Why are there Gorillas in Ontario Chicken Coops?

There are 142 gorillas living in Ontario chicken coops.  How so, you say, my faithful Blog Dogs?  Read on, and learn.

Throughout CFO's literature, they feature the young farm family, kids in tow, as the poster family for chicken farmers, just like the advertising executives recommended.  It's easy to trust (and hard to worry about) somebody who looks like the perfect Canadian family.

Is CFO telling the whole story?



Chart 7 is from CFO's 2011 Annual Report.  It is a very carefully designed chart, intended to be truthful, yet avoids exposing the problem.

Notice the simple and innocent "over 50,000 units".  The number of farmers who are in that category (142) doesn't seem to be out of line with the other categories, and this represents just 14% of the total number of farmers; again not out of line with the other categories.

What we need to ask is "Why did CFO stop at 50,000 as the biggest category?".  In other words, we know its bigger than 50,000 but just how big is it?  CFO isn't saying.  I wondered why, and you can probably guess what comes next after I start wondering about something.

CFO does say that a handful of farmers have under 14,000 units, those who are grandfathered in before the minimum quota was set at 14,000 quota units.  By knowing that the total basic quota for Ontario is 35,798,018 units, and using the geometric mean value for the average quota for each of the 6 categories, we can estimate the top end of the "over 50,000 units".

Based on those assumptions, we estimate the top end of the 6th range to be 196,500 units.  So the top category seems to be from 50,000 units to 196,500 quota units.  This gives a geometric median size of 99,122 units.  Now why couldn't CFO just come out and say that?  Why did they have to hide that fact?

Oh oh, I'm starting to wonder again.  Here comes more digging, so get your shovels and come see what ooze we dig up this time.

And there's the rub.  Note that all the other categories have a range (ie. max. - min.) of 10,000 units, but the top category has a 146,500 range.  I wonder why CFO made this choice for the categories?

Might I suggest that CFO isn't comfortable with just how big the biggest guys really are.  They needed to hide this info, so they carefully chose the category range so as to hide this issue.

So why is CFO worried about this?

Perhaps CFO has heard about HHI (Herfindahl-Hirschman Index).  It is typically used to measure market share.  For example, most governments use it to calculate market dominance and competitiveness in the marketplace.  When a big gorilla in the marketplace proposes to buy out a small competitor, the government does the HHI calculation on the basis of both before and after the proposed merger.  If the HHI change is too large, permission is refused, and the acquisition must be abandoned.  Secondly, when a monopoly exists, and the HHI is huge, the government uses it as justification for anti-trust breakup of the market gorilla into smaller units (eg. Standard Oil, AT&T, etc.).

So what is the HHI for Ontario chicken farmers?



In the above table, HHI is calculated with whole percentages for market share, so HHI ranges from 0 to 10,000 units.  We can see that the HHI for the 6 categories of chicken farmers all have small portions of the HHI, except the last category.  The last category, the one that was hidden by CFO, represents 69.24% of the HHI score.

We have found the gorilla in the chicken coop.  These 142 mega of the mega producers have 39.3% of the total quota for Ontario.  That's why CFO carefully hid this data from prying eyes.  Notice that this category only has 142 "farmers".  I would guess that there are some multi-national corporations in or near this group of 142 quota holders.  These are the people who really control CFO.  I suggest that the other 871 chicken farmers in Ontario are probably just along for the ride, and have little influence with CFO.

Do any of the small quota holders feel listened to when they call CFO?  Do these 871 small farmers know what is going on at the CFO Board meetings?  Are all the little secrets of CFO shared with these 871 peewee chicken farmers, or it it too confidential for these small guys to be informed?

I bet the 142 gorillas know all the facts, both inside and outside of CFO.

I bet that when a gorilla picks up the phone and calls CFO, everybody at CFO jumps to attention for the V.I.P. gorilla on the phone, they start saluting, and saying "Yes sir, right away sir, thank-you sir".

Who would have known that there are 142 gorillas hidden in Ontario's chicken coops?  I wonder if we should alert the SPCA, or possibly the Toronto Zoo?

Magical Trucks of Chicken

Since starting this Blog 18 days ago, I've been receiving a number of interesting phone calls and emails.  Most of the people who called wanted to remain anonymous, and once they explained the purpose of contacting me, I understood the reason for the secrecy.

They were intrigued with all that I wrote so far on the Blog, but wondered when I was going to get down to the real juicy stuff.

"What might that be", I asked.

"The magical chicken trucks", they said.

I was confused, so I asked them to explain.

They said that they used to work in one of the slaughter plants.  Every once and a while, they would load a truck with eviscerated chickens that was supposed to be exported from Canada, but it never crossed the US-Canadian border.  It went somewhere else.  Nobody on the plant floor knew where it went, except that it didn't go export like it was supposed to.

"It was a magical chicken truck", they repeated.

After asking some more questions, my light bulb finally went on.  You see, eviscerated chicken all looks the same, it's not traceable except by the paper that accompanies the chicken.  One truckload of chicken looks the same as the next; they're indistinguishable.

It appears that live chicken had been imported from the US for Canadian processing, and they were supposed to be re-exported as eviscerated chicken meat to some foreign country.  However, those chickens never left Canada.  By claiming to import for subsequent re-exporting, the processor escapes paying the 300% import tariff.  When the magical chicken truck is used, the chicken appears to leave Canada (but don't), and then the processor was free to sell the resulting meat in Canada at 3 times the selling price available in export markets.  Not a bad profit margin, if you can get away with it.

After all, it's easy for a magician to make a magical chicken truck disappear here and re-appear over there.   

Another person contacted me to say that they drove long haul reefer truck, often for chicken slaughter plants exporting to the States.  Sometimes they would have a load that they took to the States that would have some paper problems.  It appears that 2 or more slaughter plants were claiming the same truck as their own shipment, so that it would go towards their export quota license.

You get awarded quota for export, then claim that you exported as you were supposed to do (but never really export those chickens).  You then have an extra truckload of chicken in Canada that you can sell in the high priced Canadian chicken market.  That sounds like a nice way to make some quick cash, provided you can get away with it.

I understand that both Chicken Farmers of Ontario (CFO) and Chicken Farmers of Canada (CFC) are supposed to be monitoring the chicken supply management system, and ensuring that the rules are followed by everybody.

Whatever you do, make sure you don't wake up CFO or CFC to tell them about the magical chicken trucks.  They're trying to sleep.

Does CI Work?

I have proposed that the Chicken Supply Management System should be applying true CI (Continuous Improvement).  I have received some feedback, stating that my idea of CI may work for a task, but not for animals or plants.

I beg to differ.

The milk data is from FAO, as reported by Canada to the United Nations.  You can see all of this data via Gapminder, Agricultural dataset.  Here is a graph showing the Canadian cow milk yield, kg of milk per cow per year).  Notice the 2.5% per year improvement in milk yield.



Part of the improvement is genetics, but their is also the feed regime, the milking methods, health, etc.

Since 60% of the cost of chicken is the feed costs, this is obviously a place to focus the efforts to improve.  The rest of the data is from Statistics Canada



Above, we see the 1.39%/yr improvement in the grain corn yields in Canada.  Corn is one of the most important grains used in chicken feed.  The second major ingredient for protein is soybeans,  Here, we see a



0.793%/yr improvement.  Wheat is also used in some feed formulations, and here we can see a 1.33%/yr



improvement.

I had suggested 4% learning rate for raw materials, as recommended by NASA.  Milk came the closest at 2.5%/yr.  Perhaps with a more focused program, with better tools, and industry-wide efforts, more could have been achieved.  Individual efforts are good, but much more can be achieved when the entire industry take CI on as a project, and work as a team to achieve the goal.

Hopefully, this is enough proof that improvements can be achieved in agriculture, as they have been done for years.  People (ie. farmers) and processes (tractors, cultivators, sprayers, etc.) are the most important part of getting feed to the chickens.  I believe all of these systems can be significantly improved.

McDonald's Restaurants have kept their same suppliers for meat and buns for decades.  They have established a hard-fought continuous improvement relationship, and achieved excellent results.  McDonald's competitiveness and success has greatly depended on its suppliers.

I believe that the success of the chicken farmers is highly dependent on their feed suppliers.  They need to work closely together to achieve what needs to be done to supply high quality, low cost chicken to the Canadian public.

So if all of these yields are showing improvements, why is the cost of the chicken's feed going up, instead of going down?  It is because somebody is gaining excess profits, or the other costs have been allowed to run a muck.