Agriculture Committee on April 23rd, 2007

[The Chair, Conservative, James Bezan]

I call this meeting to order.

Welcome, everybody, to the second leg of our cross-country tour on the APF hearings. We did western Canada last week, and we're kicking it off here in Truro.

This was the hometown of Madame Couture-Nowak, who was shot at Virginia Tech. She used to teach at the agriculture college here. In respect, I thought it would be appropriate if we observed a minute of silence in remembrance of her.

[A moment of silence observed]

Thank you.

I want to welcome to the table today a number of witnesses: Frazer Hunter of the Nova Scotia Federation of Agriculture; Chan Wiseman of the Newfoundland and Labrador Young Farmers' Forum; from the Chicken Farmers of Canada, David Fuller, who we see often in Ottawa; from the Nova Scotia Fruit Growers' Association, Andrew Bishop; and David Ernst is here from the Nova Scotia Cranberry Growers Association.

We welcome all of you to the table. In light of the short amount of time we have together, I would ask that you respect the ten-minute timeframe for your opening remarks. You can even be shorter than that, if possible.

With that, I'll turn it over to Mr. Hunter.

[Frazer Hunter, Chairman, Nova Scotia Federation of Agriculture]

Thank you, Mr. Chairman.

We welcome the committee to Atlantic Canada and Nova Scotia. We appreciate your coming down to consult with us at this time.

The agricultural community in Nova Scotia appreciates the opportunity to meet with Canadian policy-makers and to discuss the future role of Nova Scotia. With the dramatic changes taking place within Canada's rural communities, and within the principal industry that underpins the sustainability of these communities, that being agriculture, it is critical that an open dialogue between the community and the public policy-makers take place.

No one can overestimate the impact of federal-provincial policy-making—namely, the agricultural policy framework. We're going into its second phase. We've had it for five years, APF I, and we're now moving into APF II. When we look at APF I, it hasn't sustained or transitioned our industry to sustainability. This is what we're looking for in APF II, a program that will sustain and then transition our industry.

The federation here in Nova Scotia represents some 2,500 farmers. We have 24 different commodities. When we look at our economic position at the moment, our debt load is some $700 million in this province. Our gross output at the farm gate is rising very slowly. Just to maintain the interest payments we need $42 million to cover that debt load. That debt load has risen very dramatically over the last few years.

Our vision here is to ensure a competitive and sustainable future for agriculture and a high quality of rural life in Nova Scotia. To accomplish this, our goal is the development of farm businesses that are financially viable, ecologically sound, and socially responsible.

The crisis in agriculture is not just about money. It's about social policy, environmental policy, and health policy. This is what the APF must address.

The industry here is very diverse. When you look at the business risk management framework we've had here, it hasn't applied greatly. Many of our farmers have multi-commodity farms. When one commodity rises, another commodity is down. So we don't create those disparities where we get benefits from the CAIS program.

When we talk about business risk management in the future, we must talk about renewal at the same time, not just business risk management. We're looking at the CAIS program, we're looking at crop insurance, and we're looking at renewal. This is what business risk management is all about. If you look at business risk management in isolation, you're not moving anywhere. You have to look at it with renewal.

We have to transition our industry from where it is now to where it's going to be sustainable. That's moving from commodity production to product production.

Now, I just happened to call in at Irving this morning. What's the most expensive cut of meat you can buy?

[The Chair, Conservative, James Bezan]

Is it tenderloin?

[Frazer Hunter]

It is not. It's beef jerky. It's $68 a kilo.

That's the problem with all our industry. We don't produce products, we produce commodities. We are the developed world. We have to be in product production, because commodity production is unsustainable. Brazil, Argentina, etc., look after it. The CAIS program in the past has looked after commodity production, not product production.

I'll leave this with you, Mr. Chairman. You can share it on the bus to P.E.I.

When we look at business risk management programs and the new agricultural policy framework, we support what CFA has been doing. Canadian agriculture and agrifood is a vibrant and dynamic industry, where all partners of the production chain have the opportunity to be profitable and be world leaders for the world's economic, environmental, and health objectives. That's where we want to be at and that's where Canadian agriculture can be. In the past, it hasn't moved there.

We are also supportive of the key principles that CFA has set out for APF II: create an agriculture and agrifood industry that is dynamic and innovative, increase value-added contributions, promote Canadian agriculture as a steward of the environment and provider of high-quality safe food, and create an agriculture and agrifood industry in which all parts of the production chain have the opportunity to grow and succeed.

When we look at the chain, those up the chain get a 12% return on investment and those below get a 12% return on investment, but we, as primary producers, don't get it. Until we start producing products and move up and down that value chain, we will not get a 12% return. It is essential that we do.

If we look at Nova Scotia, we guarantee the energy provider in this province, Nova Scotia Power Inc., a 12% return on investment. We do not guarantee our primary producers a 12% investment on energy they provide for the consumer.

We believe the approach the Canadian industry is suggesting through its umbrella organization is right. I'm sure the three pillars we want to see in APF II have been well explained by Bob Friesen, etc.

When we move to what this committee is actually looking at, the business risk management, we must stabilize our industry. That's what the risk management programs must do: stabilize it, so we can transition. If we're not stable, we'll never transition.

In this province, we've been looking at a program on how to utilize the funds to stabilize the industry and then develop it. The CAIS program provides money after the fact. We have to provide money up front. In this province, CAIS programs totalled $16 million to the producers last year. That's about 1% of the retail value of the food at the store. Our retail value is $1.9 billion; $16 million was provided by the CAIS program, after the fact. If that had been provided up front to provide a sustainable 12% return, we wouldn't have needed the CAIS program. We would then be able to transition our industry. With an industry with a 12% return on investment, you can move forward. You don't need any other programs.

We're saying there's enough money in the system. It just has to be better utilized. Let's not just talk about risk management; talk about renewal. Provincial and federal dollars coming into this province totalled $90 million for agriculture last year: $43 million from the province and $47 million from the federal government. There's enough money in the system to get it right now. What we are saying in the new APF II is that we must look at stabilizing our industry and transitioning it with up-front dollars, not tail-end dollars. When you get those up-front dollars with a good return to farmers, then you can move forward.

I appreciate the opportunity. I'll stop there, Mr. Chairman. If there are questions relative to this, then I'm prepared to answer them.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Hunter. And thank you for your generosity.

Mr. Wiseman, you're next.

[Chan Wiseman, President, Newfoundland and Labrador Young Farmers' Forum]

Thank you, Mr. Chair, for the opportunity to present to the committee today. I know the committee didn't get an opportunity to head a little farther east to the great province of Newfoundland and Labrador, but I certainly appreciate your accommodating me. Someone from the Federation of Agriculture will be presenting later on.

A lot of great things are happening in agriculture in Newfoundland and Labrador. We have an industry that's worth about half a billion dollars. It employs about 6,200 people. When you look at a small province like Newfoundland and Labrador, that's quite significant compared with the fishery—it's currently worth about $1 billion.

So agriculture is certainly a significant player, but it's an industry in a lot of respects that's really underdeveloped.

The first topic I'm going to talk about is the HR file and the challenges we face. Currently the average age of farmers is quickly approaching 60 years in our province. Right across the country that's something that's facing the industry. Training can be defined in three particular ways: in a formal way, such as a degree or a certificate; informal, where you can pick up certain courses involved in business management, which could be something related to the farm; and unformal, which is how most people are trained in the agriculture industry. My mom or my dad would teach me how to drive a tractor, or how they do the accounting, or how they do the proposal writing, or whatever it might be.

This is a huge challenge that we're facing in our province. We need to develop training initiatives and to ensure that the appropriate training delivery mechanisms are in place to ensure that the needs, and especially the skills gap, are being addressed. We need to ensure that the next generation of farmers have the skills needed to make agriculture work. That's simply how it has to be.

We need to focus on business management, on enterprise development. Training also needs to focus on how we're going to anticipate food safety, animal welfare issues, and environmental concerns. These are all areas where farmers, and young farmers especially, have to anticipate how this is going to affect our particular industries. If it's going to be a sustainable industry, as young farmers we need to be able to anticipate what is going to be happening, especially in the next five or ten years, when agriculture is at such a critical point.

Also, there are the recruitment and retention fees. We need to have training initiatives to make agriculture attractive for new entrants and for young people who may want to consider getting into this particular field. We need to frame it so that it is a potential career option.

The next generation of APF must also address the importance of agricultural awareness. As a young farmer in my province, and as an active participant at the national level with the Canadian Young Farmers Forum as well, I see great importance in getting public support for agriculture. It's very important for the long-term viability of producers in our province, and also producers right across this country, if we're going to be successful as young farmers and if the agriculture industry is going to be successful as a whole.

The second topic I would like to discuss, and this is very relevant to our particular province, is strategic growth. This is where regional differences really come into play. As I mentioned, we have a growing industry in our province. In a lot of ways it's underutilized and it's underdeveloped. We have huge potential in areas such as the berry industry, for instance. I'll use blueberries as an example. We had farm receipts of somewhere around half a million dollars, compared with Nova Scotia's, which are up around $80 million in farm cash receipts. There's a little bit of difference there, but there's a huge opportunity, and we need to really foster it. This is where we need good research and development to grow that particular sector.

We can look at the red meat sector as well. There's probably a revenue stream of about $100 million in Newfoundland and Labrador in that sector, and producers in Newfoundland and Labrador represent 2% of it. So there's a huge opportunity there as well, and in the vegetable sector and in the fur industry.

I'm also a fur farmer. I grew up on a fox farm, two hours west of St. John's, and there are huge opportunities in that particular industry. We produced probably somewhere in the vicinity of 200,000 pelts this year. By 2010 or 2012, we're looking at producing somewhere in the vicinity of a million pelts, so there's huge potential and huge growth there. And when you compare it to places like Nova Scotia, there are upwards of 1 million or 1.2 million. There are huge opportunities there.

As well, the secondary processing sector and the value-added side of agriculture certainly serve as huge growth areas and incredible opportunities for agricultural development. We can look at the dairy industry, for instance, and the potential there for making cheese in our province, and yogurt production as well.

It's not only for agricultural development, but it's also extremely important to the rural communities and towns in our province, for social development and economic development. So there's a huge piece here in terms of agricultural development, not only from the industry side, but also from the rural development side.

But in order to do this, we need a two-faceted approach. We need awareness of the opportunities that are in our province, to encourage young people and new entrants to look at this particular industry, and they also need a financial well for all. It's extremely difficult to get into agriculture, and while there are huge entrepreneurial opportunities to get into this particular industry, we need the programming—and the right programming—for a new intern or a young person to be able to get into this particular industry. We look at programs like the Farm Improvement and Marketing Cooperatives Loans Act. This particular program needs to be accessed by young farmers, but the restrictions need to be brought down so that young farmers can avail themselves of programs such as this.

The final point I'd like to make is on organizational funding. As I said, our organization is an active participant in the Canadian Young Farmers Forum, and we need to ensure that funding is maintained for this particular organization, mainly for the leadership or professional development part. It's going to be extremely important, if young farmers are going to be successful in this industry. We need to consolidate our voice, provincially and nationally. So it's extremely important—and the networking opportunities that come with that are extremely important. We need to ensure the organizational funding is there for young farmers so we can effectively lobby our MPs and government to ensure that we have a sustainable and viable agricultural industry.

On behalf of Newfoundland and Labrador young farmers, I thank you for the opportunity.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Wiseman.

Mr. Fuller.

[David Fuller, Chair, Chicken Farmers of Canada]

Thank you, Mr. Chairman.

Good morning. Thank you for taking the time to hear our views on business risk management. My name is David Fuller and I am chairman of Chicken Farmers of Canada.

CFC is a national organization representing 2,800 chicken farmers from coast to coast. We have 14 board members. There's one from each province and four downstream stakeholders—two from the primary processing industry, one from the further processing industry, and one from the restaurant and fast food industry.

CFC's mandate is to set allocations for the industry, which means we provide an adequate supply of chicken for the Canadian market. This system of supply management ensures a stable income for farmers, which is rare in this area of farming. A stable income permits farmers to be proactive in their industry.

Farmers are now being asked to take more responsibility than ever before in delivering programs centred around the public good. As chicken farmers we are able, willing, and ready to deliver these programs in areas such as food safety, the environment, animal care, and biosecurity. Not only are we leaders in the development of some of these areas, but these areas allow us to produce a better quality product for our consumers.

What do chicken farmers need under business risk management? First, we need government recognition of our system and its independent pillars as an effective risk management in the next generation of the agricultural policy framework. This cannot be taken for granted.

Second, we need our government to negotiate in support of supply management at the WTO and not allow a parliamentary motion to dictate inactivity.

Third, we need our government to listen, support, and work with us as we mitigate the risk of industry, government, and the public at large by being a leader in implementing food safety, animal health, and animal care programs.

Supply management is dependent on the three pillars of producer pricing, import controls, and producer discipline. Producer pricing allows farmers to collectively negotiate fair returns for their birds. Import controls allow the industry to efficiently plan production to meet the Canadian demand by permitting imports to the level of access agreed to at the WTO. Production discipline allows for the balance of supply and demand, thereby promoting price and market stability.

The second pillar, import controls, is being eroded through the administration of the chicken TRQ, which is the access level for imports. Currently our TRQ level is 7.5%, but in reality it is now at 8.4% due to the federal government's decision on April 12 to allow 100% supplemental imports. This goes well beyond our access commitments.

In addition, one point that is not in our presentation is that since 2002, the Canadian poultry industry has implored the government to correct the 13% rule that allows products that contain up to 87% chicken to be imported into this country tariff-free. This seriously compromises the stability and predictability of the domestic supply by making imports unpredictable.

Our government is in support of supply management, yet it is allowing the erosion of our domestic market, despite years of efforts on CFC's part to put forward constructive solutions to address the various challenges in administering the tariff rate quota.

On the international front, our government says it is not negotiating on behalf of supply management because it has determined that the parliamentary motion in support of supply management has tied its hands. The motion in Parliament dictates a result that you, as members of Parliament, felt should be achieved through the WTO for our sectors. Not negotiating makes it impossible to achieve those results and thus impossible to support the motion that you all felt was necessary. Not negotiating is not supporting supply management.

Without supply management, not only will we not be our own source of business risk management or income stabilization, but our capacity to be a leader in other important areas of risk management will be compromised. Our regulatory environment gives us the infrastructure to deliver on food safety, animal health, and animal care programs.

In 1998, CFC developed our “Safe, Safer, Safest” on-farm food safety program. We were the first to achieve technical recognition for our program from the Canadian Food Inspection Agency in 2002 and the second to complete CFIA's system of recognition.

In seven provinces we have 100% of our farms audited and certified under the program. Nationally, we are 80% compliant and expect to be 100% compliant by the end of 2007.

Animal health is an extremely important aspect of risk management. This is why the farmed animal industries have been working together to develop a comprehensive animal health strategy that would be incorporated into the APF as its own pillar. This strategy moves away from the ad hoc program development and funding approach to a more comprehensive approach that more adequately manages risk and delivers the public good.

Following the avian influenza outbreak in 2004, the poultry industry embarked on a number of initiatives to prevent and control a future outbreak. We developed a pre-emptive call program in collaboration with the Canadian Food Inspection Agency as an effective disease prevention tool. Measures are now in place, at the first sign of any outbreak, to ensure that the spread of the disease is limited or prevented. They key means of managing the risk and ensuring prompt reaction by farmers is adequate government compensation for birds lost. This too, unfortunately, remains unresolved. Adequate compensation for farmers in a pre-emptive call situation is not covered under the Health of Animals Act.

The disaster framework will not trigger for one farmer or for a small group, even if it saves the government money by preventing a large disaster. Adequate compensation is an effective insurance policy for government finances. As an example, the 2004 avian influenza outbreak in British Columbia resulted in a $300 million total economic loss. The chicken industry acted quickly and put forward $3.2 million in loans to chicken farmers, which were to be paid back once farmers were compensated under the CAIS program. CAIS paid farmers only $100,000 in total. The industry sought recovery from the government of $4.5 million for cleaning and disinfecting costs.

CFC has taken other initiatives to prevent the introduction and spread of animal diseases.

Mr. Chairman, what I will do, since you have the presentation, is I will go directly to the end and bring in what we are really looking for.

First, Mr. Chairman, the government must recognize our supply management system and its three pillars as an effective risk management tool.

Second, our government must negotiate on our behalf at the WTO rather than defending inactivity through a parliamentary motion that was intended to support supply management.

Third, we want to continue to collaborate with the government on developing programs that mitigate the risk and deliver a public good.

I'll leave it at that, Mr. Chairman.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Fuller.

Mr. Bishop, you're on.

[Andrew Bishop, President, Nova Scotia Fruit Growers' Association]

Good morning.

I'd like to take this opportunity to thank the committee for the opportunity for the fruit growers, the apple growers of Nova Scotia, to present their views here today, especially as it relates to the next generation of the agricultural policy framework. We appreciate this process here.

The Fruit Growers Association is a not-for-profit organization that has represented the tree fruit industry for the last 144 years, assisting its members with ongoing development of economic viability in a sustainable tree fruit industry in Nova Scotia. Our association has 112 members. There are packers and processors as well within our association.

We have about 5,000 acres of orchard in Nova Scotia, with an annual production of 2.2 million bushels, which is approximately 8.5% of Canadian apple production. Our average farm gate value is around $10 million, and our economic impact is approximately $52 million within Nova Scotia.

In 2001, our industry took steps to develop a long-term industry vitalization program. I have it here in a little bit of a chart. This just shows where we are.

We developed that industry vitalization program and we put in six interactive elements that we are currently work on. These interactive elements are integrated fruit production, cultivar evaluation and development, orchard renewal, bioproduct development, and commercialization. Some of these activities that we are working on are ongoing and some have been completed. They're all very important, and we have science and innovation and renewal as an umbrella over all these things to make them work properly and effectively.

Nonetheless, during the same period of time, the ongoing success of the industry has been threatened by issues that are not within its control. Some of those issues are related to the current agricultural policy framework. I'll just give you a few examples of some of the issues.

One is cutbacks in the agriculture and the agrifood system. These cutbacks have caused the downloading of government costs onto producers, producer organizations, and others, with no compensation to counterbalance the added costs. This is a very serious issue and it really needs to be addressed immediately.

There is also continued rationalization of the regional primary production research infrastructure. This AAFC rationalization of science infrastructure related to primary production will soon create a drop in the industry's ability to maintain overall productivity, which will negatively affect the sustainability of the agriculture and agrifood industry.

Another issue is increased regulatory burdens and associated costs. As a result of society's demand for improved food safety, traceability, and environment stewardship, regulatory burdens are being placed on producers at a significant rate and at a high cost to the producer. The implementation and long-term maintenance costs of these new requirements that are being incurred by the industry must be recovered. This situation really needs to be remedied. We're not getting it out of the marketplace. At the present time, as Frazer mentioned, what has to be done is that we have to get our 12% return. We're not getting it. If we can't get it from the marketplace, we have to find other ways to get it.

Another issue is ineffective and inefficient government programs. This industry has had to work with ineffective and poorly managed federal government risk management programs, such as CAIS, which is not sensitive to the needs of diverse mixed farming and horticultural operations. This also must be corrected.

These issues, at a minimum, must be addressed effectively through the next generation of the APF.

The government has said that the next APF aspires to lay a foundation for profitability for the food chain, producer to consumer, but without a healthy and profitable production base, the APF will not perform. Farmers still drive the production, which is the food value chain's basic ingredient.

We feel strongly that the APF must address strategic investment in the industry. The APF needs to support industry strategies for development and renewal. We know that the replanting of orchards with high-value cultivars is one of the answers to economic sustainability in our apple business. AAFC supporting the proposed national tree, fruit, and vineland replant program would be a strategic investment. Currently there are provincial replant programs that have been implemented in three of the five apple-growing provinces, but these efforts need federal partnering if the provinces are to meet their full potential.

Canadian trade policy and practices need to be changed. The Nova Scotia Fruit Growers' Association agrees with the B.C. Fruit Growers' position on trade. I believe on April 16 the tree fruit industry in B.C. had an opportunity to address this committee. I'd like to emphasize one of the things they mentioned:

Fair trade is an issue for fresh produce. Fresh produce occasionally gets into an oversupply situation. The consequent price collapse is often centred on the North American market due to retail consolidation and U.S. expansionist subsidies that stimulate overproduction. Market failures have a negative impact on industry, which causes the level of investment and the confidence in business planning to suffer. Consumers suffer when investments in quality, food safety, and local availability decline. Taxpayers suffer when financial programs and transition payments are generated to help producers in difficult financial situations. Retailers are huge beneficiaries as they get an unexpected windfall by purchasing produce at half the price expected, and then do not pass the savings onto consumers.

Apart from imploring the government to provide special assistance during a price collapse, grower associations can also pursue trade actions against dumped product. For fresh produce, we would like to see an alternative to the current anti-dumping process in trade actions. The drawbacks of the current system are:

(1) The process is not timely. It takes a lot of time to gather extensive data, to prove dumping, and finally to prove injury.

(2) The process is expensive to administer. At a minimum $275,000, for example, to launch an anti-dumping suit, the same amount of in-kind time and effort must be spent by a commodity group that is also impacted by the financial disaster.

(3) The process is highly uncertain, and the results often seem to be random or at the whim of the administrator. In this case the Canadian Import Trade Tribunal has the final decision-making authority.

This is the current process industry must deal with under the Special Import Measures Act. We feel that a new method of dealing with market failures and price collapses precipitated by product dumping needs to be investigated.

The current APF neglects to address domestic marketing of Canadian product. Under the next APF we would like to see Brand Canada promoting Canadian product to Canadian consumers. Consumers need to be prompted to buy Canadian first. A strong emphasis being placed on the issue of domestic product in our home market will support APF safety and environmental programs and encourage the development of food security for Canadians.

It is imperative that the AFC re-establish and continue to invest in science and innovation at the regional primary production level. New knowledge is created through science, and the new knowledge prompts innovation and commercialization. Primary products are the fundamental ingredient for an all bioproduct development. Without availability to sound science at the regional primary production level, the production base will be compromised in a very short time.

The Nova Scotia Fruit Growers' Association supports the CFA's proposed Canadian farm bill and its three pillars: public goods and services, business risk management, and strategic growth.

The Nova Scotia Fruit Growers' Association also supports the Nova Scotia Federation of Agriculture's position regarding the next generation of APF.

Our comments above are further to the standing committee submissions by these two groups.

We thank you for the opportunity for expressing our opinion.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Ernst.

[David Ernst, President, Nova Scotia Cranberry Growers Association]

I'd like to thank the committee for the opportunity to speak to you. This is a new experience for me, and I'm a little nervous.

The Nova Scotia Cranberry Growers Association is a different group to the larger commodity groups. Cranberries are a different crop, and I suppose that warrants some of the differences.

The cranberry industry in Nova Scotia has undergone a major renewal within the last 10 years, which flies in the face of more traditional agricultural commodities. The main reason is price. As you are all probably well aware, the cranberry industry went through a real boom time in the nineties. The Nova Scotia industry, like most of the industry across Canada, greatly expanded.

The Nova Scotia Cranberry Growers Association consists of a whopping 15 members. To put things into perspective, we have a total of about 250 acres of cranberries in Nova Scotia, and that's it. The 250 acres of cranberries planted by 15 people represents an investment of approximately $10 million to plant those cranberries in the ground. It's a significant investment.

The industry is a little fragmented. There are some very small growers who planted a couple of acres by using their retirement savings and that type of thing. There are some large growers. There are two large growers who represent two-thirds of the acreage between them. They actually have on-farm value-added activities as well. I'm in the medium group. There are a bunch of us in the middle, with smallish but not small-sized farms.

The production from Nova Scotia out of those 250 acres is about 1.5 million pounds of cranberries per year. This represents a farm gate value of about $800,000. We invested $10 million to get $800,000 at the gate. Out of that, we take all of our expenses and pay off all of the interest on the loans. You can imagine the state the industry is in.

The group of cranberry growers is largely not made up of farmers. I am an engineer. There are guys in the construction industry. There are some other farmers in other commodities who have branched into cranberries as well. It's a different group of people. They're fairly enthusiastic. One of the larger growers in the valley is still working on his profitability as well. He would describe it as an addiction to growing cranberries. It's the type of industry we're in. We're still optimistic, and we are looking for opportunities.

I'd like to switch over to talk about the agriculture policy framework and how it relates to our industry here in Nova Scotia. I am by no means an expert on all the details of the agricultural policy framework, but I work with it on a day-to-day basis, like all the other farmers. We can give you that feedback.

As far as business risk management, it is not used within our industry. There are a couple of issues in the way I understand it. The biggest one is that we are a young industry and we are only coming into production. Ninety percent of the acres in Nova Scotia were planted within the last 10 years. It means most of them are still coming up to crop potential. How do we insure earnings that we never had? It's more about development.

On the environment side, it has been a very significant part of our industry as it's developed. Nova Scotia had the fortune, or the misfortune, depending on how you want to look at it, of having Nova Scotia Environment and Labour take the lead on environmental permits for cranberry farms. Back in the 1990s, I believe it was 1997, they produced a large paper detailing all the requirements we would have to go through. All of the farmers did this. It was a good thing, because it made us think about our farms and how they would operate environmentally before we even made the farms. We are used to working within the environmental regulations. The environmental farm plan is something we're all becoming compliant with. It's not a very difficult procedure when you grow and start the farm under those regulations.

On food safety, on-farm food safety is something that we are all working with. It's mainly been pushed by the buyers of the fruit, not the federal policy so much, although the support for on-farm food safety training has been used.

The big part of the agricultural policy framework that we have all used is the innovation side. Our industry is new. It gave us a chance to innovate. It gave us a chance to employ new ways to plant cranberries, to grow cranberries, to harvest cranberries, and even to do things with cranberries. I know that most of the farmers have used quite a bit of assistance from the Farm Investment Fund here in Nova Scotia, which follows through from that.

Looking forward, what our industry needs is to have more of a focus on how we can get—basically what other people have said here—the return on the investment. We've made the investment. It was done at a time when the industry was in its heady days. We realize that's not realistic. The people who are working in the industry are still optimistic that we can do this.

To that end, one of the large farms in the valley is one of the major fresh fruit packers for cranberries in North America. Fresh fruit represents about 5% of the total cranberry crop, and he sells to 50% of the Wal-Mart stores in the United States, for example, from Nova Scotia here. He's making his latest investments in Wisconsin because it is a more appropriate area for him to distribute from, he feels. But he has given it a good shot here.

The other way the industry is going is the commodity market of frozen cranberries that get used overseas. The other large farm in the valley invested in its own freezing facility, which became registered with CFIA just recently. They ship internationally by the container load.

There are a few small businesses, including mine, that are looking at retail opportunities here in Canada. Our facility is registered for processed cranberry products with CFIA. We see a future in that more than we do in the growing. To be honest, I can buy cranberries cheaper than I can grow them at this point.

So the industry is progressing into a different stage where it is needing the support to go to processing rather than producing.

I'd be happy to take any questions later on the Nova Scotia cranberry industry, and I'd like to thank the committee for the opportunity to speak.

[The Chair, Conservative, James Bezan]

Thank you.

We're going to open it up. We're going to try to stick to five minutes or as close to that as possible.

Mr. Easter, you're on first.

[Wayne Easter, Liberal, Malpeque, PE]

Thanks, Mr. Chair, and thanks, folks, for coming. I've got a lot more questions than I have time for, that's for sure.

In Mr. Bishop's presentation there are a lot of great points on the issues that are threatening the industry. Public research at the primary product level is something we've heard every day and at every location where we've held hearings, that not only should public research be done on the value-added chain, matched with industry dollars, but we basically need discovery research at the primary production level.

Mr. Bishop, is there a tree planting program in Nova Scotia? Whether there is or isn't, would companion programs make a difference? We don't allow companion programs now. Should we?

[Andrew Bishop]

Yes, there is a tree planting program that we partner on with our province. We were successful in getting the program with our province after we put together our vitalization plan and did some market research.

The tree plant program is very focused on one variety, the Honeycrisp and its pollinators. We focus on that because the Honeycrisp apple is a new cultivar. When you do the numbers on it, it's sustainable on its own.

But our industry is in such a shape that our producers don't have the investment funds to put into it. So the partnering with the province and putting something into it is very important. We do need companion programs to go with it to help move this program forward. We are concerned that we have a five-year mandate and that we're not going to achieve the goals we set out, mainly because the ability for investment at a primary level is difficult to get.

[Wayne Easter, Liberal, Malpeque, PE]

Okay, thanks. If ever there is a good example of new varieties, it's in B.C., not in apples but in some of their other industries.

Dave, maybe you could explain the 13% rule a little, but I certainly am concerned about the 8.4% supplementals. Could you expand on that a bit more? To be honest with you, I'm not aware of the decision the government made on April 12—maybe I ought to be, but I'm not. Explain that, and the impact.

On these kinds of supplemental things, primary producers are often in one location and the processing industries are often in another. Where is it at in the chicken industry? Are both on the same wavelength?

The last question I have really relates to your presentation, Frazer. This happens to a great extent more so in eastern Ontario under APF, where we see the cross-subsidization of commodities because there are more commodities in farming operations. They're not one commodity. What do you see as the solution to that? I know people who have set up two corporations for their farm. We don't want to get into that. But how do you see a solution there?

Dave and Frazer.

[David Fuller]

Mr. Chairman, on the two points on the 13% rule, I will give you a very quick explanation. A product that contains more than 13% non-chicken can come into this country tariff free. If you mix two products together and 86% is chicken and 14% is rice, if they are mixed together, that product comes into this country tariff free.

Our industry—the farmers, the primary processor, and the further processors—are on side and have made a request to have an article 28 launched. This government has decided not to take that action on the 13%.

On the tariff rate quota, our access for imported product tariff free is 7.5%. Over the last number of years we have been hitting our head on the top level. The previous governments have put in a clawback mechanism. Not everyone gets what they want, and it allows the industry to come together and find solutions.

This government has just come out with a decision on April 12 that will allow, I believe, an additional 8.8 million kilograms of chicken into this country above our tariff rate quota level. That will come in tariff free. Those kilograms all come out of our barns. All that grain that is fed...that is no longer done in Canada. All that economic loss will now come from outside of the country.

Those are your two.

[The Chair, Conservative, James Bezan]

Very briefly, Mr. Hunter, because Mr. Easter's time has expired.

[Frazer Hunter]

You are quite right when you say that I have a dairy and sheep farm and it would pay me to have a forage company and a dairy company and I would qualify for CAIS. Whereas I'm in dairy, with over 51% of my income coming from supply management, it doesn't work.

When we talk about the transition program, which we're developing here, we're looking at that 12% up-front return from CAIS moneys, and we must have the flexibility and the companion programs in Nova Scotia to do that. When we look at other provinces—when we look at Newfoundland and Quebec in the last APF agreement—they had flexibility to use those dollars, and we must have that in Nova Scotia if we are going to sustain our industry. With 50% of our farm gate return coming from supply management and with various products on our farms, we didn't have that flexibility within CAIS. We're kept at a low level of sustainability. We don't have ups and downs like they have in single commodity farms, and CAIS does not address our situation.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Bellavance, you have five minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Good morning. Thank you for your testimony.

My first question is for Mr. Fuller.

You said that supply management should be recognized as a risk management tool, which I found interesting. Could you explain how the government should use supply management in its strategy and promote it so that it is viewed as one of the tools available under risk management.

[The Chair, Conservative, James Bezan]

Mr. Fuller.

[David Fuller]

Thank you.

When we look at supply management systems that are in place now, because of the three distinct pillars that are supported by the government and the producers of those commodities, the producers have the ability to negotiate on behalf of all producers and to be able to expect a return on their investment. That is our business risk management portion—those three pillars under supply management. But I must emphasize that when you take out any one of those three pillars, you no longer have a supply management system.

If we do not have restrictive import controls, we cannot properly plan domestic production, taking imports into account. When we look at planning domestic productions, we have to take into account Canada's agreed upon level of imports from other countries. Unless we know that we have a solid import barrier and we know what production is coming in, the amount coming in from outside will go up and down so erratically that we will never be able to plan a stable market. Our market will go up and down as it did in the past.

The important thing to recognize is that those three pillars under supply management allow supply management to be a business risk management tool. I think that's the key. We have to have those three pillars solidly in place. We're asking the government to recognize those pillars and supply management under a business risk management pillar because it is a supply management business risk management tool.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

While formal negotiations have not resumed at the WTO, many bilateral discussions are underway. We know that the United States is discussing matters a great deal with other countries, particularly India and the European Union. Talks are under way and a tremendous amount of negotiating is taking place.

You have presented supply management as an aspect that is essential to the survival of Canadian agriculture and particularly, in my case, Quebec agriculture. I believe you understand why we, in the Bloc Québécois, believe that so much importance must be given to supply management.

You mentioned the repercussions that may result from the current negotiating round at the WTO, because the government, as you explained in your presentation, is saying that it really cannot negotiate at present because of the November 2005 motion on supply management.

Could you elaborate further on the consequences of the position currently taken by Canada, which is saying that its hands are tied and that it cannot negotiate because of this motion.

[David Fuller]

First off, what we see in the motion that was passed in the House is that it is a result motion. To me, the motion that was passed in the House in November 2005 indicated to us that all parties in Canada support supply management. That's what it indicated to us. It indicated to us that there was strong support, and that when Canada goes to the WTO negotiations, Canada is to stand firm for supply management.

It doesn't say that Canada should go to the table and say, “Here's what we want and we're not negotiating”. Canada must do its job and negotiate on behalf of all Canadian farmers, not just on supply management and not just for beef, pork, or fruit. Canada's job is to negotiate on behalf of all Canadian farmers.

Canada's saying that this motion ties our hands is not accurate. It is a result motion. It talks about a result at the end of the WTO. It does not talk about how you get there. Canada needs to be at the table negotiating on behalf of Canadian farmers, and that's all we're asking of the government.