Agriculture Committee on Nov. 28th, 2006

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you very much, Mr. Chair.

Thank you, Brian and Fred, for your very cogent and persuasive presentations this morning.

I'll maybe just ask for a yes or no answer, but it's my understanding that the average age of tobacco producers is about 58. Is that correct?

[Fred Neukamm]

I believe so, yes.

[Lloyd St. Amand, Liberal, Brant, ON]

And the average debt load is in the area of $400,000?

[Fred Neukamm]

That's also correct.

[Lloyd St. Amand, Liberal, Brant, ON]

I have a few questions.

Number one, I'd like either one of you to describe for the members of the committee the impact of this on communities who have relied for decades on the production of tobacco. I'm talking about communities such as Delhi, Tillsonburg, Aylmer. Can you describe in a couple of minutes what the impact has been on those communities, and of course on the citizens of those communities?

[Fred Neukamm]

Yes, Lloyd, I'd be happy to answer that question, and I'll also ask Richard to help with the answer.

As an example, the community of Delhi, which prided itself on being the heart of tobacco country, was once a thriving small community. The downtown core of Delhi is mostly boarded up now. That community relied almost completely on the spin-off economy, the dollars spent by tobacco-growing families in that community. The car dealership is closed up. Many of the stores and restaurants on the main street have closed up. And there's nothing there to replace that economy.

Richard, do you want to add to that?

[Richard Van Maele, Vice Chair, Ontario Tobacco Board]

Also, if you take a look at a community like Tillsonburg, which you would think would be a relatively thriving community, as it has a little more diverse economic base, the local retailers up and down the street, whom I know personally, are complaining about the fact that there is no traffic, that no business is coming into their stores any more.

The people who used to support our businesses were our tobacco farmers. The farmers came to town and spent their hard-earned dollars within the community of that town. I know of specific individuals who used to do more business 10 years ago in the month of December, when the tobacco industry was strong, than they do in a 12-month period today. If you go up and down the streets of Tillsonburg today, you'll see closed doors. Tillsonburg was one of those communities that always had a thriving downtown core; it was a model town for a lot of the small rural areas.

The local communities have based their economies around tobacco and the farmers have supported those communities. The unfortunate part now is that the farmer doesn't have the ability to support the community. The farmer is now in what you'd call survival mode, doing whatever he can to survive to the best of his ability. Unfortunately, it's the local community that's paying the ultimate price, whether stores or charitable organizations, even. You just don't have the dollars to put forward to help benefit your local people.

[Lloyd St. Amand, Liberal, Brant, ON]

Thanks, Fred and Richard. I think we've got a flavour of it, for sure.

If I could ask, why is it such a critical time now, as the year-end approaches, for something to be done, compared with next May or next June? Can you comment on that perhaps, Brian?

[Brian Edwards]

Right now there has been a moratorium placed on tobacco quota sales by our board. It's been put in place to protect those who are most vulnerable, and it's been in effect since May. There's no out-year to plan for with our tobacco companies. We're in a situation now where there's got to be time for whatever the decision is—and we need to know that decision soon for planning purposes. Growers need to know: if there is an exit, should I take the exit now? The actual customer, our tobacco companies, have to have time to put forward what they see for our future, whether it's direct contracting or some other method of growing tobacco. They also have to have that time. We need the time for the producers to make an informed decision.

[Lloyd St. Amand, Liberal, Brant, ON]

Thanks, Brian.

Perhaps, lastly--Mr. Chair, if there's still time--I think you've made a compelling case that something needs to be done. I get a sense that the political will is there, and that something needs to be done much sooner than later. That being said, you also made reference to buyout models in both the United States and Australia. What do you see as the preferred model or the preferred strategy, in terms of a buyout for Ontario producers?

[Fred Neukamm]

Lloyd, we have submitted an initial proposal to the government. There are some key principles within that proposal. We are talking about a total exit over a defined period of time; the timeframe, really, is to be determined through consultation among the growers, governments, and the manufacturers. At some point, we believe, tobacco production will come to an end, be that in two years, five years.... As growers, we don't have that specific answer, but we believe it will come to an end. We believe that all of our growers, from now until that end date, should have access to a program at a fair level of compensation. We believe that many of our growers, perhaps anywhere from one-half to two-thirds, should be in a position to access a program right now, prior to any planning for 2007. We know that the manufacturers do require a small amount of tobacco in the short term. They will not support the thousand families we still have. Many need to leave right now, with the remainder to leave over the course of perhaps the next three to five years.

[The Chair, Conservative, Gerry Ritz]

Mr. Bellavance, go ahead for seven minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you.

Thank you very much for your presentations. As you know, I have had an opportunity to study this matter quite closely when I worked for the member for Joliette, Mr. Pierre Paquette. In the Lanaudière region, there are many producers of flue-cured tobacco. Of course, I made many representations to the government, which was a Liberal government at the time.

[The Chair, Conservative, Gerry Ritz]

If I could interrupt, we have our gentlemen from Quebec with us now. Do you want their presentations before you ask your question?

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I would appreciate that, yes.

[The Chair, Conservative, Gerry Ritz]

Gentlemen, we've thrown you a bit of a curve this morning. We had an hour slated first for apple producers in Ontario. They're socked in, in Hamilton, and not able to get here. We've actually switched our meetings around. We're happy that you're here. The other folks have just done their presentations, and we're just starting into the question round. If you want to open with a ten-minute presentation, then we'll continue on with questions if that works okay for you. We're throwing you right into the firing line right off the bat.

Okay. From Quebec, joining us today, from the Quebec producers of tobacco, we have Luc Hervieux, vice-president, and Christian Boisjoly, director.

Welcome, gentlemen.

[Christian Boisjoly, Director, Office des producteurs de tabac jaune du Québec]

Okay. The presentation will be in French, if there's no problem.

[The Chair, Conservative, Gerry Ritz]

That's fine.

[Christian Boisjoly]

Good morning, and thank you for giving us an opportunity to present the views of the tobacco farmers of Quebec. We are all from the Office des producteurs de tabac jaune du Québec. My name is Christian Boisjoly, and I am the Regional Director of the Lanoraie District and Linguistic Advisor, and with me is Nicolas Asselin, the Secretary Treasurer, who should be here shortly, and Luc Hervieux, the Vice-President.

We would like to give you a little background on the crisis in the tobacco industry. This crop which supported three generations of farmers in the Lanaudière, la Mauricie and even Outaouais regions and allowed them to amass wealth for themselves, their families and their regions, suffered a dramatic blow in March 2003 when one of the major companies, RBH, in other words, Rothmans, Benson & Hedges, suddenly decided to stop buying its tobacco in Quebec. A shock wave hit all tobacco farmers, because two years earlier, RBH, as well as Imperial Tobacco and JTI-MacDonald, had all required the complete conversion of tobacco-drying units. There were 725 units in Quebec and this was extremely expensive for tobacco farmers, but did suggest there was a long-term market for the product. Despite requests for contacts, representations and discussions, RBH's cavalier attitude did not change. The other major companies told us over the following months about their offers and their plans for the future— namely, a huge reduction in 2003 and small, final purchases in 2004. This more or less spelled the end of over half a century of tobacco production in Quebec.

In response to this crisis, our office quickly began contacting the media, elected people, municipal, provincial and federal officials, in an effort to try to find short, medium and long-term solutions. At the regional level, people were stunned, because the contribution made by tobacco to the economy was significant in terms of direct and indirect jobs, and in terms of redistributing the region's wealth. We need think only of the number of suppliers involved in growing tobacco—suppliers of fertilizer, farm equipment, fuel, insurance, and so on. So a support system was developed, and the response of the provincial government and its officials was quite quick, even though it was somewhat bureaucratic—with a lot of forms to fill out of all types—and rather incomplete. I would invite committee members to consult the information we appended and sent to the committee last week.

At the federal level, a number of round tables were held beginning in December 2003 at which our office, the OPTJQ, through our president, Gaétan Beaulieu, was invited to discuss the problems of tobacco farming in Canada. Because while Quebec was shown the door, Ontario saw its production decreasing gradually. As a result of these discussions, the TAAP, Tobacco Adjustment Assistance Program, was introduced. The announcement was made on May 4, 2004. The general idea was to offer a lump sum of $67 million dollars, first to Ontario farmers who wanted to get out of tobacco. The federal government purchased their quotas at a reverse auction in the spring of 2005. The objective of the program was chiefly to rationalize the supply for Ontario farmers.

There were two major problems for Quebec farmers. The first was that we had no say, in other words, we were the victims of an undemocratic, unfair decision. The second was that in our case, there was no talk of rationalizing tobacco production, but rather stopping it altogether. The representative of the previous government said that the TAAP was a step toward a more comprehensive, long-term program, and the final figures set at the reverse auction, $1.05 per pound of quota, would also be paid to Quebec farmers in a fair and equitable manner.

Mr. Beaulieu, after trying to explain the difference between the Ontario and Quebec quota systems—and here we must look at Appendix 1 where we discuss the 1.6 balancing factor—accepted the money from the federal government, on behalf of the OPTJQ, but said clearly that it was not enough. He based his statement on a study done by AGÉCO, an independent firm that published a report in 2004 that was funded by the federal government. The purpose of the study was to evaluate tobacco farms in Quebec. The people who did the study went to visit all tobacco farmers and they had to provide all the information required for the study.

And then the government changed. Representatives from the OPTJQ were once again invited on June 6 to meet with Ms. Christine Bakke and Mr. Donald Boucher at the Agriculture Canada Building. Once again they had to put forward their demands which, I should mention, were strangely similar to those put forward by Ontario. However, the figures have to be converted to correspond to the Quebec situation: I'm referring to the famous 1.6. They also explained once again the problem with new additions, particularly the difficulty of converting in terms of financing, market and young farmers. The reaction to this meeting by Minister Chuck Strahl was to send us a letter on September 26, 2006 inviting us to take part in a round table on the tobacco industry at a future date.

So here we are today representing all Quebec farmers to tell you that after three years of uncertainty, stress, and many attempts with replacement crops, sometimes productive but rather fragile, and often not encouraging, particularly because of saturated or controlled markets, the situation facing most former farmers is difficult, and in some cases quite precarious. Only 25% of them have decided which new crop they will turn to.

In conclusion, we see that the losses caused by the closing down of the markets in Quebec jeopardize the economic situation of these farms and limit their capacity to diversify into other markets requiring significant investments and a number of new skills. And if the figures in Appendix 2, which do not include the $1.82 a pound in quota, were to be in the hands of our proud, hard-working farmers in Quebec, we would at least have some justice, even some hope.

We would like to remind the committee members that we congratulate the OFCTGMB, the Ontario office, on its efforts to find solutions to the Canadian tobacco crisis, as well as the TFIC, which most Quebec farmers belong to as well, for the solutions it has put forward as regards a Canada-wide solution that respects Quebec.

We would like to thank you, and we are now prepared to answer your questions.

[The Chair, Conservative, Gerry Ritz]

Thank you, gentlemen.

We're back to Mr. Bellavance for seven minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, Mr. Chairman, and thank you for allowing the witnesses to make their presentations.

I would like to thank you very much for coming today. As I said when you arrived earlier, I had an opportunity to work with Mr. Beaulieu quite a bit when I was working for the member for Joliette, Mr. Pierre Paquette. In Lanaudière—and you are probably from that region—there were many producers of flue-cured tobacco; almost all the farmers growing this crop in Quebec were in that region. So the former government received a number of representations. A program was announced; you spoke about it earlier. We should know how much of the $67 million that was announced went to Quebec. You should also explain the difference in the quotas for us. You say that there is a difference between the system in Ontario and the one in Quebec. You speak about the 1.6 factor. I would like to understand exactly what the difference is and why the June 2005 agreement is not satisfactory for Quebec producers.

[Luc Hervieux, Vice-President, Office des producteurs de tabac jaune du Québec]

For a Quebec tobacco farmer, it took a basic quota of 152,000 pounds to produce 100,000 pounds, while in Ontario, a basic quota of 234,000 pounds was required to produce the same amount. That is the difference between the two systems. In our opinion, the quota is much higher in Ontario than in Quebec. In terms of payment, this represents a difference of 80 %. That is why, when we are paid by quota, if we get $1 in Quebec, the Quebec farmer gets $152,000, whereas the same number of pounds of quota in Ontario would produce $234,000 for each farm. That is the difference between the two that we have been trying to explain, and that is the reason for the 1.6 factor.

[Christian Boisjoly]

We are talking about significant amounts of money, of course, and the way in which these quotas are actually managed creates quite a different image. The situation was that traditionally, in Quebec, people were still producing 60 % of their basic quotas, roughly, particularly toward the end. In Ontario, people had been at 40 % for quite some time. However, the money we are seeking still refers to the basic quotas, and that is where there is a serious difference between the two figures.

You also asked us to explain the most significant difference between the quotas in Ontario and those in Quebec. We come back once again to the Tobacco Adjustment Assistance Program, the TAAP, which was designed to rationalize the supply, although it was over for Quebec, it was final. There was no program to deal with the situation in Quebec, which is no longer in the market at all. In Ontario, the program was for those who were still in the market, to help them survive for quite a while. The idea is that the industry would be rationalized, that those with quotas would be able to continue to survive, and those who wanted to would be helped to get out of tobacco, so as to remove their supply from the market. In Quebec, there was simply no supply. So it was an assistance program, but certainly not the assistance people were expecting.

Furthermore, as we can see today, because the representatives from Ontario, I think — and I did not listen to the preceding presentations, but there is good communication between our two groups — also have quite a comprehensive program to encourage people to get out of tobacco, but about two or three years after we went through this situation.

So they are experiencing a shortfall as well. I think the Ontario office talks about a figure of $3.30 for people who want to get out of tobacco. So that is the proof that the figure of $1.05 that we got is really not enough. That's why we want some adjustments made. Moreover, we use their figures to defend our position, without forgetting the conversion factor, because the situation in Quebec is very different, particularly as regards quotas.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Despite what you received earlier under the agreement, and since you are supporting the Ontario producers, if there were a new agreement with the government, you would like an adjustment, so that you can get your fair share of such a program. Is that not correct?

[Christian Boisjoly]

Exactly, we want our fair share.