Thank you, Mr. Easter, and good morning. I'm the vice-president of the National Cattle Feeders' Association and I too would like to thank you for the opportunity to share our views on budget 2018. Before I do that, I'd like to take us back to budget 2017.
Canada's agriculture community was very pleased with budget 2017's emphasis on the importance of agriculture and agrifood to the national economy and our potential to contribute even more. We agree with the findings of the advisory council on economic growth, the Barton report, that were referenced in budget 2017. We too believe that an expanding global middle class and an increasing international demand for food creates a significant opportunity for Canada's agricultural and agrifood industry.
As I said to this committee last year, and to some extent this was reflected in the budget, Canada does indeed have all the elements to become a true agricultural superpower. When it comes to beef, which pound for pound is our most valuable agricultural product, we have all the ingredients for success: a large arable land base, rich endowment of water, ample natural grasslands, superior genetics, a good climate, a fulsome supply of feed grains, tons of industry experience and know-how, and a world-class food safety system.
Budget 2017's goal of growing Canada's agricultural exports from $56 billion to $75 billion by 2025 makes a lot of sense, but it won't be automatic and it won't come without the support of policies and programs, and that's certainly the case with the beef industry.
Canada currently exports between 40% and 45% of our beef and cattle production. In 2016, 360,000 metric tons of beef worth $2.3 billion were exported. That's up from $2.2 billion a year before and $1.9 billion in 2014. While that all seems encouraging, all is not entirely well. Our national herd is below historical levels. In 2005 we had almost 13 million head of beef cattle. In 2017, that's just under 10 million, a 22% reduction. In 2005, fed cattle production was 3.6 million head. Last year, it was 2.4 million head, a 34% decline. There is concern about the industry losing its critical mass. That being the case, the timing may well be right for new policies, programs, and even goals to reverse some of the troubling signs of decline.
Getting back to budget 2018, how can Canada get to 75 billion dollars' worth of agriculture and agrifood exports and how can beef contribute to that larger goal? We believe that competitiveness emerges as the single most important prerequisite to achieving growth and achieving that export level. With that in mind, I would make five suggestions for the committee to consider.
The first concerns labour, which I believe is the single largest challenge facing Canadian agriculture and agrifood. A critical and chronic shortage of labour is impeding competitiveness and limiting our growth in future opportunities. We are very pleased to see the recommendations of the HUMA committee report on the temporary foreign worker program and decisions in budget 2017 to eliminate the four-year cumulative duration rule and to continue the exemption of certain employers from the program cap.
We're certainly pleased with the $200-million investment in the TFW program and the budget's commitment to engage stakeholders in securing improvements to that program and to improve pathways to permanent residency. Such efforts are under way but progress is slow, red tape continues, and the labour need remains great.
In budget 2018, we urge the government to follow up on its previous commitments and ensure that agriculture and agrifood has ready access to the labour it needs to remain competitive and to grow.
The second concerns rural infrastructure. Agriculture and agrifood is certainly poised to grow as an economic driver, but a strong local rural infrastructure foundation is needed. Agriculture operations are located in small rural municipalities with a limited tax base and meeting local infrastructure needs that provide national benefits is very challenging.
We welcomed budget 2017's establishment of the new national trade corridors fund and the Canadian infrastructure bank. We welcomed the $10-billion investment for gateways and ports and the $2 billion for rural roads and bridges. However, rural infrastructure support is still meagre compared with investments in urban areas. Some $2 billion for rural infrastructure over 11 years and spread across the entire country can only go so far. Meanwhile, pressures continue to build.
In the county of Lethbridge, which has a $3.5-million annual shortfall in funding for roads and bridges, the county has imposed a business tax on all livestock producers. For cattle feeders, this amounts to a $3 head tax on every beef animal in the county. A 50,000 feedlot operation in the county saw a $150,000 increase in their local taxation last year alone. These sorts of things have the potential to cause serious harm, particularly if cattle begin migrating to the U.S., shortening the supply of cattle to Canadian beef facilities.
In budget 2018 we urge the government to increase its investment in rural infrastructure to support agriculture, and to develop an ongoing stream of meaningful funding that will keep us competitive and help us to grow our exports.
Third is with regard to taxation. Federal, provincial, and local governments are introducing tax measures that are negatively impacting competitiveness. Federally, we see proposed changes to the Income Tax Act that are expected to leave less income in farmers' pockets and constrain their ability to grow. Provincially, a new carbon tax could increase costs for producers up to $7 per head. Locally, the head tax in Lethbridge is originally set at $3 per head, but plans have called for that to rise to $4 per head.
There is a piling on here that worries producers. We figure that the combined effect of these new taxes could reach up to $14 per head. The average annual profit margin for a cattle-feeding operation in Canada across the last 10 years is $18 a head. That's a 75% hit with respect to profitability.
In budget 2018 we urge the government to ensure that any changes to the Income Tax Act do not negatively impact our nation's farmers, ranchers, and feeders, and their ability to compete, grow, and expand exports.
Fourth concerns regulatory impediments. NCFA welcomes budget 2017's commitment to advance regulatory alignment with our trading partners through the $6 million invested in the Treasury Board Secretariat and the Regulatory Cooperation Council. In budget 2018 we urge the government to follow through with these funding commitments and reiterate the trade benefits of regulatory reform.
Fifth is with respect to trade. NCFA is a strong supporter of liberalized trade and recent deals such as CETA, the South Korean free trade agreement, and the TPP process. All of these are key to reaching our export goals. However, we need to resolve our labour, infrastructure, and tax challenges. Without that, we simply will not be able to take advantage of those new market opportunities because we are just not competitive.
In budget 2018 we urge the government to ensure that our trade policies and priorities are not being undermined by action or even inaction on other policy fronts. Competing internationally requires reinforcing policies that do not work at cross-purposes.
Finally, we commend the government for completing the new $3-billion Canadian agricultural partnership. With the heavy lifting done, NCFA encourages the government to push ahead with establishing the new agrifood growth council, as recommended in the Barton report.
With that, I would be pleased to answer any of your questions.
Thank you.