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.