Tuesday, March 19, 2013

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?

No comments:

Post a Comment

Off-topic commercial spam that's posted so as to help sell your wares will be deleted.

On-topic comments, where you behave yourself and play nicely, will remain posted; whether they are pro or con. Everybody needs to fully understand all points of view so that we can find a solution that encompasses everybody's concerns. Give it your best shot.

If you decide to post, your posting becomes part of the public record, and SFPFC has full rights to use it (or not) in any reasonable manner or medium that suits our purposes.

Before posting, please proofread, and correct as necessary. If you subsequently discover a need to fix your previous posting, make an additional posting that refers to the original posting, then set the record straight.