#207, 15252 – 32nd Avenue

Surrey, British Columbia, Canada V3Z 0R7

Telephone: (604) 542-9734 • Fax: (604) 542-9735 • Toll Free: 1-800-663-1461

Website: www.bcveg.com

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December 16, 2019 DELIVERED BY ELECTRONIC MAIL

Supervisory Panel BC Farm Industry Review Board

Bob Dhillon,

Prokam Enterprises Ltd. Murray Driediger

President and CEO

BC Fresh Vegetables Inc.

Dear Sirs/Mesdames:

RE: Vegetable Supervisory Review and Prokam Enterprises Ltd.

DELIVERY ALLOCATION The delivery allocation calculation the BCVMC provided in our submission are the correct numbers. Prokam gives the appearance that it lacks the specific knowledge it has on its delivery allocation in order to avoid responsibility and attempt to gain some advantage in the market access volumes (tons) it feels that it is entitled to. Prokam has shipped far in excess of its delivery allocation in periods A, B and C. All of the potatoes shipped in period C (Oct-1 to Jan 31) were shipped in October / November. The ‘TOTAL shipments transferred’ table in the letter issued to Prokam dated June 23, 2016 is being deliberately misrepresented as the actual delivery allocation that was being transferred for the 2016/17 Crop Year. This table represents five years of shipments for each period and category. To determine the delivery allocation that was transferred, divide each number by five. Delivery allocation is calculated as the average of the shipments over the past five crop years. Attached to this same June 23, 2016 letter are the actual delivery allocation reports (titled: Grower Product Shipments With Delivery Allocation Calculations For The 2016/2017 Crop Year’ that were also given to Prokam. These reports provide the actual delivery allocation that Prokam was entitled to for the 2016/17 Crop Year. You will note that the numbers from the ‘TOTAL shipments Transferred’ table in the letter tie into these reports under the line item titled ‘TOTAL’. The line item ‘2016/2017’ represents the delivery allocation volume (tons) for the 2016/17 Crop Year. Furthermore, there is an abundance of documents that provide evidence that confirm that Prokam is fully aware of the actual 2015/16 Crop Year delivery allocation that was transferred to Prokam from Hothi Farms Inc on November 20, 2015. In the attached book of documents you will find copies of the actual 2015/16 Crop Year Delivery Allocation Transfer Request form that was signed by Bob Dhillon. As written in the December 18, 2015 letter issued to Prokam, “Delivery Allocation is established on a rolling 5-year average of shipments. The actual values to be transferred will be calculated using the final shipments for the 2015/16 Crop Year. Once the total shipments are submitted by the transferor’s Agency, the Commission will send you a letter with your finalized 2016/17 Delivery Allocation values.” This referenced letter was the June 23rd, 2016 letter.

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OPPORTUNITIES TO INCREASE THE SIZE OF BC’s POTATO INDUSTRY “There are opportunities to increase the size of BC’s potato industry by replacing potatoes sold in British Columbia that are imported from outside British Columbia (which are not subject to the Commission’s minimum pricing), and by replacing potatoes sold in Alberta and Saskatchewan that are imported from the United States. Prokam is well-positioned to develop these opportunities.”

• What are these opportunities? What volume of fresh potato imports crossing into Canada through a BC port of entry remains within the province of BC, Alberta, and other provinces? What percentage of these imports are Russets, Whites, Yellows, Reds, Organic? What percent of these imports are imported by Alberta potato processors to produce french-fries and other processed potato products to supplement local supply? There are many unanswered questions about the “opportunity” that Prokam seeks to fulfill. The data referred to by Prokam does not answer these questions.

Potatoes are grown commercially in the USA in 30 states, but Idaho grows more potatoes than any other state, followed by Washington. North Dakota, Wisconsin, and Colorado are also leading producers. “Idaho is the top contributor to the total United States potato harvest, contributing almost a third of all potatoes grown in the United States. With [count] french fry factories Idaho is also the place where most potatoes for french fry production are grown and processed. Sixty two percent of all Idaho® potatoes are used to make processed products such as frozen and dehydrated; 29% are shipped fresh and 9% are grown for certified seed. The top potato varieties grown in Idaho (fall harvest 2016, by acreage) are: Russet Burbank (51.3%) Russet Norkota (16.7%) Ranger Russet(13.1%) All other varieties count for less than 3% of the Idaho Fall acreage.” Source: https://www.potatopro.com/idaho/potato-statistics “Washington is the state that ranks second in the United States for potato production, with a total yield of around 100 million cwt (5.2 million metric tonnes).

The top potato varieties grown in Washington (fall harvest 2016, by acreage) are:

o Russet Burbank (31.1%) o Ranger Russet (14.4%) o Russet Norkotah (13.3%) o Umatilla Russet (12.9) o Alturas (5.9%) o Frito-Lay varieties (4.2%) o Chieftain (3.4%) o Clearwater (3.0%) o All other varieties count for less than 3% of the Washington Fall potato acreage.”

Source: https://www.potatopro.com/washington/potato-statistics

The bulk of USA potatoes imported into Canada through a BC port of entry when Prokam is shipping potatoes are Russet potatoes, yet Prokam produces White, Red, and Yellow varieties.

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• Consumers buy local first, which drives purchase patterns by retail. Retailers favour purchasing programs that transition supply to the next available local source that meets or exceeds its own required product specs and food safety standard. As local inventories of potatoes are depleted in Alberta, Manitoba and BC, customers switch to USA imports. BC is first to market in western Canada with fresh product shipped from the field, and retailers switch from stored potatoes to fresh potatoes as soon as fresh product is available. BC potato producers have access to early land and have historically supplied product to the market over Period A (start of new crop to end of July). Supply is also abundant over period B and period C, but may be somewhat short in Period D when product has been in storage over several months and net returns to producers on product sold over this period are lowest. There is greater opportunity for Prokam to service period D supply, and offset USA imports over this period, than the advantage it presents by having access to early land. The market opportunity for BC grown potatoes is dependent on a number of factors including availability of supply from other growing regions. Alberta and western Canada is part of the natural market for BC grown potatoes. However, BC’s ability to compete in these markers is also subject to the availability of Alberta grown or Manitoba grown potatoes. In a recent article published by fresh plaza, Thomas fresh is actively pursuing the development of a local, Alberta grown, fresh market potato brand1. Consumers and retailers in Alberta want Alberta grown potatoes. As fresh market production in Alberta increases, the window of opportunity shrinks for BC grown product to supply this market. Source: https://www.freshplaza.com/article/9144300/new-alberta-grown-potato-line-launched/

• Prokam has not identified what consumer and retail demand it can satisfy that is not already serviced by the delivery allocation produced by the BC industry.

ORDERLY MARKETING “Economic Imperative” “The concept of orderly marketing should include the economic imperative of ensuring that the market is served by optimizing the production of products from British Columbia as opposed to imports. Every effort should be made by the regulator to encourage the new ideas, new production, new markets and new products that replace imports and add to the British Columbia economy.”

• Prokam has provided no evidence or compelling argument that the BC potato producers are not optimizing the production of products from British Columbia as opposed to imports, and, are not pursuing new ideas, new production, new markets and new products that replace imports and add to the British Columbia economy.

1 Article is included in the book of documents, pages 21-23

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PRODUCER-SHIPPER APPLICATION Prokam applies to the BCFIRB for an order that would permit it to market bulk potatoes directly to a wholesaler under a grossly inflated delivery allocation. The Commission submits that the application is a transparent attempt by Prokam to avail itself of the benefits of the orderly marketing system, without adhering to its requirements, at the expense of other potato growers who are operating within the confines of that system. At its most basic level, the orderly marketing system is premised on the exercise of the power expressly conferred on the Commission pursuant to paragraph 11(1)(a) of the NPMA, namely: the power “to regulate the time and place at which and to designate the agency through which a regulated product must be marketed”. In other words, the orderly marketing system operates to maximize producer returns by requiring producers to market through designated agencies. While the Commission has issued producer-shipper licenses in the past, these have been issued only in the most extraordinary circumstances, none of which are applicable here. These exceptions to the general requirement to market through a designated agency are to be avoided wherever possible, as they inevitably tend to undermine the maximization of producer returns by allowing some to circumvent mandated centralized marketing through designated agencies of the Commission, often at the expense of others. Prokam’s application is couched, vaguely and inaccurately, as an effort to capture “opportunities to increase the size of BC’s potato industry by replacing potatoes sold in British Columbia that are imported from outside British Columbia.” In addition, Prokam asserts that it must be granted the opportunity to operate outside of the designated agency system because “it is not possible for it to have a productive agency relationship with BCfresh at this time.” With respect, these assertions reflect an effort to disguise the true purpose of the application. First, there is no evidence to suggest that designated agencies cannot capitalize on “opportunities to increase the size of BC’s potato industry by replacing potatoes sold in British Columbia that are imported from outside British Columbia.” Second, any animosity that Prokam might have towards any designated agency cannot provide a sufficient basis to exempt it from the application of the orderly marketing system. The express purpose of the NPMA is “to provide for the promotion, control and regulation of the marketing of natural products.” Should BCFIRB allow Prokam to operate outside of the designated agency system, Prokam will be able to take market share away from other potato producers by directly marketing bulk potatoes to a wholesaler at a discounted price (because there is no intervening grading and packing by a designated agency). The disruptive effect on other producers cannot be overestimated. The Commission respectfully asks that the BCFIRB uphold the orderly marketing system by denying Prokam’s application. At a minimum, the Commission asks that the BCFIRB thoroughly consult with all other affected industry stakeholders before granting an extraordinary order that would permit Prokam to operate outside of the designated agency system at the expense of other producers Thank you. Yours truly,