Agriculture Committee on Nov. 23rd, 2010

[France Bonsant, Bloc, Compton—Stanstead, QC]

As far as subsidies go, I will not be rude. But I prefer to subsidize farmers so I can eat instead of Americans so the government can buy F-35s.

Mr. Littlejohn, from what I understand, if agristability calculations do not take into account production costs, programs stay effective and efficient, regardless of the fact that you are taking 10 years to assess whether it is profitable or not, from beginning to end. When a program is not put together well, it will not be explained well, and so it will not be effective.

[Curtiss G. Littlejohn]

And the question is...?

[France Bonsant, Bloc, Compton—Stanstead, QC]

You said earlier that production costs were not taken into account under the agristability program. Even if you take 10 years to review and improve the program, if it does not take production costs into account, will the program automatically be ineffective?

[Curtiss G. Littlejohn]

Okay. I think I understand a little better.

The cost of production, as we see in the supply managed commodities, is an excellent way to ensure that producers make a reasonable return on their investment for their time and labour. By not having cost of production in the formula, you disadvantage a section of our industry. The programs that we have today don't take into account all costs.

It's a different issue, I guess. We disadvantage our producers here in AgriStability in two ways. We do not allow for true costs of production, and that is a challenge. As Mr. Shipley has said, we need to understand how, if we have a COP program, we limit production so that we don't cause over-expansion. There always needs to be a certain amount of expansion within an industry. The flip side of that is that in all of our trade talks we defend our supply management to the detriment of the non-supply-managed commodities.

So we do a little bit of sucking and blowing. It's a difficult question. This is not a simple issue, as we all realize, in how to address that. The challenge we have is that we're trying to plan a strategy for an ongoing war while we're in the middle of a heated battle, and that always makes it difficult. The challenge you have is that we are the ones who pay the price as we try to figure it out.

[France Bonsant, Bloc, Compton—Stanstead, QC]

I am trying to wrap my head around this. We talk a lot about the next generation of farmers. I believe you mentioned it earlier, when you referred to the cartoon in The Globe and Mail. The government is working on a report on the next generation of farmers.

If agristability, agriflexibility and so forth are inadequate, could that prevent the next generation from taking up farming? I am no farming expert, you are the experts. I am simply trying to understand. If the programs are no good, will there be fewer young people interested in pursuing farming as an occupation, as a way of life?

[The Chair, Conservative, Larry Miller]

Mr. Van Tassel, do you want to jump in there?

[William Van Tassel]

If a sector is profitable, there will be no problem in terms of the next generation. Look at Quebec. It had a program. Of course, supply management comes into play, but farmers are, on average, much younger there. If a sector is doing well, the next generation will step up.

I want to come back to something you said earlier about the programs. You can have an agristability program with an average of 10 years. It will help; it will improve the reference margin a bit. But a real program that takes into account production costs would clearly work much better.

I would like to respond to something I heard earlier. Canada is a big country, and the same model will not necessarily work everywhere.

[France Bonsant, Bloc, Compton—Stanstead, QC]

It is the same as gloves: you cannot have one size fits all.

[William Van Tassel]

Exactly. The agriflexibility program was put forward because different provinces can use it where the need exists. Programs can vary, as in the example I gave earlier. Manitoba may want an agristability plus program. Ontario may opt for a risk management program, as well.

[France Bonsant, Bloc, Compton—Stanstead, QC]

The pork industry is not supply managed, is it?

[Curtiss G. Littlejohn]

No.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Would that be a good idea? We wondered about whether....

[Curtiss G. Littlejohn]

No.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Is it something you want to see happen?

[Curtiss G. Littlejohn]

That's a good question. There's been a lot of talk over the years about supply management in the pork industry. I believe in 1972 there was a vote, and it wasn't put there.

One of the challenges we have in supply management, and supply management is COP-plus, so there's always a return, is that in many cases—and we see this in Quebec, where they have an ASRA program, which guarantees a base level—it develops a parasitic relationship where the suppliers know what your support level is and their costs line up so your margin stays the same. Only the very efficient producers ever get past that and say they beat the average, and they make exceptionally good money. The average producers live in this parasitic relationship. They're allowed to make a good living, they're allowed to feed their families, and they're allowed to have money for retirement, but the suppliers know what you're making as a profit and it becomes very parasitic.

On the opposite side, looking at where we are today, what we have is not working either. We're going to become dependent on imports of food to feed our country.

[The Chair, Conservative, Larry Miller]

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.

[Curtiss G. Littlejohn]

That's very true. While I like the idea of supply management, I don't believe I've ever been a proponent of moving the hog industry there. We do depend on world markets. To me, there's a difference between supply management and a support program that guarantees you're going to have a food supply within the country.

There's another point here that I wanted to bring....

When you look at any industry—I don't care what industry it is—if you want to be good in the export market, you have to be strong in your domestic market.

Right now, in the cattle industry and especially in the hog industry, our processors and further processors and our exporters seem to have forgotten that. They're so focused on export, export, export that they've let the Americans and the Europeans come in—some of the Danes to a certain degree, but mainly the Americans. They've kicked our butt to the tune of almost 250,000 metric tonnes a year.

That product is not to the same specifications as it is here in Canada. It's not identified the same way. We've heard at other agriculture committee meetings where our processing industry is not allowed to use products that were allowed to be imported. I don't know whether it's lax inspection or just that nobody knew about it.

It's a very complicated issue. At the end of the day, if we don't have a strong domestic industry able to feed our people, then we cannot compete in the export market.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Excuse me, I'm working on about four hours' sleep; I got in late last night. But we'll keep working through this.

When we were talking a little earlier about whole farm support and I made the comment about the beef and the grains, one of the things I left out was the income tax portion of it.

When you have a grain farm and a beef farm, if you have the ability to write off your losses on the beef against your grain, how would you handle it if you were to say, okay, we're not going to do the whole farm, but in the same breath there are income tax benefits to having the whole farm under the tax act?

Stuart, do you have any comments on that?

[Stuart Person]

From a tax perspective, I assume you're going down the road of having separate operations or separate corporations. If you separate the corporations, you are going to pay tax on the profitable one for sure. Is that a bad thing? I don't know.

As a producer, if I was going to be subsidized, or assisted, I guess I should say, in my cattle operation, because it was struggling, and my grain operation was doing fine, maybe I wouldn't mind paying taxes on my grain operation. From a grain farming perspective, I'd say 80% of my producers are paying tax through the nose, because they're successful. We're encouraging that. Tax rates are good right now.

Does that answer your question?

[Randy Hoback, Conservative, Prince Albert, SK]

Yes, I guess so. I'm just looking for ideas. I've heard that quite a bit from farmers, saying they don't want to go into beef. Actually, it's gotten to the stage where, even on my own farm, we grow one crop. We're not even going to cross-subsidize a low barley price with canola. We're going to make sure our margins are high.

You're looking at the program starting to make decisions for you based on the safety net, instead of being based on what the market signals are telling you to do.

Mr. Bailey, did you have a comment?

[Roger Bailey]

I don't know the details of how the tax would work, but I think it wouldn't be as big a difference over time, on the face of it. If you're paying tax on one side, you're developing a loss carry-forward on the other. I don't think that's such a big factor.

Cost of production in our industry is calculated regularly. I like the idea of going in that direction rather than separating the loss under the current program. Cost of production is something that...the consumers vote to put things in place that we must follow when we produce their product.

It might be more stomachable to have a bigger ag budget for these programs based on a cost of production, because that cost of production is something the consumers of the country give us as farmers. We can all produce a less expensive.... We can produce perhaps as cheap as other countries. But under the cost of production, those costs are put upon us by the consumers of the country. So it might be more stomachable to move the budget.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Bailey, I know what you're trying to do. You're trying to get a floor so that at least you have some profitability.

The problem I see with the cost of production, and maybe you have some ideas on this, is that as soon as we do a cost of production program, those costs change and they seem to escalate and escalate. In fact, you start creating false costs. You see industry in the sectors start cranking up fertilizer. He's got a guaranteed profit, so he can add another 10% to the fertilizer. We can add another cost here and another cost there. How do you prevent that from escalating?

[Roger Bailey]

I don't know. I've never thought of it going in that direction before. All I'm looking for are things that respond to the consumers' desires. Consumers put higher food safety regulations on us than some of our competitors have. So the consumer, or the taxpayer, needs to share that burden if they want product produced in Canada.

Straight cost of production doesn't work. We used to have farm income insurance in the tree fruit industry. It drove it right in the tank, because everybody's aiming for just below zero so they can get the biggest payout. That's the same argument as splitting the crops out so you get a payment on one side.

I'm not saying I advocate that. It's the same thing: everybody's shooting for a bigger payment. That's the wrong thing. As a country we should be shooting for better production. What I don't like is it creates this unlevel playing field so that the old boys' club, in whatever form that takes, has a much easier time of it than new entrants. Perhaps that's the way it should be. That's the way it is in most of society. However, that doesn't bode well for the future of farming in Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

I'm sorry, William, I'm going to cut you off; I know you probably have some good ideas on it. I'm going to change to a different set of questions

I know we've heard lots of people complain about the viability test. But as a taxpayer, when do I say enough is enough? Is it after three years? Is it after four years? When do I, as a taxpayer, say you have to change the way you have structured your business or farm? What is the proper timeline? There has to be some balance there. You can't just keep throwing money at an unprofitably structured situation on a farm.

One thing about a farm is that you can grow lots of crops; you can produce lots of different animals. When do we, as an industry and as taxpayers, find a balancing point to say this thing has gone through a structural change and now you, Mr. Farmer, have to change?

I will start off with William because he didn't get a chance last time.