Thank you very much, Mr. Chairman.
First of all, I'd like to say it's my pleasure to be here to address the committee today.
I'd like to introduce myself. I'm a fourth-generation farmer from Limerick, Saskatchewan. The year 2007 will be the 100th crop on our farm by our family, so we have deep roots there. We currently are farming 5,000 acres, which used to be considered a large farm. At the present time it's probably somewhere near an average-sized farm in our area of southern Saskatchewan. We grow and process and retail pedigreed seed to retail and wholesale customers.
I guess I should preface my remarks by saying that I'll be speaking from a western perspective. I have been the president of the Canadian Seed Growers Association the past couple of years, so I've seen agriculture across the country, but I can't speak for it today. I also can't speak for the animal industry. I really can only speak for the grains and oilseeds industry, as I know it best.
About the CSGA, we have 4,000 members in nine provinces across this country. We have about 1.2 million acres under pedigreed production. We have been promoting quality seed and genetic improvement for 102 years across Canada. It was needed 102 years ago, and in our mind it's needed even more now.
I want to address this a bit differently than the previous speakers did. I recognize that this is the agriculture committee, but I think we need to recognize that others in government and citizens of this country may ask why the government is responsible for business risk management. I feel government is responsible for business risk management. The government is responsible for agriculture policy in this country, and I think that's a big reason why we need business risk management, because of the long-term failure of our agriculture policies, the failure of our policies to look far enough ahead and to create a positive plan for agriculture in Canada.
Crop production does vary widely. Particularly in the west, we have extreme weather, and that causes risk. We need to have some ways of managing those risks, particularly now that costs are so high. We're in a cash economy in agriculture, and costs are high, so we need to be able to manage that risk from the weather. We also have market-based fluctuations, price risk. Those are to a large extent almost totally out of growers' control, and we need to manage those risks.
Also in the long term, particularly in the last 10 or 15 years or so, individual farmers really cannot compete with foreign subsidies and tariffs. That is something that's totally outside of our control. As producers, we look to our government for support and direction in addressing that and for direction and help in the WTO process, as well as in bilateral agreements. Those are things beyond individual producers' ability to influence, so again that's the government's responsibility. If those things don't produce desired results, then it falls on government to accept the responsibility to assist in business risk management tools.
Again, as I said, in my view I think we've had a very piecemeal and outdated national agriculture policy--indeed, if we can even call it an agriculture policy. It seems that our policy is the same as it has been for the last 100 years: that we're good at doing what we do, so we'll do it, and the world will beat a path to our door. Unfortunately that doesn't work very well anymore, and it's going to work less well in the future. So we need some significant work done in that area.
It's a very competitive international marketplace. A lot of our competition in the international marketplace has been far more proactive than we have. The U.S.A. has a policy, and has had a policy for a large number of years, of having low-priced grains and oilseeds in their country. That's done--not by accident, it's planned, in my view--to encourage value-added production and processing. They are sticking to that plan. They're going about it a different way now with the biofuels industry, but that has been their plan.
The EU has a policy to ensure that they never again have food shortages in those countries. For anybody with a historical view, you can really understand why that would be so important to them. Their view is also to maintain traditional family farms, because society views that as important.
Another competitive international marketplace that we face is emerging competition from new exporting countries. A lot of those countries have lower costs of production than we do, and they have efficiencies in transportation that we don't have. I think we have to be realistic and recognize what our strengths are and what our weaknesses are.
Getting to business, I'll discuss risk management. What components do we have right now? Right now we have crop insurance as a business risk management tool. We have CAIS and we have ad hoc government programs. That's what we have, and we can talk about those and other things.
In terms of the problems we have with the current system, crop insurance often does not cover the costs of production, so that is a problem. It's a pretty good system. I think most farmers appreciate it and use it, but at times of low commodity prices, it does not cover your costs of production. It doesn't make sense to insure your house for less than what it costs you to build it, but that's what farmers are forced to do with crop insurance if market prices are low.
As for the CAIS program, the process is complicated. It's expensive, it's unpredictable, and it's unbankable. I don't mean to dump on it totally; it has some benefits, but those are the problems, and I think you've heard them significantly before. It's also slow to respond to low net farm income. This is especially true for farmers with fiscal year-ends from January to July. If you have a year-end from January to July, you basically are waiting another year before you can file your CAIS form, so you're waiting another year. I know of farmers who have been forced off the farm; a year later, they get their CAIS coverage cheque, and it's a significant cheque. That's an unfortunate situation, and it shouldn't really happen that way.
Another problem with CAIS is that it really is designed to stabilize farmers' incomes. Stabilizing incomes is a good idea in normal times with normal fluctuations in price and production; stabilization does not work well in a long-term trend to lower net farm incomes, and that trend is contributed to by subsidization by our competitors as well as by our higher costs of production. It was really exacerbated with removal of the Crow freight rates. That has taken a lot of net income every year from farmers in western Canada.
Seed growers have unique needs. I should comment on that. We have some unique needs distinct from those of commercial farmers.
We have significantly higher costs of production. Our input costs, particularly on acquisition of stock seed and breeder seed and various things that we use in our production methods, are significantly higher than farmers' costs are. That's another big risk for us. We also have significantly more marketing risks than farmers do. We have quality risks. We're concerned about germination and disease levels, things that commercial grain farmers aren't nearly as concerned about. We also have varietal risk in the marketplace: if we produce a pedigreed seed crop and there's no market for it because the market doesn't want the variety we have, that's a bigger risk for us. As well, there is crop kind risk: if the market changes to another crop kind and what we have is not in demand, well, that's just our problem at the time.
In terms of future direction, I think crop insurance is a good program. Farmers depend on it; it's good for what it's designed to do. In normal times, with reasonable costs for commodities, crop insurance can be effective in covering production risks. There are some adjustments made annually to crop insurance, and I think that program is valuable. It needs to be continually adjusted.
We need to simplify and improve the responsiveness of CAIS. It's good in the fact that it does recognize an individual farm's variability and profitability, so it does reward individual farms and gives them higher coverage if they can show that historically they have earned that coverage. I think that's the good part about CAIS.
I think the implementation of producer savings accounts or a new version of NISA will be very popular with farmers. It addresses the need to have it within their control. They know what they have to help them out when they come into financial problems.
In the longer term we really need to look at our agriculture policy, to get away from dealing with the symptoms to dealing with the problem. We need to be honest, as a country, and look at our strengths and weaknesses and build on our strengths. Let's put our producers in a position where they can be profitable on their own.
Our farmers don't want to be dependent on government. They've been in that situation for a significant number of years, and they don't want to be there. They want to get off the dole. They want to profitable and enterprising and to run profitable businesses. But they need some direction, as I said before. They need some help from government in setting policy to allow them to do that.
As I said, we must focus on our strengths. One of those strengths is innovation. Farmers in this country are very eager to adopt innovation. They've proven that in the past. We need to allow them more opportunities.
One of the problems is that there are impediments to innovation in this country. Through my work with the CSGA, I've become aware of many of those impediments. One thing government can do through the regulatory system is to try to ensure that those impediments are not unreasonable. They were put in place for reasons, but let's ensure that they're not overly delaying innovation.
Thank you very much.