New Levy Surprises Supply-Managed Producers

“It simply comes down to an added cost on the farm.”

– DAVID WI ENS, DFM

Manitoba’s supply management industry has been stunned by a new provincial surcharge on quota transfers.

The NDP government has slapped a two per cent levy on the value of successful quota exchanges for dairy, eggs and poultry.

The measure was contained in the 2010-11 provincial budget which came down March 23.

Government officials expect the levy will raise $300,000 a year in general revenue for the province.

The move came as a total surprise to producers, who said the government never consulted with them on it.

Marketing boards were scrambling last week to find out more about the levy.

“We’re disappointed to hear that government is imposing a fee on dairy farmers and other supply-managed commodities,” said David Wiens, Dairy Farmers of Manitoba chairman.

“This simply had added another cost that wasn’t there before.”

Wiens said milk producers often use the exchange as a management tool to adjust quota to production on their farms. They may buy or sell quota several times a year as part of an overall quota management strategy.

“Now suddenly if there’s this fee that’s going to be charged, it’s an extra cost that’s come out of nowhere,” said Wiens.

“It simply comes down to an added cost on the farm. And that makes things more difficult, especially in terms of how producers manage production quotas on their farms.”

DFM holds quota exchanges every month. Producers submit offers to sell quota and bids to buy it. Successful exchanges occur when a clearing price is reached.

Dairy quota in Manitoba sold at $27,950 per kg of butterfat in an exchange conducted March 1.

Wiens expressed concern about the province getting involved in a business transaction which is privately run and paid for by producers.

FEE INCREASE

The provincial budget announced other fee increases for agriculture, including a doubling of licence fees for fertilizer and pesticide applicators and a hike in rental fees for Crown land leases.

But those are fees for things which ultimately result in benefits for farmers. The quota levy appears to go straight into government coffers, not back to the industry, said Wiens.

Manitoba’s egg, chicken and turkey marketing board also conduct quota exchanges, although successful sales do not occur as often as for dairy.

Spokespersons for Manitoba Egg Farmers and Manitoba Chicken Producers declined to comment, saying they did not have enough information.

An official with Dairy Farmers of Canada said provinces sometimes charge assessments on milk quota transfers. But the money is used either to keep the value of quota in check or to establish a quota pool for new producers.

The Manitoba levy is something new and equivalent to a sales tax on the transfer of quota from one producer to another, he said.

“I can’t see how I’d be able to characterize that as a good thing. It’s revenue that’s leaving the industry and going somewhere. [email protected]

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