FGMLP is Governed by Regulation 402
The Farm-Gate Minimum Live Price (FGMLP) is governed by Ontario Regulation 402 made under the Farm Products Marketing Act.
On February 5, 2021, amendments to Reg. 402 prescribe a framework and formula for determining the minimum live price for chicken in Ontario beginning with quota period A-169. It applies to the reference bird that is in the weight range 2.15 kg to 2.45 kg and is not organic or raised without antibiotics.
The formula for determining the farm gate minimum live price is based on the cost of production and is:
FGMLP = Feed Cost + Chick Cost + Producer Margin
The regulation allows feed and chick costs to be updated every eight weeks and the producer margin to be updated annually.
The regulation also empowers a negotiating agency consisting of CFO and licensed Ontario chicken processors to negotiate updating adjustments to the formula. If the negotiating agency fails to reach an agreement, the regulation provides for the FGMLP to be determined through arbitration.
The New Pricing Framework Contains Structural Improvements
Beginning quota period A-169, the pricing framework includes significant structural changes to what was previously in place.
Annual Adjustments Are No Longer Prescribed
Previously, the regulation mandated three prescribed annual adjustments to the FGMLP. Beginning A-169, annual adjustments are no longer mandated or prescribed by regulation.
| Producer Efficiency Adjustment
| Mandated by regulation with prescribed values.
| Feed Efficiency Adjustment
|| Mandated by regulation with a prescribed rate of reduction to reflect changes in the feed conversion ratio.
||Built into the updating of the feed conversion ratio which can be adjusted every eight weeks by the negotiating agency.
| Volume Adjustment
|| Mandated by regulation with a prescribed formula to reflect the impact of changes in the volume of Ontario’s domestic production.
||The producer margin can be updated or adjusted annually by the negotiating agency which can take into account the impact of changes in volume.
For A-169 to A-173, the impact of volume change has been taken into account within each component of the producer margin.
All Defined Cost Items Can Be Updated
Beginning A-169, every cost item defined in regulation can be updated through negotiation or arbitration.
The superseded regulation, while allowing for negotiation, had designated some cost items as ‘fixed’. The cost items that were previously ‘fixed’ and could not be updated were: depreciation, farm vehicle, and levies and license fee.