By Ian Cumming

August 1, 2012 will mark the third year (the fourth for Quebec) since Ontario milk quota was capped in price and pro-rated in its offering to bidding producers. The result is that due to overwhelming demand the average-sized producer is expanding with purchased quota at the rate of about a cow per year, a cost of $25,000.

Farm Credit Canada (FCC) and banks loan money for quota for up to 10 years. That means on Aug. 1 about 40 per cent of Quebec’s milk quota debt will be eliminated and 30 per cent of Ontario’s, since most miniscule quota purchases are now cash flowed. Those are the facts and results desired by the government(s) who pushed the quota price under control, back when it was over $30,000 a cow.

But those of us who have borrowed for quota and sat opposite FCC and bank lenders know that "package deals" have also been offered. They rolled quota in with the new barn loan that accompanied a large expansion for the next generation and the debt termed out for far longer.

When Federal Agriculture Minister Gerry Ritz learned about these "package deals," from an article I wrote in The National Post over a year ago, he discovered that loans including quota were being stretched out as far as 20 years and he hit the roof.

"You got us in a lot of trouble," a Western Ontario FCC lender told me then. "Ritz called us and, man, was he pissed. He didn’t know. Quota loans are now for 10 years."

This means, noted the lender, that previously combined quota loans that included land and new buildings have had their paperwork adjusted to reflect that debt over 10 years is on physical assets, rather than on the paper value of quota.

While the money you borrowed to buy quota might have been termed out longer, does the legal paperwork now show that? It does if you consider that the value of the land is inflated to cover for quota. Ask any real estate person, farmer and money lender involved.

There is also a detailed document hashed out over several years between all the provinces and the federal government bureaucrats on how to export non-quota produced milk and milk products from Canada in the event of a leak in the supply management dike. The initiative began here in Ontario, actually after Georgian Bay was shut down, on the orders of former agriculture minister Helen Johns, with OMAFRA’s Bobby Seeber being front and center on the whole project.

The plan exists. It has been shelved and is gathering dust and everyone pretends they’ve never heard of it. It’s there in case something happens. I wrote about a leaked draft version several years ago and since then a spooked Bobby has kept the single final version under his pillow and in a briefcase chained to his arm. Or so it appears.

What they have to ask themselves, is why does it exist, along with a quota policy to virtually eliminate quota debt?

In fairness to many politicians, what’s being done has escaped the understanding of most farmers as well.

What’s being imposed here — and I’ll leave the why for you to ponder because I am now farming in New York state and don’t have a dog in this fight anymore — is the European Union (EU) plan to phase out quota. The EU plan promotes exporting milk and eliminating quotas without producer compensation. Their target date to phase out quota and quota debt is 2015. Canadian farmers are just on a longer time line to eliminate quota debt. Remember that Agriculture Minister Gerry Ritz told a press conference several years ago, "I will never compensate for quota."

What this means is up to debate. EU and Canadian farmers are both being given extra quota every year to facilitate a "soft landing."

Ask why.