Supervisory Review of Dairy Quota Governance

The B.C. Milk Marketing Board (Milk Board), responsible for regulating dairy production and marketing in B.C., is reviewing its milk quota policies and programs as part of a Supervisory Review process initiated by BCFIRB on October 12, 2012 in its supervisory role under the Natural Products Marketing (B.C.) Act (NPMA).

The objective of the Milk Board’s review is to evaluate B.C. dairy quota policy through a transparent consultative process with the aim of developing an effective quota allocation and governance policy that will preserve, build and transition the B.C. dairy industry for future generations.

BCFIRB expects the Milk Board to demonstrate to all of its stakeholders – including the public – that its quota policies and programs meet sound governance principles, and serve the overall public interest by effectively reconciling industry business needs and public interest objectives.

Dairy is the largest agriculture sector in B.C. in terms of farm cash receipts. According to a recent study, in 2011, B.C.’s 517 dairy farms produced 666 million litres of milk valued at $ 522 million in farm cash receipts, approximately 20% of the total farm cash receipts in B.C. Dairy producers directly generated approximately $132.1 million towards provincial GDP, employing an estimated 5,653 workers (21.5% of B.C. agriculture jobs) and supporting large and vibrant B.C. dairy processing and marketing sectors.

Supervisory Review Decision

Why a BCFIRB Supervisory Review?

This Supervisory Review process arose from a Milk Board request to BCFIRB to change BCFIRB policy that restricts the transfer of certain milk quotas between producers. In support of its request, the Milk Board cited quota management issues – both on-farm and industry-wide – in connection with the quota transfer policy, which also applies in B.C.’s other supply managed sectors (chicken, eggs, broiler hatching eggs, turkey).

In recent years, the Milk Board – with varying degrees of involvement from BCFIRB – has been overseeing a number of issues with respect to quota management, including issues related to under- and over-production, availability of quota on the Quota Exchange and transparency in quota transfers, new entrant program governance and administration, and succession planning.

While identifying and responding to systemic challenges is an important part of strategic leadership, governance is not only about where to go, but also about who should be involved in deciding, and how decisions are accounted for. The Milk Board's proposal was to replace one policy with another, without considering broad impacts, options or interests, as was done in the 2003 to 2005 Specialty Review. BCFIRB was not satisfied that this was sound marketing policy.

In response, BCFIRB initiated this Supervisory Review to provide general guidance to the Milk Board in conducting its own transparent consultative process to evaluate and, where deemed appropriate, modernize its quota policies and programs.

In its review, the Milk Board is expected to engage with its stakeholders, including the public, to examine its provincial quota allocation policy, and

  1. Evaluate whether current policies and programs (such as those related to quota allocation, transfer, industry entry) are effective at meeting sound marketing policy objectives in the public interest,
  2. Identify issues and gaps,
  3. Propose solutions, and
  4. Report its findings and recommendations to BCFIRB.

BCFIRB has been working with the Milk Board to ensure a common understanding of expectations. If any outstanding issues are identified after receiving the Milk Board’s final report, BCFIRB will assess whether and how those issues should be further addressed.

B.C. Dairy Quota Governance Review Background

Quota

Provincial commodity boards, such as the Milk Board, use quota to manage the volume of commodity production within a province. Quota allows (and obligates) a farmer to produce a pre-determined amount of product, such as milk.

Controlling the volume of production is one of the three pillars of supply management. In the dairy industry, the volume of milk produced for industrial purposes (for example, cheese) is set at the federal level while provincial dairy boards determine how much milk needs to be produced for the fluid market (for example, milk in cartons).

The other two pillars of supply management are import controls (a federal responsibility) and price setting (a provincial responsibility, with the industrial milk price based on support prices announced by the Canadian Dairy Commission).

Farmers who hold quota are confident they they will sell what they produce at an assured price that covers the cost of efficient production. As a result, quota provides an economic opportunity for farmers while ensuring consumer demand for a product is consistently met.

B.C. Quota Governance

“Quota Governance” is the process whereby B.C.’s supply managed commodity boards (dairy, broiler hatching egg, chicken, table egg, turkey) make decisions about quota, determine who is involved in the process and how those decisions are accounted for.

The supply managed commodity boards are faced with the challenge of delivering quota policies and programs that ensure a consistent supply of food for consumers in accordance with federal-provincial legislation and agreements. At the same time, they meet other public interest objectives set out in B.C. agriculture policy – such as industry growth and innovation (in part to satisfy consumer demand for specialty products), succession and new entrant opportunities, sustaining regional industries, and food safety assurance.

Under the Natural Products Marketing (B.C.) Act (NPMA), B.C.’s commodity boards are accountable directly to BCFIRB as the provincial supervisory board. They are also accountable more generally to industry stakeholders (producers, processors, consumers, etc.), the general public, and government. They operate within a framework of integrated federal-provincial policy, legislation, regulations, and agreements alongside BCFIRB’s supervisory principles and expectations.

Key Considerations for Quota Governance in B.C.

These considerations highlight

All points have been communicated previously through the above noted sources and/or BCFIRB communications will all boards and commissions.

Quota governance adheres to legislative requirements

  • Quota remains the property of the boards at all times.
  • Boards cannot attach monetary value to quota.
  • Policies and programs meet sound marketing policy objectives in the public interest.

Quota governance reflects the intent of supply management

  • Boards retain a flexible approach to quota management and distribution in order to be able to respond to market demands.
  • Producers are actively engaged in production and committed to being in the industry. The historical intention of quota is that it is produced.

Quota governance reflects provincial agricultural policy

  • Boards establish policies and programs to facilitate the entry of new producers.
  • Boards establish policies and programs to stimulate and promote innovative approaches to production and marketing that have potential to create sustainable demand for B.C. products.
  • Boards ensure their policies and decisions do not inhibit the economic viability of regional industries. Boards consider ways to sustain regional industries and capture unique opportunities for regional production and marketing.

Quota governance reflects a principles-based approach to regulation

  • Boards undertake effective consultation with stakeholders and consider all appropriate perspectives in their decision making.
  • Policies and programs are accountable – they are developed and delivered in an effective, strategic manner that reflects a fair, inclusive, transparent approach.

The Policy Cycle: Closing the Loop

In the 2003 to 2005 Specialty Review, BCFIRB took newly issued government policy objectives for B.C.’s regulated marketing system and, following an extensive consultative supervisory review involving all five supply managed commodity boards, issued principles and directions resulting in significant policy and program changes for B.C.’s supply managed sectors.

In the absence of an evaluation of the policies and programs that were put in place following the Specialty Review, the policy cycle that opened in 2005 has not yet fully revolved.

This Supervisory Review process will help to "close the loop" by requiring the Milk Board to evaluate its existing dairy quota policies and programs in light of today’s evolving industry and public interest needs through a transparent consultative process, before moving forward with any new program or policy proposals.

Timeline: How We Got Here

2003

BCFIRB initiates a review of specialty production and marketing across B.C.’s five supply-managed commodity boards (dairy, broiler hatching egg, chicken, table egg, turkey).

2004

B.C. Ministry of Agriculture (then Ministry of Agriculture, Food and Fisheries) releases public policy framework for the regulated marketing system – the Regulated Marketing Economic Policy (PDF).

2005

BCFIRB issues general directions (concerning specialty production, new entrant and other quota programs) to supply-managed commodity boards, including the Milk Board, following its two-year Specialty Review.

2006

BCFIRB prior approves the supply managed commodity board orders, including the Milk Board’s Consolidated Order, which sets out quota policies and programs in detail.

2009

BCFIRB initiates its Enhancing Markets Review, intended in part to evaluate outcomes in each of the supply managed sectors since the Specialty Review directions were implemented. It is suspended in 2010 due to budget constraints arising out of the economic crisis.

2010

The Milk Board reports quota management issues in the dairy industry and requests to change a quota transfer assessment policy directed by BCFIRB in 2005. BCFIRB invites the Milk Board to submit detailed policy proposals that will show how policy objectives can be met while providing for “optimal functioning” of the system.

2011

BCFIRB and the Milk Board continue dialogue on dairy industry needs and supervisory expectations with respect to governance and the public interest.

2012

BCFIRB and the commodity boards adopt the "SAFETI Principles", a set of sound governance principles for B.C.’s regulated sector. These and other criteria for BCFIRB decision-making are communicated to the regulated sector and the general public with BCFIRB’s Accountability Framework.

BCFIRB initiates its B.C. Dairy Quota Governance Supervisory Review.

2013

The Milk Board adopts a set of key principles for the dairy industry to guide development of effective quota governance policy and initiates its B.C. Dairy Quota Policy and Governance Consultation.

Agency Roles

Milk Board

The Milk Board is the first instance regulator of the dairy sector in B.C. Under the British Columbia Milk Marketing Board Regulation, the Milk Board has the authority to promote, control, and regulate the province’s milk production and marketing.

Some of the Milk Board’s responsibilities include managing and distributing milk quotas to producers, administering the provincial share of the national industrial milk quota, and licensing all producers and processors of milk, fluid milk and manufactured milk products within B.C.

BCFIRB

BCFIRB’s responsibility for the general supervision of B.C.’s marketing boards and commissions under the Natural Products Marketing (B.C.) Act includes ensuring they are:

  • Acting within their legislation, and
  • Following sound marketing policy.

BCFIRB’s general supervisory role enables it to review, to oversee and, where BCFIRB deems it necessary and appropriate, give directions. This proactive role is complemented by BCFIRB’s appeal role, which is only triggered when a person files an appeal from a decision, order or determination of a marketing board or commission.

Supervisory reviews are a formal exercise of BCFIRB’s supervisory powers, which can lead to decisions and directions to boards and commissions.

B.C. Dairy Quota Governance Review Process

Stages & Schedule

This review will be conducted in three stages:

1. Establishing Common Understanding of Expectations (Fall 2012 to Summer 2013)
BCFIRB works with the Milk Board to develop and establish a common understanding of base expectations concerning the review process along with BCFIRB’s core considerations when assessing the final Milk Board recommendations.

2. Milk Board Quota Policy and Program Evaluation (Summer 2013 to Spring 2014)
Milk Board develops and conducts its own evaluation process informed by the established shared expectations as well as their own considerations. At the close of their evaluation, the Milk Board reports on its findings and recommendations to BCFIRB.

3. BCFIRB Next Steps (Spring 2014)
If BCFIRB identifies any outstanding issues after receiving the Milk Board’s final report, BCFIRB will assess whether and how those issues should be addressed in its supervisory or appellate roles.


Schedule


1. BCFIRB and the Milk Board establish expectations

Fall 2012 to Summer 2013

2. Milk Board conducts 1st Consultation Period

Fall 2013

3. Milk Board develops report incl. any proposed policy changes

Fall/Winter 2013

4. Milk Board conducts 2nd Consultation Period

Winter 2013

5. Milk Board reports findings and recommendations to BCFIRB

Early 2014

6. BCFIRB reviews Milk Board report and assesses whether and how any outstanding issues should be addressed.

Post receipt of Milk Board recommendations


 

 

 

 

Submissions

Written submissions will be posted here as they are received.

B.C. Dairy Quota Governance Review Documents

The following is a list of key documents related to the B.C. Dairy Quota Governance Review.

BCFIRB Supervisory Review Decision

Follow-up to BCFIRB September 23, 2014 Decision - MMB Quota Governance Review - GEP (PDF) – December 2, 2014

BCFIRB Decision Quota Governance Review  (PDF)– September 23, 2014

Supervisory Review Directions and Correspondence

BCFIRB Supervisory Review of B.C. Dairy Quota Governance  (October 12, 2012) (PDF) – BCFIRB to Milk Board

BCFIRB Supervisory Expectations Cover Letter (PDF) and Attachment (PDF) (November 22, 2013) – BCFIRB to Milk Board

Background: Policies, Principles and Supervisory Directions

First In, First Out vs. Last In, First Out (LIFO) and 10/10/10  (February 10, 2012) (PDF) – BCFIRB letter to Milk Board

Quota Management and Governance Update  (July 20, 2011) (PDF) – BCFIRB letter to Milk Board

Quota Management  (PDF) (April 5, 2011) – BCFIRB letter to supply managed boards

BCFIRB Initial Response to December 20, 2010 First In, First Out Proposal of the B.C. Milk Marketing Board Supported by Submissions from Certain Producer Associations  (PDF) (April 5, 2011) – BCFIRB letter to Milk Board

Quota Management (PDF)(March 23, 2010) – BCFIRB letter to the Milk Board

Review of Mediated Agreement Between Lilian and Sandy Stewart, and Steve Verdonk (PDF) (March 11, 2011) – BCFIRB decision

Quota Management (April 26, 2010)  (PDF) – BCFIRB letter to supply managed boards

Supervisory Review of the Allocation by the British Columbia Milk Marketing Board of Graduated Entry Program Quota from Lilian & Sandy Stewart to Steve Verdonk  (PDF) (June 26, 2009) – BCFIRB Supervisory Review Decision

Principles and Procedures for the Distribution of National Allocations – Suggested Response Framework  (PDF) (February 5, 2008) – BCFIRB letter to supply managed boards

Principles and Procedures for the Distribution of National Allocations  (PDF) (December 13, 2007) – BCFIRB letter to supply managed boards

Review of Specialty Production and New Entrant Programs – Improving Access to the Supply Management System – Eligibility Criteria for New Entrant Programs (May 3, 2007) – BCFIRB letter to supply managed boards

Review of Specialty Production and New Entrant Programs – Improving Access to the Supply Management System (PDF) (July 19, 2006) – BCFIRB letter to Milk Board

Quota Transfer  (PDF) (September 2, 2005) – BCFIRB letter to supply managed boards

Specialty Review, BCFIRB 2005

Regulated Marketing Economic Policy (PDF) B.C. Ministry of Agriculture, 2004

Bifano Farms et al vs. B.C. Milk Marketing Board (PDF) (May 30, 1996) – BCFIRB appeal decision