Good afternoon, everyone. The Western Canadian Wheat Growers Association welcomes this opportunity to appear before you to present our views on business risk management.
My name is Stephen Vandervalk, and I am the Alberta vice-president of the Wheat Growers. I'm a fourth-generation farmer from Fort Macleod. We're a family business, and we grow durum wheat, canola, mustard, peas, barley, timothy, and alfalfa.
For 37 years, the wheat growers have been advocating forward-looking farm policies to improve the profitability of our farms and to reduce our reliance on government support. It has always been our goal to ensure that farmers have the ability to earn as much income from the marketplace as possible. We are proud to be farmers and to contribute to the wealth of this nation.
In our presentation today, we will provide specific comments on the current approach to BRM and some of the challenges and risks that need to be addressed.
Before I begin, the wheat growers wish to extend our thanks to the federal government for the recent federal announcement to provide $1 billion to kick-start farmers' savings accounts and to assist in rising production costs.
In our view, there are two major risks that we face: production risks and various marketplace risks.
In grain, production risks are primarily related to weather, disease, and pests. Crop insurance currently plays a lead role in managing these risks, although in recent years the private sector has introduced contract-based products that give farmers more tools to manage these risks.
One difficulty with crop insurance programs is that there appears to be a wide variability in terms of premium levels and coverage across the Prairies. Production rates vary considerably depending on the perceived value of these programs. In the past six years, we have seen coverage levels drop and premium levels rise to a point where it is often no longer an effective insurance tool, and I will have some examples from my own farm, if you wish to ask about it in Q and A time. The wheat growers would like to see a greater share of federal farm support funding devoted to making crop insurance more affordable.
Prairie grain producers also face a number of what we call marketplace risks. These are risks that affect either our revenues or other input costs. Many of these risks are often beyond our control. For example, in February, farmers were the victims of a crippling strike at CN Rail. For two weeks CN workers were off the job and imposed significant costs to farmers, including demurrage payments on vessels, increased storage and interest costs, lost sales, reduced canola prices, and severe disruptions to the pulse industry. It's very difficult to get an estimate on the price tag of these financial losses, although we understand demurrage payments alone by the Canadian Wheat Board were in the millions. We now face the risk of a repeat CN strike. We urge all parliamentarians to immediately pass back-to-work legislation to limit the losses to farmers and other wealth creators in this country.
In our view, the best way to deal with these marketplace risks is to reduce our reliance on the export of raw grain. We currently export 50% of our grain production, and it's mostly shipped by rail to offshore markets. We strongly believe the future of our industry lies in processing more of our grain closer to home, whether it is through grain processing, biofuels, livestock production, or any other initiative that can reduce our dependency on shipping raw grain to export markets.
In this regard, we appreciate some of the initiatives that have been undertaken by the federal government to encourage greater grain processing on the Prairies. For example, the wheat growers strongly endorse the federal government's recent biofuels initiative under which we will move to a 5% renewable standard in gas and a 2% renewable fuel standard in diesel. We also endorse the program announcement in December that will provide some investment assistance to help with the start-up of biofuel plants.
While we support these initiatives, we have some concerns with the contemplated clawback provisions that might discourage investment in the biofuel industry in Canada. We urge your committee to ensure that the investment climate is right for all investors, whether they be farmers or others, to take advantage of this growing opportunity.
For an ethanol industry to fully develop, we also emphasize the need to allow the development of wheat varieties that are specifically geared to industrial uses. In this regard, we commend you for your report on the Canadian Grain Commission review in which you recommend the removal of KVD, kernel visual distinguishability, as a registration criterion in all wheat classes. We ask you for your continual vigilance to ensure this constraint is removed as soon as possible.
The wheat growers are also very encouraged by the progress towards gaining marketing freedom for wheat and barley producers in the Prairies. Currently, about twice as much wheat is processed in Ontario and Quebec as in the Prairies, yet the Prairies grow eight times the wheat. We do not begrudge this of our eastern counterparts; in fact, we applaud their efforts to process more of their grain locally. We simply want the opportunity to do the same. For this reason, we wholeheartedly endorse the government's initiative to give prairie farmers the same marketing options for wheat and barley as Ontario farmers now enjoy. We fear the wheat acres will continue to decline unless the government moves forward to bring the same level of optimism and opportunity in the wheat market as we see now for barley.
These are just a few examples of how our agricultural policy must evolve to meet the new risks and opportunities we face. While we believe exciting and prosperous times lie ahead for prairie agriculture, we recognize the role that government has to play in ensuring that there are adequate financial safety nets for farmers. We are pleased with the federal government's announcement of $600 million towards a new farmer savings account. In our view, this is a move in the right direction to give individual farmers greater flexibility and responsibility for handling their own financial risk management.
Moving to a NISA style of programming would eliminate or reduce many of the problems associated with CAIS. Chief among these is the program's lack of predictability regarding program benefits. In contrast, NISA accounts would give farmers greater ability to manage their own financial risks. The key to the success of the program would be to give farmers the flexibility to draw on these NISA accounts whenever the need arises, as determined by the farmer, not by some arbitrary trigger.
Another key element of farm income support is the federal cash advance program. This is a well-regarded program, as it gives farmers the ability to better manage their cashflow and marketing programs. We thank the federal government for the decision last year to increase the interest-free portion to $100,000 and the overall program limit to $400,000. These limits better reflect the size and scope of many of today's farm operations.
One final element that we believe requires more focus is ensuring that farmers have the skills to better manage risks. For example, there is a need for more education on the use of production or pricing contracts and the various risks and opportunities that each entails. There's an ongoing need for improved understanding of future market options and derivatives and how farmers can use these tools to their advantage.
In our view, moving toward a simplified farm income stabilization program such as NISA, together with cash advances, improved production insurance, and good risk management skills training, should be the four cornerstones of the business risk management program.
Thank you for the opportunity to share these views. I am happy to answer any questions you may have.