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, May 11, 2000

• 0904

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.)): All right, members, I think we are in a position to start our meeting. Welcome, as usual. I'm looking forward to this meeting. At 10 o'clock we'll have our old friend, Bob Friesen, and his sidekick, Benoît Basillais, here to give us their latest take on the farm situation.

First up is Diane Martz. Of course, she is from the Centre for Rural Studies and Enrichment, St. Peter's College, Muenster, Saskatchewan. She's going to give us an update on Compare the Share. I'm sure some of you are already familiar with the findings, and you'll find them very interesting.

• 0905

Thank you for coming, Ms. Martz. We look forward to your presentation.

Ms. Diane Martz (Spokesperson, Centre for Rural Studies and Enrichment, St. Peter's College (Saskatchewan)): Thank you for inviting me to come. It's nice to be able to bring the city down east and talk to you.

I just wanted to mention a little bit about how we got involved in this. I'm sure you're all aware that back in 1991 Ralph Ferguson did a study called Compare the Share, and when he retired he donated all his papers to us. Once we had all those papers and things started to get more interesting, I guess you could call it, in the agriculture sector, a lot of people started to phone us to ask whether we had done any work on this particular document to update it.

So we had a look at the original study, which went through the 1980s. I was interested to see what had happened prior to the 1980s, and if the 1980s were a period of anomaly. We took the data back as early as we could in the 1970s and brought it up to date as close to the present time as we possibly could with the data we had to work with. We now have 30 years of records on some of these issues.

The Centre for Rural Studies is in a small college in rural Saskatchewan. We are affiliated with the University of Saskatchewan in terms of our course offerings, but we are a separate entity. The mandate of this centre, which was set up only two years ago, is to try to do something for small farms, family farms and rural communities. We're trying to fill a niche that we think is not necessarily being filled at the moment.

I'm just going to run through some of the different data we've collected here, to set the stage. One of the things we found in our report, as we looked through the different commodities, was of course that marketing board commodities tended to do much better over time than the non-marketing board commodities. Here's a little bit of a look at turkey prices over time, where we have the wholesale, retail, and consumer prices for turkey. You'll notice that if we go back to the 1970s, these three prices were much closer than they are at the present time. The 1970s and 1980s were times of dramatic increases in consumer prices, and then the consumer prices tended to level off after about 1987.

In terms of the turkey business, back in 1972 the farmer got about 58% of what consumers paid for turkey in the store. Now the farmer gets about 38%. So even in the marketing board commodities, farmers have lost a proportion of the final price.

Eggs is the one sector that does better than any other in terms of the farmer having kept that share through a long period of time. We don't have really great data before 1980 for this, but in 1980 the egg producer got about 75% of what you paid for that product in the store, as a consumer. By 1997, the egg producer was getting 74%. So this is the best commodity in terms of having held its position with respect to consumer prices.

Another really big issue in Saskatchewan in the last couple of years has been pork. This is much more common in terms of the various commodities we looked at. If you look at the farmer's return on pork, which is on the bottom line, you can see it has basically been a horizontal line through time. In fact, once we get to 1998, when pork prices crashed, the farmer was actually getting less for pork than in 1975.

At the same time, pork chops have more than doubled in price, from $4.51 to $8.76. It really took a fair bit of pressure to see any kind of decline in pork prices at the store, even when pork prices were bottoming out for the farmers. So in this particular sector, the farmer got 30% of what you paid for the pork chops you bought in 1977, but in 1998 the farmer only got 14%.

• 0910

The issue of corn and corn flakes is a standard example used in this type of analysis. One of the things we see is that with the more processed products, of course, we turn a much lower share to the producer. Back in 1975, the producer got about 13% of what you paid for a box of corn flakes: the producer at that time got 7¢ and you paid 55¢. In 1998, you paid over $3 for a box of corn flakes and the producer got 10¢. So there's been very little increase in terms of what the producer is getting, but the price of corn flakes is six times what it was 1975, so that went from 13% to 3%.

Graph 13 is one that prairie farmers are particularly interested in. It gives a comparison of wheat and flour. It also gives you two different prices on the bottom line. One is the Canadian Wheat Board final basis price, and the second price, the lower price, is what the farmer based in Saskatoon gets. So the farmer must also consider transportation costs in their final price, on which of course they have no choice.

You will notice that the two bottom lines closely approximate each other until 1995, where the lines start to split away. So basically again we have the scenario that when the prairie farmers have to factor in the transportation costs, they are receiving less than they did in the 1970s. Farmers who are closer and don't have the higher transportation costs realize somewhat better returns.

I should also mention that in the 1970s the producer got about 51% of what you paid for a bag of flour; that's now down to only 14%, so that has seen quite a dramatic decline.

I think I'll just jump to the last couple of things I want to point out. We also did some work on the various input price indices. Graph 3 shows a comparison of the overall farm input price index and the farm product price index. It shows us that after about 1986, farm input prices increased at a much more rapid pace than did the farm product price.

Unfortunately this data series was not extended past 1996. Somebody decided to quit collecting the data on this, but I understand it may be brought back in. The problem, as you can recognize, with not having data is that you can't make these kinds of comparisons.

The Chair: Who's the somebody?

Ms. Diane Martz: That would be Statistics Canada.

I have just one last graph. It is the end point of all the things I've been showing you at this meeting.

Graph 21 looks at average farm family incomes over time. There are a lot of different lines on here, and it's somewhat confusing, perhaps. The bottom line shows the contribution to the average farm family income from the farm. You can see that from about 1982 on, that line has had very little upward trend.

When you compare the total income line to the wages and salaries line for farm families, you'll notice that for a long time, for the average Canadian farm family, wages and salaries have actually contributed more than the farm, and that gap has been getting larger and larger. Of course there are always problems when you're dealing with averages, because there are lots of deviations around averages, but the average farm family now in Canada only gets 23.7% of their family income from their farming operation. That necessitates at least one partner on that family farm working off the farm in order to bring in a decent income.

In Saskatchewan, there's a little bit of difference. Saskatchewan has tended to be a lot more agriculture-focused, but even in Saskatchewan, 1983 was the turning point when off-farm income started to provide a larger proportion than the on-farm income.

• 0915

In my estimation, all of the data, which is just basic information, kind of boils down to this particular chart, which basically indicates that the average farm family is not able to make a living off their farming operation. There are certainly some farmers who do, but it certainly points to a considerable amount of stress in that sector.

I'm finished with the overheads, so I'll just go and sit down at my place. I look forward to your questions.

The Chair: Thank you very much, Ms. Martz. What you've told us is not a very happy story. It doesn't come as any great surprise.

Are you, Mr. Bailey, starting for the opposition?

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Yes.

The Chair: Okay. You have seven minutes. Please go ahead.

Mr. Roy Bailey: Thanks, Mr. Chairman.

Thanks, Diane, for your presentation. As the chairman said, there's nothing surprising in what you said. But it does reinforce what I'm sure everyone on this committee already knows, which is that the term “family farm”...

For a number of decades, from the late 1930s up until now, I've had a mental picture of what a family farm was, and it's a constantly changing picture with each decade. What has changed with each decade? If you went back to the war years, on the family farm, as you know, the family was there, the mom and dad were there, the hired man was there, and the oldest children were there. It was all very much a labour-oriented operation that required them to be there. There was little outside help. It was strictly a concentrated effort.

Each decade has changed that. Today, if you go into my constituency, which is the constituency where you were born, the family farm may have no one around the house during working hours. Mother is gone. If there are children, they're off to school. There may be a hired man during the spring and harvest. But the concept of family just isn't there. It's a very concentrated effort by at least one person, but mainly two, seeking to provide enough income to operate in today's society and to keep the farm operating.

From the survey I've done in my own constituency, the income earned off the farm is actually supplementing the farm operation. If anything should happen outside of agriculture where these people were to lose that source of income, then you would see a toppling of the farm numbers very quickly. It's a very serious thing.

I appreciate your coming. I want to deal with one item. You said that in areas where they have marketing boards, things seem to be a little bit better.

Let's take a new crop coming in, such as chickpeas. How many more thousands of acres of chickpeas going in will it take before the market just tumbles and everybody loses? You can only stand so much. One of the criticisms I dislike immensely that comes from the west is, why don't you people diversify? You can only diversify to the extent that the product you're growing will be purchased. I say to the committee here that we are diversified to the max right now. The story of getting with it and diversifying is gone. Canadians from across Canada should know that. The west has had it up to here with diversification. In some cases it has reached the point where it's actually costing them even to attempt it.

I just wanted to bring that up. I'd like your comments about what you have heard—and I'm sure you have heard it in this particular study—about the criticism that we're not diversifying quickly enough. My response to it, because I live it and see it before me every day, is that there is a limitation on western diversification in agriculture. I'd like your comments on that, Diane.

Ms. Diane Martz: I think you echo the frustration that a lot of farmers feel when they hear this constant demand to diversify. A lot of farmers have diversified. We're seeing phenomenally different crops grown than we have in the past. We're also starting to see farmers move to alternative livestock. Just over the last five years we've had a large number of elk and bison and those kinds of operations around.

• 0920

As you mentioned, diversification is not without its costs. Sometimes it requires new equipment, and sometimes it requires faith that this particular crop is going to provide a return for you. One of the farmers I was talking to recently about this particular topic said that if you make a decision to go into something you have never been in before and it doesn't work out, you feel that for at least two years. So it's not a light decision that a farmer takes to move into a different type of crop. Plus there's a major learning curve a farmer has to go through when they move into many of these other crops.

Mr. Roy Bailey: Thank you.

The Chair: Thank you.

Mr. Desrochers, seven minutes.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): My colleague is just coming now. I'll let her have first turn if you give me a few seconds, Mr. Chairman. I'll take second turn.

[English]

The Chair: Can you just hold on. I think Ms. Martz will need to put on an earpiece. We'll have an esteemed member of the media come to help her. Let the record show that the Western Producer is on the job. With that kind of recognition, we deserve a favourable commentary.

An hon. member: We will following yesterday's announcement, for sure.

The Chair: Thank you, Mr. Wilson.

Madam Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Good morning, Ms. Martz. I read your document with interest. Like everyone, I don't think the figures are any cause for surprise since we follow the agricultural sector closely and we did a good deal of work this fall on farm economies. My first question deals with something quite different. I see the name of your organization is the Centre for rural studies and enrichment. Can you tell me if you have a definition of the family farm?

[English]

Mr. Odina Desrochers: Good question.

Ms. Diane Martz: I think the western definition of a family farm would basically be a farm that is still run by a family unit without large amounts of outside labour coming in to run that farming operation. I know that the definition kind of gets questionable when you have very large, intense farming operations being run by a family. That's where the definition starts to get fuzzy. At this point we're not taking those particular types of farming operations out of our definition of a family farm. But we are interested in the smaller farmer, more so than the very large farming operation, at least at our centre.

[Translation]

Ms. Hélène Alarie: I see. I'm asking you this question because I tabled a bill on family farms that starts with a definition. In other words, if we wish to develop policies for family farms, we have to know what a family farm is.

I often refer in this committee to an American study that I find very interesting, entitled A Time to Act. Are you aware of this study?

[English]

Ms. Diane Martz: No.

[Translation]

Ms. Hélène Alarie: The first draft appeared in January 1998. It is a very good analysis. First of all there is a definition of the family farm in this study. It is quite interesting. It is defined from the point of view of structure and in relation to revenue. Taking into account these two aspects, this definition is quite similar to the family farm that you speak of. In other words, there's a tendency to see this structure as a rather medium-sized farm operation managed by family members. This document studies the structure of all types of family farms in the United States and concludes that they are absolutely necessary to the farm economy and it makes a number of interesting proposals. That is why I asked you the question. It's all very well to do the study that we are engaged in but will this study contain structural proposals for the family farm or will it merely be a list of figures?

• 0925

[English]

Ms. Diane Martz: If I was going to give you a short answer to that, I would say that a decent return for family farms would probably ensure that the family farm would exist over time. One, there's very much an economic base to a family farm and its survival, and having a good return on the product or the commodities that the family farm produces is key to that unit surviving over time.

In terms of what kinds of changes we might be able to see in farming that would enable some family farms to survive in a different kind of milieu than they currently are, I think there are some options to move to some different kinds of farming, for example. But it's very difficult for farmers in the current crisis if they have to make those kinds of switches, because basically they lack capital to do it.

But we see that farms are getting larger and larger. On the other hand, farms are also getting smaller and smaller. Those small farms are moving into organic farming, alternative livestock, and things like that. A lot of small farmers who are farming two and three quarters would probably be interested in doing that if they could make that transition to a different kind of farming.

I'm not sure I actually answered your question, but I think the economic base is key.

[Translation]

Ms. Hélène Alarie: Let me explain to you my concern about this. If it is properly defined, there must also be a political will to provide support to it. Then it becomes a choice that society must make. Are we ready to go that far? At the present time there are lots of countries that are examining the same issue. As part of the WTO negotiations, we are faced with notions such as multifunctionality or other notions being applied to the family farm.

Where is the forum that is interested in knowing what the family farm is? Does society believe in it? What are we doing for it? We were all aware of these figures. We know that things are going badly.

Looking at the last pages, I see that in 1965, 47% of total family farm income came from the farm whereas in 1996, it was 23%. All the figures that you noted in your conclusion are quite frightening for the future of the family farm. However, I think the family farm is essential, it is something we cannot do without, it plays a crucial role.

[English]

Ms. Diane Martz: I would agree with you that it is essential, and I think that as the family farm goes, so does rural Canada—certainly in some parts of rural Canada, Saskatchewan, for example. As we see some of the reactions or the responses to globalization and so on, there is a move to larger and larger farms, causing us perhaps to question this definition of family farm. We are seeing practices and so on that do not support the local economy, in that the very large farmers will tend to buy in the large centres, or they'll buy straight from the manufacturers without supporting the local co-op, that kind of thing. We're having fewer and fewer people, and rural depopulation is definitely an offshoot of the trend we're seeing.

I agree with you that the family farm is a critical institution in rural Saskatchewan and rural Canada. Without it, we lose the stewards of the land. We end up by not having large amounts of food produced here. Of course much of it does go for export, but we lose our food security base. And we lose people in rural areas. The biggest problem I see is the ensuing rural depopulation that occurs as a result of the changes in farming that are driving this move out of rural areas into urban areas.

The Chair: Thank you.

Your analysis, Ms. Martz, I think speaks to power in the marketplace, who's got it and who hasn't. It seems to me that farmers certainly don't have as much power in the marketplace as, say, wholesalers, processors, and retailers.

I think of myself as just one lone consumer. When I go into a grocery store—and perhaps I'm a rather lethargic consumer—there's a price on pork chops or lamb chops or whatever, and I pay it. I don't have to, but I pay it. The farmer, on the other hand, might like to have more when he sells his wheat or whatever, and he needs more, but he doesn't get it. So in a sense, both the consumer and the farmer, who are at the extreme ends, or the opposite ends, of the chain, are in some ways equally impotent, although I think the consumer does have more choice and power than, say, the farmer has.

• 0930

Would you agree with that?

Ms. Diane Martz: Yes. I do think it's a matter of control. I think that's where marketing boards come into the picture, in that they do give the farmer an added element of control over what their return on the product is. One of the arguments I've heard from farmers involved in marketing boards is that the marketing boards actually allow smaller farm units to stay in business because they can be assured that they're going to have a decent return.

I think some of the other diversification ideas we've talked about are also elements of control in terms of moving into value added. That's a way to control more of that chain. And moving over to organic and those other kinds of products, where there's not a huge supply at the moment, also gives farmers an element of control. So control is critical.

The Chair: Agriculture has gone through these phases. At one time it was, produce more, produce more, produce more. Then it was, diversify more, diversify more. Now it's value added, value added, value added. It's just one period after another.

Ms. Diane Martz: Yes.

The Chair: Of course this is the farmer's way of trying to cope with a difficult situation.

Ms. Diane Martz: Right.

The Chair: Mr. McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, Mr. Chair, and thank you, Diane, for being here.

There's a lot of frustration, as there should be and would be, among our family farm communities. I'm sure all of us here around the table support family farms.

But as the chair said, there's a concentration of power, and of course this concentration goes on in through the processing, the wholesaling, and the markets. And we have a real problem with that here in this country. I'm thinking about Manitoba, where I guess it would be diversification and value added when you're taking the grain. I'm thinking about Brandon, where there was a huge investment of... And yet that investment, the power, is controlled by a very few who in fact control the pork industry across this country. That's been good and we hope it will be good.

I think it's probably the cheap food policy we have to address, and none of us has found how to do that. I've covered that myself, and I do my own little bit even on the government side. I carried a loaf of bread into the lobby and published it in my householder, showing that the farmer gets 6.1¢, or whatever number we used, for a loaf of bread.

Yet we have to be careful if we just talk about Compare the Share, because if you take the raw product and the finished product, a car has probably $200 worth of steel, maximum. There's less than that in a car.

I believe the finest furniture in Canada comes from our riding. Gibbard Furniture is found in 80 embassies around the world.

The Chair: Is this a commercial?

Mr. Larry McCormick: It certainly is a commercial. Gibbard is found in 80 embassies around the world. Because of their quality, you'll pay many thousands of dollars for a dining room set, and yet the raw product is only a few dollars worth of lumber. But I do believe the person involved in cutting that lumber and taking it to the mill is making, I hope, a little bit better living than our producers are.

So all I'm saying is that Compare the Share is one of the tools I use, but what's our next step? Where should we be going, Diane? What should we, as a committee, be doing about this power, the concentration, the Compare the Share?

Ms. Diane Martz: I actually think one of the next steps in terms of the data presented—this is very basic data—is that it would be very interesting to explore the gap that exists between the farmer and the consumer and just to get a really good idea of what's happening in that gap, because I don't think we totally understand it.

Farming is different from the forest industry in that farming is both an economic entity and a very much a social unit. The family farm is a social unit as well as an economic unit. I think that if we value this—and I think this committee has decided that family farms are an entity they want to support—I think you have to look at farming a little bit differently from how you look at the forest industry or the steel industry.

Mr. Larry McCormick: I know in the United States in the last few days or weeks some Congress people have brought forth a bill to look at that concentration and that disparity between the price of pork a year ago and the price in the supermarket, and I'm glad to see you bring it to our attention again.

• 0935

Thank you, Mr. Chair.

The Chair: Thank you.

Members, I have a list of four interrogators, and we have just enough time. So I'll go to Mr. Steckle, and then I'll go to Mr. Ritz, followed by Mr. Calder and Ms. Ur.

Mr. Steckle, please.

Mr. Paul Steckle (Huron—Bruce, Lib.): As a family farm operator myself, I think it's a very timely subject and I think it's important that we bring this subject to the committee and to the forefront this morning.

I would like us to perhaps look for a moment at where we've come from and what has happened in the last 25 years. Family farmers in their true sense are spending most of their time trying to run their operations. They're not marketers. They're great producers and are entrepreneurial in finding ingenious ways to find economies of scale to work in their favour.

They have tried to do this for the last 25 years, but I think we've reached the end of the tether. We can't go any further, because there are so many imposed costs on the way we operate today, either through government or through other inputs that we have to buy—diesel fuel, for instance, as an example this year, or fertilizers. Those are input costs that farmers have no control over.

Then we produce the product, and we can hardly get it on the truck fast enough and out the gate and into the elevator. Then we again take whatever they offer us. We really aren't in a position to bargain. So we expand some of our operations into value-adding. How does the small farm operator, who is able in some form to value-add to his product, put that into the marketplace when the marketplace that's buying that product is controlled by three majors: Sobey's, Loblaws, and A & P?

The Chair: And Safeway in the west.

Mr. Paul Steckle: But they really are controlled by others. So whether it's four, five, or a dozen really doesn't matter. The fact is that they have such tremendous power.

To give you an example—and I won't use names—there's a company in my riding that is value-adding, has developed a great product, is putting it on the shelves, and now Sobey's is coming and saying, “Listen, in order for you to do business with us, we're going to impose this cost. If you want to business with us, for us to market your product and put it on our shelves, we're going to do that.” They simply can't afford to do that.

I believe that we as government, all of us who are here, need to do something about this. We are concentrating powers by those people who are the marketers of our product. Whether the people from Kellogg's, or whoever it is that produces corn flakes, pay us 7¢ for that amount of corn flakes in that box or whether they pay us 10¢—and the difference between 7¢ and 10¢ would be the difference between surviving on the farm and not surviving—really wouldn't matter in the end to the consumer.

Power is where it's at, and as farm families, we just cannot put together the power, because we're no longer operating as a Canadian economy, we're operating as an international global community. And if you can't buy it here, you buy it somewhere else.

This is a dilemma. It really is. If you're in the business of manufacturing shoes and you're the Dack's company, you have ways of controlling your costs, you have ways of getting what you want at the end for your product. Farmers cannot do that. This is a dilemma, and if you can help us find the answer to that...

But I think one of the answers is that we stop the concentration of large units in this country, because it is the demise... And once they control it all—and it's almost at that point—it really won't matter what we produce the product for; they will get what they want in the end, to show a black line at the end of the year.

That is a summation of my frustration over this issue, but I can tell you I share the frustration right across this land. Other than the supply management sectors, we really don't have any sectors that to any degree are able to build into their end-cost product a degree of margin of profit, and if you look at the graphs, even that has come down over the last 10 years.

The Chair: You have about a minute, Diane, to answer that, if you want, if you care to. I don't say that negatively; it's just if you care to reply.

Ms. Diane Martz: I agree with you with respect to the value added in the example you presented. I know there are farmers who are attempting to move into that in Saskatchewan, and they find that they can't market their products. If it's a grocery story product, it's very difficult to get it into the grocery stores. So there are huge barriers in that move into value added from the marketing perspective, and also from the capital perspective and things like that.

• 0940

In terms of corporate control, basically I think we already are in a situation in which the large corporations in the grocery sector are very effective at maintaining their market share across Canada. It is quite formidable to try to deal with it, to do anything about it.

The Chair: I failed to mention Mr. Desrochers' name. We'll go to Mr. Ritz, Mr. Calder, and then Mr. Desrochers. We'll finish with Madam Ur.

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

Thank you, Diane, for your presentation here today.

I agree with Mr. Steckle that there's a lot of talk about the frustration of trying to get a better share of the market. We need to put primary producers further up the food chain, go a couple of links higher. We're the only industry I know of in Canada that buys retail and sells wholesale. That certainly adds to the lack of decent return.

There are two roles to be played in garnering that decent return. There's definitely a role to be played in the market, where we need that bigger share. There's definitely a role for the government to play. Have you done any studies on government almost being counter-productive to that market impact?

You talked about organic farming in Saskatchewan in the grain sector and beef and pork and so on. There is a role for organics. Yet we see government regulations on abattoirs and so on, where rules are being rewritten that make it almost impossible for those small abattoirs to start. The Wheat Board, our marketing board, wants nothing to do with organic grain production, yet they still want to control it. How do we get past that hurdle?

Ms. Diane Martz: I agree with you that certainly there are problems there. How do we get past that hurdle? I think we have to get a good sense of what those barriers are and start to try to work to dismantle those. However, that takes time. Some of the organic producers end up going out of business as we try to figure out exactly how we can move their product through the system. There have been a number of examples of that in Saskatchewan.

In terms of attempting to move into pasta, there were some serious problems in southern Saskatchewan—

Mr. Roy Bailey: Tell me about it.

Ms. Diane Martz: —around the ability of the producer to sell their product locally and get back some of the supposed benefits of that in the current system.

The woman who works with me also farms. One of her problems is that they grow malting barley, and regardless of where they sell that malting barley, they still pay the transportation costs on that.

Mr. Gerry Ritz: Freight elevation. Yes, it's huge.

Have you seen any positive impact of the AIDA program?

Ms. Diane Martz: In our area? No.

Mr. Gerry Ritz: How do we fix it?

You had one graph about input price index. Have you done any studies that break down the tax component of those input costs?

Ms. Diane Martz: No.

Mr. Gerry Ritz: We've done a little bit of work on that, and it's quite horrendous. There are things the government can and cannot do provincially, federally, municipally, and so on. We talk about the subsidies offshore that are creating a lot of the problem. That may be part of the problem and it needs to be addressed, of course.

Years ago we had a two-price system in this country, domestic consumption and so on. Have you done any correlation in your studies on the impact of that, the two-price system we used to have? How much is being consumed in the country as compared to the exports? It's tough to put a government subsidy on products you're exporting. Then you're starting to export the subsidy to the country you're sending it to. There are a lot of hurdles in the way. Of course we have more questions than answers, as Mr. Steckle was pointing out. I guess it's an ongoing work.

Ms. Diane Martz: Yes. We also have more questions than answers at this point.

Mr. Gerry Ritz: We're running out of time.

Ms Diane Martz: Yes. Apparently some of the government response to this particular document is to bring up the idea of statistics, analyse them, and so on. This might be a document that can go further. We would certainly welcome support in taking it another step down the line. There are a number of things we could have a look at. There are those kinds of questions as well as what's going on in that gap and what's happening in the food sector as you move away from the farm.

The Chair: Thank you.

Mr. Calder.

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

Diane, I'm just going to deal with two things here. There's one thing that I've heard come back over and over again: What the heck is a family farm? What is the definition of that? We've had it put in front of us that a family farm would be probably an intergenerational operation that relies largely on family labour and could be a corporation or not. Would you agree with that?

• 0945

Ms. Diane Martz: Yes.

Mr. Murray Calder: That would make McCain a family farm.

Ms. Diane Martz: Yes.

Mr. Murray Calder: It would make Don Tyson... I think we have to tighten that definition up a little bit more than what it is right now.

The other issue, as Mr. Ritz and Mr. Steckle were talking about, is the fact that farmers right now are in a situation where we're price takers on the market. If the price stinks on ice, unfortunately that's where we're at. The only way I see around our getting away from being price takers is that we become unified in how we market our product.

I used to be a pork producer at one time and I quit in 1985, when that industry voted 75% against supply management. I moved towards marketing within the poultry industry. Our operation now is drastically different from what it was when my father operated it. We're something like four times our original size and still growing.

How do we get the rest of the farmers to feel comfortable if we say, for instance, that an elected board of farmers would be better to point their industry in the right direction to get them away from being price takers? Within the supply-managed industry, we sit at the table with the processors and we come up with an agreeable price on our product. I realize that with the grain producers internationally that might be a little bit more difficult. How do we get the agricultural industry to move more towards that direction, so that they are actually sitting at the table with the processors and getting away from being price takers?

Ms. Diane Martz: At least some—

Mr. Murray Calder: It's not an easy answer.

Ms. Diane Martz: No. You have to try to convince a large number of people to move in the same direction.

Mr. Murray Calder: That's right. The problem as I see it is that farmers are a very independent bunch of people. Nobody's going to tell me how to operate my farming operation. I know. Yet as long as that philosophy remains, we will always be price takers.

Ms. Diane Martz: When you look at the data that shows that the managed sectors are doing better, that won't necessarily convince individuals who feel they can do better on their own anyway. But the data certainly does indicate that those sectors have, over time, managed to retain a much larger proportion of the final price.

Mr. Murray Calder: The bottom line, though, is that two and a half percent of the population is actively involved in agriculture, producing food, of which half of 1% is producing 80% of that food and the other 2% is producing 20%. That actually would even bring forward the question of how much of the 2% we really need.

Ms. Diane Martz: It depends on what you want in your rural areas.

Mr. Murray Calder: Exactly. I agree with you. I'm just throwing out questions, because we as a committee should be looking to the answers to those questions.

Thank you, Mr. Chair.

The Chair: It's not only a question of differing philosophies; it's a question of numbers. When you have 60,000 or 70,000 farmers involved, it's pretty hard to herd that crowd. You always get a few who want to jump the fence over there and some who want to jump the fence over there. It's not easy.

Ms. Diane Martz: Also, historically most of the supply-managed sectors have dealt with different scales of market than the grain sector has.

The Chair: Thank you.

Mr. Desrochers.

[Translation]

Mr. Odina Desrochers: This is an issue that affects me closely since I was myself raised on a farm in a small concession in the municipality of Joly. At the time, over a distance of five miles, there were 35 family farms or small farms. Nowadays there are six of them left and they have to struggle to stay alive.

We have seen the modernization of the old style farm. These farms almost become small and medium-sized businesses. At the present time, in the context of globalization and competitiveness, we realize that the survival of these farms necessitates integrators, that is people with the products to feed animals and at the same time the technical means to slaughter them. So the industry is now being attacked by monopolies, and this is a situation that probably exists throughout the country.

• 0950

The picture you present to us this morning is based on statistics that you have done a good deal of research on. I'd now be interested in knowing your opinion on possible approaches to a solution. We know what the situation is. What avenues are open to allow for the survival of small farms, the remaining ones at least, and even for the SMEs that have gradually grown up in Quebec and elsewhere? What are the possible solutions? How will they survive when faced with the WTO rules? Lastly, can it be assumed that small farms do have a future as part of our rural environment?

[English]

Ms. Diane Martz: In terms of survival of the family farm, I think there's probably going to have to be a wide variety of options or solutions. There won't be just one solution.

My concern, though, looking at the statistics that show us what the return for farming is supposed to be over the next five years, is that I'm not sure how many farmers are going to have the wherewithal to make changes in their farming operations if they decide that they want to get smaller and move into more specialized commodities, or that they want to go larger—which seem to be the two choices we have in Saskatchewan right now—or that they want to move into value-added, or that we want to develop more community farm connections in order to move more products locally.

There are a number of different possibilities there, but a lot of them depend on survival over the next five years, which I think is a really critical question given the estimates we have for returns on a number of different kinds of farming operations.

[Translation]

Mr. Odina Desrochers: Do you have any strong suggestions to make to the government of Canada? I think everyone around the table is aware of the urgency of the situation. You say that you do not know what will be happening five years from now.

We are faced with a position taken by the Secretary of State for Rural Development. The Minister of Agriculture has also taken a position. Is it not time for the government of Canada to take concrete measures, such as a cross-country tour, to consult all those people affected by the problem? If we do not act immediately, five years from now we will be sitting around this table and observing that there was a time when small family farms existed.

So what are your suggestions for the federal government? What should they be doing immediately to attempt to put this situation right and offer some concrete measure to ensure the survival of these small farms?

[English]

The Chair: You have one minute.

Ms. Diane Martz: Okay.

In terms of finding concrete practical measures, your suggestion of talking to farmers is probably a very good one, because I think they can probably tell you exactly how this impacts their lives and what kinds of changes they'd like to see.

The Chair: Thank you.

Madam Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

I couldn't agree more with the fact that farmers, primary producers, aren't getting their fair share. I certainly agree with you there. But I think agriculture's attitude over the past 40 or 50 years has been that we're going to produce it and you're going to like it. The change in food safety, convenience, and how consumers want to buy their product is having a major impact on agriculture. It seems everything is driven by the fact that if the consumer isn't going to buy it, there won't be a market for it. So we're in that change of mode.

An apple orchard fellow had his whole shipment shipped back. There was nothing wrong with the apples, but their red side wasn't out in the plastic bags and it was shipped back. Those are the kinds of stupid things that are happening, the demands that are being made on a primary producer, and they're certainly not being compensated for it.

But I think the product change due to the consumer demand and the manufacturing process has changed agriculture's approach to everything.

Looking at the problem, we see what you have done here; we see the numbers. But have we seen any solutions to these problems? We've seen these numbers before. They're just updated numbers, and I appreciate that. But do you have any ideas?

• 0955

Would it be better to include also the costs for the processing all the way along, to see the cost factor with the primary producer, the cost factor with the processors, so we have a definite look at where the extra dollars are being generated? I think that would be a better, clearer picture for us to attack and say, okay, here's basically where a problem exists, instead of always just looking at numbers. They certainly leave an impact, but we don't know where to go to see where the problem is.

Ms. Diane Martz: Right, and this is a first step.

Ms. Rose-Marie Ur: But this was a first step 10 years ago too.

Ms. Diane Martz: I know, but there was a huge demand to get this information out to people. They wanted desperately to have this information basically coming out of last year and the situation...

I think, and I've mentioned this earlier today, the whole question of what's going on in that gap between those two lines, between what happens at the farm level and what the consumer pays, to know what's going on at the producer level, how those costs are divided between labour and profit-taking and all those different things, would give us a much better picture of where you could perhaps direct change.

Ms. Rose-Marie Ur: Yes. I know in the past it has been stated that we need to increase the number of marketing boards and that, and my colleague Mr. Calder had alluded to the fact that he was a hog producer. I was at a meeting not too long ago, and the gentlemen there said they had no interest in being a part of that. They liked the volatility. So as a government, we can't say, okay, this is what you have to do.

On another issue, they say we should promote environmentally better, sustainable agriculture. I think our farmers have done that by going to no-till, for example, that being another positive.

Another suggestion was a royal commission looking into food prices and the emphasis on corporate concentration. One of our colleagues, Dan McTeague, is presently looking at that, and I think that certainly is an important factor too.

But regarding the demand by consumers—and I'm not here because I'm part of government, defending what government is doing—the consumers are also driving the government, saying “This is what we want, and it's your job to make sure we get it.” I think there has to be a bit of a balance. I'm a farmer and I want to be happy too, but the producers are also buying this product. How do we—

Ms. Diane Martz: How do you balance the consumer and the producer?

Ms. Rose-Marie Ur: Yes.

Ms. Diane Martz: That's a good question. Also, I think this is a problem in the organic markets, where the consumer wants to see a particular quality of vegetable and doesn't understand that something can have a blemish and still be a perfectly edible product. That basically comes through education.

The consumer also wants highly processed, fast everything, just because of our changing lifestyle.

Ms. Rose-Marie Ur: I wasn't an organic farmer, but I also was a vegetable farmer. I can tell you, they didn't want the little black spot on there; they wanted the beautiful white head. Well, the beautiful white head doesn't come without a little bit of spray on it, chemicals, but they wanted the white head. These consumers do not understand that does not come by nature. That comes with a little bit of help.

Just because you're a Canadian farmer, the bottom line is, if there's cauliflower from the U.S. and it's 10¢ cheaper than my really good cauliflower that I was very proud of, they sure don't care that I'm a Canadian producer; they're going to buy that cheap stuff.

An hon. member: Right on!

Ms. Diane Martz: You're absolutely right. However, I'm very surprised at the number of young people I talk to who are basically buying organic.

Ms. Rose-Marie Ur: Until they sometimes, the way it goes—

Ms. Diane Martz: You mean, until they have a family and have the additional costs, and so on, to go along with that. But if we can keep that movement going, there could be a change and an improvement in that particular area for marketing, but also a change in consumer attitude.

The Chair: Thank you. We're out of time.

If Mr. Hoeppner promises a short, tight question, I'll give him one. If not...

Mr. Jake E. Hoeppner (Portage—Lisgar, Ind.): I'll try to make it as short as possible.

The Chair: Make it short.

Mr. Jake Hoeppner: Thanks for all the information, Diane. It has been terrific.

I want to talk a bit about a solution. I've been able to travel to South America in the last year, and I've talked to European negotiators, and one thing I find they all agree on is that we need some kind of a set-aside program in the grain industry to cut back the product. I think world governments would agree to it. We have the grain food bank in Canada. They're even concerned that this could be set up on a world basis.

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So I think that is one of the solutions—if we could control the product, have a set-aside tied to government safety nets. Do you agree with that?

Ms. Diane Martz: So the idea would be to take land out of production—

Mr. Jake Hoeppner: Yes.

Ms. Diane Martz: —in order to reduce—

Mr. Jake Hoeppner: Or to put it into something else where the product is needed, like environmentally friendly fuels. This is done in Brazil.

Ms. Diane Martz: It sounds like it could be part of a larger solution. It's probably not the only solution. Other countries have had set-aside programs, as you mentioned.

Mr. Jake Hoeppner: Most of them have.

Ms. Diane Martz: Yes.

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

The Chair: Hey, you're learning. Thank you very much. You can teach old dogs new tricks, right? Thanks, Jake.

And thank you, Diane. It was very good of you to come. This is the kind of information we all need, not just this committee. The country needs this. I'm afraid we'll keep on fumbling, though, because this is an old problem that's been around a long time. We need this information, and we appreciate your work very much. Thank you for coming.

Ms. Diane Martz: Thank you.

The Chair: Now we're going to call forward an old friend from Manitoba, Bob Friesen, who is the head of the CFA. He has with him Benoît Basillais.

Mr. McCormick was allowed a commercial, so let me say that Bob Friesen comes from Wawanesa, Manitoba, which is the founding place of the Wawanesa Insurance Company, one of the finest insurance companies in the country. I could tell you why Wawanesa got the insurance company, but that's a longer story.

Anyway, thank you for coming. As usual, Mr. Friesen, I'm sure you'll have some equally provocative things to tell us. Go ahead.

Mr. Robert Friesen (President, Canadian Federation of Agriculture): Thank you very much, Chairman Harvard, and thank you very much to the rest of the committee. It's always a pleasure to come in front of this committee, because I know all of you are very sensitive to farm issues, to the farming economy.

I would like to start off by thanking each and every one of you for whatever part you played in helping with the announcement that was made yesterday. Anytime you can accrue another $178 million into farmers' pockets is very, very welcome. For those of you who will be reading our press release, of course we do have some concerns for the future, but on the short term this is very good news. Thank you very much for the work you've done.

I would like to touch today on how we work with agricultural policy. I will not spend a lot of time in talking about what I did last time I was in front of this committee. That had to do with the current farm income situation and some of the dynamics that have led to the crippling situation farmers find themselves in today. This is much more than just about asking for money all the time. I believe we have some serious things to address in making sure we can prepare ourselves better for the future.

I would like to paint a picture to start off with by saying that in Canada, agriculture and agrifood has for quite some time been, and is currently, a good-news story. We currently generate around $85 billion of revenue every year. We contribute about 14% to employment in Canada. And agriculture and agrifood comprise about 24% to 26% of the trade surplus that Canada has. So it can be a good-news story if we move the farm gate out of the picture just briefly.

Let's look at some goals and objectives we have for agriculture in Canada. We of course want to maintain the rural infrastructure. We have set a goal for a 4% share of world agricultural trade by the year 2005. We want farmers to be able to survive, but we want them to do more than survive; we want them to do well. Those are our goals and objectives.

Now, between the two, we have a whole host of agricultural policies, regulations, and tools we provide farmers to work with. I believe the success of achieving our objectives is contingent on ensuring that we build very, very important crosswalks between those agricultural policies, those regulations, and those tools. That's what I would like to spend some time talking about today. You have a deck in front of you, which I will refer to, if I could draw your attention to it.

A key issue in success for our agricultural industry in Canada is to provide our farmers with more and better tools to make sure they can perform well. If we can do that, then in part we've answered the question about rural development and ensuring that our rural community stays intact and that we can get more vigour into our rural community one more time.

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So it is more than just asking for more money. We have often said that the safety net package we provide for our farmers is about providing a net beneath the farmers so that when they do fall, when our tools fail us and when we don't build those important crosswalks between the policies, we will have that safety net to catch them.

If you look at that model in front of you, we have gross receipts, we have input costs, and that of course results in what we call farm income. What are some of the issues, what are some of the things that affect the way that is calculated and the final outcome?

Of course we have trade rules. Those trade rules have a serious impact on the gross receipts our farmers generate. It's all about market access. It's about competing in the world market.

Of course producers have answered the government's call in increasing domestic production, in developing export markets. But when producers answer the government's call and compete in the world market, that of course makes them more vulnerable and very susceptible to fluctuations in the world market. That is when we have to ensure that we provide something to insulate them from that vulnerability. And I can assure you that every farmer I talk to would prefer to get their money from the marketplace. So trade rules affect our gross receipts.

We have a tremendous challenge in front of us that impacts on our costs and how we do business. Of course we talk about environmental sustainability. We talk about trade rules. We talk about a whole host of challenges we have in front of us that impact on our input cost.

You know that over the last ten years farmers have experienced a 38% increase in input costs. Some of those costs have to do with the regulatory system; some of them have to do with an increase in cost for fertilizer, fuel, etc. So that impacts on the input costs. And domestic regulations and how we harmonize domestic regulations and agricultural policy have a lot to do with the level of cost a farmer experiences on the farm.

Then again, beneath that we have what we call an underarching safety net package. Part of the problem that has happened over the last couple of years is that we tried to move the safety net underneath the farmers while we had a problem, and we couldn't move it underneath the farmers fast enough and some of them fell all the way to the floor.

A safety net is not meant for farmers to perform better. It's meant to catch them when we don't create an environment that helps them to work as well as we need to have them work. We need to make sure that safety net is there. So let's build the tools to allow the farmer to climb up on the trapeze, and then let's make sure we have that safety net.

There are several places where we feel this breaks down. I would like to take a closer look, so let's go to the next page and let's talk about trade rules. How do trade rules impact on what farmers get for their product?

Well, first of all, of course, we have a program designed for a safety net package—the underarching safety net package. But we are extremely sensitive and very aware of the rules Canada agreed to in the annex to the agreement on agriculture, and we have to make sure we stay within those rules.

We have a very, very important export market. We only have to look at beef or pork or grain. And the success of farming to a large extent is contingent on our export markets. But we have to ensure that as we design these programs we don't make ourselves vulnerable to trade action.

A good example is the anti-dump and the countervail action that was initiated by the U.S. on beef. We won that one within the current safety net package. And we were quite frankly very relieved that we did win it. But if we had been just a little more vulnerable we could have lost it, and it would not only have resulted in the $10 million that was spent in defending the action, but it would have resulted in much more by long-term decreases in income.

We won the sunset review in the hog industry also, again within the current safety net package.

We now have an impending challenge on durum wheat. We can only hope that there again, the way we've designed our safety net package will save us on that front again.

• 1010

Then we have international subsidies, and I won't go into a lot of numbers. All of you are familiar with the comparisons we've done on international subsidies and the fact that Canada has cut way back from the last round, and it is a lot lower than the commitments they made in the last round. We're only at 15% of our amber spending. And of course other countries have found ways of taking money out of a box that is restricted and moving it into green-box spending, and there is no limit in green-box spending. We currently have a peace clause in green-box spending.

Other countries, because of their allocations toward the farming industry, have spent a lot more money on agriculture. A simple comparison is a per capita amount of money spend on agricultural support, which is $145 in Canada and approximately $350 in the U.S. The argument could be made that the per capita spending is a perfect example to say that there is no reason we shouldn't be spending a little more as well.

Then we have what other countries, the European countries especially, are now referring to as multi-functionality, and here again we believe that this might be a back-door approach to spending unrestricted amounts of money in the farming industry.

Let me use Poland as an example. Poland wants to join the EU. Well, Poland currently has more dairy farmers than all of the current EU member countries. Their average herd size is two cows, and as the Europeans start talking about trade liberalization and globalization in the next round, they will not throw those farmers at the mercy of world markets. So they want to pay their dairy farmers for being dairy farmers. They want to pay their dairy farmers for maintaining their farms in the pristine countryside. They want to pay them for that as if they're providing a service to the public. Unless our country decides to allocate enough money to the farming industry and do the same thing, it will leave us behind the eight ball.

Then we look at foreign market access, again something that impacts on trade and ultimately on our gross receipts. Some of you may know that Canada provides the highest level of minimum market access of any OECD country. We offered 5% of minimum market access; we achieved 85% fill. That is 30% higher than the average at the WTO.

We also have the second-lowest average agricultural tariff amongst the OECD countries, and we are one out of four countries that have a lower average agricultural tariff than industrial tariffs. In fact, at the OECD the agricultural tariffs average 427% higher than the industrial tariffs. Ours are lower. And when it comes to tariff peaks, only 2% of our agricultural tariffs are above 15% ad valorem.

So Canada has shown real leadership in providing market access to other countries. That of course begs the question of what we can give in the next round. Again, this has to do with how it will impact on farmers' gross receipts.

Let's look at domestic regulations. Domestic regulations, of course, affect how we do business on the farm and our costs. All of these inevitably impact on our net income. As I said earlier, we have input costs as far as fertilizer and fuel is concerned, but then we have the regulatory system. And this is where it becomes very important that we build important crosswalks. We must always ensure that a policy developed over here does not undermine the utility of a policy over here.

A good example is the partial fix we got yesterday in the transportation announcement. We tried to harmonize our transportation policy with our objectives of developing in the export markets. There was an attempt to harmonize and give farmers a better tool so that they can export their grain.

We can cite all kinds of examples. We can look at species at risk. How will this impact now on how farmers do business? Will this increase costs to the farmer?

Or we can talk about the Canadian environmental act. How will that affect how farmers do business?

Or what about the medicated feed regulations? The hog industry tells us it may add an extra $40 million in costs to the hog industry alone if these regulations go ahead as they are currently written.

• 1015

So we have a lot of policies where we have to make sure that one supports the other and they collectively move us toward the objectives we have.

Let me give you an example of where this breaks down. On the next page we talk about pesticide policy, and the pesticide policy is a very important one where we have to ensure that we harmonize with our other policies. A good example is the fact that we have tolerance levels for chemicals coming into Canada that we don't allow for use in Canada.

Let me give you a very specific example. We currently have a European wireworm problem in B.C. In B.C. two chemicals that they would use for this problem have been taken off the shelf. They are currently asking for emergency approval for a chemical, and it has been denied them. Why has it been denied them? Because the risk cup is full and overflowing. Why is the risk cup full and overflowing? Because we have apples coming in from the U.S. that use that chemical.

What really frustrates the farming community is that while our producers were asking for emergency approval on this chemical, the U.S. expanded the label for that chemical, and now we have increased products, such as spinach and beets, coming into Canada that contribute to filling the risk cup. It leaves our producers behind the eight ball. This is an example of where we are not effectively harmonizing the different policies we have and allowing our farmers to achieve their objectives.

Let me use the Biosafety Protocol as an example. In Montreal the environment minister agreed to a deal that has the potential of seriously impacting the farm community. First of all, we're concerned how this agreement is going to harmonize with the WTO. It's unclear whether this agreement will in fact be subordinate to the WTO. Then we have the way they handle documentation in that agreement. If exporters cannot guarantee that their commodity does not include any GMO residue, they will have to document it as “may contain”. How will this affect the some 2,000 shiploads of grain that we export from Canada every year? We've been told that segregation is a very onerous task at the farm gate and in the grain handling companies. If we can't guarantee it and we have to document it as “may contain”, how will this affect our objective of 4% world agricultural trade? How will this affect how we ensure that we maintain the healthy farm economy we so very much need for our export interests?

As we look at the next page, let me again emphasize that we have to make sure we build crosswalks between the different policies and regulations we have. CFA is currently carefully reviewing all the legislation and policies we do have to see how well they are harmonized.

May I suggest that in the case of the European wireworm, they should have had an interdepartmental meeting. The PMRA should have called a meeting with the policy branch; MISB, which is in charge of trade policy; and the safety net committee. If the PMRA had to turn down their request for emergency approval, MISB should have been there to consult on how this is going to affect our exports in seed potatoes. The safety net committee should have been there because, if they have to turn this down, the potential loss to farmers in B.C. is $8 million. I dare say that if our policies prevent our farmers from achieving the objectives that governments have set for us, then they should have told the safety net people that we will need an extra $8 million in B.C. because we have not provided those farmers with the tools they need to achieve their objectives.

So we have to build these important crosswalks. As we do that, we must get away from what we have started referring to as a survivalist mentality. It is not enough to maintain our policies and to maintain farm income just so that farmers can survive. Farmers need to do well, and we make no apology for that.

Let's very briefly look at the safety net package on the next page. We have four important pillars. I believe I mentioned these to this committee before. Those pillars are NISA, income disaster, crop insurance, and companion programs.

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Let me say also that there has been a lot of criticism about the programs we have designed. Part of the reason is that we didn't get the design we wanted. The other part of the reason is that it's not that we can't come up with a good program, it's that we measure need in the farm community by how much money is available. We should measure need in the farm community and then decide how much money is available. We can design a good program.

So we are currently looking at improving the design. We have made considerable improvements for the 1999 year, and we are currently looking to make improvements for the long term—I shouldn't call it the long term, but at least the next three-year safety net package.

We have seen flexibility. Part of the frustration is that the provinces have been all over the map when it came to a redesign. We're looking at inventory calculation, negative margin coverage, and family labour. For some of these design changes, the provinces have decided to agree or not agree to them depending on how much money they would like to spend. So again we must make sure there is more consistency there so that we can give farmers the security and confidence they so very much need.

If you look at the next page, the question is, what are we doing? We are looking at projections for 1999. While we are very thankful that we made the design changes, in fact it's going to increase considerably the amount of money flowing to the farm community. Let me cite Saskatchewan as an example, where they got approximately $150 million for the year 1998. The projection now is that for 1999 about $400 million will flow into Saskatchewan. But we made the design changes based on the merit of the design change. We made the changes because we wanted to make the programs better. The program is becoming better, but now we are seriously looking at the fact that we may be running out of money for 1999. So again we have made those design changes, and they are making the programs better. Now let's ensure that we have adequate funding.

Some of the changes we are looking at making in the three-year program is that we would like to get rid of the 3% of your ENS-AIDA-NISA link. That would make the coverage wider and deeper. We believe there were a considerable number of producers who, because of that 3% link, either got a much smaller cheque than they should have received or the 3% deduction might have rendered them ineligible entirely.

We would also like to see the NISA contributions be made tax deductible. That would give the farmer the ability to move his cashflow around in such a way that in a good year he can contribute and get a tax deduction. When he withdraws it, then of course it would be taxable.

We're also looking at deferred deposits. Let's say that in the year 2000 the industry has in part turned around, and the farmer may have some more money available to him, but he needs to pay outstanding bills. That would give the farmer the ability to use that money to pay outstanding bills. The year following he would be allowed to make a contribution for this year as well as for next year. That would give them the ability to manage a little better.

We're also saying that we need deferred withdrawals. In other words, if a farmer says this year he thinks he can get by without withdrawing, and if next year he finds that it's a little worse than he expected, give the farmer the ability to withdraw for both years that he triggered the withdrawal.

CFA just recently, in fact this week, adopted a policy that there should be a crop insurance-AIDA link in such a way that we don't undermine the crop insurance programs across Canada while we do have an AIDA that covers negative margins. Of course we're always looking at ways to try to ensure that we can give those farmers who have very low accounts and zero accounts the ability to fill up those accounts a little faster so that they are better prepared for the next time a disaster hits.

As we look at these programs, we want to make sure that the next time a disaster hits—and I know that clearly the grain industry is not out of the current disaster—we are not again moving the net beneath the farmers while we have the disaster. Let's have it in place, and let's have a good strong net beneath the farmer.

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Incidentally, we also recommended to the minister a while ago that we would be quite prepared to establish an adequate income disaster fund for income disaster situations. If we don't need it, we are quite prepared to move the balance to the next year. Presumably as agriculture turns around and as we regain our confidence in agriculture, there will be years when no money will have to be added to that fund and in fact it would be in place.

We don't believe there is any single issue that is going to solve the problem. We believe it's a multi-faceted problem. We believe we have to approach it in that way and ensure that everything we do, all the tools we have, all the policies we have... I can't stress enough the importance of building crosswalks between those policies and those tools to ensure that they all help to allow farmers to achieve their objectives.

On the last page, there's a diagram of a Canadian agricultural policy overarching all the different micro-policies we have in Canada, and a safety net policy underarching all that as well. Let me once more use the example of building important crosswalks between the different branches we have and the different policies.

In the next round, if our trade minister is ready to sign a deal, if he is willing to agree to a deal where the Europeans can avail themselves of a multi-functionality concept, what our trade minister needs to do is phone home to our finance minister and say “I have to agree to this, but you will have to provide an adequate amount of money to battle what we have to battle in the EU.” Or he may have to phone someone else and say “I need to agree to this. How can we ensure that the domestic policies we have...” If he agrees to this agreement, will it help to keep supply management intact? If it will not, then again he has to ensure that the right minister at home is willing to address that problem, and address it adequately.

That is our attempt to demonstrate to you the importance of the multi-faceted approach to ensuring that we can provide better tools and more tools for our farmers to be able to work in the environment. It behooves us to ensure that we create an environment where they can do what they do best. Currently when farmers go home, they see that they're doing everything perfectly, but perfect isn't enough. That is where we need to go.

Thank you very much.

The Chair: Thank you, Mr. Friesen. As usual, you have given us a solid and comprehensive presentation.

Before I go to Mr. Bailey, I just want to thank you and the CFA for your support of the package that was announced yesterday by the government. I think yesterday's announcement is the culmination, the legacy, of two years of very hard political work. It started of course with Estey, followed by the Kroeger process.

I might say that the real political work, especially for those of us in the government caucus, started after Kroeger. I can tell you—and I'm sure this doesn't come as any great surprise—that we were very far apart on some of the issues within the larger problem of western grain transportation and grain-handling. A lot of us simply wouldn't take no for an answer. We came up with what I think is a fairly reasonable package yesterday.

I want to thank people like Larry McCormick, who is the chairman of our rural caucus. It was the support of the rural caucus from all over the country, not just from the west, that largely made this happen. We coalesced, we all worked together, we wouldn't say no, and we got what I think is a reasonable compromise.

On the competition side of it, that's a work in progress, and there's going to be more happening over the next year or two on that. I think we've done a really good job here.

[Translation]

Mr. Odina Desrochers: Mr. Chairman, a point of order, please. It strikes me that your comments are not objective. I wonder whether you are now acting as chair of the committee or as a government member.

[English]

The Chair: Well, it's a surprising thing; I am a member of the government. Mr. Friesen did make a comment in support of the package and I am responding to it. I suspect that you, being a politician, would do exactly the same thing, Mr. Desrochers.

• 1030

[Translation]

Mr. Odina Desrochers: Mr. Chairman, unlike you, I am not the chair, just an ordinary member of Parliament. Once again I request that you be more objective in the comments you make before our guests. Thank you for your attention.

[English]

The Chair: Mr. Bailey.

Mr. Roy Bailey: Thanks, Mr. Chairman.

Thanks, Mr. Friesen, for an excellent presentation—well done, well presented.

To start with, I believe you were here when the previous presenter, Diane, made her remarks. They were very much directly related to some of the problems your organization has.

I don't know whether it was Paul Steckle or Rose-Marie Ur who mentioned the almost predatory-like issue of the retailer selling to the stores but charging the producer for the right to sell in that store. The reason I mention that is that I've spent hours and hours on the transport committee. We have put in place there what we call predatory practices... In this area of agriculture, that terminology should be used and should be adhered to, maybe even with legislation. That's a predatory practice and it should not be allowed. That should be under the watchdog of government.

I just throw that out because, Mr. Friesen, I'm sure you would agree that in the interests of agricultural income and the preservation of farming, indeed that practice should be under the watchdog of government.

I say this to the committee. This is probably the most versatile committee, covering all areas of agriculture in Canada. It's very difficult, of course, to bring in policy that will affect the apple producers in the Annapolis Valley to agriculture in B.C., as somebody mentioned. It's a very difficult committee and a good representation through the Canadian Federation of Agriculture.

I got a phone call earlier this morning, Mr. Chairman. The skyline in my area of Saskatchewan is changing. The landmarks are disappearing, but a new landmark is going up about 40 miles to the northeast. We have a huge new hog barn going up. So these things are changing.

I appreciate your mentioning, Mr. Friesen, the regulatory controls on pesticides and herbicides and so on. I must congratulate the Department of Agriculture, though. I don't remember the chemical, but as you know, chickpeas take a very special weed control. It wasn't licensed in Canada, but I was able to draw that to the attention... I did get a special permit for two of my producers to use that. The results have been very positive. You made a very valuable point; I think we're too slow on this.

Mr. Friesen, you said our income costs went up 38%. Of course that's an average across Canada. In some areas it's even more.

I'd like to very quickly ask you a question. It's a little off topic, but it deals with your membership. I'm not being derogatory, I'm not being negative towards this, but I want to clear up something that I can take back to my own province and to my own constituency.

I was at the most vocal of all Saskatchewan Association of Rural Municipalities meetings that I ever attended over the years. I've been to a good many, representing different organizations. One of the motions they passed there... This organization is the best organization because of the large area. It covers the whole of the most rural province in Canada. They wanted membership on the Canadian Federation of Agriculture. I have heard their reasons for why that was not accepted.

I want to put it plainly. I want it from the federation. I don't want it from a source of rumour. I don't want it from a coffee shop. I don't want it from even an editorial. I want it from the president. If you don't mind, I would like you to respond to that question. Yes, I am being selfish. The reason I want to know that is personal.

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Mr. Robert Friesen: I'd like to comment on a few things you've mentioned.

You talked about shelf space. In my previous life I was involved in the Canadian Turkey Marketing Agency, and one of the most frustrating things we dealt with was trying to get newly developed products on the shelf. You're quite right, it's not about selling the product; it's about renting real estate in the stores.

The other thing about farmers' share, and you may have seen it when we did this, is that we created what we call a “Food Freedom Day”. You've heard of Tax Freedom Day, which falls on July 1. Food Freedom Day in Canada falls on February 7. That's when the average farm household has earned enough money to pay for the entire year's grocery bill. But what's even more important is that January 9 is when the average household has earned enough money to pay for the farmer's share of the entire year's grocery bill.

As a point of interest, when Mr. Parsons drove his combine to Ottawa from B.C., we calculated that if he had combined a swath of malt barley all the way from B.C. to Ottawa, it would have been close to 6,000 acres. If it had gone for beer, he would have generated $145 million. Of that, 52% would go for government taxes, 47% would go to retail, and 1% would go to the farmer. The farmer gets about 10% of the deposit on the beer bottle. So yes, that's a challenge.

As far as your question on membership goes, yes, SARM did apply to CFA for membership, and I can honestly tell you that there is a lot of interest in accepting a membership out of Saskatchewan.

We're looking very closely at what is being done there now to create a general farm organization. The only reason SARM was turned down at CFA, and they were, is that it was deemed that they were too close to being a political body, a quasi-governmental body. Other than that, we would encourage a general farm organization in Saskatchewan. I know Sask Pool is a member of ours, but in Manitoba in fact Agricore, as well as Keystone Agricultural Producers, are members of ours, and we don't see any reason the same couldn't work in Saskatchewan as well. As I say, we'd welcome it.

The Chair: Thank you.

Madame Alarie.

[Translation]

Ms. Hélène Alarie: Let me first of all start with two comments because it was a bit of a shock for me to hear your enumeration.

My first comment relates to transport. We would like to be just as pleased as everyone else with the announcement made yesterday but when we live in the East, it is impossible for us to have this reaction since there is nothing at all for the East in the announcement.

As a matter a fact, when Mr. Kroeger held his hearings this summer, I presented a brief in keeping with one of the recommendations of Justice Estey to the effect that there should be solutions relating to the use of the St. Lawrence River and the opening of the Great Lakes. Something that is to the advantage of Ontario would also be to the advantage of all of Eastern Canada.

There is nothing at all in yesterday's announcement that takes the East into account. It's as if grain only starts to exist after crossing into the West. That is not true. In all fairness, it must be recognized that we do have grain producers, that the prices are the same in the East as in the West and that the producer who has to travel 100 kilometres by truck to transport his grain uses the same rural roads and faces the same problem.

I'd like to share everyone's pleasure with this but one person's misfortune is another person's happiness or vice versa. That is just a comment. And it isn't because we didn't do our job. It's not so easy to produce a brief to present to the Kroeger Commission in the middle of the summer.

My second comment relates to GMOs. I'm rather annoyed by the Federation's proposal since it only discusses costs. There is reference to the cost of segregation but nothing is said about the cost of losing markets. I read something yesterday about the evolution in the Codex Alimentarius Commission; we are starting to move away from the American position and getting closer to the intermediate position which is also that of Japan and Norway.

So, we are going to have to give more thought to this matter than simply saying that it will cost us a lot of money. I read the alliance's document. It says exactly the same thing: it will cost us a lot of money. However, I read in the appendix that there should be compulsory labelling in order to respond to people's concerns. There is something wrong here.

In this respect, it seems to me that an association like yours must feel bothered by organic agriculture, by the effects on soil and on the environment. But I don't see anything about this in your speeches.

• 1040

I have finished with my comments and I'd now like to ask you a question on the AIDA program.

Mr. Odina Desrochers: A lot of snags.

Ms. Hélène Alarie: When we began, an expert committee made recommendations to us before the implementation of the program. They wanted the negative margin. These were things that will eventually be granted or done because these experts knew what they were talking about. You were there, along with the UPA, which made its recommendations.

It is hard for me to understand why you didn't have a fit or even go into hysterics when you saw that nothing was working in this program from the very beginning. At the present time, I am aware of a whole series of problems faced by sheep breeders, cranberry producers, emu breeders, potato growers, market gardeners and a whole lot of others. I am told that it is in the process of negotiation, that there are new negotiations and they still don't know whether it will be retroactive to 1998.

How can you explain the fact that an association like yours didn't lose it?

[English]

Mr. Robert Friesen: That's a good question. My children at home encourage me to lose it behind closed doors. Maybe that's why.

We did lose it. We were very unhappy when the program was implemented, because in fact many of the changes that have been made to date were issues that we asked them to do in the first place. So yes, we were very upset. I guess we got really upset, and then we became very stubborn and decided to push very hard to give the government more insight into why we wanted these things in the first place. So we began to achieve some of these design changes, albeit slowly and only incrementally.

That's one of the reasons I referred to the fact that we moved the net underneath while the farmers were plunging to the ground. If we had moved it underneath them before they started falling, we would have done a much better job, and that in part has to do with the question, why didn't we implement it right the first time instead of making the changes as things were unfolding?

Some of the design changes were made retroactive to 1998. Negative margins were made retroactive to 1998. I believe family farm labour was made retroactive to 1998. For 1999, we now will have the inventory calculation as well as giving farmers the choice of whether they want to use a three-year average or an Olympic average—that's five years and you take the high and the low off.

But yes, we were very upset, and we were determined that we would continue to improve this program to ensure that we got our way in the final end. That has resulted of course in farmers being very frustrated, and again I say some very important changes need to be made for the next three years. There will be costs tied to them, and $435 million will not be enough. It may be enough in some years, but it won't be enough every year.

Very quickly, on the comment on transportation, you're absolutely right, the announcement yesterday did not deal with all the issues that were put in front of Kroeger, and that disappoints us as well. But at least, again, this is an incremental start to getting us towards where we want to go.

A good example is the domestic livestock producer in B.C., who pays more for his grain freight moving out of Saskatchewan than the freight that's applied to export grain. That's an inconsistency we would like solved. We think there should be a freight cut in export grain, but we think the same should apply to domestic users.

As for GMOs, yes, we are very concerned about our markets. We are very concerned that in the end farmers may be held to ransom by very large corporate input suppliers, and so I think we have to be very careful. We have to make sure we don't jeopardize the markets we have and we don't allow companies to be able to confine producers. Producers have to be able to make choices.

The Chair: We have only 12 minutes, so I would suggest we try to keep our questions and answers a bit truncated.

Mr. McCormick.

• 1045

Mr. Larry McCormick: Thank you, Mr. Chair.

I think I'll try for a little bit of a preamble to my question. Someone mentioned western grain transportation, but rural Canada is my life and my passion. Our challenges in rural Canada across this country are vast.

I thank and recognize the CFA for being involved with the Magog conference in Quebec, which was an excellent conference. People were there from all areas of western Canada, and we all want to work together. I want to recognize the Province of Quebec for the excellent support they give their farmers. When you live in eastern Ontario and our farmers hear about the support they're getting next door, it's a challenge.

Mr. Friesen mentioned how we'll need to have domestic policies to offset or work with this multi-functionality of the European Union in the next round of the WTO. That takes political will, I acknowledge. We need to do a better job of it. But to offer even almost as much support as we need to offer, we need to build public support for whatever the government of the day is.

I look forward to your sharing your ideas, as you do with us continually, on how we can continue to build this public support for agriculture, agrifood, cheap food policy, taxation, and so on. Do you have any comments, Mr. Friesen?

Mr. Robert Friesen: I'm sorry. What was the question?

Mr. Larry McCormick: I think the next round of the WTO will be the biggest single issue facing all Canadians in the next five years, or whenever the round comes. When the minister phones back—whoever the minister of the day is—and says to the finance minister, “We need some money, we need to do the same type of thing in Canada,” that will take a lot of political will. But I don't think the political will will bring enough money forward unless we have the support of Canadians for our agriculture and agrifood industry. I just think we all have to brainstorm on how to achieve that.

Mr. Robert Friesen: In some of the polling, and probably the informal polling that's been done, we find time and time again that the Canadian public... Actually, I believe Angus Reid did one poll, and they showed that over 50% of Canadians thought the government didn't do enough for farmers. We're trying to give that support through things like Food Freedom Day, by telling our consumers that as a percentage of their disposal income they have a lower grocery bill than almost anybody else in the world. That's how we're trying to get that public support.

Mr. Larry McCormick: Even our concert in Toronto perhaps helped a bit. It's just something we have to work at, Mr. Chair. Thank you for now.

The Chair: Just before we go to Mr. Desrochers, Mr. Friesen, you said in your opening remarks that in the 1998 crop year, under the former program called AIDA, $150 million was allocated in Saskatchewan, and you're predicting perhaps as much as $400 million for 1999. Are you then predicting a shortfall in the disaster account, and if so, how much?

Mr. Robert Friesen: It's a little too early to tell right now, but if you look at some of the loose projections we're looking at, the chance may be there that there will be a shortfall. But as I said, it is too early to know, and we will know much better towards fall how that washes out.

The Chair: Could it be $100 million or $200 million, or are we talking about $10 million or $20 million? Can you give me some ball park figure? Will it be an in-field hit, or will it be right out of the park?

Mr. Robert Friesen: We're not sure.

The Chair: All right. I'm sure we're running out of time, so we'll go to Monsieur Desrochers.

[Translation]

Mr. Odina Desrochers: Since we don't have much time left, I will put two short questions. I will give Mr. Friesen a chance to plug in to the francophone reality.

The first concerns the Cairns Group. You say in your statement that you are a bit disappointed with Canada's position, that it made agriculture vulnerable through the reduction of internal export subsidies. You know, however, that Canada is a member of the Cairns Group, contrary to the United States and all the countries of the European Community. Still, they are the cause of the Cairns Group and have a great influence on the position adopted by Minister Lyle Vanclief towards the World Trade Organization.

• 1050

My question is a clear one. Are you for or against the Cairns Group position in the present debate?

[English]

Mr. Robert Friesen: I'm not sure what you referred to when you said I was disappointed. We're actually fairly happy with the government's initial position for trade.

We have some interesting dynamics in the Cairns Group. As you know, over the last two years every time the Cairns countries have met we have also had a Cairns farm leaders meeting in conjunction with that, and we have had some success in getting the CFA trade position into the trade position of the Cairns farm leaders.

The Cairns Group is one that can help Canada build very important alliances in the elimination of export subsidies and in achieving equity in domestic support. We have a lot of support amongst the Cairns countries there. But as you well know, the Cairns countries also would like to take away our ability to have orderly marketing structures, and so there we always have to be very vigilant. And so we've tried to focus very much on saying, look, this is what Canada has offered by way of market access; now we want every other country to offer the same thing in market access.

Incidentally, if you look at a country like New Zealand, they always accuse us of being protectionist, but it might interest you to know that New Zealand's dairy industry is very protective of what we call country-specific allocations in other countries. What they do is negotiate specific market access for New Zealand and have those markets protected. And our argument is that this is absolutely no different from what we're doing with our domestic market for those commodities that need supply management.

So we need the Cairns countries for several things, but on several other issues we have to be very careful that they don't detract our Canadian position from where we want to be.

The Chair: There is time for one more quick question, Odina, and a short answer.

[Translation]

Mr. Odina Desrochers: I can understand your point of view. But I wonder to what extent Cairns can help you strengthen up the situation when we know that at the present time, there are countries that have not done what they were supposed to do following their commitments during the Uruguay negotiations, particularly the United States and the European Community, which still maintain very high export subsidies that distort the market. That is my comment.

Secondly, Mr. Friesen, you say that there seems to be a huge lack of integration and there seems to be a lack of vision relating to the future of agriculture. We talked a great deal about small farms previously. In view of the great changes occurring in agriculture and the need for the various stakeholders to speak to each other, would you be in favour of having a cross-country tour of Canada this fall or quite soon to look into this matter so that we can establish a vision of what agriculture will be five or ten years from now? What is your position on that?

[English]

The Chair: You have one minute because we're running out of time.

Mr. Robert Friesen: Okay.

First of all, at the Cairns, we can build important allies with the Cairns countries that will help us at the WTO against the U.S. and the EU. As far as the consultation is concerned, whenever this committee or another government committee takes the initiative and talks to farmers so that we can develop an overarching Canadian agricultural policy, I think it's very important and would encourage that.

The Chair: Members, according to my watch, we have about six minutes, and so I'll give two to each of the following: McGuire, Bailey, and Hoeppner.

Mr. McGuire, two minutes.

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

I have a very short comment, first, about how easy it is to get enraged about government programs when, no matter what the amount of money is... If you can get 10 provinces plus the federal government to agree on anything, that's perfect. Then I think we should bring in some people into the argument if they think it's so easy.

I was wondering where the federation would stand on the future of NISA in regard to the safety net. Should it be spent first, before a disaster program is accessed, or what role should NISA play in the future of the safety nets?

Mr. Robert Friesen: We think NISA is very important. It helps stabilize farmers' income variations between 70% and 100%. We think NISA is working quite well, and in fact there was a lot of money moving back and forth for the year 1998 and 1999 as well. So we think NISA is a very important tool and in fact we keep pushing all the provincial and federal governments that NISA has to stay.

• 1055

There are a few changes we would like to make. Part of CFA's position now is that if a farmer wants to be eligible for AIDA, they should be forced to withdraw up to 20% of their triggered withdrawal.

Mr. Joe McGuire: Not 100%?

Mr. Robert Friesen: Not 100%, because if you force producers to manage their money in a certain way and withdraw it when they're not sure they need to withdraw it, in a couple of years that account might be at zero. Then they'll come back for money anyway. NISA was meant as a tool for farmers to manage their cashflow.

The Chair: We will leave it at that. Thank you very much.

Next is Mr. Bailey and then Mr. Hoeppner, for two minutes each.

Mr. Roy Bailey: I have a quick question. Chairman John asked a question to you, Mr. Friesen, regarding the amount of money that could be paid out in AIDA for 1999. You said we may not have enough, but my understanding, on the amount of money paid out in 1998, is we haven't consumed something like 50% of it. Do you not think what wasn't put out to the farmers in 1998 should be carried over to 1999 to create a surplus of money there?

Mr. Robert Friesen: It is being carried over from 1998 to 1999. The reason it is going to hit very close to the top in 1999 is because of the inventory calculation we changed. That change is going to be very instrumental in flowing more money to the grains and oilseeds producers.

Mr. Roy Bailey: I just want to say I'm particularly pleased with that change, because I expect I will have 40% more people eligible in 1999 than in 1998, and maybe the bad-mouthing of NISA will dissipate to some extent.

Thank you, Mr. Chairman.

The Chair: You mean AIDA.

Mr. Roy Bailey: Yes, I mean AIDA.

The Chair: My recollection, Mr. Bailey, is that for 1998 the projection was $600 million. I think we were pretty well at that for 1998, and it was $900 million for 1999.

Mr. Joe McGuire: Saskatchewan is doing pretty well lately.

The Chair: Do you have something to add? I want to go to Mr. Hoeppner for just a minute or two.

Mr. Robert Friesen: I just want to say if we run short of money we'll be back next fall to say, look, the program is what it should be, but obviously the disaster is bigger than we thought it was.

The Chair: Thank you.

Two minutes, Mr. Hoeppner.

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

Bob, you did a tremendous job with your presentation.

I want to ask you a quick question. You know GRIP has been extended another two years in Quebec and Ontario. Would it be possible to do that for the western provinces while you develop another safety net program? That would give some security to western farmers.

Mr. Robert Friesen: That has everything to do with the sensitivity to trade action I was talking about earlier. I know Ontario has a market revenue program, and if that happened in too many of our provinces where a lot of commodities are exported, we would make ourselves tremendously sensitive.

Mr. Jake Hoeppner: The Americans have a similar project going right now, so I'm just wondering if we're being a little too cautious. We have to get a safety net underneath our farmers. They can't survive another two years.

Mr. Robert Friesen: You're right, it's frustrating to see the U.S. do things we know we couldn't get away with, but the U.S. unfortunately wouldn't care whether they were doing exactly what we were doing. If they could challenge us, they would.

We rely far more on their markets than they rely on ours. That's why we have to be so careful.

Mr. Jake Hoeppner: Thank you.

The Chair: On behalf of all members, Mr. Friesen, thank you very much.

This meeting is adjourned.