Thursday, February 6, 2014

Innovation for #ChickenMafia's Customers

Is Canada's Supply Management System the heart and soul of innovation in agriculture?  Some seem to think that SM is all about innovation, such as a recent comment on Better Farming's website.

Based on my life experience, #ChickenMafia are mediocre to terrible in innovation and improvement for their customers.  Due to the #ChickenMafia's arrogance and self-centered narcissism, perhaps they focus all of their innovation efforts solely to improve the monopolist's pocketbook. My response to this innovation comment is as follows:

You claim that Canada's SM is innovative.

Where is the proof of that bald assertion?  To me, it seems like an assumption, or is purposefully hyperbole, propaganda, and an exaggeration?

Let's compare our SM industries to all those around the world who are forced to compete and improve, or suffer the consequences.

In competitive industries, I have seen an average rate of improvement as high as 10.4% per year improvement for 20+ years, which totaled 723% improvement over 2 decades (1.104^20= 7.23 or 723%).

Do Canada's SM industries achieve anything close to this?  If so, where is the proof?  If they did, SM food prices would be going steadily down, not up.  For example, if inflation is going up by 3%/yr and SM farmers are improving at 10.4%/yr, consumer prices could drop by 6.70%/yr while SM farmers continue to make a "reasonable" profit (1.03/1.104= 0.9329 or a 6.70% decrease).

Let's look at Canadian factory farm broilers as an example. 

Instead of retail price decreases, Chicken Farmers of Ontario have implemented chicken price increases that caused retail prices to go up 3.57%/yr on average, every year, for at least the last 17 years.

Ontario's factory chicken farmers have a Feed Conversion Ratio ("FCR") of 1.72 but New Zealand's Tegel Poultry for example  (see ) has an FCR as low as 1.38 on a repeatable basis.  Ontario factory chicken farmers are 24.6% worse than world-class.

Since feed costs are about 60% of the total live chicken price, the poor Canadian FCR raises Ontario's live bird price by at least 14.78% higher than what it could be if Canadians were world class.

Canadian factory chicken farmers aren't good enough to quality for the local public school team, let alone the gold metal at the Olympics.

No wonder Canadian chicken prices are 3 times higher than either US or world chicken prices.

No wonder Canadian factory chicken farmers cry and whine that they can't survive without a 285% chicken import tariff under SM rules.

No doubt Canada's SM farmers have done some improvements, but only at a leisurely pace; in spite of how they puff their chest and claim otherwise.

Being the best in the world is not easy work.  We used to be one of the best in the world.  Not any more.  Canadians pay the price for this mediocre performance.  The factory chicken farmers are guaranteed to get their, no matter what.  What do they care that all Canadians get regularly screwed because of the SM farmer's mediocrity?

However, Canadian SM farmers could be the best again if given the necessary drive and the time to re-develop their weakened (and almost vanished) competitive muscles.  Unfortunately, they choose not to, and take every possible step to resist the necessary changes.

Today, Health Canada reports that 7.6% of Canadians can't afford to feed their families.  Isn't it nice that this impoverished group of hungry Canadians has no SM farmers within it?

Why bother working hard and maximizing innovation when you can be fat, dumb, and happy with a guaranteed monopoly no matter how inefficiently you operate as compared to the rest of the world.

Glenn Black
Small Flock Poultry Farmers of Canada

Is there hope that I convinced anybody to re-consider their opinion?

Am I wasting my breath and electricity writing Blog posts that few read, and those who read, ignore?

It's hard to know.


  1. as a player within the industry (chicken) I have to comment on trying to compare retail pricing for poultry to live prices set by provincial board. retailers are greedy with margins at 35-45% and on specialty items even higher. they go back to the seller and tell them what they will pay regardless of live pricing and often exchange rates. Consumers in this country pay high prices for poultry because of retailers not supply management and its pricing policy's.

    1. Thanks for your feedback.

      I agree that quota-based farmers are a small, yet significant part of the total problem with Supply Management.

      I agree that retailers sometimes take advantage, but at other times, use chicken (as well as bread, milk, eggs, etc.) as loss leaders (ie. they sell for less than what the retail store paid, as an advertising attraction of shoppers).

      For what I have been able to see so far, it is the large feed mills and processors (who for the most part are multi-national corporations worth Billions) in the middle of SM who get the lion's share.

      The big issues I have with quota based chicken farmers are:

      1. off-label drug use,
      2. bogus FCR compensation systems in COP formulas,
      3. lack of (or lame) rates of continuous improvements ("CI"),
      4. continual price increases at farm gate instead of using CI to drive prices down,
      5. failure to lobby government for lowering import tariffs funded by your rate of CI,
      6. Not allowing some more room for Small Flockers (we want no more than 10% market share, you can have the 90%).

      Farmers need to realize and own up to being used by the SM Mafia machine as the cuddly, wholesome front man behind which the SM henchmen can do their nasty work, all because people have traditionally trusted farmers.

      If farmers lend themselves as a decoy front man behind which the bad guys can hide, what do you think will happen to farmers once the majority of people figure this out? Perhaps it's time to put some distance between farmers and the other nasty players and manipulators in the SM system.

      As a quota-based chicken farmer, I'd love to get your feedback and suggestions on our point of view.

      Do you agree with any of this?

      Are we missing some important facts?

      How can we help you, in return for helping us better understand?


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