Fresh Ideas, Growing Together

CHICK PRICING FORMULA REAFFIRMED DESPITE INDUSTRY CHALLENGE: A Letter to our Farmer-Members

On June 25, 2019, the Ontario Broiler Hatching Egg and Chick Commission (OBHECC) issued
a decision regarding a challenge that had been made by the Association of Ontario Chicken
Processors (AOCP) to OBHECC’s Cost of Production (COP) formula.
 
On the core issues of farmer labour, formula efficiencies and the capital model, OBHECC has
confirmed that its current pricing approach will remain in place, and that the changes AOCP
was seeking were rejected.
 
Consistent with the extensive process followed by OBHECC in designing its COP formula, the
Chicken Farmers of Ontario (CFO) Board of Directors finds the decision to be principled,
reasoned and one that strikes a responsible balance between providing fair returns for the
sustainability of farming, while encouraging innovation and efficiencies.
 
OBHECC reaffirmed the substantial effort and work it put into designing its pricing formula.
CFO is pleased that OBHECC did not appear to be intimidated by, and did not bow to, AOCP’s
pricing challenge - which was ultimately motivated to produce a reduction in chick price.
 
A formula that provides a practical, fair, and reasonable return
 
In May 2018, OBHECC approved and implemented its new COP formula. It did so following
extensive consultations with industry stakeholders, which included AOCP and CFO.
 
Having reviewed OBHECC’s new formula, CFO conveyed its support for implementation.
However, AOCP asked for reconsideration by OBHECC on a number of fundamental
elements. CFO determined that it should take part in the hearing that followed, after
recognizing that AOCP’s efforts against OBHECC’s COP also posed serious implications for
the new chicken Cost of Production Formula (COPF).
 
In its participation, CFO focused particularly on the issues of the capital model and formula
efficiencies. Flaws in both these areas are central to CFO’s views that the 2014 chicken
COPF is flawed and needs to change.
 
However, rather than acknowledging the flaws in the chicken COPF, AOCP instead attempted
to convince OBHECC to alter its formula in the areas of capital and efficiencies and adopt
the same approach as the current chicken COPF.
 
Therefore, CFO’s participation in the process was rooted in its view that AOCP’s motive in
challenging the OBHECC COP formula was to weave those flawed elements of the chicken
COPF into the chick pricing formula and further diminish farm-gate returns.

Instead, OBHECC reconfirmed a pricing formula that provides a practical, fair, and
reasonable return in the context of supply management and in doing so rejected the farmer-hostile
pricing principles being advanced by AOCP.
 
CFO continues to seek significant improvements to the chicken COPF, with the objective of
securing a COPF that provides a fair and reasonable return to farmer-members and which
provides sustainability, in the environment of industry growth and innovation.