Agriculture Committee on May 1st, 2007

[The Chair, Conservative, James Bezan]

I call this meeting to order. Welcome to the table today.

We have the Honourable Chuck Strahl, Minister of Agriculture and Agri-Food. Welcome, Minister. We're always glad to have you here to talk about the issues of the day, and of course the main estimates, which we're dealing with right now.

Joining the minister we have Deputy Minister Yaprak Baltacioglu. Welcome, Deputy Minister. I understand that you're fairly new in the job but no stranger to the Department of Agriculture. We're really pleased that you have taken this new position with the Department of Agriculture.

We're also joined by Pierre Corriveau, who is the assistant deputy minister, and from the CFIA, François Guimont and Gordon White. Welcome, gentlemen.

With that, Minister, I will turn it over to you so that you can make your opening remarks.

[Chuck Strahl, Conservative, Minister of Agriculture and Agri-Food]

Thank you, Mr. Chair.

Good afternoon, everyone. It's good to be back. I appreciate the committee's invitation to be here today.

I want to thank you as usual for your hard work and dedication to agriculture. I think it goes without saying, but I'll say it anyway, that I believe this committee is one of the most active committees in Parliament, and there's a lot of passion for the agricultural sector here around the table. I appreciate that, as do farmers and the agrifood industry across the country.

I would also like to recognize the valuable work this committee has done in examining the independent review of the operations of the Canadian Grain Commission and how it's governed under the Canada Grain Act. That's valuable work for the grain sector. That was a very useful report. Parliament, producers, and Canadians are going to be beneficiaries of that work, so I do appreciate that specifically. It was an in-depth study, and it will be very useful, obviously, to guide us as we move forward.

For my opening remarks today I'll update members on the progress we've made on a number of important files since we last met and talk a little about future directions, and of course answer your questions.

Through budgets 2006 and 2007, the government will have provided a total of $4.5 billion in new money for the sector over five years. That's over and above regular funding levels in existing programs for farmers. We're working with the provinces and territories to deliver funding for farmers, including $500 million per year for five years that will go towards farm programming, nearly $1 billion to fix the CAIS inventory method and negative margin problems. Our recent announcement of $1 billion for farmers' savings accounts and cost of production support is broken into $600 million earmarked for the producer savings account and $400 million to help address cost of production.

I'd like to speak about that $600 million in a moment, but as for the $400 million, earlier today I announced that cheques will begin to flow in June, and the bulk of the money will be delivered by the end of October. The initial payment on that $400 million will be based on 2.36% of a producer's net sales for 2000 to 2004. If any funds are remaining, final payments will be made in December, and in the future we are committed to up to $100 million annually that will be paid into the producers' savings accounts to address increasing production costs.

While working to meet farmers' immediate needs, we're also very concerned about helping the next generation of farmers stay actively involved in agriculture. In budget 2007, we've increased the lifetime capital gains exemptions for farmers from $500,000 to $750,000, which will help facilitate the transfer of the family farm from one generation to the next.

We've also taken action on biofuels. In support of farmers in rural Canada, we've announced $500 million over the past four months to help producers in rural communities to seize new market opportunities in the agriculture bioproduct sector through our biofuels and bioproducts initiatives. This $500 million includes $200 million for the eco-agriculture biofuels capital initiative, which I officially launched last week, to help finance the construction or expansion of transportation biofuels production facilities and to help producers get involved in these projects.

There's also $145 million in science and innovation under the agricultural bioproducts innovation program to support new and existing research networks and to encourage the development of clusters in areas of the bioeconomy where greater benefits can be generated from collaborative research.

There's another $134 million toward the agri-opportunities program, which focuses on the commercialization of new agri-based products, processes, and services.

There's $20 million in the biofuels opportunities for producers initiative, which is double the previous allocation due to the strong uptake right across the country; and $1 million to support folks wishing to form coops as a way to take advantage of opportunities associated with biofuels and other value-added activities.

So combining these investments will help producers capture new opportunities for profitability, and they will help advance our country's agricultural sector as a whole in the areas of health, the environment, and the bioeconomy.

In addition, budget 2007 allocated $2 billion to foster the production of renewable fuels across Canada, and while that's not all in our department, that $2 billion initiative has been well received across the country by organizations and industries that realize that this allocation is going to go a long way towards starting that viable renewable fuels industry.

Under marketing choice for grain producers in western Canada, we are moving forward on our commitment to allow marketing choice while maintaining, of course, a strong but voluntary Canadian Wheat Board in barley. We said we would consult with farmers first. We've done that through the barley plebiscite. Barley producers have spoken, and the government is listening and acting on their behalf. More than 29,000 barley producers participated. The majority of those farmers, 62%, have asked for choice in marketing their barley.

This result is consistent with the Wheat Board's own polling, which shows that the majority of growers favour choice in barley marketing.

So we have our marching orders and they come from the farmers. We intend to move forward decisively with changes to the Canadian Wheat Board regulations.

Those draft regulations are now available for public comment. We plan to consider comments and develop the final version of the regulations in the coming weeks, with a view to making marketing choice a reality for western Canadian barley farmers by August 1, 2007.

For wheat, we promised to consult producers in a plebiscite before taking any action. That was a promise we made earlier this year. I have no plans to do that this year, but before there are changes made to wheat and how it's handled we will be consulting farmers in a plebiscite at some future date.

Trade negotiations have been in the news again lately. Internationally we continue to stand up for our producers and our processors. We're working hard at the WTO negotiations on agriculture. We want to make sure that our agriculture and agri-food industry can compete effectively and successfully in the international marketplace. It goes without saying that Canada has much to gain from a successful outcome in Geneva. For Canadian agriculture to thrive we need to achieve an ambitious result, and we need to strengthen the rules that govern agricultural trade.

We're continuing to seek substantial reductions in trade-distorting domestic support, as well as significant improvements in market access and the elimination of all forms of export subsidies. Canada will continue to work constructively with other WTO members to achieve progress in the negotiations and aggressively advance Canada's interests.

Even if the near-term prospects for the Doha Round remain unclear, Canada has been clear about one key point. As we move forward in these negotiations we are going to continue to seek an outcome that benefits all of Canada's agriculture, and that includes both export-oriented and supply managed industries.

The government will also continue to ensure that Canada has a strong overall trade policy strategy going forward, including regional and bilateral trade negotiations that serve our commercial interests.

We also clearly understand the enormous value that the supply management system brings to those sectors that have chosen to market in this way. That's why the government has supported supply management, both at the WTO negotiations and here at home.

For example, we have made the changes that were needed in order to control dairy product imports. Following the announcement by Canada's new government on February 7, 2000, the process for amending our milk protein concentrates agreements has now been officially initiated. Negotiations under Article 28 of the General Agreement on Trade and Tariffs will be held over the coming months.

On another topic, we announced that the Canadian Food Inspection Agency would be establishing a regulatory process for cheese composition standards. The process is underway and draft regulations will be submitted shortly.

We are also working as promised to replace CAIS to make business risk-management programming more responsive, predictable, and bankable for farmers and to be better able to help them respond to rising costs.

Three weeks ago in Winnipeg we had some very productive discussions with the provincial and territorial ministers on the issue of developing new business risk-management programming, including a margin-based element, a disaster framework, production insurance, and a savings account program arising from consultations with the sector.

Provincial ministers expressed appreciation for the federal $600 million kickstart to the accounts, which they agreed would replace the top tier of the income stabilization element of the former CAIS program. This is contingent on working out the details with our provincial partners, but I'm optimistic it will happen. We made good progress on this, and we are working to finalize the details of the new savings account at our annual meeting coming up in June.

Over the past year, we've been working with the provinces, territories, and industry, and we have responded with significant improvements to the margin-based program. We've reached an agreement in principle on a disaster relief framework, and we're working to expand production insurance. Taken together with the proposed savings account program, which will include a federal cost of production component, this represents the federal government's proposal to replace CAIS.

Let me take a minute to relate to you the improvements that have already been made to the business risk-management programming, particularly the margin-based element.

At the request of industry, in keeping with our commitment in budget 2006 in response to recommendations from industry, we've improved the inventory valuation adjustment for 2003, 2004, and 2005. This was an investment of $900 million, and final payments are now going out to producers.

We expanded the eligibility criteria for negative margin coverage to better cover viable farms with deep losses. This commitment of $50 million in federal funds, which is $80 million with the provincial contributions, will provide assistance to even more farmers.

We've made interim and targeted payments available. We've improved deadline flexibility. We've made electronic filing available. We've developed an electronic calculator. We've made some other changes that you may want to ask questions about. But all in all, we've made some good progress.

We fully agree that work remains to be done. As I mentioned, our government is working with the provinces and territories to work on a new suite of risk management programs in 2007 that will better address the needs of Canadian producers.

I met with the Auditor General yesterday to discuss the report. She singled out the CAIS program in her report, which you may have seen earlier today. We fully agree with her recommendations. We've already taken action on many of these recommendations and will address the others shortly.

When this CAIS program was first developed and it first came out, there were plenty of warnings from industry and from the then-opposition that the CAIS program would not work in the way it was originally designed. We said it was too complex and it would not deliver in the way it should.

Since taking office, we've been working with the provinces to replace CAIS. It's already a much different program to what it was in 2004.

As I mentioned, through changes to the components of BRM to a disaster relief framework, improved production insurance, a new margin-based program, and a farmer savings program, we believe we will have farm financial programs that are simpler, more predictable, and bankable, which are all things identified in the AG's report.

In the bigger picture, of course, all of the reacting to and acting on the AG's recommendations will make this part of government more effective and accountable to the industry and to Parliament.

I also want to touch on CFIA as an important part of this portfolio. The Canadian Food Inspection Agency has celebrated its 10th anniversary. Over the past decade, the agency has successfully used its resources to face many challenges. As a result, we have an inspection and regulatory system that has an excellent reputation at home and internationally. The agency has worked hard to build solid relationships with its federal and provincial partners, which also strengthens the effectiveness of our system.

Since I've been minister, a lot has happened at the CFIA. It has successfully managed several high profile events related to food safety and human, animal, and plant health. Anthrax in western Canada and golden nematode in Quebec are only two of the pests and diseases that the CFIA has dealt with over the past year. The CFIA uses its resources to effectively deal with these pests and diseases so that domestic and international confidence in our system is maintained.

A testament to this high level of international confidence is the fact that Canada has been recommended for official recognition by the OIE as a BSE controlled-risk country. It's a very important resolution that many on this committee would know.

Another example of international confidence in the CFIA is the designation of 13 of our CFIA laboratories as OIE reference labs. Again, it's the highest compliment we can be paid.

While it always must respond quickly to emergencies, its budget also allows the CFIA to develop and implement long-range strategic initiatives so that we continue to have a safe food supply and a healthy animal and plant resource base.

Areas of strategic work include new inspection approaches in food safety and a contribution to international science-based standard setting. The agency will be looking at ways to increase compliance with its regulatory objectives and alternative approaches to achieving regulatory outcomes.

For example, the CFIA wants to make inspection and enforcement more consistent across the country. It's also looking at ways to improve food safety standards and compliance in the non-federally regulated sector.

Steady growth in global trade will open new markets to Canadian exporters, which is good news. However, this can also present challenges by making it more difficult to contain pests and diseases. With respect to diseases like avian influenza and other threats, its resources allow the CFIA to always be working on ways to prevent disease incursions or to deal with them effectively in the event of an outbreak.

Just as an example, in the area of prevention, the CFIA is collaborating with the Canada Border Services Agency and Foreign Affairs on the program called “Be Aware and Declare!”, which is targeted at international travellers. By raising awareness and influencing human activities, this campaign will help reduce the number of harmful pests and pathogens carried into this country.

During the last 10 years, the CFIA has played an important role in the life of our country. The foundation of a proud legacy is being built.

I'll close with a longer-term perspective and say a word about the process we've embarked on with the development of the next generation of agriculture and agrifood policy, one that will help the sector meet the challenges of the new millennium.

As a critical first step in that process, federal, provincial, and territorial ministers agreed to conduct a series of in-depth consultations with Canadians. Over the past four months, we have completed two rounds of very comprehensive consultations, first with industry, and then broadly with farmers, processors, and others, including members of the public.

I'd like to thank the over 3,000 participants who engaged in a dialogue, either in person or online, from across the country in the agriculture and agrifood sector and among the general public. Collectively they offered many innovative suggestions on how to move forward with the next policy framework, which will enable the industry to remain prosperous in the years ahead. We have now asked officials to develop the framework based on what we've heard in those consultations, and to continue working with industry as they move forward.

I'd like to acknowledge as well, Mr. Chair, the work of this committee in gathering input on the agricultural policy framework during its recent travels across the country. I note that many of the issues and ideas--not surprisingly, I suppose--are similar to what we have picked up in our consultations on the next generation process. I look forward to this committee's recommendations and as well your reflections on the feedback received.

Mr. Chair, that is an overview of what we've been doing and where we're heading. Once again, I want to thank the committee for its hard work and its dedication to advancing all things agricultural and agrifood.

I would be happy to take questions at this time.

I am pleased, Mr. Chair, to welcome my new deputy to the table. Yaprak Baltacioglu came over in March of this year. She is replacing Len Edwards.

Len Edwards has moved on to Foreign Affairs. I would like to thank Len for his dedication to the sector.

I welcome Yaprak aboard. I know you'll find her very professional and supportive of the good work done here in committee. She is very knowledgeable, has fit in very well, and has been busy across the country already in support of the work that the department is doing and that you are doing as well.

We also have here François Guimont, the CFIA president, and various officials who can provide any background you may need.

I look forward to your questions, and thank you again.

[The Chair, Conservative, James Bezan]

Thank you, Minister Strahl.

I just want to remind members that the minister is here only until 4:30. We're going to do five-minute rounds so that we can get as many members as possible in on the first round of questions. Questioning should be related to the main estimates or to the minister's opening comments.

With that, Mr. Steckle, you're up first.

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

Thank you very much, Minister Strahl, for being here today, and for the officials being here.

I'm going to spend my short time talking about one program, specifically the Canadian farm families options program. It's part of the program you've put forward, a most recent program in fact.

We closed out our tax year yesterday, and most people have prepared their tax forms and submitted their numbers. Just a week ago, we find, the program that was introduced last year was changed—a very unusual time for a program to be changed.

When I look at the numbers, I see $550 million as a start to the program. Over two years, the accounting costs, I think, were deemed to be about $170 million, which left about $380 million in the program for actual delivery to farm families. What I see on paper here is that as of April 22 about $142 million had been delivered, leaving about $238 million yet to be delivered.

I'm wondering first of all why the program was changed at this late time in the program. It would be like suggesting to people, after they've made their RRSP contributions, that they're not valid contributions for that particular year.

In Ontario, 3,129 applications were received. When you apply the numbers as I've been given them by an accountant, we would find that besides the $29 million delivered to the program in Ontario, another $9 million was further delivered to the accountants.

So I'm not sure whether this program was designed and created for farmers or whether it was designed to help defunct farmers who are actually taking on a second job as accountants to subsidize their industry.

Basically, that's the premise of my question. I have other questions as well.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

In general, the Canadian farm families options program was a program we developed last year. We announced it as a two-year pilot project. We wanted to see if it would meet some of the needs in the agricultural sector, specifically for farmers who didn't have a net income over $25,000.

We deemed that to be low, of course, and thought that this program might be useful not only to give them some much-needed cash, but also to help them with business planning and with skills development to help turn the corner. Obviously, with that kind of low income you can't stay in the farming business, so we're trying to help them find ways to develop those skills, and business planning, and so on that would help them develop into long-term viable businesses.

On average, the program paid out last year to farm families about $9,900 for a family that qualified. There were about 15,000 people who qualified for this program. I think it did some good. It filled the gap in a year when we had particularly low farm income. As I mentioned, the average family that qualified ended up receiving almost $10,000; the average individual almost $8,000.

So I think it did some good, and people who are in the program will be allowed to continue in it until the end of this pilot project. Of course, I hope they will continue to take advantage of that other programming that will help with the second part of it, which is not just the cash, but the skills development and other ways we can help them, and so on.

The reason it was cancelled, frankly, is to respond to both industry demands and demands by members of Parliament.

I have to tell you that I did not receive one supportive letter from any member of Parliament on this program, not one. I did not receive one supportive signal from a national farm organization, not one. What they did say is that they wanted more funds to go directly to farmers, wanted it to be transparent and predictable, and wanted something to address the cost of production.

So what we're doing is winding down this program in response to those demands. We are coming up with a farmers' savings program—it will be, of course, much larger than this farm families program—and a cost-of-production element as well.

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

But it doesn't address the concerns of the farmer who planned his year-end based on this program; who made certain business decisions knowing that if he made those decisions at the right time, he would be able to benefit from the program.

Now we have all this money left over. Was there not some assessment and evaluation done on this program before it was introduced? Or was this one a fly-by-the-seat-of-your-pants kind of ad hoc program?

What does the Auditor General have to say about this, and what does Revenue Canada have to say about it, given that there's going to have to be a review of and amendments made to some of these tax returns that have been filed?

This is not a debacle that is over yet; it is just beginning.

[The Chair, Conservative, James Bezan]

Your time has expired.

Mr. Strahl, a quick response.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I don't think the Auditor General has anything to say on this because she hasn't been asked to look into it.

Originallly, on this program we thought that up to 19,000 people would apply. It turned out 17,000 applied. So we weren't far off. It wasn't a debacle. It was very much in the order of what we thought.

I think the program did serve a purpose and does serve a purpose. I think in the evaluation that will come at the end of this second year, we'll be able to have a good analysis of it. It is a pilot project; it was announced as a pilot project.

Clearly, what farmers said to us, what industry leaders said to us, and what members of Parliament said to me was they felt this money would be better spent--and it's not like it's going into a bank account--on a farmers' savings program and a cost of production element for two things, and then a series of other programming that we will announce over the next few weeks that will specifically help farmers and farm communities.

[The Chair, Conservative, James Bezan]

Thank you, Minister.

Monsieur Bellavance.

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

Thank you, Mr. Chair.

Thank you for being here with us today, Minister. In your presentation, you alluded to milk protein imports. We have worked long and hard on this, to achieve the results we now see. However, there are other import-related issues, concerning preservation of the supply management system, that are very important.

A variety of Quebec producers' federations have recently held a number of annual general meetings. Because I attended several of those meetings, Mr. Strahl, I would like to tell you what was discussed there, in particular concerning poultry imports.

According to the Fédération des producteurs de volailles du Québec, your government has agreed to an 8.7 million kilo increase in poultry imports, which allows for 8.4 per cent market access instead of the present 7.5 per cent. With 7.5 per cent access, Canada is one of the top ten importing countries in the world. Those imports are possible because of the rule that an imported product containing less than 87 per cent chicken is not considered to be chicken, and so is not subject to the tariff quotas.

I do not know whether you have heard about the chicken coming from the United States. The chicken is put in a box and rice is added to it, and once it enters Canada the rice is removed. This means that the chicken is not subject to tariffs. The Fédération des producteurs de volailles du Québec is calling for Canada to make imported products containing more than 20 per cent chicken subject to customs tariffs under Article 28 of GATT.

My second question deals with Quebec dairy producers, who are concerned about chocolate milk imports. We have already had the whole tale of the butter oil in ice cream, a battle we lost, I would remind you. Last year, milk chocolate sales rose by 11 per cent in Canada and Quebec. The Fédération des producteurs de lait du Québec is calling on the federal government to make imported dairy products subject to customs tariffs, including chocolate milk and flavoured milk.

I would like to know whether you are prepared to agree to these requests today.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you for that list. I think most of them apply to supply-managed industries, and are obviously always a concern not only to me but to the Minister of International Trade, who often has to handle these trade issues in his portfolio.

On the poultry imports, I know I have had requests from the poultry industry that they would like us to use article 28 when it comes to dealing with these poultry imports, especially when it comes to the 13% rule and so on that applies to the poultry imports. There are several problems with that.

Article 28 is a sledgehammer of an instrument to use on trade policy. Governments have always been very reluctant to use article 28. Ours was the first government since I've been in Parliament, in many a year, to use article 28 to reclassify milk protein concentrates. We've started that initiative, as we promised the dairy industry we would. Our application has gone in to the WTO. We're expecting comments from them on that. But it is a pretty serious step when governments use that. We're prepared to use it. We're doing that, and we're following through on our commitment.

Article 28 doesn't apply to the United States. We have a NAFTA agreement that covers our trade arrangements with the United States, so much of the concern of the poultry industry is concern about U.S. imports, and that's a different issue from article 28. It can't be handled the same way. It's not a matter of reclassifying it under article 28, because it just doesn't work the same way.

So while I understand their concern about that, it can't be handled, in our opinion, the same way. Also, with the quantity of imports on the poultry side, as I do on whether it's beef imports, poultry imports, or you name it, I encourage farm organizations to sit down together with these panels the trade minister has put together to give their input into that decision-making process.

As we debate this and figure out what the right levels of import are, I encourage the poultry industry to sit down on those committees that have been put together by the international trade minister to get their input in on that, and that's the most effective way to influence the process.

My understanding is that the change is roughly 0.6%. I believe the difference on the imports this year over last year is less than 1%, and I don't think that's a draconian amount. Again, if they want to influence things moving forward, then the best way to do that is to sit on the panel and give advice to the Minister of International Trade, so that when all of us get together to make those decisions they're part of that process.

On the dairy side and chocolate milk, I've been of course seized with a couple of other issues on the dairy side lately, one of them being the use of article 28 and making sure that we get.... CFIA's been busy pulling out the lines of milk protein concentrate, how much we've imported, getting those numbers down pat. Also, there's the whole idea of milk compositional standards, which is another issue, and they're ensuring we have that process in hand and that we're moving ahead with it as well.

I have had correspondence on the chocolate milk concerns, as I have on other things from the dairy industry, but frankly, I've been working primarily on those first two issues, the article 28 and the compositional standards. We've been consulting with stakeholders and doing our part to make sure that proceeds properly.

The other issues, and I know there's always a series of issues.... We meet regularly with the Dairy Farmers of Canada, with the processors, and others to determine what's the best path forward, but right now I think we'd best get these first two things in order. That has been the priority of the milk industry, and I think that's what we need to get done first.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Miller, you're on.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you, Mr. Chairman.

Thanks, Mr. Minister, for being here today, and ladies and gentlemen.

Mr. Minister, I wonder if you could maybe give us an update on your meeting with the provinces last month and on some of the things that came out of that. Were there any further discussions taken on changes to the CAIS program? I wondered if the long-term disaster program was discussed with them at all.

Also, the SRM deadline's coming up here in July. Basically, I'd like to know, are all the provinces on board and ready to go?

I'll start with those, anyway.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you, Mr. Miller.

We had a good meeting. I think the co-chair of the meeting, at the post-meeting press conference, said it was the best meeting he had been at in his time as agriculture minister. I thought it was a very productive meeting. We addressed all those issues you had raised.

In the communiqué, the provinces agreed to move ahead with a replacement of CAIS with four elements. They agreed with a disaster framework. They have not agreed with the funding formula for that disaster framework. So the framework is there, how it's going to work, what's covered under the framework, and so on. Some provinces are hesitant on the 60-40 split we have put forward as a funding proposal under that, but the disaster framework has been agreed to.

They've agreed to enhance the production insurance side of things. This is important. I think in Ontario alone, there are about 40 pilot projects on better production insurance under 40 different commodities that we want to add to PI. That's going to be an important part of the underpinnings for future BRM programming, because if we can get some good programming for what used to be considered maybe more exotic--some greenhouse issues, some cattle or other sectors--if we can get a good PI system the industry says is useful, and it can be part of the way forward, the provinces are very keen on that, and of course we'll pick up our share. We're paying for part of these pilot projects right now. They're very active both in Quebec and Ontario and across the country, but those two provinces specifically have been very active in promoting pilot projects to expand the PI prospects.

They've also agreed to this new.... There's a margin-based component to the BRM programming, and then they've also agreed to this farmers' savings plan. Of course we're going to kick-start that with $600 million from the federal government, federal-only money. But then it will replace what was the top tier of the margin-based program and it will go directly into farmers' savings plans.

So all those things I think are demands that we have had from the industry, from the national CAIS committee, from the CFA, from UPA. It's been broadly told to us and reconfirmed today in the AG's report that the current system was not working as it should have. The improvements we've made in the last year and the improvements agreed to at this federal–provincial meeting are going to help us have a better set of programming to replace that.

Something that would be of interest to the committee, I think, is that there's a growing interest in what the provinces are calling “regional flexibility” in programming. Again, that's undefined as yet, but what's come up repeatedly in these consultations on the next generation of agriculture policy is the need to have more regional flexibility. The way to address problems in Ontario is quite different from in P.E.I., for example. So there's a growing demand for regional flexibility, and we're working with provincial officials right now to come up with a definition of that before our June meeting, I hope.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Minister, I think you should note that in our last two weeks when the committee was travelling across the country, that was very evident in almost every area.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you for that. If you can give me details of that as you put your report together, that would be useful for me to hear as well. We heard it from the provinces. We're hearing it from the industry. We're all hearing it from the farmers. I think we're detecting a common theme here, as they say. So your input on that would be useful.

The final thing is on the SRM deadline—it is coming up. That feed ban enhancement was announced last year. It's moving ahead for July 12, I believe it is. Mr. Guimont made a presentation to the provinces on how that's going. It does appear to be coming together well in all regions of the country. As you know, we have a program, we have an $80 million packet of money from Agriculture Canada to help the industry and the provinces make those transitions.

We've signed agreements with most of the provinces now--Alberta, British Columbia, Ontario, New Brunswick, and Nova Scotia--and we have agreements in principle with the other provinces more or less ready to sign. So that $80 million will go to help make the transition. It's all on track for July 12. But of course the impact is starting to be felt even in May, because the renderers and so on are starting to make their decision on what can go into feed products in advance of cleaning out the system in anticipation of that July 12 deadline. But it seems to be coming together. Everyone is a little nervous, because it's a big change, but they've had lots of notice and they've been working very productively.

I think you had another meeting last week. Mr. Guimont did with the industry as well, and I believe it's on course. It seems it's come together in time in every province.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Atamanenko, the floor is yours.

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

Thank you very much, Minister, and thanks to all of you for being here.

I'm going to fire two or three questions at you, Minister, and hope you'll have time to answer them.

First, on the draft regulations and barley, how close will you be monitoring the situation as it plays out with the Wheat Board? We've been on different sides of the fence here. If it doesn't work out according to plan and the Wheat Board, for one reason or another, isn't able to continue marketing barley, and farmers aren't benefiting from the market--maybe not this year but next year--are you going to be monitoring this closely and then maybe reassess the situation?

Second, it came up a couple of times in our tour that some people were concerned about what's happening at the WTO negotiations. On the one hand you mentioned that you would like to sign a deal at all costs, and on the other hand we're protecting supply management. Some people asked whether that kind of takes the rug out from under our feet so we have no bargaining power. How can we reach a compromise, if we're not prepared to give away anything in supply management, and then sign a deal?

The third question is about tobacco farmers. I'm just wondering if there's anything in place to finally give them an exit strategy that will not cost--according to their proposal--the taxpayers any money? Are there any high-level discussions currently planned to get this done once and for all?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you for those questions.

The draft regulations on barley, as you know, have been published now, and I expect to get some public comment over the next month on those. It is our intention to move ahead, of course, as the regulations have spelled it out. Obviously we're monitoring the situation overall. Again, as you know, we've been on different sides about where we want to end up. We want to have more marketing choice for barley. That's what the plebiscite told us that farmers want.

I've urged the Canadian Wheat Board to consider ways they can be part of this in a marketing choice environment. Other marketing boards seem to thrive in a marketing choice environment. I believe there are lots of farmers who want to use the Wheat Board. They have first-class sales people and a network of producers and buyers around the world that I think sets them in a very good place to take advantage of those assets, human resources and others.

I talk frequently with the board chairman, their executive group, or the whole board when I can. Obviously we work closely with the industry and I get input from them on an ongoing basis, and we will continue to monitor the situation closely.

On the WTO negotiations, I don't think I did say anywhere along the line that there's a deal at all costs. What the Minister of International Trade has said, and I would echo, is that it's inconceivable that we would not be in the WTO. It's hard to imagine that Canada, out of all the countries in the world, would say that we are going alone, that the rest of the world is all together but we're out of step. It's simply inconceivable to me that we would be out of this. We're an exporting nation, not only in agriculture but in many, many ways, and being outside of the WTO is inconceivable, I must say. But the deal-making that goes on is a little bit like making sausages: it is a messy business, and it goes on and on and on.

Clearly, what we see, even in the paper that was released yesterday, is that Canadians continue to have influence in generating ideas at the WTO with our negotiators. You folks have had Steve Verheul in here before, and I'm sure you'll have him in again. Steve and his team are among the best in the world, so their ideas keep cropping up in every one of these statements on how issues can be handled, complex issues that are very difficult for both emerging and developed nations to handle. Canada's hand is in that often. You can see it in some of the language and some of the ideas.

However, it is true that we have, as we all know, both offensive and defensive interests at the WTO. We very much want more market access, and we're very aggressive on reduction in domestic support and elimination of export subsidies. We want to beat down non-tariff barriers to trade. We want all this and we want a very aggressive package. However, like all countries, we also have defensive interests. In our case, our sensitive product interests tend to be in supply management—not exclusively, but mostly—and we make no bones about it. All countries have both offensive and defensive interests.

It makes it a complex negotiation, but all countries are in this in some way. Some might say “I don't want to reduce my domestic support but I'd like more access”. Those countries have to be in the negotiations, as are we.

What we're not prepared to do—and I don't see any national organization encouraging us to do this—is to throw one sector overboard for the sake of another. I simply don't see that. That was clear even at the Cairns Group meeting when the CFA, for example, had to disagree with the other farm organizations from the other countries involved in the Cairns Group and have a dissenting report, if you will. Well, we ended up in the same way at the ministers' level. The other ministers came out with a report saying we like what this is saying, but we have to take note that we don't agree with statements that say we should eliminate sensitive product protection.

This is a balancing act, and it goes on all the time. It's a very difficult thing, but all countries are faced with these sorts of debates and we simply have to make sure we are there doing our part to advance the entire sector.

[The Chair, Conservative, James Bezan]

Thank you, Minister Strahl.

Mr. Atamanenko's time has expired.

Mr. Easter, you're kicking off our next round.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair, and thank you, Minister.

Minister, yesterday I gave you a letter outlining the areas where we're very troubled by some of the decisions you've made and the lack of background reasoning for those decisions. I hope we can get some answers on the background material.

First, on the farm families options program, it really shouldn't matter whether you're getting letters of support on that program or not. On December 31, in good faith, farmers made decisions to do sound financial planning with their accountants, believing they could draw out of that program. After the fact, on April 20, you changed the rules of the game. That's absolutely unacceptable. They used all legal means possible--optional inventory adjustments, capital cost adjustments--and now they're being put in a financial rut as a result of your decision. Some of them promised their bankers that money would come out of the farm families options program.

I would ask you to seriously reconsider the decision to cancel that program. I think you may find that the Government of Canada is in a difficult legal position as a result of jeopardizing farmers' financial planning.

Second, you did compliment the committee, and we appreciate that, but Mr. Minister, we differ very strongly on the barley vote. There's no question about that. You and the government showed absolute contempt for this committee and for Parliament by ignoring a vote that instructed you to hold a vote based on clarity. You should admit that the vote you held on barley was basically an absolute fraud. There's no question about it. The activities of you and your parliamentary secretary parading across this country putting gag orders on board members of the Wheat Board, and the list goes on--you've heard me raise them in Parliament--to get the doctored result you got at the end of the day.... You really have 13.8% support in terms of getting rid of the Wheat Board, which will be the end result.

On that question, I'll say this to the department. Your tabling in the Canada Gazette looks more like a political document than a professional document. I think that professionally the department should be concerned about the way that is tabled in the Canada Gazette.

You don't mention that you're in effect collectively taking $52 million annually out of farmers' pockets as a result of the loss of single-desk selling. You do say you're worried about the cancelling of contracts. And you should be worried about our international reputation.

You said at the beginning of this meeting today that you're going to eventually move forward with wheat. How can international buyers have any confidence in terms of doing business with the Canadian Wheat Board if you go down that avenue or they have to cancel contracts in the future as a result of your government's actions? Is the Government of Canada going to compensate the Canadian Wheat Board, which flows through to farmers, as a result of any legal challenges, losses of contracts, etc., for your imposing on the Canadian Wheat Board that they change their marketing procedures effective August 1?

[The Chair, Conservative, James Bezan]

Minister, please keep your response short, as Mr. Easter's time has almost expired.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

There are several issues here. I'll go through them as quickly as I can.

Obviously changing the CFFOP program wasn't done lightly. The 15,000 people who were in the CFFOP program last year will continue in the program this year. They will be able to follow through as originally planned with the program in its second year, and then we'll evaluate it at the end of that.

It is important to note, of course, that while we have changed the CFFOP program, within two weeks or so we added an extra $1 billion in new spending for farmers, including a farmers' savings plan that will put $600 million out and put $400 million on the costs of production side. That will make the CFFOP program pale by comparison. Six times as much money is being spent on those new programs as there was in the CFFOP program. There are improvements; there's more money being offered and available to all these farmers and more, and more money to boot.

On the issue of the Wheat Board, as you say, Mr. Easter, we're going to disagree, and that's fine. I understand there are different political positions, and that's as it should be. We campaigned on this in the last federal election. It was front and centre on our brochure that we would like to have more marketing choice for western Canadian grain farmers. We asked a question--it's almost identical to another question you asked me in the written thing.

This is from the 2006 Canadian Wheat Board annual producers survey. They asked the questions--well, here's their summary. The summary from the Wheat Board says that on barley, just under half preferred dual marketing, 46%, and then 19% want a totally open market. That's up three points from last year, and that's from the Wheat Board's own survey. In other words, it's the majority of people. It's exactly consistent with the plebiscite--that's not surprising, I guess--and exactly consistent with polling data that I saw last fall. I don't know if it was Ipsos Reid, but it was an independent pollster.

Barley farmers want choice on marketing their barley. It's interesting to me right now; I have no complaints, or very few complaints. I shouldn't say none, because philosophically people who want the Wheat Board will want it come hell or high water, I think, but what I'm not hearing is a groundswell of support from people asking us to please put them in the barley pool and give them less money right now. What they're saying is, “Free me up right now, and I can finally make a killing in the barley market. Finally I can get the money that I should have been getting all along. Finally, after begging for such a long time, I'm going to get a return on my investment and all my risk.”

Under this system barley producers are finally going to get a lot more money for their barley, and they are thankful for that. They're ready to move on that. Even the people who say they supported the Wheat Board are reluctant right now--let's face it--to ship it to the Wheat Board, because if you ship it to the Wheat Board right now, you'll get less money than you will on the open market. They are reluctant to do that, not because of questions that we've raised or anything else, but that's a decision they have made; they're voting with their pocketbooks. Farmers finally are getting a return that they deserve on their investment. We've all said farmers should get their money from the marketplace; this is finally a chance for them to do that. I'm pleased as punch for these guys.

To people who say we should intervene in some way and stand up for international grain companies, which is basically what you're saying, I'm saying it's time to stand up for the farmers. Farmers finally are going to get the bang for their buck that they have long deserved and have pleaded for.

[The Chair, Conservative, James Bezan]

Mr. Gourde, you have five minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

Minister, I would like to congratulate you on the year I have been working with you. You care a great deal about agriculture, which is facing some major challenges.

I would like to talk about the possibility of using biodiesel in agriculture. Will the biodiesel plan that has been submitted to the Department of Agriculture and Agri-food have a positive impact on the climate and on rural Canada?