Supply Management Systems
In Canada, the broiler hatching egg, chicken, dairy, egg, and turkey industries operate under national supply management systems. These systems are controlled by national bodies and by provincial commodity marketing boards that have been delegated powers by federal and provincial governments.
The national systems are similar in many ways. The amount of each commodity that is marketed by producers is controlled through a quota system. The volume of the commodities imported into Canada is limited by tariff rate quotas, under which very high tariffs are applied on imports above a specific level. By matching the total supply of the product available in Canada with the market demand, supply management systems aim to provide efficient producers with fair returns and to provide Canadian consumers with an adequate supply of the product at reasonable prices.
The Ontario flue-cured tobacco industry operates under a provincial supply management system because most of Canada's tobacco is grown in the province. The fundamental concept of matching supply with demand is the same as for the other supply-managed commodities, but imports are not restricted.
This factsheet provides a brief overview of each commodity's system. Further details can be found in other factsheets prepared by the Ontario Farm Products Marketing Commission (OFPMC).
The Canadian Broiler Hatching Egg Marketing Agency (CBHEMA) is the national body that administers the national system for broiler hatching eggs. CBHEMA sets the annual national production level, taking the Chicken Farmers of Canada's projected level of domestic chicken production into consideration, and then allocates it among member provinces.
The Ontario Broiler Hatching Egg and Chick Commission (OBHECC) regulates the production and marketing of hatching eggs and chicks in Ontario. Its major roles include allocating the provincial share of the national supply to Ontario producers (quota holders) and setting Ontario prices paid by hatcheries for hatching eggs and chicks based on the cost-of-production (COP). In addition to holding quota, producers must have contracts with hatcheries before they are entitled to produce hatching eggs.
Hatcheries sell chicks directly to chicken producers. Chicken producers are individually responsible for obtaining the chicks they require.
The Chicken Farmers of Canada (CFC) administers the national system for chicken. CFC uses a 'bottom-up' approach to determine the national supply of chicken, taking into account the reasonable needs of downstream players. Provinces each submit requests to CFC for a specific volume of provincial production. CFC then determines whether the aggregate represents the Canadian market requirements for the quota period.
Ontario's demand is determined by the aggregate of individual confidential requests submitted to the Chicken Farmers of Ontario (CFO) by processors. As long as the requests fall within the provincial cap, the numbers are submitted to CFC as Ontario's provincial allocation request. CFO allocates Ontario's share of national production to quota holders.
Each Ontario processor receives the amount requested as long as CFC provides Ontario with the full allocation request. If Ontario does not receive its full request, each processor's request is cutback by the same percentage. Processors sign up producers of their choice to supply their chicken and pay them the regulated price.
The Market Development Program provides a framework under which additional chicken can be produced for export. In Ontario, individual processors desiring this extra chicken submit a request specifying the desired volume and price. Individual producers volunteer to produce a specific volume of chicken at the average discounted price.
The Canadian Milk Supply Management Committee (CMSMC) oversees the national system for industrial milk (used to make dairy products such as cheese, butter, etc.) It is chaired by the Canadian Dairy Commission (CDC), a federal Crown Agency that provides a framework for federal/provincial participation in order to facilitate the design and implementation of dairy policies and programs. CMSMC determines the national domestic supply of industrial milk and allocates this volume among provinces.
The volume of fluid milk (milk and cream consumers drink) to be produced in Ontario is determined at the eastern regional level by the P5 Supervisory Body. This group is structured similar to CMSMC. The P5 includes Ontario, Quebec, and the Maritime prov-inces.
The Dairy Farmers of Ontario (DFO) allocates Ontario's share of the fluid and industrial milk production among quota holders. Producers' quotas are expressed in terms of kilograms of daily butterfat.
DFO purchases all raw milk produced in the province, sells this milk to processors, and pays producers. The regulated prices vary with the end use of the milk. Under national and regional agreements, Ontario milk revenues are pooled with the revenues in other provinces before being paid to Ontario producers. Each producer receives a blended price that reflects fluid and industrial sales.
Raw milk used to make fluid milk and cream (milk and cream that consumers drink) is supplied on-demand to primary processors. In Ontario, milk for some industrial products (eg. yogurt, cottage cheese) is also supplied on demand. Ice cream manufacturers must have milk entitlement quota (MEQ). MEQ is a permit issued by DFO that allows milk to be sourced on-demand. MEQ limits this to 50% of the butterfat requirements. The remainder of the butterfat must be sourced from skim-off on the open market. Skim-off is the butterfat that is re-moved when whole raw milk is processed into homogenized, 2%, 1%, and skim milk.
Primary processors of other industrial products (primarily cheeses, butter, and evaporated and powdered milks) require Plant Supply Quota (PSQ). New or additional PSQ must be obtained from another Ontario processor.
The Canadian Egg Marketing Agency (CEMA) administers the national system for eggs. CEMA determines the annual domestic egg supply and divides it among the provinces. The Ontario Egg Producers (OEP) regulates the production and marketing of eggs in Ontario. OEP allocates Ontario's share of the domestic egg supply to producers.
All eggs are bought by graders at the price set by OEP. Retailers buy table eggs from graders at a price negotiated between the two parties. Eggs not required for the table market are repurchased by either OEP or CEMA at a price that is derived through a formula and based on CEMA's provincial COP calculation. Processors, also known as breakers, buy eggs from OEP or CEMA.
Producers receive table egg prices for all eggs marketed but levies are deducted to pay for eggs sold in the lower-priced industrial market.
The Canadian Turkey Marketing Agency (CTMA) administers the national system for turkey. CTMA's roles include determining the amount of turkey to be produced in Canada each year for domestic con-sumption and then dividing it among the provinces.
The Ontario Turkey Producers' Marketing Board (OTPMB) regulates the production and marketing of turkey in Ontario. Based on market needs, it determines the volume of each size of turkey (broilers, hens, and toms) that should be produced to fill Ontario's share of the national supply. OTPMB informs individual quota holders of the amount of turkey they are entitled to market.
Primary turkey processors contract directly with producers of their choice. Processors must pay producers at least the regulated price.
In addition to the annual domestic supply determined by CTMA, extra turkey can be produced for the export market. Turkey processors can obtain regrow credits if they export domestic turkey or turkey parts. The processors then contract with producers to have the regrow birds produced for the domestic market at the domestic price.
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