Poultry processor fails bid to obtain more supply

Thursday, May 8, 2014

by SUSAN MANN

Eastern Ontario chicken processor, Laplante Poultry Farms Ltd., has failed to convince an agricultural tribunal it’s entitled to a bigger chunk of the provincial market.

The Agriculture, Food and Rural Affairs Appeal Tribunal’s May 6 written ruling says the onus was on Laplante Poultry to prove it was entitled to receive 286,553 kilograms of market share, called ‘calculated base,’ in addition to the 156,449 kilograms it was granted by Chicken Farmers of Ontario when it became a Class A processor license holder on May 16, 2012.

The appeal was heard in Cobourg on April 28 and 29.

Robert Laplante, who owns Laplante Poultry along with his mother and father, and Michael Edmonds, Chicken Farmers of Ontario communications and government relations director, could not be reached for comment.

The tribunal says under Ontario’s existing regulations chicken processors must have calculated base, which is a processor’s share in kilograms of the Ontario market and is determined by Chicken Farmers of Ontario, to buy chicken supply from provincial farmers. In addition to having calculated base, processors must have a Class A license issued by Chicken Farmers.

Laplante says in the written tribunal ruling it wanted the extra kilograms because it “does not have sufficient supply to keep its Sarsfield processing facility operational.” Moreover, without the additional kilograms of chicken to process the company claims it can’t “grow and expand its processing business and it is struggling to keep qualified staff.”

There are two ways to get calculated base in Ontario under existing regulations. One is to buy it from a competitor or from a processor leaving the industry. Currently, calculated base is selling for $12 to $13 per kilogram and it would cost Laplante Poultry about $3.4 to $3.7 million to buy 286,553 kilograms. The second way is for Chicken Farmers to grant a processor calculated base or by adjusting the bases of existing processors.

For example, processors’ bases were adjusted after the Ontario chicken board and Ontario Association of Chicken Processors signed an agreement on Jan. 26, 2011 with their Quebec counterparts. The agreement clamped down on producers on either side of the provinces’ shared border shipping chicken across for processing. That total amount of supply “was entering the market but outside the regulatory regime,” the ruling says. “Unregulated supply is the antithesis of the supply management system.”

As part of the 2011 agreement, significantly more Ontario chicken production became available in the province and, in April 2012, Chicken Farmers adjusted the calculated bases of processors listed in a section of its policy document. The adjustment, however, occurred a month before Laplante Poultry obtained its Class A license and calculated base.

The tribunal says the fact that Laplante Poultry didn’t have a license nor calculated base during Chicken Farmers recalculation of bases alone determines the appeal. “That fact alone is fatal” to Laplante Poultry’s appeal.

Laplante Poultry cited two other processors in its appeal: Remy Poultry Inc., which ceased to be a poultry processor in 2010 and sold its 529,690 kilograms of calculated base; and Riverview Poultry Ltd. of Smithville which bought Remy’s base for $6.375 million. The deal was made April 21, 2010 and closed Jan. 2, 2011. Chicken Farmers approved the transfer of calculated base.

Laplante Poultry argued it was more entitled to Remy’s Quebec supply kilograms than Riverview because of a deal it made in 2008 to take over as broker for Remy. Laplante paid Remy’s former broker, Richard Glaude, $50,000 for the transfer.

In 2007, Laplante Poultry was a chicken broker and sourced Quebec chicken production for Ontario processors to buy. It then undertook a direct contracting role with Quebec farmers, buying chicken production and making its own contract arrangements with Ontario processors.

Jack Chan, Remy president, says he never signed the 2008 deal between Glaude and Laplante Poultry as it was in French and he wasn’t able to read or understand it, the ruling states. Before the deal, Glaude was a broker for Remy and was paid a commission but wasn’t an employee. Chan says Glaude had “personal problems” and wanted to transfer his brokering role to Laplante Poultry, and Remy agreed to the change.

Remy did not have any supply rights to Quebec chicken but rather bought chicken from Quebec farmers on a quota period by quota period basis, the ruling states.
 
The tribunal says Laplante Poultry didn’t produce satisfactory evidence for it to conclude the company had a regulatory or contractual connection to the Quebec supply kilograms of Remy, let alone “the closest connection.” BF