Dairy entrants face high deposit fee

Friday, October 26, 2012

by SUSAN MANN

People wanting to become farmers through Dairy Farmers of Ontario’s new producer program will soon have to pay a $1,000 application fee and a $10,000 deposit.

The changes are effective Nov. 1 and were introduced to ensure only those people seriously interested in producing and marketing milk apply for the program. The deposit will be put toward their first quota purchase.

DFO found that some applicants didn’t bid for quota during their assigned month and that delayed others from getting started in the industry. Under the revised program, if an applicant doesn’t bid in their assigned month they are removed from the queue and their deposit is lost. The deposit is also lost if an applicant withdraws from the queue.

Applicants in the lineup would only have their application fee and deposit refunded if they were accepted into the New Entrant Quota Assistance program –– a separate program from the new producer program and the one in which DFO provides quota loans –– or if DFO cancelled the new producer program.

David Squibb of Staffa, located north of London between Mitchell and Exeter, got his start in the dairy industry in May 2010 through the New Entrant Quota Assistance program. But he was in the line for the new producer program and he likes the changes being brought in by DFO. The changes will ensure that applicants are serious about starting in the industry and they’re not just thinking about it, he says.

Squibb, who grew up on a dairy farm and always wanted to farm, milks 35 cows on 150 rented acres. He notes the programs help new farmers get started in the industry.

Other changes to DFO’s new producer program are also being discussed. At DFO’s fall regional meetings this month, delegates from dairy producer committees were asked which would they prefer: if the quota for new producers through the program comes from the monthly exchange as it does now, or from the organization’s provincial entitlement? DFO will consider the delegates’ feedback and bring a policy proposal to the March 2013 spring policy conference for discussion.

George MacNaughton, DFO director of production and regulatory compliance, says in general fall regional meeting delegates favoured the quota continuing to come from the monthly quota exchange for the new producer program “because it just has less overall impact on producers in the industry.”

Since the new producer program started in 2009, there have been 38 new producers who bought quota and started shipping milk, DFO says in a report released at the fall meetings. Through the program, DFO gives one new farmer priority access to quota on each exchange. The average amount of quota purchased by the 38 new producers was 31 kilograms and it ranged from 12 to 35 kilograms.

The changed program enables new producer applicants to buy a minimum of 10 kilograms up to a maximum of 35 kilograms of quota on the exchange when it is their turn to bid. That allotment is significantly higher than the one used for existing producers on the exchange. Since the demand for quota generally exceeds the supply, DFO regulates the amount available to each bidder on the monthly exchange.

There are currently 90 potential new producers in the new producer program queue. MacNaughton says the $1,000 application fee won’t apply to people already in line.

DFO stopped taking new applications in December 2011 pending the completion of a program review that was started because Quebec was also reviewing its program. Quebec cancelled its new producer program and now Ontario is the only province among the five in the Eastern Canadian milk pooling agreement to continue a new producer program. The other provinces in the pool with Ontario and Quebec are Prince Edward Island, New Brunswick and Nova Scotia. These provinces share revenue from industrial and fluid milk markets and work cooperatively on other matters of mutual interest.

DFO will start accepting applications again to the new producer program starting Nov. 1, MacNaughton says. The $10,000 deposit will begin in November for the person eligible to bid on the November 2013 exchange. The deposit will have to be paid one year before the applicant’s assigned month to bid on quota.  

Since the new producer queue started with the operation of the March 2010 quota exchange (the queue to buy quota began after the program’s 2009 launch), there were four exchanges where there was insufficient quota and two exchanges where the eligible new producer didn’t bid for quota during their assigned exchange “resulting in a delayed opportunity for a new producer to acquire quota,” the report says.

In the 12 months ending July 2012, new producers acquired 327 kilograms, or 8.7 per cent, of the 3,776.85 kilograms of quota available on the exchange.

Another policy change being implemented Nov. 1 by DFO will enable people who buy an ongoing farm operation to resell it without having to operate it for a minimum of five years as they do now. BF