by SUSAN MANN
If eastern Ontario dairy farmers Andy Senn and Franz Suter were to buy the 186 kilograms of quota on the provincial quota exchange that they obtained through the purchase of a nearby farm two years ago it would take them 39 years to get all of it.
That's because of other policies at play which restrict how much can be bought at any one time – despite assurances from the Dairy Farmers of Ontario when the policies were introduced in 2009 that it would only take a few months for farmers wanting to expand their operations to acquire their quota on the exchange, says lawyer Alyssa Tomkins.
Those were some of the many facts to emerge during a weeklong (Oct. 27-31) hearing before the Ontario Agriculture, Food and Rural Affairs Appeal Tribunal in Ottawa.
The two St-Bernardin-area farmers, who are brothers-in-law and business partners, had asked the tribunal to grant them an exemption to Dairy Farmers’ policies limiting the use of shared facilities to only times of exceptional circumstances and for only up to one year and prohibiting the relocation of quota bought as part of purchasing an ongoing farm operation for five years.
Tomkins and Anne Tardif, both of Caza Saikaley LLP in Ottawa, represented the two farmers. In arguing for the exemption, Tomkins says part of what they contend is the Dairy Farmers’ policy on moving quota obtained through purchasing an ongoing farm is unsound. “We have challenged its reasonableness and its wisdom as part of the exemption argument.”
They also raised the matter that the Dairy Farmers’ board doesn’t have the authority under the Milk Act and its regulations to restrict quota transfers, Tomkins says. They based their argument on case law covering how public bodies get their power and their jurisdiction. “The case law is quite clear that it has to be either express or it can be necessarily implied. We’ve said there’s no express power here.”
In other cases where quota movement restrictions have been upheld, public bodies were given specific powers to regulate quota transfers between farmers, she says. But the power Dairy Farmers has to fix and allot quota “says nothing about transferring quota.”
Graham Lloyd, Dairy Farmers of Ontario general counsel and communications director, says “we believe the policies are in the best interest of the industry. We believe the tribunal will accept that evidence in which case the policies will continue to achieve the desired outcomes, which is essentially to ensure there is sufficient and adequate quota for all producers in Ontario available from the (provincial quota) exchange.”
For his part, Senn is glad the week of the hearing is over and he’s back on the farm doing chores.
Senn and Suter bought the 186 kilograms of quota through the purchase of an ongoing farm near St-Bernardin in October 2012 called the Gauthier farm. They bought the farm for their sons, Lucas Senn and David Suter, who planned to go into dairy farming after finishing post secondary degrees. The Gauthier farm needed renovations and Senn and Suter applied to Dairy Farmers for and received a shared facility permission to temporarily produce milk to fill the 186 kilograms and their own quota both at the home farm.
In September 2013, Senn and Suter requested permission from the Dairy Farmers quota committee to:
- Transfer the quota from the Gauthier farm to their sons and to treat the transfer as if Lucas and David bought the farm and its milk-producing license. Dairy Farmers granted this request.
- Exempt them from the prohibition on transferring quota bought through an ongoing farm purchase for five years so they could transfer milk production to a property better suited to their situation that was to be bought near the Gauthier farm.
- Extend the shared facility permission to enable them to build modern facilities on the newly acquired property.
In 2013 at both a hearing and a reconsideration hearing, Dairy Farmers denied the relocation of quota request and extended the shared facility permission only to Jan. 31, 2014.
Tomkins says there were two barns on the Gauthier property, a free stall and a tie stall, and when Senn and Suter started getting estimates to renovate “they realized it was going to be a lot more expensive than they had intended.” The tie stall barn was in very poor shape and needed to be torn down, while renovating the free stall barn would have cost the same as building an entirely new barn.
But they decided it would make more sense to build the new barn at a better site, she says. It would be located either adjacent to the home farm or across the street. Senn was going to flip the Gauthier land for property owned by a neighbour adjacent to his land, she says. One of the reasons for their decision was the Gauthier property purchase only came with 80 acres, which is an insufficient amount of land for their nutrient management needs. “They were going to have to truck feed from the home farm to the Gauthier property as well as dealing with the manure.”
Another factor is Senn and Suter recently set up a bio-digester at their home farm that they’re using to pump energy back into the electricity grid and the treated manure from the digester “is not as harsh for the soil,” she says.
Tomkins says Senn originally intended to operate the quota from the Gauthier property as a second farm operation at the new property. “It would just be much closer (than the Gauthier property) and more convenient.” Senn needed the exemption to relocate the quota from the Gauthier property.
But then Senn learned late in 2013 Dairy Farmers had granted a farming couple permission to merge quota from their two farms. That case did not come before the tribunal, she says. “When he realized that happened” he questioned why he couldn’t merge his quota too. “What he really wanted was an effective merger,” Tomkins says, adding that became the focus of their appeal. In addition, they asked for an indefinite time for use of shared facilities.
“Even through we call it an effective merger, the quota would remain separate. It would just be farmed together at the home farm under a shared facilities permission,” she says.
If the Senn/Suter side wins the case, Lloyd says “we believe it would undermine the primary objective of the policy, which is fair and equitable access of quota for all producers and it could result, therefore, in much greater mergers and producers getting an unfair advantage to quota.”
Senn says if they win the case some farmers won’t like it but “in my opinion for the longer term future of the dairy industry in Ontario it will be a gain. The way it is now the system benefits the ones who want the status quo but for the guys who want to progress they can’t.”
Delaying improvements to the quota exchange will put progressive dairy farmers in jeopardy, he adds, adding he knows of one of the biggest dairy farms in Ontario being listed for sale. “Guys are going to start saying there’s no future in Ontario.”
Dairy Farmers operations director George MacNaughton and consultant John Groenewegen, who has a PhD in agricultural economics with a specialty in supply management, testified on behalf of the marketing board. Lloyd says Groenewegen has worked extensively with Dairy Farmers and other supply-managed commodities to develop agricultural policies.
Tomkins says agricultural economists, Al Mussell, George Morris Centre senior research associate, and Prof. Alfons Weersink of the University of Guelph testified on their behalf. They also had an accountant from Deloitte, John Saunders, who did a study outlining the incremental costs and capital outlay required to run a second farm operation. “We were quantifying the inefficiencies that are resulting from the board’s current policies,” she says.
Saunders “calculated there was an annual incremental cost of $186,000 and then an annual incremental capital outlay of $96,000,” she says. “The extent of the inefficiency is very significant.” But the policy considerations Dairy Farmers raised to justify the inefficiency “are minimal,” she adds, noting especially when one takes into account how important efficiency is to the dairy industry.
As for how things went compared to how he expected they would go, Lloyd says they were very pleased with the tribunal panel. “We felt the panel was extremely engaged and understood the issue.”
The panel heard evidence most days from at least 9 a.m. to 5 p.m. “We believe the evidence went in as expected,” he says. “We didn’t have any unexpected evidentiary issues.”
Tomkins says “we were very happy with how things went. They went just as well or better than we expected.”
She agreed with Lloyd that the tribunal members were very engaged. “They acknowledged this was not a typical tribunal proceeding. The amount of evidence was significantly more than is typically before them.”
What impact did the Dairy Farmers of Ontario arguments have on the tribunal? Lloyd says “we’re confident that the policies and procedures that Dairy Farmers has implemented and the regulations that it has followed are accurate and appropriate. We think the evidence will be accepted.”
Lloyd notes their arguments included that the goals and objectives of the organization’s quota transfer rules “are to have as much quota driven through and available through the exchange to ensure fair and equitable access. I believe the tribunal understands those are the legitimate goals and objectives.”
Tomkins says it’s very difficult to say what impact the arguments from their side had on the tribunal. “They keep poker faces.”
Senn agrees, saying he found it hard to judge the impact. “One minute you think you’re doing really great and the next minute it looks different again.”
He says he didn’t have much expectation going into the hearing but “we’re still hoping for the best.”
In an earlier interview this summer, Lloyd said the Dairy Farmers rules were being challenged using the argument they conflict with federal Competition Act rules and that Dairy Farmers lacks the jurisdiction to make policies that interfere “in the business or competition of carrying on milk production.”
Dairy Farmers met the constitutional challenge of Senn and Suter to the organization’s ability to enact policies that may conflict with the federal Competition Act by using a long-standing defense to anti-Competition Act allegations called the “regulated market defense,” Lloyd says. “The long-standing principle (within the Act) recognizes provincial authorities can have regulations where deemed appropriate and necessary within the provincial jurisdiction to regulate certain markets. In those situations the Competition Act does not apply. We’re confident that supply management is one of those situations.”
Tribunal decisions are normally handed down within about 30 days but Tomkins says this one will likely take longer because of the amount of evidence panel members will have to sift through and the amount of analysis they’ll have to complete. BF
Comments
Very interesting a lot of the same arguments Mr black makes for his small flockers
So if these two farmers win then it would seem all you have to do to get more quota is buy an operating farm and transfer the quota to your home farm. Nothing would prevent you from later selling the farm right?
Wouldn't that allow the real value of the quota being purchased to be lumped in with the cost of the farm being purchased? In other words instead of paying say, double the going rate for quota which is barred under the current rules, wouldn't you just pay more for the land and buildings which would be legal and still achieve the same result?
CAN YOU BELEIVE THAT THESE TWO FARMERS WOULD PAY 40,000.00 KG FOR QUOTA AND BUY THE ONGOING OPERATION AND THEN SELL THE FARM FOR A LOSS JUST TO GET MORE QUOTA ?? THEY ARE DOING WHAT ALL GOOD BUSINESSES DO ,CONSOLIDATE THERE OPERATIONS AND STILL KEEP THE LAND BASE NEEDED TO FED THERE CATTLE !!THIS CONTROL SHOULD NEVER HAVE BEEN PUT IN PLACE ,OUR GROUP FAUGHT IT AND WON LATER !"!DFO DOES NOT LIKE PEOPLE TO CHALLANGE THEM ON ANYTHING ,FARMERS SHOULD KNOW BY NOW WHO THEY WORK FOR !! THE ONTARIO GOVERNMENT ,STAFF AT D.F.O AND THE BANK ,AFTER ALL FARMERS ARE LIKE SLAVES !!LIKE TO BE TOLD WHAT THEY CAN DO ,THIS COUNTRY IS WORSE THAN CHINA IN LOTS OF WAYS !! THE GOVERNMENT LIKES CONTROL OF EVERY ONE ,IF THEY CAN GET IT AND DAIRY FARMERS LOVE IT !!THAT WAY THEY DON'T HAVE TO THINK ,D.F.O. TELLS THE SHEEP WHAT THEY CAN AND WILL NEVER DO ,BUT YOU DAIRY FARMERS GET TO PAY THE BILLS !! HOW GREAT IT IS AND HOW FAST YOUR FELLOW FARMER WILL TURN ON YOU !! I AM GLAD WE HAD THE GUTS TO CHALLANGE AND WON ,SAD FOR THE SHEEP THAT FOLLOW US !! BILL DENBY EXPORTER /IMPORTER
Only you think that you challenged and won anything.
Feel bad for you.
Editor: Anonymous comment will be published if resubmitted and signed.
Nowhere in this nightmare does anyone express any concern about how the outcome of this charade, regardless of who "wins", might actually help consumers, the people who, after all, are supposed to be the people on whose behalf all of this posturing is being done.
Therefore, this Hearing, and this dispute, appear to be a classic case of arguing over what colour to re-upholster the deck chairs of the Titanic, instead of examining the larger issue of icebergs.
In a nutshell, this dispute is about how to best screw the consumer - by bigger farms, or by the status quo. If the applicants win, more money will go into their pockets because they'll have economies of scale - if the Dairy Farmers of Ontario wins, we'll all lose because smaller farms means higher costs of production, and, therefore, higher prices for consumers. Neither side cares about the consumer one iota.
What's worse is that consumers were, by definition, through the obscenity of supply management, paying for both sides to waste an entire week of everyone's time going through this exercise.
It's this "everything for us - nothing for anyone else" mindset on the part of everyone in supply management which antagonizes not just consumers, but the rest of the farm community and demonstrates, once again, just exactly why supply management is not liked, and will not be missed.
Stephen Thompson, Clinton ON
Quota value is one of the challenges of supply management. I think marketing boards have done a poor job of explaining this to consumers and of coming up with solutions.
Supply management is one of the great things about Canada, like medicare another great Canadian institution, it isn't perfect and until this weakness is addressed it gives some shrill critics a platform.
Its not that consumers are stupid and don't understand supply management, its that they understand it and they don't like it.
When I go to the USA and visit farm friends there they always so excited for us to sample the cheese or ice cream their coop is producing and we don't have those same options here.
There coops are actually real coops where all there milk actually go the coops own facility for processing that isn't the case here in Ontario.
you can could be a member of Gayle or Organic Meadow Coop but that doesn't mean that is where your milk is going to end up.
I know we can make it here in Canada with out supply management, it will just mean that poultry and dairy farmers will have to make a more realistic wage that is inline with the rest of agriculture and yes it will create a much different system, but just because we phase out supply management it doesn't mean we have to open the flood gates to imports either, we can phase out supply management then we can have a 10 year moratorium on imports and exports.
We will take our dairy or poultry industries to the next level under the current system it just won't happen and we wont ever be competitive or innovative at the rate we need to be to meet changing consumer demand.
Sean McGivern
(1) What is it about the powder-keg created by forcing younger non-supply managed farmers to spend their entire lives as second-class farmers and second-class citizens in their own communities that you don't understand?
(2) What is it about Ontario consumers paying almost 38% more for milk than US consumers that you don't understand?
(3) What is it about tariff-based systems being definitionally net-negative for jobs and economic activity that you don't understand?
(4) What is it about supply management's singular ability to force companies (Chobani) which might actually increase sales of dairy products to flee elsewhere that you don't understand?
In addition, comparing supply management, in any way, to medicare is stupid, stupid, stupid, stupid - medicare was founded to give poor people increased access to medical assistance, while supply management was created to restrict the ability of poor people to buy dairy and poultry products.
If artificially reducing the ability of poor people to buy dairy and poultry products is one of the "great things about Canada", then my Canada doesn't include selfish, narrow-minded, and anonymous people like you.
Thank you for your arrogance and dismissiveness, thereby giving all supply management opponents even more reason to detest it.
Stephen Thompson, Clinton ON
You've been on your soap box for years saying you don't understand why the system is still in place. Well young farmers don't feel second class because working for SM farmers are their preferred customers. It has been explained here why and you still don't get it. Politicians, banks agri-businesses and even consumers support dairy SM. People won't sign their name because you bully, badger, insult, berate, etc., etc., etc. anyone you perceive doesn't adore you.
Editor: partial deletion from this comment
Young non-supply managed farmers very-much do feel like they are second-class farmers and second-class citizens - I have them contact me all the time to tell me that, if anything, I don't go far enough in my criticism of supply management.
In addition, the claim that SM farmers are somehow the "preferred" customers of non-supply managed farmers is patronizing drivel, and more than claiming that "our slaves love working for us" because, as slaves, what choice do they have?
If anything, nonsense like the above posting, particularly the nonsense that in spite of being forced to pay almost 38% more for milk than US consumers, "even consumers support dairy SM" serves only to stiffen the resolve by everyone in the farm community who doesn't own quota to get rid of the quota system, and the elitist attitude of those who own it, by any means necessary, and as soon as possible.
Stephen Thompson, Clinton ON
I am not even going to lower myself to agree to disagree. You're previous post was not only off, it is dead wrong. Young farmers, and I know many, have stated that the SM farmers are part of the greater farm community. These young farmers have started and are starting farming with the support of dairy and feathers. Doing relief milking or chicken catching is one of the best part time jobs for aspiring young farmers. It is the furthest thing from a slave/master relationship. Farmers work along side the young people, invite them in the house for meals or a beverage when the job is done and very often show a genuine interest in their carreers and offer much advice. The relationship is more of colleagues than boss/employee and not anywhere close to slave/master
Young croppers or young beef farmers quite often rely of the bit of extra part-time work they can pick up in the off season, and it is that bit of extra that ties them over till they can market their own produce effectively.
Many of your posts are so steeped in anger you are blinded by the greater economic picture. and most of your anti SM posts don't relate to the article you are posting to either. take this very article the subject is about defining the rules with in the system, your constant nattering about needing to eliminate the system offers no credible input to this article.
If you can offer an alternate ORGANIZED marketing system for SM products than do so, but the chaos you seen to happily embrace with a complete and immediate dismantling of the present system will send all of Canada ag, ag business and ag finance in complete devastation.
In case you missed it the first time I said it, you are dead wrong and please set aside your anger and hatred because it is blinding you to the reality in Canada's greater farming community.
WHat every other farmer and business in Canada has to deal with is chaos why don't they just buy quota like we do
So J Groenewegen has a PHD in agriculture economics is an economist and economist Al Mussell both back DFO so they must support supply management !
How could any economist do such a thing ?
I believe Groenewegen testified on behalf of DFO, while Mussell and Weersink testified for the plaintiffs.
Even the economics discipline has individuals who go to "the dark side" in return for the biblical 30 pieces of silver -
Stephen Thompson, Clinton ON
Editor: Deletion in accordance with our guidelines.
Still the fact is that an economist was helping to defend SM when they should in your way of thinking ALL be doing ALL they can to get rid of it .
Your biblical 30 pieces of silver example speaks volumes for past reports from GMC staff and economists in general . So who can you believe or trust any more ??
Appears to be just another case of the larger farmers wanting to be the biggest. If they are so ambitious and have the finances to be so then let them move to the USA. Supply Management was intended to allow the average size farm families to make a living. A few producers , the larger aggressive ones feel they have the RIGHTS to get whatever they want. I recall a larger operator publicly telling the export group that failed that they should leave the country. Now some are complaining that we cant expand anymore in Canada, so we ll just leave, thanks Canada.
Farmers seem to have forgotten the benefits of cooperating. Cooperatives for example have bitten the dust across Canada. Marketing boards are being attacked from within. Look at the wheat board which did so much for farmers on world markets. The pork industry in many provinces has nearly destroyed itself and dismantling their boards hasn't helped. When something has problems you address them you don't destroy them.
There are certainly some similarities between supply management issues and the ones the taxi licensing authorities are facing with Uber the dispatching app that doesn't follow the rules but seems to make some customers very happy. Taxi companies are getting together to fight Uber.
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