Business & Policy
By Tony Greaves
By Tony Greaves
Although the Chicken Farmers of Canada commenced operations in 1979 (as
the CCMA or Canadian Chicken Marketing Agency), its roots go farther
back than that.
A history of the development of supply management and the formation of what is now known as the Chicken Farmers of Canada
Although the Chicken Farmers of Canada commenced operations in 1979 (as the CCMA or Canadian Chicken Marketing Agency), its roots go farther back than that.
Supply management in the Canadian poultry industry was first proposed in 1948 by Fred Beeson, the editor of Canada Poultryman magazine, to help the Canadian egg industry after England cut back its egg purchases after World War II. However its first practical launch was as a provincial strategy to improve the lot of the broiler chicken producers in B.C. This was in response to chicken prices as low as 17.5 cents per lb. in late fall 1961 and the indication that prices were slated to go even lower. The B.C. Broiler Marketing Board came into being on Dec. 12, 1961, the first poultry marketing board in Canada after 150 producers had considered a draft plan the previous August.
|Call for Structure. The idea of having a supply management structure for poultry was first proposed in 1948 by Fred Beeson, former editor and publisher of Canada Poultryman (now Canadian Poultry magazine). Above is an editorial written in 1962 calling for a national representative among provincial poultry associations.|
Other provinces followed suit, including Quebec and Ontario in 1965, Saskatchewan and Nova Scotia the
following year, and Manitoba in 1968. But, although boards improved the bargaining power of the chicken producers, they were continually faced with competing offers of cheaper product from one province or another and from across the border.
In his June 1965 editorial, Fred Beeson, editor of Canada Poultryman urged broiler growers across the country to meet after the Canadian Hatchery Federation (CHF) convention and set up a national broiler council. The Canadian Broiler Council (CBC) was formed on Oct. 1, 1965 at a meeting in Toronto immediately following the CHF convention of that year. Its founding members were Bruce MacNamara, ON, who was elected Chair; Bob Blair, BC (vice-chair); Bert Hall, MB; Amos Blenkhorn, NS; Everett Shiplett, SK; Jack Brown, AB; Roger Landry, QC and John Janzen who served as secretary treasurer.
At that meeting BC’s Blair reported a firm price of 21-1/2 cents per lb. while Ontario’s MacNamara and Gerald Tedford expressed the hope that their price of 19 cents could be maintained after planned production cutbacks took hold. This price was considered high enough to be profitable. The meeting indicated that most provinces would soon have boards for broiler chickens, which was considered to be the only way that corporate farms would not supplant family farms.
Agency First, Border Controls Later
The CBC, with members from each of the provincial boards, attempted to negotiate gentlemen’s agreements on the amount of chicken that would be produced. But often, although members agreed to go home and cut production by a definite percentage, the adherence to the cuts was spotty at best and at worst, provinces increased production to take advantage of the market opportunities presented by the expected production cuts in other provinces. In addition, imports of product were not controlled and didn’t allow producer prices to rise above subsistence level for very long.
CBC delegations went to Ottawa to ask for border controls on the imported chicken that was “short circuiting” the fledgling national supply arrangements. However, they were told that border controls could only become a possibility if there was an operational national supply management system.
In 1970 Ontario and Manitoba were supplying eggs to outlets in Quebec and the Quebec government authorized the Quebec egg marketing board to restrict that inward flow. In retaliation, other provinces, including Ontario restricted the movement of Quebec chicken into their provinces. This was the so-called “Chicken and Egg War.”
Because Manitoba could not refer the Quebec legislation to a Manitoba court, it enacted identical legislation of its own, then referred that legislation to its own Court of Appeal, where the legislation was struck down.
This made it clear that provincial marketing plans were limited in coping with problems of interprovincial and international trade. As a result, the Farm Products Marketing Agencies Act was passed in December 1971 during the closing months of a Conservative government and was assented to on Jan. 12, 1972.
The Farm Products Marketing Agencies Act provided for an essentially parallel structure at the federal level intended to dovetail with existing provincial plans.
This act established the National Farm Products Marketing Council, which was assigned the duty to advise the minister of agriculture on the formation and operations of national agencies operating under the act.
Plays From The Bench
The Canadian Egg Marketing Agency was first to take advantage of this legislation; however, the CBC negotiations to develop a national plan for chicken took another five years of wrangling. One of the major impediments was failure to agree on market shares between the various provincial boards. Some provinces liked a goal of provincial self-sufficiency; other provinces — with an established interprovincial market — were not in agreement. Another sticking point was the difference of opinion whether a national chicken agency should have the authority to buy and dispose of surplus product. The Canadian Egg Marketing Agency (CEMA) had got into extreme difficulty over this. According to a Canada Poultryman editorial in April 1975, Quebec wanted the national chicken agency to have this pooling authority, Ontario and BC did not, because they claimed it encouraged surpluses, concomitant loss and extra costs which would be passed on to the producers.
|Nova Scotia’s Eric Meek was the CCMA’s first chairman. In his report to Minister of Agriculture Eugene Whelan after six months|
of operation, Chairman Meek stated that although all had realized that
bringing a national supply management system for chicken on-stream was
going to be a significant undertaking, “It is fair to say that we
underestimated the magnitude of the challenge. Being practical people
from farms, we should have realized that the larger and heavier the
wheel, the longer it would take to get it turning.”
During those five years the basic wording of a national plan was slowly hashed out, but so often, a tentative agreement was turned down by one or another provincial “player” after the delegation returned home. Often, this change of heart was initiated by the provincial governments or by the provincial supervisory bodies.
Francois Lemieux of the Ottawa legal firm of Herridge, Tolmie, provided legal guidance through the years.
In April 1975 the National Farm Products Marketing Council held public hearings across Canada on the establishment of a national chicken agency. Following those hearings, Gerald Tedford reported to Ontario producers that the Council had made changes to the proposed plan on a unilateral basis, including provisions which the provincial boards had not agreed upon. His report in Canada Poultryman stated, “This, together with the severe criticism of the Egg Agency, cooled out the desire for a National Agency at this time.”
This five-year marathon was very expensive and required a significant investment by the provincial boards to cover CBC’s legal expenses. And travel to the CBC meetings, which were held in all the provinces over the years, cost some provincial boards up to 10 per cent of their total budget. Meetings occurred three or four times per year and lasted around two days, with most of the progress being made, if any, in the final half day.
Unfortunately, as the years went by and as a National Chicken Agency and border controls seemed more likely, chicken imports increased — from 1.54 million lb. in 1971, to 8.53 million lbs. in 1974, 20.75 million lb. in 1975 and 2.1 million lb. during the first 24 days of January 1976. Importers expected to have their import history perpetuated in future import rights.
However at a late February meeting in 1976, Minister of Agriculture Eugene Whelan was adamant that imports could only be brought under regulation if there was a national supply management system for chicken. He also said that it was up to the broiler producers themselves to come up with a workable proposal for an agency. He noted that the CBC had failed to establish an Agency after the April 1975 hearings and that it was about time that Canadian chicken producers showed that they really wanted a national chicken agency.
There was an ongoing effort to gain first receivership rights for the national chicken agency, that is that all imports would go through the hands of the agency, rather than directly from the U.S. source to the Canadian end purchaser. However, Ottawa continued to be adamantly opposed to this.
In the final document, base market shares were split into Under 4 lb. and Over 4 lb. categories. Although historical production levels in the previous five years had been a basis for discussion, the final provincial tonnage shares were the result of back room negotiations, primarily between Ontario and Quebec. That is why the provincial base shares for under 4 lb. chicken had Ontario and Quebec pegged at identical levels. Roaster tonnages were set separately, with Quebec’s higher output in that category pulling them ahead of Ontario in total base share of chicken.
|Minister of Agriculture Eugene Whelan was adamant that imports could only be brought under regulation if there was a national supply management system for chicken.|
The formula to decide future provincial allocations was also a major sticking point, with many provinces wanting to get the benefit of any increase in provincial demand. However, the National Farm Products Marketing Agencies Act had in it a clause which referred to “Comparative Advantage” which had been inserted late in the legislative process, some say at the eleventh hour. Since this term is used in economics parlance to compare the competitive potential between two commodities, it had been used incorrectly in the wording of the Act. It later became accepted to mean the ability of each province to compete with each other. In addition the National Farm Products Marketing Council insisted that the federal provincial agreement on chicken was not a platform to promote provincial self-sufficiency.
Finally, the Canadian Broiler Council adopted a proposal for a national chicken marketing plan on Aug. 12, 1976. This was later amended unilaterally by the National Farm Products Marketing Council and was forwarded to the federal government lawyers as a base from which Schedule “B” and Schedule “A” — the Proclamation — were developed. Although the CBC proposal became Schedule “C” of the final “Federal-Provincial Agreement with respect to the establishment of a Comprehensive Chicken Marketing program in Canada,” its wording is subservient to the other schedules. But that was the price Canadian chicken producers had to pay to initiate establishment of a national chicken plan and provide some measure of control on chicken imports from the U.S.
But it was a price worth paying, even though after negotiations between the two governments, the U.S. was eventually awarded an “allocation” amounting to 6.3 per cent of domestic production. This percentage was based on the historic amount of chicken that had been imported in the years 1975-1978, not the period immediately prior to the 1975 hearings into establishment of a chicken marketing agency. It was increased to 7.5 per cent on Jan. 1, 1989, as the Canada-U.S. Free Trade Agreement became law.
The NFPMC again held hearings in the fall of 1977 and it was rumoured that Eugene Whelan was about to announce the formation of the Canadian Chicken Marketing Agency. This was at a Yorkton, Sask. meeting of agricultural ministers in mid-1978, but the announcement had been forestalled at the last minute by a wire from Prime Minister Pierre Trudeau. However, the chicken agency was eventually announced a few months later.
Canada Poultryman reported, “The long awaited announcement from Agriculture Minister Eugene Whelan of the formation of a Canadian Chicken Marketing Agency came on December 29 (1978) in a release from Ottawa. Mr. Whelan also announced that steps are being taken to place chicken on the import control list under the Export and Import Permits Act…The new agency will represent 92.6 per cent of national chicken production and 95 per cent of producers.” Because chicken could not be produced at prices competitive with U.S. product it is arguable that without this national plan, imports would have severely damaged or even destroyed local industries.
Within a week after Ottawa’s announcement, the NFPMC imposed two federal appointees on a “take it or leave it” basis, according to Alberta’s Don Potter writing in Canada Poultryman. The two appointees were Bruce McClellan to represent the processing sector and Joan Friesen to represent consumers. At the same time, Potter passed on the rumour that this was contingent on there being greater consumer input at Council level. A week later still, the agriculture minister replaced Paul Babey with Mrs. June Menzies from the Food Prices Review Board as Council Chair along with modified Council guidelines.
The Canadian Chicken Marketing Agency held its inaugural meeting in Ottawa Feb. 5 and 6, 1979 and met again at Harrison Hot Springs, BC on Feb. 27 and 28. The CCMA’s first chairman was Eric Meek (NS), who had served as the CBC’s chairman for the previous five years. The executive committee was rounded out with 1st Vice-Chair Laurent Mercier, (QC) and 2nd Vice Gerald Tedford, (ON). Other directors were: Leonard LeBlanc, (NB); Bruce McAninch, (BC); Bert Hall, (MB); Percy Naumetz, (SK); and William Wood (PEI).
Alberta and Newfoundland were not founding members of the CCMA. Alberta had indicated it would not be a party to the agreement back in 1976 but later took a place at the director’s table, albeit without a vote. An Alberta processor stated in 1979 that the federal provincial agreement on chicken appeared to be designed to accommodate provinces with static growth, such as Quebec or Manitoba. Newfoundland joined the chicken agency in 1980.
At its inception, Agriculture Minister Whelan had provided a start-up grant of around $100,000, but this went only partway to covering Agency expenses incurred before levies started being collected in July and August.
During that February a global production target was set for 1979, initially an optimistic 10 per cent or 75 to 80 million lb. above 1978 marketings. But even this figure was increased to 12 per cent above 1978 at the Harrison meeting. Hatching egg and chick supply was considered the main limiting factor. It was agreed that no specific provincial allocations would be set and overproduction penalties would not be assessed.
Until Agency staff were in place, the Ontario Chicken Producers Marketing Board made available the services of John Janzen, their Secretary Manager and some of his staff on a part-time basis. Janzen had been the secretary-treasurer of the Canadian Broiler Council, the pre-cursor of the CCMA, since that body’s inception and was familiar with the struggle to form the national agency. The Agency’s solicitor was Francois Lemieux, who had guided the Canadian Broiler Council through muddy waters prior to the formation of the Agency.
The Canadian Chicken Marketing Agency office commenced operations in August 1979, after Paul Guillotte was appointed general manager on July 9th. He was joined soon after by Ms. Josie McLorn as Director of Economic Research, Mrs. Lise Turner, Bookkeeper and Mrs. Bernadette Mansfield as Secretary. The Agency’s office was located in Brampton, Ont.
First Annual Report
In his report to Minister of Agriculture Eugene Whelan after six months of operation, Chairman Meek stated that although all had realized that bringing a national supply management system for chicken on-stream was going to be a significant undertaking, “It is fair to say that we underestimated the magnitude of the challenge. Being practical people from farms, we should have realized that the larger and heavier the wheel, the longer it would take to get it turning.”
But by early 1980, he said that sufficient regulations were now in place to allow the Agency to implement the national supply management system for chicken. Not too soon either as record national production together with record imports produced record storage stocks and disastrously low prices. This increased supply would have been partially due to efforts to maximize production and import rights before the controls were put in place.
Before the department of Industry, Trade and Commerce would negotiate border controls with the U.S., the Agency was told it had to adopt effective quota regulations, accept a penalty system and get a cost of production formula approved by the National Farm Products Marketing Council.
But until those controls went into effect, U.S. product moved freely into Ontario and Quebec and the inevitable “ripple” effect made itself felt across the country. To prevent inward movement, provinces increased their own production but had to accept the downward pressure on price that this caused.
In his first report to Whelan in early 1980 Meek makes reference to the delay between the first public hearings that preceded the Proclamation of the Agency. He said that by the time border controls could be imposed, imports had climbed from 1.5 per cent of the Canadian market to over 7 per cent. He added that the Agency failed to get Ottawa’s support for determining the U.S. share of the Canadian market based on imports prior to 1974, just prior to the initial public hearings regarding formation of the Agency. As it was, the entire U.S. import quota was utilized and many supplemental import permits were sought because of the lower price of U.S. chicken.
Meek’s first annual report also stated that a major part of Agency staff duties revolved around sourcing domestically produced chicken to fulfil these demands — and quite successfully. This was one area in which Ottawa gave the Agency significant support once border controls had been negotiated with the U.S. They declined to issue supplementary import permits unless absolutely necessary in this and succeeding years.
The discretionary power of the Minister of Industry, Trade and Commerce to issue — or refuse to issue — supplementary import permits was challenged unsuccessfully in the courts. Only one supplementary import permit was issued in 1979 — for a shipment of live birds. The Agency sourced, “chicken for a market that needs 20 million lb. less chicken not 20 million lb. more,” Meek said.
Initially the members of the Agency established a levy of 3 cents per hundredweight of live chicken marketed by producers, which was collected by the various provincial boards.
At the start of 1980, storage stocks were at 43.7 million lb. and chicken was being featured for 58 cents per lb. at retail. Processors in all provinces were reporting financial losses and some went out of business. The 880 million lb. allocation set for 1980 in late 1979 was reduced to 839 million lb. in early 1980. In April this was reduced again to 818.9 million lb. Some confidence returned to the industry in summer 1980, with retail prices reaching a high of $1.49 per lb. But it was not until fall that the quota cut showed in stock levels. Consumption reached 870 million lb. by year-end, just 1 per cent lower than the record of 879 million lb. in 1979 — but at a price.
In February 1980, an editorial in the Canada Poultryman criticized chicken agency members for, “jockeying for position in the pecking order,” adding, “…probably it will again take the Minister of Agriculture to put his foot down, heavily, really heavily, in the same way CEMA was handled.” Beeson went on to claim, “If it hadn’t been for such provincial bickering four or five years ago the Agency would have come into existence when an average of four or five annual imports would not have averaged more than 5 million lb. instead of fifty million plus a year as of now.”
The Canadian Poultry and Egg Processors’ Council also criticized the Agency for not being any closer to solving its problems than when it was proclaimed. “They are heavily in debt and show no signs of having the will to increase levies…” They even suggested that CEMA should buy them out!
Supply Management Committee
The Proclamation of the federal provincial agreement on chicken required the Agency to establish a Supply Management Committee (SMC) to advise the Agency on how much chicken the Canadian market required to fulfil demand.
It was mandated to include representatives from all interested parties: including producers, consumers, processors, the trade, allied industries and the public in general.
For a number of years, this committee met quarterly, immediately prior to the Agency meetings which set quarterly allocations. In its early years it was chaired by Doug Maley, a member of the Saskatchewan Dept of Agriculture. He compiled a report from the presentations by the various sectors represented at the SMC meeting and presented it to the Agency the following day. These reports included data and outlook from Agriculture Canada, plus an indication of needs from both the Canadian Poultry and Egg Processors’ Council (primary processors) and from the Further Processors’ Council. Each province had an opportunity to state its view of local needs and the Consumers’ Association also made recommendations and the hatchery sector commented on the probable hatching egg supply for the period in question. The final recommendation from the Supply Management Committee tended to be a compromise position, but provided a rationale to support its proposed level of production.
Warnings From Ottawa
In a meeting of signatories to the Plan in early 1980, NFPMC Chair June Menzies reiterated Council’s concern over the slow development of the Canadian Chicken Marketing Agency. “Provincial self-interest must be modified to make such a national program work,” she stated. Gaetan Lussier, the Deputy Minister of Agriculture even warned that without broad agreement the agency would crumble, border controls would disappear, along with producer growth and profit. Later he stated that without patience and tolerance the future of the Chicken Agency was in “Great, great danger.”
The following year, Agency Chairman Bruce McAninch reported that in 1980, Newfoundland applied for Agency membership and was welcomed to the table. However, the Agency was unable to satisfy Alberta’s concerns about securing the benefit of their continuously increasing production and consumption within their provincial allocation. Another contentious issue was the lack of a policy to encourage chicken exports.
Also in 1980 the levy was increased to 6cents per hundred lb. liveweight. Work continued on the analysis of the five criteria for the allocation of overbase quota, something that would return every year for many years. The initial global allocation of 874 million lb. for 1980, set in November 1979 was reduced to 839.9 million lb., but it took two separate meetings to do it, the latest being on March 3 behind doors closed to all but signatories to the plan.
By mid year a penalty system requiring payment of 5 cents per lb. of chicken above the allocation was approved, backed up by bonds, which totalled a million dollars across Canada. In addition, both the CCMA and the CBC — considered the political arm of the chicken industry — asked Agriculture Minister Whelan to make good on his statement that the U.S. import figure was too high and should be re-negotiated. He had made this statement when John Wise served as agriculture minister during the short-lived Conservative government the previous fall. Nothing ever came of this challenge.
In October 1980 a meeting of signatories to the plan met to consider results from the Agency’s Criteria Committee. Council Chair June Menzies reminded signatories that the meeting was a result of the Ontario and B.C. appeals against the 1980 provincial allocations. Both she and Whelan’s Senior Assistant Deputy Minister Dr. Gerry Trant said that application of the criteria in the plan must incorporate a significant measure of “comparative advantage”, because it was required by the Act. Trant even stated that this criterion must be given substantial weighting. He said, “Failure to do so could jeopardize the Agency’s future.”
The pace of this meeting was brisk while considering how the first four plan criteria were to be applied to sharing of overbase quota. But the meeting bogged down when “comparative advantage” was the topic. It was eventually agreed that up to 10 per cent of the overbase allocation should be set aside for use in “special cases”, a category in which P.E.I. and Newfoundland were placed, in the three year phase-in period for the criteria. Of the remaining overbase allocation, 55 per cent to 70 per cent would be allocated to criteria (a), change in consumer demand, 20 per cent to 35 per cent to criteria (e) comparative advantage, leaving 10 per cent for criteria (d) or the proportion of provincial demand met by production in that province. Criteria (b) was to be addressed by a penalty for under-producing a provincial allocation. The application of criteria (e) was dependent on the collection of more accurate data by Agriculture Canada on minimum wholesale provincial prices.
By the end of 1980, the supply and demand for chicken became better balanced and producer prices advanced markedly. However, the Agency set first quarter production for 1981 lower than in the same period in 1980 at 199.1 million lb.
Bert Hall became the Agency Chair in 1981. In his report for that year, Hall referred to the unregulated production occurring in Eastern Ontario. Historically, production in this area had gone to Quebec processing plants, but once quantified, Ontario did not want the production charged against its provincial allocation. In November, these producers were allotted special quota for marketing their output but only in interprovincial trade.
In 1982 Arne Mykle took over the Chair. During the year the Agency’s Supply Management Committee recommended quarterly supply targets, which tailored supply more closely to seasonal demand.
The Agency recognized that unregulated and illegal production remained a considerable problem, that regulation enforcement was an area of concern and, according to Mykle, “Effective utilization of the criteria for the determination of provincial allocations,” was still being sought.
Scott Simmons’ term as Chair of the Agency commenced in March 1983. In his annual report he later described the need for more frequent meetings to address the ever-increasing workload and the need for increased staff to complement this escalation.
He referred to the Hays & Williams Review of the structure of the Agency which had been initiated by the National Farm Products Marketing Council. Simmons said that 93 per cent of its subsequent recommendations had been accepted and 38 per cent had been immediately implemented.
Difficulty in distributing the overbase quota continued and Alberta confirmed its rejection of Agency membership. Interprovincial dumping and unregistered production continued to plague the effective operation of the national body. In addition, several appeals were launched by signatories to the federal-provincial agreement on chicken with regard to the size of the global allocation and how provincial allocations were made.
Chairman Simmons referred to the recent severe recession, which Canada had gone through, but said that largely due to supply management, chicken producers did not experience the heavy toll that other sectors of the economy had done. He labeled national promotion, exports and poultry research as worthwhile objectives for the future. He also expressed the gratitude of supply managed producers to the Honourable Eugene F. Whelan, a gratitude that has been mentioned many times over the years.
There were a total of eight full Agency meetings in 1983, plus 20 executive meetings. Late in the year the allocation for 1983 was set at 375.8 Mkg, peaking at 98.97 Mkg in the fourth quarter. In this year, Alberta made an agreement with the Agency to comply with its quarterly allocation on a contractual basis, but a majority of Alberta producers turned down a proposal to apply for Agency membership in 1984.
Also during 1983, Saskatchewan’s refusal to pay a monetary penalty for overproduction in 1981 pointed out the need for a more effective production monitoring and enforcement system. More effective guarantees and penalties were the result.
In this and later years, the global allocation was occasionally appealed by two provinces, one claiming it was too large, the other stating it was too low. At other times the provincial allocations were later appealed because, although they had been agreed by all parties around the table, they had been the result of “gentlemen’s agreements” and compromise and not the result of strict adherence to the application of the criteria as understood by other provincial signatories. In these cases, the National Farm Products Marketing Council upheld the appeals based on the legal requirements of the Plan, even though that effectively short circuited the compromises that had been worked out by the producer sector.
Tony Greaves is the former editor of Canadian Poultry Magazine. After emigrating to Canada from England in 1957 after attending agricultural college, Tony worked as a chick salesman for a Regina hatchery. From there, he served as both Secretary/Treasurer and President of the Saskatchewan Hatchery Association. He has also served as chair of the Canadian Hatchery Federation. In addition, he was the part-time manager of the Saskatchewan Chicken Marketing Board (1972 -1983).