Agriculture Committee on Nov. 25th, 2010

[Wayne Easter, Liberal, Malpeque, PE]

Yes, but let me interrupt again, because I'm going to run out of time.

The problem here is that the objective of the program and the advance payment program is to get money out there so that people don't have to put their product on the market right now and drive down prices. This program was brought in place because of an extreme economic downturn in the market—the results of BSE, the results of circovirus, and a number of other things—and it was supposed to be designed to assist farmers.

Is the program misplaced, then, that it's not putting the money in place to assist farmers? In my province, 80%—do you hear me?—80% of the industry is going to be in default next June. We're going to lose another industry. We need to find other answers.

[Jody Aylard]

I can speak to the flexibilities that are--

[The Chair, Conservative, Larry Miller]

Your time is up, but I'll allow her to answer.

[Jody Aylard]

Pardon me?

[The Chair, Conservative, Larry Miller]

I was just telling him that his time is up, but I'll allow you to answer the question.

[Jody Aylard]

If it adds some clarification, I can speak to the flexibilities that have been put in place for producers when they go into default, to reduce the costs of that situation. At this point, should producers go into default, they have been given a five-year repayment timeline; the normal timeline is three.

The costs of actually going into default have been reduced to the extent possible. They would have to repay the interest they owe on that advance, but for the interest-free portion they would only pay a quarter of one per cent, and 1.5% plus prime going forward, so we have tried to reduce the costs as much as possible. For a producer who has a $160,000 advance, for example, that's a reduction in interest costs of about $35,000 over the normal prime-plus-three default penalty that goes forward.

We have rules within the program and we have tried to maximize the flexibilities we have to reduce the impact that would have for those producers should they go into default.

[The Chair, Conservative, Larry Miller]

Thank you, Ms. Aylard.

Now we'll go to Mr. Bellavance for seven minutes.

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

Thank you, Mr. Chair.

I want to thank the witnesses for being here.

Mr. Meredith, on the subject of program review, you mentioned some phase one consultations that the department engaged in in May and June of 2010. More consultations are planned. As you surely know, the members of the Standing Committee on Agriculture and Agri-food also consult with the agricultural sector, which in turn consults its own members. These consultations lead to a number of recommendations and possible solutions, as we saw when the committee travelled to different locations recently to consistomder the future of young farmers. During its tour, the committee heard many comments about certain program shortcomings. As I have always said, some programs work well, some are more or less successful, while others do not work at all. I think that is quite normal. It is wise to conduct a program review after a period of a few years, to see what types of improvements can be made.

I just want to make a few specific recommendations about the AgriStability program. I have singled out four recommendations that emerged from the consultations with producers. I am sure you are aware of the producers' demands, but I would like to hear your opinion of each of the changes they are seeking to the AgriStability program.

One of the recommendations that was made is that for the purposes of reference margin calculation in a given year, producers should be allowed to use either the Olympic Average or the average program margin of the last three years. The highest amount would be the one retained. This change would ensure that certain producers who currently do not qualify for the AgriStability program because of the Olympic Average would now receive some payments.

Another recommendation calls for the elimination of the viability test applied to negative margins.

A third recommendation calls for increasing negative margin coverage from 60% to 70%. I believe this particular recommendation was mentioned this week when producers testified before the committee.

Lastly, it was recommended that producers have the option of either taking advantage of the 15% coverage above the reference margin or of participating in the AgriInvest program.

These are just a few of the recommendations we received. These changes to the AgriStability programs have been fully endorsed by the agriculture sector. I would like to hear your comments on each recommendation.

[Rita Moritz]

First of all, we have already heard these comments from the agriculture sector. I will ask Danny Foster to respond to your comments.

[Danny Foster, Director General, Business Risk Management Program Development, Farm Financial Programs Branch, Department of Agriculture and Agri-Food]

As mentioned, there are three changes. Or was it four?

[A voice]

Four.

[Danny Foster]

Four changes, and actually, a number of changes have been proposed by the industry, but you hit the main ones: the negative margins, the cap, and the choice of a methodology for calculating the reference margin. Those options have been brought to federal-provincial ministers several times for discussion and analysis. The ministers have agreed that they want to wait to make changes to programs in the context of the next BRM suite of programs.

So we're looking at these options in the context of what the next suite of safety net programs, if I can use that terminology, should look like. We've done our work. We've taken it to the federal-provincial ministers, they have considered the changes that have been brought forward by industry, and they have made the decision that this has to go into the mix of what the next round of programs should look like.

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

Although you are looking into all of this, you are also in the process, as you no doubt realize, of developing the next strategic agricultural framework. I'm sure that you have examined each of these measures.

Is there anything you think should be done? From your perspective, or in the opinion of the minister, are there certain points on which you will stand firm?

[Rita Moritz]

We also have some other suggestions. We are getting them together and weighing the impact and the costs to departments. Producers will continue to receive compensation while we work on the next strategic framework.

We are looking at policies and at the same time, trying to provide as much information as possible about what this means in terms of programs. We do not wait until these policy discussions have taken place.

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

So then, you are saying that you are weighing your options at this time and that no one option has been discounted. As far as these recommendations go, you have no major objections to, for instance, increasing negative margin coverage from 60% to 70%. Right now, you are not in a position to say that for some reason or another, you cannot do that.

[Rita Moritz]

We have a responsibility to provide the minister and the government with the most reliable information on the various options that are being presented to us by the sectors.

[Danny Foster]

Some of those changes would be easier to make if ministers made that decision. Others do have challenges--like giving producers the choice of the top 15% or a margin-based program. You can well imagine producers trying to make that decision and finding out at the end of the year, “Geez, I made the wrong choice”, and that they should have gone with the margin-based program rather than the 15%.

There's a lot of complexity when you start giving options on an annual basis to producers to choose which one they want. Even if we said it was a one-time choice, I have a lot of experience of realizing that the one-time choice doesn't last long. When producers find out that they're disadvantaged by the choice they've made, there would be pressure to make choices.

There are many issues around the one-time choice, as an example, though some of them are feasible to implement. But again, ministers have made the decision to assess these in the context of the next framework of BRM programs.

[The Chair, Conservative, Larry Miller]

Mr. Bellavance, your time has expired.

Mr. Atamanenko, you have seven minutes.

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

Thank you.

Thank you for being here. I'm going to start with a general question. Then I have some specific ones.

Wayne mentioned that U.S. subsidies are somewhere around $180 billion this last year. We've always known that the Americans tend to pump more money into their farming sector on a per capita basis than we do. I just completed my own tour across the country, based on food sovereignty and food security. A couple of major themes that came out were that there's a tremendous number of local initiatives--some of you referred to that today--and the other thing was the whole idea that in some instances, perhaps, trade has impacted negatively on farmers. We've seen that with the way the dumping that's allowed in Canada has hurt our fruit industry.

This committee a number of years ago made a recommendation, supported by all members of all parties, that we should be encouraging local procurement for federal government institutions. The response we got from the department was that we have to be careful, because of certain trade obligations, about countervail duties. At the same time, I know there are states in the United States that do this. Illinois, for example, has said that by the year 2020, 20% of the procurement for local state institutions will come from local farmers.

I'm wondering in general whether somebody is studying or looking at how the Americans are able to inject this amount of money and still stay within trade agreements. I get the feeling that we're afraid to do some of this because of the trade agreements. Maybe that's just a general question. Are we starting to look at this to see how we can support local producers, do programs such as local procurement for federal institutions, and at the same time somehow keep our trade agreements?

That's the first question.

[Greg Meredith]

Thank you. That's a complex question, but in effect you're right, Mr. Atamanenko. Our trade obligations prevent the federal government from biasing procurement toward a given commodity or Canadian products only.

I think there's a lot of risk in that. You saw the problems we faced with the United States and their Buy American strategies in the post-recession period, when our government had to work very, very hard to try to exclude Canadian firms from that because of the loss of business. It's a difficult trade path to go down if you start to bias toward local procurement.

I think there are strategies for marrying up consumers to local farmers, and those kinds of initiatives are actually taking place right across the country. We do work in the department to try to help our producers get involved in the value chain so that they can connect with consumers. We have a number of value chain round tables that bring together the producers in the sector with the processors and others to make sure we're responding to consumer demands.

You mentioned dumping and other issues. We actually do have access and have successfully used access to anti-dumping in the tree fruit industry in British Columbia, for example, so trade rules do work for Canada. I'm sure you know that in the WTO one of our major objectives is to limit and reduce as much as possible trade-distorting domestic support of the very kind you're pointing to in the United States.

In terms of the amount of support the U.S. delivers to its sector, it varies on a commodity-by-commodity basis, but overall, the producer measure of support is actually higher in Canada than it is on average in the U.S. I would be pleased to provide that information in detail to the committee. It does seem counterintuitive when you see the numbers that are thrown around. I haven't read Mr. Clark's study, but I know Peter very well, so I will be talking to him about it to see what kind of methodology is behind that. But in OECD estimates, Canada is actually a bit higher than the United States.

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

To follow up on that, you mentioned that we have problems with the countervail and it's not a good path to go down, but the bottom line is that they're doing it down there. Somehow, at least one state--if not more--has determined that they're going to be supporting local farmers for local procurement. It doesn't seem quite right that you have two countries that signed an agreement and one country is able to do it and support their farmers to that extent and we're saying that we can't do it.

In regard to dumping, the feedback I'm getting from the fruit industry is that we do have this mechanism that exists, but by the time the wheels start rolling it could be months down the line, and it will be too late. Whether there's a win or a loss, our farmers will have lost that money, so the way it currently stands is not working.

To follow along with this, the feedback I'm getting from the tree fruit industry is that AgriStability isn't working. The question they are asking is whether the government is prepared to consider a program based on the cost of production. The fruit industry is different from the grain program. You probably know that to get pears going it takes seven to ten years, while for apple trees it takes four years. This industry is one of the industries that is being harmed by the dumping practices, yet it's more difficult for the farmers and the horticulture industry to access the programs we have.

I noticed, Mr. Foster, that this is under review by the provinces and the federal government, but is there some specific consideration to keeping this industry afloat to make sure they don't continue to plow their orchards under in order to convert them either to grapes or to subdivisions?

[Greg Meredith]

Well, on the specific question of whether the Government of Canada is interested in supporting a cost-of-production series of programs, the answer is no. We do get pressure. We have had it from Quebec, and from Ontario recently in its risk management program, and we do have calls from various other commodity groups to partake or participate in cost-of-production programs.

The real risk there is countervail. If you have region-specific or commodity-specific subsidies like that, you are risking countervail. We've seen this many times in the hog industry--hog, pork--and we've seen countervail actions taken against provincial programs. The risk is very high there, particularly when you have commodity-specific and region together, that you're going to trigger a countervail. That's a very, very difficult process for producers who are export oriented. As you know, it can take years to resolve. During that period of resolution, the countervail is in place and hurting the industry. It triggers all kinds of other pressures for more program payments, which are almost going to stimulate more countervail risk.

So the short answer is, unfortunately, no, we're not looking at those kinds of programs right now.

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

Thank you.

[The Chair, Conservative, Larry Miller]

Thank you, Mr. Atamanenko.

Mr. Lemieux, you have seven minutes.

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

Thanks, Chair.

Thanks for the presentation today.

There are a lot of numbers flying around, but I would like to just highlight a couple of numbers. We have Growing Forward, the current suite of business risk management programs. One of the criticisms is that these programs are not paying out, that money is not being delivered to the farm gate, and that farmers aren't receiving any kind of help from the government.

However, I was pointing out at the last meeting that, as far as I could recollect—I didn't have exact numbers—billions of dollars are flowing out to farmers to help them through difficult times. So if we're just going to focus on the business risk management programs, could I have you underline or highlight, perhaps, how much funding has moved through the BRM programming in Growing Forward, the current suite of programs, since 2007?