Agriculture Committee on June 12th, 2020

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I thank the three witnesses for their presentations, which were very clear. Instead of putting questions to them separately, I would ask them to speak up if they disagree with the following statement.

Mr. Legault, Mr. Lewis and Mr. Ker, my understanding is that the income stabilization programs must be completely overhauled, but that the first step would consist in bringing the AgriStability threshold to 85% and removing the reference margin limit. That is an easy thing to do and it is urgent.

Is that correct?

As no one is saying anything, it means that it is. Wonderful!

I would now like to address Mr. Legault.

Mr. Legault, I really liked your summary presentation on the history of programs, where you explained that we went from an income stabilization logic to a disaster protection logic. However, as Mr. Lewis rightly pointed out, when it comes to disaster protection, cheques sometimes arrive after the bankruptcy. I am putting this question to Mr. Legault first. Mr. Lewis could then complete Mr. Legault's answer.

Have you already thought about a support system that would be more upstream and could take inspiration from what is happening in Europe? Have people from your sector talked about this already?

[Benoit Legault]

There are two considerations to this: quickness in terms of response and quickness in terms of payments provided to businesses. I have been in the field for a long time, and I have seen that the program-focused thinking has always been difficult in terms of establishing responsiveness when a problem or a loss occurs. That has been the case for the AgriStability program. As you know, the management of the AgriStability program is based on income tax returns that arrive after the payments. In Canada, most organizations that manage programs give themselves tools to allow for advances, but the bulk of the amount often comes after the actual calculation of the losses experienced.

I would still like to say that the 85% threshold was set based on an estimate of losses a modern farm can suffer and on the assessment of all the risks it is exposed to. The factors include succession, which we discussed earlier, debt and producers' ability to survive margin and income losses.

Once again, programs have a short-term focus. They were created to manage a problem arising over the course of a given year. They were not implemented to manage specific situations, such as a string of bad years. A 20% income loss over the course of a year is one thing, but a 20% income loss two, three years in a row, regardless of the reason—be it owing to the market, the weather or any other factor—is another.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I understand you.

Ultimately, this year's particular context has made it necessary for the sector to acquire emergency funds or direct assistance, in addition to the funds provided under the programs. That could be additional support and is actually what your organization has called for.

Is that indeed what you are trying to say?

[Benoit Legault]

Our organization would never be opposed to that kind of an approach. We are proposing a return to the 85% threshold, as we are familiar with the political context. That is why, at the beginning of my presentation, I was talking about proceeding in stages. We don't believe that the 85% threshold is the ultimate goal. Our organization would not be opposed to a special assistance fund being added.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

How do you see the future if support continues to drop in Canada compared with the support provided in the United States and taking into account your competitiveness?

[Benoit Legault]

That has already been raised. The long-term consequences are always difficult to assess. Will a loss of competitiveness and a slowdown in the adoption of new technologies occur? The key element was raised by Mr. Lewis, and it concerns what will happen with the succession. Successors to current farm owners must be found because the current farms will ultimately not be able to just continue to grow. The country needs a fiscally strong succession without too much debt. It is certain that a country that is giving itself fewer and fewer resources to support its agricultural businesses does not leave a great deal of room for succession.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I will continue along the same lines, Mr. Legault. You are talking to me about succession, and I will talk to you about small businesses.

I don't know whether you agree with what Mr. Lewis was saying about current programs practically forcing producers into monoculture, so that business losses would be at a fairly high percentage in order for compensation to kick in.

What changes should be made to the programs to resolve that and to ensure that small businesses have increased access to those programs?

[Benoit Legault]

It is certain that small farms are going through particular situations. They are often involved in mixed farming, but the current programs are not very effective for them. So solutions remain to be developed in that respect.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Okay.

Mr. Lewis, do you have any potential solutions to suggest?

[The Chair, Liberal, Pat Finnigan]

We are listening, Mr. Lewis.

[Todd Lewis]

I think it's a little bit like Mr. Ker said. The programming could be as simple as allowing those farms that do have mixed operations to split their operations, so they can put it under two programs.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Lewis. Unfortunately, we have to move to the next questioner.

Go ahead, Mr. MacGregor, for up to six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Chair, and thank you to our witnesses for contributing to our study on the BRM suite of programs. I sincerely appreciate having your expertise today.

Dr. Ker, I'd like to start with you. In your comments you were mentioning how provincial Crown corporations are largely responsible for the delivery of the programs. You mentioned how they participate in reinsurance programs, and you had mentioned a federal reinsurance option that wasn't used all that much. Just so our committee has that information and it's on the record, can you maybe go into a bit of detail about that?

[Alan Ker]

Yes, sure.

If, in fact, the reserve falls below zero, the federal government does have an avenue—I think it might be even zero interest or whatever—where the provincial Crown corporations can borrow so they no longer go into debt or anything like that. There should be a certain level of reserves, and they need that to run the insurance program, but these reserves could handle 25 years of the worst losses ever all in a row. It's well beyond where they should be, particularly for a public program with a central bank and treasury. You never see this in any other developed country.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Okay, thank you for that.

I want to move on. The COVID-19 pandemic has certainly been, as an understatement, quite a shock to the system. I wanted to know your point of view, Dr. Ker. How well do you think our BRM programs have responded during this pandemic? In other words, do you think they are in fact the appropriate vehicle to deliver aid to farmers, given the magnitude of this crisis?

If another pandemic hits us in 20 or 30 years with the same kind of impact, would you suggest that the BRM programs continue to be the appropriate vehicle to deliver aid, or should we be looking at something else entirely?

[Alan Ker]

If I would guess now, if we were a year from now and we looked back, I think we might be surprised at how many payments were triggered under AgriStability—I mean the lack thereof. Again, that's because the coverage has dropped quite a bit, down to 70%. I think we're going to be surprised at how we have this pandemic and the lack of triggering AgriStability payments. Whether that should be moved up or not, I suspect this was a government budgetary decision, pegged at where it needed to be for the budgetary outlay. If it were to be raised, then it would require more budget. It's as simple as that.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Yes, the AgriRecovery program was infused with $125 million, specifically for pork and beef, to keep the livestock herds alive because of our loss in processing capacity. I guess because that vehicle exists, and there was a cash infusion, you're saying, really, that this could be sufficient, but the decision on what kind of money is put through it is essentially a budgetary decision.

[Alan Ker]

Well, I assume it is. You guys hold the cards.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Well, not me, sir, but I'd like to one day, yes. Thank you for that clarification.

[Alan Ker]

Yes, I would say the government's response to date has been very appropriate.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

That's good to know. Our ultimate goal is to make these programs as good as they can be.

Mr. Lewis, maybe I'll turn to you now. We do have the upcoming FPT meeting in October, and from your perspective, from the perspective of farmers in Saskatchewan, how optimistic are you that, when this meeting concludes, we're going to have these fixes in place? A lot of these programs are going to require the federal and provincial governments to come together. There's that agreement formula that's in the CAP. Are you pretty optimistic that we're going to get this accomplished come October?

[Todd Lewis]

Well, all we can do is hope. Certainly this process has been ongoing for three or four years. You know, it's very frustrating to farmers that these are programs that were under review. Suddenly now COVID has happened, and we're getting messages from the federal government that these programs should be covering us under this situation. Well, why are they under review if they've been such great programs?

Producers have watched this be really a political football between the provinces and the federal government for a number of years, and we want to see movement on it. We're not optimistic at all even under the current.... On anything that has been tried to make changes under COVID, we've seen no back-and-forth at all or agreement between the provinces and the federal government. Honestly, producers aren't holding out a lot of hope that come October we're going to see major changes, because we certainly haven't up to this time, and we're going into the third and fourth year of this.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Monsieur Legault, I'd like to hear quickly from you on the same question. I just have 20 seconds left. Come October, are you optimistic we're going to get these changes done?

[Benoit Legault]

Since you are putting the question to me, I will tell you that I am an optimistic individual.

We have received mixed signals in terms of the intention to implement that kind of a measure. We are currently hearing statements that the federal government would be ready to implement such a measure, but that it is struggling in terms of funding by the provinces, which may prevent it from moving forward.

Am I optimistic? I am, as the idea seems to have come a long way. If it is true that the problem has reached this stage and that what remains to be done consists in convincing some of the provinces to move forward, then yes, I am optimistic.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Legault.

Thank you, Mr. MacGregor.

As we have a little bit of business to take care of, this will be the end of this panel. I really want to thank Monsieur Legault from the Producteurs de grains du Québec, Mr. Todd Lewis from the Agricultural Producers Association of Saskatchewan, and Mr. Alan Ker, as an individual.

Yes, Mr. Blois.