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Quota Levy Still A Mystery

Confusion still reigns over a new surcharge on quota sales for milk, eggs and poultry six months after the Manitoba government announced it.

The two per cent levy is still not in effect and producers remain in the dark over how the province will implement it.

“There is very, very little information on how it might work,” said David Wiens, Dairy Farmers of Manitoba chairman.

The government surprised the supply management industry March 23 with the levy on the value of successful quota exchanges. The measure contained in the 2010-11 provincial budget is expected to raise $300,000 this year in general provincial revenue.

But Wiens said the province has provided no details on how it plans to administer it.

Industry representatives met with government officials in spring but came away with unanswered questions. Further meetings have not yet been scheduled.

Wiens said he doubted DFM will have more information for producers attending the milk board’s annual round of fall district meetings which began this week.

He said unanswered questions include: Does the levy apply only to quota sold on the exchange? Does it apply to whole-farm transfers as well? Does it include quota roll-forwards? Who pays the levy: the buyer, the seller or both?

Manitoba’s dairy industry stands to be the most affected because DFM conducts quota exchanges every month. A clearing price is established by matching bids to purchase and offers to sell.

The egg-, chicken-and turkey- marketing boards also hold quota exchanges, but not all are successful.

Wiens said the levy will hurt milk producers in two ways. It will be an added cost for them. And it will inconvenience their use of the exchange as a production management tool.

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.

Having to pay a levy on every transaction may discourage producers from using the exchange to manage their quotas, said Wiens.

He said producers will pay the levy if they have to but want the money to benefit them, not the government.

“We want some kind of alternative, whatever it would be, to return some kind of a benefit to the industry.”

One suggestion is to use the money for industry research, which suffered in this year’s budget. The province reduced an annual agriculture research grant to the University of Manitoba by $87,000 as a cost-cutting measure.

But Lorne Martin, a Manitoba Agriculture, Food and Rural Initiatives assistant deputy minister, appeared cool to the idea by saying the levy has to meet the budget’s goals of either increasing revenue or lowering expenses.

“We’re looking at options to achieve an end result of the budget direction,” Martin said.

It’s been suggested producers might factor the levy into their bids and offers on the exchange, thus artificially inflating the price of quota. Wiens said that doesn’t appear to be happening so far.

Dairy quota sold for $28,200/ kg of butterfat Sept. 1 after briefly topping $30,000/kg in June and July. [email protected]

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