Wednesday, November 26, 2014

Smoke & Mirrors for Chicken Pricing & Provincial Allocations

Supply Management was ordered to develop a better formula for pricing of their essential food products (dairy, chicken, turkey, & eggs).  What we got was bureaucratic, impenetrable & confusing smoke and mirrors.

The old system for chicken was based on the farmer's price of buying chicks and chicken feed, plus a "reasonable" amount for the farmer's labor, overhead expenses, and capital costs.  Sounds reasonable, easy to understand, and possibly justifiable.

Unfortunately, the #ChickenMafia and their friends floated mirages and artificial prices for each of these pricing formula factors, putting in the fix to maximize the #ChickenMafia's profits.  This system of smoke and mirrors allowed the #ChickenMafia farmers to become the highest paid farmers in Canada, 21.1% higher than the median farmer's income (see Blog posting Tail Wagging The Dog ).

How did the #ChickenMafia distort a simple pricing formula to their weapon of choice for gouging the Canadian public?  Many family farms have been bought, merged and amalgamated into the fold of Big Ag. multi-national billionaire corporations.  Many other chicken farmers have become Big Ag's puppets.  Big Ag. and their feed mills own or influence the chick hatcheries, the chicken feed producers, the chicken farmers who grow the chicken to full size, the abattoirs who slaughter and process the chickens, and distribute them to the grocery stores.

That web of control and influence is called vertical integration.  That vertical integration creates a very powerful force, one that is hidden from public view, and beyond government control, supervision, or oversight.

Barrie McKenna at The Globe & Mail described the struggle over the ammeding this sneaky, stealth control of the chicken pricing formula by the #ChickenMafia.

On a related basis, Chicken Farmers of Canada are ammending their formula for which province gets to grow Canadian chicken.  Here is the guts of the new deal:

4.1 Subject to the other provisions in this MOU, if the national allocation for a period is set above base, the growth (over base portion) of the domestic allocation will be distributed using a differential growth formula that consists of the following eight components and component weighting:
A. Provincial share of the national base allocation – 45%
 B. Population growth – 7.5%
 C. Income - based Gross Domestic Product (GDP) growth – 7.5%
 D. Consumer Price Index (CPI) – 7.5%
 E. Farm Input Price Index (FIPI) – 10%
 F. Quota Utilization – 7.5%
 G. Further Processing – 10%
 H. Supply Share – 5%

These 8 factors all add up to 100% of the weighting.  At least they got that right, we now have proof positive they know how to add and do percentages.  The rest is in doubt.

Under the 2001 Federal-Provincial Agreement for Chicken, allocation of quota amongst provinces is supposed to be based on lowest cost producer.  This help ensures consumers get less expensive chicken, rather than subsidizing inefficient producers.

Will the new MOU ensure this occurs?  I doubt it.

The advantages of CFC's system is this MOU defines how all the provinces will jockey and fight amongst themselves.  At least that is a battle somewhat among equals.  Fortunately, the innocent and helpless consumers are proected from these vicious Supply Management Monsters when the MOU is implemented each quoota period.

Agri007 describes the MOU and its 8 factors, and doubts it will achieve something in the consumer's best interest.

The deck of cards is stacked against the consumer.  All the aces are secretly tucked up the sleeveof the #ChickenMafia.  The #ChickenMafia then makes a big media blitz and promotion that they are re-shuffling the deck of cards, and dealing a fresh hand to all players.  Some people might be fooled to enter their anty, trust the new dealer, and try one more time with eternal hope for a better tomorrow for Canadian consumers.

Unfortunately, no matter how many times or how well the deck is shuffled and cut, you need to realize that the aces are up the sleeve of the #ChickenMafia.  Those aces will be re-introduced to the game with great stealth at just the right time.

It's a rigged game.

The consumer has no chance to win.

End of story.

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