Agriculture Committee on Nov. 23rd, 2010

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

Have the funds been available for that through Farm Credit, for example?

[Stuart Person]

Yes, but there is no backing there.They'll bankrupt you just as quickly as any other bank. AgriStability is great right now for me, but is it always going to be there? I don't want to be sitting here in three years, like these two guys, saying I'm done.

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

I want to go back to Curtiss for a minute.

You mentioned 2004, and we actually had this discussion with the Canadian Pork Council.

I know you took a bit of a shot at bilaterals, but quite honestly, the Canadian Pork Council have indicated, as we have, that this is where we are going to open markets up. We start to look at markets. In Canada we don't use the whole animal. We need to be opening markets, and the minister has actually spent more time doing that than being back at home most times.

When I go back to 2004 I get confused a little bit. The dollar was at 65¢. In my area we had a number of what we call loops jumped into the scenario. We more than doubled the production of pork in 10 or 12 years. It was built on cheap feed and a low dollar. Then we were hit by circovirus. The next year the government came in with $67 million or $76 million. Quite honestly, it was a miracle drug.

[Curtiss G. Littlejohn]

The vaccine.

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

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.

[The Chair, Conservative, Larry Miller]

Mr. Shipley, could you ask your question?

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

Okay.

How do you help us so that we don't get back into this situation again, given the facts I've given you?

[Curtiss G. Littlejohn]

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.

[The Chair, Conservative, Larry Miller]

Okay. Thanks, Curtiss.

Mr. Eyking, could I ask you to take the chair for a couple of minutes?

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thanks, Mr. Chair.

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?

[Curtiss G. Littlejohn]

Thanks, Wayne.

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.

[The Chair, Conservative, Larry Miller]

Wayne, your time is up.

Mr. Richards, you have five minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you. I will be sharing my time with Mr. Hoback, but I'd like to ask a quick question.

I guess this is probably mainly for Stuart as our young producer here. When we were going across Canada this spring, I know at least a couple of you appeared when we were doing that study on the future of farming, looking in particular at young farmers. I would certainly be open to letting others address this particular part as well if they'd like to. We heard quite often that a lot of times the programs weren't working properly for those trying to get into the industry, young farmers trying to get started. The programs could be improved in terms of what they're doing there to help with those trying to get into the industry.

I'm just curious as to whether that would be your take on it and why or why not.

[Stuart Person]

My experience with it as a new producer is that you do get assigned some sort of area average margin to start with. You have to be operating for a couple of years before you build a history.

One of the things that could be done to assist with that, and this is being tested right now, is that if you're a young producer and you buy an existing farm--let's say you buy a corporation from a gentleman who could be your father, your uncle, or someone you don't even know--that AgriStability margin should go with the operation. If you are buying out a good, viable farm and you have a strong AgriStability margin, you should make sure that stays with the operation no matter who the owner is. There's value in that too. As accountants we look at that as well, in terms of selling the farm. We think there could be value in there, and it would increase the value of the farm when the producer is selling it, because there would be a safety net with a good margin in place.

But for anyone just jumping in with two feet, cold turkey, it's not as good. We do need to ask what the benchmark is. Area averages take into account farmers who are not very good producers. So you are dragged down by them. Do you look at the top 50% of the producers in the area and say you're going to give an average of their margin? That might be something to look at.

[The Chair, Conservative, Larry Miller]

Does anyone else have any thoughts on that?

[Roger Bailey]

Beyond that, when a young person gets in, quite often they're looking at the numbers as to what they would do to be a viable farm, but whenever they make a move in the direction of being viable through diversification or upgrading, they're cut out. I'm in the tree fruit industry. Apples were looking as if they weren't going to be as stable as other things, so I opted to change to cherries. So when my neighbour loses half of his margin in apples and triggers a payment, I lose half of mine in the apples but don't trigger a payment because the cherries are good. So this type of program is a disincentive for that diversification. I believe it should be a lot-specific or commodity-specific program, not a whole farm program.

[Stuart Person]

I'll speak to that as well. It's the exact same thing if you're a mixed farm, with animals and grain. You know, your cows are down, your grain is up. You take the cow loss. You have to take it because you're not going to trigger a payment, and vice versa. If you're specifically in cattle and you happen to have a margin, which is pretty much non-existent right now, you will trigger a payment. It's the same with grain. So it does penalize guys who are diversifying. We all encourage diversification, yet the program is structured to penalize people for that.

[The Chair, Conservative, Larry Miller]

Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

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.

[The Chair, Conservative, Larry Miller]

Do you have any comments on what Randy is asking there?

Mr. Bailey.

[Roger Bailey]

Recently, the administration of the programs for B.C. has been moved regionally to Kelowna and out of Winnipeg. This is the beginning of it, but early indications are it's more responsive. The people in the office, to a large extent, are the same people who were transferred from Winnipeg, those who wanted to go, and yet it's far more responsive, for whatever reason. Maybe that will help in other areas also.

[Stuart Person]

I guess all of those changes are possible to make if you really want them done. Do we need to look at doing a bit of a study on the program? We did it in Saskatchewan with crop insurance. We went out and talked to the producers, got some feedback, and put forth, I think, 14 recommendations, or something like that. I think 12 of them were adopted. Maybe that's something we need to do with this program.

One of the problems is you're talking about Canada. Well, there's huge diversity in terms of what's going on in Prince Edward Island versus B.C. versus Saskatchewan, so I'm not sure you can put an umbrella program in place that would work for everyone.

As I said, I'm here until Thursday. We can talk for two days on this stuff, and I can give you all the answers that I think should be there.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Person.

Just before we move on to the next round, Mr. Bailey and Mr. Person said something a couple of minutes ago about being penalized for being diversified. I understand and agree with you to a point, but I just want to throw this out, whether it's a question or just thinking out loud.

Is it not up to us as producers? I am a farmer in my other life, I guess you'd say, and I'm going to give an example in my own case. Back in the 1980s, with everybody in my part of the country, the move was to grow corn as a cash crop. Well, everybody did it. I soon found out that I couldn't do it. I could grow a hell of a crop of silage and feed it to my cattle, but I couldn't make money, so I got out of it because it wasn't making money.

If you start having the taxpayer subsidize that diversification, I'm not sure that's right. I throw that out, and if you want to comment on it, that's fine. But I think you see where I'm coming from on that.

[Stuart Person]

I agree, but the taxpayer is going to subsidize. You're talking here today about subsidizing Curtiss here, who is a straight pork producer. So what's the difference if you have a mixed farmer who's doing grain and pork? You're going to subsidize Curtiss, but you're not going to subsidize me because I happen to have grain? In essence, I'm subsidizing myself with my profitable grain operations.

What you end up having is...you're dividing it. I'm a grain farmer; Curtiss is a pork farmer. Curtiss is going to go broke. We have no more pork industry in the country. That's what's going to happen.

If you're going to subsidize pork, you've got to subsidize it all the way, because some guys may like to run a mixed operation and some guys might find that works better for them.

[The Chair, Conservative, Larry Miller]

We're going to move on, but I would even throw that further. What you're suggesting, I think, is that you subsidize over-production, which is, in turn, exports. And I'm not sure the taxpayer should be funding exports to feed people in other countries. But that's another issue for another day.

Ms. Bonsant, five minutes.