Agriculture Committee on Nov. 28th, 2006

[Fred Neukamm]

Mr. Chair, if I may, it's an excellent question.

In our opinion, it started with government policy to reduce smoking and high taxation on the product. That has caused this major underground economy in cigarettes, most of which come in from other jurisdictions, the U.S., the Far East.

The major manufacturers, in their attempts to protect their own profitability and their market share, have decided to go into discounted brands of cigarettes. In doing so, they've increased significantly the amount of imported tobacco they use in those products.

It's not that many years ago that legal domestic cigarettes in Canada were approximately 90% Canadian content. There was only a very small component of import, certain grades or styles that they could not access either from Ontario or Quebec. But in their attempts to protect this profitability, they've increased their imports dramatically, whereby the content of legal Canadian cigarettes is probably at 50% or 60%. This has rapidly decreased our crop size, and that's why we're in this situation.

As long as it is profitable for them to do so, they will continue to sell cigarettes in Canada. The largest company is Imperial Tobacco Canada Limited, which is a subsidiary of British American Tobacco. It has decided to close down all its bricks and mortar in this country. All of its manufacturing is being moved to Mexico. It intends to continue selling those cigarettes in Canada, but the manufacturing in Montreal, Guelph, and in my community of Aylmer is all being shut down and moved to Mexico. We expect the other major manufacturers have these sorts of contingency plans in their back pockets as well.

[The Chair, Conservative, Gerry Ritz]

Anyone else?

Go ahead, Brian.

[Brian Edwards]

In our tobacco advisory committee negotiations we had a two-price system. Domestic tobacco for consumption in Canada was higher priced, and we had an export price for shipping tobacco to other countries.

Tobacco health policy has been a high-priced product for the Canadian consumer. In my community, 20 miles from where I live, there is a carton of cigarettes available in a clear plastic bag for $7, and it's up and down the roads on native reserves. How do we help our manufacturers and ourselves, as growers, when this is happening? Clearly the taxation policy is not getting all of that tobacco. And after 9/11, nobody can tell me that it can't be tracked if it's coming across our border. Clearly we have to change that point of taxation to cover this.

Native producers have legitimate treaty rights, and I recognize them and we support them. But can we identify other things to get tobacco back in control?

There are three components in a cigarette: you have the paper, you have the filter, and you have the actual tobacco. It's pretty simple. Let's get it all covered so we actually know what is being produced and what's being consumed.

Right now, $1.5 billion that's not being collected is a huge problem for us as growers, because the manufacturers are identifying that if they're going to be allowed to do it, then we have to compete in a price war.

[The Chair, Conservative, Gerry Ritz]

Alex, you have time for one more point.

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

Recently I wrote a letter, after talking with you folks. Everybody knows that the crisis is here, and it's not something that started this year. The only answer I have so far is that on September 26 there was a letter from the minister saying that there is going to be a round table. Is that as far as we've gone? Is that the only answer we've had from our authorities, from the government to date?

It seems to me that all this information is here. Has there been no other decision or a meeting with you folks or all the producers to work out a timeline, to work out a plan to work on an exit strategy?

Australia has done it. Am I right in assuming that after all of this, we're just talking, and we're looking to talk some more at a round table?

Monsieur.

[Christian Boisjoly]

That is pretty much the situation. We have received some invitations from the new minister, but it pretty well stops there. In the case of Quebec, as I mentioned, we have been waiting three years already, and people are really running out of steam. Clearly, we discussed the situation of Ontario producers, which is definitely not rosy. Nor is their future, based on the news we hear that Imperial Tobacco would like to get out of the market.

We have been living with this situation since 2003. The program provides for round tables; that is all there is. We have no promises or even a compensatory budget on an urgent basis—we have nothing like that. In many cases, people do not know what money they will have for 2007. Some experiments that worked and that produced significant incomes such as replacement crops that are very similar to those in Quebec and that Mr. Bannister spoke about are simply not very common. Even the 25% of farmers who have changed crops have only very average subsistence incomes. Even for them, it is difficult to continue expanding. Others are still at the stage of doing research and development. I spoke about my own case, but there are many others who, like myself, have run into walls.

On the other hand, we were talking about hope. There is hope. For example, I am just back from a trip to Winnipeg where I attended the 4th Canadian conference of people interested in growing hemp. I am referring to the hemp market, which is growing in Canada. In Manitoba, almost 50,000 acres are devoted to hemp production. There have been some experiments in Quebec that seem quite promising. We have contacts with a number of manufacturers and processors. Once again, we want to set up a cooperative. We are halfway there, but it is difficult to go further, to get producers who have already been burned to take an interest in this. So we have to ensure we have some support and political will.

In our region, our political representatives and members of all provincial political parties are showing a great deal of interest. However, at the federal level, as I was saying, we are still at the round table stage. We have not yet started finding solutions.

That is why we wanted to tell you about our views, which are somewhat different than those in Ontario. However, I do think that Ontario producers will be experiencing the same situation shortly, that is more people will be affected.

[The Chair, Conservative, Gerry Ritz]

Thank you, Christian.

Mr. Neukamm, do you have a short comment?

[Fred Neukamm]

Yes, in response to Mr. Atamanenko's question.

We have been working very closely with the government on this issue. We've made our initial proposal to them. We're waiting for a response to that proposal. We appreciate the level of serious consideration that the issue has been given. We hope the issue can be resolved quickly, and we would ask committee members individually to do what they can to encourage Mr. Strahl and other key affected ministers to come to a solution on this issue quickly.

[Brian Edwards]

Tobacco is, as some people say, a difficult subject. We are agriculture, there's no doubt about it, but tobacco hasn't been treated the same as the rest. Government policies have affected our marketplace. We need a decision made to help us exit tobacco farming, because our equity is destroyed. The livelihood is going to disappear as smoking declines. That's a given and we accept that. But we cannot get out of this mess ourselves. Our communities, and we as farmers, are in severe distress.

[The Chair, Conservative, Gerry Ritz]

Just before we move to the second round, I have one question. We've just seen in the news today that Australia has settled. They've done it. Other countries have done it around the world as well.

Is there a model out there that this government should look at? Are any of these settlements around the rest of the world addressing infrastructure and equipment, as your settlement is asking for? I am looking for clarification on that.

Brian.

[Brian Edwards]

The U.S. model was based on recovery of the earning power of your quota. That was what the basis was, along with the economic power of the quota itself.

In Australia, the producers actually were a cooperative. The remaining growers were a cooperative actually processing the tobacco for the manufacturers, and they have been recompensed based on their shares in the cooperative. They were small producers who pooled their resources to make an economic farm viable.

Here in Canada we're very much the same. In Ontario especially, we have just under 272 million pounds of quota and 1,080-some-odd quota producers. Back in 2002, we were using 400,000 pounds of our quota to make an economical farm unit. This year, we're at over 544,000 pounds of quota, so you can see that families are pooling their quotas to try to keep the farm operating.

We're not going to make millionaires out of every farmer, not by any means. These are families—mothers, fathers, sons, and daughters. There are generations involved in the farm unit now, with smaller amounts of quota. We're trying to identify a way for these farming generations to get out of tobacco growing.

In Australia, for those who exited farming totally in some of the previous buyouts, they've actually been giving a tax exemption. If you exit farming, there's not even any tax on it, and I believe they are asking for that to include tobacco farming. In Australia, though, tobacco was not the only crop on a farm; it was a component.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Easter for five minutes, please.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair, and welcome, folks.

I have just three quick points and two questions.

I think the facts are clear in terms of the difficulties for you, the tobacco producers, in the communities.

Secondly, this is not a normal market situation. It's really government policy--in terms of the drive to get rid of smoking--that's driving you out of business, and I think driving the country away from a safer tobacco, because there's no question that the tobacco that's being smoked now by those who smoke is not as healthy as the Canadian brand was. You don't know what impurities are in some of this imported stuff. That's point two.

Point three is that there's no question that what happens as you go out of business is that there will be an impact on other agriculture commodities and on the industry players. I don't think there's any question about that.

My questions, really, are these. First and foremost, I think the Minister of Agriculture is in a difficult spot--I'll give him that much--in that this is a result of government policy as a whole, enforcing an imposition on what's seen as an agricultural problem, when it really should be seen as a general government problem. It should be the Minister of Finance, and not just Chuck Strahl, addressing this issue.

On your proposals going forward, do we have agreement on a plan from the vast majority of producers, including those in Quebec, including the Farmers in Crisis, and including the tobacco board? Do we have, number one, an agreement on a plan--I mean the plan to exit, or to stay in and get out over time? And do we have, number two, included in that research and development that's needed to get into alternatives, including forestry or whatever? Is there community support, or can it be determined whether there's community support for that plan?

[Fred Neukamm]

Mr. Chairman, I could speak to that.

There is virtually no difference between the proposal that our board put forward and one that the Tobacco Farmers in Crisis have also put forward to government. Within our community of growers, there is overwhelming support for our strategy. Within the community itself, just very recently, The Expositor newspaper in Brantford ran a poll asking the question, “Should the remaining tobacco farmers be bought out by government?”, and I believe 89% of the respondents answered yes. So there is community support for this.

I can't speak specifically to Quebec, but a component of our proposal is also to increase the level of compensation that those farmers who exited in the 2005 TAAP program received. I believe Quebec would support that position. I think they clearly stated that this program, while helpful, was inadequate to meet their needs. Many in our community and we, as a board, believe that as well. It was welcome help. It was required, but that program was not without some problems, as was clearly stated.

The mechanism that was chosen to establish the price, the reverse auction, essentially pitted one desperate farmer against another, and resulted in that price being artificially low. It was not universally accessible. That was another problem. It was a partial solution. We all recognize that. One of the stated objectives of that plan was to allow some growers to leave, in hopes of creating a more stable environment for those who remained. It did that very briefly, but our situation has deteriorated very rapidly since then. Again, as I wanted to mention, it was helpful; it just didn't go far enough.

I apologize--I may have missed another component of your question.

[Wayne Easter, Liberal, Malpeque, PE]

The key is, if the government or the minister is going to have half a chance of doing anything, then there has to be unity between the tobacco growers and the community side in terms of the plan. That's point number one. It's absolutely essential. I think we around the committee, from all parties, can support you on that, but there needs to be absolute agreement on what the plan is. We have the United States, and we have Australia that moved. There needs to be agreement in your sector, no matter how hard that is, because if you come into government and there are two different proposals, the Minister of Finance will say, “If they can't agree, why should I?” So that's critical.

[Fred Neukamm]

I met with Minister Strahl a little over a month ago, and he assured me personally that the proposal we had put forward was at the centre of all their discussions.

[The Chair, Conservative, Gerry Ritz]

Mr. Edwards.

[Brian Edwards]

From the point of view of Tobacco Farmers in Crisis, as Fred has said, it might as well be a mirror.

Our proposal puts forward that there be an exit of tobacco farmers. As the board has stated, the first and the last farmer should know what that exit program is. It's up to someone else to decide how long that's going to take. We've used up everything we have--our retirement, our RRSPs, our cash, our investments--and we're in a position now where someone has to help us.

[The Chair, Conservative, Gerry Ritz]

Christian.

[Christian Boisjoly]

In Quebec, we used the figures put out by the Ontario office. However, we did not take into account shortfalls and the decline in property value, because it was difficult for us to argue on this issue. We did not do any studies. The AGÉCO group did a study to support the price per pound for quotas that were lost and the price of machinery, but that was not taken into account.

However, there is the famous 1.6 factor, which represents the difference in the quotas, because everything seems to have been worked out per pound of quota. If we can win on this issue, the figures and demands will be very similar to those of the other two organizations. I said earlier that there was a willingness within our communities to help out these people for economic reasons—that is very clear, we are talking about jobs—and in order to develop other markets.

As Mr. Bellavance noted, the Lanaudière region is very aware of the tobacco-growing issue, and the soil issue. Approximately 8,000 acres were used for growing tobacco on a rotating basis. So if farmers can get these funds, they will remain in farming. They will not grow just cover crops, they will be revenue-producing. So we must be given this opportunity. We need the same amount of money as people in the other two associations.

[The Chair, Conservative, Gerry Ritz]

Thank you, gentlemen, for shifting gears and hopping into the early slot this morning. It was much appreciated.

Our apple growers have descended upon us. I see they've brought lunch with them. Thank you, gentlemen.

We will suspend for just a minute as we move you folks away and bring the other gentlemen up to the table for the second hour.

Thanks so much for your presentations.

[The Chair, Conservative, Gerry Ritz]

We'll call this meeting back to order.

We'd like to thank Mr. Rickard and Mr. Gilroy for making the attempt to get here. I know what it's like trying to get through airports when the weather is bad.

Thank you for the apple for the teacher. You're certainly going to get a good hearing, better than people who don't bring apples.

We generally work with the format of a ten-minute presentation from you gentlemen. If that's workable for you this morning, then we'll open the floor to questions and comments. We have about 45 minutes left, and of course we need time to get to question period and so on.

Welcome, this morning. Who will be the presenter, Mr. Gilroy or Mr. Rickard?

Mr. Rickard.

[James Rickard, Chair, Ontario Apple Growers]

Thank you. We did bring a little nutritional break. There's a promotion around five or ten fruit or vegetables per day. As you can count the numbers, it might do for your total supply of fruit and vegetables for today. They are all Ontario apples. They came from Georgian Bay.

Brian Gilroy is a grower from Georgian Bay. I'm a grower from east of Toronto. I chair the Ontario Apple Growers marketing board. Brian is vice-chair. It is a marketing organization, a lobbying organization, of producers that's been in existence for three years. The only authority we have is to negotiate the price of juice between the processors and ourselves. The rest of it is support of the producers who pay an acreage fee to support us and lobbying efforts to try to help the industry to help itself. That's one of the projects we have. One of the dreams, thoughts, visions we have is what Brian is going to present in the next two minutes.

So without any further ado, Brian Gilroy, vice-chair of the Ontario Apple Growers.

[Brian Gilroy, Vice-Chair, Ontario Apple Growers]

Thank you very much, ladies and gentlemen, for shifting your schedule to allow us to make this presentation to you.

We're here speaking on behalf of Ontario Apple Growers. I'm sure it's something you hear about regularly in different aspects of agriculture, but the financial hurt in horticulture crops has been severe. For apple producers it has been devastating. Apple producers have gone through two of the worst marketing seasons in recent memory, as a result of declining exchange rates, world overproduction, and the dumping of apples into the Canadian marketplace.

Our growers have looked to their governments for assistance through business risk management programs, but these programs have fallen well short of their objectives and will see a small percentage of growers receive moderate support. The CAIS program has resulted in an uneven distribution of these much needed funds, with apple producers receiving much less than their colleagues in other agricultural commodities.

In Canada we do not over-produce apples, which, by the way, is our national fruit. Canadians are net importers. I'm sorry I don't have national statistics, but over 60% of Ontario's fresh apple consumption is being grown outside the country. With government policy dictating development freezes for agricultural lands, like Ontario and British Columbia's greenbelt legislations, saving agricultural lands is seen socially as the right thing to do.

The apple growers and tree fruit producers need help to strengthen their rural economies. Apple acreage in Ontario has been reduced from 25,000 acres to 17,000 acres in the last six years. A strong rural economy needs a strong agricultural sector. Average farmers are long gone, generally speaking. Only the best professional farmers remain.

We are here to ask the federal government to invest in the future of our industry through the national replant strategy, and to remain invested in the self-directed risk management program for Ontario horticulture.

We also recommend that a “buy Canadian first” procurement policy be adopted for all government-funded institutions. It's something that would cost very little, yet could accomplish so much.

In the brief before you there's a bit of an introduction to the national strategy for the tree fruit program. This is something we've met with Agriculture and Agri-Food Canada about in the past, and we've recently received a response from the Minister of Agriculture saying that the project still needs more work.

We commissioned a business plan for orchard reinvestment from the Ontario perspective. I'm sorry I don't have that translated into French, but if you would like copies, I'd be happy to leave some here, or make a list and make sure you get copies. Basically it's a partnership between the federal and provincial governments and the growers to replant 25% of the acreage of apples and tender fruit in Canada. It's felt that this proposal would go a long way toward strengthening the apple industry in Canada.

One of the other challenges we face at the start of the fourth year of the agricultural policy framework is that when it was signed, the Honourable Lyle Vanclief promised that production insurance would be available to all producers across Canada. That promise hasn't been fulfilled yet, and horticultural producers have been using a self-directed risk management program for some time.

In Ontario, under the new APF, crop insurance currently provides less coverage and has become more expensive for our growers. Only about 40% of the apple producers in Ontario subscribe to the crop insurance plan. A lot have used the self-directed risk management program.

The Ontario plan has worked for many apple growers but not all. For those, the self-directed risk management program has provided an alternative. Again that's a partnership between the two levels of government, federal and provincial, and the growers. We still feel this is the best way to help growers through those times when mother nature and/or the marketplace disrupts things dramatically.

On our recommendations to the federal government through this committee, first, provide federal support for the national tree fruit and grape replant proposal. Second, continue to provide the federal 60% support for the continuation of the self-directed risk management program until a more meaningful production insurance tool can be developed. At the very least, provide this support for the next two years to match the Ontario government's agreement to do so. Third, implement a “buy Canadian first” policy for all government-funded programs and institutions.

We respectfully submit this report on behalf of Ontario Apple Growers.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Gilroy. You caught me with a mouthful of apple.

Mr. Rickard, do you have anything to add to this point?