Evidence of meeting #39 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 programs.
A recording is available from Parliament.
Conservative
Randy Hoback Conservative Prince Albert, SK
I guess I'm a little concerned. Mr. Easter made a comment that about 80% of the producers in Ontario are going to be defaulting on their advances...?
Conservative
Randy Hoback Conservative Prince Albert, SK
Can you table that, Mr. Easter? Because that's a very startling number, and I'd like to see that report, because if there are 80% in default, then I'd also like to see what else is in that report. Can you table that for me?
Liberal
Wayne Easter Liberal Malpeque, PE
[Inaudible--Editor]...discussions with the industry, including the minister--
Conservative
Liberal
Conservative
Randy Hoback Conservative Prince Albert, SK
I guess my concern, Mr. Easter, is that you're throwing a number out here of 80%, which is a huge number. It's very concerning to me when I hear that number, but in the same breath, is it real?
Liberal
Wayne Easter Liberal Malpeque, PE
Come down to P.E.I. and talk to farmers and the minister down there. They'll tell you the same thing.
Conservative
Randy Hoback Conservative Prince Albert, SK
No, no. It's my time.
If it's 80%.... Can you check into that and verify Mr. Easter's number that 80% of the industry is in possibility of default and report that back to committee?
Director General, Finance and Renewal Programs Directorate, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
Each individual case for a farmer is different, so forecast numbers are a challenge to put forward. The situation, though, just to clarify, with the emergency advances that most of the hog producers and a large portion of the cattle producers took in 2008-09, the security requirements were different from the normal program. So what you described is correct most of the time, but in response to the demand for a cash infusion, the emergency advances were put in place. The BRM security requirements were different and they could get an advance on--
Conservative
Randy Hoback Conservative Prince Albert, SK
But I'm still confused, then. How did they get out of security...? How did we end up advancing the money without any type of inventory security?
Director General, Finance and Renewal Programs Directorate, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
Because the conditions of the emergency advances were different from the regular program.
Conservative
Randy Hoback Conservative Prince Albert, SK
Okay. So the Government of Canada took mercy on the industry in this case and actually said it would throw up an olive branch and give these guys some assistance to kind of get them stepping through this. Is that correct?
Director General, Finance and Renewal Programs Directorate, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
That's correct.
Conservative
Randy Hoback Conservative Prince Albert, SK
So we did everything we could under the existing...including ignoring a possibility of not having security in place?
Director General, Finance and Renewal Programs Directorate, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
I wouldn't say it was ignored. It was just a different condition under the emergency advance situation.
November 25th, 2010 / 9:50 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Going back to the AMPA programs themselves, one of the things I'm hearing about in my riding as I talk to constituents--and some of it has been addressed--is the timeliness of payments. It sounds like moving the offices out to the regional areas--moving them out of Winnipeg to Saskatchewan, for example--seems to be improving that.
One other issue that always comes up, which I think reflects the 21st century, is removal of caps. The reality is that $400,000 on a grain farm now is nothing; it's not even 2,000 acres of inputs. Has the removal of caps been under consideration?
I'm going to keep listing off a few things here, so perhaps you'll want to take a few notes, because I know I'm going to run out of time.
On bankability, again, I know that a couple of years ago there was talk about creating a form that would be similar to income tax so that it was bankable, and so that when it was done you knew roughly how close you were to what you would get or not get when you filled out your forms.
Another thing I'm concerned about on the crop insurance side of things is the ability to purchase enough insurance to cover the inputs. As we look into new crops, new varieties of crops, and crops for non-food purposes, the inputs are going to be substantially higher than we saw in the past. We need to figure out a way for the producer to purchase that type of insurance. If it's through government, that may be one option.
I understand that private industry is also looking at providing those types of insurance. If private industry comes in and provides that type of insurance, are we willing to subsidize that insurance, equivalent to what we do in crop insurance? Again, that's a question I throw out there.
Removable barriers: again, that should come up in any program. We have a big barrier in western Canada in the wheat sector. It shows up in everything we do. I don't even have to mention its name. Again, those types of things should be talked about.
The other thing that I think is really interesting, and that I think you need to be aware of, is that we're seeing corporations now that are getting tremendous margins, especially in southern Saskatchewan with their lentils and peas and stuff like that, and they're capitalizing that margin when they go to sell their business, the same as quota got capitalized.
We're seeing guys who have substantial margins. When somebody new comes and buys their business, buys their shares, they're carrying that margin forward and saying, “Because my margin is higher than David's, I should get x number of dollars more.” That concerns me because I'm not farming it any longer, but somebody else who is now taking over and farming it, and it could lead to an inflation in land values, based more on margin than actual production of crops. I guess I'd throw that out there too.
Perhaps I'll leave it at that. There are a few other things I think we need to look at. Maybe I'll finish off with mixed farms.
We're seeing guys being driven out of mixed farms because of the way the program is structured, because of the cross-subsidization of grain in your whole farm approach. If there's a way that we can structure it so that we don't do this...because I feel it actually creates more risk in the long term. If the farmer is willing to offset losses from grain for cattle and vice versa, he shouldn't be penalized for doing that. But the way the program is structured right now, he is actually being penalized.
I'm not sure I have the answer to that, but in the same breath, I think it's something we need to be discussing. What happens is that we're seeing people specialize. For example, in the hog sector, when that sector goes down, their only insurance and their only saving grace is the BRMs--it's government and that's it. In the old days, which weren't always the best, if the grain was no good, the cattle came up, or vice versa. Well, we're actually encouraging guys to do the opposite of that.
I'll leave it at that.
Director General, Business Risk Management Program Development, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
Thank you.
There was a point you made about high margins being experienced. What was that point? I missed it. I'm sorry.
Conservative
Randy Hoback Conservative Prince Albert, SK
When they go to sell their farm, their corporation, they actually say their margin is higher so they want more value for their corporation.
Director General, Business Risk Management Program Development, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
And what was the point before that? I'm sorry. Do you remember that?
Director General, Business Risk Management Program Development, Farm Financial Programs Branch, Department of Agriculture and Agri-Food
I'll try to whip through these in terms of responses.
In terms of delivery, as you mentioned, we have devolved the delivery of AgriStability to Saskatchewan now, in addition to B.C. The federal government is delivering the AgriStability program in four provinces: Manitoba and three of the maritime provinces. The handover of the delivery has gone very well and hopefully it helps.
What we're hearing, too, is that having people on the ground working through the program with producers, to deal with some of the issues you've raised about bankability, is probably part of the solution. When I talk to producers, they say that once you walk through the program and understand it, it isn't as complicated as you think. I think moving it to the provinces is the right direction for delivery. Then you can deal with the whole package, including your AgriInsurance as well as your AgriStability.
On the issue around caps, you mentioned two caps. There is a cap of $400,000 on the federal advance payment program. That was raised I think just a few years ago, when we added livestock to the eligibility for APP. We haven't heard a lot about raising that cap.
We have heard a lot about raising the cap for the AgriStability program, which is currently sitting at $3 million. Going back to Mr. Bellavance's point, that's one of the issues the industry has also asked us to look at for some of the larger livestock and horticulture operations. I'm glad to hear that now the grain operations are bumping up against that cap as well. Again, this is something that would have to be part of the package going forward, which ministers would have to consider in terms of any possible changes to programs.
You mentioned bankability. Bankability, diversified farms, and long-term margin declines are the three key issues we hear about from industry in terms of needed improvements and issues that we need to address.
The long-term margin decline is an issue, but the program is not intended to address long-term margin declines; it's intended to address short-term income volatility. This is something that again will have to be part of the deliberations of ministers when they look at the next Growing Forward framework.
I think I'll pass it over to Greg, who can talk to the insurance issue.
