Agriculture Committee on April 24th, 2007

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

Yes, very well.

What do you think of the idea of having a disaster component? There would be a disaster component as part of the risk-management mechanism. NISA, which was replaced by CAIS, had a sort of risk self-management component. CAIS can be effective in covering major risks, when there is a drop of over 15% in comparison with historical margins.

Would a program that included a disaster component, like the one that was part of NISA, and the components of CAIS that cover major risks be better than the current CAIS program?

[Vince Kilfoil]

It's very important to maintain the CAIS program, to maintain production insurance, to maintain a NISA-like program whether it's part of CAIS or not. It's very important to have a disaster relief program to address specific disasters, as well as any other tools we can include, such as the recognition of supply management as a business risk management tool. As farmers, we need in our toolbox all the tools we can use to deal with risks on our farm.

Farms are very diverse. The risks are very diverse. The needs on each individual farm are very diverse, and sometimes maybe that's why we find it hard for farmers to agree on funding across the country. I think it's important to have as many tools as possible in the toolbox, so that we can draw from them, tailor them, and pick and choose from them to decide which ones we're going to use to manage the risks on our farms. I think it's important to maintain them and improve upon them.

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

Mr. Bettle, you are the former president of the New Brunswick Dairy Producers. Is that right?

[Don Bettle]

Yes.

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

I was not with the committee when it went out west. In any case, this was not that pertinent there. Since the start of our visit to Nova Scotia and Prince Edward Island, however, dairy producers have been telling us how important it is to protect supply management.

In your opinion, should the government consider the supply-management system to be a risk-management tool for the purposes of its assistance programs?

[Don Bettle]

I believe supply management is a business risk tool whereby producers can have some guarantee of their income over the long term. It comes with a sizeable investment also, but producers pay that out of their own pocket. They pay their own costs and they expect a return from the marketplace rather than from government. If government protects supply management, then government avoids pouring millions of dollars into the dairy industry every couple of years to bail it out of either trade actions or some other thing that would undercut the revenue on the farm.

Dairy farmers in New Brunswick have two people to represent them here, and I'd feel a lot more comfortable if they were answering questions based on dairy.

A couple of years ago I sold my dairy cows and quota. I gave the guy a break on it because the price was high. He paid me some up front. For the rest he pays me $2,000 a month over a few years, and then he'll pay me the remainder. He's a young guy and he's just starting out, and there weren't any other programs there, so I made a program myself to help him out and help him get started to expand his farm. That's the same thing we have to find in Canada, a way to do this to help that next generation get going.

Also, that next generation needs the stability that supply management gives them, so they can depend on steady income coming into their farm. They can make long-term financing, long-term investments in that farm, and still know that they're going to get a milk cheque.

[The Chair, Conservative, James Bezan]

Thank you very much.

Mr. Devolin.

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

Thanks, Mr. Chair, and thanks to everyone for being here this morning.

We're here to talk about business risk management. Even this morning I've noticed a couple of people, when we talked about business management and business risk management, almost trip over the words sometimes. Farming is a business, and it's a big business. In terms of individually owned business, these are multi-million dollar operations—most farms. There have to be good business practices, whether you own a farm or a furniture store in town or a restaurant. That's the way you stay in business, and business risk management is one part of that.

Mr. Kilfoil, you mentioned the business risk self-assessment test or the notion that there should be something like that. I wonder if you could expand on that, but also expand beyond just the business risk self-assessment. Are there programs or things that are done to generally help farmers with business management, even beyond just managing risk, but more generally, and might that be another way to tackle the income crisis—actually just to raise the general business skills of farmers?

[The Chair, Conservative, James Bezan]

Mr. Kilfoil.

[Vince Kilfoil]

I think that most farmers who've managed to survive this long are pretty good managers for the most part, given the crisis that we're in.

I guess the concept of a self-assessment would be to follow in the model of the environmental farm plan, where you do a self-assessment of your farm and you assess your own risks and develop a plan to mitigate those risks, environmental risks under that plan, on your farm. If you could do the same thing and have funding available for business risk management and sit down and be guided through a process with maybe some experts around the table, and say, I'm at risk on my farm because—Maybe I don't have the proper management skills, or maybe part of my production area is susceptible because of wet land or because of intrusion from urban development. Or what are the risks that exist on my farm and is there anything that I can do? Is there anything that I can plan for down the road to help mitigate those risks? Can I go get the management skills? Can I drain that corner of land that's pulling me back? Can I replace that old storage that's not adequate?

If that is risky to my business—those are business risks—maybe by some self-assessment and having some of the funds available to mitigate some of those issues that I feel are relevant right now, or could be relevant down the road, to my operation, that would be a way to address some of those problems. I think that was the concept behind that school of thought.

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

Thanks.

I think it was Mr. Speer who drew reference to the picture of the 31 combines coming across the field.

In my riding in central Ontario, the southern half is agricultural and the northern half is the bush. It's cottage country for Toronto. When I was a kid growing up, on the lake I lived on there were probably 20 family-owned resorts. At that time, everybody sold the week-long package. You came from Saturday to Saturday and there was a program for kids. That doesn't exist anymore. A lot of those resorts went broke because they kept offering that after people in Toronto had figured out they could fly to Cuba for a week, quite frankly, cheaper than they could come to Haliburton for a week, especially if they included their food and booze in the cost.

Some of those resorts adapted, and that's the other question I have in terms of commodity production.

If you're producing a commodity, you're competing against Brazil and the Ukraine and the United States and lots of places versus something that's more value-added, something that's more targeted at the local market. Are there enough resources around to point out opportunities or to help farmers transition to maybe producing something that's not just a mainstream commodity, but something that's more value-added, that maybe is targeted to a more local or regional market? Are those kinds of initiatives out there? I think in the long run that's a form of business risk management, to actually get into a business that's less risky.

[Robert Speer]

Yes, I would agree that you need to get into a business that's less risky. At the same time, you need a lot more knowledge when you're into that. To just produce the bulk commodity requires a different set of knowledge than to produce the bulk commodity and take it through to the consumer. That's a role where I think there can be a lot of help in education with producers.

Is it all out there? It's probably out there, but to put it together in a format so that the producer can take his business through it and at the same time continue to manage his business, I think there's a role for government to help in that process.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Atamanenko, you're on.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you very much for being here. It's a pleasure for me once again to visit your beautiful province. I was here a couple of years ago in the summer. It was a little greener then than now, but it's nice to be back here.

Mr. Speer, I'd like to throw some questions at you specifically, and then maybe I'd also like to give an opportunity for Madam Cormier and Mr. London to give some comments, and maybe others. I'll just throw some questions out, and then we'll take it from there.

Specifically, you talked about the dairy industry and you talked about debt, and yet the dairy industry, we're led to believe, is one of the most successful in Canada, as far as stable income is concerned, because of supply management. So I'd be interested to see how debt figures in there.

We talked about the pursuit of 31 combines that Barry mentioned. The allusion is that we have to get bigger and we have to move with the stream and really go big if we want to remain competitive, and we need more research, and that whole model. Yet yesterday when we discussed this in Charlottetown, we were presented with what might be a different model, based on small communities, the survival of our rural economy and rural farms. The implication was that if we go big, maybe this would eventually spell the death of our small communities and life as we know it.

Many say—and this is the other point I've heard, and especially in the west—that our farmers are already the best. I believe also, Mr. Kilfoil, you mentioned that there is success, that farmers are good business people. So the idea that we need more training and more evaluation and skills maybe is not correct. The farmers are the best because they've managed to survive. I think you mentioned that. So what we need is some kind of support, and I'd like some comment on that.

Then there's the whole framework of what direction we are actually going in, in Canada: is it to compete in this global WTO-driven market, or should our direction be shifted a bit to ensure our food security, ensure a safe food supply and open and sustainable markets for our farmers, and the survival of our rural communities?

That's a lot of questions to answer in a couple of minutes, but if you wouldn't mind trying, I'd appreciate that.

[Robert Speer]

Okay, dairy and debt. I mentioned that my farm has four times the debt as what we paid for it. I don't necessarily see that as a problem in the sense that I have the cashflow to make the payments. The farm is four times as big as it was, so we're still making the cashflow and we're still eating and so on. I'm saying we have this debt. I think the allusion was that you don't want interest rates to go sky high. But as long as we have this stable economy, we have debt, we have increased assets.

As for the 31 combines, I gave the impression that I wanted to compete with those 31 combines. That was a mistake. I felt that we should not be trying to compete just on this scale of getting bigger, producing large amounts, and so on. I felt we had to take a little different road and not try to compete head-on with just producing a bulk commodity, but look for those other ways to increase our value.

In terms of whether we can do something local where we produce a safe crop, we have to have consumers willing to recognize that that's what they're getting. We have to have the consumer knowledge as well, that they're not looking for the cheapest product; they're looking for a safe product that supports their local community and so on. So there's an educational role there.

Are we already good managers? I think we are already good managers, but if we rest on our laurels and say we're already good, we're done. We have to keep continuously getting better.

I don't know if that answers all your questions.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Madam Cormier, do you have any comments?

[Charline Cormier, Chief Executive Officer, Agricultural Alliance of New Brunswick]

I wrote down a few notes here.

I heard a while ago about this question about when things evolve and change and so on towards adjusting and concentrating on more value-added and local and so on. Well, the industry is evolving and is growing. So yes, towards value-added and towards local is great, but in order to respond and in order to grow and in order to be profitable, the industry needs tools to grow with the rest of the world. It is a competing industry, and these tools are needed. And we can't lose sight of that.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Mr. London, do you have any comment?

[Stephen London, Secretary, Eastern Greenway Oils Inc.]

I definitely agree that there needs to be a form of business risk management. But—I'll be quite brief—I also think it's a lot healthier for agriculture in general if the majority of the money comes from the marketplace instead of government programs.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I'm just going to finish with one last question.

I have a conflict. The apple I'm holding comes from Washington state. Do I stick to my principles and throw it away, or do I eat it later on for break? This falls in line with what we've been talking about for the last week and a half.

Okay, I'll stop there.

[The Chair, Conservative, James Bezan]

Okay, we go over to Mr. Steckle.

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

Thank you very much for appearing this morning.

As we find ourselves in the latter days of our cross-Canada hearings, obviously some things have become rather repetitive. I think we've drawn the conclusion that there are certain elements of our discussions that seem to be consistent across the country; other elements are perhaps much less so.

I want for a moment to deviate from my previous lines of questioning. I want to take us into an area of modelling.

Mr. Carmichael, you talked about the model of farmers owning—you didn't call it a cooperative—this “enterprise”. I wonder whether you can tell us in very concise form what the benefits are in terms of the end dollar value for the farmer, because we're talking about the developing of niche markets and farming going in new directions. If your model is one we should be looking at, then perhaps that becomes part of what we're discussing. Is it a 12% return that you can see on this, over and above what they would normally have received for their raw product, or what are we seeing here?

Quickly, can we just have something?

[Ray Carmichael]

The success of that so-called integrated corporation or corporate structure is—Whether it's a company or a cooperative doesn't really matter; it's just a legal term. The principle is that somebody has to seek investment, and if you have investor confidence in what you're doing yourself, all the way from the producer—

If you're just selling it as a producer and are trying to get your 10% or 15% margin there, then you turn it over to a processor who is trying to get the same amount, and then to a distributor, and then a retailer, right through the chain, ultimately, yes, you're probably sacrificing. But what you might sacrifice as a producer, you stand to pick up at the next level of the chain. That's really the model we're trying to use—well, that we'll have to use—to remain—

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

But in your business plan, are you anticipating your model based on a 12% return, or an 8% return, or what are you looking at? Obviously you have a business plan.

[Ray Carmichael]

It's 25%.