Agriculture Committee on June 9th, 2009

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

I noticed in your brief you have a request for repayment of funds to be stopped immediately. What impact is the non-inclusion having on nurseries, and what would be the impact of having to repay? That's my first question. The other one is, in what way are agricultural nurseries different from other producers of seedlings used in reforestation? I think both of you have explained that. Maybe you could each clarify those two questions for me.

[Robin Dawes]

Briefly, there's no difference between us and other landscape nurseries. We produce in exactly the same way. In fact, as Luc has mentioned, we sell trees out of the same greenhouse, off the same benches. For ornamentals, we're producing conifers. They are Christmas trees.

The impact? I have a nursery in British Columbia whose deadline is tomorrow, and they can't repay those funds, so the impacts for them are rather immediate. This excludes us from all kinds of other.... We're required under law in British Columbia, in order to move our trees and sell them to the United States, to be Phytopthora ramorum certified. That's a disease that is rampant in the United States. If we wish to sell to that market, we need that certification. But under this program, because we're not eligible for farm income stabilization, we're one of the only nurseries who wouldn't be eligible for funding should we lose product as beef farmers do to BSE.

We have the same rules: if we have P. ramorum in our greenhouse, it's isolated and the crop is destroyed. Other landscape nurseries get compensation for that. We don't, because they're destined for a different market.

The other thing I have to say, having had the bankers here, is that I actually had a case representative say I should consider myself lucky, should consider this payment as an interest-free loan, and should consider myself lucky to have had interest-free access to those funds. Unfortunately, when I add that debt to my debt load at the bank, the bank doesn't quite see it that way, and I suddenly come out of covenants. It doesn't matter how benign the terms of repayment are: I'm not meeting my bank covenants. There are many nurseries in the same situation. We'll be gone.

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

Mr. Godin?

[Luc Godin]

You had bankers here this morning.

If a company requesting a loan has insurance coverage or some kind of protection, it is an asset both for the company and the creditor. At the moment, our companies have nothing of that kind. We did before, but it has been withdrawn for one reason or another.

It is much easier for us to get loans if we can prove that we have something concrete to fall back on if there is a problem.

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

I have just one last question. I think I have half a minute or so.

[The Chair, Conservative, Larry Miller]

You have one minute.

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

If you sell your seedlings to a company that replants them, say, on tar sands reclamation lands or for beautification, then you're eligible for the program, but if you sell to a company that replants them so that the trees eventually will be cut down, you're not eligible. That's the difference; is that right?

[Luc Godin]

In theory, that is what makes the difference. In Alberta, for example, six nurseries sell their products to a cooperative, which in turn distributes the trees. The people in the nurseries do not know if the trees are going to be used ornamentally, for reforestation, or for soil rehabilitation. They do not know. It is the same in Quebec. Most of the trees are probably going to be sold to the government, but the government can provide them to the ministère des Transports or to schools just as easily. In many cases, we have no way of tracking where the products go.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Shipley is next, for seven minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for being here today. I have enjoyed the discussion on an area I don't know much about: reforestation.

I would like to go to Mr. Mann with some questions. I'm trying to understand Farmers of North America Inc. I think you've set up a distribution centre in my riding--in Wallaceburg, I believe--this past year. I'm trying to understand a little bit about it. Your organization didn't really touch on it, but what is it? How do you become a member? Is there a fee? Who makes it up? Is it like a co-op? Is there a board of a directors? Who owns it? Where do those fees go?

I'm just trying to understand. It is a large organization, and I understand it to be a buyer for farmers.

[James Mann]

Yes. We're quite a bit more complex than just a buyer for farmers. There are a lot of techniques that we use to bring competition into the marketplace. The group of companies, other than just Farmers of North America, now goes well beyond just negotiating on behalf of farmers.

What happened when we entered the marketplace was that we couldn't get the companies to compete, so we had to find and bring in new entities and form joint ventures with companies to access products for our members. We sent out tenders; in fact, it was front-page news in The Western Producer. Back in 2002 we put out a tender for a million litres of product to distributors, retailers, and manufacturers and didn't get one response back. It went back to the Competition Bureau and it just died there. They said suppliers didn't have to supply if they didn't want to.

So Farmers of North America has had to become quite creative. Basically the organization is a for-profit corporation that is owned by my brother and me. We sell memberships—they're $600 apiece—to farmers across Canada. They have to buy that membership every year, and that's really how they vote. If we're doing a great job for them, they will continue with their membership.

We have an advisory board of members from right across Canada who provide input to what the organization does and provide ideas and things we can do to move the organization forward.

We represent approximately 8,000 farmers across Canada, about 15 million acres of production. We go beyond just farm inputs. Our members have asked us to get into marketing of grains. As a matter of fact, we were at a food ingredients conference in L.A. over the weekend and Monday, and I flew through the night so that I could be here today. We are doing such things as trying to find ways of putting lentils and chickpeas and peas into other products that can be used in the ingredient market, and moving our members up the chain. So we have a foods division.

We work in the fertilizer sector. And in crop protection, we have a division that is working on getting registrations so that we can again bring generics into Canada to compete with products that exist here. We have manoeuvred through the difficulties of working with the PMRA to get those registrations.

And we serve grain growers and livestock producers—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Just so that I understand that part, am I to understand that you're trying to get the permit or licence to bring products in from among the patented ones, to be licensed as generics?

[James Mann]

There used to be two systems whereby you could bring.... One was to get a full registration for a product in Canada, passing the science review, ensuring that a product was off patent, and coming in and competing in the marketplace on a regular basis.

When the registration process was put in place back in the eighties—it was called PSR-2—there was a clause put in such that if this did not create price discipline and there were excessive barriers in the Canadian marketplace, farmers had the right to own-use import when there were lower-cost products elsewhere. We did that successfully with Glyphosate product, and we had several others for which we had gone through the process.

There was a significant lobby to have that suspended and replaced with a group program, which is where it sits right now. Unfortunately, the group program is totally ineffective. It's fundamentally flawed and is not providing any value in price discipline whatsoever.

Under the other method, we are actively working with other generics from around the world to get their products registered in Canada so that we can create competition. As I said earlier, the bulk of the chemistries that are used on the farm today are off patent, and with Canada only being 3% of the global market, there is a reluctance, with all the hoops that have to be jumped through specifically in Canada, to put those generics in here.

We're different, of course, because our membership base is saying that they want us to bring access to those products here in Canada, and that's what we do.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

You mentioned that you have 8,000 farmers, and I didn't get the number of acres. I think the farms, regardless of the size, pay a flat rate per year.

We just had a number of financial institutions talk to us this morning. When you are doing the negotiation for farmers—and actually, in some ways I think you're in competition with co-ops, but likely in other ways you're beyond what co-ops do—do you provide financing for your members to purchase inputs and products?

[James Mann]

Actually, I'm quite glad you brought that question up, because we do have a financing source through John Deere with their AgLine program, which our members can get access to. It's somewhat higher than market, but it is a useful tool; it's not that much higher than market. It's a fairly good source of capital. Unfortunately, Farm Credit Corporation, which provides a lot of financing tools to some of the larger input suppliers, has sort of a tied selling arrangement whereby that financing can be used only for their product. In fact, it can reduce competition.

When we originally looked at trying to get that type of financing through Farm Credit Corporation for our members, Farm Credit Corporation saw us as being in competition with some of their existing partners, which really flies in the face of creating additional competition and giving farmers more choice in the marketplace. We'd like to revisit that with Farm Credit and see that farmers have access to those tools to buy wherever they would like to buy at the lowest cost and create that true competition.

Financing is an issue with growers. Even with today's prices, it's a major issue. In fact, the last time I was here, we talked a bit about buying fertilizer maybe a year and a half in advance of the need, when you're already deep into your existing year's operating line. You may want to buy right now for 2010, because normally in one year out of ten that's not the case, like last year. You can buy in advance, but you need additional financing tools to be able to do that.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you.

[The Chair, Conservative, Larry Miller]

Mr. Mann, you mentioned the Competition Bureau earlier, and of course they were one of our witnesses here. Do you or the other witnesses have any suggestions for the committee on the kinds of tools or changes you'd like to see or that you think would be beneficial for the Competition Bureau?

[James Mann]

I have made some comments in what I'm going to submit to the clerk here.

Fundamentally, I truly believe that there is a position within the Competition Bureau to lean on the side of larger corporations becoming more efficient in Canada as compared to the smaller, and decisions as a result have tended to lean towards allowing amalgamations and mergers, which creates less competition just by the nature of how that occurs. I think they need more and greater investigative tools. If you want to hear about some of the terms that are there, like price dominance, refusal to supply, abuse of dominance, and those things, you need to have witnesses that will testify that these kinds of things are going on. And if they can't get access to the witnesses to find out what's going on.... Maybe they have the tools and they just don't exercise them, but they certainly need to find out what the answers are and why the marketplace is behaving as it is. There is just no way that our products and services should be priced as high as they are compared to those of the U.S. It just doesn't makes sense. There is more detail in my document and certainly more than I can take the time here today to talk about.

[The Chair, Conservative, Larry Miller]

Ms. Dawes or Mr. Godin, do you have any comments on that?

[Robin Dawes]

I think I would like to say that I admire the efforts of the Competition Bureau. In the case that we're bringing forward to you, however, it's a little bit bizarre because the Minister of Agriculture and the application of the farm income stabilization are agents for a non-competitive situation. There are reasons these principles and legislation about not discriminating against producers on the basis of market were put in place. When we allow that legislation to be breached, we're creating a non-competitive situation for farmers internally amongst themselves.

The very program has become a non-competitive agent, and I would ask you to recommend strongly that this not be allowed to happen any longer.

[The Chair, Conservative, Larry Miller]

If there are any comments on how we did it, I certainly would like hear them, as would, I presume, the rest of the committee. A lot of this study leads back or points back in some way to the Competition Bureau. If this committee is going to put forward some recommendation to the government, it's nice to have input. I always tell people it's one thing to come up with a problem, but it's always even better if you can come with a suggestion for a solution.

Thank you.

Mr. Easter, you have five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

I thank you folks for coming.

It is clear that the Competition Bureau absolutely does not work when it comes to the farm sector and farm inputs. There's a farm expression I could use about how useless it is, but I wouldn't want to put it on the record.

I want to turn mainly to your area, Mr. Mann, and the whole area of generics. But I want to make a comment on fertilizer first.

I think you said that you brought in four boatloads of fertilizer. We have some individuals in my neck of the woods who are bringing in fertilizer. It's mostly triple-16 from Russia. For the committee's information, the saving on that fertilizer for a 400-acre potato grower, as compared to buying it from commercial companies--and there are basically only two big ones in our area--would be $60,000. That is just on purchasing triple-16, mainly from Russia. That's astronomical. Somebody, somewhere, is making money in this system.

The fertilizer companies bought at high prices, and now they want to download their purchasing at high commodity prices to farmers. I understand that. But farmers have no protection against it. There's no question as well that in that marketplace, from what I'm hearing from producers, the pressure is on: if you don't buy your fertilizer from some of the companies that traditionally sold it, then you may not have a market for your end product, if you're in that particular business. I think that's something we have to look at as well.

You mentioned generics in the beginning. I think you've made specific proposals to PMRA to get on with generic registration. You mentioned in your evidence that even where they are at the moment, we'll not have access to generics as quickly or as easily as they do in United States. Could you expand on that a little bit? Basically, what does this committee have to recommend to PMRA on generics to put us on a level playing field with the United States?

[James Mann]

That's a good sense of the words. How do you put us on a level playing field with the U.S.?

In the U.S., when a generic has passed the science, is proved equivalent, and is safe for health and the environment, there is a form called “Offer to Pay”, and they provide that form to the owner of any compensable data, if there is compensable data. They can enter the market immediately upon completion of that review by the EPA.

What is being suggested in Canada is that we go through a 120-day negotiation period afterwards, and if that doesn't work, another 120 days of binding arbitration.

[Wayne Easter, Liberal, Malpeque, PE]

So I don't run out of time, what we need on the record from you is specifically what has to be done. I think what you're saying is that there should be no need to go to these 120-day extensions, single or double, and that generics should be opened up immediately when the same conditions are met as are met in the United States.