Agriculture Committee on Nov. 25th, 2010

[Greg Meredith]

Yes. You raised a really interesting issue about insurance. For context, I'll situate it this way.

There are a number of crops being developed specifically for non-food uses. A good example in your area would be the crops with high lignin content that are being grown for the biochemical industry. In other words, you replace petrochemicals with these platform oils such as lignin and produce some very high-value chemicals and chemical compounds out of it, which are green and natural and produce a very high return to the farmer.

The challenge—and this is one of the things we mentioned in terms of getting the infrastructure right for the sector of the future—is whether the regulatory environment and issues such as insurance can catch up. In other words, if you plant a crop that's basically now a weed, it's worth very little, and crop insurance pays out very little. Once it becomes a bioengineered crop that's being sold into a specialized market, the value skyrockets and the return to the farmer skyrockets, but the inputs are more expensive and the coverage from the existing insurance is nowhere near what the value of the crop is.

The provincial insurance organizations are looking at how to keep up with this and how to differentiate products sufficiently to address those issues. It is quite a challenge at the current time.

[The Chair, Conservative, Larry Miller]

Mr. Bellavance, you have five minutes.

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

Mr. Meredith, I would like to come back to the question of production costs. Earlier, you alluded to the possibility of WTO challenges. It called to mind the time when people were invoking Article XXVIII to challenge milk protein imports. The department and the minister had alluded to the possibility of the same threat hanging over us. Yet, after pressure was exerted, Article XXVIII was ultimately adopted.

The disaster people feared never transpired. If the provinces are responsible for the programs, we can be virtually guaranteed that there will be no WTO challenges. I'm not sure what you are afraid of, particularly since the European Union and the United States provide billions in direct subsidies to their producers whereas in this country, producers must often pay out of their own pockets to participate in the Farm Income Stabilization Insurance Program. I just wanted to point that out quickly.

I would also like to touch on the Agri-Flex program that was briefly mentioned. Earlier, I said that we are holding consultations and that you are engaged in them as well. No doubt you heard people talk about the importance of having a truly flexible program that includes income support. This is not the case right now.

Has the department asked you to look into this matter to ensure that at some point in the future, the Agri-Flex program will fund income security programs, something that in its current form it clearly does not provide for?

[Greg Meredith]

Thank you for the question. It is important to understand the situation surrounding Article XXVIII which originates in part with the WTO. This mechanism is part of our rules. Canada follows the WTO rules.

I'll switch to English for countervail. The distinction is that we're using a facility of the WTO to protect our milk industry--section 28 safeguards--as part of our right to use, versus countervail, which is everybody else's right and ours to use in situations where sectors are unfairly subsidized.

In the case of countervail and provincial risk management programs, the risk is very high. We've had several countervails against the hog sector, against cattle, and against wheat, hogs most recently in 2004. ASRA was under a countervail threat from 1985-99 and only came out from under that burden because most of its products, most of the Quebec products that were being subsidized, were not being exported in large quantities.

So many in the industry implore the minister not to put their industry at risk. Remember that it's the individual producer who ends up paying for a countervail. For example, if we were to subsidize the risk management program in Ontario that covers grains and oilseeds, included in the countervail action would be all of the western producers and all the producers in Quebec who deal with grains and oilseeds, so they would in effect be paying for the subsidy in Ontario.

The rules for the WTO actually do work. Section 28 is a good example. The recent work in COOL has some fairly positive results so far. The trade dispute panel on COOL, our taking Korea to the WTO for a dispute settlement panel over beef, and the recent market access we gained with the EU with 20,000 tonnes of quota beef are all examples of where the WTO is working. Unfortunately, it also works in reverse with countervail. The risk is very high and the minister has indicated that he won't go in that direction.

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

I understand what you are saying. However, I heard the same threats, the same concerns, where Article XXVIII was concerned. It was the same story. Article XXVIII mustn't be invoked, otherwise the world will stop turning. However, let me say again that other countries are not afraid of going that route. I'm not saying that we should follow suit, that we should follow their lead and out-and-out subsidize, but when I say other countries, I am referring more specifically to the European Union and to the United States. It is a simplistic argument. The minister and the department are saying that we shouldn't go this route, because we would leave ourselves open to legal action, but there is nothing to indicate that this would in fact happen.

Would you care to comment on the Agri-Flex program and on income support?

[Greg Meredith]

Well, the government has indicated it will use section 28, and if it's challenged, we'll fight the challenge. I--

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

I was no longer talking about that, Mr. Meredith. I was talking about the Agri-Flex program.

[Greg Meredith]

The countervail?

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

I was wondering if any consideration had been given to adding an income support component.

[Greg Meredith]

Okay. Yes. Well, it's the same situation we're in. The minister had indicated from the get-go that AgriFlex would not be used for subsidizing provincial risk management programs, for the reasons I've already laid out on countervail.

I think it's perilous to underestimate the risk there, because once countervail is instituted, it's a very difficult situation to extricate yourself from. It's a five-year review, so you're looking at a five-year penalty on your export markets. I think the risk is real.

[The Chair, Conservative, Larry Miller]

Thank you very much.

I understand that Mr. Anderson and Mr. Shipley are going to share the time?

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

No. He's going to take the full time.

[The Chair, Conservative, Larry Miller]

Mr. Anderson, you have five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Chair, I'm glad to be here. I don't know that I have five minutes of questioning, so if Mr. Shipley is ready, that's fine.

I want to talk a little bit about the agricultural insurance side of things. In my part of the world, there has been discussion for many years about the possibility of private companies being able to do some of the work in terms of the insurance, and perhaps even on a larger scale than just western Canada—western Canada, mid-west, and those kinds of things.

Has the government ever taken any initiatives to look into that, to consider whether private insurance, in cooperation with farmers and government, might be able to provide the insurance needs that producers have? I guess I'm thinking primarily about the crop sector, but it may work in some other areas as well.

[Danny Foster]

As you know, the insurance programs we have are under provincial jurisdiction and are actually quite successful. They've been around for 40 years.

We have funded research, if you will, in looking at private sector models that could fill the gaps that aren't currently covered by the crop insurance programs. An example of that is the current effort that's under way in Alberta on price insurance for livestock. Now, that program is in fact being delivered through the provincial government, but it is fully producer-funded in terms of premiums. The provincial government is carrying out the administration and doing some potential backstopping of the program, but it is fully producer-funded in terms of premiums.

As well, we've been doing some studies on production insurance through the Canadian Swine Health Board. The federal government provided some funding to the Canadian Swine Health Board to work with private industry to see if we could come up with a hog production insurance model. Again, that's in process.

Where there are gaps, we are looking at all of the options in terms of how we can fill those gaps. Certainly, if the private sector can do it, I think we would say we would support continuing that work.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

So you see private insurance primarily as filling the gaps rather than being a primary provider of insurance?

The hail insurance system has worked well—

[Danny Foster]

Yes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

—in my part of the world anyway, and I'm wondering whether if you have considered that in terms of crop insurance. Is there a reason why the government should be involved perhaps in premium payments rather than in being the supplier of the insurance?

[Danny Foster]

I think that is something we're going to look at in terms of Growing Forward 2. In fact, at the last federal-provincial-territorial ministers meeting, ministers asked officials to look at insurance-based options for risk management going forward. There was no restriction on whether that would be public or private. I think if it can be done privately and it offers producers the protection they need, that would certainly be something governments would support.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

Mr. Shipley may have a question or two.

Or Brian?

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you, Mr. Chair.

I'll take the rest of my Saskatchewan colleague's time; he's kind of out of of the ag loop these days.

[Voices]

Oh, oh!

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

One of the things that I've heard a lot out west is about responsiveness on the timing of the programs. To be honest with you, we had a drought and it took a while to get our payments. It took about a year from when we wanted them. But at the end of the day, I couldn't help but recognize that the responsiveness increased quite a bit in the last flooding we had in southern Alberta and in Saskatchewan this year, as well as with what's going in the Interlake area.

What has the department learned from how we've come so far and so fast in the last year in speeding up? In all fairness, past governments used to take a decade before these guys got this stuff. It's a positive note, and I think things are getting better, but can you give me some of the lessons you've learned through this?

[Danny Foster]

I think probably the number one lesson is that we need to communicate better in terms of what the AgriRecovery program is about and what it's intended to do. The two initiatives you mentioned were done under the AgriRecovery program, which is a disaster framework. AgriRecovery is there not to provide assistance for lost income due to disasters, but to help producers move forward: what do they need to do to resume business operations or take actions to mitigate the impacts of the disaster?

In the case you mentioned, the pasture recovery initiative, which was a $117-million federal-provincial initiative in Alberta and Saskatchewan, was about helping producers face the challenges they were going to incur this past spring, with their pastures being in poor shape because of last year's drought. We were giving producers assistance to help them with the feed costs so they could keep their cattle off the pastures till they could recover. It was very forward-looking.

That's why the assistance came out in the spring, even though what caused the need for that assistance was what had happened the previous year. So the timeliness was there. Basically, they needed the money in the spring to deal with their extraordinary feed costs, because they shouldn't be putting those cattle on pastures and further damaging the pastures.

Similarly with the flood, the whole idea was to get the assistance out early so producers could take the necessary steps over the summer to rehabilitate the flooded cropland. This would allow them to be in a position to reseed next spring. It's very forward-looking.

But at the end of the day, one of the key things is that we have to do a better job of communicating what this program is intended to do.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I agree. Thanks.