Agriculture Committee on Dec. 3rd, 2007

[The Chair, Conservative, James Bezan]

We'll get the meeting under way and welcome all our witnesses to the table as we continue our study on the Growing Forward agricultural policy framework.

We welcome to the table this afternoon David Marit, from the Saskatchewan Association of Rural Municipalities; from the Dairy Producers of Canada, no stranger here, Jacques Laforge; from the Chicken Farmers of Canada, David Fuller; from the Canadian Egg Marketing Agency, Harold Froese; from the Canadian Hatching Egg Producers, we have Errol Halkai. Welcome. From the Canadian Co-operative Association we are joined by Carol Hunter and Lynne Markell.

I welcome all of you to the table.

I understand from the supply management groups that Jacques and Harold will be making the opening comments.

I ask that everybody keep their comments under or as close as possible to ten minutes so we can get in as much questioning as possible.

Mr. Marit, would you go first?

[David Marit, President, Saskatchewan Association of Rural Municipalities]

Thank you, Mr. Chair.

My name is David Marit. I'm president of the Saskatchewan Association of Rural Municipalities.

First of all, I would like to thank the Standing Committee on Agriculture and Agri-food for inviting us here to present our views. I also commend the committee for studying this very important issue.

I'll give you a little history about myself: I'm a grain farmer from the south central part of Saskatchewan, and we have a mixed grain operation.

I'm pleased to have the opportunity to make this presentation on behalf of SARM. SARM represents all 296 rural municipalities in Saskatchewan and acts as the common voice of rural Saskatchewan. In addition, we are mandated by our act of incorporation to act on behalf of Saskatchewan's agricultural producers.

Current agriculture business risk management programs, especially the Canadian agricultural income stabilization program, are ineffective, complex, and costly. There's an overdue demand for a disaster framework to compensate producers who are negatively affected by circumstances beyond their control, such as drought or flood, and we're glad to see this being addressed. We are encouraged by the federal and provincial governments' commitment to addressing these issues and to developing a new and renewed set of programs under APF 2.

Announcements in March of funding to address increases in the cost of production were welcome news, but we must address this in the long term. BRM programs should be simple to administer, both for the producer and the government, to ensure the timeliness of payments. Current complexities on both ends result in frustration, confusion, continual delays in payment distribution, and excessive costs. Income stabilization programs need to be effective, timely, and bankable. In addition, production costs for the primary producer must be taken into account for all BRM programs. We agree with the statement in the standing committee's report that the primary producer should be the focus of BRM policies.

The current CAlS program is not bankable, which makes it difficult for producers to make annual plans or to attain financing, as lenders and institutions cannot define what financial coverage producers will receive.

There is an extreme delay in payments, as the process is unnecessarily complicated and time-consuming to administer. Producers are currently still receiving payments from 2005, and some are still appealing 2003 and 2004. This is unacceptable, as producers have financial obligations, and as CAlS payments take longer, interest on farm costs increases.

In addition, the program is costly for producers, who often need accountants or lawyers to apply. It is also costly for the government, as administration requires a large staff who spend a significant amount of time processing applications. I recognize that the government has taken steps to do address this; I encourage them to work to further simplify the process.

The current program contains several complex details and problems, such as defining what claims are eligible. One example of this is the inability to claim feed grains used on cattle ranches and dairy farms. While this creates inequity in the industry, it can lead to time delays, underpayments, and overpayments, all of which have a significant impact on producers' financial capabilities.

There is currently a crisis in the livestock sector, as l'm sure most of you know today. The current CAlS program does not help livestock producers, as the cost of feed has gone up, as has the value of the Canadian dollar, driving the prices of cattle and hogs down and making it very difficult for producers to turn a profit. The problem is that with consecutive negative returns, producers' reference margins are decreasing or have disappeared; meanwhile, the cost to raise an animal has drastically increased. As AgriStability is still a margin-based program based on an Olympic average, in periods of very low prices for agriculture commodities farm reference margins have been consistently reduced. It is becoming increasingly difficult for farmers facing such circumstances to trigger a payment because of the depressed margins that are their reality.

Producers are often victims of the increased cost of doing business, yet the program works against them. The entire suite of BRM programs has to address this situation in the long term, but I would add on a related note that this matter requires urgent attention in the short term in the livestock sector.

The new AgriInvest program for producer savings accounts will help restore some predictability into the BRM framework. It is difficult to comment on this topic because there are few details available. We have heard that producers will be able to contribute 1.5% of their allowable net sales to the account, to a maximum of $22,500 per year, with a total cap of $1.5 million.

Until we know what the potential details are, it is difficult to comment on these numbers. However, we believe there should be no trigger necessary for a producer to access these funds. Producers should be responsible enough to access the money when they need it. Our main concern with this program is that it will be merely a cost-savings measure to the government, with the producers picking up the remainder of the cost for the first 15%, which is what CAlS was previously paying out.

We recognize that the CAlS program, now AgriStability, will still be in effect, but the AgriInvest program will be much more utilized, as it covers the first 15% of losses. Therefore, it is very important that this program be established properly to benefit producers.

The Saskatchewan Crop Insurance Corporation insures producers in Saskatchewan under a federal cost-sharing formula. While overall premiums decreased and coverage increased for 2007, the program remains inferior to both Manitoba and Alberta programs.

We realize this is provincial jurisdiction, and while different provinces have different circumstances and issues, all Canadian producers should be on a level playing field. A shift in cost-sharing arrangements or increased federal funding into provincial programs could help address these gaps and increase fairness for all Canadian producers.

An efficient production insurance that covers the cost of production--in other words, more than 80% coverage, as is currently the maximum--would reduce the demands on other programs. The idea of extension of production insurance to livestock and improved programs for forage would benefit some producers; however, the program must be viable, economical, and effective. Such a program, as well as any other new programs, should be tested and proven, as well as be supported by the industry, before they are universally implemented.

SARM is concerned that livestock programs will be phased in over time and eventually replace farmer compensation with insurance programs, which would essentially be governments offloading the burden. This would result in a significant added cost to producers, who would pay premiums to insure against disease outbreaks, which are rare and unpredictable.

Lastly, if there were a sufficient crop insurance program to cover losses and cost of production in poor years, there would be no need for these other programs.

On AgriRecovery, we have several concerns. First, however, we are pleased the government has recognized that a long-term disaster program is essential in the new framework, but we have concerns on what is defined as a disaster. “Disaster” in the current framework is defined as “a circumstance that is not covered by existing programs”.

In Saskatchewan, the biggest issues this year have been drought in the southwest, flooding in the northeast, and, more recently, cattle prices, as mentioned earlier. It can be argued that all three of these can be covered by existing programs, such as crop insurance and CAIS. The problem is that these existing programs do not sufficiently cover these disasters. CAIS payments are delayed, in the case of consecutive loss years, and a dwindling reference margin means no assistance for that producer. These disasters are unpredictable and out of their individual control, no matter what management measures they may take, and there needs to be a program in place to help compensate for these losses.

In addition, we are concerned with how this program will assess disasters as regional and national. How will the lines be drawn to distinguish where a disaster begins and where it ends? And we need to be certain about which disasters are a federal responsibility and which are to be cost-shared.

We realize there is much to work out, specifically in AgriRecovery, but any program that doesn't address our current disaster situations is a failure. Governments need to recognize the broad range of disasters, and fund the program accordingly.

SARM is committed to working with provincial and federal governments on developing these programs, and we feel it is vital to have producer participation and approval.

SARM is pleased that the standing committee recommended that the government establish a national advisory committee, and we would ask that SARM be invited to sit on the committee.

I would like to close by saying that we are getting more and more calls from our members on this new suite of programs, and we still have few answers. While I stress the need to make sure the programs are going to work and are going to serve producers, there is a need to move forward into the details. I would suggest that the next consultation have some proposed details available, such as if there will be any change in the Olympic average that calculates the reference margin in CAIS, and, in addition, what the contribution levels and triggers for payment will be in the AgriInvest program.

Thank you very much.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Marit. Your time was good.

With that, I'll turn it over to Mr. Laforge and Mr. Froese.

[Jacques Laforge, President, Dairy Producers of Canada]

Thank you, Mr. Chairman.

I'll make part of the presentation in French and Harold will conclude with the second part.

On behalf of dairy, poultry and egg farmers, I thank you for the invitation to appear before the committee on Growing Forward. There has been considerable progress on the development of agricultural policy since we met with this committee during your study on the agricultural policy framework last spring.

Since then, this committee released its report, the government has responded, federal, provincial and territorial ministers have signed an agreement in principle, Growing Forward, and met again in November to move this agreement forward even more.

Dairy, poultry and egg farmers were pleased with the committee's 20^th recommendation in their report last June that supply management and its three pillars be recognized as a business risk management program. We worked very hard for this, and we were heard by government. We greatly appreciate it.

It is important and gratifying to farmers who attend committee meetings taking place outside of Ottawa to see that they do have a direct impact on public policy. We thank you and believe that your recommendation helped in securing this important acknowledgement in Growing Forward, which states:

Supply management is a business risk management program for the supply managed elements of agriculture that are governed by their own federal, provincial and territorial agreements—the national marketing plans.

We greatly appreciate that.

We congratulate the federal government on recognizing the recommendation of the Standing Committee on Agriculture and Agri-Food that supply management, together with its three pillars, is inherently a business risk management program. This recognition needs to be included in each implementation agreement that will be signed by the federal minister with his provincial counterparts. We trust that our members can continue to rely on all members of Parliament to ensure that this happens.

A related recommendation on supply management is No. 21, which calls on the government to provide the necessary legislative support for farmer-run, orderly marketing agencies to continue to work effectively on farmers' behalf in the area of business risk management. This recommendation also calls on the government to negotiate at the WTO to ensure that supply management is maintained. Our business risk management program relies on three interdependent pillars: import controls, producer pricing and production discipline.

This is why domestic policy development cannot be done in isolation of trade negotiations; Canada needs to stand up for supply management at the WTO and ensure that any agreement does not compromise any of the three pillars.

[Harold Froese, Director, Canadian Egg Marketing Agency]

Thanks, Jacques.

Disaster coverage is a concern for our sectors. The November 17 announcement of the suite of BRM programming falls short in this area, as a disaster component now known as AgriRecovery will only offer compensation to a collective and not to individual farmers. In many cases of animal disease, collective disasters are avoided through the prompt response of individual farmers, yet for the individual farmer, this is still a disaster.

Our sectors need clarification, as we have been told that we are entirely excluded from AgriInvest, while we are also being told that we may be able to seek 100% coverage through AgriInvest in the case of a disaster. It's our understanding that under CAIS, dairy, poultry, and egg farmers were eligible for all three tiers of the program if they suffered a disaster that dropped their reference margin by more than 30%. Now, even if they suffer a disaster and have a drop in margin of more than 30%, they're excluded from the top 15% of AgriInvest coverage. This would mean that whereas our farmers had the ability to cover 100% of their net income, the best they can now hope for under the new programming is 85%. Department officials must clarify whether supply management farmers will be able to maintain 100% coverage in the case of a disastrous margin drop of more than 30%, and if not, why not.

Further to the suite of BRM programs, we'll use an example in the poultry sector to illustrate our point. Poultry farmers do not receive sufficient compensation through the Health of Animals Act regulations in the event that their flocks are ordered destroyed due to animal disease. The new maximums are insufficient for some of our commodities. This fact was acknowledged by the federal government in the regulatory impact analysis statement that accompanied the amendments. In the past, the industry was told that a phase two compensation program was forthcoming and that the gaps in coverage would be addressed. Phase two, however, continues to elude us. We have recently....

[Technical difficulties—Editor]

[The Chair, Conservative, James Bezan]

Okay, we're back. Can everybody get back to the table? I think we got it going.

Mr. Froese, you have just under four minutes left.

[Harold Froese]

Thank you. I'm not exactly sure where it was lost, but I'll begin at the second paragraph on that page.

Further to the suite of BRM programs, we'll use an example in the poultry sector to illustrate our point. Poultry farmers do not receive sufficient compensation through the Health of Animals Act regulations in the event that their flocks are ordered destroyed due to animal disease. The new maximums are insufficient for some of our commodities. This fact was acknowledged by the federal government in the regulatory impact analysis statement that accompanied the amendments. In the past, the industry was told that a phase two compensation program was forthcoming and that the gaps in coverage would be addressed. Phase two, however, continues to elude us. We have recently been told that the only compensation that will be available to farmers is what currently exists through the BRM suite and the Health of Animals Act, despite the government's own acknowledgement of the current gap in coverage.

In addition to disease outbreaks, cleaning and disinfecting a barn that has housed disease is critical in preventing further spread of the disease. It's also a prerequisite for renewing Canada's disease-free status for trade purposes. Both are for the public good and the industry's benefit. However, current regulations place the responsibility for cleaning and disinfection entirely on the affected farmer. Keep in mind that this is after the farmer has lost his or her livestock and any potential income from that livestock because of disease. This cannot be the basis of a strong disease eradication policy.

It's urgent that the federal government address the shortcomings on matters such as cleaning and disinfecting. A matter as important as this to the Canadian public should not have to be shouldered by an individual farmer or farmers, and this is only one example. Farmers are also being asked to fund other farm programs, such as on-farm food safety, bio-security, and traceability, all of which provide public good and industry benefit. These concerns are not specific to poultry, dairy, and eggs, but exist across all of agriculture.

Finding solutions is even more critical when we look at the breadth of issues confronting Canadian farmers. A farmed animal health pillar is also required. Many of these issues are touched on in the statement of principles for the development of a national farm animal health strategy, to which all of our organizations were signatories. We appreciate the committee's support for the farmed animal organizations' request that the development of such a strategy be part of the new policy framework. We acknowledge your priority for this, Mr. Chairman, by highlighting it in your June media release.

While the government's response to the committee acknowledged the importance of a national animal health strategy with regard to achieving the policy outcomes of Growing Forward, we're disappointed that it was not recognized as a necessary pillar of the next generation of agriculture and agrifood policy. We will continue to encourage the government to recognize the breadth of sectors that came together on their own to reach a consensus agreement on the principles for a national farmed animal health strategy.

These programs are being implemented on farms, and that is why we have no problem, as members of CFA, in supporting the federation's “Grown in Canada” proposal—which is also referenced in the committee's recommendation 9—regarding labelling and the “Product of Canada” designation. The “Grown in Canada” label will allow Canadian farmers to benefit from the significant investments they have made in these on-farm programs. Related to this, we think the government needs to improve its enforcement on truth-in-labelling legislation and regulations.

Dairy, poultry, and egg farmers are pleased to have been part of the process in developing Canada's current ag policy. Although we still have much to achieve and clarify on gaps in coverage for disaster programming and the development of a comprehensive government policy on a farmed animal health strategy, significant progress has been made in the acknowledgement of supply management as a business risk management program.

We look forward to continuing our work with the government on the development of agriculture policy, and would like to thank the committee for hearing our concerns.

[The Chair, Conservative, James Bezan]

Thank you.

Madam Hunter.

[Carol Hunter, Executive Director, Canadian Co-operative Association]

Good afternoon. I'm Carol Hunter, the executive director of the Canadian Co-operative Association. I'm pleased to be joined by Lynne Markell, who is our government affairs and public policy adviser and who specializes in agricultural policy.

The Canadian Co-operative Association is a national association for cooperatives. We represent more than seven million cooperative and credit union members from over 2,000 organizations. Our members operate in many sectors of the economy, and our members include such cooperatives as Federated Cooperatives Limited; United Farmers of Alberta; Co-op Atlantic; GROWMARK; and three dairy cooperatives: Gay Lea Foods, Scotsburn, and Northumberland Dairy co-op. We work closely with our francophone sister umbrella organization, le Conseil Canadien de la Coopération.

The five-year plan for how Canada's governments and others will work together to ensure a healthy and sustainable agriculture industry is one of the most important pieces of public policy being developed today. The new APF and the supportive programming will impact farmers, rural communities, rural businesses, industries that use agricultural products, and consumers of food. It will also affect Canadian cooperatives and their members. These include all types of agricultural co-ops, credit unions serving rural communities, co-op retail stores distributing food and agricultural supplies, rural energy co-ops, and emerging biofuel co-ops.

During the consultations on the APF, we suggested three pillars for the new APF: public goods and services, strategic growth, and primary producer support. The reason we suggested a primary producer support pillar was to focus serious attention on solutions to the profitability issue for ordinary farmers. Governments need to address the imbalance between farmers and large agri-businesses, as well as between primary producers and other links in the production chain. If both federal and provincial governments concentrate on the producer portion of the industry for the next five years, there is a better chance that the whole agricultural industry can be strengthened.

Canada cannot afford to lose small and medium-sized producers, which sustain rural communities. If we only have larger corporate farms whose profits leave the community, we are in trouble. If we keep losing more agricultural land to urbanization and housing, we are also in trouble. When the world's oil supply peaks and the cost of transporting food from around the globe becomes expensive, we will be in trouble if there are not enough Canadian farmers to grow our domestic food supply.

Governments need to help existing farmers, encourage new farmers to replace retiring ones, and make the primary production side of the agricultural industry stable and viable. In our brief, we recommended seven measures that should be part of the next APF. The first one is development of support and financial investments to enable farmers to move up the value chain and collectively own value-added and processing businesses. The second is adequate resources to assist farmers in developing cooperatives. Thirdly, strengthen mechanisms that give producers bargaining power in the marketplace. Fourthly, support the move into non-food agriculture, such as biofuels, renewable energy, health products, and fibre-based products. Fifthly, share the information from scientific research with groups that work with farmers, so that the information can be used for enterprise development. Sixthly, provide support to help local communities, both rural and urban, organize local food systems to distribute locally grown and processed food. Lastly, we need a federal policy on domestic food sustainability that ensures we meet more of our domestic food needs from Canadian sources.

In terms of the new APF document Growing Forward, agreed to by the ministers of agriculture in June, we were very pleased to see cooperatives mentioned as one of the approaches that could be used to enable the sector to be more competitive and innovative. While there is a phrase in the principles section of Growing Forward about helping producers improve profitability, there is no emphasis on this in the rest of the document. We have noted that the new APF has been broadened to include the agri-based products industry. One note of caution and concern is whether scarce government funding will be used for this at the expense of support for primary producers. We also think that producers who will be producing the raw materials for the bio-products industry need to be involved in the development and ownership of this new industry.

Moving to your committee's report, we see that you have championed the needs of primary producers and have called for more emphasis on farmers and on primary production. We particularly support your recommendations on a national food supply policy, “buy local” or “buy domestic” campaigns, better labelling, compensation for environmental stewardship, supply management, marketing agencies, and improved sharing of publicly funded research with the producers. What we have not seen is any discussion of farmer ownership.

If farmers are to increase their incomes and profitability, they must be more involved in other parts of the value chain. They need to have collective ownership of input supplies, marketing, value-added processing, and even retailing to consumers. Without this involvement, they will always be dependent on others who sell to them or buy from them.

Because ownership matters, thousands of farmers have successfully used the collective enterprise model of cooperatives. There are over 1,200 co-ops in Canada—these are agricultural co-ops—and new ones are starting all the time. In 2004, agricultural co-ops had annual revenues of $14.3 billion, and they returned more than $220 million in patronage dividends to their members. I would like to finish with what is needed to support producer ownership through cooperatives.

Both the Canadian Federation of Agriculture and the National Farmers Union support cooperatives and have called for resources to help producers learn about, plan, and start agricultural co-ops. Groups wanting to form new agricultural co-ops need three basic things: information, specialized advisory services, and financing. Currently, the federal government is involved in a modest way in supporting new co-op development, as are some provinces. Both CCA and the Conseil canadien de la coopération appreciate the recent funding from Agriculture Canada for the agricultural co-op development initiative. Ag-CDI helps groups of producers start new value-added agricultural and biofuel co-ops. I have brought along some material from this program, and it will be available from the clerk. This profile of 25 co-op groups that we helped shows the breadth of ideas and initiatives amongst farmers.

The broader and generic co-op development initiative, which started five years ago as a partnership between the federal Co-operatives Secretariat and the co-op sector, is up for renewal. CCA and CCC have submitted a proposal to expand and improve this program, which provides co-op advisory services across the country and helps with grants for innovation and research.

Demand for the advisory services has outstripped the inadequate resources of the provincial and regional co-op associations that provide these services on the ground. A budget of $1 million per year to pay for co-op advisory services in two official languages means that many co-op groups are not getting the help they need to get started. That is why we have proposed a reasonable expansion to $4 million a year for advisory services and $2 million a year for a grant program for emerging cooperatives. Our overall request is for $30 million over five years.

With ownership comes the need to capitalize the business. In today's economy, starting any new co-op costs money, but constructing and starting a new processing plant or biofuels refinery involves millions of dollars. The lack of capital is holding back co-op development. Groups get together and develop a viable business plan, but then find they can't get the financing to start. New co-ops have a hard time because a new co-op does not have a track record in business, their members do not have the money to contribute the large amounts of equity required by lenders—often 50%—and lenders do not understand the cooperative structure. The solutions to this are a range of capital and tax incentive measures, such as a cooperative investment plan; loan guarantees; equity matching grants; improved government lending programs, such as FIMCLA; and specialized co-op lending programs managed by the co-op sector.

CCA and CCC have proposed that the federal government seed a $70 million co-op development fund over the next five years. This fund would provide patient capital through long-term, low-interest loans to new and expanding co-ops, including agricultural co-ops. You have already heard from the CFA about the need for a federal co-op investment plan that would grant tax credits for individuals investing in their agricultural co-ops. We have been proposing this for several years. The time has now come to put this in the next budget.

The co-op investment plan already exists in Quebec and has proven its worth in that province by leveraging some $393 million in new investment from 1997 to 2006. It was supported by Mr. Harper in 2005 and was endorsed by the finance committee last year. This kind of hand-up assistance is preferred by farmers, instead of government payments when they are unable to earn enough from the marketplace.

In closing, we would like to reiterate the need for an APF that recognizes the importance of farmer ownership, provides for specialized co-op development services, and addresses the capital needs of farmers through a co-op investment plan.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you.

I do apologize for the technical difficulties that we experienced. We lost about 20 to 25 minutes there, so we'll extend as need be. We are going to continue on with seven-minute rounds, though, and we'll start off with Mr. Hubbard.

[Charles Hubbard, Liberal, Miramichi, NB]

My thanks to all the presenters.

One thing that goes through my mind when I look at this list and when we hear from the cooperative groups is how many people are involved in these various associations.

Maybe I'll start with you, Jacques. In terms of dairy producers in Canada, what figure do we have? Maybe with that, how does it compare to ten years ago? Could you give us a rough number?

[Jacques Laforge]

Is that involving cooperatives?

[Charles Hubbard, Liberal, Miramichi, NB]

No, that's in terms of your producers, in terms of dairy people who are producing.

[Jacques Laforge]

Right now, we're at about 14,500 or 14,600 farms. Don't quote me precisely, but I would say we were probably around 18,000 or 19,000 ten years ago.

[Charles Hubbard, Liberal, Miramichi, NB]

For the chicken farmers, what have we seen happening there?

[David Fuller, Chair, Chicken Farmers of Canada]

We've actually seen our numbers increase slightly over the years.

[Charles Hubbard, Liberal, Miramichi, NB]

What would your numbers be today?

[David Fuller]

They would be just over 2,800.

[Charles Hubbard, Liberal, Miramichi, NB]

How many are there in the Turkey Marketing Agency?

[Mark Davies, Chair, Canadian Turkey Marketing Agency]

We're a very small industry. We've seen a slight increase. It's right around the 550 to 560 mark. It has been very steady.

[Charles Hubbard, Liberal, Miramichi, NB]

And with egg marketing?

[Harold Froese]

In eggs, we're in the 1,100 to 1,200 range across Canada, and it has stabilized. We have seen it decline in the past, but now it's stabilizing.

[Charles Hubbard, Liberal, Miramichi, NB]

Really, in terms of what the cooperative groups are saying if we look at the future, we're getting into even smaller numbers if we look at what's happened in the last five to ten years.

The cooperative presentations talk about getting more value for product. Certainly they have given illustrations whereby various cooperatives have provided more income to some of our farm groups and individual farmers, yet the dollars that you talk about for promoting and encouraging and developing seem to be a pittance. I sat on the finance committee before, and we've had groups come before us asking for....

What was it you asked for again in terms of an annual...?

[Carol Hunter]

It was a patient capital fund of $70 million, but that would not just be for agricultural cooperatives. That would be under a generic co-op development initiative.

[Charles Hubbard, Liberal, Miramichi, NB]

But that was not over one year, that was over—