Yes. Thank you.
My name is Patty Rosher. I'm the general manager of Keystone Ag Producers.
KAP is the voice of Manitoba farmers on public policy issues. We work with governments, industry and stakeholders to ensure that primary agriculture in Manitoba remains profitable, sustainable and globally competitive.
I would like to begin my remarks by thanking the House of Commons Standing Committee on Agriculture and Agri-Food for initiating a study on business risk management and inviting us to participate. We appreciate the attention of the committee to this topic, which is important for our members, and we appreciate your recognition of the need for broad consultation.
In her December mandate letter, Minister Bibeau was asked to draw lessons from evidence-based research. KAP places great importance on evidence-based advocacy and is increasing its investment in research to support it. We recently issued a request for expressions of interest on four research topics. One of them was business risk management. In particular, we asked, what is the potential to augment AgriInsurance and AgriInvest to provide the kind of farm income risk management that is intended by AgriStability? We're very much interested in the answer to those questions because it may be time for a fresh look at business risk management, particularly as our members have not had the opportunity to consider those questions. We encourage the standing committee to commission research and to share those findings with farmers and farm advocacy groups.
The ground is shifting for farmers, and I know you're going to hear this many times, but they are facing an increasingly protectionist international trade environment. Net income has started to trend downward while farm expenses continue to increase. The expectations placed on primary producers from climate change and environmental interests continue to increase, and the industry must navigate a significant turnover of assets and operations to the next generation.
This past year, farmers, especially in Manitoba, faced almost every kind of risk there is, from production risk due to adverse weather and disease pressures to market risk from trade disruptions. Even though this causes great and sometimes unmanageable fluctuations in revenue for producers, costs continue to march upward. Manitoba Agriculture crop production cost guidelines show that operating, fixed and labour costs this spring will be $418 an acre to plant canola. Of that, $143 is just for the seed, seed treatment and fertilizer that goes in at the beginning of the spring, before anybody knows what kind of growing season it is going to be. Wheat will require an investment of $380 per acre, soybeans $368 and corn $533. Just for those crops alone, which represent 70% of our seeded acres, Manitoba farmers will be investing $3.4 billion this year. That investment represents revenue for agriculture input suppliers, equipment dealers and municipalities, and really keeps the provincial agriculture industry and our economy going. The experience this year highlights the types of risks that farmers face, and those risks have increased as production costs have increased. When we talk about business risk management, this is the kind of magnitude of risk that primary producers are taking on.
AgriStability was once thought to work very well, but increasing numbers of farmers say it is essentially useless to them and participation has been decreasing, leaving more and more farmers exposed to margin declines. KAP, through the AGgrowth Coalition, has long been lobbying for a reformed AgriStability, because of issues with its complexity, timeliness, predictability and overall effectiveness. We have talked about long-term reforms that are needed, including going back to an 85% coverage level; removing the reference margin, which was part of the most recent announcement; adding production insurance for those commodities that lack access to those programs; and a commitment to a technical working group that would enable producer groups like ours to participate more directly in analysis and development of potential BRM solutions.
On the AgriInvest side, in August 2015 along with the CFA, we conducted a survey specifically about AgriInvest on how farmers were using the program and whether they found it a useful financial tool. The majority of farmers using AgriInvest were using it as intended to overcome small variations in income, but they stated that the matching contribution was not enough to adequately fill the gap left by AgriStability. The allocated dollars were out of touch with the current financial needs of farm operations.
In 2017, our members passed a resolution that we lobby the Government of Manitoba and the Government of Canada to increase AgriInvest matchable deposits to 3% and to allow up to 2% additional contributions that were non-matchable and tax-deductible.
KAP has been working very hard this year to ensure that the priorities of young farmers are reflected in our policy. Young farmers have unique challenges with access to land and capital. We know about that. We talk about it a lot. There can also be unique challenges with access to business risk management programs.
We would like to share with you comments brought forward by one of our young farmers because I think he said it better than I could, as follows:
When a young producer first applies for crop Insurance it can be difficult to get their own contract because they don’t own any physical assets. In our case, my brother applied for crop insurance twice before he was granted a contract. We ended up juggling his acres into mine and my dad’s operation. If I didn’t have canola and he did, I would insure it, or if dad didn’t have any of the canola acres dad would insure [my brother’s] stuff. Because he didn’t have a crop insurance number he couldn’t enroll into Agri-Invest, Agri-Stability and I had to enter his acres into my Agri-whatever and try to carve it off down the road. It was a nuisance.
I’d like to head this off in the future because a lot of young farmers start farming without any assets making qualifying for crop insurance a bit of a pain to get into. Our rep was great and helped my brother get his crop insurance number eventually, but it made for a couple of years where [he] was very reliant on my dad and myself.
Here, I reiterate that we appreciate the attention of the committee to this topic, which is an important one for our members. We appreciate your recognition of the need for broad consultation.
However, not all consultations this year have seemed genuine. In fact, quite a bit of our advocacy work has been to speak up where consultations were inadequate. The seed royalty discussion is a case in point. Industry-wide consultations on value creation in the cereal grain sector began in the fall of 2018, but started with a focus on two potential models. KAP and its partners weren't satisfied with farmer involvement, so we issued our own survey and are still seeking that business case that defines the needed return on investment.
The uncertainty about the consultation on the Canada Grain Act is making farmers very nervous, although I understand some information has been shared at the grains round table meeting. When I started in this role a year ago, this was one of the top issues. There still does not seem to be any movement on it.
We look forward to the standing committee's review of BRMs because of the transparency that is embedded in your processes. We have also said that the discussions on improvements to current BRMs have been hamstrung by constraints in the the current provincial-federal funding envelope. Let's not make the same mistake and start this discussion by standing in place. We ask that consideration be given to enable real improvements that reflect current income risk levels. Indeed, farmers cannot afford to be cost-neutral year after year as they make their decisions.
Our goal is not to increase government payments to the farming sector. Rather, government best fit where farmers are not able to adequately cover their risk to make the investments necessary for agriculture to achieve the economic development goals that have been set.