PROPOSED AMENDMENT TO LEASING WINDOW IN THE LEASING OF QUOTA POLICY

Transcription

1 PROPOSED AMENDMENT TO LEASING WINDOW IN THE LEASING OF QUOTA POLICY BACKGROUND: The Production Committee met with processors on May 30, 2017 to review Alberta s utilization performance and achievement of 100% utilization. While Alberta has been performing well in utilization compared to other provinces in 2016, there has been higher than normal underproduction in 2017 (i.e. A-141). In looking at ways to support continued optimal production performance, several issues were identified. Issues: - Barn space remains an issue in A-145 and Late flock mortality has been impacting under-production (i.e. ReoVirus) - 28 days post-placement for leasing may not enable producers to respond to late flock mortalities KEY DRIVERS FOR POSSIBLE POLICY AMENDMENT: High growth environment. Tight barn space. High availability of lease in the pool. Chick supply and quality. PROPOSED DIRECTION: The Production Committee developed a framework (Goal and Principles) for identifying options to address these issues, and measureable outcomes for assessing the impact: Goal / Objective: To provide a more flexible tool for producers to target 100% quota utilization and support the orderly marketing of chicken. Guiding Principles: 1. Fairness for producers: that amendments to the Policy(ies) do not cause unfairness for producers (recognizing these amendments may not alleviate the current state) 2. First reallocation of lease is applied to producers below the 95% under-production sleeve % Utilization Target: amendments to the Policy(ies) support achievement of our 100% utilization target 4. Accountability of producers in supporting the orderly marketing of chicken. Suggested Option: To extend the timeframe for leasing from 28 to 35 days (details contained on pg.3) 1

2 Measurable Outcomes: - Reduction of lost kilograms from production below 95%, and reduction of extreme over-production (over 107%) - Utilization Performance - Impacts on producer behaviour (qualitative) i.e. are producers demonstrating adherence to the principles and objective of the policy change? Baseline Measures: Lease Kilogram pool per A-Period. Current baseline average is 4,058,764 kgs (A-138 to A-143=July 10, 2016 to June 10, 2017) Quota utilization. Current baseline average is 99.88% or -167,713 kgs. (A-138 to A-143). Lease price. Current baseline average is $0.29/kg (A-138 to A-143). Volume of lost kgs not carried forward from under 95% production segment. Current baseline total is 696,356 kgs* (A-138 to A-143). * This number will change as A-143 still needs to be included when available in Oct, Barn space capacity. Current baseline average as of May 30, 2017 is: 27,881,000 kgs per 8 week cycle or mkgs per week. Considerations and Guardrails: It is important to note that the Leasing of Quota Policy works with: - The Production Sleeve Policy: Overproduction sleeve is flexible (currently in policy at 107%) should Alberta need to avoid an overproduction penalty situation with CFC. - Density limits within the Animal Care Program: Density at 38 kg/m 2. Based on the Committee s Framework and suggested option, the Board is putting forward the following recommendation to present to Producers at the Regional Meetings: To extend the timeframe for leasing from 28 to 35 days (details contained on pg.3) CURRENT POLICY COMMENTS: Purpose of Current Leasing of Quota Policy: Leasing of quota serves as a management tool for Producers to maximize use of production facilities, respond to production issues, and to ensure quota is fully utilized. Production planning, quota utilization and the amount of chicken marketed is the responsibility of each individual Producer. The Board has a responsibility to ensure, as much as possible, that quota is allocated to Producers who will produce adequate amounts of quality chicken to fulfill the market. This policy seeks to provide for a steady supply of chicken to processors. It is expected that a Producer who has quota and certified production facilities will utilize them each and every cycle. 2

3 PROPOSED POLICY AMENDMENT: Based on the above noted background, considerations, goals and objectives, the Board is proposing the following amendment to the Leading of Quota Policy. Proposal: Change leasing-in timeframe from 28 days to 35 days (5 weeks) after placement (adding one week to the existing 28 day lease policy). Implement in Policy, effective A-148 (January 21, 2018) and monitor indefinitely over time. Rationale: Provides increased flexibility from current policy for leasing within the A-Period; seeks to mitigate some of the risks associated with opening up the leasing window entirely; and it aligns with reporting timeframe in Alberta Chicken Producers Marketing Regulation AR 3/2000 and ACPs reporting to CFC. Implementing on an indefinite basis enables monitoring of shifts from baseline metrics over time, and provides Board with flexibility to further expand or contract the timeframe accordingly. Proposed Amendments to Section 2 of Policy (changes highlighted in yellow): LEASE IN/LEASE OUT: a. Leasing-In Quota: The Lessee must file the application to Lease-in quota within 28 days 35 days of last chick placement to the Lessee s registered facility; b. Leasing-Out Quota: The Lessor must file the application to Lease-out quota within 28 days 35 days of last chick placement to the Lessee s registered facility; c. The Producer to whom the 28 day 35 day time limit is applicable is the Lessee in the first instance. d. To be eligible for approval, the Lessor and Lessee involved in a Lease-in / Lease-out arrangement must have cycles within the same A-period. e. Both the Lessor and Lessee are accountable for signing the Lease Application Form and ensuring the Form is filed with the Board Office within 28 days 35 days of last chick placement to the Lessee s registered facility (ies). f. Incomplete Lease Application Forms or Forms submitted to the Board Office later than 28 days 35 days from the last date of chick placement to the Lessee s registered facility (ies) will not be approved. g. A Lease will not be approved if the Producer has outstanding service charges or levies. h. A Lessee who is approved to Lease-in quota and experiences production difficulties may apply to Lease-out quota. The application to Lease-out must be filed with Alberta Chicken Producers within 28 days 35 days of last chick placement to the Lessee s registered facility. i. With the exception of 3(a) below, a Producer who transacts both a Lease-in and Lease-out in the same cycle must pay to Alberta Chicken Producers an administration 3

4 Measurables for assessing effectiveness of Policy Amendment: Reduction in the volume of kilograms below the 95% sleeve lost and not carried forward from current baseline of 696,356kg. Improvement in current baseline Quota Utilization of 99.88% toward 100%. Pros: Stability in lease price, assessed by monitoring any changes in lease price in each of the 6 A-Periods (compared to current baseline of $0.29/kg). Kg lease pool floor over initial 6 periods does not fall below an average of 2.5 Mkgs per Period. (Note: Current baseline average is 4.06 Mkgs (A-138 to A July 10, 2016 to June 10, 2017; historic floor between MKg) The change in barn space capacity by the end of 6 periods will be measured and factored into the assessment of continuing the leasing window change. (Note: Current baseline as of May 30, 2017 is: 27,881,000 kgs per 8 week cycle). Assists producers to better manage production performance and/or late flock mortality in the cycle than current Policy. More accountability for producers to manage their leases than extending the timeframe to after shipment (post-national A-Period) as the additional week (35 days) focuses more on lease as a production tool than as a rebalancing tool. Minimal financial risk to ACP; if the timeframe was extended until after shipment, there is a risk of Alberta as a province over-producing and incurring a penalty to CFC without the monetary penalty income from individual producers to offset the cost to ACP Less potential for volatility or manipulation of the lease price as the lease is submitted before the producer ships, eliminating reliance on a safeguard lease pool after shipping. No changes to office administration practices are required. Risk Factors and Mitigating Strategies: An additional week may not produce a significant impact in Alberta s ability to achieve 100% Quota Utilization as there remains a restriction on leases being filed prior to shipment (aside from light birds; however this is no different than the case today for light birds). Mitigated by regular monitoring of metrics from baseline to assess effectiveness of the additional one week. May not be enough to recognize a shift in the reduction of lost kilograms not carried forward from the under 95% segment. Mitigated by regular monitoring of metrics from baseline to assess effectiveness of the additional one week. NOTE: A policy that relies on a marketing date whether from the assurance of supply form or a marketing date on the leasing application can be manipulated by both the processor and producers. Therefore all options are based on the A-Period end date or placement date. 4

5 PROPOSED DIRECTION: Implement effective A-148 for 6 A-Periods Assess shift in measurables (quantitative and qualitative) from baseline metrics at A-154 If desired impact is being achieved, maintain the amended Policy and continue to regularly monitor measurables. If desired impact is not achieved, consider alternative amendments to the Leasing of Quota Policy and / or Production Sleeve Policy. If the change produces detrimental effects in terms of production and/or behaviour, the Board may consider reverting to 28 days as in current Policy. NEXT STEPS: o Present document to Producer Representatives o Present to Producers at Regional Meetings (October 31 November 2 nd ) if no concerns, implement effective A-148 (January 21, 2018) 5