Agriculture Committee on April 25th, 2007

[The Chair, Conservative, James Bezan]

I call the committee to order.

I want to welcome to the table Pierre Roy, from the Fédération des producteurs de porcs du Québec.

From the UPA, we have Richard Petit and Denis Bilodeau. Welcome, gentlemen.

And from the Federation of Quebec Producers of Cash Crops, we have William Van Tassel, who is no stranger to our committee. Welcome back, Bill.

We're going to start with opening comments. Please keep your comments to less than 10 minutes per organization.

Monsieur Roy, will you kick it off for us, please.

[Pierre Roy, Fédération des producteurs de porcs du Québec]

Good afternoon everyone. I am pleased to be here as the representative of the Fédération des producteurs de porcs du Québec. Thank you and welcome to our beautiful region of Montmagny—Côte-du-Sud—Chaudière—Appalaches.

Created in 1966, the Fédération des producteurs de porcs du Québec is an agricultural association set up under the Professional Syndicates Act. It is affiliated with the Union des producteurs agricoles du Québec and the Canadian Pork Council. Composed of 12 regional associations, the federation represents 4,111 hog farmers throughout Quebec.

Its mission is to obtain better social, technical and economic conditions for producers through the implementation of strategies designed to preserve and develop Quebec hog operations. It is dedicated primarily to marketing all pork products in Quebec. To this end, it is the sole sales and negotiating agent for all of Quebec hog producers. The federation also administers promotional and research funds and elaborates developmental hog production programs.

Risk management is an integral part of the daily lives of hog producers. Health hazards and market-related risks are the main risks that hog producers must face. The Fédération des producteurs de porcs du Québec believes that the federal government must do more to support hog producers in the management of the numerous, unforeseen and unavoidable risks that affect this sector.

I will now provide you with the federation's comments on the range of business risk management programs that the federal government offers.

Our first comment pertains to the Canadian Agricultural Income Stabilization program, or the CAIS. Quebec hog producers have extensively tested the CAIS program's effectiveness over the past two years. Indeed, the producers have been hard hit by the circovirus and has sustained unprecedented losses. In the absence of production insurance, the CAIS program had to compensate producers for such losses. It goes without saying that producers expected a great deal from the program, which was supposed to specifically compensate for difficult years based on a farming enterprise's past performance.

Producers have indeed been disappointed since the majority of farming enterprises have not obtained the anticipated level of compensation, which has undermined them financially. Consequently, the Ministère de l'agriculture, des pêcheries et des alimentations du Québec launched a $15.2 million ad hoc program aimed at overcoming these shortcomings. Moreover, it is deplorable that the federal government is unwilling to share de facto the costs of such programs when the province announces and funds them. In light of its experience, the Fédération des producteurs de porcs du Québec is requesting certain changes to the CAIS program to ensure that it fulfils its initial objective and adequately compensates producers.

I will now discuss interference regarding diversified farm operations. Farming operations that engage in several types of production are often at a disadvantage compared to those engaged in a single type of production with respect to the amount of disaster relief they obtain. Indeed, it has been observed that the losses sustained from one type of production are often offset by gains achieved in the second type of production. In the event of a disaster, such as the health crisis that hog producers faced between 2004 and 2006, it is unacceptable that the CAIS program does not offer the same level of coverage to two farming enterprises that sustain similar losses.

To resolve the interference problem with respect to diversified farm operations, the Fédération des producteurs de porcs du Québec is recommending the following solutions that should be implemented in the event of a disaster.

In the short term, all cases involving hog producers who were victims of a disaster in 2004, 2005 and 2006 should be re-examined and eligible incomes and expenses pertaining to hog productions should be isolated to calculate compensation under the CAIS program.

On an ongoing basis, the federal government should approach the provinces to ensure that companion programs are considered by production sector when a disaster strikes a farming enterprise.

The CAIS program must also be adjusted to prevent an erosion of the reference margin. Indeed, the existing program application rules combined with the absence of production insurance in the hog sector reduce the reference margin of enterprises over time. The sector cannot wait any longer for the establishment of a production insurance program, which is slow in coming, to resolve this problem. The federal government must propose solutions to support the reference margin of producers who experience a disaster, in the absence of a production insurance program.

The Fédération des producteurs de porcs du Québec believes that other facets of the CAIS program must also be reviewed and enhanced. Among the key points, mention should be made of foreseeability, response time and the administrative burden that the program imposes. A program that is as hard to foresee as the CAIS program becomes in itself a risk factor that is added to the numerous factors that the producers are already facing. As for the response time and the administrative burden, a majority of producers from all sectors criticize them and the federal government must find a way to reduce them.

Producers also find it hard to accept the principle of shared cost programs when such programs cover disasters or uncontrollable risks. When a disaster has already undermined a farming enterprise's financial position, it is hard to assume part of the cost of a program that often covers only a portion of the losses sustained.

With the launching of the Agriculture Policy Framework, promises were made that production insurance would be extended to other commodities, including livestock. Despite the industry and government's efforts, we are still far from implementing production insurance suitable for livestock.

Given the absence of production insurance and the inadequate coverage offered by the CAIS program in the event of disease, many hog farms have been undermined financially or have ceased operation. The lack of production insurance hits producers in two ways. First, production losses are not fully covered. Second, the CAIS program reference margin is being eroded.

It is essential that the federal government promote, in the provinces, the development of a production insurance program to restore fairness in relation to other commodities that have benefited for several years from such insurance. Moreover, the federal government should establish the framework governing factors such as the premiums payable and insurable diseases. It is essential that the premium that producers pay to participate in this program is affordable. In addition, the insurable diseases must not be confined to those in which the herds are disease-free, but must include those diseases that are serologically present, but whose clinical signs are under control.

Do I still have some time left?

[The Chair, Conservative, James Bezan]

You have one minute.

[Pierre Roy]

The federation is worried about the private sector's role in the implementation of a future production insurance program. Indeed, the federal government has clearly indicated that any risk covered by private insurance policies would be excluded from such a program. The federation wishes to ensure that the federal and provincial governments maintain their commitment to offer a production insurance program to hog producers to ensure that livestock producers are treated fairly in relation to other agricultural producers.

Quebec hog producers have greeted favourably amendments to the Agricultural Marketing Programs Act aimed at making livestock production eligible for interest-free cash advances under the advanced payments program.

The FPPQ salutes Agriculture and Agri-food Canada's efforts to better adapt the APP to the hog sector. However, we believe that access by hog producers to interest-free cash advances is still not as advantageous as it is for certain crop producers, who are able to keep their advances for 12 to 18 months. In the light of the short production cycle on hog farms, hog producers have access to interest-free cash advances for reduced periods ranging from six to nine months.

Hog producers who grow grain to feed their animals will be at a disadvantage as farm-fed grain will no longer be eligible for the APP, a situation that the FPPQ condemns. How a producer uses grain should not be a criterion for eligibility.

The FPPQ supports the creation of a disaster relief program. Since it is acknowledged that governments are unable to provide a range of business risk-management programs that cover all contingencies, the elaboration of a guide pertaining to specific situations will be valuable to assure producers that assistance is available in extreme situations. We must seek to elaborate this framework bearing in mind that such a program must be easy to administer and, above all, that it responds promptly. It is unthinkable that farm producers have to wait months before the federal and provincial governments intervene because of drawn-out negotiations.

The FPPQ believes that the federal government should intervene to attempt to restore a power relationship in the market and tackle concentration. It wishes to draw to the committee's attention that Quebec hog producers deem collective marketing to be a very important tool. In our opinion, this tool is an integral part of the solutions to counteracting concentration in the distribution sector and impediments to market access. This system is also more likely to ensure due reward for stakeholders in the sector, especially producers, and the federal government should financially support such initiatives.

[The Chair, Conservative, James Bezan]

You have 30 seconds to wrap up.

[Pierre Roy]

The federation is of the opinion that the federal government's involvement is essential to support producers in business-risk management. However, the amount of assistance granted and the response time of programs should be enhanced and the red tape that they engender should be reduced.

The FPPQ approves the rapid elaboration of a production insurance program to ensure fair treatment for all commodities and, for the same reasons, enhancements to the advanced payments program. We subscribe to the adoption of clear guidelines concerning disaster relief provided that the promptness of intervention improves markedly.

In all cases, business-risk-management program should treat producers fairly, regardless of commodity or type or size of operation.

[The Chair, Conservative, James Bezan]

Thank you very much.

Mr. Bilodeau.

[Denis Bilodeau, Second Vice-President, Union des producteurs agricoles]

Thank you, Mr. Chairman.

Good afternoon and thank you for welcoming us today.

We have already delivered the message we bring this afternoon to other forums. In some respects, it is more or less the same, but reiterating and reformulating the message always remains an interesting challenge. Given the structure of the UPA, the Union des producteurs agricoles, my comments will be broader in nature than those of my colleague. We will have the opportunity to address our expectations from various perspectives and we'll talk about the strategic framework that we have become familiar with over the last few years.

As far as the UPA's expectations are concerned regarding the Canadian program, they are more or less in line with the Canadian Federation of Agriculture's, that is:

[...] the future depends on a real agricultural policy that will provide producers with the means to earn reliable income from the market. Canada cannot build an agri food sector at their expense. It is essential that farms have the ability to be profitable.

Tis is a very significant issue for us. Agricultural businesses must be put into an economic situation that allows them to build a certain profitability over time. This would include special temporary measures, but above all the creation of a beneficial and positive economic context that will allow agricultural businesses to develop and to reach the threshold of profitability. To be successful, we need programs that are supported by various pillars, including strategic growth based especially on science and innovation. I'm thinking here of the renewal program.

Can you hear me well?

[The Chair, Conservative, James Bezan]

Yes.

[Denis Bilodeau]

There is also the business risk management component. In our opinion, this is a major pillar that will allow for a real implementation of support measures in the more difficult situations, whether it is a question of one time or recurring problems, so that our Canadian agricultural businesses are not put into precarious economic situations.

As you will see more specifically in our brief, our businesses are going more and more into debt as time goes by. Year after year, the agricultural businesses' cash flow is diminished. Canadian programs were set up to deal with this problem. They were probably partly to blame for this situation. This must be corrected by other programs that will be implemented differently.

Another pillar is based on public goods and services and affects primarily the environmental components as well as food safety and quality. We also talk about agricultural enterprises of human size, that are owned by families that assume their management. Agricultural enterprises must be able to exist in a more optimistic context. We represent Quebec farmers and we are aware at the same time that the average age of farmers in Quebec gives them a certain advantage over Canadian farmers. In fact, our producers are generally speaking a little younger. However, the whole issue of transferability of businesses, for young people interested in a career in agriculture, remains an unavoidable subject that must be dealt with. It is therefore essential to create and maintain a positive climate for farming, so that newcomers will want to come and take over from those who have spent their lives working in this area.

We talk about a Canadian agricultural policy that ensures the involvement of producers in the decision-making process. It is most valuable for a government to announce policies and invest money, but we have to ensure that the funds produce benefits and some profit for the producers, therefore at the grassroots level. It is important that this money gets to the farm level and be allocated in light of the most pressing needs. In fact, we have observed over the last few years that certain rather substantial measures taken by the government did not achieve their objectives, or at least did not meet the needs of producers for whom emergency measures were required. We would like to see those situations rectified.

We also address the issue of flexibility in the development, implementation and management of programs. In many respects, we come back to this flexibility. We would like, even within a Canadian context, to be able to adapt the federal programs and interventions to what has been developed in Quebec, and in complementarity with it. The objective is to be able to best respond to the needs of agricultural businesses. In my opinion, Quebec's ad hoc programs will not limit the intervention of the federal government. We should rather consider that the amounts invested will result in a more advantageous situation and greater spinoffs for agriculture as a whole.

There is also the issue of equivalence aimed at avoiding overlaps, of provincial design, of delivery by organizations already set up in Quebec, including the Conseil pour le développement de l’agriculture du Québec, or CDAQ, the Financière agricole, the Agriconseils, concerning the plan for service advisors, and the marketing boards, governed by the Marketing Act. The administrative burden needs to be reduced and more emphasis put on achieving objectives. We want a Canadian agricultural policy built in complementarity with the Quebec's orientations.

I would like to invite my colleague to make the presentation about the expectations regarding the various phases of intervention within the Agriculture Policy Framework.

[The Chair, Conservative, James Bezan]

Mr. Petit.

[Richard Petit, Assistant Executive Director, Union des producteurs agricoles]

Good afternoon. I will make a general presentation like the one that Mr. Bilodeau made. You have copies of the document in French and in English; you will certainly have the opportunity to read them. First, I want to thank you for inviting us.

The first phase has to do with food safety and quality. Let me first speak of the general expectations that were identified. Regarding quality and safety systems on the farm, there was a tendency over the past years to do things independently. Each production made its own quality and safety programs for farms, whereas each farm has not only one kind but sometimes several kinds of production. We think that we should proceed in a structured and integrated priority-based approach, which means that the same farm should not have to fill out three series of books of specifications if it has three productions.

When dealing with quality and safety, we cannot avoid mentioning the Canadian Food Inspection Agency. We must make sure that it has the means to supervise everything that has to do with regulating imports, so that the rules imposed by other countries on our exports apply as well to products imported into Canada.

With regard to regulating imports, we must make sure that when a product comes into Canada, it is up to our standards. Therefore, we must enable the agency to do so. Our approval system is not very well harmonized with that in the United States. There are products that can be used in the United States but not in Canada, which is not at the advantage of our producers. Often, this is because there is not enough critical mass of Canadian producers to perform all the tests on a national scale, and thus, these products will never be accessible to our producers. While we continue protecting the Canadian public, we must ensure better harmonization between the systems.

Regarding science and innovation, the documents that were published up until now seem interesting to us. There are many references to innovation. The UPA believes that it is important to focus on innovation, and we are doing a great deal of work on that. On the other hand, we must not neglect other sectors of research and development. We should not focus on one single link in the chain, when dealing with innovation. We must work on all the aspects together, through research, development and innovation, and then we must transfer the knowledge to farms so that Canadian producers can have access to the best available technology. We also want to ensure continuity with the work done in the past.

Mr. Bilodeau spoke about renewal and all the programs for assisting the new generation of farmers. I think that this morning you heard Mr. Benoît Martin, from the Fédération de la relève agricole, who raised the issue. This matter is of great concern to us. Generally, we believe that investment must be made in the renewal of counselling services in support of agricultural producers. Therefore, we must support producers in terms of knowledge and farm management. In Quebec, we have set up a support network, with counselling services in every region.

It is important for farms to have counselling services, but if we want quality, the counsellors must have access to knowledge and support.

Generally speaking in Quebec, as far as the environment is concerned, we wish that the Canadian government would recognize the expertise that has been developed in the province, particularly within the IRDA in terms of research, therefore that it would work with the various organizations that are close to agricultural producers and consultants.

Earlier on, we were also talking about flexibility. One program that is unique to Quebec is the special goose scaring program. I believe it was mentioned this morning. In our opinion, that is a way to show flexibility. We had a program; it was somewhat challenged. For the producers affected by the migration of snow geese, this is an essential program and it should continue.

I will move on now to risk management. This is the final component. Mr. Bilodeau and Mr. Lavoie appeared before the committee here in Ottawa a few weeks ago. We were sent the information that they presented to you, so we will not repeat it. This is an issue of the greatest importance for the Union des producteurs agricoles, particularly the whole issue of the funding of Quebec companion programs by the federal government .

As far as the market is concerned, there is the whole issue of product labelling. The Canadian government has put a great deal of effort into branding Canada, but we cannot always be sure that products with the word "Canada" appearing on the label are really Canadian products that meet quality and safety controls and environmental standards. These products could be imported . This must be part of the next policy, to ensure that when we talk about Canadian products, we are truly talking about products made in Canada.

[The Chair, Conservative, James Bezan]

Thank you very much.

Even though you didn't get through your entire reports, your reports are tabled and the members have them, so they will definitely have a chance to read through them in their entirety.

Monsieur Van Tassel.

[William Van Tassel, First Vice-President, Fédération des producteurs de cultures commerciales du Québec]

Bonjour. I'll do my presentation in French, but just before starting, I want to tell you I will be showing some graphics, and I'll go to certain pages in my presentation so I can talk about them.

Good afternoon and welcome to Quebec.

I am the President of the Ontario-Quebec Grain Farmers' Coalition. The Coalition represents more than 41,000 grain and oilseed farmers in Ontario and Quebec. In Ontario there are seven organizations, and in Quebec, we have the Federation of Quebec Producers of Cash Crops.

G&O producers need the predictability of an income support program that is paid out only when prices fall below an agreed upon floor price per bushel. CAIS is an income stabilization program which does not work for G&O producers. Prices for grains and oilseeds have been stagnant for quite a few years, and this has caused a reduction in the reference margins. As we know, the CAIS works when there are price fluctuations, and when prices subsequently recover. Clearly, this program is not working for grain and oilseed producers.

Let me explain the problem.

Unfair international subsidies mean that Canadian G&O producers face consistently declining incomes. In addition, these subsidies do not trigger payments under the CAIS program. Under the proposed income-support program, the payment is triggered only when prices fall below an agreed upon floor price per bushel.

The grain and oilseed sector is facing a challenge. Here is what we suggest.

Our Coalition is concerned that current efforts underway to modify CAIS still ignore the fundamental challenges faced by G&O producers with the CAIS program. The CAIS is an income stabilization program that benefits price cyclical agricultural sectors based on production margins and penalizes grain and oilseed producers. G&O producers need an income support program that provides income predictability despite persistent income pressures due to unfair international subsidies. The program must also take into account the fact that farmers who face consecutive years of low income are ineligible to trigger payments under the CAIS program.

On page 6, we present some figures for Ontario. We can see the drop in reference margins for producers. These figures are from the Ontario Ministry of Agriculture, Food and Rural Affairs. Farmers with the lowest sales experience the greatest drop in their reference margin.

Page 7 is a chart that shows the trend which explains why the program does not work for grain and oilseed producers. Once again, these figures are for Ontario.

Page 8 present figures for smaller farms. It shows how the reference margin has dropped in this sector since 1999. The study was done in Ontario as well. We will come back to it.

Page 9 is very important. The chart shows the dramatic drop in farm revenues. The comparison is with the United States and the number are in constant dollars. It shows that since 1981, the Americans have experienced an increase in net farm revenue while the farm revenues in Canada have decreased. This is of great concern for the future of farming in Canada.

Page 10 shows the trend in total farm debt. In the long term, this is what will be the determining factor for agriculture. If the debt level is too high, farms will not be able to recover when a situation improves a little. We see that in the early 80s, the United States experienced a crisis in agriculture because of the high level of debt. At the moment, farm debt in Canada is much higher than that of the United States. Farmers in Canada have higher debts than their American counterparts, and we really do not have the same type of programs to help people pay down their debt.

What are the current market conditions?

Recent optimism over increased prices is not shared by producers, at least in part. Recent crop price increases are offset by cost of production increases. Current corn prices are $3.60 a bushel, which is 65¢ below the cost of production.

The media widely reported a $4.50 per bushel price for corn, but this price was available for only one day in March 2007. This was not enough to increase our margins.

Prices have dropped dramatically since the announced increase in acreage in the United States on March 27 and 28. We propose that a national income support program with regional flexibility that provides G&O producers with long-term income stability and predictability be introduced. We also recommend the introduction of companion programming that would provide long-term, bankable solutions to farmers, shared costs and risks by government and farmers and financial assistance only when the average world price falls below a target price.

The companion programs would use an insurance-based model. In Ontario, it is the Risk Management Program, and in Quebec, it is the Programme d'assurance stabilisation des revenus agricoles (Farm Income Stabilization Insurance Program), or ASRA. These programs are funded by premiums paid by farmers and both levels of government. Producers supply one-third of total funding. At the very least, we want federal and provincial governments to invest the remaining two-thirds based on a 60-40 formula. That is not the case at the moment, but that is what we are calling for. The funds would be distributed only when needed.

The budget of March 19 is a step in the right direction. First, it gives $600 million to the contributory style savings account, which makes CAIS more predictable and bankable, but does not meet our needs. At the first level of the old NISA program, for example, when income is stagnant, there is very little help for low-income producers. There is some help, but it does not really solve the problem. Second, the $400 million for cost of production support is a very positive step and needs to have regional flexibility to properly address diverse needs. Ad hoc based on ENS (eligible net sales) do not address the problem and in some cases make it worse.

Some organizations support our companion programs. I will like to quote what the President of the CFA, Bob Friesen, said:

The CFA is committed to the principle of federally-provincially funded companion programs that offer regional flexibility to fill the gaps not addressed by CAIS and other national Business Risk Management Programs.

The president of the Agricultural Producers Association of Saskatchewan, Ken McBride, also said:

Companion programs are tools that should be used to level the playing field in Canada with respect to regional issues, without creating regional disadvantages.

Laurent Pellerin, the President of the UPA, is also in favour of companion programs. He said:

In order to offset the impact of the Farm Bill, the federal government absolutely has to make funds available to finance national companion programs that can be used to meet regional needs.

In closing, the Ontario-Quebec Grain Farmers' Coalition looks forward to working with the government to develop innovative income support programs that meet the diverse needs of Canadian farmers.

Thank you.

[The Chair, Conservative, James Bezan]

Merci.

Mr. Easter, you're going to kick this off. I do ask that all members respect the time limit of five minutes so we can get all around.

You're first, Wayne.

[Wayne Easter, Liberal, Malpeque, PE]

We always do, don't we?

Thank you, gentlemen, for coming.

Mr. Roy, you raised the issue of internal subsidization of two commodities under the whole-farm programs that are in place in Canada. We really end up internally subsidizing cheap food, basically, because if you're running a dairy operation and a hog operation, you end up cross-subsidizing, the way our farm packages are developed.

You also raised a point about fed grains. You grow your own grain, and you feed it. In that program, that commodity doesn't apply. You're not the only one who's raised that; it's been raised in probably pretty nearly every province we've been in.

But I guess I haven't asked this question. I've been thinking about it, and I haven't raised it before. What difference would it make if it were a whole-farm program? Unless we change the programs, if it's a whole-farm program, it isn't going to make any difference whether it qualifies or it doesn't, because it's cross-subsidization within the farm. Do you have any response to that? Or am I wrong? Or does any of you?

Mr. Roy, or whoever wants to answer can.

[The Chair, Conservative, James Bezan]

Monsieur Roy?

[Wayne Easter, Liberal, Malpeque, PE]

Go ahead, Denis.

[Denis Bilodeau]

The most recent generation of programs were essentially characterized by whole farm programming. Farmers have made choices regarding the development of their businesses: some have chosen to set up a hog enterprise alongside a grain company. The objective is very laudable: producers can grow grain, feed their animals, and have manure for fertilizing the next year's plant material—and all of this can be done in the same place. That aspect is highly laudable. However, whole farm programming penalizes this sort of business. If these businesses chose to operate as two separate entities, one specializing in hog production and one in grain production, they would have a significant advantage with regard to a program.

We do not want a program which targets and privileges one business structure at the expense of another. In Quebec, in light of our unique situation, we have always favoured multi-product production. For example, we have been able to link dairy production to wheat or syrup production. This is what led to the development of farming enterprises in Quebec. The current CAIS program means that diversified businesses are disadvantaged compared to specialized businesses. Businesses could choose to separate their activities in order to benefit from programs, but that is not the route we want to take.

[Wayne Easter, Liberal, Malpeque, PE]

I agree with you, and that's one of the problems. You could have neighbours: one is a mixed farmer, and you could have one on either side of you who is just in single commodities. Your neighbours would benefit, and you would basically cross-subsidize your own operation. There's a problem with this that we need to address.

This might have been mentioned once during the hearings. But in terms of, say, the production of pork, and the production of potatoes would be another—several commodities really—in some states in the United States, processors are disallowed from being in the production of the raw commodity. What's your view on that for Canada? I don't think it's happening to any great extent in hogs, but it sure is in cattle.

[The Chair, Conservative, James Bezan]

It's happening in hogs.

[Wayne Easter, Liberal, Malpeque, PE]

It is happening in hogs as well.

Should processors be allowed to produce the raw commodity? I know what happens in New Brunswick. McCain produces potatoes. They use that to leverage down the prices, really, of the raw material. They take off profits at two levels.

What's your view on this for the industry as a whole?

[The Chair, Conservative, James Bezan]

Who wants to go first?

Monsieur Bilodeau.

[Denis Bilodeau]

Are you asking whether integrated businesses have created economic ties between commodity production and processing? Is that your question?

[Wayne Easter, Liberal, Malpeque, PE]

Yes.