Pork board under Farm Products Marketing Commission scrutiny

Wednesday, July 23, 2008

By BETTER FARMING STAFF

During testimony before the Commission, the past chairman of Ontario Pork asked why this hearing was held “in such a hasty manner” and took the Commission, which oversees the province’s marketing boards, to task for calling the hearing during the busiest part of the year for many smaller producers.

The quasi-judicial hearings, at the Ramada Inn at Stone Road and Gordon Streets in Guelph, commenced on Tuesday. Closing summations will be heard on Friday.

Testimony from intervenors such as Skinner was heard in addition to written submissions to the Farm Products Marketing Commission.   

“It is easier to break something up than it is to build it up from the ground level,”

Skinner warned. He said producers who want to see the marketing board’s powers reduced or removed paint an unrealistic picture of a free market situation where “all relationship issues would just melt away in a haze of business bliss.” Negtiations with processors isn’t easy, he said. “They won’t accept any model that isn’t coming from their own.”

Previous testimony makes the current industry appear to be dysfunctional, Skinner said, pointing out that the largest producers are much bigger now than they were in 1996, when contract production was first allowed and the contracting procedure has changed too. “Does growth equate to dysfunction?”

Skinner said the issue of Maple Leaf possibly closing its Burlington plant “overshadows anything else that is talked about here.” Maple Leaf announced earlier in the week in a press release that it had begun soliciting bids for the plant, the largest in Ontario, and a market for 45,000 hogs a week was in doubt. 

Producers James Reesor, Rob MacDougall and MarkYungblut represented RFW Farms, Paragon Farms, Great Lakes and Synergy Swine. According to Reesor, the four companies market more than 700,000 hogs annually on both sides of the border, and support “more than 220 farm families” as well as employees. Their combined checkoffs also contribute more than $1 million annually to Ontario Pork’s budget. 

Reesor did most of the talking on behalf of the four companies, and, referring to written submissions, argued that Ontario Pork must have its compulsory powers to market hogs removed, including the power to approve all contracts between producers and packers. Maintaining the status quo has “negative consequences” for the industry, he said. A complex regulated system comes with a cost to producers. The level of fees is important but not as important as the compulsory marketing powers.

Overseeing contracts “has not always been successful,” testified Synergy’s Yungblut, who declined to be more specific. He did say that through Ontario Pork “some confidential information has not been appropriately distributed.”

Reesor and Yungblut brought with them Kevin Grier, senior market analyst from the George Morris Centre, to testify as an expert witness. Grier clearly supports freer marketing and said 85 to 90 per cent of the hogs in North America are sold under some form of contract or are owned by packers. The rest of the pigs are sold on spot markets. 

“The norm is for individual producers to market hogs with individual packers,” he said. It is also normal for producers to be responsible for shipping pigs to packing plants. “Prices in the United States are very transparent and available to all,” he said. “It is the way business is done.”

Some producers may be paid more than other producers based on volume, specifications and long term relationships. Producers are paid directly by the packer.

“The marketing powers of the (Ontario Pork) board are essentially redundant,” he said. If the marketing board were eliminated, “Ontario hog marketing would not skip a beat.”

Grier disagreed with assertions from Ontario Pork’s lawyer, Sean Foran, that marketing authority was necessary to deal with the issues of settlement. Defaulting on payment to producers “is a bit of a red herring,” he said. “You don’t need marketing authority to deal with the issue.”

The hearings on Wednesday were observed by John Kikkert, president of the Christian Farmers Federation of Ontario. “I’m always concerned that what happens in pork might happen in the other commodities,” the turkey producer told Better Farming. BF