AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 22, 2001

• 0907

[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): I call our meeting to order.

There's a shortage of members on one side of the table, but, as I mentioned two days ago, we plan to start on time if we have a quorum or even nearly a quorum.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Mr. Chair, I understand you were a school teacher at one time. Does that have something to do with the punctuality issue?

The Chair: Madam Tremblay was a teacher.

Mr. Howard Hilstrom: Oh, I see.

The Chair: Pursuant to Standing Order 108(2), this morning we're looking at financial priorities for the farming community.

Before we hear from our witnesses, I'd like to bring up a couple of items. First of all, on Tuesday the liaison committee met. As you know, that committee consists of the chairs of the various committees on the Hill. It was mainly a Liberal-dominated group.

We discussed various items. First of all, we discussed setting up a liaison committee and who would be on it. Secondly, we discussed an important point in terms of all committees. In order to travel and to participate outside of Ottawa, it's generally agreed that the various House leaders will agree that a committee can travel. The only way to travel without the concurrence of the House leaders is for a motion to be taken to the House for consideration. Generally, that's not a very acceptable practice because it takes up a considerable amount of House time.

• 0910

The Canadian Alliance Party is critical of the allotted time they have for questioning in committees. The argument is—and I have heard this only indirectly through Mr. Williams, who is a member of the liaison committee—that apparently the party would like to see half of the opposition time in committees awarded to the Alliance Party.

Now, it creates an awkward situation for us because we may want to travel. I think as a committee we have to give some thought as to how we can make this thing work a bit better. Hopefully, the liaison committee and the House leaders will be able to resolve this issue before too long. Certain committees do want to travel, including the one dealing with immigration. That's for your information. I really don't want to discuss it this morning.

The second point is that yesterday a few people were critical of how I chaired the meeting. First of all, I didn't think the parliamentary secretary should be allowed to ask the minister questions. He had his hand up on a couple of occasions, and I ignored that because he works very closely with him, and it did give more time to the opposition and other members of the committee.

At the end of yesterday's meeting, Mr. Borotsik ran out of time, and he was critical of the fact that I had given a second question to Marcel. I did try to go around the table and then party by party down the list. I know, Mr. Gagnon, you did get two questions. I think Rick thought I was unfair with him because we did run out of time in terms of the allocation of six o'clock. Rick is not here to bring that point up, but he did come to the chair after the meeting. I would hope you could consider what I did, and if you want to chastise the chair, we'll entertain that when Rick comes back.

To the witnesses this morning, I'm sorry for taking up some of your time. We'll now turn to the main point of our meeting.

[Translation]

Mrs. Suzanne Tremblay (Rimouski-Neigette-et-la Mitis, BQ): Mr. Chairman, when we get to questions, would it be possible to consider first giving the floor to those persons who were here at the beginning of the discussion. Yesterday, when Mr. Calder sat down, you gave him the floor right away, and he asked a question that had already been put. We thus heard a repeat and wasted precious time. I find it troublesome that people arrive whenever and have the opportunity to speak right away, even though they have not heard a single thing. I believe that it would be best that before giving the floor to someone who was not even in the room, those who were present, in this case we six, have the opportunity to speak, if committee members are agreed. This would be a reward for arriving on time. It would serve as reinforcement.

[English]

Mr. Howard Hilstrom: I'll simply say that generally I've been quite happy with the way you've chaired the meetings since you took over. I'll just conclude by saying I compare it with our previous chair, and I'm quite satisfied with you.

Mr. Dick Proctor (Palliser, NDP): In the absence of Rick, I'd like to make some comments.

I congratulate the chair for raising this issue. I would encourage the chair and perhaps all of us to go back, because I thought we had sorted this out at one of our first meetings, if not the first meeting, in terms of how it was going to proceed. With respect, I don't think we've been following what we set out. I think that became evident yesterday in how it rolled out with the minister. So I would encourage all of us to go back and refresh our memories.

My distinct recollection is that what we agreed to follow in this session was very much what we had done in the last session. By my recollection, in round one it went Alliance, Liberal, Bloc, Liberal, NDP, Progressive Conservative, and back to the Liberals and then a second round of five minutes, which was Alliance, Liberal, Bloc, Liberal, NDP, and Progressive Conservative. We certainly haven't been following that procedure so far in this term.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): I think it probably would be best to have the steering committee deal with this, and we can move on.

• 0915

In response to Suzanne, a lot of people here are double-booked. I'm double-booked on the trade committee. I had two meetings yesterday, and I came in late.

I understand what you said about Mr. Calder's question. I believe when ministers are here, we should give more opportunity to the opposition, because we have opportunities to speak with ministers. Maybe you can make that up. Let's have the steering committee look at that.

The Chair: Is that agreed, then? I think that if we were to read the minutes, we'd see they were fairly closely followed, but I apologize if I....

We welcome this morning Mr. Douglas Hedley, the assistant deputy minister of the farm financial programs branch; and Mr. Richardson, the acting assistant deputy minister of the strategic policy branch. We have allotted 15 minutes for your presentation.

Mr. Douglas D. Hedley (Assistant Deputy Minister, Farm Financial Programs Branch, Department of Agriculture and Agri-Food): We don't have a presentation. We're open to questions.

The Chair: In our questioning this morning, I will try to follow very closely the minutes we have allocated. Just to refresh your memories, it's seven minutes for the official opposition, seven minutes for the government member, seven minutes for the Bloc Québécois, five for the NDP, five for the Progressive Conservative, and then a second round. So we'll begin.

Mr. Howard Hilstrom: No nice speech from Tom and Doug this morning. That's not too good.

The big issue, gentlemen, is you've had the experience of AIDA in 1998 and 1999, which is about a year and a half ago, and the claims have still not been paid out to farmers. The explanation that it's the farmers' fault somehow for not getting these forms in or whatever just doesn't wash with me. I believe it's complex. We're getting a lot of feedback that people processing the claims do not seem to have the academic and practical background to deal with the farm situation. They don't seem to understand farming. In fact, there are some questions such as what's a feeder calf and what's an open cow, this kind of stuff, which is so fundamental to agriculture. That seems to be a big complaint.

Seeing that 1999 isn't paid out yet, what assurance do we have that the department has changed anything so that when the Canadian farm income program applications, which are now being filled out, are submitted, the farmers will receive that money in a very timely fashion? If a farmer fills it out in February, how long would he expect to wait until he got his cheque under CFIP? I'm not sure who should answer.

Mr. Douglas Hedley: Let me start.

First of all, there is no question we were delayed in responding to the AIDA applications this past year. The AIDA application for 1999 was even more complex than the one for 1998. However, it is a targeted program. It is targeted to those who do have sharp drops in their net income each year. What that means, then, is in order to deal with it in an equitable fashion, we have to go through those farm accounts very carefully.

For the coming year, we began some months ago to prepare for CFIP 2000 and the delivery of that program. Forms rolled out, I believe, on March 14 in those provinces where the federal government is delivering, with the exception of Saskatchewan, which has not indicated yet whether or not it will join. For the rest of the provinces where they are delivering the program, the forms are now out. We anticipate we will be receiving forms within the next few days. It will take sometime until they finish their farm income tax for the previous year and then fill in the forms.

• 0920

We anticipate having full staff ready to start by April 15, to review those forms and to start to put cheques out. In my view, we will start putting cheques out sometime in early May, as we start receiving forms. I think we will try to work to about a 60-day standard throughout summer. With all of the experience we've had in these kinds of programs, though, we fully expect we will get the vast share of the applications within the last two or three weeks of the deadline. As a result, I can't promise a 60-day turnaround when you turn it in just before the deadline.

Mr. Howard Hilstrom: What was the reason the federal government did the program in provinces like Saskatchewan, but the province did it in Alberta, for instance? Was it because Saskatchewan was incapable of doing this program? The provincial administration seemed to be quicker than the federal administration.

Mr. Douglas Hedley: First of all, that fell out of discussions and negotiations with the provinces. In the case of Alberta, they were already running a program similar to this, and so was P.E.I. Alberta was running one as well for B.C., and still does. But in terms of our relationship with the provinces, at the present time we are ahead of all of the provinces that are currently delivering AIDA 1999.

Mr. Howard Hilstrom: Okay, that's good to hear.

The central, key problem with these programs—and it wasn't addressed in AIDA—was this issue of the low three-year reference margin. You can say this program is targeted to those who have a sharp drop in income, but if the three-year reference margin is already low, the drop in income is only going to give that commercial farmer...he would normally have a higher gross, but his reference margin gets so low, he gets little or no support. That's why we have the protests here in Ottawa and other cities right now. Too many farmers were left out of AIDA who are real commercial farmers—and I'm not talking about the very little farmer, I'm talking about a commercial farmer. They seem to be telling us they have in fact been left out of that AIDA-type program for the income side.

Is there anything in CFIP? If these farmers, men and women, didn't get anything or got very little under AIDA, is there any reason that they could expect to get more under CFIP, or is it the same thing?

Mr. Douglas Hedley: I think you will find CFIP is closer to the 1998 AIDA program than it is to the 1999 one. It is still a targeted program for changes in farm income in relation to the three preceding years or the three middle years of the previous five. Those are the only two options we are allowed under the WTO agreement in order to maintain a green program with the WTO, hence making it non-countervailable. To do otherwise would then run the risk of having the entire program and other programs called into question under countervail.

Mr. Howard Hilstrom: I have one last, little question.

Can you provide to this committee the statistics your department used and uses that were quoted by the minister yesterday in regard to the 240,000 recognized farmers in this country? The fact is that he's saying an awful lot of these farmers have a gross of $25,000 to $30,000. Could you provide us with the statistics that you use to analyse these programs so we can see who they apply to? Is there a public statistic you can give us on agriculture? It might be a Stats Canada figure, but can you tell us whether you can provide us your statistics that you use in analysing these programs. Or do you just get statistics from Stats Canada?

Mr. Douglas Hedley: We use directly two sources of statistics. One is from Stats Canada, and it includes the census data and the annual surveys that they do, as well as the farm financial survey that they do every two years. The second source of data is in fact our NISA accounts. We now have about 145,000 farms in that database, with some history to it. Out of that, we use a sample of about 80,000. We have long-term records on those farms, and we use those records as the basis for much of our forecasting on CFIP programs.

• 0925

Mr. Howard Hilstrom: Could you give us the compilation of those statistics? It's hard to work with just verbal presentations. Is it something you could give to the committee?

Mr. Douglas Hedley: I see no reason why we can't. We'll certainly forward them, but I don't have them with me here today.

The Chair: Okay, thanks Howard.

Bob.

Mr. Bob Speller: I actually wanted to follow up on that. It is a good question, because I think we need to get a better understanding exactly of what's going on out there.

I was interested in the minister's comment too. I'm not quite sure what it means. I think he mentioned there were some 100,000 or so farms that were under—what did he say?—$20,000 or so. But what does that mean? Why are they in this circumstance? Is it because they're just hobby farmers? What do these numbers include? That's why I think it's important for us to get some of these statistics.

Maybe you can also tell me.... You're using Stats Canada information, and you obviously have people there who analyse this and put forward stuff. Is there any of this information that we can get so we can get a clearer picture as to the real situation here in Canada?

Also on that, I'm wondering if you can give us an idea—and maybe you can start now.... It's a question I've been having a hard time with. I know we all say it's due to foreign subsidies, export subsidies, and foreign countries subsidizing their farmers more than we subsidize our farmers. You have an analysis being done in Ontario by a guy named Brian Doidge. Have you looked at the analysis, for instance, that brought the $900-million figure? Can you give us an analysis as to whether or not those numbers are true, and what they represent?

I've always wondered whether or not the bar should always be comparing us with American farmers across the border. Maybe you can tell me. Do you do analyses as to whether or not that should be the bar, or should there be a different bar? Is that a political decision, or is it a decision being made by...? I know you can't comment on the politics of whether or not government should keep up to that level, but I'm wondering if you give us an idea of what else is happening around the world. That bar there is obviously just for grains and oilseeds, but what about other commodities? How do we keep up with what's going on in other countries with other commodities?

Mr. Tom Richardson (Acting Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food): Mr. Chairman, I want to give a two-part answer here.

Mr. Speller, you mentioned a bit about markets. The minister talked yesterday about the impact of subsidies on prices. We do have data, and we could give it to the committee.

We did look at grain production over the last 30 years, in five-year slices. The last five years have been quite remarkable. In terms of the major grain-producing countries, there has only been one major crop failure around the world in the last five years. If you look at all the previous five-year time slices going back to 1970, you see seven, ten, or twelve crop failures—and we define a major crop failure as being a 15% drop in production in any major country. So in addition to the rise in U.S. subsidies over the last three or four years, I think we feel the last five years have been a quite remarkable period in terms of grain production around the world.

So we have information on that and we can share it with the committee.

In terms of your observations on subsidies, we do a lot of work on those as well, and we do have a lot of information. The OECD has been keeping track of subsidies around the world, and we calculate these PSE numbers. I think the increase in U.S. subsidies over the last couple of years is quite.... The thing we try to analyse there is that increase in subsidy level and how it relates to the ongoing income of the farms. So we also have some information on this subject that we could share with you.

• 0930

In some sense, I think we feel the U.S. grain subsidies probably are higher than what is needed to maintain farm income. Our programs are trying to stabilize income from what the farm would get from the market on an ongoing basis. What the American subsidies have done in the recent past is increase the returns significantly above what the market would provide.

Doug, do you want to add to that point?

Mr. Douglas Hedley: Yes, if I could.

Mr. Chairman, the effect of the U.S. subsidies in all of the evidence.... Indeed, evidence that comes from USDA as well as universities in the United States would suggest that about 90% of the U.S. subsidies are currently going into grains and oilseeds. More recently they have started to subsidize some other commodities—the classic that is used in the last year is the money that was put into the apple industry in Washington state. However, what is happening in the United States is that those subsidies tend to raise asset values in the United States, giving them a much higher cost base than what we have, so that new entrants then start with a higher asset base as they buy those assets and continue farming.

How much gain, then, is there in net income? Studies would suggest that those long-term subsidies in the United States get capitalized into land, and only some of them, then, is used in raising incomes.

As Tom said, our programs tend to stabilize income, not necessarily to elevate it very much. The last $500 million clearly is intended to elevate those incomes.

The Chair: Thanks. Bob, unless you say something very quick, I think your time is...

Mr. Bob Speller: No, go ahead. I can come back.

The Chair: Suzanne or Marcel.

[Translation]

Mr. Marcel Gagnon (Champlain, BQ): The difficulties encountered by farmers give the impression that there is a certain category of producers that is protected by the safety net, be it income stabilization programs or supply management programs in Quebec. We hear talk about income stabilization for grain producers. But every time there is a crisis on the grain market, we get the impression that these programs do not work as well, are less effective or are more complicated to deliver, or else simply do not exist.

[English]

Mr. Douglas Hedley: There is no question that where you have very long low-price periods, and a former speaker this morning indicated that.... The programs that we have tend to be relatively short-term, such as CFIP, based on three years, and NISA, based on five years, so that if you get into a prolonged period of low prices, then those support levels will clearly come down. What that does, then, is it brings about adjustment in a more orderly fashion than it would if we simply had no programs.

Yes, there are some provinces that are in fact elevating incomes with their provincial programs. The classic is the work of ASRA in Quebec, where there tends to be a floor under many of the commodities, paid for by the Quebec government.

Mr. Tom Richardson: Could I just add a few points, Mr. Chairman?

When you look at, say, the grain sector in Saskatchewan and the NISA data, I think the structure of the NISA accounts tells you something about the difficulty in analysing the problem. There is something like $1.2 billion in NISA accounts in Saskatchewan, but when you look at the distribution of the accounts, what you see is that about two-thirds of the accounts are quite good, and one-third are not very good at all. So you have a situation where two-thirds of the farms are in pretty good shape, in terms of their NISA accounts. The conclusion that we draw is that the programs are working for that group of farmers. But when you look at the other third, it's clear that they do not have any money in their NISA accounts, so there are issues around those farms.

• 0935

When we look at indicators of stress like arrears on loans—the Farm Credit Corporation is the biggest lender in Saskatchewan—there's a very low number of farmers who are in arrears in the province. And it's also true that the number of people going through the farm debt process is much lower than it was in the last major down cycle, which was the late 1980s. So there is some evidence that the programs are working for the majority of farmers, but there's also evidence that there is a group of farmers for whom things are not going well.

Part of the challenge is how do you design programs to deal with every situation? As Douglas mentioned, the program ASRA in Quebec is a relatively rich program, and that's been noted in Ontario, which has a somewhat similar farm structure. It's been noted that Quebec spends something like three or four times as much money on safety nets as the province of Ontario. You can design a program that's a lot richer and may be more effective, but, as Doug said, you may be providing a lot more money to farmers who don't necessarily need it. So there are issues like that.

The Chair: Marcel, you have time for another question.

I wonder, just along that line, if we could ask the witness to provide for the committee the size of the average NISA account in the province of Saskatchewan. Could you give us that figure? You just referred to it.

Marcel, I'll let you continue, then.

[Translation]

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

I am told that the programs are effective for about two thirds of producers and that a third of them are in a rather difficult situation, especially when one considers that they have to go through a period such as the one we are having now. This does not seem very satisfactory to me. A third of producers is enormous.

To what can we attribute the fact that a third of producers are in a difficult situation whereas the programs are efficient for the other two thirds? Is there something missing on the administration side? Could these programs be better adapted to the needs of that third of farmers or could we at least bring down the percentage of those who are in dire straits, for example following a bad crop or because of prices such as those that we are seeing today?

[English]

Mr. Douglas Hedley: If I may, I'll start and ask my colleague to follow up.

First of all, our programs are designed to respond to revenue of that individual farm. If the revenues are small, then the response is small. If the revenues are large, then they tend to be larger. What you find, then, is that the top third of farmers, which the minister spoke about yesterday, producing approximately 85% of all product get somewhere in the order of 70% to 80% of the moneys under our programs. Smaller farms tend to get a higher level because the larger farms run into their limits.

When you look at it in terms of commodity in Saskatchewan, for example, about 75% of revenues in that province come from the grains, oilseeds, and special crops sector. The program payments tend to mirror that proportion, so even though grain prices are down, we're still putting money into the grains and oilseeds sector in that province in proportion to their revenues.

The Chair: Thank you, Marcel.

Did someone come up with that figure?

Mr. Tom Richardson: The average account in Saskatchewan is about $28,000. As I mentioned earlier, there is this kind of a split, so the average is a bit meaningless. If you do the two-thirds and one-third thing, in fact the average account for the two-thirds tends to be a lot higher. It's up around $60,000 for the two-thirds who have substantial accounts, and then for the one-third their average is down around $3,000 or $4,000. So there's quite a dichotomy between the two groups.

• 0940

In terms of how that can be, let me respond this way. The minister mentioned yesterday the increase in the production of special crops in Saskatchewan. That's an example of the kind of situation that happens. What we know from StatsCan data is that special crops are not grown by all farmers in Saskatchewan. Over the last two or three years, if a farm just stayed with wheat and barley—which a number of farmers did—their average income went down, because cereal prices have been very low.

Those farmers who switched into special crops and a combination of special crops, oilseeds and durum, over the last few years have done significantly better. So some issues are around the ability of farms, their technological ability, their ability to do continuous cropping rather than summer fallow. There are a lot of production decisions and choices that impact on the farm income. We've seen over the last few years some farms whose incomes have fallen because of what they've grown and how they've grown it. So you do end up with these situations where the income average of some farms continues to fall because of what they've been producing.

The Chair: Thank you.

I'm going to go now to Dick.

Mr. Dick Proctor: In response to Mr. Richardson's last question, I'm amazed that the average NISA account in Saskatchewan is $28,000. I must say that I remember looking specifically at those figures two years ago, and the average was somewhere between $10,000 and $11,000. I find it very surprising to think it almost tripled in two years, but I guess we'll find the answer. I believe your aide gave it to you, perhaps off the top of his head, but I would urge all of us to go back and double-check that.

Staying with Mr. Richardson, despite your comments—and we've heard Mr. Hedley say this before, that we've rarely seen a period where grain yields have been so good for such a long period of time—you talked in terms of the five-year slices. What about grain stocks? Are they at an all-time high, or where do they sit?

Mr. Tom Richardson: They're at an all-time low. I think this is one of the things that gets commented on a lot by the industry, as you know—and Doug may have a better fix on this.

The way that grain stocks are being managed by grain companies and by millers and processors, we're seeing a much different inventory. I use the term “inventory management”. If you go back 20 or 30 years, there was a lot more storage of grain over a longer period of time. So the stocks-to-use ratios we have today are very low.

In terms of the analysts who look at markets, they keep expecting or thinking that if there is a major crop failure somewhere around the world—and hopefully it's not in Canada—you will see that tilt very quickly, and you may see a price spike. So there is certainly a lot of analysis and speculation on what's going on there.

Doug, I don't know if you have a view on that.

Mr. Douglas Hedley: Tom is absolutely right. If we go back to 1974, when they had the so-called world food crisis, you had stocks of food considered really low in the world at that time. We are now well under that, but our markets are more fluid. It is just-in-time inventory to deliveries around the world. Our transportation systems are better. Trade is freeing up in the grains area. So nobody is going to hold stocks as a buyer for six months, which they used to do.

Mr. Dick Proctor: But none of this is really helping the farmers of Canada. You associate low stocks with higher prices, and we're not seeing that because of subsidies, correct?

Mr. Douglas Hedley: My point here is that it may be low in relation to historical levels, but it is not low in terms of the way the grain trade is working around the world today. So you cannot assume, based on historical levels of stocks, that prices should be rising under current stocks.

Mr. Dick Proctor: As a quick question, if I may, Mr. Richardson, you're in charge of strategic policy. Can you give the committee an insight into what that is and perhaps where you see agriculture going over the next five years?

• 0945

Mr. Tom Richardson: My boss is on holidays this week. I'm actually the acting ADM, strategic policy.

Several months ago we split the strategic policy branch and the farm financial programs branch apart. The strategic policy branch now has a group that focuses on farm income, for which I'm responsible. We also have an environment bureau. We have a group that focuses on grains and supply management, and we have a role within the department to try to coordinate the strategic directions of the department.

Yesterday the minister talked about some of the things we're working on now, issues around the risks of environment and food safety, and some of the issues around life sciences, biotechnology, and labelling.

In terms of where agriculture is going, I think the minister commented a bit on that in his speech. Certainly from our perspective, when we look at the long-term trends, there's no question that technology is driving this industry. In fact, I think we would take the view that a lot of the stress we've been seeing recently relates to the fact that however much we love technology, there is a downside, because it does lead to long-term declines in prices and to pressure to either make a farm bigger or more efficient or try to find niche markets.

So the technology trend is something that is part of the sector, and when you couple that with the things that the minister mentioned yesterday, it certainly does represent challenges. But as the minister said yesterday as well, there are opportunities, because we do have a very good track record, and we take the view that we do have potential to extract premiums in world markets because of the structure and the quality of what we produce.

So those are some of the things. Doug, do you...?

The Chair: I'm sorry to cut you off, Dick. You've had your time.

Larry.

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

Yesterday, as the minister was speaking, I couldn't help but think of what I think is a great topic or heading for any speech, and Tom, you just used those two words: the challenges and opportunities in agriculture, perhaps more than ever before.

But I want to stay with the Saskatchewan situation for a moment, for my clarification and knowledge. My concern is on the NISA in Saskatchewan. Is it that the two-thirds that NISA is helping, and is able to be of benefit to, are those who have been established longer?

Of course the great fear and the great need that we have for farmers in Canada is younger farmers. Therefore that seems to be the weakness, if there is one, in the program, that it's not of nearly as much benefit to the younger farmer, the entrant producer. Can you comment on that?

Mr. Tom Richardson: When we look for patterns in NISA account balances, we have not seen a significant pattern of lower accounts with younger farmers. Intuitively you might think so, but younger farmers, depending on their education, if they're in a growth mode, which many of them are, in many cases will have substantial off-farm income, which they're using as equity to build the farm. So we haven't seen any particular pattern that would suggest that the accounts are significantly worse for younger farmers. It really depends more on, as Douglas said, the nature of the farm business and whether they've been able to maintain the kind of income and make the adjustments that the markets require.

Mr. Larry McCormick: Thank you very much. That's what I need to do—learn.

On the CFIP program, yes, AIDA did deliver a lot of money, and of course in a new program there were some challenges, but can we expect the efficiency, and especially the money, to get out there more speedily and to the producers? I know it's through the provinces, and through us in different cases, but should the CPIF be a better program as far as timing goes?

The Chair: We have had an answer to that.

Mr. Larry McCormick: Okay. Thank you, Mr. Chair. Doug will give me perhaps a two-word answer, and I'll go on to my next question.

• 0950

Mr. Douglas Hedley: The answer is yes. He posed a slightly different question as well.

We went from roughly 300 a week under the AIDA delivery, and, as we needed to speed it up, we have been over 2,000 files per week over the course of the last few months. We anticipate starting to look at forms April 15. We're looking at cheques coming out in early May.

Mr. Larry McCormick: Thank you. I'm sorry for any duplication.

Mr. Chair, for my information again, I've had people, both from Ontario and from Saskatchewan, ask me about these interest-free moneys. They ask—because we don't always communicate everything well, and neither do the provinces—where in both Ontario and, say, Saskatchewan, where we deliver programs...where do they apply to get this interest-free money, if I could ask that, please, Mr. Chair?

Mr. Douglas Hedley: In the case of the spring cash advance program, we will be working through exactly the same agencies that deliver the fall program—

Mr. Larry McCormick: They are?

Mr. Douglas Hedley: Last year we had 14 of them. For the fall program we have 53. In the west, the two biggest deliverers of that program are the Canadian Wheat Board and the Canola Council of Canada. In the case of Ontario, there is a collective effort there that the Ontario government and farm groups set up some years ago across most commodities. We are working through that organization organized by farmers to deliver the program.

Mr. Larry McCormick: Thank you very much.

I have time for one small additional question, Mr. Chair.

I hear different figures and different percentages bandied about regarding the land that's in production now that perhaps is marginal, and perhaps governments of the past encouraged this land to come into production. I've heard colleagues around this table give me their estimates, which would be better than mine, but what percentage of land in production—in Saskatchewan, say, as an example—today is in production that wasn't 25 or 30 years ago? Part of our solution could lie there in the future.

Mr. Tom Richardson: Mr. Chairman, I'm not sure about the change in the last 25 years. We could get that, but—

Mr. Larry McCormick: Forty?

Mr. Tom Richardson: —at this point in time there are about 10 to 12 million acres across Canada which are class 4, 5, and 6 land, which is basically very marginal in terms of crop production; 90% of that land is in the prairies.

Just to compare that, I think total acreage in Canada is about 90 million acres. Doug?

Mr. Douglas Hedley: The total acreage that we assume in agriculture is about 128 million acres, 90 million of it cultivated, 65 million of it in intensive cultivation.

Mr. Tom Richardson: So it is a significant percentage.

The Chair: Thank you.

David.

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): I guess you heard the gist of this question yesterday, but I want to bring it up again today, and I want to talk a little bit more about these clawbacks that are happening through AIDA.

I know you've had a big changeover in employees last spring, or whenever, in the AIDA administration or bureaucracy, but in 1998 people spent a lot of money and hours and time to get their forms filled out. Most of them went through accountants, and the accountants spent a lot of time with the people employed with AIDA to get those things done properly. The 1998 payments have finally been made. Some of that money was paid out a year to 18 months ago, some of it recently.

But now, when the 1999 applications have come in, new employees apparently have been dealing with these files. We have hundreds of farmers who have files that are being reviewed and are being forced to pay back money they received up to 18 months ago, and that money's been spent by most of them. Everyone agreed at the time that these were legitimate payouts. They worked with your bureaucrats, with your employees.

Now the reasons why they should be paying this money back include such things as AIDA employees making mistakes. One of the ones I heard is that they mistook bushels and metric tons, and that threw some figures off a bit. There have been instances of employees combining files without consultation with the producers. There's also been the infamous explanation, which we hear regularly, that the criteria have changed. When producers ask what those criteria are, they can't explain that to them.

• 0955

My feeling is that these arbitrary changes are unreasonable and they're unfair to people. I've not heard of an appeal yet that has been successful, and we're continually told to go to the appeal and go that route. I think we need to do something administratively to change this problem and to stop this right now. The people who are being asked for this money back, for the most part, are people who absolutely cannot afford it.

Mr. Douglas Hedley: Mr. Chairman, first of all, yes, we in fact did change a number of employees dealing with forms between 1998-99. What we have done in preparation for CFIP 2000 is we have extended all employees who are performing well through the end of December so that we have continuity in those employees. Once trained, then we maintain that training. Between 1998 and 1999 we went through a different set and had to retrain.

I would point out that many of the differences the members spoke of in fact come from audit, they don't come from the original processing. We are doing field audits. We aren't doing a huge number, but they are quite costly. We are doing audits out in the country with the individual farmers, and what we're turning up there are changes. Let me point out that if there is an overpayment we do expect it back, and we work with the farmer on the subsequent program in getting that payment back.

Where there is underpayment we are also paying, and that is a question of equity—equity not only in the delivery of the program and the laws we work under, but it's also equitable to farmers. In the appeal process, let me point out that we indeed have farmers on those appeal processes; they are making those decisions on the appeals. I don't think that our administration has rejected any conclusion drawn by an appeal committee so far. In other words, if the appeal says do this, we have accepted that as an administration.

Mr. David Anderson: As you can tell, I feel strongly about this.

I have a question about NISA. From the materials distributed, the government's asking for a review of that program, and in some of the discussion I've heard, it appears that the government has concerns over the way NISA is evolving. This morning's discussion confirms that for me. I want to know, does the government have any intention of further restricting access or clawing back from producers the money that's presently in those accounts?

Mr. Douglas Hedley: The blunt answer is no. It is an open review process—questions that ministers, federal and provincial, asked in the meeting in Fredericton last July. We're going ahead to review the program. We review long-term programs quite regularly, and it is NISA's turn. We need to look at how it is responding to the needs of farmers.

Mr. David Anderson: Do I have any more time?

The Chair: That's pretty well your time.

Mark.

Mr. Mark Eyking (Sydney—Victoria, Lib.): I thought this day would never come. I've been working with farm organizations for the last few years. I'm a farmer and I'm a new MP, and I couldn't wait to question the people who are running these bureaucracies.

I could repeat a whole lot of what Mr. Anderson said, and it's so true. If some of these employees who are working for you guys had to wait 12 months for a cheque, I don't think they would work very long. We've had banks calling our farmers, saying, “You're supposed to be getting $30,000—when is it coming?” Six months later, they get $8,000. It's back to the drawing board. They have accountants working on these files.

I could list a bunch of things. For instance, your employees have schedules, they're on and off one day, they're back on another day. They're changing the case workers. One day you're talking to one person, the next week it's another one. Another major problem was with farms with non-calendar years. The year ended in March or April, and they would have to wait until the new forms came out the following year. It just goes on. There are two comments I'd like to make.

If somebody's going to say to the farmers, you're going to get x millions of dollars, and we're going to help you out, they should automatically say it's going to take an average of 10 or 12 months before they get the money in hand so these bankers are not calling up looking for the money.

Also, I think we have to start looking at the whole way we're helping farmers. I think we have to start paying them by the tonne, or the bushel or the dozen, because getting accountants to fill out these forms every year and trying to get a few dollars out of the government is ludicrous.

My bottom line is that I think you guys failed drastically in first setting up these programs. I hope that things are changing. That's it.

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The Chair: Is that a statement or a question?

I was listening a little bit, Mr. Hedley, when you talked about employees you were training. Are these permanent people you have working, or are they simply term, or short-term or casual? Who is really trying to help the farmers? Can you describe your workforce that's dealing with this? You talk about laying them off. Where do you lay them to?

It's a very serious point I think Mark has made here.

Mr. Mark Eyking: If you had a report card it would be failure to me, because if you have a guy who says I lost money, my year ends in March, and then he ends up getting the cheque that's whittled down and he gets the twelve months, he can can say why does this application take so long to get in? And his accountant's frustrated in dealing with your bureaucracy. So I think there should be a report card done.

How long does it take to get the farmer to have his application in hand? What is the turnaround time? Especially in a non-calendar year—because you would think there would be no rush for applications in a non-calendar year where the average farmer's year ends in December—when you have a non-calendar year you would think there would be a speedier process.

Mr. Douglas Hedley: First of all, on employees, many of our employees in fact are term employees with Agriculture and Agri-Food Canada, and others are also term employees with the Canada Customs and Revenue Agency at different times during the year. They're quite thoroughly familiar with both farm income accounts and tax accounts.

We made the decision this year to extend them through the end of December this calendar year so that we could maintain a workforce that was well trained and operating.

On the question of year-end, we have examined that question and we are trying to address it to make it current. The difficulty is that your tax year is defined as the last day of your tax year. So if, for example, it is January 2 of year 2000—in other words, all except two days would be in 1999—your tax year is still the tax year 2000. In doing that the 2000 program will be delivered during 2001, which means a minimum of an eighteen-month delay after you file your income tax, or you have your year-end. We're trying to move to an actual year-end rather than calendar year-end for taxes.

The other comment I should address is we put in the rule for AIDA 1999 that only one individual would be in contact with the farmer. To the best of my knowledge this has held, and only one individual would deal with that farmer. We do have cases where individual farmers will call back on the toll-free lines rather than call back to the number or individual who has been in touch with them. So, yes, they can talk to two people, but eventually they will get back to the individual they are dealing with on their form.

The Chair: Suzanne.

As a point of clarification, I went to the Alliance just before Mark and I was going to go to the Bloc next. Are there any objections to that? I think it's fair.

[Translation]

Mrs. Suzanne Tremblay: Thank you, Mr. Chairman.

We often hear that 20% of farmers produce 80% of the food we need, which means that 80% of farmers only produce 20%. If these numbers are correct, it means that we have a bunch of farmers who are not efficient or that we keep in business simply because it is quaint. Does your department have a vision?

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Are you aware that agriculture, in this third millennium, has become an industry, or do you still believe that it is simply folksy? Are we keeping a lot of farms alive simply because it is nice to have living museums instead of static ones? I do not know, but it seems there is something to this.

Ever since I was a little girl, I have heard say that all is not well in farming. We spend billions of dollars and it is never enough. I understand that it is never enough, but how is it that no official among you has been able to find solutions so that things really start to work? For you, is it an industry that should be treated as such, in other words that there be mergers if needed between small farms and that they no longer be supported if they are not useful to the industry? I do not know, but it seems to me there should be something, that you should think of something to do things differently. This situation cannot go on, this annual wastage of billions of dollars that are never enough for people to stay above water.

You said earlier that a third of farmers are in difficulty in Saskatchewan. It seems to me that this can simply not go on.

[English]

Mr. Douglas Hedley: Your rough proportions are about accurate. Approximately 20% of farms produce 80% of product. That concentration has been growing over the years.

What I would point out is that with many of the smaller farms, the 80% that produce 20%, effectively they are multiple job-holding choices that individuals on the farm make. If they work in a factory and have 50 cows, that is still a considerable and important part of Canadian agriculture. They are eligible for all programs in relation to income and other measures that we have established. They are not denied access to those programs, but they tend to receive in proportion to the level of their production, as with the larger farms. Those are business decisions individuals make in combining farming with other occupations. It effectively is a multiple job-holding decision that individuals make.

Tom?

Mr. Tom Richardson: Mr. Chairman, to add to that, when you look at the structure of small farms, most of them tend to be cow-calf operations or cash-crop, the vast majority. When you look at what the term “intensive agriculture” is sometimes used for, you see the big horticulture operations, dairy farms, hog farms. These types of operations tend to be much larger. They're seven-days-a-week jobs, many of them. They're quite intensive. Many staff may be employed by these kinds of operations, or the dairy industry partnerships. So you tend to find those kinds of intensive operations are your bigger farms. But most smaller farms tend to be cow-calf or cash-crop. I agree with Douglas: that kind of a farm operation is compatible with other kinds of employment.

The minister commented yesterday that you cannot expect safety nets to provide an income to a farm that has $40,000 or $50,000—$20,000 or $30,000 might represent a cow-calf operation of 20 cows. But none of our policies, no aspects of our direction, aim to deny benefits to these farms. They're fully eligible for all programs. I think at this point there's no reason to consider change in that.

The Chair: Small one.

[Translation]

Mrs. Suzanne Tremblay: In Quebec, especially in the case of our farmers, assistance to cover costs is mostly provided by the caisses populaires and by the Banque Nationale, which is very much present in rural areas.

Is it true that you, the federal government, have a loan program and that you offer these loans at a rate that is 1% below the rate imposed by the caisses populaires and the Banque nationale, so as to be able to go and get that business? We have been told that with one your programs, you are competing against the Caisses populaires and the Banque Nationale. Is that the case or not?

[English]

Mr. Tom Richardson: Jacques Lagacé is here from the FCC, Mr. Chairman. I think he could address that, if the committee wishes.

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The Chair: Jacques was here yesterday too. Is it agreed that we will take a minute or two to hear from him?

Some hon. members: Agreed.

The Chair: You've heard the question, Jacques.

Mr. Jacques Lagacé (National Director, Government and Industry Relations, Farm Credit Corporation): Yes.

[Translation]

Thank you, Mr. Chairman.

Madam Tremblay, your statement greatly surprises me. The Farm Credit Corporation is indeed present throughout Quebec. We have a portfolio of some 900 million dollars, 8,000 accounts and approximately 5,000 clients. However, the Farm Credit's interest rates are generally speaking higher than the interest rates offered by the tandem partners of the provincial farm credit program. I would say that the interest rates of the Farm Credit Corporation in Quebec are on average 75 base points above those of the caisses populaires and of the banks.

Mrs. Suzanne Tremblay: Thank you.

[English]

The Chair: Thanks, Jacques.

Dick, I'm going to go to Garry next, because my thinking on this is that everyone who is at the table should have at least one chance before somebody has two.

Mr. Dick Proctor: Fair enough.

Mr. Garry Breitkreuz (Yorkton—Melville, Canadian Alliance): Thank you, Mr. Chairman.

I have four questions. Hopefully, I will get through them.

You probably don't hang on every word we say in the House of Commons, but during our supply day last Tuesday I raised an issue that concerns me greatly. I was very disappointed and dismayed by the CBC's report on The National that implied that farmers are getting much of their income from the government. The news report, which aired on Monday, March 19, said that in 1999 farmers received 57% of their income from government subsidies. Last year the number was 66%, and the report said that next year it will rise to 75%.

This, in my view, is really an extreme and unfair reporting of the facts, and I'd like to give an illustration of this. If a farmer has a gross income of $100,000 and his net income is $20,000 and he receives a $15,000 grant from the government, it would be accurate to say that 15% of his total income came from government subsidies. Instead, the CBC reported that 75% of his net income came from subsidies. Now we have the Organisation for Economic Co-operation and Development, the OECD, more accurately reporting what a wheat farmer receives when they say that 11% of his income comes from government subsidies. We compare that with 58% for European grain farmers and 46% for U.S. farmers.

I believe the CBC should have taken into account a farmer's total income when comparing subsidy levels with income. I think that would much more accurately reflect the reality on the farm.

The concern I have is that a news report really has the potential to negatively affect public opinion of farmers, when farmers really need the public's backing and understanding as never before. Farmers are only 3% of the population, or even less now. They need the support of the public for their plight, and I think there's really a need to accurately report to their city cousins what's going on. I think farmers are very disappointed their tax dollars are used to spread misinformation about their plight.

Now I ask you, who is accurately reporting the agricultural income situation? Is it the OECD or the CBC report, which relied on other figures?

Mr. Douglas Hedley: Mr. Chairman, one can compare the level of direct payments to farmers with almost any number. If you wish to compare them with market receipts, please go ahead. If you wish to compare them with realized net cash income, then please go ahead. There is no right or wrong here on how you compare them.

In the case of the OECD, they measure it against the value of products produced, the subsidy component of the value of the product. It's called the PSE, or the producer subsidy equivalent.

• 1015

If I take you down through the list of numbers that are available on our website, market receipts for year 2000 are $29.8 billion in Canada; total direct payments are $2.8 billion; total cash receipts $32.7 billion, the sum of the two; net operating expenses $25.6 billion; net cash income $7 billion; realized net income, which is the return to the farmer for his labour, and after depreciation, is $3.3 billion. The comparison the CBC has used, and many others, is the $2.8 billion in direct payments to the realized next income, which is the income of the farmer. You can also compare it to market receipts.

Mr. Garry Breitkreuz: Is that not counting the income twice, once in the net income of the farmer and then also when they report, as you've just stated, $2.8 billion in assistance? Isn't the one number included in the other already?

Mr. Douglas Hedley: If you do the straight accounting on it, in fact you do not have $2.8 billion in revenues that come from direct payments. That translates directly, in a static sense, down to the bottom line and would reduce the realized net income of farmers by that amount.

That is not true in a dynamic sense. If realized net income were only $500 million in this country—in other words, current realized net income for year 2000 minus direct payments—then clearly there would be a major number of adjustments on farms to try to raise that number. It's an unsustainable number. But clearly the comparison they have made is $3.3 billion in realized net income to $2.8 billion in direct payments.

If you look at the United States you will find that the same comparison has been made by broadcasters as well as researchers. There are approximately $27 billion to $28 billion in direct payments to farmers, and a net cash income in the United States in the order of $45 billion to $48 billion. So you'll quite frequently see the number in the U.S. that approximately half of net income in agriculture comes from the U.S. treasury.

Mr. Garry Breitkreuz: I think there needs to be a very simple way to communicate a farmer's plight to the public. And I think the way these numbers have been played out is not an accurate portrayal. But I want to go on to another question I think is absolutely important.

The Chair: Garry, we're getting in trouble here. You have a very interesting line of questioning. It was five minutes, but I am interested in this, and if other committee members are we could allow you to extend it maybe for a minute or two.

Mr. Garry Breitkreuz: Yes.

My second question really ties in with that. Your department must have some kind of an analysis of how much farmers are being hurt because of the subsidies in other countries. The hurt that they are experiencing must have been analysed on some kind of basis.

When the minister makes an announcement of how much support will be given, it doesn't seem to reflect the amount that is really needed out there to help farmers because of the hurt that is experienced by them in relation to the subsidization of other countries and the subsequent decline in commodity prices. There's a real frustration that I think I'm expressing on the part of farmers that they hear reports on television, they see what is being reported, they look at what's happening in their own situation and what the minister announces, and there seems to be a great discrepancy in that.

How do you arrive at the level of money that is needed in order to get farmers out of their plight? It just doesn't seem to relate to what they're actually experiencing. And yet the impression is given to the public that these big numbers that are being announced are somehow going to really bring them out of that plight.

Mr. Douglas Hedley: Mr. Chairman, this is an exceedingly complex topic.

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Our department participates with a number of other agencies around the world in having a look at the very large-scale modelling systems, models of how world agriculture responds to impacts on income from changes in prices and policies. We participate with at least two or three U.S. universities, plus the United States Department of Agriculture, plus the OECD, and other institutions in Europe.

One of the most difficult things is to insert into those models changes in subsidy and then find out what happened. It is extremely difficult to do. I'm certainly willing to go back and hunt, find research on that if you wish. It's horribly difficult to do.

The other side I would point out is that our programs tend to stabilize income, not to augment it. Now, I do admit that the $500 million announced by the minister a few weeks ago clearly is intended to augment incomes.

The U.S. tends to have programs that raise incomes. Europe tends to have programs that protect and raise incomes. All of our policies are designed primarily to stabilize those incomes, yet our incomes have stayed, on a percentage basis, about the same place as those of the United States. So even with a difference in direction, the income levels on an index basis, if you wish, are roughly the same as the United States.

The Chair: Thanks. It's very complex. I too was frustrated when I heard the television report. Kelly Crowe apparently did the report.

Before I go to Dick, does the CBC pick up information like this from the website to do this? And if they do, who puts it there? Is there a better way to present this information than the way it was done two nights ago on television? Is it the Department of Agriculture putting this on the...?

Mr. Tom Richardson: Mr. Chairman, we do have on the website our farm income forecast. It's connected to StatsCan, and keeps track of the historical numbers. The percentages the member mentioned are an assumption or claim by the reporter, not by us. We put the information on there, and people are free to look at it and comment on or interpret it as they wish. The information's there, but the percentages quoted are not there.

The Chair: Does the department have a communications person who tries to work with reporters covering the agricultural business? Even last night's report certainly wasn't very accurate in terms of what has happened with the agricultural industry in Canada and the United States over the last five years. I was rather amazed—probably you were too, Madam Tremblay—at last night's report.

Is there a method by which a reporter like Ms. Crowe would have to call someone to get a picture of what's really happening, rather than her impression of what's happening? Is there a way for her to do it? We do have some people here today reporting for different papers. What is their method of access to your statistics and information?

Mr. Tom Richardson: They may access the statistics either from the department or StatsCan. What we do from time to time, Mr. Chairman, is have background or technical presentations to media. We haven't had any recently, but we could certainly do so, if you thought it would be helpful to present some of this information in a more systematic way. We could do that.

The Chair: Okay. Dick.

Mr. Howard Hilstrom: Mr. Chairman, I'm ready to make a motion that we call those reporters to the stand here and find out what's going on.

The Chair: It makes you wonder.

Mr. Dick Proctor: Thanks, Mr. Chair.

Mr. Hedley, earlier you mentioned that Saskatchewan had not yet decided whether it would join CFIP. What are the ramifications if the answer turns out to be no, we're not going to join?

Mr. Douglas Hedley: At this time we continue to discuss with Saskatchewan its plans for joining CFIP. I fully expect they will honour the agreement they signed last July, which contained the elements of the CFIP agreement, but I will not speculate on what happens if they don't. That's something that may happen in the future, or it may not. But I fully expect, based on the framework agreement they signed last July, that Saskatchewan will be in the program.

• 1025

Mr. Dick Proctor: I thought you did speculate last week on what would happen if they didn't join. Is that incorrect?

Mr. Douglas Hedley: There would be concerns, if any province were not in the program.

First of all, we'd like to have CFIP as a green program under the WTO. That means we would be bound to treat all farmers equally across the country, and if we don't do so, then it cannot be green. Clearly, there would be trade implications, if the federal government did not treat all our farmers across the country equally.

Mr. Dick Proctor: But here's the dilemma. We've just heard Mr. Richardson talking about U.S. subsidies being higher than needed to maintain farm income, and over the past five years 90% of the U.S. subsidies have gone where? To grains and oilseeds. Here comes Saskatchewan and says “Look, AIDA hasn't worked. CFIP is the son of AIDA, and it's not going to work any better. We'll put equivalent amounts of money into agriculture, but we want to design a program that will work for our grains and oilseeds producers.”

The minister stands up in the House and says we'll have companion programs, and we want to give provinces flexibility on that. And now you're saying if they don't join it, then tough luck. Presumably, they're not going to be eligible for their version of the $500 million injection, which is about $115 million in Saskatchewan.

To me, we're just going around this, and not really coming to grips with it. How do you respond to this?

Mr. Tom Richardson: Both the minister and the Prime Minister have been very clear that agriculture is a shared jurisdiction. We do expect both the provincial and the federal government to carry their share of the burden.

The forecast for CFIP 2000 in Saskatchewan is $217 million. Saskatchewan's share of the $500 million, along with its share, is close to another $200 million. Combined, that's over $400 million. That has a big impact on Saskatchewan.

So I reiterate what Doug said. We certainly hope the Saskatchewan government will be able to honour its commitments, because clearly the impact on farmers would be significant. That's something none of us want.

Mr. Dick Proctor: All right. I'd like to ask a quick question, Mr. Chair.

The Chair: Ask a short one, Mr. Proctor.

Mr. Dick Proctor: Did you get a definitive answer on the average in the NISA account?

Mr. Tom Richardson: Yes. It's about $22,000. As I said earlier, that average.... We do two things. We try to look at adequate accounts and inadequate accounts. We also try to relate the accounts to the farm size.

An account balance has to be related to the income from the farm. In other words, let's say you had a relatively small farm with an income of $5,000 or $10,000. If that farm had $5,000 in its NISA account, that's a pretty good account. But if the farm has an income of $50,000, and it has $5,000 in the account, that's not very good, because it doesn't give you much protection.

We can provide the committee with some information on the $22,000 average, and how it relates to farm size and how it is distributed, because there is quite a dramatic difference. There is a significant number of small accounts relative to farm size. On the other hand, there are two-thirds who are in relatively good shape. We can provide that to the committee.

Mr. Dick Proctor: Just for clarification, the average, the $22,000, is on what you define as adequate accounts, or on all accounts?

Mr. Tom Richardson: No, that's the average for all 59,000 accounts in the province.

Mr. Dick Proctor: Thank you.

The Chair: Thank you, Dick.

Murray, I'd like to make a brief aside here before we go.

• 1030

In terms of the agricultural communities so concerned about their future—we have the 80%, we have the 20%, we have 20% producing 80%—which group is hurting most right now? Who's leading the charge in respect of the needs the agriculture committee is saying there are for agriculture in Canada? Is it the 20% or is it the 80% who talk about this great farm crisis, in your opinion?

Murray, after that I'll go to you.

Mr. Douglas Hedley: Chairman, I have great difficulty speculating on that. We have not surveyed farmers as to whether or not they are expressing concern, their size and their difficulty. I can't tell you where they are.

The Chair: In your analysis of the total farm picture, which group is most adversely affected, the 20% or the 80%?

Mr. Douglas Hedley: Let me try to answer that in a slightly different way.

I don't think it's the 80% or the 20%. What you have is a group of farmers who fall into that middle third the minister discussed yesterday. In those areas of Canada that have little or no off-farm employment opportunity within reasonable distance, what you find is that a relatively small farm is the only source of employment for a farm family. Whenever you find that circumstance, you're going to have low family income, and you're going to have little opportunity. You also have then relatively low skills in that group to help them go out to hunt for new market opportunities, niche markets, new products, value-added, all of those things. So it's a complex set of parameters affecting the group we feel is most at risk.

The Chair: I'd just like to take a minute or two.

We might assume, then, in terms of the minister's presentation, we have one-third of the people who are hobby farmers, who have incomes of less than $10,000 from sales. We have a middle third who have gross revenues of less than $100,000. And I guess what you're saying to us this morning is that group must have an off-farm income in order to continue agriculture activities. Then there's the other third who are not doing all that well either. Would that be a fair analysis of what you're saying to our committee?

Mr. Douglas Hedley: I think the upper third are doing reasonably well. Our programs tend to work reasonably well for them, dealing with the ups and downs, both from their business decisions, right or wrong, and from markets. It is the middle third, but it is not all of them, particularly where you find in the farm family off-farm employment or multiple job-holding, where there are good opportunities for one or both of the spouses to combine farming with other careers.

The really difficult group is the skill group I mentioned, with a relatively small farm, limited off-farm opportunity, due either to skill or to opportunity within the region. That's the group we regard as the most difficult in respect of the situation they're in. They are not exclusive to a particular area of Canada; we can find them in almost every province, although there is a concentration of them in the centre of the prairies.

The Chair: Thank you. It is a very difficult picture to accept, given the grossness of Canada and the historic patterns of economic development.

Murray.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman. Good morning, Doug and Tom.

Any one of us sitting around this table who still farms has an off-farm job. That is something I've seen with agriculture that is a very distressing trend.

I've got two questions. I'll ask Doug and Tom the first question, but I'd also like to ask the representative from FCC to come up to the table, because I've got some questions for him too.

The Chair: Just a second. Okay. We accepted that before. Jacques will come to the table—is that what you're asking for?

Mr. Murray Calder: Is that okay?

The Chair: Okay.

Mr. Murray Calder: Okay, thanks.

I've watched with a lot of interest since 1994, when we signed the agreement with the WTO. We agreed at that point that subsidies would be reduced by 20% over six years, and in fact the United States has lived up to that. But what they've done is to move their support out of the amber box and put it into the green box, to the point that.... I'll use the numbers the OFA used and basically explain their methodology.

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They say that right now the United States supports its farmers at $123 an acre—and this is all in Canadian funds. We in Canada provide support of about $60 an acre, and therefore there's a difference of $63. Given that there are 4.8 million acres in Ontario, that works out to the $300 million that has been cited, of which $180 million is federal responsibility, $120 million is provincial. And if you multiply that through a five-year average, across Canada the total program involves $1.5 billion, of which the federal component would be the $900 million we were asking for.

My question is, if the United States is moving its support from the amber box into the green box, why are we not looking at the same thing?

Mr. Douglas Hedley: First, I would give some background to one of your comments and statements. What we agreed to in the WTO arrangement was not to reduce subsidies by 20%, but to lower the limit on our subsidies by 20% over the implementation period. Countries can work to that limit anywhere in that range. The U.S. is well below its limit. That limit was established on the basis of a historical period that was around 1986-89, I believe, for subsidies. I can check that—it might include 1991 as well. My point is, it's not that we agreed to reduce them, it's that we agreed to reduce the limit on our subsidies by 20%.

As for their moving from amber to green, under the WTO arrangement, their agreement was that their programs, as of that date, were blue, not amber.

Mr. Murray Calder: Okay.

Mr. Douglas Hedley: And blue is the definition that was established at the end of the round. If you had production controls in place and you had a subsidy, then that subsidy was not amber, but blue, and it was exempt from action under the WTO arrangement.

In the 1995 Farm Bill, they moved many of their programs into green, where there is a payment to a farmer independent of what that farmer produces. That independence allows the move to green. But not all of their programs are green.

Mr. Murray Calder: Okay. But if you go back and take a look at this, in 1994, 1995, and 1996 commodity prices internationally were good, and there were no complaints from the grains and oilseeds sector. But 1996 is when the U.S. came in with their Farm Bill. At that point they started bolstering the companion programs they have down there that are in the green box, and we watched the situation in grains and oilseeds get progressively worse through 1997, 1998, 1999, and 2000.

So I'm back to my question again: When we saw that, why didn't we move to go in lock step with what they were doing?

Mr. Douglas Hedley: I think the decision had been made here in Canada to attempt to stabilize income as a policy priority. That is why our programs are geared to respond to need, that's why they're targeted, as with AIDA, and now CFIP. That is why NISA is designed that way: farmers put some money aside each year with government, and they have access to it when they need it.

U.S. programs are designed in a fundamentally different way, and that is to elevate incomes. They elevate them through price guarantees, loan arrangements, direct payments to farmers, which came out of the 1995 Farm Bill. Roughly $6 billion to $7 billion goes directly to farmers because they are farmers.

Mr. Murray Calder: Okay.

Mr. Tom Richardson: Let me just add to that.

Some of the actions the U.S. government has taken.... If you think about the loan rate on soy beans that they raised, they distorted markets. They really did distort the oilseed market by the action they took. What we tried to do here was to keep the markets neutral. The minister mentioned it yesterday. We've seen a huge shift in the prairies in the last couple of years into a number of special crops, pulses, etc. The producers could move to that. They weren't stuck growing canola because we had some kind of target loan rate that encouraged them to produce canola.

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I fear some of the negative aspects of U.S. programming, and I think that's one that has caused a lot of grief—certainly to the soybean industry in Ontario. I do not think those kinds of actions by the U.S. are helpful, and they don't lead to an agriculture that adjusts to world markets.

So even though they have done some green programming, they've done some other things that have been quite bad. In fact on the corn countervail that was taken in Manitoba...in fact all those programs, the target loan rates and all the other associated programs, are found to be countervailable programs by the revenue agency.

Mr. Murray Calder: Last question, Mr. Chair.

The Chair: Murray, now we're getting beyond your five minutes.

Mr. Murray Calder: Just this last question.

We've heard from farmers across the country right now that they're tapped out at the bank. What I'd like the FCC representative to tell the committee is whether he has any figures or whether he can get us figures on how many outstanding loans and mortgages the FCC has right now with the agricultural sector within grains and oilseeds that are three payments—or three months—behind and would therefore trigger the Bank Act.

[Translation]

Mr. Jacques Lagacé: Mr. Chairman, the Farm Credit Corporation certainly has this information. Unfortunately, I do not have it here with me today. If you would like information dating back to February 28, 2001, the Corporation's arrears amounted to 0.7% of its present portfolio. The level of arrears has been about the same over the last three years. There has been a slight drop since last year. At the present time, there are approximately 2,200 farms that are in arrears with us, compared with 2,500 farms in February 2000. There has thus been a slight drop. Those are the numbers.

[English]

The Chair: Thank you.

Most western provinces are down.

It's your turn now—in terms of the Alliance. Do you want to split up your five minutes?

Mr. Howard Hilstrom: Yes. We'll try to share it around.

I just have a couple of things here. First of all dealing with Saskatchewan or any other province in regard to farm programs, we know that on big national programs, for instance, if a province wants to opt out it can and get the cash instead. I guess Quebec is the best example of that in some major national programs. Is it possible for Saskatchewan to do that—opt out of the farm safety net programs and receive its share of the moneys?

Mr. Douglas Hedley: Let me start with your premise. I'm sorry, but Quebec does not opt out, as you suggested, in terms of our safety net programs.

Mr. Howard Hilstrom: No, no. I'm talking about big national social programs of children, etc.... Does it apply here?

Mr. Douglas Hedley: First of all, agriculture is a concurrent jurisdiction under the Constitution. We have worked together with the provinces for years and years. We have a good working relationship with the provinces in terms of putting these programs together.

I just don't see it in the same order as the social programs.

Mr. Howard Hilstrom: So Saskatchewan has no option to opt out and take the money—the federal money?

Mr. Douglas Hedley: Those decisions are made collectively as well as bilaterally with the federal government.

I explained the trade implications earlier to another one of our colleagues here. As a result, I think there are implications for everyone based on the actions of an individual province. That's why we work collectively on this.

Mr. Howard Hilstrom: The minister has spoken and in the throne speech there was all this talk about transition. Normally that means that if somebody's trying in a job or an industry, but it isn't working so well and it's going to be closed down, there's some kind of transition program to get those people—or a portion of them—out of that particular industry and into something else.

You must be in the process of—I was going to use the words “dreaming up”, but that's not a very good word—a program that would be a transition program. Is there such an analysis or program being developed at this time?

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Mr. Tom Richardson: Mr. Chairman, just to go back in time, beginning in the mid-eighties to the early nineties, the federal government did have a program called the Canadian Rural Transition Program. It was a bit of a euphemism, because it actually was a program designed to help farmers exit the sector. There were about 5,000 farms that took that option, and it cost about $50 million. I have some information on that program if the committee would wish to look at it.

The other major program that did have some impact on not so much exiting but giving farm families an opportunity to think about different things was the Permanent Cover Program, which was a program designed to encourage different uses of low-quality land. Both those concepts are being thought about by both provincial and federal officials. I think that in terms of transition, we're more interested in looking at programs that would give farm families different options.

Doug mentioned the situation of a smaller farm that may not be large enough to generate an income from the farm, but there may be options for that farmer to improve his skills and get better off-farm employment. One of the things that we know from Statistics Canada data is that off-farm income or multiple job holding is very much related to education and skills.

We're interested in looking at all those kinds of options, and we're interested in trying to find options that give farm families more opportunities than the situation they have. But I think everybody's agreed and the ministers did have some discussion on that at their meeting in Quebec City last week that there's no “one size fits all” or no single approach. We're talking about a very diverse group of families across the country.

So all those options are open for discussion and people have different views on what could work. I think that in terms of the minister's agenda, this is something he may want to take a look at.

Mr. Howard Hilstrom: Well, I'll be giving the minister some advice, and I might as well pass you some advice. Committee members sometimes give witnesses advice, particularly when they are in important positions as you gentlemen are.

Your transition programs—no matter what you think up—are doomed to failure. You might ask me, “why would say you that, Howard”? It's quite obvious. You said earlier that your plans—your safety net programs—apply to everyone who produces an agricultural product, whether they have 50 cows or 30 cows or whatever. They are in essence farmers and are able to access your programs. So if you transition out 20,000 farmers—be they small or big—another 20,000 will say they'd like to be farming, and they'll come up with a quarter section of land and a house and 20 cows. You can transition people out, but you're going to have people transitioning right in again at will. I think you'd better be really careful in thinking about these transition programs.

The other problem that I see—Saskatchewan is involved in this right now—is this land cover program. Farmers have been tricked by governments many times before into doing something and then finding out that—Lord love a duck—we should have been growing wheat like crazy, because now there's a big market for it and we don't have it to supply.

So I really would make the point that when you're thinking about these programs, government isn't a real good decision-maker on telling farmers what to grow and what not to grow, and we'd like to see the marketplace continue there.

With that I'll just... Is that a long time, I guess?

The Chair: It was a pretty good length. We only have about ten minutes left, and I would like to just move around quite quickly.

Mr. Howard Hilstrom: Just a quick round, sure.

The Chair: Madam Tremblay.

[Translation]

Mrs. Suzanne Tremblay: I have one short question. There is in all departments a communication program. Earlier, we talked about briefing reporters, but I imagine that this practice is already quite widespread given that there are programs in each and every department.

Could you tell us how much money your department devotes to communications and how many staff people work in this area?

[English]

Mr. Douglas Hedley: I'm sorry, Mr. Chairman, I don't have those numbers with me. We can provide them.

[Translation]

Mrs. Suzanne Tremblay: Could you send us that information? Thank you.

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[English]

Mr. Douglas Hedley: Sure.

The Chair: Dick.

Mr. Dick Proctor: Thanks very much, Mr, Chair.

Mr. Hedley, you mentioned a few minutes ago that agriculture is a concurrent jurisdiction, and we all understand that. I wanted to zero in, though, on the 60-40 split on programs, because Minister Vanclief would have us all believe this has been around since Sir John A. MacDonald was in short pants. But that's not the case at all. That has not been the case. I think back specifically to 1986, when a billion dollars in farm aid was rolled out for Saskatchewan from Ottawa, with Saskatchewan not required to put up any money.

So, can you give me the precise year the 60-40 came into being?

Mr. Douglas Hedley: The simple answer, 1996. Let me review a little bit of history, though—okay?

In regard to spending for agriculture in Canada, the vast majority of it prior to the 1960s was by the federal government. If I can recall, humbly, for this committee, the Rowell-Sirois commission of 1937-40 was really addressing the question of balancing fiscal capacity with constitutional powers, because clearly there was an imbalance created at the time of Confederation.

That began to be addressed in the late 1950s, early 1960s, and has been renewed and changed regularly. As that rebalancing took place, you saw provinces getting much more deeply into spending on agriculture.

When you get into the 1970s, you find provinces starting to compete with each other with subsidies, to gain an advantage against their neighbour. That is why we started moving in the late 1970s and throughout the 1980s to put those programs together in what became the tripartite programs, to try to avoid that competition among provinces, everyone competing for everyone else's money.

Throughout the late 1980s and early 1990s we began to explore how best to put that together in the longer term. It emerged in the 1990s—the 60-40 split really was a fallout from a tremendous number of discussions with the provinces, with industry, with the federal government, over a period of about ten years.

When did it come in officially? 1996.

Mr. Dick Proctor: Thank you.

The Chair: Mr. Hedley, that was a very quick answer to a very complicated question, because you go back to Sirois there.

Garry has a quick question—it's not a speech, Garry, is it?

Mr. Garry Breitkreuz: It's a quick comment first. That 60-40 split is basically unfair to Saskatchewan. I can go into an explanation, but that's not my question.

Murray's asked one of my questions. But the question I have is, what's the average cost to process an application? There are conflicting reports as to the administrative costs. There's a real frustration amongst farmers that the administration costs are so high. Why, also, does the money have to come from the funds promised to farmers? If administration costs are so high, why do farmers have to bear those costs?

If you could enlighten us on that, it would really be helpful, because there are a lot of complaints that farmers have to jump through hoops and over hurdles. The papers get shuffled from one desk to the next to the next, and every time they talk to somebody on the phone, somebody else is processing their application. They feel that's really adding to the cost. Could you maybe enlighten us as to what the average cost per application is?

The Chair: Garry, I don't mean to butt in, but I think it's a little bit unfair. Maybe they could take it under advisement and get back to the clerk with the answer. Would that satisfy you?

Mr. Garry Breitkreuz: Do they not know how many applications there are and how much money is...?

The Chair: I know, but to say what it costs per farm.... Do you have that information available?

Mr. Douglas Hedley: The average cost of every application processed by the federal government is just under $1,100—that's for last year. For 1998 it was approximately $600. Our costs are in line with those of the provinces delivering the program.

The Chair: To be clear, you're saying the administrative cost to look after one farmer's application is $1,100?

Mr. Douglas Hedley: Yes.

Mr. Garry Breitkreuz: That's what I had suspected.

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Mr. Douglas Hedley: I would also point out that in processing crop insurance forms in the provinces, we have an administration bill across this country of approximately $85 million, federal and provincial, and that is about $2,000 per applicant.

The Chair: Garry, I expect I know what your next question will be. Do you want to ask it?

Mr. Garry Breitkreuz: Go ahead. I don't want this to be a partisan thing.

The Chair: How much is the average payment to each farmer?

Mr. Douglas Hedley: The number is rising right at the moment, but I think it's around $15,000 to $18,000 per farm.

Mr. David Anderson: It's $12,500.

Mr. Garry Breitkreuz: Saskatchewan is really the worst off.

Mr. Howard Hilstrom: Could you answer the last part of that question? Why does the farmer have to absorb the cost of government administration of the program? Why couldn't the general taxpayer pay the cost of administering that particular program? Is this a user fee situation?

Mr. Douglas Hedley: No, it is the way Parliament allocates the money. I have to work within that.

It takes the block of funds and says these are administration and program funds. We allocate those, go to Treasury Board, get those rules established, and run the program.

Mr. Howard Hilstrom: Thank you.

The Chair: Dick, you have a minute.

Mr. Dick Proctor: To pick up on that point, how much are the administrative costs in percentage terms?

I'm working from memory, but I think on a program we generally assume that administrative costs are about 5% of the total value of the program. What has it been for the AIDA program?

Mr. Douglas Hedley: We're going to spend around $1.7 billion on the AIDA program over two years. Our expenses on that program, federal and provincial, will be approximately $80 million to $83 million, so we're dealing with about 5%.

The Chair: Garry.

Mr. Garry Breitkreuz: But if the average payout in Saskatchewan is $12,000, and you spend $1,200 on an application, that's 10%.

The Chair: We'd like to thank you for coming this morning. I know that I, and probably a lot of other committee members, have learned a good deal, and hopefully you two have learned some of our concerns and some of the problems we have in terms of how we see these programs operating.

I'd like to remind the witnesses that, in terms of the meeting this morning, we did ask for and hopefully will receive within the next two weeks a financial profile of our farms in Canada; a brief summary of the NISA accounts per province, and I think actually some of the newspapers have covered that quite well recently too; information on the Farm Credit Corporation, with their $8-billion business and arrears; and Madame Tremblay's request for information on how you communicate with the press in terms of some of your programs.

So thank you for coming. As we mentioned yesterday with the minister, we hope to be able as a committee to look at these problems and address some of the issues and work with you to improve the future and present conditions of farmers in Canada.

With that, I'll adjourn the meeting until next Tuesday.