Agriculture Committee on May 26th, 2009

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

They want to know if a maximum can be set. You tell me that the amount of the registration fees is in proportion to the amount of the approved loan. The Caisses Desjardins want to know if a maximum can be set. Is there a way to do that in the regulations?

[Jody Aylard]

It would be a question we would have to take back to the government to ask whether or not they want to change that policy in terms of how the program is financed. A certain amount of the fees go back into covering the cost of the program. So that would be a question we would have to take back to our minister.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Could I just comment, Chair? It's somewhat pertinent to the questions Mr. Bellavance is asking.

I just wanted to highlight for the committee that before the legislation was prepared, extensive consultations were conducted all across the country to speak to stakeholders. Stakeholders at all different levels participated—people who are going to be involved in doing the lending, people who will be borrowing the money—so all these types of questions, such as, is it possible to raise this, is it possible to change that, all of that was considered, of course, in the preparation of the bill, with and through the wide consultations that were conducted. So I want to highlight that this isn't the first time some of these questions would have come up. They would have come up, they would have been discussed, and decisions would have been made, and we have the proposed legislation in front of us.

[The Chair, Conservative, Larry Miller]

Thank you.

Did you have any further questions, Mr. Bellavance?

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

You can say extensive consultations, but all I know is that the Caisses Desjardins went to one meeting in Longueil. I cannot see anything stopping them from asking questions once they have read the bill. A little earlier, I forgot to mention this, but I made a point of talking about the consultations during my speech on Bill C-29. When I mentioned that the Fédération de la relève agricole du Québec had not even been invited to participate, they received a call from Agriculture and Agri-Food Canada asking if they had any concerns. That is good, except that consultations are done before a bill is tabled, not after.

So, I see no problem with questions being raised once a bill has been committed to paper.

[The Chair, Conservative, Larry Miller]

I just wonder, Mr. Bellavance, if they had an opportunity. I'm not sure how the consultation was done. I throw that out as a question more than anything: would they have had a chance the same as anybody else to consult on the issue? What I'm hearing from you is that your concern is they weren't directly contacted. Maybe no one was. I don't know the answer to that either. I'm just throwing that out for discussion.

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

Those are two different things. The Caisses Desjardins representatives took part in the consultations, but, after the bill had been drafted, they had some questions. Anyway, I have a partial answer. Perhaps I will get other answers eventually.

[Greg Meredith]

I can add a small precision on the loan limits. When you're talking about purchase of land, the loan limit time period is 15 years; for other acquisitions it's 10 years.

In terms of consultation, we did do an extensive series of consultations in 2006, and the Quebec Young Farmers' organization participated in the conference call in preparation for the changes to the bill. We did have a consultation in Quebec and invited the QFA, including all their member organizations, so there was an opportunity to engage them at that point. They didn't attend, but the opportunity was there.

[The Chair, Conservative, Larry Miller]

Any further questions or discussion?

Mr. Atamanenko.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Just one comment and one question.

As is often the case when a bill comes up, we consult with some of the stakeholders. I'd just like to thank you folks for working with the Canadian Co-operative Association. I understand you had a number of telephone conversations and they were happy with whatever transpired. So I'd like to thank you for doing that.

I just have one question. I'll just quote the last paragraph from a letter our chair received from the Credit Union Central of Canada, which you may have seen. I'd like to get your response to that, please.

I quote:

Beyond this expression of support, our only other substantive request is to have the Government confirm that it intends to retain current practices (under the FIMCLA Program) in relation to the definition of the Prime Rate for purposes of the Program. Currently, the prime rate, for purposes of the Program, is understood to be the prime set by financial institutions themselves. Credit unions wish to see this current practice continue.

I'd like your comments on that, please.

[Greg Meredith]

Thank you.

Yes, you're right. The prime rate referred to is the financial institution's prime rate, so if there's a variable rate loan, the way it works is it's prime plus one. If it's a fixed rate loan, then the bank charges its mortgage rate for that period, plus one.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

That's the current practice.

[Greg Meredith]

Yes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

[The Chair, Conservative, Larry Miller]

Go ahead, Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, Mr. Meredith, for appearing today.

I'm not sure whether you've had the opportunity to review a letter from Maple Leaf Foods to Minister Ritz that brought to his attention the change in eligibility particularly referred to in subclause 3(1), which changes the definition of “farm products marketing cooperative” in section 2 of the act. That's where it apparently changed eligibility from 100% owned by farmers to 50% plus one.

I want you to understand that by asking the question, I don't mean necessarily that I'm supporting the proposition set out by Maple Leaf Foods, but it certainly raises the question, the answer to which I'm curious about.

They say:

We note, however, that one of the amendments to the legislation would make agricultural co-operatives with a majority farmer membership (50% + 1 farmer members) eligible for loans of up to $3 million for the processing, marketing or distribution of farm products. Loans are currently limited to co-operatives owned 100% by farm members.

Their first proposition, which I'd like you to respond to, is the following, and then I have a few questions:

Your decision to grant favourable access to credit to co-operatives having just 51% farmer membership inappropriately enhances a commercial advantage to several of our competitors, specifically Olymel, Exceldor, ACA Cooperative, Granny’s Poultry Cooperative and Farm Fresh Poultry Co-op.

That's the proposition they placed before you that I'd like you to respond to.

I'd like the answer to this question as well. They ask you to explain the specific “objectives in proposing this specific amendment to the legislation”--the 50% plus one--and “whether the costs and benefits have been fully considered (particularly in the supply managed sectors)”, and “whether the amendments are consistent with the government's approach to competition policy”.

Could you respond to those?

[Greg Meredith]

With regard to the situation with co-ops, there are about 1,200 agriculture co-ops in Canada. They're generally small. There are a number that are fairly large. This particular bill and that change really put the farmer or the ag sector on the same footing as the small business loans act.

In terms of competitive advantage, though, the cooperative structure, as you may know, is quite different from, for example, a publicly traded company, which can access equity markets. The co-op generally finances itself through member shares and retained capital, so there's a significant challenge, especially for smaller co-ops, in accessing expansion capital and in accessing moneys on the scale that is possible for a larger equity-based company.

It's probably fair to say that this is going to be more beneficial for smaller co-ops, because the limit is $3 million. A very large firm would probably have established operating lines and access to capital markets that a small co-op wouldn't benefit from.

[Frank Valeriote, Liberal, Guelph, ON]

There's a suggestion in the change that.... A current co-op has to be 100% owned by farmers; now it's suggesting only 50% plus one. Are there opportunities for non-farmers to own interests in co-ops? Why would you particularly subsidize those co-ops that aren't 100% owned by farmers? Who are you trying to help?

[Greg Meredith]

I apologize. I should have answered that in my first response.

In addition to the competitive disadvantage that smaller co-ops in particular face in accessing finance capital, what we've seen over time is more joint ventures between a co-operative and others who are outside the farm operation but are in the value chain. They might be, for example, in the community where the co-op is based. In addition, what we've seen is a trend towards co-ops trying to access additional equity capital by inviting others to buy shares in the co-op. That's an effort both to extend their reach into the value chain and to access expansion capital that is relatively difficult for them to come by. The intention of the 50% plus one is to enable those co-ops that have a slightly different structure to have a little bit better access to capital.

[The Chair, Conservative, Larry Miller]

Does that answer your question?

Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

I was just going to give you an example that would answer the question.

[Greg Meredith]

Sure. Go ahead. I'd love to hear it.

[Randy Hoback, Conservative, Prince Albert, SK]

I'll use an example of a small town. Let's say it's where I grew up in Canwood. You might have a group of farmers get together and then some business owners in the town actually join them because they bring some expertise to the table that the farmers don't necessarily have. Under the old program they wouldn't qualify, whereas under this program they would allow their venture to actually get up and going. That flexibility is required in some of the smaller communities, that's for sure.

[The Chair, Conservative, Larry Miller]

Do we have any further discussion or questions?

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Earlier in the questioning you said something about a 90% guarantee. Under section 4 of the act, it says “the Minister is liable to pay to a lender 95 per cent” or “another percentage of not more than 95 per cent” as fixed by the regulations.

What is the per cent of guarantee currently that we're looking at here in terms of lending to a farmer who has been in business for a considerable time, to a beginning farmer or one who has been in business for less than six years, and to a co-operative? What are the levels of guarantees?