New broiler chicken pricing method takes effect in February

Friday, January 23, 2015

by SUSAN MANN

The Association of Ontario Chicken Processors has yet to do some number crunching to determine what the financial impact will be from a new method of establishing minimum live broiler chicken prices.

Nevertheless, “we look forward to establishing minimum live prices under the new process,” association executive director Mike Terpstra says by email.

The amendment to the pricing regulation under the Farm Products Marketing Act was made Jan. 8 and filed Jan. 14 by the Ontario Farm Products Marketing Commission.

The amendments take effect with quota period A-129, which begins Feb. 22.

Chicken Farmers of Ontario representatives couldn’t be reached for comment.

The Commission’s amendments were developed after it reviewed submissions from the processors’ association, Chicken Farmers of Ontario and comments received through the Ontario government’s Regulatory Registry.

Commission chair Geri Kamenz said in a September BetterFarming.com> article the changes were proposed to update the supply managed commodity’s cost of production formulas, add transparency to the process and ensure a continued stable and profitable return “to efficient producers.”

The Commission says on its website the new cost of production formula includes provisions for regularly updating “the individual elements to ensure the formula remains current and reflects a reasonable return to efficient producers.”

It also notes “this is a significant milestone in the ongoing evolution of the supply managed system for chicken.”

Commission representatives couldn’t be reached for comment.

Terpstra says under the new system the costs that make up the live price are derived from on-farm data and a model farm. The “on-farm data was collected and analyzed by independent experts to determine things like feed costs and the feed conversion while the model farm was used to measure costs, such as capital and labour.”

The new pricing formula also includes three annual adjustments, he says. One is a cost adjustment to reflect the impact that changing volumes (connected to annual allocations of domestic chicken production to Ontario by Chicken Farmers of Canada) have on fixed costs. A second is a feed efficiency adjustment to account for ongoing improvements in feed conversion. The third is a producer efficiency adjustment that has the “effect of removing from the producer survey data 10 per cent of the producers that had the highest costs,” Terpstra says.

The survey of farmer costs and model farm components were based on 2012 data, he says.

To determine the live price for the A-129 quota period, the processors’ association and Chicken Farmers of Ontario need to update the costs and calculate the appropriate annual adjustments, he says.

John Slot, general manager with the Ontario Independent Poultry Processors, says his organization has never been involved in the process to establish the cost of production. The independent poultry processors group represents Ontario’s smaller processors.

“We never felt the cost of production process was a big priority for us,” he says. “Our priority is more to do with supply.”

The current method to determine minimum live chicken prices has been in place since 2002. BF