Thank you very much.
Thanks for inviting me and for the opportunity to provide the written submission.
Just as a quick background, I have 45 years of experience observing and evaluating Canadian farm policy as a professor, as the head of an agri-food think tank, as a partner in agri-food management where we've provided management training for well over 300 farmers and as a facilitator of a very progressive six-family peer group at the moment.
My presentation, which basically summarizes my written one, has three major points, and they are: In my view, the current BRM suite emphasizes compensating people for losses, but underemphasizes preventing them; second, some elements of the CAP that facilitated prevention before have been removed by some provinces, which I think is a mistake; third, future emphasis, in my view, should be more on prevention and on moving the sector forward, and with the current structure, that's done through AgriInvest.
When we talk about the issue of compensation versus prevention, all of the programs, except for AgriInvest, are all about compensation of loss after the fact. AgriInvest is mostly about that, but with a second objective.
When we teach risk management at any management program, mine or anybody else's, there is, of course, emphasis on insurance, but the vast majority of what we talk about are the actions that will prevent losses, like Mr. McClean's talking about diversification, for example. The only part of the BRM suite that encourages that is that second title of the program. In fact, as an example, as Mr. McClean said, diversification is generally a major aspect of risk management and, ironically, given the way AgriStability is structured, it's much more likely to pay someone who is not diversified than who is, because of the fact that one commodity can offset the other. Probably, because of WTO requirements, there's likely little we can do to change that if we want to stay compliant and, as a result, many producers don't find it very useful and many, as we have heard, are not enrolled.
Most provinces used to have assistance for management training or planning but have removed it. The arguments that I've heard for why that's been the case are that there's no evidence that management training increases profitability or reduces risk, and that the programs haven't been used very much. In my view, the first argument is total nonsense in any industry, but especially for an industry like agriculture that has no management requirements for coming in, and so anything that's going to improve management should be good. In addition, there's large and growing evidence to the contrary that, in fact, management ability increases profitability and reduces risk and, therefore, the liability of government of programs.
We can go back to the “Dollars and Sense Study” that Farm Management Canada did a few years ago, which said that seven management factors are positively correlated with profitability. We did an analysis of our CTEAM program, which is like a mini-MBA for farmers, and we went back and asked them what impact it had on their businesses. They went through a whole long list of things that improved in terms of their management, and, as a result, their profitability increased, their organizations were better structured to manage and they had personal benefits such as improved confidence, improved leadership ability, improved mental health and stress management.
Most recently, as an illustration of the kinds of things we see, we did a study with BDO, and this is the third year in a row that we've found the same results. Part of it came up with 1,776 grain and oilseed farms in Manitoba. If you looked at $1 million of sales, our analysis of those farms said that the 25% most profitable had profits of $315,900 on $1 million of sales whereas the least profitable had losses of $160,900. Everything about that study and every other study says the same thing and suggests that many of those differences are because of management capacity. People could argue that is a function of soil and rain.
Let's go to the dairy part of this. We had 992 dairy farms in Ontario in that study, and the 25% most profitable had $270,000 in profit on $1 million of sales. The least profitable had losses of $150,000. I don't think weather and soil type has much impact on that. I think most of it is about management, although not all of it.
Obviously, investment in new technologies is also important. In much of my recent work, I have been working with those in horticulture. In some cases, a number of farmers have used government money, although in other cases have used their own money, to invest in machine planting and harvesting in the horticulture sector, which has reduced their labour costs and is certainly helping them manage the labour shortages they are experiencing this year after COVID.
Similarly, a few years ago, in a different kind of program, the Ontario tomato-processing industry decided, as a farm group, to invest in drip irrigation because of the risk in the industry of variation in yields. Doing that really reduced the variation and therefore reduced the risk, and that industry, which has been struggling to be competitive over time, has been helped an awful lot. Investing in technology is quite clearly an important thing and an important part of prevention.
To me, there are two issues with AgriInvest that are important. First, the amount available is relatively small. As Mr. McClean just pointed out, if you use it one year for income insurance, it becomes a problem later. Second, there is no requirement to use it. We have a situation where many farmers see it as a pension program because it's kind of administered as a pension program.
I have three suggestions for moving forward.
I have two more pages and then I'll be finished, Mr. Chair.