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Sunday, March 29, 2015

Chicken for Lloydminster

Lloydminster straddles the border between the two Canadian Provinces Alberta and Saskatchewan.  Where should the people and grocery stores of Lloydminster buy their chicken from, Alberta or Saskatchewan?
Lloydminster (red square above) is located smack dab
on the provincial border between Alberta (AB) and
Saskatchewan (SK), two Western Provinces of Canada
(overall map of Canada in bottom left corner).  Map
derived from Wikipedia

Lloydminster has been incorporated by both provinces as one city.  Lloydminster is not a twin city that happens to have the same name in both provinces. Lloydminster is one city, with half the city in Alberta, the other half in Saskatchewan.  Lloydminster is unique.

I believe Lloydminster can held end Canada's Chicken War.

Inter-Provincial Trade

In the Canadian Constitution, right from the start of Canada back in 1867, inter-provincial trade is guaranteed to be free and fair.

More recently, Canada and all the Provinces have signed an Agreement on Internal Trade which minimizes or eliminates barriers to internal trade between Canadian provinces.

Therefore, the good people of Lloydminster should be able to decide if they want to shop in either Alberta or Saskatchewan, then return home with their groceries and other purchases. The same goes for any grocery stores in Lloydminster, or elsewhere in Canada.  Everybody has the right to have suppliers and/or customers from any province.

Canadian constitutional law experts say,

“The flow of interprovincial trade, as a legislative subject matter, is within Parliament's jurisdiction over the regulation of trade and commerce pursuant to section 91(2) of the Constitution Act, 1867.  As a result, provincial legislatures cannot pass laws prohibiting extra-provincial transactions. However, pursuant to sections 92(13) and 92(16) of the Constitution Act, 1867, provincial legislatures may pass laws respecting local trade."
That constitutional expert also speaks about "disproportionate impact" where a provincial law on a matter of provincial jurisdiction has a secondary effect that purposefully or inadvertently impedes the flow of inter-provincial trade which are not necessary to implement the objectives of provincial legislation.  In that case, those superfluous clauses in the provincial law would be repugnant to the Federal jurisdiction of inter-provincial trade under Section 91(2) of the Constitution Act, and would therefore be unconstitutional.

With free trade between provinces, you'd think that the quality and price would be the same and similar in all provinces of Canada  for commodity goods such as chicken, as chicken is grown in every province and is easily transported.  Let's check that assumption.

Using Agriculture & Agri-Foods Canada's Table 31N data for 2014 on Weighted Average Retail Poultry And Table Egg Prices Report we see that chicken prices between Alberta and Saskatchewan vary from a ratio of 0.66 (Alberta 34% cheaper) to 1.85 (Saskatchewan 85% cheaper), with an average price ratio of 1.02 (Saskatchewan 2% cheaper) and a median price ratio of 0.99 (Alberta 1% cheaper).

Fresh Whole Chicken Retail Price Ratio between Alberta and Saskatchewan for 2014

There are some very significant price swings (for unknown reasons) on a month-to-month basis between Alberta and Saskatchewan, as much as 85% for the various types of chicken (eg. whole, fresh, frozen, wings, legs, breast, thighs, etc.) in the same month. These swings indicate to me that there were competitive forces at work during 2014 somewhere in the value added chain (eg. at either farm, processors, wholesale, or retail).  If the price ratio between AB and SK was constant each and every month, price fixing would be the obvious cause.  I assume that independent grocery stores in Lloydminster who care about their customers (and their own profits) will call two different wholesale suppliers, one on each side of the border, then buy from the cheapest.  Consumers likely do the same, as it's just across Meridian Street in downtown Lloydminster to get cheaper chicken; perhaps as much as 85% cheaper.

Provincial Goals

Each of the provinces of Canada seem to feel that their province should be self-sufficient for chicken.  In other words, if it is eaten in-Province, it's grown in-Province.  I can understand and support that goal, but the key is how they go about accomplishing that goal.

That is why there has been a huge squabble between everybody at the board table of Chicken Farmers of Canada ("CFC") as they set the provincial quota allocations for all of Canada.  Alberta dropped out of the Federal-Provincial Agreement Chicken, 2001, and then agreed to re-join when they were finally offered a better deal. After years of argument, a tentative solution was found.  On Nov. 20, 2014 CFC announced a truce was reached with all parties on the new chicken allocation agreement (ie. the Memorandum Of Understanding, "MOU").  Both Alberta and Ontario would be given a greater share of the chicken production allocation to feed their growing population.

This week we learn that while CFC's MOU deal was tentatively accepted by the provincial representatives at the CFC Board table, the chicken processors in British Columbia, Saskatchewan and Manitoba have all filed appeals with their provincial governments over the new national chicken allocation policy.

Personally, I'm surprised that Quebec and the East Coast didn't complain too.

Where does all this leave Lloydminster, otherwise than on the border between Alberta and Saskatchewan?

If the Chicken Mafia from outside a province are prohibited  from serving customers within that neighbouring province, then the residents and processors within each province are trapped victims, at the mercy of their local branch of the Chicken Mafia.  Sound familiar?

Section 23.(2) of the Federal Farm Products Agencies Act ("FPAA") says:
 "In allocating additional quotas for anticipated growth of market demand, an agency shall consider the principle of comparative advantage of production."
What that means to me is that CFC should be allocating additional chicken quota to the most efficient producer of that chicken, which should provide the lowest cost chicken that meets the quality standard required.

Lloydminster's Chicken Divide

Let's assume that on one side of Meridian St. in Lloydminster, the chicken producers and processors rest on their laurels, chicken productivity drops, and retail prices climb.  On the opposite side of Meridian St., they are the most industrious of all chicken producers and processors, continuously improving, and doing their very best for their retail customers, causing retail chicken prices to drop continuously, month after month.  Soon there is a drastic Chicken Divide in Lloydminster, with huge retail price differences for chicken, depending if you are on the East side or the West side of Meridian St. in Lloydminster.

According to the FPAA, CFC should give any additional quota allocation to the more efficient side of Lloydminster, so that the people do not suffer, but can benefit from the innovative and effective chicken supplies from the better side.  This also reward the most effective of the Chicken Mafia, encouraging them to continue on the same path, and for others to follow in their footsteps.

What do you think the smart people of Lloydminster will do if instead of more chicken made available from the cheapest & best supplier, CFC came up with some weird and dysfunctional MOU formula for allocation of additional chicken quota based on:
  • Provincial shares of national base allocation,
  • Population growth;
  • Income - based Gross Domestic Product (GDP) growth;
  • Consumer Price Index,
  • Farm Input Price Index,
  • Quota utilization; and
  • Further processing and supply share.
as CFC has done in Section 1.(1.1).(A) of their Memorandum of Understanding?

The social activist people of Lloydminster are smart people who care about their chicken.  I believe Lloydminster consumers will get in their cars and drive to the better side of Meridian St., and buy all of their chicken there.  Neighbours will help buy for each other, crossing Meridian St. so as to save the cost of Chicken Commuter traffic.  Chicken processors in Lloydminster will call up the farmers on the good side of Meridian St., and order their next truckload of chicken from the good side.

Would anybody do otherwise?

Lloydminster is a special place, easy to use as an example to help guide CFC, and the Federal and Provincial Governments to finally understand.  However, every other city and village within Canada is no different, as all of us want what Lloydminster has:  CHOICE.

If all those sitting at CFC's Board Table can work together to develop an MOU that works for Lloydminster, I suggest it will work for the rest of Canada.

Perhaps CFC can quickly construct a live game scenario (ie. like playing Monopoly) with three chicken farmers, three chicken processors, and three consumers on each side of Lloydminster's Meridian St..  The dice can be rolled 7 times at the beginning of each round to simulate each of the 7 MOU variables for that round.  Farmers and producers can set their prices.  Producers can then decide who they will buy from, and how much chicken they will buy.  Then the consumers can decide who they will buy from.  Each player sets their strategy and take turns responding to what all other players did in their previous turn in the previous round.  After 3 to 30 rounds, it should be obvious to all those present if CFC's current MOU has any hope of working.  Then CFC can help them draft the "Lloydminster Chicken MOU", something that will really work.

Will the Chicken Mafia listen & learn, or will they continue making one disastrous mistake after another,  driving a wedge deeply between the warring chicken factions, and a stake through the heart of chicken consumers.

When will they learn that people want safe, nutritious, affordable chicken?

People do not want a bunch of gamesmanship on how to become chicken millionaires.

2 comments:

  1. Keep up the good work. I believe that over time, more and more people will support this movement as the discover how our food is actually produced in this country and demand changes.

    ReplyDelete
    Replies
    1. Thank-you for your kind words of encouragement. Sometimes it gets lonely out here, typing away in the hope that somebody reads, and others care.

      Glenn
      Small Flock Poultry Farmers of Canada

      Delete

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