Agriculture Committee on April 19th, 2007

[The Chair, Conservative, James Bezan]

I call this meeting to order.

We have a very tight agenda today, so we're going to want to get through it as best as possible.

First of all, of course, I want to welcome everybody to Selkirk--Interlake, or as I like to call it, God's country. I hope you all had a great evening in Gimli, one of the jewels of the Interlake, a community I'm very proud of. I live straight west of here and a little bit south, about 30 miles away. It's one of the areas I'm very proud to represent.

We're going to continue with our study on the agriculture policy framework.

Joining us this morning, we have Keith Kuhl from the Canadian Horticultural Council, all the way from Winkler in southern Manitoba. We have the Manitoba Corn Growers, Bob Bartley. Welcome, Bob. From the Manitoba Canola Growers, we have Brian Chorney. And joining us from the Manitoba Pulse Growers, we have Lincoln Wolfe, who is the president, and Tammy Jones, who's the executive director. Welcome to both of you, as well.

We're looking forward to your presentations. I'll remind you that we are on a tight timeframe, so ten minutes or less would be appreciated.

I'm going to kick it off with you, Keith.

[Keith Kuhl, Chairman, Potato Committee, Canadian Horticultural Council]

Thank you for the invitation to speak to the committee today on business risk management.

My name is Keith Kuhl, and I'm the president of the Southern Manitoba Potato Co. Ltd., a fourth-generation family farm based in Winkler, Manitoba. We specialize in the production of fresh-pack chipping and seed potatoes. In addition, I'm the elected chair of the potato committee executive of the Ottawa-based Canadian Horticultural Council and the president of the Seed Potato Growers Association of Manitoba.

Manitoba is the second-largest potato-producing province in the country, second only to Wayne Easter's province of P.E.I., of course. And Ivan Noonan would never let me forget that one, Wayne, I assure you.

I'm going to focus on potatoes today. The potato is the most valuable vegetable crop in Canada. The potatoes produced in all ten provinces on over 385,000 acres with farm cash receipts in the 2005 calendar year in excess of $920 million represent approximately 40% of all vegetables and approximately 20% of all farm cash receipts in the horticultural industry.

The Canadian potato industry supports the efforts of the federal and provincial governments under the APF and its commitment to improve risk management. From our perspective, there are four types of risk management we want to look at that our governments need to be involved with, and they are income stabilization, production insurance, phytosanitary compensation, and orderly marketing.

Income stabilization, offered through the CAIS program, has been commented on extensively by many other commodities. The CAIS's main weakness is selecting an Olympic average over a timeframe that may have production margins below the cost of production. This was certainly the situation for potatoes in 2003 and 2004. We understand that work is being undertaken to address these issues, and we look forward to the results.

There are two issues with production insurance that I wish to bring to your attention. First, coverage for seed potatoes varies greatly among provinces, in that no coverage is offered in three provinces, and seed class coverage is offered in only two provinces. In provinces where production insurance is available, there is a wide variation in program structure.

Second, two provinces provide coverage for bacterial ring rot, a regulated, non-quarantined pest that can have serious impact on a grower's operation. It is understandable that the provinces ensure stability in their primary industries through production insurance. However, as a result of crop importance or value in a province, the program varies significantly across the country. This variation in structure and delivery of production insurance among provinces can be just as significant a trade barrier as differences between the Canadian and U.S. agricultural programs.

The potato industry, and indeed all horticulture through the Canadian Horticultural Council, has been a strong advocate of the broad-based development and implementation of production insurance for all horticultural crops in Canada. APF I provided assurance that this would come to be. To date it has not, and I must state that there is an obligation on the part of the Government of Canada to fulfill this commitment.

The Health of Animals Act has many components, including compensation. There are no adequate provisions for plant-health-related losses, and we support the development and implementation of a national plant health strategy that would include phytosanitary compensation. A strategy and program of this nature is a critical component of the comprehensive business risk management program. It must also be noted that while providing a tool to an individual producer, a program of this nature indeed offers protection and risk management to entire commodities and sectors of agriculture.

Currently, there is no compensation dealing with disposal, extraordinary costs not covered by existing programs, and participation cost-renewal programs as available for regulated quarantine tests pursuant to the Plant Protection Act. There is no compensation for regulated non-quarantine pests such as bacterial ring rot unless a grower participates in the production insurance program in one of the two provinces that has BRR as a peril. The financial impact on the seed potato industy across Canada from 1999 to 2005 on the 12,177 acres that were rejected or decertified for BRR was $36.5 million. The average cost per acre was just under $3,000, ranging from a cost of over $36,000 per acre for nuclear stock to a low of $1,851 per acre for foundation.

Re-establishing seed production on a decertified farm can be costly, as growers are not permitted to plant potatoes in the affected area for two years. CFIA is developing a national plant health initiative, and it is our understanding that they are looking to use the compensation model developed for Quebec potato growers affected by the potato cyst nematode.

A potential phytosanitary compensation issue facing the potato industry across Canada today is the U.S. government requirement implemented on March 21 of this year that all seed potatoes shipped from Canada to the U.S. be tested and certified by the CFIA to be not positive for the potato cyst nematode. Since March 15, the Canadian industry submitted over 1,500 samples from the 2006 crop year. To date, no positives have been found. If a positive had been found, the impact would have been an initial restriction on all exports from the province where the positive occurred until a delimitating survey, trace back and trace forward, was conducted. This requirement was imposed during the height of our shipping season to the U.S., where the trade value was $27.4 million.

We believe that production insurance is a personal business decision, whereas phytosanitary compensation is an industry decision that needs federal and provincial participation to ensure equal access and participation across the country. The pests I have referred to are national in scope and the desire of the industry is to eradicate these pests. The weakness of the compensation offered for regulated quarantine pests in the Plant Protection Act is that the compensation is ad hoc and reactive; the production insurance coverage offered for regulated non-quarantine pests in these two provinces focuses on managing the pests. To ensure industry participation, there needs to be an incentive to report the presence of a specific pest and knowledge that a phytosanitary compensation program will provide an adequate safety net to regroup and move forward. That would remove the need to shoot, shovel, and shut up.

Orderly marketing results from the existence of a sound regulatory base that is adequately resourced. There are two levels to orderly marketing: within an industry and to consumers. For the consumer side of orderly marketing, we believe there is a sound regulatory base. However, CFIA and AAFC have increased their focus on food safety over the past 20 years, resulting in the subsequent erosion of resources for phytosanitary and quality services. As consumer demand for niche market products such as organics increases, fraud will become a large issue, considering the past behaviour of a small number of companies in this produce industry. Without an adequate and appropriately resourced public service, we as an industry will bear the brunt of any public backlash when fraud does occur.

Orderly marketing within an industry is not fully understood by federal and provincial governments and is illustrated in a CHC submission to ACAAF focusing on the development of trade standards, a model contract, the parameters of dispute resolution, and the inclusion of seed potatoes in the Fruit and Vegetable Dispute Resolution Corporation's mandate.

I'll just summarize quickly the paragraph there. We've been trying to get seed potatoes included under the DRC, the Dispute Resolution Corporation. The attitude has been that, in order to do that, we have to get Mexico and the U.S. on side. Our belief is that because 80% of the seed potatoes in Canada are moved within Canada, it would be futile to try to create a secondary system to the DRC. We would like to be able to include Canadian seed potatoes within the DRC.

In summary, I would like to review some of the issues that we are facing with funding mechanisms for existing programs and what our industry hopes to achieve in order to ensure health and growth.

The application process is bureaucratic and repetitive. There is little consistency among the programs, such as CAFI and ACAAF. A business plan approach would be preferred by us.

Cash advances are not available within the programs very often when we're looking at funding.

We're looking for greater flexibility in funding allocation once a project has been started, in order to encompass changes within the programs.

A clear and transparent application review process would establish time standards. The review process should be an open dialogue between the submitting organization and the decision-makers to facilitate information flow to improve the decision-making process. The timelines that are submitted with projects for our industry represent the capacity of the industry to undertake projects. The review process does not take this into consideration and puts the project off-cycle and impedes its ability to succeed.

We'd like recognition for entities such as CHC that have a good track record on research projects.

The ACAAF system works when the objectives of government and industry are similar. However, a long-term and more stable funding mechanism should be established that still meets the government and industry objectives. The Horticulture Australia model works quite well in meeting the aforementioned. It is worth examining as a model for the Canadian horticulture industry.

Once approved, contribution agreements must be issued in a timely manner. The report of the independent blue ribbon panel on grant and contribution programs, From Red Tape to Clear Results, addresses these types of concerns, which are expressed repeatedly on a cross-country, cross-commodity basis.

We agree with government that business risk management is a key component to building a stronger, more profitable agricultural sector for the 21st century. However, as potato growers, we are seeking assistance in developing, maintaining, and improving risk management on our terms. We must all carefully consider the traditional as well as the not so obvious and perhaps non-traditional elements that could provide the best possible business risk framework for Canadian producers.

While we appreciate the programs that are in place, we are committed to work with industry and officials towards much-needed improvements.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Kuhl.

Mr. Bartley, ten minutes or less, please.

[Bob Bartley, Director, Manitoba Corn Growers Association Inc.]

Good morning, Mr. Chair, members of the House of Commons Standing Committee on Agriculture and Agri-Food, and fellow guests. Thank you for providing us with the opportunity to speak about issues that are important to corn producers in Manitoba.

My name is Bob Bartley, and I'm a director of the Manitoba Corn Growers Association. The Manitoba Corn Growers represents over 900 corn producers in the province. I grow grain and oilseeds on 1,300 acres in Roland, Manitoba, located 60 miles southwest of Winnipeg in the Red River Valley. Roland is the home of Canadian 4-H and the Giant Pumpkin. Grain corn has been one of our main crops ever since we started producing it in 1964.

Some of the issues I would like to cover on behalf of our members are safety net issues, trade, environmental programs, cash advance programs, pesticide harmonization, and the rail strike.

The need for a predictable and bankable safety net program has been an outstanding issue for quite a number of years now. With the review of the current business risk management programs as part of the review of the agricultural policy framework, it has become clear that even with some of the adjustments that have been made, there is still room for improvement.

I would like to encourage the government to maintain a strong production insurance program and to continue to look for areas within production insurance to enhance so that corn producers will have a predictable core program to rely on. One of the areas we feel could be improved is to provide a more transparent methodology for arriving at the prices used by production insurance, and to involve commodity groups in the development process well in advance of the announcement of those prices.

The current CAIS program is not predictable enough for financial institutions to include in a producer's basic equity statement. This problem has been mentioned from the beginning of the CAIS program, and it does not seem that any of the changes made to date have strengthened this reliability. Governments need to work with farm groups and financial institutions to make adjustments that work for everyone. These changes need to result in a program that is predictable, that is simple to apply for, and that reduces the amount of time that producers spend filling out paperwork.

When CAIS does provide support for farmers, it often arrives a year or two after the loss. There need to be modifications to the income tax system so that proceeds of the claim become taxable in the year of loss rather than when they are received.

Another area that actually causes double expenses for grain and oilseed producers is the fact that we pay twice for the same level of coverage that other commodities pay only once for. When grain farmers participate in production insurance, they pay a premium for that insurance as well as paying another premium for CAIS. We would not like to see producers set crop insurance aside in favour of just carrying CAIS, so there must be a more equitable system developed so that grain and oilseed producers do not pay twice.

One of the areas that are still not covered by any of the programs provided for the support of grain and oilseed farmers is the area of injury caused by foreign subsidies. For many years now we have had to compete against grain that is subsidized by other governments. We feel that there needs to be a greater commitment from government to provide support for farmers until a resolution is achieved through the WTO negotiations.

Perhaps a simple solution might be to increase the reference margins of grains and oilseeds producers by the amount of the injury. Whatever the chosen method is, it is an important component that is currently being left out and that puts corn producers and all grain and oilseed producers at a disadvantage to other commodities in Canada. To be clear, corn growers do not wish to depend on a government for their living, but we do need governments to provide a predictable safety net program that can be relied upon to cover the areas we cannot control, such as weather and interference in our markets by dumped and subsidized product from other countries.

We also need the federal government to be a strong presence at the WTO negotiations and work hard to increase market access for grain and oilseed producers. Canada's work at the WTO needs to send a strong message that is fair to all commodities across Canada.

We applaud the government's move to increase the dollars available to producers under the new cash advance program. This increase certainly better reflects the reality of farm sizes in today's agricultural climate.

Another area of concern for corn producers is the increasing cost of providing service through our farms that are actually for the public good of all Canadians. Many of these environmental requirements add significant cost to farmers, with no reasonable expectation of return on that investment.

The federal government must increase the budget applied to these areas, and these dollars should not come out of the agricultural budget, as they provide benefits to all taxpayers.

It is also clear that any support for producers under these programs would be considered “green” under the WTO rules and would therefore provide a base level of support for producers, without fear of trade action. A good example of this type of program is alternative land use services, which now has a pilot project running in Manitoba. Others are to follow in P.E.I., Ontario, Saskatchewan, and Alberta. These areas benefit everyone and should be given increased consideration.

We also urge the federal government to move quickly to reach full pesticide harmonization with the U.S. on old, new, and generic products. This will also provide more options for our members at less cost. Currently, Manitoba corn farmers lag at least two years behind the rest of Canada when getting appropriate chemicals registered for corn in our area, as it must all be done through minor-use registration. Since there is little funding available for this type of research, our growers must bear the additional cost of getting these registrations approved under the minor-use system. Moving to full harmonization would remove these barriers and provide safer, quicker access for our producers.

Another area of current concern is the interruption of rail service in the country. The fact that we are now into the second interruption of the season speaks to the need for a long-term solution to this problem. This is a cost to our producers. One example of direct cost to our producers is the increased cost of fertilizer in the past several months. Although this increased cost is partially attributable to the increase in corn acres in the U.S., we have seen a significant rise, again, because of the rail interruptions. In fact, there is now concern that producers will not be able to get the fertilizer at any price, simply because not enough can be moved into the area because of the rail strike. This will also increase the number of trucks on the road as farmers attempt to access the fertilizer themselves. This is also an increased cost for all levels of government due to additional wear and tear on the highway system in western Canada.

Disruption of rail services also causes grave concern with respect to the international markets, as Canada can no longer be seen as a reliable supplier. This could cause a considerable loss of sales to countries overseas and, therefore, a corresponding loss of income for Canadian farmers.

These labour disputes, along with previous disruptions at the terminals on the west coast, have put Canada's reputation at stake, and the federal government needs to take a good look at declaring the whole system used to export grain an essential service. If this is not possible, there needs to be a support program put in place to compensate farmers for lost sales due to another issue over which we have absolutely no control.

In closing, we thank the committee for this opportunity to speak of our concerns and remind you that the best programs for farmers are the programs that are simple to use, can be managed by producers on their own farms, and provide a predictable level of income in years when farmers are affected by events that are beyond their control.

Thank you again for your time, and I would be pleased to answer any questions you might have.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Bartley.

Mr. Chorney, the floor is yours.

[Brian Chorney, President, Manitoba Canola Growers Association]

Thank you, Mr. Chairman, and good morning to you and to the members of the standing committee.

It's a pleasure to be here today to discuss business risk management. It is an important topic for canola growers, not only for growers in this province but also for growers across Canada.

I am representing the Manitoba canola growers, and I farm in East Selkirk, Manitoba. I would also like to point out that our organization is represented at the national level by the Canadian Canola Growers Association. Our position on business risk management provincially is consistent with the position nationally.

At a provincial level, the Manitoba Canola Growers Association represents approximately 10,000 growers within the province. MCGA's membership elects eight directors to govern the association. MCGA is a member organization committed to maximizing the net income for canola.

At the national level, the Canadian Canola Growers represents approximately 60,000 growers, which is about 95% of the canola growers across Canada. CCGA is governed by a board of directors of elected representatives from the provincial grower organizations. Our mission is to influence national issues, policies, and enhance the profitability of Canadian canola growers.

Production of canola in Manitoba is estimated at 1.8 million tonnes in 2006, up significantly from the 2005 production of 1.2 million tonnes. Canola is big business in Canada. Our 60,000 farmers who grow canola on their farms produce about 6 million to 7 million tonnes a year of production, and this continues to rise. For example, in 2005 Canadian farmers produced 9.6 million tonnes of canola.

The farm gate value of the canola, depending on the price, is about $2 billion to $2.5 billion. This can represent anywhere from one-third to one-half of an individual farmer's gross revenue in any given year. The canola industry also generates about $11 billion in economic activity annually.

With our industry partners, we recently announced a production target for 2015 of 15 million tonnes. We are expecting to achieve this through increased yields, oil content, and acreage. It should be noted that we are expecting the ratio of classic to designer canola to move from a 90-10 split to a 75-25 split.

The entire industry is concerned that transportation issues may limit these targets, but as a grower, two items drive what I grow on my farm. One is the expected returns per acre, and the other is risk assessments on each of the crops that I could grow.

As growers, we have communicated to the rest of the industry that the only way these targets can be met are through the proper pricing signals. What also needs to happen are proper risk management strategies.

This is just one crop and one part of the agriculture industry. When you consider all farms across all commodities, the latest statistics in 2005 showed farm receipts in Canada were just under $37 billion. Operating expenses and depreciation amounted to $35 billion that same year.

Today's farming is big business and it involves significant investment. It involves significant sink costs and variable costs. The bottom line is that the financial risks are very high. This is why getting effective policies on business risk management is critically important to our farmers.

As a canola grower, the major issues of risk in my business are production risks, price risks, and price-distorting and production-distorting practices of foreign government policies.

On the topic of production risks, I would like to point out that as a first line of defence, growers actively manage their production risks with good, sound agronomic practices. We rotate our crops. We fertilize. We rotate our chemicals. We scout our fields for insects and disease. We do everything we can to ensure that we can maximize the potential yield and quality. However, we are still susceptible to weather: frost, drought, heat, excess moisture. They can all take a toll on our production.

It is at this point that our production insurance plays a very important role, and it needs to continue to play an important role. Production insurance has served us well in the past; however, to ensure that it continues that it continues to effectively meet the needs of farmers going forward, it needs to keep current on prices and production levels.

There is a disturbing trend in production insurance: premiums continue to rise, and coverage levels continue to fall. This needs to be addressed to ensure our insurance programs remain a viable risk management tool for farmers.

One part of the solution that could be examined is that an adjustment could be made to the base program to account for the significant impact new seed technology is having on yields. This is very prevalent in canola. With new hybrid varieties delivering substantially higher yield potentials, the current 10-year averaging for determining insurable yield does not respond quickly enough to the new reality. Therefore yield coverage levels through production insurance will continue to lag unless something is done. We need some kind of innovation factor built into the base production insurance model so that it responds to and offsets the risks of today, not of days gone by.

The same issue arises on the price side. Specialty canola, which is expected to see significantly increased acreages, is an example of growing a higher-value specialty crop. However, farmers are not able to insure these crops at high enough values to fully offset their risk and potential loss opportunity. Also, in Manitoba it is not differentiated from classic canola within the crop insurance system; it should be noted that specialty canola is differentiated in Alberta and Saskatchewan.

A concept we are working on as canola growers is that of revenue insurance. This concept would build on the existing production insurance program and would create a combined price insurance/production insurance model that would essentially offer farmers a new market-based revenue insurance product. We have studied the performance of this concept, and our research to date shows it could be an effective risk management tool for farmers.

We believe national market-based insurance programs should be used as a foundation to the federal BRM strategy. We should be looking very closely at price insurance, at revenue insurance, and maybe even at weather insurance. If designed appropriately, insurance models reflect true market signals. They allow farmers the flexibility to select premium and coverage-level options that fit their individual farming businesses. The downside risk and bottom-line coverages are known and bankable; payouts are quick and paid out in the year of need. These features of insurance are major shortcomings in the current CAIS program, as I am sure you've heard on numerous occasions.

Also related to risk management on the price side is a cash advance program. This has been a very effective program, and I'd like to thank the Government of Canada for recently expanding the dollar limit of this program and expanding it to other commodities as well.

We use this program to cash-flow our business while we market our grain. Without it we would be driven to market grain more for cash flow purposes, rather than focusing on maximizing returns from market prices, so this program is very useful for us.

Part of the success of the program is that it is effectively and efficiently demonstrated and delivered by grower groups. We would encourage the government to consider other programs that grower groups could administer on its behalf.

Another point I would like to make is that we really appreciate the government's recent announcements on renewable fuels, and biodiesel in particular. Thank you for that. It is always important to diversify our customer base as a way to lower our business risks. Once the biodiesel industry is up and running, canola growers will have a new domestic market to serve.

I'd also like to touch briefly on the third area of business risk I mentioned earlier, which is the trade distorting policies of foreign countries. It is a risk we cannot manage on our own, and I feel the negative impact on my farm.

Studies have been conducted that show the international marketplace is distorted by subsidies and tariffs. These are costing growers real dollars every single day. Estimates are that trade-distorting subsidies cost Canada's grains and oilseeds sector $1.3 billion, and tariffs and quotas are costing us about $1.2 billion every single year.

When you look at canola specifically, these distortions are costing us $800 million every year. We need you to fix this for us. To do this we need real and meaningful trade liberalization in all three pillars of the WTO negotiations: domestic support, export competition, and market access.

Bilateral trade agreements have their place, but they do not really address the trade-distorting domestic subsidy issues. We need Canada to be active on all fronts—WTO and bilaterals—to aggressively pursue trade liberalization for us as exporters. The current WTO rules are not acceptable.

Countries such as the U.S. and EU still have substantial room within the existing WTO agreement to increase trade distorting programs and policies. This will be an ongoing risk to the viability and competitiveness of the Canadian canola growers until a new and improved agreement is reached.

In closing, I would like to point out a very important linkage between the federal government programs for business risk management and international trade. Any program that is developed must be designed to minimize the risk of countervail actions by other countries. To do that, federal programs must be national in scope. They must be generally available and used by all, and they must not advantage one region or commodity over another. This is a fundamental principle that the Government of Canada has followed in the past, and we fully support the principle now and going forward in the future.

The concept of regional flexibility in a federally funded program quickly takes us down the path of a countervailable program. As a major export commodity, canola could easily be targeted for retaliatory measures should a trade dispute arise. We do not want to see a situation where we pay the price for countervailing action against a government program.

[The Chair, Conservative, James Bezan]

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

Ms. Jones.

[Tammy Jones, Executive Director, Manitoba Pulse Growers Association Inc.]

Thank you.

I will provide a brief introduction, and then Lincoln Wolfe, our president, will provide his comments.

The Manitoba Pulse Growers Association is a producer-funded association representing producers of pulse crops including dry beans, peas, soybeans, lentils, chickpeas, and fava beans. The acreage of pulse crops peaked in 2002 with over 620,000 acres, and the five-year average is over 500,000 acres in the province. The major pulse crops grown in Manitoba continue to be dry edible beans, field peas, and soybeans.

On behalf of our association, the key areas of focus that we pursue include research, market development, and policy representation.

In the area of research, approximately 50% of our annual budget is provided for research activities, including areas of agronomics, pest management, breeding initiatives, and value-added opportunities. We continue to encourage the federal and provincial governments to support these essential activities.

In the area of market development and access, we have focused on bean markets in Cuba and Mexico, as well improving relations with the U.S., including participation in the NAFTA meetings.

On policy, MPGA has addressed various issues including production insurance, safety nets, trade, and other regulations that impact on the ability of pulse producers to produce their commodity.

As a final initiative, member relations is key, aimed at providing relevant information to producers about the activities of the association and how they may impact on farms.

Business risk management is a necessary part of production, although not one that producers prefer to rely on. Commodity prices are steadily declining in real terms over time, and this has recently been compounded by the strength of the Canadian dollar. Safety nets provide producers stability from highly variable commodity markets.

It's important to note that farmers across the globe have access to a series of different tools to manage risk. One of the options to consider is that Canadian producers need a similar set of tools as American producers, given our close proximity to our U.S. counterparts.

Production insurance is vital as a risk management strategy. The linkages between CAIS and production insurance must not penalize the farmer for utilizing production insurance, as was mentioned by other members here today. Price determination for coverage levels is also a concern. Inaccurate forecasting significantly impacts on coverage levels, but it also may have impact on seeding intention, which we would like to avoid.

Market development and safety nets have been working together to help build the industry. The market development Initiatives build a long-term strong industry, and safety nets provide the stability until the potential of market development can be realized. Safety nets provide stable supplies for processors, and dramatic swings in prices typically cause large shifts in supply, which could jeopardize the building of infrastructure for those processors.

Trade is critical in general for agriculture in Canada, but it is especially critical for pulse crops because we export 85% of our production. Canadian producers require freer, fairer, and open international trade for the long-term stability of the industry. Unilaterally reducing Canadian business risk management programs prior to other nations will definitely have a negative impact on Canadian agriculture.

[Lincoln Wolfe, President, Manitoba Pulse Growers Association Inc.]

Hello. My name is Lincoln Wolfe. I'm the chair of the Manitoba Pulse Growers Association. I'm a grower from the Portage la Prairie area, where we specialize in edible bean production. Business risk management is an important component of our operation, as it is for all other producers in the province.

We do not feel it would be beneficial to replace the CAIS program entirely, but we support intentions instead to transform CAIS to make business risk management simpler and more responsive. The concept of margin-based programming has been the basis of several risk management programs in the past. Continuing to overhaul the existing program to adjust to current needs is superior to developing a new program that farmers would have to re-learn.

CAIS is not working for many Canadian growers because of time delays on processing the claims and time delays on payment. Long-term declining reference margins are also a concern, as is the difficulty of predicting payments, if any, once a loss is incurred. The lack of bankability is also a concern.

A long-term solution must also be developed, one that is bankable, sustainable, and predictable, given the divergent needs of farmers across Canada. Provincial governments are very diverse in their ability and desire to support agriculture. The federal government should encourage their provincial counterparts to participate to the fullest extent. The federal government has the primary responsibility over farm income catastrophes, especially when due to trade policies in other countries of the world. This is not an area that has purely provincial jurisdiction.

Any program should take into account Canada's WTO position and the expected outcome of an eventual WTO agreement. Programming should be as trade-neutral as possible, given our reliance on exporting production.

The impact of low commodity prices and crop failures is only heightened when the cost of production is also rising. With little or no leverage over crop input suppliers, support payments could end up going through farmers' pockets directly to input and service providers. Consideration should be given to how programs can be structured to address that reality.

Payments should not based on calendar year or income taxes, but rather compatible to the individual farm's year-end. Decreasing complexity would reduce the administrative burden, including reducing paperwork for producers and the cost of hiring accountants.

Increased bankability for producers: producers need the assurance of predictable support programs when they go to their lending institutions.

Addressing declining reference margins: Reference margins have declined significantly in recent years due to consecutive difficult production years. The Olympic average currently utilized is too limited to completely assess the profitability of a farm, and a more comprehensive approach should be utilized for assessing relevant reference margins.

Assessing structure changes based on land base alone is not reflective of other input costs, such as labour costs. The future of agriculture depends on making sure that there is a return to farmers' bottom line before pursuing opportunity. We need to continue support of research for the public good, including research in the area of genetics, breeding, and agronomics to enhance the potential for value-added opportunities. We need a business risk management program that works to ensure the industry will be sustainable.

Transportation is a serious concern for producers. It continues to be an area of concern to producers. Interruption of rail service and inadequate levels of service are reducing the ability of producers to service export markets and jeopardizing any market development and trade opportunities.

Without assurances that rail services will be improved, there is significant doubt that Canada's reputation regarding servicing markets will continue to degrade and will negatively impact on our ability to export. Rail service should be considered an essential service, or some of our support programs should compensate producers for the inability to market their product due to transportation.

Turning to minor use and pesticide harmonization, the accomplishments of our minor-use program and the minor-use research initiatives as well as the risk-reduction program are beneficial to producers and to the general public, making this an area that should continue to be publicly funded. The activities of the PMRA are important and should be continued. We are optimistic that the outputs and activities of the PMRA have a future in meeting the pest-management needs of Canadian growers, registering new chemicals, improving access to existing products, and moving towards the ultimate goal of NAFTA labelling for pesticides.

Regarding the environment, renewable fuels are an opportunity that pulse crops are uniquely positioned to provide benefits in, based on the suitability of the feedstock and the added benefit of their nitrogen-fixing ability.

Pulses are well positioned as a nutritious food source with significant health benefits. Public health cost could be reduced by encouraging growth in the production of functional foods and nutraceuticals with research funding provided for the processing and for enhancing the ability to produce healthy foods and their health-related properties.

Thank you very much.

[The Chair, Conservative, James Bezan]

Thank you.

I think we'll stick with the practice of five-minute rounds. I hope everybody is in agreement with that.

With that, I will pick it up with Mr. Steckle.

[Paul Steckle, Liberal, Huron—Bruce, ON]

First of all, let me welcome you to the meeting here this morning. I know that we're in James's riding, and we're pleased to be here. It's my first time to Gimli, and I'm impressed with the ice. We know now that he comes from the northern part of the hemisphere.

Anyhow, I just want to dwell on a number of issues that I think are important to help us as we move forward in our APF deliberations, and as we look at the risk management concept, whatever model that might be.

To you, Bob, first of all, do you grow pumpkins bigger than 1,400 pounds? If you do, I'll concede the title to you.

[Bob Bartley]

Fourteen hundred?

[Paul Steckle, Liberal, Huron—Bruce, ON]

Fourteen hundred. Port Elgin still holds and reigns, I think, as the Canadian champion, and that's my riding. Anyhow, you and I are in the pumpkin business on a part-time basis.

Brian, you raised a number of issues, as well as you, Bob, and the others as well. But there are two issues I want to talk about. One is the issue of the crop insurance or production insurance, which is something the various groups that have met before us have universally endorsed as a positive program. I think we need to work from the positive side, work with programs that are working for us and see how we can improve them. But I see a shortfall, or at least the argument seems to be made that on the crop insurance side, because of the increased yields being incurred, because of research that has taken place, and the fact that sometimes in succeeding years using the insurance program our numbers come down, we fail to realize what we should realize for our crop insurance. So I think there's some work that could be done there.

Would you agree that the crop insurance program is a program we need to continue to work on improving?

The other part of the question there would be, is there sufficient research being done, particularly in canola? I know the argument has been made that corn gets the lion's share of the research dollars because of the yield increase that we've seen there. Is the same thing happening in canola? That's the first part of my question.

The latter part would be in regard to the model that has been put forward by Quebec and Ontario, in terms of being self-directed, where farmers would choose the value of the crop that they would see as a bottom line for a return on their cost of production. Would you see that as a model that might be worked on and improved upon?

I think, Brian, you may have spoken a little to that; I felt you were touching on that. Is that the model you were talking about, or is it something you would look at, where farmers take responsibility, whether there would be three parties involved—a tripartite investment: farmers; the province, in this case; and the federal government? I think it would be a concept that I would find very interesting.

[The Chair, Conservative, James Bezan]

I'll ask all witnesses to keep their comments brief and to the point.

Who wants to go first?

Mr. Bartley.

[Bob Bartley]

With crop insurance on corn in Manitoba, we have the luxury of individual coverage, so every farm has its own yield. Our problem is with the prices that are multiplied by that yield and how those prices are arrived at. Quite often they do not reflect actual market values. I think we have to work together to come up with more accurate pricing, and maybe adjustments later on.

[The Chair, Conservative, James Bezan]

Brian.

[Brian Chorney]

One of the things from the crop insurance side is that it's a bankable program. It's very good, when you go to your financial institution, to try to move and put a crop into the ground. I agree with you that it is a very important program from a production perspective.

There are a couple of things I want to mention, though. One is consistency within the canola industry. We're trying to grow more specialty canolas because of transfat issues and we're having a difficult time getting consistent crop insurance programs throughout the provinces. Consistency would ensure that the production opportunities are there for all growers.

Another thing I'd like to touch on is the ten-year averaging that they use. With hybrid technology and the increasing yields in some of the new canola varieties, that is a long lag period to look at these increases in yield. Farmers had a hard time seeing that yield ten years ago compared to what some of the technology allows them to do in current production practices.

Those are the three points I wanted to make.

[Paul Steckle, Liberal, Huron—Bruce, ON]

I'm not sure I've heard anyone specifically say that on the production side—The model that was put forward had the option for a corn producer—for example, he could choose a premium at the $3 level, at the $3.50 level, at the $4 level. Canola would be different. It could be $7, $8, $9, or whatever; I'm not here to determine the dollars. I mean, it's hard to make money in insurance. They're there to cover your losses.

You're going to buy the premium that you feel best suits your needs. I think that's putting the onus back on the farmer. You know it's bankable. You can go to the bank with that commitment. You'll get the money and you can borrow on that. So this is a bankable program--all the way through. I'm wondering why more people haven't come forward to say that this is where they want to go. That would take care of some of the costs of trade disorders, where the price is higher. You're covering your costs.

We can't anticipate what the prices might be. We're not going to bring you up to a level that might be much higher than Canadian levels, because the Americans have a bigger treasury than we do. That's not what this is all about. I think you need to take some responsibility, as farmers, where you want to see yourself at the end of the year.

[The Chair, Conservative, James Bezan]

Mr. Steckle, your time has expired. Ms. Jones wants to get in.

Very brief comments, please. Tammy first, then Bob.

[Tammy Jones]

Thank you.

We have been very concerned about price determination in the area of crop insurance. The way we think we could address that issue in Manitoba is similar to the Saskatchewan contract insurance for IP canola. A producer comes to production insurance staff with their contract and says, “This is the price we're guaranteed. Regardless of the price discovery mechanism that has already being employed, here's what we're contracting our production for, and this is what we think is reasonable.” You would then use the average of those two estimates to at least provide some assurance that the producer is getting a realistic coverage level. That's something we've asked Crop Insurance Manitoba to pursue. We think it may have opportunities for other areas of production in Manitoba, other than just pulse crops.

[The Chair, Conservative, James Bezan]

Mr. Bartley, very, very quickly.

[Bob Bartley]

The market doesn't guarantee that they would cover our expenses and neither does crop insurance.

[The Chair, Conservative, James Bezan]

For those of you who require translation services, you have translation equipment in front of you.

Monsieur Gaudet, you have five minutes.

[Roger Gaudet, Bloc, Montcalm, QC]

Thank you, Mr. Chair. I am very happy to be in your area.

My question is to Mr. Kuhl. The case of potato contamination last year in Saint-Amable shows how difficult it is to get compensation from the government.

Could you describe to the committee a model of compensation in the case of a disease or infestation relating to potatoes? I would like to have you opinion on this matter. I am talking about a straightforward model, not one involving endless applications.

[The Chair, Conservative, James Bezan]

Mr. Kuhl.