Agriculture Committee on May 10th, 2010

[Laeticia Létourneau, As an Individual]

I was invited here by Mr. Lecours to talk about starting my dairy farming business. My spouse, Justin, and I started a dairy farm. Today, we have 33 kilograms of quota, and we started with nothing. Justin's family owned a dairy farm, and 100% of it was passed down to him and his brother. My father is a lumber producer. We both studied agricultural management and have a DEC.

It all started after CEGEP. I managed a dairy farm. We had good production, which was known in the region. The idea was to have our own dairy farm. We took a look at emerging crops. I considered maple syrup production, we got a foundation stock of 125 to start in bee keeping, but those did not interest us. It was very time consuming and not very profitable.

So we went to see a man we did not know, who was dismantling his farm, and he loaned us $300,000 with 2% monthly interest over 10 years, with no principal repayment. We had a small house at the time. I was able to get $50,000 to $60,000 by selling the house. Since we had both studied agriculture, we had two $80,000 subsidies to get started. We found a dairy farm. The owner sold us very good land and buildings that were ready for animals. Everything was there: feeding machines, the processing system. All we had to do was bring in the cows. He sold us that for $400,000.

I developed a little plan that I went to present to the Financière agricole du Québec, which did not even want to look at it. Its representative advised me to throw it away so that he would not have to do it himself.

Since my spouse worked on contract for the Financière agricole du Québec, in crop insurance, and knew some of the higher-ups, we went to see them. They referred us to other advisors who took the time to look at our plan. They told us that it was not enough, despite everything that we already had. We were entitled to the five kilograms for new entrants. At the time, the 10 kilograms, which is now 12, did not exist. We could not buy the land. They told us that they did not help young people start out by having them buy land; they had to lease it.

We had a hard time convincing the man to lease us his land, which was not something he was considering; he wanted to sell. It was a lease with an option to buy. We submitted that to the Financière agricole du Québec and were denied again. We needed around $100,000 in guarantees to start up our farm. We found a third good Samaritan who was willing to sign for us and guaranteed the $100,000 so that we could get our farm up and running. We needed three good Samaritans to start a family-run dairy farm.

On January 1, we started our fourth year of production, and we have 33 kilograms of quota. Things are going very well. The hardest part was getting started.

[The Chair, Conservative, Larry Miller]

Thank you.

Now last but not least, Mr. Lehoux for seven minutes.

[Richard Lehoux, As an Individual]

Good morning. I thank you, Mr. Chair and members of the committee for giving me the opportunity to speak this morning. I am here as an individual. I am an agricultural producer, a dairy farmer. I co-own a dairy farm with my brother. I have two sons who are 25 and 29. They love agriculture they live and breathe it. However, getting them settled in the agricultural world is a very difficult task.

I am also the mayor of my municipality, and reeve of my regional county municipality, in Nouvelle-Beauce. I should mention that it is the second-largest agricultural RCM in Quebec, after the RCM of Maskoutains, in the Saint-Hyacinthe region. Chaudière-Appalaches is a very agricultural area. The next generation plays a very important role for the future, if we want to continue to see this agricultural industry develop.

I hope you will forgive me if I start by saying that I believe in maintaining supply management, in dairy farming, among others. It exists and it is unavoidable. Supply management ensures the durability of the productions, such as eggs or poultry. Other productions could have something to gain by changing to this type of management.

I am not against the globalization of the markets. However, when it is a matter of feeding the planet, we must pay attention. Mr. Groleau's comments earlier were right on the money and I agree with him.

We need only look at the European Economic Community, which stopped using it a few years ago, to see how important some kind of management is. We need only look at the decreased prices being paid to producers. There is no way we can think of bringing in strong and competitive new producers if that were to happen here. I have friends who are producers in Switzerland, Belgium and France, and they have a hard time recruiting replacements, because of all the problems that currently exist in Europe in the dairy farming sector.

We must also be careful not to destabilize the regions by changing programs or policies, or simply by abandoning a policy that is there to support them. The vitality of our regions—I am saying this as a mayor—depends greatly on the vitality of its agriculture and agri-food processing industries. Agri-food processing in our regions is very important to our communities' economies.

I still believe that for a country that is so strong, the agriculture must be as strong as possible and must be supported by a development plan and by better suited policies. A medium- and long-term agricultural policy would be very important in helping to bring in the next generation.

I would also like to mention some other things to think about. We could have lower interest rates for new entrants. There is currently a commitment from the Financière agricole du Québec, but could we not see lower rates supported by Agriculture and Agri-Food Canada? That could be significant, because starting up an agricultural farm, whether it is dairy or other, requires a considerable amount of money. Lower interest rates could make a difference.

With respect to increasing support for new entrants, there is the AgriInvest program, which helps farmers for five to ten years. The current contribution is 1.5%, but it could perhaps be increased to 3% or 4%. Also, Agriculture and Agri-Food Canada could simply take on the producer contribution for new entrants, for young farmers, for the first five to ten years after they start their businesses.

I would also like to mention another important thing regarding assistance for family transfers, a reality that I live every day. I own a family business with my brother. We both have children who want to get into farming. We want to expand this business. We do not want to see it grow, but perhaps split. That requires a considerable contribution from the parents. Increasing the capital gains exemption when selling the business to children could make a huge difference.

We should also consider adjusting the taxable value of businesses, for example, finding a happy medium between the actual value at the time of sale and the market value.

We know it is impossible to think about selling property to our children at market value. No one is able to buy the farm at that price. In dairy production, no young person would be able to pay for the quotas, the land, the herds.

One of my children has tried twice to get financing. Even if I try to support him, it is not possible, it will not go through. My other son was able to start his own farm, a business separate from our own, but we had to provide a considerable amount of support from the assets of the business that I share with my brother.

I think some serious thinking needs to be done if we want to bring in the next generation. I will stop there. If you have any questions, we can discuss them later.

Thank you, Mr. Chair.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We're going to move to Mr. Eyking, and we're going to cut it to five-minute rounds. If we have time left over, we'll certainly use it.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Jacques used up all our time, did he?

[The Chair, Conservative, Larry Miller]

Anyway, it's your time now for five minutes.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Chair.

I thank the witnesses for coming today.

As we have travelled across Canada in the last few weeks, we have been hearing the same story about the hog industry. It's in really bad shape. It reminds me of when my father was in the egg business in the 1960s. It was a desperate situation. We are hearing that the federal programs, whether they be AgriFlex or AgriStability, are not working for the hog producers. These loans only put you more in debt, which you have to repay. Also there was a buyout incentive. The uptake didn't seem to be very good on that.

I guess what was needed in the last year or so was cash, so much cash per hog or per pig that you are producing.

My understanding from earlier this morning is that 40% of the hog production in Quebec is exported out of Quebec. I don't know how a marketing board would fit in there. It might not fit in very well with that amount of production. There was also talk in the last few weeks of floor prices for many commodities that are not in supply management.

I'm just thinking of other ideas. Mr. Leblanc, you mentioned an insurance. We used to have an insurance package that was called NISA. I don't know if they had it in Quebec. The producers, in the years they could afford it, would put so much money in. The federal government would put so much money in, and the province would put so much in. It kind of build up a little nest egg, and you would draw from it as you needed it.

We are hearing quite a bit that such a program should come back, or some kind of child of that program.

My questions are mostly for the hog producers. Where is the industry going to bottom out? And more importantly, our understanding is the programs aren't working now. What do we drastically need to change out there to get some cash in the hog producers' hand, obviously, but, more importantly, so that the industry is on a more stable footing?

I need a little time for my last question. In the Maritimes, where I'm from, our hog industry is pretty well gone. One of the repercussions of that is, for instance, in P.E.I., where they grow a lot of potatoes. Their crop rotation would be barley, and the hog industry used to consume the barley. So they're not only losing their killing plant and hog farms in P.E.I., they're losing a very vital part of their potato crop, which is barley.

The first part of my question is, what should we be doing in the federal government more than we are doing now? The second part is whether the downturn of the hogs will have a drastic effect on other agricultural industries in Quebec.

[Réjean Leblanc]

On your first question, I think the programs are not working because of the risk management program. I think we're now in a crisis situation. That's why when the producers try to manage in that program they don't see the money coming. That program works if you have a good year, a bad year, a good year, and a bad year. But now we've bad years for a couple of years, so I think that's why those programs aren't addressing the situation well.

If you look at the pork sector as a whole in Canada, it's going down. You see that in the Maritimes. Here in Quebec we have an insurance program from the provincial government that's slowing things down, but in the end it will be the same as in all the other provinces--just the speed is different.

When we build the sector--pork was built on export and everything--we all may agree it would be a good thing to slow things down a little. But we have to make sure it's done in a proper way so we don't destroy everything as a sector. We have people working on farms. We have industries selling feedstuff. We have to make sure everything goes...give it time, then adjust and cut everything in this, because you lose farms and all the businesses around them.

So I think the program has to be made to address risk management when things are going normally. But we need programs to stabilize the sector before it gets better. That's what we're looking for now for the pork sector. We had that for beef, so it's the same thing.

We know the market fluctuates and it's hard for the producer. We know that the health issue is important, and if we can take the impact of health out of the cost of production, it will help the sector manage the fluctuations in price and feedstuff.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

So you're looking at the short term and the long term, basically?

[Réjean Leblanc]

Yes. I think the programs right now are just for risk management, but we have nothing for when the sector is in crisis.

[The Chair, Conservative, Larry Miller]

Thank you.

I'll move to Mr. Bellavance for five minutes.

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

Thank you very much.

Thank you for your testimonies.

When witnesses appear as individuals, we do not always know who they are. Mr. Turgeon, we would very much love a written copy of the document you presented earlier.

You are a producer, an agronomist? Could you explain briefly, please, as we have only five minutes.

[Benoit Turgeon]

I am an agronomist. I have two roles: I am a management advisor for dairy, hog and other types of farms, two days a week, and I have been an agro-economist for the Centre de développement du porc du Québec, the CDPQ, for five or six months.

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

So with respect to the projected portraits with control groups that you mentioned dearlier, you had a contract to do that, if I understood correctly?

[Benoit Turgeon]

It was not an outside contract. It was an initiative of the centre.

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

The control group was—

[Benoit Turgeon]

There were two control groups. The first came from the study by the Fédération des producteurs de porc du Québec, [Inaudible—Editor]. The data is obviously from 2008. The 2009 data will be available within a few weeks. The group on which we made the projections was a control group from the Fédération des producteurs de porc.

The group whose results I mentioned was made up of real farms from the consulting group I work for. We just collected the 2009 data.

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

One of the measures you mentioned was what could be done regarding an APP freeze. Could you estimate how long that freeze would have to last? You said that we would need a freeze until the crisis is over. How much could such a measure cost? When Jean-Guy Vincent, the president of the Fédération des producteurs de porc du Québec appeared before the committee, those were the same questions he wanted to ask the agriculture minister, Mr. Ritz. He wanted to know what would happen when the deadline arrives. Are we able to estimate how much that could cost?

[Benoit Turgeon]

I do not have any figures because I have not examined this; I was not asked to. However, because a significant number of businesses will not make it through the crisis, it is important to focus on those that can be saved, even if we must decrease the amount of the repayments for two or three years. I obviously have no answer as to the length of the crisis.

However, even if we must lower the repayment of the capital on these loans, it is an option that must be examined. A business that is not able to handle its expenses and the interest will inevitably have to shut down one day.

I do not think that we should torture these businesses indefinitely. Some of them should not have been eligible for the APP in 2008. The APP allowed them to last another two years, but they will inevitably shut down.

However, we must support those for whom it was fair. If they reach only 30%, 40% or 50% of the capital of the debt for the next two or three years, is a profitable option.

If this is not the case, Quebec and Canada will have struggling hog farms, but the slaughter industry and processing sector will inevitably suffer as well, as the gentleman was explaining earlier.

When hog producers stop buying grain, what happens to the grain? When there is no more pork, what happens to our slaughterhouses, to the processing plants?

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

Mr. Lehoux, I agree that the vitality of the regions is directly related to the vitality of the agricultural industry. I believe that it is also linked to the idea of keeping the land populated. I imagine that if some regions lost their populations, there would be no more agriculture.

I also wanted to briefly mention what is going on with the stabilization insurance program in Quebec.

You are likely aware of the difficulties and of the negotiations underway between the UPA and the Government of Quebec. You are also likely aware that part of our taxes go to the federal government. I should know, and I think that we should pay our taxes to a single government. There is the AgriFlex program from the federal government, but it excludes income support.

With respect to stabilization insurance in Quebec, do you not think that including income support to the AgriFlex program would allow Quebec, and the other provinces that have stabilization programs—some could even create them if they do not have them now—to resolve this problem?

That is what we are hearing from the other provinces. I would like to know what you think.

[Richard Lehoux]

I am not very familiar with the AgriFlex program itself, but I believe that there should be a greater contribution from Agriculture and Agri-Food Canada.

AgriFlex deals with productions that are not subject to quotas, but what about the rest, all the other productions that are managed and where there are no investments?

My speech this morning was very much focused on the next generation, because if there are no new farmers, the regions will start shutting down one after the other, and the processing industry will gradually disappear as well. When there are no more businesses to produce, there will be no more processing.

I have not carefully examined what, exactly, Agriculture and Agri-Food Canada could do. However, I believe that there should be more assistance. Should this assistance not be part of a national agriculture policy that is very precise and structured?

I think that is what we should look at, a Canadian agriculture policy.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Atamanenko has five minutes.

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

I thank you very much for being here. I have a few questions, and I would like you to comment.

Would it be an exaggeration to say that survival in rural Canada and Quebec is in jeopardy? We see, for example, fewer farms than there were a few years ago.

That must be concerning to you, Mr. Mayor, because agriculture is the basis of any small town.

It has been clear that for years, the federal policy has focused on exportation and tries to create markets while trying to protect supply management. We are an exporting country, but we also want to protect our domestic industries.

My question is for everyone. What can we do to protect what we have and to try to open up markets? Until now, we have seen that that does not work for sectors like the hog or beef sectors.

Should we consider a supply management system, for example, in the hog sector? Would that work? We know that we export and import pork.

These questions are rather philosophical, but I think that we are talking about all kinds of programs and we want to help these sectors. In general, how can we maintain our vision of promoting our rural communities while continuing to export?

I will leave you with those questions. We could start with Ms. Létourneau, and then anyone else who would like to comment will have a chance.

[Jean Lecours]

On the agricultural side, there is indeed a problem in some areas right now. I am thinking of the hog industry, but that also applies to other types of production. I think that the situation is going to change, not quickly but gradually. Many businesses will diversify to become short channels. This means they must have a kiosk on the farm, or be much more present in public markets. We currently see this pattern in Quebec, and we are working on it.

As a management consultant, I remember someone who telling me about a kiosk on the farm. That was a rare occurrence. Those who would set up such stands were seen as oddballs. Today, it is just the opposite. The programs of Quebec's agriculture, fisheries and food department, among others, are very much focused on an operation with short channels—that is a kiosk on the farm or in a public market, or a distribution channel with only one retailer—and with a significantly reduced processing operations. However, this type of structure is much more risky from a financial point of view.

When a producer comes to see me because he wants to start diversifying his production, I always try to ensure that his production will include commodity products, that he will have access to a place where it is going to be easy for him to sell his products and have an income. As regards other considerations, diversified products have a smaller volume, which is going to gradually reduce the financial risk that may be associated with them. I think we are going to see greater diversification in the agricultural sector.

There is also another thing happening right now. In the past, a couple would often work exclusively for the family business, whereas now one the two spouses must work outside, which is unfortunate. In the case of a start-up business, and even when production is already well established, we recommend that one of the two spouses—it is often the woman—work outside the business. This results in the other spouse being overworked. We are seeing it now, and I am afraid this situation is going to become more prevalent.

[The Chair, Conservative, Larry Miller]

We're out of time, but I'm going to give you 30 seconds, Mr. Lehoux.