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I call the meeting to order. We apologize for the delay, but we had to await the termination of another meeting.
This morning we are gathered to look at the main estimates. We have before us the Honourable Andy Mitchell, the Minister of Agriculture. He's going to be with us until 12 o'clock, at which time he has to leave for a cabinet meeting, so we want to get right on with it.
Certainly there will be other witnesses this morning, following the presentation by the minister. As well, we have at the table a number of other people who will probably give assistance to the minister in his response to questions.
We have with us from the Department of Agriculture and Agri-Food, Leonard J. Edwards, the Deputy Minister, as well as Bruce Deacon, the Assistant Deputy Minister, Corporate Management Branch; and from the CFIA, Richard Fadden.
We will be meeting after 12 o'clock with the CFIA and with the department, so we'll have people remaining after the minister leaves. You might want to direct your questions to the minister, while he is here, more directly to the program as it relates to the estimates and take your other related questions to the associate members who will remain after he has gone.
At this time I welcome the minister and I would ask him to proceed with his presentation.
I will now call vote 1 in order that we may begin our review of the main estimates.
Mr. Minister.
:
Thank you very much, Mr. Chair, and my thanks to all of the committee members who are here today. I appreciate the opportunity to be able to provide some comments and then to answer some questions.
This is my first opportunity to be in front of this committee as the minister. I've been here before as the Secretary of State for Rural Development, but I'm pleased to be here in my new role as the minister. In that vein, I'm going to talk for just a couple of minutes about some general things, and then I will move on to some specifics. Of course, I will have an opportunity in the questions and answers to deal with some of the specific items that members may want to bring up.
First of all, Mr. Chair, in taking over the portfolio and this particular task, there are three broad principles that I intend to employ as I approach my job.
The first one is that despite the complexity of the portfolio—and there are a lot of complexities to it—and the vastness of it, when you get right down to it, one of the fundamental principles that I need in guiding our actions is for us to work towards creating an environment that will allow producers to earn a living. At the end of the day, if producers can't earn a living, they won't be producing, and that's a diminishment not just to the producers or to rural Canadians but also to all Canadians—and indeed, from my perspective, to all of the world. So to me, that is a first fundamental principle that's essential.
Second, in taking the broader responsibilities that I have for the industry as a whole, I think it's also important to be taking measures that will allow all of the agrifood industry to be profitable in many of the actions we take, or measures that lend themselves to that.
Thirdly, Mr. Chair, and this probably comes as no surprise to those who know my former roles in this House, is the importance of ensuring the sustainability of those communities that support our natural resource industries, particularly our agricultural industry in this case. If we don't have that network of communities supporting our producers, then it will be very difficult for them to continue on with their task. One of the principles that underlies what I do is ensuring the long-term sustainability of that network of rural communities that support our agricultural industry.
Those, Mr. Chair, are three fundamental principles that I measure the task I'm presented with.
In terms of some approaches I intend to take in trying to achieve those objectives and principles, first of all—and those of you who have heard me give a speech before have heard me use this phrase, and it's with all due understanding to everybody—all knowledge is not resident on the ninth floor of the Sir John Carling Building. What I mean by that, Mr. Chair, is that there is a great wealth of knowledge held in the communities, held by producers, and held by members of the industry. As we move forward, in my view, it is absolutely essential to call upon that wealth of knowledge, to call upon that experience, to call upon those individuals to assist in developing the approaches we need to take.
This leads to a second approach that I very much believe in, and that's a collaborative approach. If we're going to be successful, if we're going to achieve the objectives we want to achieve as a department and as a Parliament, then I believe taking a collaborative approach is essential. Obviously, agriculture is a shared responsibility, first of all, between the federal government and the provinces, so there needs to be a collaborative approach between the two levels of government. But even more important, and beyond that, is the collaboration that needs to take place between governments, producers, and the organizations that represent producers. As we move forward in either developing policy or responding to the issues of the day, I believe that collaboration has to be a hallmark of how we move forward.
Thirdly, in terms of approaches, is the willingness to change. Simply because we've done something in a particular way for a particular period of time is no reason in and of itself that that's the way we're going to continue to do things as we move forward. I think that's an important approach to take.
Fourth is the importance of thinking outside the box. This relates back to the willingness to change. There are times when we need to be creative, when we need to be innovative, when we're faced with different types of challenges that call for different types of responses. We need to be willing to do that. That's not always an easy thing to do, Mr. Chairman, to be willing to think outside the box, to be willing to change and to move off what may have become the status quo.
Finally, in terms of approaches, I think it's absolutely essential that we all remember that at the end of the day it's all about people. It's abut the men and women who each and every day go out in their operations, onto their farms; who need to work; who meet the significant challenges that face our agriculture industry. We owe, in my view, a debt of gratitude to those people, because what they do is not just advantageous to themselves, it's advantageous to all Canadians. I am very proud as the Minister of Agriculture to see the kind of dedication and the kinds of men and women we have in our industry.
Obviously, Mr. Chairman, there have been a number of very key issues that I have been dealing with since assuming my position some three and a half months ago. I'm going to touch briefly on those--there are others, and if colleagues want to talk about those, they should bring them up.
First of all is the whole response to BSE, the subsequent border closings, and the types of things we need to do in respect of that.
Also, Mr. Chair, there is the issue of our WTO negotiations. That has very significant ramifications for our industry. They are entering into a very intense phase of negotiations.
Third--and this is something that both of my predecessors, I know, talked to this committee about on a number of occasions--is the implementation of the agricultural policy framework.
I think all of those are key issues as we move forward.
I had an opportunity on September 10 to make a particular announcement about BSE to help reposition the industry. As I said at the time, it's designed to ensure that we can return profitability to the industry with or without an increased border opening. The plan was built in close collaboration with the provinces and with the industry. We tried to make sure we designed it in a way that would respond to the needs they were facing and to do it in a way that provided flexibility, recognizing that the industry is not the same, doesn't operate the same way, in different regions of the country.
It has five main components to it.
First is a continued and significant effort directed at the United States to work with them and urge them to open the U.S. border. It also contains an initiative to create new slaughter capacity, both on the financial side and on the regulatory side. Third, it allows for adjustments in the industry in the interim, while we're trying to build the increased slaughter capacity, and that includes a fed cattle set-aside, a feeder cattle set-aside, and a managing older animals component. Finally, Mr. Chair, there are efforts to increase our ability to penetrate foreign markets and to diversify those markets beyond simply the United States.
In terms of the World Trade Organization, Mr. Chair, there are three fundamental principles that Canada is working for in those negotiations, which form part of the framework that we agreed to at the end of July. First is the elimination of export subsidies, second is the reduction of domestic subsidies, and third is the issue of increased market access.
I should say, Mr. Chair, in trying to achieve those principles that collectively our producers and our industry wish us to pursue, there is also the need to ensure that producers have the opportunity to choose the method they wish to use for domestic marketing. I believe that also has to be part of what we include as we move forward.
In terms of the agricultural policy framework, we're working to implement our business risk management, which has changed under the APF, both in terms of our production insurance and our income support program, the CAIS program. We're also at the same time rolling out the other four pillars of the agricultural policy framework, again doing this in conjunction with the provinces.
As with any new initiative, Mr. Chair, it's important to examine it to judge how you're moving forward, so we will be having an annual review, a process that's being put in place. This review process will include representatives from the federal and provincial governments, and 50% of those people involved will be from the industry.
I should say I view APF as a three-legged stool--the federal government, the provincial governments, and the industry--and if one of those legs were missing it would be very difficult for that stool to stand upright.
Finally, I should mention just a couple of things about CFIA and their determination to protect the health and safety of Canadians through the work they do on plant and animal health. They do this work vigorously and have done yeoman's service, I believe, in both the situation we faced with avian influenza as well as in terms of BSE. We need to do that in the context of efficient operation, and I know my officials understand the need to do that as well.
Finally, I'd like to close, Mr. Chair, by thanking the men and women who work for both the CFIA and Agriculture Canada. They spend a great amount of time with producers right across this country, and they are very dedicated individuals. I just thought it would be appropriate to take an opportunity publicly to thank them.
I'd be happy to answer any questions.
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What will be good enough is when CAIS is able to respond to all producers.
Mr. Chair, let me just speak to this for a minute.
First of all, the CAIS program is an income support program that deals with income positions as of the previous year. What we're mostly dealing with right now is the result of production year 2003. As producers reconcile their books and have a loss that would trigger CAIS, they make application.
The reality is that ministers collectively, provincial and federal, extended the deadline for making application, so it would be hard to make your case, Mr. Ritz, that the program isn't working when we haven't even finished the period of time for the first year of CAIS that producers can make application. We have about 120,000 producers who've indicated that they intend, at some point in time, in that period, to make application for CAIS. About $280 million has been disbursed. When CAIS for the 2003 year is completed, it's estimated that there will be payments of around $1.3 billion.
I should also mention, and Mr. Ritz mentioned, the ad hoc programs. It's important that we remember what CAIS is and what it isn't. CAIS is a program that deals with an outcome. It deals with a result--basically, a loss of income. There are things that happen that cause that need. Sometimes they are things for which we have very little control. It could be a drought, it could be an infestation of insects, it could be a frost. It could be a series of things over which we have no control. CAIS is a program that deals with the result. There are, though, instances where you may have an opportunity to deal directly with what is causing the problem. That's why from time to time you will see a specific program targeted in a specific way. That's why you've seen the programming to deal with BSE. CAIS is a program that deals with the outcome, but occasionally you will need to deal with the structural or other problem that's causing that outcome, and that's why there have been those programs for BSE.
To date, something in the order of $2 billion in federal-provincial dollars have been pledged to deal specifically with BSE. I wouldn't throw them overboard because there's a bunch of ad hoc programs. I think they are important programs, I think they are meaningful programs, and I think they help the cattle industry. And that's $2.1 billion before CAIS even begins to come online.
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First of all, on the issue of young farmers, I think that in part goes back to that first principle I spoke to. If there's a young individual who is looking at farming as a potential occupation and they don't have a belief they can earn a living doing it, it would come as no surprise that they may choose to do something else. I think clearly one of our objectives--and this is a big part of the APF, not just the business risk management but the other four pillars as well--is to create an industry that can be profitable into the future, where individual producers can in fact earn a living from farming and will make the choice to stay in.
There's an issue, though, that goes way beyond simply what a business risk management issue would do. Several sectors of the industry are experiencing long-term historic declines in farm income. I think that's an issue we need to deal with very clearly. For instance, I believe the Canadian Federation of Agriculture is holding a symposium later this month on just that issue. I've assigned to my parliamentary secretary, Mr. Easter, a particular project within the department to deal with those issues of long-term decline in farm income and to develop recommendations and proposals to deal with them.
On the issue of providing income or payments to producers under the CAIS program, essentially the way CAIS is designed, it responds or reacts to a loss of income that a producer has in a particular year. The producer completes their financial records, completes their books, and then the program responds to that.
It was envisioned, though, that there would be issues where producers were facing liquidity issues almost immediately in a given year and they needed to have that liquidity issue dealt with before their books were reconciled in the following year. On that basis, the whole idea of having advances or interim payments was developed.
A producer, for instance, in 2004 who is finding that they have liquidity problems and they have made a determination that in fact when the year is all said and done they're going to experience a loss that will trigger CAIS, then rather than having to wait for sometime in 2005, they can trigger an advance payment in this year so they can deal with liquidity.
Beyond that, in particular for cattle and beef producers, there was a need. They were experiencing significant liquidity issues beyond all of the structural issues. As part of the announcement we made on September 10 there was a special advance calculated very simply that was able to be processed expeditiously. Letters went out in the last two weeks of October to whomever we saw as eligible for this special advance, inviting them to come forward. Those replies are coming in right now. As of the end of last week, I believe there were 4,500 replies, and I am quite prepared to update the committee. I know there are reports on all of our programs that come to the committee. I think we should also, on the special CAIS advance, incorporate that in our reporting to the committee so they can see this happening on an ongoing basis.
:
Let me respond to that in a number of ways.
First of all, I want to make something clear. Our delay in Quebec is not the responsibility of the Government of Quebec. There was a need for increased discussions on how to deliver it—I don't want anybody to be under any illusion of that—on testing and on a number of things.
First of all, there is no scientific basis for doing 100% testing. People who have employed it have done it, in some cases, because they want to try to instill consumer confidence. That hasn't been the issue in Canada. The reality in Canada has been that our consumption of beef after the BSE actually increased. It wasn't an issue of having to provide consumer confidence in Canada with 100% testing. Canadians had clearly demonstrated, by their buying habits and by their consumption habits, that they had confidence in our beef supply—and they should have, because it is safe.
Our largest export market, the United States, is not going to 100% testing. In terms of trying to assuage foreign markets, the United States isn't there. Even the Japanese, who were there, are moving from that. In fact, they're going through a regulatory change in their country where they will be moving away from 100% testing.
I don't think there's any scientific reason to do it. Certainly domestically there's no need to do it to assure our consumers. They are assured. Our major international marketplaces are not demanding 100% testing. I don't believe we should be entering into it for those reasons. So that's the approach.
I would not want to get ourselves into a position where we inadvertently provide a non-tariff barrier that could be employed against us by countries that would all of a sudden say, if you're doing 100% testing, that must mean it's good, so we want you to do 100% testing in our marketplace, when they've never asked for it before. I don't want anybody to be able to be in a position to use a decision we took here as an excuse for creating a barrier to the export of our beef.
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Let me give you the numbers right now. I'll do these in weekly totals.
We're operating at around 81,000 per week. That's up from about 75,000. Most of those have come from existing plants that have been able to maximize their output.
We need to get to around 105,000. That will get us to where we need to be, plus a little bit more, because it's probably not reasonable to think we can operate at 100% capacity all the time. That's the objective; that's where we want to go.
There are certain things that I believe are important as we build slaughter capacity. I think proposals that come forward need to make good business sense. They need to be proposals that suggest that when a new plant is up and operating, it can actually operate profitably, that it can actually process animals and be able to service whatever debt it may have incurred and be able to continue to operate. If it doesn't have that ability, it is not going to last.
I think the second principle is that it needs to be sustainable. That means a business plan has been created where that plant will continue to operate even after we have access for live animals into the United States. To do otherwise would be a very poor investment, to pour $10 million, $12 million, or $14 million into a plant that would operate for a short period of time until you had a border reopening, and then that's all sunk investment. I don't think that makes a lot of sense. Those have to be underpinning principles.
We're using the vehicle of the loan-loss reserve so that we cannot replace private sector investment, but rather entice private sector investment. A $38-million loan-loss reserve, if it works well, should trigger about $120 million worth of investment. They can't get it right down to exact...but people who have done the analysis suggest $120 million worth of investment will make up that difference between $81 million and $105 million. That's what you're trying to accomplish.
We released the details of the programs to the chartered banks and to others. I should make the point that it's not just chartered banks that are eligible to participate in this; others are as well.
I took the opportunity to speak to the senior agriculture lenders personally in a number of those institutions last week, to describe the program to them. I have agreed to have a collective meeting later this week, after they've had a chance to review the details, and to have a discussion with them about where they might have some concerns, where they might feel that things work well, just to understand from their perspective, basically, and to understand the way they want to proceed on it.
I don't think we should forget the other half of the new slaughter capacity--that is, the regulatory side--because it's not just the building that has to be built; it has to be built in a way that maintains the health and safety part of it.
We have also provided increased resources to the CFIA so that they can respond in a timely manner.
I should make this clear, that the money is for them to respond more efficiently, not to slacken or lessen the health and safety standards. I don't think any Canadians want to see us do that, but they do want to see us be able to proceed as quickly as we can.
:
That is a very good question. First of all—and I'll take the blame for this if it hasn't been communicated properly—the September 10 program is what you say it should be, Mr. Bezan. It is a determination to get away from a series of programs.
Hindsight is always 20/20, isn't it? When we first experienced BSE, the idea was that we had a very short-term problem. We wanted to put programming together to assist producers in the short term; then we would get a reopening of the border and it would be turned back to the way it was.
That's not the intent of the September 10 program. The September 10 program is designed to do exactly what you believe needs to be done—and it's a belief I share—and that is to restructure the industry so that it can be profitable with or without the border opening. That's the idea behind it. That's why we are encouraging the building of new slaughter capacity. It's why we've tried to bring some rationality to the market in the short term until that comes about.
Having said that, we're still going to continue to work on getting the U.S. border open. I'm not giving up, because I think it's a positive thing for Canadian producers if we can get that border open, and we will continue to work on it.
You are quite right in insisting that as we take a look at building slaughter capacity we have to relate it to the what ifs. I mentioned before, in my answer to one of the questions, that we want to make sure a plant is sustainable if and when we get a U.S. border opening.
You bring up another point that's important. We have to understand that within the macro numbers there are also some micro issues we need to deal with. The rule change being contemplated by the United States right now is one for live animals under 30 months. When that goes through, we still have a longer-term issue dealing with the older animals. That needs to be part of the planning as we go forward.
As for managing the older animals, we have made the invitation to the provinces to participate. I believe Manitoba has agreed to participate. Others are still contemplating it. The design of how we actually deal with this issue will be dependent on the number of provinces and how individual provinces are going to manage.
One of the things I've tried to do with this program is not, as the federal minister, to say, “It shall be exactly this way.” I've tried to enter into discussions with my provincial counterparts, as in the discussions I described with Quebec, to make sure we do it in a way that makes sense for them. We will deal with the provinces. I realize that your province has indicated a desire to participate, so it is certainly going to happen in Manitoba.
I can give some numbers for what has been paid out for some of the business risk management programs and some of the BSE programs. In addition, I can probably talk a little bit about some of the APF programs.
Let me start with the business risk management programs. In terms of CAIS, I think our minister this morning indicated that since the beginning of the calendar year--and I remind the committee members that for CAIS the program year for 2003 actually began when the final implementation agreement was signed in December 2003--so since January, CAIS has paid out, in 2003 interims, final payments for 2003, and interims for the 2004 year, over $280 million.
Production insurance for 2004--what was formerly known as crop insurance--is usually paid out at the end of the calendar year. For the 2004 crop year we are predicting that approximately $976 million in federal-provincial payments will go out to producers.
On the BSE recovery program, which I think committee members were informed of last year, the majority of the payments were made in the 2003 calendar year, but to date we have paid out over $444 million--that's federal and provincial. The program allotment was $520 million.
On the cull animal program--this is the previous cull animal program, not the one that was announced on September 10 by our minister--most of those payments were made in the 2004 calendar year. To date, the federal government has paid out over $103 million. This was a program where provinces were asked to participate--some chose not to. The provincial payout was $1.8 million.
There was another program that I think the minister also referred to this morning, the transitional industry support program payment. This payment was announced in March 2004. The payments are 100% from the federal government. An allocated amount was allowed for direct payments to cattle and ruminant producers, and there were general payments that were based on eligible net sales. The majority of payments were made last spring and this summer. We recently topped up the payments. Because there is a fixed allotment we paid out 70%, and we recently paid out the remainder. As the minister indicated this morning, the full amount has been paid out. That will come to about $880 million.
There are some other cash advance programs available to producers. One is called the spring credit advance program. It essentially flows up to $50,000 interest free to producers in the early spring. In 2003, the amount of money that went out to producers under the spring credit advance was $727 million, at an interest-free cost of $13.7 million. This year in the spring, for 2004, over $500 million went out to producers, with $3.6 million interest free.
In addition, in cash advance programs to producers we have a fall advance program. It allows producers to essentially store their crops in the bin. It provides cashflow and allows producers to market or sell their produce at the highest prices possible, so they determine when they can get the best price. For 2004--this program is going on right now because it is a fall cash advance--to date we've paid out $37 million in advances, which are loan guarantees, with $2.3 million interest free.
So that is an example of some money that has gone out.
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I'm trying to exercise my prerogative as chair to make sure that happens, but since Mr. Angus would have been...I've taken the privilege of asking him to speak first now. Then I'm going back to Mrs. Ur, and then I'm going to start back here and we'll go through the formula again. I'm trying to be as fair as I can be.
While the others are taking their place at the table, members of the committee, if I could have your attention for a moment, the next two meetings have to do with CAIS and APF. With your permission and direction, I would suggest that we continue our discussions under the guise of estimates, so that we may delve deeper into the estimates. We do not have to report them until the 30th, and if you agree, we'll continue on under the estimates formula, as we have done here this morning.
Is that something we can agree to? All agreed?
Some hon. members: Agreed.
The Chair: I guess we see ourselves moving forward under that particular direction.
At this time, I want to welcome to the table Mr. Brian Evans, who has been here before, and Mr. Gordon White.
We know that Dr. Evans has distinguished himself as a leader in resolving BSE and in how we have come together as a country, and he has been recognized by our American neighbours as a leader in this field.
We welcome you, as well as Mr. White, here this morning. Thank you very much. If you have some comments to make, you can do that now and we'll proceed with the questioning.
:
Again, Mr. Chairman, thank you very much for the question. It's a very legitimate and worthwhile question.
I would point out at the outset in responding to the question that, first and foremost, the information that was brought forward from the CBC was not new information but was in fact information that we brought forward a year ago, in May and June, during the course of our investigation. There was no new information brought into the public domain through that particular access-to-information request, but that information had been publicly disclosed in our technical briefings and placed on our website. There had been no effort here to try to disguise or suppress any relevant information from a public interest standpoint.
With respect to what was found at that time, yes, there was evidence with respect to that particular animal. One of the issues that did arise was the fact that the animal had been rendered several months before because of the delay in moving forward on that particular sample between provincial and federal jurisdiction, which has subsequently been dealt with as well.
On what was entered into the feed system, as you've indicated, we did do on-farm verifications. In actual fact, in our numbers, it was not 20% of farms that were inappropriately feeding animals. In fact, it was less than 3% of animals that were potentially being exposed, either inadvertently or through accidental circumstances at the farm level. This was also associated with on-farm feeding practices, where about 80,000 farms in Canada actually mix their own feeds on the farm at any given time.
For those producers who raise multiple species, this is an ongoing issue of concern. It has been fundamental to the proposal that we have tried to bring forward on a revised feed regulation that would take material out of the system at the top end and not allow it to be rendered or go to a commercial feed mill. Therefore, it would deal with the issue of any cross-contamination that would subsequently take place in the system because there would be no prohibited material.
Having expressed that, Mr. Chair, again, I come back to the point that, in all real sense, neither the Government of Canada nor the governments of the provinces have the ability to be on every farm everyday. So our approach in dealing with this from a regulatory perspective is to have regulations in place that are practical and implementable, and that we have good awareness programs to work with the production sector on how they feed their animals.
We find that industry as a whole is extremely positive about doing the right thing to maintain consumer confidence and takes great pride in the quality of the food they do produce in this country.
At the same time, we're very dependent on downstream verifications to make sure there's no issue going on in the feed system, by doing sampling of the feeds to ensure there is no prohibited material included in the feeds.
It's not an issue, I don't think, Mr. Chair, to be on farms every day inspecting and verifying that the regulations are being implemented. In fact, it's a broader strategy to include all the people who have an opportunity to make a difference in the quality of the feeding of our animals.