AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 25, 1998

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[English]

The Chairman (Mr. John Harvard (Charleswood St. James—Assiniboia)): We'll bring the meeting to order. It's 3.30 p.m., and we like to be punctual.

Today we resume our study of the current income crisis in the farm community of Canada. This afternoon we have the honour of hearing from three distinguished organizations: the Canadian Cattlemen's Association, represented by Neil Jahnke and Jim Caldwell; the National Farmers Union, represented by Cory Ollikka, vice-president from Alberta, and Randall Affleck, who is the maritimes coordinator, who's from Bedeque, P.E.I.; and Keystone Agricultural Producers, from my province of Manitoba, represented by Don Dewar and Marcel Hacault.

I think the representatives of KAP have agreed to lead off. Then we'll hear from the National Farmers Union, and we'll fit Mr. Jahnke in batting clean-up this afternoon.

I think you know the format, gentlemen. After your introductions and your initial presentations, we'll go to questions. We'll start with Mr. Dewar.

Mr. Donald Dewar (President, Keystone Agricultural Producers): Thank you very much, Mr. Chairman, and good afternoon to the members of the committee.

Keystone Agricultural Producers is Manitoba's general farm policy organization. We have between 6,500 and 7,000 members, and another 5,000 potential members. So we have 10,000 or 11,000 farm units on our membership list.

We're happy to be here today to present to you, although the topic of discussion is not one that's pleasant in Manitoba. There are signs that the farm economy in Manitoba is struggling, and it's coming from a number of sources, some of which we'll highlight this afternoon for you.

According to a Statistics Canada release in May, total net income in Manitoba dropped 57% between 1996 and 1997, to $203 million. That income is to drop another 30%, to $143 million, for 1998. And although it's pretty early to put numbers to it, it looks like it will be even lower in 1999.

Mr. Marcel Hacault (Vice-President, Keystone Agricultural Producers): My name is Marcel Hacault. I'm the vice-president with Keystone Agricultural Producers. Today I'm not running my hundred-sow farrow-to-finish; my wife and kids are taking up the slack for me. My primary source of income is from the hog sector, and as you realize, hogs are in fairly significant negative margins right now. So this is very dear to my heart and it affects me very much on a daily basis.

We've just gone through a round of meetings in Manitoba, our district annual meetings. We've been visiting all the areas in Manitoba. I believe we have one meeting left. We've been hearing a lot of concerns from farmers in different areas of the province, and every area to date has expressed concerns about how the farm economy is going and how low their incomes are going.

Mr. Donald Dewar: We'll try to cover most of the sectors that are produced in Manitoba and we'll let the Cattlemen's Association deal with the cattle situation, although our neighbours that are in the primarily cow-calf are coming home from the auction marts with less than they expected or hoped to get when they took them to market.

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As a grain producer myself, I would like to address that. With the prices of wheat being down, people are saying to grow other commodities, that you don't need to grow just wheat. Well, I think the prices of peas in Manitoba are a prime example of where people have switched production, switched some acres into another crop, and the prices of peas are down almost 50% from where they were a year ago. If we talk price per bushel, they were between $5 and $6 a bushel last year, and now they're just over $3. You have to fight to get $3.50 a bushel for the peas.

Some crops seem to be strengthening. Canola, flax, and the edible bean markets are reasonably strong. But these are crops that are in very thin markets, and they run into rotation problems in production. There are limited markets, a limited region, and therefore a limited acreage. And the same thing could happen, particularly in the beans market. If everyone switched into beans, the profit level would be reduced to the same place where the peas are today.

The wheat is starting to move if we talk about cashflows that are needed for farmers. There is some wheat moving. In fact with the Canadian Wheat Board being 50% sold and their initial prices being something between $40 and $60 less than their return outlook, we just last week requested that they consider an increase and notification to cabinet to try to get some more of that money out. But that only increases the cashflow; it does not address the overall problem.

Barley is another market in Manitoba, both feed and malt. The malt premium market is gone because of the European subsidy. It works out to $170 Canadian, which is more than we can even expect to get for the barley in the first place. And they don't differentiate between feed and malt, which just drives down the world price of barley. So barley is not an exportable commodity from Manitoba, and our malt premium has disappeared completely.

All of this is caused in large part by the overproduction in our competing countries, the United States and Europe, and the subsidy programs, which I'm sure you've all been made aware of, that are assisting their producers and directly or indirectly encouraging overproduction of the commodities. In Canada, part of it could be attributed to the additional cost on the farmers when the Crow benefit was identified as an export subsidy and removed. The farmers are now paying that out of their pockets, and it's being reflected in the net income figures.

Mr. Marcel Hacault: I guess you have to realize that in Manitoba we're slightly different from Ontario and Quebec, where supply management is a lot stronger. I think supply management in Manitoba is a fairly small portion of agriculture. All our pork I guess is exported: I think around 80% of our pork production goes out of the province. For cattle, probably close to half of our cattle production gets exported, either outside the province or to the U.S.

So in a sense we're very dependent on the export markets. The concern that always come back to us is whatever gets announced should not be countervailable, because we have to keep the access to those other markets. I just wanted the other members from the other parts of Canada to realize that in Manitoba we depend a lot on those export markets and having them open to us.

Another concern producers are telling us about is the whole cost recovery initiative put in by government, costs that could be green if we were to go under GATT. The inspection services, which benefit all of society, are being passed on to producers. One producer in particular, who is shipping a lot of weanlings to the States, has had his costs for weanling inspections go up. He estimated he was going to be paying 30% of the cost recovery exercise in that whole department himself, on his farm. So that is one thing they'd like to see be part of the solution, if there is one to be proposed.

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Another thing is that the new entrants to farming are really being slowed down with all the investment needed. And a lot of the existing safety net programs do not encourage new entrants to farming. So some tinkering around I guess would help, but again acknowledging that any program that does get announced has to take into account those new entrants.

Another concern they have is that a lot of research done in the past has been funded through and targeted to export markets. In Manitoba we're trying to shift some of our focus to feeding a lot of the wheat. So a lot of the research has been based on export markets, which has left a void in actually doing research on crops that can be used in-house in Manitoba to feed or to bring value-added.

Mr. Donald Dewar: One of the signs we're seeing of the fact that farmers have less income is that the farm equipment manufacturing companies in western Canada are laying off people. They've shut down production. The sales of tractors and combines, for example, are down by 50% this year. The dealers feel the effect of that. It's rippling through the economy already.

We talked to fertilizer dealers in Manitoba who did about 50% to 60% of their normal fall volume. In their minds, people are not sure if they're going to be farming that land in the spring. It's not that somebody is going to force them off it, but that they may make the decision not to farm the land and not to lose more money or more equity.

There's more leasing of equipment and less ownership. We've had calls from farmers who have in fact had their bins padlocked. And we know of fertilizer dealers who have taken grain in payment of account. They hired trucks and sent them to the field to pick up the grain so that they were assured of getting paid. So we know there are things happening.

If we were to look at what we have in place, the cash advance system is being used. The staff of the Manitoba Canola Growers Association administers for other crops in Manitoba. They handle the corn, bean, canola, and pulse advances. They've had to hire extra staff to handle the volume of cash advances. So the Canadian Wheat Board, which has lower values and lower dollars as well as lower tonnes to base that on, may not be writing quite as many dollars in cash advances as they have in other years. The other higher-value crops are being used to a great extent.

We have crop insurance in Manitoba. We have one of the best crop insurance programs in Canada—in fact, arguably the best. Some 85% of the insurable acres in Manitoba are included in our crop insurance. But that is a production insurance; it does not do anything to help with the revenue. It brings you to a 70% level of an average production, and of course when you factor in the world prices on the commodities that doesn't come near to covering the costs of production. In fact, there were enough bushels grown, enough volume of crops grown, that there were very few claims against the all-risk crop insurance program in Manitoba.

Mr. Marcel Hacault: If we look at NISA, which has been touted as one of the existing ones that has $2.5 billion or $3 billion, we'd like to remind you again that half of that is producers' money. In my case in particular, I'm in straight hog production, and I've only been able to contribute in the last four years. I've actually withdrawn my NISA already.

Just to give you a sense, I'm losing $50 a hog. I took out $8,000, losing $50 a hog. That's around 200 hogs that I can produce before going in the hole again. So four years of savings has allowed me to stay in production for one and a half months. That's the extent of how NISA helped me out. That program is probably adequate to address small variations, but in the long term—

The Chairman: A point of order?

Mr. Denis Coderre (Bourassa, Lib.): For the purpose of the health of the translator, maybe you could relax a little bit.

[Translation]

You're going a little too quickly. Take your time, we are in no hurry. The engine is heating up.

[English]

The Chairman: Maybe you should speak in French, Marcel. Maybe you'll be a little slower in French.

[Translation]

Mr. Marcel Hacault: What was I saying? I was talking about hog production.

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[English]

The Chairman: We Manitoba French people— you know, we're laid back.

[Translation]

Mr. Marcel Hacault: Should I repeat what I said?

Mr. Denis Coderre: No, just speak a little more slowly.

[English]

Mr. Marcel Hacault: I'll take a deep breath and let it go in both languages.

Mr. Denis Coderre: They're not going to cut us off.

Mr. Marcel Hacault: As for the grain farmers, Don probably should talk about the whole program and the grains—

Mr. Donald Dewar: Well, regarding NISA, on the grains side of it, I think if you look at the average numbers—and again we refer to the Manitoba ones in our brief, which will be presented to you later—78% of the accounts in Manitoba are less than $20,000. Almost 50% are less than $6,000, and that won't go very far to paying even the fuel bills on most farms in Manitoba for one month. So the money that's available through the NISA account— and the accounts may be lower for a lot of reasons, one of which is the fact that they are individualized. Individual farmers may have drawn out because they had a crop failure, and crop insurance is production insurance, not price insurance. For any number of reasons, they could have accessed a portion of their account in the past, and in that way they have less now.

So I think we've covered a little bit to give you a sense of the hurt that is happening in Manitoba, and I think we can only emphasize that when agriculture hurts, as we've pointed out, the farm equipment manufacturers are laying off staff, and we also cannot then afford to support our local businesses in all aspects, whether they be suppliers or whether they sell consumer goods like the shirts for our backs or the groceries for our tables.

So it's very important to stimulate our economy. As one banker told us, he expects 30% fewer farmers in five years—not that there are going to be major financial losses, but people are going to decide to leave the industry. And what do 30% fewer people in the countryside do to our communities? How do the services that are required get funded? In our minds, the snowball just gets bigger and we start to get a real social issue, which started with the low incomes in agriculture.

Marcel, do you have anything to add?

Mr. Marcel Hacault: Yes. Our agriculture minister has said that the 1 million people in Manitoba are actually producing food for 6 million people. The message we hear in the country is kind of mixed. We always hear that agriculture is important for Canada, that we want to be 4% of the world trade, that agriculture is important for jobs, yet we always feel as if we're being targeted. A lot of cost recovery is happening. We seem to have lower government investment in research. We feel we've contributed more than our fair share through helping the government balance its budget and that we are important to the industry, and we'd like to be treated—

Maybe it's time to reinvest in agriculture. We've paid the price, helped the government look good, and I think probably the time is now to reinvest.

The Chairman: Thank you, gentlemen.

I'll now go to the representatives of the National Farmers Union. Welcome, gentlemen.

Mr. Cory Ollikka (Vice-President (Alberta), National Farmers Union): Thank you, Mr. Chair. The NFU welcomes this opportunity to present the views of farmers to the Standing Committee on Agriculture and Agri-Food.

The NFU is the only voluntary, direct membership, national farm organization in Canada. It is also the only farm organization incorporated through an act of Parliament. The NFU is non-partisan and works toward the development of economic and social policies that will maintain the family farm as the basic food-producing unit in Canada.

There can be no doubt about the magnitude of the current farm income crisis. Farm incomes in Canada are approaching record lows. Realized net farm income per farm in Canada is well below the levels of the last fifty years, and the briefs we have circulated to the committee, which I don't believe have been widely distributed, have graphs explaining that income drop.

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The problem arguably is worse in the prairies, but it's clearly not a regional problem. Crop and livestock farmers in all provinces will be hard hit by disastrously low world market prices. Statistical data in these regards tend to lump the winners and losers together, and it's likely that gains by producers in supply-managed sectors mask and offset the significant losses by hog, grain and oilseed producers. Again, despite the relative financial stability of supply-managed sectors, Canadian farm income is at record lows.

Anecdotally, of course, our cohorts from the Keystone Agricultural Producers have pointed to some specific examples. Farmers I've talked to from across the country have indicated $30 to $50 losses per hog. Saskatchewan farm income, which is dominated by the grain sector, is expected to be the lowest since StatsCanada started reporting in 1926.

The cause? Farmers are not to blame for the current income crisis. They have not been passive victims either, having aggressively invested and diversified in attempts to capture the best prices in a shifting world market. The problem seems to be the markets themselves, fluctuating wildly in the short term and drifting ever downward in the longer term. High subsidy levels in the U.S. and European Union indicate that farmers worldwide are unable to earn a fair and adequate return from the marketplace, and such subsidies clearly exacerbate the hurt that Canadian farmers are feeling, with their safety net system unable to respond to the existing catastrophe.

The solutions: There's a clear and pressing danger that thousands of farmers will be unable to continue farming unless they can find immediate short-term money to pay bills and plant crops in the spring. The Minister of Agriculture suggested that NISA can provide this short-term money. In most cases this is not true. The protection provided by NISA will be extremely uneven. The 20% of NISA participants with significant account balances represent only 8% of Canadian farmers.

The NFU therefore proposes a number of steps that can be taken to help Canadian farmers.

First, the National Farmers Union recommends that the Canadian federal government immediately approve the payment of at least $1 billion in short-term assistance to Canadian farmers who are hard hit by low incomes and unrealistically low world commodity prices. This, we believe, is a modest request. To match, for example, the U.S. support levels would require direct cash injections of $2 billion to $3 billion, and to match the European Union's support levels would require a cash injection of some unrealistic $10 billion.

How to target government financial assistance to maximum benefit: When providing assistance to farmers, either short-term money or long-term programs, the government should aim to support farm families in rural communities, not bushels and not acres. The National Farmers Union recognizes that the government must be financially prudent and we therefore point out that targeted and capped payments are the most effective, cost-effective and prudent way to disburse limited financial resources. There is not currently a crisis in farm acreage or production. Both crop acreage and production in Canada are increasing. The aim of any government assistance must be to ensure that the maximum number of farm families remain on the land and that these farm families are able to support local economies and communities. Government assistance based solely on acreage production or income will not accomplish these aims.

The NFU recommends that short-term financial assistance be capped at approximately $50,000 per farm. Further, the NFU recommends that assistance be targeted so that it is distributed as equitably as possible and so that the greatest possible number of farm families receive useful assistance.

Second is cost recovery fees. The NFU also recognizes that one of the most significant increases in recent history since 1994 is the increase in cost recovery fees associated with the business lending plan of the government. The NFU therefore recommends that these fees can be and should be reduced by the Government of Canada.

Third, the NFU recommends that the federal government immediately reinstate costing reviews and productivity gain sharing in regulated grain freight rates. This would cost taxpayers nothing and keep scarce moneys in the pockets of farmers. For example, 1998 freight rates are about $144 million higher than they probably would be if the productivity gain sharing had been kept in the Canada Transportation Act of 1992. This is money that could stay in the hands of farmers.

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Fourth, other necessary short-term measures: The NFU recommends that the federal government freeze all foreclosures until the fall of the year 2000. Further, the NFU recommends the government offer loan guarantees on new operating fund borrowings for each farm equal to 20% of gross farm income, with a cap of $40,000 per farm. This would help ensure that cash is available for farmers to plant a crop next spring.

In terms of a longer-term solution, the fifth thing we suggest is a disaster assistance program that works. Canada needs a durable, stable and predictable farm income support program, one that will make the best use of our limited monetary resources and one that will effectively protect farmers from weather- and price-related disasters. NISA is not such a program. NISA fails those most in need of income support and stabilization, people like the beginning farmer, the struggling farmer, and given the low account balances in NISA, it will likely fail the vast majority of farmers. Further, NISA provides inordinate benefits to farms least in need of assistance.

In January 1994 the Saskatchewan Farm Support Review Committee outlined a superior alternative to the NISA program, called the pool stabilization program. An outline of that program is attached to our brief, by the way. The pool stabilization program would target more money to the farmers who need it most and provide superior income stabilization for Canadian farmers. We recommend that the federal and provincial governments replace NISA with the pool stabilization program outlined in the January 1994 report of the Saskatchewan Farm Support Review Committee.

Sixth, protecting orderly marketing and supply management: Farmers and politicians alike cannot help but be struck by the relative prosperity, security and stability of dairy, chicken, turkey and egg producers during the current farm income crisis. Clearly, these programs, which pay farmers fair, adequate and predictable prices based on the cost of production, are the ultimate in farmer support programs. Further, they cost governments and taxpayers little or nothing.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Did you hear that, Gary?

Mr. Cory Ollikka: Therefore, the National Farmers Union recommends that the Government of Canada maintain and defend orderly marketing and supply management agencies. Further, the NFU recommends that the government encourage farmers in sectors without orderly marketing, specifically, to move towards such arrangements. Immediate action to reinstate orderly marketing for hogs in all Canadian provinces would be an effective first step.

Randall.

Mr. Randall Affleck (Maritimes Coordinator (P.E.I.), National Farmers Union): Cory has covered quite a bit and I'll keep my comments very brief.

The committee mandate talks about the upcoming crisis in farming. Well, we're very much into it, as my friends from KAP have indicated also.

On Prince Edward Island the main industry that's suffering is the hog industry. I talked to a member of ours today, and ironically, they're exiting the industry and in the process of doing so they shipped, I think, 14 hogs and received about $65 a hog. They said their minimum costs, just cash costs, were about $120, so they had a loss of $55, which is consistent with what KAP has indicated. To put that in perspective, if on Prince Edward Island you could find a job at this time of year that paid $10 an hour, you would be working for close to five or six hours to sell one hog, and I think that's just ridiculous from a farmer's perspective.

In terms of its impact on rural Canada, there can be no question this is in effect a price drought. If you had a crop failure due to a drought—or a flood or any other natural disaster—the impact would be the same in rural Canada in terms of the loss of cash. I think members should recognize it in that context.

In terms of Canada's ability to pay, the NFU argues that Canada has exceeded its commitments under the WTO agreement in terms of rolling back costs. Additionally, to add to what KAP mentioned in terms of cost recovery fees and their category in the green box, that's certainly been a major cost increase in terms of the potato industry.

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I'd like to conclude simply in terms of the NISA program and in terms of a vehicle to get funding into the communities to the producers and farmers who need it. This is not going to be the vehicle, in our view, because of the number of farmers who are not accounted for in the NISA rolls. Our numbers show over 100,000 farmers in Canada.

The other interesting statistic in terms of NISA is that one-third of the NISA participants have account balances that average just $395. Of the top 1%, that balance is $290,000. In the questions and answers, we'd like to go into a little more detail perhaps on a co-stabilization program in terms of the future.

The Chairman: Thank you very much.

Last but not least, we now turn to Mr. Jahnke of the Canadian Cattlemen's Association. Yesterday he was wearing his trader's hat, and today he isn't wearing anything.

Go ahead, Mr. Jahnke.

Mr. Neil Jahnke (Chairman, Foreign Trade Committee, Canadian Cattlemen's Association): Thank you, Mr. Chairman and members of the committee. My name's Neil Jahnke. I'm a director of the Canadian Cattlemen's Association from Saskatchewan, where we run a family beef operation. Along with me is Jim Caldwell, who I'm sure you all know.

I want to thank you for inviting the CCA to participate in your discussions. Some of you who have been around for a few years realize that cattlemen don't always see things quite the same way as other commodity and general farm organizations see them.

The official position of the Canadian Cattlemen's Association as it relates to safety net programs is that we do not support direct government payments to producers. It's our feeling that government support programs can only lead to trade action. I'm sure you're all aware that we're up to our necks in trade problems at the present time. While we don't feel that we have any programs at the present time that are countervailable, we still have to defend ourselves.

This process of defending our industry will cost the cattle producers, through the Canadian Cattlemen's Association, a minimum of $1 million, and it could go as high as $6 million. Washington trade lawyers are expensive.

The federal government will also spend millions of dollars in staff and travel expenses to defend the Canadian position on the countervail case. If we should be countervailed, the money that will be lost in increased tariffs will never make up for the money received in the form of government payouts.

It makes us very gun-shy when we hear rumours about government payouts. You can be assured that our trading partners are following these discussions very carefully.

At $5 billion, the Canadian beef industry is the single largest source of farm cash receipts. We export over 50% of our production, and it's mainly to the United States. That's about $2.5 billion in export sales.

If we were to lose the U.S. market for our beef, there isn't a safety net program large enough to cover our losses. It would result in a total decimation of our industry. So you can see why we're very concerned about safety net programs.

I'm not going to suggest to you that all is great and wonderful in the beef industry in Canada today. It isn't. Sure, some of our producers are having real difficulties. Sure, we have producers who could use some help. I live in Saskatchewan, and I know what some of my neighbours are going through.

However, we don't believe that throwing more money at the problem is going to solve the farm income problem. It may help on a temporary basis, but at what price? Is it the price of losing our main markets and inviting trade action? I believe we have to be very careful.

The beef producers experiencing the greatest problems are those producers who are also involved in other commodities, such as grain. Grain prices have dropped to unprofitable levels, and cattle prices are not high enough to support low grain prices. So the producer is being hurt. If the beef producer is also in hogs, it only adds to the problem.

The National Safety Nets Advisory Committee, of which CCA is a member, is currently looking at the development of a low-level national disaster program. I want to stress “low level”. We must have every assurance that any program is compatible with WTO rules on support programs.

The producer should have some protection against situations that are beyond his control, such as the weather, but what must be avoided is some form of price stabilization program.

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I would ask you, as members of Parliament, to insist that any new programs that are developed are put before trade lawyers for close scrutiny before they come into being.

The CCA believes there's a role for government to play in assisting the agricultural industry. We feel the government funds could be much better spent in making sure that the industry is dynamic and is taking advantage of all opportunities. This is why we believe so strongly in research and market development. We feel there's a role for governments to play, and it's for this reason that the CCA has been seeking funds for this area. Research and development is also “GATT green”.

We export 50% of our product. If we're going to continue to grow and export, we must develop new products and new markets.

We need funding for research to make our product the best in the world on a consistent basis. We have been doing a lot of work in this area, but we must do even more. We have to develop new markets around the world.

I am the past chairman of the Canadian Beef Export Federation, and we have developed new markets, particularly in Asia. But it's expensive and requires funding. We are up against Australia and the United States, which pour millions of dollars into these markets each year for promotion and research. If we are going to play on the international market, then we must do the same.

We know we have a good product. We just have to convince the rest of the world of that. At present, 96% of beef exports from Canada are to the United States. Putting all our eggs in one basket is dangerous, as we are now finding out. Short-term, ad hoc solutions and a quick infusion of money will do little to develop an industry over the long term. It will only mean that you have solved the problem temporarily, as the problem will return again and again.

We live in a country that is rich in resources. We live beside the richest country in the world and the largest importer of beef. We have a free trade agreement with the U.S. Other countries would love to be in our position. The cattle industry can be profitable here.

We do believe in two-way trade. Canada has also the distinction of being the largest importer of beef in the world on a per capita basis.

I can compete with any other beef producer in the world. However, I can't compete if someone is going to close off my main market. I also can't compete with countries that subsidize their producers, such as the European Union.

The cattle industry knows all about support programs. We had the grandfather of them all: tripartite stabilization. It was a great program. It guaranteed you wouldn't lose any money. Beef producers loved those cheques that came in the mail. But our production grew and grew, and we got to the point where we had to start exporting. Then we realized we were in trouble, so we called for the elimination of tripartite.

There were indications that the program affected normal production cycles, because during the period tripartite was in effect, the Canadian beef herd grew while the American herd remained steady. CCA realized that if the program continued and our exports continued to grow, particularly to the U.S., the we would face severe trade problems. We took what we thought was responsible action back then. We still believe that today.

Finally, we're not here today to suggest that there isn't a farm income crisis being experienced by some producers in some commodities. They may very well require some assistance to stay in business. However, we believe that we must also look to the long term. We must be careful not to implement programs that could put our industry in a worse position in the future than the one we're in today.

I thank you for your interest and look forward to any questions.

The Chairman: Thank you, Mr. Jahnke. I just need one piece of clarification. You seem to be saying that you would be wary of any government program for helping farmers through the current difficulties. I'm no advocate of a subsidy war, but are you saying the Americans would retaliate against us for doing exactly what they're doing right now?

Mr. Neil Jahnke: Yes, Mr. Chairman. We know they're so big that when we deal with the Americans or the European Union we have to prove, first of all, that we're clean. Then we have to use common sense and reason: we can't threaten the Americans, go to war with them, or beat them at their game. We have to carry on dialogue to come to a reasonable solution for our problems in the trade area.

The Chairman: Meanwhile, they put their boots to us.

Mr. Neil Jahnke: Well, we're—

A voice: This is three-to-one trade.

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Mr. Neil Jahnke: Yes, three-to-one trade puts us in a very awkward position. I appreciate that.

The Chairman: Thank you.

Mr. Penson, you have seven minutes.

Mr. Charlie Penson (Peace River, Ref.): Thank you, Mr. Chairman.

Welcome to the committee today, gentlemen.

Mr. Jahnke, I think you really hit the nail on the head when you talked about Canadian producers—you were talking about cattlemen in that case—being able to compete with anybody on the basis of production. But I would also suggest that this applies to grain, oilseed, and grass farmers as well.

Unfortunately, there are massive subsidies, especially in Europe and the United States, that are not creating a level playing field. Therefore, this is causing a lot of distress.

My concern is twofold. I want to ask a question. It seems me that we not only have to address the immediate problem of a shortfall in cash, we need to have a longer-term solution to try to get the Americans and Europeans to the table to phase down these subsidies.

Say this means we have to be into a short-term program. I saw one of the WTO officials suggesting the other day that it could be at least 2003 before we see any action. It could be further. Who knows? So Canada could be in the business of subsidization for four or five years at least before we start to address the real problem, which is the phase-down of subsidies worldwide. How is that going to affect your industries?

Mr. Neil Jahnke: As you know, we're fighting the Americans now on a countervail action and an anti-dumping action. If the cattle industry receives any direct funding or subsidies, whatever you want to call it, from the federal government, we won't have a chance on the countervail or on the anti-dumping. As beef producers, we're dead. We're exporting 50% of our production. There's no possible way we can eat it at home. All the government programs in the world aren't going to make up what we will lose by the loss of that market.

Mr. Charlie Penson: I'm just wondering, on the grain side and the other organizations, what your response is to that question of a five-year period.

Mr. Donald Dewar: It's over the short term, but I think the issue is trade. We're going to be back tomorrow to talk to you about that. I think we in Canada—as Neil suggested—need rules in trade, because even if we're right, we can't afford the countervail and the fight with, for example, the Americans. And it could happen with others.

Most of their programs—I may be wrong—are continuations of programs and modifications of programs that were there. That's allowed in the rule book, but a new program isn't. So we have to be very careful. Our position has been that we have to be very careful that support comes that's compatible with the WTO so that we aren't subject to the countervails.

I might add that Keystone is supportive of the Canadian Federation of Agriculture and the proposal for a disaster type of program similar to the Alberta disaster program, which has been through the General Accounting Office and has been recognized as green, or acceptable at least. It's non-countervailable. So it would be a similar type of program. It doesn't do what some of our members are calling for, which is a major injection of what some say should be $40 an acre. The hog producer needs $60 a hog.

Mr. Charlie Penson: I want to explore that a little bit further. Say there is a short-term program. I noticed the NFU is suggesting that it should be capped at—I don't remember the exact number—$50,000, I think. I'm wondering how that squares in the grains area, where about 80% of the production is accomplished by 20% of the producers. Therefore, you have some producers who are producing a lot of grain and you have some who are producing very little. I'm just wondering how that $50,000 cap, or capping it, would solve that problem.

Mr. Randall Affleck: Well, the principle in the cap is that taxpayer dollars should go to where the priority is, the family farm.

In the NFU, our members here are small and medium-sized farmers. That's clearly where we think the emphasis should be. That's where the economic value in terms of rural communities is, and we're simply presenting the concept of a cap on how much goes in there, that it's targeted for family farms and not acres or yield.

• 1615

Mr. Charlie Penson: I know in my constituency in the Peace River country of Alberta there are some very large operators. Our family has a 2,000-acre grain farm and we are not one of the largest ones, by any stretch of the imagination. I don't see how that would fit with solving some of the problems we are trying to address here today. And I don't think it's realistic. I wonder what your thoughts are on it at Keystone.

Mr. Marcel Hacault: It all depends on your definition of what farmers are, whether we're trying to solve a social problem or whether we're just dealing with a business problem. If we're looking at it as a social issue—the value of farmers and the rural economy and the whole bit—it's totally different from looking at it from a strictly business point of view.

Mr. Charlie Penson: And how would you like to see it looked at?

Mr. Donald Dewar: We've been saying that there should be no caps. It's an industry problem. This is not a social problem. We're talking agriculture, not health and welfare.

Mr. Marcel Hacault: I've been going around to some of the larger hog producers in my area asking them how the current safety net— We talked about NISA, and it was funny because the CEO of the group, because they are a group of farmers, laughed because of the cap within the whole NISA program. NISA was virtually of no benefit to them as a farm organization, a farm group.

Mr. Charlie Penson: I have one quick question to the National Farmers Union. I see that you've recommended here that government encourage farmers and sectors without orderly marketing and supply management to move towards those arrangements. How would that affect the grains industry, which essentially exports about 80% of their product? Would we just give up on the export market, or what would we do there?

Mr. Cory Ollikka: Not at all, actually. Keep in mind that orderly marketing and supply management are similar in some ways, but very different concepts. The Canadian Wheat Board is a classic example of orderly marketing in the grains industry, and it's one of the largest net earners of foreign currency. It's a $6 billion initiative and it's export-oriented. So promoting orderly marketing doesn't necessarily mean foregoing trade and foregoing exporting.

Mr. Charlie Penson: But we already have that.

The Chairman: Thank you. We're out of time, sorry.

We go to Madame Alarie for seven minutes.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): While I may annoy some of the members at this table, I would like to remind people of what is happening in Quebec.

Historically, we chose to do things differently from the other provinces. We are the only province that gave income support programs a particular focus. Our support programs do not include the NISA, except for ornamental horticulture. Our main program is called the ASRA, which is farm income stabilization insurance. Like the other provinces, we also have crop insurance. But all the amounts we receive through similar programs are put into the ASRA program. In some ways, that limits us when we want to help a specific sector, such as sheep production, which did cause us some problems. However, I think we do manage to support our producers.

In the hog sector in particular, to come back to that crisis—

Let me start by telling you how the ASRA works. It pays the equivalent of the production cost. If the production cost is set at $1.32, and the market price is 72¢, we make up the difference. That way, the producer is sure he will at least recover his production costs, whether he is a hog, beef or grain producer.

I agree that immediate financial assistance is required. I agree that we must reinvest in agriculture. I fervently hope that our share will be fair, because the meter is running at the moment. We are paying quite dearly to support our hog industry. We do so nevertheless and our producers are managing to cope. They are not suffering the same hardship I am seeing in the other provinces.

• 1620

I listened to everything that has been said in the last little while, and I am not at all in favour of providing direct assistance to families rather than assistance calculated on the basis of farm area. I am not in favour of ceilings either. I think that in some way, we should focus on production costs, because that is a system that works, and is fairer. We will not make any distinctions between big, medium-sized and small producers. At the moment, all producers are having trouble if they are not getting assistance.

I come now to my question. Have you seriously considered setting up disaster relief programs—programs we might term "WTO- proof," or recognized by the WTO? Programs of this type would allow a government to provide assistance amounting to 70% when there is a 30% reduction in income.

I understand that we have to comply with some WTO rules, even though others do not do so. However, we have to find a solution that, while respecting the WTO standards, is satisfactory to our producers.

Mr. Marcel Hacault: That is what we are suggesting to the Canadian Federation of Agriculture. It would be a disaster-related program, which would be based on the margin of the preceding three or five years. It would be based on individuals, on individual farms, and not on a specific type of production. Everyone would have access to the program. It would amount to 70% of each producer's margin. The program would probably be similar to the one that exists in Alberta, Prince Edward Island, and British Columbia as well, I believe.

If I understand correctly, your program would be different in that it would be based on production costs rather on than on the margin, but that is what we would suggest to Keystone.

Ms. Hélène Alarie: Thank you for your comment. I would have also liked to hear from the other witnesses we have here today.

I would tell you quite honestly that I'm afraid a program will be announced that does not take into account the efforts made by Quebec for several months now to support its producers. For example, the government may introduce a program that will be begin on January 1, 1999, even though we have been supporting our producers for eight months. So I am saying publicly that I am very concerned about this. Announcements are often made while we are on vacation.

However, a disaster relief program would not thwart what we're already doing, it would simply complement our efforts.

I would like to hear the reaction of our other witnesses.

[English]

Mr. Jim Caldwell (Director, Government Affairs, Canadian Cattlemen's Association): Madame, we are very much aware as members of the National Safety Nets Advisory Committee— Yvon Proulx looks after the interests of the ASRA program in Quebec.

I don't think the program in Quebec, first of all, is GATT green. The amount of support you give your producers in your particular province has never been tested. I think we would have problems with some of the programs for your cattle industry and for the pork industry. But I think that certainly Mr. Proulx has been looking after the interests of the UPA at these meetings. He's very much aware of the program. We had a meeting just a couple of weeks ago in formulating the letter to the minister and he was very much involved in that process. I understand that the ASRA money, if they pay it out, is probably going to bankrupt the program. He wants funding from the federal government to replenish what has been put in by the Quebec government and their own producers in that particular province.

But I don't want to answer for Mr. Proulx or for the UPA. I'm sure you're going to hear from them.

I want to make one comment, though, that we are talking about the program developed by the national advisory committee as being GATT green. That has not been proven yet, and one thing the cattlemen want to be assured of is that the program is GATT green before it is implemented by the government.

• 1625

The Chairman: Thank you, Madame Alarie.

You seem to be saying, Mr. Caldwell, that when it comes to a program like ASRA we can get away with it, if I can put it that way, on a provincial basis or a small regional basis, but if that were turned into a national program we would soon be challenged.

Mr. Jim Caldwell: I feel very uncomfortable talking about these kinds of programs. As Mr. Jahnke has pointed out, I'm sure our friends from the United States are following discussions very closely, and we wouldn't want to give them any more ammunition than they already have.

The Chairman: But we do have to be realistic.

Mr. Jim Caldwell: I think we have to be realistic, and the program that Quebec has would be countervailable. And as far as the FIDP program in Alberta is conerned, in the case we are now fighting in Washington it has also been included in the countervail. It wasn't for a while, but it is in there now.

So we're not saying it is, but they're looking at all these programs.

The Chairman: And would you have the same concern about Ontario's market revenue program?

Mr. Jim Caldwell: Yes, probably the same concern.

Let's be honest about the program. Quebec is not a big beef producer. If that program was in Alberta, the border would have been closed last night.

The Chairman: Thank you. That's the kind of discussion we need.

Now we're going to go to Mr. McGuire.

Mr. Joe McGuire (Egmont, Lib.): Thank you, Mr. Chairman.

I want to thank everyone for coming and giving us your ideas.

You're not making it very easy for anybody, because if there is a program, no matter what it may be, it's going to satisfy some people and it's going to make other people unhappy.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Was that your answer in the House yesterday?

Mr. Jake E. Hoeppner (Portage—Lisgar, Ref.): It sounds like it.

Mr. Joe McGuire: So if you get a short-term solution for the crisis in hogs and grain and whatever other commodity, I think it would have to be applied to the whole farm. If it's not, it'll be countervailable. My understanding is that the program was supplied as a whole farm basis, that it will be a green program.

So in the short term it is something that is not going to be satisfactory, probably, to the cattlemen, because basically you're in a better position financially right now than the pork or grains.

I'd ask the Keystone people, what do you see as an adequate method of applying the program? I understand you're not in favour of the whole farm concept, that if you're doing well in something else you shouldn't get it.

Mr. Donald Dewar: No. I think the program that the Canadian Federation of Agriculture is proposing is whole farm and individual farm. It's based on your individual margins; and without getting into too much detail, if it drops below 70% of some predetermined average, then the program would support at a 2% to 70% level. And then with the other tools we have, if crop insurance took over, then you would have access to NISA and NISA would never be able to go just as deep.

We're not suggesting that this would be a short-term program. We hope that the use of it would only be short term. We think that programs such as this would be put in place, and it could be there forever. I see the five being held up, but it could be there forever, but hopefully never used, because if the margins don't drop, it's not going to be tapped. So it wouldn't require funding unless indeed there was a disaster.

It could also cover things like the ice storm or the flood of the century. Those producers whose margins were affected would have received money from the program, whereas those who weren't would not have. So we see the program for people who have to destroy animals with disease. Again, it would be an income disaster caused by some reason that would affect their margins and therefore there would be a payout.

In Manitoba, our hog producers are as concerned, even though they're losing $60 a hog, as the cattle producers are, because 85% of our pork goes south, and if there's a countervail on pork because of the Quebec program, for example, it's not the Quebec producer who's going to notice it, it's going to be the Manitoba producer or the producer of the pork that's going south who's going to ultimately be paying that.

So our producers are very concerned that in spite of the need for something out there, it has to be green; it has to be acceptable by our trading partners.

Mr. Joe McGuire: It's your opinion, through the federation, that the whole farm concept is green?

• 1630

Mr. Donald Dewar: It seems to fit when you look at— and we understand that the Alberta government did submit their plan to the General Accounting Office in Washington, and at that time it was okay. I would hope that the cattle producers at the same time are countering that the American cattle producers are receiving support through the loan rate program on corn, because they're buying corn at a lot less than the farmer is getting for it.

Do we respond in kind? Are we using all the tools we can on the other side? I think, again, that's somewhere that our government could be supporting us.

I know the pulse growers have had a challenge. They just got through one. I think they finished it two years ago. The government was very supportive there.

Mr. Joe McGuire: How would you apply the short-term program, if it came about this fall, and still not undermine the NISA program? Is NISA actually necessary if you have a national program? If it is, how do you apply a national disaster program without undermining the NISA program? I'll leave it open to anybody.

The Chairman: While you're thinking of them, I know one of the representatives, Mr. Ollikka, wants to say something.

Mr. Cory Ollikka: Yes, thank you, Mr. Chair.

First of all, the NFU agrees that while clearly the Government of Canada has the responsibility to protect citizens, it's not realistic that in exercising that responsibility we should be living in fear, yet we still have to recognize that we have to play by the rules that are established in the WTO.

I'll turn your attention—although, again, you don't necessarily have the brief in front of you—to the pool stabilization program, which in many ways is the best of both worlds—

The Chairman: They do have it.

Mr. Cory Ollikka: —between a NISA program and a whole farm program similar to that of Alberta, Alberta's FIDP. The problem, of course, with FIDP and programs like it is that there's a limited envelope, and if it's not used in good years, that money doesn't roll over into subsequent years. If you wind up having a huge wreck nationwide, for example, there may not be enough moneys in allocated envelopes to deal with those needs.

The pool stabilization program is like NISA in the sense that it's an ongoing year-to-year program where moneys continue to roll over and a pooled account exists, which producers, on an individual whole farm basis, can draw on in times of need. So I point that out.

There are other alternatives out there, and we don't need to be limited by the NISA and FIDP mindsets.

The Chairman: Mr. Dewar, did you have an answer to Joe's question about NISA?

Mr. Donald Dewar: It wouldn't undermine NISA. We don't believe they should be connected at all, for the reasons I said, that if a producer is able to use his NISA, it's for the little fluctuations.

That's still 30%. Most farmers, if they're supported to 70% of their previous five-year average— You ask the average wage earner on the street what that would do to their household income. They'll be lucky to still survive at the 70% level. So that's where those who have access would be able to use the NISA program.

There are a lot of tools in there. There's the deemed matchable thing that works, the money, if it's triggered, that can roll through, and so on. It's a tool on the top limb.

The Chairman: Thank you. We're out of time. We're going to Mr. Hoeppner for five minutes.

I'm sorry, Mr. Breitkreuz. Go ahead.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much.

I'd like to see this discussion continue. I think this is what we should be doing. We should be trying to hammer out some kind of an agreement as to what the short-term and the long-term solutions are to this whole crisis that we're finding ourselves with in agriculture. I'd like to see that continue.

I'd like to add a couple of things to the mix, however. I don't know if you watched Question Period today. I put the proposal before the minister that we could possibly right now reduce the fees that farmers pay—taxes of various sorts, user fees, inspection agencies, Canada Grain Council and all that. His response—and I'm paraphrasing a bit here—is that farmers are happy to pay for these services.

Do you find that a realistic approach in the short term? It's not going to be the whole answer; it's $138 million or something. How do you feel about that? I was surprised, because farmers to me are not happy. A lot of these things benefit all of society, not just farmers. What do you think about some of these other things we've been floating? I don't know if you're aware of all the ideas we've been putting back out there as to tax reduction and all this kind of thing in the short term. Would they be GATT green? Are they realistic? I would like to discuss further this short-term and long-term solution. I would like all of you to react to that.

• 1635

Mr. Donald Dewar: It's our impression that those types of government services, such as the Food Inspection Agency that has been spun off from Agriculture and Agri-Food Canada, would be green if they remained 100% funded by the government, just like PMRA would be green.

You mentioned the Canadian Grain Commission. I spent two days last week at their review meetings. They were floating the idea of a quality assurance levy for a whole bunch of reasons and that everybody would pay something at the time you delivered your grain to whomever. To a man or person around the table, representatives from the National Farmers Union, the Western Canadian Wheat Growers Association, Alberta Wild Rose Agriculture Producers and ourselves said agriculture cannot afford that now.

Mr. Garry Breitkreuz: That's what I'm hearing.

Mr. Donald Dewar: That's not the answer, not now.

Mr. Garry Breitkreuz: Okay.

Mr. Randall Affleck: I come from Prince Edward Island as a potato grower. In terms of the increased expense we've incurred from cost recovery and the business alignment plan, it costs 29¢ a hundredweight for the inspection service for export into the United States of our potatoes, while just on my farm the labour cost, not including family labour, to grade a tractor load of potatoes is 25¢. That takes us a full day in our operation, and the inspector comes in for 15 minutes or so. To farmers that's just ridiculous, that level of fee. Now, they have frozen that. Our argument has been that in the east it's extremely unfair in that industry in comparison to the cost on a hundredweight basis with grains.

Now, having said that, clearly the Canadian Grain Commission is key to exporting quality grain products from Canada, and farmers strongly support that, certainly in the NFU. In terms of its cost, we strongly believe all Canadians benefit when something is exported, from food safety concerns and that type of stuff. So in that respect, yes, and, yes, GATT green. It's an essential service.

Mr. Neil Jahnke: I'm a cattle producer from Saskatchewan. You mentioned taxes and costs. If the money I pay in education tax was cut in half, if the money I pay in fuel tax was cut in half, and if I didn't have to pay 7% GST on everything I bought, we wouldn't need to sit here and talk about programs.

An example is the land tax I pay in the province. When I started ranching 25 years ago, my dry cows paid my tax bill. They paid my land tax for the year. Today, if I took so many dry cows as it takes to pay my taxes, I wouldn't have any cows to calve next spring because I'd use them all up. This is how our taxes have increased. That's just the land tax. There is also the fuel tax. It all revolves around the fact that you give and give and they take. I think one thing that should be looked at is basic tax reform pertaining to agriculture, in my industry anyway.

The Chairman: Thank you.

Now we go to Mr. McCormick.

Mr. Larry McCormick: Thank you very much, Mr. Chairman.

Thank you, gentlemen, for being here today. Welcome back to the cattlemen.

If we could all sit around a table with all the groups in this country for a long enough time, I don't think it would take forever to come up with an agreement of how we should do this program if we did it. We have to get something. We can't quit until we do. We have the mid-term, the short term, and the long term we agree to, and certainly the farm crisis, which is devastating for our producers, is going to be felt by everyone in these communities across the country. It will be felt right on into the cities, and it's one of the things I try to take to our urban colleagues regarding the steel mills, etc. I don't think there will be quite as many pick-ups bought in Saskatchewan in the spring of this year as there were last year.

• 1640

I find interesting the phone calls I've been getting in the last few days, of course from the pork producers but also from my colleagues and friends in the different farming sectors of agriculture here in Ontario. I'm an Ontario member. I hear some saying everything is going to be out of balance and Ontario is going to lose greatly. That would only be the odd individual saying that, of course. On a long-term basis, yes, we want to be fair in this country, but I would hope that Canadians will support the immediate concern and demand, whether it be pork producers in Ontario or New Brunswick or the grain producers in Manitoba.

It will be interesting to see how we arrive at the pork cap agreement in Quebec. I understand why everyone has let Quebec away—probably because it's for their own internal use. If that has been that way, that's great. It's helping the producers out there.

I was just wondering if you had any comments. You are in the NFU and you've been with Keystone, and certainly I respect ranchers as much as anyone in this country. How we can talk with the people who are communicating with us who are concerned that one province or one sector will get $1 more than someone else out of whatever pot is available? It will not come as soon as we need it, but we won't stop fighting until we get it. You've talked to these people over the years. We all have neighbours who are in all businesses, and your industry of agriculture is a most important business we have to fight for.

Mr. Jim Caldwell: I didn't talk to Terry Bainyard before I came.

Mr. Larry McCormick: He's just one of very many people. I talked to Terry and a lot of others.

Mr. Donald Dewar: I recognize that probably Saskatchewan would benefit more so from a program.

I think we have to look at whether or not the program does the job where it's needed. If it's not needed in Ontario right now, it might be next year or the year after.

I think the capping should not be done for an individual sector or producer but for the program. Saying “We want this program to do this job but we're only going to give half enough money” causes provincial organizations to fight for their region, because there's not enough money in the pot. I recognize the constraints the government has, but if you went out there and said this is the program and it's going to have the funding to do the job, I don't think you'd find that, because then when the job needed to be done, it would get done. Then the argument becomes who is going to get underfunded.

Now, that doesn't answer your question, but maybe it points out why you're hearing that right now. You've heard the numbers for income drops for Saskatchewan and Manitoba. The Canadian drop was 4%, and averages are dangerous.

Mr. Larry McCormick: Thank you for the moment.

The Chairman: Thank you, Larry.

Mr. Dewar, you mentioned the hog prices in your earlier comments. I'm not counting on serendipity to get us through this difficulty. I heard someone yesterday saying that he had been looking at the hog futures market, and he thought that based on the hog futures market, by June, which of course is six or seven months away, there would be a significant turnaround in hog prices. Is that at all consistent with anything you know of the futures market?

Mr. Donald Dewar: Marcel is a hog producer, so I'll let him answer that.

• 1645

Mr. Marcel Hacault: The one thing I'd like to point out is that at the rate we're losing money right now we almost need some signals. If it's a market signal it's positive, but if the market signals aren't there by March and there are no signals coming out of government that there will be something to provide a floor, hog producers will be getting out of this industry like hot cakes.

A voice: They won't make it.

Mr. Marcel Hacault: We won't be able to make it until June.

The Chairman: You'll be losing even more hair.

Mr. Marcel Hacault: Is it possible?

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

It's been a good discussion. I've enjoyed it.

I want to go back to the taxation problem. I paid my property taxes just before the end of October and I was astounded; they went up 9%. That's a big hit on a couple of sections of land.

The Chairman: Is it a Liberal-dominated council? Do they tax and spend?

Mr. Jake Hoeppner: The Liberals didn't fund health care or education, so my taxes went up. We can put the blame on everybody.

I also farm three miles from the U.S. border. I talk to American farmers pretty regularly, and they have as much compassion for us as we should have for them. I just saw in the latest news release on their next activity that we're not targeting farmers or ranchers; we're targeting the unlevel playing field. I think we have to agree that if we can't work with the American farmers to fight the real enemy, which is the Europeans, we're going to fight a losing battle because we can't out-fund the American's purse, or even the European's.

Have you done any talking with American farmers on these problems? Over the last 11 or 12 years in North Dakota the pasta industry has just been booming, with one plant after the other. I don't know if grain is being dumped in there at a lower price, but they fear it is.

When will we start realizing we have to work as a team to overcome our real enemy? Taxation fits right into that, because when you talk to the American farmers on their fuel taxes compared to my fuel taxes, there's a big gap there. Then you look at some other costs like machinery costs right now because of our Canadian dollar. You pick up a part for your John Deere combine and you're just about buying it all over again.

These are things we have to work with them on. I've always found the agriculture industry in the U.S. to be fairly level-headed. About the politicians I wouldn't say so, but when it comes to farmers— Isn't that part of our solution?

Mr. Joe McGuire: I hope they're not going to blockade the border.

Mr. Neil Jahnke: I would certainly agree. The Canadian Cattlemen's Association have always worked very closely with our American counterparts. We have had a good relationship for a number of years.

This is a personal observation, but on our present troubles with the Americans they're a little hard up and would like a little more money, so they're on edge. It's just the northern tier states. The problems started there with the northwest project we initiated in discussion with the Americans. We kind of betrayed them, or at least they felt we didn't give them what we had told them we were going to give them in this deal. Last June the people in Montana were really upset because no feeder cattle were moving north and they expected they would. So I think we have to accept a little bit of responsibility

There is a good working relationship between the National Cattleman's Association and the Canadian Cattlemen's Association. We discuss everything, and they are not our enemies. Some of the little irritants have become bigger than they were really meant to be, so you're right that we have to communicate with them at all levels and they are our friends. I suggested years ago that the Americans and the Canadians should be marketing their beef together in Asia and wherever the market opportunities are.

• 1650

Mr. Donald Dewar: I think we have to recognize that. I'm a little farther away from the border than you are, but I know a few American farmers and have talked to them. They don't view us as enemies. They understand we're suffering and so are they.

We've been asked by our membership to start talking more with the northern states—Minnesota and North Dakota primarily. But we would like to get into South Dakota after the fiasco this fall as well and talk to some producer groups just so they can better understand what we're up against.

As you mentioned, the cost of production is indeed one side of the equation. We're subject to the same marketplaces, but if our costs of production are higher, for whatever reasons, we can't compete. We can all compete, and as Canadians we're not afraid to compete on any basis with anybody in the world.

Mr. Jake Hoeppner: I went to the railway hearings in Montana last year just to get a feeling for what they were fighting. I was astounded by the difference in freight rates—from where they had competitive rates to where they had non-competitive rates. They suggested to me they could probably cooperate with us in using some of our transportation facilities in certain parts of the country and we could use some of theirs to bring in competition.

There are many avenues where we could work together. Politicians like to use these little glitches and the problems we have sometimes to their benefit, and it's not helping us.

You know the Liberals wouldn't do that, but then you know—

The Chairman: You're out of time. Do you want to give a very short response to that, Mr. Dewar?

Mr. Donald Dewar: No.

The Chairman: Okay, thank you.

Now we go to Mr. Calder for five minutes.

Mr. Murray Calder: We wouldn't do that, Jake, because we're incredibly nice people.

I want to switch gears here. Yesterday we met with the Canadian Wheat Board, and some of the insights that were given to us I found relatively shocking. I've been doing a lot of surfing on the Internet comparing what we do here in Canada with USDA, and I hope to get into the EU next.

One of the things I have found is there will probably be about a 50% increase in 1998 payments to farmers in the United States, plus they have the loan deficiency payments. They're going to be doing a number of things down there, whereas the average we'll be paying here in Canada is about 14.5% in support.

The EU, for instance, by the time we get to 2001, won't be able to carry anything forward on their grains any more, so there's the possibility that about 38 million tonnes will be dumped on the world market in 1999 and 2000. I don't care how you wrap that grain, whether it's inside a pig, a cattle beast or whatever, it's going to have a drastic effect on the market at that time.

Our negotiators in 1993 should have seen all this. We came into this at the very end of it, and quite frankly that's one of the reasons why the standing committee is now looking at it, even before we open up the preliminaries next year in August. Then we're going to get really serious about it in 2000.

First of all, I'd like your opinion on our negotiators, because when we signed this in 1994 their assessment was that we wouldn't be in the mess we're in right now, but we are. In fact, I read in the Globe and Mail that Mr. Gifford was kind of hard to find by reporters this morning after some of the points that were brought forward yesterday. You know my opinion on this.

I would like your opinion and your comments on where we should be going on this, because this is one of the reasons why the committee is looking at it. We're trying to be proactive.

The Chairman: Jim.

• 1655

Mr. Jim Caldwell: Mr. Calder, as far as the last round is concerned, as we indicated yesterday on the trade thing, the beef industry actually, for the first time, did end up with a tariff rate quota. Although it does not have great teeth in it, because it allows supplements in, it does prevent other countries from dumping into Canada if the U.S., say, closed their borders or worked within their tariff rate quota. So we were generally pleased with what we received out of the last round.

I'm not going to comment on whether or not we got the best deal in the grains industry, or whether we didn't get the best deal for some of the other commodities. I don't want to get into that.

Mr. Murray Calder: Okay.

Mr. Randall Affleck: In terms of negotiating strategy, I'm a dairy farmer in Prince Edward Island, and I'm not pleased at all with the negotiating strategy that was taken. I wonder if we really achieved anything in the grains industry, because it's export subsidies that were in fact depressing the price and we find out now—well, we knew that before—that EEP was never put to rest. It's a sleeper, and whenever the commodity prices go down, as they have, then it kicks right back in.

I use the example of butter oil. In terms of our negotiators and the kind of detail, I submit that they knew in advance that this was going to be an issue in terms of a tariff line, and our negotiators didn't take care of that tariff line. I'm of the opinion that in the last round Mr. Gifford was opposed to supply management in principle, and we traded a lot away for no access and—

A voice: That's not what's on the record today.

Mr. Randall Affleck: No, true. But I was responding to the questions.

The Chairman: Mr. Dewar.

Mr. Donald Dewar: Well, if they did a good job— we don't have a sugar industry in Manitoba any more. We suggest it was partly the negotiation, but the American government has a sugar policy and Manitoba doesn't. We've lost a major industry, and that's affecting agriculture because we had, at that time, 35,000 or 40,000 acres of sugar beets, and we could have doubled that. We have the capacity and the ability to double that.

Overall I think, as Mr. Caldwell mentioned, we did get a set of rules, something we never had before. In that, it was good. We were in a hurry to get to our targets, 1999-2000, and we beat the other countries to get there, for whatever reasons, and we're paying some of the price for that now.

Before we go back to the table—and we'll talk more about this tomorrow—we have to make sure the old rules are abided by before we start giving in on some new things. I think that has to be foremost, that we have to better get those ones down.

The Chairman: Mr. Penson.

Mr. Charlie Penson: Mr. Chairman, Mr. Calder and I have a difference of opinion on this area of the topic he has just brought up—

Mr. Murray Calder: Oh, big time.

Mr. Charlie Penson: —but I think it's important to point out, and I'd just remind the panellists here today, that there were no rules in agriculture up until the Uruguay Round, and that concluded in 1993-94.

I remember the backdrop to it well. We had a massive trade war in agriculture—

Mr. Murray Calder: What do we have now?

Mr. Charlie Penson: —similar to what we have today. But I think there was a general recognition that we had to start someplace and get agriculture started. It has been a tough one to get under trade rules, as everybody knows.

So they took the 1986 year as a base year, the highest subsidy levels in the world, and started from there with a minimum phase-down that we could sort of get everybody started on. People have stayed within the rules; countries have stayed within those rules. It might not have been as much as we would have liked—certainly it wasn't as much as I would have liked—but in recognition that it was a modest start, there was another round scheduled for the year 2000, six years after the first one.

The concern I have is more that instead of going back and rehashing whether our negotiators achieved as much as they could have at that time, I think we have to prepare for the next round. That brings me to my point: what should Canada's negotiating position be going into this round?

I raised it with some other groups before. We have an option. Right now, there's a sectoral approach, a single sectoral approach on agriculture that's going forward in the year 2000. So there is a negotiation that has to take place. There's another one running alongside of it in the service sector.

• 1700

But a number of issues are unresolved at the World Trade Organization: industrial tariffs that are left over, international competition policy, and more work in intellectual property. There are things that could be rolled into a general round that might give us the ability to achieve more gains in agriculture than if we were just to have a single sectoral on agriculture alone. I'm just wondering if there's any advice you might have as to which might be the best approach.

The Chairman: I'm just going to interrupt here to say that Mr. Dewar will be here tomorrow to talk about WTO. Today we're talking about the farm income crisis.

Mr. Charlie Penson: That's true, Mr. Chairman, but I've noticed that there does seem to be considerable overlap here.

The Chairman: There is, but I'm just saying that in Mr. Dewar's case, he'll be here tomorrow. We'll be lax, though.

Mr. Ollikka.

Mr. Cory Ollikka: I'll try to speak about the issue at hand, the farm income crisis. As I indicated in the presentation, in touching on the WTO, what has to be an integral part of our trade negotiating stance is that we will not erode state trade organizations. Clearly, if you're talking about what needs to happen in agriculture, you have to take that right to the grassroots level and look at what benefits farmers. Clearly, reducing export subsidy levels around the world helps farmers. The proof is in the pudding, but where did it go in the last round? The National Farmers Union would not be prepared to listen to any further negotiations until, as was mentioned, the existing trading rules are abided by. Definitely, do not trade away or bargain away the power of state trading organizations, because they help farmers.

Mr. Neil Jahnke: We have to do our utmost to eliminate all subsidies and tariffs, and establish free trade.

Mr. Charlie Penson: I guess I'm asking what the best negotiating stance would be. Could there be more put on the table by rolling agriculture in with a general round?

Mr. Neil Jahnke: —

[Editor's Note: Inaudible] —the spot yesterday. Yes.

The Chairman: He just got you coming and going there, Charlie. Are you finished?

Mr. Charlie Penson: If there's time for Keystone—

The Chairman: There is, yes.

Mr. Marcel Hacault: We're here tomorrow, but I assume you're not going to be here tomorrow morning. When we look at it, we definitely need to straighten out some of the stuff that was agreed to in the past one but hasn't been addressed or fully adhered to.

Mr. Charlie Penson: Are there any examples that you would name?

Mr. Marcel Hacault: The pork producers always cite the example of how they thought they would have an access to the European market in terms of a certain percentage. When the calculations were done on the meat access to Europe, it just so happened that when they did all the calculations, pig meat was at 0.5% when we thought we might have 3% access. Right away, in terms of benefits that we thought we would get, in just the way the calculations were done, it was just tinkering around with the numbers.

If I can make a personal comment, I find that other countries go out of their way to interpret the rules to their own advantage, while Canada seems to put its imagination away, just going by the letter of the law. I imagine there are probably examples, but I'm not involved in the actual details. For God's sake, though, we must have been able to interpret the rules as imaginatively as other countries were, and would have been able to take much more advantage.

The Chairman: Thank you.

Just before we go to the gentle lady from southern Ontario, I want to put a question to Mr. Dewar.

The current crisis has been brought on not by a crop failure but by a failure in prices, if I can put it that way. If this crisis had been brought on by a crop failure—a lack of production because of weather, for example—crop insurance would kick in. With crop insurance as we have it now, would it be able to respond to the kind of crisis we now have? Or, because it is a serious crisis, would we find ourselves scurrying about looking for money under crop insurance as much as we are now?

Mr. Donald Dewar: No, crop insurance is production insurance. Because it guarantees you, you insure a certain level of picked wheat, a certain number of bushels per acre.

The Chairman: I know, but I'm saying that if we had a massive failure, if the farmers in the prairies basically grew nothing—

Mr. Donald Dewar: But it's also a function of price.

The Chairman: Well, if you had a combination of price and crop failure, would crop insurance handle it?

• 1705

Mr. Donald Dewar: If the price was a high enough price, crop insurance would work. If the world price was economical, say $7.50 or $8 a bushel, or something like that—I'd have to do the math—it would probably pick up the disaster in the grains industry. The type of program that we've been talking about, through the CFA, would work for all commodities, not just grain.

The Chairman: But where would the money come from?

Mr. Donald Dewar: In crop insurance?

The Chairman: Yes.

Mr. Donald Dewar: It's two-thirds government and one-third farmer.

The Chairman: What I'm saying is that we're having some trouble finding $500 million or whatever it is. Don't you find it a bit strange that if you call it crop insurance, we can find the $500 million?

Mr. Donald Dewar: They would run a deficit to find it.

The Chairman: But if you call it something else, we're having trouble finding it. Do you understand my dilemma?

Mr. Donald Dewar: Yes.

Mr. Larry McCormick: Do you understand his?

Mr. Jim Caldwell: Mr. Chairman, I believe you have a bigger dilemma than that. You also have $2.5 billion sitting in NISA accounts. The first thing Mr. Martin is going to ask when the minister goes before him is why they don't use the money in their NISA accounts first. If there is still $1 billion or $2 billion sitting in NISA accounts, how are you going to get any more money for disaster programs?

The Chairman: Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I thank you for your presentations.

In the NFU presentation, under “Orderly marketing and supply management”, you state:

Western Canadian provincial governments have recently dismantled hog boards in the western provinces. They did so, they claimed, so that hog production could expand. And expand it did, until the market was glutted and the price plummeted.

Do you think that is a factor? I guess you're the hog producer from that district. Do you really feel that has played a major, significant role in what's happened? I know there are many factors—Asian flu and all that other stuff—but do you feel the expansion was too great in areas that glutted the market?

Mr. Marcel Hacault: Manitoba has close to 4 million hogs. Personally, I feel that if we were to only produce one hog, and if the U.S. had had the expansion that it did, it would have made no difference. Our market impact on the whole world's price of pork is, I would say, probably almost zero. All of Manitoba's production is probably 2% of U.S. production.

Mrs. Rose-Marie Ur: I'm not just talking about Manitoba. When the prices were a little bit higher a few years back, there seemed to be a greater expansion in the barns.

Mr. Marcel Hacault: Right, and there has been in Manitoba. The whole structure has changed.

I always maintain that it doesn't matter what we do in Manitoba. The price is dictated by our neighbours to the south. I'm affected more on the farm by what's happening in the States than I am by what's happening in Manitoba.

Mrs. Rose-Marie Ur: Yes, I know. I read in the paper today that a farmer sold a hog and got $9 and change, the price of a pound of luncheon meat basically. You can't educate our urban colleagues—they maybe don't understand the crisis as well as some of us rural members do—about that, can't put it into this kind of caption that says it's kind of a jolt in reality in terms of what's happening out there.

Mr. Marcel Hacault: I was just telling Don that this slaughtered a guilt that hadn't been bred, if you would. I would have got 10¢ a pound on the open market, which is $50, I guess. After I've slaughtered it, I get 370 pounds of meat. I can go out and sell that to anybody for a little over 10¢ a pound, but I don't see that price reflected anywhere in the supermarket. That's the difference.

The Chairman: Mr. Ollikka wanted to say something, Rose-Marie.

Mr. Cory Ollikka: Yes, and I see Randall also has his hand up.

My answer to your question would be that I think the large, intensive, industrial-scale hog operations that have been promoted by all three prairie governments certainly have had an effect. The impact of the income crisis would probably be less in the farm community if you focused more on small and medium-size diversified farms rather than on the large, intensive-scale ones. I think the smaller operations can respond more quickly if they're diversified. They can take a few hogs out of production if they have 100 hogs or 400 hogs, as opposed to thousands of them.

Mr. Randall Affleck: I was going to make the comment that the price collapse is due to overproduction worldwide, and I understand his argument. We've seen world-record level grain production. Hogs are at the highest level they've ever been at in the United States. It's the same with cattle. There's too much production-chasing, and there are too few markets with cash. This is the dilemma that we've found with an export strategy in hogs. The whole policy emphasis on hog expansion was a response to transportation cuts in the prairies. We had this massive expansion—in a lot of cases, it was corporate—to chase Asia markets, and the Asia market has dropped.

• 1710

The dilemma we have here in Canada today is that family farms in several sectors of the Canadian agricultural economy are hurting, and they're hurting badly. We're spending more time at this hearing discussing what the Americans are going to do on anything we do than we are at trying to deal with our dilemma. I find that quite problematic. This is the dilemma of hanging your hat on one hook in terms of agricultural strategy.

Mrs. Rose-Marie Ur: Mr. Hacault, you stated that you need a signal by March to be able to survive. Can you survive until March while not knowing what—

Mr. Marcel Hacault: We looked at B.C. and its program. I believe it took about six months from when it was announced to when the dollars started coming out. If there was an announcement this month or in December that there will be a program, along with details on how it will be structured, I think farmers would be willing to go to the bank saying that they're going to keep hanging on. If there's nothing out there, though, I'd say March is the deadline. That's the deadline I picked from my own personal experience. If nothing's out there by March, I'm out.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: I'm told that I have short questions from Mr. McGuire and Mr. Calder. I'll believe it when I hear it.

Mr. Calder.

Mr. Murray Calder: Thank you very much for your support, Mr. Chairman.

An hon. member: The truth hurts.

The Chairman: Any time, Murray. I'll buy you a chicken dinner.

Mr. Murray Calder: I've heard this from our panellists here right now: when we get into the negotiations, we get down and get really serious about things. Obviously, we have moved ahead of what we promised; the rest haven't, and that's one of the reasons we're experiencing low commodity prices right now.

How successful do you think we are? I've heard it basically stated that we'll tread water while everybody else catches up to us, given the fact that negotiations are over—let's call things for what they are—the barter system.

Mr. Neil Jahnke: We're in an awkward position. We should not have given away so much to begin with or followed through with the original agreement so quickly. That was our fault. Now how are we going to catch up?

Mr. Murray Calder: How are they going to catch up?

Mr. Neil Jahnke: That's what I meant. How are we going to make it even again? It's going to be tough, but I guess the truth of the matter is that we have nobody to blame but ourselves.

Mr. Jim Caldwell: I think that has always been the Canadian position on lots of things, though, Mr. Calder. We are always the boy scouts. We're always the good guys. We always make the rules and hope everybody else abides by them. I think we've had to do that because of our size. We're not a big player in the international community. We hope the U.S. goes along with us. We hope the EEC will go along with us. If they don't, it presents a problem: what are we going to do?

We've heard comments today about the numbers of EEC subsidies, that they're doing this for their producers, and that the Americans are doing that for their producers. Yes, sure they are, but the fact is that we are trying to sell 53% of our beef to the States. The States are not trying to sell 53% of their beef to us. It's a 3:1 trade. We could take the Americans and say we're going to countervail them. They'd say to go ahead and countervail. They'd tell us to keep our beef, they'll keep theirs, and everybody will be happy. But we won't be happy. We can't be happy. We have to trade. That's the dilemma we're in.

The Americans are big players and are going to continue to be big players. We have to work with the Cairns Group. We have to work as hard as we can with all the groups of like thinking. We formed the exporters alliance—which I think is a good group within Canada—and we're going to do it. But still, when it comes down to the bottom line, the Americans are going to do as they damn well please. They are the United States of America.

Mr. Murray Calder: Thank you.

The Chairman: Mr. McGuire, and then Mr. Hoeppner.

Mr. Joe McGuire: I have one short for Randall, and one for Neil. I'd like to get Neil on record again about these high prices in the stores, and how they are more beneficial than lower ones. I know we've talked off the record, but maybe we can— It is a different—

Mr. Neil Jahnke: Our finding a number of years ago, when we pushed hard on beef and called the packers and processors all kinds of nasty names and convinced them to lower their prices, was that the price did drop at retail. In the normal cycle of the beef industry, our production came back. Then we had an awful time increasing the price. The consumer out there—and there are a lot more consumers than there are producers— It's easier to take the price of hamburger from $1.49 to $0.99 than it is to get it from $0.99 up to $1.49. It is very, very costly, and it hurts our consumption.

• 1715

So let it fluctuate. That's fine. We don't have a problem. But when they talk about dramatic cuts, I think it's a mistake, because the cycle is not that long. When the cycle returns, I don't want to be sitting with hamburger at 50¢ a pound.

I don't know whether that explains it or not.

Mr. Joe McGuire: I wonder what you think, Marcel.

Mr. Marcel Hacault: I guess I would have less of a hard time accepting that my pork is worth less if I went to the supermarket and saw I was lowering costs for other people. It's slightly more palatable to me, I guess, if I'm losing money, but on my back at least somebody else is benefiting, and it's the consumer. I guess I have a little harder time taking it on the chin when I see the packers or the supermarkets taking all of it.

Mr. Joe McGuire: But do you think Neil has a point?

Mr. Marcel Hacault: The price is always easier to take going down than going up, but I think the supermarkets can probably manage to ratchet it up a few cents a week over six months—

Mr. Neil Jahnke: They won't, though. That's the problem. We've been there and we've done that, and it was a wreck.

Mr. Joe McGuire: Anyway, Randall, I'd like to let you know that Manitoba claims they grow more potatoes than we do now. I wonder what the health of the crop is. It was poor last year. Is it making a rebound this year? What is the situation in that particular crop?

Mr. Randall Affleck: In terms of the maritimes potato crop, it was a very poor year in terms of weather and very difficult to dig. A lot of tubers went into storage with water on them, plus it was a very bad year for blight because of the moisture. The short story is they're experiencing storage problems. A lot of the crop is in, but a lot was left in the ground too. The warning's not over in terms of—

Mr. Joe McGuire: Are many producers shaking out?

Mr. Randall Affleck: Price-wise, the potato board in P.E.I. established a minimum price, and that was at the request of the dealers. To my mind, that certainly hasn't happened in recent history. That's to prevent undercutting. A lot of people speculate that the price should be a lot stronger than it is, but storage problems are a key concern right now.

The Chairman: Thank you, Mr. McGuire.

Mr. Hoeppner.

Mr. Jake Hoeppner: I want to go to Mr. Hacault.

I agree with you, a market signal would help in hog production, but when I look at the political scene in the Asian markets today—that's where we were depending on shipping a lot of our stuff—I think we're in a bind for at least four or five years, if I look at the political situation in those countries. It's the same with the Japanese. You know what has happened over there.

My concern is the grains markets can pick up because of a disaster somewhere, but as you know, hog production is going to be there, no matter whether there's no grain growing. How do you read the markets? The Americans will set the trend, there's no doubt about it. They will get the first recaptured markets in the Asian countries, I think. Aren't we in for a longer term of depressed hog markets than we want to admit?

Mr. Marcel Hacault: You're asking me to be a bit of a futurist.

Mr. Jake Hoeppner: Yes. I'd like to make my own decisions on it, as a politician.

Mr. Marcel Hacault: I think the structure of the American market has changed. Where we used to get a lot of people going in and out, I think that's changed. I think a lot more producers with the newer barns going up in Manitoba are in for the long haul. The market, in my mind, will probably take longer to turn around than it has in the past. Having said that, there are always, as there was two years ago, outbreaks of disease. If the Reform Party would like to send over a special mission to Europe and aggravate their disease problems, I wouldn't want to hear about it, but that would be one solution.

• 1720

Mr. Jake Hoeppner: My concern is that we are looking at a solution that will fix things by next spring. I think it's a longer-term problem than next spring.

I seem to remember agriculture minister Harry Enns saying a year ago, “Where's all the grain going to come from?” All these inland terminals that are supposed to take grain out of the country, all the big hog barns going up— Something is out of balance here. How do we get it back in balance?

Mr. Marcel Hacault: And the irony of it is that the producers that did diversify that were in straight grain and then went into hogs, now they have the double-whammy effect—the opportunity to lose money on both sides.

Mr. Jake Hoeppner: Yes, and they were encouraged by government to do it, right? And the transportation issue was big in helping develop that problem, or make it more severe.

Mr. Larry McCormick: It goes back in history a lot further than that.

The Chairman: I'll take the liberty, if you don't mind, of asking the last question.

We have been admonished on several occasions not to have an ad hoc response, an ad hoc program. Yet beyond Mr. Jahnke, most people are calling for some short-term infusion of cash. So my question is, can we have a short-term infusion of cash and not violate the principles set out in the current safety net programs?

Mr. Donald Dewar: I don't know all the details.

The British Columbia provincial government set up a whole farm income protection program. I believe they announced it last October and the cheques were written in March.

I don't know what short term is. Is that the life of one between elections? Is that what short term is?

Mr. Larry McCormick: We'll give you half a point for that.

Mr. Donald Dewar: I go back to my comments earlier. This program could be implemented, this 70% margin program— All the details aren't there, but it could be implemented within six months. It could be announced earlier, and money could flow in six to eight months. If it's announced, people can go to the bank, as Marcel said.

The Chairman: He says he needs the money by March.

Mr. Donald Dewar: But he can go to the bank if he knows it's coming.

The Chairman: In other words, something bankable.

Mr. Donald Dewar: Something bankable that can flow fast. Short, long, I don't know—it may need some tweaking. The program might not be perfect the first time.

The Chairman: Tweaking?

Mr. Donald Dewar: Yes.

The Chairman: Anybody else, or is that it?

Mr. Neil Jahnke: I would just like to say that if there is a program and if you come up with a program, we suggest in our presentation that you make darned sure you run it by the best trade lawyers in the world and don't do anything that could jeopardize our future. It is my future and my kids' future, and we need those export markets.

The Chairman: He wants us to be the tweakiest of all.

Thank you very much. I think this was a very enlightening discussion, and I really appreciate it. Thank you on behalf of all my colleagues.

This meeting is adjourned.