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

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Adema v Ontario Broiler Hatching Egg and Chick Commission

Adema v OBHECC 2001 ONAFRAAT39

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

July 19, 2001

DATE OF DECISION:

August 9, 2001

2001-39

NEUTRAL CITATION:

2001 ONAFRAAT39

Adema v Ontario Broiler Hatching Egg and Chick Commission

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 Agriculture, Food and Rural Affairs Appeal Tribunal by Martin Adema, Waterford ON, from the June 27, 2001, decision of The Ontario Broiler Hatching Egg and Chick Commission (OBHECC) not to adjust the flock disposal date of August 4, 2001 of his current flock.

Before:

Denis O’Connor, Vice Chair; Ralph Huckle, Member; Doug Flook, Member; Bill Olsen, Member.

Appearances:

Martin Adema, appellant.

Paul Trudel, counsel to the Ontario Broiler Hatching Egg and Chick Commission.

Michelle Snyder, witness for the appellant.

Ralph Harris, witness for the respondent.

Bill Vanderklippe, witness for the respondent.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Thursday July 19, 2001. Martin and Tracy Adema appealed a decision of the Ontario Broiler Hatching Egg and Chick Commission not to adjust the August 4, 2001 flock disposal date for the current flock.

The Background

Section 16 (2) of the Ministry of Agriculture, Food and Rural Affairs Act is as follows:

16(2) Subject to subsections (4) and (5), if a person is aggrieved by an order, direction,

policy, decision or regulation made under the Farm Products Marketing Act by a local board or under the Milk Act by a marketing board, that person may appeal to the Tribunal by filing with the Tribunal and sending to the local board or marketing board written notice of the appeal.

The relevant section of Regulation 396 of the Farm Products Marketing Act states that:

9. (1) The Commission authorizes the Egg and Chicken Commission,

(a) to require that hatching eggs be marketed on a quota basis;

(b) to prohibit any person to whom a quota has not been fixed and allotted for the marketing of hatching eggs or whose quota has been cancelled from marketing any hatching eggs;

(c) to prohibit any person to whom a quota has been fixed and allotted for the marketing of hatching eggs from marketing any hatching eggs in excess of such quota; and

(d) to prohibit any person to whom a quota has been fixed and allotted for the marketing of hatching eggs produced on lands or premises in respect of which such quota was fixed and allotted from marketing any hatching eggs other than hatching eggs produced on such lands or premises.

(2) The Commission authorizes the Egg and Chick Commission,

(a) to fix and allot to persons quotas for the marketing of hatching eggs on such basis as the Egg and Chick Commission considers proper;

(b) to refuse to fix and allot to any person a quota for the marketing of hatching eggs for any reason that the Egg and Chick Commission considers proper;

(c) to cancel or reduce, or refuse to increase, a quota fixed and allotted to any person for the marketing of hatching eggs for any reason that the Egg and Chick Commission considers proper; and

(d) to permit any person to whom a quota has been fixed and allotted for the marketing of hatching eggs to market any hatching eggs in excess of such quota on such terms and conditions as the Egg and Chick Commission considers proper.

(3) The Commission authorizes the Egg and Chick Commission,

(a) to require that hatching eggs be produced on a quota basis;

(b) to prohibit any person to whom a quota has not been fixed and allotted for the producing of hatching eggs or whose quota has been cancelled from producing any hatching eggs;

(c) to prohibit any person to whom a quota has been fixed and allotted for the producing of hatching eggs from producing any hatching eggs in excess of such quota; and

(d) to prohibit any person to whom a quota has been fixed and allotted for the producing of hatching eggs on lands or premises in respect of which such quota was fixed and allotted from producing any hatching eggs other than hatching eggs produced on such lands or premises.

(4) The Commission authorizes the Egg and Chick Commission,

(a) to fix and allot to persons quotas for the producing of hatching eggs on such basis as the Egg and Chick Commission considers proper

(b) to refuse to fix and allot to any person a quota for the producing of hatching eggs for any reason that the Egg and Chick Commission considers proper;

(c) to cancel or reduce, or refuse to increase, a quota fixed and allotted to any person for producing hatching eggs for any reason that the Egg and Chick Commission considers proper, and, without limiting the generality of the foregoing, to cancel or reduce any such quota as a penalty where the Egg and Chick Commission believes on reasonable grounds that the person to whom the quota was fixed and allotted has contravened any provision of the Act or the regulations; and

(d) to permit any person to whom a quota has been fixed and allotted for the producing of hatching eggs to produce any hatching eggs in excess of such quota on such terms and conditions as the Egg and Chick Commission considers proper. R.R.O. 1990, Reg. 396, s.

The Ontario Broiler Hatching Egg and Chick Commission (OBHECC) sets production targets for producers, proportionate to their share of Ontario Hatching Egg quota and based on the provincial allocation set by Canadian Broiler Hatching Egg Marketing Agency (CBHEMA).

OBHECC producers in Ontario hold quota for Hatching Egg Market Share (H.E.M.S.). Based on the H.E.M.S. quota held by an individual producer, a specific number of hens whose egg production is determined by breed average, are placed with the producer at the beginning of the Breeder Production Cycle (BPC). Within the current system for producing hatching eggs, a Production Allocation Certificate is issued for each flock placed. The certificate sets out the flock disposal date, if chicks are placed as allocated. The first and last dates for flock disposal are also set out.

The Issues

1. Should the Tribunal order OBHECC to vary Mr. Adema’s flock disposal date of August 4, 2001?

2. Should the Tribunal order OBHECC to implement a system that guarantees producers the production of a specific number of eggs?

The Evidence and the Findings

Mr. Adema contends that this flock disposal date of August 4, 2001 is preventing him from reaching the market share for which he holds quota. In addition to the request for removal of the August 4 flock disposal date, Mr. Adema requested that the Tribunal order OBHECC to implement a system, namely an “egg-based” system that guarantees producers their full market share. Mr. Adema told the Tribunal that, should the flock disposal date of August 4, 2001 remain, he would loose the ability to produce some 100,000 hatching eggs. Mr. Adema said that he had based this figure of 100,000 eggs, on a calculation as follows;

Total # of hatching eggs allocated to ON X 52 (number of weeks per year)

of ON quota units held 48 (number of weeks per production cycle)

= 134.444 hatching eggs, per quota unit.

Mr. Adema said that his quota is 13,600 units of H.E.M.S.. He told the Tribunal that his quota multiplied by 134.444 eggs per unit of quota, is equal to 1,828,438 hatching eggs for the 2001 BPC. Mr. Adema explained that he had shipped 1,588,860 hatching eggs as of July 9, 2001. By projecting forward to August 4, 2001 he predicted that he would produce a further 140,000 hatching eggs, for a total of 1,728,860 hatching eggs, which is 100,000 hatching eggs short of his H.E.M.S..

Mr. Adema told the Tribunal that he based his understanding of Quota from the definition set out in the OBHECC Regulation Book, Reg. A1 and the note to Commission Policy Direction #33 which states:

H.E.M.S. is not a guarantee that a specific number of birds will be allocated to any producer . It is a device used to measure each quota holder’s share of the global allocation of hatching eggs in each year. The new issue of extra H.E.M.S. in no way guarantees any quota holder more production than in previous years. A quota holder’s market share will change depending on what percent of extra H.E.M.S. producers claim or refuse.

Mr. Adema stated that he realized that the provincial allocation for hatching eggs had been reduced, and that his calculation of a loss of production of 100,000 hatching eggs, was therefore somewhat high.

Michele Snyder provided testimony on behalf of Martin Adema. Ms. Snyder said she was an employee of Jarvis Chicks Hatchery. Ms. Snyder responded to questions stating that, given estimates from their own data, the hatchery projects an egg shortage. Ms. Snyder stated that Jarvis Chicks favoured moving to an egg-based allocation system. Ms. Snyder testified that the egg-based system would ensure a specific number and quality of eggs per flock. Ms. Snyder said that this would simplify the hatcheries’ projections and reduce shortages. She said this would make it unnecessary for her hatchery to source eggs from other sources.

Mr. Adema responded to questions that:

• He had been a hatching egg producer for six years.

• He said that the current allocation system had been in practice since 1989.

• He agreed that there were 81 producers province wide and that four producer and four hatchery members, were elected to the OBHECC board.

• He told the Tribunal that hatcheries regularly source eggs from the United States and other Ontario hatcheries when necessary.

Mr. Harris told the Tribunal that he was employed as the data co-ordinator for OBHECC. Mr. Harris said that it was his job to administer the current allocation system. Mr. Harris explained the bird-based system with reference to a schematic illustration of the calculation used to derive the number of day old female chicks that are placed with a producer at the beginning of the BPC. Mr. Harris responded to questions that:

• OBHECC tries to meet the provincial allocation as set out by CBHEMA.

• Due to a change in projections the production of Mr. Adema and all other Ontario producers had been curtailed.

• Successful production levels are dependant on flock management, the time of year the flock is grown, the housing of the flock and the breed of bird.

• OBHECC reacted to findings of production differences among breeds by implementing a breed indexing system.

• Individual management at the farm level is largely responsible for production differences from producer to producer.

• There is some limited variability in producer rankings for productivity, but producers are fairly consistent in their productivity.

• Mr. Adema has not been treated differently from any other producer in ON.

Mr. Harris went on to explain that OBHECC had sent a delegation to Quebec to study the egg-based allocation system in use there. Mr. Harris explained that with any system there are flaws, with an egg-based system a producer may find himself in the position of having to lease out unused egg allowance, from flocks finishing in the same year. Mr. Harris told the Tribunal that OBHECC would be continuing discussions for the improvement of the system of allocation, in the next few months. He refuted Ms. Snyder’s claim that sourcing eggs would not be necessary under an egg-based system. He said that, though Quebec has just two hatcheries, whereas Ontario has seven, eggs are still traded. He said that the number of eggs traded by hatcheries is relatively small compared to the total volume of eggs hatched. Mr. Harris agreed with Mr. Adema that, within an egg-based allocation system producers could recoup losses causes by unforeseen mortality rates but, if production fell short, then the allocation would have to be redistributed which would give rise to the problem of allocating the surplus. Mr. Harris acknowledged that he had indicated at a previous hearing that a producers market share was a specific number of eggs. Mr. Harris agreed with Mr. Adema that, despite his over-estimation, the number of eggs derived from calculations for market share in BPC 2001 is basically correct.

Mr. Harris told the Tribunal that with the bird-based system it was more advantageous for producers to meet their market share projections early in the BPC. He said that when production adjustments are made OBHECC takes eggs out of the system rather than culling birds. Mr. Harris said the same would hold true in an egg-based system. Mr. Harris responded further to questions that:

• Any adjustments curtailing production are carried out across the board and proportionate to each producers total market share.

• Allocation Certificates are amended if a producer wishes to change the number of birds in the barn, or to change the lay period.

• Shifts in projected demand can result in flock life extension or curtailment.

• Hatchery contracts are signed with producers based on the hatchery plans for egg flow.

• A producer’s choice of allocation period must fit in with the pullet growing cycle.

• The Commission often issues two amended allocation projections per BPC.

• Producers may leave quota unused for a maximum of two years.

• Flock productivity is seasonally affected but it is not a large factor.

Mr. Bill VanderKlippe provided testimony on behalf of the Commission. Mr. VanderKlippe told the Tribunal that the producers elected four members to the Board of the Commission. He said that he was a producer and Board member. Mr. Vanderklippe said that the Board recently held discussions around the egg-based system. He explained that the Commission has determined that the bird-based system currently in place has merits that out-weigh the merits of the egg-based system. Mr. VanderKlippe testified that the bird-based system addresses the needs of the producers best, it is a familiar and well understood system and the implementation of breed indexing illustrates the Commission’s commitment to improving the system. He said that a statement of dissatisfaction from one or two producers, should not warrant a change to another system. Mr. VanderKlippe explained that the bird-based system looks at average productivity and it is designed to compensate a producer fairly. He said that the production target set by OBHECC meets the provincial target very closely from one year to the next. He said that with each BPC a producer is essentially starting afresh.

Mr. Adema summarized his position, stating that; the Farm Products Marketing Commission intends that quota be defined as a specific number of eggs from each producer. Mr. Adema maintained that he would be prevented from reaching the full market share of his quota if the August 4, 2001 flock disposal date was not changed. The Tribunal decided not to allow the entry into evidence of a petition put forward by Mr. Adema during summation.

Mr. Paul Trudel told the Tribunal that Mr. Adema incorrectly interprets the OBHECC regulations to conclude that he is entitled to a specific number of eggs per BPC. Mr. Trudel explained that the regulations specifically state that there is no guarantee of the number of birds that will be placed with a producer proportionate to his quota, hence; there is no guarantee of the number of eggs that may be produced. Mr. Trudel said that extending the flock life for Mr. Adema would be unfair to other producers and undermine the bird-based system. He said that the Ontario Broiler Hatching Egg Producers Association is satisfied with the current allocation system, as evidenced by their absence from the hearing. Mr. Trudel said that Messieurs Harris and VanderKlippe that there is an inherent incentive in the bird-based system, namely, good farm management was rewarded by reaching the full potential market share of quota. Mr. Trudel reminded the Tribunal that OBHECC had implemented breed indexing when it was found to be an important production variable. He said that it was appropriate that the Commission study issues thoroughly before adopting new policies. Mr. Trudel said that the present system had been in place for 11 years. He said that for the past six years Mr. Adema had been satisfied with the system. Mr. Trudel stated that the bird-based allocation system has the support of the industry as a whole. Mr. Trudel told the Tribunal that no systemic problems had been identified by the appellant, and that the present system was more advantageous to OBHECC producers than other systems considered thus far.

The Findings

The Tribunal understands that in any system, barriers and inequities do occur from time to time. The Tribunal finds just such an instance within the bird-based system, in that the flocks that lay well at the beginning of the BPC supply the market earlier, whereas, flocks that reach their maximum productivity later in the BPC are more likely to be curtailed. The implementation of breed indexing demonstrates the OBHECC commitment to respond to, and provide for the needs of its membership. From the evidence presented the Tribunal is confident that OBHECC will continue to monitor the allocation system presently in place and hold discussions, with a view to adjusting rules and regulations as may be required to address the concerns of the industry.

The Tribunal finds that Mr. Adema has chosen an appropriate forum to raise the issues of systemic inequities and the manner in which OBHECC policies have been applied to him specifically. The Tribunal cannot however agree with Mr. Adema that he has been treated differently than any other producer by the expectation that he comply with the August 4, 2001 flock disposal date nor, that the definition of quota is based on a specific number of hatching eggs. Further, the Tribunal does not find that Mr. Adema is any more limited than other producers, from reaching his full market share due to adjustments for market fluctuations, or minor structural shortcomings within the allocation system. In fairness to all producers, any adjustments made for Mr. Adema, would necessarily have to be applied across the industry.

Decision and Reasons

After careful consideration of the evidence filed and submissions made, the Tribunal decided to deny the appeal.

The reasons for this decision are that:

1. Mr. Adema was not treated differently than any other producer, by being required to dispose of his flock on the date set by the Commission.

2. The Tribunal was not persuaded that an egg-based allocation system would serve the Ontario industry better than the current bird-based allocation system at this time.

Dated at Guelph, Ontario the 9^th day of August, 2001.