Thank you again for giving us the opportunity, and for your continuing concern in terms of what's happening in our sector. They're extremely difficult times.
We're going to address the two questions that we've been asked to address in terms of this committee. One is the reaction to your report, and the second is the response of the government to date. I'll be addressing the first part, and Stephen will be addressing the second. I'm certainly glad to entertain questions after and talk about specific situations around the current state of the industry.
In terms of the reaction to the report, the response to the question is very easy. Your report, from our perspective, was excellent and bang on. You heard very clearly what we said: the industry is facing the perfect storm, with high feed costs, low prices, and a very strong Canadian dollar. And you heard our recommendations, particularly that liquidity and a response to that, via a loan, are needed to help in the short term. We're committed to long-term competitiveness within a globalized marketplace.
We're very pleased with recommendation number one, that AAFC “deploy, before the end of 2007, a special transitional measure that will provide cash-flow in the form of interest-free loans to be paid back over a period of three to five years, and bankable cash advances to hog and cattle producers”. This is what we need, although we are prepared to pay interest on the loans. After all of our examination of existing programs, we continue to request the loan—it will treat everyone the same and fill the gaps that the existing programs cannot. It gives our producers a chance to make some intelligent decisions.
With regard to recommendation number two, that the remaining percentage of CAIS inventory transition initiative be paid out, we understand that this may be of some benefit to our sector, but we do not see this measure as being able to address the current cashflow needs of our industry. It's an expensive way to address the issues in our industry.
Recommendation number three states that Agriculture and Agri-Food Canada “hold formal discussions with the Minister of Finance to show the impact of the strengthening Canadian dollar on the food producing and processing industry in Canada and to examine ways to relieve the pressure on the industry from the rising Canadian dollar”. This is absolutely critical and continues to be.
Yes, the agriculture sector is not alone in facing the rising Canadian dollar, but we could easily lose vast segments of agriculture, representing resources that will not return to food production in the future. I believe the industry can adapt over a long enough period of time. It has to. But no one can expect individual operations or sectors to adapt to such a quickly changing environment. Canada needs to have a plan in place to help remedy this situation, not only for us but for others as well; otherwise we will lose the very fabric of our rural Canadian life.
We're looking into the concept of Dutch disease syndrome. If you haven't heard about it, I invite you to take a look at it because there are other countries that have faced a similar scenario in the last 25 years, and it has absolutely devastated some of those economies. We don't need that happening to Canada, not only in agriculture but in forestry and manufacturing as well.
Recommendation number four addresses the particular recommendations with regard to the CAIS program. We certainly support the first bullet, that “for the purpose of reference margin calculations, to use the better of the Olympic average, the average of the last three years...”, and we very strongly support raising the maximum contribution limit to AgriInvest. The remaining two, the viability test and fast-tracking the $600 million Kickstart program, are also reasonable.
We have additional changes, though, that we requested when we met with you the last time, and these include four bullets.
Giving producers a choice between the new AgriInvest program or the top 15% of AgriStability: we're not disputing the move to this, but the timing of it hurts our sector, and giving us the option for an additional two years would be very helpful.
Secondly, compensating producers who experience disease outbreaks on their farm during the reference margin in a manner that would be equal to what CAIS payments would have been had the disease not been present and eroded the reference margin. Frankly, that would help. We've talked about production insurance, and the Government of Canada and the provinces are all committed to that. We think this could be done on a pilot basis to see if it could work, and it would certainly help many of our producers who have been hit very hard with circovirus and influenza.
Thirdly, raising the caps on CAIS, the AgriStability program, and fourthly raising the cap on Kickstart.
Recommendation number five requests “a complete review of regulatory measures susceptible of putting the Canadian meat industry at a competitive disadvantage”. We obviously fully support this and think it still needs to be done. For our industry to be competitive in the longer term within a globalized market, and particularly with a higher Canadian dollar, we are going to have to find every dollar, every cent, that we can squeeze out of our costs, and that's at the farm level through to final processing.
We have an inefficient regulatory system, from excessive time lags for new product registration to cost recovery and to some feed grain issues, particularly in western Canada.
We're suggesting that recommendation six addresses a beef-specific issue.