AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 3, 2001

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[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): Good morning, everyone. We'll call our meeting to order.

Today we're looking at Bill C-25, an act to amend the Farm Credit Corporation Act and to make consequential amendments to other acts.

We'd like to welcome the parliamentary secretary, who is, I guess, earning his keep this morning by replacing the minister. So, Larry, and the people from the Farm Credit Corporation, the floor is yours.

Mr. Larry McCormick (Parliamentary Secretary to the Minister of Agriculture and Agri-Food): Good morning, Mr. Chair and committee members.

I want to read some comments into the record on behalf of the minister regarding Bill C-25, the Farm Credit Corporation, the amendments to the act. But first, I should certainly recognize the CEO—and all the other titles Mr. Ryan has—and I'll let him introduce his two people here before I make the statement on behalf of the minister, if I could, Mr. Chair.

Mr. John Ryan (President and Chief Executive Officer, Farm Credit Corporation): Good morning, Mr. Chair and ladies and gentlemen.

It's a pleasure to be here again this morning to talk about Bill C-25. I have with me Louise Neveu, our executive vice-president and chief knowledge officer, and Moyez Somani, executive vice-president and chief financial officer of the corporation.

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

Colleagues, today we are beginning hearings on the proposed amendments to Farm Credit Corporation legislation, as detailed in Bill C-25. We will be discussing FCC's role as a federal crown corporation in meeting the changing needs of agriculture today and into the future.

As all of you know, the agriculture and financial industries have changed greatly since the Farm Credit Corporation Act was last amended in 1993. These amendments address the gaps in financial and business services that have emerged in the past several years. Last year FCC met with more than 100 agricultural and financial groups to seek their views on financial services needs and how amendments to the act could help meet them. The majority of the groups were supportive of the proposed legislative changes. As a result of their input, the amendments are focused on the following guiding principles. The bill will provide agricultural operators with a greater range of options in financial and business services. It will increase access to services for farm-related businesses in support of primary producers. It will provide greater structural flexibility, to allow the corporation to more effectively meet the needs of producers and farm-related businesses.

Now I come to the legislative amendments. I will briefly review the amendments tabled in the House of Commons on April 5.

A major amendment proposed that the corporation's name be changed to Farm Credit Canada, to better reflect its federal identity. In French the name will be changed to Financement agricole Canada. This change will send a clear message of the federal government's commitment to agriculture and rural Canada.

Another amendment will allow the corporation to offer business services to producers and farm-related businesses. These services will complement existing ones and the corporation will often work in partnership to deliver them. FCC employees are recognized for their level of agricultural expertise. Through partnerships, FCC will be able to use this expertise to offer producers more business management tools to achieve long-term success. The end result will be increased access to business services across rural Canada.

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Bill C-25 will allow FCC to serve farm-related businesses that benefit agriculture, whether or not they are farmer-owned. Since the act was last amended in 1993 FCC has been able to lend to farm-related businesses that were owned in majority by farmers. However, the restriction has limited the corporation's ability to finance many farm-related businesses that benefit primary producers and provide jobs for rural Canada. The agricultural industry has grown much more interdependent in the past several years. Producers' success is linked to the strength of farm-related industries, on both the input and the output side. By helping the value-added sector grow, FCC will provide new markets for primary producers and help strengthen rural economies.

At the same time, the corporation will keep its focus firmly fixed on primary producers. The government has included an amendment in Bill C-25 that makes a formal commitment to maintain this focus.

Another amendment will clarify the corporation's powers to offer lease financing, directly or in partnership, to agriculture operators. There is a growing need, Mr. Chair, for lease financing in the agricultural industry for operators who want to manage cashflows with increased flexibility. The 1993 act does not prevent FCC from offering lease financing. However, this new amendment clarifies the scope of the corporation's services in this area.

The ability to offer equity financing is another tabled amendment that would also help foster growth for the entire industry. A national venture capital study shows that only 2.6% of the $2.7 billion invested in 1999 went to agriculture. There is definitely a need for more equity capital in this industry. FCC will extend equity financing to producers and farm-related businesses, either directly or in partnership with others. This amendment will enable FCC to act as a catalyst, attracting needed equity capital to the agricultural industry in rural Canada. Previously FCC has not been able to meet the equity financing requirements of potential customers.

Now I come to the legislative amendments regarding the corporate structure. The partnering with other organizations of financial institutions has always been part of FCC's approach to delivering products and services. For this reason, one of the bill's amendments will clarify FCC's ability to participate in and lead financing syndicates. Financing syndicates allow for the distribution of risk among the syndicate partners. Through its ability to lead syndicates, the corporation will be able to offer producers increased access to a wide range of services. At the same time, it will reduce the risk to the existing lending portfolio. This amendment enhances the corporation's role as a catalyst in bringing new and innovative financial and business service options to the agricultural marketplace.

One of the amendments would give FCC the power to create subsidiaries. It would essentially provide the corporation with a means of entering new areas of business, either by itself or in partnership, while reducing risk to the corporation's lending portfolios. Through subsidiaries, FCC will be able to isolate businesses that are distinctly different from its core business. Examples could include equity capital investments and lease financing.

Another amendment provides for enhanced risk management capabilities. As the corporation's services increase in variety and complexity, it would require greater scope to manage risk exposure. Through this amendment, FCC will have access to a broader range of current risk management tools, which will allow it to meet the growing needs for services and capital. This same amendment provides the ability to pledge securities and cash. FCC would be able to enter management agreements and meet its obligations under such agreements. Again, the corporation would have increased flexibility to manage risk.

Two of the amendments address corporate governance needs. Currently, the president of the FCC is given the authority to act as chair of the board of directors, if the actual chair is absent or the office is vacant. The amendment will require that the board appoint an acting chair who is not an employee of the corporation. As well, the board can appoint an acting president if that office is vacant or if the current president is unable to act.

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The second corporate governance-related amendment will clarify the fact that the corporation's name change will have no impact on its legal obligations.

In conclusion, Mr. Chair, the federal government believes that the amendments included in Bill C-25 are relevant and necessary to ensure FCC continues to meet the needs of the agricultural industry. Through this bill, FCC will continue to serve as a stabilizing force in the agricultural industry, providing access to services through all agricultural cycles. The corporation will be better positioned to meet the needs of producers through the life cycle of their operations from start-up to retirement. Farm-related businesses will have greater access to capital and services. As a result, they will contribute to the strength of the agricultural industry and create jobs and economic development in rural communities. Finally, FCC will be able to build on its role as a catalyst. Through partnership it will encourage innovative services to agriculture and attract increased investment into rural Canada.

Thank you for your attention.

Mr. Ryan, president and CEO of the Farm Credit Corporation, Dale Canham, and whoever else will join with Mr. Ryan, are with me today. They're certainly most qualified and hopefully will be able to answer all your questions.

Thank you, colleagues.

The Chair: Thank you, Mr. McCormick.

With that, we'll begin our round of questioning. I would only say that in terms of the success the corporation has had over the last decade, we are certainly looking at it much more positively than we were because of what was occurring in the 1980s.

As a committee we have to look quite extensively at your changes, and with that I'm hoping we can continue to make Farm Credit Corporation—or the body under a new name—a success for the next generation.

David, are you going to start off the questioning?

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): Sure.

I recognize that Farm Credit has been a big player in Canadian agriculture, particularly in our area, southwestern Saskatchewan. It's played an important role there.

We've gone through the legislation here. We've had our first day of debate on it. I guess my main concern—and our main concern—is that we feel this legislation expands FCC's position far past the farm gate. Up until now either the primary producers have had to be the recipients of the loan or they've had to control the operation the loans have been given for.

I'm strongly in favour of diversification of development in our areas, but we have a concern. We need some specific reassurances. What's going to protect those primary producers, that traditional group of borrowers, who often have trouble getting credit from other institutions? I know your bill says the primary focus will continue to be on farming operations, but we need a little more reassurance than that. I'd just like your response to that.

Mr. John Ryan: I think, Mr. Chair and honourable member, it is a very good question. It's a question that has come up over and over in terms of the consultations we did over the course of last year. A number of the farm groups asked that very same question, and our response at the time was—and it continues to be—that clearly what we're trying to do here are things to further benefit primary production, not to take anything away. I do not at all see this being an either/or situation, either in support of agribusiness or in support of the primary producer, but a combination of both.

In specific reference to your question, when we spoke with the various agricultural groups, in particular the Canadian Federation of Agriculture, they expressed this concern. My response was, you give me the words you want to see put in the new legislation that would give you the necessary assurance that the corporation will not be straying away from its primary focus, which is the primary producer.

If you look at the bill today, it does have in the summary very clear comments saying the focus will be there. That will become law when the bill is passed, and once it becomes law, we will have to adhere to it.

In terms of checks and balances, we have a board of directors who will look at this very closely. Over and above that we have the Auditor General's office as our auditors. They will come in and do a review of the corporation on an annual basis and will do a special examination every five years. One of the things they'll clearly be looking at is to determine if we are meeting the intent and purpose of the mandate and of the legislation itself.

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In addition to that we have, on an annual basis, a corporate plan that is put forward and needs to be approved by Agriculture, Treasury Board, and Finance. In that corporate plan we have to spell out clearly what the intentions and the direction of the corporation are, not just for a one-year period but for a five-year period. Every year that is reviewed, and these departments have the opportunity at that point to agree or disagree.

Mr. David Anderson: My concern is that in our local area the businesses that are diversifying are producer-controlled and producer-owned for the most part. We don't have a lot of other people coming into those areas to put money into them. Your amendment here also talks about “business related to farming”, and the definition is:

a business that primarily produces, transports, stores, distributes, supplies, processes or adds value to inputs to or outputs from farming operations;

That's such a broad definition it can include almost anything.

I see that in some ways this could actually take away the opportunity for smaller borrowers to get money. I want to ask if there are any provisions in Bill C-25 that would prevent FCC from bailing out large non-farmer-owned businesses at a later date. The example that comes to mind is a rumour that the Wheat Pool went to the provincial Government of Saskatchewan for money about a year ago; they weren't forthcoming about doing it or denied they'd done it. Is there anything here that would stop FCC from putting a huge injection of cash into an organization like that?

Mr. John Ryan: I think I'll go back to the bill, where it makes reference in the purpose section, proposed subsection 4(1), that the focus is on small and medium-sized agribusiness, so that's clearly spelled out in the bill itself. The Sask Wheat Pool, as an example, would not fit into the small and medium-sized category. In addition to that our board of directors does set the limits on what size loan we provide, and I think the checks and balances are there in those two areas. One, it's in our act, and two, our board of directors sets the limits.

Mr. David Anderson: Does this legislation limit you to those medium-sized businesses?

Mr. John Ryan: It says “small and medium-sized”.

Mr. David Anderson: And what do you consider to be a medium-sized business?

Mr. John Ryan: We do not use a specific example or number to arrive at “medium-sized”, but at the end of the day what we do is ask, in the normal course of things, does this appear to be a small or a medium-sized business? If you're dealing on a large, national or international basis, our approach when we're looking at these individual proposals is whether they meet.... You used the Sask Wheat Pool example, and they're into billions of dollars of sales on an annual basis. That to us is not small or medium-sized.

Mr. David Anderson: Okay.

This may be a question more for Mr. McCormick, but would the government object to amendments to Bill C-25 that would set limits to the size of loans that could be offered to businesses that are not majority-owned by farmers? I realize there's a $20-million limit right now on them, and I guess we're thinking in terms either of size or of the percentage of your portfolio.

Mr. Larry McCormick: Well, Mr. Chair, I will offer a thought on this question. We certainly encourage amendments because we can learn from amendments, and we can learn from the debate we'll have over these amendments down the road when we do the clause-by-clause. Whether the amendments come forth in committee or later, I certainly won't answer on behalf of all committee members or the minister, but we welcome your participation, David.

Mr. David Anderson: What's the current split between farm loans and the non-primary-producer-related volume?

Mr. John Ryan: Ninety-four percent of our portfolio is in primary production now, and 6% is in what we call the agribusiness or the value-added side.

Mr. David Anderson: What do you project? Do you have any projections of what those splits might be later?

Mr. John Ryan: It would be a bit of crystal-balling, but when we do our corporate plan, we have to forecast for five years. When we look at that forecast on a five-year basis, we see it moving to approximately 80-20, 80% on primary production and 20% on the value-added side.

Mr. David Anderson: And what percentage of that would be to non-farmer-owned or non-primary-producer-owned businesses?

Mr. John Ryan: We haven't made the extra split there because I think what we'll find in many situations is that there are various combinations. The main ones will be straight primary producer going into the value-added side, primary producer and non-primary producer joining together, and a third group that are not producers. The last group will be going on their own but will require on the supply side a product coming from the primary producer. We haven't taken a further cut there. I think if we did take a further cut, that 80% would actually go up, not come down—

Mr. David Anderson: Right.

Mr. John Ryan: —because the 20% includes everything.

Mr. David Anderson: Okay.

The Chair: Thanks, David.

I'm going to move now to Marcel.

[Translation]

Mr. Marcel Gagnon (Champlain, BQ): Thank you, Mr. Chairman.

In the explanations on the improvements to the Farm Credit Corporation Act, the expression “family farm” is still being used. Now I personally find that very good, but it seems to me that in fact, in Quebec anyway, the farms that used to be called family farms are fewer and fewer because the agricultural farms have become extremely huge and often what you have are family corporations.

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According to the definition you have in the bill, what does “family farm” mean? Is it by man/work unit or is it a farm where, for example, a man with a family can earn some income? What is the definition of family farm?

Ms. Louise Neveu (Executive Vice-President and Chief Knowledge Officer, Farm Credit Corporation): Let's say it is extremely difficult to come up with a specific definition. In our case, we use that expression where the owners come from the same family. Let's say that could mean the mother and the father with a few children. Of course, they can be set up as a corporation. It can be an association, but they are the owners themselves and they do most of the work.

Mr. Marcel Gagnon: The family?

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: It could also mean the extended family.

Ms. Louise Neveu: Exactly.

Mr. Marcel Gagnon: In that case, that is a rather broad definition.

Ms. Louise Neveu: We cannot find any easier definition in terms of limits. Usually, it is simply based on the fact that the people operating the farm are members of a family.

Ms. Suzanne Tremblay (Rimouski-Neigette-et-la Mitis, BQ): Mr. Chairman, you know as well as I that there was an agricultural congress last weekend at Sainte-Croix, Lotbinière. They had a National Film Board production titled Beef Inc. where the biggest owner is a single family. It is sort of a world-wide multinational, but a single family owns it. So is that a family farm?

Ms. Louise Neveu: Not necessarily. According to our definition, it would not be because we still say that the family members are the ones doing most of the work. So it would be limited in terms of salaried employees who are not members of the family.

Ms. Suzanne Tremblay: If ever we came up with a definition for you, could we submit it?

Ms. Louise Neveu: Certainly.

Mr. Marcel Gagnon: It is already there, but you are broadening, you are improving funding to the primary sector. Could a processing industry using an agricultural product and processing it, for example, someone selling chemical fertilizer, could they be considered as part of the primary sector?

Ms. Louise Neveu: In both meanings: input or output.

Mr. Marcel Gagnon: Input or output.

Ms. Suzanne Tremblay: During the consultations you held, the UPA, in Quebec, found that maybe it was a good idea to broaden it, but it was too broad. They said that the new Farm Credit Corporation should put its money mainly into farms, the primary sector. But all of a sudden there you are opening the door do the secondary and tertiary sectors. The UPA found it was too broad. Would it be possible to restrict that by establishing, for example, that the Farm Credit Corporation must target at least 60, 70 or 80% of its funds to farmers and people directly involved in agriculture and maybe 20% for the others? Otherwise “mainly” means 50.1%.

Ms. Louise Neveu: According to our present business plan, which is naturally approved by the Department of Agriculture and Agri-Food, Treasury Board and the Department of Finance, at this point in time we anticipate that after five years the maximum percentage of our portfolio for agribusiness will be about 20%. So 80% will still go to primary agriculture. There is no limit as to how our funds are divided. Even if the primary sector was growing, there would be no limit in the portfolio. We could still put 80% of it into primary agriculture.

Ms. Suzanne Tremblay: But there are no guarantees. All we have is your business plan and we don't know what it is.

Ms. Louise Neveu: The Summary of our Business Plan was tabled in the House.

Ms. Suzanne Tremblay: It's a public document.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: The business plan is the market study you did.

Ms. Louise Neveu: Exactly.

Mr. Marcel Gagnon: It wouldn't be possible to impose the 80% figure in the act itself.

Ms. Louise Neveu: It is certainly possible to amend the bill, but at this point it's not suggested in the bill you have before you.

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Mr. Marcel Gagnon: Thank you.

The Chair: Paul.

[English]

Mr. Paul Steckle (Huron—Bruce, Lib.): Thank you, Mr. Chairman.

I want to thank the members for coming before the committee again this morning to continue our line of questioning that was begun a few days ago.

You talk about leasing. What was your connection with CULEASE and why did they need you? Or why did you need them? I guess that's the question.

Mr. John Ryan: I think the honourable member has a very good question from a point of view that perhaps illustrates what the corporation is trying to do, which is, at the end of the day, to bring more services to the agriculture community, in this particular case the primary sector, but also on the value-added side. We understood CULEASE was involved in leasing. What we did was sit down with them and say “We're getting requests from our customers who are looking for leasing”, and this isn't necessarily something the corporation always has to be doing itself. “You have an expertise in that particular area. We have a network of 100 offices across the country. Are there benefits for the two organizations to come together to see potentially what we can do together?”

What we agreed to with CULEASE people was that we would basically be what I'll call the front-end part, where we would receive the inquiries or the applications and in turn forward them to CULEASE on a referral basis. CULEASE would then actually book the lease on their particular books.

Mr. Paul Steckle: So we would be a referral agency.

Mr. John Ryan: As it is, yes.

Mr. Paul Steckle: My thoughts in reading some of the comments are that you may be considering going into leasing. I'm wondering whether land leasing is one of those options that you might be looking at. In my former life I was involved a bit in this business. I'm wondering whether you're thinking of lease to own, whether that's an option, whether that's being looked at, and whether it should be looked at. Obviously machinery is, but I'm wondering about the land itself.

A reference to that might be going back about 25 years ago to the program called ARDA—I don't know whether you're familiar with that or not—where farmers were given an opportunity to put in their name for a number of years and extend that for another five years. I believe it was up to ten years. I'm wondering whether you're thinking of something like that as a beginning farmer.

Mr. John Ryan: I think there are two responses.

Clearly when we talked about leasing in this particular bill it was on what we call “personal property”, which is equipment and chattels. It was not intended to at all address what I'll call the land bank or land management side of things. That's not where we were going with this particular bill.

When we did our consultation studies across the country, the only time that came up on a positive basis was with the development farmer. And they were saying, because we were asking them for options on what we could be looking at, maybe it would be nice if you did have land that we in turn could lease from you with the right to buy at some later date. But that's not what this bill is about. This bill is about personal property, i.e., equipment, chattels.

Mr. Paul Steckle: What about home mortgages? This bill is taking us into some new directions. I'm wondering, if a farmer has a business and he wants to build a home perhaps on a lake someplace, are you giving mortgages on homes that are not part of the original farm operation even though that person who's seeking a mortgage may be a farmer, may be a farm-related business operator?

Mr. John Ryan: No.

Mr. Paul Steckle: So in other words, he wouldn't be able to get a mortgage on his cottage or his primary home other than on that property?

Mr. John Ryan: We have in the current legislation today, in our current portfolio, the situation where we have financed the family farm home, the residence, but not when we look at it from the point of view of someone who wants to build a cottage. We ask the fundamental question, what's the benefit to agriculture? What's the benefit to the primary producer?

Someone could argue there's some benefit because it allows them to have a cottage, but that's not the role we see for Farm Credit Corporation.

Mr. Paul Steckle: I know. That's a bad term. But you've cleared that up and I appreciate it.

But let's take that to the next step. The man, the operator, the person who owns the operation doesn't have a home and he needs a home. He builds it on the shore of a community where it would be deemed to be his primary residence. Could he seek a mortgage through Farm Credit Corporation because it's his primary residence, which services the farming operation?

Mr. John Ryan: My response to that would be no. We're looking at what we are doing for agriculture. What are we doing for the primary producer?

Mr. Paul Steckle: He needs a home.

Mr. John Ryan: But I think there are other places he can go to get the financing for that home.

Mr. Paul Steckle: I appreciate your comments. I'm just taking this down that road—

Mr. John Ryan: Fine.

Mr. Paul Steckle: —because I think it's something you're going to be tested with down the road, I'm sure.

Mr. John Ryan: We are today, sir.

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Mr. Paul Steckle: I welcome the opportunity to seek more competition in the lending institutions of our country. I think that's a positive, and I welcome it.

I don't want to go away from this idea of long-term mortgages, and I realize that we cannot give 25-year guaranteed mortgages as we once did. At least, I'm not aware of any institutions or organizations that do this. However, there may be merit in that, and again I go back to it. You said the other day that this is not in the scheme of things, and there doesn't seem to be an appetite for that kind of thing.

Mr. John Ryan: From a point of view of our authority, capacity or powers, we can do that today. But when we look at coming up with new products and services, the first thing we're saying is how big is the appetite? If the appetite were there, we could respond to that.

One of the things you'll see in other countries, particularly in Europe, is what they call perpetual mortgages that go on forever and a day. We are looking at that now and asking if it makes good sense for our producers here in Canada. We're not there yet, but it's something we will want to explore.

The role of the corporation, as we see it anyway, is to continue to look at what's good for the producers here in this country, and therefore look at what may be going on in other countries that we need to apply here.

Mr. Paul Steckle: The family farm has changed dramatically. There are criteria of controls and regulations that are placed on farmers going, particularly, into livestock operations. There are environmental farm plans, and many conditions that are placed on the operation from a local municipal and perhaps provincial standpoint.

How diligent are we in consideration of environmental issues when we grant moneys for mortgages on those kinds of properties? Do we hold out on conditions, which perhaps are beyond those of the province or of the municipality? Or do we simply go along with whatever the standards are in that particular jurisdiction?

Mr. John Ryan: We don't look at ourselves, from our perspective, as being the ones who should set the policies or standards, but we do, very clearly, look at it and say, what are the federal, provincial, and municipal standards? When we are doing these financing arrangements we have to be satisfied that they do comply with those particular standards that have been set.

Mr. Paul Steckle: The reason I asked that question is the fact that where those conditions are applied, there appear not to be, at least not in Ontario, the teeth for enforcement. That is the greatest encumbrance, as I see it, on some of these things.

We require farmers, people who are going into extensive livestock operations, to comply. But when it comes to non-compliance, there isn't, or at least there hasn't been, in Ontario the will for enforcement. I think there's frustration on the part of municipal leaders, and perhaps even provincial leaders, in terms of finding the body of enforcement that would bring enforcement on those issues.

The Chair: Thanks, Paul. I have to move over now.

Dick.

Mr. Dick Proctor (Palliser, NDP): Thank you, Mr. Chair. Welcome everybody.

Part of the additional powers that are sought in this piece of legislation is the creation of subsidiaries to diversify. Mr. Ryan, I wonder if you could expand on that and give us some practical examples of what is meant.

Mr. John Ryan: Basically, what we're looking to do there is have the capacity to be able to establish a subsidiary for any new—I'll call it—venture proposal we might want to enter into.

Let me give you one example, which could be on the equity capital side of things. We truly do believe there's a need for equity capital in the agricultural marketplace. The other venture capital is not there today. We hope to position ourself as the catalyst to draw other people into agriculture and to show that indeed they are good proposals, that there are solid investments that can be made, and you can get a decent return for your investment based on your risk.

We have not come to a point of being able to come to any conclusions with anybody yet because we don't have the powers, but quite clearly one thing that could happen is a group could come up and say, if you want to be there, FCC, let's do it together, let's do it on a joint venture, and let's do it through a subsidiary approach. That gives you the opportunity, then, to very clearly say that for this particular subsidiary this is their only purpose in life. So you segregate that from your main portfolio and your main operations so that you can clearly monitor and follow that.

Some of the questions that have come up in terms of some of the preliminary discussion we've had with others is, would you be in a position or capacity to be able to do that? Today we can't, but in the future we would be able to do that.

Thank you.

Mr. Dick Proctor: I want to pick up on another aspect of the direction Mr. Steckle was going in. I think a year or so ago in Flesherton, Ontario, you had this situation where there was a loan approved for a bottled water plant that was on a farm. I think, in retrospect, there was a recognition by Farm Credit that this was not appropriate. My question is, with these expanded powers, won't there be more opportunity for people to approve loans that are questionable as to whether or not they relate to farming? This clearly was inappropriate. The rationale was that it used to be farmland, therefore it was okay.

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Mr. John Ryan: We had a complete look at that.

Ms. Louise Neveu: As you know, it's always a matter of judgment. I've heard both sides of the argument on that case, with people who supported the project saying it was providing a number of opportunities for employment in a rural area. That would be one side of the argument. At the same time there was the issue around whether it was in total compliance with what the community might accept as standards in terms of the environmental issues of water being taken from a particular location. None of those issues surfaced in the same magnitude prior to the loan approval.

I agree with you that in many instances we would be looking at it and saying, where is it going in terms of regulation? Strictly speaking, for that particular kind of loan, the eligibility was reasonably clear. The majority shareholder was by definition a farmer.

The project never went ahead, so maybe the people who were involved chose to do something different.

In those cases our eligibility rulings are done at multiple levels, so a number of people would look at them. We are very careful to look at what the community would be responding to.

Mr. Dick Proctor: So if somebody came along and wanted to put a housing development on what used to be farmland, that would be ruled out immediately.

Ms. Louise Neveu: Yes. That's very clear.

Mr. John Ryan: Mr. Proctor, just to follow up from an environmental point of view and to show that as a corporation we're very sensitive to that, within the last few months we introduced the first loan in Canada from any financial institution to deal with the environment. That dealt with manure facilities in Quebec. There was a subsidy program, but they needed support until they received the money from the provincial government. We provided our first loan package there, which we now have introduced right across the country. We see that as being very important, and someone has to take a leadership role there.

Mr. Dick Proctor: I have one last question, at least in this round. Some eyebrows have been raised about the fact that the acronym of your proposed new name is different in French from what it is in English. Some people also note that when the new acronym in French for Quebec is pronounced, it's essentially the same. Wasn't due consideration given to this? Was it an afterthought? Tell us about it.

Ms. Louise Neveu: It's an evolving kind of issue. When we started our research in terms of the name change, the provincial organization had not indicated what its name was going to be. So we've gone almost in a parallel stream on that.

We were looking to add “Canada” to our name, so we started doing focus groups across Canada. We found that the acronym and even the name of the Farm Credit Corporation was very well recognized in most parts of Canada. But our French name did not have a lot of equity, because it was easily confused with the existing name in French for the Quebec provincial organization.

We now believe there's a fair distinction because the provincial organization is now going to be known as La Financiére. Before they had gone under an acronym very easily, SFA, and now it's La Financiére. They actually are being recognized much more as a single name. So we truly believe that the outcome is one of clear distinction, especially with “Canada” in our name.

Mr. Dick Proctor: Thank you.

The Chair: Thanks, Dick.

Murray.

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

Good morning.

To go back to the family farm, I do have a definition for that. I call it an intergenerational operation that relies largely on family labour. With that in mind, under this new legislation and the expanded scope that FCC will have, what new products will you have in place to allow for the transfer of assets from one generation to the next?

• 0945

Ms. Louise Neveu: As you know, Mr. Calder, we have our fleet of products under the AgriStart program that allows for the intergenerational transfer.

We have started this new project with seven partners across Canada called AgriSuccess. A significant component of that is to look at elements under succession planning. We're hoping we will be able to build on some of the ideas that are going to emerge from this and to start developing new products, whether it be special entry premiums in terms of young people or beginning farmers being able to get into the industry or criteria that would allow them to ease into farming. Currently, we have no new products to announce, but product development is our primary focus.

Mr. Murray Calder: With regard to succession planning, is the FCC involved in that process?

Ms. Louise Neveu: As FCC we have developed the website that directs clients to various pieces of information or programs that exist within provincial governments, because there are excellent programs within some of the provinces, and it also directs them to our partners. The Canadian Farm Business Management Council is one of the partners at the table with us. Then we have partners across Canada. UPA is another partner, along with Meyers Norris Penny and a number of accounting and management consulting firms across Canada. They are then offering the seminars. So for a fee producers would come to a seminar that would help them start planning for succession at a fairly young age, we hope, because 50-plus is a bit too late to start working on it.

Mr. Murray Calder: We've dealt with the major banks on the issue of them wanting to get involved in insurance and car leasing. You have CULEASE as a stand-alone body, but the way I'm reading this new legislation, the leasing would come directly to FCC. Are you getting any resistance from the agricultural equipment manufacturers because they themselves have leasing programs? Is there a concern that if you have the leasing, you have a little too much power, because you're running the mortgage and all this other business?

Mr. John Ryan: We haven't heard it so much from what I would call the agricultural manufacturers. In fact, I'm not aware of any from the manufacturing side of things.

But when we did our consultations with the chartered banks, as an example, they did say, you're looking for powers on the leasing side of things. Our response was that we were looking for clarification because we believe we already have that, number one.

Number two, my understanding is that today financial institutions or chartered banks have the capacity to do equipment leasing in the agricultural community. But what they're really looking for, as you indicated earlier, is the vehicle side, the light trucks and cars. That's not where we intend to go. Ours is on the equipment, the short-line manufacturing equipment in particular, versus what they've been looking for—and I think the auto industry has clearly been lobbying the other way—which is the retail side. That's not where our focus is.

Mr. Murray Calder: Mr. Chairman, I know Rick has questions, so I'll stop at this.

Mr. Rick Borotsik (Brandon—Souris, PC): Can I take the rest of his time?

Mr. Chairman, first of all, I should say that Mr. Ryan could have put Mr. Proctor's fears to rest. We all know that the financing for golf courses, hotels, and housing developments comes from the BDC and not the FCC. We know that the FCC's focus is on agriculture.

I have a couple of questions. I've heard a number of times about this loan limit of $20 million. That's not a legislated loan limit. That's a loan limit that's policy driven by your board of directors. It could in fact be increased if the board of directors felt that with the new powers and the new abilities you have, it may well seem.... Have you talked about this at the board level? I know you've said that now it's $20 million and that's where it stays, but has your board discussed an increase in the loan limit?

Mr. John Ryan: We haven't discussed it so much from an increase perspective, but it has been on the board's agenda in the past. There are 12 persons on the board. Nine of them are primary producers, one is a lawyer by profession who works in the agricultural community, and one is on the agribusiness side. I'm the lonely other.

Mr. Rick Borotsik: How long has this loan limit of $20 million been in place? When was it last increased?

Mr. John Ryan: It was in 1996 or 1997.

Mr. Rick Borotsik: Obviously, with the new abilities you have, you're anticipating an increase in business. You had a record number last year of $1.7 billion. We're anticipating a record again this year if you have additional ways of doing business. Where do you get your capital from?

Mr. John Ryan: Perhaps I can ask Moyez Somani to speak to that. He has to earn his keep here today. He's our chief financial officer. He has that responsibility.

Mr. Moyez Somani (Executive Vice-President and Chief Financial Officer, Farm Credit Corporation): I thought I was going to get away without speaking.

• 0950

Thank you for the question. Most of our funds are raised through the capital markets, so our assets are guaranteed by the Government of Canada. As to our debts, again, we have the same credit rating as the Government of Canada, so that enables us to raise capital.

We have a limit within the legislation of twelve times our equity, so we're able to raise twelve times our equity in the way of debt, and that's where we go for—

Mr. Rick Borotsik: Are you at that limit now?

Mr. Moyez Somani: We're at 9.3 times.

Mr. Rick Borotsik: So you've got three times the equity you can borrow.

Mr. Moyez Somani: We have over $2 billion worth of—

Mr. Rick Borotsik: Of capacity.

Mr. Moyez Somani: —capacity, yes.

Mr. Rick Borotsik: And you're looking for that, obviously.

I know we've talked about your arrears. We've talked about how well you're operating. Your business is running. What were your write-offs in the last fiscal year?

Mr. John Ryan: Do you remember the specific amount, Moyez? We're finishing up our year-end right now. It won't be until the last couple of days of May.

Mr. Rick Borotsik: Could you ballpark? Is it increased? What's the ballpark number of write-offs?

Mr. John Ryan: It's $17 million to $20 million.

Mr. Moyez Somani: It will actually be around $15 million.

Mr. Rick Borotsik: Okay. The new powers you have, in my opinion, will allow you to incorporate additional risk—

Mr. John Ryan: Yes.

Mr. Rick Borotsik: —higher risk than what you currently have with respect to simply primary producer funding.

Have you estimated in your business plan any additional write-off numbers there as a contingency?

Mr. John Ryan: We factored into our business plan the fact that because we're going into new areas, there will be higher risks associated with it. But we also factor in that when we're taking higher risks, we're going to be charging a higher rate to offset that. So if we have higher losses, it has to be paid for by the higher rate we will charge, and we look at that on an individual proposal-by-proposal basis.

Mr. Rick Borotsik: Hog operations are huge in my area. Can you currently fund non-primary producer hog operations?

Ms. Louise Neveu: Not if they're not majority-owned by primary producers.

Mr. Rick Borotsik: Okay, and thank you for the answer. A lot of them are not owned by primary producers. There is a lot of syndication—a lot of investment through urban investors.

No, I'm talking urban investors in our own areas. This would allow you, then, to invest in that industry, which, by the way, has been well-serviced I think by financial institutions now. You're going to be competing with a lot of those financial institutions in this industry. How is that going to affect the industry? And how do you see the growth of that part of it, having you as being part of the business?

Mr. John Ryan: I actually see it as a plus, and the reason I see it as a plus is that access to capital has clearly been identified as an issue. I think people do want alternatives. They do want options. In fact, after our new legislation was tabled, the media in Saskatchewan picked up on it and they started to make some calls around. They called one producer who happened to be a hog producer—a very large one in Saskatchewan—and his response was that this is good news for agriculture, because FCC understands agriculture: “Access to capital is a problem, and we're glad you're going to be there.”

Mr. Rick Borotsik: Do I have more time?

The Chair: What time is it?

Ms. Louise Neveu: Mr. Borotsik, if I might add, I think you're also in a very fortunate area. There has been an awful lot of support by the small urban communities in your area. I think if we could model that and have it everywhere, it would be wonderful.

Mr. Rick Borotsik: That's for investment—not necessarily the citing of those operations, but investment, certainly.

Ms. Louise Neveu: No, the investment part.

Mr. Rick Borotsik: Last question, if I have some more time.

We're going to talk to a number of stakeholders when they appear before us. You've had 1,600 sessions. In your opinion, who is opposed to this piece of legislation? Who has serious concerns?

Mr. John Ryan: The NFU would be opposed to this. Basically, NFU has said you should stick to your knitting, that is, primary production only. That would be from a straight agricultural group perspective.

I think when you hear from the financial institutions, you'll hear—at least this is what we heard back from them—that they didn't have such a big problem with the new legislation because there are areas they're not in. They took equity capital, as an example. They said it's good that you're going there.

Where they had perhaps more of a challenge is that this corporation today, with this existing legislation, might be too much of a competitor to them.

Our response is that we're active in the community. Our interest rates are a quarter to a half a point above, so we don't feel we have an unfair playing field. The fact of the matter is our goal has been to work whenever possible with the other financial institutions. It also depends on what institution you're talking to. Some will say it's good and we can have a partnership that works well. From others, where we haven't been able to build that local partnership, you'll hear just the opposite.

Mr. Rick Borotsik: Would you do a half-tonne lease?

The Chair: Only for Rick.

Mr. Rick Borotsik: Sure you would.

The Chair: David.

Mr. David Price (Compton—Stanstead, Lib.): Thank you, Mr. Chair.

• 0955

I'll talk about my particular area, since I'm rather new to this committee. In fact, in my area the family farms are about 95%. But there is a change happening. Those farms are becoming more and more small corporations, and families are getting together to make larger farms and forming another corporation.

Now I just went through one case where three brothers of one family and another gentleman from another family got together and have just gone through a rather major construction. You were involved in it. But it was very difficult. They went through a lot of difficulties, too. I think it was because it's no longer considered a real family farm, yet it is. Yet it was very obvious the way it was all set up. What they're doing is they're basically building towards the future. The kids are involved—I mean the younger kids are involved. They're trying to keep them on the farm.

So I'm wondering whether this legislation is going in that direction, to help out that type of situation?

Mr. John Ryan: Clearly what we want to try to do is make it easier for the family farm and others to have access to credit—to Farm Credit Corporation. I'm not familiar with your individual proposal—

Mr. David Price: But will you be considering that a family farm when you have two families getting together to form a corporation?

Mr. John Ryan: I would think the direct answer to that would be yes. It's just a broader definition of a family farm. I guess it depends who you quote today what the family farm is. There are all kinds of different definitions.

We don't look at it necessarily by asking whether it is a family farm and whether we can provide the financing. Are they in the primary production, or are they into the value-added that's directly related to agriculture? That's what is our driving force versus that definition itself.

Mr. David Price: Okay. So that takes one part, because there's no question on that part. It's a dairy farm and it's a big operation.

But the other part of it is that we're seeing more and more the problem is with rurality and keeping the kids on the farm, or not necessarily on the farm but at least in the area.

Mr. John Ryan: The community.

Mr. David Price: A lot of the farms are going into sidelines, basically to keep the kids there. It could be that they're going into furniture manufacturing or day care. Day care is on the farm for a particular area. Electrical contractors are starting up. There's a little side angle there, yes. There's a certain amount they can do in the area, but also they're going out and working in the general area.

With this new legislation, would that type of industry...? Because you're talking industry here.

Mr. John Ryan: Yes.

Mr. David Price: I mean, these people are building their own welding shops and whatever on the farm. Probably a very tiny part of it could be related to the farm, but mostly it's out. It's near an urban centre, and they're in as a manufacturing—

Mr. John Ryan: It's unlikely we'd be wanting to be doing any of that type of financing. Again we come back and ask the fundamental question, what's the benefit to agriculture? If you're an electrical contractor...I don't think that's our role or where we should be.

Mr. David Price: Okay. What about things such as a day care centre, for instance, where you have the whole group?

Ms. Louise Neveu: But there have been a number of issues where it was an on-farm business that was basically going to be a supplement to income and allow someone to have a better family income. We have been lending on those kinds of proposals, because it's on-farm, and in those circumstances it normally has been supplying a service to others in the farming community.

We've had small cottage industries that develop this way—making of jams, making of special products that got developed on-farm. As cottage industries start, they may bloom. They may do other things, but they have been supplementary income.

In the same way we've also provided financing for agritourism, on farm buildings that were constructed to add value to the farm—add some income—which we have seen as very positive.

Mr. David Price: Good.

Do I have some time?

Mr. Murray Calder: Take some of Rick's time.

Mr. David Price: Okay. Thank you, Rick.

One of the complaints I have heard in my particular area.... Our farms are quite rich. We're in pretty good condition. That's why we don't have much trouble getting loans from Farm Credit. But some of the ones that are borderline have a little more difficulty, and their complaint is that the Farm Credit is there for them, if they're in good shape. If they're not in good shape, Farm Credit says, “Head for the banks; we're not taking any chances”. You're taking very, very low risk only.

• 1000

Mr. John Ryan: I don't see that as the case, and I don't know the individual situation you may be referring to. But if I look at the type of lending that's done in the corporation, there's clearly a higher risk there. It doesn't mean that every single proposal we undertake is at the high end. If you looked at a cross section of our portfolio, you'd have some at very low risk, all the way through the gamut right to the top end. I think, quite honestly, you need that to be able to balance your portfolio, to be self-sustaining at the end of the day.

As a corporation, we do not and have not set out any kinds of parameters or policies saying we should be involved in just the low-risk financing. To the contrary, I think what you'll find is that there's a mix. You could find any single proposal at any one point in time where we've looked at it and we didn't see the economic viability and we had to say no. At the end of the day, we look at it and ask whether we are doing any favours to anyone by financing proposals that are not, in our assessment, economically viable.

The Chair: Thank you, David.

Kevin.

Mr. Kevin Sorenson (Crowfoot, Canadian Alliance): Thank you for coming.

I'm not a regular on this committee, but I have looked at this bill. I'm a farmer, so I understand a little bit about the Farm Credit Corporation.

I remember a number of years ago I was looking for some packages of land. I'm from Alberta, but I was looking for packages of land even in Saskatchewan. I recall looking in the Riverhurst area, and on the map I saw FCC, FCC, FCC on, if I remember correctly, 96 quarters in that one little area. My concern at that time was, how long is FCC going to hold this land?

In 1986 the price of land where I live was $1,000 an acre. I went to the city, worked for six years, and moved back and bought land for $500 an acre. It's worth $1,000 now. If FCC was holding 96 quarters of land, credit had been extended and people were unable to pay, and they continued to hold this land, this basically affects the values of that farmland in rural Saskatchewan and western Canada.

Do you think there should be some type of legislation, if there is not at present, that would put a time limit on how long FCC would be able to hold land before putting it back out into the market, artificially, perhaps, holding up the values of land, preventing young people from coming in to own land?

I have about four other questions. If you want to answer that quickly, you could do that.

Mr. John Ryan: I think at the time you were referring to, or at one point in time, we actually peaked in Saskatchewan with 1.4 million acres under our ownership that we had leased back to producers throughout the province. But we were, I guess, responding to a law at the time that said it was six years we had to extend leases to. Those expired in 1999. We have worked consistently to bring our land mass down. We're down to about 120,000 acres now. The goal is to be out of the land management side of things altogether. It's not our goal to be trying to do anything in adjusting the prices.

Mr. Kevin Sorenson: Were the people who owned the land buying it back at 10¢ on the dollar?

Mr. John Ryan: No, I don't think so.

Mr. Kevin Sorenson: Is there legislation that prevents them from buying it back?

Mr. John Ryan: There's not legislation to prevent them from buying it back, but what we do have is a professional group of appraisers who assess the value of the land and set the price on what the market value is, not at the high end, nor at the low end, but right at the market level, so we do not find ourselves influencing prices.

Ms. Louise Neveu: They have the right of first refusal, so they actually have the reverse.

Mr. Kevin Sorenson: Okay, so they would have that opportunity.

Mr. Steckle mentioned that he appreciated more competition in the market. I have a problem with more competition when it's competing with a publicly owned corporation. Already we have the Business Development Bank of Canada that can provide moneys to equipment dealers. Again, I feel like maybe you're changing the wrong word in the name. Maybe eventually it's just going to become Agri-Credit Canada, because we're moving away from the farm to equipment dealerships, all those that are now getting money through Farm Credit, whereas there are lots of avenues for them—the credit unions, the chartered banks, and even the Business Development Bank of Canada, competing with another corporation. That is a concern of mine, that we're leaving the family farm. I like Murray's definition of the family farm, but I think we're walking away with it from the FCC.

Mr. John Ryan: From our perspective, we do not believe that. We fully expect that whether we're talking now or talking five years from now, the focus will remain on the primary production of the family farm. If you go specifically to the Business Development Bank of Canada, we have signed a memorandum of understanding with them. What we were looking at doing was working in cooperation with them, so they take their dollars and expertise to the table, we take our dollars and expertise to the table, and we're providing more access, not less. We don't want the duplication or overlap, and that's why we've developed the MOU we have.

• 1005

Mr. Kevin Sorenson: If I read this one part of the section, just explain to me.... You basically said you're going to be limiting operations to small and medium-sized businesses. But in the bill, proposed subsection 4(1), I think it says something quite different:

4.(1) The purpose of the Corporation is to enhance rural Canada by providing specialized and personalized business and financial services and products to farming operations, including family farms, and to those businesses in rural Canada, including small and medium-sized businesses....

Doesn't that mean something different from “limited to”? When it says “including small and medium-sized”, well they're included in what? They're included in the big package of big business.

Mr. John Ryan: Perhaps it's a question of the wording, a question of the definition. Our interpretation of it is, that's where the focus is, as compared to its being included with something else. So what we were trying to do is be specific, and perhaps we weren't that successful. But we were trying to be specific in saying, there's the focus of the two areas, the primary producer and small and medium-sized.

Mr. Kevin Sorenson: It doesn't say restricting to small and medium-sized, it says including—that's very inclusive.

I would suggest that in politics there are ways big business can be worked into this legislation. If the Saskatchewan Wheat Pool was in trouble and if small family farms were going to be negatively affected by the closing down of elevators and all those kinds of things, then all of a sudden, politically speaking, the arm of the FCC could move to understand that in order to support some of these small and medium-sized family farms, perhaps we'd better look at supporting big business. And then pretty soon the bottom drops out of what....

Mr. John Ryan: I just don't feel—

The Chair: We're going to have to come back here, as you're over six minutes.

Suzanne.

Mrs. Suzanne Tremblay: I think it's very interesting. Can I give him one of my minutes, so he can finish?

The Chair: You're very generous.

Mr. Kevin Sorenson: Well, I'm shocked. Thank you.

I think we realize that the Wheat Pool is an integral part of family farms in Saskatchewan. And I would agree the Wheat Board is.... It would be better if it could be changed so that it could have more impact on family farms. But I'm concerned about enshrining something in legislation that, politically, can be interpreted, in order to hold up the investment, or in order to hold up these family farms, and then pretty soon the money is going to big business and we've lost our focus.

Mr. John Ryan: I'd make a couple of points. What we see here in this legislation, small and medium-sized, is what we have in our existing legislation. I think we've been operating on that since 1993, or we've had the power to do it and we haven't gone that particular direction. If we use the Saskatchewan Wheat Pool as an example, this whole corporation has an equity base of about $600 million. It's not a large corporation by standards that would be able to support an institution of that size. So clearly we look at that, and our board of directors has been given that responsibility, to make sure we remain self-sustaining. Investing too much of your assets in any one business is not a good thing.

Mr. Kevin Sorenson: I'd throw out a little commendation here. In my constituency back home I've had a number of people from FCC—unfortunately, I haven't availed myself of them yet—who have been very willing to come and speak to me about the corporation, about the new things coming down. I think the guy's name is Allan Toove in Camrose. He seems to be very willing to do that, and I appreciate it.

Mr. John Ryan: I thank you for that commendation.

The Chair: Thank you, Kevin.

Maybe Madame Tremblay now will get into some of the processing problems in Quebec. I'm not sure here, but they're not dissimilar.

[Translation]

Ms. Suzanne Tremblay: Thank you, Mr. Chairman. I have quite a different question.

• 1010

I tried to compare the bill we have before us with what you're proposing here, but I don't really understand the changes to clause 7 of the present act concerning the chairperson of the board and the president.

If the Governor in Council appoints someone to a position, I don't understand why a board could then give itself the right to replace that person even for an interim period. In my opinion, if the initial appointment comes from the Governor in Council, the person appointed for the interim period should also be appointed that way. It shouldn't be a power... I find it funny to have the Governor in Council delegating its power to appoint someone on an interim basis to a board of directors. What are the reasons underlying this change? Do you often change presidents? Does the corporation fire at a moment's notice? Are there a lot of people appointed on an acting basis?

[English]

Mr. John Ryan: I hope not. Basically what we're trying to do there is straight from a governance point of view. If for any reason the position was vacant, there's someone available to provide continued direction and continuity for the corporation. The bill does talk about an appointment for up to 90 days. It's very much a bridging situation. We do expect fully that a Governor in Council would make the permanent appointment, whatever that might be. It's to provide continuity in that particular office.

[Translation]

Ms. Suzanne Tremblay: Here's what I find funny. The Governor in Council appoints two people: the chairperson of the board and the corporation's president. They appoint those two people. Is that the case?

Mr. John Ryan: Yes. That's the case.

Ms. Suzanne Tremblay: In the act that is still in force, subsection 7(4) reads as follows:

7. (4) If the chairperson is absent or unable to act or if the office of chairperson is vacant, the president has all of the duties and may exercise all the powers of the chairperson during the absence, inability or vacancy.

I find it normal for the act to provide that someone be appointed by the Governor in Council, i.e. the president of the corporation replacing the chairperson of the board who was also appointed.

In the new legislation, if the chairperson of the board is unable to do the job, “if the chairperson is absent or unable to act”, the board may authorize a replacement. Thus the board could grant anyone the right to replace the chairperson of the board whereas now we're dealing with someone who's been appointed. It seems to be a weakening of the legislation. I don't understand why the government would do something like that. It doesn't make any sense.

It's a good thing that a person be appointed by the Governor in Council, acting for the Canadian taxpayers, to replace someone who was appointed by the Governor in Council. Why would someone appointed by just anybody who doesn't represent anyone except that anybody, have the right to manage the corporation for the Canadian taxpayers? I don't understand that. To me, this is a huge weakness in the new act. This isn't justified in my eyes. I don't see any justification for that. I don't understand it.

[English]

Mr. John Ryan: Basically, it's really boiling down to a governance perspective. Back in 1993, when the last legislation was passed, the chairperson was a full-time person of the corporation. In addition, there was a chief operating officer. It changed in 1995. In 1995 the chair became an appointed person who had responsibility only for a board of directors. The current legislation says if the chair is not able to act, the president should.

If you look at current governance practices today, they're basically saying split the role of the chair from the person who is running the operation so you have independence there. We're trying in this particular legislation or bill to say if the chair is not there, as president, I should not be directing the board as well as the management of the corporation. I should be focused on the management of the corporation and someone else should be directing the affairs of the board of directors. Someone should come from the board until such time as a Governor in Council appointment would come through to appoint a permanent chair.

[Translation]

Ms. Suzanne Tremblay: Do you have a vice-chairperson of the board?

[English]

Mr. John Ryan: No, we don't. I am the only officer of the corporation on the board of directors. All others are outside people, outside of the Farm Credit Corporation.

No, we do not have a vice-chair.

[Translation]

Ms. Suzanne Tremblay: Who appoints the members of the board?

Ms. Louise Neveu: The Governor in Council.

• 1015

Ms. Suzanne Tremblay: And on whose recommendation?

Ms. Louise Neveu: I don't know. I presume that the members of the government would be recommending those people.

Ms. Suzanne Tremblay: It's something that isn't provided for. I didn't see how that was done.

[English]

Mr. David Anderson: Political appointments.

[Translation]

Ms. Suzanne Tremblay: It still looks funny to me.

[English]

An hon. member: It's a good point.

I'd like to follow up on Kevin's line of questioning.

Several months ago, one of the largest dairy co-op processors in western Canada was sold out. When I talked with the former president, he told me his biggest concern was the lack of capital. He just didn't have enough money in the system to make the co-op work. I'm referring, of course, to Dairyworld Foods and its sale.

Under this type of legislation, in the past and the present, would Farm Credit be able to assist a group of farmers who have a processing company in major need of capital? I haven't seen their books. I know it would be very large. They were a large group and in fact went into New Brunswick, having bought out Baxter Foods Limited.

We see these multinationals now buying up the processing business. Is there provision for us, as Canadians, to maintain control of our processing by assistance through farm credit?

Mr. John Ryan: I think it's a long answer there. The first part is the eligibility would be okay, from the point of view that they are our producers. They are in the farm community so there is a benefit to agriculture. It would boil down to its sheer size, though. Is that something the corporation realistically could get involved with and support?

We do have the limit, as we talked earlier, of about $20 million. I'm not familiar with the magnitude of the particular project you're talking about. I just don't know.

You'd have to understand the full proposal itself to be able to say it's something the FCC could support or finance.

The Chair: I'm sure Marcel will probably want to move along with that later.

I have to go to Dick next.

There's a major concern with processing. This is escalated by the purchase of subsidiaries and a bigger and bigger organization. I mentioned, in terms of Suzanne, in the province of Quebec we see the same thing happening. After you get so big, you guys are out of the game. Then a lot of our processing is going to be concentrated in a very small number of companies. The future of farm cooperatives is going to be put at risk.

With that, Dick, I'll move to you and maybe a different line of questioning.

It is a major concern I have, as a former president of a co-op.

Mr. Dick Proctor: Thanks, Charles.

I'd just like to read a paragraph and see whether you agree with it or not:

If the bill is passed, FCC would become a true investment bank for agrifood activities, a sort of business development bank for farm-related activities. Its mission would be modernized and its various financial instruments would be more closely tailored to the needs of an expanded clientele.

Is that something you think, essentially?

Mr. John Ryan: There's nothing in there at first blush or a reaction to say, “Oops, we're on the wrong track”. Clearly it's about having the current tools available to the agricultural community.

Mr. Dick Proctor: Okay.

It was written for the bill that came before the House in 1993. Why do you need expanded powers above and beyond what was presented at that time?

Mr. John Ryan: In the bill, in 1993 when we first started out, I do believe we clearly wanted to be able to provide support on the value-added side. I'll have to qualify it because I wasn't here. What was put in was the restriction that it be farmer controlled.

By being involved in the last number of years on the value-added side, we've seen a number of proposals that made good solid business sense that we could not finance because they were not farmer controlled. I have lots of examples where we said, from a credit criteria point of view, they meet our criteria. We've had to say no. As a consequence, the producer doesn't benefit from it and the local community doesn't benefit from it.

Mr. Dick Proctor: Could you just expand on a couple of those examples?

Mr. John Ryan: Yes. In Manitoba, we had a farming operation that moved into the egg grading business. We were able to finance it. The egg grading business was successful. They wanted to expand and sold the farming operation. They came back to Farm Credit saying they now needed additional dollars to finance the expansion of the egg grading. We had to say no. We could no longer point to them as being a primary producer.

• 1020

That's just one example, and I've got lots of them I can share with you.

The Chair: Rick.

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

I guess Dick was on the tangent I wanted to go on. We talk about leasing, where you want to expand your abilities into leasing equipment—especially equipment. This is not something new that has just cropped up. Farmers have been leasing equipment for the last decade. In fact, it's been rather prevalent in the last decade. Rather than purchasing, they lease, because of their cashflow requirements and their ability to get into new equipment with less cash down initially.

Are you always behind? You want to get into the leasing business in farm equipment, which has been a requirement of farmers and producers for the last ten years. Now you're saying you need to do this. What's next? Why are you always behind? Why don't we go ahead and look to the next ten years? Maybe we can put in some legislation that will help you in the future as opposed to just having you catch up all the time.

Mr. John Ryan: Well, we're clearly not intentionally trying to be behind. I think there is a sheer capacity within the corporation as to what we'll be able to do and where we set our priorities. What we are trying to do in this legislation is have enough room in the legislation that if we don't anticipate what might be the current needs ten years or five years from now, that we have the capacity to do so, provided—

Mr. Rick Borotsik: Does this legislation speak to that?

Mr. John Ryan: I think it does, from the point of view that you'll hear some people saying it's too broad.

Mr. Rick Borotsik: Well, I'm not one of those. I think maybe it's too narrow. Does it speak to that?

Mr. John Ryan: We think it does, from the point of view of taking off the restrictions we presently have in place now.

Mr. Rick Borotsik: Okay.

Back to capital, you mentioned something...well, first of all, Moyez, you mentioned that this is guaranteed by government. You go out there and you get your capital guaranteed by government using the government credit rating that's in place now. You said, John, that you have a one-quarter to one-half percent differential in the notes, in the loans. Are you not doing a very good job of getting capital, or are you just trying to squeeze more money out of the farmer? Which is it?

Mr. John Ryan: Really we look and say this is our cost of funds. What's our cost of operating?

Mr. Rick Borotsik: Is the cost of funds at other financial institutions less than yours?

Mr. John Ryan: I think you have to look at it from the point of view...if they are using their deposit-taking, very clearly, yes.

Mr. Rick Borotsik: Fair ball.

Mr. John Ryan: There is no question about that.

I don't know how much more you want me to carry on.

Mr. Rick Borotsik: No, that's fair ball. You are, however, one-quarter to one-half point higher than what the normal lending institutions are. Correct?

Mr. John Ryan: Yes.

Mr. Rick Borotsik: I'd like to be a fly on the wall at your board of directors sometime. Is there ever any talk from the board of directors that you become more competitive, that you not have that one-quarter to one-half percent differential, that you become more in line with the lending rates from other institutions?

Mr. John Ryan: I think the discussion around the board table is much more around what we are doing to help the producers. There's not a lot of time spent—

Mr. Rick Borotsik: I think one-quarter to one-half percent less would help the producer, wouldn't it?

Mr. John Ryan: That's one component of it, but what else can we be doing? Obviously, our board of directors tries to manage it in other ways. When they look at our annual financial statements, they say what are your costs? Are they kept in check? If they're not kept in check, guess what? The cost you charge the customer needs to go up. So they watch that very closely.

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

The Chair: Back to David.

Mr. David Anderson: I would like to come back to what Mr. Sorenson was talking about here, and that is that I think legislation needs to be specific. This may be aimed more at Mr. McCormick than at the employees, and we'll be making some amendments in that direction. But his point is well taken.

One of the reasons FCC ended up with 1.2 million acres was because of political pressure to hold that land and political pressure that was applied within the provinces as well. But this legislation needs to be specific in addressing these concerns.

Interpretation is not good enough. When you say you include small and medium-sized businesses in the package, to me that says they're probably going to be a small part of that, because one $50-million loan wipes 100 farmers off the map as far as being able to get funding. Again, I think leaving an open interpretation creates too much opportunity for problems, and we've seen some of that with the Business Development Bank, for example. So I just encourage the government to be really specific in what they're doing.

I have a couple of questions. One of them is, do you have any idea of what the name change will cost the organization?

Mr. John Ryan: I've seen this question come up before. I guess I'll read the second debate. One of the first things I would say to you is that as we change the name, assuming everything goes through, the following day we're not going to be dumping out all our current stationary and saying we have to start over again. Our plan clearly will be to utilize the stationary and the letterhead and everything else we have with Farm Credit Corporation on it. When that is done, then we order it with the new name.

• 1025

On the other side, we do expect to look at changing our signage in our buildings across the country. That will perhaps take us some months to do. The best estimate right now is around $2,000 per sign. It's a best estimate because we haven't gone to quotes or anything like that at this point.

Mr. David Anderson: I'll switch direction a little bit to the equity financing part of your legislation, which I think for the most part is good. I like the idea of that. Can you give a specific example of a situation where FCC's equity financing would allow somebody to access credit where they couldn't get it through the private sector? What are some of the areas where you think that is going to be...? Again, I feel strongly that this should apply to primary producers, that they should have access to that, because again you bring in a whole group of other people who don't necessarily have any connection to agriculture who may be accessing this money.

Mr. John Ryan: On the equity capital side of things, because we've not been in the marketplace and we haven't had people coming to us with specific proposals looking for equity capital because they know we're not there, I don't have anywhere near the magnitude of examples I could give you on the value-added and straight lending sides.

Take, for example, a few of the proposals we have seen. A major seed-cleaning operation of recent date was putting in very advanced technology, which they had worked on for years, to develop that particular technology to allow the seed-cleaning business the grading that is second to none anywhere in North America and perhaps around the world. They had investment to put in themselves and they had other lenders lined up on the lending side of things, but still they needed additional capital because there was going to be a period of time before they got set up...operational, and generating a cashflow that would allow them to make terms of repayment; in other words, working capital. That would be an example.

Mr. David Anderson: When you talk equity financing, are you thinking of things like seed-processing plants, where you have a large amount of collateral, or are you thinking more in the line of things like feedlots, where the collateral is basically a moving...?

Mr. John Ryan: Regardless of what we look at, it will be a situation where there will not be a lot of capital collateral. When you look at providing equity capital, I don't think you can think of what you're going to have as collateral. You're going in there basically as a shareholder.

Mr. David Anderson: Okay. Those are high risk. Do you anticipate that the other lenders then are going to have some higher costs associated with their loans because of that?

Mr. John Ryan: What we expect or anticipate is that we'll be able to go in as a shareholder. They'll take some comfort from that, and the more equity they're actually carrying, the less debt load they have to carry. Actually, hopefully, it will be an improvement, and the other banks will look at that on a positive basis. At least, that's the reaction we received when we did our consultation studies. They said, good, we see lots of proposals that are light on equity, and it's good that you're going to be able to go in there and put equity in.

Mr. David Anderson: My last question would be to Mr. McCormick. Would the government object to amendments to this bill that would limit equity financing to operations directly related to primary production?

Mr. Larry McCormick: I think I answered that before.

Mr. David Anderson: Will they consider it?

Mr. Larry McCormick: Everything is open for consideration, and we'll see where we go from there.

Mr. David Anderson: I'll turn it over to Mr. Sorenson.

Mr. Kevin Sorenson: As far as another question from me....

The Chair: You may not have time to get answers. That's the only thing. Your five minutes is almost up. I'll come back to you.

Mr. Kevin Sorenson: I'll give my minute back to....

The Chair: Marcel.

[Translation]

Mr. Marcel Gagnon: Thank you, Mr. Chairman.

I'd like to come back to the idea of “family farm” again and also about how to finance the farm upstream and downstream. It's because personally, and I can feel I'm not the only one here, I'm worried about the way agriculture is going.

I'll just use Quebec as an example. During the 70s, I was one of those who worked very hard to put in supply management, joint plans, production quotas and so on. At that point in time the goal was really to protect the family farm. We'd even define the family farm in view of what we were doing.

Today, I'm just about sure that for the major productions—pork, chicken, eggs—we could easily calculate, without having a degree in higher mathematics, how many owners there are of real family businesses. In my opinion, a lot of farms use workers for the business done upstream and downstream, in other words the big companies producing feed or slaughterhouses or both kinds of business together. That was not the objective we had when we set up supply management.

• 1030

When I see that we're opening up financing in this way, personally, I'm worried for the future of agriculture. I'm not saying I'm against it, but I think we're going towards huge farms and I wonder if the real agricultural producer isn't simply going to become, more and more, a salaried employee on his own farm, in other words a contract worker hired by big business.

You say that you're limiting this as much as possible to the family farm, but to the broadened family farm and that business that's too big won't be able to access your credit. However, those who are knowledgeable about all the credit possibilities that already exist can easily subdivide their business.

I wonder if, in your opinion, my concerns are exaggerated. Does the Farm Credit Corporation really intend limiting its credit to family farms?

Ms. Louise Neveu: Mr. Gagnon, I would certainly agree with your last interpretation. As you certainly know, everything is always evolving. So how does one determine at what point in history we'll be able to establish what is acceptable for the agricultural community? Today, with the present state of the market, it would certainly be possible for us to say that in actual fact we are suggesting or anticipate imposing a limit on our loans up to a maximum of 80% for the primary agricultural sector as we can see it.

Now, defining primary agriculture... Of course, we're not the ones who decide how science evolves. I find it very difficult to answer very specifically because, in that area, we usually adapt to what happens.

Mr. Marcel Gagnon: One definition we had at the time, and I don't know, and I don't know if it would still be applicable, was a man/work unit. That's what represented a family business and it could be multiplied by two, three or four units according to the number of producers working together. Is that kind of definition absolutely “passé”? Would it be possible to define the nature of the family business using the man/work unit concept?

Ms. Louise Neveu: At this point, it would be extremely difficult to limit the unit to a single person. I believe that in most enterprises, a single person wouldn't be enough anymore.

Mr. Marcel Gagnon: Agreed. But it can be multiplied.

Ms. Louise Neveu: It could certainly be multiplied. Once again, it depends on the sector, the kind of farm, the geography of the area. I find it very improbable that we'd manage to find a definition that would be valid for all of Canada.

Mr. Marcel Gagnon: Canada is big, hey? We know all about it.

You work in the agroforestry sector, in other words your services extend to agroforestry, maple syrup production and aquaculture. Are these areas presently expanding rather quickly? Is the speed of their growth good?

Ms. Louise Neveu: I wouldn't say it's fast. In aquaculture, our portfolio is about $50 million. For maple syrup production, I'm not sure about the exact amount. Mr. Lagacé is certainly more aware than I. I could certainly get you the precise figure.

In agroforestry, it's a beginning. We've been doing that really only for a few years. So it's a portfolio that's still very small. It's not something that it is evolving rapidly.

Mr. Marcel Gagnon: Thank you.

[English]

The Chair: Thank you, Marcel.

Paul.

Mr. Paul Steckle: I'm going to ask a question that may be sort of off the wall, but I think it's something you're probably going to be asked sometime.

I have a fairly large operation, in the thousands of acres. This person has ambitions to expand beyond Canada, and perhaps move to Brazil with some of his operations. If you can't beat them, you join them. What would your response to that person be if he came to you and said, “I want to mortgage land in Brazil against some of my land in Canada and I'm seeking an FCC loan”?

Mr. John Ryan: I'm just conferring with Louise about whether we can or cannot.

We would not be able to provide financing for an international operation, i.e. take any collateral on security in Brazil. We could if indeed we saw the merits of actually doing some financing here in Canada, and take charge of the Canadian property but not the Brazilian.

• 1035

Mr. Paul Steckle: Okay, that's the answer I expected. But someone is going to test that one some time.

In terms of encouraging venture capital, where people are expecting fairly reasonably high returns for risk, how do you intend to encourage, and in what industries associated with agriculture would you see that happening?

Mr. John Ryan: The first thing we expect to be doing, assuming we have our legislation behind us in terms of having the power to provide venture capital, is to go out and talk to the other venture capitalists across the country to find out what their appetite is on the agricultural side of things. The work we've done to date basically says there are some regional players who are investing in agriculture today. They can't do it all themselves. The feedback I've received directly from them is that they're looking forward to the day the corporation has the power to be able to do that so we can joint venture on proposals.

My expectation will be that we'll have to establish partnerships with a number of different groups across the country, that there's not any one single group that we can deal with on a national basis.

Mr. Paul Steckle: And the straight yes or no answer to the land leasing is no?

Mr. John Ryan: On land leasing, no, we're not interested in the land management, land bank, side of things.

Mr. Paul Steckle: Okay.

The Chair: Thanks, Paul.

Kevin, are you ready, then?

Mr. Kevin Sorenson: This is more technical than what this bill talks about, but what about the opposite of what Mr. Steckle was referring to, if Brazil came here?

Murray Calder was talking about the Taiwan sugar company. They're setting up a huge hog operation in my constituency, in fact probably about 20 miles down the road from where I live. Would legislation allow a foreign interest that was to take up residence here, as far as providing jobs, and people would be working here? Would they qualify?

Mr. John Ryan: They do today, don't they?

Ms. Louise Neveu: Canadian residents could qualify.

Mr. John Ryan: I think they do apply.

Mr. Kevin Sorenson: For a corporation held in Taiwan, though, if the ownership of the company is in Taiwan, it would be offshore.

Mr. John Ryan: It's Canadian businesses.

Mr. Louise Neveu: I've never faced that. We can check with our legal counsel just to make sure, but I would say probably not.

Mr. Kevin Sorenson: I'm sure their head office will stay. They'll send over CEOs and people to run the place, and hire many people here. I don't think there's a money problem; I'm sure if they're coming here to build, they can quite adequately fund their operation. But is it dependent on Canadian citizenship or ownership?

Mr. John Ryan: We can only finance Canadian companies. We'll have to go back and look at it, and ask, from a legal definition, what does that mean?

As Louise indicated a few minutes ago, and I'll repeat what she said, we haven't seen that example come to us yet, so I can quite categorically say yes or no without going back and checking. But we do have people who come in from other countries, acquiring land here and establishing businesses that we have financed before on the dairy and the hog side of things.

Mr. Kevin Sorenson: I have one other quick question.

You say you are not going to get into the leasing of land, and it is very positive that your land holdings will be diminished even more this year. But you're going to lend money to equipment dealers, lend money to perhaps keep these equipment dealers in operation, and then you could conceivably turn around and compete with them in leasing.

Mr. John Ryan: I guess it's always possible, but as a corporation, we've gone out to the equipment dealers and said, we have a national equipment dealers' program wherein if you have equipment to sell, we have financing we can provide to help in the sale of that particular equipment. I don't know the number of equipment dealers we have across the country now who have signed up—maybe 25 or 30?

Ms. Louise Neveu: There are 25 very active ones, but we'd have about 100 who have signed up.

Mr. John Ryan: They are actually selling the equipment and utilizing FCC to provide the financing for those pieces of equipment.

We could be wrong here, but we don't see that being a major situation we'd be in conflict with. The principal goal of the corporation is what more can we do for agriculture and how do we leverage what we already have? That's where partnering comes in.

• 1040

Mr. Kevin Sorenson: You're saying we aren't competing with the ones we're lending money to; we're just competing with the other equipment dealers in those communities that are competing with the people FCC lends money to. I guess that's fair, because you're helping that business.

Mr. John Ryan: At the end of the day, what we're saying is we have the capacity to support you if you're interested in our services. They make that conscious decision, and it's about access to capital.

The Chair: Okay, Kevin?

Mr. Kevin Sorenson: Thank you.

The Chair: With this leasing, Mr. Ryan, there are different ways of leasing. Some manufacturing companies have leasing through, for example, Citicorp, which is coming into the country to pick up these leases, and it's second and third levels that you're dealing with.

How do you perceive Farm Credit getting into leasing? Would you be the owner of the equipment, and after three years the equipment comes back to your books in terms of a residual value? We've watched the car companies, which have had major problems with leasing. They liked it, but now they're finding they have all these units coming back to dealers and aren't worth the money they have as residuals.

In terms of your presentation of this amendment, who do you see as the owners of the equipment? When all these old tractors and old assets come back after three years, and some of them in not very good condition, would Farm Credit own those? Or do you plan to have some other company hold them and then get rid of them at whatever you can get on the market?

We have Odessa out here dealing every week with thousands of cars going through these auctions. What is your definition in this change you want to see in terms of leasing? Could you explain that to our committee so that we know what benefit we're going to get as a government from owning probably half the tractors in Canada in maybe three years' time?

Mr. John Ryan: Our goal is certainly not to be the major owner of tractors in Canada. Our goal clearly is, if a producer or someone on the value-added side comes to us and says they want to acquire this piece of equipment, giving them an option: Do you want to finance it, straight lending, or do you want to lease it? If they opt to go on the leasing side of things, our plan—and it's just a plan or a goal, because we don't have the powers to be able to do this exclusively right now—is to work with the equipment dealers. Perhaps it goes back to the honourable member's question before in saying, okay, let's set it up in such a way that we have dealer recourse. With dealer recourse, we're into it together; it's ourselves, the producer, and the dealer. If at the end of the three-year period, or however long the lease is, it does come back in, we will work with the dealer, because we have recourse on it and how to get it back to the marketplace.

I think we also have to look at it from the point of view that we have been financing equipment now for seven or eight years. If people do not pay their debts, we always have that situation where it could come back to us. We do not have lots full across the country where we're selling off equipment. I think at the end of the day our producers do take very seriously whatever debts are outstanding, and repayments are made, which is some of the stuff we talked about the last time around when we talked about the overall arrears within the corporation.

The Chair: So your goal really is to finance the first three or five years, and hopefully the farmer is going to continue and pick up the residuals, rather than....

Mr. John Ryan: A farmer can either pick up the residual or work with the dealers.

Until such time as we actually go out and negotiate this, I can't say this is ironclad, but that's the goal of the corporation. It's like land management. We don't want to be the major owners of land, nor do we want to be the major owners of pieces of equipment across the country.

The Chair: Okay.

Dick.

Mr. Dick Proctor: Thanks very much.

On Paul's question and Kevin's intervention on this foreign ownership, let's say the example isn't Brazil or Taiwan but the United States. Somebody comes up and wants to borrow from Farm Credit, and you say no because they're not Canadian citizens. Some of us are concerned about the investor-state provisions. Why wouldn't that operation be able to go to the NAFTA panel and say they're being discriminated against here, that they have a free trade agreement with Canada?

I guess my question is twofold. What would prevent them from doing that, and have you looked at this proposal and do you think you're inoculated against it, or can you be inoculated against it?

• 1045

Mr. John Ryan: We haven't spent any time, Mr. Proctor, looking at that, as to whether we can be inoculated or otherwise. We have an act, it's to provide financing in Canada, and that's where our focus is. I don't know if—

Mr. Dick Proctor: Yes, but this would still be in Canada. I'm talking about somebody who would come up here with a business operation, perhaps move into Alberta, acquire land, be a farmer, and qualify under all the other things, except the foreign ownership provisions. Not being a lawyer and not pretending to know a lot about it, I would suggest that somebody have a look at that as we go through this legislation.

Mr. John Ryan: I think that's a valid point. I don't have an answer right now. I don't mind researching and coming back to the committee.

The Chair: David.

Mr. David Anderson: I have some questions about venture capital. The financiers and lenders expect high risk, but they also expect high return. Have you thought about how you're going to position yourself for both of those things?

Mr. John Ryan: Certainly I think the two go hand in hand—the higher the risk, the higher the return you're looking at. Our approach to this is that we've spent 40 years in agriculture, our people do know agriculture, so you know the market and you know the industry. You should be able to pick and choose the winners, as opposed to the ones that are not going to make it. You're never going to be successful all the time. In fact, venture capitalists will tell you that you'll have two big successes, you'll have six that are kind of the living dead, and two will go by the wayside within six months. So there's no question in my mind that there's increased risk associated with it.

Some of the venture capitalists I've talked to who have been, at a regional level and perhaps a provincial level, making investments in agriculture have been able to demonstrate that there are good proposals out there and there are returns. Our goal is to work very closely with them, so we take our expertise to the table with their expertise, put it together, and I think make the right business decision.

Mr. David Anderson: Are you considering making that a subsidiary, that division?

Mr. John Ryan: It could be. We're not far enough advanced yet, but I guess we look at our new legislation. The last legislation has been in place for eight years; this may be in place for another eight years, ten years, I just don't know. But give us the power, and if that seems to make good sense from our perspective or from our partner's perspective, we could go that route. It would be an example.

Mr. David Anderson: Agriculture has had a tough time getting venture capital in a lot of areas. Do you think this is more appropriate than some appropriate tax measures?

Mr. John Ryan: We haven't looked at or tried to debate one against the other. We approached it more from the perspective that this is something we think we can take to the table vis-à-vis the agricultural community. We have a role to play in it. I don't know about a tax point of view—we haven't tried to address it that way.

Mr. David Anderson: The last one I'll ask is, do you have any plans in dealing specifically with biotech and venture capital? Do you have any thoughts on that or plans for dealing with that?

Mr. John Ryan: Certainly we would see the biotech industry being in need of venture capital. So we would see that as a thing we would be financing on a go-forward basis from an equity capital point of view. Have we gone to the point of actually developing a specific business plan to target biotechnology? Not yet.

Mr. David Anderson: I guess I do have one more question. I want to change direction. You say you don't want to hold and lease land, and from the evidence I think that's fairly obvious. But I'm wondering why that's not in the legislation and why that isn't addressed? You've been really specific today that you're interested in equipment, not in land. I think we need to consider putting that in the legislation as well.

Mr. John Ryan: The only time you're going to find the corporation into landholdings is when the business didn't go well and we have to take it back. That has been in the past and will be in the future. As it relates to us acquiring tracts of land and being a big landholder, we're just not interested in that. We had what we called an an agriland division managing this. If you looked at the size of that division two years ago, and look at it today, it's considerably smaller. We're winding that down.

Mr. David Anderson: No one wants that accumulation of land again, but I realize the provincial government had bound you in some ways there as well.

Mr. John Ryan: Yes.

[Translation]

The Chair: Suzanne.

Ms. Suzanne Tremblay: Mr. Chairman, a very brief question because that's all we were given. I find it very interesting because we have questions and we don't get the answer.

If we start from the principle that a brewery processes barley, couldn't a beer producer making many millions of dollars a year be eligible for loans from your bank, from the Corporation? Could he be a new client?

[English]

Mr. John Ryan: I think the potential is always there for that to happen. If I had to make a bit of a distinction, though, we talk about Molson versus a microbrewery. The Molson would be “no”, the micro brewery “could be”.

• 1050

[Translation]

Ms. Suzanne Tremblay: Mr. Chairman, I'd very much like us to get an opinion on the question that was put by our colleague. Under Chapter 11 of the NAFTA, relative to the USA and Mexico, could those two countries say, if a loan is refused them, that they were not treated like the others and then sue Canada? Could we get a formal opinion on that?

An Hon. Member: [Editor's Note: Inaudible]

Ms. Suzanne Tremblay: Okay. Thank you.

[English]

The Chair: Are there other questions this morning?

Mr. David Anderson: One more question.

You talked about how you're working with the Business Development Bank. I'm just wondering whether you can lay out where they fit into agricultural lending right now using our definition of a business related to farming. What are they already doing that you will be moving into by changing this definition?

Mr. John Ryan: The primary area would be in the food processing side. They would be financing some food processing operations today. They do not get involved in the primary production side. I'm saying that as a general statement. It will be in the value-added side.

From my discussions with the Business Development Bank, they're looking to us from the point of view that we have the agriculture expertise. They have other expertise. How do the two of us come together so that at the end of the day we're providing a greater service to that value-added community than what we are individually today?

Mr. David Anderson: Your answer actually makes me more comfortable with leaving things the way they are than it does with changing them and expanding your role into covering what it sounds like they're already doing.

Mr. John Ryan: I guess you need to look into what the magnitude is. Where is the focus? I think from a Farm Credit point of view you can feel very comfortable in saying the focus is on agriculture. When you look at the Business Development Bank of Canada—and I think they'll say this themselves—their focus is not on agriculture. That's not where their area of expertise is. But they have other expertise, so that I think by us working together, it's going to be better for agriculture.

The Chair: Thanks, David.

Just before we conclude, one thought that goes through my mind in looking at some of the western papers is the so-called short-line railways. Is that completely off the wall in terms of Farm Credit? Where could they turn for some help? What if you are getting into problems now? It's really quite essential to some of the western producers to maintain those lines. Has that ever been considered or looked at in terms of...?

Mr. John Ryan: In fact, our mandate today would allow us to do that, provided it's the primary producers who are getting together to do the short-line railway.

I was directly involved in looking at a proposal about a little over a year ago. We weren't able to do it, but we were at the table to see what could be done there.

Mr. David Anderson: But the new legislation would allow you to fund short-line railways then?

Mr. John Ryan: The existing legislation will allow us to do that as a primary producer.

The Chair: Murray, you have something along that line.

Mr. Murray Calder: Yes, just on that line, I have been involved in organizing one of these railways. So the question would be this. Would you look at helping municipalities take and finance that? One of the things with the short-line railway is that if the municipality owns it, then they don't have to pay property tax, because you don't pay property tax on city hall and/or the right of way. But if the farmers went together and bought the short-line railway, they in turn would have to pay property tax on the right of way. So the question would be whether you would consider financing a municipality for a short-line railway.

Mr. John Ryan: I guess we'd have to come back and ask who the owner is and who actually is going to be operating it, so that we're satisfied at the end of the day that there can be a success there. I don't know if we've ever done—maybe you can help me, Louise—any loan proposals to a municipality. I don't think so, Mr. Calder.

Mr. Murray Calder: Okay.

The Chair: Thank you, Mr. McCormick, for coming before our committee today.

It's my understanding that on Tuesday we'll be looking at plans and priorities. By Wednesday, hopefully, some witnesses will be coming. We'll be meeting on Wednesday afternoon next to look at Bill C-25.

So thanks, Mr. Ryan, Madam Neveu, and Mr. Somani.

Larry, we may have more questions, but I think we covered most of them this morning. Each of us can go back now and look at reading the bill and the fine print. Maybe if you have amendments, get them into the clerk as soon as possible. Thank you.

With that we'll adjourn our meeting this morning.