Thank you, Mr. Chair.
I will provide the opening remarks.
On behalf of Les Éleveurs de porcs du Québec, I thank you for this opportunity to share our concerns and our expectations regarding risk management programs. My name is René Roy and I am a pig farmer in the Chaudière-Appalaches region. I am also an administrator with Les Éleveurs de porcs du Québec. I am accompanied by Mr. Mario Rodrigue, our director general.
Les Éleveurs de porcs du Québec brings together more than 2,700 producers who own pig farms. They are the foundation of an industry that generates more than 31,000 jobs in Quebec and exports 70% of what it produces. The entire Canadian agriculture and agri-food sector wants to contribute to the recovery of the Canadian economy, and the pig sector is particularly well positioned to increase its already considerable contribution. However, producers must have the tools and resources they need to ensure that their businesses are sustainable and to harness its development potential. It is important that the toolbox include risk management programs properly tailored to the realities and issues facing the businesses for which the programs have been created. From this perspective, improvements must be made to the risk management programs offered by Agriculture and Agri-Food Canada.
We fully support the Canadian Pork Council's position that it is important to review the parameters of the AgriStability program to restore the trigger level to 85% and remove the factor that limits the reference margin. In its current form, this program is not fulfilling its role. The result is increased pressure on business liquidity and on the risk management tools developed and provided by some provinces, including Quebec. When deprived of the cash flow they need, producers must postpone investments that are necessary to stay competitive and meet societal requirements in terms of animal welfare.
Improvements are also needed to the AgriRecovery framework to ensure it has the flexibility to adapt to the specific realities of sectors facing extraordinary costs following a catastrophe. For example, although they have had to cope with costs directly related to COVID-19, producers will not likely be able to receive their share of the $125-million envelope announced on May 5. This is because only expenses resulting directly or indirectly from the obligation to euthanize pigs are eligible.
The $3.7 billion generated by Canada's pork exports is a key asset for the Canadian economy. However, this strong presence in export markets exposes producers and the industry to risks over which they have little control. It is important to remember that the prices paid to producers by U.S. packing plants serve as a reference for determining the selling price of pigs in Quebec. The trade war involving the United States and China in 2018 led to a significant drop in the selling price of pigs in the United States, which directly affected the price received by Quebec pork producers.
More recently, the pandemic has caused major disruptions. Within a few weeks, the forecast average price of pigs sold in Quebec for 2020 dropped by nearly $20 per 100 kilograms, below the cost of production. This represents a $150-million shortfall for Quebec producers.
Like the other Canadian provinces, the Quebec government offers risk management solutions for farm businesses. Pork producers in Quebec have access to the Farm Income Stabilization Insurance program, or FISI. However, producers must assume one third of the compensation paid under FISI. It is important that Agriculture and Agri-Food Canada provide producers with risk management programs that are complementary to those provided in the provinces.
The drop in the selling price of pigs due to external shocks, such as the trade war or COVID-19, has increased FISI payouts. As a result, the premiums paid by producers increase at the same rate and prevent them from reaching their cost of production. For this reason, steps must be taken to limit the frequency and dollar amount of FISI payouts.
In addition, FISI parameters do not make it possible to record and take into account costs that are not in line with the realities observed during the investigations commissioned by La Financière agricole au Québec. COVID-19 had the effect of temporarily reducing slaughter capacity, thereby forcing producers to postpone the delivery of pigs. The consequences of this delay on the various technical efficiency coefficients, such as the decrease in average daily gain or the increase in mortality rate, are not covered by FISI.
Several studies show that volatility in agricultural markets has increased since the early 2000s due to new factors over which individual businesses have no control and which they cannot predict, prevent or adjust to. From this perspective, it is imperative to establish an income safety net that provides sufficient, predictable and competitive support. To continue to operate, adapt to change, innovate and compete, farm businesses need a stable base on which to build. They must have access to effective and reliable business risk management programs. These financial tools represent a strategic investment by governments in the economy.