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.