Agriculture Committee on Oct. 20th, 2016

[Rosser Lloyd]

Thank you for the question.

Certainly the producers are asking whether the trigger in our AgriStability program is sufficient enough to cover the situations that they see happening with respect to prices. At the same time, we recognize that the producers have realized some fairly good years, and the coverage under AgriStability is substantially higher than it was when we came into those negative years.

I think our discussions with industry need to be twofold: what can the current programs do, and then how robust will they be when we realize those price declines? Then, of course, we'll have the conversations around the trigger levels as well.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

The stakeholders you met at the round tables may not necessarily have been aware that the government will implement a carbon tax across the country. This factor must be considered when calculating the profit margin of farmers, who need to cover the cost of energy, inputs, nitrogen, potash, electricy, natural gas and oil.

In the coming years, the carbon tax will increase from $10 per tonne of CO2 to $50, and there will be no ceiling. Specialists are even saying the cost should increase to up to $150 per tonne. This will greatly affect competitiveness. Canadian farmers will be in competition with farmers from other countries who won't be subject to a carbon tax.

Will the program include compensations, so that the federal government's policies don't cause major problems for the Canadian sector in terms of competitiveness?

[Andrew Goldstein]

When we had our consultations last week, when we talked about the environment, the participants were concerned about the potential impact of a carbon tax on the competitiveness of the sector, particularly looking at other jurisdictions they compete with that don't have similar prices on carbon.

There were more questions than answers on that topic, because I think it remains to be seen how that is going to play out across the negotiations with the provinces. We'll have to hold off and see how that flows out before we start to look at the potential impact on the sector.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

It must be taken into consideration that, for risk management programs, the government's contribution or lack of contribution is always based on the participant's margin, and that margin will be more and more negative. When a margin remains negative in the long term under this program, it affects the government's contribution. Someone therefore must sound the alrm.

Will the producers be compensated directly or indirectly for the carbon tax? Otherwise, 25% to 30% of farms will be forced to stop production as a result of their lack of competitiveness on the market. Have the stakeholders raised this issue directly with the department or the Minister of Agriculture and Agri-Food?

[Andrew Goldstein]

Those are certainly issues that the sector has raised with us, and I'm sure with the minister. They'll be looking toward seeing how that will fit in with our existing suite of programs, both our innovation-type programming and others, as well as our risk management suite. Again, I think it's too soon to say exactly what the impact will be and what impact it will have on our programming.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Gourde.

Now we'll go to Mr. Longfield for six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair; and welcome to our new clerk.

It's great to have our witnesses here as well. At this point in our study, we have been looking at Growing Forward 2 and getting some feedback independent from what the ministry is also doing. We're going towards the new policy framework now, so this is a perfect time for us to be talking.

It's really good to see the additional sections in the Calgary Statement on climate change, public trust, and food processing. I'm going to try to get some questions in on each of those areas.

On climate change, we're looking at investing in good things and putting a price on pollution. That takes different forms with different provinces and jurisdictions, which will complicate each market that we're working in, especially in agriculture.

In the work with the provinces, then, we are taking an all-of-government approach. In the work with our Minister of Environment and Climate Change as well as our Minister of Agriculture and Agri-Food, do you see any discussions we are having that bring both of those people to the table?

[Andrew Goldstein]

Yes. We work quite closely with our colleagues at Environment and Climate Change Canada. We work with our provincial counterparts as well. When we start to look at how we address issues around climate change and reductions in greenhouse gas emissions, those are really some of the things we can look at—i.e., what can we do with the provinces to incent farmers to take action to implement practices that will reduce greenhouse gas emissions?

[Lloyd Longfield, Liberal, Guelph, ON]

Terrific.

I think the bigger question is the impact of climate change on growing seasons and on the risk management profiles we're now seeing with more frequent weather events. That has to be a very tough part for you to try to work with. Is there flexibility within the program? It's changing almost yearly. We're seeing very quick changes in the climate impacts on agriculture. Is there flexibility within the program going forward?

[Rosser Lloyd]

Our foremost business risk management program in the response to weather events is AgriInsurance. It's our crop insurance program. It's an actuarially sound program that looks at the history over a period of time. Our actuaries follow that extremely closely in terms of the patterns they're seeing.

Is there flexibility? Yes. You can do what is called “trending”. If you start to see some concerns, you weight different years differently in your actuarial analysis. I can also offer some comfort by telling you that our AgriInsurance funds are in fairly good shape with the provinces. We're in a position where we can sustain some hits if they occur.

[Lloyd Longfield, Liberal, Guelph, ON]

Terrific. Thank you.

I'll turn now to food processing. It's very good to see this priority coming forward. This is the value-added part that the Premier of Ontario has been focusing on. It would be good to have a national focus on this area as well.

I also sit on the industry, science, and technology committee. We had a presentation from Troy Warren yesterday. He's the chair of the Canadian Meat Council. He gave us some challenging comments on our competitiveness compared to Europe and our competitiveness compared to the United States. Meat shipments going to the United States are 100% inspected. It adds a lot to the cost to the farmers and producers. It delays transit across the border. Products are turned back to us. That creates waste and cost within the system.

Is this within the scope of the new framework?

[Andrew Goldstein]

We've heard those kinds of concerns as well. We've started to look at the overall competitiveness of the food processing sector. We are supporting them through innovation and market development activities currently. As we start to look towards the future, we certainly see addressing capital investment kinds of things as a key element of competitiveness in the future.

Of course, we export a tremendous amount of our products, so making sure that the movement of goods across borders is as seamless as possible is critical to the success of our sector. They deal with a lot of technical issues as well as barriers and things like that. We work quite closely with our trading partners to address those things.

We see various initiatives. Sometimes we address some of those as part of the framework in terms of dealing with technical barriers to trade. We have our market access secretariat, which deals with these issues within the department. However, many activities that support those kinds of things are outside of the framework and are on the government's broad agenda.

[Lloyd Longfield, Liberal, Guelph, ON]

In terms of bringing forward some witnesses, maybe we can add to that discussion in the next little while.

Finally, on public trust, I'm thinking of first nations and whether that is part of the northern food strategy and part of our framework as well.

[Andrew Goldstein]

Certainly public trust is a key element. I think the ministers as well as the governments have made it clear that they want to have a broader engagement with indigenous people. We're building that into our planning and engagement activities as well.

In terms of the northern food strategy, that starts to get beyond what we're looking at. We do work with the territories, and they might address some of those things. The minister has another mandate commitment around developing a national food policy. We think that kind of work probably fits more closely into that aspect.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Goldstein.

Thank you, Mr. Longfield.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

Now we'll have a five-minute round.

Mr. Anderson is first.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I welcome the new clerk as well today.

With five minutes, I have to move fairly quickly. I'm wondering what programs have decreasing levels of participation. You talked about that a bit earlier, but in which ones specifically are you seeing a decrease in participation?

[Rosser Lloyd]

It's the AgriStability program that we have the concerns with. AgriInsurance and AgriInvest are fairly stable.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

Mr. Gourde made some good points about carbon taxes and hidden costs for farmers, or whatever. Not all of them have an impact on those reference margins and the trigger levels and so on, so I think we need to be very conscious of our competitiveness levels. Mr. Longfield mentioned that as well.

I do want to ask this question. The demand for assistance has not been high over the last few years, so those trigger levels and reference margins haven't come into play in the way that they may in the future.

As was pointed out, prices are dropping and debt is rising for farmers as well. The last time we had an issue with a drop in prices, those debt numbers came into play very significantly. I'm just wondering if you think the triggers and margins work effectively now, especially for young farmers, those farmers who are starting and do have those debt levels, because in the past, trying to use the programs effectively has been a real issue for younger farmers. There were no averages set up for them.

Are we going to be able to address that issue if we find ourselves in a situation of dropping prices?

[Rosser Lloyd]

You're right that the recent high prices have resulted in fewer payments under our programs. Our programs, I would say, haven't really been tested in a downturn yet.

At the same time, keep in mind that AgriStability is built on a reference margin and those reference margins are building, whereas in the late 2000s, in 2008 and 2009, we had very low reference margins. We went into a downturn, and the program's ability to help was limited. Those margins are substantially higher than they were in those times, so I think we're riding in with some fairly good coverage under those programs.

Are they going to hold up to what might come? Our suggestion is that they will pay out substantial amounts of money if we experience a significant downturn, but we need to continue to engage the industry on it.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

So they were set up and they paid out a significant amount to some people all the way along, but I'm wondering particularly about young people, the younger farmers, the ones who have been in it less than six or seven years.

[Rosser Lloyd]

When a producer doesn't have a history of being involved in our program, we actually end up creating a history for those individuals that is based on the industry averages in the area. As a result, a young producer can participate in those programs at the same level as any other producer.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Since farm debts are at record levels, do you have any consideration of farm debt in your new APF planning? It doesn't seem to be a concern in the industry or the banking community or whatever, but we've been through these cycles before and we've seen prices drop off. Is the APF concerned at all about farm debt? Do you have any components dealing with that, or are you expecting AgriStability and AgriInvest to kick in and cover the kinds of issues that come out of that situation?