Agriculture Committee on Dec. 15th, 2011

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

Right, and I guess a key point to underline here is that the farmer is insuring himself against what he can sell his product for. He is not insuring himself against profitability, which is where cost-of-production models come in. Cost-of-production models basically insure profitability, as opposed to sale price based on what the market is telling you. Would that be a fair...?

[Travis Toews]

That's true, and that's a fundamental distinction.

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

Right, and I think it's fundamental because from a trade action point of view, certainly if the federal government were to engage in a program that insured profitability, that would be trade actionable, because it certainly looks like a direct government subsidy going to farmers, whereas if the farmer is insuring himself against what he can sell his product for, regardless of what his input costs are, then that's an insurance-based program.

[Travis Toews]

I fully agree with that statement.

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

Just in the short time I have, do any other witnesses have comments on that, on the insurance-based program, etc.?

[Humphrey Banack]

Yes. All the cattle price insurance program does is it allows.... We could do exactly the same thing by going out and hedging the Canadian dollar and buying futures on a mercantile exchange and doing all these things ourselves. What it does is that it puts it in one spot. It's an easy decision to make as you move forward. It's not an insurance program on returns; it just helps farmers use the tools that are already out there. It just puts them in a lump and says, this is what your coverage will be and here is the premium to get there.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Toews, a last comment.

[Travis Toews]

To follow up on that, Humphrey described it very well; but on top of laying off your futures risk and your currency risk, it also lays off your basis risk, which is one risk component, and it is very difficult to find a tool to do that. That's why there is so much interest in this program.

The only other way to lay that off would be a direct delivery contract with a feedlot or a packer.

[The Chair, Conservative, Larry Miller]

Mr. Delaney, do you want to comment on that?

[Michael Delaney]

I'd just like to say that all those relationships work if you're living in Alberta where the slaughter plants are. You're going to have a different basis in every part of this country. So maybe at the end of the day, you're forcing the beef industry to choose. If they're advocating a national program made up of all the provinces, there is no way in hell a program like that can work in Atlantic Canada, even though you might want it to work. The only one that will work there is the Chicago futures market, with the farmer figuring out his own basis.

[The Chair, Conservative, Larry Miller]

Okay, a quick response.

[Travis Toews]

Clearly there would be a need for regional indexes to be established where price correlations don't track. You're absolutely right. In Atlantic Canada they would likely need their own regional index, as Alberta has theirs today.

[The Chair, Conservative, Larry Miller]

Thank you very much.

We're going to end the questioning there. We have some brief business here.

I'd like to thank all of you for being here. And to you, Mr. Delaney, please pass on our thanks to Mr. Ling for joining us.

I'd like to wish all of you a prosperous 2012, and I hope you have a very merry Christmas. With that, we'll let you go. Thanks again.

[Michael Delaney]

Thank you.

[The Chair, Conservative, Larry Miller]

I want to talk to the committee about what I mentioned at the end of the last meeting—where we want to go in the new year.

We have two other themes that were suggested by the analysts, and those were marketing and trade, or meeting consumer demands. All I'd like is direction for the clerk and I as to where you want to go.

Any comments or discussion? Is there any preference?

[An hon. member]

It's on the list: A, B, C, D.

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

Sure, just the way you presented it.

[The Chair, Conservative, Larry Miller]

Okay. How many meetings? Any suggestions?

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

Can we get back to you on that? What we can do over the holidays is to come up with some witnesses and then plan for that.

[The Chair, Conservative, Larry Miller]

Okay. That's fair enough. Then we'll wait. Would you like to put a timeframe on it? If we don't put a date on it, it just passes, and then the clerk is sitting in limbo. For David to go ahead and do his work, it would be nice.... Would it be fair to ask that we have some kind of comment from each party, say, by Wednesday next week, on the recommended number of meetings to follow? Is that fair?

[Frank Valeriote, Liberal, Guelph, ON]

Can you send us the list that you have there? I don't have it.

[The Chair, Conservative, Larry Miller]

Yes. I think you should have....

[Frank Valeriote, Liberal, Guelph, ON]

Oh, we have that one. Okay. Yes, it's in there.

That's fine, by Wednesday.

[The Chair, Conservative, Larry Miller]

Any further questions on that?

Thanks very much. I don't know whether we should be proud or whatever, but I believe we're the only committee working this afternoon.

[Some hon. members]

Hear, hear!