Agriculture Committee on March 22nd, 2007

[The Chair, Conservative, James Bezan]

I want to welcome everybody to our meeting as we kick off our study on business risk management and the way it applies to the overall APF.

We are looking at the livestock side of it today, and I'd like to invite to the table Clare Schlegel, with the Canadian Pork Council; Stephen Moffett, with the Canadian Pork Council Safety Net Committee; Jennifer Fleming, who is the executive director of the Canadian Sheep Federation; and from the Canadian Cattlemen's Association, Travis Toews and Ryder Lee, who will be making their presentation.

I ask that everybody keep under their 10 minutes so that we can have as much time as possible for questions. Bells are going to ring at a quarter after five, so we do want to wrap up well in advance of that. We do have some housekeeping business that we have to take care of before that time, so I will be adjourning this discussion and suspending the meeting at about five after five so that we can deal with the business and our travels to eastern Canada.

With that, I'll turn the floor over to you, Clare, if you'd kick off the presentations.

[Clare Schlegel, President, Canadian Pork Council]

Good afternoon, everyone. It's a pleasure to be here today to speak with you about business risk management. I'm Clare Schlegel, president of the Canadian Pork Council, and l farm in southwestern Ontario, halfway between Buffalo and Detroit—there's no humour here. With me is Stephen Moffett, and Stephen farms in New Brunswick.

The Canadian hog sector is a large segment of Canadian agriculture, with production occurring in every province. In 2006, 30.8 million hogs were produced in Canada. Approximately 8.5 million of these hogs were exported live to the U.S., either as weaner pigs or market hogs. Of the remaining 22.3 million hogs processed in Canada, 50% of the pork was exported to 88 countries around the world.

While our success in export markets has allowed the sector to grow, it also places very large demands on producers to meet the expectations of customers in both the domestic and international marketplaces. Risk management, therefore, is part of the everyday decisions made by producers. Currency fluctuations, interest rate changes, input costs and availability, management challenges, and increasingly sophisticated customer demands are all big risks. The vast majority of these risks are borne directly by producers.

The question facing us today is where governments can play a role in helping to mitigate risks. We have read the discussion paper developed to help frame the debate around business risk management, as well as the next generation of agriculture and agrifood policy framework. We support many of the concepts within the paper, and we will touch on them below, beginning with the design principles.

The first principle outlined in the paper and identified as the most basic principle is to ensure that funds are used in an equitable manner, treating producers across commodities and regions equitably.

The CPC is fully supportive of this principle and asks governments to focus on this. It is clear that the current suite of programs does not meet this principle, particularly where programs originally intended for crop producers are not expanded to livestock production. We will speak more on this in terms of production insurance.

We support the principle that government funding should focus on mitigating the negative impacts of uncontrollable and unforeseen events, and we support that programming must conform to international trade obligations and minimize the threat of trade actions. The hog sector is no stranger to trade challenges, as you well know, having experienced countervail and anti-dumping actions. It is well aware of the costs of such actions in direct expenses and, more importantly, of the damage that arises in a sector as a result of the uncertainty created.

The design principle that looks for producer involvement in sharing the program costs is, as in many cases, unnecessary. As noted above, the majority of risks facing hog producers are borne directly by producers. Producers already assume considerable risk in production, and sharing in the program cost is simply an added expense.

Regarding the new suite of business risk management programs, we have the following comments to make—and I'll turn it to Stephen at this point.

[Stephen Moffett, Chair, Canadian Pork Council Safety Net Committee]

Mr. Chairman, we want to stress that the Canadian Pork Council supports the continuation of a margin-based income stabilization program. The current CAIS program has met the needs of many hog producers across the country, although there certainly can be some improvements. There have been some significant improvements made, but there still are a few more things we could do.

We would like to see a deeper negative-margin coverage, that is, 70% instead of 60%. We would like to see the historical reference margin based on the better of the past three years or the Olympic average; we think that would make the program more responsive, and it would certainly work better for a larger percentage of the producers. We would like to see eliminating the risk of government prorating of payments, and we would like to improve timeliness and reduce the administrative burden.

Program payments should be considered as income in the year of the hurt. Often we receive the money the next year or later, and of course there are tax implications related to that.

Predictability and bankability is one of the things we hear most from producers, and we would like to see improvements around that. I think there have been improvements made. I know the department is trying very hard to make the forms more simple, but there's still difficulty in predicting what you're going to receive. There is a commitment to put some calculators on the Internet, but they're not there yet. I think we need to persevere and have those available so producers are better able to calculate what they're going to receive and better able to understand the program, especially as it relates to structural change.

There have been many complaints about the current CAIS program, but the whole farm program available to all commodities is a useful approach, and we feel it should be maintained. It's whole farm, and from a trade point of view, we feel it's a good way to go.

Regarding the special disaster coverage, the Pork Council supports the creation of a framework for disaster relief. It is recognized that governments will not be able to provide a suite of business risk management programs that can address all eventualities. Therefore, having a framework to guide special situations will be valuable and will provide producers with the confidence that assistance will be available in extreme situations. Efforts must be made to see this framework finalized. That would give producers more confidence that they don't have to rely on ad hoc payments, that there is a framework there and there'll be something they can draw on, and that they won't necessarily need national publicity in order to get an ad hoc payment. I think having that framework would be very helpful.

It is in the area of production insurance that the Pork Council has the most frustration. With the launching of the first agricultural policy framework, promises were made that production insurance would be extended to other commodities, including livestock. Despite work that has been done by both industry and government, we are no closer to the implementation of a suitable production insurance program for livestock. The result is a huge gap between crop producers and livestock producers, and we feel this needs to be addressed.

This gap has been made painfully clear to the hog sector in the past several years. As you know, many producers have been hit hard by this new disease caused by a circovirus. It's very devastating. It's a disease that has actually put producers out of business. We don't feel that this needs to have happened. Had we had good production insurance, we would have addressed the losses that producers suffered.

Of course, from our point of view, it's twofold. You could say that many of those producers would receive benefits under CAIS. That's true, and they have, but the problem is that it erodes their historical margin. Then when they get into a situation where the price collapses, the CAIS isn't able to do what it was meant to do, because they've already used up that portion of their margin.

Fortunately, vaccines are now available, and that appears to be working effectively to control the disease, but the industry cannot afford another circovirus situation. We certainly appreciate the work that has been done by Agriculture and Agri-Food Canada to look at production insurance, but it is difficult to see that a viable scheme would be available in the near future, and that's our concern. As I mentioned, the second effect of the lack of production insurance is the impact it has on our CAIS reference margin.

The discussion paper notes that any perils covered by existing private insurance policies would be excluded by production insurance. That's a little bit of a concern for us, because we want assurance that the federal and provincial governments will continue to be committed to providing equitable treatment to livestock producers as they do to crop producers. The federal government is providing funding to research projects examining what private insurance would look like, and these projects could actually result in a private insurance tool. Obviously we wouldn't want to see a private insurance tool come in and then negate the need for production insurance for livestock.

I just want to stress that we're really concerned that production insurance be similar from province to province. Crop insurance, as you know, is provincial territory. We're really worried that it would be very different in each province, and that has trade implications for us. So it's a big concern from the federal government's point of view.

On the cash advance program, we're really pleased that there have been amendments made that will make a cash advance program more workable for livestock. In reality, for small producers, I think it's going to work really well, and I commend the government for that. There are some limitations on the maximums, so a significant-sized producer, in reality, will only be able to access the program half as much as he would have had he been a crop producer, because of our shorter cycle. So we encourage the government to look at that issue.

I'm running out of time here, but I have one more point. Regarding the latest announcements and the idea of the deposit-based program, as you know, we did support the federation's concept that the federal government look at the idea of a NISA-type program, which could replace the top 15% of CAIS. We feel that this idea has a lot of merit and we're interested in it, and we would like the federal government to take a look at it. We probably don't have a real position, because we don't know all the information, so our position is that we need to take a look at this and see how it works. There's a little bit of concern that there are winners and losers, but we're looking forward to working with the government on that.

Those, in a nutshell, are many of the issues we're interested in, so we look forward to answering questions.

[The Chair, Conservative, James Bezan]

Thank you. You went over by only about four seconds, so that's great.

Madame Fleming, would you begin your presentation?

[Jennifer Fleming, Executive Director, Canadian Sheep Federation]

Sure. I'll try to make up for the time he went over and make mine really brief.

First of all, I'd like to thank you for the opportunity to speak to you today. The Canadian sheep industry definitely appreciates the opportunity to be here to present our thoughts on business risk management.

The Canadian Sheep Federation represents all 13,000 producers in Canada. We have nine provincial members and two associate members.

The national sheep producer organizations—the Canadian Sheep Federation, the Canadian Sheep Breeders' Association, and the Canadian Co-operative Wool Growers—have all accessed the programs provided to the agricultural industry through the APF programs. We've used these programs to address some of the risks that sheep producers face and to increase our industry's viability and sustainability.

In particular, these programs were beneficial to us as we navigated our way through the May 2003 border closure that had a devastating effect on our industry. Our imports had been set to increase in 2003 by 71% over our 2002 exports. To have that border closed to the U.S. and subsequently to Mexico really devastated our purebred sector in particular.

While we have benefited from the programs that were available to us, we do have concerns over their effectiveness and their ability to meet the immediate needs of producers.

Just by way of some overall comments, any effective business risk management program has to be easy to understand and simple to use in order to facilitate producers' access to the program and the speed with which assistance can be provided.

In addition, the programs must also be flexible not only on a national basis for each commodity but also on a regional basis. For example, the OIE is moving away from zoning countries as free of a disease and moving towards declaring regions as free of a disease. We may see an increase in the need to have programs available for certain areas of Canada, not necessarily to the country as a whole. So any kind of program that's implemented needs to be adaptable and flexible, but it also needs to minimize any kind of interprovincial competition.

The sheep industry recognizes the importance these programs have in mitigating risks to producer organizations that rely largely on exports. We also, however, have a need for the programs to focus on our ability to expand our production and meet our domestic needs. Currently we fill only 50% of the demand for lamb in the country.

In order for programs to be effective at supporting both international and domestic needs, they have to be comprehensive in nature, encompassing all aspects of the value chain.

I'll now just make a few other more specific comments.

In terms of farm income, the sheep industry would like to see a long-term strategy dedicated to addressing the declining farm incomes. Despite government intervention during crises such as the BSE border closure, incomes dropped. We feel this can be partially attributed to the fact that assistance programs do not react readily enough to producer needs and they don't generally provide business interruption assistance. So producers are often left accumulating debt while awaiting assistance.

In terms of business interruption assistance, there can be issues such as loss in production, cost of feeding animals that don't have a market, welfare slaughter, carcass disposal, and cleanup.

We'd also like to see expanding agricultural lending capabilities for organizations such as FCC, for production issues and programs for producers, which can result in positive changes to farm incomes. Additional benefits of these would be an increase in the understanding and transparency of business risk management programs.

In terms of production insurance, as does the pork industry, we do appreciate the fact that this issue is being expanded to incorporate livestock. However, as it's currently proposed, it doesn't adequately address the needs of producers.

The current model covers only mortality caused by insurable disease, mandatory slaughters, and preventive elimination ordered by a vet. It does not cover losses due to accidents, weather, production, or predation, which is a large reason we're not having as much flock expansion as we'd like.

The production insurance programs need to be developed in full partnership with the commodity organizations to ensure they're meeting the commodities' specific needs.

In regard to CAIS, this program was ineffective for many sheep producers and was complex in nature. It was ineffective primarily because the inventory date was set to be at a time of year when the majority of market lambs had already been sold.

In addition, some producers were asked to pay back the money as their margin values were not adequate in a downturning market. In short, producers invested time, deposits, fees, and accounting costs into a program that they felt was unpredictable and slow and to which they are now indebted.

To wrap up that brief presentation, I'd like to express our thanks for the March 9 announcement of the $1 billion investment in agriculture to improve farmer incomes. We welcome any and all support to agriculture. However, we do realize that the funding will not be available until after the budget is approved and that further details are required. And again, I would like to thank you for the opportunity to give this presentation today.

[The Chair, Conservative, James Bezan]

Thank you very much, Madam Fleming.

We'll now go over to Mr. Toews of the Canadian Cattlemen's Association.

[Travis Toews, Director and Vice-Chair, Domestic Agricultural Policy, Canadian Cattlemen's Association]

Thank you, Mr. Chair, for holding this hearing on business risk management and for inviting us to advise the committee on the policy views of the Canadian Cattlemen's Association, an organization that represents over 90,000 cattle producers across Canada.

My name is Travis Toews. I am an elected director of the Canadian Cattlemen's Association. I serve as vice-chair on the Domestic Agriculture Policy and Regulations Committee and am also chair of the Biofuels Subcommittee. My family and I ranch west of Grande Prairie, Alberta, and operate a cow-calf backgrounding and yearling operation.

As l'm sure you know, Canadian agriculture is exposed to many risks, and the cattle industry is no exception. While many of these risks are difficult to mitigate, some can be managed with reasonable effectiveness. Risk management options available to producers include diversification, private insurance, commodity hedging and forward contracting, stockpiling feed, and robust vaccination programs, to name a few.

The Canadian Cattlemen's Association sees these and other private sector means as the preferred tools for business risk management in Canadian agriculture. We do acknowledge that government programs play a role in agriculture risk management and believe that in exceptional circumstances this role is legitimate.

Accordingly, we have a number of principles that we believe government programs should comply with. These are:

- Normal income fluctuation risk should be the responsibility of producers;

- Programs must be as market-neutral as possible and structured to minimize influence on business decisions;

- Programs should not alter the competitive balance within industry, between regions, between sectors, and between operation structure types, including operation size;

- Programs must allow industry to be driven by clear market signals;

- Programs must be structured to minimize risk of foreign trade action; and

- Programs should be transparent and predictable.

The Canadian Cattlemen's Association's first priority regarding government's involvement in business risk management is that Canada develop a national disaster program framework. In May 2003, Canada experienced its first case of BSE. In the following weeks and months the industry struggled to avoid complete shutdown and worked with governments attempting to address the issues. If a predictable disaster framework had been in place, solutions to the issues would have been timelier and the industry could have functioned with more certainty.

A national disaster program would address both natural disasters such as floods and massive droughts and “like natural” disasters such as border closures. This framework would pre-emptively define a disaster and set out funding parameters, governance, and, to the extent possible, program details specific to the disaster.

Producer groups and organizations could work with governments to proactively develop plans that could fit into this framework. The predictability created by this type of framework would reduce industry uncertainty and encourage investment in Canadian agriculture. Without a disaster program framework in place, some disasters receive ad hoc support while others do not. Just last spring, an area of Saskatchewan and Manitoba farm land was flooded out. It was not seeded, and a disaster that nobody could plan for occurred. The government stepped in with a program to partially offset producer losses incurred as a result of that disaster. This type of program is something cattle producers in southwest Saskatchewan and the Peace region of B.C. and northwestern Ontario look at now when they consider the drought they have experienced for up to the last three years. They wonder why one disaster qualifies for aid while another one does not. Without a framework in place, events are not treated consistently by governments, and tensions and competitive imbalances occur.

Last year a draft disaster program framework was presented to us by AAFC. Discussions involving industry stopped in November. We fear that progress on this framework has been stalled by federal-provincial negotiations, and we believe that development of this program framework should be a top priority for agriculture policy moving forward and that industry needs to be involved in the process.

I would like to now discuss the CAIS program, the government's cornerstone income disaster and stabilization program.

While the CAIS program has undergone some recent improvements, it fails to comply with a number of the principles I outlined earlier, particularly as the program applies to income stabilization. The CAIS program can be intrusive on business decisions, including organization structure, breeding herd buy/sell decisions, and cropping rotations.

CAIS provides a disincentive to producer risk management. It is most lucrative in times of increased volatility. This discourages the use of risk management tools available to producers, such as diversification. In our area, some producers who used to rotate crops to ensure that they had a balance of exposure to risk each year have changed their operation to increase their swings in income. They now realize relatively high margins in some years and very poor margins in other years, increasing their income volatility and their CAIS payments.

CAIS is complicated, unpredictable, and non-transparent. While efforts are being made to improve the program in this regard, margin-based, targeted programs that adjust to structural change will tend to be complex, poorly understood, and difficult to assess on a timely basis.

The support in the stabilization tiers of CAIS is amber, which is always a concern for trade action. The recent announcement made by the Prime Minister and federal agriculture minister, creating a contributory-style producer savings account, appears like a step in the right direction.

There is a piece of the budget that does concern us. The recent announcement allocating $500 million to address high costs of production concerns us for several reasons. Our primary concern is the potential effect this type of program may have on foreign trade. The cattle industry in Canada exports approximately one-half of its production in the form of live cattle and beef. This leaves the viability of the industry extremely vulnerable if a trade action were to occur. Government support that is based on the cost of production can be vulnerable to countervail actions by our trading partners, including, and most likely, the U.S., which is overwhelmingly our largest customer.

Support programs based on cost of production can alter the competitive marketplace and, in time, undermine productivity. When an industry receives ongoing government support, the support tends to be capitalized in the cost of land and inputs. Over time, ongoing government support will lead to reduced competitiveness for agriculture in Canada. Any reduction in industry competitiveness will be met with calls for increased support, creating an economic environment that is unsustainable.

We also have concerns in this regard as it applies to an emerging North American ethanol industry that is a competitor with livestock producers for feedstuffs. Based on information available to us, the viability of the ethanol industry in North America at this point is largely dependent on government support and mandated use. We are concerned that government support to a competitor of the cattle industry may indirectly reduce the competitiveness of the livestock sector.

While it is our opinion that sound industry planning and innovation, along with private sector tools, should be the preferred means of business risk management in Canadian agriculture, we do believe governments can play a vital role in creating and administering a national disaster program.

Thank you for the opportunity to speak to these important issues. We would be pleased to answer any questions you may have.

[The Chair, Conservative, James Bezan]

Thank you very much.

Just to remind those members who were out of the room when we kicked off, we are going to suspend at about 5:05 to do some housekeeping. The bells start ringing at 5:15 for votes tonight.

We'll open up the first round to you, Mr. Steckle. You have seven minutes.

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

Good afternoon. Thank you for appearing. This is a very timely subject, given that we've just had a budget delivered and some new programming announced.

I'm going to direct my questions first to Mr. Toews and to Mr. Schlegel, and then perhaps to the three of you in terms of the three industries that are here today.

Mr. Toews, you mentioned in your presentation to us today that the viability of the industry would be extremely vulnerable if trade action were to occur, largely due to the fact that half of our production goes outside the country, particularly south. During the crisis from 2003 to 2005, there was a great effort made by both your industry and the government to increase our slaughter capacity. To some relative success, that was accomplished, but now we're seeing that capacity not being utilized because farmers have chosen to send their beef south. Are we not setting ourselves up for another disaster if something were to happen again? Is the industry as shortsighted as I might think it is, in the fact that it is allowing this to happen? Even though there may be a dollar or two more made by doing that, should we not be boxing this beef and sending it south?

We have tried to help your industry. Prior to 1993, there wasn't much interest in the cattle industry being involved in programming. The cattle industry was pretty independent. I know the industry quite well. I know that in the past they have frowned at us helping other sectors, but they found that their independence came to a point where they could no longer sustain the losses without government intervention. Where do you see your industry on this issue going forward?

[Travis Toews]

Thank you for that.

Since 2003, processing capacity in this country has expanded. We can now process or have the capacity to process all the cattle we produce if we run at maximum capacity or near maximum capacity. We do have a challenge in this country, in this industry, to maintain that capacity and not leave ourselves in the risky peril that we were in prior to 2003.

The question really comes down to competitiveness. Cattle producers will sell their cattle to the highest bidder. If American packing plants are more competitive, to the point that they can outbid Canadian plants on Canadian cattle, there will be a tendency for the cattle to move south and an underutilization of capacity in Canada.

I believe it's vitally important that we have a regulation structure in place in the business environment, as much as possible, to allow our plants to be competitive with their U.S. counterparts.

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

Is that something that has to come from within your industry and not from government?

[Travis Toews]

It's a combination. Obviously the cattle industry doesn't control the regulatory environment. That's a combination of municipal, provincial, and federal legislation. From that standpoint, there is some government involvement.

At this stage of the game, again, cattle producers will sell their cattle to the highest bidders. At this point, U.S. plants are vigorously bidding for our cattle.

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

I don't want to leave that, but I must.

To you, Clare, we share a common geography in terms of where we come from. I myself am a pork producer. At least, my operation is still operating, even though I'm not there.

The pork industry is at a crossroads, given that there is the possibility of our major slaughtering capacity operation moving its operations into Manitoba. That is on the horizon.

What kind of a backup plan do we have, given that we sell a lot of our live hogs to the States? We send a lot of our weaner pigs to the States. What if, tomorrow, there was to be some sort of an intervention on the part of the Americans to say they no longer wanted Canadian pigs, whether they be weaners, whether they be shoats, or whether they be market pigs? What is the backup plan, particularly relative to the Maple Leaf issue?

[Clare Schlegel]

Just a lot of prayer, Paul.

That's probably one of the largest areas that has consumed our time in the last two years. Working through the pork value chain round table, we've given thought to this whole question of market collapse. What happens if a border shuts? What happens if foot-and-mouth disease appears in Virginia, for instance, instead of north of the border? We still would have problems moving pigs around.

We're probably one of the most vulnerable countries in the world in terms of being exposed to border action. We have to work toward integrated solutions. We have to work toward harmonized standards, particularly in Canada and the U.S., but beyond that in terms of pricing, in terms of OIE standards with regard to animal welfare.

In terms of actual plant closures, it's not only Burlington. The Maritimes are potentially threatened. In the Saskatoon situation, producers there are very concerned. A report will be coming from the round table to the federal government, hopefully next week, outlining some of our thoughts in those areas.

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

This is for the three of you, and you may answer however you wish and in whatever order you wish.

Since we're talking about risk management today, the grains and oilseeds producers in Ontario put forward a proposed plan about a year and a half ago. I realize that's based on units. Would you like to see a risk management plan for cattle, hogs, and sheep? Would it work on a unit-based system for you, or would you see it going forward as a margin-based program? That is rather more difficult, but again we have to look at the trade issues.

Where would you see that going? Could the proposal put forward by the grains and oilseeds producers be adapted to work for the livestock sector as well?

[The Chair, Conservative, James Bezan]

Let me ask everyone to make a brief response to that. We're almost out of time on this round.

[Stephen Moffett]

From the point of view of the pork council, we went on record as being very sympathetic to the plight of the grain producers. At that time many of them were losing their farms as a result of currency changes and programs in the U.S., and it was a real issue. At that time we said we would support some kind of support program for grains because there was a real need there. We look at it with a bit of trepidation, because, as you know, we're extremely paranoid about any kind of action that would make us countervailable. If there were a program specific to grain that was deemed to be a pass-through and a subsidy to pork, we could be affected.

So our position is that there certainly is a risk. Whether we can say we absolutely want zero risk...I'm not sure how far we can go. Whatever we do, we have to be very careful and have the trade people involved to make sure it's not deemed as a pass-through subsidy to livestock.

[Jennifer Fleming]

I think it's something we'd be willing to look into. It's not something we've actually discussed in any great detail. All of our conversations have focused on margins.

[Travis Toews]

From the Canadian Cattlemen's perspective, a program that basically worked off units of production would concern us initially, from the standpoint of trade and countervail risk. Without looking at the details, that would be my comment up front. Access to trade, countervail risk, and vulnerability are of utmost importance to our sector.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Steckle.

Monsieur Bellavance.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, Mr. Chairman.

Good afternoon, and— thank you for your testimony.

This is not the first time the Standing Committee on Agriculture and Agri-Food has examined the issue of risk management, and it will undoubtedly not be the last. Whatever the case may be, it is always good to conduct an update, especially of the malfunctioning of the Canadian Agriculture Income Stabilization program. I think we around this table, and even in Parliament, agree that that program is far from being as effective as it could be.

We are starting to hear witnesses, but the fact remains that documents from a number of associations are telling us that one of the viable solutions for replacing the CAIS program would be to implement a self-management component for the first 15% of risk, as was the case for the NISA program. Here we're talking about a program by sector, including the livestock sector, managed by the producer. There are various criteria, of course. We're also talking about maintaining a program like the CAIS program to cover significant risks.

I'd like to know whether, with a view to replacing the present CAIS program, you at the Pork Council consider that that is one of the potentially promising solutions.

[Stephen Moffett]

Mr. Chairman, as I said earlier, we were very interested in the announcement of a NISA-type program. We didn't make many commitments beyond that.

We certainly have experience with NISA. When we had the NISA program before we felt it was trade friendly, and I think it could continue to be trade friendly. So we're supportive of that.

I think the NISA program was not a real benefit to hog producers in the old days because there wasn't enough money there. NISA was based on eligible net sales. At the end we were starting to look at some other kind of trigger that would be a little more useful for livestock.

The easy answer is that it would be great if there's enough money in the program. I think that's the case here.

We think NISA would work well for crops, because eligible net sales is a much larger percentage of their total sale, whereas in our case you start to deduct some of the other commodities you buy and your eligible net sales become a smaller percentage.

If we do go to that type of a program, we would probably like to look at some other kind of mechanism other than eligible net sales—something more like a gross margin or some kind of a net value-added trigger. If that was the case, I think we would certainly be willing to look at it. We have been saying for some time that we would like to have more information on how that would impact producers. I understood from the minister last week that there has been some work done. We've asked to see the work that has been done and how that would impact pork producers.

[Jennifer Fleming]

We looked at the NISA program. Historically, sheep producers did not take advantage of it, for a number of different reasons. One reason I've heard is because it didn't help producers who were pasture-based, which is a lot of the sheep production in the country.

I think our first reaction would be a bit of hesitation. But we definitely want to discuss it further.

We're also a bit hesitant because there is a feeling that some of the other programs that have been implemented didn't adequately meet our needs. As I stated earlier, the inventory date wasn't adequate with CAIS. We didn't have enough animals on farm in order for it to be effective for sheep producers. So there would be a bit of hesitation, I'm sure.

[Travis Toews]

Consistent with the principles of the Canadian Cattlemen's Association regarding safety nets, we would basically be in favour of at least investigating the movement to a broad-based contributory-style program, particularly for the income stabilization tiers. I think CAIS, the targeted margin-based program, works reasonably well in the disaster tiers. But in our opinion, when that targeted margin-based approach is applied to income stabilization, it can be intrusive on business decision-making. It can provide a disincentive to producers for managing their own risk and using all tools available to manage their risk, and it rewards volatility.

We would see value in investigating the broad-based, non-targeted, contributory-style approach for the stabilization tiers in our safety net program.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Schlegel, last November, we heard from the Fédération des producteurs de porcs du Québec. At the time, we were examining the crisis in the pork industry. In its brief, which I have recovered and which is very interesting, the Federation talks about the advisory committee that looked into income protection. It talks about that program, and says that a definition of the term “insurable disease” used in the report of that advisory committee is not adapted to the hog sector. It states:

This proposal specifies that losses resulting from diseases which the insured knew were present before the contract took effect are not covered.

Once again, consultations are being conducted on certain programs without coming to an acceptable solution for all sectors.

Have you had any news of this study since then? Has that advisory committee made progress? Have you had any news of about what is going on? Do you know whether it has corrected certain deficiencies?