Dairy farmers favour quota price cap
Thursday, April 2, 2009
© AgMedia Inc.
by SUSAN MANN
London-area dairy farmer and former Dairy Farmers of Ontario board member Craig Connell says capping the quota price at $25,000 a kilogram is the right way to go.
“The price of quota is the single largest cost of dairy farming in Canada,” says Connell, who milks 300 cows. “To keep the markets we’ve got or to find new markets, we have to become more market responsive as far as pricing is concerned.”
John Miller, who milks 110 cows near Creemore south of Collingwood, says the quota price cap, coming Aug. 1, “is more palatable and fairer to the producer” than the current transfer assessment policy. Transfer assessment caps quota sellers’ returns at $25,500/kg regardless of market price.
Limiting bids to 10 per cent of their quota holdings, another policy debuting in August, may take farmers some getting used to, Miller says. The policy (new entrants are exempt) means farmers will have to buy quota incrementally rather than all at once as they do now. “If you’re doing an expansion you’ll spend 12 or 24 months bidding on the exchange every month,” he says.
Quebec farmers have been doing it this way for about two years. “They’ve been quite happy about it,” Miller says.
Dairy Farmers of Ontario’s board approved the quota changes in March. It discussed the changes for several months with P5 counterparts in Quebec, Nova Scotia, New Brunswick and Prince Edward Island. The P5 group already shares markets and revenues. Harmonizing quota policies is an important step toward the ultimate objective of having one decision making body in the pool, the DFO board said in a March 27 letter to farmers.
Bill Emmott, DFO’s chair says Ontario will proceed even though the New Brunswick Milk Board has not yet approved the cap system for its producers. “The whole idea is to harmonize so that everyone is in the same place.”
Among the new policies:
• a quota price cap of $25,000;
• a new entrant assistance program;
• an over-production quota credit limit reduction to 10 days from 20 days effective Feb. 1, 2010 (under-production credits remain at 30 days); and
• general quota increases that apply to all farmers are non-saleable
The transfer assessment, the 10 kg exemption from the assessment and the pay-what-you-bid policies will be eliminated after the July quota exchange.
The quota price starts at $25,500/kg on Aug. 1 and drops $100 each month until the $25,000 cap is reached on Jan. 1, 2010. The monthly price will be the price cap or the exchange clearing price, whichever is lower.
Bill Mitchell, DFO’s assistant communications director, says spring meeting delegates supported the gradual reduction to ease the transition. Quebec is taking a similar approach.
Other quota exchange rules include: offering all quota on the exchange except for same-site transfers to family or non-family members or donations to a child; prorating sales in two stages if demand exceeds supply at the price cap; allowing only a single bid on the exchange; limiting farmers’ bids to 10 per cent of their quota holdings (new entrants exempted). BF