Special Committee on Cooperatives Committee on July 10th, 2012

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Does FNA operate outside of Canada?

[Bob Friesen]

No. When FNA was started, there was an organization in the U.S. that was interested in being part of the structure. I believe there were some that bought memberships. But Farmers of North America is a Canadian organization.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Does FNA own any of the input suppliers or have interests in them?

[Bob Friesen]

FNA itself does not, but the president of FNA has interests in some input supply partners. We have what we call AgraCity, which has been doing the fertilizer. They are the ones who brought the fertilizer in through Churchill, as you might recall. We also have a generic pesticide organization that is also an input supply partner, in which the president of FNA would also have an interest.

[The Chair, Conservative, Blake Richards]

Mr. Bélanger, your time has expired.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

It has, has it?

[The Chair, Conservative, Blake Richards]

Yes.

We will now move to the second round of questioning, and I have on the list Mr. Boughen.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair.

Thank you, gentlemen, for taking time to visit with us this afternoon.

First of all, Mr. Friesen, I have a question. I need some clarification on whether I heard correctly. Let me just say that it sounds very interesting. I heard you say there was a sum of money that's, for want of better words, now in trust, money that could be invested.

[Bob Friesen]

Yes. In the federal-provincial governments' safety net programs or business management programs there is a top tier that's called AgriInvest. Part of the definition of AgriInvest is to invest in projects to maximize future revenue.

Farmers can pull that money out any time they want. They can pull it out to buy a motor boat if they want. It's a NISA-like tier.

[Ray Boughen, Conservative, Palliser, SK]

I understood you to say that when that money is pulled out it is taxable. Then I think I heard you say if it's reinvested, you're of the opinion that the people who reinvest it shouldn't pay tax on it.

I'm asking, because that's very much the position of realty as brought forward in Saskatchewan. If a business is sold, taxes are not paid on those dollars, on the revenue, if it's reinvested within 30 days in another business or another building or whatever in terms of a business investment. This sounds very much as though it could work with your organization as well.

[Bob Friesen]

This is farmers' money. There's also a precedent in the first-home ownership RRSP tax waiver. Instead of always going to the federal-provincial governments and asking for money for agriculture—and I know people are already wondering why there is $1.3 billion sitting there not being used—we're saying not to force farmers to do it, but create an incentive so that if farmers pull out that money and invest it, say in something like a project that Gay Lea might have, to develop a market or a grain handling project or a farmer-owned fertilizer project...they are investing in something that will maximize future revenue. Then, of course, they will be taxed on that once it happens. We're saying, in the meantime, waive the taxes to create an incentive for farmers to pull it out and invest it, rather than having it sit there, because I know already that people are getting concerned that government money is flowing into an account almost like a black hole and it is sitting there.

A farmer's age also makes a difference. Older farmers might say they are going to keep the money in there because they need a nest egg, but I think young farmers are quite willing to stick their necks out and invest it, and they won't pull the money out if they're in a taxable year anyway. Who would do that if they had to pay 30% taxes on it?

[Ray Boughen, Conservative, Palliser, SK]

Agreed.

I have a question for both of you gentlemen. We've heard a lot today about the downsizing of various parts of our agricultural section. What does that downsizing do for you? Does it do anything? Does it affect your operation? If there are fewer employees under the Department of Agriculture, will that upset your apple cart or will it go unnoticed? How does that affect you?

[Michael Barrett]

We have not partaken of the programs that Denyse Guy has referred to. Because we are an established cooperative, we don't really access that support. Where it does impact us, however—and I'll take my example of the grocery store—is that the cooperative sector is going to have to fill that void, so that means I am going to take funds from Gay Lea Foods and from my members to be able to fill that void. It's a little discouraging when we're looking at trying to reinvest, and it's part of our principle to be able to help other cooperatives. It doesn't impact our business, but it now means we have to reinvest our dollars out of our sector in helping other cooperatives when those loans and those opportunities and that funding and that advice are not there.

I spend a great deal of my time designing governance models for other cooperatives that are establishing themselves, but I do have this other job that I get paid for that talks about growing the sales of Gay Lea Foods.

[Bob Friesen]

My answer to that question would be that if budget cuts result in a more efficient regulatory system, then we applaud them. In fact, we wrote the Minister of Agriculture , Mr. Ritz, applauding him for eliminating the efficacy requirements at the CFIA for fertilizer. That's one of those areas where we think redundant regulation was eliminated, and we would certainly applaud that. Where budget cuts result in things like that, we think they're great.

[The Chair, Conservative, Blake Richards]

Thank you.

Your time has expired, Mr. Boughen.

We now move to Madame LeBlanc.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you.

I want to thank our witnesses.

Mr. Barrett, thank you for your presentation. I have a question I'd like to ask you. You mentioned Denmark and Holland, saying that the federal government in each of those countries was very supportive. Could you tell us more about that?

What's more, I believe the president of La Coop fédérée said in a speech that Denmark was also a model country as far as credit unions were concerned. Could you elaborate on that?

[Michael Barrett]

Thank you for the question.

Using Denmark as the example, and taking two steps back and coming quickly forward, certainly, as many of you may be aware, the milk quota system in Europe under the European Union has been dismantled. Therefore, in all countries, but even more so in Denmark because Denmark is very reliant on the dairy sector for a good portion of its GNP, certainly with the demise of the quota system there was an incredible loss of farmer equity—dairy farmer equity. So what the Danish government did is to change the corporate and cooperative legislation in order to be able to ensure that the co-ops would be able to have the same playing field, in the sense of the elements that were discouraging investment in Danish cooperatives. And being able to recognize the investment of the members as indeed equity on the balance sheet certainly helped the Danish cooperative Arla in particular in being able to grow its market, and to be able to export.

Now there is a system that goes along with that to support it, because they don't have the same supply managed system. But there was support for the farmers, in the sense of being able to transition from the lack of value they had in their quota, which was literally millions of euros, being able to recognize that, and giving them—I think it was, and don't quote me on it—a five- or six-year transition, to transition that loss of quota. So the government was actively involved in ensuring that the dairy sector just didn't disappear during that transition.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

You also mentioned that you often help credit unions in your spare time. I know you are governed by the Ontario Corporations Act. What role do you think the federal government should play, as far as service offerings go, to help new credit unions come up, to encourage them, or to raise the profile of credit unions?

[Michael Barrett]

There are two questions in that. First is the role of the federal government, and I think I probably could not put it as well as Denyse Guy did, the executive director of CCA, in the sense that in job creation economics is very important. So that governance model, that initial business investment and the development, is very important for new generation cooperatives to come forward, as Denyse spoke to. To me, that is a critical component of being able to provide that aid.

The second piece on being able to recognize what the cooperative is, or being able to understand what a cooperative is in the broader sector, is certainly in being able to have policies and programs that also support the development of cooperatives, and being able to look at it as an alternative model. I would certainly support, and I've seen it internationally, that cooperatives can serve a lot of social ills. Actually, I think it's a win-win, because I think there's a desire to be able to ensure that the government is not involved in spending dollars within the community. Cooperatives are the model that can have the community rally around the need to be able to provide the need.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you kindly.

We have a Canadian model, but you said there were things we could learn from other countries' models. And you aren't the first witness to say so. That is why, later on in our discussion, I would like to talk about the importance of addressing those other models in our committee report, to show what is happening internationally.

[The Chair, Conservative, Blake Richards]

Thank you. Your time has expired.

We move now to Ms. Gallant for five minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman, and through you to our witnesses. All my questions are directed to Mr. Barrett.

First of all, does Gay Lea buy its milk through the Ontario milk marketing board?

[Michael Barrett]

That's correct.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Generally speaking, what is the relationship with the Ontario milk marketing board? Is it merely the vendor, or do you interface in different ways?

[Michael Barrett]

The way the milk marketing board works, and indeed, it's not just in Ontario but in all provinces, is that the first purchaser of the milk is the milk marketing board. In this case, it's the Dairy Farmers of Ontario. The way the market is set up, we own a certain industrial quota. Then there is quota-free milk, which means that you can take as much as you want. It's on demand. Our relationship with the DFO is that they are truly a vendor, in the sense that we purchase the milk. It comes in certain specifications and fat levels, etc., but they are the vendor. We purchase directly from the Dairy Farmers of Ontario.