Agriculture, Food and Rural Affairs
Appeal Tribunal
1Stone 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
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL:
Farm Fresh Poultry Co-operative Inc. v Chicken Farmers of Ontario
Farm Fresh Poultry Co-operative Inc. v CFO 1998 ONAFRAAT 31
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
July 24-31, 1998
DATE OF DECISION:
August 11, 1998
1998-31
NEUTRAL CITATION:
1998 ONAFRAAT 31
Farm Fresh Poultry Co-operative Inc. v Chicken Farmers of Ontario
IN THE MATTER OF THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE AND FOOD ACT.
AND IN THE MATTER OF:
An Appeal to the Farm Products Appeal Tribunal by Farm Fresh Poultry Co-operative Inc. (Farm Fresh) from the decision of the Chicken Farmers of Ontario (CFO), on June 10, 1998, denying Farm Fresh a process to reach an allocation of two million kg over a reasonable period of time and also the decision of the CFO in a reconsideration hearing on July 9th, 1998, denying Farm Fresh an increase in their base allocation from 450,000 kg to 650,000 kg.
Before:
Jim Rickard, Chair; Denis O’Connor, Vice-Chair; Anna Andres, Member; Karen Ratcliffe, Member.
Appearances:
Mr. George Alkalay, advocate for the appellant, Farm Fresh Poultry Co-op Inc.
Mr. Rob Shapiro, advocate for the Association of Chicken Processors of Ontario.
Mr. Geoff Spurr, Counsel to the respondent, the Chicken Farmers of Ontario.
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario, commencing on Friday July 24th , 1998 and continuing on Friday July 31st . Farm Fresh Poultry Co-operative Inc. (Farm Fresh) appealed to the Farm Products Appeal Tribunal (the Tribunal) from:
The decision of the Chicken Farmers of Ontario (CFO), on June 10, 1998, denying Farm Fresh a process to reach an allocation of two million kg over a reasonable period of time, and
The decision of the CFO in a reconsideration hearing on July 9th, 1998, denying Farm Fresh an increase in their base allocation from 450,000 kg to 650,000 kg.
The Background
The CFO passed Quota Policy No. 129-1996 effective May 31st, 1996. The effect of this policy was to establish a framework for assignment of the supply of live chicken to each processor. Farm Fresh claims to be a new entrant into the chicken processing industry and claims its request for an allocation of supply should he considered by the CFO and Tribunal under Clause 14 of Quota Policy 129-1996. Clause 14 is as follows:
- Applications of new entrants for supply of chicken to be purchased from producers through the Board shall be made in writing to the Board which will determine on a case by case basis whether the application should be granted.
The supply of live chicken has been allotted by the Board using Quota Policy 129-1996 since May 31st, 1996. Concerns arose in the industry surrounding the assignment of supply resulting in a meeting between the Farm Products Marketing Commission (the Commission), the CFO and the AOCP on January 8th, 1998. By letter of January 9th, 1998 the Commission informed the CFO and the AOCP of its decision to establish a committee of up to four members appointed by each of the AOCP and CFO chaired by the Commission to develop an allocation system for live chicken. The Commission established a deadline of March 31st , 1998 for bringing closure to the issue of how processors secure their individual supply of live chicken. In the January 9th letter the Commission also stated:
“As of Thursday afternoon, January 8th, 1998, the Commission directs CFO to not allocate chicken to new applicants.
Regarding applications currently before the CFO, these should be dealt with in a manner taking into account that the policy review is being undertaken.”
In the fall of 1997 several chicken producers formed Farm Fresh and purchased the processing plant formerly owned by Ungerman/Thompson Poultry Products (Ungerman). The CFO assigned to Farm Fresh the supply of live chicken that had previously been assigned to Ungerman under Quota Policy No. 129-1996. Farm Fresh applied to the CFO for an increase in the assigned supply of live chicken indicating that it was a new entrant into the industry and that it wished to grow in a rapid and orderly fashion to process two million kilograms of live chicken per quota period. Farm Fresh indicated that the two million kilogram figure was the current production of its producer members.
In January 1998 (Quota Period A-19) Farm Fresh appealed to the Tribunal requesting an increase in its supply of live chicken and an order directing an orderly increase in its allocation to two million kilograms per quota period. As a result of that hearing, on February 5, 1998 the Tribunal ordered that the CFO set the assignment of supply of live chicken to Farm Fresh for Quota Period A-19 at 382,000 kilograms of chicken.
Niagara Country Fresh Poultry Inc. (Niagara) is a new entrant to the chicken processing industry with a plant at Smithville Ontario. Niagara is also seeking an assignment of supply of two million kilograms of live chicken per quota period. Niagara appealed to the Tribunal for an assignment of supply for Quota Period A-19. On February 4th, 1998 the Tribunal upheld the CFO decision not to assign a supply to Niagara for Quota Period A-19. Niagara applied for a supply of live chicken for Quota Period A-20. The CFO denied its request and Niagara appealed to the Tribunal. After hearing the evidence the Tribunal ordered CFO to assign Niagara a supply of 100,000 kilograms for the domestic market and 200,000 kilograms for the export market. Niagara petitioned the Minister and the Minister subsequently reviewed this decision of the Tribunal and varied it by providing Niagara a supply of 500,000 kilograms of live chicken in Quota Period A-20. This assignment was made by the CFO. Niagara applied to the CFO for an increase in supply for Quota Period A-21. The CFO granted a supply of 600,000 kilograms to Niagara. The AOCP was aggrieved by this decision and appealed to the Tribunal. That hearing commenced at the Tribunal on June 11, 1998. On June 24th, 1998 the Tribunal issued its decision fixing the supply of Niagara at 500,000 kilograms for Quota Period A-21. In this decision the Tribunal pointed out that the Minister, when he varied the Tribunal decision for Niagara in Quota Period A-20, directed that future growth for Niagara should come within the new CFO policies.
The sequence of events relative to Quota Period A-21 is as follows:
May 28, 1998 CFO provided Niagara a supply of 600,000 kilograms for Quota Period A-21.
June 10, 1998 CFO provided Farm Fresh a base supply for Quota Period A-20 of 650,000 kilograms but denied Farm Fresh’s request for a program of growth to allow it to reach two million kilograms of supply “in a reasonable time”.
June 11, 1998 the Tribunal held its hearing on the appeal of AOCP on Niagara’s supply.
June 24, 1998 the Tribunal issued its decision on Niagara fixing the supply at 500,000 kilograms and interpreting the Minister’s direction to the CFO regarding growth in allocation of supply to processors.
July 7, 1998 Farm Fresh applied to the Special Request Panel under the new supply setting agreement and received an assignment of 95,000 kilograms from the 800,000 kilogram pool for Quota Periods A-22 through A-27.
July 9, 1998 the CFO, at the request of the AOCP, reconsidered its decision on Farm Fresh and decided the set Farm Fresh’s supply for Quota Period A-21 at 450,000 instead of the 650,000 it had decided on June 10, 1998.
July 13, 1998 Farm Fresh appealed to the Tribunal the decision of the CFO after its July 9, 1998 hearing.
The Issue
The issues before the Tribunal are:
Should the base supply of live chicken assigned to Farm Fresh be 450,000 kilograms or 650,000 kilograms in Quota Period A-21?
Should a system be instituted to increase the supply of live chicken to Farm Fresh in each quota period for the next 24 to 36 months to allow Farm Fresh to reach a level of supply of two million kilograms in that period of time?
The Evidence and the Findings
Mr. Jim Judge, President of Farm Fresh told the Tribunal that he is completely frustrated with the process. He said he realizes that in a regulated system the policies have to govern growth but they have been trying to find out just what the rules under Quota Policy 129-1996 Section 14 are since October 9, 1996. He said Farm Fresh has been bounced between CFO and AOCP, given kilograms only to have the supply taken away. He said he feels that the CFO has not dealt with Farm Fresh’s request at all. He pointed out that Farm Fresh applied for a supply as a new entrant under Quota Policy 129-1996, Section 14, and should continue as a new entrant until the request for a supply of two million kilograms has been properly considered. He said that Farm Fresh is targeting specific markets of fresh air chilled Cornish to replace frozen product that is coming from out of province. He said that any decision of the Special Request Panel under the proposed new policy should be ignored in this appeal.
Mr. Judge told the Tribunal that Farm Fresh set up its plant to be air chilled and federally inspected. He said it needs two million kilograms of supply to be efficient and wants to process as much of the members chicken as possible. He said with Farm Fresh’s marketing program it will have no difficulty in marketing the two million kilos projected.
According to Mr. Judge, the Ungerman plant was 4,000 square feet when purchased and has been expanded to 12,000 square feet with added equipment for efficiency. He said their was no guarantee that any allocation at the plant would be transferred so Farm Fresh did not make arrangements to purchase the Ungerman supply when it bought the building and equipment. Mr. Judge said that the members of the cooperative looked at the growth pattern of some other processors under Quota Policy 129-1996 and if their plant followed this pattern it would reach two million kilograms in a reasonable period of time. He specifically reviewed the growth of Riverview Poultry, Cericola Farms and Sargent Farms. Mr. Judge said that the AOCP has not been responsive to the cooperative’s needs and has not provided any of the special consideration he thinks Farm Fresh warrants because it is a cooperative owned by farmers.
In response to questions, Mr. Judge told the Tribunal that the volume of its market for Cornish and the basis of its request to the special request panel for increased allocation of supply are confidential and he would not provide the details. He said that the offer to buy Ungerman was not conditional on the assignment of the existing plant supply to Farm Fresh but he refused to file the offer of purchase with the Tribunal.
Mr. Judge told the Tribunal that the purpose of Farm Fresh is to work toward processing all of the cooperative members birds. That is the objective of this application.
Mr. Judge said that the reason that Farm Fresh applied for the Ungerman allocation when the plant was purchased was because it was already “in the system”. The birds were in the barn so it made sense to have that production assigned to Farm Fresh. It was never the intent of Farm Fresh to accept this as its long term supply.
Mark Finnimore told the Tribunal that the Farm Fresh plant is located just outside Harriston in recently develop industrial park. The original plant was about 4,000 square feet and an expansion to 12,000 square feet was started this spring. The plant produces air chilled chicken using a rack for the chilling process. At the present time the plant can process two million kilograms in a single 37.5 hour shift. The product is air chilled, is scalded at a lower temperature, is yellow skinned and has no water in the package. He said that since he joined Farm Fresh it has not lowered the selling price of its products. He said Farm Fresh’s customers prefer air chilled chicken.
Mr. Finnimore said that Farm Fresh’s first market is air chilled Cornish. In this market it competes with frozen products imported from out of province. He said people who buy fresh Cornish are buying other meats if fresh Cornish is not available. He said he feels the market for fresh Cornish is in excess of 300,000 kilograms per quota period.
He said that if Farm Fresh gets an increase in allocation with a secure growth curve it would target Cornish from out of province, then out of province utility and grade A roasters in the chain stores. He said Farm Fresh is in business to make money not to participate in price wars.
According to Mr. Finnimore Farm Fresh processes mainly 3.2 to 3.5 kilogram live roasters and Cornish. He said at some time Farm Fresh will be in competition with the existing processors.
John Georgeakakis, a witness subpoenaed by Farm Fresh, president of Riverview Poultry told the Tribunal that he and four other producers had purchased a chicken processing plant in Cayuga from Grand River Poultry during the “bottom up” method of setting supply. He said at the time of his purchase the plant was processing a million kilograms of chicken. The market had collapsed due to oversupply. At the time of purchase he could request any volume he wished and it would be assigned to the plant.
Mr. Georgeakakis said that the Riverview plant first production was about 540,000 kilograms in Quota Period P-10 (April, 1994). This has grown to a supply of 1.4 million kilograms for Quota Period A-21. He said that Riverview had plans to be larger but had participated in the negotiations for the supply setting agreement contained in Quota Policy 129-1996 and that agreement had allowed them to grow to the 1.4 million kilogram level at Quota Period A-21. He said that he wanted the supply of chicken to his plant to grow faster but also wanted to work within the system.
Mr. Georgeakakis said that, in his opinion, everyone suffered during the “bottom up” period. It caused markets and returns to plummet. Everyone acted in the best interests of the industry negotiating Quota Policy 129-1996.
In response to questions Mr. Georgeakakis:
Agreed that Riverview had grown from 833,000 kilograms in Quota Period A-9 to 1.4 million kilograms in Quota Period A-21 for a growth rate during the period of 75%.
Said that, in his opinion, once a new entrant accepts a volume assignment and begins to be part of the process its status as a new entrant ends. He said that, in his opinion, Farm Fresh is not a new entrant at this time.
Starting with the Ungerman plant which is now Farm Fresh, the supply to this entity grew from 142,000 kilograms in Quota Period A-15 to 450,000 kilograms in Quota Period A-20 for a growth of 317%.
Don Taylor, a witness subpoenaed by Farm Fresh and Chair of the Commission, told the Tribunal that he was not with the Commission in January 1998, however his review of the information available indicated that the Commission was concerned about the industry and had decided to embark upon a process of discussion on a new allocation process. He said addressing any new applications for supply after January 8 could prejudice the review so CFO was directed not to allocate supply to new applicants, but applications already in the system were to be handled in a fair manner bearing in mind the review was taking place. .
Mr. Taylor said that the Commission facilitated the process of arriving at the new allocation agreement. He said that the policy should not restrict new entrants, and that the economical viability of a proposed plant has to be determined by the entrant.
Mr. Taylor agreed that one mandate of the commission is to ensure boards exercise their powers for the betterment of the industry.
Kevin Thompson, Marketing Coordinator for the CFO, told the Tribunal that the CFO received a request from Farm Fresh for an increase in its base allocation for Quota Period A-21. This request was granted by the CFO. Subsequently the CFO received the decision of the Tribunal with respect to Niagara and the decision of the special request panel awarding a supply of 95,000 kilograms to Farm Fresh from the 800,000 kilogram pool in the new policy scheduled to take effect in Quota Period A-22. The CFO, at the request of the AOCP, held a reconsideration hearing for Farm Fresh and decided to return Farm Fresh to an allocation of 450,000 kilograms.
In response to questions Mr. Thompson said that what changed between the two CFO decisions was that the CFO received the decision of Tribunal in the Niagara case and also the recommendation of the Special Request Panel. He said the CFO wants fair and equal treatment under the new system, and recognized that the decision to increase the supply to Farm Fresh was contrary to the new policy.
John Slot, chicken producer and Board Director for CFO, told the Tribunal that the CFO made three separate decisions on this application by Farm Fresh. The first decision denied the request because Farm Fresh did not provide any evidence upon which the CFO could evaluate its request. At a reconsideration hearing, requested by Farm Fresh, additional information was provided by Farm Fresh and the CFO decided to increase the base allotment in Quota Period A-21 from 450,000 kilograms to 650,000 kilograms. It also decided not to establish a growth pattern to allow Farm Fresh to grow to two million kilograms in the next 24 to 36 months. The third decision was at a reconsideration hearing requested by AOCP and was held after the CFO receive the decisions of the Special Request Panel and the Tribunal’s Niagara decision. He said the Directors realized they had made a mistake in interpreting the Minister’s letter to Niagara and, since the Tribunal and the Minister indicated that growth should come under the provisions of the new policy, the CFO reversed its previous decision on Farm Fresh’s application.
Mr. Slot said that under the new agreement all processors and potential processors are treated in a similar manner so Farm Fresh’s claim to be a new entrant has no bearing on the decisions to be made under the new assignment of supply policy.
In response to questions from the Tribunal, Mr. Slot said that, in his opinion, by applying to the Special Request Panel and accepting an assignment of supply from the Panel, Farm Fresh effectively accepted the new agreement for assignment of supply to processors.
Robert Shaprio, speaking on behalf of the AOCP, told the Tribunal that the combination of Ungerman and Farm Fresh has received more attention under the assignment of supply agreements than any other processor and has grown at a percentage rate higher than all other processors. He argued that the only case that Farm Fresh has presented is that it is a producer cooperative with membership producing two million kilograms and that they believe there should be a policy allowing producers to slaughter their own chicken production. He said there is no government policy or CFO policy to support this proposition.
Mr. Shaprio pointed out that Farm Fresh specifically asked for and received the supply that had been assigned to the Ungerman plant before closing the deal to purchase the facility. He also pointed out that Farm Fresh has refused to file with the Tribunal the offer made to purchase the plant to verify that the only thing purchased was the “bricks and mortar”. Having received the allocation of Ungerman and the growth pattern negotiated by Ungerman in Quota Policy 129-1996, Farm Fresh is no longer a new entrant, in his opinion.
He argued that processor viability is not a government policy and not a criteria that can be applied to assignment of supply without opening a floodgate of requests from the industry.
Mr. Shapiro argued that Farm Fresh has had several hearings before the Board and a hearing at the Tribunal. In all instances its request for increased supply and a growth pattern to allow it to grow to two million kilograms of production in one to three years have been denied. They have been treated by the CFO on a “case by case” basis but will not accept their decisions until they get what they want. He said, in essence, what Farm Fresh is asking for is an exemption to the Quota Policy until it reaches a level of supply of two million kilograms and then Farm Fresh will agree to abide by the policy affecting all other processors. He argued there is no justification to exempt Farm Fresh from the Quota Policy.
In his summation Mr. Shapiro asked the Tribunal to uphold the decision of the CFO.
In his summation Mr. Spurr urged the Tribunal to uphold the decision of the CFO.
In summation Mr. Alkalay asked the Tribunal to make several findings. The requests and the opinion of the Tribunal follow with the request printed in bold face type.
Farm Fresh requests the Tribunal to find that Farm Fresh’s application to the CFO should be considered under Quota Policy 129-1996.
In the opinion of the Tribunal, this application was considered by the CFO under Quota Policy 129-1996 but the CFO also took into account the spirit of the new policy as directed by the Commission in its January letter. Farm Fresh was granted 95,000 kilograms from the Special Request Panel under the new policy. The Tribunal finds that the application was considered by the CFO under Quota Policy 129-1996 and further finds that Farm Fresh has also benefited from the application of the new Quota Policy.
In the opinion of the Tribunal, it is the mandate of the CFO to develop policy to determine allocation of supply. There is a new policy in the process of being developed and decisions on allocation should consider the new policy when determining supply to any processor after January 8, 1998.
Farm Fresh requests the Tribunal to find that Quota Policy 129-1996 should remain in force for a period of three years from the end of Quota Period A-20 and, in any event, that it should continue to remain in effect until such time as it is expressly revoked by the Board.
There was insufficient evidence at the hearing for the Tribunal to make a finding on this request. In the opinion of the Tribunal, the CFO is responsible to set its policies and if circumstances warrant to change those policies.
Farm Fresh agrees with the line of reasoning which the Board so well expressed in its original decision, and respectfully requests that the Tribunal reinstate it as a basis for its own decision. In addition, Farm Fresh asks that the Tribunal follow this reasoning through to its logical conclusion and allocate Farm Fresh a growth rate that enables it to reach its goal of two million kilograms of supply within a reasonable period of time.
The Tribunal is unable to agree with the decision of the CFO to increase the supply of Farm Fresh to 650,000 kilograms or the reasons given for that decision. The Tribunal found after a hearing in January, that Farm Fresh cannot be a new entrant and at the same time take an existing supply of a processing plant. In the appeal for Quota Period A-19 the Tribunal denied a request of Farm Fresh for additional allocation and determined at that time that Farm Fresh was not a new entrant within the meaning of Quota Policy 129-1996.
The documentary evidence filed at this hearing by Farm Fresh clearly indicates that Farm Fresh did make a written request to the CFO for an assignment of the supply formally provided to the Ungerman plant. This invalidates one of the reasons given by the CFO for increasing the supply to Farm Fresh.
The Tribunal accepts the argument that plant capacity is not a criteria for allocation of supply and that a proposed business plan is not a criteria for allocation of supply.
The Tribunal was not provided by Farm Fresh with evidence to substantiate the market for Cornish hens. The evidence indicates that the Cornish production in Ontario is in the order of 20,000 kilograms per quota period even during the time frame after Farm Fresh’s claims to have expanded the market for air chilled Cornish.
Farm Fresh requests that the Tribunal acknowledge its status as a new entrant should be maintained until a reasonable growth process is granted to Farm Fresh which will enable it to reach the level of economic viability set out in its business plan.
The Tribunal determined in the appeal of the allotment for Quota Period A-19 that Farm Fresh was not a new entrant for the purposes of Quota Policy 129-1996.
The Tribunal agrees with the argument of Mr. Shapiro that the effect of this request is to exempt Farm Fresh from the application of CFO Quota Policies for assignment of supply to processors until such time as Farm Fresh reaches its stated goal of two million kilograms of supply. The Tribunal was not presented evidence to justify granting such a request.
Farm Fresh requests the Tribunal to assign a growth rate to the Cooperative which is commensurate with that of other new entrants to the chicken processing industry over the past five years. In specific, Farm Fresh requests that it be granted an allocation of supply of 650,000 kilograms for Quota Period A-22, and an additional allocation of 75,000 kilograms during each subsequent quota period, starting with Quota Period A-23, until the Cooperative achieves its target growth of two million kilograms.
The Tribunal accepts the argument that a percentage growth is the appropriate measure to use as opposed to a set number of kilograms. The Tribunal recognizes that there is a program in place in the new supply setting agreement- the Special Request Panel - which is the agreed upon method of addressing growth rates. In the opinion of the Tribunal, this new agreement should be given the opportunity to work.
The processors referred to as Riverview, Sargent and Cericola all started into business during the bottom up allocation phase. Farm Fresh started after that. In the opinion of the Tribunal, it is improper to compare growth rates achieved under one regulatory regime with those possible under a different regime.
Farm Fresh requests the Tribunal to find that Regulation 1533-1998 was wrongly and retroactively applied to Farm Fresh. It further requests that the Tribunal give notice to the CFO that the retroactive application of regulations and policies is unacceptable and can only lead to a loss of investor confidence in the food processing sector in Ontario.
In the opinion of the Tribunal the new policy has not been retroactively applied to Farm Fresh, The request to the CFO was considered under Quota Policy 129-1996 and ultimately denied. Farm fresh then benefited from the application of the new supply setting agreement by receiving an additional 95,000 kilograms of supply beginning in Quota Period A-22 and running for six quota periods.
Farm Fresh requests the Tribunal to order the CFO to establish an independent process for considering requests for allocation of supply by new entrants, processors who are not members of the AOCP, and processors who are aggrieved by the recommendations of the AOCP. At a minimum, such a process should allow applicants for supply from the Board to make submissions to the CFO on a confidential basis without an applicant’s potential competitors privy to all of its privileged business information.
The Tribunal is of the opinion that the Special Request Panel in the new supply setting agreement fulfills this request.
Farm Fresh requests the Tribunal to give consideration to the application to Farm Fresh of the Minister’s decision in his review of the case of Niagara Country Fresh. Farm Fresh further requests the Tribunal to conclude that the principles guiding the Minister’s decision apply to Farm Fresh such as to require the Cooperative to receive an allocation of supply necessary for it to meet the level of economic viability set out in its business plan.
The decision letter from the Minister dated May 14 gives no reasons for the decision. As the Tribunal already noted, this letter indicates that growth for Niagara is to come under the growth provisions of the new supply setting agreement.
The Tribunal accepts the argument of the CFO and the AOCP that economic viability is not a reason to grant supply.
The Tribunal notes that both Farm Fresh and Niagara want a supply of two million kilograms per quota period. Both currently have a supply of about 500,000 kilograms per quota period and both are at about 25% of their desired capacity.
Farm Fresh requests the Tribunal to find that the promotion of competition represents an important policy objective of the Government and the Farm Products Marketing Commission and to order that the CFO take the Government’s and the Commission’s objectives concerning the promotion of competition into consideration in determining how supply is allocated to new entrants, and specifically to Farm Fresh.
There was no evidence presented at the hearing that there is an express policy of the government to promote competition in the chicken processing industry. The evidence indicated that the Commission is concerned if a policy of the CFO were to prevent new entrants into the chicken processing industry and the Commission supports the new supply setting agreement
In the opinion of the Tribunal, considering the number of new processors that have come into the chicken processing industry in the fast five years the Commission, the CFO and the AOCP have done an admirable job of fostering competition in an industry with a limited supply of product.
Farm Fresh requests the Tribunal to find that the Special Request Panel’s award of 95,000 kilograms has no bearing on the allocation of 200,000 kilograms to Farm Fresh. Farm Fresh further requests the Tribunal to reverse the CFO’s decision to decrease its earlier allocation of 200,000 kilograms on the basis of the Special Request Panel’s subsequent allocation of 95,000 kilograms.
Tribunal agrees that the two programs are independent. The Tribunal finds that the decision of the Special Request Panel is not the main reason that the CFO reversed its position from a supply of 650,000 kilograms to 450,000 kilograms. In his testimony Mr. Slot told the Tribunal that the overriding principle in this case is that the good of the whole industry supersedes the aspirations of any one processor. The Tribunal agrees with this principle.
Farm Fresh requests that the Tribunal establish, as a guideline for the CFO, the principle that an allocation of supply to new entrants cannot be denied in the absence of compelling and conclusive evidence demonstrating a direct, immediate, and irreparable adverse impact on the viability of other processors and on the overall health of the industry. Farm Fresh further requests the Tribunal to find that no such adverse impact has been shown to result from the requested allocation of supply and growth trajectory for Farm Fresh.
There was no evidence brought to the hearing that anyone had predicted the impact on the industry that the requested supply to Farm Fresh would have on other processors or the industry as a whole. Therefore there is no basis for the Tribunal to find that the requested supply to Farm Fresh will not impact other processors or the industry.
Having dealt with the specific requests of Farm Fresh the Tribunal wishes to note that the last five years has been uncomfortable for all processors as the industry struggled to increase Ontario’s share of the Canadian market. Processors all sacrificed during the period to bring stability to the industry. In the opinion of the Tribunal, Farm Fresh made a decision to purchase a plant and then to expand that plant during a period of time when there was a strongly controlled supply allocation. The members of the cooperative are knowledgeable producers at least three of whom are previous directors of CFO.
In the opinion of the Tribunal, since the supply of chicken in Ontario is limited, it is logical that a system of assigning that supply to the various processors be developed in order to foster a system of orderly marketing of chicken.
The Tribunal finds that the CFO acted within its mandate when it made both the decision of June 10th and July 9th based on the information available on those dates. The Tribunal does not accept the arguments from Farm Fresh that the 200,000 kilogram increase in its Quota Period A-21 supply should be reinstated and that Farm Fresh should be guaranteed a growth rate to two million kilograms.
Decision and Reasons
After careful consideration of the evidence presented and the submissions made, the Tribunal decided to deny the appeal of Farm Fresh.
The reasons for this decision are:
In the opinion of the Tribunal, no evidence was presented at this hearing of a substantial change in the marketplace that justify an increase in allocation to Farm Fresh in Quota Period A-21.
In the opinion of the Tribunal, when a new assignment of supply system is being implemented in Quota Period A-22, and this supply is dependent on the supply received in Quota Period A-21, the CFO must not only be fair but be seen to be fair to all processors in the supply assigned in Quota Period A-21.
The Tribunal interprets the Minister’s letter in the Niagara appeal to mean that, with repsect to growth in the allocation of supply, all processors are to participate in the new policies of the CFO to attain their growth objectives.
Dated at Guelph, Ontario, this 11 day of August 1998.
Minister of Agriculture, Food and Rural Affairs
Queen’s Park, Ontario M5S 1B3
Ministre de l’Agriculture, de l’Alimentation et des Affaires rurales
October 9, 1998
Mr. Jim Judge, President Farm Fresh Poultry Cooperative Inc. 191 John Street Box 729, Harriston, ON, N0G 1Z0
Dear Mr. Judge:
Re: Appeal from a decision of the Farm Products Appeal Tribunal regarding Farm Fresh Poultry Cooperative Inc. dated August 11, 1998
After having reviewed the decision of the Tribunal and the other materials on this issue, I have decided to vary the Tribunal’s decision by awarding to Farm Fresh Poultry Cooperative Inc. an allocation of 105,000 kilograms of live chicken for use in the domestic market commencing in period A-24. In considering the request, I have taken into account the allocation to Farm Fresh Poultry Cooperative Inc. of 95,000 kilograms by the Special Request Panel.
To implement this decision for A-23 would be disruptive to both producers and processors. Therefore I have decided that it should be implemented effective period A-24.
With regards to your request for an accelerated growth pattern to reach 2,000,000 kilograms over a reasonable period of time, I have decided to deny your request at this time. However, I am concerned with the fact that Ontario producers and processors are not meeting consumer demand, yet are not producing the maximum allowable under the cap of the National Allocation Agreement. I will be contacting both Chicken Farmers of Ontario and the Association of Ontario Chicken Processors to suggest that they move quickly to expand Ontario’s production in line with the agreement. It would be my expectation that in this way Farm Fresh Poultry Cooperative Inc., as a newer processor, along with all other processors, will be able to benefit from the additional growth in the Ontario industry.
Please accept my best wishes and kindest personal regards.
Sincerely,
Noble A. Villeneuve Minister