Agriculture Committee on June 13th, 2016

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone, to our meeting of the agriculture standing committee. Today we will have our first meeting regarding the agricultural policy framework.

With us today we have Mr. Greg Meredith, assistant deputy minister, strategic policy branch, and also Mr. Andrew Goldstein, director general, policy, planning and integration directorate, strategic policy branch.

We'll have opening statements. Would you start, Mr. Goldstein? You have up to 10 minutes if you wish.

[Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

I'll start, Mr. Chair, if you agree.

[The Chair, Liberal, Pat Finnigan]

Okay, go ahead, Mr. Meredith.

[Greg Meredith]

We're very happy to be here, as usual, but it's an important time for the committee to get involved.

We are very pleased to appear before you today.

As I mentioned, the timing is quite opportune because we're about halfway through the current agricultural policy framework and in a couple of months, ministers will be meeting, in July, to discuss the next policy framework, and within a year, we should have a significant milestone in the form of a multilateral agreement with all ministers. The department is welcoming the committee's interest in this exercise.

The policy framework says our set of agreements among governments that help us align policy and programming in agriculture—because we share a constitutional jurisdiction, which I'll get into a bit later in the discussion—but the frameworks provide us a valuable opportunity to maximize government interventions on behalf of the sector. Getting ready for the future is quite critical, so the committee's work will be very welcomed.

I want to spend a couple minutes, if you will, setting the context about why the sector is so important to the country.

The agriculture and agri-food sector is incredibly diverse. It is also a powerful driver of the Canadian economy. The sector generates over $100 billion—or close to seven per cent of Canada's GDP—and one in eight jobs. The sector has evolved to become highly sophisticated and efficient, while achieving great advancements in crop varieties and yields.

Thanks to investments in productivity growth, Canadian farmers today can produce twice as much output compared to 1961, with the same level of input. For instance, from 2005 to 2012, Canada's national dairy herd declined by 11 per cent, while total milk production increased by 6 per cent. Better feeding, disease control and genetic advancements have increased the amount of milk produced per cow. Despite international and year-to-year variability, yields for corn, canola, wheat and soybeans have trended upward over the past four decades - all due to better crop varieties and production practices.

Underpinning these advancements over a lengthy period of time has been a very strong reliance on research and development and science, a large proportion of which has been conducted by the Department of Agriculture and Agri-Food. Collaboration with our partners in federal, provincial, and academia has been quite critical in producing some breakthroughs over the period of the last 50 or more years. Research begun in the 1980s, for example, has led to a 90% reduction in summer fallow, which means 10.3 million hectares of extra land brought into production as a result of certain techniques. Summer fallow, as some of you will know, is leaving acreage not planted so that you can replace nutrients, replace nitrogen, rejuvenate the soil, and control pests.

By bringing that acreage into production, you're providing producers with literally millions and millions of hectares of possible production. That was done by collaborative research among governments and academia into reduced tillage techniques, introducing different fertilizer and different pest control applications that keep the soil healthy. It retains moisture and allows the production of extra crops.

By the way, it also acts as a carbon sink. Zero till and techniques that support zero tillage or low tillage strategies have been a major method in the agricultural world to mitigate greenhouse gas emissions.

One small example of the advantage that a reduction in summer fallow has brought is the increase in pulse production in Canada, from 193,000 hectares in 1981 to 2.2 million hectares in 2011. You may know that Canada is one of the world's largest, if not the largest, exporters now of pulse crops. Research and development are critically important.

I think you will know also as a committee that Canada is one of the few countries that is a net exporter of food. The country has a certain obligation to ensure the most productive practices possible. In 2015 Canada exported over $60 billion of agriculture and agrifood products, so there's an exceptionally important role for the country to play in feeding the world, a role that will only become more important over the period of the next framework.

I should say also that farmers have been doing very well in the last several years. Farm cash incomes reached a record high of $15 billion in 2015. The average net worth of a farm is forecast to grow to $2.7 million—that's assets after debts—in 2016. The prospects for the future look very bright.

From our perspective, as we prepare for the next framework, we're looking at an opportunity of very significant population growth in the developing world combined with income growth and urbanization, with all three trends equalling changes in diet and changes in capacity to purchase western-style foods, including foods from Canada. We see a significant demand increase in that region of the world. In fact, if you drew a circle on the map that encompassed a portion of China and a portion of India and southeast Asia down to around Indonesia, you would have more people than in the rest of the world combined. There's a very significant export opportunity and a very significant obligation for the country to ensure that people have access to nutritious foods.

That said, there's a lot of risk in the world. There's a lot of risk built into farming. Weather, pests, and markets all present farmers with risks they have to manage. We do see forthcoming increased volatility in weather patterns, which create an enormous challenge for farmers. One point I want to make for the committee is the importance of research and development in helping the sector maintain a resilience in the face of that kind of volatility. Some of you will remember that we had a very difficult growing year in 2014-15. The season started off extremely dry. There was a large number of concerns about yield and productivity and returns to farmers over the course of that very challenging growing season. Despite all those challenges, the western crop was the second-largest crop on record—science, research, and development proving that we can improve products and improve practices to build resilience into the sector.

Another challenge for Canada going forward as we start to build the new agricultural framework is the preferences of diets, both here in Canada and abroad. Consumer tastes are changing. The growth of pulse crops is a good example of that. The acceptance in the developing world of canola oil is another example of consumer-driven opportunity that we have to ensure the sector continues to be able to take advantage of.

By way of setting the context, if I may, the evolution of agricultural policy frameworks goes back almost 15 years. I would say that prior to the 2000s, because of concurrent jurisdiction and because of governments wanting to intervene on behalf of their producers, there were often misaligned policies and misaligned programs in the sector. Sometimes there was internecine competition between provinces wanting to get the best for their producers. The advent of a policy framework strategy that aligned policy and program among governments was a significant advantage for the sector.

The APF, the agricultural policy framework, in 2003 was the first such framework. We're now in the middle of the third.

[The Chair, Liberal, Pat Finnigan]

Excuse me, Mr. Meredith, is there going to be only one presentation?

[Greg Meredith]

Yes.

[The Chair, Liberal, Pat Finnigan]

We had 10 minutes per person, so I'll allow you to finish your presentation.

[Greg Meredith]

I've co-opted Andrew's time. The fact that he works for me makes that easy.

I'll be brief though, and I'll give you an example. Our response to COOL, country of origin labelling, which was a very long and dragged out effort to reopen borders for red meat in the U.S., was a very well-aligned strategy between federal and provincial governments culminating in a successful outcome. It's an outcome that I don't think would have been as easy to achieve without the alignment that governments have learned to introduce.

I'll briefly go over what constitutes an agricultural policy framework.

It's first and foremost a set of programs that align and point in the same direction. The federal government administers a number of those programs to the tune of about $1 billion over five years. Our provincial colleagues administer programs that are worth about $2 billion over five years. The federal government contributes 60¢ for every one of those two billion dollars. That helps with the cohesiveness of the framework. Last, governments have agreed to jointly administer a number of business risk management programs, which in the main provide direct income support to producers under conditions whereby either their productive capacity is threatened in a disaster situation or there are significant market returns that collapse.

Let me quickly go over the main milestones that we foresee coming.

In July, ministers will be getting together to talk about the framework and will produce, we hope, a common vision in the form of a policy statement going forward. That policy statement will signal to the sector where governments think the priorities should lie, and will signal also areas where governments are very interested in getting engagement and feedback.

Over the course of the next year, after July, we'll see some significant level of engagement and consultation with the sector. We've already begun to do that. Last week Minister MacAulay launched our first national engagement session with about 75 producer organizations and other organizations interested in the next policy framework. Prior to that, officials have met about 150 organizations in getting ready for the next phase of engagement. By July 2017 we should have a multilateral framework in place. That's the direction that will set both the budget—the amount of money committed to the sector—and the division of that budget among policy areas going forward for the next framework.

I won't get into the business risk management programs because of the time, but I know there will be a number of questions about those. We're more than happy to address them. That is all to say, though, that there were some significant changes in Growing Forward 2, but despite those changes, these programs have paid out about $4 billion since 2013.

It's also in my minister's mandate letter to ensure that those programs are working on behalf of producers. In that endeavour, he's going to be joined by his provincial colleagues, who agreed at the outset of Growing Forward 2 to have a mid-term check-up on business risk management programs to ensure that the programs continue to work.

So far we're hearing a few things from the sector, Mr. Chair. One, the emphasis on innovation, research, and development continues to be a priority, as do trade and market access. Market access is critically important as we see more countries resorting to different types of technical or other barriers to trade. Having a trade agreement in place is important, but making sure that you can actually access the provisions of that market agreement is equally important.

Some emerging areas that align with this government's priorities include a greater emphasis on climate change and climate change adaptation as well as mitigation for the sector; a renewed emphasis on food processing, because of the importance of the food processing sector with regard to employment in the country; and an important effort to ensure that research and development dollars are set in a series of priorities where the best value for every research and development dollar is extracted.

Mr. Chair, in the interest of time, I'll wind up there.

Mr. Goldstein and I are happy to answer questions for as long as you'll have us.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Meredith, for the opening statement, which is, of course, the beginning of a long conversation that we're going to have on APF, one that is very important for all producers across Canada.

Right now we'll go to questions, and the first one in the first round will be Mr. Warkentin, for six minutes.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Thank you so much.

Thank you, gentlemen, for joining us. We certainly appreciate you coming. Obviously, you're the wealth of knowledge that we'll draw from today, and it's important that we hear from you before we begin the hearings.

I'm going to drill down on an issue that I've heard again and again. I may be the exception here because I live in a different region than most in this room. One of the challenges that has continued to dog any program as it relates to a business risk model is the requirement for farmers to have crop insurance. It's obviously a provincially administered program, but it's a concern, insomuch as farmers are limited in their access to a federal program based on the requirement that farmers engage in crop insurance at the provincial level.

The challenge is that there are certain regions of the country where insurance rates simply skyrocket, regions like the Peace, where we have a significant amount of acreage. Farmers find that their rates are so considerably higher than other regions in the province, and for that matter, the rest of the country, that the business case is not there for them to purchase provincially available insurance.

Is this a concern that you've heard? Am I the first one to bring this concern up with you? If so, would there be a feedback mechanism for farmers to give that feedback to the minister as they consider this new program?

I suspect that it's probably a niche concern, but one that has a significant impact in terms of the ability for farmers in my area to engage in what is a federal program based on the requirement to engage in a provincial program.

[Greg Meredith]

I have to admit I'm not familiar with the linkage that has been drawn between a federal program and provincial insurance. We have a program broadly called AgriInsurance. It's shared federally and provincially, administered by provinces so that it's close to the producer. It's the most popular program we have, and it's the most well financed.

Of all the programs in business risk management, that's the one that governments spend the most money on. I would say for the most part it's the most popular program. It's deemed to be predictable in terms of what it would pay out, under what circumstances, and it's transparent in terms of what the farmer has to pay in premiums. Subscription is very high and payouts are quick.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Is there a regional breakdown of that engagement?

Would we be able to see if there's a certain portion of the country that's not—obviously, it's highly....

[Greg Meredith]

Yes, you're right.

Some of these products are provincially based. We have one program—

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

I guess in the province of Alberta they have been, because the Province of Alberta has gone it alone on the insurance side.

[Greg Meredith]

Yes.

In one specific case, the western livestock insurance program was developed by Alberta for cattle producers, and that may be what you're referring to in the Peace. Otherwise, they were partnering with the federal government. In this case, with the agreement of the other western provinces, Alberta has now built out the coverage to incorporate Manitoba, Saskatchewan, the Peace River region of B.C., as well as Alberta.

This is a unique product that we have helped Alberta develop because it is all producer paid. That may again be a source of some of the comments that you've heard.

In the case of crop insurance, governments have subsidized premiums. In the case of livestock, that particular product is not subsidized.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

In terms of the insurance portion, though, determination of the premium is decided based on region and the anticipation of frost and different variables.

[Greg Meredith]

Correct.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

In our area, it has rendered a situation by which farmers have decided not to engage in it because of the....

It would be interesting, I guess, if we could see the uptake in terms of the regionality of the program. What I hear consistently is that farmers decide not to engage in the program because the premiums are simply too high in our area. Therefore, they effectively opt out of the federal government's component, the percentage of the money that the federal government provides for the program.

Is there a way during this time to review the premiums that are being paid out, the way that the premiums are being determined, and whether or not there's a corresponding relationship between the premiums that are being charged and the actual risk level?

[Greg Meredith]

We do that with the provinces on quite a regular basis. We have our own actuaries who interface with the provinces to make sure the programs and the funds remain actuarially sound.

I can undertake to come back to the committee in writing about uptake, broken down by region, if that would be helpful.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

I think it would be helpful.

Anecdotally, I hear time and time again that if you are looking at the Peace River region of the province of Alberta and B.C., people refuse to engage in the program simply because they believe the premiums are too excessive. Based on the business decisions of the farmers, they have simply opted out, which opts them out of the program completely.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Warkentin and Mr. Meredith.

Mr. Drouin, you have the floor and you have six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here. This is the third time we've seen you at committee. Thanks for your availability.

I want to talk about the business risk management programs and understand how your department measures success. Can you talk about the metrics of how you measure success for each program, AgriInvest, for instance?

[Greg Meredith]

A number of metrics are in place on each one of the programs. Let me quickly list them.

We have a program called AgriStability, which is largely about market return and insurance. We have AgriInsurance, as the previous member mentioned. That's very popular. We have a program called AgriRecovery that helps in disaster situations. We have AgriInvest, which is a program that provides money for farmers for proactive risk management or innovation. There are a couple of other smaller programs, but I'll set them aside for now.

We do a couple of things. We look at participation rates very carefully. We look at satisfaction rates with issues like predictability; in other words, will I know if this program is going to pay out and when? We look at timeliness satisfaction; in other words, does the program pay out when it should in a timely way?

Overall, those metrics produce a fairly positive set of feedback. In particular on the AgriInsurance front, timeliness, predictability, and transparency are all very positive.

I would say that AgriStability is probably our most challenging program in communicating the payout to producers, and how quickly it will come. In that area we have some work to do, which we will be talking about to ministers in July of this year.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I've had a conversation with a few farmers in my riding. One of the issues they want fixed for the next program is on AgriInnovation. I know that's a cost-shared program with the province. It was the timing of application.

Growing Forward 1 was essentially one application per year, or one timeline. Correct me if I'm wrong, but I understand from them that under Growing Forward 2, they can make four quarterly applications.

Part of the issue is that they appreciate it, but it's just that the timing of investment is key and it doesn't necessarily correspond with when they need it. If there's a way to fix the application process so it can meet the time of investment, which is extremely important for them, that would be appreciated.

I know you've had some consultations. I want to know if you've heard about this before.

[Greg Meredith]

Mr. Chair, this is a point we hear about from every dimension of the sector.

A couple of things happen that create the challenges the member is describing.

One is that in between this framework and the next, in some cases there's a gap. That gap would occur on, let's say, April 1 of the next framework, because you're going into new programming and new terms and conditions. If governments are not very quick to put in place those new programs, you can lose a whole crop year. If you don't have project assurance between April and June, the crop year can be lost. That creates a significant problem for any organization that's doing research on the ground in a producer-oriented format. That's a problem we've heard about and that governments are very sensitive to and are working right now to try to avoid.

The other issue, though, is somewhat broader and certainly more persistent over time. That's the complexity of the application process.

AgriInnovation, I'll confess, is a federal program. But I think provinces suffer the same challenge with respect to a timely response to organizations that are applying for money.

As governments, we know that problem exists. We certainly have feedback about it on a regular basis. We're doing work now to try to address some of those challenges.