Thank you, Mr. Chairman, for holding these meetings on APF and for inviting me to comment on the policies that will shape the future of agriculture. While I've had the opportunity to address this committee many times in Ottawa, as you know, it's great to see you in the heart of agriculture here in Saskatchewan, and we welcome you here.
Today I'm speaking on behalf of Pound-Maker Agventures Ltd., the company I'm employed with. Pound-Maker is a privately traded ag company owned by over 200 shareholders, most of whom are primarily grain producers. We were established in 1990, and our primary mission is to add value to primary agricultural production, to create jobs in rural communities, and to provide additional returns to our investors. Because of this vision, we have developed new and innovative programs for our shareholders and have allowed our shareholders to diversify their crop base and increase their returns.
We currently operate a 30,000-head capacity feedlot and a 13-million-litre ethanol facility, the first fully integrated ethanol feedlot facility ever constructed in North America. The complete integration of these two operations is unique worldwide. We currently utilize over 4 million bushels of feed grain annually and take the production of about 100,000 acres of grain and forage land.
Today we have purposely set aside our comments on business risk management and CAIS, because there are certainly others here and I'm certain you've heard lots about those subjects before. I'd like to target my comments to some other pillars.
It's important for me to begin by emphasizing that we recognize that Canadian agriculture is exposed to many risks, and the cattle industry is no exception. While many of these risks are difficult to mitigate, there are certainly tools available to manage these risks with some effectiveness. Options available to producers include production diversification, private insurance, commodity hedging and foreign contracting, stockpiling of feed, and employing robust animal health and vaccination programs, just to name a few. We see these and other private sector means as the preferred tools for business risk management in Canadian agriculture.
We do, however, acknowledge that government programs play an important role in agricultural risk management, and we believe this role is legitimate in exceptional circumstances. But during the development period of these programs, there are a number of principles that we believe government programs need to use to evaluate their design. Some of these include normal income fluctuation risk being left to the responsibility of producers. Programs must allow industry to be driven by clear market signals, and they shouldn't alter the competitive balance within industries, between regions, between sectors, and between operational structure types, including operational size. They must be structured to minimize risk of foreign trade action, and they should be transparent and predictable.
The cattle industry experienced several market-distorting programs in the past, such as the old national tripartite program that distorted market signals and ultimately led to trade friction and the threat of countervail actions. Recent announcements allocating millions of dollars to address high costs of production concern me for the same reason. My primary concern is the potential effect this type of program may have on foreign trade. The cattle industry in Canada exports 60% of its production in the form of live cattle and beef. This leaves the viability of the industry extremely vulnerable if trade actions are to occur.
Government support that is based on the cost of production can be vulnerable to countervail actions by our trading partners, including the most likely, the United States, which is overwhelmingly our largest customer. Support programs based on the cost of production can also alter the competitive marketplace and, in time, undermine productivity. When an industry receives ongoing government support, the support tends to be capitalized in the cost of land and land rent. Over time, ongoing government support will lead to reduced competitiveness for agriculture in Canada.
As a player in the cattle industry, our company believes the government's first priority in business risk management should be that we develop a natural disaster program. In May 2003, Canada experienced its first case of BSE. In the following weeks and months, the industry struggled to avoid complete shutdown, and it worked with governments attempting to address the crisis. We are all gratified with the response we had to assist our industry by all parties and all levels of government. Many of you who are sitting at this table were among this group, and we thank you for that. But the process takes time and is not consistent for all producers in all areas.
If a predictable disaster framework had been in place, solutions to the issues would have been more timely and the industry could have functioned with more certainty. A national disaster program will address natural disasters such as flood and drought and light natural disasters such as border closures. This framework would pre-emptively define a disaster, set out funding parameters, governance, and, to the extent possible, program details that are specific to the disaster. Producer groups and organizations could work with government to proactively develop plans that can fit within this framework. Predictability created by this would reduce industry uncertainty and encourage investment in Canadian agriculture.
Without a program in place, some disasters receive ad hoc support while others do not. Just last spring, an area of Saskatchewan and Manitoba farmland was flooded out. It was not seeded, and a disaster occurred that nobody could have planned. The government stepped in with a program to partially offset producer losses. This type of program is something that cattle producers in southwest Saskatchewan, the Peace River of B.C., Alberta, and northwest Ontario could have equally benefited from last year. They are frustrated that one disaster qualifies for aid while another does not. Without a framework in place, events are not treated consistently by government, and tensions and competitive imbalances occur.
With respect to animal agriculture, it's important to include these economic disasters that occur from disease outbreaks, not only from the losses that the disease itself can cause, but also from the effect of market losses due to border closure and market disruption. There are diseases in all of animal agriculture and within every species, whether it be avian influenza for poultry, foot-and-mouth disease, hog cholera, chronic wasting disease, BSE, or other unknown diseases yet to be encountered. The effect of the market reaction is damaging to producers, if not more damaging than the disease itself. Our experience with BSE is a clear demonstration of how devastating a disease outbreak can be to producers even though the disease losses themselves were inconsequential.
It is extremely difficult, if not impossible, to design an ongoing income support program that could deal with an economic occurrence like the one the cattle industry has experienced. While we're very pleased and appreciative of the support we received, one of the key lessons we learned is that a swift, decisive response is necessary to reassure producers and to prevent irresponsible actions by all stakeholders, not just producers.
The future of animal agriculture has depended, and always will, on our access to foreign markets. The successful outcome in WTO and our bilateral negotiations is critical to opening up a fair and level playing field for Canada in our export markets. As Canada is the fifth largest exporter of agricultural products worldwide, we need to take a leadership role in ensuring our interests are being addressed. Our negotiating tactics employed to date at WTO have damaged our reputation and have hurt our chance to have a deal that is best for the 90% of Canadian producers who produce export-dependent products. Only once we're successful in trade access negotiations can we fully realize the benefits that trade can bring.
During a recent trip I made to Asia to assess our Asian consumer markets, I learned that Canada is perceived as a very pristine environment, where wholesome, quality products are produced. The problem is that most consumers know very little or nothing about us at all. Our capacity to increase our promotion efforts in these key markets and to begin market promotion in the developing markets like India, China, and others will undoubtedly result in significant sales opportunities for all Canadian agricultural products. This is a key pillar, which should be strengthened in any new APF structure. This is where real, sustainable, and meaningful benefits can be achieved. They can be achieved from the marketplace, not taxpayer subsidies.
Finally, the need to invest in research to improve grain and forage varieties that can be used for feed and fuel will be key to maintaining our competitiveness in the future, for animal, agriculture, and biofuel production. While new technology continues to improve yields and returns on a per-acre basis in the U.S., our cereal grain varieties have not kept pace with that of corn. The new agricultural economy is changing the use of traditional crops from that of strictly food to one of feed and fuel sources. Unfortunately, most of our grain varieties to date, particularly our wheat varieties, have been bred and designed for human food characteristics, with emphasis on baking quality, protein content, and others.
Publicly funded research needs to be increased and targeted toward cereal and forage cultivars that address this changing market of maximizing yield and increasing starch composition. One only needs to look at the advances in canola production to see the opportunities for cereal and forage improvements in Canada. Not only will this improve returns to grain producers, but it will also improve our competitive position in cattle feed and ethanol with the U.S.
In closing, Canada has many unique advantages and stands at the threshold of an emerging world economy that will hold opportunities for export countries. I'm excited by the future potential we have for growing our industry, but we must recognize that our opportunity is dependent upon developing export opportunities, negotiating new and fairer market access agreements, and increasing our market promotion. We must develop and align our strategies and tactics nationally based on this reality.
It is unrealistic to think that governments can protect agriculture from normal economic cycles. We do need government to protect us from those events that are catastrophic and beyond our control. A national natural disaster program could provide that.
Thank you again.