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:
Holm v Ontario Egg Producers
Holm v OEP 1999 ONAFRAAT 27
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
November 1, 1999
DATE OF DECISION:
November 8, 1999
1999-27
NEUTRAL CITATION:
1999 ONAFRAAT 27
Holm v Ontario Egg Producers
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 James and Yvonne Holm, Ayton, Ontario from a decision of the Ontario Egg Producers denying them a right to sell 450 units of quota that was allotted to them on a non-transferable, non-saleable basis.
Before:
Jim Rickard, Chair; Anna Andres, Member; Bob McKim, Member
Appearances:
Jim and Yvonne Holm, appellants.
Diane Benedetti, on behalf of the respondent, the Ontario Egg Producers.
Brian Ellsworth, on behalf of the respondent, the Ontario Egg Producers.
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Monday, November 1, 1999. James and Yvonne Holm appealed to the Farm Products Appeal Tribunal (the Tribunal) from a decision of the Ontario Egg Producers (the Board) denying their request that they be allowed to sell 450 units of quota that was allotted to them on a non-transferable, non-saleable basis as a result of a Tribunal decision in 1989.
The Background
On January 6, 1989 the Tribunal heard the appeal by James Holm concerning a decision of the Ontario Egg Producers' Marketing Board ("the local board") refusing his application for an egg quota for 1,050 birds.
The background to that appeal as reported in the Tribunal decision is as follows:
“The appellant operates a general purpose farm at R.R. #1 Ayton, Ontario. He took over the farm from his father in 1985. He currently produces eggs from approximately 900 hens and, in addition, has a cow/calf operation. The appellant's father, Mr. Walter Holm, has kept hens on the farm since 1969. For many years, approximately 900 hens were kept for the purpose of producing broiler hatching eggs. The local board had issued a licence to market hatching eggs to Mr. Walter Holm in order that he could market eggs which he produced in excess of those required for the production of broiler or roaster chickens. When the Ontario Broiler and Roaster Hatching Egg and Chick Commission was established, it issued a licence to James and Yvonne Holm as a hatching egg producer. The Commission allotted quota to the appellant far in excess of the number of hens his facility could handle. He found that the costs to renovate his barn to handle the quota were excessive and, therefore, he did not proceed to utilize the quota. The licence to market hatching eggs issued by the local board in April 1985 expired on April 3, 1986. This licence was not renewed by the appellant as he had commenced the production of eggs for sale to a health food store in Harriston, Ontario. In order to supply this market, the appellant produces eggs certified by the Organic Crop Improvement Association. The hens are kept in a "free range" environment making sure that no synthetic fertilizers, insecticides, fungicides, herbicides or antibiotics were used in any form in the production of feed and in the feeding of the hens. Organic foods are required to be processed using methods that retain freshness and nutritional quality without the use of synthetic or artificial fumigants, preservatives, additives or irradiation. The appellant has applied for full membership in the Organic Crop Improvement Association.
The local board has denied the appellant's request for a small egg quota to enable him to continue to keep approximately 1000 layers to produce organic eggs for the health food market where the demand exceeds the supply. His present facilities will allow him to produce these eggs without the need of costly alterations and the amount of quota requested will make his farming operation viable. The appellant is asking the Tribunal to request the local board to allot him an egg quota for 1050 birds.”
At that time the Tribunal heard:
“The appellant stated that he is not financially able to purchase egg quota as he estimates it would cost him approximately $40,000.00 if he was to obtain a quota for 1,050 birds. The amount of quota he is asking for is the upper limit which he can handle due to the additional work involved in the production of organic eggs. He currently operates two small flocks in two areas of his barn, one comprising 500 hens, the other 400 hens. “
“He is paying the required levies to the board and grades his own eggs.”
The Tribunal issued its decision on that appeal as follows:
“After carefull consideration of the evidence and representations made to it at the hearing and recognizing the present circumstances of the appellant, the Tribunal made the decision that the appellant be allotted a quota for 900 birds. This quota shall be non-saleable or transferable. If the appellant discontinues production, the quota shall be returned to the local board.
The appellant is to abide by all rules and regulations of the local board.”
Mr. Holm has now asked the Board for approval to sell 450 units of basic production quota allotted to him as a result of the 1989 decision of the Tribunal and the Board has refused this request. Mr. Holm now appeals this decision of the Board to the Tribunal.
The Issue
The issue before the Tribunal is:
Should James and Yvonne Holm be allowed to sell basic egg production quota that was allotted the them in 1989 on a non-transferable, non-saleable basis as a result of a decision of the Tribunal?
The Evidence and the Findings
Mr. Holm told the Tribunal that he and his wife have operated his egg laying flock, producing eggs for the organic market, ever since the 1989 Tribunal decision. They have a grading station and have complied with all the changes and requirements of the industry over the past ten years. However, the overhead costs in the last few years has eroded the profit. With the start of the HACCP they decided that they were doing a lot of work for little money. On June 29, 1999, they met with the Board to ask for approval to sell 450 units of quota. He said they have always paid the levy, like other egg producers, took quota cuts, like other egg producers and were inspected on a regular basis, like other producers. They are now asking to be allowed to sell the quota like any other producer.
In support of his request, Mr. Holm quoted from the Tribunal decision in the Betty Henderson case. He read from that decision as follows:
“The Tribunal is concerned that the restrictions attached to this special quota could continue indefinitely. In the opinion of the Tribunal, market forces do not stay constant. The production capacity of the hen has changed over time as feed quality and genetics improve. The Tribunal accepts the argument that after the passage of time speculation is no longer a consideration. The Tribunal finds that these producers are bona fide egg producers but they are not allowed to dispose of their quota in the same manner as any other egg producer in the province. While the Tribunal recognizes the Board's concern about the seven producers who have returned the special quota, the Tribunal feels strongly that a restrictive policy should not be placed on this quota unless it contains a "sunset" provision or allows for periodic review coupled with a right to terminate it if it becomes outdated. In this case, the Tribunal feels that these producers have demonstrated a long term commitment to egg production, have participated in all of the activities of the Board and should, therefore, be subject to the same rules and regulations as all other egg producers without exception.
After reviewing the evidence, the Tribunal concluded that any of the producers who received an allotment of egg quota from the Board as a result of the 1981 decision of the Tribunal and have maintained that quota for a period of twelve years should be entitled to have their egg quota treated the same as all other egg quota.”
Mr. Holm said that, like Mrs. Henderson, he was allotted quota that had restrictions placed on it but without a sunset provision. He urged the Tribunal to find he also has demonstrated a long term commitment to egg production and remove the restrictions on his quota so that he can now sell the quota.
Mr. Brian Ellsworth, speaking on behalf of the Board, told the Tribunal that this situation has developed over a long period of time. He has known the Holms for quite awhile. When the Ontario Broiler Hatching Egg and Chick Commission was established, it issued a licence in April of 1985 to James and Yvonne Holm as a hatching egg producer, with an allotment of 8,000 units. This was far in excess of what their facility could handle, and the cost of renovating the barn was excessive, therefore the quota was not utilized. When the licence expired in April of 1986, it was not renewed, as the appellant had commenced the production of table eggs for sale to a health food store in Harriston. In 1972, when the Board was established Mr. Holm’s father would not have qualified for a quota allotment for table eggs as he was producing hatching eggs for broilers. In 1987, an inspector visited the farm and found that the Holms were in fact producing table eggs from a flock of approximately 1000 birds, twice the number allowed in an unregulated flock. At a hearing before the Tribunal in 1989, the Board was ordered to allot to Mr. Holm an egg quota for 900 birds, this allotment being non-saleable and non-transferable. This special quota was issued so the Holms could continue in business as long as they wanted to produce eggs. If they decided to cease production, they were to return the quota to the Board. Mr. and Mrs. Holm currently have 918 units of non-saleable, non-transferable basic quota.
Mr. Ellsworth asked the Tribunal to deny the appeal. He also said that if the Tribunal is inclined to grant some relief to the Holms it should restrict the relief to allowing the sale of 418 quota units. He pointed out that Mr. Holm has been a producer for a number of years and can, under the Board policy, continue production with an unregulated flock of 500 birds. If the Tribunal allows Mr. Holm to sell all 918 units of basic quota he can do that and still maintain a 500 bird flock. This would be unfair.
In response to questions from the Tribunal, Mr. Ellsworth said:
Unregulated producers who sell through a grading station have Board levies deducted automatically, no levies are paid on farm gate ungraded sales.
Many of the producers who have an unregulated flock find that operating their own grading station is too large a burden so they sell to a registered grading station.
Unregulated flocks of 500 birds are not subject to HACCP regulation.
Mr. Holm did not sell his hatching egg quota when he switched to egg production as hatching egg quota was not saleable at that time.
In the Henderson case, Mrs. Henderson was a pullet grower with pullet quota. She was given egg quota by the Tribunal on the basis that (a) she exchange her pullet quota in return for egg quota on the basis of four units of pullet quota for one unit of egg quota, and (b) she purchase the quota from the Board at the then current price. When she finished egg production, she was to return the egg quota to the Board on the same terms i.e. one unit of egg quota would receive four units of pullet quota and the original purchase price would be returned.
There are about 1,700 unregulated egg producers in Ontario.
The levy is 22 cents per dozen. Of this about 17 cents is paid for industrial removal. All egg producers get paid the same amount for their eggs but some are sold to the industrial market for less than those sold into the table egg market. The 17 cents is used to make the producer price the same regardless of where the eggs are sold. It is a type of price pooling. 2½ cents is used in administration of the National program and 3 cents is used for provincial administration.
The Tribunal examined the evidence filed and submissions made by the parties including the Betty Henderson decision and the 1989 Holm decision. In the Henderson case, Mrs. Henderson surrendered 10,000 units of pullet quota and paid the Board the market rate ($8,050.00) for 2500 units of egg quota which she could use for as long as she wanted. When she ceased production she had to return the egg quota to the Board and she would receive 10,000 units of pullet quota and $8,050.00. Mrs. Henderson filled the quota and participated in the egg industry for twelve years. The Tribunal accepted her argument that the restrictions placed on her quota were designed to avoid speculation in quota values and allowed her to sell the special egg quota. In the Holm case, the Tribunal directed quota be allotted to Mr. and Mrs. Holm on a non-transferable, non-saleable basis.
Mr. Holm told the Tribunal that the price he receives for his organically produced eggs is based on the price of eggs set by the Board. Mr. Ellsworth told the Tribunal that the majority of the levy charged egg producers is used as a form of ‘pool’ to support the removal of eggs from the table market to the industrial market. This is the basis of the Board’s ability to establish a uniform price for egg producers. Since the price Mr. Holm receives is tied to the Board price the Tribunal concludes that Mr. Holm has derived benefit from the levies paid to the Board over the time that he used the special egg quota allotted to his farm.
In the opinion of the Tribunal, Mr. and Mrs. Holm had the effective use of the special quota for the past ten years and participated in the industry growth and reductions and payment of levies just as any other egg producer. However, unlike Mrs. Henderson, the Holms did not purchase this quota when they began production. This is a significant difference in the two situations.
Decision and Reasons
After careful consideration, the Tribunal decided to the deny the appeal of Mr. and Mrs. Holm.
The reasons for this decision are in the opinion of the Tribunal:
The Board acted within its mandate by denying the request to sell quota that was allotted to Mr. and Mrs. Holm on a non-transferable, non-saleable basis.
The Tribunal was not convinced that there is sufficient reason to interfere with the decision of the Board.
Dated at Guelph, Ontario this 8th day of November, 1999.