Evidence of meeting #53 for Agriculture and Agri-Food in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was program.
Director, Manitoba Corn Growers Association Inc.
In grains and oilseeds, the margin-based programs just haven't been working.
Director, Manitoba Corn Growers Association Inc.
There's been a steady decline there.
President, Manitoba Canola Growers Association
Yes, I think the move to the NISA-type top-up is positive. The challenge with the CAIS program has been, and I think will continue to be, how bankable it is. That's something that, hopefully, we can address in the future.
Chairman, Potato Committee, Canadian Horticultural Council
Certainly if you went to having it partially NISA-based, that would be bankable. One of the things that happened in the past was that the accounting services forced us to add the NISA accounts to our balance sheets, which was a good thing.
I am always perplexed about why we see savings accounts as a good thing, when many of us are operating with operating lines of credit, as well. So if we're going to do something, I would hope it would be set up in such a way so we didn't have a savings account, on which we're getting 3% or 4%, as opposed to a line of credit, on which we're paying 6% or 7%.
Conservative
The Chair Conservative James Bezan
One question that I'm surprised didn't come up today, since we have the canola and corn growers sitting here and the green growers, is biofuels. We talked a little about that, but not in any hard questions. Are we seeing activity here in Manitoba that's going to be beneficial to producers so that they're going to be able to participate in the production of biofuels?
Director, Manitoba Corn Growers Association Inc.
Biofuels in Manitoba as far as ethanol goes are wheat-based, so we're—
Conservative
Director, Manitoba Corn Growers Association Inc.
There may be some poor-quality corn going in there, but I guess our benefit will be from the amount of corn that's eaten up in the States.
President, Manitoba Canola Growers Association
The announcement that was made in the budget was very positive. There are a number of projects that have been on the books waiting for some positive direction from a policy perspective, and I think the announcement in the budget has definitely helped that.
I think one piece of the puzzle that we're still waiting for is the capital formation assistance programs and the details of how that's going to roll out so that producer participation can move forward. So we're looking for those details.
Executive Director, Manitoba Pulse Growers Association Inc.
I think renewable fuels have provided optimism to parts of the industry. For instance, in Hartney, there's Clean Country Resources looking at a barley and pea mixture as their way of producing ethanol. There are some concerns in incenting particular feedstocks over others. With biodiesel, it's the iodine value and how that impacts on whether soybeans are included as a version of a feedstock or not. Obviously the cost of the feedstock will be more relevant than an iodine value.
In general, we're hoping that all commodities are equally incented. I think it will provide a really positive choice for consumers to be able to have that option, which is a made-in-Canada solution rather than something that comes from the U.S.
I've just been reminded that mandating as an incentive is an important part of that. So we would encourage it to happen. We think it's positive for primary production as a value-added opportunity, and we just hope that there's a level playing field for all feedstocks out there.
President, Manitoba Canola Growers Association
On the mandate side, we really would like to see the 2% for biodiesel at 2010, instead of 2012. We're looking forward to being able to provide the test results to allow the government to move on that.
Conservative
The Chair Conservative James Bezan
I want to thank all of you for taking time out of your busy schedules to present to the committee today. It's helped us come up with our own report that we'll take back to the House of Commons. As we continue on with our study and hear from all points in the regions, it's important that you have your input in that. So we appreciate that very much.
We are going to suspend. It gives us a chance to clear the witness table. I will ask the next group of witnesses to come to the table for 10:30.
For those members who need to check out of the hotel, I would recommend that you do it now if you haven't already done it.
Conservative
The Chair Conservative James Bezan
I call this meeting back to order and welcome to the table Andrew Dickson, general manager of the Manitoba Pork Council; Neil Hamilton, CEO of Manitoba Agricultural Services Corporation, which includes production insurance; Martin Unrau, president of the Manitoba Cattle Producers Association; and Dennis Kaprawy and Roy Eyjolfson, from Bifrost Bio-Blends.
We will start off with opening comments of ten minutes or less per group. We'll kick it off with you, Mr. Dickson.
Andrew Dickson General Manager, Manitoba Pork Council
I apologize for not having any notes. Essentially I'm going to work through some messages that the Canadian Pork Council has already provided to you, and put some of it into a Manitoba context.
I'm the general manager of the Manitoba Pork Council. We have 1,400 members and a mandatory levy. We're not a marketing board and don't do any marketing. I want to emphasize that, because some people get confused. We produce nine million pigs in Manitoba, of which five million are finished pigs that go through the various processing companies. We produce four million weanlings, the bulk of which are shipped to the United States. We're the largest hog producing province in Canada by the number of pigs that hit the ground. Unfortunately we don't finish all our pigs, like they do in Ontario and Quebec.
For us it's really important to have another review of the agricultural policy framework. I know there's been a lot of discussion about crop insurance and so forth this morning, but we would like to broaden it and bring a few other topics into that discussion.
Competitiveness is a key issue for us. We feel it's really important that be brought to mind when you are in deliberations on developing new policies for the agricultural industry. Just to give you an illustration, the Canadian dollar has had a major impact on us as a hog finishing industry. It has probably knocked $20 to $30 per pig off the profitability of finishing pigs here in Manitoba.
Labour is becoming an issue. We are pleased that the federal government has delegated part of that authority back to Manitoba to allow more provincial input on how we bring in workers from other parts of the world, not only in the raising of animals in barns, but in the processing industry as well. We have a major expansion underway right now in Brandon with the Maple Leaf plant, and access to labour is critical. On the processing side there is an impact on farms as well, because if we don't have processors there's not much point in raising pigs.
We also need a competitive regulatory system. Regulations are a policy instrument, but they need to be used in the context of other policy instruments that have an impact on agriculture. For example, hog producers in the United States have access to some vaccines. I can't remember their names right now, but prices are lower than ours. A vaccine is a vaccine. It's not terribly complicated for the industry to produce vaccines, so why do we have problems?
There's this whole issue of certification, inspection fees, and so on. It needs to be carefully thought out too in the context of who we do trade with.
It's absolutely critical, in finishing off pigs or any livestock, that we have access to competitively priced grains. Our competition is Iowa, where they grow 200 bushels of corn per acre. Here we are trying to grow essentially non-human-grade feed grains, and we're getting 35 to 40 bushels an acre. We need to take a hard look at how we can increase our yields here so we're competitive with the United States.
As an example, on Monday I got a call from barley researchers who have brought out a new type of barley that's low in phytate. They're having significant problems with CFIA in getting this product into the field so producers can use it because there's a question about it being novel. I don't know what novelty means, but it's some sort of regulation that needs to be looked at. Apparently this is going to create a greater delay now in bringing these varieties out. If you think that's an issue, low-phytate barley offers a solution to the problems—if you look out the window here—of the hog industry's impact on Lake Winnipeg. Apparently we're part of the problem there. That's another issue.
We need very strong animal health programs in place in Canada. Canada does a good job on this. We need to maintain those programs. We have a good veterinary service in Canada. It's important to make sure that the universities are capable of pumping out veterinarians who work in the animal industry, not just with pets. That has implications through the whole system, in terms of them doing inspections and so on.
I'd like to emphasize that we need catastrophic insurance of some description on animal health here. I don't personally think it would be a very expensive program, because when was the last big catastrophe we had, apart from BSE?
If you think that was a problem, I can tell you that foot and mouth disease in the hog industry would be a catastrophe that most people in this room would have problems dealing with. What psychologists call cognitive dissonance would come into play. But if we could have that in place, then we as an industry are really interested in looking at some sort of private price insurance model, because the hog cycle has been proven to last four years. You can go back almost 130 years and show there's been a four-year hog cycle across the world in terms of prices.
I'm not going to go on about market development and trade. You've had a lot of stuff from our national body on that. I just want to emphasize here too that at the provincial level we do a lot of work ourselves with our major customer, which is the United States. We are down in the United States every year promoting our industry down there and dealing directly with the state livestock associations, the Iowa Pork Producers Association, the Minnesota Pork Producers Association, and so on, doing trade advocacy work.
We'e very pleased with the support that we get from Agriculture Canada with your staff down there in Minnesota, and we're interested in looking at the concept of a pork pact at some time. There's an auto pact for cars and stuff like this. We're looking at the idea of a pork pact to try to resolve our trade issues with the United States. We're one of the few commodity groups that's actually won a trade challenge in the United States, but it cost our association $6.3 million last time to hire Washington lawyers to fight this thing, and we had to raise that money from levies.
A forthcoming issue is this whole COOL, country of origin labelling, thing. It's a huge, big wave coming down. This will hit us next spring, when the Americans have to make a decision as to whether they're going to buy our weanlings or not, or the 1.3 million finished pigs that we ship into processing plants in places like Sioux Falls.
In environment, various pieces were being presented to you by the Canadian Pork Council. The key thing here from a provincial perspective is that we have a seamless blending of the roles of the federal and provincial governments in dealing with environmental matters. There used to be a standard sort of gentlemen's agreement on this that if the provinces had reasonable environmental policies in place, the federal government would restrict its involvement. What we've been seeing is an increasing role of the federal government in environmental issues through things like the Department of Fisheries and Oceans appointing staff to inspect drainage ditches and determine whether they're spawning grounds, which has implications in terms of where we can spread manure on fields and so on. So it's a whole other issue.
We're very concerned about where we're going on biofuels and so on. We don't want to see the situation that seems to be developing in the United States, where they're going to take their 11 billion or 12 billion bushel corn crop and devote up to 6 billion bushels of that towards fuels, which has huge implications to the feed industry, in pigs and cattle and dairy and so on. Our industry can't use the byproducts of these things very much. The cattle industry might be able to use them, but we can't. We need the starches and proteins in the feed to feed our animals. Ours are monogastric animals.
In terms of food safety and quality—and you've probably had lots of presentations on this thing--a big thing for us is that a strong food safety program has implications for market access into key markets like Japan and so on, and increasingly in places like the United States and so on. We need to make sure that we mesh our programs in terms of federal inspection roles and in the farm inspection programs we have in place.
For example, in Manitoba we use this thing called the Canadian quality assurance program. We use local veterinarians to do the farm inspections and so on to make sure that antibiotics have been used properly in the production process.
You probably have had lots on science and innovation. You just need lots more done, and it's unfortunate, but in the pig industry there's not a lot of research being done. It has been cut back, and we're relying more on things like the universities and so on to do our work. As an association, we give significant grants to the University of Manitoba here to do work, also the Prairie Swine Centre and others. And we need to see research done on things like feed grains and so on.
It's critical that we get this issue solved on the prairies. You're going to hear the same thing when you talk to Alberta and Saskatchewan and so on. This whole issue of increasing yields for the feed industry is becoming more and more. As an example, we buy a million tonnes of barley every year as an industry and feed it to our animals. We are the major buyer of feed grains here in the province. We are a significant factor and we can pay a competitive price.
In terms of renewal, one thing you might want to think about is different approaches for different-sized farms. There's this whole issue of do we need two types of policies, one for the smaller producer and one for the large commercial operations. We have to be careful we don't use the same policy, because they have different impacts for these different types of producers, and the whole issue of smaller producers trying to explore niche markets and so on is becoming more important.
On business risk management, Stephen Moffett, who's the chair of our committee on this thing, has made a presentation to you on this already.
In terms of Manitoba, our feeling is that we need a program in place. It should help producers and compensate them for things like diseases and other losses of productive assets, which are beyond their actual control. We want to make sure there's a compatibility of these programs across Canada, and we have to be careful that they don't become trade-distorting.
Once we get that in place, it also opens up our opportunity to make use of things like the cash advance program and so on. That's a critical item for us. We haven't made use of that program, but with the changes the federal government's made on that thing, we're going to have some meetings next month to try to make sure we can get use of the cash program.
I have used up all my ten minutes; I'm sorry.
Conservative
The Chair Conservative James Bezan
Thank you, Mr. Dickson.
Mr. Hamilton is next, for ten minutes or less, please.
Neil Hamilton President and Chief Executive Officer, Manitoba Agricultural Services Corporation
Thank you, Mr. Chairman.
My name is Neil Hamilton. I'm the CEO of the Manitoba Agricultural Services Corporation, which is an amalgamation of the former Manitoba Crop Insurance Corporation and the Manitoba Agricultural Credit Corporation. We're in the agricultural insurance and lending business. I'm going to focus my comments today on livestock insurance, given the makeup of the panel, and I'll make a couple of general policy comments at the end.
Production insurance—and in this province we've offered production insurance since 1960—has traditionally been an output program, so we've really focused on grain, oilseeds, and special crops, as you've heard from the previous group that was in front of you. We have dealt with forage and pasture in terms of livestock, and that isn't a recent thing, we've had a forage program since the early 1970s, but there is a fundamental difference. Most of the crops we deal with are output-based: the farmer is selling them, so if they have a loss, they get replacement of that value, and it's done.
For livestock, in terms of forage and pasture, it's an input, so it has to be replaced. As a result, producers have adopted different ways of dealing with that situation, so there is less demand for crop insurance for those types of products. Just to put that into perspective, in terms of forage and improved pasture, in Canada about 25% of the land is insured, and in Manitoba it is 26%, just slightly higher.
However, in terms of other crops that are available under the program, the Canadian average is 69% and the Manitoba average is 85%. So for us as an entity, we're covering 85% of crops, grains, oilseeds, and special crops, but only 25% or 26% of pasture and forage. I'm not sure the problem is necessarily in the way it's approached, but forage and pasture is a very different commodity.
Many alternatives have been tried by different crop insurance agencies to deal with this problem, and you'll hear people talk about weather derivatives, satellite imagery, proxy crops, and all these types of approaches to get at how we measure loss in forage and pasture. The cold, hard reality is that they've all had very limited success, based on the numbers that I have quoted, and everybody is ranging in that 25%, 30% range, far below what we'd like to be.
Under the APF, livestock was brought in to production insurance, and the intention was to start to have livestock covered. In my view, that was probably an equity issue, trying to bring more equity to the table for livestock producers. Because the reality is, in the programs we offer, grain producers get price insurance and output insurance, production insurance, and cattle producers and hog producers largely get price insurance through CAIS. So there's a perceived inequity in terms of the subsidy that's received.
I think we have to ask ourselves a cold, hard question, and that is how much production risk is there in livestock. It may not be that fundamental, and if it isn't—and maybe that's why production insurance doesn't work that well—maybe we're trying to approach a perceived inequity and subsidy through possibly the wrong tool.
One of the issues in trying to insure livestock output—and I'm talking about pounds of production of livestock, not forage and pasture, but actually the output of livestock—is in our view that a lot of the perils that cause reduction in livestock output are largely management-related, whereas in crops they're natural perils such as weather. You can't make that perfect distinction, because obviously weather has an impact also on cattle production rates and so on.
What are livestock producers looking for, from our perspective? We feel that they're looking for income loss due to disease; that's fundamentally what they're looking for. We also feel that they're looking for production loss insurance, pounds-of-production guarantee. That's another thing they're looking for. Mortality insurance is the way production insurance seems to be heading at the current time; whereas some producers may be interested in it, I don't think that's what people want.
Production insurance can accommodate a pounds-of-production guarantee approach. However, we, being insurers, would have to get over trying to identify a loss with a particular peril, because that would be very difficult in the case of livestock.
I'd just like to make a couple of brief policy comments before I end here.
We have a view, and I think it's held by at least some other provinces, that under APF what we should be doing is adopting an insurance-first policy. Where it makes sense and where programs can be delivered effectively, they should be the first line of defence, and then CAIS programs or contributory savings accounts or disaster should be a fallback, a backstop to that.
Now, that may well sound like a self-serving comment because we're in that business, but the two fundamental things that insurance products give you are predictability and reduction in financial variability over time. With insurance products, we can establish reserves, we can smooth losses over as much as 25 years. In certain cases we can even buy reinsurance from the global market. So there are some fundamental reasons that an insurance-based approach would be more effective.
Having said that, insurance does not work in all applications. So I'm not going to sit here and say we can design a program for any product. We can't. As I pointed out earlier, we're struggling in forage and pasture, as are all other jurisdictions.
Mr. Chairman, with that, I'll conclude.
Conservative
The Chair Conservative James Bezan
Thank you, Mr. Hamilton.
Mr. Unrau, from the Manitoba Cattle Producers.
Martin Unrau President, Manitoba Cattle Producers Association
Thank you, Mr. Chairman and members of the standing committee, for visiting Manitoba to discuss the agricultural policy framework and future farm programs.
My name is Martin Unrau, and I'm the president of the Manitoba Cattle Producers Association, which represents approximately 10,000 producers in various aspects of the beef industry, including cow-calf, backgrounding, and finishing.
The cattle industry is worth in excess of $500 million annually to the Manitoba economy. My family and I live in the MacGregor area and are committed to seeing our industry move forward. We're involved in all three levels of this industry, cow-calf, backgrounding, and finishing.
I appreciate the opportunity to provide some comments for the committee. Manitoba cattle producers are a self-reliant group. Our industry does not usually ask for government programs and as producers we take many steps to manage risk on our farms and ranches, such as implementing herd health programs, ensuring adequate feed supplies, and using other management practices to move our industry ahead and keep it viable. We believe that markets and not government programs should provide the signals that guide our industry. As cattle producers, we recognize there will be cyclical ups and downs in our industry, and we try to plan for them accordingly. However, in spite of our best practices, some factors are simply beyond our ability to manage, such as the BSE crisis in the last four years--and the crisis is not over at this point.
Other natural disasters, such as flooding and drought, are also a problem for us. Faced with challenges such as these, cattle producers may sometimes need to access risk management programs. The debate over Canadian farm policies has been going on for many years, and many programs have come and gone--NISA, AIDA, CFIP, and CAIS, just to name a few. We believe the politicians and policy-makers developing these programs have had good intentions. However, sometimes the gap between good intentions and successful program delivery has been great, and producers have not received the types of assistance that were needed.
In developing future business risk management programs, the cattle producers would ask the government to adhere to some key principles. Crafting farm programs to meet the needs of different commodity groups, such as cattle, pork, grain, and horticulture sectors, can be extremely challenging. What may seem to be a logical program component for the grain sector could have adverse effects on the cattle sector. It is important that a competitive balance be maintained, be it within a particular industry or between the different sectors. It is imperative that future programs be trade-neutral. As an industry that has been at the centre of an ongoing trade dispute for nearly four years, we are well versed in the devastating impact of trade disruptions. Moreover, cattle producers remember all too well the United States cattle group R-CALF launching a countervail anti-dumping complaint against our industry in 1998.
Programs that are being designed to mitigate risk must not inadvertently place certain sectors at risk by courting trade challenges. The Manitoba Cattle Producers Association asks that future business risk management programs be more predictable, more transparent, and less bureaucratic. Farming is challenging enough without producers having to try to digest convoluted risk management programs that may or may not provide assistance to them when they need it the very most. All too often, producers have been confused about what it will take to trigger a program payment. Hiring accountants or consultants to help wade through this process is costly and time-consuming for producers.
Of equal importance is the need to deliver assistance in a timely fashion. For example, payments related to natural disasters must flow quickly, not months after the crisis has ended. Uncertainty about when program payments will be made causes stress to affected farmers and ranchers and it certainly does not help those producers as they try to manage their operations.
The Manitoba Cattle Producers Association supports the view of the Canadian Cattlemen's Association that Canada needs a national disaster program to address a broad range of issues that could potentially affect our industry. Ideally, such a program would be able to address diverse challenges such as trade disruptions, as well as natural disasters such as flooding and drought.
Had such a program been in place in May 2003, the cattle industry would have been in a better position to tackle the BSE crisis. Our industry and allied industries had, and continue to suffer, hundreds of millions of dollars in losses because of this crisis. The crisis is not over; in Manitoba we see some producers struggling to repay loans such as the BSE recovery loan, and it will take many years for producers to recapture lost equity.
While no one can predict when a disaster will occur, it is critical that these programs be in place to deal with potential threats to key industries such as agriculture. Such programs would help encourage industry stability and would offer a vastly increased level of preparedness in the event of a disaster. The creation of a national disaster program must be a priority.
As you've travelled across the country, you will undoubtedly have heard a lot of comments about the CAIS program and how it could be improved. I would like to cite the concerns raised by some Manitoba producers about the CAIS program as examples of areas in which it does not meet the needs of producers.
These producers, and undoubtedly many others across Canada, have concerns with the CAIS inventory transition initiative and the fact that it does not include breeding animals. The government's rationale is that breeding animals are not intended for market, and as such there is no market loss on these.
However, for cattle producers this is hard to swallow. When a grain producer faces a cash crunch on his farm, he can just sell more grain. When cattle producers face a cash crunch, it's common practice for them to sell breeding stock. We believe breeding stock is a marketable commodity, just like grain, yet, for whatever reason, policy-makers have treated breeding stock differently from grain. We would strongly encourage the government to revisit this policy decision. Fairness in the development of farm programs is key.
We would also like to comment on the federal government's decision to include livestock in its expanded cash advance program. This is welcome news for Manitoba. The Manitoba Cattle Producers Association is working to set up an entity to deliver this program to Manitoba producers, as we believe this will be beneficial for the provincial cattle industry.
However, the concern we have with the advance payment program is that CAIS must be used as security by producers applying for the advance. Unlike grain producers, cattle producers do not yet have production insurance that could be used instead of CAIS for their required security. As a result, this could limit the amount of money cattle producers will be able to borrow under this new program. It is our hope that means can be developed to overcome this challenge.
I'd like to make a couple more comments before wrapping up.
Cattle producers in Manitoba are watching the development of the ethanol industry with great interest. Ethanol plants will compete with cattle producers for feedstock such as corn. A considerable level of federal and provincial government support, including mandated ethanol usage, is flowing towards this sector. It would be unfortunate if the long-term competitiveness of the cattle industry were undermined as a result of these policies. We urge the federal government to carefully monitor the impact of its policy with respect to ethanol and biofuel developments.
The standing committee has undertaken considerable work on the supplemental import permits issue, and the Manitoba Cattle Producers Association appreciates this. Any steps that can be taken to reduce trade irritants with key trade partners such as the United States are extremely important for our industry, and this is a step in the right direction. We hope the motion suggesting guidelines to limit the use of supplemental import permits will be received and supported by the House of Commons in the near future.
We would also like to comment on the urgent need to restore international beef product markets that were lost as a result of the BSE crisis. An example is Korea. We would strongly encourage the federal government to work diligently at trade barriers that keep our beef products out of some of these key markets.
Again, on behalf of the Manitoba cattle producers, I would like to thank the committee members for visiting Manitoba to discuss the future generation of farm programs.
I would be pleased to answer any questions you may have.
Thanks again.