2017 Harvest

2017 Harvest

Tuesday, November 23, 2010

Burford, Ontario farmer denied permission to exceed quota to make up for past undermarketing

Victor Osztrovic farms in the Burford area. The farm is a mixed cash and specialty crop operation (including tobacco) and since 2002 Osztrovic has been a chicken producer holding production and marketing quota of 66,841 kilograms (kgs.) in each quota period. The quota is issued to him by the provincial regulator, Chicken Farmers of Ontario (CFO).

Early in 2009, Osztrovic experienced higher than usual bird mortality and as a result, he ended that quota period marketing 12,783 kgs. below his quota of 66,841 kgs.  The chicken industry describes the marketing result Osztrovic experienced as "undermarketing".  Undermarketing is significant to chicken producers because in the usual course of business they cannot make up the lost opportunity represented by that 12,783 kgs. due to the operation of the quota system.  As an example, in the usual course of business Osztrovic could not simply increase his production in a future quota period by the lost 12,783 kgs. since doing so would put him over his quota and expose him to penalty levies on his excess production and a corresponding quota reduction.

However, CFO has enacted Quota Policy 170-2005 that addresses undermarketing.  Section 2.22 of that Policy permits an undermarketed producer like Osztrovic to re-grow up to 10% of his quota allocation, or 6,684 kgs., spread over two future quota periods.  The Policy operates to "exempt" that 10% production "re-grown" from the otherwise strict operation of the quota, which would entail penalty levies and a quota reduction.

Osztrovic, however, wanted the opportunity to re-grow all 12,783 kgs. that he lost.  He applied to CFO seeking relief above and beyond the 10% allowed in section 2.22 of the Policy.   CFO denied Osztrovic's requested policy relief and he then appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal under section 16(1) of the Ministry of Agriculture, Food and Rural Affairs Act (MAFRAA).

In denying his appeal, the Tribunal said the following:
In the circumstances and facts of this case, the Tribunal declines to grant Victor the requested relief.
CFO developed the undermarketing policy as a "fault free" entitlement. Producers can access the 10% re-grow entitlement if they undermarket for any reason [emphasis added]. The evidence is clear that CFO developed that policy to address undermarketing arising from weather conditions, among other factors. However, the policy contains no threshold criteria. Producers who undermarket due to laziness or negligence or poor chick quality or bad feed or mechanical failures or weather conditions can all access the undermarketing policy and re-grow up to 10% of their quota.

In a quota based regulatory system, exemptions are the exception rather than the norm. In the case of chicken quotas, the CFO has created a standing exemption arising from undermarketing through its Quota Policy 170-2005, section 2.22. That Policy allows producers who undermarket to re-grow the lost kilograms to a maximum of 10% of quota over two future quota periods.

If everything that happened to cause undermarketing gave rise to an exception, the quota policy would become meaningless and that would undermine the regulatory regime. That is even more so where there is a standing exemption as in section 2.22 of the Quota Policy.

Therefore, the Tribunal concludes that to obtain relief above and beyond the undermarketing Policy, Victor must satisfy us, on a balance of probabilities, that something truly unique and exceptional occurred to cause the undermarketing.

Probably more than any other businesses, farmers are particularly at the mercy of the weather. However, weather conditions, even extreme weather conditions such as Victor experienced, are not unique and exceptional in Ontario.

The Tribunal is not satisfied that there was anything truly unique and exceptional about the weather event that resulted in the barn conditions that caused Victor's crop loss.
Read the rest of the decision at: Victor Osztrovic vs Chicken Farmers of Ontario (CFO).