:
I'll call this meeting to order.
We have a bit of a problem this morning. The folks from the Ontario Apple Growers were caught in Hamilton. They were fogged in and may be a little late.
We do have a motion on the floor and we can work with that first. We're also circulating a card for Jean-François, our regular clerk, as his father passed away on the weekend. He's away attending to family business and a funeral. That's going to take precedence.
We'll stall for a bit of time by doing Mr. Bezan's motion and any other business before the committee, and as soon as the apple folks get here, we'll put them on. I thought we could perhaps switch hours with the tobacco folks, but they're not here yet either. Unfortunately, we're finding ourselves with a bit of dead air.
Let's start with the motion. Mr. Bezan, do you want to carry us forward on that?
As a cattle producer and as somebody on whom the BSE crisis has had quite a heavy impact, and in consultation with some of my colleagues, I decided to come forward with a motion on the whole issue of TRQ.
As probably most of you realize, on Friday, the USDA put the rule in to the Office of Management and Budget in the United States. So the OMB is now looking at the rule and going through the process of bringing forward the opening of the border to cattle over 30 months of age.
The one concern I have, along with many people in the industry, is that traditionally we've always had a tariff rate quota with non-NAFTA countries. That has been followed very stringently since 2003, since the BSE crisis. What we're asking is that the TRQ be adhered to and that companies in Canada that make use of processing beef for their deli markets, or whatever, can access the majority of those products through the TRQs from offshore sources or from other NAFTA partners such as Mexico and the United States. So we're saying we respect that the TRQ remain the current practice in place, and we ask that if there is a need to increase it, the Minister of Foreign Affairs, who oversees the TRQs, essentially has to report back to the House with a reason why they need to have an increase in the TRQ.
Gentlemen, the math doesn't quite work out to 1.5 million kilograms, because it's 2.2 pounds per kilogram, not 2. So we're just going to stick with the 76,405 tonnes. We can say metric tonnes, if we want to make sure it's metric. That's 76,405 metric tonnes. Is that okay?
Okay, so that will be the wording.
Is there any other discussion on this motion?
The question stands on the motion put before us, amended now to read “76,405 metric tonnes” in place of “1.5 million kilograms”.
(Motion agreed to [See Minutes of Proceedings])
The Chair: Now you are asking for this to be reported to the House, James?
:
—and maybe a little cheer.
We have a budget for that type of thing. I think it's great. It always helps.
Is there any discussion on that? Everybody's okay with that?
Some hon. members: Agreed.
The Chair: We're not going to do a gift exchange or anything. How many lumps of coal can Mr. Easter—
An hon. member: [Inaudible—Editor].
The Chair: The problem is that there's a baggage requirement, a weight requirement, and Mr. Easter couldn't take all the coal home.
Some hon. members: Oh, oh!
The Chair: Mr. Easter.
:
Getting back to order, we will proceed now with the hearing that we're going to have on the tobacco situation in Ontario. We also have some Quebec producers who will be with us shortly, I hope.
From the Ontario Tobacco Board, we have Fred Neukamm, who is the chair, and Richard Van Maele, who is the vice-chair.
From the Tobacco Farmers in Crisis we have Brian Edwards, president, and Mark Bannister, vice-chairman.
Welcome, gentlemen.
We have a ten-minute presentation timeframe for each of you, and then we will open the floor to questions.
Would you care to kick off, Brian, or Mark, if you're splitting the time?
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Why are Canadian tobacco farmers in crisis?
Tobacco farmers are victims of conflicting government policies on tobacco and a gap in tobacco control policy has put them into debt and economic devastation. Since 2002, tobacco farmers and their families have been in a state of turmoil, brought on by dramatically declining crop sizes, costly mandatory infrastructure investments, rising contraband and an increase in cheaper imported tobacco.
Despite a still-existing and legal market, they find themselves unable to meet their obligations and are at great risk of losing their farms and their homes.
At an average age of 58, with average debt loads of $400,000, the significant devaluation of tobacco farming assets, and little or no real employment opportunities elsewhere, many Canadian tobacco farmers risk losing everything they and their families have honestly invested in and worked for over four or five generations.
[English]
What factors have forced us as tobacco farmers into debt?
In 2002, the tobacco companies demanded that we do burner conversions to eliminate nitrosamines. This was mandated. We will not buy Canadian tobacco unless you do this. We as tobacco farmers invested over $65 million into burner conversions.
We had to make a choice at that time: either we were in tobacco or we were going to leave because of the cost of those burner conversions. So we, as Tobacco Farmers in Crisis, have identified the year 2002 as the base year. With those burner conversions, tobacco advisory committee negotiations said that if you did not do this, the tobacco would be marked on the auction floors as separate, not available for the TAC agreements.
When we did this, we made the choice. Yes, we had a stable future, because in the 2002 agreement it was stated that we would have a stable future. In our handouts we've given examples of the TAC agreements in 2002, 2003, 2004, and 2005. We had three-year agreements with two-year out-years of stable crop sizes.
With that type of a future, farmers saw a stable future. We saw a future where we could plan for debts and payment of those debts. What we have now is 50% less production. We're in an impossible situation. We can't pay debts when we are only growing 20.4% of our quotas. This year at tobacco advisory committee negotiations the companies have said there are no further out years. We expect the situation to be changed.
Right now the tobacco companies are no longer supporting us as growers. We feel abandoned by our governments. We are here in the agriculture committee, yes. Unfortunately, the agriculture committee has been left with the train wreck that has happened to us.
We have the federal government tobacco control strategy that started five years ago, a ten-year plan. There was $450 million invested in that program. Health Canada has identified tobacco to be denormalized, which means we're going to tax the product and we're going to try to discourage adult and youth smoking, and we support that as farmers. The health policy is right. If you consume tobacco, probably you will get sick. Tobacco policy for taxation is here to stay. It's not going to go away. There's all-party agreement that we will have taxation policy, a high-priced product to deter adult and youth smoking.
We have precedents that have been established in the world. Right next door, our neighbours, the U.S., have eliminated tobacco quotas. The price they have established is $10 across the board. It's a split payment between the quota owner and those who grow the actual tobacco.
Just recently in Australia, another Commonwealth country, tobacco growers have been bought out, as we would describe it. There will no longer be tobacco grown in Australia. What we are asking for as tobacco growers and Tobacco Farmers in Crisis is a program that allows tobacco farmers to leave this profession. It was a legal profession. It still is.
The governments of Canada collect $9 billion in taxes. Tobacco companies themselves have over $1 billion in profits. There is an underground economy that has been estimated at $1 billion to $1.5 billion by the tobacco companies themselves, with surveys, and actually with some of our friends in the convenience stores. They've collected data. The question was asked, “How did you come up with the numbers? What was your survey?” It was really simple: you walked the sidewalks, picked up the tobacco butts that were left, and that showed how much was not legal.
Our tobacco board has been asking for a buyout since 2000. Under former Minister Bob Speller, a tobacco adjustment assistance program was promised. Unfortunately, because of the election timing, it happened a year and a half later. This has caused problems in our business situations, because sales that could have taken place and should have taken place were backed up. Now after spending $67 million federally in one year, the benefit that was the stated goal of that program is that we're at 20%, when after the program we were at 31%. This year alone, $69 million will disappear out of the revenues for tobacco producers.
The tobacco companies are saying we have to change. There's too much infrastructure involved here. There are too many growers for the crop sizes we see in the future. Right now we're trapped; there's no escape. We're looking at one another between the eyes. You can't pay for a tobacco farm, the quota, and the infrastructure under these tremendously decreased crop sizes.
Our equity has been destroyed, and we're asking for help from our federal government to live up to the Framework Convention on Tobacco Control and its articles that say we as tobacco farmers should be provided a viable alternative to tobacco if we would like to leave. Right now there's no escape.
We on the tobacco board are asking for the same thing: an exit program for growers. We've done evaluations. In fact, Physicians for a Smoke-Free Canada did an evaluation in 2004. It was $3 a pound for the quota to recover the investments that tobacco farmers have put into the industry. Tobacco Farmers In Crisis looked at the U.S. model and have done an evaluation based on that.
What's the cost of doing business? For a Canadian tobacco company selling product in the U.S., they're paying for the U.S. grower at $10 a pound. How are they doing that? There's a levy collected on the product. It's delivered through the Department of Agriculture, where the consumers pays. We're asking for a program for tobacco growers now. It's needed immediately.
Thank you very much.
:
Thank you, Mr. Chairman, and good morning.
First, I'd like to thank the committee for having us here this morning. My name is Fred Neukamm. I'm the chair of the Ontario Flue-Cured Tobacco Growers' Marketing Board. With me here this morning is Richard Van Maele, our vice-chairman.
What I'd like to do this morning, Mr. Chairman, is get the committee to understand four key things: first, who we are; second, to explain our situation to you, as it is bad and we need help; third, that government policies over a period of years have caused this to happen; and fourth, that we see a solution is available.
I realize you are very busy people, and I will try to be brief.
Our board represents all flue-cured tobacco farmers in the province of Ontario. This is about 1,000 farm families. Since 1957 we have been a provincially mandated marketing board that looks after the production, marketing, and advocacy on behalf of our farmers. We are a duly elected board of 11 farmers. Both Richard and I and the rest of the directors of our board are farmers from across southwestern Ontario, stretching from Brant County across to the Chatham area.
We also oversee a strict regulatory framework for tobacco production that ensures that all tobacco is legally sold in the province through our auction exchange.
That is who we are.
The situation, as Brian has very clearly pointed out, is that we are trapped. Our farmers have invested their life's work in tobacco-specific equipment and assets, their farms, and are carrying significant debt associated with those assets. In many cases, we are second- and third-generation tobacco farmers, and now we have no way out.
We know the Government of Canada, as a signatory to the World Health Organization's Framework Convention on Tobacco Control and through its own aggressive policies, is committed to stopping tobacco use in Canada. One of the consequences of this commitment has been the demise of tobacco farming in Canada. Since 1998 our crop size has reduced from over 150 million pounds down to 55 million pounds in 2006. What that really equates to is the loss of over $200 million of farm gate value each and every year.
We see our request as a logical extension of those government policies. The stated goal of those policies has been to aggressively reduce the use of tobacco products, and those policies have worked. That is why we find ourselves in this terrible situation. We believe it should also be government policy to help farmers make the adjustment out of tobacco production.
We believe now is the time to take the obvious next step and put a plan in place that will eradicate tobacco production in Canada at some point in time. We want to solve this problem once and for all. Last spring we put forward a plan to the government that we believe will accomplish this over a defined period of time. The proposal we put forward is based on a set of principles, those being universal access for all flue-cured tobacco farmers and a fair level of assistance that helps them out of this business, while compensating them for the loss of their livelihood.
We also strongly believe that the communities that have heavily relied on tobacco production for their economy also need a significant amount of help to adjust to a new economic base. Investments need to be made that help both the agricultural and non-agricultural sectors to succeed in this transition.
We have received support from members of Parliament from all sides on our proposals and our ideas, and we have been working closely with government at all levels on this issue. We appreciate the level of serious consideration that our proposal has received. However, time is running out. Last year alone, our production was reduced from 85 million pounds to 55 million pounds. That's a 35% drop in production in one year. We lost over $60 million in our local economy just from one year to the next.
Our farmers have never been in a more precarious financial position. Many cannot hold out much longer, and the anxiety in our community is running at a fever pitch. It is now time to look at the issue of tobacco production in an up-front and mature way and to put a plan in place to deal with it from now until the time that flue-cured tobacco production is no longer used in Canada. We are asking government to fix this issue once and for all.
Thank you, Mr. Chair.
:
Good morning, and thank you for giving us an opportunity to present the views of the tobacco farmers of Quebec. We are all from the Office des producteurs de tabac jaune du Québec. My name is Christian Boisjoly, and I am the Regional Director of the Lanoraie District and Linguistic Advisor, and with me is Nicolas Asselin, the Secretary Treasurer, who should be here shortly, and Luc Hervieux, the Vice-President.
We would like to give you a little background on the crisis in the tobacco industry. This crop which supported three generations of farmers in the Lanaudière, la Mauricie and even Outaouais regions and allowed them to amass wealth for themselves, their families and their regions, suffered a dramatic blow in March 2003 when one of the major companies, RBH, in other words, Rothmans, Benson & Hedges, suddenly decided to stop buying its tobacco in Quebec. A shock wave hit all tobacco farmers, because two years earlier, RBH, as well as Imperial Tobacco and JTI-MacDonald, had all required the complete conversion of tobacco-drying units. There were 725 units in Quebec and this was extremely expensive for tobacco farmers, but did suggest there was a long-term market for the product. Despite requests for contacts, representations and discussions, RBH's cavalier attitude did not change. The other major companies told us over the following months about their offers and their plans for the future— namely, a huge reduction in 2003 and small, final purchases in 2004. This more or less spelled the end of over half a century of tobacco production in Quebec.
In response to this crisis, our office quickly began contacting the media, elected people, municipal, provincial and federal officials, in an effort to try to find short, medium and long-term solutions. At the regional level, people were stunned, because the contribution made by tobacco to the economy was significant in terms of direct and indirect jobs, and in terms of redistributing the region's wealth. We need think only of the number of suppliers involved in growing tobacco—suppliers of fertilizer, farm equipment, fuel, insurance, and so on. So a support system was developed, and the response of the provincial government and its officials was quite quick, even though it was somewhat bureaucratic—with a lot of forms to fill out of all types—and rather incomplete. I would invite committee members to consult the information we appended and sent to the committee last week.
At the federal level, a number of round tables were held beginning in December 2003 at which our office, the OPTJQ, through our president, Gaétan Beaulieu, was invited to discuss the problems of tobacco farming in Canada. Because while Quebec was shown the door, Ontario saw its production decreasing gradually. As a result of these discussions, the TAAP, Tobacco Adjustment Assistance Program, was introduced. The announcement was made on May 4, 2004. The general idea was to offer a lump sum of $67 million dollars, first to Ontario farmers who wanted to get out of tobacco. The federal government purchased their quotas at a reverse auction in the spring of 2005. The objective of the program was chiefly to rationalize the supply for Ontario farmers.
There were two major problems for Quebec farmers. The first was that we had no say, in other words, we were the victims of an undemocratic, unfair decision. The second was that in our case, there was no talk of rationalizing tobacco production, but rather stopping it altogether. The representative of the previous government said that the TAAP was a step toward a more comprehensive, long-term program, and the final figures set at the reverse auction, $1.05 per pound of quota, would also be paid to Quebec farmers in a fair and equitable manner.
Mr. Beaulieu, after trying to explain the difference between the Ontario and Quebec quota systems—and here we must look at Appendix 1 where we discuss the 1.6 balancing factor—accepted the money from the federal government, on behalf of the OPTJQ, but said clearly that it was not enough. He based his statement on a study done by AGÉCO, an independent firm that published a report in 2004 that was funded by the federal government. The purpose of the study was to evaluate tobacco farms in Quebec. The people who did the study went to visit all tobacco farmers and they had to provide all the information required for the study.
And then the government changed. Representatives from the OPTJQ were once again invited on June 6 to meet with Ms. Christine Bakke and Mr. Donald Boucher at the Agriculture Canada Building. Once again they had to put forward their demands which, I should mention, were strangely similar to those put forward by Ontario. However, the figures have to be converted to correspond to the Quebec situation: I'm referring to the famous 1.6. They also explained once again the problem with new additions, particularly the difficulty of converting in terms of financing, market and young farmers. The reaction to this meeting by Minister Chuck Strahl was to send us a letter on September 26, 2006 inviting us to take part in a round table on the tobacco industry at a future date.
So here we are today representing all Quebec farmers to tell you that after three years of uncertainty, stress, and many attempts with replacement crops, sometimes productive but rather fragile, and often not encouraging, particularly because of saturated or controlled markets, the situation facing most former farmers is difficult, and in some cases quite precarious. Only 25% of them have decided which new crop they will turn to.
In conclusion, we see that the losses caused by the closing down of the markets in Quebec jeopardize the economic situation of these farms and limit their capacity to diversify into other markets requiring significant investments and a number of new skills. And if the figures in Appendix 2, which do not include the $1.82 a pound in quota, were to be in the hands of our proud, hard-working farmers in Quebec, we would at least have some justice, even some hope.
We would like to remind the committee members that we congratulate the OFCTGMB, the Ontario office, on its efforts to find solutions to the Canadian tobacco crisis, as well as the TFIC, which most Quebec farmers belong to as well, for the solutions it has put forward as regards a Canada-wide solution that respects Quebec.
We would like to thank you, and we are now prepared to answer your questions.
:
We are talking about significant amounts of money, of course, and the way in which these quotas are actually managed creates quite a different image. The situation was that traditionally, in Quebec, people were still producing 60 % of their basic quotas, roughly, particularly toward the end. In Ontario, people had been at 40 % for quite some time. However, the money we are seeking still refers to the basic quotas, and that is where there is a serious difference between the two figures.
You also asked us to explain the most significant difference between the quotas in Ontario and those in Quebec. We come back once again to the Tobacco Adjustment Assistance Program, the TAAP, which was designed to rationalize the supply, although it was over for Quebec, it was final. There was no program to deal with the situation in Quebec, which is no longer in the market at all. In Ontario, the program was for those who were still in the market, to help them survive for quite a while. The idea is that the industry would be rationalized, that those with quotas would be able to continue to survive, and those who wanted to would be helped to get out of tobacco, so as to remove their supply from the market. In Quebec, there was simply no supply. So it was an assistance program, but certainly not the assistance people were expecting.
Furthermore, as we can see today, because the representatives from Ontario, I think — and I did not listen to the preceding presentations, but there is good communication between our two groups — also have quite a comprehensive program to encourage people to get out of tobacco, but about two or three years after we went through this situation.
So they are experiencing a shortfall as well. I think the Ontario office talks about a figure of $3.30 for people who want to get out of tobacco. So that is the proof that the figure of $1.05 that we got is really not enough. That's why we want some adjustments made. Moreover, we use their figures to defend our position, without forgetting the conversion factor, because the situation in Quebec is very different, particularly as regards quotas.
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They are still doing research and conducting tests. There are a number of examples I could mention. In my own case, I tried to grow beans, among other things. The first year, the yield was very good. It was interesting and great, except that when it came time to deliver our product, the purchaser was insolvent. I had to hire a lawyer to defend myself, and, fortunately, to recover my property.
But let us take a look at the case of Nicolas, who is not here today. He is a member of our group; he is the secretary-treasurer. Even if small amounts were involved, he had to deal with a situation where he had nothing at all, and finally the authorities had to get involved. I managed, but he did not.
Sometimes people who go into market gardening—fruits and vegetables—go into bankruptcy. Some producers had invested as much as $75,000 and were waiting for money to start coming in, but it never did. Of course, the following year, they try to grow a different fruit or vegetable or something else. It is not that easy to find markets. People still have some energy to carry on, but these attempts to develop markets have used up a lot of the money people had. And now we are facing the new problem of young farmers. When children who become old enough to take over the family farm see their parents gradually using up all their savings, they are not necessarily encouraged to go into farming themselves. However, if people could get some new funding that would allow them to grow a crop for which there is a market, then there would be some hope.
That is pretty much what we are facing, and I imagine it is similar to many people in Ontario.
I want to thank everybody who has taken time out of their busy schedules for today's situation to make their presentations.
I know that Mr. Finlay has been advocating at cabinet and to the Prime Minister and caucus for a buyout for the industry. As a caucus member and a fellow farmer who knows what a crisis is, who's gone through BSE, I don't fully understand all the implications. I know you guys have a huge capital investment in your operations, there's a regulatory situation, and I understand there's competition coming in from other sources as well that is impacting upon you.
Try to paint the picture for me a little bit. When you're talking about transition, what are alternative crops? I'm hoping you guys aren't going to just walk away from your farms and see all this land go idle. I hope there are alternatives out there. What alternatives are there? What's going to happen in your communities as you move forward?
Exactly what is it that you're asking us to take forward to the government? What is the exact buyout and transition program that you're talking about?
:
No. A number of years ago our acreage would have been 50,000 acres. We are always in a rotation. We're not perpetually double-cropping tobacco. This year's production represents approximately 25,000 acres, so many of those acres have already either gone into cover cropping or other crops.
There has been a great deal of research already into these alternative cropping areas. There have been departments within the provincial government that have been working on this for 25 years. Some of our farmers will stay in farming after an exit program into some other area of farming. Some, we expect, will just do well to pay off their debt and leave farming completely—go through retraining, start a business, get an off-farm job.
We also believe that some of the most fragile and sensitive lands ought to be retired from farming through reforestation.
We hope that some of the current innovative ideas, such as biomass production for ethanol feed stocks, may become viable.
I think there is a multitude of potential solutions. I don't see one singular quick fix.
I'm sorry, I forget the second part of your question.
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I'll pick up where Mark left off, I guess, in regard to the comments that were made earlier.
I hope we're not seeing a blueprint for all of our small farming communities here. If we continue in this direction, it seems to me what we're seeing here we will see all over rural Canada. Obviously, we have to do something.
That's simply a comment I couldn't help thinking about.
The other thing is, and James touched upon this, obviously people are still smoking. Rothmans and those companies aren't shutting down production. The fact that they've stopped buying from producers in Quebec doesn't mean they've gone out of the smoking business.
I was talking to a duty-free person in my riding and he was telling me that if the companies leave Canada, he will have to buy from Mexico and it would cost him more.
Are we seeing a shift out of Canada from the major tobacco companies? That's the first question. The second one is, what's the reason for this? Is it this underground economy that's going unchecked, or is it the pressure from...? Let's stop there for now.
:
Mr. Chair, if I may, it's an excellent question.
In our opinion, it started with government policy to reduce smoking and high taxation on the product. That has caused this major underground economy in cigarettes, most of which come in from other jurisdictions, the U.S., the Far East.
The major manufacturers, in their attempts to protect their own profitability and their market share, have decided to go into discounted brands of cigarettes. In doing so, they've increased significantly the amount of imported tobacco they use in those products.
It's not that many years ago that legal domestic cigarettes in Canada were approximately 90% Canadian content. There was only a very small component of import, certain grades or styles that they could not access either from Ontario or Quebec. But in their attempts to protect this profitability, they've increased their imports dramatically, whereby the content of legal Canadian cigarettes is probably at 50% or 60%. This has rapidly decreased our crop size, and that's why we're in this situation.
As long as it is profitable for them to do so, they will continue to sell cigarettes in Canada. The largest company is Imperial Tobacco Canada Limited, which is a subsidiary of British American Tobacco. It has decided to close down all its bricks and mortar in this country. All of its manufacturing is being moved to Mexico. It intends to continue selling those cigarettes in Canada, but the manufacturing in Montreal, Guelph, and in my community of Aylmer is all being shut down and moved to Mexico. We expect the other major manufacturers have these sorts of contingency plans in their back pockets as well.
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In our tobacco advisory committee negotiations we had a two-price system. Domestic tobacco for consumption in Canada was higher priced, and we had an export price for shipping tobacco to other countries.
Tobacco health policy has been a high-priced product for the Canadian consumer. In my community, 20 miles from where I live, there is a carton of cigarettes available in a clear plastic bag for $7, and it's up and down the roads on native reserves. How do we help our manufacturers and ourselves, as growers, when this is happening? Clearly the taxation policy is not getting all of that tobacco. And after 9/11, nobody can tell me that it can't be tracked if it's coming across our border. Clearly we have to change that point of taxation to cover this.
Native producers have legitimate treaty rights, and I recognize them and we support them. But can we identify other things to get tobacco back in control?
There are three components in a cigarette: you have the paper, you have the filter, and you have the actual tobacco. It's pretty simple. Let's get it all covered so we actually know what is being produced and what's being consumed.
Right now, $1.5 billion that's not being collected is a huge problem for us as growers, because the manufacturers are identifying that if they're going to be allowed to do it, then we have to compete in a price war.
:
That is pretty much the situation. We have received some invitations from the new minister, but it pretty well stops there. In the case of Quebec, as I mentioned, we have been waiting three years already, and people are really running out of steam. Clearly, we discussed the situation of Ontario producers, which is definitely not rosy. Nor is their future, based on the news we hear that Imperial Tobacco would like to get out of the market.
We have been living with this situation since 2003. The program provides for round tables; that is all there is. We have no promises or even a compensatory budget on an urgent basis—we have nothing like that. In many cases, people do not know what money they will have for 2007. Some experiments that worked and that produced significant incomes such as replacement crops that are very similar to those in Quebec and that Mr. Bannister spoke about are simply not very common. Even the 25% of farmers who have changed crops have only very average subsistence incomes. Even for them, it is difficult to continue expanding. Others are still at the stage of doing research and development. I spoke about my own case, but there are many others who, like myself, have run into walls.
On the other hand, we were talking about hope. There is hope. For example, I am just back from a trip to Winnipeg where I attended the 4th Canadian conference of people interested in growing hemp. I am referring to the hemp market, which is growing in Canada. In Manitoba, almost 50,000 acres are devoted to hemp production. There have been some experiments in Quebec that seem quite promising. We have contacts with a number of manufacturers and processors. Once again, we want to set up a cooperative. We are halfway there, but it is difficult to go further, to get producers who have already been burned to take an interest in this. So we have to ensure we have some support and political will.
In our region, our political representatives and members of all provincial political parties are showing a great deal of interest. However, at the federal level, as I was saying, we are still at the round table stage. We have not yet started finding solutions.
That is why we wanted to tell you about our views, which are somewhat different than those in Ontario. However, I do think that Ontario producers will be experiencing the same situation shortly, that is more people will be affected.
:
The U.S. model was based on recovery of the earning power of your quota. That was what the basis was, along with the economic power of the quota itself.
In Australia, the producers actually were a cooperative. The remaining growers were a cooperative actually processing the tobacco for the manufacturers, and they have been recompensed based on their shares in the cooperative. They were small producers who pooled their resources to make an economic farm viable.
Here in Canada we're very much the same. In Ontario especially, we have just under 272 million pounds of quota and 1,080-some-odd quota producers. Back in 2002, we were using 400,000 pounds of our quota to make an economical farm unit. This year, we're at over 544,000 pounds of quota, so you can see that families are pooling their quotas to try to keep the farm operating.
We're not going to make millionaires out of every farmer, not by any means. These are families—mothers, fathers, sons, and daughters. There are generations involved in the farm unit now, with smaller amounts of quota. We're trying to identify a way for these farming generations to get out of tobacco growing.
In Australia, for those who exited farming totally in some of the previous buyouts, they've actually been giving a tax exemption. If you exit farming, there's not even any tax on it, and I believe they are asking for that to include tobacco farming. In Australia, though, tobacco was not the only crop on a farm; it was a component.
:
Thank you, Mr. Chair, and welcome, folks.
I have just three quick points and two questions.
I think the facts are clear in terms of the difficulties for you, the tobacco producers, in the communities.
Secondly, this is not a normal market situation. It's really government policy--in terms of the drive to get rid of smoking--that's driving you out of business, and I think driving the country away from a safer tobacco, because there's no question that the tobacco that's being smoked now by those who smoke is not as healthy as the Canadian brand was. You don't know what impurities are in some of this imported stuff. That's point two.
Point three is that there's no question that what happens as you go out of business is that there will be an impact on other agriculture commodities and on the industry players. I don't think there's any question about that.
My questions, really, are these. First and foremost, I think the Minister of Agriculture is in a difficult spot--I'll give him that much--in that this is a result of government policy as a whole, enforcing an imposition on what's seen as an agricultural problem, when it really should be seen as a general government problem. It should be the Minister of Finance, and not just Chuck Strahl, addressing this issue.
On your proposals going forward, do we have agreement on a plan from the vast majority of producers, including those in Quebec, including the Farmers in Crisis, and including the tobacco board? Do we have, number one, an agreement on a plan--I mean the plan to exit, or to stay in and get out over time? And do we have, number two, included in that research and development that's needed to get into alternatives, including forestry or whatever? Is there community support, or can it be determined whether there's community support for that plan?
:
Mr. Chairman, I could speak to that.
There is virtually no difference between the proposal that our board put forward and one that the Tobacco Farmers in Crisis have also put forward to government. Within our community of growers, there is overwhelming support for our strategy. Within the community itself, just very recently, The Expositor newspaper in Brantford ran a poll asking the question, “Should the remaining tobacco farmers be bought out by government?”, and I believe 89% of the respondents answered yes. So there is community support for this.
I can't speak specifically to Quebec, but a component of our proposal is also to increase the level of compensation that those farmers who exited in the 2005 TAAP program received. I believe Quebec would support that position. I think they clearly stated that this program, while helpful, was inadequate to meet their needs. Many in our community and we, as a board, believe that as well. It was welcome help. It was required, but that program was not without some problems, as was clearly stated.
The mechanism that was chosen to establish the price, the reverse auction, essentially pitted one desperate farmer against another, and resulted in that price being artificially low. It was not universally accessible. That was another problem. It was a partial solution. We all recognize that. One of the stated objectives of that plan was to allow some growers to leave, in hopes of creating a more stable environment for those who remained. It did that very briefly, but our situation has deteriorated very rapidly since then. Again, as I wanted to mention, it was helpful; it just didn't go far enough.
I apologize--I may have missed another component of your question.
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In Quebec, we used the figures put out by the Ontario office. However, we did not take into account shortfalls and the decline in property value, because it was difficult for us to argue on this issue. We did not do any studies. The AGÉCO group did a study to support the price per pound for quotas that were lost and the price of machinery, but that was not taken into account.
However, there is the famous 1.6 factor, which represents the difference in the quotas, because everything seems to have been worked out per pound of quota. If we can win on this issue, the figures and demands will be very similar to those of the other two organizations. I said earlier that there was a willingness within our communities to help out these people for economic reasons—that is very clear, we are talking about jobs—and in order to develop other markets.
As Mr. Bellavance noted, the Lanaudière region is very aware of the tobacco-growing issue, and the soil issue. Approximately 8,000 acres were used for growing tobacco on a rotating basis. So if farmers can get these funds, they will remain in farming. They will not grow just cover crops, they will be revenue-producing. So we must be given this opportunity. We need the same amount of money as people in the other two associations.
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Thank you very much, ladies and gentlemen, for shifting your schedule to allow us to make this presentation to you.
We're here speaking on behalf of Ontario Apple Growers. I'm sure it's something you hear about regularly in different aspects of agriculture, but the financial hurt in horticulture crops has been severe. For apple producers it has been devastating. Apple producers have gone through two of the worst marketing seasons in recent memory, as a result of declining exchange rates, world overproduction, and the dumping of apples into the Canadian marketplace.
Our growers have looked to their governments for assistance through business risk management programs, but these programs have fallen well short of their objectives and will see a small percentage of growers receive moderate support. The CAIS program has resulted in an uneven distribution of these much needed funds, with apple producers receiving much less than their colleagues in other agricultural commodities.
In Canada we do not over-produce apples, which, by the way, is our national fruit. Canadians are net importers. I'm sorry I don't have national statistics, but over 60% of Ontario's fresh apple consumption is being grown outside the country. With government policy dictating development freezes for agricultural lands, like Ontario and British Columbia's greenbelt legislations, saving agricultural lands is seen socially as the right thing to do.
The apple growers and tree fruit producers need help to strengthen their rural economies. Apple acreage in Ontario has been reduced from 25,000 acres to 17,000 acres in the last six years. A strong rural economy needs a strong agricultural sector. Average farmers are long gone, generally speaking. Only the best professional farmers remain.
We are here to ask the federal government to invest in the future of our industry through the national replant strategy, and to remain invested in the self-directed risk management program for Ontario horticulture.
We also recommend that a “buy Canadian first” procurement policy be adopted for all government-funded institutions. It's something that would cost very little, yet could accomplish so much.
In the brief before you there's a bit of an introduction to the national strategy for the tree fruit program. This is something we've met with Agriculture and Agri-Food Canada about in the past, and we've recently received a response from the Minister of Agriculture saying that the project still needs more work.
We commissioned a business plan for orchard reinvestment from the Ontario perspective. I'm sorry I don't have that translated into French, but if you would like copies, I'd be happy to leave some here, or make a list and make sure you get copies. Basically it's a partnership between the federal and provincial governments and the growers to replant 25% of the acreage of apples and tender fruit in Canada. It's felt that this proposal would go a long way toward strengthening the apple industry in Canada.
One of the other challenges we face at the start of the fourth year of the agricultural policy framework is that when it was signed, the Honourable Lyle Vanclief promised that production insurance would be available to all producers across Canada. That promise hasn't been fulfilled yet, and horticultural producers have been using a self-directed risk management program for some time.
In Ontario, under the new APF, crop insurance currently provides less coverage and has become more expensive for our growers. Only about 40% of the apple producers in Ontario subscribe to the crop insurance plan. A lot have used the self-directed risk management program.
The Ontario plan has worked for many apple growers but not all. For those, the self-directed risk management program has provided an alternative. Again that's a partnership between the two levels of government, federal and provincial, and the growers. We still feel this is the best way to help growers through those times when mother nature and/or the marketplace disrupts things dramatically.
On our recommendations to the federal government through this committee, first, provide federal support for the national tree fruit and grape replant proposal. Second, continue to provide the federal 60% support for the continuation of the self-directed risk management program until a more meaningful production insurance tool can be developed. At the very least, provide this support for the next two years to match the Ontario government's agreement to do so. Third, implement a “buy Canadian first” policy for all government-funded programs and institutions.
We respectfully submit this report on behalf of Ontario Apple Growers.
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Anyhow, you know what I'm talking about. But I do go back a long way.
I know they were so badly priced at the time I took over the farm in 1965 that I pulled them all out and put in a lawn. Now I have to cut the grass. But it was still better than growing apples.
When I look at your recommendations, I know what you're doing. The replanting and growing varieties that people want to buy really has nothing to do with whether we buy a Canadian apple or an American apple. The price really isn't relevant. It's what people want. What we have to do here in Canada, in my opinion, is make.... And I guess your third recommendation--buy Canadian first--would not only apply to apples, but would apply to a lot of our fresh fruits and vegetables. Whether it's spinach, or whatever we buy, I think we should do more to buy Canadian first. If we took pride in doing that.... Because you couldn't buy a better apple than that from California.
What must we do? Have we not advertised properly: “buy Canadian first”? Do we need a policy of government? I don't think government should be involved in everything we do.
I'm concerned about that, because I know what's happening in the apple industry. And I guess when I look at support programs, we have business risk management, a program that is designed that hasn't yet been adopted by government. But would that program, if it were adopted for fruit growers, apply equally to you as it would to the grain growers and other people? Why not?
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Let me interject for a moment while Jim collects his thoughts.
Eighty per cent of the imports of apples into Canada come from Washington State, which produces almost as many apples as the rest of North America put together. They're a huge apple-producing machine. When they blow the price out or sell to the three major grocery retailers in eastern Canada and give them huge incentives to advertise Washington State fruit, it's something that makes it very difficult for us to compete against.
When it comes to the service industry—the suppliers of restaurants, small bodegas, and smaller grocery stores—almost all of those apples come from Washington State. Why? Because for whatever reason, they're able to move huge volumes at discounted prices. Their growers are in a similar situation to ours. Washington State doesn't do that to the northeastern states, which also produce apples. They have a hands-off policy there, but export is very important in Washington State.
Two years ago, there was serious dumping of the 2004 crop with depressed prices into Canada, and that hurt us dramatically.
When it comes to government, I don't think it would hurt at all to have a strong recommendation made that whoever in government is involved in the procurement of food, for the military, prisons, hospitals, and so on, try to purchase Canadian product when they can. I think that would go a long way, because those service industries don't carry both U.S. and Canadian; they carry the U.S. 90% of the time.
The service industry has gotten much bigger over the last ten years. People are too busy to go to the grocery store and buy their food. They depend on the service industry more.
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We know when people shop for apples today, they buy three or four at a time. We used to sell them by the bushel. Now, you're putting them in...I know what the containers look like.
I'm totally convinced that it's not a price issue. I said that not only about apples, but other products as well, because we have organic products selling for enormous prices, and not always to the rich people, but to other people too.
So people have made market-buying choices. If government can help you do that, we ought to do it. Certainly starting with the institutions over which we have some buying power and control, we ought to be doing that. I think all of us here want to help you guys, but how do we do it? That's the big question.
On the question of business risk management, could that program work for you guys?
On that same point, we did see Canadians rally around the BSE situation and buy more beef than they ever had before. Waving the Canadian flag when it comes to food...they know the quality and the safety and security are there, and a lot of food today is not price point.
If we're going to implement a program such as that, my concern is in our labelling. In this country we've allowed the labelling to be, for lack of a better term, “perverted” to the point that I can buy Argentinian beef, and as soon as I slice it here, it's Canadian. It's a secondary processing. We're going to have to look at the labelling act in order to go forward with those types of recommendations.
Mr. Bellavance for seven minutes, please.
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We should add that there has been a significant replant program in British Columbia and Nova Scotia. British Columbia's program has been running for about 15 years and the Nova Scotia program for probably four or five years. The Nova Scotia program was very variety-specific.
I will make sure we get those statistics to you, as to what the overall cost would be. It is to plant varieties that are more profitable. The whole goal of this exercise is to increase the profitability.
Apple growers have had a really difficult time meeting their cash cost to production. You need cash cost to production plus a reasonable profit if you're to stay in business for any length of time.
As I've said, our grower numbers are down. Acreage is down and the equity that farmers/growers have in their operations is down as well. That's one of the big reasons we're coming to the levels of government with this three-phase approach.
In British Columbia, more than 50% of their acreage has been replanted. They had the challenge that they are also.... They don't over-produce in their province, necessarily, but close to it. They produce almost as much as they consume. They depend heavily on an export market to the Far East. With some of the political changes that are taking place over there, it's hurt them as well.
If we go back as far as 1999, there was a huge crop of apples. Growers lost, on average, around 6¢ a pound for every pound of apples they grew.
I grow, on average, a million pounds of apples. I'm a small to medium-sized grower, but that was a significant hit for me. That's a hole you find yourself in. In terms of the 2004 crop, dumping took place. We investigated whether an anti-dumping action should take place on Washington State apples. There was a ruling on grain corn that year that made us back off. They had better statistics than we did for grain corn, and they still lost their case.
Amy has handed me some information. The overall investment for the seven-year program was $300 million total: $100 million federal; $100 million provincial; $100 million grower.
I gave you some bad statistics a moment ago.
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Mr. Steckle asked some questions in terms of what we are doing and what you could do.
We've developed a relationship with the marketers. We meet quarterly and semi-annually with marketing, with the people who pack the apples in the bags. We work together on promotion, access some core funding, and we can advance funding to promote that.
We're starting to develop a relationship with the retailers, the Sobeys, the A&Ps, and the Loblaws. In fact, this past fall we financially contributed to some pages to promote apples, which is something, because right now clementines are kind of taking everybody's attention.
We're addressing the consumers at the Royal Agricultural Winter Fair. We're a part of that Foodland thing.
A policy to promote “buy Ontario”, “buy Canadian”--we're talking two levels of government here--would be very nice. Lip service would perhaps be even nicer. My belief is that most Canadians...when we start out to buy, we probably don't have a problem thinking we'd like to buy Canadian food, until we get to the store and the promotion drags us aside, or the pricing drags us aside. I'm afraid we have to match the pricing.
Honey Crisp--you heard about the returns to the farmer, and that's because the pricing at the store is up. It doesn't matter whether they're Ontario, Nova Scotia, or Washington Honey Crisp, they're up there. So if we can produce it, why should we have to import it? You walk into the store and the flag is important. “Foodland Ontario” is a good logo.
Those are five things: retailers, marketers, consumers, a national buy Canadian policy, and lip service. None of what we say matters, but if we keep saying it often enough, they'll start believing us. And that's what the marketing board is saying: buy the food your neighbours grow.
One of your points was national replanting. I'm assuming that's replanting to other apple crops?
Mr. Brian Gilroy: Yes.
Mr. Alex Atamanenko: Although you mention B.C., in British Columbia the provincial minister of agriculture is telling our people to grow grapes.
I was at the Fruit Growers' convention in British Columbia a few weeks ago and I talked with the president, Joe. We were throwing this idea around--and I talk with him a lot; we communicate. We signed the Columbia River Treaty with Washington State. We gave them our water, they've irrigated their land, and now they're flooding our country with apples.
It used to be in British Columbia, and I imagine across Canada before NAFTA, that produce in season...once we produced onions there would be a tariff on the border, so people could continue to produce onions. If we take onions, we had over 2,000 farms, and now there are only half a dozen or so because of NAFTA.
Americans are pretty good at protecting, whether it's their lumber or their agricultural produce, even in NAFTA. We've tried going to try this process, when dumping took place a few years ago. By the time it goes through the courts, by the time we get a legal opinion, often the prices rise and then it's too late, so we've wasted all this time and the producer has suffered.
Joe and I were talking about this, and I'm sure there have been discussions. When dumping takes place, there should be some kind of a rapid response mechanism to slap on some quotas or tariffs on behalf of government until that dumping stops. Otherwise, if we go through the current procedure, it's very complicated--and you've talked about that in your presentation.
Is there a unified stance in the horticulture industry in Canada to work with government, to lobby government, to have something like this in place? As I said, they do it to us.
You were talking about producing 40% of your needs for apples and you import 60%, probably from Washington State. It's the same distance from British Columbia as it is from Washington State. Why isn't there an agreement that we're sending our surplus apples to Ontario, or vice versa? We've got these apples coming in from Washington that often come in and are dumped at below the cost of production.
So that's the scenario. Joe is going to be in town next week and we're going to talk. I think he's got a meeting with the minister and he's going to talk to him.
You've got your three-point plan, but is there a plan to have some kind of a stance, to get something in place, to really protect the producers with some kind of risk management before they have a disaster?
That's my question.
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It's a challenging scenario. In the early to mid-nineties there was an anti-dumping agreement for apples. There was a minimum price. I believe it was $12.50 a pack carton for ten months of the year. I think in July and August the duty was removed.
Every period of time there would be a review of that dumping duty, and it was rescinded around 1995-96. The reason given was that there was no proof that dumping took place while the duty was in place. That's what the duty was to prevent. So it was sideways logic, but anyway, that's what was used.
In 1992 the Canadian apple industry had an opportunity to develop a national apple marketing agency with similar powers to dairy, chicken, and so on. Don't ask me how or why, but it was defeated by the growers and not put in place. It would have held import levels at a rolling five-year historical average. I've asked the question of politicians as to whether there'd be any hope of such a vote taking place again, because I would go on a national campaign to ensure that such a system was put in place.
The appetite of government to deal with dumping of agricultural commodities hasn't been there recently. In this grain corn ruling, it was very clear to most people that dumping was taking place. If we gathered statistics for eight or nine months.... Well, for the whole of 2004, the sale volume of Washington State apples went up dramatically, and the sale value went down dramatically. What does that tell you? It tells you that dumping was taking place. Could we prove it in a court of law? Well, we spent $30,000 to hire a lawyer to investigate it and decide whether it made legal sense to proceed. After the corn ruling, he just told us not to bother.
Washington State wised up and didn't dump last year. But for whatever reason, our return values did not increase in eastern Canada. They did in the west, but in eastern Canada the value that growers received for their apples from the 2005 crop was as low, if not lower, than when competing against the dumped crop from the year before.
I don't know if I've answered your question. We're not avoiding anti-dumping action, but it's left to the policy-makers of the day to decide whether it's something they are willing to support us in.
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What I think Mr. Atamanenko was talking about is a better dispute mechanism situation with better triggers. Right now the onus is on the majority of the producers in the country to come forward with the action before the government comes on board. Until you act, we can't--that type of thing.
One other point that I wanted to make here is that we have the PMRA--and I know you guys say that and spit, the same as we do on certain days--coming before this committee. Would you guys like to put forward a little bit of a brief that we can use when we're doing up that report?
I know there are some concerns that you don't have access to front-line fungicides, pesticides, and insecticides the same way that, say, Washington State does, at the same kind of costing. If you wanted to give us a brief or some information to that extent, we'd certainly make use of it at that meeting.
I think the meeting is taking place on December 12. We've had a bit of a change, because they're at a meeting in Quebec. They were slated for December 7, but now it's December 12.
If you could get us something that we could use at that meeting, if you're so inclined, that would be very helpful.