Agriculture Committee on Dec. 13th, 2011

[Voices]

Oh, oh!

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I'll just give you a little bit of my background. I'm a farm boy. I grew up in Lacombe on a cow-calf operation—actually, it was a mixed farm when I was a kid, and it became a cow-calf operation because it was the only thing that was viable after a while. With the small number of hogs and the small acreage we had, it no longer became viable to grow grain or oilseed crops. It no longer became viable to produce hogs and sell them in the marketplace. I eventually left the cow-calf operation when BSE hit in 2003, and the rest, as they say, is history. Dad is still there trying to diversify and to do what he can, but other pressures that have been put on his current operation are going to try to force him out of business again.

Without getting into too much detail about my personal life, I also spent a long time as a computer programmer. I worked for Agriculture Financial Services Corporation in Alberta. I worked on programs—I built information systems like the farm income disaster program, the database, and all the data architecture behind there—and I understand the enormous amount of money we spend on the administration of agricultural programs. As a member of Parliament, I have problem after problem when constituents come to me and say it's taking too long to get their applications through. Accountants come to me and say that filling out an AgriStability form—or the CAIS application form, as it was known as before—required a master's degree to even navigate through the paperwork.

We're spending all this time and effort and frustration, yet at the end of the day we don't seem to get any further ahead insofar as Albertans moving forward. I'll give you an example. We have some running jokes in Alberta: we say we work in the oil patch to support our farming habits. When you take a look at the young people growing up in rural Alberta right now, they are all working in the oil patch—drilling for oil, natural gas, or whatever the case might be. They're diversifying their farm operations by having steamer trucks or other types of oil field operations...working out in order to help keep the farm going. It just isn't viable or sustainable.

I'm going to ask a very technical question here, getting back to the reference margins. Somebody brought up the idea of moving to an Olympic average versus the three. If you look at what happened to the hog industry, when you have depressed prices over a sustained long period of time, your reference margins go so low that you can't even trigger a payment anymore through the stability programming. How do you fix that?

[Arden Schneckenburger]

Good question. Again, I'll just take my particular case of BSE. I deem the problem of BSE to be partially political, where the borders were closed and they really shouldn't have been. So how we can fix those low margins—that's where I was saying we have to be compensated; our reference margins have to be lifted as if the borders were open.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

That would incite or give an opportunity for more political interference. You could initiate any type of trade challenge and so on, because we are artificially altering those reference margins—within certain reason.

We understand the risks associated every time we start putting funding toward a program. But then you move those reference margins, and if the commodity price doesn't come back up and the reference margin stays high, you'll still never trigger a payment in the future.

[Arden Schneckenburger]

We lost 40% of our feedlot industry in Ontario due to BSE. There's a political—

[Blaine Calkins, Conservative, Wetaskiwin, AB]

What are you going to do?

[Arden Schneckenburger]

Yes, you can say we're completely green, or whatever colour you want to use for negotiations and world trade organizations, but there is a point where you're going to have to adjust somewhere to keep those farms in business, or you let them go out and the strong get stronger. We'll have fewer farms. That's okay.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I appreciate those comments. Those are tough decisions for a politician, at the political level, to make.

I have one more question for you. I've heard cases where individuals incorporate every quarter section of land they have under a private number and they simply farm the business risk management programs. Do you guys have any knowledge of that? Is that happening with any of your neighbours, your friends, anything like that? Do you know of any cases where that might actually be in existence?

No? Well, that's good. I'm glad because—

[Jim Gowland]

We have no quarter sections in Ontario.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I have to tell you, we should be out there farming the land. We should be out there on the tractor or making business decisions on the computer. We shouldn't be making business decisions based on the government support programs that are out there. I think everybody at the table agrees with that, even though we all have different backgrounds in what we're looking for, whether it's grains and oilseeds or whether it's the red meat sector.

[Jim Gowland]

I'll just make one comment.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Sure.

[Jim Gowland]

I think you can try to manipulate the system, but at the end of the day who are you kidding?

[Blaine Calkins, Conservative, Wetaskiwin, AB]

That's just it. You should be farming the land, not farming government programs.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Lemieux, you have five minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thanks, Chair.

Good discussion today, partly because we are talking about each of the individual programs, or many of them, and about where improvements could be made and where some of the frustrations are, but also because I detected, for example, Mr. Gowland, a strong preference for certain programs over other programs.

Certainly, in our previous meetings I've been putting forward the proposition that the pie isn't going to get any bigger. To want to make changes to all programs would increase the pie when in fact we may have to make decisions as to whether financial resources should go more toward a program that actually works for farmers less. Just to give an example, should some of the criteria for AgriInvest be relaxed and use AgriStability less? In other words, we're not adding more, more, more; what we're doing is starting to transfer to programs that farmers say would work better for them. So there have been some really good comments here.

I want to underline one thing that we have also discussed. This is the idea—one of my colleagues, I think Bob Zimmer, brought it up—of insurance-based programs. I don't mean cost of production programs, because there's a difference. Insurance-based programs don't guarantee profitability. They try to protect against the downside, but they're not going to guarantee profitability, whereas cost of production programs guarantee profitability. Of course, that's where we get into a problem as a federal government, because as soon as you start guaranteeing profitability, it's starting to look a lot like a subsidy. When it starts looking a lot like a subsidy, you start being open to trade action.

Let me go back to the insurance-based program that's not cost of production based. Instead, it's basically trying to cover some of the downside. You're basically going to see a price that you'd like to sell your product at and you insure close to that price, depending on how much premium you want to pay. It has nothing to do with your input costs. It just has to do with a market price, what you see on the market, insuring toward that price, and if you don't sell, you're covered to a certain level. In fact, Alberta has something like that for their beef sector, of course, under crop insurance. We, the feds, offer the crop insurance program, which is based upon that model.

I want to ask each of you your opinion on this in terms of perhaps expanding that to other commodities, because federally we only offer that really as crop insurance. We have a province that took a particular initiative, which is fine. I think that's where regional flexibility comes in. A provincial government looks at its sector and says, “Well, I think we should move on this kind of a program for our farmers.”

I would like to know your input, from a national perspective, if you see that that type of an insurance program would be worthy or worthwhile, helpful to farmers and other particular commodities, that you would have a recommendation to be covered.

Let me start with Mr. Gowland and we'll just work our way to the right.

[Jim Gowland]

That's a good question. Thank you.

I have to think about that fairly quickly here.

Certainly the production insurance side works out well for us in Ontario. It would be great if that could be across provinces.

Whenever we start to talk about income guaranteeing of cost insurance, profitability insurance, or whatever you want to call it, the first thing that comes to my mind is where are the thresholds where it's affordable, from a societal point of view and from the government as to whether it can be cost-effective. Also when you put out an insurance premium on your farm operation, I think where's the threshold of where that can be and stuff like that.

With insurance programs, in our operation, we look at it as maybe you can become insurance poor by putting premiums out, depending on how much that's going to cost. In a situation where we're probably looking at 1.5% on our production insurance side of it, there are costs there. If we look at AgriInvest at 1.5%, and we start looking at more programs and stuff like that, where's that line? I like to look at, as I say, what can you afford within your gross revenues as a part of insurance premiums? At what threshold is it that you're basically taking away from your right to make a living?

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Yes, that's a good point.

[Jim Gowland]

So trying to guess where you're going to be in profitability and trying to peg a rate that's comfortable to you, it becomes quite a challenge.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

It's a good point.

Mr. Dechaine.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Dechaine, and then Mr. Schneckenburger, if you'd like to comment.

[Louis Dechaine]

In Alberta we have spring price endorsements on our crops already, where we can insure our crops for certain bushels at a certain price, and we have the crop insurance.

With cattle, they have one now. But it's each to their own to take it, I guess.

[Arden Schneckenburger]

As for insurance-type programs for what you're talking about, the more volatile markets are—like they are at the present time—for grain, oilseeds, and livestock. The cost of insurance, i.e., doing it right now by doing options in the futures market, is cost-prohibitive.

I would say in stable markets that might work. In very volatile markets, I would say you'd have a very hard time setting a premium.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

All right.

Thanks for the feedback.

[The Chair, Conservative, Larry Miller]

Thank you.

Arden, I thought you had a comment earlier, and it's one I have heard before. You talked about Ontario producers having 24% of the overall farm gate receipts in Canada, but those same farmers access a little over 16%. What's the reason for that, in your opinion? Are Ontario farmers better at diversifying, or do they use self-business risk management more? Is there a flaw in the program? Any comment on that?