Thank you, Mr. Chairman.
I'm honoured to be appearing in front of the standing committee. SARM President Marit sends his regrets due to other commitments.
The Saskatchewan Association of Rural Municipalities is an umbrella association for all of Saskatchewan's 296 rural municipalities. All the agricultural land in Saskatchewan lies within these boundaries.
Some particular issues that SARM would like to highlight in this presentation regarding high input costs include: the difference in fertilizer prices between the United States and Canada; the value of programs such as the own-use import program; and the value we see in trying to harmonize the Canadian regulations that govern these products with countries like the United States to achieve a more level playing field for our producers in the North American context.
My name is Ray Orb. I am a director with SARM and the reeve of the Rural Municipality of Cupar, which is about 80 miles northeast of Regina. My wife and I operate a grain farm and a cow-calf operation, and have done so for 29 years.
During all the years my wife and I have been farming, we have never seen such buoyant grain prices. Many of the commodities, such as flax, canola, rye, and field peas, have recently set records in old crop prices. Because of low-crop carryover and low stocks-to-use ratios, many analysts are forecasting higher prices for new crops as well.
As the standing committee knows, there is a crisis in the livestock industry. Although the hog industry is in a different situation, we think the cattle industry will survive because many of our operators are more diversified in the grain industry and have become used to livestock profitability being more cyclical in nature.
Over the years, many of my colleagues have publicly stated that if farmers are required to sell their commodities at world prices, they must have the right to purchase their inputs at world prices as well.
The rapid increase in fertilizer prices has not gone unnoticed by SARM either. The Agriculture and Agri-Food Canada bi-weekly bulletin from March 2007 estimates that the average price paid for fertilizer in Canada increased by 3.9% due to increased demand and decreased supply. They also indicated that increased fuel and energy prices would add to the cost of fertilizer. This 3.9% increase in fertilizer prices equals about $99 million. They estimate that every one cent per kilogram increase in price adds about $61 million to Canadian farmers' annual fertilizer bill.
As an example, the price for nitrogen fertilizer in my area since December 2007 has increased from $595 a tonne to $605 a tonne--an increase of 2%. However, phosphate fertilizer, which is one of our basic building blocks in growing a good crop, has increased even more rapidly, from $615 a tonne in December to $839 a tonne as of March. This is an increase of 36% in the same time period.
Keystone Agricultural Producers from Manitoba conducted a study from April 15 to May 15, 2007, and compared fertilizer prices at various locations in both Manitoba and North Dakota. The results indicated that average fertilizer prices were 33% higher in Manitoba versus those in North Dakota.
As a specific example, the price of anhydrous ammonia was 63% higher, and liquid phosphate prices were 41% higher in Manitoba than in North Dakota. Their study also discovered that a large amount of the fertilizer being sold in the U.S. is coming from a Canadian source. That begs the question as to why fertilizer companies can use Canadian natural resources to produce fertilizer and sell it at a lower cost to American farmers than to Canadian farmers.
David Rolfe, then Keystone's president, was quoted as saying:
This is essentially providing a subsidy to American farmers at Canadian farmers' expense, and governments have full responsibility to investigate and correct this situation on behalf of our producers.
SARM agrees with this statement and encourages the federal government to investigate this serious discrepancy on behalf of Canadian farmers.
Farm pesticide prices are also on the rise, and a large price differential exists between similar chemicals sold in Canada versus the United States.
SARM believes the federal government was providing a price management tool for producers that would allow them to import lower-priced U.S. chemicals through the own-use import program. In 2005 the OUI program allowed producers to obtain 3,146 permits to import 5.75 million litres of ClearOut 41 Plus, which is a generic glyphosate.
In July 2007 the OUI program was replaced with a grower request own-use program. At that time it was our understanding that the GROU program was going to simplify both the permit process and a process for establishing program eligibility, and that a larger number of products would be made available for import. This sounded great on the surface; however, we still raised concerns through letters and meetings with Minister Ritz and the Pesticide Management Regulatory Agency that under the new program products needed to be identical, not equivalent in formulation, to qualify. We feared this would exclude many products.
Since the introduction of GROU, we have heard concerns from our members that the program isn't working as it was intended. The list of products eligible for import under the program has dwindled from eight products to now only five. Also, the GROU program requires that all empty containers from imported products be recycled, and manufacturers have established large recycling fees for these containers. In some cases, this has made the end cost of imported products more expensive than their Canadian equivalents, resulting in no benefit to producers from importing.
Because the program has been proven ineffective in its first season of operation, SARM requests that the federal government and the PMRA extend the OUI program until the GROU program can be proven effective.
In a time where the total net income for Canadian farmers has declined substantially over the past 30 years and input costs continue to escalate, programs allowing producers to access lower-priced U.S. chemicals are very much welcome, because Canadian agricultural commodities must compete in a global market and farmers need competitively priced inputs to compete. That is why the savings that have resulted from the OUI program have been so significant for a number of producers.
Saskatchewan farmers and farmers across Canada are at risk of losing millions of dollars if the OUI program is not maintained. We have made a formal request to Minister of Agriculture and Agri-Food Ritz and the Pesticide Management Regulatory Agency that the OUI program be maintained and that farmers be made aware that this program is available to them.
To ensure that our producers maintain a competitive advantage in the world market, we believe that regulations governing farm inputs such as pesticides, fertilizers, and fuel should be harmonized within North America wherever possible. This would allow competitively priced inputs to flow more readily across the borders within North America, and this would in turn ensure that our producers had access to the most competitive prices for their inputs and would lower input costs.
In conclusion, SARM recognizes that the evidence of higher prices for both fertilizer and farm chemicals indicates two anomalies that require further investigation.
First, KAP's study was conducted in 2007, when our Canadian dollar was at 80¢, and they noted a 33% average discrepancy in the price of fertilizer between Manitoba and North Dakota. Now that our dollar has improved, you would think these price discrepancies would have remedied themselves. We are not seeing evidence of that.
Second, since the majority of the fertilizer, especially nitrogen, is produced right in Canada, most of it in Saskatchewan, you would think that Canadian producers would recognize a lower price, but instead, in some cases U.S. producers are paying less.
As stated in the KAP study, PriceWaterhouseCoopers noted some reluctance on the part of dealers to discuss possible factors that may be contributing to price disparities, and SARM has met with the same opposition when attempting to study such disparities. Therefore, SARM would request the following of this committee.
First, SARM would ask the committee to encourage the federal government to study the reasons why these disparities exist between input prices in the United States and Canada to determine whether or not customers, namely farmers, are being placed at a competitive disadvantage because of unfair price-fixing or other factors.
Two, SARM would ask this committee to encourage the federal government to reinstate the OUI program until the GROU program can be proven an effective replacement.