saskatchewan broiler hatching egg producers marketing board · the saskatchewan broiler hatching...

Saskatchewan Broiler Hatching Egg Producers Marketing Board

2013 Annual Report

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Table of Contents Putting a Face to the Name 3

Board of Directors 3

Office Staff 3

Reports 4

Chair’s Report 4

Chief Executive Officer 5

Saskatchewan Poultry Extension Service 6

Table of Contents 7

Introduction/ General 8

Broiler Hatching Egg Producers 12

Chicken Producers 14

Turkey Producers 17

Table Egg Producers 18

Budget report and Predictions 22

Financial Statements 23

Index 24

Independent Auditor’s Report 25

Balance Sheet 27

Statement of Operations 28

Statement of Changes in Net Assets 29

Statement of Cash Flows 30

Notes to Financial Statements 31

2014 Broiler Hatching Egg Budget 37

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Putting a Face to the Name…..

2014 Board of Directors

From Left to Right: Jeff Regier, Henk van Steenbergen (Chair), Clinton Monchuk (Chief Executive Officer ), James Glen

Missing: Dave Janzen (Vice-Chair)

Office Staff Back Row : Gale Kellington (Office Manager)

Middle Row: Clinton Monchuk (Chief Executive Officer)

Front Row: Christina Nelson (Market Analyst)

Missing; Colleen Kohlruss (Executive Assistant and Promotions), Tamara McLoughlin ( Poultry Ana-lyst/Auditor), CHEQ Auditor, Aaron Neufeld

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Reports

Chair Henk van Steenbergen As I am writing this report in the middle of February, the 2013 calendar year seems already a distant past. A long and cold winter may have something to do with this! In July of 2013 Saskatchewan, as well as the province of Alberta, were finally able to become full members of the Canadian Hatching Egg Producers (CHEP). This means for our province that we will continue to send our levies as in the past but can now vote on what to do with these levies. July was also the month in which the Saskatchewan board hosted the CHEP summer meeting in Wask-esiu. It was at this meeting that Ben Kleinsasser accepted the award of “Producer of The Year” on behalf of Hepburn Poultry. On behalf of the Sas-katchewan broiler hatching egg industry we would like to congratulation Ben Kleinsasser, Dan Reddekopp and Mervin Slater for this well-deserved achieve-ment. Production targets for 2014 have seen an increase over previous years as we expect movement of chicks from other provinces into Saskatchewan to be drastically reduced. The movement of chicks between provinces and its effect on the ability to produce according to each province’s broiler allocation continues to be of great concern to us as board, as well as at the national level. For 2014 and beyond we will see some challenges in how we produce our hatching eggs. There seems to be continued pressure on the livestock industry to bring production practices up to ever increasing demands from special interest groups, consumer groups, end users and government. The ban on preventative use of Class 1 antibiotics in broiler chicks has already resulted in some changes for us as hatching egg producers and may result in more changes when this ban is implemented for our breeder chicks as well. Each one of us will have to take a good look at our farms and try to figure out how these changes might affect our ability to produce our production targets. This past year again has seen well attended producer meetings, meetings between the board and hatcheries, and board meetings (provincial and national) supported by our staff at the board office. We may not always agree on everything but let us agree that together we keep working towards a better industry within a strong national supply management system. Henk van Steenbergen

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Chief Executive Officer Clinton Monchuk

The 2013 calendar year marks the continuation of advancing a sustainable hatching

egg industry in Saskatchewan!

Supplying hatching eggs for Saskatchewan hatcheries are meeting demands. The

later part of 2012 showed some ‘hiccups’ in the supply system where by short term

excess supply resulted in earlier than expected flock removal and excess supplies be-

ing sold to Quebec. As a result of this experience the board invested time and fi-

nances into developing an egg flow model that has been used to identify peaks and

troughs of demand and supply. Working very closely with both hatcheries the board

feels the industry is now better suited to correct issues before they exist, barring any

unforeseen circumstances.

The Saskatchewan Broiler Hatching Egg Producers’ Marketing Board also made its first long-term investment in

feed related research. In the summer of 2013 the board agreed to fund just over $60,000 towards Dr. Hank Clas-

sen’s National Science Engineering Research Council’s Industrial Research Chair project. This five year project is in

partnership with the other Saskatchewan poultry marketing boards, Prairie Pride Natural Foods, Sofina Foods, Avi-

agen, the Canadian Poultry Research Council and Poultry Industry Council. This project will seek to improve feed

efficiencies and profitability in the poultry sector.

As the board continues into 2014 we will pursue the completion of new regulations, monitor egg flow and continue

to represent our farmers provincially and nationally.

Yours truly,

Clinton Monchuk

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Saskatchewan Poultry Extension Service University of Saskatchewan

Annual Report

January – December 2013

Prepared for:

Chicken Farmers of Saskatchewan

Saskatchewan Egg Producers

Saskatchewan Turkey Producers

Saskatchewan Broiler Hatching Egg Producers

Lilydale Foods Inc., a Sofina Foods Company.

Prairie Pride Natural Foods Ltd.

Dr. S. Gomis, Dept. of Veterinary Pathology, U of S

Dr. H.L. Classen, Dept. of Animal & Poultry Science, U of S

Prepared by:

Tennille Knezacek

Jenny Fricke

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TABLE OF CONTENTS

I. INTRODUCTION .......................................................................................... 8

II. GENERAL..................................................................................................... 8

2013 Saskatchewan Poultry Industry Conference 8

Presenta ons and Newsle ers 9

Par cipa on in Consulta ve Processes 9

CanNAISS Program 9

Canadian Integrated Program for An microbial Resistance Surveillance (CIPARS) 10

New Bird Submission Forms 10

Infra-Red Camera 11

Emergency Response Planning 11

NSERC Industrial Research Chair in Poultry Nutri on 11

Acknowledgements 12

III. BROILER HATCHING EGG PRODUCERS ....................................................... 12

Health Report 12

Inclusion Body Hepa s 14

IV. CHICKEN PRODUCERS ............................................................................... 14

Health Report 14

Infec ous Bursal Disease 16

Yolk Sac Infec ons and Enterococcus 16

V. TURKEY PRODUCERS ................................................................................. 17

Health Report 17

VI. TABLE EGG PRODUCERS ............................................................................ 18

Health Report 18

NIR Technology 19

Salmonella Monitoring Program 20

VII. 2013 BUDGET REPORT .............................................................................. 22

SASKATCHEWAN BROILER HATCHINGEGG PRODUCERS MARKETING BOARD

Financial Statements

December 31, 2013

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SASKATCHEWAN BROILER HATCHING EGG PRODUCERS MARKETING BOARDIndex to Financial Statements

December 31, 2013

Page

INDEPENDENT AUDITOR'S REPORT 1 - 2

FINANCIAL STATEMENTS

Balance Sheet 3

Statement of Operations 4

Statement of Changes in Net Assets 5

Statement of Cash Flows 6

Notes to Financial Statements 7 - 12


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INDEPENDENT AUDITOR'S REPORT

To the Members of Saskatchewan Broiler Hatching Egg Producers Marketing Board:

We have audited the accompanying financial statements of Saskatchewan Broiler Hatching EggProducers Marketing Board, which comprise the balance sheets as at December 31, 2013 and December31, 2012 and the statements of operations, changes in net assets and cash flows for the years endedDecember 31, 2013 and December 31, 2012, and a summary of significant accounting policies and otherexplanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements inaccordance with Canadian accounting standards for not-for-profit organizations, and for such internalcontrol as management determines is necessary to enable the preparation of financial statements that arefree from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with Canadian generally accepted auditing standards. Thosestandards require that we comply with ethical requirements and plan and perform the audits to obtainreasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity'spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to providea basis for our audit opinion.

(continues)


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SASKATCHEWAN BROILER HATCHING EGG PRODUCERS MARKETING BOARDStatement of Operations

Year Ended December 31, 2013

Budget2013 2013 2012

REVENUESProduction levy $ 151,375 $ 151,375 $ 130,183CHEP levy - 83,526 89,948Interest 2,000 783 948Licenses 150 150 150CHEP summer meeting sponsorship - 5,000 -CHEP quota lease pool - - 1,459

153,525 240,834 222,688

EXPENSESAdministration (Note 5) 47,250 47,250 45,000Audit fees 6,600 7,303 6,208Bank charges 880 505 978CHEP levy - 80,928 84,488CHEQ program 5,000 2,502 2,881Directors per diem 22,000 11,550 12,950Directors travel and meals 11,000 10,793 11,095Employee benefits - 572 110Extension charges 12,705 9,924 12,107Insurance 1,000 788 584Janitorial (Note 5) - 563 539Legal fees 22,250 14,494 13,875Management travel 2,000 5,893 1,899Meetings 2,200 7,040 818Memberships 150 120 120Miscellaneous - 2,623 1Occupancy (Note 5) 18,430 12,384 10,966Office 288 123 318Telephone (Note 5) - 2,034 2,001U of S NSERC Chair Funding - 8,825 -Utilities (Note 5) - 301 310

151,753 226,515 207,248

EXCESS OF REVENUES OVER EXPENSES $ 1,772 $ 14,319 $ 15,440

The accompanying notes form an integral part of these financial statements


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SASKATCHEWAN BROILER HATCHING EGG PRODUCERS MARKETING BOARDStatement of Changes in Net Assets


2013 2012

NET ASSETS - BEGINNING OF YEAR $ 147,727 $ 132,287Excess of revenues over expenses 14,319 15,440

NET ASSETS - END OF YEAR $ 162,046 $ 147,727



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SASKATCHEWAN BROILER HATCHING EGG PRODUCERS MARKETING BOARDStatement of Cash Flows


2013 2012

CASH FLOWS FROM (FOR) OPERATING ACTIVITIESCash receipts from producers $ 202,563 $ 221,823Cash paid to suppliers (172,098) (169,139)Cash paid for administration (47,250) (45,000)Interest received 863 980

Cash Flows From (For) Operating Activities (15,922) 8,664

CASH FLOWS FROM (FOR) INVESTING ACTIVITIESIncrease in investment (322) -

Net change in cash and cash equivalents during the year (16,244) 8,664

CASH AND CASH EQUIVALENTS - UNRESTRICTED - BEGINNINGOF YEAR 109,235 100,571

CASH AND CASH EQUIVALENTS UNRESTRICTED - END OFYEAR (Note 3) $ 92,991 $ 109,235



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SASKATCHEWAN BROILER HATCHING EGG PRODUCERS MARKETING BOARDNotes to Financial StatementsYear Ended December 31, 2013

1. NATURE OF OPERATIONS

Saskatchewan Broiler Hatching Egg Producers Marketing Board (the "organization") is incorporatedunder The Agri-Food Act, 2004 with the purpose of administering the marketing of broiler hatchingeggs in Saskatchewan.

The association is a not-for-profit organization, as described in Section 149 of the Income Tax Act,and therefore is not subject to either federal or provincial income taxes.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

a) Production levy - The levy is determined by current and future budgets and calculated onbase quota holdings. The levy rate is established by management and requires producerapproval. The levy rate is $0.005 per egg set of base quota and is invoiced quarterly toproducers.

b) CHEP levy - The levy is $0.0029 per egg set. Since this levy is based on production, notbase quota, the organization charges producers based on ‘saleable chicks’. Saskatchewanuses the average of a 75% hatch, so a rate of $0.0039 per saleable chick is charged.

c) Interest - Revenue is recognized on an accrual basis. Interest on fixed income investmentsis recognized over the terms of these investments using the effective interest method.

Financial instruments

a) Measurement of financial instruments - The organization initially measures its financialassets and financial liabilities at fair value and subsequently measures them at amortizedcost. Financial assets measured at amortized cost include cash and accounts receivable.Financial liabilities measured at amortized cost include accounts payable and accruedliabilities.

b) Impairment - At the end of each reporting period, the organization assesses whether thereare any indications that a financial asset measured at amortized cost may be impaired.Objective evidence of impairment includes observable data that comes to the attention ofthe organization, including but not limited to the following events: significant financialdifficulty of the issuer; delinquency in payments; or bankruptcy. When there is an indicationof impairment, the organization determines whether a significant adverse change hasoccurred during the period in the expected timing or amount of future cash flows from thefinancial asset. If identified, the organization reduces the carrying amount of the asset to thepresent value of cash flows expected to be received. The carrying amount of the asset isreduced directly or through the use of an allowance account. The amount of the reduction isrecognized as a bad debt in the statement of operations. When the extent of impairment ofa previously written-down asset decreases and the decrease can be related to an eventoccurring after the impairment was recognized, the previously recognized impairment loss isreversed to the extent of the improvement, directly or by adjusting the allowance account.The amount of the reversal is recognized in the statement of operations in the period thereversal occurs.

(continues)


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Capital assets

The costs of capital assets are capitalized upon meeting the criteria for recognition as a capital asset,otherwise, costs are expensed as incurred. The cost of a capital asset comprises its purchase priceand any directly attributable cost of preparing the asset for its intended use.

A capital asset is tested for impairment whenever events or changes in circumstances indicate thatits carrying amount may not be recoverable. An impairment loss is recognized in the statement ofoperations when the carrying amount of the capital asset exceeds its fair value.

An impairment loss is not reversed if the fair value of the capital asset subsequently increases.

Capital assets are measured at cost less accumulated amortization.

Amortization is provided for on a straight-line basis over their estimated useful life. Amortizationcommences in the year the capital asset is placed into use.

The organization held no capital assets at the end of the fiscal year.

Management estimates

The preparation of these financial statements in conformity with Canadian accounting standards fornot-for-profit organizations requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during thecurrent period. Significant estimates include those used when accounting for the impairment offinancial assets and legal contingencies. All estimates are reviewed periodically and adjustments aremade to the statement of operations as appropriate in the year they become known.

Cash and cash equivalents

Cash includes cash and cash equivalents. Cash equivalents are investments in guaranteedinvestment certificates (GIC's) and are valued at amortized cost. Interest receivable related to theGIC's is presented separately on the balance sheet. The carrying amounts approximate fair valuedue to their short term maturity.


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3. CASH AND CASH EQUIVALENTS 2013 2012

Cash and cash equivalents - unrestricted $ 92,991 $ 109,235Cash and cash equivalents - restricted 48,322 48,000

$ 141,313 $ 157,235

The Saskatchewan Broiler Hatching Egg Producers Marketing Board is a member of the CanadianHatching Egg Producers (CHEP), a national marketing agency. The organization is required to payCHEP a levy that is set nationally based on production. As a result of its membership, theorganization is required to maintain a specified balance in a highly liquid investment to ensure theCHEP levies are secured for a duration of one year. The investment consists of a guaranteedinvestment certificate with an interest rate of 0.25% (2012 - .67%) and matures in eight months (2012- eight months) from the year-end date. This balance is shown as restricted cash and cashequivalents.

4. FINANCIAL INSTRUMENTS

The organization is exposed to various risks through its financial instruments and has a riskmanagement framework to monitor, evaluate and manage these risks on an annual basis. Thefollowing analysis provides information about the organization's risk exposure and concentration as ofDecember 31, 2013.

Credit risk

Credit risk arises from the possibility that parties may default on their financial obligations, or if thereis a concentration of transactions carried out with the same party, or if there is a concentration offinancial obligations which have similar economic characteristics that could be similarly affected bychanges in economic conditions, such that the association could incur a financial loss. Theorganization is exposed to credit risk from its producers. An allowance for doubtful accounts isestablished based upon factors surrounding the credit risk of specific accounts, historical trends andother information. The organization has a significant number of producers which minimizesconcentration of credit risk.

The maximum exposure of the organization to credit risk is represented by the balance as shown onthe balance sheet for cash and cash equivalents and accounts receivable.

Cash and cash equivalents: Credit risk associated with cash and fixed income investments isminimized substantially by ensuring that these assets are invested in major financial institutions.

Accounts receivable: Credit risk associated with trade accounts receivable is minimized by theorganization's diverse producer base. The organization monitors the amount of credit extended whendeemed necessary. Management assesses annually whether potential credit losses should berecognized based on existing factors.

(continues)


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4. FINANCIAL INSTRUMENTS (continued)

Liquidity risk

Liquidity risk is the risk that the organization will not be able to meet a demand for cash or fund itsobligations as they come due. The organization is exposed to this risk on accounts payable andaccrued liabilities.

The organization meets its liquidity requirements by monitoring cash flows from operations andholding assets that can be readily converted into cash.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuatebecause of changes in market prices. Market risk is comprised of currency risk, interest rate risk andother price risk.

The organization is exposed to market risk on its cash and cash equivalents.

Currency risk

Currency risk refers to the risk that the fair value of financial instruments or future cash flowsassociated with the instruments will fluctuate relative to the Canadian dollar due to changes in foreignexchange rates.

The organization does not transact in foreign currencies and therefore is not exposed to this risk.

Interest rate risk

Interest rate risk refers to the risk that the fair value of financial instruments or future cash flowsassociated with the instruments will fluctuate due to changes in market interest rates. In seeking tominimize the risks from interest rate fluctuations, the organization manages exposure through itsnormal operating and financing activities.

The exposure of the organization to interest rate risk arises from its interest bearing assets.Fluctuations in market rates of interest on investments do not have a significant impact on theorganization's results of operations.

Changes in risk

There have been no changes in the organization's risk exposures from the prior year.


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5. RELATED PARTY TRANSACTIONS

The most commonly encountered related parties in the organization include the following:

- Management or persons fulfilling a senior management function

- Directors or those having authority and responsibility for planning, directing and controlling theactivities of the organization

- Members of the immediate family of individuals described above. Immediate family comprises anindividual's spouse and those dependent on either the individual or the individual's spouse

- Another party, when a management contract or other management authority exists

During the year, the organization had a contract with the Chicken Farmers of Saskatchewan toprovide administration and management services. These services are provided on an ongoing basisat specified rates and are measured at the carrying amount in the normal course of operations. Thecontract also specifies occupancy costs to be charged on an annual basis regarding office space. Atyear-end an accounts payable exists to the Chicken Farmers of Saskatchewan for $5,467 (2012 -$5,219).

At year-end a contingent liability exists involving a director of the organization. See note 6 for furtherdetails.

6. CONTINGENT LIABILITY

Two producers have made legal claims against the organization concerning actions taken regardingthe marketing and distribution of quota. These matters are at various stages and their outcomes andan estimate of loss, if any, are not determinable. Accordingly, no amount has been recorded in thefinancial statements. Any potential amount payable in the future relating to settlement of thesematters will be recorded as an expense at that time.


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7. PRODUCTION QUOTA AUCTION AND TRUST FUNDS

Operating under The Agri-Food Act, 2004 and The Broiler Hatching Egg Marketing Plan Regulationsthereto, one of the Board’s roles is to facilitate the sale at auction of broiler hatching egg productionquota in the Province of Saskatchewan. Section 21.2(4) of the regulations provides that the proceedsfrom the sale of new production quota at auction shall be placed in an entity to be known as theBroiler Hatching Egg Industry Trust Fund (“the Trust Fund”). At year end, the Trust Fund had notbeen created.

In June 2001, the Board conducted an auction of 10,000 units of production quota for proceeds of$360,000 with these proceeds ultimately to be placed in the above-noted Trust Fund. Following is anhistoric analysis of the sources and uses of funds and the balance that will be transferred to the TrustFund when it is created:

Proceeds from sale of production quota and conversionquota $ 723,000

Payment to producer in conjunction with conversion ofbroiler hatching egg quota and the producer's exit fromthe industry (42,750)

Interest earned on funds on deposit in transit 13,075

$ 693,325

The above noted funds are held and are designated to be placed in the Trust Fund when it is created.Accordingly, since these funds are not an asset of the Board, they are not reflected in these financialstatements. No changes occurred during fiscal 2013.


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Saskatchewan Broiler Hatching Egg Producers - 2014 Budget

Chicken Farmers of Saskatchewan/Saskatchewan Broiler Hatching Egg Producers Marketing Board

224 Pacific Ave, Suite 201

Saskatoon, Sk. S7K 1N9

Phone (306)242-3611 Fax (306)242-3286

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