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Court Ruling Upholds Milk Board Authority

Arecent Nova Scotia court decision upholding the provincial milk board’s legal right to reduce the amount of producer-held quota is being hailed as a victory for supply management.

Had the ruling gone the other way, it would have undermined the board’s ability to control milk production, one of the system’s essential pillars, said Brian Cameron, Dairy Farmers of Nova Scotia general manager.

The impact of such a ruling would have been felt throughout Canada, he said.

“It could have had national implications,” Cameron said from his office in Truro, Nova Scotia. “Because the board’s authority was being challenged to reduce quota, that speaks to one of the fundamental things we do within supply management.”

The case involved two separate legal challenges by two Nova Scotia dairy farmers, Paul Taylor of Windsor and Doug Bacon of Amherst.

NO RIGHT

Taylor and Bacon claimed DFNS had no right to lower a producer’s quota without compensation. They also challenged the milk board’s authority to cap the quota exchange clearing price.

Nova Scotia, Prince Edward Island and New Brunswick are gradually reducing milk quota prices to $25,000/kg, the same price as in Quebec and Ontario. It’s part of a plan to harmonize quota prices in the P5 eastern milk pool by capping the price at which quota can be traded.

The Atlantic provinces have until 2012 to harmonize prices with Ontario and Quebec. Nova Scotia’s quota price as of Nov. 2010 was $27,778/kg.

The case was heard in Nova Scotia Supreme Court Feb. 10-11, 2010. The ruling, released in late November, dismissed the challenges by the two applicants and found in favour of DFNS.

The decision is being appealed to the Nova Scotia Court of Appeal.

The rulings apply only in Nova Scotia under the province’s Dairy Industry Act. But the one about quota could have set a precedent for other provinces had it gone differently, Cameron said.

REGULAR ADJUSTMENTS

That’s because all provincial dairy-marketing boards regularly adjust quota up or down to meet fluctuating market demands for fluid milk. Boards increase quota as the market grows and reduce it if the market shrinks.

That happens all the time, said David Wiens, Dairy Farmers of Manitoba chairman.

For example, he said, DFM adjusted quotas at least four times within the last 12 months. It reduced them in the spring of 2010 when fluid milk demand was soft and started increasing them in September when demand began picking up again.

Not being able to do so, or at least having to compensate producers for it, would severely hamper a milk board’s ability to match supply and demand, Wiens said.

“We have to have the ability to manage production quotas. That’s what allows us to meet the local consumer demands for dairy products,” he said.

“If we would not have that control, we would be constantly undersupplying or oversupplying the marketplace.”

THREE PILLARS

Canada’s supply management system for dairy, eggs and poultry is supported by three so-called pillars: production quotas, regulated prices and import controls.

“All these things help create stability in the Canadian dairy industry,” Wiens said.

The ruling about the quota price cap is unique to the P5. The P4 western milk pool, which includes Manitoba, does not set limits on the price of quota traded on provincial exchanges.

DFM has gone out of its way to avoid such a measure. A motion adopted at the board’s Dec. 2006 annual meeting called for the quota exchange system to “be left as it is and oppose any interference with the current system.” [email protected]

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Itcouldhavehad nationalimplications.”

– BRIAN CAMERON,

Dfns

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