Thank you, Mr. Chairman, for the opportunity to appear before your committee.
I'm here today to express the concerns of livestock producers in my province, Prince Edward Island, concerning the proposed repayment of the advance payment loans.
First, I'd like to say that the advance payment program has been very beneficial in general to the agriculture sector and has provided much-needed capital to our producers. In P.E.I. alone, over $50 million has been advanced to producers, covering all commodities.
Under the 2008 severe economic hardship advances, P.E.I. has 156 livestock loans totalling more than $17 million. This is about four times more than all the other maritime provinces combined. I guess the reason for that is that we were able to utilize this program more than the other provinces in the region because of our larger cattle and hog feeding industries.
The original market environment that generated the need for the severe economic hardship loans has changed very little since 2008. I would say it has probably worsened since then. During recent short-term price spikes in the hog sector, the regional cost of production has dictated that our producers have not been able to repay all their mounting debt positions. Cattle have not recovered from the BSE crisis in 2003, and during the period of 2008, severe economic hardship loans, the loss of market value, and the increase in feed costs have offset the value per head received under the advance payment program. The ethanol demand and the loss of potato waste to P.E.I. producers have driven up our feed costs a minimum of $100 per head in our cattle industry.
Since 2007, we have lost approximately 80% of our hog producers and 50% of our beef producers. If P.E.I. producers are forced to repay these loans in the timeframes outlined under the latest day of default, we will certainly lose more.
Financial institutions have been removing themselves from exposure in the livestock industry. This position has resulted in lending bodies being unwilling to take second place on securities. Many producers will be unable to get priority agreements signed, even if they still have inventory to roll the old loans into current advances. Producers who are able to only roll a portion of their old loans into new advances will not have the cash to pay out the remaining balance within the required production period, forcing them into default on the entire advance payment program. This applies especially to 2008 hog loans, which were based on annual sales under the severe economic hardship advances, and any new loans taken out now will be based only on inventory. That will amount to about 60% less that they will be allowed to secure under the advance payment program because of the change.
P.E.I. has a percentage of livestock producers who are multi-commodity but depend on advance payment loans for other inventories, such as potatoes and grain. If these producers are put into a default position because of being unable to deal with the outstanding livestock debt, they will be further implicated in their inability to access loans for those other commodities as well. We have a number of producers who finish cattle and hogs on P.E.I. who are also mainly potato growers. If this in fact is what's going to happen to their loan program and they go into default, they are not eligible for any money under the APP program for their other commodities.
Our producers have told us they are willing to repay the loans. When we took the loans out under the advance payment program, we realized they were loans and we would have to pay them back. But we cannot realistically afford to do so within the current proposed timeframe.
I don't know if you realize the timeframe we are talking about. In the livestock severe economic hardship loans, we have to start paying back on June 1, 2011, and in the hogs it is March 2012. They have to be paid back within a 10-month period.
We have asked the government to consider turning out these loans over a longer period of time or to tie the repayment to profitability, so as to not place them in a default position.
Those are all my written comments. Hopefully, I'll be able to answer some of your questions.