[Translation]
I am here today on behalf of the Union des producteurs agricoles. I am a farmer in Lac-Saint-Jean, Quebec, and the association asked me to give a presentation on agriculture programs.
The agristability program is without a doubt the main risk management program available under the current policy framework, Growing Forward. Unfortunately, the program has a number of flaws, so it is not quite the safety net farm producers were hoping for.
To begin with, certain sectors have seen a continuous decline in market prices in recent years. Most of the time, these declines are due to various factors that have nothing to do with structural changes in the affected sectors. For example, these issues can be attributed to the normal price cycle in the sectors or a range of specific events, including the economic crisis and the H1N1 flu pandemic.
Like the former Canadian agricultural income stabilization program, or the CAIS program, the agristability program does not provide an adequate response to a prolonged drop in prices, as my neighbour here just mentioned. What these drops do is shrink reference margins, so the program can no longer respond to the situation. At worst, it may even disqualify farms that are still viable. And the proof is that a number of other ad-hoc programs have been put in place since the CAIS and agristability programs came into effect, and some provinces have augmented margin calculations under the program in order to obtain more support during a crisis, when the basic program stops working.
Furthermore, farm producers complain that agristability does not provide predictable response measures, that it cannot be used as security with a financial institution and that it disadvantages producers with diversified farms.
As a result, we recommend that the agristability program be adjusted as follows:
First, we recommend that, every year, producers be allowed to use the better of the Olympic average or the average of the last three years, for the purpose of reference margin calculations. That way, certain producers who would not be entitled to payments because of the average would receive them.
Second, we recommend that the viability test applied to negative margins be eliminated. Currently, producers with negative reference margins for at least two of the three years used to calculate the preference margin are not eligible for any protection.
Third, we recommend that coverage for negative margins be increased from 60% to 70%. Currently, the government compensates producers for up to 60% of their negative margin. This measure would allow producers to choose between the top 15% of margin reference coverage or agriinvest.
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These changes would equip agristability to better respond to farmers' needs, especially in terms of helping them respond more effectively and efficiently to market price cycles. According to the Canadian Federation of Agriculture, these changes would represent an annual investment of $330 million in Canada's farming operations.
Bear in mind that, on behalf of farmers, the Canadian Federation of Agriculture was calling for risk management measures under the agriflexibility program. The original version of the agriflexibility program would have provided producers with customized assistance specific to their sector and region, factors that cannot be taken into account under national programs, which are applicable from coast to coast. For example, agriflexibility could have helped fund risk management programs such as Quebec's farm income stabilization insurance program and Ontario's risk management program. There is now talk in western Canada of an agristability plus program, an idea put forward by producers in Manitoba. Unfortunately, the current agriflexibility program does not address all the needs that were originally identified because it is not based on risk management and because it is underfunded.
Producers greatly appreciate the agriinsurance program. Under this Canadian crop insurance program, producers benefit in terms of agricultural planning and risk management strategies. Over the past half-century, this initiative has evolved into a predictable, needs-based program. Producers are especially grateful for the program during years when mother nature is not so cooperative. It is the envy of producers in the cattle and poultry sectors. Although these industries are not as susceptible to yield fluctuations, they have long been calling for an insurance program modelled on the crop insurance program to help in those rare but devastating cases of livestock loss due to death. Such losses often occur when a known or unknown disease suddenly destroys a barn, a herd or an entire farming operation. For years, this has been a topic of debate, and the time has come to put forward tangible solutions in terms of equipping the cattle and poultry sectors with a tailored production insurance program that is effective and efficient.
While risk management programs are of course necessary, there is no doubt that, in the long term, the Canadian government will need to pursue research efforts that genuinely address producers' needs. Personally, I am a wheat farmer in Quebec. Although our wheat varieties did improve in the 1990s, our yield did not. In my view, if producers are going to be competitive over the long run, the government will need to either invest heavily in research or foster an environment that encourages companies to invest in genetics.
Thank you.
I have been here several times testifying on behalf of the Canadian Pork Council, on behalf of Ontario Pork, and on behalf of my own individual case, which is the case today. It seems that since we have been here so often we are like family, and obviously when family gets together, the first thing we talk about is the dirty laundry.
We operate a 600-sow farrow-to-finish unit in southern Ontario, and we support—well, we actually don't support our families on that; we have off-farm income because we can't generate the revenue. Technically, we're broke. If anyone were to want to give us a push, we would be in bankruptcy tomorrow. It is only because our suppliers continue to support us that we are able to continue. There is a strange business case here, because we are looking at next June in the U.S., which is what our commodity-priced product is based on. We are looking at potentially historic record highs of one dollar per pound. Five years ago, that would have translated into a $300 market hog here in Canada. Those are being eroded by high grain prices. If the world continues on the path it is on, we could see record high grain prices; we could see record high hog prices, and then we could still see producers struggling to make ends meet.
In our case, we financed a $2 million expansion starting in 2005. We had a builder that put the screws to us. We ended up in litigation, and today we have a structure that has no occupancy permit and does not meet the Nutrient Management Act, and we have a banker who is pushing us to liquidate as we move forward.
It is interesting as you look at that, and we go back to the penny auctions of the 1980s and how things have evolved. We have all sorts of producers. You may have heard of some of them in Ontario—Wayne Bartels and others—who are looking at using social networking and media such as Facebook, Twitter, and YouTube to bring forward the plight of farmers and to reach people instantly. I'm not sure if we're there.
We have farms under the gun in Ontario, and I see it across the country. I was talking with a gentleman this morning from the east coast. His accountant has 30 farms that are in farm debt review. I was talking with another gentleman yesterday from Saskatchewan. There are 30,000 sow spaces out there that are empty and that could be purchased for somewhere between 10¢ and 15¢ on the dollar, but nobody can find the money to buy them.
We see as we move across the country—and as a producer, I am fortunate to have the ability to contact these people—the definition of insanity being repeated. Some of you...I was fortunate enough to meet with Larry at a reception last week. My definition of insanity is that we continue to do the same thing we did last week, last month, last year, and expect a different result. We have some major lenders in this country that are doing that today. They are going out and forcing farmers off their farms. They are stopping the ability of people to produce and to feed this country, and then they are turning around and putting them on the market and getting bare land value. So why is it that when the farmer offers bare land value, these producers are not allowed to purchase their farms back?
In Ontario, we have an interesting situation: 50% of all farms that are in the hog farm transition program are coming out of Ontario; 30% of the production changes in the country will come out of Ontario; 60% of all the processing and slaughterhouses in this country are in Ontario. What that tells me is that as we allow the basic infrastructure in this country to erode in the swine industry, we're not only putting farm families at risk, we're also putting processing jobs at risk. We're putting trucking jobs at risk. We're putting electricians' jobs at risk, jobs of the people who repair these plants and keep them running. It's a very large issue that goes beyond the farm.
I just found out yesterday when I was at the OFA convention in Ontario that we now have foreign investments stepping into Ontario. Four thousand sow spaces apparently closed in one week, and those 4,000 sow spaces produce approximately 2,000 hogs a week, or they did. The purchaser is in the U.S. Those pigs will now go to the U.S., and as we walk down the line and we follow that back, that's basically a day's kill at one of our plants. It's 30 farm families that all of a sudden, in four months, will have no source of income because their contracts have been cancelled.
How do you sell to the world from an empty shelf? As we continue to lose producers, we will continue to lose processing, and this industry will continue to shrink. Four short years ago, the Ontario industry was reaching for $1 billion in sales, and we were supplying 45% of all the product exported out of this country. And let's remember—I'm sure you're all aware—that the agrifood industry is the fifth-largest exporter in Canada. We are one of the huge contributors to the GDP and to keeping people employed.
We look at all that, and I ask why the minister is going out looking for free trade deals, for bilaterals. If this trend continues, in two years we won't have enough to supply our own markets, let alone supply the world as we have.
But we are here today to talk about the business risk management, and we will move on to that.
Three things I think all of my newly made friends here from the agricultural industry across the country will agree on is that all of these programs need to be bankable, need to be predictable, and need to pay out in a timely fashion. We have none of that within the existing suite of programs we have today.
In AgriInvest, we have a declining fund that's been paid out. Being Canadians, three or four years ago we did the Canadian thing. We took what money the government chose to invest in those programs and we spread it across all commodities. For some commodities, that was a very timely insertion of cash, because since that time they have had record prices for their crops. Typically, across the country, on average, they had better than average crops. Those AgriInvest dollars they're matching up are going into their bank accounts, and they're building for the future.
It's sad to say that in the hog industry and the beef industry the opposite has been true. We not only lost $75 million in AgriInvest money, we've had five years of complete devastation. I'll give you an example of that when we get to AgriStability.
The kickstart program in our industry.... They say that when you're playing the commodity markets, it's better to be lucky than to be smart. Well, I guess we weren't very lucky. We thought we did the smart thing, but we ended up getting hurt. Kickstart also really impacted our industry because of circovirus. In the western provinces, the issue wasn't so bad, but in eastern Canada and central Canada, circovirus contributed to a 40% decline in some farms' income in a single year. Imagine having to go to the barn and draw straws to see who's going to drag all the dead pigs out that day. You had people breaking down and having to be hospitalized.
We have to change that. We have to get those AgriInvest dollars back to the farmers who really need them.
We have AgriStability, which is the core platform in our suite. To use our own example, because I know you like to have numbers you can use, in our 2004-05 reference year, our margin was over $500,000. In 2004-05, our actual margin was $480,000, so the program looked like it was working fairly well. Due to circovirus, appreciation of the dollar, and the decline in markets, in 2005-06 our reference margin was down to $240,000. Our actual margin was minus $300,000--a $600,000 swing in twelve months. That was on top of all the building issues and other issues we went through. At this point, our 2011 reference margin looks as if it's going to be minus $100,000.
In four of the last five years we've had negative margins. And we're producers who in 2008 marketed almost 24 pigs per sow. We're in the top 5% of producers in this country.
We need to reset the clock. There's no chance for any margins in our industry until well into 2015. We need some interim intervention to look after H1N1 and circo.
AgriInsurance I'm only going to touch on very briefly, because we've been talking about it since 2003. We still don't have production insurance, and I see no indication that the government is getting off its ass and doing it in the meantime. I'm sorry, but that's a real issue, guys, and you folks here need to get it out there for the beef guys and the hog guys.
We have AgriRecovery, which is where I believe we can see payments come out to deal with circovirus and H1N1. H1N1 took $35 million out of our industry in one week. Unfortunately, AgriRecovery is very political in the way it's set up. The hog industry was told three years ago, and continuing to last year, to wait until AgriStability comes out and we'd see where it is, to wait until provincial programs come out and we'd see where it is. We still haven't seen anything come out of AgriRecovery to deal with those non-economic issues we had in terms of H1N1 and circo.
Yet when the grain farmers in western Canada had a need, the payments were out within 30 days. They didn't have to wait for AgriStability. They didn't have to wait for crop insurance. The money flowed.
Mr. Chairman, thank you. I'm open for questions.
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Thank you, and good morning.
I'd like to thank you for the opportunity to participate in this discussion today. As some of you are aware, I'm a fourth-generation grain farmer from Saskatchewan, and I'm also an agriculture business advisor. Just to clarify, I attend this meeting today as both of these. However, the views and opinions I'm about to express are those of Stuart Person, the individual, and they should in no way be associated with any organizations I work for.
Okay, with that out of the way, I'd like to talk about the effectiveness of the risk management programs under the Growing Forward framework, as you had asked, and I'm going to be speaking from a western Canadian grain farmer's perspective, which will differ quite a bit from my colleagues here, as you will see. At the moment, the risk management programs under the Growing Forward framework are actually very good for grain farmers in western Canada. My recommendation would be that they stay in place. Farmers involved in production of crops—this is the best they have ever had it in terms of the AgriStability program, and the previous government should be applauded, from a grain farming perspective, for bringing that in, and the existing government should be applauded for continuing to improve on that and maintain it. I realize there are challenges with the other industries, as have been noted.
These programs have significant advantages to producers and their ability to manage risk on today's farm from a grain farming perspective, and as a producer I use these programs to assist with risk management strategies on my farm every year.
I will just go over some of the key benefits I see in these programs. From my perspective, it does provide financial stability in times of volatile commodity markets and weather conditions. It provides a reduction in overall farm stress. It provides assistance with financing and cashflow planning. At the moment, it is encouraging farmers to make further investments and expansion in their grain farms. It does provide some assistance with succession planning and providing some stability in the profitability of the farm. For young and new farmers in a grain scenario, it is working at the moment in overall strengthening of our industry as a whole in terms of grain production in western Canada. However, all the benefits aside, some things should be looked at for improvements, and I'd like to go through a few of those, if I may.
The first one, as a general comment, is program funding. As a producer, I would like to ask that you please ensure that these programs continue to be funded and that they are properly funded. I often hear people in my area talk about concerns over the programs bankrupting the government or not being affordable. As a farmer, I'm making business decisions every year based on this program, based on the assumption that I'm going to have access to funding when I need it. As part of my risk management strategy, I'm counting on them to provide me with assistance when difficulties arise. My creditors are counting on these programs and they would like to know they are bankable. That was raised earlier as well. If for any reason they are not going to be funded and you do decide to make changes to the program, all I can ask is that you please give us lots of notice, because from my standpoint, I need lots of time to make other arrangements. So I am relying on this program as it would relate to AgriStability specifically.
Audits. Both as a producer and as an advisor, I would like to put forth the recommendation that you consider a statute barring system, especially to AgriStability, so that some closure can be obtained on these files. Being subject to audits on information that is eight years old is not reasonable, in my opinion, and can be expensive. We have seen a number of files pulled back as late as 2002-03 to be reviewed, and I think at some point we have to cut that off. If we can do it in the income tax system, I don't know why we can't do it under this program.
In the future, when you are writing the rules of these programs and you are coming up with new ideas on these programs, you need to recognize that the Hutterite groups seem to get left aside. They have a different and special set of circumstances and needs. They are a large group of producers in western Canada, and I'm sure they have a presence in the east as well. All I would ask is that you consider their needs when you are writing programs and how those programs will apply to these specific groups. If you need advisors for that, please contact me and I can put you in touch with people who can talk about that group of people.
As a producer and advisor, I would say that we need to consider the timeliness of AgriStability and AgriInvest program delivery, especially as it relates to non-calendar year-ends of corporations. No matter the year-end selected by the producer, they should be able to submit the agri program form within a reasonable amount of time, say three to nine months, and funding should be available shortly after. At the moment, that's not the case. Certain corporations are filing 18 months after their year-ends, which puts the money in their hands up to two years after the losses are incurred.
AgriInvest processing as well was very slow in 2008. I'm sure you've heard this before, but some producers are just getting their notices for 2008 now. That's two years afterwards, which is just too slow. We need to look at how to speed that process up.
I don't have to go too far into livestock challenges, as my colleagues here have already been down that road. But I will re-emphasize the point that a further study needs to be done on how these programs can effectively help the livestock industry. Right now they are failing, and changes are necessary to address that issue.
Lastly, on agri programs, there is a bit of a technical issue. I won't get into it, but if anybody wishes to talk to me afterwards, I'd be happy to talk about it. When corporations are selecting a year-end for their farm business, they have an option to go with any month of the year they choose. Sometimes it becomes necessary to change that year-end, maybe for tax or business reasons. Things change and people might realize a different year-end. I just ask that you consider those situations. Right now, the way the program works is that you can be penalized if you change your year-end, and there's not a lot of direction in the program handbook on how to deal with that. As a producer and an advisor, I'd just like to recommend that these types of things be looked at in more detail going forward.
I was also asked to talk about advance program payments. If I understand correctly, I assume you were talking about the grains and livestock cash advance programs. I'll make a couple of comments on that.
Spring and fall cash advance programs are excellent programs on the grain side. They provide many farmers with much needed cashflow every year. But one thing to consider is that we may want to look at changing the caps. Instead of having a flat $400,000 limit per farm, we could look at a per acre limit. The $400,000 cap has really been outgrown by a lot of farms, especially in western Canada. It's just not sufficient. We're talking about millions and millions of dollars going in every year, so a per acre limit would be more suitable going forward.
On the cattle and livestock advances side, it is also an excellent program. But a complaint that I've heard is that it lacks flexibility in terms of calving dates for livestock producers. There is a deadline for repayment. I believe it's September. Depending on your calving date, that repayment could come before you've actually been able to get your calves to market, which puts you in a cash crunch for a short period of time and unable to repay. It poses some financial difficulty for the producer.
Lastly, I just want to say that I'm in Ottawa for a couple of days, so if anyone is willing to talk to me, I'd be more than happy to do so. I have lots of other things I'd love to talk about, so please contact me after the meeting today.
Thank you very much for the opportunity.
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Mr. Chair, I will ask my questions in French. I encourage you to use your earpiece if necessary.
Good morning, gentlemen. Thank you for your presentations.
The committee wanted to hear from farm producers and see how they were using current programs. Even though you all represent organizations, you are all still farmers. That is the best method we, as elected officials, have to see where things stand. When we implement a program, no matter how much we study it or review the criteria, we cannot know straightaway whether it will work well or not. I think you are having the same problem. When the government replaced the Canadian agricultural income stabilization program with agriinsurance, agriinvest, agrirecovery and agristability, the idea was that these programs would bring certain improvements, but it was not known whether those improvements would benefit producers in a tangible way out in the field, in real life, or whether they would provide producers with adequate income support and insurance.
The best time to take stock of a program, to see what the outcome has been for producers, which areas need to be improved and what has worked well, is after a few years of use—and, by the way, I have been urging the committee to review these programs. We saw proof of that earlier: we heard that agriinsurance was working fairly well. So not everything has been negative, but some issues keep coming up. We seem to be hearing the same complaints, especially as far as agristability goes. When the minister appeared before the committee last week, I told him about those complaints. Basically, producers had the same complaints about agristability as they did about the CAIS program. For instance, the cost of production is not taken into account. And that creates problems we are familiar with. When producers are in serious trouble for a number of years in a row, similar to what you experienced in the grain sector and what the cattle sector is experiencing now, they cannot take advantage of the agristability program. So changes need to be made.
When the minister was here, I did not get the sense that he was very open to such change. As Mr. Littlejohn said, the minister made no commitments in his speech. Nor did he make any in his remarks before the committee. You can read what he said. He did tell us, however, that agristability was better than the CAIS. But you, yourselves, told us that they were more or less the same thing. It was like trading six of one for half a dozen of the other, as they say.
In your view, what key changes should be made to agristability before it is really and truly a better program than the CAIS? What areas should we focus on exactly? That question is for all of you.
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Thank you for the question. It is very succinct.
I think there are some very simple things that need to be changed with the program, especially from the hog industry point of view. The three-year negative margin rule has got to go. It's got to go tomorrow. Today would be even better.
In our industry, for the factors you all know, most farmers have been in negative margins for five years. There will be no payouts, or very limited payouts, so that rule has to go.
On lengthening the average out to ten years--the Olympic average, or going to a simple ten-year average--as we've watched these programs grow and evolve, I believe that would be a more realistic way of predicting where average margins are. We watch the grain markets, and it's a longer cycle than in the hog industry, unless there's a real issue somewhere in the world.
Base them on COP. I think that's a good way of doing this. We live in a technological world; all the numbers we need to do this are in the system today. It's a matter of somebody putting the money forward to build the programs to make that happen.
The other big issue we have is response time. When we are almost at the end of 2010, waiting for a 2008 return is plainly unacceptable. I'm amazed that the Auditor General hasn't picked up on that and slapped the government of the day. You can change that. Response times can be changed by using technology. The challenge is that technology costs money to put in place, and unfortunately, agriculture technology doesn't rank high on any government's list of things to put money into, whether it be provincial or federal.
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Thank you, Mr. Chair, and thank you, everyone, for coming.
Mr. Bailey, I hear what you're asking, and I believe it's the mandate of the government to decide one way or the other. If I can, I'm going to ask you to comment. I know the CFA is working on a national food policy. The chair is correct; we have this federal-provincial dynamic that talks about how we do programs.
Quite often, we're not necessarily doing what works for farmers, even though the intentions may be right sometimes. Clearly what we're hearing is that the CAIS program didn't really address the needs. These programs don't really address these needs. Depending on which farm you happen to be on, and as Mr. Person was talking about earlier, on one side, as a person—no pun intended—you're doing okay in the grain industry, but on the consultant side, when you talk to folks in the livestock industry, they're not doing so well with a similar program. He gets the dual experience.
You're in the fruit industry, which obviously in the Niagara peninsula, where I come from, is a significant industry. We saw it being decimated over the years for different reasons.
Let me ask you what you need, not what we think you need. What do you need in the tree fruit industry to be viable, sustainable, into the future? I premise that by saying I don't buy the argument that if I can get apples cheaper in China, then we don't grow apples in Canada anymore. I want to know about growing whatever that tree fruit is here in this country, and how you would see the programs making your viability an essential component as we go forward.
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There are two parts to my answer. Just in simplistic terms, the programs that exist now need to take into account ways to trigger in years where margins drop for those producers who are doing the right things: diversifying; expanding their operations to reach an economic unit; or beginning in an industry, regarding succession or just new entrants to the industry. Those things completely wipe you out of all these programs, except the top tier of AgriInvest. Nothing else even comes close.
I've been farming tree fruits for 15 years, which makes me one of the newest entrants in that business, and expanding to become what is now, I believe, to be our economic unit. It's around 100 acres, when it was 20 acres 15 years ago. That's a difficult thing to do. Under your structural change guidelines, it doesn't even come close. I can get just as little for my fruit compared with the year before and not trigger anything, when the farmer who hasn't done anything and has all the wrong varieties and declines a little bit triggers a big payment.
In terms of the way the structure of the program works, that would be it. In terms of the long view of it, I need the government to recognize that agriculture is important in Canada, and when we're talking about free trade with other countries and these types of things, give us the tools to compete. We have low-cost producers who use products that we're not allowed to use because our citizens in Canada want us to be model farmers in the world of farming. Yet we compete directly with those countries that are able to use obsolete products and other things that we're not allowed to use anymore with no tariff barriers and no trade barriers.
I'll give you an example from this summer. The cherry industry in tree fruits is a good spot to be in right now in B.C., and this year we had a new pest move in. It came in on fruit from California. It was originally from Japan, and the CFIA was marking our shipments as “not exportable”. At the same time, they said it wasn't within their mandate to stop that fruit coming in from California.
That's a little bit outside of the mandate of this, but you have to push the government to look at the bigger picture so they're not restricting you to just looking at the safety net programs in themselves.
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Thanks for a difficult question.
Being involved in the management group that has $75 million in the hog farm transition program, I've had the ability to watch the country shrink. What has happened in the last five years has destroyed what hog industry there was in eastern Canada, east of Quebec. They're down to 100,000 hogs a week as opposed to 600,000 or 700,000 five years ago. The same is true once you get past the Manitoba-Saskatchewan border. The industry has been devastated.
The industry in Canada is being concentrated in Manitoba, Ontario, and Quebec. Ontario is where the dominant share of our country's population is. And there will always be a hog industry in our country and in Ontario. I can't predict exactly where it will be, because I have no idea, of the people who will survive this battle, how many will be mortally wounded.
The challenge we have, if you get right down to it, is that the answer is not in safety nets. The dollars are in the food chain. Galen Weston's corporation last week announced quarterly profits of $213 million. My friend here, the accountant, will tell you that's after they're done squeezing every penny out so they wouldn't have to pay tax.
They had the same issues in England about 12 years ago, and they fixed it by having a royal commission. The royal commission came in and said that goal number one is that farmers shall be profitable. Goal number two is product identification—we'll identify our products so that consumers have a choice. The livestock industry in Britain, especially the swine industry, was destroyed by retailers demanding what they thought consumers wanted. And they flooded the shelves with product that was raised to those specifications.
Well, you know what? Consumers are consumers and citizens are citizens. Citizens want to do what's right. They'll tell you in a survey that they'll buy it if it's identified, they'll buy it if it has traceability, and they'll buy it if it's organic. But the minute they walk past the grocery store shelves they become consumers, and they buy the best product at the lowest price. It's a mindset that we have to change.
I honestly believe there are enough consumer dollars in the food chain today that no one who produces product in Canada that's sold on a Canadian grocery store shelf should have to be begging the government for money to feed his family and to support his operation.
I have the same issue with my family at home. I have two children in university, both taking ag courses. On the bulletin board in our office we have a little cartoon that came out of The Globe and Mail . It's a son and his dad, standing on a cliff overlooking a field full of cattle. The dad has his arm around his son and he says, “Someday, son, this will all be yours”, and the little balloon coming out of the side of the kid's head says, “This must be some kind of family curse.”
If there is profitability in agriculture, we will have another generation and we will feed the world. If we continue to let cheap products from other countries flood our shelves and feed our consumers, then we get what we ask for, gentlemen and ladies.
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It was a miracle drug that actually made healthy pigs. I think most producers are still using that vaccine.
The next year, the dollar was starting to climb. The quality of feed was excellent. We now had sows that were healthy. We were having larger pigs and larger litters because of healthier pigs. And it just seemed that everything was growing, because we now had people who had gone into the industry who had never had a pig on the farm before. Obviously, the processors jumped in, because some of them were financing this. Quite honestly, they were mostly financing this. They were expanding the processing.
So you build an industry on cheap feed and a cheap dollar. When I talk to other business people, they say that if you do that, you're going to crash. We have an industry that crashed. I'm here to help the industry. I'm just trying to understand what we're going to do so that this doesn't happen again.
As Curtiss said, we have all these barns sitting out here, and we've brought in four or five programs to help the industry. Some have been more successful than others. But how are we going to stop this from happening again?
The pork prices started up and took a bit of a dip. They're going to come back. I was at a meeting not too long ago, and I was talking to some beef guys and pork guys, and I asked the one guy, younger than you by a bit, how it was going. He said it had been tough going. I asked how lamb was doing, and he said, “Well, lamb's really selling.” I asked if there was anything around here, and he said, “Well, we've got one down the road. It's about 7,000 acres.” I said, “Wow, are you going to buy it?” He said he would go down on his hands and knees to buy that farm.
There's a hog producer. I'm going into the equipment dealer...and they're selling equipment to all parts of agriculture, including hog and beef guys. Land rents in my area continue to go up. Land prices continue to go up. It's not driven in areas where there's supply management--it's driven a bit by them--but in the areas where I don't have supply management....
I need some help to understand a little bit. Curtiss, how do we come out of this? I mentioned that to Mr. Preugschas one time. How do we get out of this, and what are you doing so that we don't get back into it again? We will come out of it.
I agree that we need to look at it. I don't know where cost of production comes in. I know how it works, but I'm not sure how you implement it, because everybody's cost of production.... You have land at $1,000, and you have 7,000 or 8,000 or 10,000, depending on where you are.
:
You covered a lot of ground there.
There are two things I'll touch on. First of all, I didn't slam the bilaterals. I firmly believe that the bilaterals are part of what we need to do. What I said was that the minister can build them, but if we don't have an industry here to supply them, we won't be able to do that. I think the bilateral with the EU could be the saving grace for our industry. They use products that we don't, and it would be fabulous for us to see.
Your question becomes a real business question. In southern Ontario, especially in your area, we're very fortunate. We have a lot of older farms that are land-based. Their COP is phenomenally low. What I've seen in the last two years, from the friends I have in that part of the country and up in Perth and Stratford, is that they've been subsidizing their hog operations with the high price of grain and the bountiful crop. Most of them, in the last two years, have had a crop that has been 15% to 20% above normal. That crop has been sold, and that cash has been ploughed back into the hog operation. One of my best friends is a farmer just outside of Sebringville, and he figures that his cost of production—he doesn't include his labour, he doesn't include his owned land, and he doesn't include depreciation on his machinery—is the bare cost of inputs to grow his corn. Those people are going to survive. They are absolutely going to survive.
Strangely enough, my COP, and I buy all my feed, is less than his, if you figure in the land he bought, because we're not land-based.
As far as expansion, it's going to be a tough sell. I think we succeeded in doing what we did back in the early 1980s, and we've poisoned a generation of bankers to the livestock industry, whether it be cattle or hogs. They are taking significant losses.
Everybody was aggressive. You commented on people who have never been in the pig business getting into the pig business. There is the large one in your area with premium pork. That was an amazing franchise that was put together by someone who understood how to structure franchises and how to make money. He sold out two years before that; he took his money and ran and left the farmers to take the rap.
Thanks, folks, for coming in.
There's an interesting and shocking story in today's Globe and Mail, showing that Canada is really falling behind in terms of agriculture and meeting our own needs, actually.
But I think one of the most interesting comments was your comment, Roger. Curtiss said the issue is profitability. Are we going to have profitability or are we going to depend on other countries for our supply of food? You asked if we either want the type of program that will take a little bump out of the road or something that's really going to be a strength to agriculture. Having been there when CAIS was originally developed, with all its warts—and AgriStability is really the same principal program—do you think these kinds of safety nets are really what we require going forward? I think that's a key question that we have to ask.
The government members defend the current programs, but these really are just CAIS reinvented and changed a little bit. As you said, Stuart, it's working now for you, but we know that prior to 2006, it wasn't, and it's the same damn program. So I think we really have to seriously look at that, because we know it's not working in the livestock industry. We're hearing absolute horror stories, and AgriRecovery isn't really working either, from everything I hear.
I think I'd ask for your experience in AgriRecovery, Curtiss. You talked about the circovirus and some of the other problems you've had. If AgriRecovery had worked, it would have helped your margins, I assume. So what's your experience with AgriRecovery? We certainly know it's not working in the wet zones, or for the livestock industry in some areas of the west and most of eastern Canada.
Rather than going through them, I think there are a lot of good points in what you said, Bill, and you, too, Stuart, and Roger, on solutions, such as doing away with the viability test, the negative margins, and so on. We want to push those forward.
Looking at that whole averaging business, I think the objective of government should be to get money out to producers in times of need, and do whatever they have to do with the averages to get that money out there. Now, that's not necessarily the fault of the minister, but I can tell you that the Department of Finance looks at that very closely. They don't want to spend a dime; that's their objective.
Anyway, to you, Curtiss, I asked my question about AgriRecovery. What did you mean by “bare land value”? You went through your own personal situation. And where is Farm Credit? Farm Credit was designed to assist farmers. Are you claiming they won't restructure?
First of all, those from AgriRecovery have limited experience in our industry, other than looking at it from a foreign animal disease perspective. When individual producers or the Pork Council approached the government and said that circovirus was a disease--a non-economic issue--and that there should be money here, the government did come forward with some money to pay for vaccines. The bureaucracy stepped forward, and we got an emergency release on vaccines out of Europe. But in my opinion, at the end of the day, the devastation was such that there should have been a payout under AgriRecovery, and I think all the provinces that were affected would have supported that.
Instead we were told, “Wait for the AgriStability money; that will help. Wait for your AgriInvest cheque; that will help. Wait for these other programs to kick in, and they will help.” At the end of the day, we took it with a grain of salt and said we'd do that. But the knife in the heart came this spring when the western guys needed money, and they got it before they had to jump through any of the hoops. So it appeared the grain industry was held in a higher regard than was the livestock industry in this country--and let's be honest here, it always has been, no matter who has been in government.
You asked the question about FCC. I was speaking with a gentleman this morning on the phone and he put forward what I've been hearing in Ontario, which is that the definition of insanity is being reinforced almost on a weekly basis. I have to be careful here, because I am in farm debt mediation myself and I can't use anything from my own perspective--that's not allowed--so I have to go by what I've been told.
Wayne, you know Mr. Bartels. You've talked to him down in southern Ontario. I was talking to a gentleman this morning in eastern Canada. Last week I talked to people in the western provinces. Basically what we're looking at is that for hog farms...as long as the building on them is less than five or eight years old, the farms are going for land value.
The definition of insanity is to continue to do what you've always done and expect a different result. What we see happening is that farmers are managing through family. In one gentleman's case, I know his church has come to the rescue and offered him enough money to buy his farm back from Farm Credit at land value. He is refusing to take that. They want more money than what an accredited appraiser has offered as an opinion of the value of the property. So this young gentleman and his family will soon be evicted--I don't like to use that word--and yet the offer was there on the table. In that case we'll see Farm Credit having to carry this farm all winter. There are going to be animal welfare issues to deal with.
If the dollars are there for what the marketplace is paying, why are we testing the market with every single case? That would be my question. Why are we testing the market? The market will need to be tested at some point in time, but we don't need to test the market every single time. That's the definition of insanity.
Actually, you've touched on one of the areas I was going to touch on. I'm looking at the programs, and there are some things I'm hearing consistently over and over again. One is the timeline of repayment, or the time of a payment. Bankability always comes up when I talk to producers. If they could go to the bank...even if they know they're going to get their payment, if they knew the payment would be close or at least closer to what they actually get.... I think there have been some improvements there. Then the cross-subsidization, or the farmer who has a combination of, say, in this case, hogs and grain, or beef and grain, getting caught in that scenario, as Mr. Person talked about. The other concern I always hear about is caps. I come out of Saskatchewan, so I hate caps. Caps, to me, basically punish the efficient producer, and I don't think that's fair.
I guess what I'm looking for here is a couple of things. Regarding timeline of payment, do you have any ideas on how we could speed that up? Right now we have the ability to do an advance on your AgriStability payment. I know there were concerns when we did that a couple of years ago. Under CAIS, when you did an advance, some guys would actually take the advance, over-estimate, and then suddenly get a bill in the mail because they had over-estimated. I think we made some changes, at least in Saskatchewan, to help prevent that from happening.
In the same breath, on bankability, Revenue Canada.... I kind of like my income tax forms, even though I hate income taxes. But at least when I fill out the form, at the end of the form it says I'll get so much back, or I have to pay so much, and that's pretty bankable. Have any of you guys looked at what we could do to create that situation in this scenario?
Then, of course, there is the cross-subsidization, such as when you have a hog enterprise and you have a beef enterprise and a grain enterprise. Have any of you thought about how you would structure that? I know even trying to restructure it through corporations doesn't necessarily work, because they'll merge you together and bring it back under the whole farm. In fact, I've seen scenarios where some of the bigger farmers are actually four or five brothers who farm together to be efficient, yet they get penalized because they're getting lumped together under AgriStability.
I guess I'll go back to the timeline of getting the payments out quicker, and work down that list. What I'm looking for here, guys, is how to make it better. We can all pick on whether it's a good program or not. I hear that it's generally a good program except for a few flaws, and I think that's what we need to speak to as a group. Let's pick out what those flaws are and see what we can do to improve them.
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I was going to touch on this at the end, but Madame Bonsant was just talking about the issue.
Earlier you mentioned bilaterals, but also pork or beef or whatever. I can tell you, before I came to this place, I was always a little biased toward it. It just drove me nuts when I heard about American or New Zealand beef, or whatever, coming into this country when I was having a heck of a time as a producer trying to make a living.
You made a comment about shutting that down, and you just talked about how there was a vote—and I think there has been more than one, or at least it's been talked about a number of times, about making the industry supply managed.
The Canadian Pork Council, along with the Canadian Cattlemen's Association, has made it quite clear—not everyone, obviously, agrees within the industries—that they don't want to go that way. My point here is that both the Pork Council and the cattlemen want to send products. We want to look at markets or find markets around the world, because we want to produce. It's like being almost pregnant; there is no such thing. You either are or you aren't. If we're going to ship our products around the world, I think you know as well as anybody that we can't turn around and close our borders, or you're closed in.
I don't know whether you want to comment on it or not, but I thought it needed to be pointed out.
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I want to come back to Curtiss.
Overall, on this whole discussion, one of the things that has me concerned is how we stack up against the rest of the world. Are we, as a country, going to support our producers equivalent to other producer support in the world, or are we not? Otherwise, we're going to fall behind.
I come back to the bare land value and your comments, Curtiss. As I understand it--and I have several Farm Credit Corporation cases myself right now--you could have an operation or land values at $400,000 and Farm Credit will not restructure with the current operator. They'd rather take the chance on selling that out, even if you can get financing to purchase that operation at the bare land value.
I find Farm Credit is more interested in putting people on the market than they are in keeping them on the farm. It's a huge problem.
You said, in your case, that you're in the top 5% of producers. You're an efficient operation. You have market problems, etc., that put you where you are, and the other things you mentioned.
Is Farm Credit of assistance in keeping guys on the land, or are they not, in terms of that kind of proposal?
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That's a multi-part question, Wayne, but I'll tell you what I hear in the countryside.
There is a struggle with where Farm Credit's policy has been in the past. In talking with accountants and lawyers--producers call me all the time, and I'm the local rep--15 or 20 years ago, Farm Credit had a policy of finding the market value and then finding the quickest way to resolve at that value. They would do many things to make that happen. They would use trailer mortgages. They would use debt set-aside or plain debt writedown. They were in the business of trying to fund agriculture, and at the end of the day, if they sold it to the neighbour for $1, why wouldn't they move it back to the farmer for $1?
From what I'm being told there seems to have been a policy change at FCC. They will move so far, but then they're going to test the market. From research I have seen, I do know that every time they've tested the market in the last nine months it pretty much comes back at land value. With the gentleman we talked about earlier, if he and his church can raise the money to buy that farm back, or offer Farm Credit what they will probably get in the marketplace, it would seem like a reasonable business proposition to take that: reduce your costs and move on.
Having said that, there will come a point when the market needs to be tested; I don't know if that's every other week or every other month or once every six months. But we know in our business today, the hog business, that grain prices are going up and hog prices are not keeping up with that. Producers, at least in the next four or five months, are going to struggle to keep going.
I guess I'll leave that there.
I'd like to start by commenting on something that Curtiss said regarding opening of foreign markets. Curtiss said that really the minister shouldn't be focusing on that--bilaterals are not what the sector needs--he should be focusing more at home. I think I disagree. The bigger the marketplace that farmers have to sell into, the better. The more places they can sell their product, the better. It's simply a supply and demand equation. If supply stays constant but demand goes up, that's better for farmers, and demand goes up when foreign markets are open. Certainly, this has been one of Minister Ritz's strengths, and I think it's been one of his areas of priority.
The second thing I want to mention is regarding some of the discussion we've had today as to whether the programs are working or not. I think what we're hearing around the table, what we're hearing from you, is that at particular times for particular commodities the programming doesn't always work particularly well. However, I would like to point out that...I don't have the exact number in front of me, but we spend about $8 billion a year on agriculture, and billions of that actually flow to the farm gate through these programs. It's billions and billions of dollars that flow to the farm gate every year in these programs, and that money is reaching farmers.
Part of my experience, simply by being out on farms talking with farmers, is that if a farmer receives support, he doesn't broadcast that. That's his farm operation and he doesn't put a big sign up on his gatepost saying he received this amount of support from the government because he had a difficult year. The inverse is true. When a farmer doesn't necessarily get the support he needs in a particular year, that's broadcast a little more widely.
So I wanted to point out that there are billions of dollars that are flowing through these programs to help farmers every year.
I guess if we look at the pork sector, when a program struggles to support an industry that is in decline for a number of reasons--it might be the high dollar, it might be overproduction, it might be the COOL that went in down in the United States, and there are a number of things that can come into play--then I think the government makes an effort to provide a supplemental program. For example, in the case of hog farmers, there was the HILLRP program put together. This was a program that didn't exist before, and it was put into place with the help of the industry. I think the government tries to plug holes as they present themselves, with additional programs, or they try to provide leniency--for example, on advanced payments--where and when they can to give farmers that extra breathing room.
I'm not saying the programs meet every need under every circumstance, but I'm saying there are a number of tools that are at the government's disposal and are used to help when they can.
I want to go back to...it ties in with the pork. I think the question Mr. Hoback asked is a good one because it's something that we all struggle with. We understand the implications of negative margins over time, but the question becomes.... The federal government tries to provide a level playing field so that all farmers across Canada are treated equally, so that commodities are treated in the same fair manner. This is something producers asked for, right? They want a level playing field; they don't want it tilted in favour of any one commodity or another, or one particular circumstance or another.
If you take pork, I think the industry realized that a year or two ago the supply was too large for demand, so pork prices started to plummet. A lot of our exports to the U.S. dropped at the same time. This was part of too much supply and not enough demand, because of the COOL implementation, which we're fighting. So the herd had to downsize, and that's painful--that's very painful, particularly when it gets personal. A pork farmer has to decide whether he is viable in these circumstances or not. That's a very personal, very difficult, gut-wrenching decision.
I'm not too sure who determines viability. After what period of time does one say it's been in declining margins for such a long period of time now...? At what point, as Mr. Hoback said, does the taxpayer say we should limit the support?
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I have a couple of quick points.
It's the second time, Mr. Chairman, that I've been challenged on my comments around bilaterals, and I'll repeat it. I think bilaterals are good, but I do believe that if we don't look after the industry here at home, we'll have nothing to sell once those bilaterals are accomplished. Minister Ritz is, if anything, an advocate for the agricultural export industry.
Leveling the playing field is a big issue. If we have an industry here.... We get into things and we ask at what point do we stop subsidizing an industry and let it go into decline. We need to be there.
I'll use my own example. I have a cost of production that rivals that in Brazil, because of the way we've chosen to structure ourselves, yet Brazilian product will come into this country and displace the product that I produce because it's coming here at an incredibly low rate, the same as American product, which is dumped into this country.
I'm prepared to go head to head with anybody in the world on cost of production as a viable producer. I'm not prepared to sit back and go out of business because the Government of Canada—and it doesn't matter, sir, whether it's a government of today or a government of tomorrow—is not willing to protect its industries here at home.
I'll finish up on the other comment you made, sir. Under the—