Evidence of meeting #35 for Agriculture and Agri-Food in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tractors.
A recording is available from Parliament.
Conservative
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you very much, gentlemen, for being here.
Following up on what Jacques was talking about with regard to dealerships, you seem to be in agreement that biofuels are very positive for the industry. Do you see that there could be more small businesses opening up, in other words reversing the process of the amalgamation of different businesses? Can you foresee that happening in the future, if this industry really gets off the ground?
That's my first question.
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
We're seeing that right now in the Winchester area. There is a small business called the Tri-County Protein Corporation. They extract oil from soybeans and are actively seeking markets to distribute their byproducts, which include a biodiesel or the oils generated from that. This is a small business that didn't exist ten years ago and is trying to break into the market right now.
I could see the need for assistance to help those types of businesses establish their roots in developing markets for byproducts.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
If we talk about machinery, I have the impression that over the last year, business hasn't been that bad. Although we all thought that it really wouldn't be that good, because of the low-income crisis on farms, obviously somebody has been making some money to be able to buy equipment.
If we continue to advance the biofuel strategy, what's the advantage to the retailers and manufacturers? Would there be more of the equipment that you have now to sell? Or will it be more of the same equipment, because people are producing more than they need? Or will there be new types of equipment that will run on new energy, the biofuels, or converted machines? I'd like to know in what direction you think this will go.
First Vice-President, Canada West Equipment Dealers Association
Generally any time an industry has a larger revenue stream, there is going to be an overall benefit. Also, with some of the innovativeness that we see in the rural community, if there's an opportunity, they're going to jump on it.
In Shaunavon, south of Swift Current, a producer group has been working on the development of an ethanol plant. That's a positive example where they're trying to look after themselves.
Any time you see that industry gets more revenue, they are going to buy more equipment. They're going to spend it in local communities, so you'll see a reduction of businesses exiting. Then by all means, if the economy is stronger, there is a potential for new businesses to start up.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Do you see any difference between the ethanol sector and the biodiesel sector? Is one maybe more advantageous at this point in time, from your perspective?
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
Ethanol seems to be driving a lot of optimism.
I would like to confirm something about the fragility our industry has just come through the last several years. When we say it is getting better, it is because it has been so bad for so long that anything right now seems better.
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
Yes.
That is the perspective we have to start from. We are seeing a lot of optimism because of the ethanol plants—positive discussions with the plants they are proposing down in the Prescott area, and seeing, hopefully, some optimism coming out of the Cornwall one—just those things alone.
The U.S., driving their massive surge forward on ethanol, is creating a wave of price increases that have changed our business. We maybe don't realize how close to the wall we were before this changed, but the optimism is very welcome, from our perspective, and it has saved a lot of businesses.
It goes back to the used inventory. We are seeing used inventory start to move again. How we are managing inventory was an absolutely huge concern for us as well. The used inventory was affected by the dollar's up-and-down continual motion. These are avenues we are watching quite closely.
Yes, the ethanol is something we really want to encourage.
First Vice-President, Canada West Equipment Dealers Association
What it has the ability to do for us is to take some of the cyclical nature out of our business. Our business is not for the faint of heart. There is no such thing as a straight line in this: it is up and down, riding a roller coaster the whole time. This will have the potential to provide some stability.
That goes back to the point regarding the CAIS program, or whatever. If we get that in our industry, it provides some stability that everybody is looking for.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
The other point you touched upon was qualified help and wages, and the fact that it is hard to retain good people. Why is this happening? Is it because of the oil sands?
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
Our first approach to this was that I brought a guidance counsellor into our dealership and explained that we are not looking for failures in the school system to change tires. We need top-quality, highly trained kids coming out of school, who want to advance.
With the new technology we are dealing with—global positioning systems, auto-steer, the computers that are required, the diagnostic capabilities required of our new apprentices—the level of technology has advanced so far that a lot of the school systems and the people who are guiding the youth don't realize what we are looking for.
Our biggest challenge, which we have started dealing with, is getting education done at that level to get an interest back in it again, a sense that there is a future in agriculture, that there is a future in what we are doing.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Should we be encouraging more apprenticeship programs, then? Do you see the federal government playing a role here?
First Vice-President, Canada West Equipment Dealers Association
Apprenticeship programs are key in making sure that the space is there, that the qualified educators are there, and that the proper tools in the school system are there as well.
We also require incentives for them to purchase their tools. Just recently—I believe it was just last year—for the first time technicians were able to deduct the cost of their tools.
In our industry, they have to buy their own tools to service the equipment, and they can have up to a $25,000 investment. It is just recently that apprentices, as well as journeymen, I think, have had a small deduction and are able to deduct it, but it is still nominal relative to their expense. We definitely need support in that area.
In the area of technicians, we estimate that there is a need for at least 1,000 technicians in our industry right now. There has definitely been an exodus to the oil industry in the past few years, especially for those of us right beside Alberta. There has been an exodus or a very strong push in wages that has driven our wages up and in turn required us to have higher labour rates.
We have done some innovative things to try to encourage it. I was over, as were John and some other dealers, in Germany at a job fair we attended in both east and west Germany to try to recruit skilled labour there to come over. Some were successful; some weren't. There are some other dealers who have been to the Ukraine. There are discussions now for another Germany trip and trips to Korea and the Philippines to try to do this.
Of course, there are language challenges that come with it, and some cultural issues, but that is one thing we are trying to do. The strength still relies on trying to get people from home to enter our industry.
Conservative
The Chair Conservative James Bezan
Thank you.
We're going to start round two.
We welcome Mr. Hubbard to our committee. He used to be a chair here some time ago, but has returned to work on the great agricultural committee that we have.
February 8th, 2007 / 4:35 p.m.
Liberal
Charles Hubbard Liberal Miramichi, NB
Thank you. I'm glad to be back.
Your presentation mainly talks about capital cost allowance with tractors, and I see you have a combine sheet, but there are many other implements used in agriculture that are really much worse than the 30% we talk about. It is down to 10% and 5% for some of them.
Have you analyzed any of those in terms of what recommendations might do, or are you simply thinking in terms of your own...?
Canadian Public Policy Advisor, Association of Equipment Manufacturers
Yes, we have taken a look at that. I'm not sure if this made it into the letter to the Minister of Finance, but the simplest way of describing it is to just move everything up by 10%. Class 10, which is at 30%, would be moved up to 40%; class 12, which is at 20%, would be moved up to 30%, and so on down the line.
Liberal
Charles Hubbard Liberal Miramichi, NB
Okay; I'm glad you're looking a little bit beyond your own business and into the lesser ones.
I think Jacques has talked about the big problem with used equipment and trying to get that somewhere out of the country. It's kind of peculiar, Mr. Chair, that we bring most of the stuff in from someplace else--there's very little manufactured in our own country--and then we use it a few years, and even at the 30% rate, the thing is worth about... Maybe 75% has been written off by the time you get even 0.3, 0.3, and 0.3, so you have it fairly low. I'm not sure if the agricultural community could afford to get rid of it at 25% of what they paid four years ago.
The other point he mentioned that I think is quite significant is the cost of parts. I know you hear farmers complaining about the little gear they buy, about so long, that costs $700. The off-market maybe is where you can look, but do we have enough standardization in this country with our equipment? It seems New Holland will have a part, and John Deere throws theirs in, and then somebody else....
As dealers, do you see enough standardization in terms of the internal components--not necessarily of the engines, but of other parts of the equipment? You could use a John Deere part if you were in a crunch with a New Holland piece of equipment—
First Vice-President, Canada West Equipment Dealers Association
Nobody would need New Holland or Case equipment if they all had John Deere parts.
Liberal
Charles Hubbard Liberal Miramichi, NB
I'm not sure. I know green is green, and Quebec is big on the John Deere; when I go by in La Pocatière and those places, it's John Deere, but in my own province of New Brunswick it's not quite as absolute.
With reference to the offshore tractors that are coming in now, do you see those? We hear questions in the House about the auto sector and the agreements we're we're talking about making with Korea; the manufacturers and the dealers are looking at this with a lot of raised eyebrows, but we're seeing Chinese tractors now. I see a few of them back home, coming in at prices that you would not believe.
Did they make any dent at all on your figures last year? We talk about tractors at roughly $1,000 a horsepower; they're bringing them in at less than half that. Is that something you are concerned about in our future?
Canadian Public Policy Advisor, Association of Equipment Manufacturers
There are a couple of areas of concern there. So far most of the tractors coming in are smaller tractors. Most of them would be under 40 horsepower; there wouldn't be too many of them over 100 horsepower, from our observations, but let me tell you a couple of concerns that dealers and manufacturers share.
The first is in the standards. The simplest description of that would be the rollover protection safety standards that might exist for a rollover bar on a tractor. Tractors sold in North America have to have certain standards for that rollover bar. Some tractors are coming in with those rollover protection devices, but not to the standard that we expect in Canada. That's the first thing.
Another area of concern is in what we call the grey market goods. I'll give you the example of Kubota; we've had this raised with us through Kubota.
Tractors have come in that are Kubota tractors for other markets. They may have the shift lever for the PTO in a different place, or instead of going up, it may go down, or maybe the locations of the hydraulic levers are not standard or not common on your North American tractors. I don't know if you folks have seen this in your areas, but this is what we've heard from AEM members--that some of these grey market tractors coming in have different standards. For example, instead of having a 540 rpm PTO, it might be 600 to 620 rpm.
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
And the PTO turns backwards in them.
Canadian Public Policy Advisor, Association of Equipment Manufacturers
So with a PTO turning backwards, the tractor would be useless. So those are a couple of concerns we've heard of, and this is where the Canada Revenue Agency or the Canada Border Services Agency should be a little bit more diligent about seeing what's coming into this country.
Director, North American Equipment Dealers Association, Canada East Equipment Dealers Association
And also about not being able to supply parts for them. We've run into a couple of situations where customers want to trade those Kubotas in, and one of the customers couldn't get filters for it and we wouldn't take it on trade, because it was one of these grey market tractors. And there was another one whose PTO turned backwards, because it was designed for another country, which we wouldn't touch either. So he was very upset that he had bought it, and he had bought it through a non-dealer.
But these are issues—
Liberal
Charles Hubbard Liberal Miramichi, NB
They haven't talked about the Chinese ones that I see at home, but anyway—