Agriculture Committee on Nov. 24th, 2011

[Dr. Gord Surgeoner]

In my opinion, it's moving the bar forward. Let me say two key things. This is, in a nutshell, the food versus fuel debate. Really, that's what you're talking about.

First of all, hunger is not a production issue, globally. Hunger is a distribution of wealth issue, and I want to really emphasize that component. We have 700,000 Canadians who go to food banks and 75 million Americans who take food stamps. Is that because there's not enough food? No.

There are more calories and more protein being produced by agriculture than ever in the history of mankind, even with 7 billion people here, so per person. What we need for third world countries is to allow their farmers to get fair return for labour and investment. If you want to talk ethics, the worst thing we can do, in my opinion—unless there's a catastrophe like Haiti—is dump free food into those countries and destroy the markets of their farmers.

If we want to help those countries—and many of the aid agencies are starting to do this—we shouldn't give to the governments of those countries, because corrupt government in those countries is one of the key problems. Look at North Korea, Zimbabwe, and I could name a lot more.

You contract to co-ops of those farmers, where you give them forward contract money so that they can buy the seed, they can look at it, get stability, and provide the food to their population. But if we simply give it away, we are destroying their farmers, and I think that's a recipe for disaster.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Those are great comments.

There is one other topic I want to ask you about. We've heard from organic farmers about transitioning from traditional to organic and the period of time it takes to become officially certified. We were talking before the meeting about farmers, even in my own riding, who have made a decision to grow switchgrass. Do you think it is something we should consider when we think about innovation and changing the different lineups or portfolios that we grow?

The other question is, we provide funding, or loans—I guess I should say loans—with the advanced payment program, $400,000, and $100,000 of that more or less interest-free, to advance farmers, but when they transition, or if they choose to transition.... In your opinion, is it their choice? They have to make that decision and they live with it, or should the government look at funding this or helping?

[Dr. Gord Surgeoner]

I'm so glad you asked that question because it was one of my points.

We have very innovative farmers, so it is actual people who are moving the edges. We actually have, in our system, disincentives for change. I agree with crop insurance, and I agree with advance payments, particularly with high fertilizer costs and things like that, but the guy who is putting in a crop like switchgrass or miscanthus, who is actually moving the bar forward for a whole new realm of crops, has to wait two and a half years before he'll get cashflow, because it takes that long to get up on these perennial crops.

The farmer has land rental costs, fertilizer costs, etc., and that farmer is about $1,000 in the hole before cashflow begins. He's taking a risk to move into a whole new world of change. He's innovating, if you like. It's a high risk, and yet if I want to just grow corn again, my normal corn, wheat, or soybean, I get the advance payment, I get my crop insurance, and all that.

We should, in my opinion, have a pool of money that allows for farmers to de-risk the actual risks that farmers run trying some of these new crops, transitioning to organic, or whatever. Allow those opportunities. Cap it so you don't have everybody going crazy, but in my opinion we need to level the playing field so that we're not creating disincentives for the farmers who are actually trying to make a change by doing something different.

[The Chair, Conservative, Larry Miller]

You're out of time.

Now I'll move to Mr. Atamanenko.

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

Thanks, Mr. Chair.

I want to begin where I left off. If we have farmers who take part of their grain and keep it with the board in the interest of stability, has there been anything done to see how much we would need to maintain that viability? If everybody takes the wheat out of there, then there's no credibility in the world, and when farmers want the Wheat Board, it's not there. Is there some talk among farmers about how they would like to do this?

[Richard Phillips]

There's still a lot of speculation, but we have a long history of cooperative spirit on the Prairies. I believe that people will use the Wheat Board. Whether it's for a third or half or two-thirds of their wheat, I believe people will use the board.

There has been a poisoned atmosphere, and I won't point any fingers. I was in meetings yesterday and I was talking with some Canadian Wheat Board mid-level management people. They said that if this was what was going to happen, then they wanted to get at it as a staff group. They want to go out there and buy that grain and do business with the farmers.

They have an incredible Rolodex of sales contacts. They have good people who know the logistics of ocean freight and rail freight, and they have a good brand, Canada. The Canadian Wheat Board has a great brand name around the world. I think people are going to use them.

[Trevor Petersen]

May I add a comment?

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

Certainly.

[Trevor Petersen]

As a farmer, whether I agree or disagree with the Wheat Board and its stance, all I want is a choice. I don't want somebody telling me that I have to sell my malt barley or my milling grade wheat through the board. All I've ever asked for is a choice, and I haven't been offered that. I will use the board if I see that there's a benefit to using it. I don't want to see the board disbanded. I think it has a valuable place on the Prairies, but I want a choice.

The farmers have spoken, and they want the single desk. But what about the farmers like me who don't necessarily want the single desk? All I'm asking for is a choice. The farmers' rights are being ignored by the government. What, my rights don't matter?

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

We're not going to get into that debate here. We have a few minutes and my colleagues would like to ask another question.

[Francine Raynault, NDP, Joliette, QC]

Thank you.

I have a question for Mr. Mann.

In your presentation, you pointed out that an increasing number of producers are vulnerable and need risk management tools. Do you feel that the situation is serious, even critical? Should we be worrying about your members' future?

[James Mann]

Managing risk is one of the most important things for any business, especially a business like farming that carries a huge amount of risk on many different fronts. A producer has to improve his land. We have to be marketers, accountants. There are a lot of things that we have to do, and managing risk is one of the most important things you can do when things are volatile.

We've had tools to manage risk, and there are new tools being created on the horizon. I'm sure others will take the place of those that have been changed. But the bottom line is that in Growing Forward I would encourage the government to find ways to facilitate or fund farmers in the process of managing risk. Take a look at what FNA-STAG is doing to create research to help farmers make better decisions, provide information, and give farmers the tools they need to do it on their own.

We have about 30 staff. Most of them are agrologists. We talk about succession planning, but more important is strategic planning on the farm. We have consultants in the program that allow for that, but it's a snapshot in time. It's a very dynamic environment.

What we do is work with farmers to manage that tremendous risk. ICE is putting up some tools out there for wheat and barley, for futures contracting on that side of things. We need more on the input side, because it's the forgotten side of farming. You have $40 billion in revenue and $38 billion of that is what you expand in inputs to get $2 billion in net, as an example.

We have to find ways of managing that risk. There are all kinds of things that are being done to buy futures on fertilizer and crop protection. I firmly believe we need more tools to do that.

[The Chair, Conservative, Larry Miller]

Thank you.

We'll now move to Mr. Payne for five minutes.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Mr. Chair.

My question is through you, Chair, to the witnesses.

First of all, I want to thank you all for coming out today. It's very important that we hear your words of wisdom as this committee looks at all aspects of Growing Forward.

I missed some of the conversation that went on around transportation. I know that Mr. Mann talked about it, and Mr. Phillips also talked a bit about it.

Mr. Phillips, I think you talked about some of the organizations that are going to be part of this process, particularly the coal and grain growers. As part of that whole rail review, will every producer, whether of grains, oil, coal, or liquefied natural gas, be part of the whole process? If not, why wouldn't they be?

[Richard Phillips]

There are a couple of things going on.

First, we have the Canadian rail shippers coalition. We represent about 90% of the freight revenue of CN and CP. This is the critical mass that we've had to keep pressure on the government and to keep pressure where it had to be to get this rail service through the system. To the railways' credit, they're good lobbyists the other way.

What we also have, though, is, the grain logistics working group—I can't think of the right acronym—which is going to be just the grain sector looking at why we aren't getting the grain trains, 64% versus whatever that other number was, on time. In fairness to the railways, sometimes the terminals may not be unloading the cars quickly enough, or maybe somebody is trying to ship the wrong grain out just because they want it out of their elevator, and then they plug up a terminal somewhere in port position.

The government has created the working group so that we can ask where to measure everybody. In fairness, it's not always the railways that are the problem. We'll ask what the grain companies need to do. How many days in advance do they need to order their cars? How many days in advance can they tell the railways, “We have a boat coming into Vancouver, so we're going to have to get 10,000 tonnes of wheat through the system by this date”? That system has not worked well in the past, and there's a lack of communication among all the players.

So the government has appointed a working group, of which the grain growers are part. We are going to sit down with the railways and the terminal operators to try to sort this out, to find out whether we can make this communication work better.

So there are two different groups there.

[LaVar Payne, Conservative, Medicine Hat, AB]

Will the shippers by boat be part of that process, as well as the individuals who load those ships?

[Richard Phillips]

The committee that was just recently appointed by the government includes the associations. It's the Keystone Agricultural Producers, the Saskatchewan Association of Rural Municipalities, the Grain Growers of Canada, and Pulse Canada. It's the actual associations that have farmer representatives or representatives from the staff of the farm groups who are very knowledgeable in transportation.

[LaVar Payne, Conservative, Medicine Hat, AB]

The reason I ask is that sometimes there are bottlenecks at the ports.

[Richard Phillips]

Yes. The Port of Vancouver is there. I believe all the ports are there, but I don't have them in my head.

[LaVar Payne, Conservative, Medicine Hat, AB]

That's an important piece, because I did work for a petrochemical company and I understand some of the difficulties we've had there.

I'd like to ask Ms. Labbie some questions. You talked about capital gains and what we need to do to change that provision to increase it. I think you mentioned that we've gone from $500,000 to $750,000. I missed part of your conversation about how you saw that moving forward.

Second, is the capital gains exemption just for farmers, or is it for all aspects of CFIB?

[Virginia Labbie]

Thanks for the question.

Our recommendation on the lifetime capital gains exemption is to index it to inflation annually. By indexing it, we won't see the value erode over time. Really, what we've been saying is that as we index things such as tax brackets and those kinds of things, we'd like to see the lifetime capital gains exemption indexed as well to ensure that it keeps up with inflation every year.

[LaVar Payne, Conservative, Medicine Hat, AB]

Is that for all individuals?

[Virginia Labbie]

Yes, that would be for not only farmers but for business owners as well. It's not exclusive to farmers, but that is our small business recommendation. We know that our farm members do use this as a significant retirement vehicle, so certainly that would be something our members would really appreciate in the 2012 budget.

On the capital cost allowance, again, that is in our pre-budget recommendations as well. Again, we're saying initially start out with agricultural equipment. We have a number of recommendations in our federal pre-budget for various industries, various small business measures for small business, so there are a number of recommendations in there, but this one is specific to agricultural equipment.

Thank you.

[The Chair, Conservative, Larry Miller]

Very quickly.

[Richard Phillips]

I think you have to ask yourself this. What is the goal of this capital gains exemption? Is it to provide tax-free savings for farmers to retire, or is it to actually assist, in theory, selling your land cheaper to your children, for the next generation of farmers coming in? If it's the latter, if you want to look at increasing it, you may want to just think outside the box and say that if you're actually selling it to a younger farmer or someone in your family coming in, maybe there could be a higher exemption, versus just selling it to a neighbour who's going to be a larger farmer.

You may want to look at how we can use that system to accomplish what it is. What's the goal, I guess?