Agriculture Committee on April 23rd, 2007

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Thanks, Mr. Chair.

This has been an interesting discussion to listen to.

I want to ask a couple of questions about supply management, and maybe I can get some comments from you, Mr. Whidden.

In the last panel we had someone here from Chicken Farmers of Canada talking about some of the threats to that industry—a major one, of course, being supply coming into the country that kind of went around the rules, or certainly around the spirit of the rules. I know that in dairy there's a similar product; in chicken they combine the chicken with something to get it into Canada, and with milk they deconstruct it, bringing it in as a component.

I appreciate the comment that supply management in itself is inherently a business risk management program if it functions properly. I have dairy farmers in my area. Quite frankly, I have concerns about the dairy farmers in my area, about whether they're still going to be there five or ten or fifteen or twenty years from now.

Another threat that I see to supply management, and particularly to dairy in my area, is that the value of quota has gotten to the point where I presume the major part of a business decision on whether or not you expand your herd is based on whether you're going to go out and actually buy quota. It's to the point that I don't think it's unreasonable to say that the value of quota itself has become a threat to the dairy business. In order to make money, you have to be able to manage all your costs, and if the single largest cost is quota, especially if you have to go out and buy quota—

Within the dairy industry, are you as dairy farmers dealing with this, or recognizing that this is a threat to your industry? If so, in the broadest context of business risk management, what are you doing, and how do you foresee your industry managing that in the future?

[Havey Whidden]

Thank you for the question.

Yes, the high value of quota is a concern for us in the dairy industry. We are taking measures to address that issue.

One of the problems with the purchase of quota is that it's the only way we, as dairy producers, can increase the scale of our businesses. With all the pressures that have come to bear on us over the last number of years, the economies of scale come into play very strongly within our industry. Because we're in somewhat of what we call a mature industry, and there's not a lot of growth in the marketplace, we have to look to other ways to acquire quota, which is really to buy it from a producer who's retiring from the industry. There's tremendous competition for that, because we have a lot of producers who want to grow their businesses to actually remain viable in an industry that is somewhat stagnant.

Here in Nova Scotia we are involved in an agreement with four other provinces, what we call the P5--Quebec, Ontario, New Brunswick, P.E.I., and Nova Scotia--whereby we share our revenues. We all get paid the same price for our raw product. In all those provinces, except P.E.I., since about last mid-November, we've put policies in place to address the high value of quota.

We've all done different things. In Nova Scotia, for example, at our annual general meeting, which was held in January, we passed new quota policies, which will mean that in the future, after May 1, 30% of any quota that is purchased in the province, when it is resold, will be recaptured by the industry and redistributed to current entrants in the industry. In other words, if you buy 10 kilograms of quota, when you go to sell it after May 1, you'll only be selling seven kilograms. The other three kilograms will be redistributed throughout the industry.

We also have put a cap on the price of quota in Nova Scotia. Our capped price is $30,000 per kilogram. We will not accept bids for any amount over that. So yes, it's a very serious issue, and we as producers are addressing it.

[Barry Devolin, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Okay.

In my part of eastern Ontario, dairy farmers also had a second revenue stream, many of them from selling breeding stock overseas and genetic material. Obviously, BSE wiped that out. Most of those farmers weren't in CAIS, because they kind of assessed it at the front end and decided it didn't make any sense.

Is that also a problem out here? Are some of your members dealing with a loss of a secondary income stream? How is that being managed? Can CAIS be fixed to address that?

[Havey Whidden]

Well, it certainly is a problem here. A great many producers here, in the past, have taken advantage of sales of livestock outside the country, mainly to the U.S. It's been a very difficult situation since BSE and since the borders closed.

It has even had a major effect on sales within the country, because those animals that are not going out of the country compete with other sales within the country. So yes, we have certainly suffered from that.

As far as fixing CAIS, to address that problem I think there are probably things that can be done. One of the things I mentioned earlier is that when a dairy farmer looks at CAIS and crunches all the numbers, it's very difficult to get excited about that program, because we know we have somewhat of a predicted income. Unless that income is severely hampered due to whatever situation, we just have not taken up the CAIS program. It just hasn't been of interest to us.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Devolin.

We'll go to Mr. Steckle.

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

In looking at history, there have been a number of programs that have worked reasonably well; crop insurance is one of them, and supply management has worked well. We know that GRIP, in those provinces that had it, worked reasonably well. NISA worked well for those people who had some money to put into the program. So moving forward we have some lessons to take from programs we don't have anymore. We also know that the CAIS program, which was to be one program to fit all, doesn't work in that form and context because of the variables we have in this country.

I'm just wondering, given the things that happen in agriculture, is there a consensus that margin-based programs probably are not the direction we should be going? That would be something I'd like comments on.

I'm also wondering how you feel about production insurance that is somewhat similar to what they have in Quebec. They have the ASRA program. It's costly, but they know it's bankable. We keep hearing that it has to be bankable and predictable, and that certainly is.

Then we get back to the component of whether the consumer pays for the public good. If it's for the public good, how do we find those dollars? I put that question forward a few years back—simply to get discussion on the issue—when I proposed a food tax. I heard a number of times last week that perhaps we should call it an ecotax. Well, call it whatever you want, but from talking to them, I think consumers are prepared to do something for us. We, as farmers, are afraid of our own shadow when it comes to these things. We're afraid that people will stop buying our food. They will buy whatever they want. The people who buy organic food products pay a premium price, and it's not only rich people who buy that product. People make consumer choices.

I'd like to have some ideas from you for when we go forward. We talked about whether it should be one government delivering the service. We know that one size doesn't fit all. How can we take the best from what we've had? I think maybe we need to look south and see what kind of a model they have, because it seems to be working for them. But they have one farm plan, and that's one thing I think we should take into consideration.

I'd like to have a quick fix to this, and I know that one size doesn't fit all. But please, can we eliminate the things we don't want and mention some of the things we think might be a starting point for us going forward.

[The Chair, Conservative, James Bezan]

Who wants to go first?

Mr. Wiseman.

[Mervin Wiseman]

Yes, I'll go first.

I'm not sure we have consensus, and I'm not sure we'll ever achieve consensus on where we should go. But there's no question, a lot of what we do is going to be contained in the language. I'd say in terms of where the public comes from, we do it the hard way or we do it the easy way. If you don't want to pay up front in a tax, then we'll take it through the public treasury. One way or the other, we have to do it.

If you want to get some ideas on what we should do, talk to Wayne Easter. He put together a damn good report. It was done from the ground up. It was done from the producers. It was an excellent report. Go back to it. Everybody, take a good look at it. It's something that producers can very much identify with. We can put language around that and do what you like.

On production insurance, we can learn something from Quebec. I'm around the CFA table, and we all talk that language. We say let's adopt some of the things they do in Quebec; we like it.

One thing we can't do generally across this country is connect production insurance to CAIS. We can't do it. It's going downhill fast. Now we're talking about moving production insurance into livestock. When I heard it, I just about flipped. Come back three or four or five years from now, and I'll tell you right now, we won't have production insurance for livestock. It's just a dog's stomach. We have to consider how we do this.

The other thing is, let's connect some of these programs. We've fought for years to get the advance payments program in our province. We just started this year. But by God, can we get it? Not a chance. If we don't have production insurance in livestock—I'm a livestock producer--we don't have APP. Some people say let's put up the CAIS reference margins for security. Well, when you have no reference margin, you have no security for APP. So let's decouple this idea that we have to connect production insurance from that kind of a program.

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

Can we go quickly, on margin-based?

Mr. Boudreau.

[Dennis Boudreau]

I'll go quickly.

Margin-based programs don't work anymore in Nova Scotia. They have worked in the past, but the high Canadian dollar has killed profitability across the board. So we have to have something very different. Having an ASRA-type program I think is one of the best solutions. It's almost like a COP formula.

If I may, nobody has really talked this morning about it, but we should really think about the CAIS program. As a federal government and as policy-makers, you've tried to make a friendly policy. When you look at the last hog case and the countervail duty they tried to put against us—we won. And the CAIS program was totally hurting—We would have been fine; the duty would have come into play. The only reason we won in Canada was because we didn't hurt the American farmers. Let's be realistic: we're killing the Canadian farmers. At the end of the day, we would have been penalized by having such a program. So CAIS is not that free. There's too much of this—

[Havey Whidden]

I think the fundamental question we have to ask ourselves in this country is, do we want to be in a position in 10, 15, 20 years' time to produce our food in this country to feed our people? That's the first thing we have to do.

After we make that decision, then we know farmers want to farm in Canada, and they're good at it. We're good at what we do. But it's also very fundamental to any business that we have to receive a fair return for our efforts. Cover our input costs and give us a small profit margin so we can invest in our farms into the future. How we get it...there are lots of different ways.

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

Gordon, can I have your comment, please?

[Robert Gordon]

There's not much I can add to what the other three highly respected producers mentioned. Certainly those are issues that the industries recognize, and certainly as an academic institution we see the need for the research we do to support that being highly linked to some of these competitive issues.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Steckle.

Mr. Bellavance, a supplemental.

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

Mr. Whidden, you are right when you say that we are good at what we do. Now the government must have the political will to ensure that we can continue to be good at what we do, with the cooperation of farm producers, of course.

The Canadian government recently made a significant decision with respect to the use of article 28 and the import of milk proteins. Obviously, we were very pleased with that decision.

However, we don't discuss composition standards very often because now we have, if I can say this, turned off the tap. I would like to hear your comments on the importance of this issue, which was also announced by the minister during the Dairy Farmers of Canada Convention.

Do you think using article 28 coupled with milk product composition standards will make it possible to provide some longevity for dairy producers, at least as far as the manufacture of our products is concerned, so that we can limit imports of dairy products or milk proteins, which is an important pillar in this sector?

[Havey Whidden]

Thank you for the question. On the article 28 that was announced by the minister, which has been moved forward in recent days, we understand that the federal government has notified the other countries that will be affected by this; they've notified them that we are moving forward on the article 28. It will fix one of the problems.

There are still many problems in regard to imported products coming in, circumventing the spirit of the agreement, I guess is the best way to put it. There are still products coming in, like the butteroil/sugar blend, for example, which is coming in similar to the way David Fuller mentioned the rice and the chicken. Compositional standards for cheese are another issue that we're going to be working very hard on in the next short while, to see if we can come to a resolution on that issue.

Article 28 is only one of the issues we have to deal with, and we have to be very cognizant of all of the other ramifications. And there are many things within the WTO agreement that we have to really study very stringently and make sure we understand. We always seem to be the good guys, and we let the damage happen in a lot of cases, and it gets to the point where some of the damage is irreversible. Why can't we put measures in place right up front to protect our industry?

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

So you still have some concerns. Action was taken with respect to the import of milk proteins, but as you and others said today, when it comes to negotiations at the WTO, we all are aware of the pressure that will come from other countries regarding supply management.

Do you have any fears with respect to the government's vision on this issue?

[Havey Whidden]

Yes, it is correct. We do have some concerns. Although the government is telling us on the one hand that they support us 100%—they stand behind us and they're going to maintain supply management—on the other hand they're saying that they're at the table, that Canada is a trading nation, and no matter what, they're going to sign the agreement at the end of the day.

That doesn't give me, as a Canadian dairy farmer, a whole lot of confidence in our industry in the long term. And as I said earlier, we have major investments in our farm, and in order for us to have a healthy industry, we have to have long-term confidence in our industry.

The government seems to be saying one thing out of one side of its mouth and saying the other out of the other side of its mouth, so it's a very difficult situation for us as producers.

[The Chair, Conservative, James Bezan]

You have time to ask a brief question.

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

I agree with you. We sometimes get the impression, either with this government or with others, that we are trying to straddle the fence. Are you aware of an interview that the Minister of International Trade, Mr. Emerson, gave to The Western Producer? The minister appeared before the committee following this interview. Regardless of what the case may be, I agree with you with respect to your concerns. Mr. Emerson said that supply management reduced international trade opportunities.

Are you aware of this interview?

[Havey Whidden]

I am familiar with the interview, and yes, it's those kinds of statements that make us as producers concerned about what our government's actual position really is. I'm repeating myself, but we have some people within government saying one thing and other people saying another. Where is it all going to come out at the end of the day? Canada has stated they are going to sign the agreement no matter what.

It's a major concern for us.

[The Chair, Conservative, James Bezan]

Merci beaucoup.

I have a few questions I want to raise.

We were talking about biofuels and the concern about the negativity that might have on the livestock industry. I'm a cattle producer, so I have some of the same concerns on ethanol. I don't have it so much on biodiesel. I see biodiesel as a win-win. It's producing a feed product, more protein meal for the livestock sector, and it really enhances soybean prices and canola prices.

There is this whole issue of ethanol, instead of being corn- or wheat-based, going to cellulose. I look around the Maritimes and I see there's a lot of biomass out here, a lot of fibre that can be used for cellulose production. Has there been any research taking place on that? Will that also provide some easement on some of the gas prices in the area? Even though we have a lot of oil offshore here, there still seems to be a lot of foreign oil coming to this part of the country.

[Robert Gordon]

That's a great question.

Certainly, there's been a lot of interest in looking at more cellulose-based opportunities. There have been a few recently announced federal programs. The ABIP program is one example of where regionally we're looking at doing some research to better position the industry here to take advantage of opportunities.

Again, for any alternative energy, any biofuel production opportunities, we have to always consider the fact of capacity of scale. We have a small land base, and it's always going to be a challenge to be able to meet some of the needs and the cost-efficiency issues we're going to be facing. But certainly our climate is very conducive to forage production systems. There might be opportunities in that area to examine, but it's going to take a huge effort in terms of looking at the technology simultaneously with the crop production issues. The efficiency of those is going to be paramount to being able to make this profitable.

[The Chair, Conservative, James Bezan]

At the agricultural school—you were talking about the amount of research you have—do you have the partnerships in place with the public and private sectors to help carry out those research programs? Is there enough money being invested in this area to help with some of the issues that are very specific to Atlantic Canada?

[Robert Gordon]

One of our challenges as a small institution—we have less than 70 faculty at NSAC—is really having the capacity to be able to take advantage of some of these emerging opportunities. I think institutionally we've done fairly well. I mentioned in my short presentation the industry chair's program, which is a good example of where industry has come up to the table with government, and we've created these innovative research opportunities that have evolved into some major capacity-building exercises.

The challenge is that these things don't happen overnight. We're always going to be at the disadvantage of not having that human resource capacity, and again, it's one of the reasons, under science, that continuing to build our research strength in the future through fellowship programs is very important.

But certainly we are at a disadvantage at NSAC at being able to always attract the best young minds to the faculty because they're getting poached by other universities. We've seen a substantial number of our talented faculty head south in the last few years as well, because of the huge start-up opportunities those institutions provided. That's the challenge we face.

At the same time we are very efficient at working with industry at being able to find adaptive solutions to things. We really hope we're going to be able to take advantage of some of these new opportunities the industry is identifying, and hopefully we'll help with respect to adding value to the industry in the future.