Agriculture Committee on March 11th, 2008

[The Chair, Conservative, James Bezan]

You mentioned you were releasing a study from the George Morris Centre. Would we be able to get an advance copy for the committee? We plan on having our report wrapped up in the next few weeks as well.

[Clyde Graham]

If you just state when you would like to have it, we'll get it to you by that date.

[The Chair, Conservative, James Bezan]

We'd like to have it after we come back from the Easter break, if that's possible.

[Clyde Graham]

Absolutely.

[The Chair, Conservative, James Bezan]

Thank you. We really appreciate it.

Mr. Miller.

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

I will share my time with Mr. Storseth.

Mr. Graham, you spoke just a minute ago about farmers being uninformed consumers, and I think most farmers would take offence to that. For the most part, particularly in the last 10 to 20 years, they've had to be informed. There's always room for improvement, and I'll take that note, but I think overall they're very informed.

Mr. Haney, back to your comments about supplying a quality product for safe food production, that's all admirable when you talk about a reasonable price. Well, that's the only part the industry has forgotten about. You talked earlier about your prices, how they dropped between 1985 and 2000, but in 2002 to 2005 we probably had some of the worst prices we've ever seen in grain and oilseeds, and the price of fertilizer was going up. So I don't think the level of support to the industry that they feed off is there when it should be. Now all of a sudden when the grain and oilseed guys hit pay dirt, there's extra gouging going on there. Whether you want to buy into it or not, it's there.

Back in the BSE crisis, I went off to the banks, because some of them were saying, “Oh, all of a sudden we've got good times and we want to kick the guy when he's down”. To the banks' credit, after getting raked over the coals by more than just me, they actually backed off, and for the most part I give the banks credit for sticking with the farmers. I think your industry could learn something from that. I honestly believe that, and when somebody is down.... It isn't just the grains and oilseeds producers who use fertilizer. The livestock industry is heavy on it as well, and they're in the worst crisis they've had. BSE was nothing compared to what the livestock crisis is.

So you have to support the industry, and you have to be prepared to take some of the lumps along with them, and I'd just like to say that.

I'm going to turn it over to Mr. Storseth.

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

Thank you very much, Mr. Chair.

In the short time I have left, we might as well be as frank as we can be. On the security regulations, I agree with you, this is borderline silly. It should be about safety and not security.

The four recommendations I see before us are basically these. We need to educate farmers better. As Mr. Miller says, I take offence to that. Allow them to buy throughout the year. That's basically two and three. Number four is essentially to give agri-retailers more money.

Mr. MacKay, you've said that some of the cost of the security regulation is already being passed down to farmers. If you were to get the money you're asking for, how much savings would this produce for our producers?

[David MacKay]

That's a difficult question without analysis.

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

I'll just ask one last question, and then I'll let you answer it. Otherwise, I'll get cut off.

We said that in 2007 there were 27% savings if you bought in the fall rather than the spring. Is it not also true that in the last 10 years that has become more of a prevalent thing for farmers to do, that those savings have tightened? So once farmers have the ability to flat-out buy throughout the year, those savings are going to continue to decrease, and the industry is going to continue to eliminate those savings and generate its profit throughout the year and maintain a steadier profit line.

I'll let you answer both those questions, and then I'm sure my time will be up.

[David MacKay]

I'll start with the security regulations. All I can tell you is that we have estimated the costs to the industry to be in the neighbourhood of $50 million to $70 million. So there are the dollars, however you wish to apply them to the market. If we were to pass on our costs--and those are just our costs, never mind any up-charge--$70 million would be stressed back into the market for growers.

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

Yes, but I didn't ask how much your costs were; I asked how much of that you're willing to give back to the producers.

[David MacKay]

That should all be passed on to the producers.

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

So if you were given that money, all of it would be passed on.

[David MacKay]

That's correct.Typically, 100% of that should be passed on to the producers.

[Greg Haney]

Mr. Chairman, in answer to Mr. Miller's comments, I did not mention anything about prices going down in the 1980s. My only reference was to the fact that our group did, but I was on the receiving end too when corn prices were at $100 a tonne--I go by metric tonne--and my input costs were going up.

When I came out of university, it was always the opposite. When the price of corn or wheat was going up, your fertilizer tended to do the same. That was just due to demand. Farmers have the ability to pay for the product when they're making money. That's my comment on that.

The other question was basically on how the prices are with the 27% increase. You will see less of a difference between early purchases and the spring. I say that now, but I don't have a crystal ball, because if we experience the same increase in demand for fertilizer and increase in prices on costs, we could see the same thing happen again, coming up, let's say, in the fall of--

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

That has been the historical pattern.

[Greg Haney]

It has that historical pattern. The difference between, let's say, a fall purchase and a spring purchase is minimal--minimal in a sense, but you've still got at least 5%. We've always given the farmer the benefit of the doubt. We've taken his cash, we've paid for it, and we've given him an interest return on it.

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

I have one last comment. If indeed these--

[The Chair, Conservative, James Bezan]

Mr. Storseth, your time has expired. I have to cut you off there, just to be fair to all members on the committee. You were right, I do cut you off.

Monsieur Bellavance is next.

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

Thank you.

Mr. MacKay, earlier you startled me twice. In response to a question from Ms. Skelton, you said that your industry wasn't responsible for public safety. I take issue with that comment. There is a concept called social responsibility. So it's shared. Everyone, including you, must be concerned about public safety, particularly since we're talking about products that can... Earlier we had some examples of people who could even use fertilizer and products with bad intentions and improperly.

I don't know whether you want to explain that to us a little more, but you have a responsibility.

[David MacKay]

Mr. Bellavance, I do agree with you, without question.

My comment was that we are not in the business of public safety per se. We have a shared responsibility in complying with the regulations because we helped write them, so we're aware of some of the most common sense ways to protect the public. We impart those recommendations to government, hopefully we agree on a way to proceed, and then away we go. Unfortunately, the cost of those recommendations can be prohibitive.

Under no circumstances are we shirking our responsibility in terms of compliance with public safety, but I'd like to say that I think the government has a responsibility for public safety as well. Here's a situation in which the industry will bear 100% of the cost of those security upgrades, while 0% will come from government, other than maybe a few tax rebates. That, to me, is imbalanced. The government should share in the cost of security for the public; they clearly are not.

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

We agree on that, and I think you've clarified the situation. Sometimes one remembers only a fragment of a sentence.

It does indeed go without saying that the government will be responsible for helping the industry when it imposes and raises its standards, particularly since everybody needs them these days and the federal government isn't short of surpluses. We've said that on numerous occasions.

Mr. MacKay, in the pile of documents you filed with us, there is—I don't know whether it's a study—a document from the Fertilizer Institute referring to factors contributing to an increase in retail fertilizer prices. One of those factors is the depreciation of the U.S. dollar, and thus the increase in the value of the Canadian dollar. That somewhat contradicts what we heard from the Canadian Federation of Agriculture and the UPA. They also came here and told us that the rise in the value of the Canadian dollar should increase our purchasing power, thus enabling us to pay less for our inputs, including fertilizer.

I would like you to explain to me where that statement comes from and to say a little more on how the depreciation of the U.S. dollar contributes to higher retail fertilizer prices.

[David MacKay]

Because we don't set pricing, I'm going to refer that question to CFI in terms of how price is set for fertilizer.

I can just tell you that at a retail level, if the Canadian dollar is high, you've got purchasing power relative to the American dollar if you're purchasing American product. That's why we're seeing some of the cross-border activity in fertilizer and in pesticides. The OUI and GROU programs are examples of that.

We're also seeing global shopping taking place: growers groups are now scouring the globe for affordable fertilizer, because they have higher buying power in general. That element is potentially enhanced by the purchasing power of the Canadian dollar. Of course purchasing from the U.S. is taking place, and the differential is what we are talking about today, but I'll refer discussion of the actual setting of the price to the industry that manufactures.

[Roger Larson]

Thank you, Dave.

The increase in the Canadian dollar increases Canadians' buying power around the world. Fertilizer is a globally priced commodity. The price is set by the worldwide market. When the Canadian dollar goes up, that increases the leverage of importers, retailers, and farmers combined who are working in Canadian dollars. So they do buy cheaper.

The two graphs we showed you demonstrate that up until 2006, the price index change in the U.S. was 83% and the price index change in Canada was 48%. The Canadian index has gone up less because of the strengthening Canadian dollar. It shows clearly that the Canadian farmer is benefiting from a stronger Canadian dollar in terms of their purchase price on inputs.

In terms of security and our public responsibility, CFI and its affiliates, including CAAR, came out with a program called “On Guard for Canada”--in French, Protégera nos foyers--in 1996, if I remember correctly. It talked about the importance of maintaining security in the supply of fertilizers to farmers: know your customer, report any suspicious activities to the police. We have been working on this, in conjunction with public officials, for a long time. We take our responsibility very seriously.

[The Chair, Conservative, James Bezan]

Thank you. The time has expired.