Agriculture Committee on Dec. 15th, 2011

[The Chair, Conservative, Larry Miller]

I'd like to call our meeting to order. We do have enough members to hear witnesses. I was going to ask for unanimous consent due to the timeframe. The fact that the House is no longer sitting doesn't mean we can't sit here, but I'm sure everybody wants to get on the road, so without further ado, we'll get started.

I'd like to thank all of our witnesses for being here.

Mr. Delaney and Mr. Ling are joining us by teleconference.

Can you hear me, gentlemen?

[Allan Ling, Chairman, Atlantic Grains Council]

Yes, we can.

Can you hear us okay?

[The Chair, Conservative, Larry Miller]

Yes, I can hear you.

Just in case we have any technology problems, we're going to start with you, gentlemen.

You have 10 minutes, please.

[Allan Ling]

First of all, we apologize for not being there, but due to the timeframe it was just impossible, so we thought we would do the next best thing.

Thank you for the invitation to present on Growing Forward 2.

I'll start by saying that my name is Allan Ling. I'm a mixed farmer from Wheatley River, Prince Edward Island, and the president of the Atlantic Grains Council.

The Atlantic Grains Council represents over 1,600 cereal and oilseed producers farming close to 200,000 acres through the entire region. The Atlantic Grains Council is a member of the Grain Growers of Canada, which has already made a presentation to your group, we understand, on November 24.

With me today is Michael Delaney, who is the general manager of the Prince Edward Island Grain Elevators Corporation, a leader in the marketing of cereals and oilseeds in P.E.I. especially. We give you regrets from Robert Godbout, a farmer and vice-president and business owner from Grand Falls, New Brunswick. Unfortunately, a work commitment got in his road.

I'm going to turn it over to Michael. He can lead some of the discussion. I'll come back in a few minutes.

[Michael Delaney, Member, Atlantic Grains Council]

Thank you, Mr. Chairman.

I appreciate the opportunity. We have a message here that we'll make available to you after we're done, if that's of any value. I'll read it for you and try to lay out the background.

[The Chair, Conservative, Larry Miller]

Thank you.

[Michael Delaney]

The forum provided by our council actively encourages all provinces and all value-chain organizations similar to the grain elevators corporation to become involved. We have considerable research capacity and infrastructure available regionally in all three provinces. Our members include provincial government representatives, millers, feed companies, processors, researchers, and seed suppliers.

While cereal and oilseed production structurally are secondary to forage in Newfoundland, we are endeavouring to extend our membership to growers in that province. Discussions have been held with industry leaders there to examine ways to further build capacity through identification of the potential synergies that may exist. I guess what we're alluding to there is the fact that most of their grain comes from other parts of the country, and we'd like to engage in a discussion on how we could perhaps change some of that. They have a large handling facility there and handle a lot of corn—or did—and soybeans.

In terms of background, farming in the Atlantic region has been subject to tremendous challenge and change over the past several years. Our livestock industry has declined. Hog production has decreased by 50% or more in some provinces. Local federally inspected livestock facilities for swine processing have all but disappeared. Cow-calf numbers and slaughter capacity are diminished. The local beef slaughter plant in Borden, P.E.I., is incurring huge monthly operating deficits. Despite this regional deficit in livestock markets and the inherent freight premium, it is clear that the region's value-added processing capacity may not be competitive.

On the other hand, the fish-farming sector is increasing. Potato production is stable, with 100,000 acres cultivated regionally, and an abundance of local processing capacity available in P.E.I. and New Brunswick.

Supply management schemes are important to Atlantic growers. These farmers are often our customers. These operating arrangements offer a level of stability and are well respected by them. We support a continuation of these arrangements.

Grain production is in surplus on P.E.I. and in deficit in the remaining provinces. Milling wheat, barley, oats, feed wheat, and corn are all produced regionally. The recent price experience is positive, despite higher input costs. Cereal products are imported from other parts of the country to cover the various shortfalls in local supply. Demand for local cereal grain is stable, with active and recent reinvestment taking place in the feed milling sector. It augments the high regional level of grain grown on farm and fed to livestock. The local customer base includes farmers, feed companies, the fish and fur industries, and flour mills.

Recently there has been exponential growth in oilseed production, primarily soybeans, both identity-preserved and GMO, for P.E.I., and also canola, particularly in northern New Brunswick. In 2011, for example, close to 75,000 acres of beans were planted and 10,000 acres of canola, versus 10,000 acres combined for these crops as recently as five years ago. There is a growing market in the world for vegetable oil, and in countries like Japan, for IP soybeans served as tofu, as an example, for human consumption.

With the help of commercial drying facilities, the region is fortunate to be able to participate in growth in these markets. There are small oil and meal producers starting to crop up locally, with larger processors available in Quebec and offshore, with a reasonable local market for both soybean and canola meal for protein supplementation in livestock feed.

If a major DON toxin problem—that's a toxin in wheat, as you know—may be overcome, there's a ready market for up to 100,000 tonnes of milling wheat for flour produced at our local P&H Milling in Halifax. These market opportunities bode well for the region and help optimize freight, as marine capability is readily available to service them. Contrast that to P.E.I, which no longer has rail capacity and may be short of trucks during a busy fall harvest.

I have another little paragraph or two on critical issues, and then I'll turn this back to Allan.

In order to support the maintenance of growth in the entire Atlantic production system, including cereal and oilseed producers, in the context of Growing Forward 2, our council wishes to comment on two important aspects relating primarily to federal government investment: funding for safety nets and public funds for research or innovation.

It should be borne in mind that with the region’s small size, and with the possible exception of potatoes, our main focus is the domestic not international trade. We take the view that we don't contribute to large global food surpluses. It also means that it is difficult to attract large investments for genetic modification in crops, breeding, or other forms of innovation, for example.

Thank you.

[Allan Ling]

Thank you, Michael.

I guess you guys realize that the outcome of this work is very important to us. Accordingly, our council appreciates the opportunity to present to your group, to comment, and to provide an Atlantic Grains Council perspective.

Regarding safety nets, we understand that ministers will be discussing, for Growing Forward 2, a continuation of safety net programs in accordance with pre-existing frameworks, including AgriStability, AgriInvest, AgriRecovery, and crop insurance. Our council supports these programs and this effort.

The advance payments program and price pooling program have been utilized by the local industry. The APP has been well received. The PPP has had administrative problems. We would ask for your support in encouraging government to retain or even enhance this important funding envelope. This is only fair when competing with foreign government treasuries.

We would not support cuts in existing programs to find additional dollars for innovation. The current framework of programs, when operating together as they were designed to do, can provide adequate coverage whenever factors come together that impact the farm margin or crop losses. We would hope that farmers will still enjoy the current 15% margin-loss support in AgriStability, and we would recommend that the funding level for AgriInvest be increased to 3% of eligible sales—it's at 1.5% now—matched by government.

One only needs to see how the safety net program had a positive impact in assisting western grain producers facing losses due to drought or flooding. In livestock commodities, we know that poor prices generally follow periods of high prices. There are tools in this package to assist producers to be ready for these circumstances.

Funding for innovation is a public good, as it helps build wealth for our nation, particularly if there is a greater investment in value-added processing beyond the farm gate. Granted, if there are yields or crop improvements to be gained, there is a win there for primary agriculture in supplying the food needs to a growing world.

Perhaps production of Atlantic biomass for heating fuel is another form of regional innovation. It remains unclear if these investments will take place here in Atlantic Canada, since, with the possible exception of potatoes, most of our goods are consumed domestically.

[The Chair, Conservative, Larry Miller]

Could you wind down?

[Allan Ling]

Pardon me?

[The Chair, Conservative, Larry Miller]

Could you wind up, Mr. Ling, please?

[Allan Ling]

Yes, okay.

The other avenue that we will touch on very quickly is research. I'll not bother reading through it, but it is very critical that we keep the research programs and further enhance them. We've done a lot of work trying to get back to the 1994 level in real dollar terms. Maybe we can go into that in the question period.

Thank you very much.

[The Chair, Conservative, Larry Miller]

Certainly.

Thank you.

We'll now move to the Canadian Cattlemen's Association, Travis Toews and Ryder Lee.

[Travis Toews, President, Canadian Cattlemen's Association]

Thank you, Mr. Chairman.

Thank you to the committee for another opportunity to present to you.

For those who don't know me, my name is Travis Toews. My family and I ranch near Beaver Lodge, Alberta, and I'm currently the president of the Canadian Cattlemen's Association. With me today is Ryder Lee, our manager of federal-provincial relations for the CCA, who is stationed here in Ottawa.

The Canadian Cattlemen's Association policy book includes principles on government involvement in the cattle and beef industry. The preamble reads as follows:

CCA believes that the shared vision of industry and government must be to create an open environment that allows businesses to reach their full potential in a free and competitive marketplace. We recognize that not all operations will be successful in a competitive market and the size of the industry will vary according to market conditions.

Specific to business risk management, the policy states:

Government support for industry must come from national programs that minimize the risk of adverse impacts on international and inter-provincial trade, minimize distortion of market forces and minimize influence on business decisions. Programs must not disrupt the competitive balance between agriculture sectors or regions.

These portions of CCA policy inform what I'm going to discuss today. I've said these things at this table in the past.

There's also another principle that warrants consideration in risk management discussions. I firmly believe that government-managed risk management programs should not reward volatility or provide a disincentive to producers who are doing what they can to manage their own business risks.

In the cattle industry, producers manage risk by stockpiling forage, by diversifying their operations, by managing their herd size relative to the land base in a responsible manner, and by managing production to accommodate annual cashflow requirements. Whole-farm margin-based programs such AgriStability, when applied to stability tiers as opposed to disaster tiers, tend to reward volatility and, in some cases, become a disincentive for producer-initiated risk management practices. Day-to-day business risk, often defined as the top 30% of margin coverage, should be managed by producers. Producers should be encouraged to use all the tools available to them to manage their normal business risks, including insurance programs, diversification, sound production management, and revenue protection strategies.

As we consider the price management tools available to Canadian cattle producers, price insurance would be a very useful tool for producers to have at their disposal to manage price risk.

I am pleased to be sitting before this committee during a time of near record prices for all classes of cattle. Right across the country, there's an optimism in the cattle industry that l've not seen since prior to 2003. High input costs, however, have accompanied these high prices, and with that, increased risk of a downturn in the market.

AgriStability has provided some protection against this risk, but on a whole-farm basis, with its transparency, predictability, and timeliness challenges. We assert that the insurance program model would be timely and predictable.

Alberta has moved forward in the last couple of years with the development and implementation of price-insurance-based programming for cattle producers, from cow-calf through to finished cattle. Through this program, if producers identify that risk of market downturn is something they would like to protect themselves against, they would have a tool to conveniently lay that risk off.

As you know, there are methods available in the marketplace today to protect against some of the price risk. However, the complexity of these methods, along with, in some cases, the lack of complete correlation with the Canadian market, has resulted in very low participation by producers, and participation by smaller and mid-sized operations is extremely rare.

The cattle price insurance model is unique in that it is a single tool that manages the future, basis, and currency risk. For a premium, it effectively provides producers a floor price based on expected future prices. Because it is based solely on expected future prices, it is not market-distorting.

One certainty producers face in the current economic environment is volatility. A cattle price insurance program would be a very valuable tool as producers manage in this volatile environment.

Unfortunately, this type of protection against currency, basis, and price risk can only be subscribed to in Alberta. We are encouraged that the federal government is backing a recent request for proposals, put out by Manitoba Agriculture, examining the feasibility of this program across the four western provinces. It is CCA's position that this type of program should be available nationally, with cost-shared premiums. We would like to see it extended across Canada as part of Growing Forward 2.

Keeping to the theme of overarching policy and principles for a moment, l'd like to discuss crop insurance and the distorting effects it has on land use in Canada. We have crop insurance in all provinces, which is well subscribed for annual crops. This tool allows producers to manage and lay off some of their weather risk. The premiums for this program are cost shared between the federal and provincial governments and the producers who are taking the coverage.

It is not wholly the fault of governments that an effective alternative program for perennial crops does not exist, but it is true that in most of the country hay and pasture insurance is poorly subscribed to, if it is offered at all. The effect of this imbalance is that it provides an incentive to plant marginal lands with annual crops rather than perennials. The ability to lay off the risk of crop failure with a subsidized premium makes it economically sensible to plant annual crops in many cases.

The CCA is working with the federal and provincial Forage Task Team in an attempt to develop a workable product that will fix this inequity. Every effort must be made to develop and implement a forage insurance product that will remove the distortion that currently exists in the decision to grow annual crops or forage.

We have a number of specific recommendations on the books, aimed at improving AgriStability. Due to the difficult years in the cattle industry, largely owing to market access challenges following BSE, AgriStability in some cases did not provide an adequate safety net. Reference margins dropped, negative margins in some cases made producers ineligible for the program, and program caps limited the program response for our large operations. In most cases, these were viable operations simply caught up in a very difficult economic time.

Our specific recommendations related to AgriStability are to remove the viability test; increase negative margin coverage from 60% to 70%; provide producers with the option of the best of Olympic average, or average of the previous three years in reference margin calculations; and remove the caps from the program.

I want to briefly expand on one of these recommendations, and that is on the issue of program caps. I strongly believe that government programs should not discriminate against any particular business structure, and that includes the size of the operation. If we are to ensure our global competitiveness as an industry, we must let the marketplace provide direction with regard to optimal business structure, and government programs should not create an unlevel playing field.

With reference to caps, we have the same issue in AgriStability and AgriInvest, and indeed in any program. Caps in programs discriminate against large operations. These operations, in most cases, grew because of competitive operating practices. These large operations contribute significantly to community job opportunities and rural prosperity. It is CCA's understanding that the BRM programs of Growing Forward are designed with the goal of assisting farms in managing risk, regardless of size. With that in mind, caps should be removed so that all farms are treated equally.

The economic disaster in the cattle industry due to the discovery of BSE in Canada has reinforced for us the necessity of a predictable, transparent disaster program. The creation of the AgriRecovery program has been a good start, but we recommend that the program be better defined. Clear definition of a qualifying disaster, along with the resulting response, would make this program significantly more effective. Improved transparency and predictability will allow producers to make better and more timely decisions during times of economic crisis.

I'll close by noting a couple of indirect but incredibly important efforts in business risk management. As a country with a large land base and a small population, devoting resources proactively to improving and defending market access is critical in managing risk for the Canadian cattle industry and, I would argue, for Canadian agriculture in general. As a country we must ensure that our trade policy is consistent with that of a country that depends on exports to sustain itself and to maximize the opportunities for producers.

At my appearance before this group six weeks ago, I placed a high priority on innovation, and that is unchanged for today. Business risk management programs can be, and are, useful tools when producers experience unforeseen events. But these programs are built to respond to short-term events, and do little for the long-term competitiveness and sustainability of our industry.

I would stress again that the best way to build and enhance the cattle industry and all of agriculture is through ensuring that we operate in a very competitive business environment, domestically and globally, and that we increase investment in research, innovation, and technology transfer.

I firmly believe that the next 20 years in agriculture will look very different from the previous 20. Agriculture policy must be forward-looking if we are to maximize the opportunities ahead. Failure to provide this forward-looking policy will profoundly limit the opportunities of Canadian agriculture producers.

[The Chair, Conservative, Larry Miller]

Thanks, Mr. Toews.

Now I'll move to Mr. Banack, from the Canadian Federation of Agriculture.

You have 10 minutes.

[Humphrey Banack, Second Vice-President, Canadian Federation of Agriculture]

Good afternoon.

My name is Humphrey Banack. I'm a grains and oilseeds producer in central Alberta, with 4,500 acres of grains and oilseeds and a 50-head cow-calf operation. We're very proud of our century-old farm out there. It's a wonderful part of our lives. I'm also very proud to be vice-president of the Canadian Federation of Agriculture and president of Wild Rose Agricultural Producers, Alberta's general farm organization.

It is my pleasure today to have the opportunity to present on Growing Forward 2 and business risk management.

As many of you know, the Canadian Federation of Agriculture is Canada’s largest general farm organization, representing 200,000 farm families in every commodity and region of this country. The mandate of the CFA is to promote the interests of Canadian agriculture and agrifood producers and to ensure the continued development of a viable and vibrant agriculture and agrifood industry in Canada. Understandably, managing risk is a key issue for our members and the CFA.

At CFA we firmly believe that agriculture policy must be a three-way partnership among the federal and provincial governments and the industry. As such, we firmly believe that we cannot simply offer criticism; rather, we promote concrete ideas and solutions on how to improve existing programs, as well as ideas on additional tools. As such, I would like to touch briefly today on some of the preliminary work and discussions we have been having around the CFA table in conjunction with other industry groups and government on additional business risk management tools that may assist producers in better hedging their risk.

Let's touch on the existing programs first. Despite significant increases in technology, farming remains an unpredictable and risky business. Producers face many uncontrollable production and economic risks every year. These risks can result in large fluctuations in producer incomes, which threaten the stability of our agricultural sector.

For many families, government business risk management programs and non-BRM programs help reduce the impact of these risks and provide some predictability to our farm incomes. To achieve sustainable growth, we need programs that are for the long term, and that are simple, equitable to all commodities, predictable, and are delivered consistently across Canada. As such, the Canadian Federation of Agriculture strongly recommends that BRM and non-BRM programs remain fully funded in the 2012 budget for the next generation of Growing Forward.

Payments from AgriStability and AgriInvest have fallen significantly over the past number of years. This can be explained by two significant events. First, returns from the grains and oilseeds sector, by far the largest group of participants in AgriStability, have increased dramatically. This has resulted in a much lower demand on the program. Second, the returns in the livestock sector remain historically low in comparison to their long-term average. Since reference margins for AgriStability are derived from historical farm revenue, this means that our livestock producers are no longer triggering payments from AgriStability.

Combined, these two factors have led to a drop in total federal and provincial AgriStability payments of 50%, a drop of $834 million from 2008 due to reduced program demand. As such, we believe that if AgriStability is to remain the base support program for all Canadian producers, it should include changes to the program that would permit it to effectively deal with these declining reference margins, diversified farms, and other chronic program issues. Removing the negative margin viability test could be beneficial to many farm operations.

Currently, a producer that has negative margins in two or more of the three years that end up in the reference margin calculation will not be eligible for coverage. We recognize that in many of these instances the farm had been viable in the past and, given the opportunity, will become viable once more when market conditions improve.

The CFA urges the government to allow farmers to choose either the top 15% of AgriStability's reference margin or to participate in AgriInvest; to use the larger of the Olympic average or the average of the previous three years when determining reference margins; and to increase the coverage of negative reference margins from 60% to 70%.

AgriInsurance is another important part of our coverage. The CFA maintains that crop pricing should consider moving toward a market price-discovery mechanism, instead of being derived from government projections. Decisions made by government need to ensure there is increased protection for our producers in times of need. As well, the CFA continues to call for the current slate of insurance programming to be expanded to include coverage options for the livestock sectors, such as cattle and hogs. Until this goal is reached, the provision of alternative methods of coverage should be considered.

Our next point is about exploring public-private risk management tools that could help farmers minimize farm income volatility and reduce the overall burden on BRM programs. Here the CFA has been exploring the potential for public-private, insurance-based products that farmers could voluntarily use to mitigate farm operation price and production risks.

A number of private companies and marketing boards provide farmers with various risk management tools that help minimize price risk and other financial uncertainties. These include fixed price forward contracts, purchasing agreements, and tools for various perils such as hail and weather. However, during time periods with extreme market volatility, or in areas where there are significant linked risks, the private sector is unable to continue offering such products, or can’t offer them at a price that makes them attractive to farmers.

Products that used to be offered, such as fertilizer forward contracts, disappeared when markets became volatile, reducing the number of tools available to producers just when they needed them most. CFA envisions two separate government activities to help develop and administer public-private risk management tools.

First, the CFA suggests that government could create a risk management administrative support structure that would help co-operatives, marketing boards, and private businesses provide useful and reasonably-priced private risk-management tools. This support could include credit guarantees to ensure that liquidity is not pulled back when markets become volatile, favourable currency-swap agreements to help reduce basis risk, reinsurance capabilities, and technical support to help negotiate contracts with counterparties.

Second, CFA suggests that government could help identify and design tools that would be impossible for the private sector to create independently. These could include hedging against risks that have no tradable derivative market, such as fertilizer and many horticultural crops, or providing basis insurance tools that are currently not independently available.

One of the reasons these products are not often available is that because farmers do not have big enough operations to warrant the effort of designing a custom agreement with a willing third-party insurer, such as an investment bank. However, if a sizable group of farmers formed behind a single government banner, it could become worthwhile, and enough to entice a large financial institution to assume that risk in return for a reasonable premium.

By helping marketing boards provide new and useful tools, and helping industry design tools that are impossible to implement on their own, the industry could become more competitive and burdens on current BRM tools could possibly be reduced.

In conclusion, we believe that if the current BRM suite is maintained, there should be changes made to let it deal with declining reference margins, diversified farms, and other chronic program issues. We face production risk and economic risks, and it is crucial that programs, existing or new, be designed, developed, and reviewed in consultation with established farm organizations. These programs must be adequately funded by both levels of government, while keeping in mind the goal of fostering an agricultural policy that focuses on the profitability and stability of primary producers.

Thank you for your time.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Now we'll move to Mr. Kevin Wipf from the National Farmers Union for 10 minutes.

[Kevin Wipf, Executive Director, National Farmers Union]

Hello.

My name is Kevin Wipf. I'm the executive director of the National Farmers Union, and we surely welcome this opportunity to come here today and present to you.

The NFU is a direct membership, nation-wide organization made up of farm families. It was founded in 1969, and chartered in 1970 under a special act of Parliament. The NFU and its predecessor organizations have always worked to implement policies that help to ensure that agriculture is socially, environmentally, and economically sustainable. While NFU members produce a wide range of commodities, we believe the problems facing farmers are common problems and that producers of various commodities must work together to advance effective solutions. The NFU believes that the pursuit of only individual self-interest leads inevitably to self-destruction.

For our membership, Growing Forward represents a concern. We basically see it as a continuation, apart from minor details, of an agriculture policy that's actually been carrying forward since the 1970s. A lot of it has to do with the idea of having fewer farmers in the countryside, and allowing input suppliers and big agribusiness companies to get bigger and bigger and actually to grow to dominate the industry.

We feel that if we're going to talk about BRM, one of the things that must be addressed is this problem of farmers not being able to draw much income, if any income at all, from the market, especially since the late 1980s. One of the things that we see is that while farmers have been extremely effective at increasing production and the value of their production, and while we have been extremely effective at increasing exports, it's an incredible paradox to us that farm income has essentially remained flat. It has even disappeared into negative territory in many of the recent years.

One of the questions that we have about business risk management is what is its purpose. In the mid-eighties we saw, what I'll call for now, farm assistance payments increase to over $3 billion. There was an effort by government at that time to really pursue trade agreements and start making the industry more competitive by increasing exports. There was an effort at the time to try to decrease farm assistance payments in what is now called BRM. So they dropped under $1 billion by the mid-nineties, but then something happened. Farm assistance program spending went up again in the late nineties, and it has increased. It actually surpassed $4 billion in the early 2000s. I think it was over $3 billion last year.

Our question is why do we have these programs that are actually about taxpayers transferring money to farmers who can't draw income from the market? Why isn't this business risk management, and why isn't the discussion today about why farmers aren't actually able to draw income from the market?

The other phenomenon that's been happening—and this doesn't fall into the category of business risk management—is that farmers have actually been engaging in their own business risk management, if you will. Off-farm income has actually become a major portion of farm income. It's being calculated in and counted as farm income at times, when in fact it's a form of self-subsidization of your farm operation. Even the largest farms are counting on as much as 40% of their income coming from off-farm income. The question is why are farms not able to draw income from the market. We believe we need to start focusing on programs and policies that will actually tackle this problem.

One of the things that we've seen—and it's common knowledge, as farmers from all farm groups will talk about it—is that farm returns from a box of corn flakes have essentially been flat, yet retail prices are increasing. Why is that? Why aren't farmers seeing an increase in pay like everybody else? A lot of the corporations that are controlling the input and retailing sectors are realizing record profits, but farmers are not.

One of the things we've seen in BRM, as we call it now, is an incredible investment of time and energy by governments and farm groups in trying to work out the details of these programs without actually addressing the bigger problem at hand, why farmers aren't able to draw adequate, fair incomes from the market. We believe that is what you would see in a healthy industry.

In fact, when we run into trade problems, like we saw with BSE, a lot of the questions become ones about the border. Well, what about the fact that perhaps there was a hypersensitivity in the industry because we were too dependent on one trade partner for us to actually deal with economic hardship when it came? Then, again, the question was thrown back of trying to figure out farm assistance programs that would solve that problem, without actually tackling the heart of the problem itself.

I'll leave my comments there.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move into questions.

Mr. Allen, for five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

And thank you, folks, for being here, and to our friends in Charlottetown as well, who are obviously not here, but are certainly with us on the screen.

It seems that at either end of the table we're hearing something similar, albeit maybe put differently by Mr. Toews and Mr. Wipf, about business risk management tools and the point that we should be looking more at the market. Everybody wants that to happen, obviously. That is the logical thing to do. When one has a business enterprise, one expects it to stand on its own two feet and eventually to get to a point where it makes a profit and achieves returns for the hard work, etc.

As much as it's ideologically sound and very rational, is this doable in your mind? Here I'll go to Mr. Toews first and then move to Mr. Wipf. Is this doable based on the nature of variables we inherently can't control—neither you as farmers nor anyone else for that matter—when we have a product based on the weather? The last time I checked, Mother Nature always wins, no matter what we try.

This is a conundrum for me, to be honest, so I'd appreciate your thoughts.

[Travis Toews]

Good. Thanks for the questions.

I am not pessimistic about the future of the cattle industry. I believe we have a very bright future ahead of us, and we're already starting to see this as we've recovered our market access since 2003. Again, as global cattle supplies have tightened, and in spite of high commodity and feed prices, and in spite of a dollar at par, and in spite of recessionary levels of demand in important parts of the world, we're still seeing near record cattle prices in Canada. I believe the future is bright. There is some profitability in the industry now—in every sector of the industry, I might add—and there's an optimism across the country.

We need to get our competitiveness factors right, and that includes everything from market access to our domestic business environment here. I'm convinced that we can compete. We had a small pilot project with regards to trade in 2003. We found out that trade in fact adds a lot of value to the cattle industry, because saw prices go from close to $1.20 on fed cattle to about 50¢ a pound when we lost our access to foreign markets. And that wasn't just the U.S. market, but global access—though it was the U.S., our largest trading partner, that was the first major market to reopen to us. It wasn't the other, peripheral markets.

So we're dependent on trade. I'm optimistic about the future.

[Malcolm Allen, NDP, Welland, ON]

Mr. Wipf.

[Kevin Wipf]

You were talking about whether there is any hope with weather-related issues and whatnot. What I would say is that we're seeing record returns in the marketplace. There's lots of value being produced in the marketplace. It's not about weather, but about being able to extract enough of an income from the marketplace that you can weather a bad year. If you have a drought one year but had been making a fair share from the marketplace, you would be able to weather the storm, if you will. The problem is that there's a hypersensitivity in the industry among farmers. They're excellent business people. One of the things that gets bandied about is that some farmers can't actually do it, but the amazing thing is that they've been able to do it on such thin margins.

In fact, the one caution I would have about prices is this. While I think it's fantastic when prices increase, it's really about the margins. One thing we've seen over and over again is that no matter where prices go, input prices follow. That is essentially what captures your ability as a farmer to extract a living from the marketplace. So when you have something like a trade dispute or a weather-related issue, you're not able to get through that crisis because your income is actually hypersensitive. That throws us back to talking about these programs to bail us out of these problems created by a power imbalance in the marketplace.

[Malcolm Allen, NDP, Welland, ON]

I appreciate the comments. I threw the weather at you, because it's the least controllable thing any of us have at any point in time.

As we look at the suite of programs, I'm not really interested in asking or arguing about whether or not they work. There is this sense that when you look at them and say “Let's move away from them”, there is this push-pull between yourselves as primary producers and me as the primary consumer, because I'm an eater, not a farmer. I want to eat cheaply. If I want to eat cheaply, I have to pay you less—and pay the retailer less too, obviously. But that becomes a real variable, and I'm not sure how to bridge that.

Does anybody want to comment on this whole idea of the world getting cheap food, but at whose expense?

[The Chair, Conservative, Larry Miller]

Okay, we'll let them comment before we're out of time.