Supervisory Review of Dairy Quota Governance

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.

• Read about the 2003 to 2005 Specialty Review

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.

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).

• Read about supply management

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.

• Read about BCFIRB’s governance initiative

These considerations highlight

• Points of legislation,
• BCFIRB’s 2003 to 2005 Specialty Review directions,
• The B.C. Ministry of Agriculture’s 2004 Regulated Marketing Economic Policy (PDF), and
• BCFIRB’s “SAFETI” principles

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.

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.

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.

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.

Submissions

Written submissions will be posted here as they are received.

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

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