Mr. Speaker, first of all, I would like to inform you that I will be sharing my time with one of my colleagues.
I think it is indeed worthwhile to take whatever time is required to look at the situation of the agricultural industry across Canada. Needless to say it is an industry of vital importance. The agri-food industry accounts for about 9% of Canada's gross domestic product, employs nearly two million people and generates almost $91 billion a year in sales on the domestic market. It is appropriate to take stock of what is going on in the industry and paint a realistic picture of the current situation.
Nationally, net farm income is expected to drop from the 1997 record level, given the prices of major commodities like pork, cattle and grains, which undergo cyclical downturns, and the fact that some of our best foreign markets have been affected by the so-called Asian flu.
In addition, depreciation expenses will grow in 1998 to take into account the substantial capital investments made in this industry in recent years. It is also to be expected that Saskatchewan and Manitoba will be particularly hard hit. However, I want to make it clear that this is not a widespread situation. Cyclical downturns do not affect all industries the same way.
For instance, income from dairy, eggs, poultry and horticulture will remain stable. Farm cash receipts in a number of industries have actually been good these past few years, resulting in record revenues in 1997. However, it is important to recognize that the difficulties experienced in the agricultural industry are part of a much larger economic problem. Indeed, no one is immune to the Asian flu.
As the finance minister indicated in his economic and financial update last week, most countries in the world are experiencing a recession, and the International Monetary Fund now predicts 2% economic growth worldwide this year, instead of the 3.1% growth forecast just months ago.
Stock markets around the world have plunged, and commodity prices have dropped nearly 30% from the peak reached at the end of 1996. In absolute terms, they are now closer to their all-time low since the early 1970s.
But the global economy will recover from this difficult period, as it has in the past, and Canada is in a particularly good position, because it has put its fiscal house in order.
In the agricultural industry, the price of most of the products that we sell has always been determined by world markets. When commodity prices go down, farm income does also. Conversely, when the global economy is on the upswing and commodity prices bounce back, farm income follows the same trend.
Farmers will tell us that cyclical downturns are unavoidable, that they often anticipate them, and that they do their best to cope with the situation.
As a government, we have done our best to help farmers prepare for cyclical downturns and we continue to do so. The Standing Committee on Agriculture and Agri-Food is currently hearing representations from those concerned, so that, together, we can find solutions to provide greater security to our farmers.
Each year the federal and provincial governments invest $1 billion in farm income protection programs. This money is in addition to the contributions made to the various programs by the farmers themselves.
The result is that farmers have now accumulated over $2.5 billion in net income stabilization accounts, which are the cornerstone of our national income security program. According to preliminary studies conducted by Agriculture and Agri-Food Canada, the majority of those contributing to net income stabilization accounts have enough money in their accounts to meet their needs during the winter.
Moreover, crop insurance will probably make payments of about $430 million this year to help farmers who have suffered a shortfall. The government also set up services to help farmers who, for one reason or another, could not meet their cashflow requirements.
Most farmers remain optimistic about the future. The primary production industry is in most cases in a good financial position and things look very positive. In fact, levels of investment in the industry continue to increase.
Long term positive outlooks for the sector are in fact one of the reasons for this situation. The healthy cash flow and credit positions of many farm operations is another reason.
The other important factor is the general good health of the Canadian economy, characterized by a lack of deficit, low interest rates and relatively low inflation. As the minister mentioned, the government has taken a pragmatic and strategic approach to the financial challenges. We have set guidelines. We have followed them and will continue to do so in the future.
I will give members an example. At one point, as tangible support, the Farm Credit Corporation initiated the agristart plan. The agristart program provides a new range of farm loans to ensure the future of farmers expanding their operation and to help pass on farm operations from one generation to the next.
There are three types of loan. There is the family farm loan, which enables the developing farmer to finance the purchase of farm assets, or transfer shares in a family farm business. The 1-2-3 grow loan permits farmers starting or expanding an enterprise to defer payments over three years or longer in order to accommodate the drop in their income. The payday loan is for people wanting to start a farm or people with off-farm employment wanting to expand their operation.
This government is continuing to work closely with farmers and the provinces to set up an income protection program that meets the sector's current and future needs.
