Saskatchewan Egg Producers will auction all new quota increases using a blind bidding process.
SEP, the provincial supply management agency, is seeking approval from the Saskatchewan Agri-Food Council for the procedure.
An increase in provincial quota of 22,253 laying birds has resulted in quota being available to individual producers, and officials decided to auction it off.
Saskatchewan has 66 registered producers and 3.9 percent of the Canadian production. To encourage new producers to enter the industry, 15,289 of those birds will be available only to individuals not now licensed as producers. That restricted block includes quota for one lot of 1,001 birds and two lots of 7,144 birds.
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Bert Harman, SEP chair, said this auction will allow three new producers Ð one smaller operation entering the egg business and two larger sized operations.
Industry estimates suggest that smaller scale egg producers can expect to clear about $10 per bird annually, with larger operations earning up to $15 though efficiencies of scale.
Each of these new producers must be at arm’s length from an already established licensed producer or quota owner.
Michael Katz, general manager of SEP, said all bidders will be required to show evidence that they have the means and intention to enter into production personally and are Saskatchewan residents.
The remainder of the auction lots will be unrestricted and available to anyone who has or could become eligible to obtain an egg producer’s licence in Saskatchewan.
This unrestricted quota must be put into production within six months of winning the bid.
The remaining 6,964 bird quota will be auctioned off in 13 lots of 500 birds and one lot of 464, with a limit of one lot per bidder.
Harman said the intent is to allow producers with empty barn space to add to their operations.
All successful bids require a 10 percent deposit with the remaining payment due when the birds are placed in the barn.
Winning prices of bids will not be announced in hopes of avoiding the establishment of a floor price on which all future quota transactions will be tied.
Katz said the sealed bid system should prevent the runup in value of the quota as happened in Ontario and Quebec where values now range between $100 and $150 per bird.
“We want this process to be transparent and to create opportunities for new entrants into the industry, not to jack up the value of quota to an unsustainable level that will only allow expansion for the largest producers.”
Harman said all future quota increases would be auctioned.
Producers’ licences will still reflect the number of birds they are allowed, but that will be based on the total egg quota allowed for the province, divided by the Canadian Egg Marketing Agency’s official rate-of-lay figure, now at 24.4 dozen per hen, per year.
Grade A table egg producer prices are between $1 and $1.50 per dozen depending on size.
The auction is expected to be announced within 60 days and will be advertised for 30 days, said Katz.
