AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 26, 1998

• 1101

[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): Okay, we're in session.

Mr. Breitkreuz has a point of order, and then I'll introduce the witnesses.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you, Mr. Chairman.

Mr. Chairman, in looking at our list of witnesses here, I think there has been quite a major oversight. My understanding was that we would have an all-party delegation from Saskatchewan, but I see that we only have one person sitting at the table. Would it be in order for me to request that the committee allow the other two parties, the Liberal Party and the Saskatchewan Party, to also be represented? Do I need consent for that? I mean, this is a delegation that has come all the way from the province of Saskatchewan, but they're not all listed on here.

The Chairman: Mr. Breitkreuz, there's absolutely no oversight. This meeting has been planned for many days. We sent out invitations, and the clerk, through me, has scheduled four organizations for today. All we have room for is four, as we have only two hours. I feel for anyone who would like to make a presentation, but this is clearly the schedule that we have today.

Mr. Garry Breitkreuz: This is part of the delegation that comes from Saskatchewan. It's not an additional group.

The Chairman: Mr. Breitkreuz, I spoke to Mr. Upshall about this. Mr. Upshall did indicate to me in our conversation that there would be other people coming, but I made it clear that he would be the spokesperson and that there would be no one else, and that's it. Thank you.

We're now going to get down to business. We have the good fortune of hearing from four different organizations. Of course the issue is the current cash crisis in the farm community. We'll be hearing again from the Western Barley Growers Association, represented by Mr. Rockafellow and Mr. Armstrong. From the Canadian Canola Growers Association we have with us Bruce Dalgarno and Curtis Egert. Here from the UPA, from Quebec, is Mr. Yvon Proulx. And, as already indicated, the Honourable Eric Upshall, Minister of Agriculture and Food, is here to speak for the Government of the Province of Saskatchewan.

We're going to hear from the canola growers first, followed by the barley growers and the UPA, and the fourth presenter will then be Mr. Upshall. We have this room until one o'clock. I would hope that all presenters will keep their presentations as tight and succinct as possible so that we have plenty of room for questioning.

So without further ado, Mr. Dalgarno.

Mr. Bruce Dalgarno (Past President, Canadian Canola Growers Association): Thank you, Mr. Chairman and members of the committee. I'd just like to see that our presentation has been distributed to all the members.

On behalf of the Canadian Canola Growers Association, thank you for inviting us to share our views on the current farm income crisis and for considering our recommendations.

• 1105

Despite near-record national farm income levels in 1997, Agriculture and Agri-Food Canada is anticipating an additional 20% drop in 1998. The outlook for 1999 is not promising either, with the possibility of low prices and a continuing decline in farm income. On a national level, the 1998 income is only 4% below the previous five-year average. But when we take a closer look, it's easy to identify who is taking the brunt of the losses. In 1998, Saskatchewan and Manitoba producers are expected to be the most severely affected, with farm income down 70% and 40% respectively, relative to the previous five-year average. Farm income in P.E.I. is also expected to drop 40% from the previous five-year average, with a severe potato blight and drought having had a devastating effect on P.E.I. farms last year.

Prairie farmers find themselves squeezed between increasing input costs and declining prices. Some of the primary reasons for that situation are low commodity and livestock prices; high freight costs, particularly for export crop growers in Manitoba and Saskatchewan; sharp increases in property taxes; and operating expenses for machinery, parts and services, that are way beyond the price of the commodity. Meanwhile, 1998 net income for the prairie provinces is forecast at $143 million for Manitoba, $83 million for Saskatchewan, and $540 million for Alberta, for a total net income of $766 million.

Of interest is the fact that producers in the prairie provinces grew 13.2 million acres of canola in 1998. With canola returning an average net revenue of approximately $50 per acre, this means a total of $660 million, or 86% of the net income for the three prairie provinces derived from canola. In other words, canola is certainly carrying the farm in many cases in the prairies. While the canola industry is not experiencing the same setbacks as the other commodities, many of our farmers, for agronomic or economic diversification reasons, grow other crops and also raise livestock. Our concerns rest with those producers.

Despite the economic crisis in certain industries, hogs in particular, we do not see ad hoc government payments of the past as a solution for farming's future. Ad hoc payments are no longer feasible nor invited, either from a world trade or a competitive standpoint. Ad hoc payments are a short-term fix with long-term implications.

Federal and provincial governments are in a position to immediately reduce some of the farm input costs and to assist farmers, without upsetting trade negotiations. One of the ways in which they can do that, both federally and provincially, is to freeze agriculture-related cost-recovery initiatives. It's estimated that Canadian farmers currently pay over $100 million a year for services either provided or required by different levels of government. And governments can also reduce taxes on fuels and the farm implements that we use.

There's also a need to shift education tax from property tax to income tax. All Canadians benefit from our education system, yet landowners foot the majority of the bill. We feel it's time that we distribute our education taxes fairly. And there's a need to increase transfer payments from the federal government to the provincial governments so that the provincial governments can address education shortfalls.

• 1110

The Canadian Canola Growers Association also recommends that the federal government develop a national agricultural disaster plan in the event of a total market collapse. Such a plan should be designed to complement our existing safety net programs that are in place—the net income stabilization account, or NISA, and crop insurance. NISA's role is to look after income fluctuations within the realm of a working market. It was designed to stabilize income, not to be a crutch in a major market disaster. The disaster plan must not be trade-distorting. It should be commodity neutral, while covering the whole farm operation. And it should be available to all Canadian agricultural producers.

To conform to the WTO guidelines, government payments to farmers cannot exceed certain limits. We currently have the ability, within our trade negotiations or trade agreements, to have support programs in place that would equal $3 billion to $4 billion annually. However, today that contribution is less than $1 billion. There is clearly room within the trade negotiations to use $2 billion to $3 billion to create a national agricultural disaster plan.

The Canadian Canola Growers Association also suggests that the national agriculture disaster plan be modelled on the one in Alberta, the Alberta Farm Income Disaster Program. It is a voluntary whole-farm support program for Alberta farmers, and its purpose is to provide income to support active farmers when, for reasons beyond their control, they have an extreme reduction in their farm incomes. Some of the elements of the FIDP are availability to all Alberta farmers and all agricultural commodities; farmers themselves looking after their normal income variations on a year-to-year basis; and the program kicking in when income shortfalls are outside the normal range.

On the trade front, more effort is needed to liberalize agricultural trade. In today's global marketplace, it's imperative that countries play on a level playing field. The sooner we reach it, the better. In 1999, in the trade negotiations that are about to start, we urge the Canadian government to continue to press for reforms that limit the ability of the U.S. and the EU to engage in major subsidizations of oilseeds, grains and livestock. As well, there is a need to eliminate the oil tariffs in Japan, Korea, China and Mexico.

During the Uruguay round of the GATT talks, the zero-for-zero proposal for oilseeds was presented. Suggestions included eliminating export subsidies, import tariffs and export taxes on oilseeds and oilseed products. Although it wasn't adopted, zero-for-zero did receive reasonably strong support. A recent study, Trade Liberalization of the International Oilseed Complex, by Professor Karl Meilkie, from the University of Guelph, assessed the impact of the zero-for-zero proposal, had it been accepted. He concluded that “Canada, along with several other developed countries and some less developed countries, would gain from adoption of the zero-for-zero proposal.”

On some of the transportation issues that are a huge cost to growers, as producers now foot the entire freight bill, we need an efficient, least-cost grain transportation system. The CCGA has offered the following recommendations to the submission to the Estey review: we need to implement commercial contracts at all level of grain handling and transportation, so that companies have financial incentive to create efficiencies and to get rid of the inefficiencies; we need to move the system from an inland push to a vessel-specific pull for all our products; and the entire system should be focused on customer service, reliability and reduced waste.

As for some of the canola-specific issues, canola is presently more financially viable than either wheat or barley, despite costing approximately 20% more to produce. Markets are working, signalling to growers to produce more. How much more will depend on what the futures markets indicate between now and March. Analysts have predicted a jump from the 13.2 million acres in 1998, to a record 15 million to 16 million acres in 1999.

• 1115

Any increase of this magnitude in canola acreage certainly has some major impacts on the canola industry. First, it exerts downward pressure on the price in the marketplace, but that is still within the realm of a working marketplace. Also of some concern is the fact that with the tightened rotations an increase in canola production will push the threshold of disease and insect infestations. Two ongoing studies in Alberta are looking at tightened canola rotations and the impact of increased disease and insect pressures. Preliminary results show losses as high as 35% in canola when canola is continuously cropped, as compared to the already tight two-year rotations. The threat of more yield-robbing pests will impact canola production negatively in the next three to five years. Third, most of the increase in acreage is going to come from areas that are more non-traditional and more environmentally risky for this canola production. That places those producers at a higher risk of crop failure. Finally, higher canola production costs will force producers with tight or non-existing cashflows to seek more credit, thereby increasing their risk of bankruptcies.

In conclusion, Canadian farmers are in a financial crunch. Past experience with ad hoc payments proves that such payments do not work. Instead, the CCGA would urge the government to take immediate steps to cut farm input costs by reducing taxes and freezing all cost-recovery initiatives. A long-term solution is to design a national farm disaster program. It's also imperative that the Canadian contingent continue to push for an end to U.S. and EU subsidy programs on agricultural products in the next round of world trade talks.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Dalgarno.

I would urge all witnesses to try to keep their opening remarks as short as possible. We have only two hours.

We're now going to go to Mr. Rockafellow of the Western Barley Growers Association.

Mr. Greg Rockafellow (President, Western Barley Growers Association): Actually, Mr. Chairman, Mr. Armstrong will begin.

The Chairman: Wonderful. Welcome, Mr. Armstrong.

Mr. Ed Armstrong (Director, Western Barley Growers Association): On behalf of the Western Barley Growers Association, we wish to thank you for inviting us to present our views on the farm income crisis. I don't believe our report is available, because it wasn't here long enough to be translated. I'll have to read most of it.

The Western Barley Growers Association, the WBGA, was a member of the 1990 national safety net committee that was responsible for the development of the net income stabilization account, NISA; the gross revenue insurance plan, GRIP; and crop insurance. Mind you, crop insurance was there before; however, because of the barley growers, we kept the crop insurance on the table. These programs were to be the solution to having a sound financial agriculture economy to prepare Canada for 2000 and beyond. We are not there yet, and Canadian agriculture is in a state of financial disarray. What has gone wrong, and why are these programs not addressing our current crisis?

The whole process in 1990 was flawed from the outset. The Western Barley Growers believe this was due to the fact that the federal government had set up a think-tank type of committee to study agriculture finance a few years previous, from which came NISA. In Alberta Crop Insurance Review Report, 1986, on pages 82 to 84, there is a section called “Prairie Revenue Insurance Plan”, from which came GRIP. The sole function of the national safety net committee was to make sure these two programs were recommended and implemented. The government could say the farmers involved were responsible for these programs. The Western Barley Growers and the NFU were the only two organizations to go on record as being not in agreement with these two programs. The end result was that Ontario implemented the GRIP-type program that the Western Barley Growers wanted for western Canada. The Ontario GRIP program has approximately $300 million in funds—they haven't paid out much yet—for when corn and wheat prices go down. The problem with this program in the long term is that it is red, according to world trade rules—i.e., commodity-specific and grain sector only.

• 1120

GRIP for western Canada was the worst program for being manipulated by farmers for their own interests. The program only lasted approximately three years. We believe it is fair to say that due to the design of the program, the money paid out from the program was to a large degree wasted. The program allowed farmers to expand and carry more debt rather than allowing them to pay down their debt and get their farms in good financial order. With the present financial crisis it will be difficult for some of these farmers to cope. The end result is that we have widened the gap between the have and the have-not farmers.

In Alberta there is approximately $500 million in the NISA account, and approximately 4% of the account holders control 80% of the money. Yet in Alberta this year the farm income disaster program will pay out approximately $110 million.

In Saskatchewan there is approximately $1 billion in the NISA account, yet they have a farm financial crisis. Again, it is estimated that approximately 4% of the account holders control 80% of the money. If the age of the farmer population is taken into account, it is the retiring farmer or the farmer who is exiting agriculture who has benefited from these programs. Agriculture as a whole hasn't.

The Western Barley Growers Association is frustrated and disappointed with the 1990 safety net process. In January 1992 we were informed by the Alberta assistant agriculture minister that changes were going to be made to GRIP...and also in light of the New Zealand farm crisis at that time.

The Western Barley Growers Assocation decided to actively participate in shaping agriculture policy relating to safety nets. In March 1992 the Western Barley Growers Association called a meeting at which 11 farm organizations attended. Agreement was reached that day that there were problems with the safety net programs. We would call ourselves the Alberta Safety Net Coalition. We requested that the Alberta government provide the services of Frank Kehoe from the Alberta Agricultural Planning Secretariat to be the facilitator for the coalition.

From then until fall 1993 we held many meetings that resulted in a position paper setting out the criteria that a safety net program had to address. That safety net program had to address the following mandatory criteria. Farmers should have the confidence that the development process was farmer-driven, farmer-evaluated and farmer-disciplined. The safety net should be categorized as green within the World Trade Organization. The four pillars of growing together should be fulfilled. These include enhancing market responsiveness, fostering greater self-reliance, recognizing regional diversity to promote environmental sustainability, and helping farmers cope with price and income uncertainty outside the predictable range in the marketplace.

The process should respond quickly to cashflow needs. The program and related support should be seen as acceptable by the public. The potential for countervail of exports should be minimized. The program should provide compensation to farmers for non-insurable risks equivalent to a compensation offered to other industries.

Supplementing these mandatory criteria, it would be preferable that the safety net program assist in achieving the following results: removing non-market barriers to entry and exit in farming and ensuring that the program is actuarially sound.

This position paper was presented to the Alberta government in December 1993. The Alberta government agreed with the position paper. As a result, we had ten focus group meetings at five locations in the province to seek the input from the grassroots farmers on where they agreed or disagreed with our position on the criteria for a safety net program.

The results were a surprise, because the farmers wanted something done about restraints in agriculture. They wanted a good disaster program. They wanted an effective crop insurance program. Bluntly put, the message the government was given was “Government, get off our backs; take your program and be gone with you. Just leave us alone and let us do our job of farming.”

In cooperation with the Alberta government and the Alberta Safety Net Coalition, the FIDP, the farm income disaster program, was developed and implemented for the 1995 income tax year. Here are the fundamental principles of the FIDP program: it's market driven; it uses tax principles and data; it measures change in both cost and income of the individual; it focuses on a profit margin; expenses are as low or efficient as possible; market returns are maximized on income; profit margin is a key to the program; and the onus is on the farmer to keep good farm records on year-end inventories, on accounts payable and on accounts receivable.

• 1125

Also, from 1996 onward NISA has had a linkage with the FIDP program. By default, we made NISA work in Alberta.

What happens in Alberta is if there's a payment under the FIDP program, from 1996 onwards you first have to account for the federal government NISA program, and then the FIDP program makes up the difference. So whether you're a farmer who is in NISA and your account is full, whether it's half-full, or whether you're a beginning farmer who has no account, everybody is treated equally.

The program has been in operation for three years, and it is working. It is a win-win situation. The program is needs-driven; therefore, government costs have been decreased and an efficient use of taxpayers' dollars increased.

In the event of a financial wreck on the part of the farmer, he or she now has a program that will pay out a large amount of money when it is needed most. The Alberta government has just completed a review of the program. Out of 1,000 farmers surveyed, 88% stated that had it not been for the FIDP payment, they would have been in very dire financial straits. They further stated they used the money to pay outstanding trade accounts or outstanding loan payments.

Because of the action taken by the Western Barley Growers Association in 1992, the Alberta farm organizations have taken control of the Alberta safety net policy and the Alberta farmer has a program that is helping the farmers cope with the lower net farm incomes today.

On the national scene, there is a severe financial crunch for 1998, more so in some sectors than others, and more so in some provinces than others. Unlike 1992, when we had time on our side, we don't have it now. Actions by both levels of government and farm organizations have to take place now. Adding an ad hoc payment is not the answer. Government and farm organizations have to sit down with an open mind, with no hidden agendas, with the main objective of addressing Canadian agriculture as a whole, not just one segment or province.

The process has to develop the criteria and framework in which safety net programs have to operate. Also, a goal or objective statement for Canadian agriculture needs to be developed. It has been established by the Safety Net Review Committee that crop insurance and NISA are national programs; however, we have to apply the criteria against these programs to ascertain if they fit, and if they do not fit, why not and what needs to be changed.

Companion programming has to be developed by the farmers and their provincial governments, but their programs have to fit or comply with the national criteria. There has to be flexibility within the safety net envelope to allow farmers and provincial governments to reallocate funds to a companion program that will address the need at this time in their province.

Crop insurance has to be dealt with in a similar fashion. This is one of the next projects that the Alberta Safety Net Coalition will be addressing.

Also, a task force or a committee has to be struck to address the cause side of low farm income, and this is where the farmers were very strong in their support.

When we went to the focus groups they said let's look at the causes of the whole situation—that is, worldwide protection, lack of diversification, government subsidies, marketing constraints, transportation, input costs, lack of further processing. To that I'd like to add finance, the calculation of arrears. The Farm Credit Corporation, with provincial lending agencies, has to be looked at.

In summary, the Western Barley Growers Association is of the opinion we can get a short-term fix to address most of the problems, but the short-term fix has to be part of the long-term solution. This will mean commitment on the parts of both levels of government and farmers. However, as the Western Barley Growers Assocation has proved and demonstrated in Alberta, this is possible. At the end of the day we can achieve a Canadian agriculture industry that is competitive in the global marketplace.

Thank you.

The Chairman: Thank you, Mr. Armstrong.

Now we'll turn to Mr. Proulx of the UPA to make his presentation. Good morning, Mr. Proulx.

[Translation]

Mr. Yvon Proulx (Economist, Research and Agriculture Policy, Union des producteurs agricoles du Québec): Thank you, Mr. Chairman. On behalf of the Union des producteurs agricoles du Québec, I would like to thank you for having invited us to make this presentation.

As you know, the Union des producteurs agricoles du Québec is the organization that represents all Quebec agricultural producers. It is one voice speaking for all producers. Today I am going to make a brief non-technical presentation, the purpose of which is to urge the government to recognize the existence of a problem and the need to find a solution to it immediately.

• 1130

To make the interpreters' job a little easier, I'm going to stick more less to my text and I will read slowly.

Your committee was given the mandate of considering the upcoming farm income crisis in Canada and reporting on possible solutions. In the few minutes made available to me, I would like to demonstrate to you that this crisis is not merely upcoming but very real, and that the federal government must address it now. I want to express the support of the UPA, which I represent here, for the solution proposed by the National Advisory Committee on Income Security, on which I also represent the UPA.

The crisis is very real. The farm income crisis is not merely upcoming; it is very real. I shall not remind you of the estimated total farm income for 1998 and 1999, of which you have no doubt already been informed. Moreover, the gentleman to my left addressed this earlier by providing us with some figures. Instead, I shall try to illustrate what the evermore serious collapse of pork prices means to the average hog producer.

You may have heard that yesterday the price of pork in Quebec was $80 per 100 kilograms. That was the price yesterday when I was writing this document. Today, I must point out that it is $170 and even a bit less for 100 kilograms, while it costs at least twice that amount to produce 100 kilograms of pork. If prices remain that low, the average producer, who easily produces 5 000 hogs per year or 425 000 kilograms of pork, must deal with an annual shortfall of $300 000. Let's hope that it does not stay at that level for the entire year, because that would be extremely hard on producers. We do not need to be scientists to understand that this producer not only has no income or wages, but indeed has bills that cannot be paid.

You will probably point out that Quebec producers are not using that much money because of Quebec's ASRA, which is a farm income stabilization insurance program. You may draw the conclusion that thanks to ASRA Québec producers are not loosing that much money. You might say to yourself that the ASRA is there to take care of that type of problem.

It is true that ASRA exists. Yes, it is true that the farm income stabilization insurance is designed to take care of that kind of problem. But the ASRA must be financed, and the rules of the game mean that producers themselves finance one third of this shortfall. Clearly, when the shortfall is as large as I have indicated, and the average producer must finance one third—and I do mean the average producer—the shortfall may be as high as $100 000 per year.

Moreover, the situation is also difficult for the Quebec government, which has said that it has no money. Because of its fight to bring down the deficit, the government does not have any money. It was even forced to cut hospital budgets. The government must nevertheless finance two thirds of the program. As a result, it has become extremely difficult for both the Quebec government and producers to finance a shortfall of this magnitude.

The federal government must act now. It is important to point out that at the time of the last major farm income crisis, in the late 1980s and early 1990s, Canada had a much more elaborate farm income protection system than the present one. There were tripartite programs, GRIP and NISA, in short the income safety net was much more developed that it is now.

The federal government and provincial government contributed to it more than three times as much as they do now. They contributed approximately $3.5 to $4 billion per year to farm income security programs in Canada. Today, the two levels of government combined devote under $1 billion to these programs.

A number of major elements of that system have now disappeared; the tripartite programs no longer exist, nor does GRIP, as a result of new international trade rules and the huge budget cuts made in order to reduce the deficit. No doubt it will now be seen that a number of these elements were important and necessary. If we cannot bring them back, it seems clear that the government will quickly have to offer Canadian producers another income protection system on a permanent basis.

Before commenting on the nature of the new system, I want to emphasize that the government has the duty to decide now to inject substantial new money into it.

• 1135

I would like to point out that several months ago, the government of our main competitors, producers in the United States, decided to double its spending on farm income support. The farm income crisis in the United States is, however, not as serious as it is here. Estimates prepared show that farm income in the United States will have dropped by 16% in 1998. Here in Canada, it is clear that they will have dropped more, by 20 to 30%, according to our estimates.

The American government nevertheless decided two months ago to double its spending on farm income support. It added a $5.9 billion to the $5.6 billion already earmarked for this purpose, without taking into account the funds and other major steps taken to facilitate export sales of United States farm products. So it is extremely important for the federal government to follow suit.

During the international trade negotiations that we have been witnessing for more than a decade, governments, both provincial and federal, have very often asked farm producers to be competitive. Now it is producers' turn to ask the federal government whether it, too, can be competitive and match what is being done by the American government and the European Union.

Lastly, I emphasize another important reason that should convince the federal government to act; its objective of significant export growth, an objective that will certainly be not be achieved if the government cannot help businesses remain viable during crises of the scope of this one.

I shall not make comments on what shape a national income protection program in case of disaster should take. That is contained in the National Advisory Committee on Income Security proposal, of which I assume you have already been informed. The Canadian Federation of Agriculture has probably appeared to explain the details of the National Advisory Committee on Income Security proposal to create a national income protection program in case of disaster.

What I want to say is that the UPA fully supports this proposal and considers that the government must quickly make the decisions required for such a program to be made available, to cover 1998 income losses, and to cover losses subsequently on a permanent basis. That is the new component that the federal government must add to the income safety net this year.

The only comment I want to make about this program is that its operation must not interfere with that of other, existing elements of Canada's income protection system, but must complement them. The suggestion that producers should empty their NISA accounts before being eligible for payments under the disaster program must be rejected outright. I would be unfair to penalize producers who have been cautious and built up their NISA accounts and to force them to empty their account before being eligible for payments under the disaster programs. This suggestion would be a disincentive to producers to build up NISA accounts.

In closing, I know that the organization I represent urges the federal government to inject substantial new money into this program. Our organization will endeavour to insure that Quebec obtains its fair share of federal spending on this new income security program.

Thank you.

[English]

The Chairman: Thank you, Mr. Proulx.

To round out the opening presentations, we'll now turn to the Minister of Agriculture and Food for the Province of Saskatchewan, the Honourable Eric Upshall. Mr. Upshall.

The Honourable Eric Upshall (Minister of Agriculture and Food, Government of the Province of Saskatchewan): Thank you, Mr. Chair.

I have with me today two people, Mr. Bob Bjornerud, representing the Saskatchewan Party caucus, MLA for Saltcoats, and Mr. Gerard Aldridge, representing the Liberal caucus, MLA for Thunder Creek.

• 1140

I'm very pleased we are here today in solidarity in terms of the need. The opposition put forward a motion in the House a while ago, which was accepted by all parties and has been sent to Ottawa, supporting Saskatchewan's position on the need for assistance. I think this has happened because this has gone beyond politics.

I just came out of a farm meeting yesterday at Neiburg, where over 400 people basically asked me to send the message to Ottawa that while this is not a happy time for me to come down here, it's an urgent time for me to come down, and that farm families and children are at stake here, and are at risk of being moved off the farm because of the low commodity prices.

This has gone beyond... I wish to ask, has everyone got the presentation? I'll be going through the presentation page by page. Do we have it distributed?

The Chairman: No, we can't distribute it.

Mr. Eric Upshall: You can't distribute it, but we can.

Mr. Garry Breitkreuz: On a point of order, I think the witnesses should be informed of the fact that they can distribute it to the members of the committee, but they can't distribute it through the committee.

Mr. Eric Upshall: I was just going to ask to have it distributed.

I apologize too, because—and it is totally my fault—I made some last-minute changes so we were unable to get it translated into French, but I assume that happens.

The Chairman: Sorry, I just checked with a clerk. You cannot distribute it. That is the rule. We cannot give an advantage to one member over another, and I ask you not to distribute it.

Mr. Eric Upshall: Okay, that's fine.

The Chairman: Thank you.

Mr. Eric Upshall: I'm sorry, we were under the understanding we could. But that's your rule. That's fine; it's not a problem. The points will remain the same.

This is not a matter of being able to produce; it's a matter of being able to acquire return for your product. Saskatchewan farmers, as in all of Canada, are as efficient as any farmers in the world and have proven they are competitive.

If you look at Saskatchewan's reaction to this world problem compared to that of the U.S. or the Europeans, we have reduced our spring wheat acreages from 1992 to 1998 by 9 million acres. We went from over 18 million acres to about 9 million in that time period. That is a reaction from the producers in terms of what the market was doing.

If you look at Europe in comparison, this year they've increased their wheat acreages by 15%. If you look at the United States, their acreages have remained relatively unchanged. That's because the subsidy programs in those countries have not dictated farmers should react to the marketplace. We have in Saskatchewan, and we've done a tremendous job of moving nearly 10 million acres, if you can picture that, from wheat to other commodities.

We are unable to address this problem in Saskatchewan, from the farm gate or the provincial level, because it's the European national treasury and the U.S. national treasury we're fighting against. There is a need, therefore, to address both short-term problems and the long-term problems in terms of ongoing negotiations with our world competitors. In the short term, we need short-term cash to bridge the gap to a longer-term, multi-year, disaster-type program.

So the farm income problem is...I'll outline it briefly. The 1993-97 five-year average realized net farm average was $596 million every $600 million. In 1998, as opposed to the five-year average, it was $189 million; in 1999, minus-$170 million. This is not a happy tale.

The actions by the U.S. and the Europeans, as I stated, in combination with the actions by the Government of Canada in terms of living up to their commitment... And I do not argue the decision to remove the Crow benefit, which was nearly 100% of the subsidy we had here, to meet that WTO commitment and to meet some budgetary commitments you had. We've gone through it in Saskatchewan, and we make those decisions even if we don't like to sometimes. So I don't argue against the decision.

What I argue is the result of that decision, and the fact that decision was not made in consultation with the U.S. and the Europeans as to what they might do in the future. The result of those decisions in three countries has put a squeeze on our producers, where the input costs have risen dramatically because of the rise in transportation costs of nearly 150% and the downward pressure on the world price caused by the continued subsidy of the U.S. and the Europeans.

• 1145

We are in that squeeze. It has absolutely nothing to do with our ability to produce, but everything to do with the fact that influences beyond our borders are taking away our livelihood. So we try to compete against the Europeans and the U.S.

Let's have a look at what they do. The European per-acre support payment for wheat is $175. The support price is $205 per tonne at the elevator. They use an export subsidy of $60 per tonne. In the U.S. they have a loan deficiency payment, which is $15 per tonne or about 50¢ a bushel. A production flexibility contract is $37 a tonne under their FAIR Act or their Farm Bill, which is about $1 a bushel. On top of that is the $6 billion that was announced a month ago.

I just want to give a brief description of the loan deficiency payment. If I've got 10,000 bushels of wheat in the U.S., the loan deficiency price equivalent in Canada is about $3.90 a bushel, so I get a loan 10,000 times $3.90. If the price goes up and I sell my grain and I pay the loan back, I'm okay. If the price goes down to $2 and I sell my grain, I keep the difference. This is quite different from what we have in this country. And Europe of course is even worse.

The low prices due to the trade wars and the rising input costs impact on our farm families very much and very directly: reduced incomes; inability to service loans; reduced income.

Yesterday in Neiburg, one young woman, very bright and articulate—her husband couldn't be there because he's working off the farm, as are 60% of producers—showed us the figures for their farm. They were $80 an acre short on roughly a thousand-acre farm. This is not something that's usual and something that normal programs can solve.

There's an inability to service loans, reduced opportunities for new investments, potential farm failures. There are reduced sales to the agri-business sector in rural Saskatchewan, reduced machinery sales. We've already seen 500 people laid off at one of our largest machinery manufacturers in Saskatoon, and others are doing the same. The level of economic activity in the entire province is greatly reduced. Therefore there is a need for assistance.

The current safety net programs are important programs and they must be maintained. While we can always improve on programs like crop insurance and NISA, they were programs that were set out to smooth out incomes and to protect against production losses in terms of crop insurance; they were never set out to deal with huge, huge drops in prices, as we see today. Clearly, NISA has some gaps. Approximately 36% of producers have an account balance of less than 10% of their annual average eligible net sales. So that compounds the problem.

There's a need to address the situation. We're facing significant cashflow problems. There's a need for an immediate program to put the crop in for this year. When I talk about crops, I'm also talking about livestock. As we know, yesterday the price of hogs in Saskatchewan was under 50¢ a kilogram, or under $50 for 100 kilograms. There is an immediate need for a cashflow influx to bridge the gap to a long-term program.

Saskatchewan strongly believes in a national disaster program, but it has to be that, national. A national program means all producers receive protection, not just those provinces in which the tax base is large. The problem we have in Saskatchewan is very critical because of the difference between our land size, our arable land, and our tax base.

The design of a disaster program must address the needs for assistance. It must be administratively feasible, affordable, and not production-distorting.

We also firmly believe, because of the situation I've described, that the federal government must fund a program. The major cause of a multi-year disaster, as I said, is international. European and the U.S. national governments, not sub-national, provide the funding. The federal government chose to end the Crow benefit, as I said, which compounded the problem.

• 1150

Provinces with a large agricultural sector and a small tax base do not have the ability to fund national programs. I'm not ducking responsibility, because in Saskatchewan we provide on a per capita basis over four times as much as the federal government and 4.7 times as much as any other provincial government. In fact we more than double what our nearest rival, Alberta, contributes on a per capita basis.

What is income in Saskatchewan when it's agriculture? It's 10% of our GDP. Approximately 40% of our jobs relate to agriculture. We have 3% of the Canadian tax base and we have 47% of the cultivated land. So you can see why large drops in prices cause us a major problem in terms of our ability to give ourselves a blood transfusion when we're hemorrhaging. Our agricultural sector does not get the same benefit of the stability offered by supply management as other programs. Supply management programs across Canada are giving stability to other provinces. We only have a very small portion of the supply-managed programs.

We currently cost-share 60-40 in crop insurance, in NISA, and we will continue to do that. But in terms of this need for bridging cash to a long-term disaster program, we really have to have the federal government come onside. A fixed cost-share means that a Saskatchewan taxpayer is more responsible, as I said, because of the ratio of 3% of the Canadian tax base and 47% of the cultivated land, than any other taxpayer in any other province. I don't think that's quite fair. A 60-40 cost-share would clearly be inappropriate in this national program.

In the paper that you will receive, you will see a comparison by government across Canada of transfers by type, “regulatory” being supply management, “indirect transfers” being things like research dollars, and “direct” meaning money into NISA and crop insurance and other programs. If you look at this graph, you will see that while we have equivalent direct and indirect proportions, our regulatory aspect, which is supply management, is almost negligible.

In conclusion, there is a need for a multi-year disaster program. There is a need for Saskatchewan and Manitoba to have bridge funding. The assistance must be in the hands of farmers as soon as possible, before spring seeding. We are prepared to work with the federal government in order to accomplish this.

Thank you very much.

The Chairman: Thank you very much, Mr. Upshall.

Thanks to all the witnesses. We have a little more than an hour for questions. I'm sure members have many to ask. I turn to Mr. Breitkreuz for seven minutes.

Mr. Garry Breitkreuz: Thank you very much, Mr. Chairman.

Thank you very much, all of you, for your presentations.

I welcome Mr. Upshall to the table. I would like to address my first question to him.

I appreciate the fact that you are in Ottawa with the rest of your delegation. There was a bit of frustration a while back because the Government of Saskatchewan wasn't speaking up more vociferously on this issue. We need to be together on this. We need to let the federal government know what is happening in the province, the seriousness of the problem. I'm glad to see that you've included all parties in your delegation.

One of the things that would help the credibility of the province coming here would be a matter I'm sure the federal minister will point out to you. The Saskatchewan government has actively encouraged diversification in the province, including the hog industry. The problems have been compounded in the province because of the government influence on the decisions that normally farmers would make in determining what they produce. The incentive to entice farmers to get involved in hogs has virtually destroyed some of them because of hog prices, as you've indicated.

Would it not be better to reduce the tax burden for all farmers? There's a federal and a provincial component to the taxes that farmers pay. Many of them have come to me and said that if there was more fairness in this area, they could compete. What responsibility, Minister Upshall, is the province taking for this position?

• 1155

Mr. Eric Upshall: The reduced taxation? I'll make a couple of comments. I thank you for that question; it's a very good question.

First of all, you may or may not have been listening, but I've been speaking out on this issue for a long time. I'm not one to brag, but I stuck my toes in the sand at the federal-provincial meeting in July and wouldn't leave until long-term disasters were on the table. And thanks to Mr. Vanclief, who agreed, it is on the table and it's being discussed. Maybe you're not back in the riding much, but I think some people are getting sick of me talking about this issue through the media in Saskatchewan.

As far as the hog incentives are concerned, I'm not sure what you're trying to subliminally imply here, but if you threw all the hogs out of Saskatchewan, the price wouldn't change in North America. The North American price is set. So I'm going to continue to push the hog industry, because it's value-adding our grain that is going to make the difference in the economy in our province—more hogs, more chickens, more pigs, more buffalo, more elk and whatever we can grow.

In terms of reducing taxes, this is the point I really appreciate you bringing up, because this is precisely the point. Our ability to do that, whether it be a well-made point about the education tax on farmland, that we would like to have more taxpayer funding to make it more equal across the piece; whether it be reducing PST or income tax... We virtually have eliminated or exempted all taxes on farming except for a little bit on fuel tax. Diesel is completely exempt. We have a fuel tax rebate to the tune of $140 million a year. So as far as tax on sales go, it's almost done. The feed stock tax is still there to some degree.

The point is, in a crisis like this, the ability of the Government of Saskatchewan—and let's not confuse the Government of Saskatchewan as anybody but the people who are paying the taxes—the ability of that taxpaying group to provide taxes to first of all have their taxes reduced in order to help themselves but then go back and ask them for more taxes to bail themselves out of a slumping world price is a dilemma. You don't have to a be rocket surgeon, as Don Cherry would say, to figure out that it's almost impossible to do.

Mr. Garry Breitkreuz: Thank you.

You brought up the education tax, and so did one of the other presenters. I think it was the canola growers who brought up the education portion of the property tax. I wondered how you would reply... I have a lot of farmers coming to me, and I'm sure you do as well, and for years and years they've tried to bring more fairness in that area of taxation. The education tax really is a huge burden upon them.

In regard to fuel tax, farmers are aware of the fact that the province charges the railways quite a heavy tax, much more than any of their competitors. And that tax is not paid by the railways; it's passed on to farmers. One of the biggest costs farmers incur is transportation.

Mr. Eric Upshall: You may know that the railways are trying to solve this problem by reducing the number of trains that run through on the tracks.

Mr. Garry Breitkreuz: I'm quite aware of that.

Mr. Eric Upshall: In the full scheme of things, that is again the problem. We could reduce the tax to the railroad on their fuel. We could reduce the PST more. We could transfer the cost of education more onto the provincial government or all the tax base. The fact remains that the pie is only so big, and you have to figure out how to slice it. That's where we're at right now, and that's why it's virtually impossible to ask our taxpayers to assume the added burden of trying to put back into the system the hundreds of millions of dollars that the drop in grain prices has caused us.

Mr. Garry Breitkreuz: Yes. I appreciate that very much, and I'm onside with what you're trying to do here today. The point I'm trying to make is that we shouldn't just be pressing for a short-term solution. I think we absolutely need to have together with that a long-term solution.

One of the presenters made the point that ad hoc payments may be a short-term solution, but we have to look at their long-term implications. This problem in Saskatchewan has been brewing for many years. As we're pressing the federal government to work out some kind of a short-term solution, do you not agree that we also have to, at the same time, be working on a long-term strategy?

• 1200

The Chairman: Just a short response, Mr. Upshall.

Mr. Eric Upshall: The answer is yes. I started in July at the federal-provincial meeting, and we're going to continue. I said there are two approaches, short term and long term. I agree.

The Chairman: Thank you very much, Mr. Breitkreuz.

Madam Alarie for seven minutes.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): My question is for Mr. Proulx. You talked about the National Advisory Committee on Income Security proposal. Without going into detail, I would like you tell me if the national income protection program in case of disaster is such that the Minister of Agriculture would like to see it. Will this program stand up to WTO pressure? Will it be WTO- proof, if I can put it that way? Will this program be retroactive and cover all of 1998? I know that the government is always quite reluctant to apply programs retroactively. I would not want the implementation of a new program to put an end to other programs that preceded it. The producers are the ones who are facing serious difficulties in 1998 and who need assistance. During the meeting, did you assess the costs? I imagine that that is where the shoe pinches.

Mr. Yvon Proulx: Thank you, Ms. Alarie, for your question. The National Advisory Committee on Income Security has now worked out the final details of its national income protection program in case of disaster. This national program applies to each and every farm producer in Canada.

You asked me if the program complied with the rules of international trade. This program corresponds exactly to the World Trade Organization definition of a green box program. It goes without saying that we will ask lawyers to examine our proposal so that we can be absolutely certain that it does not run counter to the rules of international trade. But the program was explicitly designed on the basis of the specific definition of a green box income security program according to the World Trade Organization. As a result, from that perspective I think that it is fully compliant.

Ms. Hélène Alarie: And in terms of costs?

Mr. Yvon Proulx: You raised the issue of retroactivity. The National Advisory Committee on Income Security met three to five times over the course of the past month to define the nature of the program. The proposal that it presented was designed to cover producers whose income dropped in 1998, in other words producers who are experiencing the current crisis. We expect that the federal Minister of Agriculture will soon be presenting this proposal to Cabinet, that Cabinet will approve it, and that we will be in a position to offer this program to all agricultural producers in Canada, and that it will apply to the 1998 crop year and, of course, that it will be on a permanent basis after that.

It is more difficult to answer your question on costs, because it is an individual program. Under the provisions of this program, if, in 1998, a producer declares that his income has dropped by $50 000, by taking into account the deductible and complying with the rules of international trade, he could receive a reimbursement of $30 000. But if a pork producer is also a grain producer or a dairy producer and he is doing extremely well in one of these sectors, he will not receive the same compensation since the program is a whole-farm program. So it is extremely difficult to assess costs.

We do, however, have some overall estimates that were compiled by some members of our committee. We expect the cost to be roughly $600 million.

• 1205

Although we are proposing that both the federal and provincial governments jointly subsidize this program, the Minister seems to want subsidies to come solely from the federal government. I would like to point out that this $600 million is a very modest sum for the federal government compared to the 3, 4 or $5 billion it injected during the last crisis. I believe that the federal government has the money and that it must invest it in an income security program with a view to resolving the very serious problem we are currently facing.

Ms. Hélène Alarie: Thank you, Mr. Proulx. By and large, I hear people say that farmers are productive and competitive and that there are no problems at that level. However, there is a world-wide overproduction problem that will only get worse once the European countries are better organized. I do not foresee there being a drop in overproduction worldwide.

Basically, what is bothering me is that the international rules are not being respected. I have not seen any concrete action on the part of the government to openly criticize what is happening in the United States or Europe. Nor have I seen an assessment of the impact that this might have on our agricultural producers.

You say that producers will have to abandon production or change sectors, especially out West, which in the long term will lead to a loss of expertise that may be quite serious. Throughout the country, or at least in Quebec, this situation is directly affecting our social fabric or rural society, if you will.

Should we not, alongside the implementation of a national income protection program in case of disaster, criticize what is occurring before undertaking the next round of WTO negotiations? I am under the impression that that is one of the reasons for the current crisis. I agree with asking for money as a form of concrete and quick assistance, but should we not at the same time condemn what is happening worldwide?

[English]

The Chairman: Could we have a short answer, Mr. Proulx?

[Translation]

Mr. Yvon Proulx: We will be appearing before you again on December 8 to discuss the rules of international trade more specifically, to examine the possibility of tightening them up and improving them to ensure that countries comply.

We agree that all our producers are productive, but in my opinion, overproduction is not behind the current crisis. Instead, the crisis stems from the fact that demand for these export products has dropped dramatically as a result of the crisis in Asia and Russia. Agricultural producers alone feel helpless in light of the financial crisis that has rocked Asia.

[English]

The Chairman: Thank you.

I want to remind witnesses and members that there are sandwiches at the back. Unfortunately, we don't have enough to go around, so those of you in the audience will have to try one of our good cafeterias on the Hill.

I noticed that my good friend Dave Rinn snitched a sandwich a few minutes ago. Dave, we will be asking the comptroller's office to send you a bill.

Mr. Calder, seven minutes.

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

Minister, you talked about a national disaster relief program. I get the feeling when you're describing it that this has to be, in your opinion, totally funded by the federal government and you're not really interested in say a 60-40 provincial split. Am I right?

Mr. Eric Upshall: In terms of the short-term program? Absolutely, yes. In terms of a long-term national disaster program, that would be my preference.

Mr. Murray Calder: So that would be totally funded by the federal government?

Mr. Eric Upshall: If the program were to handle problems that were beyond the control of the borders of the province, and also taking into account the ability for the tax base to solve its own problem.

Mr. Murray Calder: Okay.

I know in 1993 the GRIP program was let go because quite frankly it was in the blue box. How would you describe a program we're talking about right now that would not be in the blue box?

• 1210

Mr. Eric Upshall: The program would have to be along the lines of the whole farm program. I don't know what the federal government is thinking exactly, but you really should look at whether it can be commodity-specific or acreage payments. The last question was very good, because we say that we can't do commodity-specific or acreage payments because they're going to get countervailed, yet when I look around I see commodity-specific and acreage payments in our competitive countries under the same agreement.

Mr. Murray Calder: I agree. In fact, one of the concerns I have is the carry-forward that the Europeans have right now, which in 1999-2000 could constitute something like 37.8 million tonnes of grain coming out on the market. Do you agree?

Mr. Eric Upshall: I don't know that number, but I agree that's a problem.

Mr. Murray Calder: Okay.

Now, to take a look at the short term here, it's my understanding that your government is going to be reporting a surplus of $100 million this year. Is that correct?

Mr. Eric Upshall: Thereabouts.

Mr. Murray Calder: Are you going to put any of that surplus toward the short-term solution for the problems you have in Saskatchewan right now?

Mr. Eric Upshall: The surplus, if you analyse it, is just over $100 million, and $100 million of it is the sale of an asset one time, so that is a problem in terms of what we can do.

We have backfilled and continued every year all the other cuts that have been coming out, to health care and education and all those types of things. So the pressure is on. As I said, we continue to provide more assistance per capita than any other province, and we'll continue to do that, yes.

Mr. Murray Calder: In other words, this is something you're probably pushing for around your own cabinet table, as our own minister is pushing for here.

Mr. Eric Upshall: We have lots of problems on an agricultural basis in terms of input costs that we address. One of my colleagues back here, Mr. Aldridge, is always on us for input costs, which is a very good issue, because we have to figure out how we get the spread, how we get to keep the margin, and input costs are a major contributor to that.

We talk about a number of issues, but in the short term. The ability for us—us being the taxpayers of the province—to manage, or even beyond the ability, to look at the crisis and compare it to other things in other parts of the country... I always compare it to the cod problem. It is said that government policy partly contributed to the depletion of the cod stock. All taxpayers contributed to that area. I agree with that. This is no different.

Mr. Murray Calder: In my other life I'm a poultry farmer in Ontario, and therefore I know the merits of supply management and marketing boards. Now, you went ahead and basically dismantled the marketing board for pork in Saskatchewan. Was that the right move, given the situation we have in pork today, or would you have done the same thing again?

Mr. Eric Upshall: First of all, let's separate supply management from the marketing board. They are two totally different things. I believe I wouldn't have done that had I not believed it was the right thing. I still believe it's the right thing. We have basically doubled the hog production capacity in two years. We're still behind Alberta and Manitoba, and everybody else is increasing as well. But I think that helped, and it seems to be working very well.

Mr. Murray Calder: How much more time do I have, Mr. Chair?

The Chairman: There are a couple of minutes left.

Mr. Murray Calder: Good.

This is something that's a bit of a bone of contention for me. On the negotiations we entered into in 1993, we came into the process very late, when we were elected as a government, and quite frankly, some of the projections and solutions we decided we were going to achieve by this time we haven't reached. That's obvious. We were supposed to stop low prices, and that has not happened. The reason it hasn't happened is because the other countries are subsidizing. Europe, for instance, on wheat, which you'll be well aware of, has a subsidy of $2.75 more than what we subsidize, and the United States has a subsidy of $1.55 more than what we subsidize. Therefore, it puts our farmers in a very bad situation.

• 1215

Given the fact that negotiations involve a barter system—that is, we give away, you give away, and we've already given away too much, as far as I'm concerned—how do we get our own negotiators to stand fast on the position that the Europeans and the United States have to catch up with us before we're even willing to start talking about moving from the point we are at right now? How do we do that?

The Chairman: There is less than a minute left.

Mr. Eric Upshall: Before I go into a negotiation, I like to see that the playing field is level. You're saying it's not level now, and one of the responses would be let's make it level. Let's put a disaster program in place and come to the edge of the WTO and put ourselves back on an equal basis with the European and American subsidies nationally. That way, when you go back in there, you can say we're on the same basis. You're right, we don't have any aces left in the hand, so we'd better try to get a few before we go back to the table.

The Chairman: Thank you.

We'll now turn to Mr. Proctor for five minutes.

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

Welcome, everybody.

Mr. Minister, last night while you were probably flying here with your delegation, there were stories on The National news and again in the Globe and Mail this morning about figures that the Minister of Agriculture is taking to a cabinet committee today, that is, $350 million to $400 million this year, $500 million next year, on an ad hoc or short-term basis with a long-term projection. I wonder if we could get your reaction to that. Do you think that's going to be sufficient to offset the problems we all recognize?

Mr. Eric Upshall: Unfortunately, I got that information second-hand from the news media as well. I don't know what the program is. I don't know what $350 million, $400 million, or $1 billion means when I don't know the design. Unfortunately, we haven't been consulted on the design, and I hope that would happen.

If the parcel of money—disregarding the figure—means it's a disaster program that is portable to need across the country, that is, basically the hog industry and the grains industry in certain things, then maybe it's okay. If it's a fixed ratio across the country, then the number becomes absolutely more important. Is it going to be totally federal government funded? Is it going to be cost shared? I don't know the details, and that's part of my frustration as to the whole process.

Mr. Dick Proctor: I think the suggestion, as I heard it, was that they were going to be seeking some cost-sharing by the provinces. But, again, it's just speculation.

In your presentation you talked about the need for a blood transfusion. A lot of people in the industry have said that maybe $1 billion is what is required right away in terms of short-term relief. I'm wondering if $350 million or $400 million this year and a further $500 million is going to be enough, or are farmers simply going to bleed to death more slowly?

Mr. Eric Upshall: That's a very difficult question to answer. As I say, the ability to move the lump sum is important, and if it's $350 million or $400 million for the hog industry and the grains industry, where the need is, it may be. If it's going to be cost shared, we don't know what the percentage might be. I understand your question, but it's a very difficult one for me to answer.

I would encourage that there be a little more consultation in terms of what we might do, because if the federal government drops a program on the table and says take it or leave it and it's across the piece, where there are shared fixed pieces across Canada, it puts a province like Saskatchewan, with our small tax base, in a very difficult position to be able, as I say, to give ourselves that blood transfusion.

• 1220

When you think of it, we have 60% of the farmers working off the farm and 40% of the people affected by farm income. We're going to go back to those same people who have reduced incomes, fewer hours of work and lost jobs, and say “We want more from you to help you”. It's silly.

Mr. Dick Proctor: In a previous answer you said we could probably rule out commodity-specific and acreage payments because they'd be in violation, yet we see our major competitors doing just that. What do you think the rationale is for the fact we can't do it but the other guys can?

Mr. Eric Upshall: I guess the rationale is that's what was agreed to at the last round of WTO, but within that round there was flexibility. I think we can go back and increase our subsidies. I know we can. If we want to put ourselves on the level playing field, maybe we should do it through similar ways.

I don't promote that, but I'm just saying we have to put ourselves on the same footing as our competitors when you go back to the table. They're holding the aces and we have the deuces here, so that's why we have to do something at the federal level and right across the piece. All governments cost-share the standard programs, but we have to figure out what's standard and what's not standard.

Mr. Dick Proctor: Thank you.

The Chairman: Thank you, Mr. Proctor.

I think it would be accurate to say we're all impatient, and the current spate of newspaper and broadcast stories have heightened speculation as to what the federal government might do. Would you not say though, Mr. Upshall, you are encouraged by the news reports that Mr. Vanclief, the Minister of Agriculture and Agri-Food, may in a very short time be putting something substantial before his cabinet colleagues?

Mr. Eric Upshall: I have stated several times in the last two weeks to my media back home that in terms of how things work in government in the provinces and at the national level and the speed at which they work sometimes, this is occurring very quickly, and I compliment the government on that. I have said that many times over. I guess my request would be for a little more knowledge of what's going on.

The Chairman: Thank you.

I'm sure my colleagues in cabinet will appreciate hearing that, and I appreciate that.

We're now turning to Monsieur Coderre for five minutes.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): I would like to start by welcoming the Minister and the other witnesses, including Mr. Proulx.

We know that the situation in the pork sector in Quebec is particular. The blockade on Highway 20 raised our awareness of the problem. Basically, if I ask you to talk about it, it is to alert my colleagues from the other provinces.

Then there is the Farm Income Stabilization Insurance. I do not have a problem with that program, no more so than I do with the national program project. Like you, I think that when specific problems arise, we have to respond to them. I also believe that the true sovereignty of a people rests in its ability to feed itself. So we have to protect our farmers.

However, the federal government, which has done a lot, which is all ears and which must make commitments when required, has given out considerable amounts of money, namely to the Quebec government. The Quebec government chose to set up the Farm Income Stabilization Insurance instead of choosing to do what the other provinces did.

Are you in favour of a national program? In the pork industry, among others, the Quebec government had already expressed an interest. There was even an agreement with producers. That is why Highway 20 was blocked. Do you prefer the money being administered under a national plan or it being given to the provinces in exchange for guarantees that they will keep their hands out of the pot, and not do what they did for pork at the provincial level?

Mr. Yvon Proulx: To understand the crisis that rocked the pork sector in Quebec this fall, bear in mind that the steps we took were designed to reintroduce pork into the Farm Income Stabilization Insurance Program as it was a year ago.

In the wake of the budget cuts and the battle to reduce the deficit, the level of support for that sector dropped quickly and substantially.

Mr. Denis Coderre: Despite the agreement, reserve funds were used.

Mr. Yvon Proulx: Yes, that is right. On the assumption that an extremely quick rise in productivity made it possible to confirm that production costs had dropped substantially. However, the cuts in that area were much too high and too drastic.

• 1225

As a result, the exceptional steps taken by the producers were designed to convince the government to bring the program back to what it was a year ago. That was the purpose of the demonstration by pork producers, who were supported by all other producers. They wanted the program brought up to the level of efficiency it was at a year ago.

Mr. Denis Coderre: If that was the case, instead of implementing a national disaster program, namely for pork, should we not increase the amount of money Ottawa transferred to Quebec for the Farm Income Stabilization Insurance Program?

Mr. Yvon Proulx: That is clear. Our organization supports the setting up of a national income protection program in case of disaster, but it goes without saying that in Quebec, we are going to negotiate a distinct arrangement with the federal government. Individual producers will not receive any money under the program because they are already being compensated under the Farm Income Stabilization Insurance Program. Payments under the National Income Protection Program in case of disaster will go into the Farm Income Stabilization Insurance Fund.

Mr. Denis Coderre: Mr. Proulx, I would really like the UPA to give the federal government some recognition from time to time. We set up a disaster program namely during the ice storm. It worked very well.

Mr. Yvon Proulx: Yes.

Mr. Denis Coderre: Nevertheless, during the provincial election campaign, we heard the Premier of Quebec say that it was entirely thanks to him that things went well. So I hope that the UPA will recognize the role played by the federal government in Quebec and acknowledge that this role was extremely important. Do you agree with that?

Mr. Yvon Proulx: I do not have a problem with that. Of course we recognize it. If that were not the case, we would not work with these committees.

Mr. Denis Coderre: And that is to your credit.

[English]

Mr. Upshall, do you think we should have an arrangement like ASRA in Quebec to settle the hog issue? I don't have the English version. We truly believe in Quebec that kind of program worked very well. Maybe it would be an asset to apply it nationally.

Mr. Eric Upshall: Every safety net package has components that are negotiated between the federal government and the provinces. One of the requests is that they're transparent so we can understand what's involved. How those negotiations go and what the end result is will be determined through those negotiations, but I would like to see the support level to producers nationally as equal as possible.

Mr. Denis Coderre: This is the last question. I think the name of the game obviously is leadership but it's also partnership. I don't understand why it shouldn't be shared between the provinces and the federal level. It's the same pocket paying it, by the way. It's the citizens at the end of the day who will pay for it. Now you have a surplus and I'm pleased to hear there's a surplus in your government, but maybe the partnership is the real issue and it would be more viable if it's a shared program instead of 100% from the federal government. It's easy to always let the federal government pay for everything.

Mr. Eric Upshall: Historically, the federal government carried basically 100% of the responsibility. As the years went by and government decisions changed that policy, we went to 80%-20% and now we're at 60%-40%, basically. We participate in those programs and will continue to do that.

I just can't emphasize enough that in your family, if your income drops by 70% this year, you will have a problem paying your bills—your mortgage, car payments and everything—and put food on the table.

Mr. Denis Coderre: We all agree on that.

Mr. Eric Upshall: So the family of Canada is here and one component of that family has a cash problem. Is it right that someone then says you should go back to your bank account and solve your problem? You could ask that, but are you able? You have no ability.

• 1230

It's now the same thing in the province of Saskatchewan. We cost-share the programs we have now, and in the long term we'll continue. I never shut the door on cost-share programs. But right now when you have 3% of the tax base and 47% of affiliated land with a fixed safety net program—

Mr. Denis Coderre: You just can't make it.

Mr. Eric Upshall: —you just can't do it.

The Chairman: We're over time. Just before we go to Mr. Hoeppner, Mr. Upshall, you mentioned the loss of the Crow benefit. Maybe it's because I was raised on a farm, but I would be the last person to try in any way to understate the plight faced by many of your farmers in your province. But to put the loss of the Crow benefit into a broader context, I think we have to remind ourselves there have been adjustment funds paid out to offset the impact of the loss of the Crow benefit.

Is it not true, Mr. Upshall, that since 1994 when the Crow benefit was abolished, the adjustment funds paid out have been almost equivalent to the Crow Benefit, had it continued?

Mr. Eric Upshall: As far as the dollar's concerned, if you look at the 1996 realized net farm income, in 1996 was about $500 million. We had $900 million paid out through the Crow benefit. We had $180 million wheat pool share pay-out. The income in that year was remarkably high. But let's put it into context. If it's just dollars and cents contribution, that's fine; I agree. However, if you look at what happened, 1996 was a catch-up year for producers and they improved machinery and used that money very wisely to try to give themselves the ability to continue to produce.

Now the bottom's fallen out of it, and from 1996 to 1999 there's been a huge drop. The money that was put forward has evaporated. If you're on a farm, money was well received at that time but evaporated into machinery, the land payments, whatever they had to do. Now there's been this huge drop. Had this huge drop not been here, or had the Crow benefit been paid as a support payment every year, we probably wouldn't have this problem. I'm not arguing about the decision, but I guess I'm arguing about the decision to put it all in one year where it evaporated into capital. Now we don't have the ability...the day-to-day.

The Chairman: Mr. Hoeppner.

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

Welcome, Minister Upshall. You'll be the star here today, probably, because we don't see you that often, so it's not that I want to neglect the other people.

I just paid my property taxes in Manitoba and they went up 9%. Did your property taxes go up last year?

Mr. Eric Upshall: Yes. We had a situation in Saskatchewan where we had an arm's-length group of government called SAMA. It was composed of three board members from the local rural municipalities, three board members from the urban municipalities, and three from the government. That body decided to change the tax structure, which hadn't been changed for 30 years. The result was some dramatic increases or shifts in taxation. When the formula for education kicked in, it even compounded the problem and I'm very aware of this.

Mr. Jake Hoeppner: When you received the Crow benefit pay-out and had some good years, I imagine your income taxes went up quite substantially, so your treasury benefited quite a bit from that, didn't they?

Mr. Eric Upshall: To put it mildly and in the words of other people, we had a remarkable turnaround in the province because we asked the taxpayers to make some sacrifices from 1991 on. They've done that remarkably well, as we balanced our budget five years ago. We continued to have a marginally balanced budget after the sale of assets in certain particular cases. Yes, the revenue from income taxes has increased. We were then able to reduce our PST by two points to reduce income tax. That's the way you manage government, as you know.

Mr. Jake Hoeppner: I think it's a very wise decision you've made. But I want to get back now to what Mr. Calder was questioning you on. Your answer sounded a little to me like the Liberals when we ask them a question.

Mr. Murray Calder: Ah, Jake, how can you say that?

Mr. Jake Hoeppner: We make a little bit of a detour. If the delivery of an aid package depends upon provincial participation, will you put Saskatchewan bucks into it to get delivery of that aid package? You have benefited under the tax system over the last number of years, and I want it on record whether you're willing to stand up for farmers and now put some of those tax benefits back into an aid package.

• 1235

Mr. Eric Upshall: Perhaps you weren't listening. Saskatchewan stands up for its farmers more than any other province does, including the federal government. We do four to four and a half times more even with our small tax base.

Mr. Jake Hoeppner: Yes or no?

Mr. Eric Upshall: The answer is as I've stated it. I'm asking for a short-term cash injection to help—you can sit there and smile, but it's not a funny matter—our families—

Mr. Jake Hoeppner: I know that.

Mr. Eric Upshall: —to survive in rural Saskatchewan. There's also the spinoff to the manufacturers, teachers, nurses, and everybody else who depend on them. I'm asking for short-term cash to be a federal problem just as it was in Newfoundland in the cod stocks. It's the same thing. I'm saying that in the long term, we always cost-share.

Mr. Jake Hoeppner: Mr. Upshall, I was in your province in 1993. We heard today about GRIP and the programs that were made available to farmers. I heard nothing but disaster in your province with the way you interfered with the GRIP delivery program whereby farmers just totally objected to it. It worked very well in Manitoba, Ontario, and also I guess in Quebec.

Now, if we had the GRIP program in place, we would have at least something with us to go to the WTO negotiating table to say that since this is red, we want to know what they are going to give up.

Mr. Eric Upshall: That's a simplistic and inaccurate view of the world. Regarding the GRIP program in Saskatchewan, the reason we were the first province to get out of it—Manitoba followed quickly because it wasn't working very well—was the inability for the province to afford that program. We could not afford it. We could not go to our small tax base and deliver the dollars necessary from them for themselves. That was the problem.

You can talk about getting GRIP back, but we have to deal with reality. GRIP's gone, and for a very good reason.

We've got replacement long-term programs, like crop insurance and NISA, which are good programs. They could be improved, sure, but they are good programs. We need a long-term, multi-year disaster program, which I've been pounding on for six or eight months now, and also a short-term injection of cash.

The Chairman: Thank you. We're out of time.

Madam Alarie, you have five minutes.

[Translation]

Ms. Hélène Alarie: My question is for the Minister.

Someone mentioned the Crow Rate earlier. I have been wondering about something for a long time now and I am sure you can help me resolve it.

At the time, the Crow Rate subsidy, which represented several billion dollars for the West, was paid out to individuals, to farmers themselves, if I remember correctly. At the same time, Quebec received equivalent amounts for adjustment measures, totalling $66 million in all. The money was paid out to the union, and although $66 million was not a huge sum, it was used for training and education.

Obviously a producer who needs money, and you always need money on a farm, on receiving a cheque will make use of the money to replace his tractor, machinery, what have you. In a way, it may seem that this money just vanishes, as someone said.

Do you not think that we may risk falling in this trap if the money is paid out to farmers rather than redistributed?

[English]

Mr. Eric Upshall: The short-term injection is necessary simply to keep them there. It's so we don't lose more producers. They can maintain themselves when things settle off and the prices come back to a reasonable level.

When I say the Crow benefit evaporated, it evaporated into capitalization for the most part as a catch-up for land and machinery. This time, it's just money to pay the bills. It'll evaporate into the bills. It'll go directly into putting put food on the table to paying the land mortgage.

That's why I say we need this in the short term. Then, the long-term, multi-year disaster program has to be structured so that it just handles the sharp downturns like those we see every ten years.

The Chairman: Thank you, Mrs. Alarie.

Mrs. Ur.

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

I'm not long on eulogies, but I'm going to make a statement before I ask my question.

• 1240

Just to let presenters know, I was a farmer from Ontario in my previous life, and a politician, but I'm here representing hog farmers, whether that hog farmer lives in Ontario, Manitoba, Saskatchewan, Quebec, or wherever. And that's the way we sat through these meetings. I don't think we're here to pit one province against the other. There's a disaster out there, and we should work collectively to look at what's happening.

I have a couple of questions. I'll ask the questions, then you can answer them.

Mr. Minister, can you explain to me, with the way hog prices are today, why we are still seeing barns being built under the crisis situation? Can you explain the logic, in this day and age?

Mr. Eric Upshall: Absolutely. Yes, I can. First of all, the hog industry is cyclical.

Mrs. Rose-Marie Ur: I understand.

Mr. Eric Upshall: The futures are up. It's going to come back up. And I can explain it from a western Canadian point of view in terms of what we have to do to try to build our economy. We have to take the grain and add value to it by putting it through the hogs or the beef. In this case, you're talking about hogs. We have to continue that.

And we will continue to grow. Why? Because when we get through this bubble, which is compounded by the Asian flu... And we will get through it; the consumption of pork continues to rise in countries that didn't traditionally eat a lot of meat. The meats—beef, pork, and poultry—are increasing, and will continue to increase. We have the most efficient production in North America because of our position in terms of getting the grain out. We can compete there much more efficiently than other parts of Canada can. So it's going to continue to rise, and I'm going to continue to advocate that, because in the long term, that's what we need to maintain a more stable economy.

Mrs. Rose-Marie Ur: I don't know whether that would be held by the other commodity groups for a long period of time, to weather the cyclical trends. I believe the hog industry is probably the most severe cyclical industry out there. It seems to go up quickly, but it also comes down very quickly.

Mr. Eric Upshall: It's usually a four-year cycle.

Mrs. Rose-Marie Ur: Right.

The Chairman: I'm sorry, Rose-Marie. Mr. Armstrong wanted to say something.

Mr. Ed Armstrong: Yes. I'd like to respond to that comment you made about why the hogs are being expanded.

This is one of our number one criteria, and that's why, if our program is to work—and Alberta farmers are experiencing it—it has to be market driven. If you expand at the top of the market, you're going to lose value in the program. And this is what we have to get back to in agriculture: looking at the marketplace and taking our direction from the marketplace. Instead of selling at the low of the market and buying at the top of the market, we have to get our act together.

Mrs. Rose-Marie Ur: No doubt.

Also, in response to the canola producers' presentation, you stated that during the next round the Canadian contingency has to encourage subsidy removal from the United States and the E.U. Now, you're not here as a canola representative, you're the negotiator. You tell me how you would do that, as a negotiator.

Mr. Bruce Dalgarno: In the last round of GATT talks, the level of awareness for the zero-for-zero policy concerning oilseed tariffs around the world was heightened. I don't really know the answer to that, but as Canadian—

Mrs. Rose-Marie Ur: But you are the experts who have to tell us how to do that.

Mr. Bruce Dalgarno: I think there has to be a process in place to be able to persuade the people who have the tariffs in place—the Japanese, the Koreans, the Chinese, and to a certain extent the Mexicans—that they have tariffs in place that are not to the benefit of a level playing field. They have discriminatory tariffs between canola oil and soybean oil. If they bring it down to a level playing field, then we can be as competitive as the next guy in the production of oilseed.

So I think our trade negotiators have to take that forward. And I think in this next round there is a building awareness of that process. It will move forward and we will come to some conclusion.

The Chairman: Thank you. Bruce is an expert, I'm sure, but it reminds me of what my mother used to say, that an expert is “anybody from out of town”.

Mr. Proctor.

• 1245

Mr. Dick Proctor: Thank you very much.

I have a couple of questions for the minister. If there is time, I would also like to address a question to Mr. Proulx.

We spent a lot of time today talking about the short-term strategy, but your paper also touches on the long-term solution. I wonder if you could elaborate for the benefit of the committee, Minister Upshall, on what you think some of those long-term strategies include.

Mr. Eric Upshall: The basis of it would be a multi-year disaster program that cannot be handled now by the current NISA and crop insurance programs across Canada. I think we must have a mechanism that provides something above and beyond these. The NISA program is a smoothing program. A multi-year disaster program would be for things like the hog industry, where you can access the program quickly and not have to go through much administration. It would be for where the grains industry is down, or when beef goes down.

The model is looking like the program might be along the lines of the farm income disaster program of Alberta. We have some concerns with this. Yesterday there were a number of people from Alberta at the meeting in Neiburg, and they weren't that cracked up on FIDP either.

I don't know the details. All I know is we need the program. We're very willing to negotiate the details of how it should be formed with the federal government.

Mr. Dick Proctor: We've been asking the agriculture minister—less often in the last few weeks, but certainly more often prior to this—about what he was going to do, or what his government was going to do, about the problems we face. The answer we continually got was we have NISA and we have crop insurance, so we have two good programs.

I think I heard you say you don't have a problem with NISA, except it can't work for this kind of a disaster. Could you elaborate on this a little more, please?

Mr. Eric Upshall: For example, nearly 40% of the NISA accounts have about one-third of the net annual sales in their accounts, so there's not enough volume there. Here are a few quick examples. If you're a new entrant, your account doesn't help you. If you've increased your land size, your account is not equal to your land base. If you're a livestock producer in the west and you got in in 1994, it isn't quite big enough. If you've had an extra number of years of disaster in a row, your account is empty. If you've had a blow-up with your combine and you didn't have a down payment, you pulled right out of it and you got a three-year penalty.

There are a multitude of problems with it. It's still a good program, but it was never designed to handle this type of a drop.

Mr. Dick Proctor: Thank you.

[Translation]

I have a question for Mr. Proulx. Recently, Mr. Proulx, an agricultural economist from the University of Saskatchewan said that Quebec farmers had more advantages than other Canadian farmers because they spoke with a single voice, that is through your association, the UPA. In the West, we have lots of farmers' groups with their own priorities. Do you think that farmers outside Quebec would stand to benefit if their associations were brought under a single umbrella?

Mr. Yvon Proulx: There's no doubt that in Quebec, the organization I am representing here today, the Union des producteurs agricoles, is very strong. And obviously when it brings pressure to bear in order to obtain something, it usually does achieve results.

Now as far as Canada is concerned, I wouldn't say that there is fragmentation or disorganization in this sector. I think that the Canadian Federation of Agriculture, to which the UPA belongs, like all the other farm organizations in Canada, does provide advice for all the farm producers in Canada.

It could be said that the Canadian Federation of Agriculture should become more powerful, and be better financed to increase its staff and its ability to influence the government of Canada. Such an opinion is legitimate. Nonetheless, it is the voice representing the agricultural sector and at the present time it is pressuring the government to obtain this famous disaster relief program that is being talked about today, and it probably will be successful.

[English]

The Chairman: I think Mr. Armstrong wanted to squeeze in a short answer to an earlier question from Mr. Proctor.

• 1250

Mr. Ed Armstrong: Yes. It seems we've been going at great lengths here on getting extra money. We've proven in Alberta that the present program isn't working; there is a great distribution problem, as I mention in my report. We think we should take a look at the present program and get some money out of it to make the disaster program work. I think there's money there for the province.

The Chairman: Okay, colleagues, we'll finish it off this way. We'll go to Mr. Breitkreuz. Mrs. Ur is dying to give one more question. We'll go to Mr. Hoeppner and then we'll finish off with a couple of questions from your chair and that will be it.

Mr. Garry Breitkreuz: Minister Upshall, if an aid package depends on the participation of the provinces, will you stay at the table?

Mr. Eric Upshall: Yes, I will.

Mr. Garry Breitkreuz: A couple of weeks ago the federal minister said he'll show farmers how to use all the tools in their tool box. The federal minister has hinted that the assistance will likely be provided through currently existing programs. Do you agree this is going to work?

Mr. Eric Upshall: Not knowing the detail, it's hard to answer that question. I'll just say this. We have an administration of NISA. We should try to minimize any extra administration costs and get as many of those dollars to farmers as possible by using current routes.

Mr. Garry Breitkreuz: I won't have time to get into why the province is encouraging farmers to diversify and yet it concentrates just on the hogs and why you don't perhaps encourage it in other areas.

Mr. Eric Upshall: We're doing it in all areas. Hogs is just the most obvious area.

Mr. Garry Breitkreuz: I'm also surprised that you agree that the Crow pay-out was at a level that was sufficient for what the benefit was worth. I have talked to farmers and they said that the pay-out was equal to about one or two years of their transportation costs.

Mr. Eric Upshall: The chair was asking about the total dollar volume. If you look at Saskatchewan, it was $900 million, and we're getting roughly $300 million. It was equivalent. Because it was diluted, because of the way it was put out to the individual producers, that's a different story, absolutely.

Mr. Garry Breitkreuz: We were pressing in 1993 that 80% of that Crow money be taken and set aside for events like this. On an annual basis, if that had been set aside, we would have $3 billion in that account right now. For the government to let that go and then not even use it at the bargaining table is just totally inadequate.

I have so many questions here. Mr. Chairman, I really feel it's totally unfair that we have all these people together when each one of them probably has an hour they could present for.

It's very important that the Canadian Canola Growers Association elaborates and tells this committee why ad hoc payments are a short-term solution with long-term implications.

Mr. Bruce Dalgarno: Just from the trade ramifications that come from this, we as growers do not want ad hoc payments being mailed out to growers and then in turn have our trading partners view that as being very negative and up the ante. And they would then put more subsidies and more tariffs in place to stop the movement of our product into our marketplace.

Mr. Garry Breitkreuz: What do you think a long-term strategy should be? If you were the government, if you were us, what would you like to see the government do? I'd like to have everybody here... Some of you have been really short-changed because Minister Upshall's been here with you.

Mr. Bruce Dalgarno: Every one of us has touched on it to a certain extent. We need an ongoing national disaster program that is going to work with our crop insurance program, with our NISA program, and be in place for disasters as we have today for all the agricultural producers, regardless of what sector they're in.

Mr. Ed Armstrong: Yes, this is one of our big concerns. We disagree with the disaster program because we want it as part of the companion program. You have your national crop insurance, NISA. There has to be a companion program that the farmers and the province are responsible for putting together to fix the need in that province. You have to have a quick delivery of the program.

• 1255

We need criteria at the federal level to govern the rules those programs operate within. We are very strong. There are differences across the country. Each farmer and their province should have the ability to put the program...to get to the need as quickly as they can. The national program isn't going to do that.

Mr. Yvon Proulx: There's really not enough money in a companion program system to face the crisis we have in place now. This is why we are asking for a long-term national disaster program. The farm communities in most provinces are requesting this because in the regular envelope of the safety net system in Canada there's really not enough money to face the kinds of problems we have now.

The Chairman: Thank you.

Mr. Garry Breitkreuz: I really appreciate you all coming here.

Your suggestion needs to be explored much more, Mr. Armstrong.

The Chairman: Thank you, Mr. Breitkreuz.

Mrs. Rose-Marie Ur: It's not so much a question but a point of clarification to the Western Barley Growers Association.

I believe early in your presentation you stated that the government should get off your backs. They should take their programs and be gone with them. Toward the end of your statement, as best I can remember, you said you needed a short-term fix to be a part of a long-term solution. This will mean a commitment on the parts of both levels of government and the farmers.

Perhaps I misunderstood it. Is that not a bit of a contradiction? First you want us to get lost and then you want us to come back. Which way is it?

Mr. Ed Armstrong: There's too much regulation controlling the farmers. The programs we had in the past aren't working, and what they want is a good disaster program. Let's get rid of this regulation so that we can get out and do our jobs.

The problem is we have a crunch right now. In Alberta we have our act together and we've prepared the Alberta farmers to help them cope with it. From our experience, we can get a short-term solution in light of the long-term solution and we can fix this problem. It's just a matter of taking the envelope there and doing some tinkering with it. That's basically what we did in Alberta. There's a distribution problem.

In Saskatchewan there's $1 billion sitting in the farmers' accounts, and yet they have a problem with the farm crisis? Something is wrong. This is why we farmers in Alberta did something about this to correct it. That's why we have the linkage with NISA, so you have to take the money out and that way every farmer is treated fairly. If you don't do that, then you're going to start favouring one sector over the other.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: Thank you.

We'll finish with Mr. Hoeppner.

Mr. Jake Hoeppner: I see around the table here how important it is to get cooperation, not just between countries but also between provinces.

We know the farm prices can be aggravated by the Americans if they start another blockade. What do we do to avoid that? It's going to add to the problem. How do we handle it? I'd like some advice from anybody.

Mr. Eric Upshall: We're doing the communication with the U.S. and the federal government. I know they are also talking to Washington. This is a serious problem, because it affects not only trade relations but it also affects the pocketbooks of the western producers.

We're just saying please stop and give this thing a chance to work since the last little disruption.

Mr. Jake Hoeppner: What about the Alberta barley growers? You always seem to have answers to problems.

Mr. Greg Rockafellow: I'm not sure there's an answer to this problem, but I know there were many reporters at the Canada-U.S. grain summit. That was right at the height of the dispute. They certainly encouraged Minister Vanclief in his efforts to communicate with all farm groups in trying to have some cohesiveness there.

A lot of the reporters were coming to us. The answer we were giving to them was not the one they were expecting from us. We just kept saying, “I'll tell you what, folks. You keep bringing up your barley, you keep bringing up your feeder cattle and your hogs and we'll put the jobs in Alberta. Then we'll turn around and we're going to take you out of the market somewhere else, in Asia or wherever, when those markets improve.” That put people's backs up incredibly. They said what are you talking about? They didn't want to hear that sort of thing.

Mr. Jake Hoeppner: That brings me to the other question. How long until the Asian markets redevelop? They are really the crux of the problem right now. We've lost them, and I'm a little pessimistic that we have a long-term problem of five or six years here.

Am I correct, Mr. Upshall? You probably have a better insight than some of us.

Mr. Eric Upshall: I hope not.

Mr. Jake Hoeppner: I hope not, either.

• 1300

Mr. Eric Upshall: Who knows? The general consensus is that by the second half of next year... And we're seeing the markets starting to edge up. They'll go up and down. The trend line is what you look at, and it's starting to trend. We just hope it continues. I'm not the expert.

Mr. Jake Hoeppner: That's a good positive note to end on.

The Chairman: I would like to finish off, Mr. Upshall, with an observation and a question.

I'm pleased to hear you say that you would not walk away from any negotiations that are premised on provincial participation in any disaster relief program.

My question would be framed this way. Here in Ottawa, Mr. Martin, our finance minister, is projecting some kind of a surplus that will put added pressure on him for funding a disaster program. But of course he has calls for spending his surplus from every imaginable direction. My question would be, does your government also project a surplus? If so, would you be using a part of that surplus to fund any disaster program?

Mr. Eric Upshall: We have built a plan to project surpluses, as you have. Mr. Martin's surplus will be spent fifty times over, as our small surpluses are spent fifty times over.

It gives me no pleasure to come hat in hand to Ottawa. I hope I've described the real problem that we face in terms of asking people who are being affected by something beyond their control to participate in a program. We will continue to serve our farmers, as I said, proportioned to our tax base much more than anybody else. We'll continue to partake in the sharing of the crop insurance, NISA-type programs. We will look at the long-term, multi-year disaster in terms of what participation we will take.

All I'm saying is until we get there we need this short-term injection to save our farmers and to spin off 40%, plus the economy.

The Chairman: If I understand you correctly, you as a government haven't earmarked any projected surplus to go toward a disaster relief program.

Mr. Eric Upshall: Not as a government, no, because we are asking Ottawa to come through in this situation because we think it's their responsibility, as it was with the cod stocks.

The Chairman: Thank you very much.

On behalf of all of the members, I want to thank all of you. You did an outstanding job. I'm sorry we had such a big star here. I'm afraid that Mr. Upshall stole the show. That's the way it happens.

This meeting has ended.