Public Safety Committee on June 9th, 2008

[Fred Neukamm]

That was federal.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Okay.

I was also very interested in the buyout because of quota. We don't have tobacco in my riding, but we do have dairy. People can own quota without actually growing the product. What percentage of your quota would be owned by people who are actually engaged in growing tobacco at this time? Would 50% own quota but not grow?

[Fred Neukamm]

Roughly 90% of our quota holders would have farms, and just purely because of the economics of that, and since we have a system whereby a producer can rent or lease quota from another, roughly 50% of our membership were active growers last year. A large reason for that is just pure economies of scale. As the quota utilization has dropped and dropped, many of our growers with smaller holdings have not been able to have a viable labour force for a small volume, so they have opted to lease that quota to a neighbour.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you.

The response to Ms. Priddy's last question hit on something I was going to mention, so I'd like to explore it a bit further.

Also of great interest is the person who just comes to your farm, knocks on the door, and says they would like to buy so many pounds of tobacco. Of course, you wouldn't want to deal with that type of clandestine business arrangement. But when you report that to the police, what's their response, especially if there is a subsequent theft?

I come from a rural area, and we have a neighbourhood watch program. We write down the licence number of the person who comes, or a description of the car.

What has been your experience and that of the farming community in relationships with the police? It's obvious that this is an organized crime issue. When you responded to that, there was quite a concern about what else would happen if you responded.

I'd like to explore the relationship between a clandestine offer to purchase and a theft, and the relationship with the authorities after that.

[Fred Neukamm]

That is very difficult to assess and describe. As an elected board of directors, we tend not to be directly involved in the whole process of farmers giving tips. We delegate that authority to our staff. When tips come in, if a farmer happens to be willingly involved in the illegal activity, we have to oversee the process of a hearing, a judgment, and the possible quota cancellation. So we tend not to be involved in the initial stages of that.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

So you would find it to be a conflict of interest.

[Fred Neukamm]

Yes. However, in many cases we're hearing that farmers are somewhat reluctant to report these individuals who visit their farms, even if they are turned away. They are fearful about giving a description of the person and the licence plate. The person who visited the farm knows where you live, and if all of a sudden they become the subject of an investigation, the farm family is fearful for their own safety.

We are aware of situations where farmers have let it be known to neighbours that they got visits and turned people away, and a couple of weeks later their barns burned down. So these are the types of things we're dealing with at our homes. This is where we live.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

You talked about the 85% drop in just 10 years. Is that all attributed to the lack of a market, or do you think that more of your members are willing to sell that crop under the table?

[Fred Neukamm]

It has everything to do with the drop in legal demand, which is due to a combination of factors. We do not deny that fewer people are smoking. However, if the marketplace truly reflected all consumption legally, we probably would have been able to manage that decline internally. But so much of the marketplace has been displaced by this illegal activity--not only the illegal activity straight up, but the imports that the legal manufacturers are using to substitute and compete with the illegal tobacco. That is what has contributed to our desperate situation.

[Dave MacKenzie, Conservative, Oxford, ON]

One of the problems that perhaps people don't understand is we're talking about a fairly small geographic area where tobacco is grown. My understanding is that the tobacco board can fairly well estimate how much tobacco is grown and how much is sold. So it would be rather difficult to sell a large quantity of tobacco under the table.

[Linda Vandendriessche]

Yes, it would be noticeable.

[Fred Neukamm]

That's correct.

[Dave MacKenzie, Conservative, Oxford, ON]

Part of that knowledge of how much tobacco is grown is gathered by a variety of means.

[Linda Vandendriessche]

Right now the crop is planted. So after the crop is planted, we will send out our inspectors. They will go out and sometimes they will literally measure the fields. They will site-inspect and draw maps of the farms. Those farmers will be asked how many fields they have and approximately how many acres they have put in, and the inspectors will make sure there is a map of that.

So we have a pretty good handle on what's been planted and where it's at.

[Dave MacKenzie, Conservative, Oxford, ON]

So the point here is that it's very difficult for a legitimate farmer to sell under the table.

[Linda Vandendriessche]

Oh, definitely. They would have to have hidden fields and areas that we haven't inspected, because we account for it; we account for how many acres are out there. If it's grown, we ask the farmer, how many pounds did you harvest, how much did you cure? And we have an order system that goes into the auction exchange to the market, so we know exactly how many pounds from each producer are going to be marketed. We know how many pounds have been marketed and what should be remaining in the barns.

We have a full system. We follow that crop from the time it's planted to the time it's sold, and after it's sold we do an inspection again. It's called a carry-over inspection. Therefore we know exactly how many pounds are carried over by each producer.

We have stringent rules and regulations, and we do enforce them, but we have a lot of factors against us right now.

[Dave MacKenzie, Conservative, Oxford, ON]

And one of the biggest problems, I gather, from listening to others, is the consumption of contraband tobacco by people on the street, which seemingly has no negative effect on those who do smoke it.

If you pay $8 for a package of 200 cigarettes, as opposed to $8 for a package of 20, the demand will go on forever and ever.

[Linda Vandendriessche]

Definitely, yes.

[Dave MacKenzie, Conservative, Oxford, ON]

And we see that in the tobacco part of Ontario, also?

[Linda Vandendriessche]

We see it everywhere.

[Dave MacKenzie, Conservative, Oxford, ON]

That's the part that we're looking at, the contraband tobacco being bought for $6 or $8 or $10 a baggy.

[Linda Vandendriessche]

You don't have to go very far. When I was walking on the street the other day when coming up to Parliament, I could see an individual sitting on a stoop with a plastic bag of rollies. So you don't have to go very far.

[The Chair, Conservative, Garry Breitkreuz]

Okay, thank you very much.

We'll go over to the Liberal Party here, but I just have a question from an agricultural perspective, I guess.

Farmers cannot grow tobacco outside of the quota system legally, can they, in Ontario?

[Linda Vandendriessche]

That's right.