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Chicken Dispute Offers Cautionary Tale

Ontario and Quebec are embroiled in a chicken war reminiscent of trade squabbles between provinces that led to the creation of supply management more than 40 years ago.

Chicken Farmers of Ontario has placed a moratorium on interprovincial movement of chicken to stem a bidding war between processors at home and in next-door Quebec.

The moratorium, imposed six months ago, has been renewed regularly for several quota periods with no end in sight.

The issue involves chicken processors in Ontario and Quebec signing marketing agreements with producers in the other province.

CFO put a hold on new supply contracts between Ontario producers and out-of-province processors effective October 1, 2009.

Previously, Ontario and Quebec processors had raided each other’s producers, sometimes using price premiums, to gain market share at each other’s expense.

The dispute goes to the heart of supply management in which marketing boards are supposed to match production with demand.

“It creates a disruption in the ability of provincial marketing boards to operate,” said Al Mussell, a senior research associate with the George Morris Centre in Guelph, Ont.

“Try managing supply when you’ve got this phantom supply floating between provinces.

Asked whether the brouhaha is a return to the interprovincial chicken wars of the 1960s, when provinces dumped surpluses into other provinces, Mussell said, “We’re there to some extent.”

Industry officials say the issue is actually the reverse. It’s a case of processors wanting more supply and trying to pull it in from outside their borders, said Mike Dungate, Chicken Farmers of Canada general manager.

But the effect of processors and producers chasing each other around is still the same. It disrupts orderly marketing and confuses prices, Dungate said.

He and CFC chair David Fuller attended the Manitoba Chicken Producers annual meeting in Winnipeg this week.

A federal-provincial agreement governing chicken production in Canada allows for so-called differential growth in different regions, notwithstanding individual provinces’ base quota allocations that go back as far as supply management itself.

“There is a lot of discussion around our board about, do we need to inject more differential growth into the allocation setting?” said Dungate.

“The marketplace is evolving. We need to be able to let processors grow and compete without destabilizing markets.”

But whenever CFC allocates production for an upcoming seven-week period, it usually ends up in a fallback position, approving allocations equal in market share, he said.

SUPPLY PLAN

The Ontario-Quebec chicken dispute does not affect Manitoba producers directly, said Jake Wiebe, vice-chair of Manitoba Chicken Producers.

But it affects them indirectly because the Manitoba government is concerned about something similar happening here, said Wiebe, a producer from New Bothwell.

The province last year ordered the industry to develop a plan ensuring supplies of live chicken to processing plants.

It also slapped a partial freeze on producers who want to switch their deliveries from one processor to another. Producers must give 42 to 49 weeks’ notice (equivalent to six or seven production cycles) before switching processors.

The move caught the industry by surprise. Producers and processors at the time both said they hadn’t asked for it.

The restriction has effectively stopped producers from changing processors, which didn’t happen a lot before anyway, Wiebe said.

“In my opinion, they’re trying to fix something that isn’t broken.”

A provincial working committee is developing a report on ensuring adequate supplies for processors. A final version is expected soon, Wiebe said. [email protected]

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