Agriculture, Food and Rural Affairs Appeal Tribunal

1Stone Road West Guelph, Ontario

Tribunal d’appel de l’agriculture,

de l’alimentation

et des affaires rurales

N1G 4Y2

Tel: (519) 826-3433, Fax: (519) 826-4232

Email:Tribunal@OMAF.gov.on.ca

1, chemin Stone Ouest

Guelph (Ontario) N1G 4Y2

Tél.: (519) 826-3433, Téléc.: (519) 826-4232

Email:Tribunal@OMAF.gov.on.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Szombati v Ontario Flue-Cured Tobacco Growers’ Marketing Board

Szombati v OFCTGMB 2004 ONAFRAAT 29

STATUTE:

Ministry of Agriculture, Food and Rural Affairs Act

HEARING:

August 11, 2004

DATE OF DECISION:

August 20, 2004

2004-29

NEUTRAL CITATION:

2004 ONAFRAAT 29

Szombati v Ontario Flue-Cured Tobacco Growers’ Marketing Board

IN THE MATTER OF THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT:

AND IN THE MATTER OF: An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Edward William Szombati and Mary Sharon Dwynne Szombati, Cathcart, Ontario from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board to deny their request to allow them to rent out 100% of their 2004 marketing quota.

Before:

Murray Cardiff, Chair; George Klosler, Member; Blake Bexon, Member

Appearances:

Barry Bresner, counsel to the OFCTGMB

Edward (Ed) Szombati, appellant

Vicky Malcolm, Secretary, OFCTGMB, witness

DECISION OF THE TRIBUNAL

This appeal was considered in Guelph, Ontario on Wednesday, August 11, 2004. Mr. and Mrs. Szombati appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal from a decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (OFCTGMB) to deny their request that they be exempt from a OFCTGMB regulation and be allowed to rent out 100% of their tobacco marketing quota in 2004.

Statutory Context

Subsection 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 Farm Products Marketing Act allows for various powers and authorities to be delegated to a local board. The OFCTGMB is a local board under the Act and has been authorized to regulate the production and marketing of tobacco and to administer a quota marketing system (Regulation 435, as amended).

The sections of the OFCTGMB General Regulations 2004-2005 which are most pertinent to the matter under appeal are:

Subsection 11 (2) which states:

(2) All rentals of marketing quota are prohibited, except for: (a) such spring and fall rentals as are permitted under Sections 19 and 20 hereof; (b) such rentals between members of an immediate family as are permitted under Section 12 hereof; (c) such rentals between a partnership and a partner thereof as are permitted under Section 13 hereof, provided that the partnership was an allottee of basic production quota and was in existence on or before March 17, 2003; and (d) such rentals between a corporation and a shareholder thereof as are permitted under Section 13 hereof, provided that the corporation was an allottee of basic production quota and that the shareholder was a shareholder of that corporation on or before March 17, 2003.

Subsection 14 (3) which states:

(3) Where any application made pursuant to this Section discloses that an allottee of basic production quota does not intend to produce tobacco in 2004 and does not intend to market tobacco produced by said allottee in prior years, the local board shall fix but not allot marketing quota to that allottee, unless that allottee’s application discloses an intention to apply to the local board to transfer basic production quota or to apply to surrender basic production quota under the Transitional Assistance Plan.

The Evidence

Szombati Case

Mr. Ed Szombati told the Tribunal that he had grown tobacco for 38 years and had always been a small producer. He explained he also grew other crops, kept beef cattle and had off farm employment as a school bus driver.

Mr. Szombati testified that growing tobacco had become increasingly difficult and he found the marketing of the crop stressful. He said he had suffered from poor health for five years and wanted to take a year off from growing tobacco, see if his health improved, and then make the decision as to whether to stay in the industry or not. Testimony regarding Mr. Szombati’s health issues was given in camera. Two letters from his family doctor were provided to the Tribunal.

Mr. Szombati told the Tribunal he had tried to find immediate neighbours to sharegrow the crop for him but none were interested. He said he did not have an extra house on the farm so could not provide accommodation to a sharegrower. He said the fact that he had standard kilns, rather than the more popular bulk kilns, made his farm less attractive to sharegrowers.

Mr. Szombati said he was aware of the OFCTGMB no rental policy when he decided not to plant a crop in 2003. He said he did not want ongoing rental income from marketing quota but asked that he be exempt from the no rental policy for one year to allow him to evaluate his options for the future.

Mr. Szombati also indicated:

• He sought a similar exemption from the OFCTGMB in 2003 but was turned down. He subsequently grew a 4-acre crop that year, with the help of family members.

• He spoke to a neighbour, Mr. Vanbesien, in mid-March 2002 about sharegrowing but did not finalize anything at the time. He later approached four other neighbours about sharegrowing. He did not advertise for sharegrowers or a farm manager.

• In 2004, he decided to take a year off from growing tobacco regardless of whether the OFCTGMB gave him an exemption or not.

• His land could have grown tobacco and plants were available from his neighbour, had he wanted to grow a crop. The land was planted in soybeans instead.

• He would have to grow 15 acres to make it worthwhile for a harvest team.

• He had enough quota to market 8 acres, could rent in 20% of his quota and could carryover extra tobacco.

• He had a sufficient number of converted kilns to cure a 15-acre crop.

• Normally he does all the work on his tobacco crop up until harvest when he hires local teenagers to assist him.

• He was not sure if he would be able to grow tobacco in 2005 or not, due to his health concerns.

• The farm was 96 acres, of which 70 acres was workable.

• He had 9 bales of carryover tobacco (40-50 lb. bales) and had marketing quota to cover their sale.

• He had rented out 30% of his marketing quota in the Spring, but was not eligible to rent out any in the Fall. If he and his wife were not exempt from the OFCTGMB no rental policy, the remaining 70% of their quota would be redistributed to other growers.

• If he could rent out his marketing quota he could get 60-70 cents per lb. on the balance of his marketing quota for 2004-

OFCTGMB Case

By way of background information, Mr. Barry Bresner explained that the OFCTGMB issued tobacco growers a fixed amount of basic production quota, which did not change from year to year, and marketing quota, which varied from year to year according to the negotiated crop size. He said marketing quota was allotted each year to tobacco growers who intend to plant a crop, as a percentage of their basic production quota, and to tobacco growers who did not intend to grow a crop but who planned to market tobacco carried over from a previous year. Mr. Bresner explained that tobacco growers were permitted to rent up to 30% of their marketing quota in the Spring, and 20% in the Fall. Mr. Bresner also pointed to regulations which allowed growers to rent quota between family members and between corporations and their shareholders.

Mr. Bresner testified that any marketing quota that is not allocated to tobacco growers is distributed free of charge in December to all producers who grew a crop that year. He said the OFCTGMB policies helped keep the cost of production down because they prevented quota holders from renting out quota as retirement income.

Ms. Vicky Malcom testified that she was the Secretary of the OFCTGMB, had held that position for five years and had worked for the OFCTGMB in various capacities for 30 years. She said she attended OFCTGMB hearings and estimated that it heard 2-3 requests per year for exemptions to the no rental policy, due to health reasons. She said the OFCTGMB looked at whether the producer intended to grow a crop, had made preparations to grow a crop, had attempted to get a sharegrower/farm manager, the suddenness and severity of the health problems and whether the producer was capable of growing a crop. Ms. Malcolm testified that the OFCTGMB had also exempted growers from the policy if part of their crop is damaged due to severe weather such as hail.

In response to questions, Ms. Malcolm indicated:

• The OFCTGMB does not have a doctor on hand when making decisions on requests for exemptions due to health reasons.

• The OFCTGMB always gets a detailed report from a doctor and documents backing up the health claims before granting an exemption for health reasons.

• One of Mr. Szombati’s doctor letters was vague, the other was more detailed.

• She was not aware of any exemptions to the no rental policy being granted for health reasons in 2004.

• Quota was not attached to the land; it had been in the past but the policy was changed in 1976. Quota could be sold separate from a tobacco farm.

• The current rule was that 70% of the tobacco crop must be grown on land owned by the tobacco grower. There was an exception that allowed quota to be moved between immediate family members.

• There had been no substantive changes to the OFCTGMB rental policies in at least three years.

Summations

Mr. Szombati said he had been on his farm since he was four years old and seen many changes in the tobacco industry, both good and bad. He submitted that a tobacco farmer should be given a one-year grace period for whatever reason.

Mr. Bresner said that Mr. Szombati was not required to grow a tobacco crop but that if he did not grow a crop he did not need marketing quota and the OFCTGMB should be able to allocate it to growers who did produce tobacco. He said exemptions should only be granted in exceptional circumstances as quota rentals increased the cost of production of the crop. He pointed out the industry was in decline, said there was financial difficulty in the industry and argued that the focus should be on assisting active growers.

Mr. Bresner argued that Mr. Szombati’s health problems were not sudden, that he was not incapable of growing a crop and that it is not unusual in a declining industry to have older producers who are chronically ill. He said the medical evidence provided did not definitively link Mr. Szombati’s health problems with growing tobacco. He also suggested that Mr. Szombati had not made a reasonable effort to get a sharegrower.

Mr. Bresner referenced two previous decisions of the Tribunal in which it upheld the OFCTGMB no rental policies.

The Findings

The Tribunal accepts the medical evidence that Mr. Szombati has an ongoing health problem and finds that this was the reason he did not plant a tobacco crop in 2004.

Mr. Szombati had the options of having someone else grow his crop, selling his basic production quota or sitting out a year and renting out 30% of his marketing quota. He sought an exemption to the OFCTGMB policy and regulations so that he could rent out 100% of his marketing quota, thereby generating additional income.

Mr. Szombati did approach his neighbours about sharegrowing, but the Tribunal was not persuaded that Mr. Szombati made a sincere effort to have a tobacco crop grown. He did not follow up with the one neighbour who expressed an interest in supplying plants and growing the crop. The Tribunal understood it was his preference not to grow a tobacco crop in 2004 and not to have someone else grow a tobacco crop on his land. He was aware of the OFCTGMB regulations when he made the decision not to grow a crop. He had other options which he chose not to pursue.

The Tribunal accepts the OFCTGMB argument that it is beneficial to minimize the cost of production of tobacco growers who have tobacco to market rather than to provide income to growers who have not planted a crop. The Tribunal finds that the OFCTGMB policy is reasonable and finds no compelling reason to exempt Mr. Szombati from the OFCTGMB regulations.

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:

1. Mr. Szombati indicated to the Tribunal that he had no intention of growing a crop in 2004. The Tribunal accepts he has a health problem but believes that he did not fully pursue all available options.

2. The no rental policy has been in place for some time and the appellant was aware of the policy. The Tribunal accepts the no rental policy as beneficial to the operation of the tobacco industry.