New leasing arrangements on the way for Ontario's egg farmers

Tuesday, February 3, 2015

by SUSAN MANN

Egg Farmers of Ontario will introduce a new way of allotting leased quota to farmers in the 2016 leasing pool.

The approach will give producers some certainty so they can plan ahead, says the organization’s general manager.

But, as is currently the case, just how much of the opportunity farmers can take advantage of will depend on the size of their barn and the amount of production quota they currently have, says Harry Pelissero.

The new layer leasing allotment, which the board recently circulated to farmers in a memo, proposes to provide farmers who have room in their barns the opportunity to lease up to 735 birds at $7.30 per bird, per year.

In egg farming’s supply managed system, a unit of quota equals one bird, so, for example, a person with 600 units of quota has 600 birds. Hens lay eggs on average for 51 weeks and produce about 25.5 dozen eggs each during their lifetime.

The new allocation approach will apply to an additional allocation of 274,611 birds the provincial organization recently received from Egg Farmers of Canada.

That amount was Egg Farmers of Ontario’s share of the past two national agency’s allocations that were made within the last 12 to 16 months, Pelissero says.

“This is new quota as a result of increased sales in the marketplace,” Pelissero says.

For the past three or four years, Egg Farmers of Ontario has put the additional allocations it gets from Egg Farmers of Canada into its layer leasing pool and “leased it out,” he says.

Pelissero says currently, farmers apply to get quota from the allocation, and if they have room in their barns, they can lease the amount they request – up to the lease’s cap, which is an amount equivalent to the amount of production quota the farmer owns.

So, for example, a farmer who owns a production quota of 700 birds would be allowed to lease up to 700 more birds, bringing the number of birds in the barn up to 1,400. By way of contrast, a farmer who owns a 500-bird production quota would only be allowed to lease up to 500 birds, bringing the total under the barn roof to 1,000 birds.

Pelissero explains the board decided to cap the number of birds producers could lease in this way to prevent producers from taking advantage of leasing to expand their operations without making at least an equal commitment to owning quota.

Of the new allocation from the national organization, 36,750 birds would be set aside for new entrants and additional quota holders joining the industry in future years, Pelissero says. The set aside also serves as a cushion as “we are only allowed to have 97 per cent of our allocation in our barns,” he adds.

Birds left over from farmers not able to lease their full allocation are put back into the pool and are distributed to farmers with room for them. Of the province’s 323 quota holders, only 223 have room to place birds, Pelissero says.

In the case of a farmer with quota holdings to cover the 735 birds, but who doesn’t have room in the barn to add 735 leased birds, “we will hold that number until they have room,” he says. They get those birds in the following year’s pool.

Farmers must let Egg Famers of Ontario know by the end of June for the next year’s pool whether they will be leasing quota or not, he says.

The way the layer leasing allotment is set up makes it impossible for the leased quota to get concentrated in larger producers’ hands, Pelissero says. “Each quota holder is treated the same regardless of if they have 200,000 birds or 2,500 birds.

“There’s no ability to favour larger producers or discriminate against smaller producers.”

Another plus of the proposal, he says, is that “when additional allocations are allocated to Ontario it’s simply a matter of adjusting the layer leasing number for each quota holder.”

Funds generated from the leasing pool go toward reducing Egg Farmers of Ontario levies that all producers pay. “The last couple of years we’ve reduced the levy by 1.5 cents a dozen as the result of money coming in from leased birds,” he says.

The current total levy in Ontario is 31.25 cents per dozen with the bulk of that being remitted to Egg Farmers of Canada for its work, Pelissero says.

The average flock size in Ontario is 25,000 birds, he says. BF