Thank you very much, Mr. Chairman, for inviting the Ontario Cattlemen's Association to present today to you our policy views on several different issues.
I am president of the Ontario Cattlemen's Association and a cow-calf producer from Elgin County, about an hour and a half southwest of here. With me today is Dave Stewart, the executive director of OCA in our office in Guelph.
I'd like to begin by stating three overall principles that we feel Canada's agriculture policy should comply with: policy should foster the competitiveness of Canada's industry and producers on a global basis; efficient regulatory processes that foster competitiveness and innovation should be a clearly stated aim of policy; and policy should recognize individual needs and differences of provinces, and provide for flexibility in the delivery to accommodate regional issues.
As I'm sure you know, Canadian agriculture is exposed to many risks, and the cattle industry is no exception. While OCA sees these and other private sector means as the preferred tools for business risk management in Canadian agriculture, we do acknowledge that government programs play an important role in agricultural risk management.
I'd first like to discuss the CAIS program with you. OCA has been a strong supporter of the CAIS program. We are on record, though, as requesting changes to make the program more effective for our members. You'll be interested to know that in a paper of February of this year developed by the George Morris Centre in Guelph and entitled “A Review of Business Risk Management”, Ontario cattle producers identified their top three potential risks to be, number one, margin and price; number two, border closure and market access issues related to foreign animal diseases; and, third, production-limiting disease complexes.
We believe that the CAIS program has the potential to help mitigate these risks; however, the current design of the CAIS program is not working as well as it could for beef producers. I just want to highlight briefly two or three changes that we think need to be made to the CAIS program.
First, we feel that BSE support payments and other government payments must all be included in the production and reference margin calculations for the years in which they were received. These payments should be retroactive to 2003, the beginning of the CAIS program. The governments, both the previous government and this government, have been very good at supporting the beef industry with programs. We feel that those program payments need to be included in the reference margin calculations. This is a matter of fairness and uniformity across all sectors, and we feel that this is one way that the CAIS program could be made much more beneficial for beef producers.
Program payments must be predictable and easy to forecast accurately. This is not the case right now. Producers should be able to determine how the decisions might impact the outcomes. Banks do not consider the CAIS program when looking at the overall financial situation on an individual's farm, and this needs to change.
Adjusting the reference margin to reflect the changed base of production is achieved by applying what we call benchmark production units, or BPUs, to adjust the reference margin to the new production base. These BPUs are not made public, and this again contributes to the uncertainty and the mistrust of the program. We feel that a producer's own numbers should be used in determining the BPUs. This would again help to create some confidence in the CAIS program if this BPU issue was fixed up.
Finally, the payments need to be timely. Program payments should occur in the year in which there was a need for the payment.
We also believe that the recent announcement by the Prime Minister and the federal agriculture minister, creating a contributory style producer savings account, will not benefit beef producers. This change, we feel, will shift money from the green box to the amber box, and depending on the use of amber in the future, and the potential for a reduction in Canada's amber allowance, we feel that this could be problematic. This change also moves us away from whole farm agriculture policy and addressing a system of entitlement. So we do have some concerns at OCA about the announcement that was made a couple of months ago.
In addition, the announcement allocating $500 million to address the high cost of production concerns us, for several reasons. The primary concern is the potential effect that this type of program may have on foreign trade. The cattle industry in Canada exports approximately one-half of its production in the form of live cattle and beef. We feel we are very vulnerable to trade challenges. Government support that is based on cost of production can be vulnerable to countervail actions by our trading partners, including the U.S., which is by far our largest trading customer.
We're also concerned about the emerging North American ethanol industry, which is a competitor for feedstock. At this point the viability of the ethanol industry in North America is dependent on government support and mandated use. We are concerned that government support to a competitor of the cattle industry may drastically reduce the competitiveness of our industry. This is a case where a policy that was based on good intentions but was not well thought out damages a sector that has been stronly free market for many years.
I'd also like to briefly discuss production insurance. At the ministers meetings in July of last year there was an agreement to move forward on extending production insurance to livestock. I think staff was directed to bring forward criteria and operating principles relating to a production insurance, event-driven, disaster program. We have seen a draft proposal on this and we feel it is little more than a mortality insurance program. It does not fit our requirement for an overarching production insurance program.
In terms of moving forward on a national disaster program, we feel there has to be some mechanism to have that program in place in the future. A national disaster program would address natural disasters such as drought and floods and issues like that, but the framework could also pre-emptively define a disaster and set out funding parameters, governance, and, to the extent possible, program details specific to the disaster. If there had been a framework like this in place prior to May 2003, the entire industry would have been much better off. Producers would have made much better use of the government dollars that flowed immediately after May 2003 had we had a disaster framework program in place and known what we were going to deal with rather than dealing with it ad hoc and on the fly.
I'd like to close with a few other recommendations, which have already been included in our written submission for the next generation of agricultural policy.
In regard to trade, Canada's international trade policy must be advanced by establishing a WTO mandate that empowers Canada's negotiators to achieve substantial improvements in market access. We could be exporting beef to other countries. However, we are held back by high tariffs in countries like Japan, Korean, and the European Union. It's a must that we see reduced tariffs, worldwide, through a WTO deal.
We also feel that traceability is a big issue. Again, that is in our brief, which you will be receiving. We have five principles of traceability and I would encourage you to understand what those principles are. This could affect our competitiveness, as an industry, if we get into some traceability programs that don't abide by our principles. Again, it could affect our competitiveness.
We are also strong supporters of the Canadian Animal Health Coalition's national farm animal health strategy. We feel that animal health should be a separate pillar under the next generation of agriculture policy. Included in animal health there needs to be strong recognition that animal care is part of that pillar. Animal care programs and polices need to be based on the premise that good care in the Canadian context fosters healthy and productive animals. As we move forward, animal care issues are going to be much more of an issue for the Canadian livestock industry to deal with. Again, there needs to be some recognition of that in the next generation of agriculture policies.
With that I will close. Thank you.