Agriculture Committee on April 18th, 2007

[The Chair, Conservative, James Bezan]

I call the meeting to order.

Welcome to the table this morning. We have Roger Holland and Richard Mardell, with the Western Cervid Ranchers Association; Wayne Goerzen, who is with the Saskatchewan Alfalfa Seed Producers Association; and Kenton Possberg, with Possberg Grain Farms. We're expecting John Treleaven to join us from Farm Pure Inc.

We're going to continue with our cross-Canada tour and study of the agriculture policy framework. We are looking forward to your comments this morning.

With that, I'll turn it over to the Western Cervid Ranchers Association. Roger, can you keep your opening comments to ten minutes or less?

[Roger Holland, President, Western Cervid Ranchers Association]

Okay. I'll try my best.

I'll give you a little background on our association and what it's about. Our purpose in forming this association was to get the cervid industry under Agriculture Canada as animals of domestic livestock. This would place them on equal ground, rules, and regulations with the beef cattle, bison, sheep, etc. The health issues that have been raised would also be handled by the federal department, CFIA.

The Western Cervid Ranchers Association is asking the federal government and its agriculture committee for a review of CFIA. In the past, trade in this industry was under the jurisdiction of the federal government and CFIA. This is the jurisdiction that all other agricultural livestock and production are under in Canada. There has been a shift into the jurisdiction of provincial control. The decision to make the change seemed to be made at a lower level of government administration, such as the CFIA field officers and provincial bureaucrats below the ministers.

Game farm industries in other countries around the world are enjoying growth and prosperity. With respect to game farm markets and trophy animals, we used to use export documents provided by the Government of Canada, CFIA. If an export document is required for a U.S. hunter now, a provincial document is to be used, if you can get one. Yet if an export document is needed in any other country in the world, it is issued by the federal department, CFIA.

We want to know why there are two systems and standards. What policies or legal changes were implemented in Parliament to justify this? If fish and wildlife departments are allowed to continue controlling game farm trade, this industry will not recover. There was no cry from government bureaucrats to eliminate the cattle or sheep industry when there were disease outbreaks. The chicken and turkey industries were not under any pressure to be eliminated due to the bird flu, yet the decision of a disease on a game farm results in the fish and wildlife department demanding that game farming be eliminated.

All diseases can be managed and controlled in the environment of the game farms. Every domestic country in the world recognizes there is a risk of disease transfer from wildlife and the environment to a domestic stock by way of wind, dust, water, and unrestricted migratory movement of wildlife, birds, and insects. When a disease is discovered on a farm, it is an indication of what is in the immediate environment and wildlife.

The mess is a product of the past Liberal government, and it's time for some accountability. The producers in the cervid industry can and will assist in the process by way of an inquiry or an investigation to bring out the truth. This will help the federal ministers in charge make the proper decisions so that the cervid industry can move forward to a successful future. We can move forward into a successful industry because the markets are still there. We just need the right authorities to step up and be there for it.

The federal government must provide a policy across Canada for the cervid industry that will secure the right to provincial trade, international trade, and put disease under CFIA without any provincial interference. Declare the cervid industry a part of agriculture, with the right to enjoy the same rules of trade as the cattle industry enjoys with government support.

Thank you.

Richard will speak a little too.

[Richard Mardell, Director, Western Cervid Ranchers Association]

The antler market was one of the main driving forces of the elk industry. With the onslaught of CWD that hit our market—just like the BSE that hit the cattle industry, or bird flu—we eradicated 8,000 animals in Saskatchewan. To this date we haven't made any further progress. Basically, if we find a disease they come in and slaughter our animals, but there is no end result.

Korea has closed its borders to our horn market. China, now with world trade, has stopped all imports of food products and antler products into its market. Right now we're strapped. In the last five years we've gone from getting between $80 and $100 a pound for antlers to $15. Some of it is being processed here. Some of it is being smuggled into China. That's what's left of our market. Nobody has ever stepped forward to help us regain the confidence of Korea or China—to say that our products are safe and clean.

So that is where we are right now. The market is still strong in those countries, but we can't get our product there because we haven't had any government backing to help us open those doors again. That is the big problem with our market right now.

I don't know what else to say. Those are the big factors that have really hurt our industry--disease, and no backing from the government to open the doors again.

[The Chair, Conservative, James Bezan]

Thank you, gentlemen.

Mr. Goerzen.

[Wayne Goerzen, Executive Director, Saskatchewan Alfalfa Seed Producers Association]

Thank you, Mr. Chairman. I'd like to express my appreciation for the opportunity to address this committee.

The producers I represent are involved in the western Canadian forage seed industry. Forage and grass seed production in Canada is concentrated primarily in Alberta, Saskatchewan, and Manitoba. Over 500,000 acres are devoted to the production of forage, legume, and grass seed crops in the prairie provinces. These crops include alfalfa, clover, timothy, fescues, bird's-foot trefoil, and numerous other species, with alfalfa seed representing the largest forage seed crop acreage.

Over 2,400 western Canadian producers are involved in the production of forage and grass seed crops, which are a critical link in the agricultural production chain since they provide the seed required to grow the high-quality hay that the Canadian beef and dairy cattle industries depend upon for forage.

In addition to substantial domestic forage and grass seed sales, the value of western Canadian forage and grass seed exports, primarily to the U.S., exceeded $100 million in 2006. A driving force behind increased production within the forage and seed grass sector is the expanding turf seed market, particularly with respect to perennial ryegrass and creeping red fescue production.

Forage, legume, and grass seed crops have traditionally been considered special crops on the Canadian prairies, although they have generally received very little in the way of government attention and support. Government resources have often been devoted to forage hay issues rather than to forage seed issues.

As is the case with the production of all pedigreed seed crops, there are high input costs associated with the production of forage seed crops. Producers of pedigreed forage seed must pay careful attention to stand establishment, weed control, and disease control. In the case of alfalfa seed production, producers must also manage an alfalfa leaf-cutting bee population in order to pollinate their alfalfa and thus produce a seed crop.

Forage seed crop production, like conventional field crop production, is subject to wide variability due to weather-related risk. In addition to production risk factors, producers of forage seed crops must contend with price risk due to market-based fluctuations. These risk factors are not under the control of producers and must be managed through the utilization of business risk management tools.

Farm safety net programs currently available to most forage seed producers include crop insurance and CAIS, while ad hoc agricultural support program, which are developed on an ongoing basis, may or may not include forage seed production acres. In the current crop insurance system, not all forage seed crops are covered under all provincial programs.

When crop insurance is available, it often does not cover the cost of production. A case in point is alfalfa seed production in Saskatchewan, where the current crop insurance program does not offer a pedigreed alfalfa seed option. As well, alfalfa seed is the only forage seed crop included in the Saskatchewan crop insurance program.

While existing crop insurance programs are of value to western Canadian forage seed producers, these programs must be reviewed and adjusted on an annual basis in order to provide the maximum benefit to forage seed producers.

The CAIS program is complicated, expensive to administer, unpredictable, and unbankable for the forage seed producer. CAIS is designed to stabilize farm income, which works well in times of normal production and price fluctuation, but does not work well within the current long-term trend to lower net farm income. The CAIS program, along with the CFIP and AIDA programs that preceded it, has represented a problem rather than a solution for many producers. Future farm income stabilization programs that are developed to replace CAIS must be more user-friendly and responsive to the needs of producers.

National ad hoc agriculture support programs continue to be a source of great frustration for western Canadian forage seed producers. While the most recent concern on the part of the forage seed industry has centred on the exclusion of forage, legume, and grass seed crops from the commodity list eligible for payment under the grains and oilseeds payment program, or GOPP, the unfair treatment of forage seed crops under national agricultural support programs extends back to the exclusion of all forage, legume, and grass seed crops from the WGTA payout that accompanied the loss of the Crow benefit in 1995.

Since these forage seed crops have been included more recently on a list of special crops eligible for payment under FIPP and TISP, forage seed producers were dismayed to learn that forage, legume, and grass seed crops were not considered as special crops under the GOPP. Western Canadian forage seed producers are continuing to press the federal government for inclusion of forage, legume, and grass seed crops in the GOPP.

Federal government policy states that the GOPP was designed to address the impact of long-term declines in grain and oilseeds prices; and therefore, producers must have sold product into markets that have experienced this long-term decline over the last 10 years. This statement precisely fits the profile of western Canadian forage seed crop production, since virtually all forage seed produced in Canada is sold into domestic and export markets.

Forage seed crop production has been subject to the same increasing input costs—i.e., land rental, taxes, fuel costs, fertilizer, machinery costs, herbicides, insecticides, fungicides, desiccants, farm labour—as other grains, oilseeds, and special crops.

Forage seed crops are produced in the same geographic areas of Canada where GOPP-eligible commodities are produced. Forage seed crops are harvested once per year, and forage seed production is subject to the same weather-related production loss factors, such as frost and drought, as is the production of other grains, oilseeds, and special crops.

According to the agriculture policy framework that governs the GOPP program, agricultural support programs must be designed in such a way that they are fair to all producers, minimize distortion in production or marketing decisions made by producers, and encourage the use of risk management practices.

The GOPP program has not followed these principles and is penalizing western Canadian forage seed producers who have diversified their farm operations. Western Canadian forage seed producers, like all Canadian producers, want to be in a position to utilize their energy and enterprise to run profitable agri-businesses.

A recent initiative involving the possible implementation of a new NISA-style program is a development that will be welcomed by many producers. Forage seed producers require that the government set a forward-looking policy that is fair to all producers and that allows each agricultural sector to be competitive in domestic and export markets.

Thank you once again for the opportunity to address this committee.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Goerzen.

Mr. Possberg, please.

[Kenton Possberg, President, Possberg Grain Farms Inc.]

Good morning.

I thank you for the opportunity to make my presentation. Did everybody get the things I provided?

[The Chair, Conservative, James Bezan]

If it wasn't in both official languages—

[Kenton Possberg]

It was.

[The Chair, Conservative, James Bezan]

It was?

[Kenton Possberg]

Yes, you bet.

[The Chair, Conservative, James Bezan]

Yes. Okay, go ahead.

[Kenton Possberg]

My name is Kenton Possberg. My wife and I operate a grain farm in Humboldt, Saskatchewan, which consists of 13,000 acres. We are a grain-only operation.

This presentation is in regard to production insurance and the lack of coverage, especially in Saskatchewan.

I realize that production insurance is a provincial-based program, but the variance in programming between provinces is alarming, and I have come to the conclusion that we need a federal-based program that will level out the differences between provinces and allow for more flexibility from a federal standpoint.

In the past five years in particular, our operation has had weather events play a huge role in our production. In 2001 we had drought; in 2002 we had severe drought; in 2003 there was drought again; in 2004 we had frost in August; and in 2005 we had 15 inches of rain at the beginning of harvest. As such, we have been reliant on production insurance coverage to try to make up the shortfall in income. We have always insured at the highest coverage levels.

I did an analysis between Alberta and Saskatchewan crop insurance programs. The period I examined was from 2003 to 2006. I used our actual numbers for production, and also for coverage and payments. I spent a fair bit of time working on the Alberta numbers and consulted their agriculture department. There may be some minor mistakes made, but the point was not for 100% accuracy, but rather the relative differences between the two.

Also, note that I did not include the year 2002, as too much time had passed for me to be able to be confident in my analysis. But this was the year that would have shown an even larger discrepancy due to a severe drought that cut our production by over 60%.

The main differences between the two provinces' programs are the way that a producer's yield is calculated for coverage, the effect that a production loss has on a producer's future coverage levels, and premium calculations based upon production history and claim history.

I found, based solely upon production loss, that between 2003 and 2006 an Alberta producer would have received an extra $454,000 in insurance payments. In addition, Alberta producers also have the ability to participate in a revenue insurance program, which will pay out based upon a drop in grain prices. This is not available in Saskatchewan or most other provinces. From 2003 to 2006, I found the same Alberta producer would have received an additional $288,000 through the revenue insurance program, had they participated.

In conclusion, I feel that too much time is spent debating the CAIS program and disaster aid, but not enough time is spent on looking to improve our current programming. A huge reason for the drop in our CAIS reference margin is due to the lack of a proper crop insurance program. CAIS was not designed to make up for crop insurance deficiencies, but to work in conjunction with a properly working program.

I have worked with the provincial department to design a more relevant program, but have gotten nowhere. The only way to get a proper production insurance program is to have a federally developed program that can be designed to fit each production area.

I would like the committee to undertake a provincial comparison of the net benefits from crop insurance for the typical farmer, assuming a wheat yield or canola yield with various levels in drops of production—let's say 50%—over a five-year period, and take into account what the impact of the CAIS program would be, and other programs, so that policy-makers have a better understanding of how farmers in various parts of the country are treated under the programs.

I'm not a proponent of handouts or ad hoc programs, and with a proper risk management program in place there would be no need.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Possberg.

Just as a point of interest, I used to work for crop insurance in Manitoba. I agree with you, there is a big difference from province to province in the way the program is delivered.

Welcome, Mr. Treleaven. We're talking about APF. The presentations or opening comments are to be ten minutes or less. The floor is yours.

[John Treleaven, Farm Pure Inc.]

Thank you, Mr. Chairman. As I only have 10 minutes, I'll have to speak in English.

I will not be able to make a presentation in ten minutes in French; I'm very sorry.

I wish to thank you for the invitation to appear here today on behalf of a remarkable organization, the Farm Pure family of companies, headquartered in Regina. Farm Pure began as a pedigreed seed company and has grown into much more. The company is farmer-owned, with 196 shareholders from across western Canada. These men and women share a common dream of self-sufficient agriculture, and are motivated to achieve a vision of creating a most rewarding and sustainable value chain for their stakeholders and customers.

We represent the best seed from 30 of the world's finest breeding institutions to create wholesome and energized consumer-ready products. Linked to and owned by a select group of farmers with extraordinary skills, Farm Pure capitalizes on capturing the best nature has to offer.

Our core product is pedigreed seed. However, our business is knowledge-based value creation. It is our mandate to produce food, beverages, and intermediate products, beginning with pure grain grown in an extraordinarily friendly environment for discerning buyers. Based in western Canada, we have global interests and are active in five continents. We are open to partnerships or joint ventures where we create innovative agriculture value-chain relationships.

Earlier this year, the Conference Board of Canada issued its Canada Project, which called for the resolution of issues that have been bothering this country for some time if we are to achieve our maximum potential. The authors of that report included a chapter devoted entirely to the agrifood sector.

This chapter highlights the success of the sector in growing exports. Canada's growth in this sector outpaced growth in global food exports. We took an increasing share of global food exports from 1995 until the BSE crisis in 2004. Our trade in this sector is being driven by value-added agrifood exports, from 52% of the total in 1990 to 80% in the year 2004.

Against this background, the report notes a number of issues that, if resolved, would carry the industry to the next level of achievement—namely, market- rather than production-focused innovation; the need to strengthen value chains; regulatory regimes facing industry; and a variety of human resource issues.

My company agrees with the analysis and recommendations of this report on these broad areas of public policy affecting the future of this industry and, clearly, the work of this committee. Today Farm Pure produces a range of products aimed at enhancing the lives of millions of North Americans stricken with celiac disease. From an array of pure oat consumer-ready products, a revolutionary new grain-milling technology, and recently patented all-natural beverage manufacturing process for ingredients in beer, the focus of the company and its shareholders is totally consistent with what we have identified as the only sustainable future for agriculture—high value-added, niche-focused, and value-creation reflected.

Focusing on creating food products for celiac sufferers has brought us into yet another key area of innovation for agriculture. The numbers are staggering: perhaps 3% of the Canadian population carries this sensitivity. Of those who do, only 3% have been diagnosed. This leaves the health care system coping with the need to treat symptoms without ever getting to the root cause.

The costs are enormous. There is an urgent need to link the health care budgets in this country with agriculture research opportunities and human nutrition. It is in this direction that we are taking the company, and it is in this direction that I think the government wants to see industry move.

In the short time available to me, I would like to highlight one area that is a constraint on my company and on the whole innovation effort in the agrifood companies across Canada, consistent with agriculture policy frameworks I and II. At the very least, entrepreneurs from all sizes of companies have to be able to drive their dreams if they are to succeed. Let me highlight the area of capital formation.

As I've mentioned, at Farm Pure our core product is pedigreed seed. However, our business is knowledge value creation. Across the country today, as our export numbers demonstrate, entrepreneurs are taking a fresh look at this sector and putting their investment capital where their ideas are. On a grand scale, the current battle in the grain industry among Agricore, the Saskatchewan Wheat Pool, and Richardson is evidence of a new look being given to these industries. In this case, even major pension funds are getting involved. And that's a very good thing.

Missing from the picture, however, is a vibrant juniors market of the kind that characterizes both oil and gas and mining industries. It is here that most new ideas are brought to market to the benefit of shareholders and customers. It is from this pool of smaller players that larger companies emerge, or from which acquisition targets draw the attention of larger buyers. The impact of new initiatives in this area is quite predictable and immediately beneficial to all in the sector.

Increasingly high value-added agrifood businesses will survive and thrive only when they are combined with high-value product and with capital-intensive manufacturing to produce high-value jobs—as one person I talked to recently said, “adding value without necessarily adding people”. Put another way, the success of the industry will depend on its ability to pay high wages to highly skilled workers. The equation requires access to capital for the same reason that energy and mining industries do.

In this country we have supported primary industries, such as the resource industry, with tools to assist capital formation. The introduction of flow-through shares in 1984 for individual investors has resulted in substantial capital being raised for exploration and development. It is estimated that in 2006 alone, $1.25 billion was raised through flow-throughs. These funds ensure the evolution of technologies for finding, developing, and producing resources that are fundamental to our national income. We now have a world-class resource sector.

Many, if not all, new resource projects originate out of the junior corporate sector. Small companies are much more accustomed to innovation and the risk profile that are essential for development. However, this junior sector is not profitable from production, but has the expectation of profit from growth of the company. This means that many of the exploration and development expenses either must flow through to investors who are prepared to invest in the company, or are lost in the process.

Flow-through shares are simply a method of flowing the eligible expenditures that are attached to a common equity share. These junior companies can now expand their capital base as risk-reward metrics have been improved.

In closing, on this subject we simply have to find ways to become more efficient at raising capital if we are to strengthen our position in the global marketplace. Access to capital is the catalyst for innovation and development, a key element in the agriculture policy framework I and undoubtedly agriculture policy framework II.

Thank you very much.

[The Chair, Conservative, James Bezan]

Thank you, gentlemen, and thanks for respecting our time limits.

Mr. Easter, you have the floor for the first five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thanks, Mr. Chair.

Welcome, folks, and thank you for coming out this morning.

To the groups who presented, for one reason or another, as I understand it, the federal programs don't fit. Regarding the cervid presentation, there is federal government responsibility for exports. I find it strange that the federal government is not involved, through a number of agencies, regarding antlers, as that relates to the cervid industry in general.

Can you explain to me, Richard or Roger, what the situation was ten years ago versus now? Was it different? Was it CFIA at that time?

[Roger Holland]

What's happened here is that for all countries, the export of antlers was taken care of by CFIA. In 1998 there was a shift in stuff in Saskatchewan, and the wildlife department kind of stepped in.

Here's what's happening today. For an export permit for horns and capes, you go to the provincial government and get a permit, if you can get one. They won't give one to everybody, because they're using it as a policing tool. If you're not in compliance with all their little regulations under their environment department and all of that, you won't get a permit. If you can get a permit, and you can go across, the Americans can take the horns and capes back. That I found out just yesterday. I've been working on this thing since July.

The federal government is not involved in it any more. For the provincial government, it's the Saskatchewan Environment Department that made the agreement with the U.S. Fish and Wildlife Service. There was a personal agreement with them. The agriculture department wasn't even involved in it in Saskatchewan, but they designated a person in Saskatchewan Agriculture and Food to have signing authority to sign the permit for you, and that's how it's done today.

That could be reversed overnight if there were a disease in the cervid industry. If the USDA were involved, that would automatically be thrown back to CFIA instantly.

When you talk about the legal things, just imagine if you were an American citizen who came to Canada, and you went back to the United States—and this applies anywhere in the world. If you haven't got the proper documentation—it's called a document of origin--from the country you shot that animal in, and you're taking those products back to the United States, you can be charged in the United States under the treaty act, and the sentence for that is a jail term.

[Wayne Easter, Liberal, Malpeque, PE]

I certainly believe that CFIA or some federal agency has to be involved somewhere, even if it looks on the surface that Saskatchewan's doing it. We'll have a look into that, because that really seems strange to me.

The second question—and I'm going to run out of time here—is you said 800 animals that you had to slaughter?

[Richard Mardell]

Eight thousand animals.

[Wayne Easter, Liberal, Malpeque, PE]

Okay, 8,000. I wasn't sure on that number. Did you get compensation for those animals through CFIA or through the federal government by any means?

[Richard Mardell]

There was compensation paid to the farmers at that time, but out of those 8,000 animals there were about 120 animals that were infected with CWD. We approached them to slaughter the animals, test the animals, and sell the meat or start a meat market for us so that we could have a place where we could get rid of our animals if this disease happened again on another farm. But that was never undertaken.

To this date, basically their means of testing is to slaughter all the animals, and nothing else is done. It's just eradicate, and then you go ahead and keep feeding and try to survive without any means of promoting the market. They won't give you a clean bill of health. Actually I've been in the elk industry since 1989. We've had no disease on our farm. I approached CFIA to give us a clean bill of health. They will give you a letter stating that yes, this farm is clean of disease at this time, but never anything more to endorse that you've been a clean farm for 12 to 15 years and no disease on your farm.

[Wayne Easter, Liberal, Malpeque, PE]

Okay.

[Richard Mardell]

That's as far as they will go.

[Wayne Easter, Liberal, Malpeque, PE]

On the Alfalfa Seed Producers Association, this is an area we worked on, and the same with the dehydrate industry. I think you make the point well that for whatever reason, the federal programming doesn't seem to fit. I worked on this when I was the parliamentary secretary as well. I think it should. It just doesn't seem right to me. Each seed production, whether it's in the Peace River area or whether it's this area, is an agriculture crop, and yet regular programming doesn't seem to fit.

Basically, just so we're clear, you're making the recommendation that alfalfa seeds and basically forage seeds of any type should fit under federal programming? We have some problems, there's no question about that, but the same as other agriculture commodities, grains and oil seeds?