AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 3, 1998

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[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): We will bring this meeting to order.

In this meeting we'll hear from the very same organizations that testified before us during the past two hours, but this time they will be sharing with us some very important information about the farm income situation in Canada. I appreciate their coming here this morning.

I would say to all of the witnesses that if I have one hope for the outcome of this session today and the other sessions we'll have over the next three to four weeks, it is that we, as politicians, as public representatives, will be better informed than we are now.

I know all of us around the table are counting on you to share with us information you have about this difficult situation in our farm communities. I know the government is counting on information from you because the government needs good solid information to be able to respond in a responsible and adequate way.

I would like to say also that as we deal with this situation, we should remind ourselves this is not a courtroom. There is no prosecution team, I would hope, or defence team. This is simply a gathering to share information for the benefit of all of us—not only those sitting around the table, but especially for what you might call the powers that be.

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The government needs good solid information. I don't think any one individual or organization has all the information. That's why over the next three to four weeks we're going to try to hear from as many organizations as possible, and then try to sift through the information and decide what action is necessary.

So with those few remarks we're going to hear again from the representatives, perhaps this time in reverse order. We'll start with Mr. Wilkinson and then go to Mr. Edie and then Mr. Larsen, if that's okay. It's the same format, with opening statements and then rounds of questions.

Unfortunately, there is an opposition day motion on this very subject going on in the House right now, and that's offering some competition, but it's important that you get your information on the record.

Go ahead, please, Mr. Wilkinson.

Mr. Jack Wilkinson (President, Canadian Federation of Agriculture): Thank you very much. We have a brief that has been circulated that we would like read into the record. I would just like to give some highlights and additional points versus going through it word for word.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Mr. Chairman, which brief is that precisely?

Mr. Jack Wilkinson: Okay, we'll make sure. There was a farm income presentation. Both of them have the same brown cover page, but Sally Rutherford, I think—

Mr. Howard Hilstrom: This is the farm income one.

Mr. Jack Wilkinson: Yes.

I think it's fair to say that what's happened in the last number of months has created a crisis in some areas of the country and in some commodities within the country.

Last year the national, regional, and provincial farm organizations got together to make a recommendation and a report on the current status of safety nets—farm income support programs in Canada. That presentation was given to the ministers at the federal-provincial ministers meeting in Niagara last July. It recommended the need for a farm income disaster program.

Even though prices weren't of a critical nature at that time, generally speaking, we identified—and this goes back to the original third line of defence that was advocated by the farm organizations when the first memorandum of understanding was signed over five years ago on our current safety net package—that there was a missing link, a very serious problem. We had a net income stabilization program that was very clearly designed to help even out the price fluctuation in normal price circumstances. It cost around $200 million at the federal government level and approximately $100 million for the provincial governments and producers paying matching contributions.

We then had approximately $180 million plus in the crop insurance system from the federal government point of view, which, generally speaking, is considered quite a reasonable level of protection from weather-related losses in most commodities in most parts of the country. There are some flaws and some failures, but in general a lot of farmers use that. We also had approximately $220 million that went to companion programs from the federal government point of view. It allowed a great deal of flexibility as to what provinces chose through their producer organizations or in the agri-food industry as to how some of that money was being spent. Even though we were concerned about where that companion programming might go, it was agreed upon by everybody a number of years ago—not all willingly, but that's the way it was.

There was budget reform. There were program cuts and in 1986 we had $2.5 billion of farm income support. Now we have at the federal government level around $670 million, with an additional amount of around $400 million from the provinces. But some provinces, for example Manitoba and Saskatchewan, chose to enhance their crop insurance over the last number of years and effectively eliminate commodity price support programs. So producers there effectively have NISA when it comes to program guarantee; that's all.

Alberta brought in a program. B.C. brought in a program that dealt with margin losses. P.E.I. brought in a program. Quebec has a different one. Ontario has its market revenue for its crops and effectively nothing for its livestock. It varies dramatically across the country.

Now that we've had the cancellation of a lot of contracts in Russia and the incredible downturn in the Asian market, all of a sudden what were markets have now disappeared. As you can imagine, it's a supply and demand business when you're dealing with perishable food, so when you put a 10% glut of pork, for example, on an international market, prices go through the floor, which they have done everywhere around the world.

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Our people are relatively exposed in Canada. Grain prices are down 41% for durum wheat from 12 months ago. No NISA program can deal with those price fluctuations. It is impossible, and we acknowledge that. We're not into throwing stones at anybody and saying we told you so or anything. We're saying in 1974 net farm income in Canada was $5 billion, in 1986 it was $3.5 billion, and last year it was $1.7 billion. Granted that had a big depreciation bubble going through it, and maybe it wasn't quite that bad, but with this year's forecast, Agriculture and Agri-Food Canada will admit to $2 billion, with the expectation next year of no better. That's $2 billion, with the possibility of it actually being worse.

This is being exacerbated by the trade war between the European Union and the U.S. to fight for market share and protect their producers. They are protecting their producers, as we know from the additional $7 billion that went to the U.S. producers last week, in what we considered to be a much higher program than we had to start with.

We're here today to talk about the need to act, from our point of view. The federal government has balanced its budget on a yearly basis. Just about every province other than one has balanced its budget. We're asking for reinvestment in agriculture to shore up and create a disaster income relief program that will deal with weather, crop loss, price loss, and anything that causes a disaster on the farm, designed in a way that it won't create trade problems for us. That means it cannot be commodity-specific. It has to be generally available, it has to deal with the whole farm income, and it has to be decoupled from individual prices in individual commodities.

We think we have the details of that. We think if it won't be GATT green it will at least be countervail-free. We think there's a possibility of creating a GATT green program to start with. But even if that doesn't happen, we're confident we can do it in a countervail-free design. We think it's imperative we move now.

We acknowledge the fact that there is $2.3 billion in NISA. Half of that is farmers' money. Of the approximately 140,000 accounts, 42,000 have less than $1,000 in them. We're not saying it's a failure of NISA; we're just saying NISA cannot deliver today the degree of depth depression we have in this price cycle. It is a useful program and has benefits, but it was never designed to deal with and is incapable of dealing with this current situation.

Our point is let's move now. Let's hopefully have a committee and support from all parties to acknowledge the fact there is an income crisis in the farm community. We can make expenditures well within our GATT obligation for domestic support. We're 15% of what we were in 1986. We can move all the way up to 80% without creating trade problems if the program is designed right. We're obviously not asking for that degree of money. We know there are limitations, but we know there has to be action.

I would implore all of you— We'll answer whatever detailed questions on any aspect of it. We think we have a program that will work, and it's now time politically to move. We think it's imperative with what's happening internationally to move, and we would like the support of this committee and everyone to do that.

The Chairman: Thank you for that opening statement, Mr. Wilkinson.

Now we'll turn to Mr. Edie.

Mr. Kenneth Edie (Board Member, Agricore): Thank you very much, Mr. Chairman. Some of the comments we have in our paper were made in the last one, so I will not read them in detail but may perhaps summarize some of them.

Agricore, on behalf of its farmer members, is very concerned about the financial situation of prairie farmers. We thank you for making this effort to consider the income situation, and we look forward to working with you to make sure we can find the best solution to the problems.

The best way to understand the income situation on the prairies is to spend some time there with farmers who are actually living it. Sometimes we have to use numbers to try to quantify the problems, bearing in mind that numbers can be manipulated to paint any picture one wants or needs. Here are some numbers.

Statistics Canada numbers show that in 1997 the total net farm income on the prairies dropped 35% in Alberta, 40% in Manitoba, and 84% in Saskatchewan from 1996. In addition, the prairie producers have seen their revenue drop significantly in 1998. Farm cash receipts for the first six months of 1998 are significantly lower for prairie farmers than for the same period last year. They're 10.2% lower in Alberta, 8.9% lower in Saskatchewan, and 12.5% lower in Manitoba. These figures are for all produce of farmers, and not just grain. So it really underlines the seriousness of the situation.

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As I stated, we did go through the numbers. If we look at number one wheat, there's a farm gate return of $3.66 a bushel. And even in canola, which has been a somewhat brighter picture, we're still looking at a $35 per tonne drop from last year. That equates to almost a dollar a bushel, being that there are 44 bushels in a tonne.

These prices leave very little margin for prairie farmers after they pay the basic costs of producing their crops. It's going to be difficult to cover basic household expenses and very unlikely that any capital investments will be made. In fact, numbers from the Canadian Farm and Industrial Equipment Institute show that at least some capital investments aren't being made. For the first nine months of 1998, tractor sales are down by as much as 54%, combine sales are down 40%, and sales of balers and swathers are down 13% and 14% respectively from the same time last year.

At this time there's little optimism for significant improvements in the 1998-99 crop year. World wheat production will be over 590 million tonnes, just slightly below the all-time record. Faced with the ever-growing government-owned stocks of wheat and barley and other crops, the European Union has been increasing its export subsidies. The United States has used export subsidies in the international grain market, and there's potential for it to continue.

Prairie farmers rely almost entirely on the marketplace for their livelihood. As has just been illustrated, when world prices are distorted by subsidies and other activities that impact trade, Canadian farm income drops.

Our major competitors in the international market are not as vulnerable to world market prices. The average European farmer receives $175 Canadian just for growing the crop.

Actions by the U.S. government to support grain producers include the purchase of two million tonnes of wheat by the government for food aid. This purchase was outside the normal food aid programs. Its stated purpose was to boost wheat prices for American farmers. The United States government has also committed to provide substantial farm assistance for farmers this year. The House and Senate have agreed to an income support package that will amount to over $6 billion U.S.

In contrast, prairie farmers do not have these kinds of support programs. Farmers in Alberta, Saskatchewan, and Manitoba received about $600 million in total, federal and provincial payments.

I would like to put forward some ideas for addressing the problem. In the immediate term it is not too soon to begin to work toward developing a program that will help farmers weather the storm that is being created by the world financial situation and the activities of our international competitors. We would like to work with government to assess the situation and to develop a program that will address the problem without distorting production or reducing the market responsiveness that our industry has worked so hard to develop.

At the same time, we need to address costs. There is a role for government to play in this area. First of all, we urge the government to immediately freeze or roll back cost-recovery initiatives. It is estimated that farmers in Canada pay well over $100 million annually for services provided or required by the government. Our estimates are that the cost-recovery initiatives reduce the net operating margin of grain and oilseeds producers by over 1%.

Despite the significant downturn in the farm economy, new cost-recovery initiatives and increases in current ones are on their way. For example, the Canadian Coast Guard plans to implement a new user fee for ice-breaking services. Notice has been given for an increase in the fees for the maintenance and dredging of the St. Lawrence Seaway. Notice has been given for increased inspection fees by the Canadian Food Inspection Agency; some of these are overtime charges on ship inspections. Notice has been given for increased fees to access government loan programs such as farm improvement loans. The Pest Management Regulatory Agency, faced with a budget shortfall, may soon propose an increase in fees for registration of crop protection products. The Canadian Grains Commission, faced with reduced volumes of grain over which to recover its costs, will likely need to address a budget shortfall.

We submit that there are other charges in cost-recovery efforts that are adding to farm costs. There should be an immediate commitment to roll back existing cost-recovery efforts and not to implement any new initiatives.

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We would like to suggest that the minister appoint a special task force with a mandate of identifying all the costs that are imposed on farmers, both directly and indirectly, by the federal government and with a mandate to make recommendations for either short-term or permanent rollbacks.

In order for this to be a useful process, the task force should include industry representatives. It should work under very tight time constraints, and the government must commit to taking its recommendations very seriously.

A major review of the western grain transportation system is nearing completion. We hope this review will result in recommendations that will identify and capture hundreds of millions of dollars in efficiency gains for prairie farmers. We've urged the Minister of Transport to immediately begin consultations with industry stakeholders on the recommendations and to take early positive steps to reduce transportation costs for producers while at the same time ensuring that they receive efficient service.

Immediate steps should be taken by all levels of government to address taxation measures that put our producers at a disadvantage to their competitors. For example, property taxes paid by grain terminal facilities in Canada are well above those paid by similar facilities in the United States. Also, the application for provincial retail sales tax on leased rail cars that move through some provinces is both costly and inequitable. While we realize that taxation issues are difficult, it is in the best interests of farmers, the prairies, and Canada that joint efforts be made to address taxation policy differences.

In the longer term, it is our hope that the government will work together to allow our industry to compete based on its natural and quality advantages. This would involve the elimination of export subsidies and significant increases in market access; identification and removal of domestic regulatory and other barriers that place our industry at a disadvantage to our competitors; development of a meaningful national safety net program that includes a national disaster program to help producers deal with both weather and market risks; and ensuring that producers have the very best agronomic and technical tools available by making a solid commitment to the funding of basic agricultural research.

In conclusion, I would like to restate that prairie farmers are in a very difficult financial situation this year. It is a situation that will likely worsen as the European Union increases stocks and uses growing export subsidies to sell them on the international market. As the effects of the Asian financial crisis continue to be felt, Agricore wants to work with government and others to develop short-term strategies to help farmers cope with sagging market prices and reduced demand. In the longer term, we look forward to international trade rules that allow us to compete fairly and to domestic programs that do not hinder but enhance our natural ability to compete.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Edie.

Now we'll go to Mr. Larsen.

Mr. Leroy Larsen (President and Chairman, Board of Directors, Saskatchewan Wheat Pool): Thank you very much, Mr. Chairman.

I apologize that I do not have a written document to submit to the committee. However, I will confer with my fellow partners at this end of the table.

I think first of all we should look at how we got to this situation in agriculture in Canada. We have to go back a little bit. Ken identified very clearly the increase in production internationally in many of the commodities that we produce out of Canada. The international monetary situation has certainly not helped the marketplace. The Asian flu, as it's identified, has impacted some of the buying powers of many of our traditional customers. And as we talked about earlier this morning, the trade-distorting subsidies that are depressing the current marketplace are impacting the income on my farm and everyone else's farm as well.

Then of course there are the Canadian programs that have changed the situation for the farmer. The loss of the Crow is a major cost to my farming operations. I identified earlier that I can't produce feed barley for the export market and pay the full transportation costs. I have to add value to that. Yes, there was a Crow buy-out, as I call it, and many producers have made capital investments on diversifying and changing their farming operations as well, but they have not yet had the opportunity to reap any of the benefits of the investment they made from the Crow buy-out or the capital they've put into their production units as well.

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Ken and Jack mentioned the cost recovery and the taxation issues that have impacted my farm bill. Many of them are hidden to the producer and difficult to identify, but we know they are there and are curtailing the net bottom line for our farmers.

Nobody was prouder than I was when our government finally came to the position where they had a balanced budget. But I want to say to all government members that I was very disappointed that agriculture wasn't identified as one of the contributors to that balanced budget. We have made sacrifices in the agricultural community. We have brought revenues into this country that have been beneficial for all Canadians. One of my comments on the last budget presentation to the media was that I think there should have been a thank you to agriculture in balancing the budget in this country. I would have liked to have seen that.

It was suggested you've got to go out to the farm. I have a son on the farm who is attempting to follow in my footsteps. You can use that as an example of where the farmer finds himself, particularly the young farmer who is trying to get established, who has a number of hurdles to overcome. A young farmer usually is carrying a larger debt load than he should. The interest rates are reasonable, but it is still an obligation that has to be met. The ability to develop a NISA protection package has not been available to the young and upcoming farmer as well, and he has no backstop to where he goes.

All you have to do in Saskatchewan is go to some of the farm auction services and see the listings they've got to identify the demise of the farm communities out there. We have a major farm auction service in northern Saskatchewan that is booked up. You can't get an auction with that service right now, because they're booked up right until seeding next spring in many instances.

I will reiterate that we need a companion program to the safety net programs that are there now. We need that companion program to deal with the extended price depression situation you find yourself in, and it has to be there for unusual weather patterns or whatever. All you have to do is go to northwestern Saskatchewan and talk to the farmers. I think you can do the same for northern Alberta to a large degree, an area that didn't know what drought was for many years, for most of my lifetime. In the Meadow Lake and Lloydminster countries, they have had drought conditions unheard of in that area. You talk to those people about safety nets and they say “My crop insurance premium has gone up and my coverage has gone down. NISA? I've got nothing in my NISA. I haven't been able to contribute to NISA because of failure in three of the last five years in that area.”

I will say, as my other two partners have said here this morning, that there needs to be a cash injection into the agricultural economy as soon as possible. I think that because we are moving into a negotiation period to renew the safety net program, that companion program has to be there. I think this cash injection can be identified as a form of bridging into that new companion program. We'll all have to sit down and talk about how that can best be achieved. I know the Minister of Agriculture is having a meeting tomorrow that most of us will be a part of. The provincial agriculture ministers are coming out to that. I hope we can move forward from that.

The situation is serious for many producers in western Canada, and I would suspect all across Canada.

I'm prepared to respond to any questions.

The Chairman: Thank you, Mr. Larsen.

I think we've had a good start with those three presentations.

Just before we get to Mr. Hilstrom, I have two short questions, which I think can be taken together. I'll direct them to Mr. Wilkinson.

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Mr. Wilkinson, the two questions are predicated on the assumption that the low-income farm crisis brings with it a range of impacts. Some farmers are hit harder than others. So my first question is whether the government is able to precisely identify where each farmer falls within that range of impacts.

My second question is with regard to any response that might come from the government. Should it be specifically targeted at those farmers who are least able to absorb the shocks of the current crisis?

Mr. Jack Wilkinson: Well, it is somewhat difficult to be precise in basically nailing down the impact. A lot of farms are diversified to some extent. Therefore, one may have particular commodities on your farm that have not suffered nearly as much in this price regime, and others that have collapsed. It depends on your specialization, the commodities in which you're specialized, and the degree of diversification, how badly it impacts you specifically.

But I think it's fair to say that you can look at net farm incomes on an individual basis. What we're proposing for a disaster relief program, for example, would look at the individual margin on your farm. If the margin drop is more than 30%, this program would kick in. So it's very specialized in looking at each farm case individually, and it identifies that change. Then when that change comes to be more than 30%, it would kick in.

It will be GATT-compatible. It will deal with all income, so it will be a net farm income. It will not be commodity-specific in treating, for example, that commodity by itself. If we do that, we run a very serious risk of having trade problems.

So we're proposing that you can look at the farm individually, you can identify that farm in the system we're proposing, and it won't create trade problems.

It's hard to figure out what exactly the dollar implication would be, although we have an indication in our presentation. If you had 70% coverage, i.e., a margin drop of 30%, it kicked in, and it dealt with negative margins, it could cost in the order of $500 million in total in Canada. But there are some provincial programs currently in place that will absorb some of that hit already. So it would probably net out to be less than that.

The Chairman: All of this is politically sensitive. Are you prepared, Jack, to say to some of your members they're not hurting enough, and that any disaster assistance is going to go to—

Mr. Jack Wilkinson: Yes.

The Chairman: —your neighbour or your neighbours, because they're hurting more than you are?

Mr. Jack Wilkinson: We've already said that, and we're willing to stand by it.

The Chairman: Okay.

Mr. Jack Wilkinson: We're talking about a program that has NISA at this level, crop insurance at this level, and an income disaster program that is going to cover off the bottom end.

We know full well that it will not treat everybody identically, because of the different commodity mix. But in the other way of looking at it, we view it as treating everybody fairly. If your income has dropped that much, then this will kick in and pick you up at that point. So it will be bankable and fair.

The Chairman: Thank you.

I'm going to step out of the chair for just a few minutes. For about the last month I have promised the Crop Protection Institute that I would meet with them. I've cancelled I don't know how many times, and I've just seen them come into the room. I'm going to step out for a few minutes, and ask Mrs. Ur to take over.

Mr Hilstrom, you can start your seven minutes now.

Mr. Howard Hilstrom: Thank you, Mr. Chairman. I have a couple of things to set the tone. We have a bit of time here today.

I certainly appreciated your comments, Mr. Larsen. I don't know if you fellows mind if we use first names. If we sometimes slip, does that matter much?

Certainly we went through the balanced budget concept in all sectors, from the public service right through to the farm economy. The farmers took their share of the hurt on that balanced budget. There are no ifs, ands, or buts about that. We're living with that right now, and that's certainly a place of opportunity in looking at what we can do now.

This issue is so important that I felt— when this committee started out and put forward the motion that got this going for our committee, and was supported by members of the government and the other members here.

Today I also initiated the supply day motion that was debated in the House all day. The Chairman's remarks were fine. It's kind of unfortunate, in a way, that they're both going at the same time.

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The Canadian farmer looks down here at Ottawa and sees 301 MPs. If we stand here and say that we can't get enough here to listen to three or four different activities at the same time, then I think that farmer has a right to come and ask, what are you guys doing with all these people?

So I think that we will get through these hearings, no matter how many events are on the go. As members of the parties, we have to make sure we have at least one or so people here.

I'm not sure if at a future meeting the chairman will discuss whether he should be leading off the questioning on these issues. We'll bring that up in-house later on.

But the average Canadian, the fellow living in the city, the ladies and people living in the cities don't really understand this crisis. We have a communication problem as a government and as MPs, and you as industry people, to make sure that this big block of people in the cities understands what's going on out here. They are the ones who are contributing a lot to the federal budget, the taxes, and they'll have to agree to the solutions that are ultimately put out here.

I'd like to make two other points before we move on at all. It has to do with this idea of the homogeneous farmer, this mythical farmer who does everything, has to always be talked about more in sectoral terms. That is as opposed to just saying “farmers,” because that just doesn't cut it. I'm a beef producer, and, you know, you're primarily into canola and grains, whatever. So in talking about farmers, let's talk more from a sectoral point of view.

Also, with all the figures that are thrown out, I would like to try to have the presenters and the committee talk in terms of— They talk of total farm income and this sort of thing.

I think it's necessary for us to identify that in a lot of cases we're talking about Statistics Canada statistics, and that in fact we should differentiate if we're going to talk in terms of something other than total net income. They have realized net income and net cash income. Of course you guys all understand that. It removes the capital cost allowance, and this sort of thing.

So I think that in terms of a general tone, if you're going to use something other than total net income, which accounts for depreciation or not, we should identify that as presenters. I just ask you to try to do that.

The Acting Chair (Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Mr. Wilkinson.

Mr. Jack Wilkinson: Well, we have been very consistent in the way we define the numbers we put forward, and we constantly have been consistent. But I would like to make two other points.

First, I don't think the taxpayer in Canada has any problem at all. I appreciate your point that they don't understand, but, I mean, they elect MPs to come down here and make decisions.

Quite frankly, I think there will be no opposition tomorrow if the Minister of Agriculture comes to that meeting and says there is a crisis here that has been very clearly identified and quantified, and as the federal government in conjunction with provincial governments, we are going to move to put a disaster relief program in place to deal with this question. I don't think we'll hear one whimper out of the consumer population, because they're so divorced from primary agriculture now that they don't know on a daily basis what's going on.

Also, we have a justifiable back-up case with facts and figures. When that's explained to them, they will say they had no idea it was that bad, so go ahead, move; we don't want our farmers to go down the tubes.

For that sectoral approach, even though an individual farmer says “Why should money not come to me, because my beef price dropped, or my hog price, or my grain— Why do you look at my entire farm?”

We have to look at it that way. The Canadian cattlemen, for example, or the Canadian pork farmers and any other association that deals with trade issues will come to this committee and will say “If you give us a commodity-specific program, we'll be in front of countervail in the United States in 30 seconds. So please don't do anything that puts us in trade problems.”

So that's why we have to look at whole farm income, decoupled from production. Even though as an individual producer you may say you don't like that approach, I'm afraid that with the trade obligations we have, we have no choice. I think all of those national associations in the export business would absolutely concur with us on that.

Mr. Howard Hilstrom: Okay. You also have to appreciate something here. We all should appreciate it. It's not only the taxpaying person living in the cities and in the rest of Canada there. But in looking at the federal budget— And this is where we're talking about the final solution. That's why I have been insisting that this be done so quickly. This is so that it can meet that timeframe of hitting the next federal budget, which I believe is in February. But in preparing that budget you have to understand that in the government you have to look at prioritization. Where is the money going to go? It's not unlimited.

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The battles that are going to take place inside the cabinet, the caucuses—the rural caucus is probably represented by people here—are going to be gigantic. We shouldn't downplay the fact that the general public who affect these caucus members have to be on side.

The Acting Chair (Mrs. Rose-Marie Ur): Mr. Hilstrom—

Mr. Howard Hilstrom: Are we getting close to the end?

The Acting Chair (Mrs. Rose-Marie Ur): You get one minute for an answer.

Mr. Howard Hilstrom: Okay. So we're starting off, and I think it's important that as a committee we kind of understand and set the tone for these comments.

Your presentations have been fine, and we're going to have another round of questions. I've done a lot of talking on this first point, but it's necessary to ensure that as we ask you our last questions, you as presenters know where we're coming from on this.

Is there a comment anyone wants to make on what I've said?

Mr. Leroy Larsen: You know, I just want to add to what Jack identified earlier in the proposal he's put forward. One of the things has to be clear: we certainly don't want a program that penalizes the people who have been trying to protect themselves through the safety net program, through crop insurance, NISA, and those sort of things.

So I think we have to be clear on that one. That has to be part of the equation in working out the distribution of support.

The Acting Chair (Mrs. Rose-Marie Ur): Thank you, Mr. Larsen.

We'll move to Mr. McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Madam Chair.

The farm crisis is certainly a very serious situation. It's been many years since concerns were this real.

Thinking out load is dangerous, but one of the things we've done in our government—and someone mentioned the word “caucus”—is that we build support within caucus. This includes many urban colleagues. All of these small things, such as informing them that the effects will be felt in every community across this country— The steel industry and all the other commodities that go into the manufacture of these implements—everything is going to slow down to almost a stop.

I'm just reading the order of the day here. So we've controlled this quite well. It's called the study of the upcoming crisis in farm incomes. Sitting on this side of the government table, I see that farm income crisis is now. I agree that we have to have these hearings to know the extent. I certainly will be listening, and wish we could sit there against the wall every part of the day tomorrow to hear all this. But we have national caucus and a few other things on our schedule, so we'll be listening to hear what you think, and what you think the government and the minister are saying. I hope and trust that the minister is there to listen to you people.

I have a question on the farm income. You mentioned, Jack, that if it's down 30% or more— One of the things I'm hearing from home is that we have to be very careful when we talk about this farm income. We have to know whether we're including off-farm income, thinking about the spouses who quite often the female gender of the family. They're out working.

I'll give you an opportunity to speak on that.

Mr. Jack Wilkinson: Well, we don't think that off-farm income should come into the equation at all. I mean, I think it's very unfair to do something like this: basically take an individual farm business operation, and then go through the system and say that because you either by choice or by necessity work off the farm to supplement or for whatever reason, you should be discounted on your business enterprise. We think that's totally inappropriate.

Often that number does show up, even on Ag Canada numbers. They imply that somehow because off-farm income is there, you don't have to do anything to deal with farm income.

Agriculture policy is not having an automotive plant every 200 miles so people can work off the farm. Agriculture policy is designing the programs that need to be in place and that deal with the issues that are agriculture-oriented. Therefore, we think it stands on its own merit.

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The numbers are clearly showing a crisis in the farm community. It was identified very clearly that we had some program gaps. As I said earlier, this is not a matter of throwing stones at people, it was identified for everybody. In the means of cutting budgets and balancing books, there were some clear holes. We're saying they're now showing themselves in spades, so let's block them, let's move quickly, and let's deal with this issue in a way that's compatible to trade.

Mr. Larry McCormick: Thank you.

There are figures here that could cost up to approximately $460 million, some of which could come from the provinces and provincial programs that are in existence now. Of course, we're glad that all players will be around the table tomorrow, including the provincial ministers. But if $400 million or $450 million should and could and needs to appear, I'm curious as to how this would help our producers over what period of time, because this problem will not be over at the end of this calendar year. I'm just wondering if you could fill me in on that?

The Acting Chair (Mrs. Rose-Marie Ur): Do you want to respond to that?

Mr. Kenneth Edie: Perhaps I could, both to your former comments and to some of Howard's.

What Jack has outlined is one method that could be used. It does need to be refined, but I'm not sure we can sit here and refine it or say it will even be done tomorrow. Maybe it will work, maybe it won't work. The agriculture food policy review of December 1989 was done here in Ottawa. From that flowed the safety net process. Jack and I are both veterans of that, so we know the difficulties in designing these things and the things that come along with the particular activities that we try to work through.

With the farm income issue, you have to get around certain individuals. Patty was saying she got a phone call yesterday from a farmer in Alberta who never asked for anything. He was relatively young, and he said he just won't be here. So these things are quite real, and we need to make sure we understand what the individual needs are and how we address them, but it's not going to be easy.

We started talking about one of these things when we were here the first week of October. The immediate reaction we got was that we were asking for an ad hoc program, when you thought we didn't like ad hoc programs. Well, we don't like ad hoc programs, but the process was started in 1989 and it went various places. As Jack has outlined, it's different in different provinces, but there was no national third line of defence, etc., put together as a long-term plan. What else can we do except come in and say there's a problem, and let's address it quickly?

The Acting Chair (Mrs. Rose-Marie Ur): Mr. Larsen.

Mr. Leroy Larsen: I'd just like to add one comment to what Mr. McCormick said on this one.

I think one of our delegates summed it up very nicely when he said “I work on my farm to feed the world. I work off the farm to feed myself and my family.” We shouldn't have that kind of an industry in this country.

Mr. Larry McCormick: That's true. I concur.

The Acting Chair (Mrs. Rose-Marie Ur): Mr. Wilkinson.

Mr. Jack Wilkinson: I'd just like to make a point about how long this will last.

It's very difficult to analyse, but it's fair to say that in hogs, for example, the liquidation has started to occur on farms in Europe, and it has also just started in the United States. There's some indication that it's taking place in Canada as well, very clearly because the prices are so low. We are in a situation now in which there is between 8% and 10%—those are recent numbers, although I don't know today's—of an oversupply situation because of the cancellation of so many orders. It will take time for that market to recover. We'll have to get rid of breeding stock, and I think some people expect it will take between six and nine months at minimum to do that.

Grain prices are also a very difficult question to deal with because they will depend how long the European Union, the United States and weather play here with the oversupply situation that we currently have on the market in relationship to buyers. I think it's fair to say that, more likely than not, it's going to last more than a year. I think it's also fair to say that anything we have to design has to be willing to be able to deal with that reality right up front. It's not only today's prices, because this may last for a little bit.

This is a worldwide situation. The net farm income in the United Kingdom, for example, was four billion pounds two years ago. This year, it's estimated at 750 million pounds. Wales will have a negative net farm income, Scotland will have a negative net farm income, and the list goes on and on. Manitoba will have a negative net farm income this year. Saskatchewan will have a net negative net farm income. This is not only the total elimination of the household expense, this is the farmer's incapacity to meet his expense ledger on his farm when his net income is obviously in a minus situation.

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This is not people musing about what may happen tomorrow. As we well realize from just looking at the numbers, it's here right now in some commodities. Some regions have been hit harder than others, but it's a national problem in some of those areas, and it's very serious. I think we all agree on that, and I'm pleased we're not arguing about the numbers on any front. Everybody acknowledges that this problem is real. Now the question is how we deal with it in the most appropriate fashion, with limited resources and in order to get the best bang for the buck and create no trade problems.

The Acting Chair (Mrs. Rose-Marie Ur): Thank you, Mr. Wilkinson.

Mr. Hilstrom, you have five minutes.

Mr. Howard Hilstrom: Thank you, Madam Chair.

I'd like to reassure the witnesses that, as a committee, we're pleased to have presenters come here—and it's the same with every committee I've ever worked on in the House of Commons. Sometimes the questions get rather pointed, but they're not meant as attacks or anything on the presenters. The presenter is the king in this room, and we very much appreciate your being here.

I just wanted to clarify something, and I'm sure you'll clarify it for me. In this case, Jack, your presentation talks of an upcoming crisis. Do you believe it's not here, or do you just mean it'll get more serious down the road?

Mr. Jack Wilkinson: Basically, I mean that as every month goes by, the impact of poor prices deepens in terms of the effect on an individual family business operation. The more months you have poor prices—

We acknowledge very clearly it's here right now in certain commodities, and we are concerned it will spread. It's fair to say that what normally happens when you have very low hog prices often works its way into dragging down beef prices, it works its way into other commodities that compete. It does run the threat of seeing it broadening. The longer it lasts, the more it drains family resources and NISA accounts as it deepens the crisis in terms of how families can cope with it.

We've been lobbying for this right from day one. I think the record will show that CFA was off the mark early in identifying the issue and the need for action. I'm comfortable with our record; we have identified this for a long time.

Mr. Howard Hilstrom: Thank you. It's good to get that clarified a bit, because we're going to be going through things and will be preparing a report with recommendations afterwards, so we want to have all your material as perfect as we can get it and in a way in which we understand it.

I've seen the reports, but I'd like to hear this from the pools again—and from you also, Jack: Do you believe there is a significant amount of room for the government to move in the cost-recovery area and in terms of the cost of government on agriculture? These include your various taxes and everything else, like fuel and that.

Is there room for the federal government to work with the provinces? One of the biggest problems I have on my ranch in Manitoba is that I have to have a large land base, and I'm paying education taxes like crazy on all that land. They are a significant cost to my operation on the input side. Is there room for this crisis to be addressed through working with the provinces in some of these areas also? Can you go ahead and make comments on those things?

Mr. Kenneth Edie: Madam Chair, I'd like to respond directly to that and use an example.

I represent the Canadian Federation of Agriculture on what's called the crop protection advisory committee. I'm also on the environment management committee of the Pesticide Management Regulatory Agency, so that's a long string. The fact is that we had a meeting yesterday, and I'll just use some of our numbers. The costs that are estimated for the agency are $28 million, of which we're being asked to recover $16 million with a shortfall down to $12 million. The numbers are important and the dollars are important, but what is really important is that the agency operates efficiently and quickly, does turnaround on new products and does efficiently the re-evaluations that are necessary. That's government policy. We can be there as an economic management advisory committee, but we can only deal with the policy that PMRA has. I have a lot of sympathy for those people in what they are faced with in their activities.

The meeting we had yesterday, which Jack co-chaired, was the best one we've had so far. Some progress was made, but there are further things that could be done. For instance, part of the shortfall is being made up under Agriculture and Agri-Food Canada's A-based funding of $2.5 million a year for six years. As a farmer, it's unacceptable to me that you should take money from Ag Canada and put it over there to cover a shortfall.

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So it's not only the dollars, it's also the opportunity to operate quickly. We can go through the marine thing. If we get through here soon enough, we can go talk about marine issues this afternoon. People have to be aware of these things and how they can impact negatively beyond the dollar figure.

The Acting Chair (Mrs. Rose-Marie Ur): Thank you, Mr. Edie.

Ms. Townsend, you have 30 seconds.

Ms. Patty Townsend (Manager, National Affairs, Agricore): I'll give it to Leroy because he asked first.

The Acting Chair (Mrs. Rose-Marie Ur): All right.

Mr. Leroy Larsen: I just want to reiterate that there's room to manoeuvre on cost recovery. We have asked for some time for a halt in cost recovery programs and even a rollback in some of those areas. That may seem insignificant, but in total, there's not going to be one big solution here, as a number of little things have to happen.

We've been hammering our provincial government on the taxation that has hit the farm community. In the Saskatchewan Wheat Pool, our property taxes for rural property doubled in the last year because of the reassessment adjustment that was made there. They're doubled. That comes from no place but out of that tonne of grain in our country elevator system and in the marketing of farm supplies. It's those kinds of things that have to be rolled back.

I know our agriculture minister from Saskatchewan is going to be here tomorrow. We've been hammering him from the farmers' point of view as well. He'll argue that Saskatchewan spends more per capita on agriculture than any other province in this country, but it's a big industry in Saskatchewan as well. Everybody is going to have to make a contribution to turn this thing around.

Ms. Patty Townsend: Just very quickly, I will take a few seconds.

Everyone hates it when we ask to establish a task force or committee or something. However, I think we're at the point now where there are so many hidden costs in provincial taxes, provincial policies, federal policies, and regional policies that it's time for us and the government to put a very high priority on identifying them and figuring out how we can roll them back. This should be done not over the long term, but very quickly. We're suggesting that the minister should immediately establish this task force with industry representation on it to do just that.

The Chairman: Thank you very much.

Mr. Jack Wilkinson: May I just take a moment?

The Chairman: Yes.

Mr. Jack Wilkinson: I think there are two issues. One is for the very short term, and action is required. The other one involves some of these other things that are being talked about.

Say we basically look at the day's crisis in income and figure we can deal with it by tax reform, etc. We all acknowledge—we're on the record—the things that need to be done. This has been said, but there's also the short term. If we look at savings on the input side to deal with today's income situation, the farmer will be gone before particular line ministries, or whatever, act and any money flows back through the system.

It's important to do some of the things that have been suggested. I don't argue that at all. But that will not solve today's income problem. We need a national disaster program now. The farm community has agreed on the principles of how to do it in general, and we think we're close enough that we can put this in place literally in months. All of these other issues have to flow out of it to deal with the overall medium and long-term problems that need to be identified.

The Chairman: Thank you. We'll go to Mr. Steckle.

Mrs. Ur, do you have questions after?

Mrs. Rose-Marie Ur: I'll go after Mr. Proctor.

The Chairman: Yes, okay. Mr. Steckle, you have five minutes.

Mr. Paul Steckle (Huron—Bruce, Lib.): Yes, good morning, Mr. Chairman. I apologize for being rather late in getting to this meeting. I have another engagement very shortly, but I will stay and include my remarks and comments.

This morning I think we have perhaps best understood the term or old saying that necessity is the mother of invention. We're going to have to invent something rather quickly to deal with the crisis we're facing right now.

I remember listening in 1991 and 1992 to our then agriculture minister and other people who came together. In my particular region of the country, they formed a committee called the Line in the Dirt. I think Jack knows whereof I am speaking. They were looking at a third line of defence. But we've come into some good times. We've had good times for the last five years. Now we're in trouble again.

When can we get the farm community and government to sit down and work together to come up with a comprehensive safety net program that deals with these issues? Yes, we have three programs—well, we have two programs, depending on what part of the country you live in—but somehow we always seem to fail to do what we have to do when times are good. We always wait until we find ourselves with the horse stolen, then we lock the door.

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I have heard some really positive things this morning in terms of rollbacks and cost recovery. As members on all sides, we have argued and debated whether it's fair that we assume those costs, because we have no mechanisms by which we can pass on those costs to the further servicers.

So farmers are left in a predicament. Yes, we can say the hog farmers could have predicted that this was going to happen because of the large expansion in the hog industry. I predicted myself that this was going to happen.

The only people who are reasonably safe today are the ones who are in supply management. We have those on the other side sometimes who don't agree with the safety net that's basically in place because of supply management. There are things that are wrong about that program, but those people are not coming to us today for help.

So we need to do a lot of things. We need to understand this as farmers. I put myself in that category even though I represent a political position today. My thoughts are never far removed from those people on the land because I still go back there every weekend. I know how desperate things are back there.

How do we deal with those situations in my particular area? We have regional drought. So 15 miles from one place, they may have had the best crop they've had in 25 years, while another guy is droughted out. He has nothing. So we have to be able to deal with those site-specific farm situations. We don't want ad hoc programs, but I think we have to move quickly.

I like the idea that was suggested this morning. I think Ken brought it up and Patty talked about it. It concerns putting a task force in place. I think something has to happen quickly. I think we know now that we must move, so how do we deal with those site-specific issues?

Mr. Jack Wilkinson: As far as what we're proposing in terms of the program, we can't forget that a lot of work has been done. There were 33 farm organizations that met all last winter. They made suggestions and proposals for the next generation of safety nets. There's a five-year memorandum of understanding, so it had to be looked at again. So that process took place.

One of the recommendations that was handed to the federal-provincial ministerial meeting in July was the need for a disaster relief program in Canada. It identified the missing link, which is the third line of defence that we talked about in the last go around that never came into existence.

There is a great degree of commonality and unity among farm organizations as to how to deal with it. There were a lot of conversations about how to do it to minimize trade problems and find ways to have it move quickly. We don't need a task force to move on a disaster relief program. I hope we'll be able to say to the minister tomorrow afternoon, when it comes to discussion, that this is the way to do it. You've got agreement basically in the farm community. So that's critical.

It will, as we're proposing, deal with the site-specific situation on the farm. It will look at a farmer's individual calculations on the margin on their farm. If it decreases by more than 30%, the program will kick in and pick up that drop past that point. So it's not a high-slung safety net. A marginal drop of 30% is a substantial change in your farm business. We're not advocating that it's all for everybody, but it will deal with the drought in your riding for an individual farm that had half an inch of rainfall up to midsummer. If that income drops by more than that percentage, it will be covered.

It will deal, for example, with the scrapie situation of sheep producers in Quebec. Your program handled the liquidation of the flock, but it didn't deal with the loss of income. Look at the flood in Manitoba or Quebec or the ice storm in Ontario and Quebec. If the disaster is individual on your farm, it will come in to cover it. We treat all income losses the same. We think it's got a very positive way of dealing with future occurrences so we don't have to come here and have these hearings every six or seven years.

The Chairman: There's one more minute for this, if you want it.

Mr. Paul Steckle: I'm going to defer to my colleague.

The Chairman: Okay. We'll go to Mr. Proctor, then.

Mr. Dick Proctor (Palliser, NDP): Thanks very much. I offer my apologies for coming here in the middle of this.

As for this task force, I think I just got some of the answer from Mr. Wilkinson, but you're suggesting this could be reported very quickly. There could be action very quickly.

Mr. Jack Wilkinson: I think all we need to clear up is— Agricore and others have suggested that there needs to be a look at the long-term implications of cost recovery, taxation policy, and all of those things. We absolutely agree with that.

From our organizational point of view, there are two things. One is all of those implications in the medium and long term that are always going to be a problem to the expense side of the ledger of farms that have to be dealt with in terms of provincial and federal government policy. But we think there's a great deal of commonality and unity as to what needs to be done to deal with today's income situation. From our point of view, we don't want to give the impression to the standing committee or anyone that we need to start a process to identify that.

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The CFA had a discussion at its annual meeting and we put a policy together at our semi-annual meeting, which was given. The 33 farm organizations made a report in the spring and gave it to the minister in the summer. We think there is a lot of commonality as to action, and we can move in that area, knowing full well there are medium-term and long-term issues that have to be identified and worked on.

Ms. Patty Townsend: The cost recovery thing we're talking about is not just long term. We are asking for an immediate freeze or rollback of all existing cost recovery to at least make sure there are no additional costs imposed on farmers and hopefully reduce some of the costs that are imposed on farmers. The task force is a short-term proposal. We are asking that this task force be put together now to identify all the costs that are in existence now so we can undertake an immediate rollback or freeze. It's not just long term.

Mr. Kenneth Edie: Some work has already been done. Brian Paddock of Agriculture and Agri-Food Canada did some work starting quite a while ago on what the cost recovery meant. I agree with Jack that we need it upfront.

A lot of it is long term, but some of it is short term. For instance, the Canadian Grain Commission is looking at either decreasing services or increasing fees. If they decrease services and that makes it more difficult for us to meet our obligations in quality control and all the things that go with that and we don't meet our specs on shipments, this means it will go right back to the farmer as a loss because the service has not been provided. It wasn't provided on January 15, and bingo—there's a problem there.

We need to keep both sides in perspective. In one sense they are two separate issues but in another sense they roll together. So we do need the short term, and some of the short term can come out of the cost recovery initiatives when we don't get the regulatory functions done in a time-effective way.

The Chairman: Thanks. I'm reminded I have to talk into this mike because I think this one has died.

To Patty Townsend, whenever we hear task force we think delay, etc. My concern is that we have to get some help to farmers today—tomorrow. Are we saying they would have some money if the government agreed they could have money before spring planting?

Ms. Patty Townsend: We're not saying that freezing or rolling back cost recovery is the only thing that's needed. It has to be made clear that we fully support that there needs to be something developed to address the income problem in the short term. Just to put it into perspective, while we're talking about developing a program to get some money into the hands of farmers or whatever kind of program we're looking at, over there the coast guard is talking about putting another 25¢ per tonne on the cost to farmers for ice-breaking. Over here, CFIA is talking about increasing the fee for inspecting ships. So we're talking about putting some money in, but other sides are talking about taking the money out. We need to do both at exactly the same time.

Mr. Dick Proctor: Mr. Larsen, you were talking about property taxes, and I'm beginning to hear concern from some farmers in my constituency. This may be unfounded or misguided on their part, but they seem to be equating the treaty land entitlements with a sharp increase in their tax loads. I'm wondering whether you're hearing from any of your members on this or not. It may be that they're misinformed on this thing, I don't know. When you raised the issue of property taxes, it jogged my memory.

Mr. Leroy Larsen: I'm not aware of anything like that. As I understand the land entitlement agreements, there is compensation to the municipalities as part of that agreement to offset the impact within the local jurisdiction.

I just want to add to your comments and some of the others around here that this is not going to be just a one-time, let's give them some money for spring seeding and stick our heads in the sand kind of thing. We need to have an ongoing program in place, and that has to be clear in everybody's minds. There has to be bridging to an ongoing program.

On Mr. Steckle's comments about how to solve the farm income situation for the long term, we need to have a safety net that takes into account all the components that can impact the industry, and Jack identified some: the ice storm, the floods, the droughts and the international marketplace.

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Mr. Dick Proctor: I appreciate the clarification on that. My point is if we don't have it in place by next spring there will be a lot fewer farmers to worry about.

Mr. Jack Wilkinson: Absolutely.

Mr. Leroy Larsen: Yes.

The Chairman: For those of you who want to take on sustenance, there are sandwiches at the back. I invite you to discreetly get up out of your chair and you can grab a sandwich and then assume your seating positions. I'm not going to interrupt the meeting.

Mrs. Ur, five minutes.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

I commend these 33 commodity groups that have worked on this program and I look forward to seeing what happens tomorrow at the meeting. Let's leave politics at the door here. This is a non-partisan issue. We all eat, some of us more than others, and it's a real national issue. Let's work for the good of our farmers, because if we lose our ability to feed our people we are in deep trouble.

Jack, maybe I'll find out tomorrow, but see if you can help me now. My one concern with the national disaster program is how will you address a farmer out there—and I'm a farmer in my previous life, and I know how some farmers operate sometimes—who either couldn't afford it or he chose not to participate in NISA, or who chose not to go into crop insurance, and there was a disaster, and this third line of defence was there? Would there be some kind of mechanism in there to address that instance?

Mr. Jack Wilkinson: We view is that NISA in itself should stand independently, and we don't want a disaster program that is going to discourage people participating in NISA. That has to be a separate issue, the same as crop insurance. I would like to make this perfectly clear. The disaster program we're advocating is not going to solve everybody's first loss of dollar income. We're talking about a disaster program. We're talking about one that's slung low enough that it will respect the taxpayers' need for a reasonable expenditure while saving those people as best as possible. But it still will encourage them to take crop insurance out, or encourage people to take NISA, because that's what will handle the first fluctuations on your farm. This one is set down here. It's to handle this incredible price drop that has occurred, which is not planned on by any business in their operations—the trade war, the collapse of an Asian or Russian market or whatever unexpected, the 40% drops.

So I'll still take crop insurance out on my farm, because I will get much higher levels of protection by being involved in crop insurance and that will cover the much higher level of support to help back it. And farmers will still take NISA out. But they're modest programs, so there is room for the three to give an integrated package that will handle these issues in the future.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: Mr. Hilstrom.

Mr. Howard Hilstrom: Thank you very much.

Certainly, as Mrs. Ur has stated, we're trying to keep politics out of this, but Mr. Steckle saw fit to comment that someone over on this side of the bench was against supply management. He was looking at Mr. Proctor and I suspect that possibly he was looking at myself or talking to myself and the Reform Party. But certainly the Reform Party and myself are not against supply management.

Supply management is in place. It's just like the Canadian Wheat Board. Five years ago 99% of the people in the country would have said there will never be changes to the Canadian Wheat Board. I'm saying, as does the Reform Party, that while we support these things at the present time, the evolution of agriculture requires innovation; it requires all these things to become more competitive. So I take a little exception to that comment about supply management.

In any event, we have a lot of things that are affected on the input cost side, and the first one I'd like to talk a little bit about is fertilizers. You, the co-ops, deal in inputs for the farmers. First of all, how significant is the return from the farmer-owned co-ops and the pools that get back dividends in mitigating some of these input costs? Is there a significant return to farmers on that?

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Mr. Leroy Larsen: It fluctuates quite a bit. Take the situation two years ago with Western Co-op Fertilizers. Agricore and we are its owners. It had a very good margin, and it's based on the marketplace. But you go back a few years, and that industry was on the ropes. So it has a lot of fluctuation.

Last year it was down some. This year the forecast is for even further reductions in the margins and contributions back to the producer.

Mr. Howard Hilstrom: Do you know the taxation—

Sorry, Ken, go ahead.

Mr. Kenneth Edie: If I could respond directly to that, sometimes policies impact on us. Three years ago, on Western Co-op Fertilizers, which Leroy mentioned—we're in partnership as owners—we had to take a $62.5 million set-aside for environmental concerns. I'm not saying that's wrong, but it's a fact, and it's a government-driven initiative. Yes, we need to be responsible for what we did, but that's $62.5 million.

And then we did have further earnings. In our own case, in the year ending July 31, 1997, we allocated 8.8% of people's farm supply bills through their account. This year it's 4.6%. As the Manitoba Pool, in calendar year 1998 we're going to pay out over $8 million in cash to farmers.

Mr. Howard Hilstrom: Yes, so there's some feedback. When I look at my own and my neighbours' operations, inputs are a gigantic part of it. It's not just fertilizers; it's many inputs.

Do you have any comment as grain shippers— I understand there was quite an issue over pilots on the Great Lakes. What comments do you have in regard to that? I understood it was virtually the captain saying that we don't need a pilot to get through this area, and why do we have to have that on us? Is there room for movement there?

Is it Patricia or Patty?

Ms. Patty Townsend: Patty. I'll start out.

Pilotage has been a bone of contention for quite a while. A couple of years ago the Standing Committee on Transport did a fairly thorough study of a lot of issues that contributed to the competitiveness in the marine sector. The Pilotage Act was one of the things they studied.

This is very basic and simple, but what they did was recognize that pilotage is provided basically by a monopoly that's created by federal legislation. In addition to the fact that it's a monopoly, they're made to recover all their costs. So not only do they have a monopoly on providing the service, but they have to recover all their costs. So they aren't responsible to anybody.

So we do have great concerns. In fact, if you look at the cost of pilotage right now—and we're not arguing with the fact that maybe there is some pilotage required in some areas on some ships—a pilot is costing more now on a ship than the rest of the crew on the ship altogether. So we want some competition injected there. We do think there's an awful lot of saving to be made if we can deal with that issue.

The issue involving captains was that in a lot of cases on the Canadian ships, the captains have much more experience and much more knowledge of those routes than do the pilots who are paid to come on board to guide the ships.

We did support one of the options that was put forward: if the captains can pass the same sorts of tests and qualifications as the pilots, then they should be certified and be able to pilot the ships, in the absence of pilots.

There is a review going on of the Pilotage Act. It is going to be conducted throughout 1999. We have high hopes for it.

Mr. Howard Hilstrom: Thank you.

The Chairman: Let's see if we can try to keep our focus on the farm income situation.

Ms. Patty Townsend: That's part of it.

The Chairman: Oh, I know. You can relate anything in agriculture to anything, but I think we should try to specifically deal with the current cash crisis.

I wanted to ask Mr. Wilkinson—

Mr. Howard Hilstrom: I would like to raise a point of order, Mr. Chairman.

I kind of resent that, because pilotage and all these input costs— That's what I was talking about. The inputs are part of the problem with the farm incomes.

Even though we've heard these things before, I think we have to be on record as discussing them when a witness has knowledge of such matters. Let it be on the record so it may be reflected in our final report.

Thank you.

The Chairman: Mr. Wilkinson, you were mentioning a possible figure of $500 million for disaster relief, if I can put it that way.

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Currently, we have safety nets in the neigbourhood of $1 billion—$600 million from the federal government and $400 million from the provinces—for crop insurance, NISA, and so-called companion programs. When you're talking about adding $500 million, are you expecting that $500 million to be shared by the federal government and the provincial governments? Beyond that, if you add whatever the figure is—$300 million, $500 million, or whatever—to the overall amount, would that have any impact on the other component parts of the safety net programs? For example, if you spend $300 million or $400 million on disaster relief, could that mean a bit of a cutback on the companion side, the crop insurance side or the NISA side? Do you understand what I'm getting at?

Mr. Jack Wilkinson: I understand exactly what you're getting at.

When you talk about program design and numbers, you always run the risk that they can in fact distract from action and what not, but we thought it was important to basically indicate the size of the problem, or give some attempt at that.

I'll tell you what we would see happening. Manitoba and Saskatchewan have no income protection programs due to price, other than their NISA. Alberta has a program based on margin, and it would kick in after you've lost 30%. To bring what we're talking about into Alberta, all that would have to be picked up in order to add to the Alberta program is dealing with the negative margins. A lot of the income situation we're advocating is dealt with in the Alberta program, Ontario's market revenue program, or Quebec's ASRA program, etc.

So some provinces have nothing at all in existence, and others have part of a program. When we're talking about the $500 million, then, we're saying there would be cases in which there is a program in existence. Quebec's ASRA program, for example, is already funded partially by the federal government under the companion program part, by the provincial government, and by Quebec producer premiums. The $500 million would therefore not be a total additional amount, because there is already some of that in existence. We would just have to figure out a way to net that out of the system so that there wouldn't be double-dipping. For example, a corn producer in Ontario wouldn't have market revenue and then also receive a disaster relief program cheque on top of it. There would have to be a way in which those calculations could be done to allow them to receive the benefit of that while still getting their market revenue portion that's in addition to it.

So, no, it's not an additional $500 million, and, yes, there would be some savings in companion programming. If this program was in existence nationally, when they sit down next July to sort out the type of safety net programming design they want in the future, the federal and provincial ministers would discuss the way it should be cost-shared federally and provincially. But we're advocating that it be cost-shared in a manner similar to the current formula, meaining 60% from the federal government and 40% from the provinces.

The Chairman: Which is the formula now.

Mr. Jack Wilkinson: Yes, but if the federal and provincial ministers can sort out some other arrangement for the next year, that's fine with us. We're just suggesting that it is an issue to which the provinces should contribute in some way.

The Chairman: Mr. Proctor.

Mr. Dick Proctor: Thanks very much. I just have one quick question for Mr. Wilkinson, Mr. Chair.

In the House this morning, in this debate that we have going on, the Minister of Agriculture expressed some concern that millions of dollars in this farm aid program that's been announced in the United States—it's an almost $6 billion program—will end up basically going to farmers who don't need it. I'm therefore very interested in your 30% formula, and I'm wondering whether or not you can assure us that it would be going to the folks who need it most if such a program came into play here.

Mr. Jack Wilkinson: I'm very comfortable that the assurance will be built into the program design that we're looking at. There'll have to be a real loss calculated and put into place on your farm before money will flow. I'm very comfortable with that.

We have the numbers that the U.S. Congress voted, as circulated to our end. It's very clear that in the United States this is a decoupled program that has nothing to do necessarily with an individual's loss. For example, $200 million is in here for dairy producers. In a meeting we were at last week, the dairy producers from the United States said these are the best prices they've had in years, and they're going to get $200 million. Their organization said they didn't get anything out of the FAIR Act, and prices will be down in the future, so why not take the money.

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It's very clear that the U.S. has decoupled absolutely from an individual's income. If you're a wheat producer you'll get so many more additional cents; if you're a dairy producer you get so many dollars here. We're not advocating that from our side. We're saying there has to be demonstrated need. We are talking of a disaster program triggered on farm income, so that need will have to be displayed before a cheque would ever flow.

Mr. Dick Proctor: Thanks, Mr. Chair; that was the one question I had.

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner (Portage—Lisgar, Ref.): I haven't heard what you were talking about, but I was just going to follow up on the U.S. deal. They're going to have a tax reduction of $4 billion, and it doesn't explain what it's going to be for. I just paid my property taxes last week, and it had a 9% increase.

Are you looking at something like that? I haven't looked at what the books are going to say today, but that's a fact, you know. It shouldn't have risen, but it has other factors that deal with that.

Mr. Jack Wilkinson: I think it's clear to say that everybody is saying that the expense side of farm incomes over the last five to seven years has outstripped the growth in revenue. And that has created this wedge that has gotten narrower and narrower and narrower. So we acknowledge, and it's been suggested by some of the witnesses, that there needs to be an overview and a very serious look, with which we concur, at what we can do to deal with the expense side on the farm. Some of this stuff, as you well know, is within provincial jurisdiction, such as property tax. So that's something we can't solve with the discussion here at the federal government. There are other areas where it's joint jurisdiction, or cost recovery, that have been suggested to act on.

Some of that can give immediate relief. Some of it will be mid-term and longer-term relief. What we're advocating is that there's a missing part of the safety net program design. There always was. That was what used to be called a third line of defence. Now we're calling it a disaster program. We think that has to be in place immediately to deal with the cash crunch to some degree, knowing full well that some of these other issues will help very dramatically on the expense side and have to be acted on as well.

Mr. Jake Hoeppner: Can I ask you, then—and maybe you did explain it—would that program somehow be geared to individual crops, or to a general income fund?

Mr. Jack Wilkinson: Generally we're basing it so that we don't have any trade problems. Major commodities like pork and beef and others that do a lot of international trade do not want a commodity-specific program because they're worried about countervail.

Our attitude is you deal with net farm income. So if you have an individual drop on your farm with more than 30% of a margin calculation, then it will kick in and cover up that loss from that point on. A margin change of 30%, though, is very substantial on a farm. So we're talking of something that isn't a high-slung safety net that will absorb the first dollar lost from the farm. We're talking about something to deal with a very serious crisis that's in place. And it will be whole farm, so it won't individually be hit by a trade action.

Mr. Jake Hoeppner: Is that 30% geared to net farm income—

Mr. Jack Wilkinson: No.

Mr. Jake Hoeppner: —or a drop?

Mr. Jack Wilkinson: It's a gross margin calculation. So there are certain things that are allowed in the calculation of the expenses and revenue. We're trying to follow— It's similar, for example, to the calculations that are currently done in the program in P.E.I., Alberta, and B.C., with some very modest changes so that it can be something that can be up and running very quickly.

Mr. Jake Hoeppner: That brings me to another question. I know in Manitoba, CAP brought out last year at one of the CFA hearings that the average net income was $8,000 per Manitoba farm. Well, that's not enough to live on. Are you figuring the cost of living into those expenses, so that not the husband and wife both have to work?

Mr. Jack Wilkinson: Well, we're talking about a disaster program, to be fair. We're not talking about the program that will absorb the top end. We're saying that's what you use NISA for, or other mechanisms like crop insurance and other income protection risk management tools on your farm.

There will be hurt on the farm family on an individual income basis before there's money out of this. We're calling it a disaster program because we've had price decreases of over 40% in some commodities. So it's not a high-slung safety net. We think it's fair, it's reasonable. But there will be individual incomes that will be hurt before you'll get money out of this.

Mr. Jake Hoeppner: Have you had input from provinces on this?

Mr. Jack Wilkinson: CAP, for example, is a member of CFA, and they have seen the proposal and principles we're working on, the same as the pools are. So we have endorsement in general principles from all our members on this type of proposal.

Mr. Leroy Larsen: The number would not include off-farm income, though, in the calculation.

Mr. Jake Hoeppner: Very good. Thank you.

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The Chairman: Thank you, Mr. Hoeppner.

All of you have spoken to the urgency of the situation, that we really don't have a lot of time to waste—in fact we don't have any time to waste at all. Yet as I understand it, your proposed disaster program would be funded as a companion program with the provinces. Is that right, Mr. Wilkinson?

Mr. Jack Wilkinson: We're suggesting that there will need to be additional money, and it should be cost-shared between the federal and provincial governments.

The Chairman: That's right, because in your written statement you talk about a companion program to allow flexibility within provinces.

Mr. Jack Wilkinson: Well, this disaster program—

The Chairman: Let me ask my question, and then maybe you can—

Mr. Jack Wilkinson: Sure.

The Chairman: If on one hand we're talking about urgency and time that can't be wasted, are you, through your proposal, inviting all kinds of protracted negotiations with the provinces that could go on and on and on?

Mr. Jack Wilkinson: No, we're not. I know that will be the difficult hurdle for the federal minister and his provincial counterparts to deal with, and at the end of the day the federal government may have to act unilaterally in the immediacy to deal with the question. But in all honesty as well, as currently part of the program mix that's out there within the companion programming—

For example, within Saskatchewan—and there are people here from Manitoba who can talk to it as well—they chose to put some of their government money into an enhanced crop insurance program, and the individual program that dealt with risk in the marketplace for price got eliminated. Other provinces didn't make that choice. So it's unfair now, for provinces that chose to leave money in income protection, to say we're going to bring in a federal disaster program to deal with this price collapse and it's all going to be federal money and there are only going to be about three provinces that are going to see any of this because of previous decisions.

That's why we're advocating that there needs to be some cost-sharing on these additional dollars, the same as the current program mix. There's a 60-40 split. We think it's a farm income protection program, so we should try to maintain the 60-40 split. If negotiations break down with the provinces and it's not going to move ahead, obviously we'll be asking for unilateral action.

But I can't imagine for a second that a provincial agriculture minister is going to fly back from Ottawa— If the agriculture minister comes in tomorrow and says “I've got my money on the table to deal with this question, and we'll move ahead as soon as I have provincial agreement”, I'd find it really hard to believe that the Saskatchewan minister would fly home and the Manitoba minister would fly home and say they're not doing anything in these provinces at all, and you guys can go hang yourself to dry, price-wise, because they won't put any money in. I think they'll move.

The Chairman: Do you have any projections on the information that you now have? I understand that you're going to get fresh information tomorrow, but have you made any projections on the information you have as to how many farmers will go out of business by the spring if something isn't done?

Mr. Jack Wilkinson: It's almost impossible to put that on— For example, there are now hog producers, I am told by the industry people, who are losing $30 for every weiner pig that is born by the time it's marketed. So if you're a commercial operation losing $600 to $700 a sow, it depends on how much equity you have in your farm; it depends on how much you individually have in a NISA account; it depends on whether you have an—

The Chairman: In other words, it's almost impossible to answer the question.

Mr. Jack Wilkinson: I think it's fair to say that the numbers are so deep that people are not covering their basic costs on their business. So people will not, under circumstances like that, be able to last very long.

Mr. Gordon Pugh (Vice-President, Member Relations, Saskatchewan Wheat Pool): Just by way of anecdotal information, Mr. Harvard, and as Mr. Larsen indicated in his presentation, we are told that most of the major auction houses in Saskatchewan are basically booked up on farm dispersal auctions until next spring. That's an indication that there are going to be a large number of farmers who do their pencil work this fall after the harvest is in and know they can't make it on the money that's there.

The Chairman: And what happens to their operations?

Mr. Gordon Pugh: Somebody else comes in and takes them over. But that means that farmer is gone.

The Chairman: So does that mean that the bigger get bigger and the smaller fade away? Is that what you're saying?

Mr. Gordon Pugh: Yes.

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner: I'd just like to add a comment to that. I went into the U.S., North Dakota on the Pembina Valley watershed. I had breakfast with a bunch of businessmen and farmers, and one of the farmers pointed out that he was getting out because if he stayed in another year or two he would have no equity left. I'm told that is also happening with the auction houses, that they are booking some farmers who are not really in financial trouble, but they see that if this continues another couple of years they'll have no equity. So it's compounding the problem out there.

Mr. Jack Wilkinson: I think there are two things that occur. Number one, if you are in a province that has hardly any income backstop at all, you're sitting in there and saying, as you say, this could last for two or three years. In an attempt to hang on, why would you erode literally your entire life savings in the event that something may happen or that things may turn around?

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There are a lot of people who went through this already once or twice in their lifetimes, and their spouses won't let them make the same mistake the third time; that is, they will not watch them lose all of that money to take a decade to recapture it to lose it all again. If you have kids who are ready to go to university and you have no other pension plan and the question is to move now or hang on, hoping it will turn around quickly, a lot of people are just quietly making the decision and pulling the plug. They're not willing to.

The Chairman: Mr. Edie.

Mr. Kenneth Edie: I was at a farm sale recently, within the last two weeks, and the machinery was not selling. It was literally being given away. So that's not a good sign. I know it's in the fall and it's not a time to hold an auction sale in the fall, but people don't see fit to invest more money in machinery.

The Chairman: Are there any more questions?

If there are no more questions, I want to thank you very much. We very much appreciate your coming. I think this has been a good start. We're going to hear from many more organizations throughout the month of November. I would hope that all of us, in particular those people who sit around the cabinet table, will be better informed than we are now.

Thank you.

Mr. Jack Wilkinson: Just in closing, I think we all have tried to display the urgency of this issue. Anything the committee and all parties can do to encourage action sooner rather than later I think is absolutely critical. It's a serious matter. I think there's a fair degree of commonality in what needs to be done, and we would encourage you to move as soon as possible. Thank you.

The Chairman: I don't doubt for a moment, Mr. Wilkinson, that you have the ear of government. I'm absolutely sure of that. We're in a process, and I hope the process will take us to some very positive results.

Thank you.

This meeting is adjourned.