Good morning.
I am Mary Ann Hendrikx. I'm pleased to have the opportunity to speak to you today about business risk management on behalf of Ontario Pork.
I'm a member of the provincial pork board, representing 3,100 producers in Ontario. I also sit on the pork safety net committee and act as the vice-chair of Ontario's Agricultural Commodity Council.
My family farms in southwestern Ontario, raising hogs, corn, soybeans, and wheat.
In 2006, 30.8 million hogs were produced in Canada, and over 7.4 million of these in Ontario. Eight and a half million Canadian hogs were exported to the U.S., either as weaners or as market hogs. Ontario exports a similar proportion. Of those hogs processed inside our borders, over half of them are exported as pork to 88 countries around the world.
We are part of an integrated North American market because of the large number of hogs we export into the U.S. And we purchase many inputs from the U.S., including feed, pharmaceuticals, and equipment.
Competitiveness is key to our success. Managing our business while trying to compete on a level playing field with our neighbours is the largest risk we manage as producers. Various risks affect our competitiveness and are completely beyond the control of producers. For example, things like currency fluctuations and interest rate changes affect our input costs.
Government policy and action must take into account the resulting effects. Thoughtful handling of labour issues or enabling product availability to deal with management challenges like disease are legislative things that our government can do to assist competitiveness as we struggle to meet increasingly sophisticated consumer demands. Even in an ideal competitive environment, producers require a safety net to deal with market downturns as a way to stabilize our income. Pork producers have found real value in the CAIS program and support the continuation of a margin-based program.
Of course there is always room for improvements. Timeliness of payments and predictability would lessen some of the criticisms from the grassroots producers. Also, the design principle that requires producers to finance program costs is in most cases unnecessary. Producers already assume considerable risk in production, and participating in this program has an administrative burden. Sharing in the program costs is simply an added expense. Also, many producers feel that government pro-ration would be a breach of trust if it would actually occur. In order to be effective in assisting producers during times of crisis, claims and payouts need to be considered income in the year to which they pertain, rather than when they're received.
The newly announced stabilization program sounds very promising and, in essence, what many producers have been asking the government for. A real concern exists for the maximum contribution being high enough to be of value. The previous NISA limits are too low for the size and scope of today's commercial family farms, especially in the pork sector.
There are simple ways to prevent the issues that brought the NISA program into disfavour. Mandatory withdrawal of the government portion in year of a claim is a simple solution that would do that job, as well as other suggestions mentioned earlier, like higher deposit caps and allocation of income into the year of hurt.
As I stated earlier, the pork industry is very export-dependent. We agree that programming must conform to international trade obligations and minimize the threat of trade action. We will not willingly endure another trade challenge. But being able to win these challenges is essential to our survival. One very important principle is equity across commodities and regions. All Canadian producers should be given the same opportunities and risk management programs so as to bring our industry forward together rather than spending energies trying to compete with each other.
One example of cross-commodity inequity is in production insurance. It was promised but never delivered or budgeted for. The lack of production insurance hits livestock producers in two ways. First, production losses are not fully covered. An effective production insurance program would have saved many producers who suffered extreme consequences due to outbreaks of circovirus and PRRS, two devastating pork diseases.
Secondly, the CAIS reference margin is not supported by production loss coverage. We appreciate the work to make the cash advance program more useful to livestock producers; however, only 50% of the benefit offered to crop producers is available to pork producers. A crop producer can access the advance for a crop year, which is 12 months or maybe even longer. A hog cycle is only six months. A workable solution that brings equity needs to be found.
Treating crops that are utilized differently is inherently unfair and needs to be addressed. The cost of producing either cash or farm-fed crops is equal. Farmers who diversify should not be penalized. These programs that go to non-farm-fed grains will result in either more paper sales from farmer to farmer, or in livestock farmers separating their business, with a spouse or other family member taking on the livestock or the crop portion. This is not efficient and cannot be accomplished by smaller farmers. The added bookkeeping expense is not a competitive practice.
One program that was well appreciated in the previous APF program was the Canada-Ontario research and development program, affectionately know as CORD. It was funded from transition money and administered by the Agricultural Adaptation Council. This was the fourth time we had access to CORD, and we found it to be a useful and well-used program that funded a host of valuable projects for all of agriculture. Although there were some challenges in its initial development, the conditions and parameters were successful.
Our one recommendation is to run the program from a grant rather than a contribution agreement. This would allow commodity groups to ensure that the moneys are spent as wisely as possible, rather than rushing projects to get them done by an arbitrary date.
In conclusion, I appreciate the opportunity to discuss these important issues with you today. I look forward to a promising future with the assistance of the government, and recognition of the positive influence that agriculture plays in our economy.
Thank you.