Agriculture Committee on April 18th, 2007

[John Treleaven]

I would suggest that you read the Conference Board's report. It talks about the regulatory environment faced by agriculture in Canada, about the silos, about the complexity of it all.

The reason we the public hire politicians, of course, is to resolve these issues for us. They are intractable issues.

[Charles Hubbard, Liberal, Miramichi, NB]

Brad is the only one from Saskatchewan today. He has a big job.

[John Treleaven]

The key is this: where is this industry going and how is it going to get there?

If you start with the desirable outcome that we will be—and are, in many cases—the agriculture powerhouse in the world, and go back through the policies, figure out which ones in this country are at variance with that outcome, and have that struggle, then one of the issues that would come up would be what I gather is true, that if you want to take a load of hay across the border from Saskatchewan to Manitoba, it has to be repacked at the border. I mean, I don't know that, but that's—

So it's a problem. And that's why there are politicians at the provincial level and at the federal level, to work it out so that this system works.

[The Chair, Conservative, James Bezan]

We have time for a quick response from Richard.

[Richard Mardell]

If you had five or ten good years and you built up a wonderful margin on your farm, and then you had a bad year, you would qualify for CAIS. But as Kenton says, when you have four or five bad years in a row and your margin has gone down to nothing, it doesn't help you. There's a lot of paperwork, and a lot of accountants working for you trying to figure it out. You end up with accounting bills and no payment out of it.

Elk is what I'm here to speak on, but my son and I do farm 15,000 acres, and we know what the agriculture industry is. We have to have a cost of production in the bad years. It's just not insurance if we need it but a cost of production. Some farms don't put as much into trying to grow a crop as other farms, and maybe their cost isn't as high. But when you're striving as a business and you want to make money, you have to put money into your production.

If you have a weather-based problem, you have no control over it. We can go into the futures, and peg our crops on into the futures. Some places have an act of God. If you don't produce that crop, you can get out of the contract. But with a lot of them you can't.

So you have to assure yourself that you can grow that crop. If you have a weather-based problem--hail, drought, frost, whatever it is--you can't even help yourself. You've locked in a good price for your product, but if you can't get it off the field, it's twice as bad. You have a crop insurance payment that you can't make and you're not getting much out of crop insurance.

So that's our problem--the cost of production.

[The Chair, Conservative, James Bezan]

Mr. Hubbard, your time is up.

For the government side, Mr. Trost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

My understanding is that Mr. Miller has a few questions. He can finish those up, and when he's done, he'll again split the time with me.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

If I could follow up, Wayne, you've identified a problem and you didn't really answer my question. You've identified that we need recognition, and I recognize that, but how? What process?

We need solutions, as Mr. Gaudet said earlier. We need to hear solutions here today from you. What process should be in place, ongoing, so that these kinds of things, your industry and others over history, get recognized? That's the answer that I need to know. Is it some kind of tribunal or something, based in the grassroots among farm members?

I need some suggestions there, and I think the rest of the members do.

[Wayne Goerzen]

You mentioned before that something could come from the grassroots.

Federal departments do have people looking at different sectors. I don't know what to say. A group like ours represents 2,400 producers, 500,000 acres in western Canada. What we're trying to do is let federal departments know that we're there, not only so that we can be part of programs but so that we can be considered as national policy is developed.

As for the best method for that, I guess it's on us to try to make the national government aware of our industry.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

So is the problem, then, in between, in the department, in your opinion? I'm asking, not saying.

[Wayne Goerzen]

Possibly. When a program like the grains and oilseeds payment program is developed, consultation with the departmental agencies is used to establish a list of commodities that are included in that program.

Now, if a certain sector is not in the consciousness of those bureaucrats, if they're not aware of that critical sector—and for us it is a critical sector because we produce every forage and grass seed that goes into the ground to produce all the forage that's required by the Canadian beef and dairy industries—if there's just not enough recognition of our sector, then we may be either not included in the program or, as happened in the GOPP, part of the paring down of that process. It's just easy to discard us.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay.

Bradley, I'll turn it over to you.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you.

When I introduce myself, people frequently ask who I am as an MP, etc., and what I've done. I tell them I was so successful as a farmer that after two years I retired. Now, most people in this province understand precisely what I'm saying, which brings me to a question that I don't know if any of you have particularly thought of, and that's starting out the next generation. Kenton, you look very young compared to most of the guys out there.

My general question is this: Do any of you have any thoughts or have you given any thought to young producers coming in, special challenges, any comments particularly? Guys my age are very, very few out there. As I said, Kenton, even your age, there's not a whole lot. Our age group is just not there. So are there any particular comments on the new generation?

[Kenton Possberg]

I'd just like to say that the reason there are not many people coming back is because there's no risk management in place. You can actually come out with nothing at the end of the year, so all the money that you invest—You need a lot of capital in order to produce a return. If you're going to put $2 million into the ground and you could feasibly come out with zero dollars at the end if everything went wrong, who would go into an industry like that?

I have my degree in agriculture, and my wife has a degree in marketing. We could go and do something else and it's risk-free, and that's what most people are doing. It's the risk. People just don't want to risk their livelihood, their family, everything. It's very challenging.

Most other businesses you can at least control; you don't have the risks. You do have a risk that a tornado's going to come and take it, you do have the risk that a flood's going to come and take it, but you can insure that. You can't get a decent level of insurance on this, it's just too—There's a lot of risk.

[The Chair, Conservative, James Bezan]

Mr. Treleaven.

[John Treleaven]

I would suggest to you that for young people in this country, the essence of the argument is the language of farming. Yes, farmers are custodians of the land—that's true—but farmers are business people. The land is an asset. The market is huge. When I deal with farmers in Australia, they never talk about family farms. Every farm in Australia is a farm business that's owned by a family, and if you look at it from that perspective, it's also a family farm; but it's the outcome and the output and the ability to create value for consumers and differentiate and link food safety, link food and health, get into functional foods. It's very high value added.

I talked about the celiac issue. Farm Pure produces oat pasta. Celiacs, only 3% of whom have been identified, have a terrible life. They can't eat. In Regina, there's a plant that produces pure oat pasta. Okay. Now the issue becomes whether the regulatory regime is set up to reward differentiation or to reward harmony. Farmers are, of course, entrepreneurs. The land in Canada represents an enormous asset for entrepreneurs to dream and work on. Some of the mechanisms in place don't reward that the way they do in other businesses, and I made the case about energy and mining and what not. There are ways the Government of Canada could see investors mobilize capital, as the 196 shareholders in Farm Pure do. Go to an annual meeting of this company. These are people from all across western Canada. They're dreaming about the future, and they're betting on it. I'm not saying it's an easy business at all, but it is a business, and business and entrepreneurship are about people being able to live their dreams.

That's the language that has to be associated with this industry. Saskatchewan Agrivision in this province has a competition to identify the 500 best farmers in Saskatchewan. I think there are some people in Saskatchewan who don't think there are 500 good farmers. That's BS. They're great farmers, and the competition is all about the 501st, because if you come 501st, then next year you want to be in the 500.

When we change the language of agriculture so that the 500 are now 600 are now 10,000, we won't have to worry. Look what's happened to the value of land in this province with the ethanol announcements. It's amazing what's going on across western Canada now on the farm. But are the public structures set up in a way to handle what an entrepreneur needs? Is there a responsive regulatory regime that recognizes differentiation, that cuts the distance between the producer and the end user?

It's that kind of environment that I think has to be worked on.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Trost. Your time has expired.

We still have about ten minutes left if any of you want to ask quick follow-ups.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

I want to get to the specifics of crop insurance, Kenton. You made a point on the lack of risk management. The fact of the matter is there have been absolutely huge expenditures. I know they say the money arriving in farmers' pockets is not enough, but there have been huge expenditures of money from the federal government in the last five years, the highest in history.

But when we compare ourselves to the United States, George Brinkman, who's an economist out of Guelph, compared as a percentage of income Canadian government subsidies with American, and this is where it gets rather scary. I'll quote what he said:

As a percentage of income, Canadian government subsidies represent 116% of farm incomes, but U.S. government subsidies represent only 37% of U.S. farm income.

The fact of the matter is, if you read The Western Producer of a couple of weeks ago, Barry Wilson indicated that over a 21-year period the realized net income on the farm was $51 billion over that period of time. Payments from federal and provincial governments were $58.4 billion. In other words, it was negative $7 billion from the market. So we have to really look at the whole structure of agriculture itself, I think.

So my question really from that is what the hell are we doing wrong? We've got money going out. It's not getting to where it ought to be getting.

You raised the point, John, of land prices. Land prices are going up like hell in some areas, there's no question about it. But our farm debt is astronomical compared to that of the Americans. And why are we capitalizing that money into land when we can't afford to do so?

Anyway, on the crop insurance meeting in November of the ministers, this is what they're proposing, and I want to ask you, Kenton, if you think these levels are correct. On crop insurance, Canada will on average cover 36% of the premiums, the provinces will cover 24% of the premiums, and the remaining 40% will be the responsibility of the participants. On catastrophic losses, Canada will cover 60%. And Canada will cover 60% of the compensation paid for losses caused by wildlife. Are those figures correct?

From my own point of view, I'll be honest with you, I think the feds should be paying about 90% of catastrophic losses that are infrequent, but on the other ones I think I'm relatively in agreement. What levels do you think?

[Kenton Possberg]

For crop insurance at the 50% level, that is actually what it is. As soon as you start paying, if you want to insure at the 80% level, then the producer bears a significant premium of that. And I think the ratio should remain the same the more that's insured, because it's less costly to the CAIS program then, because these other programs are filling in the gaps where they should and doing what they're supposed to do.

As far as the breakdowns go, I wouldn't be able to—I agree on the disaster, once in 20 years, once in 30 years, yes, the feds should bear the brunt of that. But I think if you had a federal program—and I don't know how it would be funded, but it should be a federal program so that you can have the level playing field throughout—and if it's clawed back through—Instead of the province paying for some, if it's through the transfer payments, I don't know how they could ever make that work. But I don't want to hear how it can't happen; I want to hear solutions, how it can happen.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Atamanenko had a follow-up.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

How much time do I have, a couple of minutes?

[The Chair, Conservative, James Bezan]

Well, do you have any further questions, Mr. Gaudet? No?

Okay, you get the last four minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Okay, thank you very much.

The question is for Mr. Goerzen in regard to the biofuel industry and your organization. What do you see in the future? What's happening now? And specifically, do you see maybe getting involved in the cultivation of switchgrass, which is a very efficient form of energy, 14 to one or something like that? I thought I'd get your ideas on this.

[Wayne Goerzen]

I appreciate that question, because promotion and development are the kinds of things we want to be talking about. Unfortunately, we can get caught up in problems with recognition and risk management. What we're interested in is development, and the development of cellulosic ethanol technology holds great promise for the fibre portion of the alfalfa plant.

The big talking point right now in the U.S. is switchgrass, but that's because alfalfa, as a forage crop, although it has a large acreage in the U.S. and in Canada, is not as much on the radar in the U.S. because it competes with corn.

One of the big developmental initiatives we're working on now is an interprovincial initiative. Saskatchewan, Alberta, and Manitoba alfalfa seed grower groups have begun what we're calling the Canadian alfalfa insight committee. Our mandate there is to get as much alfalfa going into the ground to feed as much of the Canadian and U.S. forage industry as possible. But we do see further things down the road, not only the development of cellulosic ethanol, but also the use of alfalfa as a platform for the production of pharmaceutical and nutraceutical ingredients and those types of things.

The thing is that right now, we have to go through a cycle. Cellulosic ethanol is a procedure that's being developed in the laboratory. It's very successful in the laboratory. It has yet to be commercialized, and that is happening right now, but we definitely see value added to our crop in that area.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I guess one reason I'm asking the question is because the big push is for corn in the States, and obviously it's not that efficient as far energy input and output goes. It is going to put and is already putting tremendous pressure on our cattle industry and others.

So I'm just wondering if this is somehow not the time to really start pushing this. As you said, it's in the laboratory, but evidently, if it's successful, maybe we should be pushing the cellulosics more, and maybe your organization could play more of a role in this.

Do you have any comments on that?