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Jim Lee in his closed chicken processing plant in Welland Ont. (Glenn Lowson for The Globe and Mail)
Jim Lee in his closed chicken processing plant in Welland Ont. (Glenn Lowson for The Globe and Mail)

Fowl play: How supply management is thwarting Canada’s agri-food industry Add to ...

The result is that chicken and dairy production is growing rapidly in countries that don’t manage the supply, such as the U.S., Australia and New Zealand. In Canada, output is completely stagnant – a vivid reminder of the lucrative business Canada is losing out on, Prof. Carter explained.

Canada is still a major player in selling commodities, such as wheat, to the world. But it has a large growing trade deficit in processed agricultural products.

Other countries are getting the spoils, and Canada will forever be playing “catch up,” said Richard Barichello, a professor of food and resource economics at the University of British Columbia.

“It’s very clear where the future lies,” Prof. Barichello argued. “The potential gains from exports are growing, and it’s only a matter of time before it exceeds the domestic market. We’re talking billions of dollars.”

It’s not just theoretical. Mr. Lee’s frustrations hint at the vast lost opportunity for Canada’s agri-food industry. Until a few months ago, Cami had a thriving business selling specially prepared chickens for Chinese and halal grocery stores in the Toronto area. The company hand-slaughters and air chills its birds, and to meet the custom of the fast-growing Chinese-Canadian population, the birds are sold with the head and feet intact.

But Mr. Lee is thinking much bigger. From his plant, located across the street from a shuttered former Stelco Inc. pipe-making factory, he wants to ship chickens as far away as Vancouver, New York City and Hong Kong.

He figures his plant could handle up to five times the number of chickens it now processes, selling so-called “Hong Kong-dressed” chicken to affluent Chinese consumers around the world.

Mr. Lee’s choice of a company name – Cami International – and the location of the plant in the Niagara Peninsula reflect his ambition to tap the export market. “I always thought I would be exporting into the U.S. and into the Asian market,” he said.

But Cami has been stymied on all fronts by a deal struck last year between large processors and the chicken marketing boards in Ontario and Quebec. The deal severely curtailed cross-border shipments of live chickens, virtually shutting out small processors such as Cami. The company’s allotment of chickens fell 70 per cent – to roughly 250,000 kilograms every two months from 800,000 kilograms. That explains Mr. Lee’s empty plant.

Supply management depends on tightly controlling the volume of chickens flowing into the market. Processors can only buy the amount of chickens allocated by their provincial marketing board. Likewise, farmers can only raise and sell their allotted quota of birds. Similar rules prevail in the dairy industry, where supply management also reigns.

A cultural argument

Desperate for a way out, Mr. Lee is suing the Chicken Farmers of Ontario (CFO) and six large chicken processors, seeking millions of dollars in damages, and more chickens. In a statement of claim filed in the Ontario Superior Court, Cami alleges that last year’s supply reallocation agreement violates the company’s constitutionally protected rights to freedom of religion and equality by restricting the chicken available to religious and cultural minorities.

Michael Edmonds, director of communications for the CFO, wouldn’t comment directly on the Cami case, other than to acknowledge that the agency is aware that the company wants more chickens to process. The CFO has not yet filed a statement of defence in the case.

He insisted that the CFO works hard to accommodate specialty markets, including growing demand from Chinese Canadians. “That’s not to say [the system] is without flaws. ... If there are new markets, we will look at ways to meet that demand.”

Mr. Lee’s showdown with the Chicken Farmers of Ontario is symptomatic of the dysfunctional supply-managed farm sectors. Prof. Barichello of the University of B.C. said the rich returns generated in the closed system has led to endless squabbles over the allocation of limited supply.

Prof. Barichello has also documented what he says is a growing concentration among dairy processors – the companies that package and process the raw milk into consumable products. The consolidation trend began in the late 1990s and continued through 2005.

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