Agriculture Committee on Nov. 25th, 2010

[The Chair, Conservative, Larry Miller]

We can call our meeting to order.

I'd like to welcome Ms. Moritz, Ms. Aylard, Mr. Foster, and Mr. Meredith.

Thanks very much for coming in today.

Before we start, I want to remind the committee that we need five minutes at the end of the meeting to deal with a couple of housekeeping motions.

I also want to read for you a section in chapter 20:The obligation of a witness to answer all questions put by the committee must be balanced against the role that public servants play in providing confidential advice to their Ministers. The role of the public servant has traditionally been viewed in relation to the implementation and administration of government policy, rather than the determination of what that policy should be. Consequently, public servants have been excused from commenting on the policy decisions made by the government.

I'm also going to remind members that while you spar with each other from time to time, that's acceptable, but if comments are brought in that were made by somebody not here or not participating in this meeting, I will be ruling you out of order and it will cease.

With that, I'm going to turn it over--

Mr. Easter?

[Wayne Easter, Liberal, Malpeque, PE]

On a point of order, Mr. Chair, on that point, I would ask the clerk to check out that statement under the parliamentary rules. We don't need to do it now and take time--

[The Chair, Conservative, Larry Miller]

Check what statement?

[Wayne Easter, Liberal, Malpeque, PE]

Your statement that you cannot use quotes as they're not here. It happens--

[The Chair, Conservative, Larry Miller]

I didn't say quotes, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

What did you say, then?

[The Chair, Conservative, Larry Miller]

I said that if you start making derogatory comments about any individual.... There were both the other day. There were quotes and then there was other stuff. That's all. I will rule on that accordingly. Quotes are acceptable--

[Wayne Easter, Liberal, Malpeque, PE]

Okay. That's fine.

[The Chair, Conservative, Larry Miller]

--as long as you can back them up.

[Wayne Easter, Liberal, Malpeque, PE]

I have one other question. We expected to have the department at the meeting on November 6. I don't believe you were here that day, Mr. Chair. I believe Mr. Eyking was in the chair. We were told that the department people were in Toronto and therefore unavailable. That's fine, but as a committee we made the request that we wanted the clerk to find out who was in Toronto and at what meetings. That was to be reported back to us, so I want to make sure that that's to be done.

Okay. Thanks.

[The Chair, Conservative, Larry Miller]

Do you want that now?

[Wayne Easter, Liberal, Malpeque, PE]

No--as long as we get it.

[The Chair, Conservative, Larry Miller]

Okay. Thank you.

Who wishes to go first?

Mr. Meredith?

[Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Yes, Mr. Chair. I'll go first.

I think we've distributed our opening remarks, so I won't read them out to you, but I do want to cover some key points.

As you know, the agricultural jurisdiction is shared federally and provincially. In 2003, we established the first sort of national policy framework that brought the federal government together with provincial and territorial governments to align our programming and policies to make sure that we're better serving the agricultural sector.

The agricultural policy framework initially focused on branding Canada as a leader in safe food and environmentally sustainable practices for food and agriculture. The subsequent policy framework, Growing Forward, which began in 2008 and will run out in 2013, extended that ambition, but added a great deal of flexibility for provinces to design programs that are locally relevant and effective. It also invested considerably more money in innovation, recognizing that the international landscape has changed.

We're just at the point now where we're starting our next policy framework. We began with consultations in May and June of this year. After some intense and creative brainstorming, we're naming it “Growing Forward 2”--for now. We've spent a great deal of time talking to leaders in the sector and others about what the world will look like in 2020, about what the opportunities and challenges will be looking out over the next 10 years, and in using that as a basis to design the next policy framework. I just want to talk a little about what we've been hearing.

On the demand side, the world looks like agriculture's oyster, because there is growing demand, both in terms of large population increases--mostly in countries like India, China, Brazil, Russia, and other areas--and in terms of income increases in those countries. For Canada, this means that there's an opportunity literally to feed millions of more people, given their higher disposable income. We know that consumption patterns change when incomes go up: there's a lot more dairy consumed and there's a lot more animal protein consumed. So there are opportunities for us in those areas, both on the growth side and on the income side.

There's also a considerably greater demand today for foods with specific attributes, namely mostly in the health areas, and we've seen major growth in crops like canola to feed a world that is hungry for healthy foods. There's a huge opportunity for foods with specific attributes.

On the supply side, of course, Canada is really well placed with its considerable arable land and water, which isn't the case in many other countries. China, for example, has surface water that in many cases is not even suitable for agricultural irrigation anymore. So Canada is well placed, both in terms of natural resources and technology and innovation.

Our farmers are amongst the most productive in the world and we think we'll be very well placed. Those in the sector are telling us that they're going to be very well placed to take advantage of changing consumption patterns and population growth that will be demanding more food.

The challenge for us, though, is that as populations grow there are competitors on the horizon. In Ukraine, Kazakhstan, and Russia, if they get their act together and improve their yields, they can become significant competitors in grains and oilseeds. Brazil is already an emerging giant in agriculture. So we do have our challenges ahead of us, and our farmers, I think, are up to the challenge.

We do have to become more innovative. We do have to become more productive. Innovation, we think, is going to be key as we go into Growing Forward 2, and innovation in a number of senses. One of those is in the traditional sense of research and development, in providing our farmers new technologies and new crops, with better agronomic characteristics to improve yields, but also with characteristics that will improve the attractiveness of our crops for specific consumer demands, like health attributes.

We also see innovation applying in terms of business models. Globally, what we're seeing is a supply chain that's becoming more sophisticated, with global suppliers demanding greater performance on the environmental side and the food safety side. As those business models change, Canadian farmers will have to adapt to those more sophisticated supply chains, and we think we are ready to do that. So innovation is going to be quite key.

Among the other things we are hearing from the sector is that infrastructure is an important driver, both for innovation and for our attacking domestic and global markets. We look at infrastructure from a traditional point of view; in other words, you do have to move your product to market. You do need to have ports at railways and highways, but you also need to have the infrastructure in place for regulatory policy and the legal framework, and you need the human infrastructure in place, that is, people who are smart and entrepreneurial and ready to move. The sector is telling us that we need to focus on that part in GF2.

We're looking at attacking domestic and global markets. The committee won't be surprised to hear from me that we do see greater interest amongst consumers about where their food is grown and greater interest amongst consumers about getting access to local food and understanding their connection with local agriculture. There's a domestic market opportunity there for our farmers, as well as a global market.

In this day and age, with changing standards, demands from consumers, and demands from supply chain managers for sustainable agriculture, clearly the environmental performance of the sector is going to remain very important. We need a sector that is adaptable, able to respond to new market signals, and able to deliver what consumers and supply chain managers are asking for.

So where we're at right now is that we've done our first phase of consultations and we're going to move into the second phase.

The first phase of industry engagement was held in May and June 2010 with a series of national and regional workshops held across the country. Over 400 farm leaders and other key value chain stakeholders engaged with FPT governments on the long-term challenges and opportunities facing the sector. These engagement sessions were very productive and provided valuable insight into stakeholder views.

Phase 2 is scheduled in March 2011 and will be geared towards defining policy options and securing an endorsement on the proposed GF2 framework model. Phase 2 engagement will try to include the general public as well as various associations, opinion experts and issue experts.

Phase 3 will take place after an agreement in principle is announced by FPT ministers in summer 2011 and is tentatively scheduled for winter 2011.

For the last strategic framework component, we worked very closely with the departments and we intend to the same thing this time. We want to secure a very serious commitment from the sector toward the next strategic phase.

We have made a good start. We do need to undertake some significant engagement to refine the future directions for Growing Forward 2 and we intend to undertake that in the next year or so.

[The Chair, Conservative, Larry Miller]

Thank you.

Now we have Ms. Moritz, assistant deputy minister, farm financial programs branch.

[Rita Moritz, Assistant Deputy Minister, Farm Financial Programs Branch, Department of Agriculture and Agri-Food]

Thank you, Mr. Chair.

I would like to go through the remarks very quickly. We did distribute them to members. I think they will set a context and give some examples to start the conversation that we're going to have today. Thank you.

As Greg just said, the programs we deliver were developed after significant consultations for Growing Forward. Some also had parameter changes made after that, and there were subsequent consultations with stakeholders in each of those instances as well.

There are currently over 30 different programs aimed at helping the sector grow as a competitive, innovative, and environmentally sustainable sector that proactively manages risk. These programs are delivered by AAFC, sometimes by officials in the department itself, sometimes in partnership with other federal departments, and sometimes by third parties who work on our behalf or with us, but often in partnership with provinces and territories, as Greg mentioned earlier.

These programs are designed based on industry input and are implemented and administered according to legislation, government policy at the federal and provincial levels, and with a view to international trade considerations and obligations. We try to work closely with industry and governments to monitor the delivery and also the ongoing performance of these programs. The depth and breadth of the programming is best illustrated with some key examples.

I'd like to start with the business risk management programming. We have a long history of farm support that has taken many forms over the years. APF Growing Forward business risk management program changes were driven by producer consultations and represented requests that industry had been making for some time.

As you know, the BRM suite is now comprised of AgriInsurance, AgriInvest, AgriStability, and AgriRecovery. The AgriInvest program and the AgriRecovery framework are new approaches to help producers manage risk. Fundamental changes were made to margin-based programming under the AgriStability program. These include: better methods of valuing inventories; improved interim payment mechanisms; the broader criteria for negative margin coverage to allow support for those facing back-to-back losses; targeted advances to get money out quickly when disasters occur; and as well, some administrative streamlining.

Since 2007, the suite of BRM programming has provided significant federal and provincial assistance, with over $6.4 billion going to Canadian producers. A substantial amount of this funding has been in support of the livestock sector. For 2007-08, BRM programs provided over $1.24 billion to cattle and hog producers, and for 2009-10 more than $1.1 billion is projected to flow to livestock producers through these programs.

Individually, the programs are also providing significant coverage, and we have some examples there. Under AgriInvest, for example, $1.1 billion has been contributed into those accounts. As of this month, $670 million remains in those accounts and is available to producers to assist in managing risks. Under AgriStability, $1.9 billion in payments has gone out since the introduction of the suite. For AgriInsurance, for the 2007 to 2010 program years, $2.9 billion in government premiums have been paid and $3.4 billion in indemnities. For AgriRecovery, we've had $773 million committed to provide assistance through 21 initiatives in eight provinces, including $450 million quickly made available to western producers in response to the flood.

Under the loan guarantee programs, we have the advance payments program, a federal loan guarantee program that offers cash advances to producers so they can maximize their marketing opportunities. In 2006 the Agricultural Marketing Programs Act was amended, and program improvements were introduced to the advance payments program.

The cash advance limit was increased to $400,000 from $250,000, and the interest-free portion was increased at that time to $100,000 from $50,000. In addition, more commodities were made eligible, such as livestock and horticulture. This program benefits more than 37,000 producers each year.

In 2009 the Canadian Agricultural Loans Act was passed. It expanded eligibility to beginning farmers and to more agricultural co-operatives and allowed for intergenerational farm transfers. Since the act was passed in June 2009, 3,418 loans have been issued for $184.2 million. Of these, 288 loans have been registered to beginning farmers, for a total of $25.6 million.

Transition programs are another type of program that we offer. We have two examples here. Transition programs such as the hog farm transition program and the orchards and vineyards transition program are helping to reposition sectors for the longer term.

The HFTP was one response to the Canadian Pork Council's objective to rightsize the industry, as set out in its strategic transition plan. The orchards and vineyards transition program is aimed at helping the tree fruit and grape industries in B.C., Ontario, Quebec, New Brunswick, and Nova Scotia adapt to market and industry pressures.

Under the research and innovation banner, the Growing Forward science and innovation initiatives have opened the door to greater opportunities for industry to engage in research activities that will foster competitiveness. The initiatives for developing innovative agri-products in the Canadian agri-science cluster are good examples, with over 100 proposals from the sector.

Another example is the agri-opportunities program. This is a five-year program that supports the commercialization of innovative products. It has approved 27 projects so far. They are expected to result in over $100 million in benefits to primary agriculture and to create 360 jobs over the next five years.

Additional programs have also been developed to respond to specific needs. Through one such program, the Initiative for the Control of Diseases in the Hog Industry, the government supports the Canadian Swine Health Board in its efforts to establish the foundation for a disease risk management framework for the Canadian hog sector.

The Board brings together stakeholders from across the hog value chain and across the country to address important issues that farmers are facing when dealing with disease risks and their impacts on the profitability and the competitiveness of the Canadian hog farms.

AAFC is also investing in the future of the sector by developing Canada's agriculture graduates for a career in the industry. As part of the Government of Canada's Youth Employment Strategy, or YES, the Career Focus Program provides employers with up to $20,000 in matching funds to create internship opportunities for recent graduates from agriculture-related post-secondary programs.

The program offers an economical way for employers to attract talent and provides new graduates with a valuable first job that hopefully will help pave the way to a career in the ever-changing agriculture and agri-food industry. Through an annual budget of $864,000, the program funds about 60 agricultural internships across the country.

The 2010 Budget allocated an additional $30 million for the 12 departments delivering CFP under the YES. AAFC's share of this special one-year additional funding is $726,000, bringing the total 2010-2011 AAFC allocation to $1.6 million. As a result of this additional funding, AAFC will fund 106 agricultural internships this year.

Over the last few years, AAFC has also embarked on a service and program excellence agenda. Based on past earnings and feedback from clients, from program administrators, industry associations and other governments, a number of initiatives have been undertaken to meet sector needs, to improve efficiency in program delivery and to measure program impacts against desired outcomes.

Despite the wide range of programs and the level of assistance available to the sector, we understand that there are some concerns with some programming in some parts of the sector. This feedback will be an integral part of the considerations for future program development to ensure that we continue to meet the sector's evolving needs, as Mr. Meredith stated earlier.

[The Chair, Conservative, Larry Miller]

Thank you very much. Now I'll start with questioning.

Mr. Easter, you have seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Welcome, folks.

Mr. Meredith, in your remarks you talked about being basically bottom line, more innovative, and more productive. You said that our producers are among the most efficient in the world. I don't disagree with that. They are productive.

But that has been the answer spelled out by governments since 1970, when I started in this racket: just be more productive and things will be all right. Well, that hasn't solved the profitability problem on the farm, for a number of reasons.

In fact, if you do some research, every economic indicator is positive, whether it's production per acre, exports, output per farmer, cost per unit, or whatever, except for one indicator, and that's net farm income. It just isn't there, in many cases.

Ms. Moritz, you threw a lot of numbers out there, but the key is what it means on the farm for the primary producers and their families. Regardless of the money spent on hogs and beef, the numbers sound decent, but they're not.

Canada is not standing up to the rest of the world in terms of our support for our agriculture sector versus the rest of the world. Those are the facts. I'm not blaming the minister. I'm not blaming the department. But I think we have a town here that's run by the Department of Finance, and they don't understand agriculture.

Yesterday, Peter Clark put out a release on American subsidies, and this it what it says. Peter Clark's company found that “U.S. federal, state and local governments continue to subsidize their agriculture industries with a labyrinth of programs that are conservatively estimated at over US $180 billion in 2009”.That means they're somewhere between 200% and 300% higher than they are for Canadian farms.

Yesterday, in The Globe and Mail, we saw that investment companies are buying the land out from under farmers in Canada and in other countries around the world. Farmers are becoming serfs, really, on their own Canadian land.

I make those points because this government and previous governments, in my view, in the past 20 years have never done enough at the primary production level, regardless of the numbers you've mentioned.

I want to go to some of the programs that are in place. The most worrisome at the moment are the repayment conditions for the emergency advances. The repayments had to start June 1, 2011 for cattle and had to be paid back over ten months. For hogs, it starts March 31, 2012. I'm told by industry in my province that 80% of the industry will go into default if those conditions remain in place. Somewhere around 50% of the industry is in Ontario.

Now, are there other options being considered? What can be done here to assist these farmers? The program was announced. They said that when economic conditions improve, repayments will be returned. This will drive more producers out of business, especially in eastern Canada. They don't have the program that was put in place in Alberta. What are the other options to keep farmers in business instead of this fixed timeframe payment?

[Rita Moritz]

Mr. Chair, perhaps I could start with just a few points to again put this program into context. The advance payments program actually functions under a piece of legislation called the Agricultural Marketing Programs Act. It's a federal loan guarantee program and, as I mentioned in my opening remarks, it gives producers cash advances to maximize marketing opportunities, the notion being that they are--

[Wayne Easter, Liberal, Malpeque, PE]

Madam Moritz, we realize all of that. We're all on this committee. We understand that legislation and how it works. We have to find some solutions here for these producers. If you're telling me that nothing can be done because of the legislation, then tell me that. I want to find an option here that works so that these moneys can be paid back over 10 to 15 years or some such option. Are those options available?

[Rita Moritz]

I will let Ms. Aylard tell us about what in effect will happen under this legislation. The point I want to underline is that we consulted the industry sectors, trying to do the best we could for the livestock sector in these situations, and then used every flexibility we had under that legislation to do what we could in those circumstances.

So we did use the flexibilities that are there under the legislation. Perhaps we can talk in more detail about what the situation might look like with the repayments and then what would happen if somebody did go into default.

[Wayne Easter, Liberal, Malpeque, PE]

Include in that answer, then, whether this stay of default can be continued into the future.

[Jody Aylard, Director General, Finance and Renewal Programs Directorate, Farm Financial Programs Branch, Department of Agriculture and Agri-Food]

The decision for the stay of default to be extended is a decision the minister would have to take, so I can't speak to that.

[Wayne Easter, Liberal, Malpeque, PE]

But is it legal to do it? I'm told it isn't and I'm told it is.

[Jody Aylard]

Well, it does run counter to the objective of the program. As Rita Moritz described, the minister has a mandate to operate marketing programs under that act, so it's not a program for long-term loans--