Agriculture Committee on Feb. 5th, 2008

[The Chair, Conservative, James Bezan]

I call this meeting to order.

We kick off our study today on high input costs facing Canadian farmers. I'm really glad we have with us today Bob Friesen--no stranger to the committee--with the Canadian Federation of Agriculture; James Mann and Glenn Caleval with the Farmers of North America Inc.; Pierre Lemieux and Gilbert Lavoie from UPA; and Richard Phillips and Leo Meyer from the Grain Growers of Canada.

I welcome all of you and thank you for taking the time out to come to committee and present. This is an important study. For the last few months we've been hearing about this issue, about where the price of input costs is going, particularly for fertilizer as we're coming up onto the spring season.

With that, I'm going to open it up to opening comments. Please keep your comments under ten minutes—and we'll hold you to that—so we can have plenty of time for discussion around the committee table.

Mr. Friesen, would you kick us off, please?

[Bob Friesen, President, Canadian Federation of Agriculture]

Thank you very much, Mr. Chair. It certainly is a pleasure to be invited to this hearing, together with the other colleagues at the end of the table.

I will keep my comments brief. As you know, when we start talking about input costs there is a lot of information, and I will certainly be willing to answer any questions you might have.

All of you are also familiar with how profit margins are calculated at the farm gate. That of course is gross revenue, which is price per unit times volume minus input costs. I would like to applaud this committee for recognizing the importance of input costs. I would also like to applaud this government for the announcement they made this spring when they applied $400 million to the concept of the cost of production. We know it wasn't calculated based on cost of production, and of course the cheques are always smaller than we would like them to be once they get to the farmer, but for the first time in a very long time it recognized in a material way the impact that cost of production has on farmers' margins. We often just relate it to price, but certainly input cost has an awful lot to do with that.

The input cost and the different dynamics with regard to input cost also change from sector to sector. Of course, if you have the grains and oilseeds sector, you're talking about fertilizer, which is 46% of a grain farmer's input costs. You have pesticides, which are 33% of a grain farmer's input costs, and of course fuel, and we know where all those have gone when it comes to cost escalation.

When we look at livestock, of course feed is a huge contribution to a livestock producer's input costs, as well as the regulatory system, although that could apply to all other farmers.

Then when you come to horticulture, it's labour. Labour comprises about 40% to 60% of a horticulture producer's input costs.

The different areas in the different input costs of course vary from sector to sector, so I'll take a very brief look at all of those. Then we don't just look at escalation. We also look at what is happening to those costs in the countries we compete with. In this case, it's easy of course to look at the U.S. When you look at the horticulture industry, it could be other countries we have to compete with, and then labour becomes even more important.

As I mentioned earlier, when we talk about grains and oilseeds, fertilizer and pesticides are a huge input cost. You may be familiar with the study that KAP, Keystone Agricultural Producers, commissioned and was done by PricewaterhouseCoopers, talking about the fertilizer price increase as well as the variation between what farmers in Manitoba and Saskatchewan are paying and what farmers in North Dakota are paying. But that document also identifies fuel and fertilizer, saying that a 1¢ increase per litre in fuel ends up being a $28 million increase in Canada for Canadian farmers; a 1¢ increase per kilogram of fertilizer represents a $61 million aggregate increase for Canadian farmers. Of course if you do the mathematics on that, it ends up being quite a huge cost.

We have to recognize that we have an open border with the U.S., so our farmers also compete with U.S. farmers. The KAP study also shows that the price disparity in fertilizer, according to the Thomsen research company, was 1% in 2004; it went up to 10% in 2006 and then PricewaterhouseCoopers further shows that the price disparity between Manitoba and Saskatchewan and North Dakota in 2007 was on average 33%, and as high as 63% for anhydrous. Keep in mind that we do compete against these farmers.

Then of course you also have the issue of pesticides, and I know that FNA and Mr. Mann are going to talk more about the OUI and GROU and NAFTA labelling. I will be prepared to answer questions on those. Suffice it to say that our position on that has always been that you don't take away one tool and add a new one. You keep the tools in place, all the tools in the toolbox that farmers need. Again, we think running OUI concurrently with GROU and with NAFTA labelling makes a lot of sense, and I know we'll get more into that later on.

As I said earlier, in the horticulture industry 40% to 60% of their input costs are labour. That's between $4,000 and $5,000 per acre. Using Ontario as an example, where the wage in the horticulture sector is $8.58 per hour for non-foreign workers, you add another $3 per hour on for foreign workers, and that's over $11 an hour for horticulture labour. And they compete against imports, where labour in some of those countries is between $2 and $10 a day. So that's a significant contribution to their input costs.

Then, briefly, in the livestock industry, we all know that grains and oilseeds farmers are finally getting what they deserve. We absolutely are not critical of the fact that they're getting what they deserve, but of course the increase in feed has become quite a burden to the livestock industry. Now, we still claim that if our dollar were quite a bit lower compared to the U.S. dollar and if there weren't record slaughter numbers in the U.S., our hog industry could still compete, even paying what they are paying for feed.

Suffice it to say that hog producers are competing against U.S. hog producers and against a U.S. industry that was built on cross-subsidization and protectionism, due to the trade challenges that they have submitted against Canada. Our hog industry was built on a 65-cent dollar and globalization. So that has put a lot of pressure on our industry.

To keep under ten minutes, Mr. Chair, I will leave it at that. I do have some graphs, but unfortunately I can't pass them out because they didn't come back from the translators on time. We can offer them to you within the next couple of days. They also clearly show, using a price index, what has happened to input costs and how fast input costs have gone up, how our price index remained fairly level or went down, and then of course in 2007, especially for the grains and oilseeds sector, there was a sharp increase. We're just waiting for some media article that says that farmers' income has doubled or tripled, without looking at the effect of the escalation in input costs.

Again, it would be my pleasure to answer any questions that will come from around the table.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Friesen.

Mr. Phillips.

[Richard Phillips, Executive Director, Grain Growers of Canada]

Good morning. My name is Richard Phillips. I'm the executive director of the Grain Growers of Canada, and my wife and I still maintain a grain farm in Saskatchewan.

With me today is a director of the Grain Growers of Canada, Mr. Leo Meyer. Leo is a grains and oilseeds farmer from the Peace River area. He's also a director of the Alberta Oat, Rye, & Triticale Association. In addition to raising his six children, he finds time to farm about 14,000 acres of land and is well aware of the input costs up in the Peace River area.

Following on what Bob said, fertilizer, pesticides, fuel, seed, transportation, repairs, wages...there are a lot of input costs for farmers when putting out our crops. Most of these, we feel, are greatly influenced by supply and demand, and as we look at what's happening with the biofuels and with the growth in the demand from India, from China, from Brazil, we think that we're in a new era when there is going to be more global competition, even for the inputs we have available.

For years, on the food side, we've had burdensome supplies in the EU and the U.S., and I think as we look around now there has been--for many, many years people have talked about this--how many days the food supply is inching down, down, down. It doesn't take much in the increase in demand and suddenly these food supplies, the stocks, reserves, are gone, and as a result of that demand we're seeing grain prices going up.

With the grain prices going up, you see people wanting to increase production, as for example, in the U.S. where corn acres have gone up about 10 million acres in the last couple of years. Fertilizer-intensive...there's a huge demand for fertilizer down there. Here are some rough numbers for you. From India we've seen increases of imports of urea fertilizer from one million to six million tonnes, just in the last three years. We see Brazil, estimated at another 25% increase in the coming years. China is increasing imports.

So when we see rising fertilizer prices, do we want to pay higher fertilizer prices as farmers? Absolutely not. Is it a function of being gouged? It's hard to know that sometimes. Bob and I have both had meetings with the fertilizer industry, looking at their demand side, and there is a lot of global competition for the fertilizer that is produced here in North America. So that's one of the main factors that we see driving that up.

Leo wanted to mention one option that we have as farmers, and that is on the pricing.

[Leo Meyer, Director, Grain Growers of Canada]

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

A point to be made here on the issue of fertilizer and what may now need to change is of course that we might change how we buy fertilizer. I think the days of going to buy fertilizer at seeding time are coming to an end. The supply situation might not allow you to do that, because those nutrients might not be available when you need them. So farmers will have to change the way they purchase and store fertilizers in advance of needing them for seeding. Quite often in the period between the end of October, November, December, and the first part of January, there is a timeframe when farmers can acquire fertilizers significantly cheaper than they do at seeding time. That is I think a very significant issue to be looked at at this time, which we maybe haven't done in the past as much as we should.

In the past this type of specific engagement was more of a tax consideration. People had to purchase inputs in order for a tax consideration, but now it clearly becomes another issue, and that's assured supply and better prices.

[Richard Phillips]

Just in closing on the fertilizer point, what we see is a huge demand for this fertilizer around the world, and as Canadian producers, we're going to be competing to keep those products here in Canada. What can the committee do? What can the government do? I think if there's anything that could be done to stimulate the production, if there are new mines that people are looking at, if there are incentives that could be put in place for more production.... I don't think we're going to have a situation in which we're going to try to limit the exports of fertilizer. I don't think the Government of Canada is going to go to the companies and say they can no longer sell to China. If we can't decrease the demand for fertilizer, then we're going to have to increase the supply. That would be what we would see coming down the road.

The other piece we would briefly like to touch on is grain transportation. We've done a lot of work on this file with the Grain Growers of Canada. We would like to thank all members of this committee for the work they've done in getting Bill C-8 through the House quickly. As you know, when Bill C-8 gets through the Senate, one component of it is the promise that there will be a level-of-service review of the railways 30 days following. Grain transportation is one of the larger costs that we also have in western Canada for all of the export commodities. So we want to see things going forward like the level-of-service review. We would be quite interested in seeing a costing review also of the railways, and anything that could be done to enhance competition on those rail lines would be well received by the producers. Again, with supply and demand, if there are only two suppliers, then you pay the price. So whatever can be done to increase competition of the railways and increase the supply of fertilizer would be steps in the right direction for this committee.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Phillips.

From Union des producteurs agricoles, Monsieur Lavoie.

[Gilbert Lavoie, Economist, Research and Agricultural Policy Branch, Union des producteurs agricoles]

Good morning. I'm accompanied by Mr. Pierre Lemieux, who is First Vice-President of the Union des producteurs agricoles. He is a dairy producer and maple syrup producer.

My name is Gilbert Lavoie. I am senior economist with the Union des producteurs agricoles. Like the Canadian Federation of Agriculture, we've prepared a brief document to submit to you today. Unfortunately, given the short deadlines, we did not have the time to have it translated. We've nevertheless submitted a copy of it to the clerk so that it can be translated and circulated to committee members.

I won't introduce the Union des producteurs agricoles because I believe you know it quite well. It represents all production groups, in all specialties and all regions.

The Union des producteurs agricoles wants to thank you for providing it with a forum so that it can talk about the impact of the high input costs being borne by Canadian agricultural producers. Our brief does not focus specifically on the increase in the price index, but rather on the impact of that increase on the competitiveness of the Canadian agricultural sector.

I know there are demand and cost increase factors, but the factor that has probably caused a sudden increase in input costs is undoubtedly the cost of a barrel of oil or the cost of energy, which has resulted in an increase in the cost of other inputs, be they fertilizers, agricultural fuel and pesticides, because their production entails a very high energy cost.

This has also had an impact on demand for grain products, particularly from Americans who, as you are no doubt aware, have a very dynamic policy regarding the development of their grain corn-based ethanol industry. That, of course, has resulted in increasing feed revenues for the meat industry and positive income for grain producers.

To the extent that these increases are observed globally—a point that was raised by the Canadian Federation of Agriculture—apart from ensuring that the cost of inputs is fair for consumers, one of the factors in making it more difficult for the Canadian agricultural sector to cope with all these increases is that the Canadian dollar, as a result of Canada's major oil reserves, is directly influenced by the rising cost of oil. That has caused a sharp rise in our dollar. There should be a relative decline in the cost of the inputs that we buy. However, there has been a very major impact on the incomes that producers can earn from the market, in view of the fact that we operate in a North American market and that the vast majority of our products are transacted in U.S. dollars.

In our brief, we analyze the changes in the Canadian dollar from 2002 to the present together with with changes in the price of oil. The two curves must be looked at a number of times because they are juxtaposed.

Ultimately, increased fuel costs have had an impact on input costs, but also on the exchange rate. We want to talk to you about these impacts.

We should expect to see agricultural input costs decline. Unfortunately, according to the Canadian Federation of Agriculture, the reverse is occurring. The gap between us and the Americans is increasing. As our dollar has greater purchasing power, we should normally see the gap closing and have a relative advantage in this area. That's one factor that we did not have the time to examine more closely, but we would like to do so. Are our input costs set at the right level, having regard to the impact of the Canadian dollar? Is that reflected in our purchasing power?

Furthermore, Agriculture and Agri-Food Canada clearly showed this in one of its publications. In its publication of August 11, 2006, the department examined the impact of the exchange rate of the Canadian dollar on grain prices in Canada. That publication clearly shows that, if we had retained an exchange rate of $1.30 or 65¢, the price of grain corn would not be $180 this morning, but probably $240. Why? Because when you convert the U.S. dollar to Canadian dollars, the replacement value or the market, the increase in the dollar has resulted in a relative drop of approximately $40 a tonne of corn. I have taken the example of corn because it's the main grain in Quebec, but the same impact is being felt with other grains.

This logic also applies when our producers sell their products. The increase in the dollar has had a significant impact on the base price.

In the case of live hogs, for example, which are often transacted in U.S. dollars, when the market was at $100 in the United States and the exchange rate for our dollar was $1.30, that amounted to CDN $130. However, as our dollar has achieved parity, the same $100 represents CDN $100. So that's a relative loss of $30 per hog sold.

We examined foregone income taking into account the positive impact on feed input costs in the hog sector and the negative impact on sales. We obtained $20 to $25 less per hog. For 2007 alone, that represents foregone income of $200 million in net income or in reduced margin. Canada-wide, the effect is in the order of $600 million.

You might think that the strength of the Canadian dollar only affects our exports, but it also enables our food distributors to import products. That has a substitution effect on domestic products in our own markets. What illustrates this phenomenon more clearly is that the strength of the dollar increases the price of pork meat imports. Even if we were in more local markets, the attraction of foreign products would also be greater.

The impact on export markets is known and well documented. The higher dollar hits the main exporting sectors hard. A study conducted by a woman at the University of North Dakota, in the United States, states that, every time the dollar appreciates by one percentage point, the export volume to the United States declines by 0.2%. In the short term, that represents $1.5 billion in lost export value. She explains that the effect of the higher dollar is not immediate and that that effect will be increasingly bad and significant. She talks about a $4 billion impact on the Canadian agricultural sector.

The other important factor regarding the rising dollar, which was mentioned by the Canadian Federation of Agriculture, is the importance of cheap inputs and appropriate regulations in achieving better flow in our exports and limiting impact. One need only think of all the impact of SRIs and non-reciprocity in our trade with the Americans.

How have risk management programs reacted to this situation? The strategic framework was not designed to solve these kinds of problems. All the provincial ministers of agriculture acknowledged that at the October meeting, when they announced that they wanted to put an action plan in place to assist the meat industry, which is probably the hardest hit. I would also include the produce sector.

Net income was nil, even negative for Canada in 2007, and Canadian farm indebtedness is increasing significantly, whereas it is declining proportionately in the United States. This puts us in a tougher competitive position. Some provinces have started to announce programs to help the sector overcome this crisis. I'm thinking, for example, of Quebec, Alberta and Ontario.

We have seen little to date since the Agriculture ministers' decision to put an action plan in place to help the industry. The provinces have partly taken over this responsibility from the federal government. We expect the Government of Canada to send a clear signal to the industry in order to help it adjust.

We have two more specific requests. The first concerns the cattle, hog and produce sectors, among others. We would like an emergency transitional program to be announced to assist producers in overcoming this crisis. The Canadian Federation of Agriculture, with Agri-Flexibility, among other things, has been making demands for a long time now. The Producers Association of Ontario and other provinces have also requested a program to correct the historical margins of the CAIS program to take this very sudden structural change into account. However, this is transitional assistance. We're also requesting a serious adjustment program to help the sectors improve their profitability and efficiency.

As regards the second request, it would be good for the Government of Canada to ensure that farm input costs reflect our greater purchasing power as a result of our higher dollar.

Thank you.

[The Chair, Conservative, James Bezan]

Merci, Monsieur Lavoie.

Mr. Caleval, you have the floor.

[Glenn Caleval, Vice-President, Farmers of North America Inc.]

Thank you, Mr. Chairman.

I'd like to begin with two apologies to the committee. The first apology is that I am not able to speak in French.

My vocabulary is very limited and my grammar is not very good.

So we're all better off if I stick to English.

The second apology is that I won't be able to circulate our documents today because we just got them prepared and there are some serious typos, but I will arrange to have them couriered to you tomorrow when I arrive back in Saskatoon.

Mr. Chairman, I want to thank you for your forceful support of the own use import program during the forum at agriculture days in the last election, and Mr. Deputy Chairman, for your continuing support, and the members of the NDP--in fact, for a letter directly from the leader of the NDP.

I'm in a very odd position, in that I'm going to be talking to you throughout my ten minutes about a single issue, because it is so vital, and it is an issue that, from all appearances, is entirely non-partisan, because it's gotten support from every member of every major political party. With due respect to the Bloc, I haven't communicated with you, again because of my deficiencies in the French language.

But despite that support, it does not have the understanding it requires of how important it is and what it can do for input costs. I believe there are some really simple reasons why this is happening.

So let me acknowledge that some of what I'm going to say today is quite serious by parliamentary standards, and some of it will seem less than diplomatic. The two particular pieces of testimony that I'm talking about in that context.... The evidence is compelling that this committee has been misled. I know what that phrase means in parliamentary terms. I used to work here twenty years ago.

I believe the Minister of Agriculture has been misled. I believe some farm organization elected officials have been misled. To agree that this has happened intentionally I'll leave for others to decide. The fact of its existence is not a matter of opinion, which I hope to outline.

The second point, which is perhaps less than diplomatic, is that the reason this extensive—in fact, I would say almost bizarrely complete—effort at misleading information matters is that there is an enormous amount of farmers' money at stake. On the low end, we are talking about $500 million a year. We haven't been able to calculate the high end, because when you take into account animal health costs, which are a very significant part of livestock operators' costs, particularly in the pork industry, we haven't been able to calculate the impacts of the generic animal health products yet. So on the high end, I would not be surprised to find out it's going to be $1 billion a year.

When you're talking about a minimum of $500 million a year, people are willing to invest a lot of time, a lot of resources, and a lot of tactics to hang onto that money.

As I go through this you'll see that what we're asking for is not something that involves government taxpayer funds; it doesn't involve support programs. We leave those issues to the competent policy organizations, many of which are represented here today. What we're talking about is allowing fair competition, actual competition, on inputs as much as our farmers are required to compete on their outputs. Despite what the chemical and animal health lobbies and the PMRA and their collaborators would have you believe, the issue is not particularly complicated. This committee can have a dramatic and in fact historic impact on farm input costs in Canada with very simple actions.

I'll be clear at the outset about what we're asking you to do, and I'll repeat it at the end. What we're asking you first, as a matter of urgency, is to demand in your report that the PMRA immediately start receiving and evaluating applications under the own use import program. That is what the law says they're supposed to do today. They're ignoring that law. They are claiming that various organizations, including the Canadian Federation of Agriculture and even FNA, support the fact that they have suspended that program. That is false. We have always said we will support you in proceeding with your new alternatives, but you must allow OUI to run at the same time.

This committee, in a unanimous report to the House, directed that the own use import program remain active for a minimum of two years while they test their alternatives. That report was adopted by Parliament. PMRA found a way to defy the will of Parliament by “suspending” that program, and saying “Yeah, but it's not gone.” In other words, it exists only on paper to this day, and it's costing farmers tens of millions of dollars.

FNA has submitted applications for four new chemicals twice in a row, 2006 and 2007. Each of those years, those new chemicals would have saved farmers a minimum of $67 million. We're trying to resubmit them again this year. I can give you the exact chemicals: dicamba, clethodim. I'll supply the written applications to you when I courier the package back.

The point is that we know that PMRA has cost the farmers a minimum of $134 million so far, and if they fail to do their job and evaluate those applications according to the regulations in time for this season, it will cost us another $67 million.

So the first thing we ask you is, as a matter of urgency, demand that PMRA start evaluating the applications. The second thing we ask you, and this is new, is to pull the own use import provisions out of regulations and put them into legislation. If you do this, you will have a lasting impact on reducing input costs for farmers in this country going forward, for a minimum of half a billion dollars a year, without spending a dime of taxpayers' money. All that you will be doing is insisting that farmers be allowed to benefit from the gains that competition can provide as well as suffer the vagaries that competition can deliver.

Honourable members, I've just completed a round of direct personal consultations with a number of farm organizations. From those consultations, I can report that there is even profound misinformation among them and in fact a breakdown of accountability throughout the system, from farm leaders to the Minister of Agriculture. And I don't mean that the minister isn't being accountable; I'm saying the system has broken down.

I have attached a review that will be sent to you of the position of farm organizations, which will surprise some members. For example, I attended the annual convention in Brandon of the Manitoba Canola Growers Association, a member of the Grain Growers of Canada through the Canadian Canola Growers Association. The members there clearly insisted on their own active resolution that is on the books, not only supporting an active own use import program, but also calling for it to be extended for year-round applicability. The president advised them that the reason they had ignored their active resolution was that they had been informed by their officials in Ottawa that the issue was too complicated. So an active resolution was ignored.

I can tell you that I had a meeting with the Saskatchewan Pulse Growers Association, where the president indicated that his information was that if one chemical was approved under GROU, then any competitive generics in that chemical class could be brought into Canada to compete with it. This is false; it is simply not true. It must be the identical brand.

Now, there are rumours going around that PMRA is trying to play around the edges to adjust it and to bring in a brand that is a registered account. If that's true, that's great. We would love it if they actually said they're going to make the GROU program OUI, with less bureaucracy. That's not what they're doing. In fact, honourable members, if you bring them before the committee and ask them the straight question, is the GROU program designed to increase the entry of generic chemicals into Canada, the straight answer will be no. It was explicitly designed to prevent the entry of generic chemicals competing in Canada. They won't lie to you about that. That's what its purpose is.

And speaking of the Canadian Federation of Agriculture, I'd say that the minister has been misled. I have correspondence from the Minister of Agriculture stating that PMRA's actions in suspending the own use import program were supported by the Canadian Federation of Agriculture. You can ask the president of the CFA, who's here, whether or not that is a true statement. Now, I know that the piece of correspondence was written by PMRA, or at least was drafted by them for the minister's correspondence unit, because I recognized the identical language from them.

The serious importance of this—and I'm going to speed up a little bit here—is that you really can have a dramatic impact. You really can—

[The Chair, Conservative, James Bezan]

Can I actually get you to slow down? I know you want to speed up, but speak more slowly for our interpreters, so they can keep up.

Thank you.

[Glenn Caleval]

I apologize.

Because it's a single program, because it can be made to look complex, it is easy for it to fall off the table. But it is a single program that can have a profound effect on operations, on input costs. The fact is all of the issues that have been put against it, and the so called trade-offs of GROU, harmonization, NAFTA labelling, those things are false trade-offs. It is not a matter of either we have harmonization, NAFTA labelling, or we get competition from generics now. We can have both, and both issues of harmonization have been priorities of the government from day one. This is not something that PMRA and CropLife Canada served up as an alternative to getting rid of GROU. They already existed long before they decided to try to review GROU. We shouldn't be put into a false situation.

On the animal health side, by the way, it's much more severe. I know a farm family from Ontario who had a large hog operation--these weren't just small guys on the edge of survival--and they lost everything in their hog operation. He showed me receipts that show his price for a vaccine called RespiSure was $20,000 a year more than what he would have paid an hour south of the border. On the vaccines issue it is a bit more iffy, but there is no allowance right now for competition in that sector. These are huge costs for hog producers, and they're not insignificant for cattle people, who right now are not riding a high wave either.

I would like to end with a very sincere observation, and I hope you will ask me some questions about perhaps some of the things you've heard that have made you think it's not a very serious issue. The sincere observation is that the future of farming is under construction. This committee can decide whether or not it's going to be a house that farmers can live in, or a factory that produces profits for shareholders in mostly other places. Both options have their pluses and minuses. But either you're on the construction crew, or make way for the bulldozer and do it consciously.

I sincerely thank this committee for taking up this issue. I sincerely hope you will pepper me with the hardest and toughest questions you can on this issue, because it truly matters probably more than any one single thing you can do. My president, Mr. Mann, will talk to you about fertilizer at your leisure, but it's going to be a heck of a lot harder nut to crack. This is something where the tools are there. The tools are simple. They are recognized. They have sound science behind them. We've used them before and the sky hasn't fallen in. It is something you can actually do, not just study or talk about.

Thank you, members.

[The Chair, Conservative, James Bezan]

Thank you.

I can assure you that there are no softballs in here, it's all hardballs and fastballs.

To start off pitching will be Mr. Steckle, seven minutes please.

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

Thank you very much, gentlemen--I believe it's all gentlemen this morning at the table--for appearing.

It is very timely. It seems that every time we approach the spring seeding season, we're into this whole input cost issue. I'd like to pose a lot of questions to you, Glen, because it's an issue that's near and dear to my heart. But I want to start on another area, because I sort of see my questions along this line.

Looking at where fertilizer costs have gone over the last four years, from 2002 to 2006, we see an increase of about 7.6% a year. That was up until 2006. Now 2007-08 are going to show remarkably higher numbers and increases, which is going to skew those figures substantially. The argument, of course, is that we have a huge demand for fertilizer throughout the world: potash, ammonium nitrate, and other sources. Costs have increased because of the demand.

That creates, in my mind at least, another problem. If there's demand in India, China, and all of these countries, and Brazil, where they're now producing more product, what is that going to do to prices in the future in terms of the commodity they're producing? We know we need the food, but we won't want to pay for it, so that creates a further problem.

When you have a commodity such as potash in Saskatchewan, half of Saskatchewan sits on top of potash, so there is potash there into eternity. Why have we not developed more mines? The argument will be made that it wasn't profitable. Yet in 2006 the CEO of the Potash Corporation of Saskatchewan took home $11.5 million as a bonus because he was such a good manager. Now, $11.5 million, in the overall scheme of things, is perhaps not a lot of money, but it is a lot of money. That is a lot of money that would help a lot of farmers in terms of reducing their prices. What's he going to get this year and next year for what he's doing?

These are the kinds of things that have farmers questioning what is going on, because there is no competition. We have Cargill, which is a partner with Mosaic, and they have operations both south and north of the border. It doesn't really matter where you buy, whether you're selling your steer or buying potash or whatever you're buying or doing, you're dealing with Cargill. That's the problem today. We are price takers, but we pay the price when it comes to the farm gate. The only place we can't add price is at the farm gate. Everyone else has an opportunity to do that up the chain, right to the plate.

I don't know how we can justify selling potash in the United States of America, when the dollar is at par now, for considerably less money that what we're selling it for here in Canada. To me, there is something wrong. If we, as the government, can't change that.... Glen has given us some opportunity to make some changes. We need to seriously look at what he's suggested this morning. Are we, as politicians, afraid to act? Is the department running the show? The Competition Bureau isn't helping us. We know that. They have no teeth and never will help us until we make some major changes. Are the farm organization leaders helping farmers, or what are we working for today?

I'm confused. We talk about construction and destruction. I think we're in destruction right now, not in construction.

Take it from there, guys. I have a lot of very pointed questions I could ask, but I will put that on the table.

[The Chair, Conservative, James Bezan]

We'll go to Mr. Friesen first.

[Bob Friesen]

Thank you.

You make some good points. Look at the price index and the cost index, starting in 2002 at 100. You know how much grain and oilseed prices have gone up in 2007. We're looking at starting at 100 in 2002. Oilseeds are at just over 120 for 2007. But the fertilizer started at 100 and has escalated to 160. So again, that is exactly what has happened.

Never accept the argument that the reason fertilizer is going up.... We're again looking at hundreds of dollars per tonne between last fall and this upcoming spring. Natural gas prices have gone down. We met with the Canadian Fertilizer Institute, and they showed us that natural gas prices have gone down. So it's only market demand that is driving up the price, and whatever can be done about that we would certainly welcome.

Now 90% of fertilizer is demanded by developing countries, mainly China, India, and Brazil, but it is clearly only market demand. Over the last five to ten years, 40% of the U.S. fertilizer companies closed down because they claimed that they weren't making enough money. It is only market demand we are up against.

If I may add one other thing--

[The Chair, Conservative, James Bezan]

Quickly.

[Bob Friesen]

What adds insult to injury is if the price discrepancies that we've seen in the analysis that was commissioned by KAP are correct, it means that our natural resources are subsidizing U.S. farmers.

[The Chair, Conservative, James Bezan]

Mr. Caleval.

[Glenn Caleval]

Because the phrase is being used multiple times with its own self-contradiction, the phrase being that the price of fertilizer is a function of demand, I want to quickly comment that the facts belie this. For example, at least from the Canadian situation, in terms of the idea that it's being sold for less in the United States than in Canada, there's no more or less demand around the world and in the United States than there is in Canada.

Secondly, farmers in North America can directly speak to how there's something wrong with that statement, because we, as members know, commissioned a ship from Russia, filled it with fertilizer, did all the international negotiations and sourcing and all that, brought that ship across the ocean, put it into the port of Churchill, unloaded it, and delivered it to farmers' sidings for less money than what they're paying here in Canada.

Obviously, if we can incur all of those costs and still deliver to farmers for less money than what's available, something other than demand is at play.

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

I have a question to Richard before we leave my point of questioning. You mentioned incentives for the producers. I think after hearing this debate and argument, surely you would have changed your mind in terms of whether we should give incentives to the producers of the potash industry to create more mining. I think they have enough money to do it. I don't think they need incentives.

We did that for the packing house industry too, at the same time they were making 400%.

[The Chair, Conservative, James Bezan]

Mr. Steckle's time has expired, so we would appreciate a very quick response.

[Richard Phillips]

What we don't know is are there other barriers out there? Why have there been no new entrants into the mining industry? Are there barriers out there that can be dealt with to get more competition? Because competition is what brings down the price. And I think FNA would fully agree with us on that one, Paul.

[The Chair, Conservative, James Bezan]

On a point of order, Mr. Storseth.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you.

I address this to my honourable colleague, and I didn't want to interrupt his questioning. You mentioned the Potash Corporation of Saskatchewan, is that correct? Is that a corporation of the Saskatchewan government? It's controlled by the Government of Saskatchewan?