Thank you, Mr. Chair.
My name is Martin Caron, and I'm the general president of the Union des producteurs agricoles. I'm also a dairy farmer and field crop producer.
My opening remarks will focus on four themes: resilience of the agricultural sector; agri-environment and organic production; the tax system for farm and forestry businesses; and support for the dairy sector.
First, it's important to remember that the Canadian agri-food sector employed 2.1 million people in 2021, which represents one in nine jobs in Canada, in addition to adding $135 billion to the country's gross domestic product. In addition, Canada exported nearly $82.2 billion in agriculture and food products, including agricultural raw materials, fish, seafood and processed foods. Canada is the fifth-largest exporter of agri-food and seafood products in the world.
Despite the sector's strong performance, it has been plagued by inflation, especially since the fall of 2021. Farm input prices rose 25% between the first quarter of 2020 and the second quarter of 2022, according to Statistics Canada's Farm Input Price Index.
The three main production inputs, in other words, animal feed, fertilizer and fuel, have experienced much higher price growth than the consumer price index. For horticultural crops, the price of containers has also increased significantly. In addition, in eastern Canada, which relies more heavily on imported fertilizers, the punitive 35% tax on Russian fertilizers has not only increased the cost of fertilizer, but has also weakened its availability. At the same time, farm businesses have had to invest heavily in recent years in order to meet societal expectations regarding the environment and animal welfare.
As a result, the debt load of the sector doubled during this period. Each 1% increase in interest rates results in about $1.2 billion in additional interest expenses for farm businesses over time, representing about 25% of the sector's total net income in 2021. With the Bank of Canada's policy rate rising by 3% since the beginning of the year, you can imagine the enormous pressure producers are under.
In this context, and given the critical importance of agriculture to food security, especially in the current global context, the government must act quickly to support the agricultural sector and limit this exceptional inflationary environment.
As a result, the UPA is calling for a special assistance program for the agricultural sector in order to limit the impact of inflation on the financial health of farm businesses. It's also calling for the AgriStability program to be improved to increase the coverage rate to 85% of the reference margin, while maintaining the compensation rate at 80%, as recently announced by Agriculture and Agri-Food Canada.
With respect to the agri-environment, additional public investment is needed. Although used sparingly in Canada, payment to agricultural producers for the environmental goods and services they produce encourages the adoption of beneficial practices and recognition of their positive contribution. In the United States, direct support for agri-environmental initiatives represents 1% of farm receipts and 25% of the support paid to farmers. To achieve equivalent agri-environmental support, an annual amount of $650 million should be allocated to Canadian farm businesses.
In this context, the UPA is calling for a continuum of support and accompaniment over a 10-year horizon in terms of compensation for agri-environmental goods and services, as well as the fight against climate change, both in terms of adaptation to climate change and reduction of greenhouse gases. The UPA is also asking that agricultural producers be given a stable and predictable budget for agronomic and agri-environmental research and innovation adapted to their needs.
With respect to organic production, national organic standards must be reviewed every five years, but Canada doesn't have a program to support the review work, unlike the U.S. and the European Union. Canada could also increase the number of certified companies if it established a cost-sharing program for organic certification, as the Americans have done. That's why the UPA is calling for permanent funding to review and maintain Canada's organic standards and to offer a cost-sharing program for organic certification.
In terms of taxation, our brief includes three requests. The first is to introduce a 30% refundable investment tax credit for the purchase of new or used equipment by farm businesses with gross annual revenues of less than $50,000. The second is to eliminate or limit taxable capital gains on the gifting or sale of certain assets at low cost to a nephew or niece. The last is the creation of a personal silvicultural savings and investment plan for Canadian forest owners.
Finally, with respect to the dairy sector, we reiterate that it's important that the government fulfill its commitment to provide full compensation to dairy farmers to mitigate losses related to the Canada-United States-Mexico Agreement and to make no further concessions on supply-managed products in future trade negotiations.
Thank you.