Agriculture Committee on Feb. 8th, 2007

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

A couple of things. I know that cars' fuel economy hasn't improved by 37 times in the last 20 years, so obviously their emissions improvement is dramatically better than their fuel consumption. I'm suggesting to you that when you're trying to convince the finance minister to help farmers buy new equipment, being able to point out the dramatic improvements, if they're there—which I imagine they are—might be a good sales point.

The other thing involves your second point, which was about incentives to deal with existing diesel engines. Farmers are concerned about the environment, like everybody else, but they're also business people. It would be hard to justify a big expense to take an existing piece of equipment and just switch motors or do something to improve environmental impact but not to really make it work any better or last any longer.

How realistic is this, or is the government program going to have to be 50% or 75% of the cost in order to make it worthwhile?

[John Schmeiser]

I won't go into the specifics of the California state program, but in short, if a customer has an older engine—a tier zero or a tier one—and wants to have an engine job done on it, the State of California will pay for the difference between the cost of the engine job and a new engine. When he gets that new engine, we know basically, from what Howard provided, that the fuel consumption will be better, but just the increase in technology will improve the efficiency for the farmer customer as well.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Right, okay.

The last point I wanted to make was that taking old tractors and sending them offshore, if they get used wherever they land, doesn't do anything for the global environmental impact, does it? A polluting tractor in Canada is a polluting tractor in South America, or wherever it ends up. I think something that would move towards replacing those engines or getting them out of production is probably a better idea than just sending them somewhere else where people are going to use them just as much.

[The Chair, Conservative, James Bezan]

You're out of time, Mr. Devolin.

Are there any short comments on what Barry was just talking about?

[John Schmeiser]

The attitude of a lot of our members is that when we have a used equipment problem, we look for anywhere that can get it out of our dealerships.

The reason eastern European countries have been attractive is their ability to purchase. As Duane said, how do they finance it? It seems they have more ability to purchase a used tractor from Canada than a new tractor from any manufacturer. So it's a meeting of two minds: I need to get rid of this used inventory and I have a buyer over there.

You're absolutely correct on the environmental issue, but when dealers are faced with the situation of needing to move used inventory for financial survival, they will look at what the best route is to improve their bottom line.

[The Chair, Conservative, James Bezan]

Mr. D'Amours, please.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Thank you, Mr. Chair.

I'd like to address two topics with you. Reference has been made to the issue of capital cost allowance for a number of types of equipment and technologies. Net farm profits are currently not very high in general. Depreciation will mainly be profitable from a tax standpoint. What could be the benefits for the farming community?

Furthermore, certain Crown corporations can give the industry a hand in various areas. Farm Credit Canada can definitely help your customers acquire equipment. Whatever the case may be, I'd like to know whether you think the support of organizations such as Farm Credit Canada is enough or whether it should be greater. We're talking about equipment here, not working capital. So this is long-term financing.

I was an accounts manager at the Business Development Bank of Canada before becoming a federal member. That's why I'd like to hear your opinion on the subject.

[Duane Smith]

I'll first speak of Farm Credit Canada. We use them substantially in the financing of equipment; we have a relationship with them whereby when we complete a deal with a producer, we can send the information to Farm Credit and they'll approve it very quickly and fax all the contracts back to us and help finance the deal. Next to John Deere Credit, they're probably our number two financer. The process works smoothly, as producers like Farm Credit understand the business and seem to support it in their growth initiatives. So that's very positive on the producer level.

From a dealership perspective, Farm Credit probably is offering the most unique advantages out there if I want to expand my business, with creative ways of financing that acquisition and transitioning whoever wants to get out of the business. They've got more unique programs to offer me than any other bank I've talked to. I know that in our next acquisition, Farm Credit is going to be who we deal with. They're very aggressive, but they've also got something that meets our needs.

Relating to your first question, on the CCA, I was mentioning to one other individual that in our business about 8% of our customer base drives about 92% of our revenue. So it's a very small group of farmers who really keep us in the marketplace. Those are the bigger farmers, who consolidated and took risks 15 years ago to start expanding their farms and who are able to be successful. They need this to continue for the growth of their operations.

The smaller farmers are still important. They need us for service, for parts, for used equipment. But it's that small segment of our customer base that really needs CCA to recognize the wear and tear in their equipment.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

I very much appreciated your comment on Farm Credit Canada. You say the relationship is good, that things are going well and that that organization's product is unique. I agree with you, but I'd like to know whether you think this kind of organization could offer other solutions to improve matters.

[Doug Tibben]

The only comment I've heard from our sales team—and I second everything that's been said—is that we find Farm Credit to be our number two provider of financing and we get along very well with them. They do a good job for us and we're very happy to have them there.

The only comments that I've had come back are requests for leasing, as Farm Credit does not lease. So we have had some requests for that.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

As regards leasing, that's definitely because the equipment is increasingly technologically advanced. So that enables farmers to make changes after a few years. If there was one aspect that Farm Credit Canada could improve, would that be it?

[Doug Tibben]

Yes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I appreciate your coming out.

I would like to go to number one. I was looking at your chart and reading your comments, and I think we need some clarification. I am just following up from my colleague.

The chart brings up the point that basically two-wheel-drives from 1995 onward have just been on an incline. I think that reflects some of the marketing in terms of those smaller estates. I live north of London, Ontario, and in fact the John Deere dealership there is bringing a dealership together to market specifically not just to agriculture but also to the more affluent parts of the city.

When we get to 100 horsepower and over, since 1997 it's actually fairly static. Then we move to the four-wheel-drive, and I don't know what you mean by four-wheel-drive. I don't know if that's front-wheel assist, or just the big four-wheel-drives.

[Duane Smith]

It's particularly the large horsepower.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay, so those have basically stayed pretty stationary since 1998. Then we go to the self-propelled combines. All of these just amaze me. To watch the technology change in these just amazes me, and I farm. I don't think there's a relationship here in terms of numbers of pieces of equipment and dollars. It is fairly static.

Then we move from 1999 to 2006. We are talking about the last five or six years. There was a comment that low farm prices didn't seem to be effective or weren't a large issue. We are hearing quite the opposite, but when I look at the statistics and at what's being sold, I get a little confused. I see the number of pieces of equipment sold, yet I see the farm incomes in Canada in such a decline. I wonder if you can help me try to rationalize it a bit.

[Howard Mains]

You can see the dip in 2003-04 from the BSE crisis. That's pretty evident. That's one thing I would point out, but indeed the overall size of the market.... I did put a total in there for tractors over 40 horsepower. As you can see, that particular number is around 10,500 to 11,000. That is a rather stable number, but really it goes to the point that there aren't as many farmers as there used to be, and you have to take a look at the absolute number of buyers in existence.

That's one of the things that's driving this. If you talk about the number of acres covered by a tractor over the course of a day...I don't know how many acres one of those new seed drills that can tear up 80 feet of ground can cover in one day--the fellows in Saskatchewan can fill me in on that--but you've got a couple of factors at play: you literally have fewer operators driving tractors, but they are pulling a lot more behind them. That's why the number is stable--at least, that's what I would think.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I think you've answered my question. I think you've helped cement that, if that's a consensus among the rest of you.

I am on the industry and manufacturing committee, and one of the things we talked about was recruitment and skilled trades. Are you finding any disconnect between what the colleges produce with their courses and what they're actually putting out to meet the needs of the commercial initiatives that you guys would have in the industry?

[John Schmeiser]

I don't think so. In western Canada, where our organization is, we have pretty close relationships with all the colleges that provide agricultural technician training, whether it be a one-year certificate program or a two-year diploma program. We meet with them on a regular basis. They meet with our board on a regular basis to tell us what is happening within the college.

The challenge I see is that they have so many spaces, and the number of spaces they have today is maybe one-third of what they had ten years ago. It's because there's just been a lack of people coming forward to enroll in the programs. We want to see them fill the spaces they have. We want to see them grow the number of spaces they have. To us that's a bigger issue than the training they're giving to the students who are there.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

How can you work with those institutions—and maybe you do and can give examples—to help partner in doing the marketing to encourage students to get involved in these high-need programs?

[Duane Smith]

There are a couple of initiatives. One is that we worked with Olds College in the establishment of a completely new program. It's a sales and marketing initiative, where we've provided a $250,000 commitment to them over a five-year period. We have one year left in that commitment. That was a completely new initiative that we partnered with them on. That's one initiative.

There are manufacturer/dealer educational relationships too. John Deere, in particular, has the John Deere tech program throughout the country. Those types of programs, whether with John Deere or New Holland, are extremely positive, because they're very hands-on with the equipment we operate. It's not all theory; it's hands on. It's a kind of co-op program: they work in the dealership for a period of time and then go back to school, so that we can get them up to speed a lot more quickly. We need an enhancement of these to encourage kids to enter those programs.

[The Chair, Conservative, James Bezan]

Mr. Atamanenko, do you want to finish off the third round?

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

This very quick question doesn't concern only your industry, but others in rural Canada. How do we keep those skilled young people there so that they can work at $16 an hour in Quebec as opposed to $60 an hour in Alberta? How do we do it? Do you have any ideas in this regard?

[John Schmeiser]

As the board of directors of the Canada West Equipment Dealers Association, we've partnered with Canada East to create a charitable foundation to raise money to do things such as the $250,000 that's going to Olds College. When we started getting serious about addressing this issue, we were looking for one thing that would solve the problems, and we quickly realized it's a combination of things.

The first challenge we have is to get people into the programs that are there right now, because regional colleges are under funding challenges from their provincial governments, and the last thing we need is for them to cut the spaces because there's nobody going into the programs. It just makes the problem worse for us.

I would like to offer one solution—we're looking for one solution—but we're finding it's a combination of things. Maybe foreign recruitment is part of it, but it's certainly working with the colleges, it's putting money into scholarships, it's appearing before this committee to talk about tax credits for the purchases of tools, just to name a few. It's a pretty long list.

At every board meeting we have, our 13 directors in western Canada ask what we are doing to find techs and what we need to be doing as an association to get them into the program.

[Doug Tibben]

The apprentice tax credit is a benefit as well. It's in place now, and we encourage that it stay.

[Duane Smith]

The only thing I was going to add is that one thing that might help our industry is to take a program similar to what Manitoba has, or Saskatchewan to a much smaller extent, whereby a student going to university who stays within that province will get a deduction on their tax for, I think, up to $25,000. Maybe something similar to that for our industry, whereby if they attend an apprenticeship program there could be some tax assistance to them if they stay within our industry, could be a huge benefit for our industry and ultimately our producers.