Thank you, Mr. Chair.
Good afternoon, members, and thank you for the opportunity to speak to you on this critical issue of Canadian agriculture, and critical particularly to Canada's grains and oilseed producers.
My name is Jim Smolik, and I'm a director with both the British Columbia Grain Producers Association and the Grain Growers of Canada. The BC Grain Producers Association represents the interests of the majority of the grains and oilseed producers in British Columbia. The Grain Growers of Canada is an umbrella organization, with member associations in most regions of Canada. It serves as a national voice for grains and oilseed producers.
You've already heard a number of presenters who have clearly expressed to you some of the depth of challenges producers are facing in Canada today. In my presentation I'm not going to focus on the historic income situation, but rather look forward and identify, hopefully, some of the solutions, or at least maybe a path in that direction. I'll be touching on the effects in my area, the Peace River, but rather than just identify problems, I'd first like to talk to you about solutions.
There are two ways to deal with the current situation. One is to solve the root cause of why we as Canadian producers are struggling to make a living from the marketplace. The other is to ensure that we have proper safety nets for risks beyond our control, such as weather and international subsidies.
I think those two statements are really key. If you look at any business in Canada, they look at those two statements. First of all, they define and try to solve their risks; they also have to have a mitigation strategy in place.
I would like to touch on a few root causes that continue both to demand substantial government investment in safety nets and to put stress on family farm units.
First, we know that one of the key factors in the decline of our reference margins is the unfair use of subsidies by our trading partners and competitors. The most recent study by Agriculture and Agri-Food Canada shows that between 1995 and 2000, 25% of the commodity price decline was due to foreign policies. In dollar terms, the cost to the grains and oilseed producers in Canada of that 25% price decline is approximately $1.3 billion annually.
Second, our agriculture industry is reliant on trade, both domestically and internationally. It is critical to the long-term growth and success of our industry that we operate in a rules-based environment. Whether that be through a successful WTO agreement or whether it come through a number of bilateral and multilateral deals with our customers, we must put the resources into getting fair market access for our products. I don't want to belittle the interprovincial issues in trade and problems with it. I don't have any numbers on it, but I'll refer to the 1995-2000 study on international trade. It estimated that tariffs cost Canadian grains and oilseed producers $1.2 billion annually.
If you add those two up, it's $2.5 billion annually because of subsidies and tariffs. To put that in perspective, that's between three and four times the $755 million grains and oilseed payment program that came out approximately a year ago.
From our point of view, leveling the playing field in world trade clearly shows the positive and tangible benefits that can be realized for our sector. This would also achieve our goal, as producers, of maximizing our returns from the marketplace and not from programs.
We would like to recognize both this government and the immediate past government for recognizing the long-term decline in prices and for their attempts to address it through the grains and oilseed payment program.
However, from trying to do the right thing, other problems have arisen. The grains and oilseed payment program was specifically designed to assist grains and oilseed producers affected by the steady decline in grains and oilseed prices in the last 10 years. A recent decision to include this ad hoc payment as income for 2006 CAIS purposes will see approximately 20%, or $150 million of the $755 million, offsetting 2006 CAIS indemnities. Producers in the unfortunate position of triggering CAIS in 2006 will in reality get less support than others, as federal ad hoc, non-business risk management dollars will, in effect, offset the federal-provincial business risk management program. It must be noted that as producers under the current business risk management agreement, we pay a fee and are therefore entitled to that coverage, regardless of ad hoc funds.
The simple solution would have been to call that ad hoc funding “other income” for CAIS purposes.
Our industry has rapidly advanced to where it is today through research and innovation. Looking ahead, we see food as health and we see nutraceuticals as being a tremendously important segment. Every week, it seems we see another announcement on trans fats being eliminated or on that type of issue. We continue to hear more about high-oleic and low-linolenic products. Consumers are looking for products to help them lead healthier lives.
We need both public investment and much stronger incentives for private sector investment in these areas as well. These types of high-value niche market products will go a long way to move Canadian farmers away from simply being shippers of low-value bulk commodities into an increasingly price competitive international market.
Another very exciting and very important piece of the puzzle of improving farm income is biofuels and bioproducts. Here again, Canadian producers are ready, willing, and able to embrace the future, but we need government to step up to the plate and help provide competitive incentives to allow industry and producers an environment in which to flourish.
I think it has been noted quite well that if we don't have the incentives or very close to the same incentives as the Americans, the biodiesel plants and the ethanol plants will continue to be built on the other side of the border and we'll just simply import the finished product to fulfill our mandate.
While the focus has generally been on ethanol and biodiesel, there are many advancements in the bioproducts area that will reduce our dependence on non-renewable products. I'll give you a personal example. On our John Deere combine, there's a big back shroud that covers the fuel tank. It looks like plastic or fibreglass. It's actually made from corn and soybean byproducts. I know that for at least ten years the roofs on the John Deere combines have been made out of that product. So it is a very exciting and viable alternative.
Another example is the planes we fly in. Just look around the plane when you get in it. Everything is plastic in there. It's something where we could have a renewable resource. We just need the incentives there to make sure that happens.
I feel that it's also important to raise the regulatory burden that government puts on all levels of the agricultural value chain. For this reason, we welcome the smart regulations initiative and strongly encourage the government to keep the pressure on all of your departments to follow through.
At the recent wheat and barley growers convention, one speaker identified, for example, that the new crop input products in Australia take about 250 days in their approval process, while the Canadian average is over 800 days. So companies that are looking to invest and bring new products to market certainly have to think twice about investing in Canada.
I'll now give you a very brief overview of the situation in the B.C. Peace River area this year. I could say there was extreme drought and stop right there, but 2006 was the driest year in recorded history. The BC Grain Producers Association got a lot of calls from our members to lobby the government for ad hoc assistance. We felt that it was prudent, first of all, to work with our Minister of Agriculture, Pat Bell, to define what we were going to get out of the CAIS program and out of the production insurance, because we respect that both the federal and the provincial government put money into those programs.
Minister Pat Bell was gracious enough to offer one of his staff to work with the B.C. grain producers, and we went through a process of trying to define this—and yes, some of these are estimates, because we're estimating 2006 CAIS payments and production insurance payments—and we came up with an average cost per acre value as input cost. When we subtract the two—and this is not a final number yet—it appears there's about a $40-per-acre gap. That's under maximum coverage for production insurance in B.C. and maximum coverage under the CAIS program.
So, understandably, there's certainly reserved optimism in our area. But if there is a silver lining, I think the silver lining that I see is that producers have adopted beneficial agronomic practices. Whether that's zero till or minimum till, or practices of that nature, or maybe even variety selection, we see that the farmers themselves are looking at their root causes and problems and are trying to address those that are within their control.
In short, farm families are facing some challenging times, and there's no questioning that, but we also see that by fixing some of the root causes of the income problem, we do have a bright future in front of our industry.
In closing, both the BC Grain Producers Association and the Grain Growers of Canada do not believe that government owes farmers a living; we do believe that government owes our industry policies that allow us to make a living. These policies are within our grasp. We simply need the political will to get there.
Thank you, Mr. Chair.