I'm going to call the meeting to order.
Welcome to meeting number 17 of the House of Commons Standing Committee on Agriculture and Agri-Food. We are resuming our study on business risk management programs.
I would like to outline a few rules to follow.
Interpretation in this video conference will work very much like in a regular committee meeting. You have the choice at the bottom of your screen of “Floor”, “English” or “French”.
When you do intervene, please make sure that the language channel is set to the language that you intend to speak, not the floor channel. This is very important. It will reduce the number of times we need to stop because the interpretation is inaudible for our participants. It will maximize the time we spend exchanging with each other.
To the witnesses we have in today, are there any issues? Do you understand how that all works? Is everybody okay with that? Mr. Haerle and Mr. Brock, are you good?
Also, before speaking, please wait until I recognize you by name. When you are ready to speak, you can click on the microphone icon to activate your mike.
Lastly, please make sure your microphone is on mute when you are not speaking.
We are now ready to get going.
I'd like to welcome our witnesses for today's meeting.
From the Grain Farmers of Ontario, we have Markus Haerle, chair. Mr. Haerle, welcome to our meeting. From the Department of Agriculture and Agri-Food, we have Mark Brock, co-chair of the National Program Advisory Committee. Mr. Brock, welcome to our committee.
We will start with the opening statements of seven minutes each.
Mr. Haerle from the Grain Farmers, you can start.
Thank you to the committee for letting me make a few remarks today. I'm very happy to accept the invitation to present to you today. I have an important message from Grain Farmers of Ontario and the farmer members we represent.
My name is Markus Haerle. I am the chair of Grain Farmers of Ontario, and I farm just 45 minutes east of Ottawa, in St. Isidore.
Grain Farmers of Ontario is Ontario's largest commodity organization, representing 28,000 grain farmers who produce grain and oilseeds. The grain business in Ontario represents roughly $18 billion in economic output and is responsible for 75,000 jobs.
I'm here today to talk to you about the impact of COVID on Ontario grain farms and farmer members and the need to fix business risk management programming immediately.
Farmers take pride in their job of growing food for the Canadian consumer. We grow crops that are used for animal feed. We also grow those crops that are directly consumed when made into bread, tofu and ethanol that people in this country and around the world rely on.
Farm businesses are the backbone of the rural communities in which we live and operate our farm businesses. People and businesses in rural communities rely on the economics that the farms create.
I have some data in the backgrounder for you that outlines the situation facing our members in terms of numbers. I'm not going to get into the numbers, but the document is a good reference.
These current times of COVID are presenting risks that are bigger and more uncertain than I have ever experienced in my farming career. The acute issues are that demand is down for last year’s crops and the prices are at a point where we cannot even break even. I've heard lately from some of my members a demand that we take action. I've also heard from consumers and the public that the general public is still eating, so that means we as farmers are still relied upon to produce the food they require every day, but in reality, demand is down. That is not only with food, but also with ethanol.
I'll give you a few examples. Restaurants, university cafeterias and other commercial distributors of food are closed, which has meant that for beef, chicken, pork and products that rely on the grains we grow, production capacity has had to be reduced. Ethanol production in the U.S. actually came to a halt in response to people not driving their cars. Here in Ontario, our ethanol industry is producing only at 50% capacity.
We cannot seem to get the government to listen to those concerns and take action.
What's happening is that the U.S. government is providing support for its farmers as we speak. President Trump established a coronavirus aid, relief and economic security program right away, and what farmers are facing because of the drop in price, they are getting compensated for. We cannot compete on the world stage, and everyone expects that there will be another payment before the fall election in the U.S.
Grain farmers cannot compete with farmers who are able to survive these low prices with support from their government. The U.S. farmer is our direct competitor.
It was Prime Minister Harper's government that cut the programs. As we speak about AgriStability, that was one of the programs that was reduced back in those days. At that time, the prices the farmers got for their commodities were good, but we knew that those times would be very short-lived and these programs only pay out whenever times are bad and the existence of these programs give farmers the security to reinvest in their businesses.
Now we are in crisis. Prices of all our commodities are below the amount of money that we have spent to grow those crops. This is particularly bad for corn. Experts are saying the recovery will be slow. No matter whether or not the economy opens back up and things get back to normal, it takes time for commodity markets to rebound. History tells us that prices drop fast and only return slowly. The government platform promised to address AgriStability in the election. The platform specifically named this program AgriStability, and yet we have seen no action from this going forward.
All our farm groups across the country have talked to government, provided the data and shown the issues from COVID, and we have seen no action. For our farmer members and the organization, food security and domestic policy that provide support for farmers to survive downturns that are outside of our control are not partisan issues.
My name is Mark Brock and I'm the producer co-chair for the National Program Advisory Committee. I farm just outside of Hensall, Ontario, with my wife Sandi. We have a grain and oilseed operation and we also have sheep. I've had extensive industry involvement, but right now I'm just a farmer doing some stuff and some work with BRMs on the National Program Advisory Committee.
I'm not sure how well informed this committee is about it, but that committee is made up of two individuals from every province and territory who meet twice a year to discuss issues around business risk management programs. We talk a lot about AgriStability. We talk a lot about AgriInvest, AgriInsurance and AgriRecovery, but lately a lot of the time has been spent on AgriStability in highlighting some of the issues that Markus highlighted in his presentation.
My apologies to the interpreters, because we're so busy on the farm right now I wasn't able to prepare a statement for them to use, so they're going to have to go as I go. My apologies for that, but I didn't want to miss an opportunity to present to the committee, because I think the business risk management programming is a very important component of a larger issue that I want to talk about, and I'll get to that.
My involvement with business risk management programs started way back in 2018 out of an FPT meeting of agriculture ministers when they decided, under industry pressure from different commodities groups, to create an external advisory panel to kind of blue-sky ideas around business risk management programming. That happened when was the minister of agriculture and agri-food. I was part of that process. I was one of the producers involved in that. There were other industry members as well.
For about 18 months, we kicked around ideas and looked at some issues around business risk management and AgriStability and at some of the issues around producers losing confidence in these programs and why enrolment was so low, along with other issues around that. I did pass on the recommendations that came out of that external advisory panel to your clerk. Hopefully, you can see some of those.
I want to highlight those seven things. What happened in that external advisory panel was that as these ideas came forward, three other members of the external advisory panel and I presented to ministers at an FPT meeting in Vancouver. I can't remember the year, but we provided these recommendations to them and answered any questions the ministers had.
I think it was out of that FPT meeting it was decided the further work of this external group looking at these business risk management programs should really go to NPAC, because that was a formal process which was created through the Canadian agricultural partnership, and the formal area in which provinces, territories and the federal government decided to look at business risk management programming. Those seven recommendations went to NPAC. I'm going to read out the seven that came out of the external advisory panel.
The first one is to develop and evaluate risk management tools that cover gaps in the current business risk management suite of programs. That was even to the point of looking at how government assists or facilitates producer-paid options or even producer-paid top-up programs. As Markus highlighted, I think, in some of the risks within the world that we operate in as farmers in agriculture we are willing to participate in some of these tools, but the tools need to be created and there needs to be some assistance, I believe, from government to help facilitate some of those creations.
Number two is to explore approaches to address the lack of confidence in the core business risk management program, which is AgriStability, including its complexity, timeliness and predictability challenges. I think that's a lot of the uncertainty we see right now within the current agricultural community now that we're in this COVID-19 world. It's just the unpredictability of it and trying to assess how we manage our risks. It's hard to calculate some of those opportunities to protect against risks on farms due to some of the challenges with the program design of AgriStability.
Number three is to examine approaches to improve program equality.
Number four is that AgriInvest should be maintained until some better options might be available in the future.
Number five is to modernize premium setting for AgriInsurance. If there are opportunities to do a better job pricing it, then we should look at that.
Number six, there is a role in trying to educate producers more around managing risk.
Number seven is that this work should continue.
That leads into my involvement with NPAC. NPAC is a great group of producers. As I said, two from every province and territory are looking at some of our challenges. We meet twice a year. This year our March meeting was disrupted by COVID-19, and rightly so. We're living off the work we did in December.
We sent a letter to ministers at their FPT meeting on, I believe, December 13, 2019, on behalf of the producer members of the National Program Advisory Committee. It explains how tough the current situation was for farmers, and the impacts we're seeing around all industries, whether it's grain, oilseeds or livestock. At that time we were seeing African swine fever as an issue, and disclosing some of the challenges with China and market access, and how it was impacting farmers' mental health. I think all the members on that committee agreed that the suite wasn't meeting the needs of farmers. It's not responding to some of the challenges we're seeing. I think those challenges are highlighted even more now with COVID-19.
Thank you. I'm going to switch gears and go over to Mr. Haerle.
Mr. Haerle, I've heard from some farmers in my own riding of Lambton—Kent—Middlesex. There are a lot of grain farmers in my area, and a lot of farmers are planting corn. We do grow a lot of corn in my area, especially for the ethanol plants that are around.
You alluded to food security being an issue, and just the demand being down for feed corn. I know the feed is impacted by the amount of ethanol that's produced.
I'm wondering what you've heard from farmers as of late with regard to their planting. Have they cut back on their production of corn? Have they invested more in soy? That's what I was hearing on the ground.
Where are we right now as far as production levels are concerned?
Indirectly, yes it does because it is a cost that's being downloaded to us as farmers. There's no way we can offset that in any way into the marketplace.
That $170 loss is because, first of all, the markets are not there that are going to pay us for the cost of producing it. Also, the opportunities to sell it into the marketplaces that we have established not only domestically but also for export have degraded. Around the world there's less consumption for feed, food and other uses for those grains. It's not only corn; it's also soybean.
Mr. Brock alluded to it. We have lost significant market share into the Chinese market for our soybeans. That was created by some geopolitical environments that were created by the Canadian government.
Those are the hard-sell issues that farmers have to cope with and we don't have any way out to even get anything else. There are still bins of beans out there that farmers don't even know how to sell because they're losing money on them. Every time they send a truck away they know they're not recovering their costs.
It is a big problem and it creates a cash flow issue. It's now the second year in a row that farmers are facing that at a high level. That's why there's that ask of some programs that cover the issue of today, not only around COVID, but bigger than that.
I'd like to thank the witnesses for being with us today and being so generous with their valuable time under the circumstances.
My first question is for Mr. Haerle.
Mr. Haerle, you mentioned the support that the U.S. was providing for its farmers, in contrast with the situation in Canada. You said that was making it harder for our grain farmers to compete.
Can you tell us what could happen if Canada doesn't provide better support to its agriculture sector before the crisis is over? What are the potential consequences?
Now I'm going to turn to Mr. Brock.
Mr. Brock, you provided a list of recommendations that your committee came up with. It's quite compelling.
I'd like to know whether your committee has explored the idea of making more up front support available. Right now, farmers have to incur losses before they receive any compensation, so there's a significant lag.
Have you given any thought to something that looks more like the European model?
It's my hope that we don't run into this pandemic situation again and put the pressure on the business risk management programs as we're seeing right now. Because of this pressure and uncertainty, we as producers are looking at them and feeling uncomfortable about them, as I alluded to and in some of the points you highlighted.
Really, what has happened is almost a disconnect between government action and policy development and the direction in which they want to head with agriculture and producers. There seems to be less conversation between producers and government, and that has led to uncertainty and a disconnect, and maybe a lack of trust around these programs.
We look at the ways the government has been reacting to help support different sectors and different industries, such as agriculture. There are always people looking at how different ones are being supported. I think there needs to be a lot better communication and a long-term vision and strategy for agriculture with producer and government engagement that, to be honest, isn't caught up in different election cycles and that consumers can feel confident in. If we as producers feel confident in the system, then consumers can feel confident in that system. That's where we need to get to, in case we run into a pandemic such as this again. When it does happen, not only will the producers have confidence, but consumers will as well, and government.
Perhaps I'll start with the outlook for the FPT meeting.
First of all, it's unfortunate that it had to be delayed from July until, I think, October. The problem I see coming is that we're going to have to get all provinces lined up to agree on the principles of getting a reform done on the programming itself. The wheels are in motion, but there seems to be some hesitation from the federal government to step forward and take the initial step. It would be very important that the Canadian government show leadership through this crisis, show what it is willing to offer up, and I'm nearly sure that the provincial governments will actually sign on to the programming that would be proposed.
The urgency is there. The farmers are reaching out to government levels to get action. Ontario has the premier advocating on our behalf. I think we are getting some interaction, but it takes everybody to make it work.
Mr. Brock and Mr. Haerle, I appreciate your time. There has been some great testimony so far. We know that we should all be out planting right now, so I appreciate that.
It's important to look at the evolving situation, so I want to go back and compare our current situation, even pre-COVID, to 2015.
Mr. Haerle, I'll start with you. Could you describe the prices in 2015, or thereabouts, versus the prices now?
I will reconvene the meeting.
Joining us now is Benoit Legault, chief executive officer of the Producteurs de grains du Québec.
From the Agricultural Producers Association of Saskatchewan, we have Mr. Todd Lewis, president. Welcome, Mr. Lewis.
Also, as an individual, we have with us Alan Ker, the OAC research chair in agricultural risk and policy; professor at the department of food, agricultural and resource economics; and managing editor of the Canadian Journal of Agricultural Economics.
Welcome, all of you, to our second-hour panel. We will start with Monsieur Legault, with an opening statement for seven minutes.
Mr. Legault, the floor is yours.
The Producteurs de grains du Québec wants to make clear its support for the Canadian agricultural partnership, which seeks to grow domestic and foreign markets, strengthen competitiveness and competitive advantages, anticipate and manage risks more effectively, support resilience and environmental sustainability, foster public trust, and grow the value-added agri-food sector. All those goals are very positive. When they were established, we pointed out that achieving them would hinge on businesses being able to adapt to change, properly innovate and compete. Achieving them today hinges on stability over time, and as such, business risk management programs must be effective and reliable.
It's important to bear in mind that grain production involves numerous risks, including trade disputes, geopolitical conflicts, and the return of protectionism and support policies in the European Union and the U.S. Our competitors receive considerable financial support. To the list of risks, we can add growing market volatility, unpredictable weather, global warming and extreme weather events—involving more than just rising temperatures—and, of course, local societal requirements. In Canada, we face a number of social requirements, which is not necessarily the case for our competitors. On top of those risks, we are now dealing with COVID-19, a crisis we did not see coming. No one could've imagined a public health crisis of this magnitude or its swift impact on agriculture and the food supply chain here and around the world.
We are realizing that the business risk management tools are even more vital today than they were before. We want the government to understand that those tools are also strategic investments in the Canadian economy. Yes, they benefit the agricultural economy, but they also benefit the Canadian economy. As we see it, we hit a wall in 2013, when the government made significant changes to those tools, scaling back support. It was done when prices were way up, so the impact wasn't felt immediately by farmers.
Now, we are seeing that the business risk management programs no longer match the needs and are putting the sector at an international disadvantage. We currently have access to less support than our main competitors do, and we've seen significant reductions in our support. Under AgriStability, the government provides significantly less in benefits, $4 million less per year, on average, since 2013. In the case of AgriInvest, the figure is $130 million a year. Meanwhile, in the U.S., the already generous programs provided for under the farm bill received a boost. Recently, our neighbour to the south introduced new programs, the market facilitation program and the coronavirus food assistance program, providing $16 billion in additional funding.
All of that confirms our fears when it comes to our programs and their ability to meet our needs. Program supports here have declined sharply since 2007. From 2007 to 2019, support for Canadian agriculture fell rather drastically—81%, in fact. In contrast, support for the sector in the U.S. rose by 98% during the same period. The COVID-19 pandemic simply reaffirms what we've observed: we have neither the capacity nor the tools to meet the challenges that the next few years have in store. For that matter, the programs haven't been adequate to meet the challenges of the past two years, which now include the COVID-19 crisis.
We are very worried considering that grain producers were already in a vulnerable position. According to the Centre d'études sur les coûts de production en agriculture, an independent agency in Quebec that studies agricultural costs, 40% of farms specializing in grain production have trouble paying operators because of current prices, which will most likely change in the next few months.
As a spokesperson for grain farmers, I am here today to underscore the need to enhance Canada's programs. Since the government has to start somewhere, the first step should be restoring AgriStability to 2009 levels, in other words, rasing reference margin coverage to 85%.
In the mid-2000s, the government took a hard look at what the programs should look like. Together with industry stakeholders and producers, the government correctly identified future risks and designed strong programs such as AgriStability, with a coverage level of 85%, and AgriInvest, with a matching contribution of 1.5% of allowable net sales. The government also made cuts to AgriInvest, scaling back the matching contribution to 1%—a drop of 30%.
Back then, the thinking was that the programs should be proactive, predictable, acceptable and flexible. The key word, though, is stability. In 2009, income stabilization was the underlying principle for the programs. That was lost in 2013. It became clear from the government's statements, discussions and line of thinking that it wanted to move away from income stabilization in favour of disaster protection, which is now the role of those programs. They are meant to help in the event of a disaster. They are no longer adequate to help farmers deal with new risks or current needs.
The Producteurs de grains du Québec wants the government to stop shilly-shalllying over the subtleties and technicalities of the current programs and seriously contemplate how to fix them. The first step is to restore AgriStability coverage to 85%.
I'm Todd Lewis. I operate a family farm at Gray, Saskatchewan, along with my father, brother and nephew. We grow lentils, durum wheat and canola. I'm also president of the Agricultural Producers Association of Saskatchewan. We are Saskatchewan's general farm organization, with over 16,000 members in farming and ranching, as well as 32 associate members in other agricultural organizations.
We are also part of the Canadian Federation of Agriculture, and our comments today reflect a common national view on business risk management.
Our members have been concerned about poor coverage levels in the business risk management programs since changes were implemented in 2013. AgriStability coverage has been a major issue. We are requesting, along with colleagues from across Canada, an increase in coverage levels as well as the elimination of the reference margin limit.
Enrolment in AgriStability by Saskatchewan producers is well under 50%. Producers see little value in the current program. The risk of paying the costs associated with enrolment is not worth the reward of being able to trigger a payment.
Statistics Canada 2018 farm income data released in May 2020 showed that Saskatchewan farm income dropped by 28%. Business risk management support payments dropped by 31%, their lowest level since 2009. A properly designed BRM program should provide a backstop for a revenue drop this large. Payments should have risen to support the revenue shortfall, but that is not what happened in 2018.
Going forward, in 2019 grain and oilseed producers were impacted by commodity price drops caused by trade disputes, drought, transportation delays and a late, wet harvest season.
In 2020, we've seen further disruptions in the supply chain due to COVID-19, which have caused serious revenue problems for livestock producers. This week's estimate shows that cattle producers are losing up to $452 per head on cows, and hog producers' current prices are well below the cost of production. It is clear that the current AgriStability program will not provide enough coverage in these sectors. Many other sectors of our industry are experiencing problems as well.
Besides the reduced AgriStability coverage level from 85% to 70%, another key problem is the reference margin limitation.
In 2019, APAS was concerned about the impact of trade disruption on canola prices. We did some research on a major reduction in canola pricing and the impact it would have within the AgriStability program. APAS found that even with a 35% drop from a historical average of $11 per bushel down to $7.19 per bushel, AgriStability would not kick in.
In fact, we rechecked our data this week, and it would not kick in until it dropped to $6.35 a bushel—
We rechecked our data this week, and it would not kick in until it dropped to $6.35 and the producer had lost over $200,000 in revenue. The payment at $6.35 a bushel would be $2,800, and the cheque would not arrive until long after the bankruptcy auction.
To put this in context, canola is our major cash crop, and a price drop of that magnitude, 40%, would reduce farm income by over $2 billion in Saskatchewan alone and would drive many producers into bankruptcy. Thankfully, that calculation only occurred on paper. Canola prices are currently down, but not by 40%.
In spite of the reduced pricing for canola today, producers are not expecting AgriStability payments this year. What we are seeing in 2020 is further serious real income drops and reductions, especially in the livestock sector, without a program to provide adequate coverage. Producers are facing a serious challenge in Saskatchewan and across Canada. I'm concerned about young producers who do not have enough equity built up to carry them through. They will have to exit the industry. Hog and cattle producers do not have adequate programs to mitigate their losses.
The current AgriStability program also penalizes mixed farmers because they are managing risk by diversifying their operations. A well-designed program would not drive producers towards monoculture, i.e., all grain or all livestock. Producers who rely on family labour are also penalized under the current program.
The last time the cattle industry faced a challenge of this size was the BSE crisis. We lost many producers in Saskatchewan then, and cattle production has declined.
Our recommendations to increase the AgriStability coverage levels and the reference margin limit are straightforward and would have a significant effect on producers across the country and go a long way to restoring confidence in the current programming. I would ask this committee to seriously support actions that would help agriculture producers by sharing the financial risks they take every year to produce our food.
I would also remind members that it's not only our livelihood that is at stake, but the livelihood of the one in eight Canadians whose employment depends on agriculture. Agriculture is a major driver in the Canadian economy. The industry is well positioned to be a major contributor to the Canadian economy as it recovers from COVID-19. With proper changes to business risk management programming, more Saskatchewan and Canadian producers will be in business to do what they have always done: supply safe, secure and affordable food, not only to Canadians but to our customers around the world.
Thank you for the opportunity to present to you today. I look forward to your questions.
Hello. I welcome the opportunity to speak to the House of Commons Standing Committee on Agriculture with respect to business risk management programs.
I have a joint Ph.D. in economics and statistics. I've been a professor at the University of Guelph since 2009. Prior to Guelph, I was professor and chair at the University of Arizona from 1996 to 2009 and worked closely with the United States Department of Agriculture's risk management agency on various crop insurance issues.
Today I will highlight some of the points made in my written brief titled “Canadian BRM: A Study in Syntax and Mythical Changes”. That brief raised a number of questions in regard to BRM and producer efficiency, overall program funding, program equity, risk smoothing, alternative insurance schemes and actuarial soundness. Additionally, the recommendations from the most recent national BRM expert panel were reviewed. Finally, other areas discussed included cross-compliance, involvement of private insurers, provincial Crown corporations, subsidization and the use of artificial intelligence in BRM.
Very little has structurally changed in Canadian BRM programs over the past three decades. This is not an indictment of the program. A cursory look at agricultural trade numbers suggests that Canadian farmers are competitive internationally in almost all products. In 2017, Canada produced $110 billion in agriculture and agri-food products and exported $56 billion. It would be hard to argue that Canadian BRM programs have hindered the competitive position of Canadian farmers. Moreover, it is noteworthy that the average farm household has significantly greater income than the average non-farm household and four times greater assets.
BRM programs consist of AgriInvest, AgriInsurance, AgriStability and AgriRecovery. More recently, there has been a great deal of dissatisfaction with AgriStability as represented by significant declines in participation and also by what the speakers before me just said. This dissatisfaction is, in my opinion, solely because of the pronounced and significant decline in loss coverage since Growing Forward. I want to reiterate that, while the change in AgriStability program parameters from 85% to 70% may seem relatively minor, they are not. Decreasing the level of coverage from 85% to 70% may, in some cases, reduce loss coverage for some farmers upwards of 100%.
AgriStability is also relatively complex. Although more simple alternatives exist, unless coverage and therefore budget allocations are increased, I suspect that producer dissatisfaction will remain high. If BRM budgets are fixed, a decrease in coverage or subsidies in AgriInsurance could fund increasing coverage in AgriStability.
There has been some discussion of public or private coverage for shallow losses not covered by current programs. Although AgriInvest is meant to assist farmers with these types of losses, governments could consider offering non-subsidized individual or area-level shallow-loss products but cover program administrative and operating costs. However, I would not expect farmer participation to be high, as many would continue to choose to self-insure against these shallow losses. Farmer demand for private alternatives would be even less, as the coverage would be the same as the public program but at a greater cost to farmers.
Provincial crown corporations deliver most of the BRM programs to producers. However, these entities tend to behave more like a private insurer and less like a public delivery agent. The current AgriInsurance rate-setting methodology is biased in favour of provincial Crown corporations collecting excessive premiums, much like a private insurer. The Crown corporations have $7.5 billion in reserves. Unless there is a change to the rating methodology, I expect these reserves to grow. This level of reserve could cover the maximum-ever loss multiple times over. Note that $3 billion of these funds belong to the farmers.
Furthermore, despite these excessive reserves, provincial Crown corporations still purchase private reinsurance. These Crowns represent the only public entities, across all other government agencies in the developed world, that purchase private reinsurance. For example, the Farm Credit Corporation does not purchase private reinsurance. Last year private reinsurance premiums paid by these provincial Crown corporations were in excess of $100 million, of which 40% was farmer paid and 36% was federally paid. Interestingly, there exists a relatively costless federal reinsurance option available that has been for the most part ignored.
Finally, COVID-19 and the BRM programs deserve discussion. COVID-19 can be considered a black swan event. Governments have the option to deal with these events in real time as they arise. This is almost always more efficient, as black swan events cannot be predicted as to their specific form, their timing or the most appropriate policy response. I would suggest treading carefully in making structural BRM policy changes at this time in response to COVID-19. The last few months have been a strong testament to the resiliency and adaptability of the current Canadian agricultural and food system. Nonetheless, the pandemic has provided an avenue for rent-seeking and alternative-agenda-enhancing efforts. To date I believe the government response has been appropriately measured.
I would like to finish my talk by bringing to your attention a special issue of the Canadian Journal of Agricultural Economics that deals with COVID-19 and the Canadian agricultural and food sectors. While I recognize that an academic journal is not generally suggested reading material for you, this particular issue was written for a popular and not academic audience by 18 of the best experts in their respective areas of research concentration. Moreover, although these articles were written approximately two months ago, they have been adeptly accurate so far. The considered issues include food security, farm labour, trade, the supply chain, BRM, cattle and hog markets, supply management, processors and so on.
Thank you for your time and attention.
I'd like to thank the witnesses for joining us this afternoon.
My first question is for Mr. Legault.
Mr. Legault, you said that Canada's support for the agriculture sector had dropped by 81%, in contrast with the situation in the U.S. There, it's the complete opposite.
Do you think Canada's lack of support will have major repercussions on agriculture overall, considering what a vital sector it is?
Thank you, Mr. Legault. That's exactly what I wanted to hear you say.
At the end of the day, the agriculture and agri-food sector receives a lot more support in the U.S. than it does in Canada. We're talking double.
The AgriStability program has been called into question repeatedly. We recommend bringing the coverage level back up to 85% as quickly as possible. I recognize that the government reduced it to 70% at a certain point in time, but that has to be kept in perspective, given what was happening then. The rub is that it's now five, six, seven or eight years later, so the government should realize that the level needs to be restored to 85%, and fast.
Would you say that's correct?
Not really. The suite of programs is good. There was a lot of satisfaction, and it worked very well, but the devil is in the details of those parameters, and those changes make the programs work very differently.
The programs themselves, I think, are fine. It's the fine tuning of the programs that makes a world of difference to the farmers up and down, as you're hearing from these gentlemen here, but I don't see any sort of suggestion that we bring it in this brand new program out here, and it's going to satisfy these things. I don't see that magic solution existing at all.
Bringing in private insurers is not a solution. In fact, I think that's been shown to have major issues in the U.S. as well, so I don't see that as a solution.
There is talk of some area programs and things like that, but again, I don't think they're going to satisfy any of the situations we're dealing with here today, or concerns that have been voiced over the last five or eight years with respect to the suite of BRM programs.
Structurally, the program is very good. The details are in the parameters, and those parameters matter greatly to how it serves farmers.
I thank the three witnesses for their presentations, which were very clear. Instead of putting questions to them separately, I would ask them to speak up if they disagree with the following statement.
Mr. Legault, Mr. Lewis and Mr. Ker, my understanding is that the income stabilization programs must be completely overhauled, but that the first step would consist in bringing the AgriStability threshold to 85% and removing the reference margin limit. That is an easy thing to do and it is urgent.
Is that correct?
As no one is saying anything, it means that it is. Wonderful!
I would now like to address Mr. Legault.
Mr. Legault, I really liked your summary presentation on the history of programs, where you explained that we went from an income stabilization logic to a disaster protection logic. However, as Mr. Lewis rightly pointed out, when it comes to disaster protection, cheques sometimes arrive after the bankruptcy. I am putting this question to Mr. Legault first. Mr. Lewis could then complete Mr. Legault's answer.
Have you already thought about a support system that would be more upstream and could take inspiration from what is happening in Europe? Have people from your sector talked about this already?
There are two considerations to this: quickness in terms of response and quickness in terms of payments provided to businesses. I have been in the field for a long time, and I have seen that the program-focused thinking has always been difficult in terms of establishing responsiveness when a problem or a loss occurs. That has been the case for the AgriStability program. As you know, the management of the AgriStability program is based on income tax returns that arrive after the payments. In Canada, most organizations that manage programs give themselves tools to allow for advances, but the bulk of the amount often comes after the actual calculation of the losses experienced.
I would still like to say that the 85% threshold was set based on an estimate of losses a modern farm can suffer and on the assessment of all the risks it is exposed to. The factors include succession, which we discussed earlier, debt and producers' ability to survive margin and income losses.
Once again, programs have a short-term focus. They were created to manage a problem arising over the course of a given year. They were not implemented to manage specific situations, such as a string of bad years. A 20% income loss over the course of a year is one thing, but a 20% income loss two, three years in a row, regardless of the reason—be it owing to the market, the weather or any other factor—is another.
Okay, thank you for that.
I want to move on. The COVID-19 pandemic has certainly been, as an understatement, quite a shock to the system. I wanted to know your point of view, Dr. Ker. How well do you think our BRM programs have responded during this pandemic? In other words, do you think they are in fact the appropriate vehicle to deliver aid to farmers, given the magnitude of this crisis?
If another pandemic hits us in 20 or 30 years with the same kind of impact, would you suggest that the BRM programs continue to be the appropriate vehicle to deliver aid, or should we be looking at something else entirely?
So again, that will put an end to our second panel.
I want to thank all of our witnesses for participating today. We shall excuse you.
Please remain on, members, and we'll just move on into our business.
What we need to do today is approve the subcommittee report that was sent to you earlier today and that briefly summarizes the discussions we had Wednesday evening.
You've all had a chance to look at the report. We just need your blessing on that as the main committee. Are we good with that report from the subcommittee? Does anybody have any issues?
It looks like we're all good on that, and the main focus of the meeting is also to provide direction to the analysts to prepare a draft letter on BRM. We agreed to set aside an hour this coming Wednesday—
If there are no further questions, I would like to have everyone's consent or support on the recommendations presented in the subcommittee's report.
Do we all agree on the subcommittee's recommendations?
I think everybody is good.
(Motion agreed to)
The Chair: For the calendar, we have looked at the different dates. Again, there are a lot more meetings that perhaps might not happen because we have to review a different draft. If it takes us one or two meetings, the last couple of meetings might not need to happen, but we've put enough meetings in there so that we will have a final version of the report ready to table at the opening of Parliament on September 21. Looking at the calendar, that's what we have come up with.
Again, if we can approve it more quickly, it would mean fewer meetings, but that's basically what we have to present to the whips so that they can take care of the logistics.
Mr. MacGregor, you're first. Go ahead.
First, allow me to present a dissenting opinion, or rather a constructive comment. We sometimes have very full days and I would have liked to get the schedule before today.
Second, I proposed something the other day that did not seem to cause objection. Instead of meeting once every other week—with the previous meeting being held some time ago, we would be less productive—I proposed to resume normal business much earlier. That way, we would be much more productive. Note that what I am proposing is not necessarily to hold fewer meetings. On the contrary, I would propose having more meetings. I would have us resume normal business on September 2 or 9, which would add the dates of September 9, 11, 16, 18, 23 and 25, before we resume normal business. We could remove the meeting in July or the one scheduled for early August.
I would like that option to be taken into consideration.
Perhaps we could reach consensus on something if we took everyone's proposals into consideration. Maybe we could hold a vote.
Ms. Rood made a very relevant comment on dealing with and finishing the report quickly. I think most of the stakeholder will agree with that. I do not object to us sitting more in June, on the contrary. As I said at the second meeting, the important thing is for us not to sit on June 24.
So the August 5 meeting could be cancelled. There is some confusion about the other meetings. Will those meetings be cancelled if the report is completed?
During the subcommittee's discussions, we talked about wanting to remain available in case of emergencies during the summer. I think it is important to be available should we need to meet. Mr. Lehoux and I mentioned that we would like to hold other meetings. We want to be productive, and we don't want to miss any meetings.
So I would opt for Ms. Rood's solution, as it would enable us to do everything at the same time. We would hold meetings until the end of June and would cancel the August 5 meeting. In September, we could meet twice a week. I think that would satisfy everyone.
That's right. We have July 8 and no July 10, right? Just hang on. Let me double-check that.
Ms. Rood, the reason we skipped July 10 is that it wouldn't give the analyst enough time to come up with the first version.
Does everybody have this? I'll forward it to you in a clean draft. I think that would work, and it will accommodate some of the concerns of different members.
Can we live with that?
I see no one raising their hand, so this is what we're going to go with. Again, if we have to, we'll change it. At least it secures our place with the whips to make sure we have logistics there so we can get those meetings on.
That is all I have. I don't know if there's anything else you want to talk about, but it's Friday evening, and we can call it a day.
I want to thank every one of you. We'll see you next week. Thanks.
The meeting is adjourned.