Agriculture Committee on March 15th, 2010

[The Chair, Conservative, Larry Miller]

We'll move to Mr. Bellavance, for seven minutes, please.

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

Good afternoon. I am delighted to see you. I am also delighted to hear very eloquent and relevant testimony, like Mr. Reid's and Mr. Littlejohn's, who live on the land and are sharing their experiences with us. But I have mixed feelings about this as we are meeting with you again because the situation in the hog sector is still extremely difficult. You are also the first to appear since prorogation, which means it is still an urgent matter.

My first question is for Mr. Vincent. I recently attended the general congress of the UPA. I have no doubt that you are familiar with the resolution that was passed by the congress of the Union des producteurs agricoles on the Advance Payments Program. We understand that the government has extended the deadline for repaying the advances made under the Advance Payments Program to September 30, 2010. But, at the congress, we heard that you are afraid that people will not have enough cash on September 30, 2010 even if the deadline has been extended. That means that UPA asked for a stay on the repayment of advances made under the Emergency Advance Payments Program.

Have you talked about this specifically with the minister? You mention a stay, but how long would that be? One year? Two years? Or do you want the repayment to be spread over several years? What is behind this resolution? I am sure you played an active role in drafting the UPA's resolution, but you could not prepare a 25-line paragraph. Could you tell me your opinion on this topic?

[Jean-Guy Vincent, Vice-President, Canadian Pork Council]

Thank you, Mr. Bellavance.

Mr. Preugschas clearly explained the position of the Canadian Pork Council, which I am representing, but your question is directly related to UPA's last congress. At the outset, I would like to say that you are doing a great job. First of all, you are my MP and I appreciate the work that you are doing.

You were asking about Mr. Ritz. I feel we must recognize the work that he has accomplished in the last months in order to open doors that were previously closed to export.

But, in response to your question regarding what that meant exactly, I must stress that, everywhere in the country, not only in Quebec, producers are asking themselves what will happen after March 26 and September 30. We have no idea.

I am not going to repeat what has already been said, but I would like to mention that, as producers, we have to know where we are going. In addition to what I have said, we must also know what the hog sector policy is. What can producers count on nowadays? We do not know. That is what we have to find out. We must know what is happening. Producers have been going into more and more debt. We have reached our full capacity to carry debt. All credit is due to producers who keep going in the sector and are trying to stay afloat. But they cannot do it alone.

Taking this further, we could ask ourselves if we will be able to bring innovations to the agricultural sector in 2010. Does Canada want to compete with the United States? Are we willing to do what it takes to help hog producers in Canada and Quebec get through this crisis? Together with the Canadian Pork Council, Canadian producers have focused on quality. They have implemented product quality programs in order to be able to export the products.

What can a producer expect from the government? We are waiting.

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

Mr. Vincent tells us that producers are still waiting. So, unless Mr. Preugschas has now met with Minister Ritz about this issue, there has been no specific discussion on it.

Will the minister not have every right to ask what the deadline will be if this stay is granted? This is perhaps the question that comes to mind. Are you able to answer it?

[Jurgen Preugschas]

I certainly can't answer for the minister--I'd love to--but the minister did publicly state at the Canadian Federation of Agriculture meeting that he would consider putting another stay on the repayment of the emergency advance payment program. He has since sent a letter out to every producer in Canada stating that at this time he cannot do it.

What I would read into this is that as we get closer to the date of September 30 he would consider it, depending on where the situation is. We will certainly be asking him, because we're quite clear that our producers are not going to have the money to repay it. We are going to be asking for a further stay of that money.

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

For how long would you need a stay like that?

[Jurgen Preugschas]

Well, I don't know the rules really clearly on that, but I believe he can only put on an act of stay for 12 months at a time. You probably know that answer better than I do, but I believe it's for only 12 months at a time.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Bellavance.

Mr. Atamanenko, seven minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you very much for being here.

Since I've been here, since 2006, we have met a number of times. I wouldn't be surprised if at the first meeting I was at, in 2006, all of you were here.

You know, it appears that everybody has good intentions, but some programs are working and some are not. For one, I'd just like to have a quick comment on this hog transition program.

According to the Co-Operator, “To continue to allow new bidders to join into the auction without increasing the funding, is to create a free-for-all that pits producer against producer.” I would like some comments. Honestly, I don't understand exactly what that's saying.

In general, it seems that at least since I've been here we've been hearing the same story. I remember one pork producer--maybe it was even one of you--said, “Help us compete against foreign governments. We have to somehow do something.”

Mr. Reid, you mentioned a national food strategy, that we need some kind of vision.

How do we get good-quality pork to Canadians and allow you folks to make a living? That's the key. And we haven't answered that yet.

In my province the fruit producers are facing the same situation. They're producing good quality. They're innovative. They're doing new things. And yet all it takes is apples from Washington state and they're out of business. There are rumblings there about orderly marketing. We come back to the question that I have often posed about supply management, a program that doesn't cost the taxpayer anything and keeps people basically having an income.

Is there some talk? Is this the answer? In the last four years nothing seems to have changed a lot. Obviously we have to do something. Is this the direction we have to be going in?

I'll throw that open to anybody who can answer.

[Jurgen Preugschas]

I can certainly address the supply management issue.

We understand that for the producers in the supply management system, it's very good because they are pretty much guaranteed a margin above their cost of production. But what it would mean for our industry is a reduction from 75,000 jobs to probably around 30,000 jobs. It would put a lot of the members who Jim represents here and their plants out of business.

You think the one small plant in Nova Scotia is a problem. You're going to see half the plants in Quebec go under, and half the plants in Ontario. You'll the see the brand new plant in Brandon go out of business.

If that's our choice, that's fine. If you talk to those workers and say you're putting a plan in place that'll make them unemployed, that is a route to go. We believe we produce GDP for this country and work for our citizens of this country, and we want to export and feed other parts of the world. We think we can do that. I think there are some things we need to tweak, without a question, but I would say that from a Canadian Pork Council standpoint, this is what we would rather be doing.

[Stephen Moffett, Director, Canadian Pork Council]

Thanks, Alex. It's an excellent question. And you're right, I think I was probably here at that first meeting as well.

It's been a real challenge. There are a lot of things that went on, including commodity prices. Various commodities just went crazy. And a lot of those are inputs. It just made us extremely uncompetitive.

I'll suggest to you that certainly things are changing. The market hog price in the States has come up dramatically since last summer. I think we would all agree there are much better times ahead.

It's just that we've gone through such a long period of time. Our producers are pretty bruised. I have lost so much equity--

[Jurgen Preugschas]

I mean, look at him. Look at all the bruises.

[Voices]

Oh, oh!

[Stephen Moffett]

Yes, I'm the poster boy of a bruised industry.

We are bruised, and just the ability to access credit, to be able to do the things and run our business the way we used to be able to is challenged.

The Canadian dollar, as Jim mentioned, is over 98¢ again, and so even though the American price has come up so dramatically, that negates a lot of that increase in value and just continues to hurt us. I think there are areas where the government can get involved...certainly Jurgen mentioned some of the improvements in market access, and we know there are still a lot of opportunities. Korea certainly is one of the biggest ones as well as the European Union. If we can move ahead and get some pork moving into Korea, it will make a huge difference. We know that China is open to us now. We think that's going to make a huge difference, and there are some other things the government can do.

We've talked about the issues around AgriStability. It was mentioned earlier. There are the issues of the negative viability test and the coverage on negative margins. Our problem is that the producers, with the situation they're in now, can't afford another crisis. So if an individual comes up with, let's say, circovirus or some other disease, he just can't weather that anymore, and he doesn't have the protection from AgriStability. So I think we need to make some changes to the AgriStability program.

I think the advance payment program has been a really good program for us. In actual fact, we talked about an additional stay next September. Our preference really would be to declare an emergency again, because many producers did not access the program when they could have, and in hindsight maybe they should have. Many producers did not access the full amount or didn't access it at all, and under the regular APP cannot access as much in any case. So that would be our preference, because quite frankly, the biggest challenge is getting access to credit.

[The Chair, Conservative, Larry Miller]

You have about 20 seconds left, Alex.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Curtiss, do you have any thoughts or comments?

[Curtiss Littlejohn]

The only comment I have is about the APP, if whether you can do another emergency advance. The government uses the model of a 600-sow operation when it does its calculations for where the industry is. Raise the limit in the APP to reflect that 600-sow farrow-to-finish operation. Today the $400,000 limit is around the 250- to 260-sow operation. Open it up again, and raise the limit, and it would be a definite asset to the majority of producers in the industry.

[The Chair, Conservative, Larry Miller]

Thank you, Curtiss.

We'll now move to Mr. Hoback for seven minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Actually, Curtiss, I'm just going to pick up where you left off.

That's why I hate caps, and that's why I asked you to repeat it. It wasn't necessarily for the benefit of everybody around here. I've talked to my colleagues across the floor, and they understand that. The reality with caps, with AgriStability, for example, is that when you have good years, you want to establish a good margin; you can't take advantage of that margin when it starts to turn down. It doesn't give you the strength, the financial time, to keep going through that bottom. It actually leaves you shorted out.

I have a situation in my riding where a couple... They're big farmers. They're efficient farmers, very good farmers. But under AgriStability, the husband and wife get geared together. They grabbed his dad and put him in there. They grabbed his kids and put them in there.

Well, as a family, they farm 30,000 acres, but as individuals they farm maybe 4,000 or 5,000 each. But that doesn't matter. They're capped. And that's a big problem. That's a problem not just for the federal government. It's a problem that the provinces have to understand when we start negotiating these programs.

That's why I say these caps are bad. We should at least get them back to being reflective of the year 2010, not 1980. So that's the point I was trying to get you to make again, because it is a hurdle that I see in our AgriStability programs.

I have one question, and Stephen, you started to touch on it a little bit. You see a light at the end of the tunnel. You say some things are happening, prices are coming up and stuff like that. What structurally is changing to bring the prices up? Is it the reduced demand? What I'm trying to get at is structurally what has to change in order to get profitability back in this industry? Does the dollar have to go back to 65¢? Because we know that's probably not going to happen for a long time. What will country-of-origin labelling do if that's finally put to the side and actually corrected? What else has to change? I know market access is a big thing, getting more markets. We're working hard. At pretty well every break, the minister is in one country or another selling beef or pork. What else do you see has to change?

[Stephen Moffett]

Thanks.

I say I think there's a light at the end of the tunnel because some of the things are already changing. Certainly the market for pork is getting stronger. We went through the H1N1 fiasco last summer, and that's obviously behind us. We don't have the press that goes along with that. Some of the markets that were closed to us as a result of that have been reopened.

On the market demand in general, the recession--I almost said depression--we went through this last year is certainly coming to an end. Whether it has ended or not, it's certainly coming to an end, and we see people buying more meat products. Meat products are certainly sensitive to a recession. We see people buying a lot more pork. China was closed to us at one time, and that's opened up now. People are telling us that China will be the next Japan. There will be a huge increase in demand for us.

Certainly there is a significant decrease in production. American production is much less than ours. Our production is down something like 20% from 2005. That's a huge decrease. We know that Mexican production is down close to half of what it was. There's a tremendous amount of product moving from the U.S. and Canada into Mexico. So the demand for our product is certainly increasing.

I see some improvements in our input costs. Fuel prices are down from where they were when oil was $140. Fuel's still fairly expensive, but grains seem to be stabilizing, let's say. Proteins are getting a little less expensive.

We've had the question over the last two or three years that if things are so tough maybe we should just look into something else. People will obviously continue to eat pork, and most of us would like to be able to continue to produce that. I think there are better days ahead.

We just have to deal with some of these issues, as I mentioned with the CAIS, and try to protect the risk of carrying on in business and help make it easier for producers to access credit.

[Randy Hoback, Conservative, Prince Albert, SK]

So you're looking for more bridging just to get us out of the valley, but you do see a light at the end of the tunnel. Is that fair to say?

[Stephen Moffett]

Yes.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

Jean-Guy, did you want to make a comment on that?

[Jean-Guy Vincent]

To answer your question, which was rather specific, we must recognize that we are competing with the Americans. The question is how far are we willing to go to compete with the Americans? After all, they are our main competitors. The Americans want to keep their market shares and even increase them. So we have to find out how far the Canadian government is willing to go so that we keep our market shares and continue to compete with the Americans.

We have good products. Canadian producers are known for the quality of their products, in fact. So we are asking ourselves how much the Canadian government is willing to invest so that Canadian hog producers can continue to operate and to compete with the Americans. We are able to do it because of the quality of our products. As I said earlier, ever since Jurgen has been with the Canadian Pork Council, he has promoted the quality of our products so that we have a major place in the markets.

So my answer is a question. If the Canadian government answers that question, it will provide the necessary funds for Canadian producers to carry on and to compete with the Americans.

[Randy Hoback, Conservative, Prince Albert, SK]

Well, there are two parts to that question. If you look at what our government has done to compete... Again, as for Minister Ritz, I don't think he saw his home all last year because he was out opening up markets for the beef and hog sectors.

I look at you and I say, “What are you going to do as a producer to compete?” It's tough to say this now because you don't have the sources or the funds to do that. It's always easy to say that we can go and do a marketing plan and everything else, but we never seem to do that when we're on top of the market. We always wait until we're at the bottom of the market and then we react. That's unfortunate, but that's the reality of the things that happen when you go to the marketing of different hogs.

If you look at what our government is doing... We're trying to do everything we can and we're working with you guys to keep you there, but there are some hard realities that come with any industry, whether it's grain, hogs, or beef. There are times when people have to make tough choices, and it's horrible. I'm a grain farmer and I understand that. In 2005, I was faced with those choices myself. I still farm--scaled back but still operating--but those are the tough choices that you have to make.

All I can say is that I look for programs that are going to bring you up and bridge you when the time comes down, but if there's a structural change going on in your industry such that it doesn't see a light at the end of the tunnel, then are we helping you by keeping you in there for another 10 or 15 years?

But as you've pointed out, Stephen, there are some changes coming forward. I feel optimistic that way. Now we have to convince the banker that there's some optimism so that your barn goes up from $250,000 in value to a million dollars again. Because what's he going to do, sitting there with a barn, if the industry collapses? He's not going to get even $250,000 for it. He may get $50,000 for it. That's why he's sitting there and holding back. We threw government guarantees at those loans and they still wouldn't touch them, so that tells me how serious it is for this industry.

Also, the FCC is usually the bank of last choice for farmers, and if they're going cautious on this industry, that sends up a big warning flag to me as a producer, because I know that the FCC will usually bend over backwards to try to get a loan through for a farmer. That tells me there are some structural things that have happened in the industry and that need to be addressed.

We can do the market access, which Minister Ritz is doing, and we can give you funding to go out and develop those markets, which we're doing through our AgriStability programs and AgriFlexibility and all of that, but we also have to get from A to Z sometime soon here too.