Thank you very much, Mr. Chair, and thank you for the invitation to be here.
I'm here on behalf of Farmers of North America. I'll tell you a little bit more about that organization later on. Suffice it to say for the moment that it's an organization that has as its number one mandate improving farm profitability. To that end, in fact, I would like to thank the current government for some of the things they have already done that have provided our members with the tools to be more profitable. Of course, if I were to go into those, this discussion would be a lot longer.
I do want to take a bit of a different approach this afternoon when it comes to co-ops.
I believe the reason, possibly, that FNA was invited to this forum was that very often people say that we have co-op-like concepts in our organization. To that end, I'll explain a little bit about how we operate. My focus is also going to be very narrow, in that we deal primarily with farm inputs. Certainly farm inputs are very important. The way our organization is structured, with some co-op concepts, has ended up saving farmers hundreds of millions of dollars on the input side. What I am going to do, of course, is express support for co-ops.
I want to talk a little bit about our own unique innovative organization. Then I would like to throw an idea on the table that I believe has the potential to free up a billion dollars for investment in agricultural projects, whether they are co-op agricultural projects or any other organizational projects that help to improve farm profitability.
Let me say, first of all, that among the whole gambit of co-ops, certainly our focus is more on the agriculture or farmer co-ops, and, as I said earlier, on the input side. Of course, we also know that there are very successful marketing co-ops, as my colleague from Gay Lea has just talked about. We know that we have had co-ops that weren't at all successful. They started out very successfully but suddenly lost their direction, and they are no longer in the hands of farmers. Then we have other input supply co-ops that have been very successful.
Suffice it to say that we believe that co-ops should not be supported for ideological reasons but rather for a very pragmatic and on-the-ground reason, which is that they need to help introduce competition. If a co-op or a farmer co-op doesn't help to introduce competition in the market, then we believe that it's there more for ideological reasons. We think that's simply the wrong approach. As I said earlier, there certainly are co-ops that have been very successful in doing it.
We do know that farmers need a leg up, given the consolidation in the downstream and upstream industries. One of our goals at FNA is to get farmers to the point where they can go to lower-cost, more profitable options because they can.
In a meeting I had with a fertilizing industry a few years ago, they basically said they were increasing prices because they could.
We would like, and have been successful in certain areas already, to continue to get farmers to the point, through our organization, where they are choosing the co-op or the other organizations or lower-cost and more profitable options because they can. I believe the co-op organization has this as a mandate, too. That would clearly aggregate farmer power and help to empower farmers in the marketplace.
Again, let me say, and I can't emphasize this enough, that whether we're talking about co-ops or whether we're talking about innovative organizations such as the FNA, it has to result in more competition in the marketplace. And the benefits of that added competition have to accrue back to farmers.
Now you may wonder why I emphasize the area of input for farmers so much. Farm Credit Canada, in their 2009 client survey, asked farmers what their top concerns were. The top three concerns for farmers in that year were, number one, input costs; number two, profitability; and number three, market prices.
It's interesting. I'm not a psychologist, but since input costs are their concern, and then profitability and then market prices, that tells me that they consider input costs to be a greater obstacle to profitability than market prices. That's why we're focusing so much on input cost. That's really the very reason that Farmers of North America started.
As I describe our organization, I'll let you pick up on where we may be similar to a co-op. We are not a co-op, but we certainly adopt some of the same concepts.
FNA is simply a farmers' business alliance. It's a membership-based organization of farmers that has as its mandate to improve farm profitability. We have around 10,000 farmer-members across Canada. We have members in every province except Newfoundland.
FNA, and I'll refer to it as FNA from here on in, does not retail any products. FNA develops relationships with input suppliers, negotiates lower prices for farmers, and then has the farmer deal directly with those input supply partners. We're a membership-based organization that creates a strong crosswalk between input suppliers and our farmer members.
Now, if there are input suppliers that aren't interested in dealing with FNA, we simply create our own suppliers. One of the things we haven't found nearly as evident in the upstream industry as in the downstream industry is the fact that everybody in the value chain believes they should partner together to make sure every part of the value chain can be profitable.
As I said, one of the things we've done is to develop relationships and partnerships with input suppliers. If they're not willing to do that, say in the fertilizer industry or the pesticide industry, we simply create our own input supply partner and operate it in the same way we would if we dealt with any other input supplier. FNA will negotiate a price for its farmers, and the farmer will deal directly with that input supplier.
Where it is similar to a co-op is that the benefits of the low prices accrue to the farmer-members. In some cases what we've done, to prevent the price transparency that will allow every farmer in Canada to benefit from reduced prices, is to accrue those benefits back in what we call “empower awards”. Our farmer-members will receive a discount up front, as a member, and then any other benefits and savings accrue back to those members in what we call empower awards.
The difference between FNA and co-ops is that our members receive a discount on each specific product and program they're involved in. In other words, we don't average out what you would call profits and losses and then simply accrue benefits back. A farmer who uses fertilizer specifically would get all the savings available in fertilizer. It's not averaged out with any other savings in any other product.
The other difference between FNA and their organization is in governance. We have an advisory board, but we have a governance structure of one person. The reason we've kept the governance that simple is because we know we need to deal quickly.
I don't know how many of you have seen the Sharon Stone/Gene Hackman movie, The Quick and the Dead, but you will remember the tag line for that movie was, “In this town you're either one or the other.” We know that if you're not where the need is in the time you need to be there, the need is gone. We have a very simple governance structure that makes decisions very quickly. A decision can be made today based on whatever input we get from an advisory board or from our members.
Having said that, and having described what we consider to be a very innovative organization, let me go to the suggestion I have. I know there has been a lot of talk about eliminating funding for certain organizations, etc. We believe there is a structure in place where, if we create an incentive for farmers to invest, we think farmers will invest a lot of their own money in the agricultural industry. I would propose this suggestion—and I have copies here in both English and French, which I'll give to the secretariat later on and it can be distributed.
In our current business risk management structure that we have in Agriculture, we have what we refer to as a top 15% tier—