Van Pelt v Ontario Egg Producers’ Marketing Board, 1997 ONAFRAAT 44

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West

Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

Van Pelt v Ontario Egg Producers’ Marketing Board

Van Pelt v OEPMB 1997 ONAFRAAT 44

Ministry of Agriculture, Food and Rural Affairs Act

September 26, 1997

DATE OF DECISION:

October 3, 1997

1997-44

1997 ONAFRAAT 44

Van Pelt v Ontario Egg Producers’ Marketing Board

THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE AND FOOD ACT.

An Appeal to the Farm Products Appeal Tribunal by John and Cornelia Van Pelt from the April 2nd, 1997 decision of the Ontario Egg Producers’ Marketing Board denying their request for an exemption from Quota Policy # 2 to allow them to sell their pullet quota calculated on the past two years’ utilisation rather than the past five years’ utilisation.

Before:

Mrs. Nancy McGill, Alternate Chair; Mrs. Anna Andres, Member; Mr. Armand Bechard, Member; Mr. John Lammers, Member.

Appearances:

Mr. John Van Pelt, appellant.

Mr. Brian Ellsworth, on behalf of the respondent, the Ontario Egg Producers’ Marketing Board.

Mr. Hank Renick, on behalf of the respondent, the Ontario Egg Producers’ Marketing Board.

Ms. Dianne Benedetti, on behalf of the respondent, the Ontario Egg Producers’ Marketing Board.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Friday, September 26, 1997. John and Cornelia Van Pelt appealed to the Farm Products Appeal Tribunal (the Tribunal) from the April 2nd, 1997 decision of the Ontario Egg Producers’ Marketing Board (the Board) denying their request for an exemption from Quota Policy # 2 to allow them to sell their pullet quota calculated on the past two years’ utilization rather than the past five years’ utilization.

The applicable sections of the Board’s quota policy are as follows:

TRANSFER OF QUOTA WITHOUT REGISTERED PREMISES

Section 9

(a) A quota holder may apply to the Board to transfer the whole quota without a contemporaneous transfer of registered premises in accordance with this section.

(b) Notwithstanding the foregoing, the Board will only permit a quota holder to sell 90% of the average amount of quota utilized by the quota holder for the production of pullets over the five calendar years immediately preceding the year in which the proposed transfer is to occur, as determined by the Board from its own records, with any balance of quota after the permitted transfer amount being cancelled by the Board as a transfer assessment. An application under section (a) filed with the Board on or before the 31st day of December, 1996 may be made, at the option of the quota holder, under this section or in accordance with the provisions of Quota Policy No. 7-1986 as amended by Quota Policy No. 8-1991.

{i} all licence fees, levies, interest or other monies owing to the Board or CEMA by the quota holder have been paid in full,

{ii}the quota holder (seller) is not in contravention of any regulations, policy, order or direction of the Board,

{iii}the quota holder (seller) has been the owner of the applicable registered premises for not less than twenty-four months prior to the effective date of the transfer, and

{iv}the proposed buyer can meet all the requirements of subsection (e).

The Background

In 1995, John and Cornelia Van Pelt purchased an ongoing layer/pullet farm near Woodstock, Ontario. Effective April 5, 1995, the Board allotted 12,096 units of chick-for-placement quota to the Van Pelt farm. On January 23, 1997, John Van Pelt wrote to the Board saying:

“When we contacted Diane at the board office, we realized that we could only sell eight thousand one hundred and thirty quota of our twelve thousand and ninety six total….We are writing this letter asking you in the board to make an exception to the rules in this case, allowing us to sell ninety percent of our total quota.”

The Board considered this request at its February 5, 1997 meeting and denied it. Mr. Van Pelt appealed this decision and appeared before the Board on April 2 to attend a hearing on his request. The Board confirmed its decision to deny the request and confirmed that the total quota eligible for sale was 8, 130 units. The Van Pelts appealed this decision to the Tribunal by letter dated July 24, 1997.

The Issue

The issue before the Tribunal is whether or not there are sufficient grounds to warrant an exception to the Board’s quota policy to allow the Van Pelts to sell 90% of their chick-for-placement quota, based on production in 1995 and 1996 calendar years, since the Van Pelts held the quota?

The Evidence and the Findings

Mr. John Van Pelt told the Tribunal that his wife was born and raised on a dairy farm and he started working part time for farmers at age 13. Since that time, he has always worked on a farm except when working on construction.

He said that in 1991 they began managing a layer and pullet operation in Norwich, looking after 16,000 laying hens and 35-38,000 pullets per year. In 1995, they purchased an existing laying and pullet farm complete with quota. He said that while raising their first flock of pullets on the new farm, they realized that the barn and cages were far more deteriorated than they had thought. They were catching 20+ loose birds per day and putting them back into the cages. They were arguing with the feed company over the amount of feed used in their old electric feed cart. They also had a major concern about the possibility of salmonella contamination. The pullet droppings fall into a three-inch pit which is cleaned regularly but the loose birds are running around in this mess and are dirty when they are caught and put back into the cages.

Mr. Van Pelt said that the previous owner had reduced production due to health. He raised only one crop per year. Mr. Van Pelt told the Tribunal that he and Cornelia had decided to sell the pullet quota and concentrate on the laying production on their farm because of:

the problems they had with the cages, the barn and the feeding system;
the concern over the possibility of salmonella contamination of the birds in the barn and then suffering losses as a result of not being able to sell those birds;
the large cost of refurbishing the barn right after purchase of the farm, and
the decision of the Board to change the transfer assessment from 50% of the quota transferred to 10% of the quota transferred.

He emphasized that this was a business decision and not a case of trying to speculate on the quota.

Mr. Ellsworth, General Manger of the Board, explained that the Board allotted egg quota in 1972-73 in conjunction with the National Agency. When originally allotted, the Board had quota for 12 million birds. The allotment was done on the basis of available space, cage size, existing birds, etc. This allotment proved to be too large and had to be reduced over time. As the system was refined over the first two to three years the allotment came down to 8 million birds. He said the same thing happened when chick-for-placement (pullet) quota was issued in 1981. At that time, the Board had to give quota to everyone even if a producer normally grew only one flock of pullets. That producer got quota for two because of the barn space available to him. The initial allotment was close to 12 million birds. The Board put in a quota transfer assessment to reduce the allotted quota. Now the industry is down to about 8.3 million birds and the layer quota is a little over 7 million birds. Mr. Ellsworth explained that the industry needs a sleeve in the pullet quota in order to provide flexibility to the layer producers. He said most layer producers want to purchase all their pullets from the same grower rather than mixing two flocks and that is why the two quotas are not exactly the same.

Mr. Ellsworth told the Tribunal that, prior to 1996, the Board levied a 50% transfer assessment on chicks-for-placement quota. The industry told the Board that the two quotas were getting to be about the right size for the market. There was less and less pullet quota available and everyone was using it. Prior to 1996, there was a lot of quota not being used. When quota was sold without premises half of this quota was cancelled and never re-allotted by the Board. The Board decided to reduce the transfer assessment from 50% to 10%. In making this decision, the Board wanted to make certain that only quota that was being used was allowed to be transferred. This new quota policy was made on January 9, 1997.

Mr. Ellsworth said that the Board records show approximately 7,000 birds were grown annually in the three years prior to Mr. Van Pelt purchasing the premises and quota. Mr. Van Pelt requested an exemption to the policy that would allow him to sell an additional 2,600 birds.

Mr. Ellsworth told the Tribunal that the Board denied Mr. Van Pelt’s request because:

The Board felt the policy was fair to Mr. Van Pelt since under the old policy he could only sell 50% or 6,000 units of quota and the new policy allowed him to sell 8,130 units.
The new policy did not discriminate against Mr. Van Pelt; he was not adversely affected by the decision of the Board to change the policy.
Mr. Van Pelt was treated the same as every other pullet producer and he had the choice of continuing to use the full quota for another three years if he wanted to sell the full 90% allowable without violating the principle that producers should not sell unused quota.
The Board found no compelling reason to provide an exception to the policy.

Mr. Renick told the Tribunal that the policy change was partly done at the request of hatcheries. It was felt that pullet quota needed to move around from producer to producer to use the available barn space and to use the quota to match the needs of the egg producers. He said some producers would sell quota but the 50% transfer assessment was too high so not much quota was put on the market. The new policy has improved the situation. Producers who wanted to exit the industry could now sell more quota - a windfall to those producers. Buyers found it easier to purchase quota.

He said that the remaining producers wanted to make sure existing independent producers were not put at a disadvantage by the policy. An independent pullet producer only has pullet quota and holds no layer quota. The five-year average production condition in the policy is designed to protect these growers who do not have the same bargaining power with the hatcheries and feed companies as the pullet growers who also have egg quota.

The Tribunal considered the arguments of Mr. Van Pelt. It appears that the basis of the decision to sell pullet quota is the state of the production facilities and the cost of refurbishing these facilities. While the new quota policy does not allow Mr. Van Pelt the opportunity, at this time, to sell 90% of the full quota allotted to his premises, it does provide a better opportunity than the policy that existed when he purchased the premises and quota. The Tribunal agrees with the Board that no compelling reason to vary the Board’s policy has been presented.

Decision and Reasons

After careful consideration of the evidence submitted and submissions made, the Tribunal decided to deny the request of Mr. and Mrs. Van Pelt.

The reason for this decision is that the Tribunal found no compelling reasons to make an exception to the policy of the Board.

Dated at Guelph, Ontario this 3rd day of October, 1997.