AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, April 27, 2001

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[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): Good morning, everyone.

Pursuant to Standing Order 108(2), we're looking at a briefing session this morning with the Farm Credit Corporation.

We'd like to welcome the witnesses to our meeting. We are reminded that in the next few days we'll be looking at a new bill dealing with the Farm Credit Corporation, Bill C-25, and of course we are on tap to review it. Today we will hear the report of the Farm Credit Corporation.

Mr. Ryan, I understand you will be the main presenter, and you might introduce the other members of the group. You have ten to fifteen minutes for a presentation, and hopefully we can proceed from there and have our questioning.

Mr. Ryan, the floor is yours.

Mr. John Ryan (President and Chief Executive Officer, Farm Credit Corporation): Thank you, Mr. Chairman, and good morning, committee members. Bonjour à tous.

I'm happy to have the opportunity to be here today to update you on Farm Credit's activities for the fiscal year ended March 31, 2001, as well as to give you an overview of what we're seeing as it relates to the economic challenges. With me this morning is Louise Neveu, who is executive vice-president and chief knowledge officer for the corporation, Jacques Lagacé, our national director of government relations, and Scott Grant, our portfolio officer, with responsibilities these days in new legislation.

I'd like to begin my presentation with a brief overview of the corporation itself and our mandate as we see it. We are a federal crown corporation, 100% owned by the federal government, with a complete focus on agriculture. We have something like 44,000 customers across this country, delivering our services through a network of 100 branches or field offices and some 900 employees.

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One of the strengths of the corporation is its employees. The fact is that the vast majority of them were born and raised on the farm, and they have a deep understanding of agriculture and a true passion to give back as much as possible to the agriculture. In fact, many of our employees actually continue farming on their own, in partnership with a family member or mom and dad.

In terms of FCC itself, I think it's fair to say we have a customer focus in everything we do. Our goal is really to build long-term relationships. The feedback from our customers is that they like the fact that, for the most part, they've been dealing with our account managers for ten years or more. That gives them a certain stability and comfort in that they understand the individual producer's business, and that certainly helps in building long-term relationships.

In the past I've been asked the question different times about why we have a federal crown corporation totally dedicated to agriculture. I'd like to respond to that by saying there are many reasons, but four in particular.

First, we were incorporated in 1959 to provide a consistent source of lending to the primary producers that they can rely on through all economic cycles.

Second, we are Canada's largest agriculture term lender. We act as a stabilizing force in the industry. I think that's important from the point of view of the considerable changes that are going on today in the financial services industry and their possible impacts on rural Canada.

Third, we do act as a catalyst in attracting other financial institutions to invest in agriculture.

Fourth, we do have a focus on agriculture, and we spend a lot of time in creating new products and services to meet the emerging needs of our producers and agribusiness operators. The fact of the matter is, several of our new product initiatives over the last few years have been copied by other financial institutions. We think that's very positive, because it's a benefit to agriculture.

Something some people are not aware of is the fact that, even though we are owned by the federal government, we do not rely on annual appropriations. We do not borrow our money from the consolidated revenue fund. That used to be the case, but it's not any more. Instead, we borrow our money on the open markets, and we generate sufficient profits to forecast or finance our growth on a go-forward basis. In short, the profits we do generate are reinvested back into agriculture, and we see that as a true investment.

If I look at it from a portfolio point of view and what's been happening within farm credit, you do have, within your packages, various charts showing that. But in summary, if you look at where we are today, we have some 44,000 customers at $6.8 billion. If you compare that to where we were in, say, 1995, we had some 24,000 customers then, and about a $3.5-billion portfolio. Therefore, it has basically doubled over the last six years.

In terms of new lending for the corporation, this past fiscal year ending March 31, 2001, we authorized $1.7 billion in new authorizations, which was a record for the corporation. And as I said earlier, we look at that $1.7 billion as true investment in agriculture.

If we look at the latest figures from Statistics Canada, going back to 1999, they indicate that total farm debt was something like $35.8 billion. That included both short-term—i.e., the operating credit—and long-term financing. Where does that put us in the perspective of our portfolio? It means we have about 17% of the total farm debt outstanding. If we look at it strictly on the basis of the long-term debt, we carry about 31% of the overall farm debt in terms of long-term mortgage financing.

This definitely means we are a major niche in the agricultural financing market. I would suggest that if the organization was not there, some of the gaps we see in agriculture today in terms of access to credit would be much more significant than we already see.

In terms of the sectoral overview, I think you'll see in your packages that we basically are supporting every sector within the overall agricultural sector. The chart will outline, though, that our main area of activity is focused on traditional agriculture, which is the cash crops, the dairy, and the beef operations.

I'd like to now share with you some of the things FCC has been doing in terms of developing new products and services for the farm community. We find some of our best new product ideas and suggestions come from our customers and the industry groups that we work with. For example, when we talked about the development of farming and what's needed there, we spent time with the Canadian Federation of Agriculture, we spent time with the Canadian Young Farmers Forum, and we spent time with the UPA. The message was clear and consistent from all of these, and it was that young and development farmers need access to more financing options.

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In response to that, in 1998 we introduced the AgriStart family of loans, which provide flexible payment options to help young farm families build successful farming operations. Lending volume in the past few years has been significant in that particular area, and we authorized in excess of 1,300 loans for $134 million since launching that new product.

In March of this year, just a couple of months ago, we entered into a partnership with seven different public and private sector organizations to help the farm families with life-cycle planning, from start-up operations right through to retirement. We've called this AgriSuccess. It's a joint initiative that offers seminars and online information to help producers in long-term planning issues. Through AgriSuccess, FCC is acting as a catalyst to increase the business planning services available throughout rural Canada. I think it's especially beneficial for the young and developing farmers, to help them in the early stages of their business planning, but it's also important to those who are at the later stages. We're looking at several factors associated with the whole intergenerational transfer of the farm.

I'll give you some examples of new products targeted to the needs of specific sectors, and I'll start with our Plant Now, Pay Later program. That came about as a result of the Ontario Fruit and Vegetable Growers' Association claim that they basically needed a new product that would help them upgrade and expand their orchards. The Plant Now, Pay Later program provides a loan with various payment options to help fruit producers maintain their cashflow until such time as they reach full production. Using this particular loan, FCC structures the terms of repayment to project a cashflow. Basically, it's recognizing that you plant now, you do the work, and it's an investment that takes a few years before you're going to get a return. That's when your terms of repayment would kick in.

Perhaps another good example of a sector-specific product is what we call Flexi-Hog. In actual fact, it came about as a result of a Brandon, Manitoba, producer saying to our staff that we need a particular loan that addresses the price downturns in the hog sector, when things go on the low side in terms of pricing. We introduced Flexi-Hog last spring, and the terms of that particular loan let producers decide when they want to have principal postponements. They can postpone for up to three years throughout the life of the loan, and that is really putting the power in the hands of the producer, versus having the complete power in the hands of the individual person or organization authorizing the loan.

This past year, many Quebec producers signed up for a provincial subsidy program to help them adapt their manure management facilities to meet current environmental standards. Farm Credit Corporation designed Enviro-Loan to help the producers make the upgrades and pay off the loan when they receive the subsidy. We're basically doing bridge financing there. If there are dollars still left owing after the subsidy is received, we basically extend the amortization period for an extended period of time, say five to seven years. Enviro-Loan is available across the country now, although not all provinces do have a subsidy program attached to it.

Mr. Chairman, if I could turn my attention now to the agribusiness side of things, or what some people refer to as the value-added side of things in agriculture, it is truly our belief that the future of farming is directly linked to the strength of farm-related businesses on both the input and the output sides of primary production. We've been lending to the small and medium-sized agribusinesses since 1996, so we have about five years experience under our belt there. At present, we have about a thousand farm-related businesses having a portfolio of a little over $400 million.

More and more, we think the line between the primary producer and the value-added is less defined and is becoming more and more grey. There's a greater integration as we move along, and the transition is happening within the agriculture industry. Essentially, though, our goal is to support the primary producer and the agribusiness operator. We don't think it's an either/or situation. We think it's a must that we do them both. I think agribusinesses do give producers more market opportunities for their products, and they also help in job creation and economic spinoffs in rural Canada.

Mr. Chairman, I've been speaking for about ten minutes now in relation to the role FCC has played in agriculture. I'd like to spend perhaps the next five minutes out of the total fifteen minutes to share with you some of the things we see from the economic side of things, as well as to touch very briefly on new legislation.

Before I present the results on the national arrears situation, I would truly like to emphasize that it is only one indicator of the economic health of the industry. It is a snapshot, but it may not be a current snapshot. It could very well be a lagging indicator. As well, we've seen from our customers' perspective that they have worked extremely hard to make sure their debt payments are being made, and we give them full credit for the dedication and support they are providing to ensure that accounts are kept current.

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If we look at our arrears on a national basis, year over year, we have not seen much change in the total numbers. For example, on March 31, 2000, we had something like $35.1 million in arrears. As of March 31, 2001, that increased ever so slightly to $35.7 million. We had approximately 2,600 customers in arrears a year ago this March, but this year it was 2,300, so there was a slight drop-off in terms of the number of customers.

If we look at it from a sectoral point of view, the problem still very much rests in the cash crops, and specifically grains and oilseeds, which I assume is no real surprise to you. But if we look at the numbers there, we had $22 million in arrears in the crop sector a year ago. At the end of March 2001, it was $21 million. If we go to Manitoba and Saskatchewan, where the cash crop is primarily grain, we had $9 million in arrears a year ago in March. Presently, or on March 31, 2001, $8 million was in arrears.

I think you can draw the conclusion that the problem clearly remains in the cash crops, or the cereal grains and oilseeds. We have about 40% of our overall portfolio in cash crops, but that represents about 60% of arrears when we look at that complete block of arrears of $35.7 million.

I said earlier that arrears are a lagging indicator. To give us a better appreciation of what's happening there, we also have been in contact with the farm debt mediation services that we work with on a regular basis and we've asked them what they are seeing. The figures they gave us indicate that the applications they've received over the past year have gone up slightly, year over year. Last year they received 1,369 applications. This year it was 1,393 applications, so they have seen a bit of an increase there. Quebec saw an increase largely as a result of the problems with the maple syrup industry. If we look at Saskatchewan, that's where they're seeing the largest number of applications, and it's almost exclusively in the grain sector.

If we look at it from the point of view of farm bankruptcies, we see that the total number of farm bankruptcy applications has actually declined year over year. A year ago, in 1999, there were 243, while there were 213 this past year. As a personal observation there, though, I would say I don't think that's a really good indicator, because our experience has been that, from a producer perspective, they basically sell off or work through the problems when they're in difficulty. They don't go through the formal steps of a formal bankruptcy itself.

Mr. Chairman and honourable members, I would like to clearly state that our intention here in presenting these figures is not to indicate all is well in the agriculture industry. There are some problems—in some cases, they're very severe problems—and we shouldn't underestimate them, even though our numbers year over year seem to be somewhat flat.

From our perspective as a federal crown corporation, we do make every effort to try to work with our customers when they're having problems because of market downturns or climatic disasters. Our approach is simple, but it's consistent. We work with individual clients when they're having a problem or are about to have a problem. We look to see how we can work through these difficulties with them and that, whatever problem is there, it's behind them and they can continue on.

A simple way of doing this is by sitting down with our customers on a one-on-one basis and working with them through their individual problems. I can give you a few examples of that. Last fall we sat down with the producers in southern Alberta, where they had some real problems because of drought. What could we do? We could lift the terms of repayment, or postpone the terms of repayment until better times. Last month, we sat down and spent time with the potato growers in P.E.I., because of the problems they were having there. Basically, we stated that we understood the problem was not created necessarily by them, and we asked them what we could do to help them overcome those particular problems.

In short, our goal is basically to react quickly to the unfolding challenges as they come forward, but to also work on a customer-by-customer basis to help farmers them overcome their particular problems.

Minister Vanclief recently received a letter from one of the B.C. cranberry producers, who basically thanked him for the support Farm Credit Corporation provided in a downturn in the cranberry sector. He actually maintained that FCC's actions in the face of the downturn helped to actually save that industry in the province of B.C., because we understood the cycles.

And perhaps to put things in perspective when we talk about loan postponements and postponement of payments, we did over 600 of those postponements last year.

Mr. Chairman, I'd like to conclude my presentation by making some very brief comments related to the new legislation that you made reference to a few minutes ago that changes the Farm Credit Corporation Act.

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As you know, amendments were tabled on April 5 and are expected to go to second reading very shortly. We are seeking those amendments to our act as part of our long-term commitment to continue to serve agriculture. As any producer will tell you, the marketplace has changed quite dramatically since the act of 1993, and I think the new amendments will help us serve current and future needs by increasing the range of services made available. The corporation's main focus, however, will remain very much on the primary producer.

I think the new legislation will put us in a better position to continue to support the growth of agriculture and to help producers in a variety of areas to succeed. It will also help in the overall promotion of investment in rural Canada.

I look forward to discussing those amendments with you in detail when they arrive here, and I thank you very much for your time and attention. I'm open to any particular questions you may have.

The Chair: Thank you, Mr. Ryan.

Howard, are you going to lead off?

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Yes, I guess so. And I hope MP Carol can ask a question at some point later on.

Welcome. It's nice to have you here.

I'd like to clarify one thing right off the bat. You're no longer considered a lender of last resort kind of thing, right? Is that true?

Mr. John Ryan: That's very clear. Our act of 1993 made it clear. We're no longer a lender of last resort. Indeed, you'll see it spelled right out in our act that we're to operate on a cost-recovery basis.

Mr. Howard Hilstrom: Okay. You get into loan agreements and all that, and you have these partnerships. I was interested in the partnerships. Let's say one partner is one of the local credit unions or whatever, a financial institution. Farm Credit doesn't guarantee that there would be no losses to that credit union on the loan. That is to say, you go in as equal partners, and each partner carries their own risk.

Mr. John Ryan: That's right. We both make our independent assessments as to whether we want to support that particular proposal. We come to our own conclusions, but at the same time if there are difficulties, they are on their own and we are on our own.

Mr. Howard Hilstrom: The reason for the partnership is that if the financial institution or one of the other partners feels they can't carry the whole thing themself, then you kind of—

Mr. John Ryan: That's clearly one reason.

Mr. Howard Hilstrom: Or you don't want to carry it all yourself?

Mr. John Ryan: It could be a combination of different reasons. Oftentimes what we find in partnerships and particularly, say, with the credit unions and the other financial institutions is that they may be interested in just providing the operating credit. They want somebody else to provide the term credit, so we don't do the operating credit at all. They do the operating part, and we do the term financing.

Mr. Howard Hilstrom: Okay.

Mr. John Ryan: Also, the proposal could be of such a large nature that they don't want to take the entire risk, or we may not want to take the entire risk. In that case we may want to share it.

Mr. Howard Hilstrom: Okay. That's good. You're assessing risk, and you're assessing the market.

Agriculture is your number one thing, I believe, and so is forestry to a certain extent. What is your FCC assessment of next year, 2002-03, for the grains and oilseeds in this country? Does it look better in the future, or is it going to be a continuation of the present pricing and all that? You must have made an assessment.

Mr. John Ryan: I guess our assessment goes more on an account-by-account basis. First of all, we look at it in terms of whether we are going to see major increases in our commodity prices. We don't have that forecast at this point. What we do, though, is look at it on a file-by-file basis and ask, given the debt load an individual producer is carrying and given the prices we see in the forecast, is it likely that producer is going to be able to carry on? We make our assessments based on that. We obviously rely on forecasts we receive from Agriculture Canada and other places to draw our conclusions when making our own forecasts.

Mr. Howard Hilstrom: Recently in Manitoba—and there may be other examples across the country—land went up for sale and nobody bid on it. Is that a common thing that's happening more now, or is that kind of an unusual thing? That was at Inglis, Manitoba, and it was in the papers. Is that a common thing or not?

Mr. John Ryan: The short answer to that is that I don't think it's a common thing. If we look at what we refer to as agri-land within the Farm Credit Corporation, over the course of the last two years we have had a number of leases that came up for expiry. We wanted to put the land back on the market for sale, and the demand actually exceeded what our expectations were.

Louise, you had direct responsibility for that. Perhaps you want to add something from your own perspective.

Ms. Louise Neveu (Executive Vice-President and Chief Knowledge Officer, Farm Credit Corporation): Mr. Hilstrom, we rarely see land that is not purchased.

Mr. Howard Hilstrom: You set minimum prices, though, do you?

Ms. Louise Neveu: We do set a price, yes.

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Mr. Howard Hilstrom: You set minimum prices. Now, is that minimum price related to how much you have outstanding on that, or is it set according to market price?

Ms. Louise Neveu: It's set according to market price.

Mr. Howard Hilstrom: You get that market price established through a formula set according to local sales, I suppose, or how do you establish that?

Ms. Louise Neveu: We have accredited appraisers in our organization, so they would actually do the market evaluation. Yes, similar sales would be considered.

Mr. Howard Hilstrom: That's good, because the problem we see with subsidies and a lot of other things is that the price or the rent of that land per acre gets somewhat jacked up over and above what it really should be. I just don't want FCC to be part of that.

Mr. John Ryan: How long have we been tracking land sales, Louise?

Ms. Louise Neveu: It depends on the province, but we have statistics that go back to the seventies in terms of what we've done on land prices. Even with rent, what we've done is to always offer our renters the possibility to come back and tell us if the market has shifted, in which case we will renegotiate.

Mr. Howard Hilstrom: Yes. I think this is public information, obviously—and we talked about it the other day there—but what was the FCC exposure on Isobord at Elie in Manitoba?

Mr. John Ryan: I don't know if it's public information or not. I believe it has been in the papers. As for what is outstanding, it's something like $12 million.

Mr. Howard Hilstrom: You say about $12 million?

Mr. John Ryan: Yes.

Mr. Howard Hilstrom: Okay. I notice that one-third of the arrears are in Manitoba and Saskatchewan, and I think that's an indicator of the economic situation there.

I'd just like to ask one or two quick questions here. I think I have a little more time. From a taxpayer point of view we're concerned with the FCC holding a lot of land. Does any of the wording of the act prevent future executives of FCC from deciding to actively hold and lease land for an extended period of time? Is there anything in the amendments or the act that will prevent people at the FCC decision-making level from holding land or whatever?

Mr. John Ryan: There's nothing in the act, but I think if you perhaps go back and look at the history of the corporation, we were required to hold the land for a six-year period. We made a conscious decision in the corporation not to continue to hold the land. We had 1.5 million acres of land under our administration at one point. That is now down to about 120,000 acres. Clearly our role is to get the land back into the hands of producers, and our first goal was to get it back in the hand of the producers who originally had the property. Clearly it would be a complete reversal of any thought process we have at this time.

Mr. Howard Hilstrom: Okay. My last question, then, would be...well, you can answer—

Ms. Louise Neveu: It was only provincial legislation. If you recall, that was only in Saskatchewan, that landholding thing.

Mr. Howard Hilstrom: Okay, then it was in Saskatchewan.

Ms. Louise Neveu: It was under farmland security—

Mr. Howard Hilstrom: My last question is this: if I were to propose an amendment to the act that would prevent FCC from becoming a long-term landholder and leaser and also an amendment that would require FCC to divest itself of acquired land within a specific period of time, would that be an advisable amendment to put in, to force you to divest yourself of land within a given period of time?

Mr. John Ryan: The difficulty I would see with that is that any time you put a specific time frame in place, it may not turn out to be the ideal time. It could be, but it may not be the ideal time to get maximum recovery on a particular land sale. That's where I would see the problems. You could be going against general market forces.

The Chair: Thank you, Howard.

[Translation]

Marcel, please proceed.

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

Let me say that the information that was given to us this morning and that I also had in advance is complete enough to allow a good understanding of how the Corporation works. I also had the opportunity in the past to work very closely with people from the Farm Credit Corporation in Quebec.

You talked about partnerships with banks, with credit unions and also, I believe, with investment enterprises in the agriculture sector.

Some hon. member: Yes.

Mr. Marcel Gagnon: Will you establish a partnership with Quebec's Office du crédit agricole, or will it be with either one or the other?

Ms. Louise Neveu: We rarely work in partnership with the Office, with the new organization, naturally. Within its partnership program, the Office works with financial institutions, either credit unions or banks, and not with the Corporation.

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Mr. Marcel Gagnon: However, I believe that it would not be completely out of the question.

Ms. Louise Neveu: Yes, we are excluded.

Mr. Marcel Gagnon: Really?

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: Okay.

Ms. Louise Neveu: We are not included.

Mr. Marcel Gagnon: Is the percentage of bad loans or arrears high at the present time? Is it high in the area of hog farming, for example? I have seen figures, but I don't know exactly... Is it more in the grain sector? In what area do you have the most?

Ms. Louise Neveu: One third of our arrears today are in the area of common field crops. We have had some in previous years in hog farming, but today, the percentage is very low in that sector, as well as in beef or dairy farming.

Mr. Marcel Gagnon: Prices have improved.

Ms. Louise Neveu: Exactly.

Mr. Marcel Gagnon: You also came to the help of producers in Quebec and Ontario following the ice storm. Did a great number of producers asked you for help?

Ms. Louise Neveu: I do not have the figures.

Mr. Marcel Gagnon: No?

Ms. Louise Neveu: I do not recall. A number of them certainly availed themselves of these special programs, but I do not have the figures.

Mr. Marcel Gagnon: I want to know, Mr. Chairman... This is not the right time to suggest amendments to the act. We will come back later on.

Thank you.

Ms. Louise Neveu: Thank you.

The Chair: Thank you.

Murray.

[English]

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks very much, Mr. Chairman. Lady and gentlemen, welcome this morning.

John, I was listening to some of the information your in your speech. Would I be right to say the original mandate for the Farm Credit Corporation was basically to be a higher risk lender than the banks, there to support the farmers?

Mr. John Ryan: There are two messages there. Yes, first and foremost we are there to support the farmers. Originally the corporation was established as a lender of last resort. This changed in 1993 with the change in the act.

Mr. Murray Calder: What's it now?

Mr. John Ryan: It is still there to support the primary production of the small to medium-sized agribusinesses, very clearly. We do take risks others might consider to be higher—not in all situations, but the risk is there. We have a good track record, though, of being able to establish the risk, because the people working within the corporation are very close to agriculture. They understand what the real risk is.

We look at ourselves versus the private sector. We are not there to maximize profits. For example, if you look at our return on equities within the corporation, we generate somewhere between 8% and 10% before tax on an annual basis.

Mr. Murray Calder: But I would be right to assume then that you would be there to take higher risk loans than the banks.

Mr. John Ryan: It boils down to individual officers deciding how much risk is acceptable.

On any particular file you may see both of us with the same view on the risk. From our perspective, we have a good appreciation of what degree of risk is acceptable. I don't want to position ourselves as a lender of last resort, because clearly we're not.

Mr. Murray Calder: John, you're giving me a political answer here, and politics happens to be my game. I'm asking you the question, is the FCC in there to take more risk than the banks or not?

Mr. John Ryan: That's one component of what we do.

When you look at the risk side of things, you'll find us clearly out there, coming out with new products and services to the agriculture community long in advance of others, and others will follow us.

Do you call this increased risk? Perhaps. But I don't want to put us all the way to the lender of last resort, because clearly we're not there.

Mr. Murray Calder: Okay.

The figures I took down out of your speech were, so far, $1.7 billion in new lending, a total of $35 billion right now, or 17% of all farm debt. Right?

Mr. John Ryan: Yes.

Mr. Murray Calder: This means, though, that there's somebody else out there—whether it's the banks, the credit unions, or whoever else—carrying 83% of the debt.

If you are a sort of lender of last resort, wouldn't you be higher than 17%?

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Mr. John Ryan: You have to separate the numbers.

Just for a point of clarification, we have 17% of the total debt of $35.8 billion, including operating credits, which we do not do. If you look at the straight long-term debt only, we have 31% of the marketplace, so others would have 69%, or 70% in round figures.

Mr. Murray Calder: Okay. It's still higher. They're carrying a higher percentage of farm debt load than you are, yet you're supposed to be the last resort.

Mr. John Ryan: Well, no, we're not supposed to be the last resort.

Mr. Murray Calder: No?

Mr. John Ryan: However, you have all the major financial institutions and all the credit unions combined doing 70% of the lending. We're doing 30% of the lending.

In actual fact, many will tell you that's a very high number. We can go in and on a provincial basis we could be as high as 55% or 60% of the term debt outstanding in the farm community.

Mr. Murray Calder: Okay. Then let's switch to arrears here. You said arrears have increased marginally, from $35.1 million to $35.7 million, but actually in fact your customers have decreased from 2,600 down to 2,300. Is that right?

Mr. John Ryan: Yes.

Mr. Murray Calder: Okay. Actually, within crops, your loans have decreased from $23 million to $21 million.

Mr. John Ryan: The arrears.

Mr. Murray Calder: The arrears, yes.

When I listen to those figures, I very simply make the assumption—and tell me if I'm wrong—you guys raised the bar. The reason we're not running into loan problems any more is the fact that these guys don't qualify.

Mr. John Ryan: I would not agree with you on that, sir, because this is not the feedback I'm getting from our customers across the country.

Mr. Murray Calder: It's some of the feedback I am getting, because when we had FCC in front of the standing committee here a few weeks back, I asked the same line of questions I'm asking right now, and quite frankly it surprised me, because I know what's happening in the grains and oilseeds sector, and defaults on loans were actually going down. I thought, that doesn't make sense.

I went back and talked to my people, and they said of course it makes sense: these guys raised the bar; we no longer qualify. If I'm a grains and oilseed grower and I want to go out and float a mortgage with FCC to buy some land, I can't pencil it. FCC says it doesn't work. So no loan, no problem.

Mr. John Ryan: Perhaps I'll come back on this particular point. If indeed the customers themselves say they can't pencil it, and let you pay back the debt, does it make good sense to give those customers more debt?

This isn't raising the bar. It's looking at it on a file-by-file basis and asking, is it reasonable that we can make a loan to this customer if it looks like it can't be repaid? More debt at times is not the answer, looking at it on a customer-by-customer basis.

I can very comfortably sit here and state that we as an organization didn't say that because the grains and oilseeds farmers are having problems we need to raise the bar. I can very comfortably say to you that we look at it and say let's assess it on a file-by-file basis. And if we think it can cashflow, we'll be there with the support; if not, we wouldn't be doing them any favours to okay the loan.

Mr. Murray Calder: In essence, then what you're telling me is.... What really is the difference between FCC and the bank?

Mr. John Ryan: There are several differences, but one boils down to us, to our ability to assess risk and the likelihood of a farmer being successful. We can do a very good job on this, because the people we have on the front line truly know agriculture. They're not generalists; they're specialists in agriculture.

Second, when there are problems in the agriculture industry, we are the first at the table to say let's see what we can actually be doing to help overcome those problems. When we put our letters out to some of those customers across the country who were having problems, they said “Oh, isn't that interesting—I didn't receive a letter from my bank to say let's sit and talk about what we can do, but I received some from Farm Credit”. In actual fact, some non-customers of Farm Credit said “I didn't get a letter from my bank, so maybe it's time for me to go over and talk to Farm Credit”. Those are a couple of areas.

The third area is the whole area of profit maximization I stated earlier. We do a return of 8% to 10% before tax. For the banks it's profit maximization. It's 16% to 22% after tax, and every dollar we raise goes back into agriculture.

Mr. Murray Calder: Well, I'll tell you, John, I'm not a big supporter of the banks either, but I will finish off with this.

This year in our farming operation we're putting up another poultry barn. I did all the paperwork last year. Quite frankly, the financing for my building right now is through the Royal Bank, because they had a more flexible mortgage structure I could take and work with than FCC did.

• 0945

The Chair: Thanks, Murray.

We'll go now to Dick.

Mr. Dick Proctor (Palliser, NDP): I think I should say “Flexi-Chick” as well as Flexi-Hog or something here, Murray.

Mr. Ryan, I want to stay with the line of questioning Murray began, but perhaps from a different perspective. I noticed in the notes provided that the number of customers you're dealing with has increased substantially. I think it was 26,000 to 44,000 over the last five years, which suggests you're doing three possible scenarios and a wonderful job of marketing. The banks and credit unions are getting out of the business, reducing their visibility in it, or have a combination of the two. To what do you attribute this sharp growth?

Mr. John Ryan: As we are a federal crown corporation, one of the things we made a conscious decision to do is raise the visibility of the corporation. We need to let the producers in this country and the agribusiness operators know what we have to offer.

Very clearly, to your first point, yes, we have stepped up marketing the corporation. I think we have an organization where people should know what we have to offer.

I think as it relates to the other financial institutions, it very much depends across the country on how aggressive or non-aggressive they are. It is a combination of different factors. I don't underestimate at all that we made a very conscious decision to raise the overall visibility of the corporation.

Mr. Dick Proctor: Certainly in western Canada the reduction in small branches in small communities I am sure would have an impact on your business.

Mr. John Ryan: Louise, do you want to comment on what you have seen across the country?

Ms. Louise Neveu: You have the reduction in some branches, but at the same time you also have access to different kinds of credit as well. You have the Internet kind of banking available, which in remote areas is one that is very nice to have, especially if it's for operating credit or something that is fairly fast.

The other thing I think we have to remember is we've had eight very good years in agriculture. There are some areas that have not been quite as good. Overall there haven't been any major disasters, such as in the late eighties when everything was affected at the same time. We have some sectors that are still doing very well.

Mr. Dick Proctor: When you're dealing with clients, we're hearing a lot about older farmers, people wanting to get off the land. What are you seeing in terms of intergenerational transfers and people needing some help to bring the next generation into the industry?

Mr. John Ryan: Clearly, it's a major issue. In fact one of our studies, actually a couple of years old now, identified it as a number one issue facing farmers, particularly those nearing retirement.

We think the best estimates right now suggest 125,000 farmers, who would have about $50 billion in assets, are going to retire over the next decade.

There was a study done here in Ontario by OMAFRA and the University of Guelph that said less than 5% of the farmers have a succession plan. I think it's a major issue. It's an area from the Farm Credit's perspective. I made reference to the partnership, the seven partners, we just launched a few months ago that we want to address in a more complete way as we move forward in the legislation.

Mr. Dick Proctor: Okay.

I have one other area before Rick takes over here. The Minister of Agriculture made reference in the recent past that farmers perhaps need to have an exit program to make a transition to something else. What is Farm Credit Corporation's view? Is there anything you can do to help in that area?

Mr. John Ryan: Certainly we've started with the introduction of AgriStart, a new program we launched in 1998. As I indicated earlier in my speaking notes, it has had considerable take-up.

As we go forward as a corporation, we are clearly looking at what more we can do. If the government of the day decides from a policy point of view there is to be a program specifically for the transition side of things and is looking for FCC to participate, then we would be quite happy to come to the table and say what role we could play there.

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

The Chair: Thanks, Dick.

Paul, do you have anything?

Mr. Paul Steckle (Huron—Bruce, Lib.): I want to thank you for coming before us again this morning.

With the anticipated changes in the Farm Credit Canada Corporation, as it's going to be known, what kind of reaction are you getting from the banking and lending institutions in terms of your expansion into other lending markets?

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Mr. John Ryan: We haven't had recent feedback. Prior to actually putting the new legislation forward in a bill format, we did extensive consultations across the country, including discussions with the chartered banks.

The feedback from the chartered banks at the time—this goes back just about a year ago now—was that they don't really have a big problem with what we're proposing on a go-forward basis. They'd rather look at where we are today, and in fact they would like to have us back as a lender of last resort.

So I would fully expect that at the end of the day the banks are not going to come out and say yes, it's the best thing ever, just continue to do the expansion. They did not have a problem, for example—in fact were very supportive—as to what we want to do on the equity capital side. That was more the traditional lending asking us to move back to lender as a last resort, and indicating that they liked, by the way, some of our great ideas on complementary service to business planning services. So it was pick and choose, but I'd be surprised if they'd come forward to say they fully support us in all areas.

Mr. Paul Steckle: I think that's to be expected.

What kind of cooperation do you have with banks when you take, for instance, the mortgage capital and take that side of it? Of course the operational side becomes something the banks have to address.

Do you find a cooperative spirit there? Obviously it's always nice to have the land, and let the risk go to someone else in terms of the operations. How do you rationalize that? I'm asking the kinds of questions that someone would have to think may result in problems for the two agencies.

Mr. John Ryan: I think from an overall perspective the relationships are pretty good. In fact, the matter is that when we're working closely with an individual financial institution in a local area, it can be extremely good. They're quite comfortable with taking the operating credit and the security that goes with that, and having FCC do the long-term financing.

You will find in other areas that if the relationship hasn't been good for whatever reason, there's a strain there. But generally speaking, when it comes right down to it, they do the operating and we do the term. The security is separated and we each are responsible for our own areas.

I don't know what your view has been, Louise, because you have been very close to this over the years.

Ms. Louise Neveu: It really is very dependent on the local people. Those are personal relationships that are usually established between an account manager with a financial institution and our staff. The more they can work together, the more they will share these accounts. In some areas you'll find very, very strong competitive spirit and less cooperation.

Mr. Paul Steckle: When you go to your graph charts—and I missed the early part of the meeting, as I had to attend another meeting—dairy's highly capitalized. I represent a very high percentage of agricultural communities in the area I represent. There are far more hog barns going up than dairy barns. Now, that's not true everywhere in Canada, but it certainly is true in my area.

I look at the number of customers you have. Would it be fair to say that you're more readily willing to take on the mortgages for dairy farmers than you are for hog farmers? The numbers would indicate that. The dollars would indicate that.

Again, because of recent experience in the hog business of about two years ago, we know what can happen there. Yet we look at the debt carried and not paid—arrears. There's not a lot of difference between the hog industry and the dairy industry. I know there are more customers. There are more outstanding mortgages.

Mr. John Ryan: I'll ask Louise, because she's been closer to it from an operations point of view over the years, but my assessment is that it's very much dependent on where the opportunities were. I think there has been over the years and continues to be strong demand for quota in the dairy industry. As a result, that has meant continued expansion. With that continued expansion, we end up getting more and more requests for financing. Have we taken a preference in saying we want more dairy versus hogs? I don't believe so.

Mr. Paul Steckle: Would a big factor be that where hog farmers are into contractual relationships, these relationships for the most part are usually good for about five years? Mortgages could be 20, 25, 30 years or whatever. In addressing your ability to take on that debt, would that be something you would highly consider?

Mr. John Ryan: It would certainly be a factor. You might want to talk about some of the other factors.

Ms. Louise Neveu: A very popular factor. But I think you realize that the hog sector in itself has had ebbs and flows far more in cycles over the past twenty years than it has in the past five. The past five have had more stability with many of the contractual arrangements, so that there have been far fewer in-and-outers in the hog industry than there were prior to that.

• 0955

Our portfolio is actually increasing in the hog sector versus the dairy, for example, although we have been in the dairy sector since 1959.

The Chair: Thanks, Paul. I'll come back to you later, but I'm going to go to Rick now.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

Just as a comment, there's lots of development in the hog industry right now, certainly more so than in the poultry industry. I would suspect it's because of the open market system in hogs, but we won't get into that.

You brought in the poultry—you always do: in the year ending March 31, 2001, $1.7 billion. Just for clarification, you said that's a record, $1.7 billion. Is that new lending that's gone out? Can you just clarify that for me?

Mr. John Ryan: That is new lending gone out. If you look at our total portfolio of $6.8 billion, it was $1.7 billion in new business last year.

Mr. Rick Borotsik: Okay. We've had some difficulties in the farm economy, as you're well aware. When you rewrite a loan—when you refinance, if you will—you pay out the old loan and then you bring in the new loan. Those new moneys would be reflected in that $1.7 billion. Do you have any handle on how much has been rewritten in that? The reason I ask that question is we hear about your arrears and they're very good. You do some good stuff. You do expansions, rewriting, refinancing. How much of that $1.7 billion is a record in a year, which by the way should not be a record year, in my opinion? How much of that is rewriting and refinancing?

Mr. John Ryan: Louise will look at the precise numbers, but I don't think it's as high as $200 million. I'd say it's more like maybe $100 million or $150 million.

Mr. Rick Borotsik: Of the $1.7 billion.

Mr. John Ryan: Of the $1.7 billion.

Mr. Rick Borotsik: Is that unusually high, or is that normal?

Mr. John Ryan: Actually, if I look at the last couple of years, it's not that significant in terms of refinancing.

Mr. Rick Borotsik: Then you confuse the hell out of me, because we have really low arrears and that's where Murray was coming from. We'll chat about this perhaps later, because I have two other questions.

First of all, you're a crown corporation, correct?

Mr. John Ryan: Yes.

Mr. Rick Borotsik: Are you subject to the Access to Information Act?

Mr. John Ryan: Yes.

Mr. Rick Borotsik: You're subject to the Access to Information Act in a very competitive business. You compete with banks, credit unions, and other financial institutions. Do you find having to be subject to the Access to Information Act a detriment to your ability to compete in that industry?

Mr. John Ryan: Well, I think the Access to Information Act does give us the right to protect very specific information—that's client-privileged information itself. There is an added burden—

Mr. Rick Borotsik: I don't have much time, and the chairman is not very flexible. Does it allow you not to compete in a very competitive industry?

Mr. John Ryan: I would say no.

Mr. Rick Borotsik: You would say no. The short answer is no, you can't compete. Thank you very much. And there's a reason for that line of questioning, because I just put a thing with respect to other crown corporations.

You have in some cases 55% of the term lending in some provinces.

Mr. John Ryan: Yes.

Mr. Rick Borotsik: By the way, I've worked well with your organization, and many people in my area certainly use you—maybe not to that extent, but close to it. Is the reason why you're at that level of term that the banks are perhaps getting out of the farm lending on term? I know they've taken over the operating, but are you finding that the banks are getting out of the term mortgage lending business?

Mr. John Ryan: I think it would be a stretch to say they're getting out of the term lending.

Mr. Rick Borotsik: What are they doing then?

Mr. John Ryan: You almost have to look at it by institution and by area to draw that conclusion. We find in some areas the banks are very aggressive.

Mr. Rick Borotsik: That is people, then, is it? That's the individual people in that area?

Mr. John Ryan: I think it's individual people and what appetite they have for the agriculture industry today.

Mr. Rick Borotsik: One very quick question. There's a program out called the Farm Consultation Service, or something of that nature. It's administered out of Regina. Is that a part of what you have to do at all?

Mr. John Ryan: Mediation.

Mr. Rick Borotsik: No, not the mediation. There's a consultation service that goes....

Mr. John Ryan: It's Agriculture Canada, isn't it?

Mr. Rick Borotsik: It is Agriculture Canada. Do you work with them at all? It's an excellent service where for $100 a farmer can go out and get a financial snapshot of where he is right now. You talk to yourself rather than going into bankruptcy. They sell land and they do a whole bunch of neat manoeuvring. How closely do you work with that organization? Because I'm a fan of it. I think there should be more of that educational and marketing and managing process than there is now.

Ms. Louise Neveu: We would refer clients to them.

Mr. Rick Borotsik: After they're referred, do you look at what comes back?

Ms. Louise Neveu: It would depend on the circumstance. If the person is already a client and is seeking additional advice—that would be independent third party—and the person wanted to come back to us, absolutely.

Mr. Rick Borotsik: Okay. Thank you.

Do I have more time?

The Chair: You have another 50 seconds.

Mr. Rick Borotsik: Do I really? Holy mackerel. The chairman is very flexible.

Then let's expand on that a little bit. I'll let you expand on that consultative service that's there. You say that you will put your clients in touch with them. They do the whole business plan. They come back and say this customer should be doing these things. Now, the customer doesn't necessarily always want to do those things.

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Would you then see that information before you as to what the recommendations were, and try to assist the customer to go in that direction? Because a lot of the customers who go through this don't take it to the next stage, unfortunately. Is that part of the process of what you should be looking at for future lending decisions that are going forward?

Mr. John Ryan: It very much depends on whether they want to share the information.

Obviously if they're at farm consultation, we'll want to see what's been put up before them and try to say let's work with this and see what we can do to be part of it. But in not all situations can they be honest and say they will want to put everything on the table.

Mr. Rick Borotsik: Mr. Ryan, you said you're better than the banks in being able to deal with agriculture. I agree with that. I think you're more focused on agriculture. The bank, if you have 50% equity, will give you as much money as you want, which is not necessarily the right thing to do.

Should you not be looking more at this kind of consultation service with all of your customers, perhaps?

Mr. John Ryan: I fully agree. I think when we get a chance to talk about new legislation, you'll see one key component is what we can do on a future basis on business planning services.

Mr. Rick Borotsik: That's what I was referring to, and Bill C-25 doesn't speak to that but maybe it should.

Mr. John Ryan: It is there, but it's perhaps not as clear as it could be from the the wording perspective.

Mr. Rick Borotsik: Thank you.

The Chair: Thanks, Rick.

Carol.

Ms. Carol Skelton (Saskatoon—Rosetown—Biggar, Canadian Alliance): First of all, I want to say that I am from Saskatchewan, and I would like to know how much of that 31% long-term debt sits in the province of Saskatchewan.

Mr. John Ryan: Just bear with us a minute. I don't have the numbers right off the top of my head.

Ms. Carol Skelton: While Louise is looking up that, I have another question for you.

You mentioned that you talk about problems with producers when they are having problems. Have you sat down with the Saskatchewan elk producers or any of the deer farmers, anything like that? When was that meeting?

Ms. Louise Neveu: When difficulties arose in the industry, we contacted all of our customers directly and invited them to come and discuss their issues with us. We do it on a one-on-one basis. We're always in touch with the association in terms of if they can let us know of anything that's coming up, or if they'd like us to speak at some meetings. But in most instances it's on a one-on-one basis.

Ms. Carol Skelton: There are over 400 elk producers in the province of Saskatchewan. They're going through very difficult times. There are a lot of deer farmers. I haven't heard of the Farm Credit Corporation meeting with them. So I wanted to know about that.

One question I would like to ask you is how do you set the price, and I want to know exactly? How do you set the price for land when you're selling it? Is it just on an overall basis of farmers coming and approaching you?

Ms. Louise Neveu: No. Our real estate appraisers are agricultural rural appraisers, so they have to go according to the criteria of their association in terms of how they establish real estate prices.

Ms. Carol Skelton: Could you tell me right now what the going price of land is in Saskatchewan?

Ms. Louise Neveu: Give or a take a few dollars?

Ms. Carol Skelton: Yes, roughly.

Ms. Louise Neveu: It's $275.

Ms. Carol Skelton: So it's $275 an acre.

Ms. Louise Neveu: That would be an average for the whole province.

Ms. Carol Skelton: There was some land that changed hands in our area that sold from $900 to $650 an acre. That is way above the average. It was land for which the price was bumped up because of your organization. The community feels that.

It's hard when we're having those kinds of problems. It is going to put the price of all the other land in that area up. We have farmers walking away from land.

Ms. Louise Neveu: Was that in an instance when we were selling the land, so the bid came in that high?

Ms. Carol Skelton: Yes. The bids were that high.

Mr. John Ryan: One point I'd make, honourable member, in terms of whether the corporation is trying to set land prices by being the leader in the marketplace, is no, it is not. The fact of the matter is that when all these leases were coming up from an expiry point of view, we wanted to have the property returned to the former owners or others. We were very conscious of not having too much on the market at any one point in time.

Your case may be very valid in that increased the value in a certain area. I'm not familiar with that individual example. But that's not our goal.

Ms. Carol Skelton: Is it a policy of the people in your offices if a bid comes in that they negotiate with bidders on the price of land? Or is it the top bid that's always taken?

Ms. Louise Neveu: It would normally be the top bid—normally.

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Ms. Carol Skelton: In the new bill we're talking about how you could loan to farm machinery dealerships, that kind of farm business. If the Saskatchewan Wheat Pool came to you for an injection of cash, is there anything in the legislation that would prevent the Farm Credit Corporation from becoming a major lender to the Saskatchewan Wheat Pool?

Mr. John Ryan: It is interesting that this question has come up three or four times now with different people we met in the last few days.

The first thing I'll say is that the Saskatchewan Wheat Pool itself is an organization that is not a lender to or borrower from the Farm Credit Corporation. There is not something specifically in the act that would restrict us from providing that financing, but that's not, clearly, where the corporation is going. Our focus is small and medium-sized agribusinesses. We look at the equity base that we have in the corporation. We look at our ability to take a major hit when any large organization doesn't work as well as it was supposed to. So our focus is not to be there. We have a limit that's set by our board of directors, a maximum of $20 million.

Ms. Carol Skelton: We talked about there being 2,300 farmers in arrears in Canada. Last year you had 2,600. Does that mean 300 of those producers have given up and walked away from the land?

Mr. John Ryan: Not necessarily, because what happens in some of those situations is they are able to resolve whatever difficulty they have experienced and they're back paying on a regular basis. The fact is that when we did a number of postponements for various reasons we've gone back and checked at a later date and asked how they are doing now that we postponed the payments for a year, and they were back making their payments.

Ms. Carol Skelton: Do you have numbers on how many of those farmers walked away and how many of them postponed payment?

Mr. John Ryan: I don't have them off the top of my head. I can tell you the number of postponements we did last year in relation to the year before, if that is of any benefit. But how many have actually walked away I don't know.

Ms. Carol Skelton: I'd like to know that. As a mother who had two sons leave the farm, and as a farm wife, this is of great interest to me and I'd like to know that. My husband and I are looking at leaving the land. Basically it's time for us to retire. I don't know why I came to Ottawa.... Anyway, I'd really like to know that number. How many people have walked away?

Mr. John Ryan: One thing we have to keep in mind, which may be difficult in a reconciliation, is the 2,600 from last year may not be the same 2,300 this year. There are some people who come on, there are some people who leave. Our arrears list is such that it is not a constant set of numbers. We can work to see what we can do there, but off the top of my head, that's not something we track.

Ms. Carol Skelton: I have one last question. Is it true that your collection department has a quota?

Mr. John Ryan: Does it have a quota? No. We try to manage our arrears, but in terms of everybody having a quota, no.

Ms. Carol Skelton: Thank you.

The Chair: For another round now, Larry, do you have some questions?

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair.

I want to thank the witnesses for being here. Perhaps we will see them again soon on Bill C-25. It's public knowledge today that it's on the order paper for the near future.

Just for the record, I have a question about Sask Pool or whoever. In terms of the Farm Credit Corporation lending dollars, we see a lot more movement possibly back to the cooperative movement in many facets of agriculture and agrifood. I think there are some real areas there we can encourage. Does the Farm Credit Corporation lend to cooperatives? I know that's a general question, but I want to give you an opportunity to respond.

Mr. John Ryan: Yes, very much so. The fact of the matter is we have a number of loans outstanding to co-ops today. In actual fact, we see it as a growth area on a go-forward basis.

Mr. Larry McCormick: I'm glad you have that on the record.

To get back to the grains and oilseeds, we certainly have many challenges. It's the first time in recorded history that there's been a bumper crop on all continents five years in a row. We don't wish anyone any ill deeds, but these people are struggling.

We talked about Flexi-Hogs, and just a few moments ago you mentioned how you did work out arrangements with producers in the west that would include grains and oilseeds. I wonder whether there has been or can be any more of a formal arrangement—I don't know whether it would have to be formal or not—for the grains and oilseeds, such as giving the producers an opportunity to not pay interest for a year or two. Of course we don't necessarily see the light at the end of the tunnel, but there may be some glimmers there, Mr. Ryan.

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Mr. John Ryan: At this time, as a corporation, we have not looked at going that particular route. We're looking at the corporation from a cost-recovery perspective. If we were to say, okay, we'll provide a forgiveness of interest for a period of a year or otherwise, that would clearly affect our ability in cost recovery. I think it would boil down more to a policy decision from government, rather than something Farm Credit could be looking at, because there'd be a certain number of customers who would say if we provide a break to another group in the sector, why not them?

Mr. Larry McCormick: Of course it's not always the same producers, the 2,300 or 2,600, whatever. But some of those have been refinanced. You mentioned that you had worked well with many farmers, and I know you do, but when you worked with them, with that part of the interest, would that be part of working with them or not?

Ms. Louise Neveu: In respect to refinancing?

Mr. Larry McCormick: In respect to the fact that they haven't got the money, the cash, to look after their obligations.

Ms. Louise Neveu: We have postponed both interest and principle on occasion, when that appears to be the thing required, because the crop wasn't there or there was some particular reason that there was absolutely no cashflow. But the business plan is there to ensure that this business is going to continue. We have, in some instances, postponed payments.

Mr. Larry McCormick: Very good. In southwest Manitoba and southeast Saskatchewan, where they had the flood, it was always the story that water wasn't moving on top of the ground. We're glad to see that probably won't be the situation so much, but were you able to help any at that time? Other authorities were not able to.

Mr. John Ryan: I'd say very much so. We did get out and we talked to the producers. We made a number of postponements. In fact, we went back a year later, after the postponements were finished, and they started to resume payments. We asked how many were actually in the position to start making payments. The vast majority—I think it was somewhere around 75% to 80%—were back making their payments. So it did make good business sense to make the postponement when they were having the trouble.

Mr. Larry McCormick: I certainly didn't know the answer that was coming, and I am impressed with what you've done in that area.

I come back to the AgriStart scheme. It was in the great riding of Hastings—Frontenac—Lennox and Addington, which I have the honour of representing, where the minister made the announcement, at the International Plowing Match in Frontenac County. It looks like a good advancement—1,300 loans, $34 million. I'm wondering approximately what would be the lowest amount, what would be the highest amount? What would be the average size of loan, approximately?

Mr. John Ryan: In the AgriStart it bounces around, because there are three components. There's the one-two-three grow loan, a payday loan, and the family farm loan itself. I think you could range anywhere from a low of $20,000—I'm talking off the top of my head—all the way to $200,000, $300,000, $400,000. On average though, our loan size is about $115,000.

Mr. Larry McCormick: So $115,000 average—I'm really thankful for the program—looks like—

Mr. John Ryan: That's $115,000 overall, sir, and we'll give you the details—

Mr. Larry McCormick: With the family farm program, there definitely are needs across the country as we try to encourage our young farmers. We're going to need them very soon, so I think we might want to look at any way we can encourage you to expand that.

Thank you very much, Mr. Chair.

The Chair: Mr. Gagnon.

[Translation]

Mr. Marcel Gagnon: What is the maximum percentage of the farm value that you can borrow? Do you lend up to 55%?

Ms. Louise Neveu: We lend up to 75% and, in some circumstances, we even lend up to 80%. In terms of our AgriStart Program, whose goal is to help up-and-coming young farmers, we can even go up to 90%.

Mr. Marcel Gagnon: Up to 90%. In your assessment of the farm, do you take into account the value of production quotas?

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: So you can now borrow on the value of a production quota.

Ms. Louise Neveu: Yes, we do lend on the value of quotas.

• 1015

Mr. Marcel Gagnon: In the case of very large farms that we have in my area, and certainly elsewhere as well, we see more and more companies being constituted. It is difficult for a single individual to buy a 3-, 4- or 5-million dollar farm. So there are more and more companies. Are these people who are coming together to create companies in order to buy a farm able to borrow easily?

Ms. Louise Neveu: There is no problem whatsoever. These people are treated the same way as an individual. Often, they are family partners. That would be a proposal being made in the business plan by the three business people or the three shareholders, depending on the corporate structure.

Mr. Marcel Gagnon: With regard to short-term lending, it is one thing to have 5,000 hogs in the barn, but you also have to bring them to the market. Do you do short term lending? This is the part that is being left to the private sector, to banks or credit unions.

Ms. Louise Neveu: Exactly.

Mr. Marcel Gagnon: It is a sort of cooperation.

If you lend up to 75% or even 80% of the value of the farm, that means that the young farmer who is starting up must still have a significant amount of cash.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: Nowadays, farms are enormously valuable. The AgriStart Program does not deal with this aspect.

Ms. Louise Neveu: No.

Mr. Marcel Gagnon: The AgriStart Program is for new developments.

Ms. Louise Neveu: Exactly. We offer loans only. There is no subsidy. At this time, the corporation cannot float shares. So it is simply based on a loan that must be reimbursed.

Mr. Marcel Gagnon: So the young farmer who did not have the benefit of having his father on the farm before him or of having an inheritance representing about 20% of the value of the farm that he wants to buy has no opportunity? Are there any opportunities for these young people right now? I'm not talking necessarily about your organization, but can these young people borrow money somewhere?

Ms. Louise Neveu: The Office offers lower interest rates to young people who are starting up.

Mr. Marcel Gagnon: For the first few years.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: Which is not being done in your organization.

Ms. Louise Neveu: No.

Mr. Marcel Gagnon: Are you considering doing it?

Ms. Louise Neveu: Not at this point.

Mr. Marcel Gagnon: That is the big problem, at least in Quebec. Farms are getting bigger and bigger and quotas are worth more and more. In my area, there are a number of farms that are worth 3 or 4 million dollars. So even if they come together within a company, young people must have a certain amount of capital to get into farming.

You are not considering either offering short-term lending, are you? It is not a possibility.

Ms. Louise Neveu: Let us say that it could be possible, but we have always indicated that we do not really have the necessary expertise to get into that area.

Mr. Marcel Gagnon: You prefer to work in cooperation with the banks.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: Thank you.

[English]

The Chair: Thank you, Marcel.

To follow his line there, when the minister was here, he talked about approximately 300,000 farmers across Canada. I was rather shocked this morning when you alluded to 125,000 farms that will be having retiring farmers in the next, did you say five years?

Mr. John Ryan: Ten years.

The Chair: Ten years. Following Marcel's questioning, it is a very serious situation we're faced with in the farm community, with more than one-third of our farmers in that age group. It is clarified, and I hope in your work you'll take that into consideration.

Now we'll go to Dick.

Mr. Dick Proctor: Yes, Mr. Chairman, my question's been answered.

The Chair: Your question's been answered.

Rick.

Mr. Rick Borotsik: I have one very brief question to do with application fees. Your organization charges an application fee on a sliding scale, as I understand it, when people come to you and apply for a term mortgage, as you've mentioned. Are there application fees in other institutions? Do they also charge application fees? And are you looking at adjusting those in any way, shape, or form? There's a sliding scale, I know that. Is it used as a deterrent with some people who might apply for your loans, because I understand that they're non-refundable application fees? So are they a deterrent? Are you looking at changing the application fees in any way, shape, or form?

• 1020

Ms. Louise Neveu: We review our application fees on a fairly regular basis. We're not out of the market. In many instances we would be under what is being charged by other financial institutions. We would never use it as a deterrent, but what you may hear is that in many instances we will do a fair amount of workup with a potential borrower. They're just talking about their business plan, and they'll come and vet it with our staff.

When it gets to a point that it's starting to take one or two days of work to go through a business plan with an individual, we will normally ask for a non-refundable fee. It may not be the total application fee.

Mr. Rick Borotsik: Are you saying there is a period of time there where there's no cost associated with it, where you start—

Ms. Louise Neveu: Absolutely. When someone comes in and talks to us, absolutely.

Mr. Rick Borotsik: When do you make that final decision as to whether the meter is running or not?

Ms. Louise Neveu: It would be very much dependent on the individual account manager. In some instances we have had the experience where a borrower would actually get the free service from us and then bring the plan to another financial institution. So the work would have been all done. In some of those cases, obviously, we've had all the costs that went along with preparing that loan.

Mr. Rick Borotsik: So basically, if an account manager didn't want to work with a particular client, he could make it very difficult using the application fee on the client.

Ms. Louise Neveu: I would consider that very exceptional.

Mr. Rick Borotsik: Okay.

Ms. Louise Neveu: We get—

Mr. Rick Borotsik: It's judgmental, obviously.

Ms. Louise Neveu: It's judgmental, yes.

Mr. Rick Borotsik: Do you ever get complaints on that?

Ms. Louise Neveu: I've never had a complaint on that.

Mr. Rick Borotsik: I have. That's why I mentioned it. Thank you.

Mr. John Ryan: Perhaps, Mr. Chairman, I can respond to an earlier question you had on the refinancing side of things. I checked the file and records and up to the end of January, there was something like $97 million.

Mr. Rick Borotsik: So $97 million out of the $1.7 million.

Mr. John Ryan: Yes.

Mr. Rick Borotsik: Okay, that's low.

Mr. John Ryan: Sorry, at the end of January, it was probably $110 million, or in that range.

Mr. Rick Borotsik: Okay, so you had a record year last year, $1.7 billion that went into long-term mortgages. Of that, only $100 million was refinancing. We are told continually that there are serious difficulties in the agriculture industry. There are, by the way. There are a lot of people out there suffering a whole bunch. How is it that you're having lower arrears, more money lent out? Is it going to better-financed individuals and corporations buying this land, is that what it's coming to?

Mr. John Ryan: I think we're seeing growth in pretty well all areas. I mean, we have to look at what's going on in the poultry industry—to get back to your point earlier—and the hog industry, the beef industry, and the dairy industry. They're all good, solid industries, and in many cases they're in an expansion mode.

Mr. Rick Borotsik: That's a good point. I get hung up on crops. Thanks.

The Chair: Thanks, Rick.

You used the term “postponements”. Is that different from arrears?

Mr. John Ryan: Yes.

Ms. Louise Neveu: Yes.

The Chair: It's not clouding this issue, is it, in terms of people in difficulty? How many postponements did you have, for example, last year?

Mr. John Ryan: Last year we did something like 600 postponements. Generally speaking, what that means is looking at when the customer's payments are due and saying, okay, are you going to be in a position to be able to make those payments? If you're not in a position, let's lift the requirement to make those payments and put them to the end of the term.

The Chair: Thank you.

Paul, you had a....

Mr. Paul Steckle: Yes. What is the longest-term mortgage that you can offer a farming operation?

Mr. John Ryan: Our maximum is 29 years.

Mr. Paul Steckle: You can go 29 years.

Mr. John Ryan: Long-term mortgage financing on real estate.

Mr. Paul Steckle: Okay, but you can't give a 29-year mortgage today at whatever the rate is today and guarantee that for 29 years. When was that concluded? There used to be a time when you could do that. My first mortgage was with Junior Farmers of Ontario at 5% for 25 years. You could get farm credit at that time for 25 or 29 years; it was an option.

Mr. John Ryan: At one point in time we were the same way. I think...is it five years now? If you have a 29-year amortization, at the end of five years, you review your interest rate.

Mr. Paul Steckle: That was also a front-end load mortgage too, right?

Mr. Murray Calder: Not really.

The Chair: Okay, Paul, continue.

Mr. Paul Steckle: I guess the question I would have.... Farming is a long-term thing. I realize we're trying to hedge against interest rates fluctuating, but so is the farmer. What if at today's rate you could offer a rate of, and I'm only suggesting, say 7%, but at 29 years or 25 years, you give a rate of 9%? Could you sell that?

• 1025

Ms. Louise Neveu: I don't think so.

Mr. Paul Steckle: Farmers wouldn't buy that?

Ms. Louise Neveu: No, we find that—

Mr. Paul Steckle: The reason I ask that is because farmers want the bast of both worlds—and I'm one of them. When interest rates go to 13%, that 9% will look good.

I've been there. Five percent against 22% looked pretty good. We said there would never come a time again when we would see 5% or 6% interest rates, but we've seen that now.

We've lost the appetite for long term because of the 5% thing we had just a few years ago. I'm wondering whether that would be something that would be beneficial to our farmers, if it could be offered as an option.

Ms. Louise Neveu: We currently have 10-year terms with 10% prepayment per year, and we get very little pickup.

Mr. Paul Steckle: This is just so that I can make the argument back, and for my colleagues here. Because I'm sure all of us have heard that, you know.

Mr. John Ryan: I think to reiterate Louise's point, it's there for 10 years and the appetite is not there.

Mr. Paul Steckle: Okay, well that's—

Mr. John Ryan: So if you take it and say we'll go all the way to 29 years, our sense is the appetite would be even less.

Mr. Paul Steckle: Okay.

The Chair: Thanks, Paul.

Howard.

Mr. Howard Hilstrom: Thank you.

The amendments in this make me really nervous that you're going into agribusiness loans and expanding it out. There are a few reasons for that. One of them is that the president of the Business Development Bank gets calls from the Prime Minister about loans. Have you ever had a call from the Prime Minister?

Mr. John Ryan: No, I have not.

Mr. Howard Hilstrom: Has the Prime Minister's Office ever phoned you about any loans?

Mr. John Ryan: No.

Mr. Howard Hilstrom: No influence at all from the Prime Minister's Office, okay.

Are you duplicating the efforts of the Business Development Bank in these amendments that allow you to do things now? Will you be just another duplication of some of their services?

Mr. John Ryan: I really don't think so, and the reason I say that is that we do have a memorandum of understanding, a working agreement with the Business Development Bank of Canada. So when we're looking at larger proposals on the agribusiness sector side, we look at opportunities for how we're going to be able to share those particular proposals.

We actually have a certain number of branches or field offices across the country working with individual field officer branches of the Business Development Bank of Canada to make sure we don't have that duplication and overlap.

Mr. Howard Hilstrom: These MOUs make.... Will these be public some day, or are they just between the Business Development Bank and the FCC?

Mr. John Ryan: I'd be happy to provide you with a copy of it if there's any benefit, or provided your committee—

Mr. Howard Hilstrom: If you're able to, you may want to bring it if you're appearing before us again and we can talk about it.

There's another thing that makes me really nervous about the FCC with your amendments here. There's basically one key issue that will make me recommend to the Canadian Alliance that we should oppose these amendments, and that's if the credit unions and the caisses populaires come to us and say the competition that is going to result on this is going to detract from their operations. I can't tell you how important the credit unions, the Caisses populaires, and the banks are to our communities in rural Canada. They're absolutely vital.

Do you believe that you will not be providing unfair competition in any way, shape, or form to any of these financial institutions?

Mr. John Ryan: Clearly, if you look at it from an interest rate perspective, we do not offer subsidized interest rates. The fact of the matter is in any of the work we've been doing in terms of trying to track our interest rates versus others, we're 10 to 40 basis points higher.

You may find an individual file at any particular point in time where the rate is lower than what somebody else has offered. But we're not out in the marketplace to compete on interest rates, because we really don't think that's what Farm Credit or any crown corporation should be doing.

Yes, you may find some individual credit unions that on the one side would be extremely positive about the working relationship with Farm Credit. You may find some others where—and this goes back to Louise's point earlier—if the relationship is not good at the local level, you may hear just the opposite.

Mr. Howard Hilstrom: Well, obviously I'm going to try to take a perspective from Vancouver Island to Charlottetown. I'm not going to just go by one or two.

I have one last little question. Will FCC make a loan to a supply management sector, a commodity, with the only security being the value of the quota?

• 1030

Mr. John Ryan: Yes, I think we would. If you were to look at our books today, you'd probably see that.

Mr. Howard Hilstrom: Are the banks lending money on supply management quota right now?

Mr. John Ryan: Yes, they are.

Mr. Howard Hilstrom: I'll just have to accept that and check that a bit. My understanding is the banks are getting nervous about the upcoming WTO talks and the free trade area of the Americas talks. Supply management is part of the negotiations. Five years from now that quota may not have the value it has now. Have you figured that in? Are you thinking about that?

Mr. John Ryan: If we're providing a loan just on the straight value of the quota, we will not exceed a seven-year term.

Mr. Howard Hilstrom: And what percentage of the value of the total? Right now dairy sells for about $18,000 in Ontario.

Ms. Louise Neveu: It would all depend on the individual.

Mr. Howard Hilstrom: The individual farm. So you'd take other security also?

Ms. Louise Neveu: If there's potential, we could take other security. It depends. If it's a new loan with a current borrower....

Mr. Howard Hilstrom: Who knows how these things work? At some point down the road—and I don't trust the Liberals, I'll tell you that right off the bat—they could vote out—

An hon. member: Be kind.

Mr. Howard Hilstrom: Just a minute, please. This issue of the quota is a very serious thing for farmers. It's tremendously important. Depending on what the government does in trade talks, something would have to be done with regard to the value of that quota if they changed the regulations on supply management and that lowered the value of the quota. I'm just wondering what your thoughts are on that and what provisions you're making should that happen.

Mr. John Ryan: As I started to say earlier, if we did financing solely on the strength of the quota itself, we'd provide amortization up to seven years, which means they're paying down. In anything that we've received or in any of our assessments to date, we've said that if there were changes, it would be done over a period of time. What we find in talking with our individual producers is that they're also thinking about that. They're not interested in having debt outstanding long term when there's no value to the quota. Our view at this point in time is if a ruling were made that would go in some other direction than where we are today, that debt would be paid down so that they're not left with a mountain of debt at a time when there's no value. That's how we feel we have some checks and balances in place.

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

The Chair: Thanks, Howard.

I have a question on fish farming: what's your position on it?

Mr. John Ryan: Today we have about $50 million outstanding in the aquaculture industry. You'll see that primarily in Nova Scotia, New Brunswick, and B.C. We've had some very good experiences, and some experiences have not been so good. I think a lot boils down to the individual producer. We remain active in the aquaculture industry.

The Chair: Murray, did you have another question?

Mr. Murray Calder: Yes, just a short one.

Howard was talking about supply management and the value of quota. The value of quota is basically driven by the marketplace, and the only way the value of quota is going to go down is if the government changes its position on supply management. That would be a proper assessment, wouldn't it?

Mr. John Ryan: Yes.

Mr. Murray Calder: I'd like to speak about long-term mortgages. When I was starting out in the late seventies in farming and everything, I took out an FCC mortgage in 1980. I'll tell you, it saved my bacon at that point in time because—

Mr. Larry McCormick: Your chickens.

Mr. Murray Calder: No, I was actually in pigs at that time, Larry. I made a good career change in 1985.

Some hon. members: Oh, oh!

Mr. Murray Calder: Anyway, I had a mortgage at 12%. I watched everything go up to 22%, and that was great. But the long-term mortgage I had was a front-end-load mortgage. Basically, what I'm saying here is that you pay off the interest first and then you pay off the principal. In essence, I was financing my farm with a credit card because that's basically how a credit card works, too. Until you pay off the last dollar of the principal, you're paying 12% on whatever your loan is. Say it's $100,000, you're going to pay 12% on $100,000 until you pay off the last dollar of the principal. Are the long-term mortgages you have right now at 29% structured in the same way?

• 1035

Mr. John Ryan: At 29%?

Mr. Murray Calder: Sorry, 29 years.

Mr. John Ryan: Just a point of clarification.

Mr. Murray Calder: Are they structured in the same way?

Mr. John Ryan: I was just checking with Louise. I think the short answer is yes. It's basically a blended payment we're referring to, where it's the same payment every month. In the early period the bulk of it is going toward interest, and very little is coming down toward capital.

Mr. Murray Calder: So it's a front-end load.

Mr. John Ryan: Basically, you're looking at it and saying, here's the payment I'm going to have to make over x number of years. It doesn't change. How does that tie in with the cashflow of the business?

Mr. Murray Calder: So in essence what we're saying here is if you took out a mortgage with FCC for say $100,000, you're going to pay 10%—which is one of the percentages that was bounced around here—on $100,000 for 20 years until you pay off the last dollar on the $100,000.

A voice: It has to be diminishing balances. Banks are the same way.

Mr. Scott Grant (Portfolio Management Officer, Farm Credit Corporation): Residential mortgage works the same way in a bank. You can also do a principal plus interest, where you pay a fixed principal portion every month, and an interest portion is calculated separately, just to divide the two of them.

Mr. Murray Calder: I know that for the mortgage I carry with the bank right now I have an interest payment and a principal payment. As the principal is starting to diminish as I'm paying down the mortgage, the interest is also diminishing because the principal isn't as high. But if you have a fixed payment each month, that is a front-end load mortgage because you're paying interest on the principal until you've paid off all the interest on the principal and then at the back end of it.... I will say that you do have an open clause in here so that you can pay down more principal without a penalty, I'll give you that. But in essence it's like buying a farm with a credit card.

Mr. John Ryan: What I see as a difference there is that starting out the bulk of the payment you're making goes toward interest. As you move along and start paying it down, you're really paying on the principal. More and more of your payment is going toward principal to get the principal down. So I'm not sure I fully agree with you on the front-end part of it. It's just what portion goes toward interest and what portion goes toward principal, and that changes over a period of time.

Mr. Paul Steckle: You will never get the mortgage paid off if you follow that.

The Chair: Marcel.

[Translation]

Mr. Marcel Gagnon: We just talked about the value of quotas. When you assess the value of a farm, you take into consideration the quotas, according to what was said to me earlier. Do you also take into consideration a maximum price for these quotas or do you base you assessment on the market price?

Ms. Louise Neveu: We have absolutely nothing to do about the price of the quota; we rely on the market price.

Mr. Marcel Gagnon: On the market price. However, if I understood correctly, you finance the quota over seven years, while the land itself or the first mortgage is financed over 29 years.

Ms. Louise Neveu: It can be financed over 29 years.

Mr. Marcel Gagnon: It could be financed over 29 years.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: If you finance the quota over seven years, is it because you feel it is a little bit more vulnerable?

Ms. Louise Neveu: Yes, and one should usually be able to pay it back over the short term.

Mr. Marcel Gagnon: It is short term.

Ms. Louise Neveu: Yes.

Mr. Marcel Gagnon: The reason I am saying that is because producers have concerns and are asking questions about free trade negotiations. Supply management must not be part of free trade negotiations. However, we are hearing through the grapevine that it is being considered and that supply management is perhaps not as secured as we are being told. Are you lobbying as well to have supply management excluded from negotiations? I believe that producers are expecting pressures to be exerted from all quarters. If we were to negotiate some day to make some changes to supply management and the value of quotas, the value of all farms would fall drastically.

• 1040

[English]

Mr. John Ryan: From Farm Credit's perspective, we don't look at that as part of our mandate, in terms of putting pressure or otherwise on government. It's a policy decision, and as Murray talked about earlier, whatever the decision of the government, we then look at how we can respond accordingly, as compared to taking one side versus the other.

[Translation]

Mr. Marcel Gagnon: I suppose you could still state that today, a major part of the value of farms rests on the value of quotas, that is supply management.

[English]

The Chair: Thanks, Marcel.

Are there any other questions?

Mr. Larry McCormick: On the $1.7 billion of new business of last year, perhaps my question isn't even fair in expecting you to know every detail, but I'm wondering about the dollars going out per sector.

Why I'm wondering about this is because I just had the opportunity to read the Manitoba Co-Operator in the last few minutes, dated today. Of course, they're only reporting what the chief economist of the Export Development Corporation is talking about, which I guess I'll give in my preamble. Rick is gone, and I realize Rick is very much up on this, but they're really concerned about the concentration of pork in Manitoba versus seeing possibly too much pork on the world market. Yet you're darned if you do and darned if you don't. The sector is growing, but I wonder if you have an approximate percentage on where these moneys went.

Mr. John Ryan: Perhaps I can give you some numbers, which I'll have to add up because our totals are not across the page.

Mr. Larry McCormick: You could give those later, or when you come back.

Mr. John Ryan: I can tell you that about $460 million of that $1.7 billion went to the crop sector.

Mr. Larry McCormick: Good.

Mr. John Ryan: The dairy sector was approximately $400 million.

I can give you the detailed breakdown by sector, but those are the first two, the most significant ones.

We'd have close to $300 million on the beef side—just quickly eyeballing and adding across the page.

Mr. Larry McCormick: I appreciate that.

Again, on the pork, there's real growth there, and there will be.

I always remember what a certain ambassador said to us one day—not at the agriculture committee. He talked about agrifood, and he was from Asia. He said if we could just encourage you Canadians to put a little larger maple leaf on our products.... There are people in Asia who will pay perhaps even a little bit more, 1% more, for Canadian products because we have that great reputation that has been developed.

So I guess I can do the math myself. Farm Credit Corporation didn't overinvest. Not that I can judge any of your actions, but when I add these up, you didn't necessarily overinvest in the pork industry last year. I just was curious.

Mr. John Ryan: On the pork side of things, we're looking at about $150 million.

Mr. Larry McCormick: Thank you very much. I appreciate that.

The Chair: Howard, do you have a short question?

Mr. Howard Hilstrom: No, I think I asked it already, thank you, but Carol may have a quick question.

Ms. Carol Skelton: I'd just like to know if there's anything in Bill C-25 that prevents the future leadership of the Farm Credit Corporation from actively holding and keeping land over long periods of time.

Mr. John Ryan: I think you'll find something specifically in the act that says we cannot do that. I guess all I can do is emphasize that we made a conscious decision to do just the opposite. Quite honestly, there was a lot of pressure on us just to extend leases when they came up for maturity. We didn't feel that it was our role or responsibility to be a landholder in this country, but rather, put it back in the hands of the farmer.

Ms. Carol Skelton: I'd like to see it in writing.

The Chair: Mr. Ryan, I'd like to thank you and your group for coming this morning. I couldn't help but reflect that probably ten years ago the mood wasn't quite so good when your organization appeared before a committee like ours. I think the success since let's say 1993...maybe 1993 is not a good year to pick out, Howard. But I think you've done much better since 1993. It's the bill, apparently, that happened in 1993, Howard.

Mr. Howard Hilstrom: Oh, yes, the bill. It hadn't anything to do with....

The Chair: But in any case, with this, there have been a few points this morning that I too would like to look at on Bill C-25. I can't help but be concerned about the maximum types of loans that you may want to give in terms of various sectors or various individual arrangements.

• 1045

The leasing thing, which has been mentioned here briefly this morning, has to be looked at. I would hope that when you come back you will give us a real cost of leasing to farmers. It looks very good for the year, the second year, and the third year, but what's the real cost of leasing? There are a lot of questions out there on leasing and whether it's good or bad for the industry. Some of us have views on it. For a lot of people, leasing is a way to avoid a bit of tax in the short run, but it has some implications in the long run for the farmer and also a lot of implications about the so-called sticker price that appears on this equipment.

Howard brought up the point about equipment dealers. Again, I question whether or not you can bring to us a good argument as to why you should get into equipment in terms of the Farm Credit Corporation.

Of course, the banks and caisses populaires are the other thing, and they'll be appearing too. When we look at the bill, we would like to make sure that we get back to the House with one that is well done, that is well received by our people, and that will improve the farm economy of our country.

Mr. Howard Hilstrom: I have one more little question after you've finished.

The Chair: Okay, if it's one, and just 30 seconds.

Mr. Howard Hilstrom: Yes, it's a 30-second one.

On the aboriginal agriculture, I would like you to tell us briefly how you're involved in that, and also the forestry. I know you make loans into the forestry area.

In Pine Falls, Manitoba, there is a group of employees who own the pulp mill, and the aboriginal people are putting a deal together. Is that the kind of deal you would be looking at? There are five first nations and this group of employees that own this mill. If they approached you, would you be possibly loaning to that type of operation?

Mr. John Ryan: I don't know whether they approached us or not, but I can tell you, from the aboriginal community perspective, we recently appointed someone and put that person specifically in charge of what more we can do on the aboriginal community side.

The aboriginal community has approached us in the past on land management, as an example, from the point of view that they're acquiring large tracts of land; they may not be in a position to do the farming today, but have plans for the future. So how we can help them on the land management side is one area.

We are also talking with some of the band councils and the aboriginal capital corporations about trying to do some financing for them on an individual basis, particularly in the livestock sector. So I guess our goal is to be doing even more, not less, with the aboriginal people.

Mr. Howard Hilstrom: Is that off reserve or on reserve?

Mr. John Ryan: We are looking at trying to do it both on and off. We understand the challenges associated with the land act and ability to be able to buy our security. But we're working with local band councils and the aboriginal capital corporations and asking, what more should we be doing?

The Chair: Thanks, Howard. That is a good point.

Mr. Howard Hilstrom: I know we don't have enough time, but that's an area that needs to be explored further.

The Chair: In any case, again, thank you for coming. We will look forward to working on the bill and hopefully get a good one for everyone.

If the members would stay for a minute or two, we'll talk about witnesses.

[Proceedings continue in camera]