Agriculture Committee on April 28th, 2010

[Ed Sagan]

I have more, but....

[The Chair, Conservative, Larry Miller]

Mr. Thompson, good to see you again. You have five to seven minutes.

[Ryan Thompson, As an Individual]

Thank you.

I'm very glad to be here today, and I would like to thank the committee for inviting me to take part in your discussions today.

A little background on myself: I've always been involved in agriculture. I grew up on a mixed farm in southeast Saskatchewan. I attended university at the University of Saskatchewan and got a bachelor's degree in agriculture, as well as a master's in ruminant nutrition. Today I currently operate a 250-head cow herd. As well, I manage a community-owned 12,000-head custom feedlot called Border Line Feeders at Ceylon, Saskatchewan.

Given the opportunity to talk about young farmers, I think this fits very well with me, as well as with a number of organizations I represent. I'm currently the vice-chair of the Saskatchewan Cattlemen's Association, which represents all the cattle producers in Saskatchewan; I sit on the Youth Economic Engagement Council of Enterprise, Saskatchewan; and as well, I represent the beef producers on a committee of the university tasked with relocating and renewing the beef research unit at the University of Saskatchewan. I believe all these groups have a vested interest in the discussions today.

We heard lots about the grain industry. I want to talk mostly about the beef industry today. That's my area of expertise. Obviously, we're very concerned about the average age of our producers and the lack of young people coming back into our industry. Our industry has been struggling for a number of years now. We all know that. Getting young people excited about coming into this industry is difficult. So there are a number of things I think we need to address. There are a number of huge global economic factors that affect our industry that we're not going to fix here today, and I'm not going to talk about those, but there are a number of things where I think we need to focus our resources.

The first one is training. We've heard from a number of our people today that education is important. I think we need to train our leaders and foster young entrepreneurs. I think we need to go all the way back to high school. There need to be additions to the curriculum. Teach some of these young people financial literacy. Let them know that being an entrepreneur and starting your own business is a legitimate way to make a living; you don't have to go out and work for somebody. So I think we need to really focus our training on this. These young people understand what it takes to run a business and understand that it's okay to do that. I think we can bring some of these fresh, young, aggressive thinkers into our industry.

We need to focus on infrastructure required for training. I mentioned that I'm on a committee tasked with relocating the beef research unit at the university. That particular research unit is almost 50 years old. How are we going to attract young students at the university to come into the business of beef when a research facility doesn't even reflect current practices and current industry? These are places where we really need to focus. If we can get state-of-the-art facilities and attract these young people, train them, they'll be forever in our industry. So I think funding for initiatives such as that is huge. I know a number of you may be aware of it already, and there will be some applications coming through a number of different programs that I'm sure some of you will see, and certainly we would love to see support from a national level for those types of initiatives.

A number of the other people today talked about risk. Risk is a huge issue in the beef industry. You know, years ago there weren't the fluctuations, but there are huge market fluctuations now. The fluctuation in the currency market alone can put overwhelming strain on a young start-up farmer. They can't handle some of those fluctuations. We saw it just the other day when the Canadian dollar lost 1.5¢ versus the U.S. That's huge when we start talking about the value of our products. Huge.

The current business risk management programs don't work for beef producers. I'll talk about a couple of things. The AgriStability program—one of the other fellows talked about it—actually penalizes guys who want to diversify their operation, and it actually promotes people doing one thing, building up margins, taking a big hit to collect a payment. We don't need programs like that. That doesn't help our industry.

I believe we need to be having more focused programs. We heard about crop insurance, a program that's worked for a lot of years for the crop industry. We want a program similar to that for the beef industry. We've put together--and we worked with government extensively--an insurance program for beef that's a bankable program. Young farmers can use it to manage operating lines; it's responsive: you get payments in a week or two, rather than the two or three years that we see with the current programs. It's simple. No matter what size farmer you are, whether you're start-up or have been at it for a while, anybody can use it. It's cost-effective, and most of all, it's going to create some confidence that these people can manage their risk and run their operations the way they need to.

One other thing I'd like to mention is the current disaster program we have. No one's really sure what triggers it and where it comes out. We need to have set triggers so that people know when it's going to work and when it's going to come into effect. We've had some situations in Alberta and Saskatchewan over the last year, some severe droughts and feed shortages, and nobody seems to know if anybody qualifies for any assistance. That's unfortunate. We've got to address those issues.

I won't go into a lot of detail, but financing has come up a number of times. To get young farmers into the business, we need some help with financing. Lending institutions are scared of the beef industry and don't want to lend young people money. They won't even look at a business plan any more. They just look at your net worth, and we all know everybody's net worth coming out of university is negative. If we could get some of these lending institutions to look at business plans and the merit of businesses, if we need some small government grants or some loan guarantees to do that, I think that's where we really need to focus. If we're truly committed to attracting these young people to come back into our industry, we've got to make it a viable option for these people.

To wrap up, there are a pile of issues that need to be addressed in the beef industry, and we can't get into them all today. We need to ensure this remains a viable part of the Canadian economy. Ultimately, if we can build a profitable industry and address some of these concerns and attract these young people to our industry, we won't have to be here again. These young people will take these businesses and run with them, and they'll ensure the future of agriculture in Saskatchewan.

Thanks again for your time. I appreciate the opportunity.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Thompson.

Now we'll move to Mr. Voldeng for five to seven minutes.

[Rodney Voldeng, As an Individual]

Hi, my name is Rodney Voldeng. I farm with my brother in Naicam, Saskatchewan, about 100 kilometres northeast of here. I'm also the chair of the Saskatchewan Young Ag-Entrepreneurs, an organization in the province that basically considers anyone under 40 as a young person in agriculture these days.

It's funny, because we had a conference where 70 people showed up, and someone there commented to me, “Oh, you have everybody in Saskatchewan show up who's in agriculture.” That is the general opinion, and it's been reiterated by others as well.

I would like to explain why I came back to agriculture when I finished university. The first reason was money, because I saw a lot of opportunity in agriculture. There were no other young people coming back in. They keep advertising that the average age is 60, 55, or 80 maybe. I was thinking, well, there's going to be great opportunity. I've been back farming now for 14 years, since I finished university, which you guys might be amazed by. These people are still farming and haven't left yet—but they will, sooner or later. I still see it as a great opportunity. I guess I'm an eternal optimist from that standpoint. I see opportunity for agriculture and young people as others exit the industry.

Right now it's very difficult for expand when you are loaded heavily with debt, competing against people who have considerably more equity than you do. I guess it comes back to what some of the others have said about accessing more financing. But even if we were to access more financing, we still have to repay the debt. It's a catch-22.

The second reason I came back to farming was partially the lifestyle. I enjoy being a self-directed individual. I looked at the other businesses I could start up, and farming was an opportunity I could get into at the time and continue to see expand.

I'll bring up a few things here that you guys may be able to offer young people to encourage more of them to enter the industry, through advertising and promoting the positiveness of agriculture. We have to stop talking about agriculture and subsidies. That's all we ever hear in the news, but that's not what agriculture is about. We are the environmentalists of the land; we are looking after the land, as others have said already. But we really need to promote a positive picture of agriculture.

I meet with my friends from university days, who are in Edmonton or Saskatoon, and they start asking about agriculture but know nothing about what we do on the farm. They have no idea. So we go out for supper and we try to educate them and we spend $35 for a steak. We come from the cattle industry and spend $35 on a steak.

My farm was a mixed farm of hogs and grain farming. My brother and I emptied our hog farm two years ago before everybody else did, because we did a business plan that said that if we lost money like that for two years, we would be out of business. So we emptied our hog farm before the government had any programs for that, and in retrospect, that was a good thing to do. We're now sitting with a 75,000-square-foot facility that we're trying to figure out what to do with. But that's our own boat.

Another thing we can do in agriculture has to do with the regulatory system. Coming from the hog industry, you guys have probably heard about Paylean, the product that was approved in the United States but took seven or eight years to be approved in Canada. That is just one thing. But the question I had was why were we still willing to import all of that product from the United States if we were not allowed to use it in Canada? We are still consuming that product as Canadians, but we're not allowing our own producers to use it. That includes the grain industry as well, whether it be new types of seeds or different chemicals being used on the farm. We are still importing those products into our own country and are consuming them, but we're not getting them approved through our own regulatory system. I know I've been told before that it is being looked at and worked on, but it still seems to be at a snail's pace.

That also goes to the import standpoint. When I look at this I wonder why we have high levels of traceability in Canada—which is a great thing, a great selling feature—yet we don't hold any other countries to the same standards we have. I guess some of that was coming from the hog industry, where we were doing the levels of quality assurance. Those were required just so we could sell into the packing plants, yet we import product from other countries that do not follow the same standards.

The next point is that I believe we need to encourage secondary production in Canada. We continually export our commodities and want to be able to make more money, but we're competing on a world market where people can produce products more cheaply than we can, because their labour and other stuff are cheaper, when we really need to be encouraging that secondary production. We have a few more canola crushers going up in Saskatchewan, but you still see the boatloads of canola, and the wheat and barley, being shipped out as raw product.

We're leaving a lot of money on the table, and I guess that's what I want to end with, that if we were able to access those extra dollars and produce more dollars for the pockets of farmers, that would encourage more young people to enter the industry and also reduce the dependence on subsidies there seems to be at the current stage.

[The Chair, Conservative, Larry Miller]

Okay. Thank you very much, Rodney.

We'll now move to Mr. Ranger for five to seven minutes.

[Jason Ranger, As an Individual]

My name is Jason Ranger. I have a farm in a town called Leask, which is about an hour north of Saskatoon.

I'd like to thank you guys for taking the time to come here and meet with us.

I feel that one of the most important factors to encourage young people to start farming is the profitability of the farm. Farmers have to be able to earn good wages in order to encourage young people to start farming again. You're taking a big risk to farm now. You need to have a reward that goes with the risk.

Another big concern is obtaining the capital that's required to get started in farming, but it again comes back to profitability. If the farm makes good money, you have no problem convincing a banker to give you a loan. Everything always comes back to making a good margin. If you can do that and you have a good business plan, the banks will give you money.

Another factor for young people wanting to start farming is the lack of land in some areas. We have a lot of very old farmers who are still farming. I read a survey that was conducted in Iowa. It was the international farm transfer survey. It revealed that 30% of farmers plan to never retire. It means they plan to farm until they die.

If we could figure out some type of program to encourage the over-65 crowd to sell or rent land to young farmers, or if there was some type of benefit for them to sell to young people, maybe it would be one way to encourage more young people and new entrants into farming.

I also read that Iowa has designed a program that links a pool of young farmers to retiring farmers who don't have anybody to take over the land. Maybe we could think about a program that links the younger farmers to the retiring farmers.

One topic that I really want to touch on is the fact that the majority of young farmers are not supporters of the Canadian Wheat Board. As farmers, we need to be given the choice on whether or not to market through the CWB. We're capable of marketing our own canola, oats, etc. We're also capable of marketing our own wheat and barley. Young farmers today have good marketing abilities, and it's something we enjoy doing. If some farmers still want to sell through the Canadian Wheat Board, that's fine, but give others the choice.

We're not really on a level playing field across Canada. The west is under the reign of the Wheat Board, whereas the east is not. There are others programs, such as crop insurance programs, that are different all across Canada. Some provinces insure up to 90% of production and some provinces only insure up to 80%. Some provinces also have minimum price guarantees and other provinces do not.

Risk management is a big factor for young farmers because we don't have the equity behind us to sustain a hit. I think redesigning the crop insurance programs to benefit young farmers would be a good thing.

One of the major problems I had starting out was with the fact that there's an area average for yield coverage and it takes 10 years to fully transition to an individual yield. Most of the top producers are producing about 50% above the area average, and the young farmers tend to be the high-end producers. Why are we stuck with an area average that is 50% below our production? It doesn't really work.

Thankfully, over the last four years, I haven't had to use the crop insurance program. I'm slowly building up an average, but it would be a lot better if the average could be set faster than that.

One other consideration is this. The reason you get into farming is that you enjoy the lifestyle, but the lifestyle alone is not enough to convince young people to start farming.

Some other people have said that basically small towns are getting older and older. There are fewer and fewer young families, schools are shutting down, so it's getting harder and harder to encourage young people to move back to rural areas. It's kind of funny. It tends to be the same old guys who are still plugging away at farming who are complaining about the demise of their small towns and there's not enough kids in the schools any more to keep them open. Maybe if they retired and let somebody young take over, it would also help to revitalize the communities.

That's about all I've got for now. I'd like to thank you guys again for your time.

[The Chair, Conservative, Larry Miller]

Thank you, Jason.

I wanted to be clear before we start questions.... Mr. Hickie, I was under the impression that you were presenting with Mr. Sagan, and I'd certainly give you the opportunity to make any remarks, if you wish.

[Ed Sagan]

I took up too much time.

[The Chair, Conservative, Larry Miller]

Yes.

If you'd like to speak, Mr. Hickie, go ahead.

[George E. Hickie, As an Individual]

Okay. I do have a hearing problem, but I have a presentation here, if I may present it.

[The Chair, Conservative, Larry Miller]

Yes, you may.

[George E. Hickie]

I am presently involved in transferring our 2,500-acre cattle and grain farm to two sons, but my greatest fear is that in the present environment they have no chance of making it. The only chance I see is if I give that farm to them, not sell it to them or even a part of it.

I will continue with my brief.

Very few young men and women who grew up on the farm have chosen to remain on the farm as their career choice. Why? Growing up on the farm, they know that farming is a very difficult, low-paying, high-risk, high-investment career choice. Agricultural financial experts tell us that we need a 10,000-acre operation to be financially viable in the present environment. In other words, an investment of $4 million to $6 million, a huge amount of money, must be borrowed from the lending institutions, interest payable.

To operate a modern grain farm requires machinery, fertilizer, herbicides, seed, fuel, rail services, and borrowed capital. These services and goods that we must have and cannot farm without are all controlled by a few transnational corporations who seem to be more powerful than many governments. During the last few decades, these agricultural corporations have amalgamated, consolidated, and bought each other out, to the point at which they almost are able to perform as a monopoly, and often do. Competition between the few agriculture transnational corporations seems to be a thing of the past. For example, two years ago, when world grain supplies plunged to a worrisome low, grain prices to farmers increased substantially. Almost immediately, the suppliers of farm inputs raised their prices, some as much as 400%. As quickly as we gained a much-needed raise for our grain, they took it away from us. They now have the power and ability to do just that.

Farmers are little more than economic slaves for the transnational corporations. Young men and women who grew up on the farm understand and know this. Therefore, they reject farming as a career choice.

Thank you very much.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Hickie, and thank you for being brief. I appreciate your comments.

We'll now move into questioning with five-minute rounds.

Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

First of all, I want to thank each and every one of you for your presentations and for taking time out of your day--no doubt, you would be farming--to come here and give us your advice and your insight. We can't make decisions unless we're informed by those who are most affected by those decisions, and that's you.

Kalissa, you're absolutely right. We are in a crisis, and we wouldn't be here if that crisis didn't exist. We discovered that probably in the last year and a half, while we've been examining competitiveness in the industry. Over the last number of days, that crisis has become just that much more heightened, at least in our eyes around this table, having travelled from Kelowna, in B.C., to Alberta yesterday and here today.

We've heard any number of solutions, and the solutions are consistent with what you've said, anything from harmonizing regulations between this country and other countries so that we are not unfairly disadvantaged.... We've talked about the repair that needs to be done to AgriStability, about problems with succession planning, the cost of land, the lack of a real commitment to a national food strategy, and the preservation of our industry so that we can maintain our sovereignty--in other words, always be able to feed ourselves as a country.

I would encourage any one of you who feels compelled or competent to answer this...it's on AgriStability. It was suggested by several that we move away from the margin approach and move toward the actual cost of production approach. I'm seeing a no. I don't know if there are any yeses out there, but the viability test, apparently, for some is not working. If it were to be a margin-based program, it should be the best three of five years.

Mr. Thompson, you were saying no. If there is somebody else who has an opinion about that, I'd like to hear the other side of that argument from one of you, if I could.

[Ryan Thompson]

Thank you for the opportunity. The reason I'm saying no is I do agree there are a lot of problems with AgriStability, the viability test being one. We need to be very careful of cost of production types of models, because then that starts to interfere with normal market signals. If we're guaranteed a profit on any particular commodity, we lack the ability to start responding to different market signals, growing different crops, producing different types of animals.

I do believe we need to fix it, and we've listed a number of things, but I think there need to be focused programs on different sectors.

[The Acting Chair, Liberal, Wayne Easter]

Mr. Person.

[Stuart Person]

Thank you, Chair.

I agree. The margin base, in theory, works. The problem is, if you are a cattle producer right now, you have no margins because you haven't made any money, and you have to be making money consistently, at least three out of five years, in order to have a decent margin so that you can obtain some coverage from AgriStability. We run into situations with the cattle industry where they're not making money. They have no coverage, whereas a grain farmer right now has extraordinarily good coverage. That wasn't the case three or four years ago, but over the last few years they've done well and they've built up those margins, if they've been fortunate enough to avoid all the hailstorms and everything else that can affect you.

The margin theory is good. Maybe you need to extend it now. We have five to six years of information in the program. Maybe we can extend it out, and once we get to 10 years we can take an average of 10 and drop out some low years to get a better feel for where farms should be. I understand what you're doing with this program. You're saying if you're a viable farm, on average, we can support you. If you're not making money, on average, we're not going to support that, but the trick there is why you are not making money, on average.

For cattle farmers right now, they're not making money because of a lot of political reasons, for one thing. You can't penalize those guys.

With mixed farms, you have cattle prices down and grain prices up. That's what I meant by their being penalized. Their margins are calculated together. You're not separating the industries so you have these guys taking risks on the cattle side. They may have earned money and built up a good margin grain-wise, but the cattle just drags them back down.

[Frank Valeriote, Liberal, Guelph, ON]

It's my impression that there are certain provinces that have subsidies for their farmers in certain farming industries, whereas other provinces don't. I've discovered that. I'm just wondering whether you feel the federal government has a role to play in equalizing or balancing the playing field across the country so that farmers in a particular province aren't advantaged where they have a more supportive provincial government.

Does anyone have a thought on that?

[Ryan Thompson]

Yes, I do, and I'd take it even a step further: it needs to be international as well. I talked a little bit about an insurance program for beef producers. It could be very similar for some other people as well, but we don't have a Chicago Board of Trade in Canada. We have huge basis risk and currency risk, and that's why we're looking at a solution whereby we can tie in the futures price of animals to currency and tie all that basis risk into a simple program that allows our producers to compete with those in other provinces. Right now, Alberta has a program similar to this that nobody else has.

So yes, I agree, we do need to address that.

[Frank Valeriote, Liberal, Guelph, ON]

Here is a final question.

[The Chair, Conservative, Larry Miller]

Mr. Valeriote, your time is up. We may get back to you.

Mr. Bellavance, you have five minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you very much for being here, we really appreciate your testimony.

This is not the first time since the beginning of the tour—and even before—that we are hearing about income support and the problems related to it. We are currently on a tour to consider the future of farming.

My committee colleagues will say that I am repeating myself, but since you are the first ones to hear me speak in Saskatchewan, I would like to tell you something. At first, when the idea about going on a tour regarding the future of farming was conceived, I accepted because I believe that we can do two things at the same time.

However, we also need to talk about current problems. The farming sector is experiencing countless problems that we must try to resolve right away. This is not only the responsibility of the government, but also of the whole farming industry. Farmers should be the first ones consulted. This does not mean we can't discuss the future of farming. Nonetheless, priority should be given to current problems. That is why I am not surprised to hear your testimony on problems related to the AgriStability program.

Regarding income support, government members often say that farmers reject social assistance, as they do not want to get paid for doing nothing. Of course, it is natural to be proud of our land, of the work we do, of our animals, of our crops, of having taken over the family business and of continuing to undertake the crucial task of feeding Canadians. It is quite normal to say that we do not want social assistance. However, income support is not social assistance, as you have skilfully explained, Mr. Thompson. In fact, you said that farmers may have no need for that kind of support for years, but after several lean years... For instance, over a period of 10 years, the income of grain producers in Quebec was extremely low. At the time, they were not eligible for support under the Canadian Agricultural Income Stabilization Program, which is now the AgriStability program.

If my understanding is correct, we are now facing very similar problems. I do not think that farmers are asking for charity when they tell the government that the choice must be made by society, and that they need help getting through rough times in order to be able to continue contributing to the use of the land and to growing crops here on our home soil.

Let's look at what's going on internationally. The United States have adopted the Farm Bill and the European Union is giving out a lot of subsidies. Canada never took subsidization that far, it never would have been able to do so. I never considered subsidies to be a form of charity and I do not think that it compares to sending out social assistance cheques to people who do not work. You must forgive me for my comments, but your testimony has gotten to me. I have not yet asked any questions, but I am getting there.

Mr. Thompson, you surely know that Agriculture Canada recently made public some of its forecasts. We know that farm income—especially in the livestock sector—will be on the decline in the coming years. You came up with some interesting solutions, but I would like to get more details. You said that production costs may not be the solution we should focus on.

Do you think that we could come up with a program that would be an AgriStability hybrid of sorts? What specific improvements do you think should be made to the program for it to be effective?

[Ryan Thompson]

Thank you for the question. I'll make sure I understand it correctly. You're looking for what improvements we could make to AgriStability.

I agree if it's some sort of a hybrid, that's great, but we've been struggling with a number of asks for changes to the AgriStability program, specifically for the beef industry, for a number of years, and we haven't received those. We've asked for the viability test. It's killing a lot of people.

We had an interesting suggestion from one participant here that maybe we need to stretch this out, because the biggest problem with the beef industry is that we've been so bad, for up to about seven years now, that our margins have declined to zero or below, and it's just not working. That's why we feel that a targeted program, an insurance program, whereby we can insure, for a premium...similar to crop insurance, so that we know how much we'll be able to end up with for our product in the fall when we sell it, so that we can cashflow our business.

I think somebody mentioned caps earlier. I completely disagree with the idea. We can't have caps on these programs. They penalize too many of our producers. In our operation, while it's a large operation—it's a 12,000-head feedlot—caps impede our ability to use that. They say the big guy doesn't need money. Well, if you think of it, we're a community-owned group; I have 400 shareholders. That's 400 families who are affected if we have a cap that does not allow us to use that program properly.

As I said, there are a number of issues that have come up before. We feel that we need to target these programs more. Maybe that can be done under the current AgriStability program, but it's clear that the current program has a lot of problems and needs some major reworking, and we feel we need to do the reworking now. We can't think about it for the next three years.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to Mr. Atamanenko for five minutes.