Evidence of meeting #19 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was farm.
A recording is available from Parliament.
Conservative
The Chair Conservative Larry Miller
I call our meeting to order.
Mr. Dhaliwal, I think we're going to start with you, since you're by video conference. If we run into any technical problems, we can sort them out.
To our three witnesses here in the room, Mr. Gowland, Mr. Dechaine, and Mr. Schneckenburger, thanks very much for coming here.
Of course, Mr. Dhaliwal, thanks for joining us by video. You may carry on for 10 minutes, please.
Nirmal Dhaliwal Director, Okanagan Tree Fruit Cooperative
Thank you for inviting me.
My name is Nirmal Dhaliwal, and I live in Oliver, B.C. I've been farming since 1990, when my parents purchased our first orchard. I currently operate 25 acres of cherries, apples, and prunes. I also have a full-time job outside the orchard.
I'd like to start by saying that I am speaking as a member of the Indo-Canadian farm community in the Okanagan Valley. We are about 50% of the tree fruit industry here. Our community is integrated into the whole-farm community. For example, I am also a member of the BC Fruit Growers’ Association executive, as well as a director of the Okanagan Tree Fruit Cooperative. However, as relative newcomers to the tree fruit industry, our Indo-Canadian growers have the same special concerns about government programs as all new entrants. I am looking forward to presenting to the agriculture and agrifood committee some comments and suggestions for the next five-year federal-provincial agreement on business risk management programs, Growing Forward 2.
The advance payments program is essential to the tree fruit industry, as apples and pears are storage crops. The program provides cashflow for growers and allows them to market their crop during optimal marketing periods, rather than selling quickly and at potentially lower prices due to the need to generate cash for current expenses. The need for liquidity is especially true for new growers and therefore for the Indo-Canadian farming community. The increase in the amount of interest-free advances is very much appreciated and is an example of a financial program that really works for the farming community.
Another risk management program is AgriInvest. This savings account program is popular with growers, as it helps to generate needed investments for farm improvements. Many in my community have farms that need improvements, especially buildings and equipment. This program helps us gather the funds needed to begin the renewal of our farms. Also, the funds in the account provide relief for the small, unexpected financial challenges that everyone experiences in farming. The main comment I hear is that the amount of government matching funding should be increased for this program. I believe there is some willingness to trade off improvements in AgriInvest for slight reductions in coverage in other business risk management programs, but there is a balance to be achieved and we are close to that balance at this time.
AgriStability is the problem child. While the provincial administration has improved delivery over the federal administration, there are still problems of communication with those portions of the program that remain administered by the federal government, for example, access to income data. Why is there not a practical solution offered by the federal government, like a check box on the income tax form authorizing the income tax department to expedite the delivery of my information to the provincial AgriStability administration? When I need help due to an unexpected downturn, it hurts more that the administration is not working well.
Because of all of the historic problems with the federal delivery of this program, growers are probably most willing to trade this program off for other program benefits. But in many ways, this should be the most important program for protecting growers' incomes from severe financial declines.
The AgriInsurance program, or crop insurance, is very important in the tree fruit industry. Our crops are high-value crops—about $10,000 to $12,000 per acre in revenue—but apples are very susceptible to occasional hail storms, and cherries are sensitive to rain. A damaged crop is not marketable, even for juice. Often hail- or rain-damaged crops have the majority of input expenses incurred at the time of damage, so crop damage or loss would be devastating without crop insurance.
I would like to see the national crop insurance rules reconsidered to encourage diversification. For example, if I have damage to late-season apples, which account for 10% of my acreage and production, this segment of my crop would be 100% damaged and unmarketable, yet there would be no crop insurance due to the pooling of this loss with all of my apple production. This just does not make sense, because instead of encouraging diversification, the crop insurance program is encouraging me to be a monoculture.
If there is damage to that variety due to timing of a weather event, then my whole crop of the same variety would be covered. If that variety is only 10% of my crop, then the loss is not insured, as it falls below my deductible.
I think there needs to be more flexibility in the crop insurance so that provinces can have some rules for tree fruit that may not make sense for grain, and vice versa. As long as the program remains financially sound, there should be more provincial flexibility.
The AgriRecovery program did not help the tree fruit industry in its time of need. In the fall of 2008, we had a late-season freeze that affected the last 10% of the crop, which was still hanging on the trees. AgriStability and AgriInsurance did not provide coverage, mainly because of deductibles or because the frost damage became apparent only after the crop was harvested.
AgriRecovery was not accepted by the province in this case. I feel that provision of AgriRecovery is uneven between provinces and commodities in similar circumstances. For this reason alone, the resources should be directed to better use.
In summary, the advance payments program is essential. Second, the AgriInsurance program is very helpful for investments and short, shallow financial challenges. Third, on AgriStability, if we continue to improve communication of data between federal and provincial governments, it will help growers in deep financial declines, but the problem of long-term but not permanent declines is not covered by AgriStability. Fourth, AgriRecovery coverage is inconsistent and problematic.
I hope these comments are helpful and useful to the committee. Thank you for taking the time to hear from the Indo-Canadian farm community in the Okanagan Valley of B.C. I would be happy to answer any questions.
Conservative
The Chair Conservative Larry Miller
Thanks very much, Mr. Dhaliwal.
We'll now move to Mr. Jim Gowland, a farm operator from...Huron County, I guess it is.
Owner-Operator, Farm Business, As an Individual
Thank you, Mr. Chairman.
My name is Jim Gowland. I am a cash crop producer from Bruce County, near Walkerton, Ontario. For well over 30 years my business partner and spouse, Judy, and I have farmed. Currently our corporate family farm business operates and produces 2,200 acres of field crops, including soybeans, wheat, corn, white beans, and some forages.
Similar to other successful farm business operations in Canada, our farm maintains a sustainable crop rotation that maximizes yield and quality attributes and uses cost-effective equipment capital and sophisticated technology practices, which ultimately result in long-term business profitability in our operation. Our farm business success can be attributed to taking advantage of opportunities that add value in the crops we produce.
On our farm business cards, our motto or tagline states “Quality Crop Production for Global Markets”. In my view, this reflects the ultimate in a business risk management strategy for our farm business and the entire success of the Canadian agriculture industry. Individuals in industry must work hard to produce a quality product that can add value over and above commodity status. Global markets represent all markets, local or domestic, as well as international. It's every individual's business responsibility to recognize that success depends on the industry's vision, on differentiation, and on being competitive in the global marketplace. Therefore, in my view, collaborative industry and government investment in market development, trade, market access, and research and innovation should be the top priorities in any resource allocation.
Farm business operators, industry, and government always need to be cognizant that Canada is dependent primarily on exports for the success of agriculture and that we exist within the global jurisdiction of a free and open market-based system based on international pricing and trading parameters.
There has always been an emphasis, in my agricultural career, on having a business risk management strategy or having safety nets to aid in the event of cyclical downturns, trade-distorting policy impacts by other countries, or weather and catastrophic events. These backstops are an important tool for the agriculture industry. However, for a successful and sustainable business and industry, it is imperative that Canadian agriculture not slide into total social dependency on income support programs that ultimately lose the vision of being creative, differentiated, and competitive.
Many successful farm business operators will often say that their success did not come from standing by the mailbox waiting for a lifestyle-entitlement payment but from being creative and innovative, especially through cyclical downturns.
According to Statistics Canada data, total farm cash receipts over the last five years, 2006 to 2010, average about $42.6 billion annually. Within that, total grains and oilseeds represent approximately $20 billion; the red meat sector represents about $9.5 billion; and the supply management commodities represent about $8.1 billion. Program payments such as crop insurance, provincial stabilization programs, and other Growing Forward programs represent $3.7 billion. Statistics Canada data also reveal that the five-year average from 2006 to 2010 for farm net income after depreciation and inventory change is $2.8 billion annually.
It should be especially concerning to all sectors of the agriculture industry as well as government when program payments average $3.7 billion annually and net farm income averages $2.8 billion annually. When nearly 9%—and some years 10%—of farm gate cash receipts are in the form of government support payments, there needs to be a realization by all involved that other resource investments need to be the focus for increasing profitability within the agriculture sector.
Of interest, our farm business has not received government funds averaging over 1.5% of gross farm receipts annually over the past five years, and those dollars were through AgriInvest. That being said, I will now comment on current BRM program policies and the components of BRM within the present Growing Forward and give suggestions for Growing Forward 2. I used Treasury Board data to get these cost estimates.
Here is a little bit first on general farm program policy. Any BRM programs that AAFC puts in place need the following attributes: programs must be affordable to society—I'm a taxpayer, too, like everybody else; programs need to be affordable to producers; programs need to be time sensitive and to respond to the time of need; programs need to be predictable; programs should be limited to minimal administration at the government level, the farm business level, and the accountant level; programs need to have interprovincial harmonization and agreement and need to have a totally Canadian focus; programs need to be trade-compliant; programs should not be commodity production distorting; programs should not entice capitalization—business profitability should be the true driver for new capitalization; and programs should not override competitive directives or initiatives.
Here is a little about the Agri suite of programs within Growing Forward.
On AgriInvest, approximately $160 million to $175 million is spent by AAFC annually. Again, the 1.5% of the allowable net sales is matched by government. It's a very good program, from my standpoint as a farm business operator. It's well accepted by many producers I know. It has flexibility for producers to access their moneys from their accounts in their own financial institutions whenever they wish to do so. It's very easy to access those funds, and the administration is simple, both at the producer level and at the AAFC level. As well, it’s very predictable.
Suggestions to improve it could be to increase the contribution rate from 1.5% to at least 2% or more by both producer and government. An increase over the $22,500 cap would be great too.
For AgriInsurance, approximately $450 million to $550 million is spent by AAFC annually, and then there's the provincial on top of that, of course. It's basically production insurance or crop insurance. We feel this is a pretty good program in Ontario. There's always some fine-tuning that’s necessary, but it's reasonably affordable and it's very time sensitive as related to production periods.
On AgriStability, approximately $600 million is spent annually, just by AAFC. Certainly it works better for livestock enterprises such as beef and pork. It’s difficult for crop enterprises to utilize. Diverse multi-sector farm businesses will rarely trigger payments. There's limited predictability and/or transparency in the program.
Suggestions for improving it would include improving the transparency. It would be helpful if farmers could see instantly the impact of their numbers when they actually make the application. Also, of course, there's the whole issue of timeliness of program payments in relation to the time of need.
For AgriRecovery, approximately $100 million is spent by AAFC annually. Catastrophic events that cannot be foreseen do happen, and as there is for other major disrupting events in society, there is an obligation by society and government to alleviate the severe pressures of such events.
On the advance payments program, approximately $160 million is spent annually by AAFC. Data show that it represents flexible marketing management of over $2.5 billion of agriculture production across Canada. Personally, I've used advance payments on a few occasions but prioritize other marketing tools to capitalize on orderly marketing of our agriculture products.
I would summarize by saying that as a grains and oilseeds producer, the two best complementary BRM programs for our farm business currently are the AgriInvest and AgriInsurance programs. AgriInsurance allows us to make sure that any risk in production is mitigated. AgriInvest allows us to build a security fund so we can save through good income years and have immediate access through times of cyclical downturns. To me, this allows us to be responsible in micro-managing our own farm financial business needs. I often use this tag line: AgriInvest and forget the rest.
Canadian agriculture cannot be reliant on subsidies or off-farm income for long-term business success. Again, I must reiterate that the real success for profitability in our farm operations and the future financial success of the Canadian agriculture industry must lie in continued efforts of innovation and differentiation of our agriculture products in a competitive global marketplace. BRM or safety nets need to be only complementary backstops to non-BRM efforts.
As a Canadian producer, I would like to thank the Standing Committee on Agriculture for having me here today to have input into the Growing Forward 2 process.
Thank you.
Conservative
The Chair Conservative Larry Miller
Thanks very much, Jim.
I'll now move to Mr. Dechaine for 10 minutes.
Louis Dechaine Farmer, As an Individual
Thank you, Mr. Chairman.
Good afternoon, honourable members.
I would like to thank you for the opportunity to speak to you as an individual on business risk management programs under Growing Forward 2, and more specifically the AgriStability program. The complexity, the predictability, and the bankability of this program under its current format do not work. There needs to be a better way to deliver this program—more along the guidelines of the old farm income disaster program or AgriInvest.
If I may, I would like to share with you the issues I have encountered with the AgriStability program in the last few years.
One is the ability of AFSC to change the structural change calculation for the margin years on a yearly basis. I feel that once a margin is established, the calculation should be set for the five-year period of that margin.
The structural change calculation seems to be variable based on the opinion of the person working on the file. It seems that there are verifiers who understand the way a farm operation fluctuates with the market and the seasonal conditions farmers have to deal with, and they work around it with the structural change, but many of the verifiers just process the paperwork without questioning changes that have occurred.
In some cases, farmers have pastured their hay land because of poor production and reported it in pasture instead of hay. In many cases, this error caused a structural change that should not have occurred. The people who complete their own forms can easily make these errors as well.
The pricing of commodities is based on pricing for December. In a lot of cases, pricing is poor throughout the year and increases at year-end. Pricing of some commodities is a problem. The program has become so complex that many farmers do not understand it and forms are not completed properly. Many farmers want to complete their own forms and want to understand the program they are applying for.
Payments are few for many farmers. It seems that payments are not being directed to anyone who is trying to grow their operation or maintain the operation they have established. Many payments are directed to farmers who are downsizing and getting out of farming. These are not the farmers who need the support money.
Thank you.
Conservative
The Chair Conservative Larry Miller
Thank you.
We'll now move to Mr. Schneckenburger for ten minutes.
Arden Schneckenburger Farmer, As an Individual
Good afternoon. My name is Arden Schneckenburger, and I farm in eastern Ontario at Morrisburg, which is approximately 65 kilometres south of here. I farm with my wife, Rhonda, my son, Warren, and several employees. My parents are of German descent and ours is a second-generation farm.
I would like to thank the agriculture committee for giving me, a producer, an opportunity to give input on the BRM portion of Growing Forward 2.
Cedar Lodge Farms is a cash crop, beef feedlot, and small grain elevator business. We are a diversified farm, as are many farms in eastern Ontario. Ontario in general has a more diverse agriculture base and has more multi-enterprise farms than do many of the other regions of the country.
I have been farming since the early 1980s and over the years have seen a number of BRM programs developed and implemented by the provincial government or the federal government, as well as tripartite producer provincial-federal programs. I have been active in the past as a director on several farm organizations, dealing with everything from cattle to grains, and have worked on the development of various programs.
What I like about the Growing Forward methodology of programs is the belief that no one program stands alone. Marketing, trade, international rules, business risk management, market development, and research and innovation are all key in the long-term competitiveness of Canadian farms domestically, within North America, and globally.
BRM programs have been around for most of my farming career to address issues from high interest rates to market fluctuations. In Ontario, these are referred to as safety nets. Ad hoc programs, which were unpredictable and unbankable, have given way to a more structured suite of BRMs, most recently through Growing Forward 1. This suite of programs is more predictable and bankable and deemed to be less trade distorting. The programs are now up for discussion, and through some tweaking they can help Canadian farmers manage major market shifts and make us more level in global competitiveness.
There need to be tweaks around issues that are out of farmer control, such as non-tariff trade barriers, politics around issues such as BSE, border openings, COOL, etc. These are beyond our control and should not punish us with our margins.
The agriculture farm industry needs basic suites of programs to provide support at a level that is not trade distorting and that is affordable to both producers and governments alike.
Ontario farmers are concerned that not all regions are getting fair treatment and dollars under BRM programs at this time. With Ontario's diversified farmers, fewer dollars are coming to Ontario than to other regions through programs such as AgriStability, AgriInvest, and AgriRecovery. My farm, for example, did not receive any AgriStability money even though my beef feedlot suffered the same losses as feedlot-only farms did, but my other enterprises kept me above my threshold. This put me at an economic disadvantage compared to other farmers in my province.
I agreed with many of the base assumptions of Growing Forward 1, and I believe any ongoing program should have many of the following principles. It should be non-market distorting within Canada and with our trading partners. It should be equitable across all of Canada. It should be easy for farmers to do the paperwork for it and for governments to provide it. Programs have to be cost-effective to governments and producers and should react on a timely basis. They should be as bankable and predictable as possible, should work for both young or beginning farmers and established farmers, and should not punish multi-enterprise farms. Non-farmer-controlled actions by trading partners should not affect margins. Programming should be flexible; for example, there should be AgriInsurance in all regions, but it should be different in Ontario than it is in Saskatchewan. Large enterprises should be separated to address Ontario's more diverse agriculture. There should be flexibility of withdrawal for management purposes, i.e., for AgriInvest, in which the producer decides. BRM programs should be aided by Growing Forward initiatives for market development, trade, innovation, and research.
Help us to compete in the future by providing these things rather than just money for business risk management.
Here are a few of my thoughts on the BRM suite of programs and how they can be slightly tweaked. AgriInvest, as I stated earlier, is the top 15% of your reference margin. It's farmer managed and well received. I agree with Mr. Gowland that we should look at putting a higher amount in the program, like 2% of net sales, which would raise the program cap from $22,500 to $30,000. It's quite predictable and it's fairly easy to administer for both producer and AAFC.
AgriInsurance in Ontario is a well-received program. We have very good crop insurance in the province. It's well received because farmers know it's an ongoing and changing program. Every year the farm organizations and the Ontario government work out tweaks to the program. Even though it's part of the Growing Forward suite of programs, it is still changed every year. That's what we like about it; it gives some flexibility.
As for AgriStability, Ontario farmers are beginning to have more and more issues with whole-farm coverage on larger multi-enterprise farms due to a lower likelihood of payments, as compared to single-enterprise farms. There should be some consideration of not punishing farms that are trying to self-insure themselves by being diversified rather than being farms with single entities. One of the ways you could maybe do this is by allowing larger enterprises, such as those with a minimum of $250,000 to $400,000 in gross sales, to stand alone. So if you have $1 million in cash crop sales and $500,000 in cattle sales, you have the two entities separate.
The issue of consequences and negative margins caused by circumstances outside of a farmer's management control must be addressed. Take, for example, BSE. Beef farmers, never in their wildest imaginations, thought it would take many years to have all of our borders open again. I applaud the government for its commitment to work with farmers and industry to open borders. Having said that, I believe reference margins should be adjusted for what I call political interference by our trading partners in trying to keep us out.
Another area that you can perhaps look at is changing reference margins to the Olympic average versus the three years that we have in the middle right now.
The AgriRecovery program is the least predictable and bankable of all the programs. We need a program like this, which is rapid to respond in the case of a catastrophe. We saw that with the weather we had out west in the last couple of years. Again, it works best for single-enterprise farms, thus if you look at the dollars spent on this program in Ontario over the last three or four years, it's been very low.
The advance payments program is $100,000 interest free, and it's well received by many farmers. One issue is that many of the larger farmers are not using the program because of the multi-enterprise aspect. In Ontario you're allowed to get advanced payment on a number of different commodities, be it cattle or crops, but you can't get it for each one. Again, I would look at something where, if you have a major enterprise of several hundred thousand plus, you'd be allowed to get it for both.
Ontario non-supply-managed groups have been working on other BRM programs to address income. They believe this rounds out the BRM portfolio. Much lobbying is under way, and work still needs to be done in other provinces to get this national.
On my farm, I use pretty well all of the available BRM programs to help stabilize my farm and prevent sudden income loss or shifts. I use them as an insurance, along with marketing programs for my cattle and crops, to help me stay profitable and viable. Ideally, the market would provide and no safety nets would be needed. However, this is not realistic.
Governments can further help us by putting continued resources in the other planks of the Growing Forward 2 program, specifically market development, trade, research, and innovation.
Thank you very much.
Conservative
The Chair Conservative Larry Miller
Thank you very much.
We'll now move into questions. We lost Mr. Dhaliwal. They're trying to reconnect, so all we can do is just carry on.
Conservative
The Chair Conservative Larry Miller
Well, Mr. Schneckenburger was on there a few minutes ago.
Oh, Mr. Dhaliwal's chair is empty. Maybe he thought it was over.
Anyway, we'll move to Mr. Allen for five minutes.
NDP
Malcolm Allen NDP Welland, ON
Thank you, Chair.
Thank you to everyone. Mr. Dhaliwal might come back; I don't know, but we'll see what happens.
Mr. Schneckenburger, I was interested in your comments about farms, in Ontario, at least, that are somewhat more diversified than others in other regions of the country, where they may be into mono-agriculture or one particular thing. You started to talk about where you have cut lines, in the sense that if you do X, it should stand alone inside of the whole, and you started to talk about where you saw that line being.
I'd like to explore that more in the sense of how you see it unravelling. At first blush, one says it seems reasonable, but the next thought I had was, “Well, here comes the paperwork.” So how do you pull the piece out to make it a stand-alone piece that works inside a BRM suite of programs versus being an integral part of your entire farm operation?
Mr. Gowland, I'd like you to answer the same question, if you will, because somehow I think you might have a different perspective.
May I start first with Mr. Schneckenburger?
Farmer, As an Individual
I've been thinking about this for a number of years. That's why I picked fairly high numbers, like $250,000 to $400,000. I was thinking it would have to be an entity that would stand as a full-time farming operation on its own—be it a feedlot, cash crop, horticulture business, or farmers who are in both beef and pork—so costs can be allocated to different things.
Most farms now are getting fairly sophisticated computer programs for doing bookkeeping. It's relatively easy for us to cost enterprises, and we do that so we can do our own cost of production calculations.
My opinion is that it should be explored, for farms that have that sophistication, etc.
Owner-Operator, Farm Business, As an Individual
From a grains and oilseeds perspective, that's all we do. I can empathize with Mr. Schneckenburger on a multi-entity type of situation. I would concur that our bookkeeping and our way of being able to count stuff in larger operations are basically not a big deal. Even within crops specific to our grains operation, we keep a pretty good handle on what the production is, what kind of pricing we've got, what our marketing was on that type of stuff, and what kinds of dollars have been brought in with those programs—and we assess the expenses to those too.
It depends on how technical you want to get, but you can split it down to whatever you want if you are dedicated to that purpose. So I think that yes, it can be done.
Basically, with an AgriStability program in our operation, we keep paying our premiums every year to it. The good news is that we've been fairly profitable and successful over the years. But we've had a couple of years where we ask if we can move some numbers around because that's still something that can be done, and you still don't even come close to it. So as far as AgriStability goes in a grains and oilseeds operation, yes, certainly we've been building reference margins up over the last number of years because of increased revenues out of crops. But again, I'm not going to depend on that program to look at cyclical downturns for us; I won't depend on it.
NDP
Malcolm Allen NDP Welland, ON
I don't think confidence in your operations was the question; it was really more the red tape, or at least the paperwork, that I envisioned.
Last week, the folks who were here really talked about the paperwork that needs to be returned to the government or the bureaucracy in order to engage in the programs. As for your own individual farm operations, I have no illusions that you're more than capable, very competent, and know what you're doing down to the last dot of the “i” and cross of the “t” here, there, and everywhere else.
We actually had someone here who runs a consulting business where folks go to do their paperwork to get into the programs. When you break it out, and start to see that it's not just one application for your one entity—I don't know how many entities you really have, Mr. Schneckenburger, but it sounds like there's at least two or three inside your one farm, and some might have four or five—would that present a problem?
Farmer, As an Individual
Again, I'm going to argue that the bigger the business, the more sophisticated the accounting packages. I don't think it's any more of a burden than it is for a part-time farmer who's spending $1,000 on an accountant to have the accountant do it. I think on a larger farm we spend our money on the computer programs and we tend to do it ourselves.
NDP
Malcolm Allen NDP Welland, ON
To be honest, that's good news to hear, because I think the Ontario experience is that there's a diversification.
I'm sorry, Mr. Chair, I don't want to go beyond my time, because—
Conservative
NDP
Malcolm Allen NDP Welland, ON
We're short today, I know. We're going to have votes.
But I appreciate the comment about the ability to do that. I think it's important to know that it is there, because ultimately in Ontario it is diversified farms.
Conservative