Evidence of meeting #16 for Agriculture and Agri-Food in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was farm.
2:50 p.m.
Conservative
The Chair Conservative Larry Miller
Let's hear Joe first and then...Adam, did you have something?
Anyway, go ahead, Joe.
2:50 p.m.
As an Individual
One thing I'd like to see, and I'm not sure exactly how we would do it, is that when somebody is retiring from agriculture and is willing to sell to a beginning farmer, we need to exempt them from capital gains. What that would do is allow them to sell for the same price, to take home the same amount of money at the end of the day, but the price coming out of the beginning farmer is much less. That would be one way to do it.
Another thing we need to do is somehow link up those who want to get out with those who want to get in, so that potentially they can get into a rent-to-own start-up or some sort of partnership, allowing them to get cashflow before they have to get the money to pay the whole thing down.
2:50 p.m.
Conservative
2:50 p.m.
As an Individual
I touched on this earlier. I think if we have programs, they have to be cash..... Let's say you're in the cash crop industry and it's a bad year, and say your subsidy money works out to $100 an acre; if you have 100 acres, that's $10,000. Well, there are some guys running 5,000 or 10,000 acres. All of a sudden they're getting $1 million from the government, and the young guy can't compete with that, because they'll tune their margins a bit more and say, next year we can get another couple of thousand because we know we're good. The young guy just can't get in, because they just outbid him. They outbid him for rent; they outbid him for the cost of land. I'm not too sure, but I think that's the limiting factor.
Personally, I have no family. When it's my turn to sell, if I have nephews who are interested in farming, they're going to get a deal. If they're not interested in farming and if there's a young kid in the neighbourhood, that kid is going to get a deal. I'm not going to necessarily sell to the highest bidder, because if I don't need the money and I don't like the guy, I'm not going to sell to him. But a lot of people are just going to go for the bucks. I don't blame them for that, either, but as I said, the young guy needs help—that's the only way it's going to work—and big help.
2:50 p.m.
Conservative
The Chair Conservative Larry Miller
You're my kind of guy, a guy I would like sitting beside me when I'm dealing with my banker.
Adam, did you...?
2:50 p.m.
As an Individual
A lot of it, too, especially for a young guy, is that our profits are so...they jump up and down. Maybe some type of floor price for grain, and not just for grains but for all commodities, is something that would allow you to know that things are not going to dip too far below or that you might be sucked into something you can't handle.
2:50 p.m.
As an Individual
I just don't think the young guys have.... It was probably the same for our generation too: a lot of debt can cripple you very quickly, especially when you're working in a low profit margin industry. The problem sometimes with government programs is that farmers farm the program; they don't farm the land. They look at what's going to make them the most money, and that doesn't always work.
I think we need a low-level subsidy program of some kind, not to make people rich—as Hugh is saying too, there needs to be a cap on it—but to keep them in business in years when things are no good.
I can't believe that in two years we've gone from such a world shortage of grain to such a surplus. I must have missed something some night. I don't know about you guys, but the markets change so quickly that it's hard to keep up with the change.
2:55 p.m.
As an Individual
I think there are of a couple of tools that can be used. One issue we face here is that we have a lot of farm organizations—commodity groups, livestock organizations, crop improvement associations—and it's hard, especially in a rural environment like Ontario, and it's even worse I think in the west, to get good people to sit on those committees and boards.
I would like to see a situation in our tax code whereby if you volunteer—these basically are volunteer positions—to sit on these commodity organizations, especially for younger people, because we need some new blood in there, you could write off $400 or $500 a year on your tax return. We do it for getting kids involved in scouting and camps and hockey and soccer and all that sort of stuff. There should be something for beginning farmers who want to sit on organizations. Maybe we could establish one to get more people involved in these things also.
The other thing I would like to see happening is a sort of mentoring program for beginning farmers under which they could sign up with an existing farmer and learn the tools a little more, especially from a business side. The agronomics or the veterinary side is the easy part. But there should be a win-win for both parties.
I'd be more than happy. I've taken in a number of exchange students over the years. I just have a hard time understanding why all these exchange students always have to come from overseas to learn from us. Where are the local people? It's because there is no financial incentive to mentor with what I would consider to be a leading farmer, to learn some of the tricks of the trade and that sort of thing.
If I were to take somebody in locally to mentor them, there should be a break in the tax code for that, and also for that person to go to FCC or the bank or whatever and say, “I have my ag degree or diploma and I have this mentoring system under my belt”—it's no different from the ag leadership program or some of these sorts of things—and get a cut of half a point on the interest rate. You're doing cuts on energy loans and that sort of thing through FCC; why not for beginning farmers, with extended terms?
2:55 p.m.
Conservative
The Chair Conservative Larry Miller
Thanks.
One thing, Jamie, that you touched on a couple of times in your opening remarks, and you just did again, and Hugh really hit on it, is about the negative effects of programs. I've heard producers in my own riding say to me, “Larry, sometimes with programs, all you do is keep somebody in who normally wouldn't stay in, which creates competition.”
Could both of you just briefly...? I guess I want to be clear, and the committee needs to be clear, on where you're going with this. Hugh, could you clarify this? What you're saying is that we need basically an insurance type of program and we should forget the other programs. Am I clear in my assumptions? Is that what the two of you are saying?
2:55 p.m.
As an Individual
My thought is that if we have crop insurance and a low-level subsidy to keep you in when commodity prices are low, we really don't need anything else.
2:55 p.m.
As an Individual
Yes. I realize that probably government reacts with quick, short-term programs. I'm talking about a long-term stabilization type of program. I don't want to get rich out of it. I'm not interested in farming the government. I wish the market would take care of itself year after year, but when it doesn't, I think especially we need a low floor price for every commodity; I don't care whether it's corn or peppers or cattle or hogs. It's just something in place for the long term. That way, these young farmers can at least look at it and maybe come up with a longer-term vision of where they're going.
2:55 p.m.
As an Individual
I agree with Jamie. It's to keep you in so that you don't lose your shirt, but it's not something whereby I'd be able to go out and buy a Cadillac with the program. That's part of the problem with the programs now. Some people.... If you farm enough, that's a big income coming in. As I said, maybe these programs.... I keep harping on it, but I think there has to be a cap—one you can't sneak around from five different directions, either.
As I said before, if you come out with a program and have a bunch of honest farmers' accountants and talk to them, they'll tell you how they're going to sneak around it. You have to know that before you release it, because sometimes I don't think the government realizes that we're pretty smart. As I said, we're innovative. You show me something and I'll try to figure out how to get at it. That's human nature.
2:55 p.m.
Conservative
The Chair Conservative Larry Miller
I'm personally a supporter of caps, but most farmers with half the size of acreage you're farming, Hugh, will tell you that they don't agree with caps. They think it should be bigger. I'm just putting that out—being on the other side.
Mr. Lemieux, you have five minutes.
2:55 p.m.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Thank you very much, Chair.
I don't want to spend too much more time on programming. I do hear the comment about a level playing field, but also about wanting regional flexibility, because not one program meets all the different needs of all different commodities. I often see that federal programming is put there to level the playing field--it applies to all farmers across Canada--and then the provinces have that flexibility. That's where it doesn't make for a level playing field, when the provinces launch their own programs. But it does give regional flexibility.
My riding is right beside Quebec. If you throw a stone from my riding, you hit Quebec. My farmers know quite a bit about Quebec programming and what they perceive to be a lack of Ontario programming. They see the difference between the two. But there is something to be said for that regional flexibility, where every province responds according to what it thinks its agricultural needs are.
We were talking here about equity and cashflow. Farm equity seems to be increasing, but you can have an equity rich scenario but very low cashflow. So I want to ask for your ideas on how that could be better balanced. When we were out in British Columbia, for example, we visited an apple orchard with 35 to 36 acres. An acre of land sells for $100,000. He could easily lop off one or two acres and that money would get him through the next couple of years, if they were going to be difficult years, but of course there is a farm policy in place that means he can't just sell off agricultural land and have a condo built on it. So he feels very constrained. It's all 36 acres or nothing. Now, he could go to the bank and borrow against his land, but then it increases his debt load.
I want to ask you for some of your ideas on what can be done to better manage the inequity of high equity, low cashflow, particularly in difficult years. Maybe I'll start with Jamie.
2:55 p.m.
As an Individual
What we're seeing is true. I really think high equity has carried a lot of us to this point. I thought when land got to $2,000 an acre it couldn't go any higher. I thought when it got to $6,000 an acre they were absolute fools. When it gets to $10,000 an acre you're thinking you should jump in because you can't lose.
Farmers are probably their own worst enemy. I was thinking about this the other day. In the early 1970s we blamed all the urban people for moving out of London into Middlesex County and buying these farms because they all wanted to get back to their roots, get out of the city. It's not those people who are bidding up farms; it's farmers who are bidding up farms. The ones who can do it, who have equity, can afford to go out and buy another farm for $1 million. Is it right? No. Should the bank be looking at that as a reason they should be lending you money? Probably not, but do they? Absolutely, because if you have nothing in equity, they're not likely to lend you anything on a cashflow basis.
I think we can do a cashflow every year, and probably everybody can do the same thing here, with all our projections and all that, and I bet you by year end we end up where we were supposed to, but it wasn't how we were supposed to get there. Maybe we had a fantastic crop of wheat or markets changed so quickly. In terms of doing a cashflow for a bank every year, it's an exercise we all have to do. We end up making money, but when you look back at the end of the year, maybe you were right; probably not.
It's tough. And don't ever blame a bank for not wanting to lend money if it doesn't look profitable. I don't care whether that's agriculture or General Motors or Chrysler--whoever it is. Don't lend it. I don't think the banks are to blame for a whole lot right now. Twenty years ago I wouldn't have said that.
2:55 p.m.
Conservative
2:55 p.m.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Does anyone else want to make a comment on that?
2:55 p.m.
As an Individual
I don't really pay much attention to cashflow. At the end of the year I do an accrual statement, and that means something to me. Like Jamie said about cashflow, it can change a lot, but an accrual statement at the end of the year...then I know what I did.
2:55 p.m.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Do you find when you do accrual at the end of the year that you are generally optimistic or pessimistic?
2:55 p.m.
As an Individual
Life has been good for quite a few years. If you do your year-end and you do a proper one, it's been good.
