Agriculture Committee on Nov. 23rd, 2010

[Frank Valeriote, Liberal, Guelph, ON]

Has he ever invited you into his office and said, ladies, gentlemen, we've got to sit down and look at these programs? Has he ever met with groups of you to say, let's revisit this and let's forge a new program?

William or Stuart, or any of you? Roger?

[William Van Tassel]

No, not about that point there--no, not really. We brought forward a suggestion a few years back with the Canadian Federation of Agriculture about the AgriFlex program, saying we know there are problems, so we have to use a different fund to help it out. That's what we brought forward. It was AgriFlex that we talked about. Anyway, it didn't come out the way we thought it would.

[Frank Valeriote, Liberal, Guelph, ON]

You talked about research. We know that about $156 million of an $8 billion agriculture expenditure goes into research. If you were to have input into what that research model would look like, exactly what would you invest that money in, or more, if it were possible?

I invite any of you to answer that.

[William Van Tassel]

If I could begin answering, because I've talked about the future of farming in Canada, I'm talking about grain farming and grain farmers. You must have research and you need to be competitive. You need to have the increases in yields. You need to have research for resistance.

Let's look at wheat. We're having a fusarium problem in eastern Canada and even in Manitoba. You need to have varieties that are going to be resistant. Right now, private companies are not investing in research because there is no return on investment for them. So the public has to do it, and they're not.

With regard to wheat, there's around $20 million a year being spent on breeding. It should be around $80 million. In the long term we really need to have that investment if we want to have a prosperous agricultural industry. We really have to look that way. But I can't say take away all the programs for business risk management because you have to consider the short term and the long term. You have to think about farm families. You have to think about the regional economy and what the farms provide. You have to think about having long-term research.

[The Chair, Conservative, Larry Miller]

Monsieur Bellavance for seven minutes.

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

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.

[William Van Tassel]

I listed a few things earlier. Obviously, a program that does not take into account production costs cannot really do what we would want it to.

Something else that was mentioned earlier, an Olympic average is very short. You need to increase the number of reference years in order to prevent the yo-yo or roller-coaster effect. We need to keep things on a more even keel. Now we can see a big problem in terms of the viability test. Would it be possible to make changes on that front? That is another problem that needs to be addressed. And you also have negative margins. At what point can you say that a farm is no longer viable? It can change very quickly, as we have seen. Those are the three areas where change is necessary.

Some provinces may consider other types of programs to address major challenges. For instance, the farm income stabilization insurance program in Quebec and the risk management program in Ontario.

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

Would anyone else like to comment?

[Curtiss G. Littlejohn]

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.

[The Chair, Conservative, Larry Miller]

Mr. Bailey, do you briefly want to comment?

[Roger Bailey]

Yes. As I say, this is my first time to a committee. However, I've been involved in the risk management advisory committee in B.C. and the first of the federal consultations this spring.

We always talk about changes to the program, and I wonder if someone could explain the height of your mandate to me. What can we request changes to? In my estimation, with changing AgriStability a little bit this way or that...I've been involved in those discussions for a decade in the tree fruit business.

I don't think that's where the solution is for the future. I think the solution is to realize that according to the federal government's presentation in the spring, since 1973 we've had steadily declining real farm margins. Only those commodities that are low-cost producers in the world are viable under your tests.

You have to look a little further out and ask, is this the type of program you really want to do? Do you want to put in a safety-net program that takes out a little bump in the road, or do you want to start strengthening agriculture in general?

That's a budget question. You've got real limitations under this program, budget-wise. You can't just change the program. You're taking money out of one commodity's pocket and putting it in another.

Where is that ceiling on suggestions for change you're willing to see?

[The Chair, Conservative, Larry Miller]

In general, Mr. Bailey, if I could, you talk about the mandate. Any changes to the programs are done in conjunction with the provinces; you have to have agreement there. I'm not going to argue the merits of whether that's right or wrong; it complicates things. But that's certainly a big part of it.

Mr. Allen, seven minutes.

[Malcolm Allen, NDP, Welland, ON]

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.

[Roger Bailey]

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.

[Malcolm Allen, NDP, Welland, ON]

To Mr. Littlejohn, I've spoken to hog producers in our area, who are not all necessarily in my riding--

[Curtiss G. Littlejohn]

The four who are left in B.C.?

[Malcolm Allen, NDP, Welland, ON]

No, this is at the southern end of Ontario. They live down the peninsula. I'm sure you know many of them; they've been at it for a long time, right?

I talked to a couple of them—I know you'll probably ask what equity—but I'm dealing with gentlemen who have been at it for a long time, who are making decisions as they talk about succession eating up all their equity in their operation, to try to sustain it, to pass it on, with their grown children looking at them and saying they don't know if they want this business.

At the same time, the father and the mother are trying to stay in the business to have something to pass on. I heard you say earlier that we need to change the program tomorrow, but today would be better. Is it your sense that we will have a viable hog operation in eastern Canada in three to five years, or are we watching the demise of the hog industry in eastern Canada?

[Curtiss G. Littlejohn]

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.

[The Chair, Conservative, Larry Miller]

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair. And my thanks to the witnesses for being a part of today's committee.

I don't think any of us would disagree that, under the current suite of programs, particularly AgriStability, there need to be changes. I'm hearing two different stories from grain farmers from the east and from the west. Maybe you can help me with that.

I can tell you that for the last four or five years the grain farmers here have been very happy. They have had good prices, and they've had good quality, so that isn't an issue. The issue is the long term. There is no doubt about it.

Unfortunately, we lost that long-term good stuff with the programs when CAIS came in, and now we can't go back to that. We can't go back to what we had under NISA. It's unfortunate.

Curtiss, we've met a number of times. You gave us a little of history of your place and its large expansion in 2005. Today, some young farmers who have been caught in expansions are worried. Do you think government plans should pay for expansion? I am asking Curtiss and then Stuart, because you're on two sides of the country.

[Curtiss G. Littlejohn]

That's a great question. I appreciate that, because in 2004, when we decided to embark on our new building construction—I never said expansion, I said we recapitalized and built new buildings—we were pushing 1,400 sows. We had contract barns scattered across the province. We were having issues finding qualified, skilled help. We were having issues with costs of production. We didn't think our costs were in line because of transportation, disease, and medication. We looked at developing a model that would provide a reasonable income for our family and some level of employment for the neighbours around us, and that would be able to be passed on to the next generation.

At 45 years old, we felt we would have this thing paid for by the time we were 55, with reasonable market ups and downs. My kids would be through university. I always tell them they need to work for someone else for five years first, and then maybe they'll find out that the old man is not such a miserable pup after all. Then they could come home, and if they wanted to farm, there would be a viable operation that was paid for. They could purchase it, and that would provide for our retirement.

So we didn't expand. The challenge of programs is always the expansion factor. When we look at the business risk management programs that are being put forward in Ontario, or AgriStability-plus in western Canada, there are built-in safeguards within those COP programs to prevent people from expanding more than 1% or 2%.

I agree with you 100% that programs should not fund expansion. Expansion should be done on the merit of the business.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I'm sorry. I thought I used your word when I talked about that.

[Curtiss G. Littlejohn]

I hope I didn't misquote myself.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Stuart.

[Stuart Person]

From a young farmer's perspective, expansion is a necessary evil, I guess, if you want to call it that. If I were going to get really big in the grain farming sector, I'd need a lot of cash. I'd need $250 an acre for equipment and $250 an acre to cashflow my inputs. If I wanted to be a landowner, I'd need another $1,000 an acre--and that's cheap land in Saskatchewan. It's good land, but it is probably the cheapest in the whole country.

So if you want to talk about that, I don't think the government needs to fund it, but you need to back us up. Going in there myself, I've run the numbers. I'm an accountant and it scares the crap out of me. To get a viable farm in Saskatchewan, which I consider to be anywhere from 3,000 to 5,000 acres--and if you really want to do it well, it would probably be closer to 10,000 acres--the numbers are scary.