Agriculture Committee on Nov. 26th, 2009

[The Chair, Conservative, Larry Miller]

We're going to call the meeting to order.

We are still lacking some members, but we are at a stage where we can hear testimony. I believe, for the sake of time, we will start to do that.

I'd like to thank all of our witnesses for coming today. Just so everybody is aware, around the hour mark, we're going to move back to our report. The clerk has spoken to the witnesses and has asked them to try to keep their presentations as short as possible to leave more time for questions.

We'll start off with Pierre Lemieux. Are you ready, sir?

You can go ahead with your presentation.

[Pierre Lemieux, First Vice-President, Union des producteurs agricoles]

I want to thank the Standing Committee on Agriculture and Agri-Food for having us and for giving us the opportunity to comment on the Growing Forward program.

I want to begin by saying that the AgriInvest program fulfils a request made by Quebec farm producers. It provides relative stability and allows producers to assume a certain level of risk. The program does a relatively good job of meeting the needs of certain groups of Quebec producers. However, we are not at all satisfied with the AgriStability program, which replaced the CAIS, or the Canadian Agricultural Income Stabilization program.

With certain types of production, the margins have been low for more than three years, but the program no longer does anything. It causes a great many problems for agribusinesses in terms of security, stability and production continuity. The best example is the pork sector, which is in the middle of a crisis this year, and the AgriStability program is no longer meeting the needs of businesses in that sector.

We have tried to get an AgriFlex program. Our hope was that it would provide risk coverage and some flexibility in terms of the provinces and in terms of the types of production that would allow us to obtain what AgriStability does not cover, in other words, the margin phenomenon, when periods of insufficient income last longer. Unfortunately, because of how it was structured, AgriFlex is not part of a risk management program. We are definitely going to ask for enhancements to the AgriStability program in order to improve reference margins. Reference margins need to reflect the production costs of agribusinesses more, thereby providing a certain level of stability.

There is no question that we can use the AgriFlex program, as it was announced, in terms of aspects that enhance certain other more substantive programs. It has the potential to become a collective means of providing structure. This program can still play a role, but not as far as its current underlying principles go. It, too, needs to be improved so as to provide more flexibility and consistency, in terms of a collective measure.

As for the AgriRecovery program, certain problems can be identified with respect to the types of production subject to supply management. AgriRecovery needs to be improved in order to specifically address certain problems that have already been identified. More work in that respect is probably necessary. We have experienced some serious problems in the past few years, including nematodes in the potato industry. The AgriRecovery program was created to provide a framework, but when it comes to applying it in real life, agribusinesses have a very hard time qualifying for the program and thus accessing assistance that meets their needs.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to the Agricultural Adaptation Council. We have Kim Turnbull and Angela Stiles.

[Kim Turnbull, Chairman, Agricultural Adaptation Council]

Thank you for the invitation to speak. I'll give a brief background of what Agricultural Adaptation Council is about and what happens when bureaucracy and red tape infringe on our abilities.

Gord Surgeoner, a director on the council since 2002, is also here; Angela Stiles is our executive director for 14 years; and I've been on the council for the past 10 years. It was founded in 1995 to allocate government funding by the industry, for the industry. We're a non-profit coalition of over 70 organizations from production agriculture, processors, retailers, and the science and technology innovation sector. We were created to help allocate government funds in the ag sector, and the industry we represent sits at the table and makes the decisions on the projects and applications that we have.

The adaptation council helps the government look at the rules and programs when they decide to create a new program. We've done that since 1995. Over that time, we've assisted in the funding of close to 2,500 projects amounting to more than $191 million in government funds, which has leveraged a total project budget of over $700 million.

One thing we do extremely well is handle the administration of agricultural programs. We aren't bureaucrats, so when there's money allocated to a program we try to see that all those dollars end up in the projects that the applicants bring forward. We work hard to be more effective, faster, and more efficient than any government program.

We're thrilled with the opportunity to partner with the government. We are true partners, and we fall under the accountability safety net of the Auditor General. We've been through countless audits, program reviews, and annual assessments. We've passed all of them with flying colours. We've been through audits from the federal government as well as the provincial government, and we haven't had anyone tell us that we're doing anything wrong.

I'll turn it over to Angela for the next part.

[Angela Stiles, Executive Director, Agricultural Adaptation Council]

As much as we try to implement government programs with bare minimum costs, it's becoming harder and harder to do. We want to say that we don't disagree with the concepts and notions behind accountability. We understand why these standards are put in place. We want to say on record that we want to continue working with the government. However, the way we used to work was very simple: we received our money as a grant.

Let's say, just for argument's sake, we had a program for $12 million. Over two years we would receive one twenty-fourth of that money, or $500,000, every month. Various applicants would apply to us for funding. The board would determine who was eligible and who would receive the money, and in an extremely timely manner. What was also great was that if we earned any kind of interest over the fund, we would use that money to go back into projects or apply it to the overhead.

Part of this also led to flexibility. We never had any “use it or lose it” deadlines, a term that's probably very familiar to our applicants. We never had that problem. If we were funding a research initiative and it had a bad crop year, we would simply renew the funding for another year until the conditions were right to do that research. After all, in agriculture you can basically count on the unexpected, especially when it comes to research.

So we had a flexible, no-nonsense, common-sense approach to agriculture funding. And as Kim pointed out, we passed numerous audits and compliance reviews.

In addition, the council was able to provide loans to high-risk projects, to applicants who would make a profit, and the council would work with the applicants to determine a fair payment schedule back. We didn't have itchy trigger fingers. If a payment was missed, we worked with the applicant to make sure the payments were made and that we weren't basically ending the project.

With one of our programs, we lent out $10 million and recycled those funds back to approve more projects and to support ongoing administration of the program. It was an amazing leverage initiative, and also great value for money.

We were very efficient. We were receiving our money as a grant and allocating the funding as reimbursement funding. We required an applicant to spend the money, show us receipts, and we would reimburse them for their expenses. If the applicant found some savings, so did the program. It was a win-win for everybody. It was highly transparent, efficient, timely, and accountable.

Now let's fast-forward to today. The federal government has a new program, the Canadian agricultural adaptation fund, or CAAP. We also have the Growing Forward framework.

Agriculture and Agri-Food Canada should have funded us as a grant, but this--what I'm holding here--is the introduction of the contribution agreement for the new CAAP program. This is what I'm dealing with: 111 pages in size nine font. This is what I'm working with as an administrator for a program. Approximately half of it is just the management guide, telling us how we do our job. Unfortunately, this has not one, not two, but three annexes, with an added subsection on how we do communications.

I'll pass it back to Kim.

[Kim Turnbull]

Thank you.

We've got to look at this and see whether this is accountability or just a lot more red tape and bureaucracy. And we have no problem with accountability—I think our track record speaks for itself—but this may be more like micromanagement.

Most people like to complain to government. We're not here to complain but rather to say that we have a solution. We've had a solution all along. The original intent of the program was thought up by a group of farm leaders in Ontario who worked with the federal government and the minister to bring this forward and across Canada. And it has worked wonders across the whole country. It's just that there are a lot of hoops and hurdles we're now having to jump through and over, and this can be detrimental to the taxpayers of Canada.

If we don't allow the adaptation council to handle the decision-making administration, then things won't be as clean, as efficient, or as effective. We can deliver programs in a very short period of time. And now a lot of rules and regulations are slowing that process down. For example, under communications, we ask our applicants, they send it to us, and we in turn send it to Ottawa. And all they're doing is a press release on their own project. So it's just a lot of bureaucracy and paperwork that's causing problems.

We have a track record of delivering the agricultural funding. We did so in accountable, effective, and efficient ways. And both parties, the government and the agriculture industry, were very accepting of the process. But now we seem to have a lot of rules and regulations—it's kind of wrecking the whole program.

We've got administration costs that were very effective, around 8% on the dollars we push through. Some of our previous programs with the provincial government were also contribution agreements, and our administration rate is closer to 15%. Now the federal government wants us to run the programs at 10%. So we're kind of caught between a rock and a hard place, and so are our applicants.

We're willing partners, happy to work with the Government of Canada. We want to work constructively with senior staff. We don't want to wreck any partnership. But we need to look at the strengths the various players bring forth.

I'll turn it over to Gord.

[Dr. Gord Surgeoner, President, Ontario Agri-Food Technologies]

Thank you, Kim.

I would just reiterate that I've had the privilege of serving on the adaptation council, and I sit on many boards at the provincial level and some at the federal level, and in the private sector.

The problem I see is that process rather than results appears to be the priority. I'm talking about non-business risk management here, innovation, and that entails risk. If we're totally risk-averse, that's the oxymoron for innovation.

In the interest of time, my five minutes, I have provided you my background, but basically my board is composed of five farm organizations, two universities, and three from the corporate sector.

I'm going to address five areas.

Per cent distribution in the value chain. How do we allot money between what I will call discovery research through to marketing? I do emphasize one key point here, which is that at the end of the day whatever we produce in agriculture we must sell. The quote I live by is, don't let your science and technology interfere with your sales. At the end of the day there has to be a product, and I believe in environmental, and social, and all those other values, but at the end of the day in agriculture, to get fair return for labour and investment you must sell a product.

For example, one of the key things is that now we're not allowed to actually fund projects that are of a marketing nature, even if they are grow-local campaigns and that type of thing or for external markets, because we're seen to be competing with other areas of Canada. But at the end of the day we have to sell product, and a lot of that we should be selling locally, and funding would be good for that.

One of the questions I ask is, how should we allot money between discovery right through to how we capture it, make companies, make new products, and then sell it to the world and sell it to our own Canadians? Right now the vast majority of our money goes to discovery, and if you think of discovery, I have a quote that I didn't make, but it's that research is global. It's implementation. How do we make it happen here, so that it is local? We don't have to rediscover it just in Canada.

Third party delivery is the second thing I want to talk about. The key area here, as Kim has talked about--and I'm sure you realize this at your constituency level--is that the closer you get down to the real people, the better you understand the problems. We have elected boards. Those boards then have to report back to their constituencies. The key has been that when we sit down and analyze a problem as a board, we have somebody from the hog sector, the dairy supply management sector, vegetables, and we all take our hats off and ask, what's best for agriculture?

So I think third party delivery is one of the key things. I want to compliment Ag Canada in that they have done that, but it seems to be regressing to some degree at the present time.

I would, however, again give a compliment, because I do want to work positively. Our organization does get some of our funding through Growing Forward, and we have now combined our provincial and our federal accountability. A year ago I had to do a full set of reports to the federal government, a full set of reports, full audits, and they were all combined. We're all working for the same people; they're called the taxpayers of this country. So now we've at least compressed that down to a single thing, and I think that's extremely good. But the bottom line is that the closer you're down to the people at the local level and you have the person from the soybean board, or the corn, or the hog producers, the better you can understand the problems and find the right solutions.

Accountability and transparency. We all totally agree with those concepts. I do want to emphasize--and this is my personal opinion--that between all the accountability that's done at the local level and all the audits we go through, we never see any full disclosure of the audits at the federal side in Ottawa. So how much is it costing you to deliver programs when you're telling us to get it down to 10%? How can we work together to streamline this process? Again, as Angela would indicate, we have almost three layers of accountability above us before decisions are made.

Another key thing is continuity. It was brought up that March 31 seems to be a clear date for moving forward with our funding. March 31 was the start of the new Growing Forward and funding to the CAP, the adaptation council, and all of those. Guess what? That actually wasn't signed until November 18, so from March to November we could not technically make a deal and get money out there to our producers. Our board had held money back because we figured it wouldn't be signed just in time, and we kept money so that we could continue to roll it out. Other councils couldn't do that, and they actually had to shut down. Agriculture doesn't work by a calendar clock, it works by a growing season—as most of you will know—so if you miss the planting season, you miss a year in getting funds out the door.

As we go into new accrual accounting, we're supposed to zero out on March 31, 2014. We'd better have something in place, because if three months ahead you don't know if you have a job, your very best people will go out and seek a job. So continuity is something that, in my opinion, is absolutely critical.

Speed and flexibility. In Ontario, we now have a mandate: 45 working days from the time of receipt of a grant program, you get the money. You make a decision so the applicant knows whether she or he can go forward with the project. Sometimes we hear seven months or eight months. Moving at the speed of business, moving at the speed of agriculture, we find there's no urgency. I really have to emphasize that we need to have rules.

I have one last one. I can name six programs associated with food processing. We should have just one, and we should have it flexible to the applicant, rather than everybody trying to squeeze into a little box.

And my last quote is: “We are continually faced by great opportunities brilliantly disguised as insoluble problems.” We will work together with you.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Surgeoner.

Now, from the Fresh Produce Alliance, we have Mr. Morris and Mr. Whitney. Five minutes, please.

[Wayne Morris, Project Coordinator, Fresh Produce Alliance]

Thank you very much.

I'd like to echo the comments of the two previous groups in thanking you for the opportunity to be here today. We really appreciate the time with you.

Both Stephen and I are here representing the Fresh Produce Alliance. For those who may not be aware, that particular alliance is a collaborative endeavour of the Canadian Produce Marketing Association, the Canadian Horticultural Council, and the Fruit and Vegetable Dispute Resolution Corporation.

The alliance's goal is to build an improved business environment for the Canadian fresh produce industry and the North American marketplace. Today we're here to talk to you about one of eight projects we have been working on, and it's called the destination inspection system. We want to talk to you about its importance to the Canadian industry and to solicit all-party support for a pending regulatory amendment that will assist in implementing a new business model for this important service.

I have a few words of background. The Government of Canada has provided destination inspection service to the fresh fruit and vegetable industry for approximately 80 years. The results of these quality assessment inspections provide the basis by which the produce industry can settle disputes. The government's role in destination inspection is derived from the licensing and arbitration regulations and the fresh fruit and vegetable regulations, which together create a framework for the marketing of fresh fruits and vegetables in interprovincial and international trade.

There has been a long history of cooperation and shared responsibility between government services and the private sector. However, over the last three decades, there has been a progressive shift by government to reduce its commitment to such quality assessment programs as a result of increased emphasis on food safety, animal health, and plant protection.

This particular service is of extreme importance to the industry. The board of arbitration, established under the Canada Agricultural Products Act, and the dispute resolution corporation, established pursuant to article 707 of NAFTA, function as commercial dispute groups for the fresh fruit and vegetable industry. They rely on destination inspection reports as evidence when hearing disputes and rendering decisions.

Historically, 70% of all commercial disputes for fresh fruits and vegetables are related to product condition. Therefore, access to a credible inspection service is critical to the successful operation of this evidence-based model. From an industry perspective, credibility is defined as a national system that is recognized by industry, governments, and the courts.

The inspection system has to be government-run, and that's an important point because it is one of the key elements upon which the United States Department of Agriculture provides reciprocity for Canadian exporters for their use of the U.S. commercial dispute resolution services under the U.S. Perishable Agricultural Commodities Act, PACA. This arbitration system, supported by an effective national inspection system, is a very useful tool in its own right for risk mitigation in the marketplace and enhancing overall industry prosperity. It plays a crucial role in protecting growers, packers, and shippers from unfair buyer practices, protects buyers from unfair competition, and contributes to minimizing market disruptions stemming from unfair commercial practices.

We are, therefore, here today to seek government support. There is a pending regulatory amendment. Its reference number is 20154, and it encompasses amendments to the licensing and arbitration regulations and the fresh fruit and vegetable regulations, which would ensure the long-term sustainability of this critical quality inspection service.

In conclusion, we simply solicit all-party support for the approval of this very important regulatory package. Thank you, Mr. Chair.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Morris.

We'll now go into questioning. I have a suggestion, if it is agreeable to everybody, that we move to five-minute rounds because of the time. Is that acceptable to everyone? Okay, I see it is agreed to.

Who do we have here? Mr. Easter, you have five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Thank you, witnesses, for coming.

Off the top, I knew things were bad; I just didn't think they were quite this bad. We've been going through the performance report for last year, and the numbers we're finding there are absolutely shocking as well. It's moneys not spent, and I don't know who you blame for it. Well, certainly Ritz is obviously responsible, but in fairness to him, as I think one of you mentioned, is it red tape or whatever? Bureaucracies take on a life of their own.

But on grants and contributions last year, there was $101 million lost. That's a lot of money. On the environment contributions, $15 million lapsed. On food safety, $13 million lapsed. And on business risk management, which the UPA talked about, the expenditures in that area this time around are $961,400,000 less than the year before. That's money that could have gone to the hog and beef industry with just a little restructuring, changing the viability test.

That's the sad reality of the world. And we can play politics with it if we like, but the sad reality of the world is that, as one of you said, it's results that should matter. There seems to be more interest in process. And actually, in all truth, guys—and I'm not blaming you necessarily for this—this town has a problem in that process is more important than results, and there's no industry affected more severely, I don't think, than agriculture.

So I have a couple of questions.

On the BRM problem that you mentioned, on business risk management, UPA, what could be done to maybe streamline that? We have expenditure levels we can get to. What can be done to get to that?

And on the last point that you made, Mr. Morris, on the regulatory package, what we're finding is that Canada, as always, seems to be the boy scout in the world. The Americans will shut us down. They'll use the regulation and shut us down just like that for anything. Other countries will do the same. But we don't do it the other way around.

Is this regulation important, from that perspective? What's the problem in terms of not getting this regulation done in time?

Those are my two questions.

[The Chair, Conservative, Larry Miller]

Who are you asking that to? Mr. Lemieux?

[Wayne Easter, Liberal, Malpeque, PE]

UPA and Mr. Morris.

[Pierre Lemieux]

As for the AgriStability program, among others, we need to identify known mechanisms that can respond quickly. A little earlier, I said that the program was not suitable for extended periods of decline in income. I think we need to establish reinsurance mechanisms. It may be necessary to establish margin support adjustment mechanisms based on known standards. This would give rise to easily adaptable programs that are known to producers. Producers would have choices to make, if they opted for a reinsurance mechanism. It would already be predictable. People would have preset principles and would know the risks they wanted to insure. I think it would be a matter of simplifying the programs.

The AgriRecovery program does not work. In fact, there is a combination happening. If you consider the loss of income caused by mortality or poor production practices, it is covered in part by AgriRecovery. For the other part, you have to use AgriStability. I think it is essential for the AgriRecovery program to provide for all those things, for it to truly help a business recover in the event of a natural disaster. I think the principle of AgriRecovery is a good one, but the interventions need to be structured based on the risks that the business assumes, which are caused either by production losses or by the inability to engage in agriculture.

[Wayne Easter, Liberal, Malpeque, PE]

First I might say to Mr. Lemieux--we've got two people named Pierre Lemieux here--that I can tell you our experience with AgriRecovery in P.E.I., and absolute potato loss has been an absolute disaster.

[The Chair, Conservative, Larry Miller]

Your time has expired.

Mr. Morris, I will allow you to respond to his question.

[Wayne Morris]

Thank you, Mr. Chairman.

In answer to your question, this particular regulatory package that we're talking about was not put in place to play hardball with anybody. It's simply to put in a sustainable system that will improve the business environment on the marketplace to the benefit of the grower, the grower-shipper, the wholesaler, and all the people who are buying or selling in our marketplace.

You mentioned the United States. Actually, we're quite fearful that if this does not go through, we may have a problem with the United States in trade back and forth. I will elaborate a little bit.

Because we have this particular inspection system in Canada, along with a couple of other complementary programs, the Americans recognized us, in a way, as a preferred nation in trading. When fresh fruit and vegetable exporters export to the United States, as Canadian exporters we can avail ourselves of the services they provide under AMS and PACA, the Perishable Agricultural Commodities Act. They can get a comparable inspection service and also lodge disputes in their system without having to pay double the amount of the claim, as other countries may have to do. We're quite fearful that if we don't strengthen our systems here in Canada, there is the possibility that the Americans will become increasingly uneasy with having us as a trading nation and recognizing our system as being totally comparable to theirs.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Go ahead, Mr. Bellavance, for five minutes.

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

Mr. Lemieux and Mr. Tougas, thank you for being here. I know that you are planning a very important conference, which will take place in a few days. And elections for the presidency will also be happening soon. I am sure that makes things all the more stressful for you, but it is still very important for us to hear what you have to say. Thank you very much.

Whether you like it or not, every time there is an election, whether in Quebec or Ottawa, you have to follow what goes on very closely and listen to what the parties are saying about agriculture. As representatives of the UPA, you follow what goes on, but you also question politicians about the measures they plan to use to address your concerns. I had the opportunity to meet you a few times on the campaign trail.

My question is about the AgriFlex program. As a member of the Bloc Québécois, I may not be objective. During the election campaign, I ran against the Conservatives, the Liberals and the NDP. I really got the sense that the Conservatives were promising a real AgriFlex program, as put forward by the Canadian Federation of Agriculture, a program that included risk management.

Seeing as you are not affiliated with any political party, I would like to know whether, during the September 2008 election campaign, you also got the sense that the AgriFlex program would truly be flexible, as put forward by the CFA?

[Pierre Lemieux]

When we met with all the parties during that election campaign, one of the things we were calling for was the implementation of an AgriFlex program. We wanted such a program in place to compensate for how ineffective the AgriStability program was. We got the impression that the people involved were receptive to our request.

Much to our surprise, when AgriFlex was launched, we learned that the only flexible thing about it was its name. The flexible components we sought to make up for the shortcomings of the AgriStability program were missing. We really found that deplorable on the part of politicians.

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

Just before the budget was tabled, Minister Ritz made an announcement. Once again, it had to do with an Agricultural Flexibility Fund, and there was absolutely no mention of excluding income support. Unfortunately, when the budget was tabled a few weeks later, we saw that it excluded income support, which, obviously, does not live up to your expectations at all or take into account the concerns and needs you expressed well before the previous election campaign.

A government will often tell the public that it is worried about the costs associated with a program. And so, when you say you need an Agricultural Flexibility Fund that makes up for the shortcomings of the AgriStability program, the government's response is that it has to respect the ability to pay Canadians, that it is not a bank and that it cannot necessarily afford to do it.

But I would like you to explain something to me. I understand that the federal government has been spending close to $1.5 billion on ad hoc programs for years. That money could go towards a program such as the Agricultural Flexibility Fund in order to make up for the shortcomings of the AgriStability program. That would not require any additional spending. Is that correct?

[Pierre Lemieux]

Indeed, we thought that if the money currently being spent on ad hoc programs were invested in a very structured way in other existing programs, there would be enough money to meet the needs. That is our understanding.

In addition, the UPA has recently asked Laval University to carry out an economic study on the cost-effectiveness of investing in agriculture. The study focuses on core agricultural support and is being conducted by ÉcoRessources Consultants, in cooperation with Mr. Maurice Doyon, a professor at Laval University. The study shows that investing in agriculture is far from a waste. It is cost-effective for governments, which derive major net profits from agricultural investment.

It also generates wealth in all sectors of the economy, especially in Canada's regions and sub-regions. That wealth has huge benefits for all local communities, be it through direct support to producers, processing activities or the economic spinoff for agriculture, which is even more important.

I could send you the study, and you would see just how interesting it is. A dollar in agricultural spending yields the highest return for governments, as compared with support for other economic activities.

The study even goes so far as to compare certain aspects of sustainability in some communities. In Abitibi-Témiscamingue, for example, a new job in the agricultural sector has almost the same effect, percentage-wise, as a new job at the Montreal harbour does for the city of Montreal. When you take the time to look at the study, it is really something to see all the benefits of agricultural investment.

When done right, agricultural investment benefits everyone, both in terms of security for producers and the economy as a whole.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Atamanenko, you have five minutes.

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

Thank you for being here.

Mr. Lemieux and Mr. Tougas, I want to wish you a very successful conference next week. I would also like to thank the UPA for all of its work in the area of food sovereignty. I know that your president chairs the coalition. It is one of the issues I am involved in.

Madam Stiles, I would like to see if I can get clear in my mind what you're talking about, so I have some questions.

When did this change of policy come into effect, roughly? You mentioned before and today. So when did this start?

[Angela Stiles]

My understanding is that in October 2008 there was a new policy called the transfer payment and directive. That's pretty much when we got captured under our CAP agreement.