Agriculture Committee on Oct. 17th, 2006

[Len Troup]

That's the reason that's been given to us, that technically SDRM is not an insurance program, it's more of an entitlement. You set money aside for your farm, and you can draw just on that.

In a true insurance program, apparently.... Take house insurance; everybody puts their money into a common pool. If your house burns down, then you come out a winner. If unfortunately your house is standing at the end of the year, you simply lose your premium--but you still have your house.

That's not true with SDRM because it's an individual account. It was an add-on to NISA, and it works more under the NISA concept. It works just great, nice and simple. All the numbers come off your income tax, so if you want to beat the system, you're fighting with the income tax boys.

The program had a very low administration cost and a very high recruitment of farmers. Farmers said, hey, here's something I understand, here's something that works for me. They loved it. But I guess it was too good, so they took it away. It was too simple.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Tell us a little bit more about how it works and the details of how it works. I'm familiar with CAIS, and I was in NISA for years.

[Len Troup]

There are all kinds of modifications. With the old SDRM, the way it was with NISA, you would take 4% of your gross--it was capped at the time, although really it shouldn't have been capped--and put that into an account. The governments matched it, provincial and federal. But instead of going into a collective account, that account, like a NISA account, was good only for your farm. When you had problems on your farm, you could draw out of that account--but no more. If your account was dry, that was all you would take.

It was absolutely fair. Of course you would have taken it out of your own account only if you really needed it. It was contributory. It was an add-on to NISA, and it worked very well, especially in horticulture. In Ontario, where we have at least 125 different crops, we're never going to have 125 crop insurance programs. It's all mixed up, and you're selling into a volatile market, the fresh market, where prices are different every day. It's a crazy business.

The SDRM, NISA-type thing, where you just.... When it works off of your income tax statement, there it is, nice and simple, no complications. As I say, I guess that's why they killed it: it worked.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

I want to move to a couple of comments that Mr. Friesen made.

I'm just wondering, have you done a costing of your proposals here? You say that you want most of CAIS and you want a NISA component added on top of it. You expect the companion programs can be thrown in there, and CAIS would cover disaster relief. You say that all of that “might not” cost more. I notice even your suggestion on the NISA could cost anywhere from $30 million to $130 million. But then you also talk about addressing declining margins on grains and oilseeds.

Have you costed out your proposals, what the total figure would be?

[Bob Friesen]

No. The only calculation we've done is what you see in front of you, and that's our best guess. That's why at this point we are not asking for implementation of a NISA-like tier, we are asking to explore putting a NISA-like tier at the top of CAIS. We would very much like the department to get the mandate to be able to do that research so we could look at the merits of doing it that way.

With regard to companion programs, when we had companion programs in place previously, they were there with a lot less money in the total agricultural file than we currently have. What we're saying about companion programs isn't that we necessarily need a large block of extra money on top of what the industry is currently getting. All we are asking for now is the provision that provinces can use some of the 60¢ per federal dollar that flows into the province, if they contribute their 40¢, to develop companion programs.

Further analysis would have to be done on how much a companion program would be a CAIS offset--because CAIS is a demand program--and on how much it would save there and in fact pay for the companion program.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Janzen mentioned that 90% of the productivity was done by 10% of the producers. You said we had to be strategic in our funding. Are you at all suggesting that we should gear or emphasize our support towards that 10% who are producing 90% of the productivity?

[Bob Friesen]

No, that's not our position. When we talk about priming the pump in agriculture, again we're not necessarily saying we should emulate the U.S. programs. But pay more attention to the declining margin--within the context of what has been suggested for the horticulture industry. Pay more attention to the grains and oilseeds sector. We do know that the grains and oilseeds sector does prime the agricultural pump, yet we haven't done a good enough job to make sure we do prime the pump and that those benefits then accrue to the value-added sector.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I wanted to come back to the SDRM. Did you say that in 2006 you do not have coverage? You're talking about this crop here?

[Len Troup]

The crop that is almost harvested has no coverage.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

What has been done with those accounts? Have they been forced out like NISA was? What's going on with the accounts that are present?

[Len Troup]

Well, they're dormant at this point, but—

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Do you have access to your past account? Was there money accumulated in NISA?

[Len Troup]

For the most part, they've been drawn out like NISA. There was a time when you could draw them out. There may still be some money. I'm not quite sure about the logistics of it.

We do have partial coverage now because we have the provincial portion of that 4%. The 40% of the 4% is there for 2006 and 2007. What we don't have is the 60% from the feds.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Are most accounts empty, then, or not?

[Len Troup]

For the most part.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Anderson.

Mr. Atamanenko.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I'm going to zero in on the apple industry.

As you probably know, the survival of apple growers in British Columbia is at stake, as I'm sure it is in other parts of Canada. One reason is that we have cheap Washington apples being dumped into our province. Does this problem exist in Ontario and Quebec? That's my first question.

Secondly, what can be done? I've had discussions with BC Fruit Growers on some of these issues, but I don't see any policy being discussed or formulated. Should there be a duty? We're talking about the Americans and how they react, softwood duties, all that. Should we have a floor price, so that our people can compete and at least be assured of a minimum price? The supply management system works in other sectors. Should we be doing that, and can it be standardized?

That's one of the main concerns I have seen, at least from my part of the country. I'd like to get some feedback and see if there is some kind of comprehensive approach that can be undertaken.

[Len Troup]

You've asked some very specific industry questions. I'm not really an apple man, but I am a tree fruit grower in Ontario. We grow peaches. We grow a few apples, but we grow tender fruit. Frankly, I think the problems are pretty much the same. We're in a high-cost area, and the competition may or may not reflect their costs of production. Certainly, you mentioned a Washington State situation with apples. There was an attempt to handle that legally, and it was thrown out by the court. Everybody knows they're dumping, but the court decided, for whatever technical reasons, that they didn't want to go down that road. It might have been partly political. When you get behind the scenes, you never really know.

I don't know what the absolute solution is. But we can't continue to sell things for less than it costs to grow them, because the competition keeps coming in cheap. And there are a lot of reasons for cheap competition. It isn't just the U.S.; you know that. The rest of the world is coming in--duty-free; wide-open borders; a dollar an hour, or $2 or $3 a day labour; stuff like this. That comes in in the form of produce. It goes on the shelf. It's in direct competition with us, and we're paying $80 or $100 a day for our labour and everything else.

You can't keep doing that, period. I don't have an absolute solution. You need to talk to the apple people for an apple answer.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

But the thing is that we all know there's a problem, and we all know—

[Len Troup]

It's a huge problem.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

—that nobody's doing anything. We all know that people are discussing this issue.

Is there something being developed at the level of the Canadian horticultural association to address this specifically, so that the government can start working together with people in this industry to address it?

It just seems that everybody is talking about it, we all understand it, and we say, well, we've got to do this; we've got to do value-added, take down our trees, grow grapes--all sorts of things. It seems to me there's no direction coming from either government or the industry to address this problem.

Am I right?

[Marcus Janzen]

I think I would preface my remarks by saying that the B.C. apple industry is a bit unique. It's not that the problems are unique, but there are two things, and I want to build on the base here for a second.

One, we have the agricultural land reserve in the Okanagan. The wine industry and the grape industry have put tremendous pressure on the price of agricultural land for the purposes of grape growing, which, in most cases, is similar to where the apples are right now, to the point where we have European interests buying grape land for $150,000 an acre. I don't care what kind of program you have here in Canada with respect to apples, but you're not going to compete on a world scale with that kind of land price.

The second thing is that we have an initiative called national replant. It's gone a long way for a lot of our producers who are in a position to take out old trees and go with high-density dwarf varieties.

Having said that, in the province of B.C. there's going to continue to be a real political decision that has to be made on where the tree fruit industry is right now in the Okanagan. Do we want to be a food producer or a tourist destination? Right now the scale is tipping towards an agri-tourism type of industry as opposed to being the lowest-cost producer of Elstars in North America.

Thirdly, we've also really felt the effects of China, in terms of being a net importer of apples ten years ago to being a tremendous exporter now and going forward.

I guess my point to you is that I think the solutions in B.C., while they're the same problems experienced nationally, are different in B.C. because of different factors, land cost probably being the primary one. In philosophical terms, do we want to continue to see the apple industry in the Okanagan and for what reason, agri-tourism or production?

I think that as long as the wine industry and the grape industry continue to expand at the rate they are expanding, it's going to be difficult to maintain a productive capacity of apples in the way we've traditionally defined it.

[The Chair, Conservative, Gerry Ritz]

Bob wants to respond to that, and so does Mr. Troup.

[Bob Friesen]

An all-based margin program will never ever address the declining margin problem. That's why we're suggesting adding components to a base-case program, such as companion programs.

We can use the B.C. tree fruit issues as an example. There are companion programs, and these are top tier, and the SDPI that they were talking about. Those would help in moving in the right direction to at least get away from depending solely on one national margin-based program.