AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 23, 2000

• 0906

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia)): We'll bring this meeting to order. We have a quorum to hear witnesses.

Today we're going to have the pleasure of hearing witnesses from the National Farmers Union, Darrin Qualman, executive secretary, and Cory Ollikka, president.

As I think you all know, the NFU carried out a study of European subsidies, their impact on grain prices, production, and so on. They have come to some conclusions that are maybe not mainstream, or at least not yet. The findings of the study have sufficiently piqued our interest that we thought it would be useful and certainly interesting to hear from the gentlemen, to have them explain what prompted the study and to explain the conclusions.

I'm sure there will be questions for you gentlemen after you finish your opening presentation. Who is going to give it?

Mr. Cory Ollikka (President, National Farmers Union): We'll be splitting it up, actually. I'll begin.

The Chair: Thank you for coming. You may begin.

Mr. Cory Ollikka: It's good to be here, and good to see many of you again.

We welcome this opportunity to appear before your committee to discuss with you our latest endeavour, our research paper dealing with specifically European subsidies and agribusiness market power. Of course, the brief also relates all this information to the current farm income crisis in Canada.

My name is Cory Ollikka. I'm the president of the National Farmers Union. With me is Darrin Qualman, NFU executive secretary. We will outline for you briefly what we have uncovered with regard to our research on EU subsidies and agribusiness market power. We welcome any questions you might have.

I'll turn the presentation over to Mr. Qualman.

Mr. Darrin Qualman (Executive Secretary, National Farmers Union): Thank you to the members for inviting us here and for coming to hear us today.

As farmers, we are extremely interested in the farm income crisis. Most often when somebody is asked to explain the causes behind the farm income crisis they start talking about European Union subsidies, so we became quite interested in those subsidies.

As I say, the overwhelming conventional wisdom is that EU subsidies caused the farm income crisis. The argument that's usually brought forward as to how they caused the farm income crisis goes like this: European Union subsidies have led to increasing production in the European Union, which leads to oversupply on the world market, and what follows from that is decreasing prices and the farm income crisis.

We decided we'd better look at this, look at the data and see if these connections were founded. Do EU subsidies lead to increasing production? Does that lead to oversupply and so on?

I want to start by talking for a minute about oversupply, because that, in a way, is the linchpin of this whole argument.

Governments around the world point to oversupply as the reason that farm incomes have to be low, the reason that commodity prices have to be low. I just saw a speech by Dan Glickman, and he talked about oversupply. But I encourage all of you to look at the data. Frankly, there is no oversupply of grain in the world. In fact, the opposite is true.

In our brief we have a piece on oversupply. We looked at stocks use ratios for the last 40 years. We wanted to look even further but there just isn't reliable data going back into the 1950s.

• 0910

Over the last 40 years, if you look at stocks use ratios, the lowest period for supplies was in 1995-96. Stocks use ratios hit a 40-year low in 1995-96. They've recovered a bit since then, but today world supplies are far below average. They're far below what they were in the 1970s, when low supplies caused a rapid price increase.

So there simply isn't oversupply. Stocks use ratios are one way of measuring oversupply. Another way is just by looking at how many days of food we have. When you look at coarse grains, we have less than two months' supply of corn, oats, and other coarse grains left at the end of the year. In a world plagued by drought, by flood, increasingly by global warming and other uncertainties, two months' supply of food doesn't seem so burdensome that we have to bankrupt farmers to force them to produce less.

As I say, I encourage you all to look into this, but we can't find any data that shows there's an oversupply of grain in the world. In fact, the opposite is true. We don't even have to go into how many people starve to death every month.

Just to sum up on the question of oversupply, the assertion that there's oversupply is extremely questionable. The assertion that there is such a burdensome oversupply that we should see as a result the worst farm income crisis since the 1930s is clearly false.

Turning for a moment to another aspect of the argument around EU subsidies, that EU subsidies cause increased production, this is widely accepted, almost a truism. In fact, it is the case that production is increasing in the European Union. What we became curious about was what was happening in other nations. If production is increasing in the European Union, what's happening in countries that don't have subsidies? What's happening in Australia, Argentina, Canada, and other nations, including the U.S.?

We looked at the data. It's not all that hard to get. If you turn to pages 7 and 8 of the NFU brief, we summarize that data in tables A, B, and C.

Table A looks at wheat. Indeed, there was an increase of 42% in European Union production in wheat, but in one of the least subsidized countries in the world, Australia, there was an increase in production of 44%, and in Argentina, 26%. Canada had an increase and the U.S. had a decrease in production.

In wheat, I think what we can say there is that while production increased in heavily subsidized EU countries, it increased at a similar rate in some unsubsidized countries. In the second-most-highly subsidized country, the U.S., it decreased. Looking at wheat, then, it's hard to find a correlation between subsidy levels and increases in production.

That absence of a correlation becomes even more evident when you look at table B, coarse grain production. EU production of coarse grains—corn, sorghum, millet, oats, etc.—is virtually unchanged, up only a fraction of a percent, whereas Australia had a 46% increase; Argentina's increase exceeded the EU; Canada had a 9% increase, which exceeded the EU; and the U.S. saw a decrease.

The same is true of total oils. The European Union and the United States, the most heavily subsidized nations, saw the smallest increase in oils production. In some cases it was one-quarter to one-eighth the increase in production of the non-subsidized countries.

The Chair: As a point of clarification, I thought you said that the European Union and the United States have the smallest increase in oils. They look to me to be the highest, at plus 73% and plus 70%.

Mr. Darrin Qualman: Yes, but the other ones are plus 294%, plus 522%, and plus 283%.

The Chair: You're comparing. All right.

• 0915

Mr. Darrin Qualman: So in oils and to some extent in coarse grains, there actually seems to be an inverse relationship between increases in production and subsidy levels. This was a surprising finding for us, that when you actually look at the data, the assertion that European Union subsidies lead to increased production and oversupply, and hence the farm income crisis, simply isn't true. Production increased at the same rate or faster in unsubsidized countries. We conclude that while European Union subsidies may cause increases in production, the lack of subsidies also causes increases in production.

With that, I'll turn it to over to Cory. He has a few things to say about the European attitude toward subsidies and the project of forcing the Europeans to cease subsidizing.

Mr. Cory Ollikka: The last two questions we need to ask, as people involved in public policy in Canada, are whether we can curb European subsidies, and if we can, whether we can do it in time.

We in the National Farmers Union have met with farm leaders, politicians, and trade officials from around the world, including Europe. A lot of the European officials we've met with are very blunt. They look at the plains of North Dakota, and what they see is desolation, given the vast geographic differences between their part of the world and ours, and that of North Dakota. They see a rural depopulation, and they're quite blunt about the fact that they do not believe in depopulating their rural areas. They believe in enjoying a vibrant, well-populated countryside, and their policies have been reflecting that.

I was reading this morning a speech by a Dr. Franz Fischler, the European commissioner responsible for agriculture, rural development, and fisheries. Nowhere in that speech does he allude to the fact that the European Union is going to be prepared to decrease their domestic support of agriculture. Nothing at all seems to point the European Union in that direction. It seems unlikely—especially given the stalls at Seattle—that the European Union is going to move much further, much faster, in decreasing their support toward agriculture. Granted, they have decreased some of their export subsidies, but in their overall support to agriculture, we don't see them backing away.

Even if we could back the European Union away from their subsidization of agriculture, could we do it in time? We submit, given the often tedious task of the world trade talks—many of us in this room were in Seattle, and we know those processes are long and arduous—that for the farmers of Canada and many parts of the world to wait for trade agreements to somehow bring down subsidies to help their incomes—which, as we've pointed out to you, aren't the cause of the income crisis to begin with—seems a bit dubious.

We think that even if in the next four to six years a new WTO agreement can be reached, if previous trade agreements are any indication, phase-in of subsidy reductions take a further five to six years, sometimes up to ten years. Quite frankly, for the farmers of Canada, that's just not good enough.

Everybody here is familiar with the current farm income crisis and the calls for assistance that are out there right now. It's our submission that reducing subsidies in the long run won't stop the farm income crisis. There's no evidence that the EU subsidies are the cause of the crisis. Even if they were, there's little hope that we could force the European Union to reduce subsidies. Even if we could, and even if they were the cause, we submit that it would happen too late to save Canadian farmers, the vast majority of whom need immediate assistance.

That concludes our formal comments. We welcome any questions you might have.

The Chair: Just before I go to Mr. Hilstrom, I have a question on the data apart from any of the deductions you've made from your study or the conclusion. Do you feel at least that the data is not in dispute, that even the most conservative think-tank would agree with you on the data?

• 0920

Mr. Darrin Qualman: When we looked at the data and found what we thought were fairly surprising results, our first instinct was to go and find other data. We've used the two best data sets available right now. We started with the United States Department of Agriculture data of worldwide production, and that's the data we used in the brief. But because one doesn't want to get caught out on something like this—when you make a radical proposal, it's going to be looked at rather critically—we got another set of data just to compare and make sure we were going in the right direction. That was the UN Food and Agriculture Organization data on production levels around the world. Both sets of data point to exactly the same conclusions. The numbers vary slightly—very slightly. In some cases the FAO data make a thesis a little better than the USDA data. But I don't think you're going to find people who are going to dispute the data.

The Chair: Thank you.

Howard.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Thank you, Mr. Chair.

Welcome to both you gentlemen. I believe—just for everyone's benefit here who may not know—you're both farmers, are you not?

Mr. Cory Ollikka: Yes.

Mr. Howard Hilstrom: Grain and livestock both, or just grain?

Mr. Cory Ollikka: I'm a mixed grain and livestock producer.

Mr. Howard Hilstrom: And Darrin?

Mr. Darrin Qualman: We're growing commercial hay right now. We're in the transition to organic.

Mr. Howard Hilstrom: Well, your brief, as the chairman alluded to, or said straight out, may not be mainstream right now, but it's certainly food for thought.

I'd like to bring up one thing. You have a definition of a small farm. On page iii you refer to relatively small family farms—you don't need to look at it. In the majority report, the standing agriculture committee mentioned a definition of small family farm. One of your people, who you know very well, Mr. Furtan out at the University of Saskatoon, mentioned it. Then it came up and I, along with my colleagues, put it into our minority report. It seems to me the farm policy needs to have a pretty good idea of just what a small family farm is, because the term is used constantly. Could you just give us yours, and then we'll know?

Mr. Darrin Qualman: I think the key to that definition is family. There's a fundamental shift in our society when the local families cease to own the farms and those farms are owned, as is the case with hog farms, by large international packing companies, for instance. It's not necessarily a question of acreage or income; it's a question of whether it's owned and worked by the local family. Are the sons and daughters of the family working on the farm, and are they likely to take it over?

Mr. Howard Hilstrom: Then you you agree with Mr. Furtan's definition, that it's the labour on the farm that counts as to whether it's a small family farm. And that's where government policy is directed, whether there's a definition or not.

We'll go on further here. Getting into your actual report, you have made the assumption that we are all saying the European subsidies are the cause of the farm income crisis. Well, that's only a contributing cause. No one ever said it was the total cause, that I'm aware of. I was wondering what other factors you looked at for the cause of increases or decreases of the production of, for example, wheat—it's the simplest thing to talk about. Did you look at other factors that I missed, or are they in the report? You mentioned corporate power. Are there factors other than subsidies in the production cycle that cause decisions by producers to produce more or less wheat, for instance?

Mr. Darrin Qualman: Those are two different questions in some ways. When you look at what farmers grow in Canada, rotation's a part of it, but they're also just looking around for a crop that will make them a little money.

Mr. Howard Hilstrom: I take it you're saying that subsidies aren't the cause of overproduction of wheat, in lots of cases.

Mr. Darrin Qualman: We're also saying there's no overproduction.

Mr. Howard Hilstrom: There's no overproduction, okay.

Let's talk here for a second on.... Suppose the Government of Canada gave wheat producers $2 over the cost of production of a bushel of wheat. What would the farmers produce?

• 0925

Mr. Darrin Qualman: If you did it only on wheat, we'd become relatively more profitable compared to other crops, and they'd produce more wheat.

Mr. Howard Hilstrom: Yes. So you accept that the economic forces are actually still in play in international trade and in Canada—that supply and demand are actually still around and actually work?

Mr. Darrin Qualman: No.

Mr. Howard Hilstrom: Okay, what about the price of beef in Canada right now? Supply and demand are relatively in sync, the prices are good, and ranchers are doing well on the price side, compared to the overall terms. Is that not true?

Mr. Darrin Qualman: Yes. Right now we have a cyclical upturn in the beef market. Those who have been in it for many years know that the next thing to come will be a cyclical downturn.

Mr. Howard Hilstrom: That's right, but that's supply and demand. In the beef industry, we'll increase our supply of beef, taking advantage of these better prices, and then we'll end up producing more than what the market really wants and needs. Then we'll be forced, due to lowering prices, to actually reduce that amount.

Mr. Darrin Qualman: But by that argument, one would say that right now there's a very low demand for grain. As we point out, there's about a two months' supply in the world.

Mr. Howard Hilstrom: There's an excess supply of export wheat, and there are parts of the world that could use more consumption of grains and that. But factors other than supply and demand and ability to pay are really causing the excessive export capacity in wheat.

Mr. Darrin Qualman: May I make a comment? In our brief we looked at this argument about supply and demand, and in the last one-third there are a number of case studies. We looked at how anhydrous ammonia was priced, and our conclusion was it was priced according to what the market would bear. As grain prices go up, anhydrous ammonia prices go up. We looked at hogs, and the argument around the hog price downturn was one of supply and demand. The Asian market closed, there was a glut of hogs and pork, and therefore the price fell dramatically.

We found a number of things. One, the Asian market didn't close. When we looked at the data, Asian exports from Canada were only 7% of our total market, and the downturn in that market really didn't coincide at all with the price downturn. We were also surprised to find that at a time when we were told that the Asian market had closed and there were too many hogs and too much pork on the market, packer profits doubled.

Mr. Howard Hilstrom: Can I just stop you there? You're talking now about page 26 of your report, where you refer to the cause of the farm income crisis being corporate power.

Corporations make profits; we all know that. In your report, did you consider the fact that the major cost in the production of tractors or even the slaughtering of hogs is union wages? When we buy something, any corporation will tell you that 75% to 80% of their costs are wages. Did you consider that in deciding what the cause of the lack of return to farmers was?

I agree with you 100% that we should apportion the blame for the low returns to farmers, but we should apportion it throughout the whole processing of the farmers' products and what's sold to the farmers.

What is your comment in regard to your analysis on union wages—not only union wages, but non-union workers too, who get a lot more than the farmers?

Mr. Cory Ollikka: To answer your question partially, if you open the brief up at the centre and look at the relative return on equity made by all the players in the agrifood system, you have your answer. It's not a matter of any given input for any particular processing company or machinery company, because it all boils down to everybody's return on equity.

• 0930

Mr. Howard Hilstrom: Is that on page 26?

Mr. Cory Ollikka: No, I'm looking at the fold-out. When everybody in the food system is making say 12% to 20% return on equity—some companies like General Mills are making 222% return on equity—and farmers are making about 0.07% return on equity, therein lies the injustice. You can see where the wealth is being skimmed off in the system.

Mr. Darrin Qualman: If I could make one point directly about union wages, as Cory points out, when you look at the return on equity and the profit rates, in the places where they pay union wages—in the packing plants, machinery companies and oil refineries—they have huge profits. In the one place where we don't pay union wages, the farm, we see the lowest wages. So if we look at the effect union wages have, it seems to be inversely proportional, in that those places where they're paying union wages have very high profits, and those places where we're not.... I'm not saying that's cause and effect, but I would disagree if your contention is that somehow union wages caused the farm income crisis. I don't think you have any data to show that.

The Chair: Okay, we're way over time on this round.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): Mr. Chairman, I would like to say that I will skip my turn until the decision on our demands is known. I therefore give my time to the Reform Party.

[English]

The Chair: Do you want to use up more of the time then?

Mr. Howard Hilstrom: Is there still time?

The Chair: No, you're actually three minutes over.

Mr. Howard Hilstrom: Yes, I thought so.

The Chair: Mr. Desrochers has offered his time to you.

Mr. Howard Hilstrom: I would be pleased to ask some more questions. This is a very important subject.

The Chair: You will have only four minutes, Howard, because you went over three.

Mr. Howard Hilstrom: Okay.

Mr. Odina Desrochers: I was supposed to get seven minutes because I replaced Madam Alarie today, so I give seven minutes to the Reform Party.

The Chair: I'll take it back somewhere.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): I was really surprised when you came out with your findings quite some time ago, because in our battle to try to have the farm crisis recognized on the prairies, it really undermined what a lot of farmers were trying to push for and get government to recognize. I was really disappointed, frankly, in your whole approach to this. Did you consult your membership before you made this statement?

Mr. Cory Ollikka: Yes, we did. We talked about the farm income crisis at our last convention. Our membership was aware, in our discussions, that subsidies might not be the root cause. Our membership agrees that subsidies have all sorts of effects in the world. They cause trade wars, and everybody tends to spin their wheels focusing on subsidies, but if we're looking at just the cause and effect of farm income crisis, our membership is willing to look at what actually causes farm income crisis.

We've always suspected it's market imbalance. In fact, a number of our members have gone so far as to say that European subsidies, American subsidies, or anybody's subsidies are more a response to low farm incomes than they are a cause.

Mr. Garry Breitkreuz: The problem I have is you've uncovered absolutely no evidence that the countries of the world are trying to intentionally keep down commodity prices. You have given no evidence there is deliberate intent by all the countries of the world cooperating to do this.

Mr. Darrin Qualman: We don't argue that the countries of the world are trying to keep down prices. We argue that when you put a few hundred thousand very small producers in a chain that's dominated at every link by between two and ten multi-billion-dollar corporations, without any conspiracy on the part of those corporations, they will simply suffer due to an imbalance of market power.

Mr. Garry Breitkreuz: If countries in Europe subsidize their farmers, those farmers can continue to exist, even though they sell their grain on the international marketplace below their cost of production. Is that not a given? Is that not true?

• 0935

Mr. Darrin Qualman: But what is the alternative? If you don't subsidize the farmer, the farmer goes broke. Some would jump to the conclusion that if a farmer goes broke, there's less production.

Mr. Garry Breitkreuz: That's not true. That's not, strictly speaking, true. To make that assumption means that the farmer will not use the signals of the marketplace to grow what is in demand around the world. But if in fact the subsidy is on a few things like wheat and barley, they will produce wheat and barley and they will get rid of the excess on the international marketplace, will they not?

Mr. Darrin Qualman: They'll produce wheat and barley to the exclusion of other commodities.

Mr. Garry Breitkreuz: Yes.

Mr. Darrin Qualman: We deal with that in our brief. It's an argument we often hear, that subsidies are production-distorting, that farmers are induced to produce what is subsidized and not produce what isn't. One then must ask, what are the products they're not producing—what products are they turning their acreage away from? Because we should expect to find in the world market products that are underproduced and thus at a high price.

Mr. Garry Breitkreuz: I'm going to be running out of time here, so let me get to my main point.

Nowhere has anybody indicated that subsidies are the sole cause of the crisis. The farm crisis in effect is because the profit is not there in farming—it's as simple as that. And why isn't it there? The commodity prices aren't high enough, of course. But on the other end, the input costs are much too high. Surely we can agree on that.

The real problem I have is that you have driven a wedge between farmers where the waters have been muddied. Isn't in essence what has caused the farm crisis that the input costs and price they get for commodities are too close together, and the margins are such that farmers can't exist? Can we not agree on that?

Mr. Darrin Qualman: I don't think we can.

There's a further problem, and that is that we have cornflakes selling for over $100 a bushel and corn for $3. It's not just on the input side that farmers are ill-used; it's at every link in that chain. What we find interesting is that when you look at the multi-trillion-dollar food chain, every link on that chain is seeing very large profits, with the sole exception of the farm link.

Mr. Garry Breitkreuz: With all due respect, though, you're not answering my question. Are not input costs higher than they need to be?

Mr. Darrin Qualman: Certainly they are.

Mr. Garry Breitkreuz: They are. And what is one of the main contributing factors to that? It's the tax burden that is passed on to the farmer, who cannot pass it on because he's caught in the international marketplace.

Mr. Darrin Qualman: Mr. Breitkreuz, we released a news release last week that outlines the tax on inputs, and there simply are none.

Mr. Garry Breitkreuz: Excuse me.

Mr. Darrin Qualman: There are no taxes on farm inputs. On fertilizer—

Mr. Garry Breitkreuz: The Canadian Fertilizer Institute has said that over $300 million in taxes is passed on to the farmers.

There are the fuel prices—take a look at fuel. It's not just the upfront fuel taxes, which are obvious, but there is a tax built into fuel that is passed on by the corporations when they pay on behalf of their employees Canada Pension Plan premiums, or when the employment insurance fund is used as a cash cow by government. That's passed on by the fuel companies. When you have all the royalties they have to pay, they don't pay those royalties and all the corporate taxes; they pass those on to the farmer. And the farmer is caught because he cannot pass those on.

Do you not agree that there is a tax on fuel?

Mr. Darrin Qualman: Let me talk for a minute.

There's a tax on fuel.

Mr. Garry Breitkreuz: Sure there is, and that's an input tax.

Mr. Darrin Qualman: On farm chemicals there's almost no tax. We asked Novartis and Monsanto to get us the data on the hidden taxes in their products, and they came up with nothing. It's zero or less than.... I can show you the correspondence, and I invite you to look—

Mr. Garry Breitkreuz: Do you mean to tell me that when a corporation pays tax they don't pass that on? When they pay employment insurance premiums—and the surplus now is $20 billion—they don't pass that on? Do you mean to tell me they don't pass those costs on?

The Chair: This will have to be your final comment, Darrin.

Mr. Darrin Qualman: Let me talk for a minute about fertilizer.

We asked the Canadian Fertilizer Institute how much of the farmer's dollar goes to tax, and they came back with 15%. That 15% is royalties on natural gas and corporate income tax. When the price of grain went up, the fertilizer companies raised the price of their fertilizer 60%. It's not the 15% we have a lot of trouble with; it's that 60% increase. Every time we see a good time, fertilizer prices go up.

We believe it's not good policy to stop charging royalties on natural gas, and I don't think it's good policy to stop taxing corporate profits. Farmers don't want an end to corporate profit taxation.

The Chair: Thank you, Darrin.

Mr. Calder.

• 0940

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks very much, Mr. Chairman.

Darrin, Cory, it's very interesting, I have to tell you. I want to run at this from a different point of view.

Within this report you're saying that there is no surplus of grains out there on the international market, and yet we're still seeing countries right now that we know are into a subsidy war and that's one of the reasons why the commodity prices are lower. We're also seeing here on the three charts you have that on two of the charts the United States is the only one that's in negative production and all the other countries are in positive production here, yet there's a shortage.

My first question would be why are the other countries subsidizing, and why are they driving down the commodity prices? Is it to capture market share or what?

The other thing is—and I'm a product of the supply management system within Canada here—why would a farmer make the decision to grow a crop when he knows fully well he's going to lose money? The question would be, what do you think influences a farmer to make a production decision as to what he's going to grow that year? And if in fact subsidies and the EU subsidies are not causing the problem, how should we as a government come up with policy decisions for the future WTO negotiations, given that?

Mr. Cory Ollikka: I can possibly take the last question first.

Mr. Murray Calder: Sure.

Mr. Cory Ollikka: You had a real mouthful there, so you'll remind us of the other three questions.

Mr. Murray Calder: Okay.

Mr. Cory Ollikka: With regard to the WTO, I think if it's market imbalance that's responsible at the core of the farm income crisis, then what we need to do is somehow rebalance that marketplace. When this government goes to the WTO talks, for example, they should not only be ardently protecting supply management and orderly marketing institutions—our supply management and our Canadian Wheat Board are the two prime examples—but we might look a little bit further down the road. How about looking at a multilateral agreement on taking grain land out of production, for instance?

You can still pursue some market-based solutions that actually try to rebalance market power. How about, for example, multilateral agreements on regulating the flow of capital? If you take Mr. Breitkreuz's example on farm inputs, if you look at the corporate concentration in just about any aspect of the food system, there doesn't even resemble what might be called a free market. If you regulate in that marketplace to prevent corporate concentration in any given sector from getting too great, you tend to rebalance the system and let the market do what it does best.

Mr. Murray Calder: I'm going to play devil's advocate here for a minute. When you say taking land out of production, and you've also stated that there's not this oversupply of grain out on the international market, isn't that a contradiction? I'll tell you, I'm a firm believer in this business of land out of production, because I think one of the things we as a government can do is go for carbon credits on it, because we have made commitments to the Kyoto protocol.

That, in essence, itself could be a benefit for the farmer on say a fallow program over a couple of years. It gives him a chance to change his production philosophy. But isn't that a contradiction to what you just said in this report—that we don't have this surplus of grains out on the international market, and yet you're talking about taking land out of production?

Mr. Cory Ollikka: I see where you're going with the contradiction thing, but I think what you need—and I'll reiterate that the strength of the point I made is in the second part of it—is international regulations on transnational capital. Whether you do that through production or whether you regulate the markets in products or the markets in farm inputs or what have you, the strength of course lies in regulating such that there is actually competition that benefits farmers.

• 0945

We're not talking about competition if you have only John Deere and one other machinery company, for instance. The corporate concentration in that realm is just far too great.

Mr. Murray Calder: Okay.

I'm going to go back to my first question as to what influences a farmer to make the production decisions he does. We still see farmers out west who are growing wheat. They know they're going to put a crop of wheat in. Historically, in the past, they've lost money putting that crop of wheat in, but they're going to put that crop of wheat in again this year. If they go by what happened in the past, they probably know they're going to lose money this year too. Why do they keep making those production decisions? Are they trapped in that? What's the reason?

Mr. Darrin Qualman: Well, there are two things. The reason farmers continue to produce even though they're losing money is that they lose more money if they don't produce. The second thing is that farmers have done a tremendous amount to adapt to the current farm income crisis. The farms are getting larger. They're using new technology, genetically-engineered seeds, zero-till farm equipment, and they're not growing wheat.

Around my farm over the last ten years I've seen amazing crops grow. It used to be that you could drive down the road and figure out what every crop was. Now you're stopping to check: those are chickpeas and those are fava beans and those are new a type of lentil. So farmers are trying all sorts of new crops in an attempt to find the one that's profitable.

I'll give you a little example of what happens there. In the early 1990s we started growing peas and made good money at $6. Within a couple of years, enough people had entered that market that they fell to $3. So farmers are manoeuvring around, changing crops, changing production techniques, and trying to find things that will give them a profit.

Mr. Murray Calder: Okay.

I have one last question, Mr. Chairman, if I may, and then I'll be finished.

In 1994, when we signed up into the WTO, there were 117 nations involved in that. The number now is up. I believe there are 136 there, with another 35 that want in. We're into the next round of negotiations. With that increase of nations within the WTO, do you see any effect on Canada's negotiating position as we go into this round? I'm just going by the impact of some of the larger trading blocs like the EU and the United States. Is that going to enhance our position or is it going to weaken our position when we go into the negotiating process?

One of the things I see with the increased number of nations is that it gives us the opportunity to say let's get some of the smaller nations to go with us on our positions and move in. This in fact is diluting the power of the United States and the EU, for instance, within these negotiations. How do you see it?

Mr. Cory Ollikka: I'm glad you brought that up because I wanted to have something on the record here. We've maintained for some time, actually, that we may not be in every instance allying ourselves with the right crowd when we're allying ourself with the Cairns Group. What we as a country need to carry into the WTO is a position that at the very heart benefits farmers first. Of course, a healthy farm economy benefits the economy. Nobody argues with that.

I think there's been far too much emphasis, on the part of our trade negotiators and our government, on attaining market access. We hear that we need more market access. We need liberalization of trade in order to benefit farmers. Well, our farm exports have almost quintupled in the last 20 years and farm income is down. Clearly that strategy hasn't worked. What we need to focus on is a shift in language. We need to be looking for things that give farmers market power, and that speaks to what's in this particular brief as well. We can gain all the access we want to all the low-paying markets in the world and our farmers aren't going to be any better off, even the export industries.

Mr. Murray Calder: So in a nutshell we're exporting more and losing more money in the process of doing it.

Mr. Cory Ollikka: Yes. The more you grow, the more you owe. That's the kind of philosophy.

Mr. Murray Calder: Yes.

The Chair: Thank you.

Before we get to Howard, can I just ask one question either of Cory or Darrin? I don't know whether the WTO negotiations will ever get off the ground or not, but as you know, Canada and other countries have made it quite clear that targeting subsidies would be very high on the agenda at any WTO negotiations. Certainly the Canadian government has said that and many of the stakeholders in the agriculture and agrifood industry have pushed the government to prioritize targeting subsidies.

• 0950

Your conclusions from your study say that in effect or in essence, subsidies are really no big deal when it comes to current grain prices, that they don't have an impact on current grain prices, and also that the subsidies don't have any great impact on the rate of grain production, which you say is not resulting in any great oversupply. Given those conclusions gained from your study, what then does the Canadian government do with respect to its position targeting subsidies at any forthcoming WTO negotiations? Do we simply ignore the subsidies and in effect say they're no big deal anyway, according to the NFU, so we might as well discuss something else? What should our position be, according to your findings?

Mr. Darrin Qualman: If the Canadian government stopped insisting to the Europeans that they stop subsidizing, it would open the door for a different strategy, a very fruitful, quick, and effective strategy. If the Canadian, U.S., and European governments and other exporters took a single sheet of paper and on that sheet wrote a little agreement saying they were going to pull 5% of their land out of production and they were going to pull an additional 1% a year.... The numbers might have to vary; you'd have to have your analysts look at how many percent would have to come out. They were dedicated to pulling land out of production until the alleged oversupply was reduced. Prices would increase very quickly.

This would have a spinoff benefit of making subsidies unnecessary. When world prices go up, there's no need to subsidize farmers in the United States. It's a much more straightforward strategy because you'd be asking the U.S. and the Europeans to do something they've already shown an inclination to do, and that is bringing in land set-aside programs. Both the Europeans and the Americans have had set-aside programs; Canada hasn't.

You would accomplish all your goals. You could work cooperatively rather than at loggerheads, which is what you're going to do for the next 20 years if you insist that the Europeans just stop subsidizing. Rather than taking 10 or 15 years to solve the farm income crisis and the subsidy problem, you could probably see effects within a couple and dramatic effects within five.

This is the reason the NFU brought forward this view. We thought it was really important to bring this view that it's not the European Union subsidies. This then opens up a new way of looking at what we can do at the WTO. It makes possible the examination of alternatives that are much more effective and yield fruit much more quickly. So that's what we think you should do at the WTO.

The Chair: When you suggest that some land should be incrementally taken out of production, you're saying that would address the alleged oversupply. But you're saying that the oversupply is just that: it's alleged, it's a phantom. What is the point of doing something to address something that is not there, that is not real? You've already said there is no such thing as an oversupply. Why would you want to do something to address something that doesn't exist?

Mr. Darrin Qualman: This is the point Mr. Calder made, that it was somehow contradictory to call for lower production when we say in fact there is no overproduction. In essence, this is the reason it would be very effective. Because supplies are so tight right now, because world stocks use ratios are at or near a 40-year low, bringing small amounts out of production would very quickly lead to price increases.

If there were in fact oversupply, if supplies were burdensome and far above demand, then it would take a very long time and you would need to take a very large amount of acreage out of production. Given that supplies are actually very tight, a small amount of land in production coming off the market would have very large effects.

I guess the most direct way to answer your question is that the markets work on perceptions and the perception is that there is oversupply. A multinational agreement that had specific timelines and that was very clearly going to accomplish the goal of reducing supply would shift that perception almost overnight, I believe, and we would see those prices rise very quickly.

• 0955

The Chair: Howard.

Mr. Howard Hilstrom: Thank you, gentlemen.

You mentioned that you could get these countries to take a sheet of paper and pull out 5% of production. Do you know how that sheet of paper gets arrived at? It gets arrived at through international negotiations under the WTO.

I take it from your document that you're virtually anti-WTO negotiations. So how would you get that agreement between countries without...? More than just Canada, the United States, and the EU are involved.

Do you not believe the WTO is the way to go in terms of working out farm issues around the world on exports and imports?

Mr. Darrin Qualman: As Cory pointed out, the WTO is synonymous with increasing exports, increasing trade, and that has proven to be of no benefit to farmers. As Cory pointed out, we've seen our exports rise dramatically and net farm income go down.

I don't care what venue you use, whether it's the OECD or the WTO or whatever. We think a multinational agreement on agriculture production would be effective. But what we've seen is that nations go to the WTO and do the wrong things. They fight about European Union subsidies. They work on ways to increase production. We're advocating a completely different focus in agricultural trade talks, whether they be at the WTO or at any venue.

Mr. Howard Hilstrom: And what would that do, that different focus?

Mr. Darrin Qualman: Well, we're saying they should stop focusing on the confrontational approach to get rid of European Union subsidies and they should work collectively. If they agree, if they somehow think the problem is oversupply, they should deal with.

Mr. Howard Hilstrom: Okay.

The Chair: Worldwide supply management—that's what you want.

Mr. Darrin Qualman: No, not supply management in the sense that we use it in Canada—

The Chair: Production management, then.

Mr. Darrin Qualman: —but supply management in the way the U.S. and Europe traditionally have used it. They needed to set aside some acres or else they'd have had burdensome amounts of production.

Mr. Cory Ollikka: I don't think we need to get into an argument about language. Clearly what everybody in the WTO says we need is a rules-based world trading program. Nothing wrong with that. Who are the rules benefiting? Right now the single-minded focus we seem to have around the world on export-oriented agriculture hasn't been doing farmers in any part of the world any bloody good.

All we're suggesting is that you shift the focus. Again, it doesn't matter if it's OECD or WTO. You shift the focus when you go in there on actually benefiting producers first, and you do that through discipline. What's rules-based trading if it's not talking about discipline? I mean, you can call it supply management or give it any sort of quasi-Marxist label you want, if you want to turn people off it. Call it whatever you want. All we're saying is that you shift the focus from single-minded focus on exports onto a cooperative international agreement that regulates the power of transnationals and actually makes the market work where the market can work the best.

Mr. Howard Hilstrom: Thanks for that. Be clear, Cory, that none of us around the table on any side are arguing with you, either of you. We appreciate your coming here and putting your points of view across. We've read this, and we will be reading it more carefully, looking for any gems that are useful to us. But I have a concern, I guess, that this document to a pretty big extent is really a political document. As a result, that probably detracts from it a little bit.

As evidence of that, I'll just point out here that on page 24, right at the top, it says “Corporate power is the cause of the income crisis”. That's a pretty black and white statement. I think the cause of the income crisis is certainly more than that. As I mentioned earlier, part of corporate power is also labour power. Labour and corporate together form the power at multinational, international, and national larger corporations.

I make that comment because then it's followed up with “the WTO negotiations are aimed at vastly increasing that power”. I of course take the view that the WTO negotiations are for trade that's based on scientific determination of what can be imported and exported and so on, as opposed to subjective decision-making by countries.

• 1000

That may be a political statement on my part, but I believe that's a fair way to do it so that you take the subjectiveness out of trade. The multifunctionality—and you didn't use that word, but that's what you're referring to—in Europe opens the whole issue of trade to that type of subjective decision-making.

At that point, then, if world trade in agriculture products started to reduce so that there was less and less of it, and we ended up with these marketing agencies—for instance, in Canada we have some right now—the question is—

The Chair: Try to make it short, Howard. We're already over our time.

Mr. Howard Hilstrom: Well, you used a little bit of mine, Mr. Chairman.

The Chair: No, I just used my own. I didn't use any of your time.

Mr. Howard Hilstrom: If we had these marketing agencies for all the agriculture products—and we're talking Saskatchewan here, the prairies type of thing—and we exported 50% of our agriculture production, what would we do with that production? Would we set aside all that land? What would we do? How would you handle that? What would we do if we didn't trade, if we didn't export? What would we do with that?

Mr. Cory Ollikka: Keep in mind that we're not at any time suggesting that we have to stop trading or that we have to stop exporting, but clearly there are made-in-Canada solutions we have had in this country in the past. We'll point right back to the two-price wheat system, for example, as being very straightforward, something that benefited farmers.

You can do these types of programs that benefit your producers with a negligible effect on the world market. You're still going to export.

I was talking to a group of New Brunswick potato farmers a week or two back. We're not under any illusions that there will continue to be trade and exports, but it has to be trade and exports as if farmers matter. We know that hasn't been happening. We've seen the numbers.

Mr. Howard Hilstrom: Thank you.

The Chair: We've all seen petroleum prices go up 30% to 40% in the last few months. We're told it's because OPEC has controlled or limited their production. Would you propose an OPEC for agricultural products around the world for the sake of primary producers?

Mr. Cory Ollikka: One might argue that you have that right now. It's just that it's not controlled by the producers of the world, that type of market concentration or conglomeration.

I think Cargill recently merged with Continental Grain. I was told that 40% of the world's grain will touch that entity at some point in time. Not that's it's all controlled by that entity, but it will touch it.

So if you're—

The Chair: But the thing is, OPEC is controlled by producers in petroleum. Are you saying you would like to have an OPEC-style organization controlled by agricultural primary producers?

Mr. Cory Ollikka: I think if you asked any farmer in the world they'd probably tell you that would be a good idea.

The Chair: Thank you.

Mr. Calder, I think you were indicating....

Rose-Marie, did you indicate?

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Yes, quite a while ago.

The Chair: Sorry, Rose-Marie. You have such a short name—

Mrs. Rose-Marie Ur: I know you try to pretend I'm not here, but trust me....

The Chair: —it gets lost in Murray Calder's shadow.

Mr. Murray Calder: Listen, I have tried to ignore her, and I gave up on it.

The Chair: I'm sorry, Rose-Marie, go ahead.

Mrs. Rose-Marie Ur: No problem.

I too thank you for your presentation. I can tell you, your vision is constantly brought forth in all my Federation of Agriculture meetings. I faced my last one on Saturday with my good farmers. It'll be interesting for me to provide the minutes of this meeting to the ones who have sworn by your subsidy decision as to that being the factor.

My statement to you is that Canada is such a vast land, and we have the most efficient farmers in the world. They're constantly improving their skills on the farm. Our population isn't in ratio to the food production. So if we closed Canada off, what would you, as the NFU, tell the Canadian producer to do with their farming? We don't have enough people to eat what we grow. What would they do? Would we not have a further crisis?

• 1005

Mr. Cory Ollikka: I don't think so. Again, we're not suggesting that we close our borders off or that we stop trading.

Are you specifically talking about stopping production?

Mrs. Rose-Marie Ur: No. Canadian farmers have to grow to have a profit, so if they keep producing to make a profit, there isn't a sufficient number of consumers in Canada to consume the product they grow. So what would happen? We need the export markets, but we also have to reflect back on the primary producer. So how can we address that?

You're saying we have to cut back on exports, and I agree that we have to recognize the primary producer. They're lost in this case scenario.

Mr. Cory Ollikka: Right now the two appear to be at loggerheads and to be contradictory with one another, but I don't think they have to be.

Again, I think you can have a world trade system that's fair to farmers. I think it's the responsibility of this government and every government in the world to go to world trade talks and negotiate a trade system that first and foremost benefits farmers and rural communities, starts to germinate rural economies, and grows their national economy. And I don't think that's unrealistic. I just think the powers that be in the world trade system these days aren't advocates of family farmers anywhere in the world.

Mrs. Rose-Marie Ur: In your briefing you say consumers pay trillions for food and the prices they pay increase every year. The fact of the matter is, how do we educate the consumer that our cheap food policy can't continue if they wish to maintain the constant quality of food? We have to get past this mentality that cheap food is the answer to the world, because it isn't.

Mr. Cory Ollikka: I agree.

Mrs. Rose-Marie Ur: We're suffering, and this is the message we have to get across to the consumer.

There's a grocery store in my riding right now that's closing down. I hope to work with them. Another facility is coming in, and I'd like to take some of the consumers in there. The shelves are about half empty. If we don't get our act together, this is what we're going to see every day when we go shopping.

Mr. Darrin Qualman: We have what we think is an interesting proposal there, an important key proposal. It goes along with...that internationally we must work to control supply.

Nationally, if you want to do something legislatively tomorrow, pass a bill—which will cost the government nothing—that requires retailers to post the farmer's share on every food product sold in the grocery store. It would fundamentally shift the debate on the farm income crisis if every time a consumer picked up a loaf of bread and noted that it was $1.40, they also noted that the farmer got a nickel, and every time they bought a case of beer for $15, it was right there in front of them that the farmer gets 14¢. Literally, the last time we checked, out of a $15 case of beer, the farmer got 14¢.

We think that would be key. It's something they've tried in Europe. In France they're posting the farmer's share on produce for a short period of time. We would urge you to do that. It would fundamentally change the perception of the public, because we don't have a cheap food policy in Canada. We have a cheap farm commodity policy, but we have very expensive groceries.

Mrs. Rose-Marie Ur: I agree with you to some extent, but being a farmer in my previous life, I can tell you that when I went to the farmers' market when we got into vegetable farming, they really didn't care if the cauliflower was $1.50 at one booth; trust me, they went to every booth where they got it for 99¢. So they're not going to get too wrapped up in the farmer. What they want is the cheapest price.

In one respect, I think it's good. I would certainly support something like that, but I can tell you, when you see people coming to the market Saturday morning, they're not looking to pay the highest price. They're not saying, well, because I'm a good Canadian and I like my farmers, I'm going to pay $1.50, and that guy who wants 99¢, he or she is out to lunch.

Mr. Darrin Qualman: That's not quite the argument we're making. We agree that Canadians want cheap food, and what we think will happen—

Mrs. Rose-Marie Ur: And they have it—and quality.

Mr. Darrin Qualman: But when they look at a box of cornflakes that's selling for $4 and the farmer is getting 20¢, I think those Canadians who want that cheap food should look at that box of cornflakes and say, well, if the farmer's only getting 20¢, who's getting all the rest of this money? Who's taking the rest, and how come I have to pay so much? How come, when the farmer gets $3 for a bushel of corn, I have to pay $100 for a bushel of cornflakes?

• 1010

So I agree with you that consumers do want inexpensive food, and that's why it would be very effective to show them how little the farmer gets and raise questions in their minds about who gets the rest.

The Chair: By the way, Darrin, I'm told that posting the farmer's share in France hasn't really changed perceptions much.

Mr. Ritz.

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Mr. Chairman.

Thank you for your presentation and appearing here today. Really, it's going to take thinking outside the box to make differences in Canada and throughout the world, so I thank you for your premise. I don't agree with everything that's there, but you have some germs of ideas.

A lot of the problem we see in the farming sector is margin. It's not there. There's no black ink on the bottom of the line. Prices rise a little bit, and inputs go up accordingly. You were saying that—that we saw fertilizer rise 60% last time. So when you talk about getting more return to the farmer, how do we keep the input costs in line so that return comes to the farmer and it doesn't go to all the inputs, and so on? That's my first question.

Secondly, one of the buzzwords we hear out there a lot is “value-added”. You talk about a box of cornflakes being $4 and the farmer's share 20¢. How does the farmer double his share in that? It's by owning part of the company that processes the cornflakes, and so on.

The premise the Wheat Board works under is that processing should be at the point of consumption. Do you agree with that, or should it be on the prairies to generate the economic spin we need out there so it can be farmer-owned, farmer-controlled? With regard to the potatoes in Prince Edward Island, I see the McCain plants right there; I don't see them in Toronto. The idea is that the consumer won't pay the freight to have that flour shipped from Saskatchewan to Toronto; you have to do it in Toronto. I don't agree with that. What are your thoughts on that?

Mr. Cory Ollikka: On that last point, it's clear to us that the directions of the federal government over the last 15 or 20 years, perhaps with the best of intentions to create value-adding on the prairies, by eliminating the Crow benefit, for example, haven't worked. We haven't seen any of that type of stuff happen, and we see them poised again to move to further transportation deregulation, which we are convinced isn't going to.... It's a “little more” syndrome.

With regard to the Wheat Board and processing on the prairies, I don't think you'll find very much argument from us that processing on the prairies is a decent idea. In fact, our discussions with the Canadian Wheat Board don't indicate what you say. From our meetings, the Wheat Board has been extremely willing to work with processing companies in the prairie region as long as it doesn't undermine price pooling and equity of delivery for all producers.

I think there are perhaps a lot of opportunities there, but they can't possibly put farmers in a contradictory position, because that won't do anybody any good. On the one hand, by owning a chunk of a company that you want to make a profit, does that mean you're in a conflict of interest because then you want cheap raw product? You don't want to undermine the principles of price pooling and market power for yourself as a farmer.

Mr. Gerry Ritz: But the directive of the board was that the processing should be at the point of consumption.

Mr. Cory Ollikka: Yes, but that's to protect the price-pooling mechanism. That's not saying there shouldn't be processing in the prairies.

Mr. Gerry Ritz: Yes. We did see the Crow rate disappear, no doubt about it, but we didn't get the deregulation that would allow the processing to happen. The other half of the equation hasn't happened, and it has to. That's what's going to have to drive the prices up, if we can do something with our product.

Are there different things that should be done with our products? Should we be looking at more ethanol, more bio-diesel, things like that? Cheap food is a given in our country. Should we start looking at other aspects that we can do with our production?

Mr. Cory Ollikka: Again, I don't think any of those kinds of things are a bad idea, but none of those things in and of themselves are going to solve the problem.

As Darrin pointed out, we've seen farmers diversify into umpteen different things. People are growing ostriches, and they have all sorts of different crops on the ground out there. Taking all that into consideration, realized net farm income, or return on equity for farmers, is still 0.7%.

Mr. Gerry Ritz: Yes.

Mr. Cory Ollikka: So all of those things are wonderful ideas, and we shouldn't cut ourselves off from those, but be of the mind that we have been extremely versatile in rural Canada, and we'll continue to be.

Mr. Gerry Ritz: Is that part of the problem, that we're caught in that diversification, that we paid the money to do that diversification and haven't had the return on that investment yet, that we're caught in that transition?

• 1015

Mr. Cory Ollikka: No, I don't think so. I think diversification has done as good a job as it possibly can. I think it's broader policy problems that are at issue here.

Mr. Gerry Ritz: Thank you.

The Chair: I think Rose-Marie had one short question, and then Murray—

Mr. Murray Calder: No, go ahead.

Mrs. Rose-Marie Ur: You made the point that farm income price is not caused by the subsidies. What approach should the government use to alter its position on subsidies at the hearing, then, if that's not the case? How should the government approach that, going into the proposed hearings? If subsidies aren't the problem, how can they go in and argue?

Mr. Darrin Qualman: We think the focus should be different. We don't think that continuing to argue over subsidies will benefit farmers, and it certainly won't have any benefit soon. The Europeans have stated that they're not going to stop subsidizing.

Mrs. Rose-Marie Ur: So do we roll over and die on that?

Mr. Darrin Qualman: If it's not causing the problem, if it's unlikely you can change it, and if there are other things that would be more beneficial that you could pursue in the short term, we don't think you should roll over and die, but you might want to stop flogging a dead horse and get on a live one and ride it instead.

Mrs. Rose-Marie Ur: Okay. What are your few live horses that the government should use?

Mr. Darrin Qualman: As I outlined, the next time you're at those negotiations just work with the major grain exporters of the world and ask, why we don't set aside a portion of our acreage? Send a clear signal to the large grain companies in the world that we're going to reduce world supplies each and every year until we see a significant price increase. It wouldn't take very long at all. In the early 1970s the granaries were full, and people were trading grain for farm machinery. By 1974 the price had tripled. Things can happen extremely quickly. But if you wait to convince the Europeans to stop subsidizing and then wait for that to have an effect, that's 15 years down the road, if ever.

Mrs. Rose-Marie Ur: But the thing is that in Canada we're such small producers compared with other nations that by our going to the table representing our Canadian producers and saying that we're going to take land out to reduce production, in some countries' eyes it's okay....

Mr. Darrin Qualman: We're among the top five exporters of wheat in the world. We're the world's biggest durum—

Mrs. Rose-Marie Ur: But other countries are coming on board and producing more and more as well. China is a good example, where we used to have a great market. We were the ones who were providing the food, and now we've shown them how to do it, and it's coming back to haunt us, indirectly perhaps. So we always have to remember the size of Canada in this playing field. We have to have a level playing field but the size of the player as well.

Mr. Darrin Qualman: I think you're exactly right. That's why when America set aside some land and Canada, Australia, and Argentina didn't, that didn't really work. Europe did it for a while, and other countries didn't. That's why everybody has to do it. That's why you need that international agreement, because Canada alone can't affect the world price of grain.

Mrs. Rose-Marie Ur: As one of you gentlemen stated, in Europe their countrysides are dotted with small farms, dairy farms, cows grazing in the valley, very picturesque movie scenes, and all the rest. Why are these same individuals looking at the United States and Canada? The communities are complaining that they don't want the odour, and they don't have the land mass to spread their manure. Come to Canada. We have large land masses. That's warm and fuzzy. But they're leaving that setting because they can't farm and they can't make a living. They're coming here to Canada and setting up their operations.

Mr. Darrin Qualman: I don't know that they're not making a living. Most of them are selling operations there for many millions of dollars, and they're selling them to other people who think they can make a living. That's why they're paying those many millions of dollars to buy up that barn and that land. I suspect they're coming here simply because you can sell 100 acres in Belgium and buy 10,000 in Canada and have money left over when you're done. I don't know that it's any more complicated than that.

• 1020

Mr. Cory Ollikka: Anecdotally, I have to add that I was talking to a Saskatchewan farmer about two or three weeks ago, and he said to me, “I think we have to go to Ottawa and just say that our foremothers and forefathers came a hundred years ago and settled the prairies as an experiment, and it hasn't worked, so we should all go back to Europe.” You get them saying that in western Canada—

Mrs. Rose-Marie Ur: They haven't been there in the last few years. I think a structure is developing there whereby their hands are tied, and they feel that, hopefully, it's less restrictive here in Canada.

Mr. Cory Ollikka: With regard to your comment about the smell and this type of thing and intensive operations, you're getting the same sorts of criticisms all around Lethbridge and in Manitoba—a big stink, no pun intended.

The Chair: Thank you.

Howard.

Mr. Howard Hilstrom: I have just a short question. I think it's true that in the Netherlands it was the small farmer that pretty well polluted that country, with ten, twenty, thirty pigs and two or three cows, so you can't say it's big farms, small farms, or whatever. Pollution can happen if there's overproduction in any geographical location. I don't know that the size of the farm has anything to do with it.

We've had press reports out of Manitoba in the Winnipeg Free Press with regard to the Canadian Wheat Board issue, which your representative, Ken Sigerdson, got quite involved with not only at the provincial NDP convention but also in picketing the UFCW president, Bernard Christophe. You support the government's position that the Canadian Wheat Board should remain in place and that every farmer, whether or not they want to sell through the Wheat Board, should be forced to do so. Why should those farmers who don't want to be part of the Canadian Wheat Board be forced to sell through the Wheat Board? What is wrong with letting them sell however they want in their own self-interest? What's wrong with that, even if they go broke? Why does NFU feel they know what's best for that individual farmer who wants to sell separately?

Mr. Darrin Qualman: The NFU takes the position that farmers should collectively and democratically decide how they market, and farmers have overwhelmingly demonstrated support for the Canadian Wheat Board. It is the case in our society that there are not unfettered rights. The rights are constrained by the larger community. You probably own a house. If I buy the house next to you and decide that it's going to be a Hell's Angels—

Mr. Howard Hilstrom: I'm a small farmer.

Mr. Darrin Qualman: If I bought the land immediately beside your farm and put up a Hell's Angels bar or did it to someone who lives in the city, somebody would say “Isn't there a zoning law? Can you do that?” So we don't have the unfettered right to do what we want in this country. We collectively make decisions and have legislation. We have speed limits, etc., and we agree to abide by those. I think in terms of the Canadian Wheat Board, farmers have been asked repeatedly, and repeatedly they have said yes, we support the Canadian Wheat Board and want it to continue, and we want it to be strong.

The Chair: Thanks.

Murray.

Mr. Murray Calder: Thanks very much, Mr. Chairman.

I think that before we quit here I have to ask the two age-old questions that have faced us as farmers for years. First, unfortunately, as producers of food, the primary producers have always been forced into a corner where we have to take what the marketplace is going to offer us. It doesn't matter what our overhead costs are or anything else like that. The wheat producers out west are being faced with that right now. How do we correct that problem? Is there a way we can correct it? Do you have any ideas on how we could go about trying to correct that?

Secondly, if you take a look historically at the farm community, you'll see that after the Second World War about 46% of the population was involved in farming. We now have 2.5% of the population involved. One half of one percent produces 80% of the food, and the other 2% produces 20%. What does that tell you?

• 1025

Mr. Cory Ollikka: With regard to the first question, I think it's no secret, and everybody bemoans the fact that farmers are price-takers by and large, but I think in a properly functioning market, of course, that isn't the case. I think everybody who professes to favour a free market needs to open their eyes. I don't have any problem with free markets, but I defy anyone to show me one in the world that actually exists.

They have something in the United States called the Packers and Stockyards Act, which some of you might be familiar with. What that act does—and farmers themselves in the United States are working to see that the act is actually enforced—is it prevents corporate concentration from happening. So there is some potential for the marketplace to return to farmers, but—and this is the big qualification—you do have to regulate in that marketplace to see that corporate concentration can't occur and that the market itself can't become so conglomerated in its various realms that the primary producer gets excluded and winds up being a price-taker at the feet of transnational capital or world trade laws that don't recognize food security. That's the bottom line, to my mind.

It does require regulation. Much as we want to see a free market everywhere in the world, we have to accept the reality that they don't exist and we have to regulate accordingly.

Mr. Murray Calder: I have a last question, but I see my colleague Mrs. Ur has a question, so I'm going to put over part of my time to her.

So 2.5%, 0.5%, 80%, 2%, 20%—what about that? Where do you see that going?

Mr. Darrin Qualman: The local families have been forced out of every sector of the economy. It used to be that the local families owned your shoe store and the local families owned your clothing store and the local families owned your grocery store. They've been forced out. Clearly that's happening in farming. We have to decide if that's a good thing.

The Chair: Mrs. Ur, did you want some time?

Mrs. Rose-Marie Ur: Yes, thank you, Mr. Chair.

Are you supportive of more farmers getting involved from farm gate to farm plate?

Mr. Cory Ollikka: I think the more links we can make between producers and consumers, the better. And we encourage farmers...in fact, as an organization we're acting in many ways to build those bridges between farmers and consumers wherever we can.

Mrs. Rose-Marie Ur: I meant cooperative, say for instance hog producers setting up a cooperative and having their primary producer pay into and be supportive of a particular cooperative so that they're part of the whole cycle.

Mr. Cory Ollikka: Yes, I think so. I think those types of endeavours speak to made-at-home solutions to try to circumvent the international agenda that's been beating us all down.

The Farmers Union last year set up a pilot project that we called “Pork Links”. We worked with a poverty and hunger advocacy group in Saskatoon and linked that group specifically with Saskatchewan hog farmers right in the heat of the hog crisis. Farmers got higher than the disastrously low market prices at the time, and those people in the city got cheaper food than they would get at the supermarkets.

Mrs. Rose-Marie Ur: But to that end, it wouldn't be something they could continue on a full-time basis in order to sustain their farming operation. It was something higher than nothing, but it wouldn't be a level they could stay at to maintain their farming operations.

Mr. Cory Ollikka: No. The volumes traded were not significant, but it's the principle behind them that's important.

Mrs. Rose-Marie Ur: Principle is only good if there's a profit in the farmer's pocketbook.

Mr. Cory Ollikka: There was. But there were higher prices involved than they could have garnered on the open hog market at the time.

Mrs. Rose-Marie Ur: At that time, but not to sustain that kind of working—

Mr. Cory Ollikka: That's right.

Mrs. Rose-Marie Ur: So that something's better than nothing, but it's not enough to continue business on.

Mr. Cory Ollikka: No, but you talked about cooperatives and setting something up like that on the larger scale dealing with more consumers and more producers, cutting out the middle man, as it were. The principle is there.

Mr. Darrin Qualman: If I could clarify, when we set up Pork Links, we specifically asked farmers what the costs were and what they needed to break even and what was a fair return, and that's where we set the price. We set it so that it covered all the costs and provided a profit to the farmer. And that price we paid the farmer was approximately double what they'd get at packers. And what was interesting was even after we paid farmers double what they would get if they sold the hog to the packer, the price we then had to charge the customer to cover that cost in cutting and wrapping was still 30% less than the retail price. So you gain on both ends. You pay the farmer twice as much, and the consumer, who in this case was on low income, gets a 30% break on the price.

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Mrs. Rose-Marie Ur: So maybe we should expand that market then.

The Chair: Thank you.

Maybe we can finish this discussion off with the following question. I think part of the thrust of your presentation today basically says that parts of the worldwide agricultural market are really illusory. You're saying that subsidies really don't have a big impact on prices, or at least they haven't contributed to the downward pressures on grain prices. You're saying that there really is no oversupply of grain in the world. You also indicated that the so-called Asian flu really didn't contribute to the fall of hog prices a year and a half ago. My question goes to Darrin. You indicated at the beginning of the meeting that you're in the process of changing your farming operation and you're going into some kind of organic operation. So given all these false signals from the marketplace and all this illusion, when you're farming, Darrin, what signals are you responding to? What makes you go from this kind of farming, say, to organic? What are you responding to?

Mr. Darrin Qualman: I'll give you a little bit of history.

Before we stopped farming conventionally we were cropping 4,000 acres. In 1994 we grew three kinds of lentils, two kinds of peas, and we grew spices. My wife had organic medicinal herbs planted in the yard to evaluate how that was going to work, etc. We looked at everything the market told us to do and we did it. We followed those market signals. Like many farmers, we expanded and tried to do more of it and more of it and have new crops every year. And it caused tensions in our family, etc. Following the market signals almost killed us. So we decided there wasn't a future in this—getting bigger, spending more every year on fertilizer, spending more on new technologies and capital, growing more, etc.—and we just stopped. My father retired and I started seeding the land down to alfalfa so we could break it up and farm organically.

What this brief in a way points at is farmers are trapped in the middle of a chain with the huge input suppliers on one side, huge processors and retailers on the other. Everyone is making a big profit, with the sole exception of the farmer. What organic agriculture offers to my wife and me is an opportunity to extract ourselves from that chain and to have some control over our operation, not to be held ransom to input costs on the one hand, not to be forced to sell to one or two $100-billion grain companies on the other. We got out of the box a little bit and took a look at the really big picture of what was happening to the family farm in this tremendously powerful chain and said we just have to pull our farm out of that chain, get us out of that system.

The Chair: Thank you.

Hilstrom began this by saying that your study, your conclusions, are food for thought, and I think they are just that. Thank you very much. I appreciate your coming.

Mr. Darrin Qualman: Thank you.

The Chair: This meeting is adjourned.