Dairy Farmers tackle quota availability
Saturday, March 6, 2010
by SUSAN MANN
Revisions to Dairy Farmers of Ontario’s quota policies could slow the rate for participants in the new entrant assistance program to acquire the quota they need to get started.
Each month, only one new entrant with assistance and one new producer without assistance will be allowed to bid on each quota exchange.
Moreover, their bids will be second behind licensed farmers with successful bids, according to the revisions outlined in a March 2 letter to farmers. And the process depends on there being sufficient quota on the exchange.
The revisions allocate 0.1 kilograms first to all licensed farmers with successful bids, then up to 23 kgs to one new entrant with assistance, up to 35 kgs for a new producer without assistance. Any leftover quota is pro-rated and allocated to the successful bidders.
The revisions take effect on this month’s exchange.
Bill Mitchell, assistant communications director, says when the board discussed revising its quota policies they agreed the first priority in terms of the quota exchange should be existing farmers with their ongoing need to make quota adjustments.
George MacNaughton, production division director, says they’ll make decisions about which new entrant would receive the quota based on the date of their application and the date they’re able to start producing from their own facility.
If there isn’t enough quota to do the allocations, MacNaughton says “we may not even be able to issue the 0.1 kgs (to all licensed producers). DFO would actually purchase the quota and carry it forward to the next exchange.”
There isn’t a guarantee a new entrant with assistance bidding for quota would get the quota they wanted to buy. “There would have to be sufficient quota offered for sale for them to be able to buy,” he says. “They don’t lose their order though if they’re not successful on an exchange or there’s insufficient quota for them to be successful.” Their place is held in line and they’re able to bid the next month.
Quota reviewed
Dairy Farmers reviewed its quota policies earlier this year to ensure most quota sales occur on the monthly exchange. The review included quota transfers, donations, shared facilities and relocation policies. Policy principles were effective Feb. 24 while the exact wording of the revised policies will be mailed to farmers in May.
The board’s objectives were to continue support for quota transfers on the same farm site, maximize the volume transferred on the quota exchange, and ensure all farmers have fair and equitable access to quota. The board also wanted to make sure quota from two licenses wasn’t merged and quota wasn’t rented.
MacNaughton says they were concerned some farmers may have found a way to merge quota by using a combination of policies. Dairy Farmers received requests from farmers to effectively merge their quota with “that of an ongoing operation” by using the family quota donation policy.
That meant that some farmers would have access to large parcels of quota that would otherwise have been available to all producers on the quota exchange, he says. Since some farmers thought they had found a way to merge quota “we wanted to make sure that our policies were clearly stated,” MacNaughton says.
Parents can only donate quota to a child if the child doesn’t hold any quota and is starting at a dairy facility where the parent wasn’t issued a license to produce and market milk in the last five years, according to the revised policy.
Rental concerns
Dairy Farmers always forbade quota renting and that continues. “We had some concerns that through the shared facility policy, quota may have been rented,” MacNaughton says. “We had producers looking for producers with medical challenges to be able to use their quota.”
Mitchell says there was a concern people might be using shared facilities basically to disguise a quota rental.
Officials at Dairy Farmers say several factors combined to reduce quota supply and increase demand since new quota policies became effective in August, 2009. The supply/demand equation was so imbalanced on the January quota exchange that it couldn’t run normally.
There wasn’t enough quota volume offered for sale in January and that meant that only three new entrants were issued quota.
Sale quota dwindles
Numbers in a chart on the Dairy Farmers web site showing quota sales results from March 2008 to February, 2010 indicate demand for quota in February was 7,966.60 kilograms, the highest it has been during the past two years. But just 151.68 kg were available for sale. The lowest demand was September 2008 at 449.18 kg. During that month, 383.544 kg were available for sale.
The lowest amount for sale during the past two years was in January with just 116.25 kg available; the demand for that month was for 7,189.90 kg. The highest amount for sale during the past two years, 1,289.15 kg, was in August. The amount bid for that month was 2,191.40 kg.
MacNaughton says on the supply side quota was being held back since the new policies, put in place to harmonize dairy policies in eastern Canadian provinces, became effective in August. Farmers wanted to sell it as part of an ongoing operation or as a block to another producer, he explains. Quota was being held back “until people are sure what the rules are and whether they can actually conduct that transaction.”
The quota demand is inflated because some farmers looking to expand in two to three years are starting to buy now. When quota demand exceeds supply in a month, Dairy Farmers prorates the available quota. Farmers may not get the entire quota they want in a month and have to buy smaller amounts over several months.
Mitchell says “people knowing that they’re only going to get a small percentage of what they bidding for are likely inflating that bid to try and get more.”
Ontario has 268,000 kilograms of quota. BF