years, calculated separately for both Producers and Processors SM Base quotas.  Note that they are buying something that is disappearing over the next 5 years, so bid accordingly.  Each subsequent year from D-Day plus 6 years to D-Day plus 10 years, the maximum number of new entrants will be increased by another 20% of the then current number of authorized participants in the Canada Commodity Auction.  This limitation on new entrants and their slow addition will continue until the stability of the then-current SM system and the then-current Canada Commodity Auction system is demonstrated, or 100% of all applying entrants are immediately accepted.  There may be more applications for being a new entrant than the spots currently permitted to participate, so this will be assigned by a separate auction to the winning bidders under the Canada Commodity Auction system.
    
14. As of D-Day plus 10 years, the current Supply Management system in Canada will have been totally dismantled, replaced by a free market system.
    
15. From D-Day to D-Day plus 10, all governments and industry groups will be encouraged to provide adequate training, loans, bridge financing, counseling, research, communication systems, forums, websites, disclosures, newsletters, user focus groups, reports, audits, and other facilitation, support, and management assistance to ensure a smooth transition.
     
16. Canada's Competition Bureau will be ordered to be on high alert, watching for unfair trade practices. especially between the debate on the draft legislation (ie. prior to D-Day), up until D-Day plus 10 year transition period, and beyond.  It will probably help for the Competition Bureau to do a Canada-wide roadshow to all those within the current SM system, starting as of D-Day, focusing their communication efforts with the public, plus all suppliers to SM (ie. equipment, feed, drugs, services, etc.), plus all customers of SM producers and SM processors, so that the rules are made very clear, that there will be a zero tolerance for nasty behaviour in the marketplace, and swift punishment for those who wish to test the resolve of the Competition Bureau, and the Competition Tribunal.
    
17. After D-Day plus 5 years, imports of commodities into Canada will start to be slowly lifted, and import tariffs reduced, so that at D-Day plus 10 years, they are fully removed and Canada has joined with the rest of the world in full free markets on these commodities.  After D-Day plus 5 years, foreign entities can apply to participate into the Canada Commodity Auctions.  Hopefully this will quickly help Canada to go from last place in OECD exporting on these commodities  (1.4% market share today) to first place (about 50% market share, the maximum sustainable share we could achieve).  This alone can increase Canada's SM-5 production capacity to 5 times or more, as compared to what is currently done domestically in Canada.  That could be a huge driving force for Canada's GDP.  Today, agri-foods in Canada are just 8% of our GDP and hire 2.1 million people.  If this plan truly works, these 5 SM commodities can grow by a factor of 5 or more, so Canada's GDP would increase by 32%, or 5.7% per year for 5 years.  Not even China gets that kind of growth.  What are we waiting for?

*** End of Draft Plan ***


So that's it, 17 "simple" steps to get us out of SM purgatory.

Now it's your turn.

Show me and the world through objective facts and reasoning why this proposal won't work, then propose a solution to the problem you identified.

If you want to get emotional about this draft proposal without facts, I'll listen, and I hope it makes you feel better, but that doesn't help find a solution.  If you wish to pontificate and make bald assertions, with neither facts nor explanations as to why and how this draft plan will work or won't work, that doesn't help much either.

Identify a risk that isn't adequately handled; that's helpful.  Discover how some idiot could screw everything up by doing "X", and find where a gaping hole in the draft system exists that won't prevent or protect us, that's also helpful.

I'll keep modifying this draft until everybody is happy.  Then we can start implementation.



Revision History

Current Version:   Rev. 2   Posted 2013/06/05  21:30 hrs.

Rev. #1    Posted on   2013/05/25   1:30 PM   superseded by Rev. #2

Original Version of Plan:   Rev. #0   Posted on 2013/05/25   11:24 AM,    superseded by Rev. #1

Climbing out of our SM Hole

When I speak of “SM”, I mean Supply Management, not sadomasochism, but I fully understand how people readily confuse these two subjects, as they are so similar.

When someone has dug themselves in a hole, there are 4 simple rules for escaping from their self-created prison:

1.       Stop digging any deeper

2.       Climb out of your hole

3.       Fill in the hole

4.       Find a method to keep yourself out of all future holes.

I therefore wish to define these steps for how we can escape from our SM tomb.  We need to get out of our SM frying pan, without falling into the fires of hell.

I’m not totally happy with my proposed solution as of yet.  I need help to point out the potential problems in what I’m proposing.  That’s where you come in.  Twenty experienced people poking at the obvious holes in my rough plan would be more effective than a thousand office-bound bureaucrats drafting regulations.

Principles for SM's Replacement/Removal/Solution

1.       Protect the public and the current industry from shortages, excess production, excess investment, obsolescence, shocks, chaos, and wild swings in risk, production, quality, price, and all similar measurements; thereby ensuring a smooth transition to the new reality.

2.       Protect as much as possible the investments already made in infrastructure (eg. farms, barns, equipment, office bureaucracies, policies, procedures, training manuals, etc.) so that they continue to be useful and effective for current owners & users, and all future owners & users.

3.       Develop measurements, then measure and communicate them in a honest, accurate, unbiased, objective, useful, and timely manner.  This enables us to minimize the risk, judge our progress, verify the capabilities and stability of the system, show the costs and benefits of the changes made, and encourage us towards our better, future system.

4.       While respecting the first three principles, and continuously maintaining flexibility on how best to achieve the long term goal, continue to drive the transformation forward in spite of short-term frustration, fears, finances, and friends in high places.  Stay the course, or find a better course to our better future.

If we are all in agreement on these needs and principles, then I’m ready to share with you the small seed of an idea that I think will help us transition into a brave new world, leaving behind our Sado-Masochistic Supply Management system behind, henceforth to be referred to in all history books as SM-SM or (SM)².

If the above principles are ambiguous or lacking in any way, please give me your ideas so that I can improve them.  If my ideas are weak or incomplete, you can help make them stronger and better.  If they are dangerous or unworkable, then the sooner we discover this, the better.  Bad ideas need to be identified as such, so that they can be removed from further consideration, and make way for better ideas.

If you agree, please say so.  If you disagree, please pose a better idea.  I need your help.

Fair Feed For Farmers?

A total of 19.642 Million metric tonnes of animal feed were produced in Canada in 2012.

The Dairy industry is the biggest consumer of compounded feeds, approximately 50% of the total feed tonnage.  Broilers are 4.9%, layers are 4.1%, so together the chicken fed consumption is 9.0% of the total feed consumed in Canada.

The animal feed industry in Canada is going through many changes.  Mergers and acquisitions are the name of the game today.

Animal Nutrition Canada claims to have the largest share of the feed production market, 23% of the Canadian total.  They sell under the brands Shurgain, Landmark, Nutreco, Mapleleaf.

Other major feed players are:

• Ridley, with Masterfeeds, AGP Co-op
   
• La Coop Federee
   
• Cargill, with Provimi, Hi-Pro, Purina, Nutrena
   
• Viterra
   
• Glencore

I understand that Wallenstein is one of the largest chicken feed suppliers in Canada, but have been unable to confirm this as of yet.

Typical feed cost for chickens is about $384 per metric tonnes ("MT").  As calculated previously on this Blog, if chicken feed has increased by 60% during the same period that cat & dog food increased 20%, that means that there is an excess charge for chicken feed of  $96/MT.

With poultry eating a total of 2.12 Million MT per year, that is a total gouging of $203.52 Million per year.  The farmers gladly pass those excess costs onto their suppliers, who mark it up further as it works its way down to the lowly consumer.  Assuming 40% markup at the producers level, and another 40% at the wholesale/distribution level, the gouging approaches a total of $398.9 Million per year.

Poor consumer.  When will we get relief from all of this economic sludge being poured down our throats?

Questions for FPCC and PGC

In my last Blog posting, I discussed the application of Pullet Growers of Canada ("PGC") to become another one of Canada's infamous Supply Management Mobsters.  I have read all of the info presented by PGC, and the questions asked by FPCC (Farm Products Council of Canada), all available here

PGC might thank their fortunes that I didn't find out about their application until the public commenting deadline had closed.  At this point, we have to hope that FPCC does the right thing, or somebody who is attending the Winnipeg public hearing finds these notes and submits one or more of them into the public record.

So here goes.  Does PGC have answers for any of these?

1. Why can the PGC Board arbitrarily decide that somebody raising pullets can't be a member of PGC, according to PGC's current Bylaws?  To me, this seems ready for abuse and unfair use.
2. Why can somebody who is currently a PGC member be voted out on a 2/3rd majority?   Now, when PGC is a voluntary club, this power doesn't mean much, but if PGC membership becomes mandatory to hold quota, it could be used for unfair purposes.  Please explain.
3. PGC's Mission, Vision, and Values talk about serving and helping its members.  You are now asking Canadians to give you a monopoly.  That monopoly is obviously very valuable, or you wouldn't have spent over $150,000 trying to get it.  What assurances do Canadians have that PGC will serve Canadians well?  Shouldn't your Mission Statement recognize your duty to serve Canadians, rather than just yourselves?
4. PGC's Mission talks about producing high quality pullets.  Unfortunately, it makes no commitments about affordability, availability, on-time delivery, continuous improvement, understanding & serving the customer's needs, or risk.  Why not, PGC?
5. The PGC Vision speaks of communication, but what are you going to communicate: lies or the truth?  Why not some commitment about openness, transparency, and accountability?
6. In your roadshow slides, PGC talks about continual improvement in price efficiency.  In the official documents (eg. By-laws, Mission Statement, etc.), nothing on this could be found.  Is this "bait & switch" marketing propaganda, or does PGC actually commit to these essential elements?
7. PGC states that quality assurance and cost/benefit analysis will be considered down the road.  Why shouldn't FPCC consider these as mandatory, with PGC having a proven track records in implementation prior to application for Part II acceptance?
8. In the early documents and PGC's road show, you mention a cost to consumer of 0.25 cents per dozen for PGC to enter supply management, then it became 0.5 cents per dozen, and in the most recent answers provided to FPCC, you claim 2 cents per dozen.  That's 800% cost inflation in 2 years, or 282% per year; clear evidence demonstrating that PGC understands how Supply Management works.  How do we know that the acceptance of PGC's plan by those early supporters wasn't conditional on the 0.25 cents per dozen cost, and whether members/stakeholders of PGC would totally reject their proposal if they knew it was going to be a 2 cents per dozen hike in prices?  Secondly, please explain the inconsistency in these prices.  Are we to expect 282%/yr. price inflation from PGC from now on?
9. PGC states that pullet quota will be owned by PGC, and once a farmer no longer raises quota, the quota is surrendered back to PGC at no cost.  The exception is transfer to immediate family members or to shareholder in corporation, or an immediate family member of a shareholder.  Can we not assume that farmers will incorporate, bring in a new shareholder, transfer the quota, and then cash out; thereby eliminating any quota that gets surrendered to PGC at no value?  Please explain what you foresee here.
10. PGC states that they want to participate in and protect Supply Management.  Why is there no commitment from PGC that they will improve Supply Management for themselves and all Canadians?
11. PGC notes that there are 550 pullet farmers in Canada, but had only 32 attend their AGM in 2009, 24 in 2010, 10 in 2011, and 18 in 2012; for a geometric average of 19.  These numbers include the PGC Executive and Board Members.  It appears that there are 19 or so committed members of PGC, which is just 3.45% of the total pullet growers.  I also note that the Minutes of the PGC Board are secret, not to be shared with members.  Please provide objective evidence that a majority of PGC members are truly supporting this group of 19 activists and their plans for Supply Management.
12. BC and Saskatchewan are against PGC's plans, Alberta is doubtful.  EFA is hesitant.  PGC members in only 4 provinces have a majority of support for joining Supply Management.  With 10 provinces and 3 territories, that is just 30.7% of the jurisdictions that support.  By PGC's own figures, there is just 51.456% of the current pullet growers who support this plan.  Why does PGC feel this is adequate to proceed at this time?
13. The PGC Directors are indemnified for everything.  I assume that this includes criminality such as fraud, bad faith, and negligence.  All of these costs for a wayward director will eventually be paid by the Canadian consumer.  Why is this blanket coverage necessary?
14. During the PGC's roadshows, they were asked about the impact of this plan on small flockers.  No answer was provided.  Why was this relevant question not answered?  Secondly, what is the full answer to this question?
15. Similar to the previous question, there were a number of other questions that were asked, recorded in the minutes, but no answer was recorded.  Will PGC supply answers to all of these unanswered questions before the end of the hearing?
16. In one diagram in the PGC submission package, it shows the Hutterite communities as needing to be approached for input.  Was this ever done?  If yes, what was the outcome?  If not done, why not?  Will PGC be doing this prior to the end of these hearings?
17. On numerous occasions and for assorted subjects, PGC has stated that they have nothing in place (ie. no policies, no plans, etc.) as of yet, but that once PGC is approved for Part II Supply Management, they intend to work on that issue.  Isn't that counting your chickens before they hatch, or perhaps asking FPCC to buy a "pig in a poke"?  With so many outstanding issues, there is a significant probability that one of these issues will not go as the stakeholders assume and expect.  What makes PGC feel that this is an acceptable approach?  Why not wait until PGC has worked out all of these issues, and then PGC can decide if they wish to re-submit their Part II application?
18. PGC has stated that all pullet growers have been consistently and continually unable to recoup their true cost of production ("COP"), and this is the reason supply management must be sought and granted.  Yet in their submission package, a group of pullet growers on the East Coast questioned the need for this proposal as things were going quite well and profitable.  Evidence from Manitoba's pullet growers in the evidence currently before the Hearing Panel was of a similar nature.  If PGC's assertions were true, we would expect a rising tide of churn in the industry (ie. people selling out after they lose hope of a reasonable income), or go bankrupt, or price wars, and similar artefacts.  Have these occurred?  Can PGC provide collaborative evidence to support its assertions on COP?
19. No where in PGC's submissions is there clear support for considering allocation of production to the lowest marginal cost producers.  PGC has repeatedly avoided answering this question, in spite of it being asked on many different occasions.  How does PGC see that they will meet this statue-imposed requirement?
20. In the Apr. 26/12 answers provided by PGC, PGC declares itself as 1st Receiver for pullet imports into Canada (ie. only PGC can import at the reduced duty of 6% or so, while all others would pay exorbitant duties, 300% or more).  What does PGC feel are the pros and cons of this approach, other alternative considered, and how do you justify this as the best solution?
21. For farmers who raise their own pullets (ie. closed loop), PGC proposes they would be exempt from supply management quota and levies.  Is this an escape loophole available for all?  What prevents a growing number of customers who are disillusioned with PGC from taking this approach?
22. PGC provided a Risk Assessment in their filings.  On reading the risk assessment, it was mainly directed at PGC's success with its Part II application.  Little or nothing was done on the risks for the Canadian public, upstream suppliers, downstream customers, exporters, importers, or any other stakeholder groups.  Why was PGC excluding all of these important stakeholders from consideration in their meager risk assessment?
23. In PGC's draft Federal-Provincial Agreement, PGC proposes that pullet growers in non-SM provinces would have to charge the highest of two prices.  Under some or most circumstances, this can result is all competitive advantage being lost by the best supplier, and artificial shelter provided for the worst suppliers.  This seems to defeat the mandatory consideration of a balanced approach which considers the interests of the consumer.  It also seems to defeat the preference for the best and lowest marginal cost producer.  Please explain PGC's rationale for this pricing restriction. 
24. On numerous occasions, PGC stated that pullet growers in SM provinces can ship everywhere, but pullet growers in non-SM provinces cannot ship to SM provinces.  That does not seem to be described anywhere in the official documents.  Please explain where this is part of the formal system, rather than just rhetoric.  Please describe the pros and cons of this approach, other options considered, and the justification for choosing this option.
25. In PGC's submission package, it appears that PGC was encouraged to make a Part II application by one or more speeches by FPCC, which I assume refers to Mr. Laurant Pellerin, FPCC's Chairperson.  If Mr. Pellerin has been actively encouraging Part II applications, how is FPCC supposed to make an objective, unbiased decision to recommend or reject PGC's application?  Some might consider this encouragement to be similar to a criminal court judge advocating for drug dealers to step up their criminal activity so that the Judge and other courts have sufficient work and job security.  Should Mr. Pellerin and all other FPCC personal who actively promoted Part II applications from PGC or others, recuse themselves from involvement in the PGC hearings and decision process?

Pullet Parasite: $11 million/yr Screwing of Canadians

<Sarcasm_On>The Pullet Growers of Canada ("PGC") have figured out an ingenious way to help Canadians <Sarcasm_Off>.

PGC (formally National Pullet Growers of Canada) must have figured that Canadians need to pay more for their food.  PGC thought and thought about how they could get the pot of gold for themselves, while screwing Canadians at the same time.  It's easy to do one or the other, but doing both simultaneously is the hard part.  Fortunately for all of us, there are some really smart and dedicated people in the PGC.  Their hard work paid off.  They decided to apply to join the Supply Management Club.

By becoming one of the Supply Management Mobsters, PGC will help screw Canadians out of another $11 Million per year to get eggs on Canadian dinner tables.

There are more than 550 Million dozens of table eggs produced in Canada each year, and PGC's plan will increase the cost of production by at least $0.02 per dozen, resulting in a total cost to Canadian consumers of $11 Million.

It was touch and go on this achievement for Canadians.  When PGC started, they thought they'd only be able to achieve a price increase of just $0.0025 per dozen (ie. a quarter of a cent per dozen eggs).  With further work and effort, they were able to get it up to a half cent per dozen, as promised during their Canada-wide roadshow to promote their joining the Supply Management Gangsters.

Now that they have made an application to the Farm Products Council of Canada ("FPCC") for gangster monopoly rites, they have unveiled the whole story after repeated questions, avoidance & distraction.  Fortunate for us, PGC was inspired to work even harder.  PGC now feels, as disclosed in their filings that PGC can gouge Canadians even more.  They have finally admitted that the price increase will likely be 2 cents per dozen eggs.

I'm sure with time and much more efforts, and when they really learn how to make their Supply Management monopoly work, they will be able to achieve even higher costs than a 2 cents per dozen gouging of the Canadian consumer.

How is the above any business of Small Flockers, and this Blog?

For those who don't know what a pullet is, they are female chickens that are raised from day-old chicks to 19 week old layers.  After attaining the ripe old age of 19 weeks, these pullets are sold to egg producers who use them to produce eggs for the next 52 weeks.  At 1.4 years old (ie. 71 weeks old) the egg farmers consider these pullets to be "spent", as their egg production starts to taper off for the next 5 years, so the spent pullets get sold for slaughter, ending up as chicken soup, chicken pot pie, and similar fates.

As a Small Flocker, we have the choice to:   a) use our laying hens to brood some of our own eggs to hatching the natural way that Mother Nature intended; or b) take some of our layed eggs and put them in an incubators to artifically hatch our own next generation of layers, or c) buy day-old chicks from a hatchery, raising them until they start laying eggs that we can sell, or d) buy ready-to-lay pullets from a pullet grower.  Buying just a few hens each year, Small Flockers pay a premium price to buy pullets; 5 times the price paid by the Big Boys with quota.

This addition of pullets to the SM5 (ie. the 5 Supply Management Mobster Members: dairy, broiler chickens, table eggs, hatching eggs, and turkey) will probably hurt Small Flockers most of all.

What should PGC be doing, in this Blog's mis-directed, delinquent opinion?  They should focus on helping their members improve their COP (Cost of Production) and Quality.

The above graph (from Page 26 of PGC's application files here) shows data of the 2007 pullet production year for 17 pullet producers in Quebec, 24 in Ontario, for a total of 41 farms.  The average pullet price was found to be $2.103 per pullet, which is 168% greater than the lowest cost pullet producer.  As can be seen, costs were as high as $3.75 per pullet for one producer, which is 3 times higher than the lowest cost pullet producer.

Some of these cost differences were due to land costs, age of buildings & equipment, and other reasons that the farmer is somewhat stuck with, but many of the costs are controllable, or could be controllable.  Most of the costs could be improved by communicating Best Practices amongst themselves.  By working together and sharing ideas, everybody can become equal to the best producer.  These are all the small tricks and techniques that add up to a fortune of savings.  PGC doesn't need to be a Supply Management Mobster to do any of this; all they have to do is decide to be helpful, rather than a parasite.

Those Best Practices would only be available for members of PGC.  PGC could easily prove its value to its members every year.  Everybody would want to join PGC, because it pays to do so.  They could make more money, for both themselves and Canada, rather than screwing the public by becoming another Supply Management Mobster.

Unfortunately, PGC decided to screw Canadians, rather than help Canadians.  I wonder why?

Time's Up, CFC

Chicken Farmers of Canada ("CFC") has an important role to play in the Supply Management System for chicken.  Under the Federal-Provincial Agreement for Chicken, 2001 CFC agreed, and was made responsible for a number of issues, including working co-operatively with all the other parties.  With all of the problems in the supply management system, I wanted to know how well CFC was doing in its role.  I asked CFC for objective evidence to show they were doing an excellent job, and achieving success.  My letter to CFC (with corrected typos from original version) is available here.

Unfortunately, it seems somebody at CFC decided that they would not respond to my written requests.  Whether that decision was made by the CFC Board, or Mr. Michael Dungate (Executive Director of CFC), or the janitor, or somebody else, or nobody; I don't know.

The full set of email correspondence from me to CFC, & receipts proving delivery to CFC is available here.

I have tried to ask the necessary questions of CFC; acting for myself, other Small Flockers, and the Canadian public in general.  I believe I was polite and respectful.  In spite of these positives, CFC consistently chose to leave it as a 1-way monologue, from me to CFC, with no response in return.

That is most unfortunate.  It is actions and decisions like this which gives governments a bad reputation.

I can only assume that CFC feels quite superior and arrogant, and they will not stoop so low as to recognize me as a concerned citizen with legitimate questions, nor as a stakeholder.  It appears that CFC feels they can safely disrespect and ignore me.

I don't take kindly to people or organizations who disrespect and/or ignore me.  I don't know anybody who does.

Fortunately, there is the Farm Products Council of Canada ("FPCC").  FPCC is responsible for administering the Farm Products Agencies Act ("FPAA"), as well as supervising and directing the national boards, including CFC.

Under the FPAA, FPCC is responsible for receiving, investigating, and resolving complaints against the FPAA, and the national boards.  And do I have a complaint against CFC!

If CFC happens to be skulking around this Blog, then CFC needs to understand that Time's Up!, you've had your chance.  I have now filed a letter of complaint against CFC, and asked FPCC to intervene on my behalf.  The letter of complaint to FPCC is available here.

Let's hope that FPCC is willing to listen, investigate, and help.

Monopoly vs. the Guillotine

I had previously posted some interesting data on the inflation occurring in the animal feeds supplied to the Supply Management sectors.  Price of dairy and chicken feed (Supply Management monopoly) are up 60%, while dog & cat food ("Free Market, non-monopoly") are up just 20% in the same time period.

Professor Baines of York University, Toronto ON Canada has apparently had similar concerns.  In his paper published on April 22, 2013 "Food Price Inflation and Redistribution Toward a New Analysis of Corporate Power in the World Food System", I found the following graph of C4 indexes:

C4 is a measure of the market share by the four biggest companies in that market.  "ADM" is Archer Daniels Midland (USA).  ADM's Canadian subsidiaries sources, stores, transports and processes crops such as wheat, cocoa and oilseeds at a total of 42 facilities manned by more than 1,000 employees.

ADM, Bunge, and Cargill are like 3 peas in a pod.  Let's take Cargill as an example.  Cargill started as a US company in 1865, before Canada was born.  Today, it is a trans-national producer and marketer of food, agricultural, financial and industrial products and services with 142,000 employees in 65 countries. As world-wide as Cargill is, in 2011 it generated 37% of its world-wide revenues from its North American operations (Ref: Baines 2013, op. cit.).  That's why Cargill spends about $1.5 million per year lobbying the US government.  In Canada, Cargill Limited is headquartered in Winnipeg, Manitoba and employs over 8,000 people across Canada.  Leonard Penner, Cargill's Canadian President has done lobbying in Ottawa, 23 meetings with the Ottawa mandarins and bureaucrats in the 23 days between Feb. 26/13 to Mar. 20/13, sometimes meeting with 8 different people in one day.  Busy guy.  No matter how you slice it, Cargill is BIG, and they are used to throwing their weight around in Washington, Ottawa, and Queens Park.

As you can see, the flour milling, soy crushing, and wet corn milling sectors have been steadily over-taken by these 3 dominant players.  Soy crushing and wet corn milling are central to the animal feeds industry.  In 2002, these 3 players controlled 71% of the soy crushing market.  Control these critical processes, and you have a strangle hold on everything upstream and downstream.  Nobody can move without your permission.

As can be seen from Baines' Figure 9 above, the more people starve, the more profitable it is for the Agro-Traders Nexus (see below):

Now they have figured out how to maximize their profits by people starving to death.

Upon being informed that the citizens of France had no bread to eat, Marie Antoinette , Queen-consort of Louis XVI of France, exclaimed "let them eat cake".  She ended up losing her head for that shortly later.

Are we prepared for the consequences of the Agro-Trader Nexus maximizing their profits as their corporate Mission Statements compel them to do?

Alternatively, should we inquire if France has a few used guillotines for sale?