Agriculture Committee on Nov. 28th, 2006

[The Chair, Conservative, Gerry Ritz]

I know it went down this side and I've done it, so there it is.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Miller.

Are there any other points?

There's one other one that I had in mind. Our calendar shows us going to December 15. That leaves us one committee meeting on the 14th. Generally, historically, there hasn't been a meeting on that day before the day we leave.

I know Mr. Steckle, as chair, was always excellent at putting on a dinner or something for the committee. We all got together in a little yuletide cheer and so on. Would you gentlemen be amiable to putting a motion forward to do that in our meeting timeframe on the 14th?

[Paul Steckle, Liberal, Huron—Bruce, ON]

I would be so inclined, Mr. Chair, to have us spend some time together in a rather different environment than the one we're in at this table, some social time.

[The Chair, Conservative, Gerry Ritz]

We'll book a room and we'll bring in real food—

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

The chairman usually pays for it.

[The Chair, Conservative, Gerry Ritz]

—and maybe a little cheer.

We have a budget for that type of thing. I think it's great. It always helps.

Is there any discussion on that? Everybody's okay with that?

[Some hon. members]

Agreed.

[The Chair, Conservative, Gerry Ritz]

We're not going to do a gift exchange or anything. How many lumps of coal can Mr. Easter—

[An hon. member]

[Inaudible—Editor].

[The Chair, Conservative, Gerry Ritz]

The problem is that there's a baggage requirement, a weight requirement, and Mr. Easter couldn't take all the coal home.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Gerry Ritz]

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

We could get a Canadian Wheat Board hat.

[The Chair, Conservative, Gerry Ritz]

That's fine. Actually, I think he'd probably prefer the tie. I've seen Alex's, and I'd even like one of those.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Maybe he can donate a couple of MFU ties.

[Wayne Easter, Liberal, Malpeque, PE]

I could do that too. You'd wear it.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Of course I would.

[The Chair, Conservative, Gerry Ritz]

Are there any other points? Is there any other housekeeping? If not, I'll suspend while we wait for our witnesses to show up. It's not often that government is this efficient.

[The Chair, Conservative, Gerry Ritz]

Getting back to order, we will proceed now with the hearing that we're going to have on the tobacco situation in Ontario. We also have some Quebec producers who will be with us shortly, I hope.

From the Ontario Tobacco Board, we have Fred Neukamm, who is the chair, and Richard Van Maele, who is the vice-chair.

From the Tobacco Farmers in Crisis we have Brian Edwards, president, and Mark Bannister, vice-chairman.

Welcome, gentlemen.

We have a ten-minute presentation timeframe for each of you, and then we will open the floor to questions.

Would you care to kick off, Brian, or Mark, if you're splitting the time?

[Mark Bannister, Vice-Chair, Tobacco Farmers In Crisis]

Good morning, and thank you for the opportunity to present on behalf of our farmers.

Tobacco Farmers in Crisis is a federally registered non-profit organization. We formed two years ago in recognition of the fact that our farmers were in trouble. Our board has been working on our behalf. We felt that we needed some more push, so we formed.

We are trapped within a commodity that is very lucrative for government and manufacturers, and we find ourselves, as tobacco producers, now unable to pay our bills.

Having said that, I will pass it over to Brian.

[Brian Edwards, President, Tobacco Farmers In Crisis]

Why are Canadian tobacco farmers in crisis?

Tobacco farmers are victims of conflicting government policies on tobacco and a gap in tobacco control policy has put them into debt and economic devastation. Since 2002, tobacco farmers and their families have been in a state of turmoil, brought on by dramatically declining crop sizes, costly mandatory infrastructure investments, rising contraband and an increase in cheaper imported tobacco.

Despite a still-existing and legal market, they find themselves unable to meet their obligations and are at great risk of losing their farms and their homes.

At an average age of 58, with average debt loads of $400,000, the significant devaluation of tobacco farming assets, and little or no real employment opportunities elsewhere, many Canadian tobacco farmers risk losing everything they and their families have honestly invested in and worked for over four or five generations.

What factors have forced us as tobacco farmers into debt?

In 2002, the tobacco companies demanded that we do burner conversions to eliminate nitrosamines. This was mandated. We will not buy Canadian tobacco unless you do this. We as tobacco farmers invested over $65 million into burner conversions.

We had to make a choice at that time: either we were in tobacco or we were going to leave because of the cost of those burner conversions. So we, as Tobacco Farmers in Crisis, have identified the year 2002 as the base year. With those burner conversions, tobacco advisory committee negotiations said that if you did not do this, the tobacco would be marked on the auction floors as separate, not available for the TAC agreements.

When we did this, we made the choice. Yes, we had a stable future, because in the 2002 agreement it was stated that we would have a stable future. In our handouts we've given examples of the TAC agreements in 2002, 2003, 2004, and 2005. We had three-year agreements with two-year out-years of stable crop sizes.

With that type of a future, farmers saw a stable future. We saw a future where we could plan for debts and payment of those debts. What we have now is 50% less production. We're in an impossible situation. We can't pay debts when we are only growing 20.4% of our quotas. This year at tobacco advisory committee negotiations the companies have said there are no further out years. We expect the situation to be changed.

Right now the tobacco companies are no longer supporting us as growers. We feel abandoned by our governments. We are here in the agriculture committee, yes. Unfortunately, the agriculture committee has been left with the train wreck that has happened to us.

We have the federal government tobacco control strategy that started five years ago, a ten-year plan. There was $450 million invested in that program. Health Canada has identified tobacco to be denormalized, which means we're going to tax the product and we're going to try to discourage adult and youth smoking, and we support that as farmers. The health policy is right. If you consume tobacco, probably you will get sick. Tobacco policy for taxation is here to stay. It's not going to go away. There's all-party agreement that we will have taxation policy, a high-priced product to deter adult and youth smoking.

We have precedents that have been established in the world. Right next door, our neighbours, the U.S., have eliminated tobacco quotas. The price they have established is $10 across the board. It's a split payment between the quota owner and those who grow the actual tobacco.

Just recently in Australia, another Commonwealth country, tobacco growers have been bought out, as we would describe it. There will no longer be tobacco grown in Australia. What we are asking for as tobacco growers and Tobacco Farmers in Crisis is a program that allows tobacco farmers to leave this profession. It was a legal profession. It still is.

The governments of Canada collect $9 billion in taxes. Tobacco companies themselves have over $1 billion in profits. There is an underground economy that has been estimated at $1 billion to $1.5 billion by the tobacco companies themselves, with surveys, and actually with some of our friends in the convenience stores. They've collected data. The question was asked, “How did you come up with the numbers? What was your survey?” It was really simple: you walked the sidewalks, picked up the tobacco butts that were left, and that showed how much was not legal.

Our tobacco board has been asking for a buyout since 2000. Under former Minister Bob Speller, a tobacco adjustment assistance program was promised. Unfortunately, because of the election timing, it happened a year and a half later. This has caused problems in our business situations, because sales that could have taken place and should have taken place were backed up. Now after spending $67 million federally in one year, the benefit that was the stated goal of that program is that we're at 20%, when after the program we were at 31%. This year alone, $69 million will disappear out of the revenues for tobacco producers.

The tobacco companies are saying we have to change. There's too much infrastructure involved here. There are too many growers for the crop sizes we see in the future. Right now we're trapped; there's no escape. We're looking at one another between the eyes. You can't pay for a tobacco farm, the quota, and the infrastructure under these tremendously decreased crop sizes.

Our equity has been destroyed, and we're asking for help from our federal government to live up to the Framework Convention on Tobacco Control and its articles that say we as tobacco farmers should be provided a viable alternative to tobacco if we would like to leave. Right now there's no escape.

We on the tobacco board are asking for the same thing: an exit program for growers. We've done evaluations. In fact, Physicians for a Smoke-Free Canada did an evaluation in 2004. It was $3 a pound for the quota to recover the investments that tobacco farmers have put into the industry. Tobacco Farmers In Crisis looked at the U.S. model and have done an evaluation based on that.

What's the cost of doing business? For a Canadian tobacco company selling product in the U.S., they're paying for the U.S. grower at $10 a pound. How are they doing that? There's a levy collected on the product. It's delivered through the Department of Agriculture, where the consumers pays. We're asking for a program for tobacco growers now. It's needed immediately.

Thank you very much.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Edwards.

We'll move to Fred Neukamm for the Ontario Tobacco Board.

[Fred Neukamm, Chair, Ontario Tobacco Board]

Thank you, Mr. Chairman, and good morning.

First, I'd like to thank the committee for having us here this morning. My name is Fred Neukamm. I'm the chair of the Ontario Flue-Cured Tobacco Growers' Marketing Board. With me here this morning is Richard Van Maele, our vice-chairman.

What I'd like to do this morning, Mr. Chairman, is get the committee to understand four key things: first, who we are; second, to explain our situation to you, as it is bad and we need help; third, that government policies over a period of years have caused this to happen; and fourth, that we see a solution is available.

I realize you are very busy people, and I will try to be brief.

Our board represents all flue-cured tobacco farmers in the province of Ontario. This is about 1,000 farm families. Since 1957 we have been a provincially mandated marketing board that looks after the production, marketing, and advocacy on behalf of our farmers. We are a duly elected board of 11 farmers. Both Richard and I and the rest of the directors of our board are farmers from across southwestern Ontario, stretching from Brant County across to the Chatham area.

We also oversee a strict regulatory framework for tobacco production that ensures that all tobacco is legally sold in the province through our auction exchange.

That is who we are.

The situation, as Brian has very clearly pointed out, is that we are trapped. Our farmers have invested their life's work in tobacco-specific equipment and assets, their farms, and are carrying significant debt associated with those assets. In many cases, we are second- and third-generation tobacco farmers, and now we have no way out.

We know the Government of Canada, as a signatory to the World Health Organization's Framework Convention on Tobacco Control and through its own aggressive policies, is committed to stopping tobacco use in Canada. One of the consequences of this commitment has been the demise of tobacco farming in Canada. Since 1998 our crop size has reduced from over 150 million pounds down to 55 million pounds in 2006. What that really equates to is the loss of over $200 million of farm gate value each and every year.

We see our request as a logical extension of those government policies. The stated goal of those policies has been to aggressively reduce the use of tobacco products, and those policies have worked. That is why we find ourselves in this terrible situation. We believe it should also be government policy to help farmers make the adjustment out of tobacco production.

We believe now is the time to take the obvious next step and put a plan in place that will eradicate tobacco production in Canada at some point in time. We want to solve this problem once and for all. Last spring we put forward a plan to the government that we believe will accomplish this over a defined period of time. The proposal we put forward is based on a set of principles, those being universal access for all flue-cured tobacco farmers and a fair level of assistance that helps them out of this business, while compensating them for the loss of their livelihood.

We also strongly believe that the communities that have heavily relied on tobacco production for their economy also need a significant amount of help to adjust to a new economic base. Investments need to be made that help both the agricultural and non-agricultural sectors to succeed in this transition.

We have received support from members of Parliament from all sides on our proposals and our ideas, and we have been working closely with government at all levels on this issue. We appreciate the level of serious consideration that our proposal has received. However, time is running out. Last year alone, our production was reduced from 85 million pounds to 55 million pounds. That's a 35% drop in production in one year. We lost over $60 million in our local economy just from one year to the next.

Our farmers have never been in a more precarious financial position. Many cannot hold out much longer, and the anxiety in our community is running at a fever pitch. It is now time to look at the issue of tobacco production in an up-front and mature way and to put a plan in place to deal with it from now until the time that flue-cured tobacco production is no longer used in Canada. We are asking government to fix this issue once and for all.

Thank you, Mr. Chair.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Neukamm.

We'll open the floor to questions now. We'll start with seven-minute rounds. We may have to compress them.

Mr. St. Amand.