AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 4, 1998

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[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): Members, I'd like to bring this meeting to order. This is the second in a series of meetings having to do with the farm income situation in the country. We started these hearings just yesterday, as you know. I think we had a good beginning, and I'm sure today's meeting will build upon that.

I certainly welcome the witnesses who are before us today. I'd like to indicate to the witnesses that we're trying to get to the bottom of this crisis, as I said yesterday. As parliamentarians, we would like to have a better feel for this situation. We've been told a lot of things. I'm sure most of them, if not all of them, are true. We're going to have to sift through everything to help the government respond to the situation, so anything you can contribute in a factual way will be to the better. You don't have to feel you have to embellish your story. I'm sure the story in itself is powerful, so all you will have to do is lay the facts before us as you understand them.

I'd like to tell the members that we have seven organizations represented today. They include: the Ontario Corn Producers' Association; the Ontario Seed Corn Growers' Marketing Board; the Ontario Soybean Growers' Marketing Board; the Ontario Wheat Producers' Marketing Board; the Ontario Bean Producers' Marketing Board; the Ontario Canola Growers' Association; and last but not least, the Ontario Coloured Beans Growers' Association.

We don't have representatives here from each and every organization, but we do have four representatives. They include Brian Doidge, marketing analyst for the Ontario Corn Producers' Association; Robert Down, president of the Ontario Seed Corn Growers' Marketing Board; Fred Brandenburg, secretary-manager of the Ontario Soybean Growers' Marketing Board; and Ken Nixon, chair of the Ontario Wheat Producers' Marketing Board. As I understand it, Mr. Nixon will be the chief spokesperson today.

Thank you for coming. We look forward to your presentation. After that, we'll start rounds of questions from our members.

Mr. Nixon, if you please.

Mr. Ken Nixon (Chair, Ontario Wheat Producers' Marketing Board): Thank you, Mr. Chairman, honourable members, guests and support staff.

First, we would like to say that our lack of in-house translation facilities and the short lead time for this meeting has prevented us from providing a French translation. We are deeply apologetic for that fact.

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As you mentioned, Mr. Chairman, we are representatives of three commodity groups from Ontario. We do not have direct participation, but the other groups we are representing are canola growers, bean growers, seed corn growers, and coloured bean growers.

Mr. Chairman, I'd like to start, and then I'll be turning it over to my colleagues one at a time. I would like to start with an overview of grains and oilseeds in Ontario in the Canadian context.

Compared to other Canadian provinces, Ontario has the largest, most diverse agricultural output, which is 26% of agricultural GDP in the latest year; the largest agrifood industry, with 39% of Canadian agrifood GDP; most exports, at 30%; it is one of Canada's largest producers of grain and oilseed crops; and it is a large producer of value-added products made from grains and oilseeds. The farm gate value of grains and oilseeds produced in Ontario is close to $2 billion.

The dominant crops are corn, soybeans, and wheat. This crop mix differs from other provinces, and other significant oilseeds and grains are edible beans, canola, barley, oats, and rye. Ontario grains and oilseeds are the basis of a strong livestock and poultry industry and have allowed for rapid growth in the manufacture of processed foods and industrial products.

Exports occur in the form of grain and oilseed value-added products, with both categories being the focus of major gains in recent years.

I would like to note especially that even where Ontario grains and oilseeds are not exported directly, prices are set directly in the international market, given the relatively small or non-existent impediments that exist to two-way international trade between Ontario, the United States, and other countries.

Canadian and Ontario grain and oilseed producers were directly hit by the international grain and oilseed subsidy war of the 1980s and the early 1990s. Prices in this period plunged to well below those of the Great Depression of the 1930s in inflation-adjusted dollars. Even a countervailing duty on U.S. corn imports during the late 1980s, as an example, imposed because of the injurious effects of American grain export and production subsidies, could not insulate Ontario corn growers from damage, though it did illustrate the magnitude of the price distortion. The result was a series of short-term $1 billion ad hoc programs for Canadian grain and oilseed producers and improvements in Canadian farm income support programs.

A series of crop shortfalls in the States and elsewhere led to a temporary improvement of global grain and oilseed prices during the mid 1990s. The WTO, or World Trade Agreement, of 1994 may have had a beneficial effect on prices, although this is unclear. The WTO agreement did cap foreign subsidy programs and improved procedures for handling international grain trade disputes, but it was also accompanied by the elimination of most acreage set-aside programs in the United States. Grain and oilseed set-aside requirements have also been reduced in the European Union.

Grain production has since risen to record or near record levels in the United States and the European Union. Subsidy levels, including export subsidies, are again on the rise, and grain and oilseed prices are now as low as ever in real value. For example, the present cash price for Ontario corn is about $2.75 a bushel, or $110 per tonne, before drying deductions, which is well below the average cost of production of about $3.30 per bushel or $130 per tonne.

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Mr. Chairman, at this point, I will turn it over to Ron MacDougall.

Mr. Ron MacDougall (Director, Ontario Soybean Growers' Marketing Board): Thanks, Ken. I will give you a little history of the safety net programs and where we are today.

Prior to 1991, Canadian grain and oilseed producers' income was stabilized by two programs: the Agricultural Stabilization Act, known as ASA, which supported income at a level equivalent to 90% of the previous five-year average prices; and the Western Grain Stabilization Act, commonly known as the WGSA, unique for a select group of prairie grain crops, which provided support at 100% of the five-year average. Both were found to be seriously inadequate when prices were depressed for several successive years of trade subsidy and price wars. This is why so many large ad hoc payments were needed in the late 1980s and early 1990s. It is also why the Government of Canada provided leadership in developing and introducing new safety net programs in 1991, to eliminate the need for ad hoc programs and the unfair justice and political dissatisfaction that normally accompanied them.

Two new programs were introduced in 1991, the gross revenue insurance program, commonly known as GRIP, introduced as a primary program to help Canadian grain and oilseed producers survive in the face of continuing large subsidy practices in the U.S. and E.U. The net income stabilization account, known as the NISA program, is designed to provide a lower level of support for producers of all Canadian farm commodities. Crop insurance was envisioned to continue as a third class of program designed to stabilize crop farming income. In terminology that followed 1991, GRIP came to be defined as a companion program to NISA and crop insurance. But during the depressed grain price years of 1991-92 and 1992-93, GRIP was by far the most important program for Canadian grain and oilseed producers.

In our view, it is tragic that the GRIP program was allowed to expire beginning in 1995 in some provinces through a combination of short-sightedness and, in some cases, weak administration. GRIP does continue in a modified form in Quebec through the ASRA program and in Ontario through the market revenue insurance program.

The Ontario market revenue insurance program has worked as originally intended, with funds being accumulated in years of adequate prices to address income shortfalls in periods of depression, such as we are in now. Producers pay one-third of the total payouts, as was originally intended.

NISA has also generally worked well, with the number of eligible commodities having grown in most provinces. The decision-making process tends to be dominated by prairie grain and oilseed interests, which sometimes makes it difficult to introduce or maintain features that are important to other provinces. But in general, this is a good program, functioning as it is intended, to provide a low level safety net support for much of Canadian agriculture.

I'd like to emphasize the next point. NISA is not, however, a substitute for GRIP. They're partner programs and work quite well together—NISA levelling out the income support and GRIP being there when the low-level prices cause major support losses in grains and oilseeds.

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Crop insurance has changed dramatically in some provinces since 1991, with producers no longer paying half the premium costs. Because of a wide variation in program design across the provinces, crop insurance has become effectively another companion program.

Future changes, such as the optional unit feature offered in public crop insurance programs in the United States, are needed in Ontario to make the program more suitable for the larger farmers—generally younger farmers and/or those more heavily dependent on farming as a dominant source of family income.

I'll turn it back to Ken Nixon now.

Mr. Ken Nixon: Mr. Chairman, I'd like to ask Brian Doidge to continue.

Mr. Brian Doidge (Market Analyst, Ontario Corn Producers' Association): Mr. Chair, I'll start off comparing Ontario support versus other jurisdictions.

A study that I happened to complete a year ago compared average farms in Ontario from 1992 to 1996 with support programs as they existed in other jurisdictions. On average, the combination of GRIP, known in Ontario as market revenue insurance, and NISA gave Ontario corn, soybean and wheat growers about the same level of income support as if they were supported by grain and oilseed safety net programs in Quebec and in the United States.

European programs provide support about six times larger than in Ontario. Support for Ontario producers with existing Canadian and Ontario programs comes about 50% from GRIP and 50% from NISA. However, major changes have occurred in recent weeks in the United States with the level of support provided through the 1996 Farm Bill, known as the Federal Agriculture Improvement and Reform Act or FAIR Act, having been recently increased substantially—an expected 50% increase in 1998 payments, plus the option for U.S. farmers to collect all their 1999 payments in 1998 as well—and payment of substantial loan deficiency payments linked directly to the depression in prices of corn, soybeans, wheat and other farm crops. Ontario grain and oilseed producers are no longer on a level playing field with U.S. counterparts.

Because of the different crop balances, for example, few corn and soybean acres are in production in western Canada. Comparisons between Ontario and western Canada are not simple, a problem compounded by the fact that money formerly used to support GRIP has been used for other purposes in the prairie provinces: more government money for crop insurance in Saskatchewan and Manitoba; and a new disaster support program, plus a one-time special payment for forage producers in Alberta.

In addition, the $1.6 billion, plus $300 million for infrastructure change, that the Government of Canada provided to prairie farmers as compensation for the elimination of the Crow or the Western Grain Transportation Act subsidies, complicates calculations. Presumably this large sum, about three times the size of the annual WGTA benefit, was allocated to address income adjustment needs over several future years.

Recent unpublished data from the policy branch of Agriculture and Agri-Food Canada show that 1998-99 federal spending on safety net programs is projected to be about $141 million for Alberta, $252 million for Saskatchewan, $91 million for Manitoba, $64 million for Quebec, and $105 million for Ontario. This wide range in federal support exists despite the fact that annual cash sales for farm commodities eligible for safety net support—and that is supply-managed commodities excluded—are roughly the same for Alberta, Saskatchewan and Ontario, at about $5 billion. Corresponding receipts are about half as large for Manitoba and Quebec. This relatively low level of federal safety net support for Ontario is consistent with other Agriculture and Agri-Food Canada data.

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The latest estimates available are for 1997-98, and they show that the Government of Canada provides $8.69 to Ontario for every hundred dollars of agricultural GDP as compared to $20.91 for Saskatchewan, $17.74 for Manitoba, $13.73 for Quebec and $12.93 for Alberta. Only B.C. at $6.93 is less than Ontario, and the average for all of Canada is $14.40. I'll restate that the level of support in Ontario is $8.69.

With that, I'll turn it back to Mr. Nixon.

Mr. Ken Nixon: Thank you, Mr. Doidge.

Mr. Chairman, I'd like to turn it over to Fred Brandenburg, who is going to continue our presentation.

Mr. Fred Brandenburg (Secretary-Manager, Ontario Soybean Growers' Marketing Board): Thank you, Mr. Chairman.

To assist the committee in its deliberations, and also in reference to the current federal-provincial negotiations on future safety net programs, I would like to highlight some principles and priorities that we believe the national farm safety net strategy must recognize.

The first one is we believe there is a need for an overall basic program such as NISA to provide support for normal fluctuations in farm income, plus companion and crop insurance programs to address special needs for specific sectors. We also feel the strategy must recognize the need to help Canadian producers survive and compete despite huge subsidy programs provided by the United States and the European Community. Such subsidies are currently much larger for grains and oilseeds than for most other farm commodities. We also believe the strategy must recognize the need to allow for provincial and/or regional flexibility in program design within limits that are set nationally.

Also, there is a need for federal-provincial co-funding of safety net programs. The current formula of at least 40% provincial funding seems appropriate, although it is not enforced for all provinces. We understand some provinces pay more than 40%, and Saskatchewan, according to estimates from Agriculture and Agri-Food Canada, pays about 34%.

We also believe it is important to recognize the need to ensure that the federal government does not distort inherent differences in competitive advantages among provinces by continuously funding agriculture and farm safety net programs to a greater extent in some provinces than in others. We believe the difference in competitive advantage certainly is reflected in other ways, notably the price of land.

It's also important to recognize that because of the huge variation in provincial crop insurance programs, a variation that reflects the huge size of Canada and the wide range in program needs across regions, crop insurance should be included with companion programs in the allocation of federal safety net funds among provinces.

We also believe there must be a formula that allocates federal safety net funding fairly among provinces. The present formula, which allocates federal funds, firstly, on the basis of NISA contributions and, secondly, on the measure of relative risk, with the remainder allocated among provinces to fund companion programs based on relative sales on non-supply-managed commodities, is a good start.

However, it is seriously flawed in that the $180 million federal allotment for risk, about half of which goes to one province, assumes that crop insurance program costs equate to relative financial risk, which is not true. It also fails to recognize differences among provinces in the efficiency of crop insurance program delivery or allocation of premium costs, for example, what is paid by producers as a percentage of the premium cost.

In our view, a fairer allocation would involve allocation of all federal funds, except those needed to support NISA, on the basis of annual provincial sales of non-supply-managed commodities.

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The last principle I would like to bring up at this time is to recommend that federal funds needed to support advance payment programs, which are currently up to $40 million per year, should not come out of the safety net budget of Agriculture and Agri-Food Canada. Advance payments are a marketing program, not a safety net program, so we would like to see that budget allocation changed.

I'll turn it back to Mr. Nixon.

Mr. Ken Nixon: Thank you, Fred. I'll ask Bob Down to complete our presentation.

Mr. Robert Down (President, Ontario Corn Producers' Association): Thank you very much, Ken. I wanted to clarify who I am. I think, Mr. Chairman, you indicated another organization. I'm president of the Ontario Corn Producers' Association. I hope that you can bear with me. As you can tell, I have just developed a bad cold. I happened to be in Ottawa about a week ago and I think Rose-Marie passed her cold on to me.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Could we ask for more details?

Mr. Robert Down: You'll have to check with Paul Steckle.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): I was wondering whether it's all the hot air around here that bothers you.

Mr. Robert Down: Further to the above, and pertinent to the Ontario grain and oilseed producers, we would ask for the following.

First of all, we would like the continuation of the Ontario GRIP—market revenue insurance program, as we call it in Ontario—as presently structured and funded at least until the completion of the new round of international trade negotiations beginning in late 1999. If this round results in the elimination of equivalent programs in the U.S. and the European Union, then GRIP could be phased out at the same time.

Second, we would ask for approval for the introduction of a new program delivery process for market revenue insurance in Ontario by which a high rate of interest could be generated on GRIP account funds beyond what now is paid by the Government of Ontario and by which the risk of huge fund payouts could be reduced by reinsurance and other risk-reducing strategies. This would ensure that the relatively small amount of money that governments now commit to market revenue insurance would go further, even with present and projected low grain and oilseed prices.

Third, we would ask for approval for Ontario to introduce improvements in crop insurance programs for grain and oilseeds to more closely match crop insurance programs in the U.S., which will make these programs more useful for larger full-time farmers in Ontario. The requested changes are small relative to program changes introduced for crop insurance in Manitoba, Saskatchewan and other provinces within the last two years.

Others have suggested the introduction of a new national disaster safety net program, where support would be provided for all producers at a level equivalent to 70% of the previous three-year average gross margin. That's the net profit plus other fixed costs such as interest rate and property taxes. Such programs already exist in Alberta, Prince Edward Island and British Columbia, funded by provincial funds plus federal companion funds. We support the present practice of allowing provinces to offer such programs as companion programs. Safety net programs should be designed to meet the specific needs and goals of individual provinces. However, we question the value of this type of program for Ontario, especially for grain and oilseed growers. The reasons are as follows.

First of all, 70% of a three-year average is worse than the old ASA and WGSA programs abandoned in the early 1990s. While they might bring short-term relief based on higher grain prices in the mid-1990s, they can be sure to fail in a year or two when these higher prices are replaced by much lower values than the base formula. The result would be increasing demands for more ad hoc support, such as happened with the ASA and the WGSA a decade ago. The process would be complicated on the Canadian prairies, given the decline in crop prices caused by the elimination of transport subsidies—that is, how do you calculate the benefit of the $1.6 billion compensation program.

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Two, the proposed program would discriminate against farmers in provinces where farm income is more diversified. For example, few farmers who grow grains and oilseeds for commercial sale and who also produce supply-managed commodities would likely benefit, regardless of how low grain and oilseed prices drop. The proposed program also discriminates against producers in more productive regions of the country where land costs are high. When these costs are included in gross margin calculations, they mask year-to-year variation in the amount of money available to support a farm family. Land costs and per-acre productivity are generally higher in Ontario than in most other provinces.

Three, the program is vastly inferior to the GRIP program, which was abandoned by several provinces only a few years ago. We are supportive of the right of other provinces to introduce programs such as this out of companion program funds.

Now I'll turn it back to Ken.

Mr. Ken Nixon: Thank you, Bob.

Mr. Chairman, the Ontario grain and oilseed producer groups express their appreciation for this opportunity to meet with the members of the Standing Committee on Agriculture and Agri-Food of the House of Commons. When our presentation is translated and made available to the members, it will include several appendix materials, which I will not list, but I'd like to point out that there is supporting documentation for all of the facts and figures that we have listed today.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Nixon.

My apologies to Mr. Down for tying his name to the wrong organization.

Mr. Robert Down: No problem.

The Chairman: Despite your cold, you did a fine job.

We'll start our rounds of questions with Mr. Hoeppner for seven minutes.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

Welcome to the committee. The first question I want to ask of all of you is, have you compared the farm crisis in Ontario to that of western Canada? What is similar and what is different?

Mr. Brian Doidge: I'll start off, but I'm sure the other fellows have some ideas, too. What we've seen is that, first of all, the crisis is very similar in nature. It's derived and caused by probably the same factors. Mostly, those low commodity prices are attributed to surpluses originating in the U.S. primarily, but also in Europe, for grains and oilseeds, particularly wheat but also other feed grains such as feed barley.

A second factor is the collapse of export demand, which can be attributed partly and probably mostly to Japan and Taiwan and Asian currencies and financial conditions. That has hurt export demand, and that has put pressure back on commodity prices both in Canada and in the U.S.

So is the crisis similar? In our opinion it is. The crisis originated outside the boundaries of Canada, and safety net programs in Canada were designed to help farmers in that situation.

Our submission to you is that we're not in favour of ad hoc support for a number of reasons. We think there's a good structure in place certainly in Ontario, but right across Canada, of a three-pronged safety net support program. We would not be in favour of dismantling that, turning the clock back a decade towards ad hoc programs.

Mr. Jake Hoeppner: The next question is, what percentage of wheat and corn do you grow compared to special crops? What comparison is there for, say, the feed grains or milling grains compared to special crops such as canola, soybeans probably in your area, beans, lentils, whatever?

Mr. Brian Doidge: I think what you're really asking is what's the mix of crops in Ontario, more or less.

Mr. Jake Hoeppner: Percentage-wise, acreage-wise, if nothing else.

Mr. Brian Doidge: Acreage-wise soybeans surpassed corn acreage about four or five years ago. Corn acreage this year is about 1.8 million acres, soybeans is about 2.1 million acres, and wheat is around 750,000 acres. Once you get by those big three, acreages drop dramatically.

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Mr. Jake Hoeppner: That brings me to the next question. Which crops are covered under your MRIP, or market revenue insurance program? Is it all of them or just certain crops?

Mr. Brian Doidge: There are specified crops that are covered. This includes all the major crops, such as corn, soybeans, red wheat, canola, spring grains, sunflowers, and edible beans. There are other minor acreage crops that aren't included. But all the big field crop commodities are represented.

Mr. Jake Hoeppner: Does that not give you as much protection as the old GRIP program we're used to? As you know, the GRIP program worked well in Manitoba. Saskatchewan really distorted it and ruined it, and Alberta had similar problems. I'm just wondering what the difference is between your market revenue insurance program and the GRIP program.

Mr. Robert Down: There really isn't much difference. There have maybe been a few refinements made to it over the years, but it's basically that program. From our point of view, that's our disaster program. If most of Canada still had that program in place, it would maybe help in the situation we're in now.

Mr. Jake Hoeppner: With that type of coverage you are still in financial difficulty in Ontario, and you feel that you need better insurance programs or revenue insurance programs.

Mr. Ken Nixon: Mr. Hoeppner, we would like the opportunity to refine those programs in order to make them better.

With regard to a full-blown crisis being in the wings, because of the three-tiered program we have, which includes the market revenue program, which covers price risk; crop insurance, which covers production risk; and NISA as an overall foundation for the two, currently we don't find ourselves in a crisis in the grain and oilseed sector. There are other sectors of Ontario agriculture that are really feeling the pinch, most notably pork. But because we have left the structure of the original farm safety net program of 1991 in place, we are not in bad shape at the moment.

Mr. Jake Hoeppner: So you haven't been as foolish as western Canada has been.

Mr. Ken Nixon: I believe that is fair.

I'll turn it over to Mr. MacDougall, who wants to make a comment.

Mr. Ron MacDougall: I won't say that the west was foolish, but I will say that we in Ontario who are involved with agriculture grains and oilseeds chose to keep our companion dollars in programs such as the market revenue insurance program for years like this year and next year coming up, where we're going to have price disasters because our price of our crops is based on the global marketplace, the same as it is in the west now.

Mr. Jake Hoeppner: So you need modification on that in order to protect you against the real depression prices we have right now.

In Manitoba, as you know, we had $40 million or $44 million left in the kitty when GRIP ended. I thought that it was foolish, because it worked very well in Manitoba, and I know it would help my farm tremendously this year if that were in place. NISA is not protecting my sons, who took over the farm in 1991, because they haven't had the chance to put in funds to tide them over. So that's a big problem. Plus the livestock industry in Manitoba, especially hogs, is really suffering, and I don't know what's going to happen there.

I would like to throw out one idea to you, even though you're not involved in livestock. I've had a lot of farmers ask me why we can't have an interest-free advance program for livestock like we have for grain. Would that help?

Mr. Robert Down: I'd like to just respond to your previous question a little bit before I answer that second one.

The Chairman: We're out of time, but I'll give you time for one answer.

Mr. Jake Hoeppner: We'll come back to you.

The Chairman: I don't think it's fair to the witness, Mr. Hoeppner, to ask questions when you're more or less out of time. You have to look at the clock yourself.

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Mr. Robert Down: Okay. I'll answer the livestock one, then, because the answer to the other one is partially in the brief. It explains what we want to do to help modify the market revenue plan.

With the advance payment program, because a lot of our livestock producers grow their own corn and grain for their own livestock, they do take advantage of and have continually increased their participation in the advance payment program. So they do get a fair bit of support out of the advance payment program in the livestock sector where they're growing their own crops for their feed.

Mr. Jake Hoeppner: Thank you very much.

The Chairman: Thank you. Perhaps we can get the answer to some other questions, Mr. Down.

Mr. Canuel, you have seven minutes.

[Translation]

Mr. René Canuel (Matapédia—Matane, BQ): Thank you, Mr. Chairman. Over the past few years, the producers who have come to testify here, whether they grow grain or some other crop, always seem to be telling us about the major difficulties confronting them. However, as we all know, the Canadian government helps these producers. I would like to know whether American government help is comparable to that provided by the Canadian government. What comparison could we make between the two? I took a brief glance at the documentation on American agriculture, and I got the impression that the American producers experienced fewer problems. Perhaps I'm mistaken. I'd like to hear your opinion on the matter.

[English]

Mr. Ken Nixon: Mr. Chairman, I would like to refer that to Mr. Doidge, our expert in U.S. programs.

Mr. Brian Doidge: The translation was missing in the very first part of the question, but I think I have the gist of it. You were asking for a comparison between U.S. programs and those programs that exist in Ontario and Canada.

Essentially, when I looked at the years 1992 through 1997 I used two actual farms in Ontario, a large one of 3,000 acres and a small one of about 300 acres, and then I had a benchmark farm, which was the average size of all the farms in Ontario, about 800 acres, give or take.

When I ran those farms in the U.S. programs and I compared it to the ASRA program in Quebec and I compared it to the programs in the European Union as well as GRIP in Ontario and several other programs, including the farm income disaster program in Alberta, the result was that the Ontario farm fared best in Europe, and then after that the United States, Quebec and Ontario programs were about equivalent, as long as Ontario maintained NISA and GRIP together. You had to have the two to be equivalent.

That changed in the last three months. The subsidies that the U.S. has endowed their farming population with in the last couple of months in particular have been tremendous.

So I took those same three farms again and I applied all the U.S. subsidies that have taken place in the last six to eight months. A small acreage farm is about 350 acres. You might be interested in knowing that between a combination of the support payments for 1998, the 1999 programs that were brought forward that you can access as of October 1, the loan deficiency payments, which would be the actual payments as of October 22 this year, accumulated to date, and the new market loss payment, which is a new subsidy the U.S. has introduced, this combination gave to that particular farm another $30,354.

The large acreage farm—I hope we're all sitting down for this—would have received $316,000 in additional subsidies as of October 1, 1998. The average benchmark farm in Ontario would have received an additional $77,500. At least two of those elements are new, unexpected money.

So to answer your question, the programs in Ontario don't come anywhere near those kind of payouts, nor do the programs in Quebec, nor do the programs in Alberta. The U.S. farmer has received a lot of new-found money in the last couple of weeks.

[Translation]

Mr. René Canuel: What are the main differences between grants given in Ontario and those given in Quebec under ASRA?

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[English]

Mr. Brian Doidge: There's not a lot of difference in total. It depends on how they're triggered in Quebec. In Quebec, for example, the program payouts are triggered by seeded acreage and your regional average payout and an assumed cost of production, giving a skilled labourer's rate of return or wage rate. It's a different mechanism for determining it, but in the end analysis the GRIP program and NISA in Ontario are somewhat similar on a payout level to ASRA in Quebec. It varies by commodity. Soybean is more beneficial to grow in Ontario. Corn is more beneficial to grow in Quebec.

Mr. René Canuel: Merci.

The Chairman: Thank you very much, Mr. Canuel. We will go now to the government side and Mr. McCormick for seven minutes.

Mr. Larry McCormick: Thank you, Mr. Chair, and thank you, gentlemen, for being here. I apologize for coming in late. I was sent to an HRD standing committee for a possible vote. I also have an interest and I sit on that committee because I see a slight window of opportunity to get some more attention with our unemployment employment dollars for programs in rural Canada.

However, we're not on that committee today, so I'm here where I would like to be.

As I came in a little late, Brian was speaking on the government dollars. Was it support? You compared the $8.69, or whatever, for Ontario, compared to the other provinces.

Let me just say it's been good around the table at these hearings. We haven't been political. We haven't been regional; we don't want to be. So I would just like to ask that for my own information, to start with.

Mr. Brian Doidge: When you finally do get a copy of the brief what the Ontario grain and oilseed producer groups are pointing out is that we believe in equity across Canada. We believe in the three-pronged program support system we have in Ontario. We don't want that to be dismantled, but our primary focus is on equity.

We define equity in accessing federal support dollars in terms of the amount of gross domestic product produced in the province by agriculture. We feel that it ought to be equitable across the whole country, based on agriculture as a percentage of GDP as the measure. All that whole reiterating of $8.69 for Ontario, for example, was meant to prove or show is that the level of federal support is not equitable across Canada. It varies substantially.

Mr. Larry McCormick: We have some time here today, so could I just ask you to clarify that? Why is this situation so distorted, perhaps for all the right reasons or for all the wrong reasons, in the different commodities between the provinces in, say, Alberta and Ontario? Fill me in; let's hear it from Ontario.

Mr. Brian Doidge: I don't want to dominate the floor all the time. You asked a question on how we ended up in this situation.

It's a combination of a number of factors. It's a combination of the types of programs that exist across the different provinces and the way the federal safety net funding is set up. What comes off the top first, what is defined as a companion program, for example. There are also some moneys that move outside that safety net program that are not counted.

In the west in particular, it also comes back to the handling of the WGTA or the Crow buyout. How does that impact on this? And whether or not it's included in safety net supports— we're not suggesting that we go back and try to redo whatever transpired in the past. All we're saying is it would be our position that federal support funding ought to be equitable across all provinces, based on the formula that's negotiated. The money goes into NISA first and then goes into companion programs after that.

Mr. Larry McCormick: I'm happy with your statement on that. We want the funding, and we want to talk later about the funding getting to where it's most needed.

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For example, in southwestern Ontario we have a major production of grains that happens there, and of course you've given us some figures here today. In fact, it's amazing that, as some people have said, southwestern Ontario produces as much grain, in value, as Manitoba does. And this is fine. I'm not trying to be a disturber here, but are you saying that with this crisis, our grain producers in Ontario are today, and will be in future, better off than the same grain producers in Manitoba?

Mr. Robert Down: No, I don't think that would be the correct statement. I think we made the statement in here that it affects us in the same way as it does the producers in the west. The lower prices affect each individual farmer—

Mr. Larry McCormick: I just want to put that on the record.

Mr. Robert Down: It affects us the same.

Mr. Larry McCormick: Thank you very much.

Mr. Chairman, do I have time for one more question in this round?

The Chairman: Yes, you have two minutes to go.

Mr. Larry McCormick: Thank you.

As we've had many groups come before our committee in the last few days, and more will in the next few weeks, we're going to hear different suggestions—and we need to and want to—in regard to this crisis, and about what we should do and how we should apply these moneys, small as they may be, when we do find them. That's why I'm really glad to hear about the hearings, or the meeting that's going on today, as has probably been declared here earlier.

It's been suggested we can't be all things to all people, and you may have to answer part of this in the next round. But we need to target some of this money to those who most need it. This is fine, and people have said that here. But then we don't want to penalize those people who have run their business in such a way that they may not be in crisis today. I wonder if you have any further comments on that.

Mr. Ken Nixon: The primary comment we can make, sir, is that if there is some sort of renewed assistance or new assistance package, it should be distributed equitably amongst the provinces to fund existing programs of their choosing.

Mr. Larry McCormick: Therefore, all people might benefit equally, accordingly? I'm not trying to put words in your mouth here. I'm just trying to learn. This is a real crisis, and it's started. We won't have it all solved by the end of this calendar year, I'm sure.

Mr. Brian Doidge: I think if you adopted the kind of position we're submitting to you, federal funding would flow to a province and there would be a certain compensation program. There would be the NISA program—

[Editor's Note: Inaudible] —Beyond that, the definition of companion programs means the program is structured to meet the specific needs of agriculture in a specific province. However, the level of funding is determined by an equitable formula, so once that's determined, it's the dollars that flow to the province. What the province decides to do with it is their business, and the farmers in that province will decide what kind of companion programs—

Mr. Larry McCormick: As long as the farmers are involved, great. Thank you, Mr. Chair.

The Chairman: Thank you, Larry.

Can I just pursue one point you made, Mr. Doidge? Earlier, you were alluding to the fact that Washington's farm programs are richer than ours, right?

Mr. Brian Doidge: Yes, sir.

The Chairman: I don't think you were trying to tell us that because of that some American farmers might be able to buy or drive better cars than some of their counterparts north of the border. I think you're trying to indicate how that impacts on the international marketplace, and how that then impacts on Canadian farmers. Can you just spell that out a little further, so that people, particularly in the urban areas of Canada, get a better understanding of how that impacts on the international marketplace? Of course Canadian farmers are a player in that marketplace.

Mr. Brian Doidge: I think you've done a good job explaining the impact, but maybe I'll try to expand on it a bit.

In the world trading field that we have in agriculture because of the WTO arrangements and agreements, we all compete. If one particular segment is being more heavily subsidized than the other competitors, they have an unfair advantage in that they can exist through low commodity prices for a much longer period of time.

• 1625

The U.S. right now has dumped a lot of money into U.S. agriculture. The argument isn't whether they needed it or not, it's whether all those subsidy programs are non-commodity-distorting ones. Our answer would be no. Therefore, we don't think they all fit within the guides that the WTO's current agricultural agreement says they set. So you have U.S. agriculture being, in our view, heavily subsidized by using mechanisms that don't quite fit with the WTO agreement as currently negotiated. That makes it an unfair and distorted playing field. Unfortunately, they also set world prices for most of the commodities our producers grow.

The Chairman: Thank you for that.

Mr. Proctor, you have five minutes.

Mr. Dick Proctor (Palliser, NDP): Thank you very much.

I think there's probably general agreement among all parties that there probably are some American farmers who are doing very well as a result of the announcements that were made on October 14. Jack Wilkinson, the head of the CFA, was sitting yesterday where Mr. Doidge is now sitting, I think. If I understood him correctly, he was talking about a program that would kick in when there was a drop in revenue on the farm year after year that exceeded 30%. He's calling that a natural disaster relief program. I'm wondering whether the group before the committee today would agree with that in general terms.

Mr. Ken Nixon: Mr. Proctor, I'll refer back to our presentation. In Ontario, given the three-pronged structure that we have left in place for our safety net program, we look unfavourably at the 70% disaster program. It's worse than the old ASA and WGSA programs, which were abandoned in the early 1990s. That's because if you have more than one or two years of sustained low prices, then the support price, or the supporting income in this particular example, would drop to a point where it's no longer really a viable program.

Our market revenue program is based on a 15-year moving average in Ontario, and we find that more favourable. It's more visionary, or long term, in its spectrum.

Mr. Dick Proctor: Thank you. The Minister of Agriculture said yesterday in the House that there's no question that Manitoba and Saskatchewan are the most severely affected at the moment. So is this group saying that the answer to the problem is essentially that we should re-establish the GRIP program as a companion program along with NISA and crop insurance? Would that solve the problem, in your opinion?

Mr. Fred Brandenburg: I think the point of our brief is that because of the differences in different provinces, there should be provincial flexibility. We feel a GRIP-type program, such as market revenue, is appropriate for Ontario. It's doing the job for Ontario's grain and oilseed crop sector, the field crop sector. Other provinces have chosen other mixes of programs. There's the disaster program that Mr. Wilkinson mentioned. There's a similar type of program offered in Alberta, Prince Edward Island, and British Columbia. Those provinces have chosen to put their companion funds into those types of programs.

So we're not saying that the reinstatement of GRIP is the answer for everyone, but there should be some flexibility for meeting regional differences.

Mr. Down has a response.

Mr. Robert Down: I think that's a key point. Another key point is the diversity that we have here in Ontario, where many farms are quite diversified. As we pointed out in our brief, that's to the disadvantage of Ontario as a whole when you start taking averages. We don't think that's fair, not only for Ontario agriculture but for those in some other provinces as well.

• 1630

So that's why it's very important that if there is some type of national program, as Fred has pointed out, provinces should have the opportunity for there to be some type of equity funding. Provinces would then be able to mould that program that would best suit their farmers in their own province.

I know several people from out west in Manitoba and so on who have suggested to me in the past that probably they should still have the GRIP program, but really, it's not going to come back as GRIP, it'll come back as something different.

Mr. Dick Proctor: Yes, it will.

On the diversification, Mr. Down, we can talk about which came first, the chicken or the egg. But the reality of the Crow benefit, the Crow rate and all that, meant that it has only been in the last few years that prairie farmers really have been encouraged to diversify. So we're a long, long way behind our Ontario counterparts, and I think that needs to be recognized.

Mr. Robert Down: Absolutely.

Mr. Dick Proctor: Thanks.

The Chairman: Thanks, Mr. Proctor.

Mr. Borotsik, you have five minutes.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

Just as an opening comment, I'm sure these gentlemen recognize that a government with vision put in NISA and GRIP in the first place. That government doesn't sit in those benches today; however, it was nice to have somebody with vision look to the future with respect to GRIP and NISA.

I have a question for Mr. Doidge. You talked about equity and being fair with respect to any type of program that's going to be set up on a national basis. You also talked about an equitable formula. I take it from this that if there were $460 million, which is what's being proposed by the CFA, and if that money should come to the table, then that money should be split equally among all 10 provinces based on a formula. Can you give me a better understanding as to how that formula, in your mind, should be devised?

Mr. Brian Doidge: Yes, I think it's in our brief. We apologize for not having it for you. We're defining equity as a percentage of the contribution of agriculture and GDP by province.

Mr. Rick Borotsik: Okay, so we're talking about the GDP, then.

Mr. Brian Doidge: Yes.

Mr. Rick Borotsik: That's gross volumes of agricultural product.

Mr. Brian Doidge: That's gross domestic product. That's right.

Mr. Rick Borotsik: So you can look at the percentages of the contributions of each province for that, and then that percentage would simply be a slice of the $460 million. Is that correct?

Mr. Brian Doidge: In a nutshell, yes.

Mr. Rick Borotsik: Is that all the GDP of all agriculture, including all of supply management?

Mr. Brian Doidge: No. The way we've interpreted this, to try to be fair, is that we removed supply management from the equation. So we're comparing similar GDP production across provinces.

Mr. Rick Borotsik: Okay. I don't know who it was, it may or may not have been Ken, but someone mentioned that the contribution from Saskatchewan for agricultural programs currently is around 34%. That's the number I can recall correctly.

Can you tell me what the contribution from Ontario currently is with the three-pronged approach that you have with your programs? What's the contribution of Ontario?

Mr. Ron MacDougall: It's slightly over 40%.

Mr. Rick Borotsik: It's slightly over 40%.

Mr. Ron MacDougall: Yes.

Mr. Rick Borotsik: So you're looking at 40% from Ontario and 34% for Saskatchewan.

There's one other comment you mentioned. A couple of you mentioned the WGTA and the $1.1 billion after the Crow rate was taken off. So $1.1 billion was allocated to western agriculture, if you will. You mentioned that it was difficult to factor that in to the actual contributions to agriculture as such.

I can tell you right now that a lot of that $1.1 billion did not actually go to the farmers or agriculture, it went to other programs that were seen to be programs of the day. Some of it went to roads, for example, in some provinces. Some went to high-tech infrastructure in other areas.

You said there was a problem in trying to factor that $1.1 billion in. Dick touched on it. I took a little exception to it, quite frankly, because the $1.1 billion was made up by Ontario industry tenfold over the last number of years with respect to that subsidization on rail transportation coming into Ontario industry. We're now getting into our own industrial base because of the Crow coming off.

However, in saying that, how could you factor that $1.1 billion into the actual contributions of the federal government to agriculture in western Canada? Can it be done? Mr. Doidge.

Mr. Brian Doidge: Right off the top, our number is $1.6 billion—

Mr. Rick Borotsik: Oh.

Mr. Brian Doidge: —so it's obvious we have some discrepancy.

Mr. Rick Borotsik: I think the other $500 million went to Ontario, but that's okay. So we lost it already. It's $1.6 billion.

• 1635

Mr. Brian Doidge: If we got a WGTA payment into Ontario, I'd sure like to know where it went.

I don't think we're any kind of experts on WGTA payouts, and to be frank about it, it would be unfair for us to even postulate how that thing should be factored into any kind of calculation of support.

Mr. Rick Borotsik: But it was mentioned in your brief.

Mr. Brian Doidge: Yes, but the way we mentioned it, we said we don't know how to calculate it in. We don't even know if it should be factored in over the two or three years in which it was designed to be paid out, or if it should be factored in over a longer period of time.

You've said it's gone to infrastructure investment in roads.

Mr. Rick Borotsik: Yes.

Mr. Brian Doidge: That's a longer-term benefit, in my view. How would you factor that in? How would you amortize a road?

Mr. Rick Borotsik: I don't know. That's why I asked the question. I have no idea how you would factor it in.

Mr. Brian Doidge: We don't know either.

Mr. Rick Borotsik: Thank you.

The Chairman: Thanks, Mr. Borotsik.

Mr. Steckle, you have five minutes.

Mr. Paul Steckle (Huron—Bruce, Lib.): I hardly know where to begin, because we're talking about equity this afternoon and we're hearing all kinds of views being expressed across Canada. Some of the worst-hit areas right now, of course, are Manitoba and Saskatchewan. We talked a moment ago about the distribution of this equity fund that we would see the federal government coming up with and apportioning to the provinces. My question has to be, as a farmer, how do we determine that?

We have here this afternoon the grain and oilseeds group. We have livestock producers who are really hurting today; in fact, we have a livestock producer at the table. We have in Quebec a different formula for subsidizing livestock than we have in the rest of the country. When we do these programs, how do we find equity? I have a real problem with that.

When I came here in 1993, we were going through that period where we were determining where the line in the sand should be drawn and where we find that third line of defence. I guess we came into better times and we didn't require that third line of defence, but now we're in a crisis and we really don't have that third line of defence.

Certain provinces have determined that GRIP shouldn't be part of their program, and they've chosen something else. For some provinces, crop insurance hasn't meant the same as it has for others. We saw that a number of years ago with corn. Even in Ontario there were people who weren't particularly happy with the crop insurance plan—the averaging, for one thing—and of course, there were those who chose to take off crop and others who took the crop insurance money.

So I really don't know. We're such a diversified group. We have land values that factor into this thing. Good times create higher land value prices or land rent prices. On what basis do we determine that this is the flat line that we're going to work from?

If you could help me answer some of those questions, then I think maybe we can come to some consensus. I have a real problem with some of this, and I hope you can help me find the solution to these problems.

Mr. Robert Down: We did mention it in the brief, on page 4 at the bottom, and as far as I'm aware, this was embodied in the safety net agreements of the late 1980s, early 1990s, and I still think it's worth while when whoever is figuring out how to do this; that is, that whatever is decided in the program, it doesn't distort the inherent differences in competitive advantage among provinces. I think that has to be taken into consideration, and that's all we're talking about.

We all realize that in the beginning the prairie provinces were one sector, a one-crop culture. They have diversified a lot into oilseeds and some different crops, but they aren't diversified as much as we are in Ontario, because we've been diversified right from the very start, the way we started here. So that has been some of the reasoning for the safety net programs having a higher amount going to the west than to the east.

What we're saying is that the west has been able through various means— and there are other programs; there's the prairie farm rehabilitation assistance and other programs that they have available to them in the west that we don't have available in Ontario. With the passing of time, we think they have matured and they are diversifying, so we should be getting more of what is fair.

• 1640

Are you going to set up areas in the country that, because of government support, are going to be able to compete with other areas in Canada that can't? This is a continuous problem we've had over the years of interprovincial trade and everything. It's something this government will have to deal with.

Mr. Fred Brandenburg: I guess we know the government has finite resources. There are only so many dollars to go around and we all want to make sure our budget stays balanced and everything. With those finite resources we still recognize there is a need to support agriculture because of outside influences like the big subsidies that are available to producers in Europe and the United States. Our farmers in Canada have to compete in the same marketplace.

I would like to go back to a comment Mr. Proctor made earlier. He mentioned the effects of the Crow rate subsidy. Because of the Crow rate, there's not as much of a livestock sector in the prairies as there might have been. I think that's an example of what can happen when certain subsidies help in one way but have an unintended negative effect on other sectors. That's the kind of thing we don't want to see happening between provinces in Canada, so we would like to see an equitable way of dividing up the funds to support producers so grain and oilseed producers in Ontario and Quebec are affected the same way they are in Manitoba and Saskatchewan. But we don't want to see these unintended negative impacts.

Mr. Paul Steckle: I think when we—

The Chairman: Mr. Steckle you're out of time. Sorry, it's been five minutes.

I need to get something explained—maybe it's just my own deficiencies. In effect, you're rejecting this proposal of a national disaster program based on a previous three-year average, where benefits would kick in after income falls below 70%. Is that right? You seem to be saying, and this is my understanding, a program of that kind is less fair to a region of the country where programming is more diversified, and perhaps more advantageous to an area of Canada where prices can be more volatile. I don't think I understand that.

What is the difference at the end of the day? If someone in Ontario ends up with 60% of the three-year average and deserves a benefit and it's the same with someone in say Saskatchewan, what is the difference? I really don't understand why there should be any difference in treatment. Both have suffered a 60% drop in their incomes. Does it really matter how they've arrived at their incomes or whether they grow soybeans, corn, wheat, barley, canola or whatever? The fact of the matter is that at the end of the day both have suffered a 40% drop in their incomes and they are eligible for support. Am I missing something?

Mr. Ken Nixon: If I can attempt to begin to answer your question, my colleagues will rescue me. We're not dismissing a national disaster program out of hand. I believe our position is that we have kept the original intent of the three-pronged safety net program that was developed in 1991 more or less intact in Ontario and refined it. Even when it became somewhat unpopular in rather prosperous years we stuck with it, and now it is at the point where we may start to draw from it. Looking at what we have versus what has been proposed in a disaster relief program, we are happy with the program we have and confident it will do the job it was originally intended to do for us, at least until the funding starts to get snug.

The Chairman: We may have to take this a little further.

Mr. MacDougall.

• 1645

Mr. Ron MacDougall: If I could add to what Ken has said, we're not dismissing the national program, but being from Ontario—and I'm using regions, for example, because Quebec is the same with the ASRA program—we have used our companion dollars to keep programs in place to protect us against price drops. Other provinces may have chosen to put those companion dollars somewhere else. We don't feel we should be discriminated against because we've kept those companion dollars in the programs we have. That could happen with a national disaster program, the way it's being proposed.

The Chairman: Thank you.

Mr. Hoeppner, followed by Mr. Calder.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I'm a little confused here right now. The PFRA doesn't guarantee any crop or dollars or anything. It's just a rural water improvement program right now, so it can't help us in pricing our grain. But I'm really interested in the $8.90 and the $13. All I have out of government today is crop insurance. They pay part of that premium. I have no other government help at all on my farm. According to Mr. Doidge, I'm getting $13, compared to $8.90 for Ontario. I'd like him to explain to me where I'm getting this money.

Mr. Brian Doidge: The calculations are based on all federal support programs, not just crop insurance but your entire package of support programs that flow to individual provinces.

Mr. Jake Hoeppner: We don't have anything but crop insurance.

Mr. Rick Borotsik: What are those contributions NISA would make? What are the other programs?

Mr. Jake Hoeppner: Crop insurance is all we have.

Mr. Rick Borotsik: You have the NISA.

Mr. Jake Hoeppner: Our dollars per acre percentage don't even come close to theirs.

Mr. Fred Brandenburg: Those numbers come from an Agriculture and Agri-Food Canada publication called “Government Expenditures to the Agri-Food Sector as a Percentage of Agriculture and Agri-Food GDPs, Canada and Provinces, 1994-95 to 1997-98”. It compares 1994-95, 1995-96, 1996-97 and the estimates for 1997-98. That's where those percentages come from.

Mr. Jake Hoeppner: Are you telling me the $1.5 billion or $1.6 billion, whichever it was, is factored into that program?

Mr. Fred Brandenburg: Yes. It would have been factored in, but the percentages are much higher in the years when the payments were made. The numbers are actually much closer now. Ontario's percentage was much lower in the years when those payments were made.

Mr. Jake Hoeppner: I'm a little confused.

Mr. Fred Brandenburg: That's 13%—

Mr. Jake Hoeppner: I think I hear you saying “We're not as badly off as western Canada, but if there's money going somewhere, we want part of it”. I have to point out to you that on the transportation subsidy, Ontario and Quebec have profited a lot more than have western Canadian farmers. There won't be a farmer left in western Canada to grow anything if you're going to base your support on that type of program being factored in.

Mr. Fred Brandenburg: We are saying those numbers now are much lower than they were when that WGTA payment was made. The percentage to western Canada was even higher. In 1995-96 it was 45% in Saskatchewan.

Mr. Jake Hoeppner: Tell me where the $13 is coming from for Manitoba.

Mr. Fred Brandenburg: You'll have to check with Agriculture Canada because it's from their numbers.

Mr. Jake Hoeppner: That's something I'll have to do, because it just doesn't make sense to me. I can't believe that. I'm not saying you're fudging those figures, but somewhere we have to get that straight.

Mr. Robert Down: All these charts are in the appendages, and they are taken strictly from Agriculture Canada.

Mr. Jake Hoeppner: Will we get a copy of your brief?

Mr. Robert Down: Sure.

Mr. Jake Hoeppner: I would appreciate that.

Mr. Brian Doidge: A couple of comments have been made implying that somehow or other the Ontario grain and oilseed sector is not being heard. I just want to put into the record a comparison. Prices for corn, for example, are lower today than they ever were in the Great Depression or the Dirty Thirties. I just ran some comparisons. For those who aren't aware, the price of corn today is about $2.75 a bushel, about $10 per tonne.

Mr. Jake Hoeppner: Do you want to know what I'm getting for barley today? Number one feed barley is 77¢, and snowflake—if it's number two tough—is 11¢.

Mr. Brian Doidge: On the price for corn in the depression, the lowest it ever got was 40¢ a bushel, which translates to $4.40 in today's currency.

Mr. Jake Hoeppner: I sure agree with you.

Mr. Brian Doidge: So when we're talking about who's hurt, we're all hurt.

Mr. Jake Hoeppner: You bet.

• 1650

Mr. Brian Doidge: And there's a sector that isn't even at this table, although it's been mentioned a little bit, and that's hog production. We're not speaking for the hog producers in Ontario. But the hog producers in Manitoba are hurt, and the hog producers in Ontario are hurt. We have large land costs and very high mortgage rates because of that, so the financial burden in Ontario is great as well.

So what we don't like to hear is an implication that Ontario is not hurting right now. When you look at a price for corn in Ontario that is less than it ever was in the Great Depression, there's something very wrong with the corn price.

Mr. Jake Hoeppner: I totally agree.

The Chairman: Thank you.

We now go to Mr. Calder for five minutes.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

Gentlemen, I think I want to deal with the three “whats” of this situation: what, so what, now what.

The “what” definitely right off the bat is that we see the United States and Europe basically back into another subsidy war, which they said they'd never do. The United States has dusted off EEP. There's the Farm Bill at $35 billion over seven years, and the farm aid package that they've just brought in at $6 billion. And, quite frankly, I don't even think their politicians have taken the time to really research what that's going to do and the problems it's going to cause, with $3.1 billion right into crop subsidies.

The next one is the “so what”. So what? Here in Canada right now it's having devastating effects on two provinces, Manitoba and Saskatchewan. And let's face it, when we did do away with the WGTA—grain transportation—we just made it unprofitable for Manitoba and eastern Saskatchewan to move the grains out to Vancouver, and that's one of the reasons we're seeing a lot of meat processing popping up there, because they're going to route the grain a different way. In fact, to a certain extent, that is going to be a little bit of a detriment to Ontario, because instead of our processing beef here and shipping boxed beef out, it's going to be the other way around.

I'm telling it like it is, Rick, once you get into the process and the practice of it. We're the government. We have to be fair to the whole country.

So this comes to the “now what”. The “now what” is going to be that I know during the mid-1980s the budget for agriculture was a little over $2 billion and we're down now to under $700 million. And that is because we have had to get our books in order, and we've been able to do some cuts in agriculture because commodity prices were good up until now. So we have programs in place that have worked in the past, and there might even be the possibility—and this depends on what the minister decides and what comes out of the meeting he's having today with the provincial counterparts—that we put more money into those programs. Or do we look at an ad hoc solution to it? And in looking at an ad hoc solution, we know that this isn't just a one-year problem. It's probably going to be more than one year, just because we can see what's going on internationally.

How do we, as a government, handle this problem fairly? That's what's facing me, so I might as well put it to you. It's an information meeting and we're here to find out, so I'm asking you the question. You're Solomon.

Mr. Ken Nixon: I'm scared.

Mr. Murray Calder: So am I.

Mr. Ken Nixon: We really didn't come with answers to that question, to be quite honest with you.

Let me back up if I could, for one moment. The first thing I would like to offer to the committee is the fact that in aggregate the provinces of Manitoba and Saskatchewan are facing a fairly dire outlook in the next couple of years—or even more immediate than that. My understanding is that it is because their agriculture is dominated by the grain and oilseed sector and by the hog industry, the two primary industries that are at this particular moment really starting to feel the pinch.

• 1655

Because of its diversification, Ontario is fairly steady regarding changes in agricultural net incomes and that sort of thing, in aggregate. However, grain and oilseed producers and hog producers in Ontario, if that is their sole livelihood, are facing the same difficulties as their prairie counterparts. I think this is what we're really trying to bring to the table, that as far as equity goes, a straight cash crop producer or a straight hog producer in Ontario is in as dire a situation as their counterpart on the prairies.

To the issue, then, of what is to be done. To be quite frank, in Ontario again our three-tiered approach looks as though it will help us in the short term, because we have price support, because we have production risk support in crop insurance and in market revenue and in the overall foundation of NISA. However, with long-term depressed grain prices, we could be in long-term trouble, and we would then be looking at something a little longer.

As for addressing the situation in the provinces that in aggregate are looking at the gun down the barrel, I don't have the answers. They've chosen a little different path in how they structured their safety net programs. We're not here to say we want to throw them to the wolves, but we really don't know of an answer. However, if there is ad hoc or some sort of additional funding coming for hog and grain and oilseed producers for the prairies, it is just as needed for grain and hog producers in Ontario.

The Chairman: Thank you. We're out of time. In fact, we're more than a minute over time.

Mr. Borotsik, you have five minutes.

Mr. Rick Borotsik: My question is basically on the same thing. You did very adequately, actually, in trying to explain, Ken, numbers associated with this. You've obviously looked at the CFA's proposal, and their proposal talks of $460 million. Has your organization given any thought to the number of dollars that should be allocated to some sort of a support program going not only to western Canadian agriculture—and I'll give you this; it will be agriculture across Canada, not simply western Canada—based on formula?

I still firmly believe, as was said earlier, there are others out there that are hurting, more dramatically and desperately than perhaps others, and we talked about the supply management sector. So there are formulas that have to be involved, but in dollars, is $460 million the right number, in your estimation, or is it not enough, or is it too much? In Ontario, from what I've heard now, it's way too much, because you don't need it. Your programs are in place, everybody's happy, you can live with the program. Is $460 million the right number?

Mr. Fred Brandenburg: I'm not going to answer your question directly, but I do want to say yes, we have programs in place that we feel—

Mr. Rick Borotsik: I was being facetious. Is $460 million the ballpark number?

Mr. Fred Brandenburg: My point was going to be that with the market revenue program we have, should we have two years as bad as those we had a few years back when the program first came into being, the fund that has built up would be totally wiped out.

Mr. Rick Borotsik: In two years?

Mr. Fred Brandenburg: In two years.

Mr. Rick Borotsik: So you're okay for two years.

Mr. Fred Brandenburg: That's right, but the point is, to keep that fund at a level where there will be a viable program in the future, there should be some more money going into that program. We haven't looked at whether $460 million is the right number.

Mr. Rick Borotsik: So in truthfulness, your answer is that you haven't really looked at the dollar side of it, simply the concept or the philosophy at this time, as I understand—

Mr. Fred Brandenburg: The other point is that we're in the last year of the market revenue program. It's under that federal-provincial agreement that has been given a one-year extension, and we certainly would like to see that continue in the future. So there are other political issues as far as the future of safety net programs is concerned.

Mr. Rick Borotsik: Can I have 30 seconds?

The Chairman: Go ahead.

• 1700

Mr. Rick Borotsik: I'm a little confused on the 70% that the chairman talked about, too. You say it's not good enough for Ontario. It may well be good enough for other provinces that haven't had the three-pronged programs in place.

Ken, you talked about a 15-year averaging instead of a 3-year averaging. Is that what your proposal would be? If you're looking at that level of support, at 70%, are you saying it's 15 years as opposed to 3 years?

Mr. Ken Nixon: More or less. All I said was simply that everybody who signed on to our current market revenue program, which was primarily designed in 1991, signed on to a 15-year rolling average.

Mr. Rick Borotsik: So that same real 15-year rolling average should be, again, equitable across all provincial borders, not simply across Ontario?

Mr. Ken Nixon: The point we are trying to make on the three-year averaging of this particular program is the fact that it will become quickly inadequate with more than one or two years of depressed prices.

Mr. Rick Borotsik: But I asked my question. We talked about equity here. If it's a 15-year rolling average in Ontario, should it be a 15-year rolling average in other provinces as well, in Manitoba, Saskatchewan, Alberta, B.C., P.E.I., Quebec?

Mr. Ken Nixon: If it is a national program, sir, it should have national standards.

Mr. Rick Borotsik: Thank you.

The Chairman: Let me just try this question, and it's somewhat similar to my previous question. You're saying that the disaster program as currently talked about, based on a three-year average, discriminates against a diversified farmer, let's say, in Ontario. If we can agree on that, let me ask you this.

An Ontario farmer has a two-pronged operation. On one side of his operation he has hogs, and because of the current low prices in hogs he's losing money on hogs. Let's say on the other side of his operation, on the other prong, he's doing well in chickens. The losses on the hog side of his operation are made up by the increases, say, in his chicken operation.

This is a good farmer. He's diversified and he is very efficient. Even though he is losing on the hog side right now he's doing all right because of his chicken operation. Are you saying that even though that particular farmer in a given year is not losing money because he's doing well on the chicken side and he is not eligible for a disaster program, somehow he's being discriminated against? Is that basically what you are saying? Even though he may be breaking even this year or perhaps even making a couple of bucks because of the chicken operation, he actually should be able to get benefits from a disaster program.

If you are saying that, fine, I just want to get an understanding of this. Is that what you're saying?

Mr. Ken Nixon: Mr. Chairman, I'm not going to be circuitous on this. Under the current market revenue and crop insurance programs in Ontario, if a grower experiences a loss in revenue because of poor prices or poor production, say, on his cropping enterprise, despite any other income he may have in any other enterprises on the farm he still receives payments and benefits because that is specific to the cropping enterprise.

The proposed disaster program that the CFA have brought to you is a whole farm concept very similar to NISA. And yes, that particular grower, whom you have made an example of, would not receive either as many benefits or any benefits at all because of the diversity of the program.

Whether that's fair or not is up to the lawmakers of this land. We are simply saying that in our programs for grain and oilseeds we do not discriminate against or do not factor in whether the person has other enterprises making money or not.

The Chairman: Okay. Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

This has to be one of the toughest issues, because a farmer is a farmer is a farmer whether you live in Ontario, Manitoba, Saskatchewan, or elsewhere. This is not a one-stop shopping solution that will fix each and every province the same.

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We say we have to have a program based on a formula. You would really have to take a calculated formula because, of course, so many provinces are commodity-specific compared to Ontario. It would be a challenge to find out what kind of formula we should be looking at. Do you have any suggestions?

Mr. Robert Down: Rose-Marie, if you go back to our brief and past representations we've made from the grain and oilseeds group here—and we just sent a letter out to all the MPs, too, outlining some of the areas—we're fairly clear in saying that NISA is quite a good program.

So you take NISA off the top, and then you start down the list. The way crop insurance has been handled recently, it's not really a national program so we say it's a companion program also. The market revenue program in Ontario, ASRA in Quebec and other programs in other areas are really part of the companion programs. So it's our direction to say keep NISA reasonably intact, with the refinements that people are working on all the time to improve it, and then through a formula allocate the safety net program to all the various regions and provinces of Canada. Leave it up to the producers and the governments of those areas to determine what is going to be the best for the producers in their area.

That's basically what we have said.

Mrs. Rose-Marie Ur: You're saying keep NISA intact. We've heard there's x number of dollars in NISA, but as was stated several times here yesterday when we were hearing from the various presenters, the amount that's in there certainly won't tide anyone over until next year to get a crop in or whatever. The people who have invested in these are those who are established. They are not the younger farmers. So yes, keep NISA there, but not everyone has the dollars to— it's really hard in that respect.

Mr. Robert Down: Yes, but it's only one leg of the three-legged milk stool.

It works for a certain sector of agriculture. That's been one of our basic arguments in Ontario for keeping GRIP and the market revenue program. We say that for the new, start-up farmer, whether he's young or old, NISA isn't any good to him whatsoever.

It's of more benefit to me, as an older farmer, heaven forbid, than it is to a young guy. So that price protection through market revenue is part of the young farmer's protection. Crop insurance is another avenue for the young farmer. If he doesn't have those two programs and he hits a disaster area like we're in now, he has a real problem in grains and oilseeds.

Mrs. Rose-Marie Ur: You also stated that we needed to allow for federal and provincial co-funding of safety net programs. You stated in your presentation that some provinces aren't living up to the obligations. If you want a national program through which the federal government would allocate x number of dollars to the provinces, do you see that problem just compounding then? They would decide where to spend their dollars, not necessarily where would be the best bang for their own particular situation? Is that not happening now, as what's happened out west?

I don't want to compare one region to the other, but I agree that grassroots quite often know much more than other areas about how to spend their money most wisely. We have perhaps seen through experience now what has happened in this disastrous time when commodity prices are so low.

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Mr. Robert Down: I think you're right. That's what has happened. I know I was at the CFA annual meeting and there were producers from the west, from Manitoba and Saskatchewan, especially Manitoba, who I know reasonably well, and they were concerned with some aspects of that. If you recall, I said producers and government deciding what— I may be wrong, but from my understanding I think it was arbitrarily done in a lot of cases by governments. Producers didn't have any say in it.

The Chairman: Sorry, we're out of time. We have roughly only 15 minutes. We have three more questioners.

Mr. Hoeppner.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I want to touch on something Mr. Doidge said about the U.S. putting in a huge fund. The Pembina River runs through my constituency and the watershed is in the United States, so I had a good opportunity this summer to talk to Americans. They were telling me—this was at the end of July, beginning of August—they were getting out of farming. There were a number of farmers who said, “Before all my equity is gone, I'm getting out.” I'm starting to hear quite a bit of this in western Canada. They're saying, “Hey, I'm getting out. If I can sell my machinery—I don't care what the price is—I'm getting out.”

Now, if that is happening or is going to happen—they tell me auctioneers are booked solid; you can't get a date for an auction sale in western Canada—that's going to have a tremendous impact, not just on farmers but on your implement dealers, your fertilizer dealers—the whole economy. If we don't do something, how are we going to save the rest of the country? Agriculture is basic in western Canada; 45 out of 100 jobs are somehow tied to agriculture. Now, I think we have to quit splitting hairs on what we're going to do, because if land prices are zero in western Canada, so they will be here. Have you looked at that issue? Are you concerned about it?

Mr. Brian Doidge: The issue of land prices?

Mr. Jake Hoeppner: Well, everything. The land prices, the machine—

Mr. Brian Doidge: The spinoff of a disaster.

Mr. Jake Hoeppner: The spinoff from allowing this disaster somehow to unfold so we can't stop it. The Europeans are paying their farmers $175 an acre just to grow the crop, and then they have export subsidies on that.

Mr. Brian Doidge: I think it's the same situation in any agricultural economy you go to. Agriculture is a main driving engine of most economies, and the spinoff or the multiplier effects of jobs and all the inputs you've talked about is huge.

Mr. Jake Hoeppner: Yes.

Mr. Brian Doidge: This is a serious crisis right across Canada.

Have we looked at the impact on land pricing and land rents? That's a big issue in Ontario, too.

Mr. Jake Hoeppner: Yes.

Mr. Brian Doidge: Our land rents and our prices have gone up dramatically in the last four or five years. Now we have farmers who are saddled with a very high land cost and maybe a long-term rent that certainly, with corn prices at less than depression rates, they can't afford. So absolutely, it's a long-term problem.

Mr. Jake Hoeppner: What about property taxes? I pay as much as $20 an acre in property tax, which I can't do anything about. That's not federal, but some of the spinoffs are— education and health. Those are issues I have no control over. The provincial government wants it and I have to pay it or my land is up for sale.

Mr. Brian Doidge: We didn't look at the impact of what's called the cost of doing business in the U.S. in terms of health insurance being there or not, or land rents or land rates, but I think you have a good point, which is that the multiplier effect of the crisis in agriculture is huge.

Mr. Jake Hoeppner: Yes. Thank you very much.

The Chairman: Mr. Hoeppner, were you indicating that 45 out of every 100 jobs on the prairies is related to agriculture?

Mr. Jake Hoeppner: They are somehow tied to agriculture business, yes. That's what the statistics—

The Chairman: Well, you might want to check the figures, because in Saskatchewan, as a percentage of the gross domestic product, agrifood accounts for 12.17% of the total GDP. In Manitoba it's 6.85%.

Mr. Jake Hoeppner: Well, I think there is something wrong, just like in the other figure.

The Chairman: I'm just saying you may want to check your figures, because someone may want to embarrass you.

Mr. McCormick.

Mr. Larry McCormick: I'll share my time perhaps, Mr. Chair. I just have a short question.

Regarding your formula for how this would work, would your GDP figures include off-farm income?

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Mr. Ken Nixon: No, I believe the GDP figures are based on farm gate receipts of all commodities except supply-managed commodities.

Mr. Larry McCormick: I believe our minister was almost misquoted or mistaken in what he was trying to say yesterday when he was referring to the seriousness of this situation and he talked about that subject.

My other question is this. Are you confident that if some moneys appeared from all the players and it was all given to the provinces—you would be a player there—this would be done fairly? What about this hog producer who may have brought on a lot of this Asian flu or not? They consume your product in some way. Will this get through enough to the people who need it if it's done in this way? I know we need national standards and all people need to be involved, but are you sure this will all happen fairly for all people?

Mr. Ken Nixon: I'd like to ask a question to clarify, sir. Are you asking, if there is a bundle of money and it is distributed to the provinces, are we confident then that it will be distributed equally?

Mr. Larry McCormick: Fairly and equally.

Mr. Ken Nixon: Fairly, once it reaches the provinces. Is that the question, sir?

Mr. Larry McCormick: Sir, please.

Mr. Ken Nixon: As producer organizations, our job is to work cooperatively with our provincial governments, first of all, to get the most mileage we can out of the funds—it's our responsibility as taxpayers and as growers—and secondly, within our own ranks, to decide how it shall be distributed.

Mr. Larry McCormick: You would make sure that it would be handled to your concerns?

Mr. Ken Nixon: Well, sir, we have umbrella groups in Ontario. There is the Ontario Agricultural Commodity Council, which includes all the non-supply management groups. We meet regularly. We've had good cooperation in designing programs. I see no reason why that wouldn't continue in the future.

Mr. Larry McCormick: Thank you, Mr. Chair. Can I pass on my time to my colleague Paul?

The Chairman: Well, we'll just start him fresh.

Mr. Steckle.

Mr. Paul Steckle: I've spent all my life in agriculture, and the minimums become the maximums. If we set minimum targets, they ultimately become the maximums, and we can't really live by those minimums; 70% of something is not good enough, particularly when 100% is hardly good enough. But the big concern that I think all of us share is that the Canadian purse in terms of the federal treasury cannot even begin to come close to sustaining the kind of support that European or American treasuries are putting into their agricultural areas.

One of the agreements we thought we had when we went into WTO was that we were going to get the treasuries out of it. At least it was my belief back in 1994, when we signed on, that the treasuries were going to stay out of it, and we were beginning to see marked increases in the value of our commodities. All of a sudden we're back into this whole thing, and I have to think, Mr. Chairman, that this ought to be one of the main things we bring to the negotiating table when we go to the next round of GATT. How can we possibly come to some sense of value on these commodities if we're going to see treasuries stepping in every time it happens? At least when we had come to that agreement we concluded that if there was a downturn, it was going to be for a short period of time. But this could on for an indefinite time period if we allow this to happen.

Would you be able to give us some direction in terms of this committee being able to establish some sort of directive to our negotiators and to us as we go to the table to find a point where we can address that particular issue?

Mr. Brian Doidge: I think I can leap right into that, Paul. I think you've hit the nail on the head.

The original WTO negotiations were meant to eliminate or minimize production-specific support programs that distorted production decisions. The USDA, in its recent introduction of this market loss payment, because it's geared by commodity to a specific price, is just going back and reintroducing production-specific price-distorting mechanisms.

• 1720

They're also doing it another way, and I'd suggest this to the committee too, to carry it forward in your negotiations. The way the loan deficiency program is set up in the United States, a farmer can trigger a payment—it's a subsidy that he receives—from the USDA whenever a specific commodity price drops below the county loan rate and he gets the difference between the county loan rate and the posted county price. Those are both artificial prices and they are determined by transportation differentials by the USDA to the closest two terminals.

Two weeks ago the USDA played around with the transportation differentials once again. The net impact was that those farmers in the southern part of the planes in the southern part of the U.S. that have their subsidy or LDP payment based off New Orleans got a 15¢ increase. Those farmers in the northern planes—Minnesota—that had their subsidy or loan deficiency payment based off Minnesota got 5¢ less. The rationale: the southern part of the U.S. went through some drought; I guess it also happened to be more heavily Democratic, God knows. But the net impact is that it's a subsidy that is distorted by price—

Mr. Paul Steckle: It doesn't work that way here.

Mr. Brian Doidge: —and it's distorted by production. In the last round of negotiations that Canada agreed to, those kinds of programs weren't supposed to be allowed.

Mr. Paul Steckle: That's right. Would you agree that Canada, for the most part, has lived by its agreed-upon terms in the WTO and the NAFTA agreements?

Mr. Brian Doidge: If there's a people on the face of this world that abides by agreements, it's Canada.

Mr. Paul Steckle: Right on.

The Chairman: All right. We can all agree with that.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

I threw out a bit of an idea here, that basically we have to deal with everybody fairly right across the country. I've looked back to how we've dealt with the farm crises in the late 1970s and the early 1980s, where basically the federal government became a partner with each one of the provinces to a certain level of money. Basically what happened when they did that is that they pitted provincial treasuries against provincial treasuries. That's what happened. If you had a province that had all kinds of money in its treasury, it could keep its farmers going. If you had another province that didn't have the same level of money in its treasury, those farmers were in trouble.

So actually we had trade distortion within our own country. However we handle it this time around, we have to make sure that doesn't happen.

Maybe the question would be how do we, as a federal government, treat each province fairly, knowing there are provinces within this country that are richer than other ones? Do we give each province the same amount of money and let the provincial treasuries compete against each other, knowing full well that there will be winners and losers because of that? Or however we, as a federal government, distribute that money out to the different provinces, do we take into account that different provinces have bigger treasuries than other provinces? How do we do that?

Mr. Robert Down: That's a bit of a tough one. That's what we were talking about with Rose-Marie a little earlier.

I just wanted to make one clarification. Some people sitting around this table might think that Ontario has the biggest treasury. They may have provincially, but Ontario supports its agriculture less, in the vast amount of cases, than any other province does. We want that on the record. Ontario does not pump up its agricultural sector. In fact, we continually remind them as well as the feds that we as producers in Ontario are not receiving as fair a share as are other producers in other provinces.

I don't know how to answer your question, Murray. That's the $64,000 question.

Mr. Murray Calder: Yes.

Mr. Robert Down: I don't know whether anybody else here has any bright ideas.

Mr. Fred Brandenburg: Just a comment, I think. All of our governments are trying to be more and more fiscally responsible, and quite a few provincial governments have now achieved balanced budgets. Ontario isn't there yet; they're still working away at it.

Personally, as a taxpayer, I hope the governments have seen the folly of trying to outdo each other in some of these programs. Even though they should have the right to come up with the right mix of programs for their own province and their own needs, I certainly hope they don't overdo it.

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Mr. Murray Calder: I guess maybe I'd have one last question, Mr. Chairman. Who across here would like to be the Minister of Agriculture right now?

That's what I thought.

Mr. Jake Hoeppner: I'd like to be the Minister of Finance.

The Chairman: Thank you very much.

Yes, Mr. Nixon, do you want to say something?

Mr. Ken Nixon: I'd just to like to say for the record that no one picked Mr. Calder up on the offer.

The Chairman: I want to thank all of you for coming today. I said at the beginning that I was hoping we'd have a better feel for the situation. I think that perhaps we do as a result of your excellent presentations.

I hope that we were able to ask some of the right questions. An issue of this kind raises a lot of questions, and we can't ask them all. I would hope that at least we asked some good questions. I know that all your answers were quite good.

On behalf of the members, I really want to say a big thank you to all of you.

The meeting is adjourned.