The Canadian Egg Marketing Agency must reform itself or risk seeing the 28-year-old egg supply management system collapse, says the federal government’s supply management watchdog.
Cynthia Currie, chair of the National Farm Products Council, said in a June 16 interview the egg agency has until autumn to change the way it organizes national production quota distribution and levies.
“I think the system is in jeopardy,” she said.
Currie was commenting on a strong letter she sent to CEMA chair Laurent Souligny in early June, approving the agency’s year 2000 quota regulations, but warning it is a stopgap measure.
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She said CEMA must present a new 2001 plan to the council by autumn if it is to be approved. Since last winter, the national council had refused to approve CEMA’s quota plan because of challenges from Manitoba and Saskatchewan.
It gave its reluctant approval
June 8, mainly to prevent the danger of unregulated production by producers without valid quota restrictions.
“Council’s decision should be viewed as a means to foster stability and certainty in the industry for the remainder of the year in order to provide the necessary time for the agency to develop and implement much-needed changes in the orderly marketing system for eggs in Canada,” Currie wrote.
On the surface, the decision appeared to be a setback for Manitoba. It lost its appeal.
Manitoba has been in dispute with CEMA over how many layer hens it can have outside the quota system to supply processing eggs for export. CEMA approved an allocation and Manitoba doubled it.
Last winter, when CEMA decided to increase the national flock by 810,724 laying hens, Manitoba received no increase.
CEMA argued that Manitoba already has more than its share under a 1999 agreement between all CEMA signatories that tied quota allocation to population. Manitoba said its extra birds are outside the quota system and should not count.
Saskatchewan supported Manitoba in the appeal.
The national council decision effectively tells Manitoba that it will not receive more quota this year.
“But that is not the main point of the decision,” said Currie.
The main message the council wanted to send is that this is the last time it cuts CEMA any slack.
The agency, created in the 1970s to manage domestic table egg sales at a fixed domestic price that returned cost plus a profit to farmers, has struggled to cope with the growing trend to processing and export eggs that are sold at less than domestic prices.
CEMA has tried to cope by increasing levies charged to farmers and consumers to cover the difference between the market price for so-called “breaker eggs” and the higher price paid to farmers.
That levy has increased from 2.5 cents per dozen in 1977 to 14.4 cents, with a good chance it will increase again this year.
Manitoba and Saskatchewan argued that CEMA cannot continue to fund losses in breaker and export sales through increased levies on products for the static domestic table market. They have predicted the gap could grow to $22 million annually.
CEMA should allow more outside-quota production dedicated to processor markets and returning to producers only what the processor market pays.
This month, the national supervisory council effectively agreed.
“The agency must address the continued use of a levy, primarily borne by table egg consumers, to fund sales to the domestic processing market in the face of a rapidly growing industrial market and what appears to be a declining, or at best, static demand for table eggs,” Currie wrote.
The council also chastised CEMA for distributing new quota on the basis of production versus population. This formula encourages provinces to move toward self-sufficiency in egg production, rather than to produce eggs in the most economic way, the NFPC warned.
Provincial self-sufficiency should not be a CEMA goal, said the council.
