Dairy moratorium remains

Wednesday, August 20, 2014

by SUSAN MANN

It will be at least a year before dairy farmers can once again request permission to set up a second licensed facility on the same parcel of land but the Dairy Farmers of Ontario moratorium on such requests is unlikely to cause much hardship as there are very few farmers wanting this approval.

Dairy Farmers implemented the moratorium as of June 26 and it stays in place until the P5 quota policy review is done, likely sometime next year, and any policy changes, if there are any, are announced, according to an announcement on Dairy Farmers website.

Ontario is part of the P5 eastern milk pooling agreement with Quebec, Nova Scotia, New Brunswick and Prince Edward Island. The five provinces share revenue from industrial and fluid milk markets and work cooperatively on other matters of mutual interest. In 2009, the P5 provinces introduced a harmonized quota policy that includes a price cap on quota of $25,000 per kilogram.

Dairy Farmers director of operations George MacNaughton says during the past twelve months the organization received three requests to set up a second licensed dairy facility on the same parcel of land. That’s about the same as the previous year.

Historically there haven’t been very many of these requests, he says.

The moratorium was put in place because the P5 provinces are currently reviewing quota policies and allowing second licensed facilities on the same parcel of land will be discussed, MacNaughton says. “There has been concerned expressed in the P5 on whether allowing two facilities on one parcel of land is equivalent to a merger. We don’t think it is because it’s still two separate facilities.”

The current quota policies prohibit quota mergers.

MacNaughton says the first phase of the quota policy review is completed and that was to reassess the objectives of the 2009 harmonized quota polices and study what has happened since then with quota transfers compared to what the objectives were.

The second phase is to determine a vision for the new policies and that will be done at a P5 meeting at the end of September, he says. “Hopefully that will actually set the vision and then the policies will be developed after that based on what it is we’re trying to do based on our mission and vision,” he says.After the policy instruments needed to accomplish the vision are outlined they will be sent out for consultations with producers in the winter and early spring of 2015. If any policy changes are implemented, they are slated to come into effect Aug. 1, 2015.

Lynden-area farmer Ben Loewith, who is past chair of the Progressive Dairy Operators, says quota is very complex matter and he declined to outline what he says the P5 should be looking at. “Anything I say can be ripped apart.”

The Progressive Dairy Operators is dedicated to enhancing Ontario’s dairy industry through a focus on innovation and excellence in dairy business management along with providing opportunities through leadership, experience and education, according to the organization’s website.

Loewith did say any decisions the P5 group looking at quota matters make have to be “far sighted. They have to be looking with an end-goal in mind of what the industry should look like as opposed to just trying to be plugging holes in the system.”

MacNaughton says the biggest concern producers have is they can’t actually grow their business at the rate they would like to grow it. “There are producers who are concerned they can’t do a significant enough expansion to be able to bring in the next generation. They need to do an expansion of some magnitude to be able to provide an income for another family.”

The quota exchange in Ontario is chronically short of available quota for sale with the demand outstripping the supply. That’s the same picture across the P5 and nationally too, he says.

One of the objectives P5 dairy leaders were trying to achieve with the 2009 harmonized quota polices was to have as much quota as possible transferred over the quota exchange. “We’ve seen a significant increase over time of the amount of quota that’s selling with ongoing operations so it doesn’t meet our original objective,” he says. “Now the question is: was the objective right and if so, do we actually need to look at that whole policy differently?”

It isn’t known yet if there will be big changes coming out of the quota policy review, he says. But the P5 quota committee will be looking at future trends in the industry and they will be taken into account when it sets the vision. “You have to take into account everything that’s going on around you in the environment” and determine “what are we going to strive to do during that period.” BF