Manitoba’s marketing boards are demanding to know the reason behind a controversial provincial surcharge on the value of quota transfers between dairy, egg and poultry farmers.
Producer boards and Keystone Agricultural Producers will meet with the government next week to seek an explanation for the new two per cent levy on successful quota sales and purchases.
The levy has stunned and bewildered Manitoba’s supply management producers, who say they were not consulted about it.
They also say the province has given them no information since the measure was announced in the March 23 provincial budget.
“I guess the first thing we will be asking them is, what for? What is this all about?” said David Wiens, Dairy Farmers of Manitoba chairman.
Discussion about the levy dominated the last of DFM’s six annual spring district meetings here last week.
Wiens said the levy will hurt his industry in two ways. It will be an added financial cost for producers. And it will inconvenience their use of DFM’s monthly quota exchange as a production management tool.
Wiens said dairy farmers often buy or sell small amounts of quota for brief periods to accommodate unexpected drops or increases in milk production beyond their daily quota allocations.
The quota exchange is the best mechanism for fine tuning changes in production because it leaves the herd intact, he said.
But having to pay a special levy on every transaction may discourage producers from using the exchange to manage their quotas, said Wiens.
DFM staff suggested the levy may artificially inflate the price of quota because producers participating in the monthly exchange will build the added cost into their bids to purchase or offers to sell.
The clearing price for milk quota during the last exchange held April 1 was $29,200 per kilogram of butterfat.
Manitoba’s egg-, chicken-and turkey-marketing boards also conduct quota exchanges, although successful transactions do not occur as regularly as for milk.
Government officials last month said the two per cent levy is budgeted to generate $300,000 a year from all quota transactions.
But Wiens said it will extract $1 million from milk transfers alone, based on last year’s total value of $50 million.
News of the Manitoba levy has spread quickly. Wiens said he was asked about it at recent meetings of the western milk pool and Dairy Farmers of Canada, both of which he represents on behalf of DFM.
The levy sets a bad precedent for other provinces to follow when looking for a quick cash grab. It also creates a concern that, once the levy is in place, it can always be raised, said Wiens.
“Once the mechanism is in place, changing the number is not hard to do.”
Henry Holtmann, a producer from Rosser, said the levy sends a mixed message from government to potential new entrants to the dairy industry.
“On the one hand, they want new guys to come in. But they put a tax on for them to enter the business,” Holtmann said. [email protected]