Wednesday, August 21, 2013

It's Alive!

Ontario Farm Products Marketing Commission, ("OFPMC") the regulatory boss of Chicken Farmers of Ontario ("CFO") is truly alive.

After years of complaints from many sources about the cartel imposed, monopolistic, Supply Management minimum cost of live chicken, OFPMC has finally done something about it.  OFPMC came back to life and took action against the arrogant and oppressive chicken monopoly.

The old rule, imposed on the powerless citizens who pay the ultimate price, has been in place since May 4, 2003 (and was even more oppressive and wrong before that date).

The May 2003 rule assumed a Feed Conversion Ratio ("FCR") of 2.0 but in reality, many sources (including me) believed the factory farms of Ontario had a FCR of 1.82.

An FCR of 2.0 means that it takes 2 kg. of chicken feed to produce 1.0 kg of weight gain by the chicken.

I previously wrote about this unfair extortion of Ontario consumers by this bogus FCR here, and here.

The new FCR rule will adjust the factory farm gate price of live chicken to be more in line with the real cost of raising those chickens.

CFO states:
Currently the regulation states that “for every $5/tonne change in the feed price, the minimum live price will be adjusted by one cent in the corresponding direction”. This section will be changed to “for every $5.81/tonne change in the feed price, the minimum live price will be adjusted by one cent in the corresponding direction”.

The old rule which assumed a FCR of 2.0 is calculated as follows:

($0.01/kg chicken)/($5.00/tonne chicken feed)*(1000 kg/tonne)= (2.0 kg chicken feed)/(kg. of chicken)

Similarly, the new rule assumes an FCR of 1.72

Note that the new rule is 94.57% of our assumed nightmare, and just 86% of what CFO was previously trying to convince everybody was a "reasonable" FCR.

So, it now seems that CFO and the chicken factory producers were even bigger cheats than we had previously suspected.

Well, congratulations and thanks to OFPMC for coming back to life and finally taking action.  My thanks and appreciation to CFO for swallowing hard and doing as OFPMC ordered them to do; I'm sure it wasn't easy, and won't be easy for the factory chicken farmers to accept and thrive with the more correct FCR.

The trick will be for somebody, anybody, to stop all the middle men from gobbling up this 16.3% drop in the FCR before the consumers get to enjoy it at the grocery store meat counter as lower chicken prices.

Since feed costs represent about 60% of the total cost of raising chickens, and the eviscerated weight is about 73.72% of the live weight, a 16.3% drop in feed prices should translate to a 9.78% drop in the live chicken price, and a 7.21% drop in chicken prices at retail meat counters.

Do you think consumers will see any of that FCR correction as a retail chicken meat price decrease?

I'm not holding my breath.

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