Thank you, Mr. Chairman.
Good morning, members of the House of Commons standing committee. Welcome to British Columbia. Thank you for the opportunity to speak to you on the next generation of agricultural policy framework and, more specifically, the business risk management pillar, and to provide a couple of comments on the science and innovation pillar.
As the chair mentioned, my name is Ross Ravelli. I'm a grain farmer from Dawson Creek, British Columbia. I farm about 2,000 acres. I'm here speaking today on behalf of the B.C. Grain Producers Association.
The B.C. Grain Producers Association is a grains and oilseeds commodity organization representing approximately 400 grain farmers in the B.C. Peace River area. For 21 years, the B.C. Grain Producers have represented our farmers on both provincial and national issues. Clearly, we are a small organization by numbers, but not by the determination, the dedication, and the commitment of our members in agricultural policy discussions. Indeed, many of you knew one of the past presidents of the B.C. Grain Producers, and the one with whom I first became involved on the political side of farm policy. I was vice-president for Mr. Jay Hill, who has come quite a long way. However, I don't want to follow in his footsteps. I'll just put that right on the table.
I think everyone here would agree that farming is a business and needs to be treated like a business. This does not mean big farm versus small farm, or the family farm versus the corporate farm. No matter what the size of the operation we're involved in, we need to use best management practices to be as efficient and productive as we can be. Anything less would be unsustainable.
As farmers, we need to know our risks, and each farm's risks are very different. Generally, in grains and oilseeds, there are two dominant risks that we have very little control over. There is production and there is the price risk, both of which I'll touch on.
We also need to be able to identify the programs—or tools, as they're referred to now—available to us to best manage our risks, whether they're delivered through the private industry, such as crop insurance or price tools, or by government, whether it's production insurance or CAIS, for example.
To this point, I must say—and I heard the other presenters talk about it earlier—that whoever delivers them, the tools must be understandable and simple, and they must clearly identify the deliverable benefits. Program complexity will result in even the best programs sitting idle.
Farmers are the first line of defence in addressing all of these risks, and we must personally do our very best to adapt, understand, and mitigate where we can, as much of the risk as is prudently possible. Agronomically, we must keep up to date and use best management practices to allow us the opportunities to maximize our yield, our quality of product, and our farms' financial viability.
I'd now like to look at production insurance. More directly, there's a problem that I think needs to be addressed within the production insurance program if it is to continue to have farmers' support and, more importantly, if it is to ensure that the program is a relevant business risk management tool for farmers. Simply put, the ten-year averaging of crop insurance yields used for production insurance has not taken into consideration the significant yield increases that we have seen in recent years and will continue to see at a more rapid rate. This is what I call yield lag, which means that the coverages that are being offered to growers today do not reflect the reality of what is happening in the field. Canola is, of course, the leading candidate for demonstrating this lag effect, but all grains and oilseeds will show some lag.
Herbicide-tolerant crops have led to higher yields, due to less competition from weeds and because of better research and better plant genetics. These crops became available in 1996 and are now seeded on about 95% of the canola acres in Canada. The next wave is the move to hybrid varieties. Expected to be seeded on 50% of the canola acres in 2007, hybrids have a significantly higher yield potential than we've ever seen before.
Here's what this means on my farm. Ten years ago, my production for crop insurance on canola was 24 bushels an acre. Today it's 32. However, I will expect to grow 40 or more when I go to seed this spring. That's the yield I have today. Not only can I not cover the 40 bushels that I should be able to produce and will produce, I can only insure up to 80% of my 32 bushels, which is 25 bushels. In today's reality, I'm only insuring 62% of my crop. Does that seem like an effective and sustainable program? Personally, I would gladly assume the risk of the first 20% of production loss if it were to the yields I expect and anticipate to grow.
Further problems arise on the price side of production insurance. Studies by AAFC and the George Morris Centre in the late 1990s through 2001 show the depressing effect that foreign subsidies have on our prices. It's generally in the neighbourhood of a 25% drag. Production insurance and price levels are based on current projected prices at best, and are thus 25% less than they should be. Add these two negative effects to production insurance and you will see why many farmers are questioning the program.
As I suggested in my presentation on the 27th, we need some kind of innovation factor built into the base production insurance. I say the base because I think it should be available to all provinces that have production insurance. From a federal standpoint, it has to be part of the base in order to respond to the offset risks of today, not yesterday. On the price side, we need to work aggressively at the WTO to get free and fair trade for our grains and oilseeds.
I appreciate that this is indeed an insurance program and must meet the principles of insurance, but surely there must be a way to achieve not only the insurance policies, but meet farmers' needs as well.
I'd like to make a few comments in regard to the recently announced $600 million NISA-2 savings program. We know from past experience that NISA was a popular and well-understood program. However, we must provide farmers with the needed program flexibility to access and use these funds as they see fit in their operation, and then to live by what they decide themselves.
I would like to now share some of the business risk management design features and principles the B.C. Grain Producers would like to see incorporated in any new program.
First, a program must be production-neutral and not mass-market-signalled. Farmers need to be able to make their own decisions about what is best for their farms based on agronomic market signals and the risk management tools available to them, whether the tools are available through government or private industry.
Second, a program must be predictable and bankable. Without a doubt this is the biggest criticism of CAIS, as I'm sure you're all aware. The recent design changes in inventory evaluation that were made to the CAIS program are steps in the right direction.
Third, it is important that the federal programs be designed to be national in scope, and be designed in a manner that minimizes the risk of countervail or of creating different levels of support between provinces and commodities. Canadian growers rely heavily on the export markets, and we cannot risk retaliatory trade measures by foreign countries.
Fourth, we can generally support the principle of a margin-based program. However, the program design must have more flexibility to take into account the issue of commodities that have long-term price declines due to the negative effects of foreign government policies.
Fifth, any business risk management program should have positive linkages that encourage participation in other business risk management programs, but ultimately it must allow farmers to make informed business decisions based on what is best for their individual farms.
It is important to mention that rather than simply having farmers rely on its support through its programming, government must also actively work to reduce our need for that programming. As farmers, we want and need to earn our livings as much as possible from the marketplace, and not from government programs or assistance. Government does not owe me a living. Government does, however, owe me a policy environment that gives me the opportunity--and only the opportunity--to succeed.
Therefore, the B.C. Grain Producers Association calls on the federal government to do the following: one, actively negotiate in the WTO, through bilaterals when necessary, to ensure Canadian grain and oilseed farmers and processors have access to markets that are not inhibited by subsidies, tariffs, and non-tariff trade barriers; two, move ahead on the smart regs initiative, not only to reduce the burden of regulation on our industry, but also to speed up the timelines in which Canadian farmers can access new and innovative products; three, provide the necessary incentives for research and investment in agriculture. Innovation has been critical in Canadian agriculture success, even in these very difficult times; innovation is also key to future success and competitiveness in the world market. Fourth, our government must show leadership in dealing with the perpetual transportation problems in western Canada. I need not say more.
In summary, we have presented you with our thoughts not only on business risk management, but also, to a lesser extent, on the science and innovation tools we feel are needed in the grains and oilseeds sector. We have also provided some concrete steps this government can take to minimize the need of farmers to rely on these tools and ultimately reduce the cost to Canadian taxpayers. Yes, we need the appropriate risk management tools, but we as farmers need to reduce and manage our risk as well.
I have just provided you, on the very back of your summary, with some of the fertilizer comparisons in Dawson Creek. You can look at that in your time. There have been significant cost increases.
I'd like to thank you. I look forward to your questions and your comments.
Thank you, Mr. Chairman.