AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 23, 1999

• 0907

[English]

The Chair (Mr. John Harvard (Charleswood St. James—Assiniboia)): We can start this meeting. We have a quorum to hear witnesses.

Were you indicating something, Madam Alarie?

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): Yes, Mr. Chairman. I would like to make a motion to be discussed within 48 hours, and that would be at next Thursday's meeting.

I move that this Committee study and report to the House about a clear and mandatory labelling mechanism for genetically modified organisms.

Thank you, Mr. Chairman. You have a copy of the motion in both languages.

[English]

The Chair: Yes, thank you. Now that you've served notice of the motion, we'll be able to deal with it on Thursday.

Ms. Hélène Alarie: Okay.

Mr. Howard Hilstrom (Selkirk—Interlake, Ref.): Mr. Chairman.

The Chair: Yes.

Mr. Howard Hilstrom: I also have a motion. It's being handed to the clerk now for circulation. My motion is as follows:

I move that the Minister of Agriculture and Agri-Food be requested to appear before the Standing Committee at the earliest opportunity, but no later than December 17, 1999, to address the Performance Reviews of the Department and the Canadian Food Inspection Agency for the fiscal year ending March 3l, 1999.

I would ask the committee for unanimous consent to have that passed today.

• 0910

The Chair: I don't think we have a quorum to deal with that. We could deal with it later, Howard. Right now we have a quorum only to hear witnesses. So we'll have to leave it until we have a quorum, okay?

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): If you get unanimous consent, you don't need a quorum, do you? Is that the rule?

The Chair: We don't have a quorum so—

Mr. Howard Hilstrom: Well, I'm sure this motion will receive unanimous consent anyway, so we can wait until some members get here.

The Chair: Yes. Okay.

Mr. Howard Hilstrom: What's the number again, Mr. Chairman, that we need to have a quorum here?

The Chair: It's nine.

Now we have the pleasure of hearing from our friends from the Canadian Wheat Board and a couple of gentlemen from the University of Saskatchewan. We have Greg Arason, who is is the CEO of the Wheat Board, along with his executive vice-president, Adrian Measner; Hartley Furtan, who is a professor in the department of agricultural economics at the University of Saskatchewan; and Richard Gray, who belongs to the same department.

I've already spoken to Mr. Arason. He says that he will start our proceedings this morning, if that's all right with Messrs. Furtan and Gray. As soon as Greg is finished, then we will turn to either of you. Are both of you...or is it just Mr. Gray who is going to start?

Professor Richard Gray (Department of Agricultural Economics, University of Saskatchewan): I'll start.

The Chair: Okay.

All right, Greg, welcome again on a wonderful Winnipeg-like day here in Ottawa.

Mr. Greg S. Arason (President and Chief Executive Officer, Canadian Wheat Board): Thank you, Mr. Chairman—John. It is nice to be here. It is a sunny day in Ottawa, which is a pleasure.

First of all, I want to extend my thanks to the committee for inviting the Canadian Wheat Board to appear before the standing committee on the issue of the farm income study. At the request of the committee, this presentation will address grain prices and future trends in the agriculture industry with a focus on western Canada.

Farmers have been suffering through the lowest grain prices in many years, while faced with higher input and transportation costs. Canadian producers are forced to compete with governments in the United States and the European Union that heavily support their farmers with tax dollars; heavily subsidize exports, as in the EU; or follow surplus disposal policies in which grain is often donated to commercial markets, as in the U.S.

Farmers in the U.S. and the EU are insulated from market prices by massive government subsidy payments. For example, it's estimated the U.S. government will spend approximately $22.5 billion U.S., which translates to approximately $33 billion Canadian, in direct subsidy payments to farmers in 1999. This will exceed total Canadian farm income.

It's unlikely there will be a significant recovery in wheat prices within the next two years, as prices will remain pressured by larger exporter stocks, particularly in the U.S. and the EU. Prices for other commodities, such as corn and soybeans, are not likely to recover either, due mainly to a burdensome supply situation in the U.S.

We are including a number of charts in our paper that illustrate where prices have trended over the past number of years. They are there for information.

If you look at wheat futures prices, in the past year Chicago wheat futures have been at their lowest nominal level since 1977. Wheat futures have approached these levels in the past, but not for such a sustained period of time. In real terms, adjusted for inflation, commercial non-subsidized prices are the lowest on record.

Wheat prices rallied in the spring of 1996 due to successive years of below-average world wheat crops and strong consumption demand, which resulted in world wheat ending stocks falling to extremely low levels in 1995 and 1996. However, the strong prices that year encouraged a substantial increase in wheat acreage and inputs, which, combined with favourable weather conditions, resulted in large increases in production in most of the world's major wheat-producing regions.

In the four years since 1995-96, four out of the five largest world wheat crops on record have been produced. World wheat stocks have grown by 22% since 1995-96, and the stocks among the five major exporters—those being the U.S., Canada, the EU, Australia, and Argentina—have increased by 93%.

On the demand side, world wheat import demand remains weak due to lingering economic and financial problems in Asia, Russia, and elsewhere. Also, many importing countries maintain large domestic subsidies in order to promote higher production, limiting imports.

• 0915

Turning to world wheat prices, wheat export prices are currently at their lowest nominal levels in many years. The price of U.S. Dark Northern Spring 14, which is a common representative price for hard red spring wheat, is at the lowest level since 1990-91. The price of U.S. Hard Winter Ordinary, which is a benchmark for mid-quality wheat, is at the lowest level since 1993-94. The annual average price of hard red spring wheat has been below its current level only five times in the last 25 years. Wheat prices were lower than current levels during the export subsidy war between the U.S. and the EU in the mid-1980s and early 1990s.

As shown in the graph above, the price spread between mid- and high-quality wheat has widened in recent years due to a slightly tighter world supply-demand situation for high-grade or high-protein wheat; however, the abundance of mid- to low-quality wheat on the world market has pressured the entire wheat price complex lower.

Turning to Canadian Wheat Board pool returns for #1 Canadian Western Red Spring, or CWRS, this graph illustrates the Wheat Board's pool account returns for #1 CWRS wheat from 1976-77 to the present. The top line shows nominal pool returns for this period, while the bottom line reflects the pool returns after being adjusted for inflation. The mid-point of the October pool return outlook for 1999-2000 is $167 per tonne in store. The pool returns have declined an average of 10% per year over the past four years. When the pool returns are adjusted for inflation, using 1976 as a base year, the 1999-00 PRO for #1 CWRS equates to $56 per tonne.

Dramatic decline in grain prices and pool returns should also be considered in context with the fact that transportation costs for western Canadian farmers have more than doubled since the Western Grain Transportation Act subsidy was eliminated in 1995. The average railway freight rate for a farmer located in the middle of the Prairies has increased from $15 a tonne to about $34. Costs of production, such as fertilizer, chemicals, and machinery, also continue to increase at a steady rate.

Now, looking at the volume and the value of Wheat Board sales, the table above reveals the aggregate sales revenue and volume of the four pool accounts that the Wheat Board operates. This information highlights the fact that farmers in western Canada have been hit hard on their returns. Although the results are still preliminary, the Canadian Wheat Board marketed approximately 19.6 million tonnes of grain in the 1998-99 pool year, which represents a 10% drop in volume from 1997-98, and a 31% decline from 1996-97.

The Wheat Board's total sales revenue in 1998-99 was down 15% from the previous year, and down 34% from 1996-97. This is a significant decline in Wheat Board revenue for the western Canadian agriculture industry. The Wheat Board is currently expecting sales volume to increase by 16% in 1999-2000, but the total revenue is expected to be unchanged due to lower prices.

Turning to U.S. farm subsidy payments, the United States Department of Agriculture has estimated the U.S. government will spend approximately $22.5 billion in direct subsidy payments to farmers in the 1999 calendar year—their largest amount in history. This represents a dramatic increase of 200% in the past two years. It's estimated that U.S. wheat producers will receive direct subsidy payments in excess of $2 U.S. per bushel of wheat produced in 1999, or about $4.6 billion.

The subsidy payments are made through a number of different programs, but most of the recent increase is due to greater spending on loan deficiency payments and emergency assistance. Most of the subsidies are designated as green- or blue-box spending, which are not subject to reduction under the Uruguay Round Agreement, although in our view they should be in the upcoming WTO round.

Direct subsidy spending—internal support and export subsidies—in the EU is estimated at $38 billion U.S. in 1999. These subsidy programs insulate the U.S. and EU producers from the impact their surplus production has on prices. Market signals and production decisions are distorted, and crop diversification and adaptation in the agricultural industry are constrained. These subsidies provide U.S. and EU producers with an unfair advantage, and they create an unlevel playing field that is extremely detrimental to producers in countries that do not receive substantial farm subsidy support.

• 0920

The Organisation for Economic Co-operation and Development calculates producer support estimates, previously known as producer subsidy equivalents, which are an indicator of the annual monetary transfers from consumers and taxpayers to agricultural producers. The percentage of PSE, the measure used in the above graph, is the ratio of the PSE to the value of gross farm receipts plus budgetary support. As the data clearly indicate, PSEs for wheat in 1998 were much higher in the EU and the U.S. than in Canada. The PSE percentages have been increasing for the EU and the U.S due to a combination of declining gross farm incomes and rising subsidies.

In the case of the EU, export subsidies have increased in the last two years in response to falling prices, while the increase in subsidy spending in the U.S. has been in the form of domestic support. During the same period, PSEs have been declining for Canada and Australia. As previously illustrated, U.S. subsidies have risen dramatically in 1999. This will be reflected in the OECD's 1999 PSEs, which will be released in the year 2000.

Looking at the table above, in 1998 the PSEs for wheat in the EU and the U.S. were $141 per tonne and $61 per tonne respectively. This compares to $8 per tonne in Canada. The PSE for barley in the EU was $171 per tonne in 1998, compared to $49 in the U.S., and $5 in Canada. These figures reveal a playing field that is heavily slanted in favour of U.S. and EU farmers.

Turning to the market outlook for the medium term, the wheat ending stocks that are held by the five major exporters—U.S, Canada, the EU, Australia, and Argentina—provide a key indicator that is commonly used by analysts to assess the market outlook and future price direction. There has been a dramatic increase of 93% in the major exporter ending stocks since 1995-96. The ending stocks for 1999-2000 are currently estimated at 54 million tonnes, an increasingly burdensome level.

Most of the increases occurred in the U.S. and the EU. The U.S wheat ending stocks have nearly tripled during this period to an estimated 27 million tonnes in 1999-2000, the largest level since 1987. It's extremely unlikely that there will be a significant recovery in wheat prices within the next two years, due to the burdensome level of stocks among the major exporters and continued flat demand.

Prices for other commodities, such as corn and soybeans, are not likely to recover soon either, due mainly to a burdensome supply situation in the U.S. The depressed corn market will pressure barley prices, and bearish U.S. soybean fundamentals will continue to weigh on oilseed prices, including canola.

There are a number of future trends that we're looking at in the agriculture industry. Strong growth is expected in world food demand and grain imports over the longer term—5 to 10 years—due to continued growth in population and income levels. World urbanization trends will continue to take arable land out of production, and the potential exists to significantly increase the demand base for grains and oilseeds through the development of alternative industrial uses.

There is an opportunity for Canada to continue to play a major role in supplying food to the world, earning foreign exchange and contributing to economic growth. However, given the current farm financial situation in western Canada and the market outlook for the medium term, there is a real possibility that many producers may not remain in business long enough to realize these future opportunities.

The Wheat Board recently completed a survey of farmers in western Canada, and 67% of the respondents indicated that they expected their farm operation to lose money this year. A shocking 47% of respondents indicated they will be out of business in the next couple of years if the next couple of years are financially the same as this year.

Whether by accident or design, the domestic subsidization policies of the U.S and the EU are putting their farmers at a considerable competitive advantage over Canadian farmers, and it's likely there will be limited progress in this area during the upcoming WT0 round of negotiation. Canada must take a very firm position against such subsidies in the WTO negotiations.

In summary, needless to say, this is a very difficult period for prairie grain producers. Their concerns have been voiced repeatedly over the past year. There is no quick or easy solution. The objective of the Canadian Wheat Board is to maximize returns to producers, and we are committed to seeking ways to reduce system cost. We intend to market all wheat and barley offered by producers, and we will strive to obtain the best possible value for their grain.

• 0925

Obviously we cannot unilaterally increase grain prices in a competitive environment where customers have several choices available to them. That is the reality of the world market, while the reality in Canada is that many western Canadian farmers, despite being as efficient as or more efficient than their U.S. or EU counterparts, are going broke.

We continue to hear major concerns expressed by farmers through our 1-800 call centre and at farm meetings. It is very important that the government recognize these legitimate concerns and take appropriate action.

We are about to embark on the next round of WTO negotiations, and the factors contributing to low commodity prices must be addressed in that process. In the interim, there's a pressing need for effective support programs to bridge the gap and help ensure the survival of Canadian farmers over the medium term.

That concludes our formal comments, Mr. Chairman. Again, we look forward to questions and discussion.

The Chair: Thank you, Mr. Arason.

We'll now turn our attention to Mr. Gray, followed by Mr. Furtan.

Mr. Gray, welcome to this committee meeting.

Prof. Richard Gray: Thank you, Mr. Chairman, and my thanks to the committee for inviting us to speak on this very important issue.

I'm going to open my remarks with some discussion about the way commodity prices behave over time. Although we've focused today on grain prices, there's nothing particularly unique about grain. Commodity prices in general exhibit patterns of price changes that are common.

The normal situation with commodities is that stocks are burdensome and there's no prospect of an immediate shortage of these products. In these situations, the prices are at a low enough level that they're insufficient to provide profitability and any new investment in the sector. That's a normal situation for commodities, whether you're talking about copper or whether you're talking about wheat.

These low-price periods tend to be the prevalent situation with commodities, interrupted by both small price peaks and large price peaks. The small price peaks occur when stocks get drawn down, and it draws short-term resources into increasing the production of a commodity, bringing stocks back up and back into the long-term situation of oversupply. The 1980-81 period is an example of these small peaks, and the 1995-96 period is another example. Prices rose to the point where it became profitable to switch acres into production, increase fertilizer rates, and that type of thing, easily reversing the situation.

Commodity markets are also characterized by very significant price peaks that happen over a much longer period of time. That occurs when there are insufficient long-run investments, which are required to balance supply and demand. Stocks get drawn to a low level, and there's real concern that there isn't enough productive capacity in the sector to supply the good. We talk about food shortages and that type of thing. We saw that last in the 1970s, and if you went back to the late 1940s or the 1920s, you'd see price peaks happened over that period of time.

That's the time when you get very major investment and a rethinking of how the production actually happens. In wheat, in the grain economy, for example, you had large investments in research that led to semi-dwarf wheats and the green revolution in a lot of the countries of the world. So these large price peaks are very important in changing the technologies of production over time.

With that as a background, we're in a situation that is to some extent normal with commodities, where stocks are large and the margins are insufficient to warrant any investment in the sector, as depressing as that might sound.

I'm now briefly going to encapsulate the short-run situation and talk a little bit about the medium-term outlook and the long-term outlook. Then I'll turn it over to Dr. Furtan, who will talk about the policy implications of where we're headed with this.

• 0930

In the short run, as you are all aware and as we've just heard, price levels are such that the margins in farming are very low. In fact many farmers are in jeopardy of actually having to exit the industry. The situation in wheat and grains gets carried very easily now from one sector to another, because there's a lot more flexibility, in the U.S. in particular, than there used to be. That means when wheat is unprofitable, they shift their acres faster than they used to.

It's also clear that in the event that prices rise for any period of time, there is significant excess capacity out there as well. There are still 30 million acres in the conservation reserve in the U.S. Probably half of that could easily be brought into production. There's some scope for increase in fertilizer use, etc., at higher prices. So there's no reason to believe this situation is going to change very quickly. The large stocks obviously overweigh the market right now, and as Mr. Arason said, the stocks are large enough that there's no real prospect of significant price changes for the next one or two crop years.

Also on the scope for the short-term, input prices are a real concern. Energy prices, oil prices, jumped again today to a nine-year record high. That's going to impact on producers through higher energy costs. Increases in western transportation costs are also something farmers are still trying to adjust to.

One thing that hasn't been discussed about the short run is this. As much as the U.S. is subsidising the production of grain in the U.S., their use of export subsidies so far has been limited. In fact they haven't invoked the EEP program for a number of years. That budget is still sitting there. If they see the world situation as bad enough, they may bring back those tools in the war chest, if you like, and make the current situation even worse. I don't think we should discount the possibility that in fact a trade war could come out of this low-price period.

So the short-run situation is very bleak. Without some government help for farmers, there will be a significant income crisis.

We can look at the medium term in this case as being three to five years out. The bright spot we have to look for is, if in fact some of the crisis today has been brought on by the Asian flu and they're recovering from the flu, maybe that demand to some extent will come back. It may come back to a magnitude that isn't fully anticipated in the markets right now. So that's a bright spot on the horizon that I'd like to have more discussion about.

In terms of the EU and the American policy, they're pretty committed to support their farmers at this point. Talking them out of supporting their farmers is going to be a tough battle to win. It's unlikely to change very significantly for the better, perhaps with the exception of their willingness to take more acres out of production and that type of thing, which they may consider if the policies get expensive enough.

In the long term, there are some real issues to address. The long-run trend in real grain prices is very clear. Mr. Arason presented a graph that showed real prices declining over the last 20 years. You can go back to the 1850s and you will still see a trend that's steadily down in real grain prices, with variations around that, these price peaks I talked about.

That has significant implications for what the future of agriculture is going to look like in western Canada. What does agriculture have to look like to enable farm families in the long run to earn income off a commodity that decreases in price over time? I don't see any reason why we wouldn't expect those real price declines to continue. It's important to develop a plan or a vision for how that agriculture may look as we see those prices declining over time.

• 0935

With that cheery set of prospects, I'll turn it over to Dr. Furtan, who'll talk about the policies.

The Chair: Thank you, Mr. Gray.

Mr. Furtan, welcome.

Professor Hartley Furtan (Department of Agricultural Economics, University of Saskatchewan): Thank you very much, Mr. Chairman. Let me add my appreciation for being invited to this hearing.

First of all, I'd like to encapsulate what Richard has shared with you, then I'd like to talk about the short-term agricultural policy issues. Those are the ones that are on the agenda or in the media these days.

We'd also like to bring forth a longer-term suggestion, something that we think needs to be done for agriculture across Canada, not just in western Canada.

Basically, if you look at income in a province like Saskatchewan, you find that farm incomes, including livestock and grain, have been flat since the 1960s. There has been no real growth in farm income. The problem is that farm expenses continue to rise year after year. In the 1960s farmers had a margin of about 30% to deal with. So if they had a short crop, if the prices went down, there was some slack in there.

Now farmers are dealing with a margin of less than 5%. What this translates into is that they can't take two bad years one after the other. There's simply not enough margin. There's nowhere to express the risk, no one to carry the risk of two bad years.

Many farmers in western Canada and across Canada have had two, three, or four bad years. There's simply no capital left in the operation. So that's the short-term encapsulation of this.

It seems to me there are basically three general policy objectives that the government can follow in dealing with this long-term income shortage.

The first objective is that they could maintain the course. The government has introduced a number of programs since 1958, starting basically with the Agricultural Stabilization Act, followed by the Western Grain Stabilization Act, GRIP, NISA, special grains and so on, and now AIDA.

None of those programs has been designed to deal with falling grain prices. The objective of those programs was to let farmers exit the industry as this cost-price squeeze became tighter and tighter. That's basically the policy, and we could continue that.

The second objective is that the government could make a commitment to maintain family farms. This would mean maintaining family farm income. I dare say it would be very expensive, but it's an objective that the government could have.

The third objective is that the government could recognize that they're not going to maintain family farm income and introduce an exit program for farmers. In other words, this would signal clearly that the family farm era is finished, especially in the export grain sector because the export grain industry is where the real problems are. They could introduce a program that would bridge farmers to retirement just as any other public or private industry does when they're trying to downsize.

The problem many farm communities face is that they don't really know what course the government is on. The signals are very confused here in terms of whether the government is trying to maintain family income or to let the industry adjust out. I would say that although this is the Government of Canada, it applies to provincial governments as well. The signals are not always clear.

• 0940

So that's the short-term issue, and families and farmers, especially in Manitoba and Saskatchewan, are looking for that kind of signal and commitment.

The longer-term issue is the more interesting one. One of the major studies taken at the initiative of the federal government in the last 30 years was done by the task force on agriculture in the 1970s. It came out of the farm crisis in the 1960s. They went all across Canada and they listened to what farmers, farm families and rural communities had to say, and they produced the document called Canadian Agriculture in the Seventies.

That document had an enormous influence on the policies the government followed in the 1070s and 1980s. And it had to do with things like price instability. It had to do with problems of adequate income. These same issues have come back over and over again in the 1980s, in the 1990s, and now we're ready to start a new millennium. It would seem to me that it is an appropriate time to revisit this. Should we have another task force for the next century?

One of the reasons we suggest this is that the policy process, in our view, has broken down. There's no real national debate on what the government's long-term objectives are for this sector and for these people. This is causing a lot of discouragement for many people.

The task force in the 1970s was a stake in the ground. You can go back and read it. It was a good document. Whether you agreed with it or not is another issue, but it had an enormous influence.

Today we would suggest this committee carry that forward. Let's have another broadly based national debate on what is the future and what are the government's objectives in the future of Canadian agriculture.

The Chair: Thank you for those comments, Dr. Furtan, and also thank you to Mr. Gray.

We have about an hour to ask questions. I will start, as usual, with Mr. Hilstrom.

Mr. Howard Hilstrom: Did that task force report of the 1970s and 1980s have recommendations in it?

Prof. Hartley Furtan: Yes.

Mr. Howard Hilstrom: Were any of them implemented?

Prof. Hartley Furtan: Yes.

Mr. Howard Hilstrom: Which ones?

Prof. Hartley Furtan: Grain farmers found that the Agricultural Stabilization Act, the ASA of 1958, was not working for them. And the Western Grain Stabilization Act largely came out of the Canadian Agriculture in the Seventies document. It had a lot to do with the development of supply management as well—marketing boards dealing with those kinds of issues.

Another recommendation in there that a lot of people didn't like was that there were too many resources in agriculture. That's what the market is saying today. There are too many resources in agriculture.

If we're ever going to tackle the land set-aside issue, it could come out of that kind of process today. Perhaps we have too much land in farming.

Mr. Howard Hilstrom: It certainly seems that the vision of what the countryside is going to look like is already showing up there. You can go through Saskatoon and the southwest and see farms of 10,000 acres in Biggar—no farm buildings except a few large farms.

I saw an interesting statistic that the world consumption of wheat is just a little bigger than world production. Is anyone familiar with that figure?

Okay, Mr. Measner, when supply and demand is in balance, why is the price of wheat not higher?

Mr. Adrian Measner (Executive Vice-President, Marketing, Canadian Wheat Board): Basically what's been happening in the last two years, this year and last year, is that world consumption has been a bit higher than world production. It's not a large amount, but it's slightly higher. The carry-over stocks are so high that we need to eat into those carry-over stocks to take them off the market before it would have an impact on prices. So even though the consumption is outpacing demand slightly, it's not by a large enough amount to have an impact on prices. You'd need to have another five years of that for it to have an impact.

• 0945

Mr. Howard Hilstrom: The world certainly wants to have a secure supply of food. I don't think I would ever want to see us get below this 40- or 50-day supply of food. So we have to look somewhere else to get these prices up.

Mr. Arason, did the survey that was done go out to the Wheat Board permit-holders or was it done generally for any farmer?

Mr. Greg Arason: It was done by a research firm and it was basically just a farm survey. It was not designated at permit-holders.

Mr. Howard Hilstrom: It didn't just stay within the board itself.

Mr. Greg Arason: No.

Mr. Howard Hilstrom: One of the things the committee is looking at is how to raise the incomes for farmers. The Canadian Wheat Board, of course, is the sole marketer for wheat and, to a certain extent, barley, of course, except for the domestic thing.

What I saw in the statistics is that the U.S. wheat exports, without the use of an export subsidy, were up last year, and the Canadian Wheat Board sales of wheat were down. What accounts for that over the 1997-98 year versus the 1998-99? Why is the U.S. able to sell wheat and exceed what their previous sales were and yet the board sales are down?

Mr. Greg Arason: Adrian can perhaps fill in the details, but basically it relates to the production of the 1998 crop, which was down. That produced a lower volume available for us to sell. What we had was probably an abnormally high-quality crop, but lower in volume.

Mr. Howard Hilstrom: I noticed in your presentation, Mr. Arason, you said that the world customers have a choice of where they can buy their grain, and they're able to keep the prices down. We have farm producers, as you well know, who don't have a choice in regard to selling their export wheat. Are there plans by the Canadian Wheat Board to give the farmers a choice in marketing their wheat because they have the opportunity, just as the customer does, to search out the best possible sales market and raise their income through that method? Is that possible?

Mr. Greg Arason: The mandate of the Wheat Board is to be the single-desk marketer for Canadian export wheat and barley. That is the mandate given to us by the act and that is the mandate we exist under. In our view, it's our objective to fulfil that mandate and it's not our option to alter that. What I do think the Wheat Board does, on behalf of producers, is maximize returns and capitalize on market opportunities. We can't change the supply and demand equation, but we do seek out the best markets and we do what we can to optimize returns.

You may want to debate whether or not producers could do that better individually than the board can, but my view is the board can do that more effectively.

Mr. Howard Hilstrom: No, we're not here to debate that. We as a committee are looking for options that farmers can use.

The Wheat Board, which is the marketer of wheat, can do some things. It can make sales, it can try to get the highest price, but the price essentially is set at the Chicago futures market, and there are variations from customer to customer in that.

What can the Wheat Board do to raise prices, seeing as it's so integral? You mentioned transportation costs. There are efficiencies of around $180 million that the board has indicated were gained by the railways, and they weren't shared with farmers over the past years. Why was the board not able to capture some of those efficiencies for the farmer? Was it because of the legislation that you work under, or what?

• 0950

Mr. Greg Arason: The board does negotiate lower rates on corridors with railways where the opportunity arises, but basically the rates that were in place after the removal of the WGTA were not reviewed for a period, and during that time the railways improved their efficiency ratios and captured those returns. Some of them were shared with grain companies and some were mandated to be shared by the government, but by and large the railways kept a large portion of that for their own revenues.

The Chair: Thank you.

I'm sorry, we're out of time, Howard.

Madame Alarie, seven minutes.

[Translation]

Ms. Hélène Alarie: I was very happy to hear Mr. Furtan's speech. We know all kinds of things: what happens in the mid term, what happens in the short term, what happens in the long term, the government policies, the WTO policies and the international policies. In the end, we know all that by heart. There is not much change. It is rather static and we still get to the same conclusion: we are in a deadlock.

This is the first time I hear somebody say at this committee that it is a societal problem and that the choice that has to be made is a societal choice. We dare not ask about the future of the family farm or the small farm. We cannot even define it. I think that we could get as many definitions as we have MPs around this table.

But I think it's a major problem and if we are competing with the U.S. and the European community—even more so with the latter—, it is because they made a societal choice. They decided they would save the farm businesses at any cost. At the WTO, we are going to listen to all those nice people, knowing beforehand, because they made statements in all kinds of places, that the European community will not back away from the choice it made to save the medium-sized farm business or the small farm.

I think this is a national challenge and we should start talking about it as soon as possible because we will not find a magic solution. People will get discouraged. We need the support of all the other segments in society if we want to save the farm businesses.

You suggest three long-term proposals. Maintain the present course which will bring us nowhere. You say that it would cost a lot of money if the government committed to maintain family farms. Would that cost be comparable to the subsidies given un Europe or the U.S.? Could you explain this a little more?

[English]

Prof. Hartley Furtan: Certainly it would cost more. One of the interesting provinces on this issue is Quebec. Last year I was at Laval University and had an opportunity to spend a year in that province studying their agricultural policy. As you know, they have a cost-of-production process formula and they have been able to maintain more farms that are smaller, but it's very expensive. It's a very expensive proposition.

So we can design programs that will meet the WTO rules. We might have more trouble with the American border, which is a different issue. But that clearly is a public policy choice.

The point I'm trying to make here is that these are public policy choices. One of the choices we have is to maintain farms—and we can see that, as you say, in Europe. Quebec has a different program. In Saskatchewan we really have nothing to maintain the family farm, and our farmers I think are feeling an awful lot of pressure as that cost price squeeze continues. So we're seeing a frustration.

I can't give you the number, but I can tell you it happens in other jurisdictions and it can be done if that is the public policy objective.

[Translation]

Ms. Hélène Alarie: You mention Quebec as an example. True enough, our ills turned into good over time. We were forced to diversify agriculture early on because of the scarcity of good lands.

• 0955

But it is also a societal choice we made. We get our feathers ruffled from time to time. We are told that this support costs a lot of money. But we showed the public calculations that proved it would cost even more to displace those farms or at least that we would have to pay an even higher social cost if we put a stop to the small farm businesses, to the family farms.

Has that cost also been assessed? How could we prove that, demonstrate it?

[English]

Prof. Hartley Furtan: We can assess the cost financially fairly easily, but it's the larger cost of communities and how society wants to structure certain sectors that is virtually impossible to assess. Those clearly lie within the realm of public policy and politics, and that's why I bring it here.

I can assess the cost economically fairly simply, fairly easily, but what it means in terms of communities and what society wants its country to look like is a political question, and I can't assess that. That's for you people to assess.

The Chair: Thanks very much.

[Translation]

Ms. Hélène Alarie: It's quite a task!

I have another question and I will have others later on. In the charts you give us, Mr. Arason, we always get compared to Australia where producers are much less subsidized. Let's just look at the 1998 chart. How can Australia be competitive on the market? When you look at those charts and compare with the subsidies given in the U.S. or in the European community, you automatically think that those poor Australian farmers must all be broke. How can they survive with so few subsidies, relying only on their productivity and their markets?

[English]

Mr. Greg Arason: In our discussions with the Australians, they recognized the same problems as we recognize in terms of the effect of the subsidies in the EU and the U.S. Their prices are depressed as well.

The one significant advantage that I think the Australians have is that their costs, particularly their costs of transportation, are significantly lower. The majority of their grain-growing area is within a short distance of seaports and they have significantly lower transportation costs, which I think is a natural advantage they have and is the main difference.

The Chair: Thank you.

Mr. Calder.

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

Professor Furtan, I would like from you a nice crisp definition of what the family farm is. I'm a third-generation farmer. In fact I'm supposed to be the generation that basically screws it up, if you go by demographics.

I've taken our farming operation in a totally different direction from what my father has, but I'd be very interested in what your definition is of the family farm.

Prof. Hartley Furtan: Well, my definition of the family farm is the one I just went over with my class last day, so I'm going to give you exactly the same one.

Mr. Murray Calder: Good.

Prof. Hartley Furtan: It's a farm that is the workplace of the family. The family does most of the work on the farm, with a small amount of hired labour. That is the key component, that the family farm is a farm where most of the labour—not all of it; it may be one person hired, or two, but not 50, okay?—is family labour.

Now, it's not how many acres it has. It's not how many cows it has. But the key definition I focus on is that it's the workplace and likely the residence of the family, and the labour that is supplied is largely family labour.

• 1000

Mr. Murray Calder: Okay. That's a good definition.

Right now, obviously, with the world market and grain and everything else like that.... When we did the negotiations in 1993, we were basically dealing with a supply and demand type of situation. With the price of grain and the instability in the grain market, we haven't been able to reach that equilibrium of supply and demand. I wonder if any one of you gentlemen would like to jump into that, as to why and how we correct it.

Prof. Richard Gray: I guess I would take issue with whether in fact we've reached an equilibrium. I think it's quite normal that with a lot of products, basically what happens is that an industry develops a capacity to produce, if you like, in response to high prices. They invest considerably. They expand their capacity. As the capacity expands, production expands. That basically means they put downward pressure on prices and they stay in that situation until basically, over a long period of time, there's a lack of investment and the ability to produce is reduced relative to the demand and the prices come up again for short periods of time.

I think the idea of having profitable grain farms, for example, over a long period of time, or profitable copper mines over a long period of time, is just not how commodities work. If that's the case, if they're profitable, that means there will be some investment and they won't stay profitable because output will exceed, if you like, the growth in demand. So I don't think it's an equilibrium situation.

Mr. Murray Calder: That wouldn't have anything to do with the fact that we've had four good consecutive crop years and we have a surplus of grain out there that people are trying to get rid of right now, and the best way to do it is...the lowest price is going to sell? Therefore other countries are subsidizing their grain sales to basically capture market or just to sell off the glut.

Prof. Richard Gray: It certainly has a lot to do with weather, and it also has somewhat to do with subsidies, but not a great deal. If we had a completely free market, we would also see these kinds of situations develop. That's how the industry has evolved. Basically, it would mean the price peaks would be a little higher, there would be even that much more investment that would go in during those price peaks, and we would still be stuck with a glut situation. Government aggravates the situation in foreign policies, but I don't think they create the situation.

Mr. Murray Calder: Okay. One of the things I've seen over the last couple of years since we got into this is that we tend to just get trapped into the circle; we watch ourselves and what the United States is doing and what the EU is doing. But there are other countries out in the world that produce grain too. Australia is one. I have a friend who goes and rides the combines each year. Now, we don't hear from them. Are they having a problem, or if they're not having a problem, what are they doing right? What's the situation in Australia? They export grain too.

Prof. Richard Gray: My understanding is they have a significant problem as well. Their grain incomes are very low as well. They're in a situation where some of their producers are in financial difficulty and they're not making the investments they normally make to maintain their grain production.

Mr. Murray Calder: Whereabouts did you go to get those figures?

Prof. Richard Gray: In terms of...?

Mr. Murray Calder: Australia's problem, its production. Are they having the same debate we're having here on subsidies and what not? Do you have any factual documentation?

Prof. Richard Gray: I have a colleague who just recently spent a year in Australia, an agricultural economist. Julian Alston is his name. He studied the grain markets and talked to people there, and that's where I'm getting my reference from.

Mr. Murray Calder: Okay.

Mr. Greg Arason: One of the other factors we don't often talk about—we don't see them as an exporter, but they have a huge impact on the market—is China. China, over the last four years, has had successive record production. If we go back to the period previous to that, China was a major importer. They still import a quantity of grain, but basically they are now importing for quality rather than quantity, and that has had a major impact on the market.

• 1005

Of course, the other impact has been the economic situation in Russia and the former Soviet Union, where those major markets have basically disappeared. They've become essentially food aid markets over the last couple of years.

So you take those two situations and combine that with the Asian flu, from which we may see some recovery, but I think the Chinese situation is one that tends to be overlooked as a market factor.

The Chair: Thank you, Murray.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you very much, Mr. Chair.

Welcome, everybody.

I think Dr. Furtan has given us a lot of food for thought with the three options he has presented to us this morning.

Initially, at least in this round, I would like to focus on the first option, which is, as he described it, maintaining the course, and specifically elicit from all of you, if possible, what you think the government should do with its AIDA program. As you know, it's a two-year program. Should it be continued for a time, indefinitely, or be wrapped up?

It's my view that there are signals that AIDA does seem to be working in places other than the Prairies, which is interesting since that was correctly identified as the area that needed help most a year ago. But I wonder what your thoughts are, whether we should keep AIDA or not.

Prof. Richard Gray: I could comment on that.

As you are well aware, the AIDA program is based on a three-year average. What is somewhat ironic is that those producers with the least cash reserves are those who are coming out of three tough years for one reason or another. They are at the bottom end of that spectrum in terms of income and viability.

A three-year average is a very short average for producers to provide any real meaningful stability, and I think that's one of the issues AIDA has to address.

If in fact we say let's extend AIDA for another year or two, and we then have four or five years in a row of poor incomes, it won't help. In terms of those family farms that are under a lot of stress, AIDA is not very effective at targeting those particular farms.

Prof. Hartley Furtan: I would agree with that. I would acknowledge that the government has put up a fair amount of money. It isn't getting out the way they anticipated, largely for the reasons my colleague has mentioned. The formulas that are used simply won't trigger it the way it was intended by the policy-makers.

Mr. Dick Proctor: Mr. Arason, does the Wheat Board have a view on AIDA?

Mr. Greg Arason: No, our board of directors does not have a view on AIDA specifically. What we were reflecting here today is the broad concern that some type of effective programs are needed to bridge this industry over the short term. As for whether AIDA can do that or whether some modifications are required, our board doesn't have a formal view on that.

Mr. Dick Proctor: Last week when the minister was before the Saskatchewan Wheat Pool, he indicated that perhaps Canada had been too cautious—I think those were his exact words—in its trade negotiations. Do you have any views on that, and if he's right, what could we do in the upcoming Seattle Round to signal that we're not going to be patsies?

Mr. Greg Arason: I attended the session in April where the Canadian agricultural industry and the governments got together to talk about a strategy heading into Seattle. One of the interesting comments I heard at that session was from one of the farm organization representatives, who said going into this round we should be sure, in regard the people who wrote the cheques the last time from the other countries, that those cheques didn't bounce again.

• 1010

In the view of a lot of people, Canada went to the table in the last round and made significant concessions, and you can see the result of that, whereas others have found other means to support their producers. The gap has widened considerably since the Uruguay Round, and we're in a position, in our view, anyway, where as Canadians there's really not much to give up in this round.

The Chair: Thank you, Mr. Proctor.

Mrs. Ur, you have five minutes.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): I thank you for your presentation. The last gentleman who presented certainly added some interesting points to our presentation this morning.

We've gone down this route several times, especially when we've had AIDA discussions. Being a farmer in my previous life, I find it really hard, and I don't know how we can do anything different with the Prairies. They're the grain producers, and that's what they're really known for.

I am always given the analogy back in my riding with the non-farming groups that if Ford produces too many cars, they have a shutdown. Farmers can't have a shutdown; they're producing grains.

How would you suggest we address that concern? As Murray said, because we've had so many good years, the crops have been improved, and the technology or whatever. What can we do differently to address the crisis in that respect?

As one of the gentlemen said, there are too many resources in agriculture. Are you suggesting we turn land into parkland? What are you suggesting there? I think Mr. Furtan was the man who said we had too many resources.

Prof. Hartley Furtan: That's what the market is telling us. It's telling us we're producing too much export grain.

Mrs. Rose-Marie Ur: Then we're too good.

Prof. Hartley Furtan: It's not necessarily that we're too good, but there's too much on the world market. When you reflect that back with all the costs—transportation, handling, and so on—farmers are simply unable to cover their costs. So I think one of the issues we should face squarely is do we have too much land in production? Ironically, 50 years ago that was our greatest strength. Today it may be our greatest weakness.

Perhaps because of past policy experiences, the LIFT program in the 1970s, which happened to come into place at a particular point in time when markets were moving a certain way, farmers have become very averse to such an idea. We should address this again, as the United States has done. Europe is into a set-aside program. Maybe it's time we look at that.

So maybe it should be prairie parkland. I think there's a tremendous possibility to tie it to the environment. Richard Gray is an expert on the greenhouse gas situation, and we're facing this with the Kyoto protocol. There may be a tremendous opportunity to inject cash to farmers through changing land use patterns under the Kyoto agreement and try to solve two at one time. I think it's worth thinking about.

Prof. Richard Gray: I think another issue in regard to land use in particular is that all acres are not made equal. There are always those acres on a farm or in an area that basically, year after year, make less revenue than the good acreage beside them. When we say let's retire land from agriculture, we aren't necessarily saying let's take out prime farmland.

Mrs. Rose-Marie Ur: Marginal land.

Prof. Richard Gray: It may be marginal land. So it should be considered.

Mrs. Rose-Marie Ur: Exactly. We've heard presentations before too, and we're well aware of all the subsidies the U.S. farmers have gotten just over the past year. But we've also heard the reverse from U.S. farmers or U.S. politicians, saying eventually there too the coffers will dry up. They're looking at our NISA program as something that may be beneficial to them. What is your viewpoint? I don't think they can go on forever subsidizing their farmers the way they have just this past year either.

Prof. Hartley Furtan: That's an interesting hypothesis, but it's not one that I agree with. I think grain agriculture in the United States is so small, and given the Republican representation in the Senate and what that means, the United States will protect its farmers for a long time to come.

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Thank you.

The Chair: Thank you very much. Mr. Breitkreuz.

Mr. Garry Breitkreuz: Thank you very much. I found your presentation very interesting and I appreciate your coming here. It's good to get experts before this committee.

AIDA is helping very few farmers, and your analysis clearly indicated that. But what can be done to address the inadequacies of the AIDA program, or how do you fix it? I know there are problems out there; you don't have to tell me that. Just talk to any farmer and you'll know. What do you do to fix it?

Prof. Richard Gray: First of all, if you're talking about immediately assuming AIDA is going to continue and asking how to fix it, I think moving obviously from a three- to five-year average, or at least giving producers the option to use a five-year average rather than a three-year average, helps somewhat. It is a significant improvement, but I don't think it addresses the fundamental question that those producers who have had bad years are the most vulnerable right now.

There may be a structural flaw in the program that you can't do much about. If it's based on individual margins looking backwards and you're going to use that as a basis to pay forward, that might be just a flaw in the program that you can't do anything about.

Mr. Garry Breitkreuz: It can't be fixed?

Prof. Richard Gray: Well, you could create a different program.

Mr. Garry Breitkreuz: Then what can we do to address that situation, so the money will get to those people who need it? What can be done? I don't want to let you off too easily here. I know everything you've said is true, and changing it to five years doesn't help, because you've said the problem has been there for three years.

Prof. Richard Gray: I think it matters a lot what the specific objectives of the government are. If it really means targeting and you really want to help those farm families in trouble, perhaps you need a program that is much more targeted than AIDA itself. Maybe you'd look at some longer benchmarks or some average benchmarks, and if producers are below the average benchmark for an area, you would help them out.

Targeting tends to be fairly unpopular. The first complaint you'll get from the producers that are above the average is “Why is he getting money? I should be entitled to the money as well.” So producers, on average, are going to ask for payments that send money to everybody. But if you do that, you won't have enough money to help those who need it. That's the political problem.

I'm going to opt out, as Hartley did, and say that's a choice the government has to make. If you really want to help those who need it, you have to target. If you want to be popular with all farmers, then you pay a little to each one, but you don't really solve the problem.

Mr. Garry Breitkreuz: Well, I don't know if that helps us a lot.

Let me go to the Wheat Board. One of the comments was that you're there so farmers get the best value for their grain. There's a real concern on the Prairies that the policy of the board on value-added processing is really tying the hands of those individual farmers who really want to increase their bottom lines by processing. You know what I'm referring to.

There seems to be a real contradiction here, because individual farmers are being omitted in that. How do you reconcile that contradiction?

Mr. Greg Arason: I do believe I know what you're talking about.

Mr. Garry Breitkreuz: Prairie Pasta processors is one example.

Mr. Greg Arason: One proposal specifically has been a very public discussion. The board has said it is not our mandate to play so-called favourites in the processing industry. Processors should acquire their stocks from the Canadian Wheat Board at the same price. In other words, we should create a level playing field for the domestic processing industry, based on a North American competitive price.

• 1020

What we have offered to new generation co-ops, including Prairie Pasta, is some flexibility, first of all in how they are paid, so their cashflow can be altered somewhat and made more acceptable. We've also offered them an opportunity for a stock switching program. It would make the investment available to producers across the Prairies, whether they were adjacent to wherever the plant happened to be located or not. We think that with what we've offered we have provided a significant opportunity. We have to be concerned, as I said, that we don't create a different environment for processors, in total.

I will say that value-added, in Canada and western Canada, has progressed. We've probably had more investment in the malting industry than they've had south of the border. Much of that capacity has been improved and enhanced in western Canada. We've had new mills start up—some close to Winnipeg, some farther west. Capacity has been increased at a number of the existing mills. So in our view, our policy does not discriminate against value-added; it allows it to go ahead.

Mr. Garry Breitkreuz: Sir, my time is limited. Is my time up already?

The Chair: Yes. You're over a minute.

Mr. Garry Breitkreuz: I would have liked to interrupt here, because there are some key problems with that answer.

The Chair: Thank you.

Mr. Furtan, when you were speaking to Mrs. Ur, you indicated that when it came to providing subsidies at the current scale, the Americans were in for the long haul. Can you tell me what the size of the U.S. agricultural industry is, relative to the entire GDP of that country, and then compare that to what exists in Canada?

Prof. Hartley Furtan: I can give you pretty much the exact labour statistics. I think about 1.5% of the labour force in the United States is involved in agriculture, while in Canada it's over 2%.

On the second thing, I can't give you the exact GDP figures, but the key thing is that the U.S. does not export as much of their grain as we do. My view is that we're talking about an export grain problem today. It's the heart of it. We are really vulnerable because we export so much of our grains.

The Chair: What are the figures there? Do we export 85%, Mr. Arason?

Mr. Greg Arason: If you look at wheat, exports are in the range of 75%.

The Chair: What is it in the United States?

Prof. Hartley Furtan: It would be about 30% to 50%, depending on the year. So it's about half what ours are. That makes it much more difficult for us.

The Chair: Yes, that's understandable. Thank you.

Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): I don't know where to begin.

The Chair: At the beginning.

Mr. Paul Steckle: From my recollection of facts and objectives of going into the WTO and NAFTA, a number of issues caused us to go in that direction, but it was to get rid of government subsidies in the marketplace. If I'm wrong there, then I've been wrong for a long time in my thinking on this. But it hasn't really worked.

I'm just wondering what your assessment is of our agreements, in the WTO particularly because it's international.

Prof. Hartley Furtan: I think we went into the WTO and NAFTA because we believed there were economic benefits from freer trade. I personally believe that. So I think those were positive agreements overall.

When you try to get freer trade, countries distort trade through subsidies. So one of the ways to get freer trade is to put disciplines on countries' export subsidies and, to a much lesser extent, domestic subsidies.

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What's happened under the WTO is that agriculture first came in in 1995. Previous to that, agriculture was not under the WTO. There were a lot of disciplines introduced, and here is where I would disagree with Mr. Arason a bit. In 1995, I think western Canadian grains made a great deal of sacrifice to the WTO. If we look at other parts of Canadian agriculture, they didn't make much of one, and I raise the issue of supply management here. They went from article 2.11(c) of the GATT, which was a quantitative restriction, to very high tariffs that basically gave them the same system.

I'm not saying that's bad. That's not my point. My point is that western grains got treated differently. We lost the Crow, and maybe we should have. We've ratcheted down other programs. That's what happened through the WTO in 1995.

From our perspective in western Canada, we've made a big sacrifice to freer trade, which we believe in very much—or I believe in. I shouldn't speak for other people, but I believe in it.

Mr. Paul Steckle: Someone also mentioned that we've expanded our value-added industries. You mentioned malting. I'm sure we have, obviously, but beer prices haven't come down. They're selling more beer.

The margin of success of any industry is measured in terms of profitability. GM is selling its cars or trucks always at a profit. If they don't sell at a profit, GM doesn't sell them. Banks are making exorbitant profits based on margins that they have, which is what they've been doing for a number of years. But farmers, the primary producers, somehow are left out of the equation. We used to have a two-price system for wheat. That doesn't even work any more, because now we're into international agreements. If we can't buy it cheaply enough here, we'll buy it somewhere else.

I hear nothing but cynicism here this morning. As a farmer, I have to say to myself that basically there is only one thing that will fix this. But it's not really a fix, it's money. We're limited in our resources, so what do we do? Basically I think we're the greatest country in the world, but we can't look after those people who look after us. We're unprepared to pay for the food that we put on our table. Everyone has a margin in this whole equation, other than the primary producer. Everyone has a margin in what happens. Compare the share. This is a good example of that.

Mr. Greg Arason: I would defer somewhat to my colleagues from the university, but my impression and my understanding are that food prices in North America, as a percentage of disposable income, are virtually lower than anywhere else. That is definitely an issue.

I was at a conference yesterday at which an interesting analogy was put forward. If you look at a box of Wheaties, if Tiger Woods has his picture on the front of the box, he probably gets ten cents out of every box of Wheaties that's sold, but the farmer gets five cents for producing the grain. That is the fundamental problem, in my view, and you can extend this to the fact that the packaging costs more than the product that's in it. The whole concept of food as a commodity and the value of the actual food are a fundamental issue within North America. I think it's different in Europe. There's a different attitude towards food, farming and food prices. If you go there, you certainly see it in the marketplace in terms of the cost of food.

Unfortunately, in Canada, even if we did raise the domestic price of food through some mechanism to get more of the value back to farmers, the fact is that we have a relatively small population and a very high productive capacity. Therefore, we're still at the mercy of the export market for a large part of our production, particularly export grains.

The Chair: Thank you, Mr. Steckle.

[Translation]

Mrs. Alarie.

Ms. Hélène Alarie: A moment ago, you talked about the food aid market. The question I am going to ask might be naive. On one side, we have a country that overproduces and on the other, we have people who die of hunger in the world. I already asked why we could not reach some kind of balance. It still is an interesting market for producers, but of course not for those who are going to receive those products.

The answer was that it would distort the market. Well, subsidies do distort the market. Maybe we should try to find a solution. Among the common possibilities, we do not see a solution. Maybe we should think of more unusual solutions or even strange solutions. It might be a way of getting rid of our overproduction.

• 1030

[English]

Prof. Richard Gray: In terms of food aid, it has been used in the past. The U.S. has used it quite aggressively over the years to, if you like, put grain into markets that wouldn't otherwise exist, where consumers basically do not have the resources or the access to the world market that they need. Through food aid programs, they've gotten rid of that.

Those programs are continuing, but perhaps there is scope for.... If there's a will for taxpayers to sponsor those types of programs, it would help the grain situation, just as acreage set-asides would. They have the same effect in terms of taking some of the supply off the market. But again there are expenditures involved in that. That's a choice that has to be made.

[Translation]

Ms. Hélène Alarie: In the end, we always come back to societal choices and maybe it's time to make that kind of choice.

I would like to ask a last question on transportation. Some say that the cost of transportation penalizes the farmers that are farther away. So there is no uniformity of costs in transportation. To what extent is that situation responsible for the present crisis? Is it a major factor? How big is it?

[English]

Mr. Greg Arason: Off the top, our view is that the cost of transportation and handling combined is the single largest cost that farmers have to bear, and it is significant. Particularly relative to the Australians, as I said, Canada has a geographic disadvantage in that a large part of our production is in an area that is not readily accessible to ocean ports. We are forced to transport large distances over land, and that has become increasingly expensive. The removal of the WGTA had a dramatic impact on that aspect of direct farm costs.

The Chair: We're going to go to Mr. Murray, and then Mr. Casson.

Mr. Ian Murray (Lanark—Carleton, Lib.): Gentlemen, I've found your comments very interesting, and I think we're fortunate to have you here this morning.

I'm going to do a quick poll of all four of you before I ask any more questions, recognizing that you are among the most knowledgeable people in the country on this subject. If you were grain producers—say you had a family farm and you had children—would you recommend that your children continue in the business? I would appreciate an unqualified yes or no answer, if you can.

I'll start with Dr. Furtan.

Prof. Hartley Furtan: No, probably not. I wouldn't.

Prof. Richard Gray: I have a son. I do own some farmland. If I was going to encourage him to go into farming at all, it would be into livestock, not grain.

Mr. Greg Arason: I faced this decision about thirty years ago, when grain prices were in the tank at the end of the 1960s. My father advised me to look for a job, and I did. If I were in his position today, I expect I would tell my son the same thing.

Mr. Ian Murray: Or your daughter, if that's the case.

Mr. Greg Arason: Or my daughter, yes.

Mr. Adrian Measner: I'm from a family farm in Saskatchewan, and they're still farming, but my advice would be not to have my family go into it.

Mr. Ian Murray: Thanks.

The reason I asked the question is that we had, on the one hand, Mr. Arason saying there's a pressing need for effective support programs to bridge “the gap”; we had a fairly bleak picture painted by Professor Gray about the long-term trend in grain prices; and Dr. Furtan presented us with three options, the third option being essentially to have an exit strategy.

I don't want to put words in your mouth, Dr. Furtan, but in listening to your three options, my assessment was that this probably was one you would consider extremely seriously if you were in our shoes. I'm not trying to ask you to make political statements. That's one reason I asked the first question about the future of the family farm.

Essentially, if we do put money into.... We always use these euphemisms about programs. We're talking about money, we're talking about cash. We're talking about cash that could perhaps be put into more productive investments in the country. As economists, I think, the professors will understand that. There are other investments we could make that could result in increased employment somewhere else in Canada.

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I know this may sound a little sacrilegious, but I'm asking tough questions here because we have a tough problem and it demands literally billions of dollars over the years if we're going to stay in the game it appears to me.

So, Dr. Furtan, I'd like to revisit your third option. Do you personally feel that it is a reasonable option for government?

Prof. Hartley Furtan: Yes, I think it is a reasonable option. It's not a very palatable one, but I think it is one your committee should look very seriously at, as there are too many resources in this sector. That's what the market is telling us. There is no reason to believe the wheat prices are not going to trend down, and we should look seriously at bridging people out as one option.

Mr. Ian Murray: I have one other final question. I think there's one minute left.

Saskatchewan is a province that was essentially built on grain. What happens then to that province—and, again, I don't want to be too dramatic—if we gradually exit this industry, pay off farmers, who have no other pension plan essentially, and make sure they're taken care of, but then have this land no longer in production to the extent it is today? What would that do to the tax base in Saskatchewan as you have land that is less valuable? Does that mean essentially the end of the province? I'm not trying to be too dramatic, but I would assume that's a big share of the income for the province.

Prof. Richard Gray: If you look at the long run, obviously this—exiting farming—is not a new phenomenon. If you look at the decline in farm numbers over time, I think we've averaged a 1.7% loss a year since the 1930s. In good years and bad years there has been some consolidation, and if the government were to offer some kind of assistance program for those farmers who for one reason or another find themselves in a situation where that particular farm unit wasn't very viable, you'd accelerate that trend somewhat.

But I think one thing that's happened is that we're down to, depending on how you want to count it, 70,000 or 50,000 farmers in Saskatchewan out of a million people. You might want to double that for the actual farm population, but it's not going to create a huge influx into the cities. You don't have that problem any more.

I think the other thing is that there's a lot more rural activity out there that is non-farm. The actual land will probably continue to be farmed, so there will be farm inputs, with the exception of the marginal acres. So you'll just see a process slightly accelerated of losing those farm numbers. They've adjusted in the past and I think there will be some adjustment in the future, but those social costs we have to consider.

The Chair: Thank you.

Mr. Murray, if you'd asked me your first question, I would have said that my parents had six sons and they advised all of us against farming. None of us farmed. My father suggested we take up something less risky, so I went into politics.

Mr. Casson.

Mr. Rick Casson (Lethbridge, Ref.): What were your father's comments on that choice?

The Chair: He'd already passed on. I waited and I waited.

Mr. Rick Casson: Thank you, Mr. Chairman.

Mr. Furtan or Mr. Gray, how long will it be before we'll see any results at the farm gate through this next round of WTO negotiations? How long will it be before a farmer will see any change, if there is any? Will it take five years?

Prof. Hartley Furtan: Ten.

Mr. Rick Casson: Ten years. So if we're placing any kind of hope on the Europeans or the U.S. reducing subsidies to help prices, we should forget that one.

Prof. Hartley Furtan: Yes.

Mr. Rick Casson: Some of the things we look at when we look at trying to increase the bottom line to farmers are the subsidies, so you're saying that the help there is going to be a long time coming, if ever.

We look at secondary processing on the Prairies or in western Canada to help, and then we look at reducing input costs. In terms of secondary processing, have you any figures on how that could help the average grain farmer in the west? What can we do as far as secondary processing is concerned to bring more money to the farmer?

• 1040

Prof. Richard Gray: I think it's important to note that the farm families in Saskatchewan make more income off the farm than on the farm right now. So these rural jobs are very important to the farmers. They may not be all value-added processing, but the rural employment is a very important source of income for these farm families, and any way you can grow those off-farm jobs is going to maintain those farm families. They may not be able to earn enough income from farming itself, but it is still a very important source to keep them in the rural areas in order to keep those areas vibrant.

Mr. Rick Casson: So the idea of secondary processing is not to increase the value of the product produced by the farmer, it's to give him an option on income.

Prof. Richard Gray: Yes.

Mr. Rick Casson: Mr. Furtan, I appreciate your definition of a family farm. Do you factor in revenues or net incomes when you're thinking of a family farm?

Prof. Hartley Furtan: No. I believe the focus should be that the family is engaged in the production and the management of the farm, probably live on it, but provide most of the labour. That's the key. So they could be a very large farm, they could have revenues in the millions, and still be a family farm.

Mr. Rick Casson: Are you assuming in your third option—I don't know how much you've delved into that—where we have a bridge program, that if we do this, the land that's left behind will go out of production or change production?

Prof. Hartley Furtan: No. I think the land market is best left to the free marketplace. It will find its own equilibrium out there, buyers and sellers. This is assuming there's no set-aside of program, but I believe it will be farmed.

Mr. Rick Casson: It's interesting too that I think you've shown us that there have been four record crops in a row. Is that what I heard in terms of production around the world? At the same time, we're talking about global warming and weather disasters, but that hasn't been reflected in the size of the crop being produced.

You also mentioned a bit about carbon sinks and credit for that. Have you thought about, in your mind, how that would take place as far as agricultural communities are concerned, how that would bring more money to a farm?

Prof. Richard Gray: I think in terms of carbon credits and that type of thing, first of all the prospects for the WTO are bleak for a lot of real reforms. I think Kyoto is one of those as well. Where Kyoto hasn't been ratified yet, although it might be, there could be a grandson of Kyoto that eventually gets ratified. But if in fact markets were set up for carbon, it would be another type of land use, other activities that would perhaps benefit agriculture a fair bit. Particularly if the revenue from grain falls enough, other activities such as agri-forestry and those types of things then become more viable.

The Chair: Thank you.

We'll hear from Mr. McCormick and then Mr. Proctor, and that will pretty well do it.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, Mr. Chair. I came in late because I was at a rural meeting, but thanks to all the good questions, I've learned a lot of what you shared with us earlier.

My question is that if the farm crisis continues.... You know, sometimes in the urban areas we hear we're going to go hungry, which of course is not the story, because the food is out there at this moment and will be out there from Canada. No one here can project into the future, but you've done quite a bit of this, and I'm wondering what percentage of our farm land—not the marginal land—would be operated by multinationals over the next ten years if we have at least ten years before the WTO negotiations will make any difference to the person who's in rural Saskatchewan.

Prof. Richard Gray: I don't think very much will be operated by multinationals. One thing that multinationals like is profits.

Mr. Larry McCormick: They have a lot of money to invest in the future, though.

Prof. Richard Gray: I don't think the returns are there to really attract multinationals. But the other thing is that basically large-scale grain farming, when you have a number of operators acting in a unit together, whether it be a corporate or a social farm, has been a dismal failure in the past. I don't think we see a real move towards all of a sudden having six operators working together in a unit. I think it's the same as it has always been. There have been some father-son units that have expanded, but I don't think the corporate takeover of this land is a big issue.

• 1045

Mr. Larry McCormick: We've heard that we've been losing 1.7% of our farmers since the 1930s. We hear these projections of how many farms we could lose in the next three years—or even a lot less time—if there's not the political will or support from Canadians. We've heard numbers and you've heard numbers. What numbers do you see? I'd like to ask both groups to comment.

Mr. Greg Arason: As I indicated, in our recent survey the immediate prospects indicate that there are some farmers who say they'll be out of business next year. It's not a large number, but they're definitely out there. But if you look two years out or three years out, the numbers of people saying they'll be gone under these conditions show a figure of 47% in our survey. That's how many indicated they couldn't sustain their operations under these conditions for another two to three years.

I talked to a farmer yesterday who said his debt load has quadrupled in the last three years. I wouldn't say he's an older farmer; he's sort of in the middle of the pack. He's seriously considering his options.

That's the situation we're in.

Mr. Larry McCormick: Thank you.

Prof. Hartley Furtan: I would point out that historically we've lost farmers faster in good periods than we have in bad periods. That's always the case because farmers like to hold on. They don't want to sell low, they like to sell high.

A voice: Will they be able to?

Prof. Hartley Furtan: I don't think there's any reason to expect that there's going to be any quicker exodus this time than there has been previously.

Mr. Larry McCormick: Does that reflect on the severity of the problem, though? We hear that the immediate need is much greater.

Prof. Hartley Furtan: We're all experiencing families that are leaving. I have a daughter and son-in-law who just left farming last week. They packed it up in Kipling, Saskatchewan. They've gone out, but that's good for them. They couldn't make it, but they're 21 and they have university degrees in law.

Mr. Larry McCormick: We heard about China and the opportunities there. Of course I always come back to North Korea, and I have before in this committee. I know it wouldn't make a big difference to our marketing, but I myself, sitting on the government side, would like to see us pay more attention with the resources that we do have. It wouldn't be cash, but it could be food. Again, in the last two years there have been 20 million in North Korea eating bark and grass. I don't know why we don't take the political initiative to do more for these people.

When you said this about China, the difference there is.... First of all, I'd like to know how many other countries could use our help. What small percentage of difference would this make for the Canadian Wheat Board if we put some product there?

Mr. Greg Arason: Certainly the Wheat Board would be interested in participating in any food aid program that the government chose to implement. That is one strategy that could be taken. It would draw down some of the surplus and make additional sales. The fact is that unless there is government assistance on that, though, those sales aren't going to happen because there is not the ability to pay. That's the problem in a large part of the world. There are the haves and the have-nots. That situation has been with us for a long time, and it's still there. Some of them have turned the situation around—and I mentioned China—but for others it's a chronic problem.

So it is one possible solution. It's a partial solution, anyway.

The Chair: Thank you.

I just want to remind members that we have one or two motions we have to dispose of, but we can spill over 11 o'clock by couple of minutes.

We'll go to Mr. Proctor, and then we'll wrap it up insofar as the witnesses are concerned.

Mr. Dick Proctor: I really had one question. This is really addressed to the Wheat Board officials, but Dr. Furtan had indicated that the Crow has had a significant impact. Minister Vanclief used the figure of a 300% increase in freight rates. Someone else has said it effectively moved tidewater a thousand miles further away for prairie farmers.

• 1050

In your summary point, Mr. Arason, you talked about effective support programs to bridge the problem in the medium term. Specifically on transportation, what effective support programs could be undertaken, in the view of the board?

Mr. Greg Arason: The study we undertook earlier this year in the early stages of Mr. Kroeger's process indicated there was approximately $5 a tonne in what we saw as excess railway revenues that should be captured and returned to farmers. There are various proposals coming out of Mr. Kroeger's work, but I think that number is still there. So on a total movement of approximately 30 million tonnes, there's $150 million there that we would see should be available for farmers as a minimum.

Mr. Dick Proctor: Do you have some optimism, some expectations, that that will in fact be returned to farmers?

Mr. Greg Arason: Under the concept of a revenue cap, that is a good question. What we hope is that if the revenue concept is implemented, it does not become a revenue target and the railways will maximize their returns under that, but that truly there will be an effort to flow those funds back to producers either directly through lowered freight rates or through other mechanisms.

The Chair: Thanks, Mr. Proctor.

I think we should wrap this up. We've heard from everybody. Let's just break for about two minutes. We have these one or two motions.

Mr. Garry Breitkreuz: I have a point of order, Mr. Chairman. I would like to be on record as saying that we do not have enough time to properly question the witnesses that come before us. We still have some really good questions for these experts here, and I want to simply put on the record that we don't have enough time at this committee to properly question these people. Some other key issues should have been raised, but we couldn't do so because of time constraints.

The Chair: We do try to cover as much ground as possible, Mr. Breitkreuz. But I certainly agree with what you're saying, that very often, especially today when we have such good witnesses appearing before us, it's hard to cut the discussion short.

Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): When you go out west, don't book too many witnesses for your sessions, so that you can have longer meetings.

Mr. Garry Breitkreuz: I would make the other obvious observation, and that is that we should lengthen our sessions.

Mr. Gar Knutson: Yes.

The Chair: To the witnesses, thank you very much.

We'll just adjourn for two minutes. We have these motions to deal with. We'll say goodbye to our witnesses, and we'll be back in two minutes.

• 1052

• 1055

The Chair: Members, we'll reconvene this meeting. Can I have some order, please.

We have business with regard to a possible trip out west. But before we get to that, maybe we can deal with Mr. Hilstrom's notice of motion. Earlier this morning Mr. Hilstrom gave notice of his motion. He asked for unanimous consent. It seems to be a reasonable motion.

Can I just ask you a question, Mr. Hilstrom? You're specifying a date in your motion of no later than December 17. You can leave it that way, but usually ministers will come when they have the time. I don't know. What do you think?

Mr. Howard Hilstrom: I think in the context of the words the minister spoke in Regina as to the urgency of the income issue and the various things affecting agriculture at this time, the urgency is such that December 17 would be.... He could tell the committee that it's physically impossible to do that, and we could reconsider this motion. I'd rather leave it at December 17, and let him come back to us.

The Chair: What would his parliamentary secretary say?

Mr. Joe McGuire (Egmont, Lib.): I would assume he would respond to this request. But there's going to be a week in Seattle, and there could be a week when we're out west, so we've narrowed it down to maybe next week. As for whether or not he has the time next week, we can check it out.

The Chair: There is the last week before Christmas.

Mr. Joe McGuire: We'll try to accommodate the request if it's possible.

The Chair: Then do we have, first of all, unanimous consent from the committee so that we can waive the notice?

Some hon. members: Agreed.

(Motion agreed to)

The Chair: It's your day, Mr. Hilstrom.

Now, with regard to the possible trip out west to meet with farmers and others, but in the main farmers, we need to pass a motion with regard to funds.

But let me just give you a little bit of background. I have spoken to all the critics of the opposition parties, so I think what I'm about to say is not going to come as any great surprise.

Late last Wednesday, the day before the minister, Mr. Vanclief, went to Regina to speak at the annual meeting of the Saskatchewan Wheat Pool, he indicated to me that he would like to see this committee travel out west to talk to farmers and others about the current income situation. I realized that we were facing a paucity of time. I did talk to some of my colleagues on the government side, and they thought it was a good idea.

My next move was to speak to my esteemed clerk, who knows more about logistics than I do. He turned up his nose because of the shortness of time, but under great duress from the chairman, he said he would look at a possible plan. He agreed that it could be done, so we did prepare a work plan for travel.

The work plan would require all of us to be in Winnipeg the night of Sunday, December 5, so that we would be in a position to fly to Dauphin, Manitoba, on the morning of December 6 and to Brandon, Manitoba, on the afternoon of December 6. Then it depends on the kind of transportation, but we would be moving to Portage la Prairie, Manitoba, for a meeting on Tuesday morning, December 7.

• 1100

Then we would be flying to Saskatoon for a late Tuesday afternoon meeting in Saskatoon. We would be back in Regina for a morning meeting on Wednesday, December 8. We would be going to Weyburn that afternoon, and then we would go back to Regina and be on our way to Grande Prairie, Alberta, where they've had particular difficulties in the last two, three, four years, because of weather conditions and other things.

Then we would come back to Edmonton, but we would not go into the city of Edmonton. We would choose a farm community near the airport—because I can tell you that it's important to be near airports if we're going to do this very quickly. We would choose a meeting place at Leduc, which is near the Edmonton International Airport. That would be late Thursday afternoon, early Thursday evening.

Then we are on to Calgary. We would not have a meeting in downtown Calgary. We would go to a community called Airdrie, which is not that far from the airport. I think it's about fifteen minutes away. That meeting would take place Friday morning, December 10.

That's the work plan. There's just one more thing. For this to happen, we have to pass a budget, which again I have asked the clerk to prepare.

Have you distributed it?

The Clerk of the Committee: No. Do you want me to give it out?

The Chair: Before I distribute the motion, because this motion, like any other motion, I guess, requires a 48-hour notice, I would need to have unanimous consent from the committee to, first of all, waive that 48-hour notice. Then I can distribute the motion and we'll go from there.

Some hon. members: Agreed.

The Chair: I would ask you not to blanch too much when you see the budget. It seems to cost a lot of money to travel. I guess it's a large country.

Mr. Clerk, are you distributing it?

The Clerk: Yes.

The Chair: Are you distributing both options?

The Clerk: Yes.

The Chair: Okay. Let me just explain the options. Option A involves commercial travel. Option B involves chartering an aircraft. As you will notice, members, our option B, the chartering of an aircraft, is much cheaper. It's roughly $20,000 cheaper. Being the old parsimonious type that I am, I sort of lean towards option B—for my money, anyway.

Mr. Larry McCormick: Can I make a comment on that, Mr. Chairman?

The Chair: Yes, Mr. McCormick.

Mr. Larry McCormick: Yes, option B sounds great. It just makes me think about—and this is only for one week—when we did the SSR review at HRD. Some of us were there. We did 26 cities in 35 days in ten provinces and the two territories in the east Arctic; we leased an airplane and saved a lot of money. I'm sure this chair will ensure that we wrap up somewhat on schedule, otherwise you can end up with an airplane waiting at the airport if you run every night until midnight, heaven forbid—because then you're not sharp enough for the people the next morning. That's just a point I wanted to make. We want to cooperate, and money is important.

Thank you, Mr. Chair.

Mr. Garry Breitkreuz: Those were the good old days, Larry.

Mr. Larry McCormick: Yes, we paid an all-time record.

The Chair: By the way, welcome, Madam Vautour. I think this is your first visit to our committee. You'll find us to be a very friendly bunch.

Mr. Larry McCormick: We all vote the same on everything, you see.

The Chair: We all eat the same thing, I guess; it's something like that.

Anyway, you have the budget in front of you, members. Do you have any questions regarding it? As I say, these numbers seem high, but I can assure you that I have talked to staff and it's all very normal. This is what the cost of travel is.

If you're wondering about the staff, again that's normal. There are translators, technicians, and of course our two researchers and the clerk. That's all pretty straightforward.

Howard.

Mr. Howard Hilstrom: Thank you, Mr. Chairman.

• 1105

Well, this is an observation. The agriculture minister asking us to travel doesn't seem like the normal thing for a committee. A committee normally, in my understanding of parliamentary protocol, decides on its own agenda and makes decisions on its own, as opposed to the agriculture minister deciding.

I have some observations in regard to this travel. I'd certainly like to say that Reform and I are strong supporters of getting out to western Canada in particular at this time, and we should be considering southern Ontario. Some of the same problems that are in western Canada certainly exist in southern Ontario. I've been down there talking to those farmers.

I'd like to say, Mr. Chair, that in effect the Liberal members of this Standing Committee on Agriculture and Agri-Food now want to travel to western Canada to discuss the ongoing farm income crisis after they stated in committee on November 4 that travel was unnecessary. Reform, as I said, has always supported committee travel in order to hear directly from farmers in their own communities.

We believe that this travel proposal before us must be effective and meaningful. Hearings organized in haste will not result in an accurate picture of the farm income situation or in meaningful recommendations to the minister, which I'm sure is what the objective of this trip is.

I was of course given only a 22-hour verbal notice by the chair that he intended to have a travel motion approved at this committee meeting.

As I stated, the proposed travel is to begin on December 5 and end on December 10. The proposed locations are mostly cities. My question is this: Is this sufficient time in which to organize meaningful meetings? Is there enough time for farmers to change their schedules to accommodate the committee? Will the committee actually hear from farmers directly or just from the groups that have previously appeared before the committee in Ottawa? The travel plan as outlined by the chair is virtually worthless in terms of accomplishing these goals.

Reform supports the agriculture committee travelling to consult directly with farmers, as I've stated. However, recent travel by other House of Commons standing committees has just been staged events with little real consultation. I will not allow this to happen with this committee.

In order to ensure meaningful consultations with farmers, Reform requires the following five conditions.

First, the witness list is not available here for discussion and for opposition input, which gives the chair the ability to arbitrarily chose witnesses. To effectively consult with producers, the committee must hear directly from farmers, not only farm lobby groups. To this end, we require that 50% of the witnesses to appear before the committee be put forward by the opposition and that 50% of the locations for committee hearings be put forward by the opposition.

Second, all farmer witnesses who travel to the committee hearings must have their travel and associated expenses fully funded by the House of Commons.

Third, we require that all committee hearings be open to the public and televised. This will ensure that meetings are open and accountable and that the actual presentations from the farmers will be available for viewing by the agriculture minister and the Prime Minister—the actual presentations.

Fourth, the current proposal allows for only two and a half hours per meeting. This is not enough time to hear from more than a few farmers. The committee should hold hearings for a minimum of four hours per site at a minimum of two sites per day.

Fifth, one week is not enough time in which to adequately consult with farmers. Committee hearings must be extended through January to allow the committee adequate time to plan and to hold hearings in rural communities where farmers live. Farmers will see through a hastily planned trip that does not give them time to make their concerns known to the committee, to the agriculture minister, and to the Prime Minister.

Again, I can not allow this to happen with this committee.

Those are my comments, Mr. Chairman. I'll provide you with a copy of this letter, which I've addressed to you.

The Chair: Mr. Calder, I think you indicated you wanted to say something.

Mr. Murray Calder: Yes.

I'm kind of disappointed, Howard. Quite frankly, when we talked about travelling before...and I thought we had discussed this at length. We have listened to some very credible witnesses here, who have given us some very credible information to work from. Now we can go out west, and we have been briefed on the situation out there as people, as I referred to before, are way up on top of the hill watching what's going on in the valley. That's the only way we can come up with solutions to the problem as it stands right now.

• 1110

When you start talking about the fifty-fifty split, the strength of this committee in the past—and I've sat on this committee since day one, since 1993.... For me anyway, being in the House of Commons, I've always found we have tried to work around any impasse we've had on this committee, and quite frankly your suggestion of the fifty-fifty split I find divisive. If we head out west working on a divisive platform, that's exactly what it's going to be: a divisive platform.

I want to find answers for this. I don't want to go out and set up some sort of media stage out west that the Reform is going to try to beat up the government.

A voice: Again.

Mr. Murray Calder: That's not going to help the problem at all. That is totally divisive, and it's playing politics at its worst. Let's go out and do something.

The Chair: Mr. Knutson.

Mr. Gar Knutson: It would be my preference that whatever plan we agree to, everybody buys in and accepts that we're all trying to act in good faith and do the right thing for the Canadian farm community. This discussion should be kicked over to a steering committee, and John and presumably Joe should try to work with the opposition and come up with a plan that makes sense to everybody.

Mr. Murray Calder: I agree.

Mr. Gar Knutson: I don't know if that's possible right now, but that's my two cents' worth.

The Chair: Well, maybe I should just provide you with a little more detail, because I think perhaps Mr. Hilstrom doesn't fully appreciate some of the facts.

With respect to locations, given the fact that we're going to be going to nine communities in three provinces, we have to go to communities that are relatively close to airports or that have airports. I know the province of Manitoba very well, Mr. Hilstrom. It might be nice to go Snowflake, Manitoba. It might even be nice to go to Dallas, or how about Miami, both in Manitoba. The fact of the matter is they're a long way from airports. Great people are living there, but we have choices to make.

Dauphin, Brandon, and Portage are all very much farm-oriented regional centres, and I think farmers will be more than happy to have us come to those major communities. If Reform wants to stake its reputation on something else, that's fine, Mr. Hilstrom.

Saskatchewan is different from Manitoba in that the principal cities in Saskatchewan are very much influenced by farm politics. You can go to Saskatoon and Regina, and what you do and say there resonates through the entire province. Weyburn is in an area where there was a lot of rain in June.

I've worked very hard with the staff to work out a plan.

It's the same thing with Alberta, Mr. Hilstrom.

You mentioned television. I don't think we have any control over television. I'm surprised that this would be a suggestion from a party that always resists state control. Are you asking the state to step in, Mr. Hilstrom, with respect to television? And I don't think we can order CTV or Global to come in and cover our meetings.

On the witnesses, you're going to get more than 50% of your choice. You've already started, Mr. Hilstrom—and thank you for—submitting lists of names of farmers to appear before the committee. I want the same from the NDP, I want it from the Tories, and I want it from the government side. There are five parties here, Mr. Hilstrom. If the names of the farmers are submitted by all parties, that will give you 80%, not 50%. So we can more than meet your requests.

And if you want to vet the lists, I'll take your list, I'll take Mr. Proctor's list, and I don't know who is going to supply the Liberal list, and I will take Mr. Borotsik's list, and we will pick the farmers as they appear before the committee.

• 1115

But I have to remind you of one thing, Mr. Hilstrom. This is a parliamentary committee. There has to be a modicum of decorum. I will do my best to provide as much expression to farmers as possible. I will do that as your chairman.

Given the coverage, given the meetings we've held so far, I think we can probably hold down appearances of organizations to one a meeting—for example, I'd like to hear from Keystone in Manitoba. One component at each meeting will be a representative of an organization; the rest will be just farmers. And these are three-hour meetings.

Mr. Breitkreuz was complaining a few minutes ago about short meetings here too. We're going to give you three hours per community. This is 27 hours.

So I think you should show, Mr. Hilstrom, just a little bit more appreciation. After all, you're one of the leading proponents of going and talking to farmers. Well, that's what we're trying to do. I think we should have as few obstacles as possible to make this happen.

Mr. Proctor.

Mr. Dick Proctor: Well, I support—

Mr. Howard Hilstrom: Mr. Chair, I have a point of order here. When comments are being directed to me, I think it only appropriate in a meeting situation such as this that I get to speak to you in relation to those comments, as opposed to jumping around.

The Chair: I'll be more than happy to entertain your intervention in just a moment.

Yes, Mr. Proctor.

Mr. Dick Proctor: I just wanted to say I too only received notice of this, as Mr. Hilstrom did, some 22 hours ago. But as the chair described the proposal to me, I thought it made a lot of sense. He's expanded on it, in terms of the witnesses, in asking all of the parties to come forward with a list for all of the meetings. I think that is fair and reasonable.

With respect to option A or B—maybe I'm getting a little bit ahead. I would not disagree with Mr. Knutson, and perhaps the steering committee should look at this overall if we can't resolve it here quickly. With regard to options A or B, obviously, like the chair, I agree with the cheapest way, which I gather is charter. But within that, it may be possible for us to look at some not necessarily additional sites but some other sites we could get into.

I'm thinking of Saskatchewan. Lots of times people in Saskatchewan have to go to either Saskatoon or Regina. It might be nice if we were able to take the plane to Estevan or take the plane to North Battleford or Lloydminster—somewhere where people wouldn't have to travel as far. We could go closer to them and still have a very important meeting.

The Chair: Okay.

Mr. Hilstrom.

Mr. Howard Hilstrom: First of all, Mr. Chair, who are you suggesting here is not acting in the best decorum possible? You said there's lack of decorum here or something?

The Chair: No, I didn't say that. I said when it comes to the meetings out west, we have to have some structure to our meetings. That's why I've provided this kind of format. That's all I was referring to.

Mr. Howard Hilstrom: Okay. I think you mentioned the reputation of Reform. Well, our reputation is built strictly on grassroots farmers. That's why I've asked for these meetings to be extended out through January so we in fact can get around. I noticed, just by way of comment on your list here, that Weyburn is on the edge. I think if you look at production records out at Weyburn, you'll see they're pretty good this year. I think if you consider Melita, Manitoba, and Carnduff, Saskatchewan, you will see those are the farmers who need to be spoken to. That is where we need to be going, down to those particular areas, and seeing those farmers and giving all of them the opportunity.

So I'm one hundred percent in favour of this travel. What I'm saying is we need to put this to the steering committee, where it should have gone in the first place, as opposed to the agriculture minister dictating to us that we will travel on December 5, 1999.

Mr. Dick Proctor: On a point of order, I was at the meeting last week. In fairness to the Minister of Agriculture, he did not dictate anything to this committee. He said “I can only recommend to the committee that they travel out west”, and I put that to the chair of the committee. So there's no dictatorial thing here, Mr. Hilstrom, whatsoever.

Mr. Howard Hilstrom: No, that's fine.

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The point is the minister has asked us to do it, and now within a few days we're expected to put together a $211,000 trip out west that is going to accomplish what? To speak to a few farmers and call that representative of the whole farm situation out there? Farmers have had a year and a half since these hearings were started last fall, on my motion, to have hearings into the income situation. Why on God's green earth would we run out to the west in one week and come back here and tell them we have consulted with farmers in the west?

The farmers, as I've said in my presentation, will see through this as nothing but a sham to come out and deceive them one more time. And I will not be part of that. I cannot emphasize that enough. I like Mr. Knutson's suggestion that we get to the steering committee and plan this the way we would plan any major hearings we intend to hold. Hearings that are so vital have to be done fully and properly, and I would support Mr. Knutson's suggestion that we go to steering committee and work this thing out in a proper format and so we have lots of time.

The last comment I'd make, Mr. Chairman, is that you said the priority of the committee is to get from city to city and near the airports on this. I'm telling you the priority of this committee is to serve the farmers of western Canada, and the farmers should be priority number one, the committee number two. If we have to work 12 hours a day, so be it. We're the servants of those people, those farmers. We are not their masters.

The Chair: I can assure you, Mr. Hilstrom, that the plan I've drawn up is 18 hours a day. That's 18 hours a day. I can assure you, Mr. Hilstrom, that if you want to see farmers, as I do, as all of us do, you have to be mindful of transportation. Now, as far as I know, you can't fly yourself. You have to rely on an aircraft, and you have to rely on roads and you have to rely on airports. Those are absolutely essential factors, Mr. Hilstrom. I'm just absolutely astounded that you would ignore those basic facts.

Mr. Garry Breitkreuz: You know, there are a couple of questions there that are immediately obvious, like what's changed in the last six weeks, and what's preventing us from extending this to three or four weeks and getting on a bus? I don't think we have to fly.

Mr. Gar Knutson: It's a long way out west.

The Chair: Well, Christmas is not very far away. I think right now the issue is resonating across the west, and I assume most farmers would appreciate our coming.

Mr. Howard Hilstrom: Mr. Chairman, you didn't explicitly tell us why there was this urgency to do this on December 5 as opposed to doing a proper job, starting in December, throughout the month of January? Why is it so urgent to do it at this point? And you can elaborate on the objectives of this thing.

The Chair: I guess I would put it this way. If you look at the calendar, Mr. Hilstrom, Christmas is a month away. Some of us are going to be in Seattle next week. The next week is the week I am suggesting we travel in the west. The following week is the last week of the parliamentary session before Christmas. So basically we have, if you don't count this week, three working weeks left. If we want to prepare a report for Parliament, let's say by the time Parliament reconvenes at the beginning of February, we'd better get out and see the farmers before Christmas. I think the report should be in the hands of the government before the safety net committee meets in February, which is the last meeting before they perhaps conclude an agreement for the new fiscal year, April 1.

Mr. Proctor, and then Mr. Hilstrom.

Mr. Dick Proctor: No, I'll pass for the time.

[Translation]

Ms. Hélène Alarie: Mr. Chairman, I think we heard the claims of all those who wanted to make some. Mr. Knutson made a proposal. I would be in favour of that proposal and suggest that the steering committee make the final decisions because it's where we're at.

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[English]

The Chair: Let me ask the clerk.

Mr. Howard Hilstrom: I was next.

The Chair: I'll let you talk in just a second, Howard.

If we're going to have a steering committee meeting, I think it should be this afternoon. The clerk says he'll find a room.

Yes, Howard.

Mr. Howard Hilstrom: Do you folks not see what is wrong with what we're doing here? The chairman once again said that the priority that has to be number one is the committee's consideration that we have to get this done before Christmas. We have to get it done right here in this week of December because we're off to Seattle and we're off to these other things.

What is so wrong with doing this job properly, planning and working on our plan here in November, maybe getting some hearings done in that week of December, and getting it done throughout the month of January? We're all off for the whole month of January. Surely we can travel in that time and finish up this job by hearing from all the farmers who need to be heard. Farmers are priority number one.

An hon. member: Take another week or two.

Mr. Dick Proctor: I have a clarification.

The Chair: Dick, and then Rose-Marie.

Mr. Dick Proctor: Are committees allowed to convene when the House is not in session?

The Chair: Yes.

Rose-Marie.

Mrs. Rose-Marie Ur: Actually, I may be off, but I think probably 99.9% of the MPs do work in their ridings in January. I don't head to the sunny south for the whole month of January. I'm very visible and working very hard in my riding, so it's not that I'm having a leisurely time. I think it's important; that is a time for us to be in our riding. We have to cost that factor in as well. I have farmers in my riding.

Mr. Howard Hilstrom: I have hog farmers in my riding. That's why I brought up southern Ontario.

Mrs. Rose-Marie Ur: I thought maybe it was just southern Ontario.

Mr. Howard Hilstrom: No, no. We need to do this job properly.

Mrs. Rose-Marie Ur: Right.

An hon. member: This is just a real hurry-up job to make it look good.

Mr. Gar Knutson: No, it's not.

An hon. member: It's just an appearance.

The Chair: If it's all right, let's have the steering committee meeting this afternoon. We'll be back Thursday morning so that we can ratify whatever we decide this afternoon. Is that fair? Especially to the government members—

Mr. Larry McCormick: Who's not required to be here?

The Chair: I'll give you the names of those who are on the steering committee. It's Mr. Calder, Mr. McGuire, Mrs. Ur, Mr. McCormick, and moi. You'll have to be there. We'll see the rest of you. We'll communicate with your offices as soon as we can.

Thank you. This meeting is over.