Agriculture Committee on May 10th, 2010

[Richard Lehoux]

I think that Mr. Lecours is absolutely right. As the mayor of my municipality and reeve of a regional county municipality, it goes without saying that I try to help and promote, through our local development centres, the establishment of new and diversified businesses. That said, there is no escaping mass productions such as dairy, hog or eggs, and their importance in the area.

I keep coming back to processing, because it contributes significantly to job creation in the regions. Indeed, we are going to have to turn to diversification.

We have to be careful with the global tendency to create huge operations. To let our agricultural sector lean on that side is a double-edged sword. I believe it is family and local businesses that will create and maintain vitality in our regions. We must also allow these young people to move forward. I think that is the most important thing.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We'll now move to Mr. Gourde for five minutes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

My question is to all witnesses.

When a producer or a new person settles in the agricultural field, it is often during the first few years, that he makes the largest investments, for example to buy land, improve farm buildings and buy herds. The person develops a business plan with advisors and agro-economists, based on the current and previous years' agricultural policies.

When agricultural programs change every five years, what is the impact on these producers, on these young new farmers? I think that over the past 20 years, programs have always regressed, when it comes to support for agriculture. How can these producers meet their obligations when support programs change every five years? These producers have often taken out long-term loans of 20 or 25 years. They already have closed mortgages. After five years, they have basically not repaid any principal, and they are already getting squeezed.

[Benoit Turgeon]

As Réjean mentioned earlier, when it comes to agriculture, the investments that have to be made are significant. They are often made for a single use. If we invest on a building that lasts 15 years, we need 12 to 15 years to break even. However, the policy may change after five years, as we saw recently with certain products. When the rules are changed three, four or five years later—whether it is domestic or international rules—producers no longer have any leeway.

Perhaps we should begin by making policies last longer. That would be a first step. Then, if a major policy change is required, we should try to protect the assets of the farms that have already been in operation for three, four or five years. We could maybe engage in positive discrimination under the policies. While indicating that the policy is going to change, we could implement the changes over the next three, four, five or six years, so that the operation would have time to adjust. It would not suddenly find itself in a dead end.

[Réjean Leblanc]

This morning, we talked a lot about supply management. When we discussed maintaining it, the issue of income stability surfaced. For products that are not tied to supply management, if we exclude quotas, the cost of buying assets—the land, the buildings and so on—is the same. People who buy operations that are not subject to supply management must find a way to ensure a form of income stability similar to the one provided by supply management. I do not know how this can be achieved. A lot of comments were made this morning regarding this issue.

To answer the question, I would say that, as a country—and all countries should do the same—we should ensure that we have an agricultural heritage. We protect monuments through UNESCO, but we should also find a way to protect that heritage, to allow people to use it, to ensure that people can live off agricultural production, and to promote the importance of that industry for the regions.

[Jean Lecours]

As agro-economists, when we prepare our budget estimates we obviously leave a bit of room to manoeuvre. Otherwise, we would not recommend this or that project or business plan. As regards what Benoît mentioned earlier, over the past few years, there have been times when we have made projections and then all of a sudden, the whole picture would change drastically.

Putting our signature down and making recommendations as agronomists is a huge responsibility. There is a reason why we are covered by a liability insurance. The fact is that the changes that have occurred in recent years have led us to be very cautious in our recommendations. The same is true for access to credit. People who assess the situation and issue recommendations are cautious, even very cautious. Their employer demands that they be. When there is a policy change on a very short term, people involved in the whole process of providing consulting services and credit become much more prudent. In my opinion, this hampers investments that could be made in the agricultural sector.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Chairman, if I have time, I would like to ask one last question.

Environmental standards have forced producers to acquire land for spreading manure. In Quebec, as regards the ASRA program, land was required under the concept of ecoconditionality. By setting these requirements, the agricultural heritage practically becomes the exclusive property of farm producers. They buy the farms, but they have to pay the interest and the principal. Has this situation made a number of farms more vulnerable?

[Benoit Turgeon]

Yes, that is the case for a number of operations that produce certain products, including hog farms. I would go further than that.

As regards standards, whether we are talking about environmental or business standards, I would lean towards reciprocity at the border. I think that Agriculture and Agri-Food Canada can do a lot in this respect. If we ask our producers to comply with environmental standards related to herbicides, minimum wage and so on—and that is not an easy task—we should ensure that any product which crosses the border, regardless of its origin, is subject to more or less the same conditions of production abroad. Otherwise, it is unfair. The more we want to do the right thing regarding production, the more we make our industry weaker, with the result that it can easily be pushed aside by other countries.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Now we'll move to Mr. Valeriote for five minutes.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you for coming today. I appreciate it. I regret I'm not able to ask these questions in French.

I got home this past weekend and thought about the last two weeks of crossing this country, and I thought about the dilemma the farming industry is in. I've heard from so many that they love the lifestyle, but there's no livelihood in it for so many farmers. I understand it's a little better in Quebec because you have I think a provincial government that's more supportive and programs that are more supportive.

I began to compare it with how we're dealing with poverty in this country. We make it a little more comfortable for people to live in poverty, but we never help them out of poverty. I'm worried that we might make it a little more comfortable for the farmers to live with their losses but never help them really make farming sustainable. That causes me to be very concerned about our ability to have food sovereignty and always be able to feed ourselves.

Most of you, it seems, are in the supply managed business. A lot of the others we spoke to were not. I am curious. It's one thing to get into supply management, and I understand there are big costs, but once you're in, the income is a little more stable, as I understand it.

I'm curious about two things, and this is at the other end. This is what's going to protect your prices. Two things have come to the top of the issues. One of them is the lack of harmonization of regulations and standards, those of Canada versus those of other countries, that make us less competitive, such as SRM or pharmaceuticals they can use elsewhere but we can't use here, yet we still eat their food.

The other is the concentration of power among some of the processors, some of the fertilizer suppliers. We don't have laws that allow or enable us to deal with those concentrated powers by breaking them up the way they can in the States. They've got anti-trust laws there. We don't have those here.

I'm wondering if I can hear from any one of you, or all of you, about those two issues: the lack of harmonization of regulations and standards, and the concentration of power and how it affects your industries and your production.

[The Chair, Conservative, Larry Miller]

Who wants to start?

[Frank Valeriote, Liberal, Guelph, ON]

I'd like to hear from a couple of you.

[Réjean Leblanc]

I can talk about the concentration.

I'll just focus on Quebec for this part. If you take the pork sector--and I've talked to my clients, and they have children who want to take the farm, but right now I think the market is fluctuating too much. As you said, they cannot get good revenue from it. What will probably happen is we're going to lose those family farms.

We're still going to be producing those pigs in Quebec, but they will be divided by 40 or 50 producers because we don't have any program that will be supportive of those family farm operations. Everybody will agree with me that's where we have a problem after that with the young taking the farm, because the assets are too expensive to get and they cannot get revenue. So companies have access to cash and credit, and they will be able to set up their system to still produce the pigs.

Perhaps Benoit can deal with the issue of regulations.

[The Chair, Conservative, Larry Miller]

One minute, please.

[Benoit Turgeon]

I may not talk about regulations. However, as regards buyer concentration, there are three or four large buyers of food products in Canada. It is a bit of a vicious circle: buyers want to concentrate their purchases, and if the same person buys all the ham for a company, it is much more appealing for that company than to have a buyer in each province or region.

Conversely, we must have industries that are able to supply them. So, if we ask our processing industry to downsize, it will no longer be able to meet the demand related to any contract. The buyers want millions of kilograms of ham in the same week, and in the same countries. There is a problem indeed. The solution is not an easy one.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Lemieux, five minutes.

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

Thank you very much.

Programs definitely play a major role in the life of a producer. Mr. Eyking mentioned NISA, an old program that worked well for farmers. Now, it is AgriInvest. It is a similar program: a producer invests money in AgriInvest, and the government matches every dollar invested. The producer can withdraw his money at any time. That applies to the first 15%.

This is definitely a challenge in the development of federal programs. We want to help producers but, at the same time, we do not want to hide the market's realities. If the market changes over a long period of three, four or five years, we do not want to hide that fact, because we would not reflect the reality. So, it is difficult, because we want to provide assistance, but we must also recognize that the market may be different.

In my riding, as I mentioned earlier, we have supply management and it is very important. I am a strong proponent of supply management. We can see that it provides stability for producers.

Here is my question to you. As I mentioned earlier, in Saint-Isidore, which is a village located in my riding, egg producers are young and they operate under a supply management system, while dairy farmers, who also operate under a supply management system, are older. I would like to know if there is a reason for this age difference. After all, there is a supply management system in place, a quota must be bought and the price to pay to get in the business is high in both cases.

Do you notice the same thing here, in Quebec? Can you think of reasons that may explain the difference in the average age of egg and dairy producers?

[Richard Lehoux]

I may have a partial explanation. There is no question that, as regards egg production, quota prices are in place and building costs are important. That said, it may be because of the size of the land that we must own, which is smaller, at least from my perception. Would that not be a part of the problem?

Back home, we must buy the quota, the land and the herd. For example, once my son will have bought the herd, the land and the buildings, he will probably be able to make his payments, but when the quota cost is added, he will have a problem. I believe that the amount of land required may put a greater demand on a dairy farmer than on an egg producer. Would that not be a part of the explanation? That is my view.

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

Ms. Létourneau may have something to add. You decided to get into the dairy sector.

[Laeticia Létourneau]

I have no idea as to why egg producers, unlike dairy farmers, would hand over their farm. However, I do know that many of my friends have a share in the family farm, without necessarily holding a majority interest. Their father keeps the larger share for a while, before gradually passing it on. Perhaps egg producers want to retire earlier.

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

I want to congratulate you for your perseverance. You had to face many challenges when you first started your farm operation, but in the end you succeeded. Congratulations.

[Laeticia Létourneau]

In my case, I was successful when I approached three people I did not know. However, I know many young people who did not have the same success and luck that we had when we first started our operation.

[The Chair, Conservative, Larry Miller]

Thank you very much, Mr. Lemieux.

Mr. Shipley, you have time for one question.

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

It can't happen, sir.

I am a farmer. I was also in supply management in the free market, and I was also a mayor. So beware of what might follow--statements, if not questions.

First, I do have a statement, and it's just a comment about the regulation, lack of harmonization. I had a motion put forward that we got passed by Parliament, just to deal with that exact issue. Hopefully we can continue to move ahead. It didn't have all-party support, but we got it through.

Secondly, because good succession planning and practices are long term, are they generally accepted within the farming industry?

In terms of the pork industry, it started in 2004 in our area. We had buildings being built, a doubling of pork production over 10 years. We had a low dollar--a 65-cent, 67-cent dollar. We had low feed costs.

Then the circovirus came in. We put in $67 million towards the vaccine. It was a miracle drug.

Then there was bad feed--or not as good feed--in 2007. There was good feed in 2008. H1N1 came along. I mean, it's just been one thing after the other.

We now have profit in the pork industry. The markets are there for a profit right now. But how do we prevent this from happening again? How does the industry help us to prevent this sort of thing from happening again?

And the next one... I'm just trying to understand. Mr. Turgeon, you talked about a higher debt per farmer in Quebec than in other provinces. And yet I can tell you that in Ontario it looks as if Quebec is being subsidized higher than any other province. So how does this work for beginning farmers? What does this actually mean?

I'll leave it at that.

[Benoit Turgeon]

I am not sure I understood the end of the question, but I will try to answer it nevertheless.

As regards the issue of how to avoid making the same mistake twice, I would say this. Indeed, that is a production that has expanded in a market where the value of the dollar was very low, which means that it was easy to have access to markets. We must first build our industry and then base it on domestic consumption. I think we have to be good at home before we can sell abroad.

In this regard, Canada Pork International promotes our products abroad and on the markets, which is very good. However, there is no similar body to promote domestic trade in Canada. Perhaps we should also work at stabilizing the situation and at establishing a solid base in our own country, and then take advantage of export markets.

I think that once we stabilize production, we will surely bring it to a level that is lower than the current one. It will then be incumbent upon the industry—that is producers, creditors and processors—to say that if business opportunities present themselves, they will be able to determine whether these opportunities are going to exist for two or three years, or for a very long time. In the case of opportunities that are going to be there for two or three years, since the value of our dollar keeps fluctuating, that risk factor should be taken into consideration.

There is no point in streamlining our production to, for example, reduce it by 2, 3, 4 or 5 million hogs, and then increase it again by 4, 5 or 6 millions in two or three years and go through another crisis in the years that will follow. We should have a global approach for the industry, and that includes producers, creditors, processors and slaughterhouses.