Agriculture Committee on Nov. 24th, 2011

[The Chair, Conservative, Larry Miller]

We'll call our meeting to order.

I'd like to welcome our witnesses here today. Thank you very much for being here.

We have Farmers of North America, James Mann; Grain Growers of Canada, Richard Phillips and Trevor Petersen; from Ontario Agri-Food Technologies, Gord Surgeoner. And by video from Regina, Saskatchewan, we have Virginia Labbie.

Welcome, Virginia. Can you hear us?

[Virginia Labbie, Senior Policy Analyst, Saskatchewan and Agri-business, Canadian Federation of Independent Business]

Yes, I hear you fine. Thank you.

[The Chair, Conservative, Larry Miller]

Thank you very much.

To start out, we're going to hear from the Farmers of North America, and James Mann, for 10 minutes, please.

[James Mann, President and Chief Executive Officer, Farmers of North America Inc.]

Thank you very much, honourable Chairman Miller and caucus. It's my great pleasure to represent Farmers of North America at your session today.

I think everybody's received a copy of the presentation that we put forward, and I want to hit the highlights in a few minutes and look forward to the questions that follow. Of course, I'm not a Bob Friesen, so I'm not going to be quite as well polished as he, but I look forward to the questions nevertheless.

I'd like to first introduce our organization. I'm sure most of you, being involved in agriculture in one way or another, are familiar with us. We are a commercial organization that represents around 10,000 farmers. Our primary mandate is to in fact increase competition in the agriculture sector as it applies to the farm community, to ensure that the prices they receive, but more importantly the prices they pay, for their input products are competitive globally and competitive with rates that are close to the cost of production, rather than to what the market will bear. As you'll see in the presentation, you'll note that the market behaves rather differently from a truly competitive environment. It's more like an oligopoly type of marketplace. Most of the inputs farmers have to acquire are for their land.

I'd like to address four major areas: cost competitiveness, regulatory competitiveness, innovative business structures, and speak a little bit about the Canadian Competition Bureau.

If we take a look at farming as a whole, you will note that we have a situation where farmers are generating tremendous amounts of revenue. Unfortunately, you can be gaining $50 billion in revenue and at the end of the day you're left with a very small return on investment. The significant portion of that goes into the cost of production, primarily fertilizers, chemicals, and seed. As I mentioned earlier, those areas are primarily represented by an oligopoly type of market where there's very little competition occurring.

If you take a look at where we fit globally, cost competitively, we have some deep concerns, and we'll talk a little bit about that as I get through the presentation and we get into the regulatory environment, talking about GROU and the former OUI program.

I'd just like to point out that you'll see in our presentation some of the examples and some of the industry comments that have come out over the last couple of years as grain prices and the marketplace have improved dramatically for farmers. Some of the representatives of the fertilizer sector or the grain-handling sector note that they've been given significant opportunity to increase the prices they receive. If you take a look at the operating statements of companies like Agrium, Monsanto, Bayer, and those companies that represent the seed industry, you'll see that their balance sheets and their operating statements are vastly improved as a result of what appears to be the good fortune in agriculture.

I want to make one other point, and that is on the research on volatility. As we've seen, the marketplace becomes very volatile. We see that there are certain types of farmers who have become much more vulnerable, even though the opportunities are greater, as a result of the higher level of risk associated with higher prices, both at the receiving...and the higher cost of inputs. That marketplace becomes much more difficult for a farmer to manage. Those farmers who don't have the risk management tools or certain skills become highly vulnerable to that type of environment. In fact, in good times you may see a greater loss of farmers from the industry, even our good producing farmers, because of their perhaps so-called lack of skills in the risk management area. So this is a key area.

Going back to cost competitiveness, I'd like to talk a little bit about what our organization does for competitive research. Any time you're developing a strategic plan, which our company does daily, in trying to counteract what's going on in the board rooms of the large companies the farmers are buying from, you have to have the best information possible.

Two years ago we set up an organization called the FNA Strategic Agriculture Institute, which is a non-profit organization that was sponsored by Farmers of North America with the primary purpose not only to liaise with government and other farm organizations, but also to conduct research on the competitive environment between farmers, and between Canadian farmers and other farmers around the world. Again, whether you're designing policy in the House or developing strategies in the boardroom, you have to have the best information, understand where you fit in the marketplace. In fact, CAAP provided funding to us about a year and a half ago to do a study of what was out there for that kind of research. We found that there was a lot of anecdotal evidence, lots of second-hand information, but there really is no fundamental research that talks about how farmers compete with one another around the world. And as you know, we are getting significant competition from eastern Europe, the Ukraine, and for a number of years from Argentina, Australia, and Brazil. We need to be cognizant of that, and despite our greatest efforts in Farmers of North America and FNA-STAG to get joint funding—and we've invested literally hundreds of thousands of dollars into this project—it's been very difficult to get corresponding funding from some of the government organizations to help facilitate that.

We believe that would be extremely important in providing that information, both to government and farm organizations. And we see the differentials between farmers being extremely important, so they can benchmark, try to make the best decisions as to what's best for their operations. As we progress with that, I would encourage...and one of our recommendations is to see the government help or participate in what we think is a key process to ensure our farmers remain competitive with other farmers around the world and are in fact managing in the best way possible based on the information that we can provide them.

That's part of what we're doing with regard to competition and the research. I do want to talk about another area, competition and competition law. As you'll note in our presentation, we have exhibited what tends to be a process that companies go through to gain additional market strength. There are, as you've seen, tremendous amalgamations and mergers in all the major input sectors that farmers are involved in. You can take a look at a diagram, for example, of who Monsanto has acquired, or BASF or Syngenta. Even in the fertilizer sector, you'll see massive numbers of companies consolidating down to very few.

There are a couple of reasons they do that. One is for efficiency, but more importantly it's because of their impact in the marketplace. When that happens you need to have strong competition policy. You have to have a government that stands behind what competition stands for. Our experience has been, particularly in the fertilizer sector, that.... I was involved as a witness a number of years ago, when Agrium wanted to buy out Sherritt Gordon. The Competition Bureau talked to us, and at the end, Agrium was allowed to do that. They ended up with 60% to 70% of the marketplace. When they can do that, they have literally the ability to write the ticket as to what prices are going to be, and the others just fall in line.

We've seen that when we've tried, for example, in the glyphosate business, to create competition. We ended up seeing total reluctance from companies to provide competitive quotes. We've taken that to the Competition Bureau and got just a pat on the back and “thanks for letting us know,” but really, at the end of the day nothing happens out of that. We find that in other jurisdictions—particularly in the U.S.—competition law can be quite a bit stronger, and I think we need to take a hard look at it, and perhaps take a good look at the agricultural sector and the competition law that affects that.

Again, our personal experience has been that as much as we've been through that door, we find it really isn't effective, and really, the only answer is to do what we in Farmers of North America do through private businesses to create that competition on behalf of our farmer members. But there is certainly more that we believe government can do in that whole area.

I'm getting close to my 10 minutes, so I just want to talk briefly about Farmers of North America and what we do with regard to the tremendous change that's going on in the grain-handling sector. With the change in the Canadian Wheat Board there are all kinds of changes that are going to be occurring, whether it be branch lines, grading systems, producer-car facilities, and we think there is a role we should be playing. I would suggest and appreciate it if government would help facilitate us in doing this so we can help farmers manage through this dramatic change that will be going on in the industry.

I understand that competitive forces should create an efficient environment, but we have found that Adam Smith's invisible hand doesn't always work. It's out there somewhere, and I sometimes think that maybe Bayor has found it, or Monsanto, but certainly farmers are trying to get a handle on it and get it back to help create competition.

We've created the task force. We have some of the best people in the industry looking at what we can do to create competition, and again, I would like the folks here to take note of what we're doing.

With that, Mr. Chairman, I'll wrap up and encourage any questions you may have on what our organization is doing in areas that we see need to be accomplished in the realm of competition.

[The Chair, Conservative, Larry Miller]

Thanks very much, Mr. Mann.

We'll now move to the Grain Growers of Canada. We have Richard Phillips and Trevor Petersen for 10 minutes, please.

[Richard Phillips, Executive Director, Grain Growers of Canada]

Thank you for inviting us to be here today.

My name is Richard Phillips. I am the executive director of the Grain Growers of Canada. We represent tens of thousands of successful wheat, barley, canola, corn, pulse, rye, and triticale growers in Canada.

With me today is Trevor Petersen, vice-chairperson of the Alberta Barley Commission, a member organization of the Grain Growers of Canada, and I'll be sharing my time with him.

Trevor.

[Trevor Petersen, Member, Alberta Barley Commission, Grain Growers of Canada]

Thank you, Richard.

Good afternoon, committee members.

My name is Trevor Petersen and I farm near Red Deer, Alberta, with my wife Carmen and our two children, Micah and Haley. I am a third-generation farmer, growing wheat, barley, canola, and field peas on about 1,500 acres.

I would like to discuss how we can make the barley industry more competitive globally.

Barley has had two traditional uses: malt for beer and livestock feed, primarily for cattle and pigs. With the coming changes to our barley marketing system, one of our most important needs is a commitment from government to help us develop new markets for our barley.

In the past, farmers have either sold our feed barley to local mills or feed lots. Our malt barley has gone to malting plants via the Wheat Board, or has been part of larger Wheat Board sales overseas.

Looking forward, we are excited about the many new opportunities in front of us. For example, in human health, barley lowers cholesterol, and with further research we could document other health benefits, such as lowering glycemic indexes. That would be of benefit to people with diabetes.

Another opportunity is in the Japanese market, where our barley is being used to make a popular beverage called shochu. In the malt industry, my local malting plant is doubling their storage and increasing their capacity. I know other new companies are now looking to invest in western Canada to take advantage of the growing global demand in beer consumption. This value-adding means more jobs in our communities.

The other major area of opportunity for barley is in the feed industry. One recent success story was the development of low-phytate barley. When fed to livestock, this barley reduces the amount of phosphorus in the manure. In today's world, there is a lot of concern about safe ground water and farm practices. This new low-phytate barley helps show consumers that we, as stewards of the land, are farming more sustainably and protecting our environment.

On behalf of the Alberta Barley Commission, which is a member of the Grain Growers of Canada, I would like to thank you for this opportunity to be here today.

[Richard Phillips]

For my part, I would like to raise three key areas important to helping increase competitiveness within our agriculture industry.

First, an increase in overall research funding, public and private, is needed. Those of you who have been around this committee understand that farmers are divided on many issues, but this is the one that unites all of us.

We appreciate that the federal government has started putting more money into research in the last few years, and we recognize there has been an effort through both science clusters and the DIAPs. These programs ensure that actual commodity associations and actual farmers have more influence on our research priorities.

The private sector is also a huge investor in research and innovation in Canada. But it is primarily involved in only three crops: corn, soybeans, and canola. The public sector often works on core agronomics and diseases where there may not be a commercial return, and without that return there is limited incentive for the private sector to invest. It would take an increased investment of $26 million per year for 10 years—that is, each and every year you would have to add $26 million to get us back to 1994 public research levels at Agriculture Canada.

But we also realize the fiscal reality of trying to achieve a balanced budget in these turbulent times. The Grain Growers of Canada has a new proposal to help increase public funding: change the accounting for royalty income within Ag Canada. For example, if you have an Ag Canada scientist who develops a new variety of wheat, royalty income flows back to Ag Canada. Today, that goes into the Ag Canada budget. But then the government puts that much less money into Ag Canada. This should change.

We suggest that in the absence of increased direct federal contributions, at a minimum the government should commit to the current Ag Canada research budget and adjust for inflation. Next, the government should allow all royalty streams generated by Ag Canada discoveries to be added on top of the research budget. With no new government cash, the research budget would grow by $5 million or $6 million next year. This would increase as scientists see that their programs can grow when they develop products that farmers want. It's win-win.

We also think the federal government can play a bigger leadership role in encouraging private-public partnerships.

The second issue today is trade and market access. At the Grain Growers of Canada, we believe the government doesn't owe farmers a living, but it does owe them a policy environment where they can make a living.

Increasing our trade opportunities and market access are two very important areas for our farmers. Over 90% of Canadian farmers rely on exports or export prices for their success, so bilateral trade agreements are helping to keep us on par with our competitors. Markets like the European Union and the trans-Pacific partnership will be critical to our future success.

But as important as new trade deals are, it is just as important is to ensure ongoing market access. The Market Access Secretariat is a good example of how the government can help farmers. It is one thing to open a market; it is another to ensure that trade can actually happen in a world where artificial trade barriers often exist.

Lastly, reliable rail transportation is needed to increase our competitive edge. When we don't deliver grain on time to our customers, either they start looking elsewhere or the penalties and demurrage lower the price we receive for our grain. That is why the rail service review process and the new appointment of facilitator Jim Dinning has been so important. We are happy to see the government moving this file along.

In summary, with your help and the right tools, the future and competitiveness of Canadian agriculture has never looked brighter.

Thank you. We look forward to questions.

[The Chair, Conservative, Larry Miller]

Thanks, Richard.

We now move to Ontario Agri-Food Technologies and Mr. Gord Surgeoner.

[Dr. Gord Surgeoner, President, Ontario Agri-Food Technologies]

Thank you very much for the opportunity to speak on innovation, some suggestions on Growing Forward 2, and what I think should happen.

I'm president of Ontario Agri-Food Technologies. It's a consortium of farm associations, industry, academia, and regional governments. I emphasize that we get some money through Growing Forward 1, but we put it all back out the door, and I'll show you how effective it is.

Our mission is to ensure—back to the point on science and technology—that our farmers have access to the latest technologies, whether they choose to use them or not. The other key one is to create new market opportunities for the business of agriculture.

Innovation is a commonly used term in Ottawa and all around the world. I define innovation as processes or products that create value. There's historical value, cultural value, and environmental value, but I'm talking about economic value. From a government perspective, the number one thing is opportunity for profitability for our primary agriculture sector. There's also the creation of jobs for Canadians. With that goes increased tax revenues to the federal, provincial, and local governments. Innovation can create value through savings by increasing the probability of success to farmers so we don't have to use things like business risk management as much.

I was a university faculty member for 28 years, heavily involved in innovation and research. I serve on many boards. There's a list there. I was elected for nine years to the Ontario Agricultural Adaptation Council Board. In pure science, I'm the vice-chair of the Ontario Research Fund Board that provides about $250 million primarily to the medical community, but we are seeing some agriculture go in there now.

I want to emphasize a key thing. In my opinion, there are five degrees of types of innovation. We tend to talk about research a lot, and I absolutely agree that research is a starting point for many types of innovation. That's the discovery. It's both public and private, but it's also global. Things do not necessarily have to be born and raised in Canada. But in order to create that value to society we have to capture that research and implement it, so that's the capture side.

I take this great idea and we start using it as farm practice, or we start to make that widget product. We start by selling it nationally. The next step is to work into the global markets and sell that globally. So cattle genetics.... We're selling sheep genetics to Vietnam right now. Those are the kinds of things.... So there's expansion to the world.

Another key thing we need to talk about is how to attract innovation. I was just talking to Mr. McKay. We're looking right now at a Chinese investment in Scarborough that would use $12 million worth of skim milk powder. It wouldn't affect supply management. They would send that skim mild powder as baby formula back to China, where they're sensitive because of melamine and a whole bunch of other safety issues with food. They want to make it happen here, and it really provides value to our primary producers. So we have to think in those kinds of terms.

Finally, how do we retain our companies and not have them go elsewhere? Another big one on attraction...we just got a big Dr. Oetker pizza plant. It's going to employ 1,000 people in the city of London, Ontario. But more importantly, the pepper, cheese, and wheat—all of that for a North American market is being produced in Canada.

When you talk about innovation, I totally agree about discovery. But my key point to you is that we need to make all parts of this. I do not have an accounting of how we spend our innovation money. Is it 80% on research, or is it 90%? How much is going to these other categories that I think are very critical? I'll explain. So what is the percentage, and is it the right mix of money? I think that's something we should consider in Growing Forward 2.

I want to emphasize two key things. Growing Forward 1 was basically a big success, in my opinion. The reason I say that is because some novel things were done. The federal and provincial governments came together to make programs for each province without a one-size-fits-all approach—agriculture is different in different provinces. There was resource sharing, in terms of money to make it happen, and allowing certain groups like the adaptation councils....

And by the way, after nine years, our farmers have a 98% satisfaction rate with the delivery of those programs, where elected farmers, etc., are putting out the money.

The other key things are a third-party delivery and a five-year program instead of a year-to-year program. I think those are very important.

When I look at traditional agriculture, it's been food and feed—food to the world, feed to the animals—but there is a whole new growing realm I want to talk about.

If you look at supplying only Canadians, a lot of the time in agriculture is fighting for market share. In fact, more dollars are being spent, not on the farmer or the primary agriculture, but on the marketing, SKU space, and processing. If you look at my evolution slide, you'll see that we've actually achieved very inexpensive food to Canadians. If I take out the energy, we're now at about 11% of the food dollar that the primary producer gets.

So how do we get new opportunities? If I get you to eat more chicken, you're going to eat less pork. If I get you to eat barley, we're going to have less wheat. We're fighting for market share. We need to grow the pie, in my opinion.

If you look at the expanding markets, I agree that the market for health products is going to be a big one, and industrial products is another. Ethanol and biodiesel are classics right now, but there is a plethora of new kinds of plastics and products coming down the pipe.

Here are the things I think are key in the next five years.

Bilateral trade agreements are the first thing I want to emphasize. I think that's absolutely key. We produce more than we can actually consume as Canadians. We need global markets and we have to have those bilateral agreements.

I really want to compliment something called the Brand Canada program. For the last two years, Canada has been the number one place in the world to do business, and on a global basis, Canada has been seen as the best country for the last two years. So we have a cache in the word “Canada”; let's take advantage of it in our global markets.

We're going to work on food specifically for health. Our mushroom growers, through innovation, can make a powder. If they put those mushrooms under an ultraviolet light, they make vitamin D just as you and I do. In a kilo of dried mushroom powder, there are 2.2 million international units of vitamin D. That vitamin D can then be added so that when I eat pizza, the pizza crust is actually an excellent source of vitamin D. If I eat pasta or many other things, vitamin D can be added. Because Canadians don't get a lot of sunlight in the wintertime, we are always shy of vitamin D—at least in Ontario; you get a lot more blue skies out west.

Ethnic foods are the other thing I want to emphasize. Again, the Chinese are building this whole world market on baby formula. I see the ethnic population.... Many of our rural populations were developed by the poor and destitute who left Europe. The rich, well-educated are coming in now, many of whom have been in the food processing business. We have to engage and use them to get back into global markets.

Then there is this whole new world of industrial feed stock that is being driven simply because the value we get is not rising at the same price as oil. It used to be that a barrel of oil and a bushel of corn were essentially the same price. Now it's $100, and we're really happy if we get $6 right now. As that gap grows, our opportunities into other spaces grow very dramatically as well.

If you look at the next slide, these products are all being sold commercially from soybeans: biodiesel, lubricants, and hydraulic fluids. Also, the engine oil for the entire University of Guelph fleet is 99% soybean oil. So there are all kinds of things going on.

I want to emphasize that programs don't have to be large in order to be effective. The key things are to be client-friendly, flexible, and fast. In the world of business, you have to make decisions rapidly and move them forward. When I'm trying to close a deal in China next week, the idea of whether we'll find out if we have something six months from now just doesn't help a lot down the road.

For example, in our shop we've created a rapid response to business opportunities, which allows our producers and our processors to go to foreign customers and sell products. Within 48 hours, they will make a decision—they're not going to a trade show; they have a customer they're going to sell to.

On about $140,000 of investments, $32 million of sales have been created. Some of them are big wins. An example is Dave Hendrick, of Hendrick Seeds, who has gone from planting 25,000 acres of soybeans four years ago to planting 70,000 acres.

I do want to emphasize expanding into the Maritimes. I think there were some 8,000 acres being planted this past year in P.E.I., where they need, in my opinion, more diversification in the types of crops they have. That ability to make it fast, simple, and we only pay on receipts and only on hard costs....

The other key thing is that small companies that are highly innovative are focused on cashflow. We have all these big government programs and granting programs, etc. Having been a university faculty member for 25 years, I know that writing a grant is as much an art form as it is the facts. So the key to me is that we actually help some of those where it makes sense. Get the farmers involved real early. We have our grower associations writing letters of support, and we help make it happen, but they must have a minimum of 25%, normally 35% “skin in the game” as I call it, their own private investment. That has brought in, in the last two years, $9.3 million to our processors and our farmer associations to create value.

So I have a couple of things—I'm on the final page—and here are the key ones, my recommendations.

I have seen third-party delivery systems work under Growing Forward 1. I think they're highly effective and provide great value, as does the Auditor General. We've had the Ontario one audited by the Auditor General—great value, 98% success rate by our farmers. There's a whole study to show the value of it.

One thing where I think we have failed is having industry at the start when we begin a research program or big programs. I've been involved in a couple of things where the researchers have gone off on their own thing and then they come to industry. Let's sit down at the start, figure out what we're looking for and how we're going to go about it as customer partners with our researchers. If we just do the research and then stop, and now we're going to sell it to you...“Well, I didn't want that.” We have to have our customers involved in the process.

One of the things I've been concerned about in these Growing Forwards and previous programs is that we will often have a six-month, seven-month gap between programs being signed. If I'm an employee there and I know I could be out of a job next week...some of the best people will leave, and we have very good employees in the third-party systems. I think it's critical that we don't have a gap.

Programs need to be fast and flexible, and by that I mean things like 48 hours, no boxes. They send a letter, we do due diligence. The closer you are to the problem, the better you can solve it, is my decision. Solving a problem in rural Saskatchewan or rural Ontario from Ottawa is not nearly as effective as with, for example, our adaptation councils, with elected farmers and food processors from all across the province figuring out how to do it. In Ottawa the decision is made and we're following all the rules. When we invest, we invest as much in the person as we do in the project itself—the history of that person, the trust in the farm community, how they've dealt with growers in the past. So the people side of the equation is just as important, if not more important, than what's down there on a piece of paper. Only by being local can you do that.

[The Chair, Conservative, Larry Miller]

Can I ask you to wind up?

[Dr. Gord Surgeoner]

Yes, I have one last thing.

One of the things I do want to emphasize, if you look at that graph, is optimization of program delivery. When government announces a $10 million program, it's $2 million, $2 million, $2 million, $2 million, $2 million. Well, that's not effective use of money, because it takes about a year to get the customers and projects in.

So you want a little bit at the front end, grow it up to the end, and then have most of your money at the end, particularly if we're paying the bills that these companies and producer organizations have incurred, yet we get all the money flatline. If you're having commitments, you get a money distribution one way. If you're having it based on expenditures, you should have it the other way. We have seen that over and over in 10 years. We should be using the money more effectively by not putting it out on an even scale.

With that, I quit.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We now move to our last witness, but certainly not least, Virginia Labbie from Saskatoon, with the Canadian Federation of Independent Business.

[Virginia Labbie]

Thank you.

On behalf of the Canadian Federation of Independent Business, and our farm members across the country, I would like to thank the committee for the opportunity to present our members' views today on the competitiveness enterprises pillars of Growing Forward 2.

You should have a copy of our slide deck presentation, which I'd like to walk you through in the next couple of minutes.

I just want to give you some background on CFIB. We're a not-for-profit, non-partisan organization representing more than 108,000 small and medium-sized businesses across Canada, who collectively employ more than 1.25 million Canadians and account for $75 billion in GDP. Of those, we represent 7,200 farm and agribusiness owners, the majority being primary producers.

We set our association policy through the survey process. In other words, one member equals one vote. So we're pleased to present some of our member survey results and data today on competitiveness from our recent survey on the future of agriculture. Slide 3 is our national monthly agriculture business barometer. We release this every month, and it takes into account our agribusiness members' optimism levels for the year ahead and the various cost pressures and business constraints impacting their farm businesses.

The good news is, optimism levels have been trending upwards since mid-2009, and our agriculture index is hovering near 60.

Agriculture is certainly not immune to the global economic challenges, and while government alone cannot solve all the global problems, they can certainly take steps to improve the regulatory and tax environment in which farmers operate, and help to fuel, not dampen, this optimism. That is why your work is so important in identifying those competitive challenges and barriers to growth as we move forward on policy development for Growing Forward 2.

Slide 4 is about agribusiness succession, and I certainly don't need to tell you this because the committee has focused a lot of attention in recent years on young farmers as the future of agriculture. As you are well aware, one of the trains coming down the track is the issue of agribusiness succession and farm transfer. The latest survey data from close to 1,700 CFIB farm member respondents reveals that nearly 40% plan to exit their agribusiness in the next 10 years, either through retirement, transfer of ownership, or sale of their farm businesses. That's a pretty stark statistic.

On slide 5, when we talk about enhancing farmers' business skills through Growing Forward 2, I think this is certainly one area that needs to be addressed. Only 16% of CFIB farm members have a formal written succession plan. One-third have an informal plan, but over half do not have any succession plan in place to sell, transfer, or wind down the business in the future. So I think this really has an impact on the long-term competitiveness of the farm sector, and the question we need to ask is, how do we encourage that next generation of agricultural entrepreneurs to enter the farming industry? The answer has much to do with the discussions today about removing those barriers to growth and entry and addressing our competitive challenges.

I'll ask you to refer to slide 6. This spring, we surveyed our farm members on the future of agriculture, and we received 1,049 responses from our members and hundreds of comments on the priorities for the sector. It's clear that our members are very engaged on this issue, and when we ask them to prioritize how governments could improve their agribusinesses' overall competitiveness, farmers had three top priorities for government: one, increase the focus on regulatory reform and reducing red tape; two, reduce the total tax burden; and three, increase the focus on improving market access for Canadian agricultural products.

It is important to note that providing more ad hoc subsidy payments was definitely near the bottom of the list.

If you refer to slide 7, this is what an agribusiness owner really feels like. One of our member's comments from our Future of Agriculture survey really sums it up. He says it is just the sheer volume of work that must be done to satisfy all levels of government and industry regulations: manure-spreading regulations, fishery setbacks, environmental programs, employee deductions, CFIA regulations, Stats Can requests, the level of reporting from banking institutions, new livestock hauling regulations—and the list goes on.

As you can see, it's not just that one regulation or that extra form or that bad experience with government customer service; it's that total burden that's placed on the farm business owner. That's why our first priority is focusing on regulatory reform and reducing red tape. We really believe that this is a low-cost way to drive productivity and innovation in the agriculture sector.

CFIB has estimated that government regulations and paper burden cost Canadian businesses more than $30 billion a year—this is just to comply with regulations at all levels of government. Farmers are certainly not immune to this burden. CFIB welcomed the Prime Minister's announcement of a red tape reduction commission, and CFIB's president, Catherine Swift, is serving on this commission. We understand the commission has been working towards addressing red tape and regulatory reform, and we are looking forward to its upcoming report on the next steps in the process.

Many of our farm members submitted their concerns and real-life examples of what is not working to this committee, and we are pleased that many agencies have been provided with this feedback.

One of our pre-budget recommendations is to make regulatory reform permanent through binding legislation that would require ongoing measurement and public reporting of regulatory activity and quality of government service. We also recommend that there needs to be a commitment to paper burden reduction targets—placing constraints on regulators so that for every new requirement that's introduced, one or two will be eliminated.

The Province of British Columbia is the first government in Canada to enshrine regulatory accountability into law. I wanted to provide you with a couple of examples from our Future of Agriculture survey from farmers who submitted their views. It gives you a flavour of some of the regulatory hurdles our members face.

Take the farmer who has to fill out 400 forms for every container of polypropylene bags he imports to package his pulse crops for export. This is a duty drawback that was put in place to protect Canadian bag manufacturers, yet there are no Canadian polypropylene bag manufacturers left in Canada.

We have dozens of comments from farmers who don't feel they're playing on a level field. We've talked to a member who cannot access organic pesticides that have been registered for 20 years in the European Union and in the United States.

In reference to the Canadian Food Inspection Agency, we have a cherry grower who said that the CFIA enforces inspection of exported cherries beyond necessity, and yet allows imports of cherries on consignment.

Pesticide application in Canada is not on a level playing field with the United States and many other countries, where there is access to chemical products not available in Canada.

Increased food safety concerns seem to apply only to Canadian producers and not to the bulk of imported food.

Another comment is:

My product competes openly against those from other countries, yet my inputs are strictly regulated: pesticide residue, minimum days to harvest, etc., while those entering Canada are not monitored. If the product I sell is monitored, so should the competition in the name of public safety and fair competition.

Clearly, there is work to do, and we hope that regulatory reform is a high priority in Growing Forward 2.

Our second priority for government action is on taxation, which feeds into our data on succession. In CFIB's federal pre-budget presentation to the Standing Committee on Finance and in our pre-budget submission, we are pushing for government to index the lifetime capital gains exemption to inflation, as was previously promised. CFIB was pleased that the federal government increased the lifetime capital gains exemption from $500,000 to $750,000 in Budget 2007. The lifetime capital gains exemption is a significant retirement vehicle for our farm members, and given that four in ten agribusiness owners plan on selling, transferring, or exiting their business in the next 10 years, this would be extremely helpful. Indexing this measure will ensure that its value does not erode over time.

We also recommend increasing the capital cost allowance on agricultural equipment. We know that agribusiness owners must make significant annual investments in equipment to stay competitive, and farmers must rely on cutting-edge technology to remain competitive. So CFIB is recommending that the federal government increase the capital cost allowance on farm equipment to more closely resemble depreciation rates in the United States.

Finally, slide 9, as we've heard already today, shows that our third priority is improving market access for Canadian agricultural products. This is really an important slide, because it really shows that when we surveyed our members on business risk management programs and on programs like AgriStability, and we asked them what role government should play in helping to address risk at their farm, CFIB farm members said the government's number one role was addressing actions of foreign governments—for example, border closures. Only 17% said government should address any risks their farm may experience.

CFIB's farm members applauded the recent WTO decision on U.S. country of origin labelling. It's clear our farm members have an appetite for more work to be done to continue to open up global markets to Canadian agricultural products in order to improve the agriculture sector's overall competitiveness.

In closing, we will be providing this committee our members' feedback in the CFIB report on Growing Forward 2 and the future of agriculture in the coming weeks.

I thank you again for the opportunity to appear before this committee.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We will now move to questions, starting with Mr. Atamanenko for five minutes.

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

Thanks, Larry.

Thanks to all of you for being here.

Richard, it's good to see you again, as always. You mentioned a number of things in your presentation. One was trade access, and of course we're also talking about competitiveness, with the premise being that the more competitive our farmers are the better off we'll be in our rural communities.

My first question has to do with the Canada-Europe trade agreement. We know we're pushing farm groups and the government for more access to European markets. However, at least according to the research I've done, on the European side, the main corporations are driving their agenda, and they want more access, for example, to local contracts, to what we call subnational contracts, which could put our communities at risk due to competition from these companies. If they want to provide local jobs, then they could be sued by these companies. There are a lot of factors. There's the idea that this may increase the cost of drugs. There could be some control issues with regard to our water.

When you're looking at these agreements, are you looking at them from all sides? Are you looking at the potential effects that an agreement such as this one could have on our communities, for example, in western Canada? Has your organization given this much thought?

[Richard Phillips]

I would say we're well aware of that, and we do stay in touch with groups. For example, the consulting engineers have raised some of these concerns with us as well, such as what happens if you're a small municipality—let's say my home town of Tisdale—and you put out a tender for a water plant and you get 12 European firms that bid on it, which may or may not have the capacity to understand what the weather and climatic conditions are for winters in western Canada as compared to winters in Europe? Those are the sorts of things we've talked about.

I'd have to say that as grain growers, we don't have that capacity internally in terms of staff and resources to do all of that. We have worked through the Canada-European round table, through which a lot of businesses in Canada come together. We work through groups like that and listen to what they have to say.

At the end of the day, our members, whether grain producers or beef and pork producers—because where they gain, we gain, because we supply the feed grains to them—are saying to work on this deal, but we are aware and we try to stay on top of what the other issues are. We don't have the capacity to truly analyze it.

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

My second question has to do obviously with the Canadian Wheat Board, and you folks have supported the current legislation. We have certainly talked about this a lot, and there has been a lot of heated debate.

The Wheat Board has had respect worldwide. It's had sales contacts and experienced people. Whether we like the single desk or not, it has provided stability in good years and in bad years and in an unstable world.

I'm wondering if you folks have done any analysis as to what could happen now with this opening up of a dual marketing system, and whether that stability will be hurt. Are we going to be facing American protectionism, for example, as we've seen in other areas? Will we still have the ability to get those key markets? Will it have an effect on our rail service? Will the railways try to get away with more gouging, which we know they are doing? I'm wondering what you folks have done to prepare for your position on this.

[Richard Phillips]

I would say that one of the issues out there with a lot of farmers is.... People are asking a lot of these questions, too, Mr. Atamanenko. They're asking what the contracts will look like and what they will supply. Farmers are wanting to contract their new grain. People are contracting canola, the new crop canola, into fall pricing options already. We see some good prices in the wheat market. People want to start locking in their prices. So the answer is hard to know actually.

There are going to be some big bumps on this road, I won't deny that a bit. But at the end of the day, I think there's a sense of urgency to get this done so we can start looking at that in January, in order that farmers and companies can start giving out the contracts.

I was at a meeting with some Wheat Board employees, mid-level management people. They said they're ready to roll and want to get going. If this is what they're going to do, whether we like it or not, then they have to start thinking about what the contracts are going to look like, whether their pools are going to be six-month pools, one-year pools, or 30-day pools, and what sorts of options can even the Wheat Board operate under. So there are good people there who say that if this is the new environment, let's get at it.

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

It's certain, though, that there hasn't really been an in-depth economic analysis of the ramifications, and we're still moving ahead. Do you still feel confident that...? Obviously, the farmer who is doing really well, the big operator, and I know many of them personally, will do well. But a lot of people who are good farmers are maybe not computer literate, such as myself, and in the past they have relied on the Wheat Board and their stability. What effect do you think it may have on people like that?

[Richard Phillips]

I think we want to see the Wheat board being as successful as it can be in the new environment. We do want to see that. So the five years of guarantees that are being provided, if they have good people in there.... We do want to see the pooling options. I have three quarters of wheat in this year, almost 500 acres of wheat on my farm. I want the Wheat Board there because I'm probably going to put at least half of my grain in the Wheat Board. I may break it up between the different pools. For me, that's one way to manage some of the risk in the price. If I choose to speculate in the open market with my other wheat, I can, but personally I want to see the Wheat Board there as an option, and I will use it. If we don't use it, it will be gone.

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

That's an interesting comment—

[The Chair, Conservative, Larry Miller]

Alex, you're way over time. I let you go on.

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

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

Thank you very much, and I'd like to thank everybody. We've had some great testimony. Unfortunately, I won't be able to ask all of you a question.

I'd like to welcome Mr. Petersen here from Red Deer country. I assume you live near Alix or farm near Alix somewhere.

[Trevor Petersen]

No. Actually, I'm only 10 minutes south of Red Deer.