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Enforcing the law on illicit producers
who ‘sell around’ the marketing boards

The recent confrontation between a Shanley egg producer, the CFIA and the egg board has highlighted the enforcement activities that the marketing boards must undertake from time to time in fairness to all those producers who d abide by the rules

Enforcement of marketing board rules is not a job for the thin-skinned. Just ask Mark Beaven.

The title of “operations manager” for Egg Farmers of Ontario (EFO) belies what Beaven does. Beaven heads the enforcement efforts for the marketing board and he was its point man last March, when investigators from the board and the Canadian Food Inspection Agency (CFIA) executed search warrants at what they suspected was a large illegal egg producing operation south of Ottawa.

The farmer, 36-year-old Shawn Harry Carmichael of Shanley, telephoned the local landowners’ group, a highly charged confrontation ensued, and a court case and controversy still rages more than six months and a cropping season later.

Carmichael is due in court next on Oct. 11. At previous court appearances, Beaven says he was taunted by the landowners’ group members, who are there to support the defendant. They have done their research, Beaven says. “They know where I live. They know I have a kid.”

For his part, EFO general manager Harry Pelissero says that “at the end of the day we look forward to presenting the whole story.” Maybe then, pillorying in the press, both local and national, will come to an end.

At Dairy Farmers of Ontario (DFO), its manager of farm polices and programs gets to his office in Mississauga early and leaves late. Most of George MacNaughton’s time is spent dealing with milk quality issues rather than unregulated sales. He gets “a steady diet” of calls from farmers who don’t want to comply. “It’s what you can expect when you work in enforcement,” he says. “The guy who calls to complain is not the guy who made Grade A status.”

Unlike eggs and milk, Ontario’s pork industry isn’t under supply management, but it is a single-desk selling agency. An enforcement department strives to make certain that all producers market hogs through the board and pay dues for doing it.

“We created an enforcement department with professional, competent individuals who know how to deal with this in an appropriate fashion and are not belligerent,” says Jack Slibar, Ontario Pork’s chief executive officer. Investigators are busy and there are pending files, allows Slibar, a former head of the Toronto Humane Society. That said, it isn’t easy for the officers, who perform surveillance on farms and follow truckloads of hogs to their destinations.

 “There have been times when our investigators have been obstructed from fulfilling their duties,” says Lloyd Bauernhuber, Ontario Pork’s director of finance and operational services. “When appropriate, we have filed complaints with the authorities.”

Some of Ontario’s farm commodities are highly regulated. That isn’t always understood by either the public or the press.

Reader’s Digest published a piece in August, derisively referring to the CFIA and Egg Farmers officials, as “the gallant forces” and the marketing board as “a little-known cartel, like OPEC” that controls egg production “resulting in legal price-fixing…at the expense of consumers.”

Beaven is irked at this, but EFO is biding its time. “Sometimes patience is a virtue and we are becoming very virtuous,” Pelissero told Better Farming.

On the advice of legal counsel, Egg Farmers of Ontario is tightlipped about how  Carmichael, who is charged with producing eggs illegally, came to their attention in the fall of 2005. When asked, Beaven offers only a terse “no comment.”

A document, sworn by Beaven in order to obtain the egg board’s search warrant of the Carmichael property  and filed with the Ontario Court of Justice in St. Catharines, states that an egg board inspector visited the farm last fall and was denied entrance by the owner to what he suspected was a laying facility.

Dirty eggs for sale
The egg board began surveillance at the farm last fall and found that the Canadian Food Inspection Agency was doing the same thing, says Beaven. The two agencies began carrying out a joint investigation.

None of their allegations have been proven in court but according to the Information sworn by Beaven CFIA had been monitoring Carmichael in April of 2005, when the Ontario Ministry of Agriculture, Food and Rural Affairs complained about dirty eggs offered for sale in a local store. A CFIA inspector reported that eggs delivered by Carmichael’s Stoney Meadow Farm to a store in Ottawa didn’t meet Canada Grade A Large criteria.

In May of 2005, a CFIA inspector “seized 44 and a half dozen eggs” at four stores in Ottawa, Kemptville and Merrickville because they didn’t meet size standards. In August, the same inspector “seized and detained 16 trays of unmarked eggs of questionable standard” at a Chinese takeout restaurant in Ottawa. A phone list of suppliers included a telephone number that was identified as that of Carmichael’s farm.

The document states that in 1998, an egg board inspector found that a barn on Carmichael’s property contained 145 hens. That is 45, more than he is allowed under a marketing board exemption that allows non-quota holders to sell their eggs through normal marketing channels or at the farm gate, and the inspector told the farmer that he was in violation of the 100-bird rule. An inspector reported a week later that all of the hens had been removed.

When EFO and the CFIA executed warrants last March, EFO was looking for evidence that Carmichael was violating the Provincial Offences Act, says Beaven. The CFIA, he says, was collecting evidence to prove that Carmichael was violating the criminal code by selling ungraded eggs, using a federal trademark without authorization. Eggs are graded in a registered station to ensure that they are handled and packed in a sanitary environment, explains the CFIA on its website.

The egg board passes regulations under the authority of the Farm Products Marketing Act. Those regulations forbid a farmer from possessing “fowl,” without holding quota to produce eggs, and also require a producer to pay monies to the board for eggs sold. EFO alleges that Carmichael violated both regulations. The egg board also enforces the Livestock and Livestock Products Act, which governs how eggs are sold in Ontario. There are exemptions to these regulations for small operations that don’t hold quota.   

Beaven says that there are roughly 1,500 registered non-quota-holding egg producers in the province. Some producers are allowed to have 100 hens while older non-quota operations have as many as 500 birds because they were “grand-fathered” into the current regulation.

Egg Farmers encounters two or three instances in a year of illegal egg production. Usually it is because a non-quota holder has too many hens and there is no confrontation with the owner. “They get rid of (excess layers) once we explain the regulations,” Beaven says. “They don’t want to go to court.”

Beaven finds one operation every year or so with 1,000 birds and generally an agreement is struck with the offending party to close it down. But the Carmichael operation is very different, he charges. “This is 9,000 laying hens, basically a full-time operation.”

Quota to run an operation of this size would cost an operator more than $1.5 million just for the quota to produce for the regulated market.

Stack of evidence
Beaven is plainly frustrated by what he calls inaccurate reporting of the Shanley raid. Contrary to media reports, he says, Egg Farmers “did not go into the children’s drawers” and rifle their rooms. “I was the only EFO inspector to enter the house and I did not leave the kitchen. That is where the office was.”

Beaven says that the financial records and other files obtained during the investigations and the search comprise more than 2,000 pages and the stack of evidence that will be presented in court stands more than a foot high.

The Carmichael case is not typical, says Beaven, who has run EFO’s enforcement program for 10 years. “Most people are respectful of the law,” Beaven says, and even non-quota holders are mindful of the benefits of supply management.

Moreover, a non-quota holder “is getting the same price” or his eggs) “as a guy with quota,” he says.

A producer who sets up a grading station and only grades eggs from his 500 hens and sells to stores and restaurants is exempt from the levy that quota-holding producers pay. Producers are paid $1.46 for a dozen large eggs. Currently, the levy is 34.5 cents per dozen. Beaven says the vast majority of the levy goes to support a surplus removal program. Eggs that are surplus to table needs are sold into a processing market at whatever a volatile world price will bring them.

Non-quota-holding egg producers are invited to take part in the egg board’s quality assurance program for free, he says. Food safety “is an offshoot” of the egg board’s mandate. “We’ve seen what one sick cow can do” to the beef industry, Beaven says pointedly.

Last spring, when Better Farming interviewed Shawn Carmichael, the embattled farmer asserted that “grading doesn’t change an egg.” When asked what grading does, Beaven pointed out that it assures that consumers get what they pay for in terms of size, that the shells are clean and free of cracks and that they are stored in sanitary conditions to reduce the possibility of carrying diseases..

The path from the farm to the store or restaurant is also highly regulated. A commercial egg grading station is allowed to buy ungraded eggs, as is a licensed egg dealer who takes the eggs to a grading station. A consumer can buy ungraded eggs from the farm gate but can’t resell those eggs or process them and resell them. Restaurants can’t buy ungraded eggs because they will be resold when they are served to a customer.

Beaven says the egg board has the authority on its own to seize hens, such as when a producer with quota for 1,000 hens has more than that number in his barn. He won’t go into the reasons why a search warrant was obtained for the Carmichael property. But he does say that seeking such a warrant is rare and that he has only obtained a search warrant three times in a decade of enforcing egg board regulations.

Beaven takes umbrage at what he calls “inaccurate reports” about the actions inspectors took at the Carmichael farm in March. Beaven says he was able to seize “36 dead chickens and 90 dozen eggs” as well as the documents which will be used in the court case against Carmichael.

It was been reported in the media that a deal was struck with the landowners defending Carmichael’s farm on Mar. 23 to give seized hens and eggs back to Carmichael. But Beaven says the hens were going to a contracted barn, where they would be kept until a judge instructed the egg board to dispose of the evidence in the case. There was no deal struck, Beaven says. “The hens were taken from us. They were in a U-Haul van that we had rented, locked inside, and the lock was cut off,” by the landowners.

Beaven says egg board and CFIA officials left the farm at 6:30 p.m., not because a deal was struck but because there were “safety concerns” as darkness fell.

Two months later, Ontario Egg Farmers charged Carmichael with unlawfully possessing fowl without holding quota, and failing to deduct monies payable to the board under the authority of the Ontario Egg Producers’ general regulations. Carmichael was also charged with unlawfully marketing eggs contrary to the Livestock and Livestock Products Act.

 “The board is very anxious for the real story to be told,” says Pelissero. “Don’t believe everything you read in print” about the case, he says.

No ‘shipping around the board’
Unlike poultry and dairy, pork production in Ontario is not supply managed, but it is regulated by Ontario Pork. Nearly two years ago, the pork board launched an enforcement program which ensures that those regulations are followed and that producers aren’t “shipping around the board.”

Slibar says that the enforcement program began in response to questions from producers who suspected other producers weren’t following the rules. “There was a lot of concern expressed by producers back then about there being a level playing field.” If there is a significant amount of “shipping around the board,” those who do pay are bearing a higher portion of the costs.”

The pork board is a third party to all transactions regarding market hogs in Ontario, says Slibar, regardless of whether a producer sells hogs directly through the board’s pool and pool-plus programs or through a contract between a packer and a producer. Ontario Pork is a party to transactions out of province and out of country as well.

As a single-desk agency under provincial legislation, “we sign off on a contract (between a producer and a processor),” says Slibar. “We know what the terms are.” The processor pays the board and the pork board disperses funds to the producer after deducting fees. The board monitors the financial situation of packers to ensure that producers are paid for the pigs that they sell and helps settle disputes over payments.

Making sure that all producers pay their share “goes to the heart of agriculture” and its co-operative nature in Ontario, Slibar says.

Better Farming asked Slibar how much this enforcement effort costs. He said the costs weren’t at his finger tips. Nor did he say how many cases have gone to prosecution in two years. “I can tell you that our enforcement staff has been kept busy on a regular basis and I can tell you that we have files that are pending.”

Is enforcement expensive for producers? “It’s a normal operating cost that we incorporated into our normal operating budget,” says Slibar. “We reduced our service fee and were still able to run this as an effective program,” he told Better Farming.

Legal costs can be expensive, he admits, and prosecution is a last resort. Most producers who are shipping around the board just get a talking to. People come into line when they realize that the board is serious about enforcement, Slibar says.  “If everyone is paying their fees appropriately, the fees can be lowered. In the board’s view, that is the only fair thing to do.”

‘Unsafe for human consumption’
For its part, Dairy Farmers of Ontario comes across “up to half a dozen cases of unregulated production a year,” says George MacNaughton. Usually cases are reported to the local health unit he says, whether it be milk being sold illegally in a restaurant or a sign at the end of a laneway offering butter for sale. 

McNaughton says an extreme case of unregulated activity occurred when Sunderland dairy producer Bill Denby tried to market raw milk to the United States after export sales were stopped in 2004. And last spring there was a well-publicized case where landowners’ associations in eastern Ontario challenged the milk marketing system and government officials by selling homemade cheese at a landowners’ event. DFO bought the product and tested it for bacterial content, MacNaughton says. DFO will publish its results in its Milk Producer magazine, he says. “In a nutshell, not safe for human consumption.”

Most unregulated sales don’t involve licensed milk producers, he says. They are more likely to come from someone who owns a few cows.

The rules about bovine milk sales are clear-cut, MacNaughton says. Once milk goes into the bulk tank, it is to be offered for sale to DFO. “We are the sole buyer,” MacNaughton says. The single exception is milk being sold by the Georgian Bay Milk Company for export.

Georgian Bay shipped milk for export prior to 2003 under an exemption. In April of that year, DFO rescinded that exemption following an unfavourable World Trade Organization panel decision and, more than three years later, Georgian Bay producers continue to ship milk under a legal stay while the case winds its way through the courts. Ironically, while DFO passed regulations that, in effect, banned production of this milk, its inspectors run a quality program that ensures that Georgian Bay’s product meets Ontario standards for food safety.

Georgian Bay producers “are licensed milk shippers and from a DFO perspective still come under the raw milk quality program,” MacNaughton says.

Milk quality and the right to produce it are separate issues, he notes. Milk quality came under the auspices of DFO on Mar. 25, 1998, and quality issues continue to take up most of his department’s time.

MacNaughton says 75 per cent of dairy farms meet Grade A standards, 20 per cent ship milk under a conditional status and the remainder are” non-A” and “non-sanitary.”  Both statuses are cause for concern to the milk board.

Time temperature recorders will be required for bulk milk tanks on farms as of Jan. 1, 2007. MacNaughton says complaints about this requirement have toned down recently.

Biases discounted
Back at the egg board, Harry Pelissero doesn’t think that the credibility of supply management has been hurt by the adverse publicity generated by the Shanley raid. The penned words of farm columnists who have a bias against supply management are mostly discounted by readers, he says. “The people in the know in the farming community, they know (if a columnist) has got it wrong again and they write it off as that.”

 “People no longer hold institutions in high regard” since the advent of the Internet, he says, and that includes newspapers and magazines, even Reader’s Digest. “People are more informed and take everything they read with a grain of salt.”

One of the publications that stood up for egg farmer Carmichael and the landowners’ association members that took part in the confrontation in March was the locally published Eastern Ontario Farmer’s Forum. In a recent issue, editor Patrick Meagher expressed misgivings about continuing to support a farmer who wasn’t playing by the rules.

But Meagher refused to speak to Better Farming on the record about this view.

“You are in competition with me,” Meagher said.BF

© copyright 2006 AgMedia Inc.