Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 31 - Evidence
OTTAWA, Thursday, April 15, 1999
The Standing Senate Committee on Agriculture and Forestry met this day at 9:08 a.m. to study the present state and the future of agriculture in Canada, consideration of the effect of international trade issues on farm income.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we have been studying the state of agriculture in Canada as it affects international trade, and in doing so we have dealt with the grain industry and the hog industry, and so on.
We have a very full agenda this morning. Three individual farmers from Saskatchewan will be making presentations, and, in addition, we will hear from representatives of Agricore, the Saskatchewan Wheat Pool, the United Grain Growers and the Farmers Union.
I wish to introduce Messrs Michael Cayer, Lee Cook and Bob Thomas from Saskatchewan. Mr. Cook farms on both sides of the international border, in Saskatchewan and in Montana, and thus brings perhaps a special perspective to our discussions.
We are pleased to have you here this morning, gentlemen, in order to hear about the situation of agriculture in Western Canada, and specifically in Saskatchewan. Please proceed.
Mr. Michael Cayer, Saskatchewan Farmer: Mr. Chairman, honourable senators, we are honoured to be here to speak on behalf of the farmers of rural Saskatchewan.
My wife Valerie and I farm 1,280 acres of cropland, consisting mainly of wheat, barley and oats. We plant canary seeds, but we have quit planting pulse and specialty crops because of the input costs. One crop failure with the kind of inputs required to grow these crops would wipe us out.
We also have a cow-calf operation consisting of 55 cows and, hopefully, 55 calves by the time we are finished calving. This operation has been holding its own, but the margin for profit has been steadily dropping every year. Expenses in the last 10 years have risen, in most cases by 400 per cent.
In 1981, I worked as an elevator agent for Saskatchewan Wheat Pool. At that time the price of No. 1 durum was over $7 per bushel and No. 1 spring wheat was $6.80 per bushel. Eighteen years later, in April of 1999, the price of No. 1 durum in Willow Bunch elevator is $2.90 per bushel, while the price for No. 1 spring wheat is $2.95 per bushel.
In 1981, fertilizer cost $155 per tonne. In 1999, it is worth $385 per tonne.
In 1981, my father bought a 135 horsepower tractor with all the bells and whistles on it for $25,000. Today, the same size tractor is worth well over $100,000.
In 1981, farm fuel cost $.25 per litre. Today, it costs over $.35 per litre, when oil prices are at an all-time low.
People come up to us and say, "You must be doing all right. You have your cattle to fall back on." The reality is that the margin for profit is not there any more. In 1981, good calves would bring a price of $.83 to $.90 per pound. In the fall of 1988, good calves were around a high of $1.20.
In 1981, my father bought a round baler for $8,200. That same baler today sells for over $38,000.
Expenses are four times more than what they were 15 to 20 years ago. The income from cattle has only increased by 30 per cent while grain income has decreased by 60 per cent. It is easy to see why farmers are struggling. There is not one labour union or organized labour force that would stand for that kind of treatment.
Farmers are proud people. They obtain off-farm jobs to help support their farming businesses. I do not know of any other small business owners anywhere in Canada who, when losing money and going bankrupt, would obtain another job to support their business -- in our case an off-farm job to support the farm.
After 15 years of working seven days per week, 18 hours per day, the stress is becoming unbearable. We are no closer to reaching our dream than we were 15 years ago. My wife commutes 20 miles one way to work, in order to buy groceries and to help pay for the utilities, while raising the family at the same time. The job in town is no longer a second job; it is a third and fourth job, because farming is a full-time job with many duties.
In order to survive on the farm I decided to diversify into custom grain hauling. We bought a truck with borrowed money and built a business very quickly with hard work and honesty. Two years later, I am about burnt out trying to farm, looking after cattle and meeting the needs of my grain hauling business. It does not leave me any time to spend with my family.
When I go into a farmer's yard it usually takes 40 minutes to 50 minutes to load, giving me plenty of opportunity to talk to the customer. We used to talk about farming, new concepts in farming, family issues and what was going on in town. Now, when I go into a farmer's yard we still talk, but not about new concepts; now we talk about how depressing the situation is. By the time I leave, most people are getting angry and have tears in their eyes. People are depressed. The signs of depression are everywhere.
My neighbour told me he was planning to sell a half section of land. He has 18 quarter sections and has made payments for 23 years, with only four or five payments left. He was advised to sell a half section to prevent him from losing 25 years of hard work. He has to sell that land to keep going. From the sale of just one half section he will be able to pay his last year's bills and keep going; otherwise, he will lose all his land.
Who will buy all this land? Corporate farms. We know that corporate farms are on their way, which will be the end of rural Saskatchewan as we know it. There are even a few older farmers in the Lumsden area who have said that they would rent their land for taxes. If you promise to look after their land and pay their taxes, you can use it this year. They have said that they will not spend any more of their savings on trying to farm their land. As long as they can pay the taxes on it, they will let somebody else use it.
There are many solutions, but solutions come with problems, problems which I know we can solve in time. Our neighbours to the south may not have all the answers, but they are dealing with the problem in the U.S. and are working on the solution. Regrassing programs could be implemented here, something which is needed by people with marginal land. It would help people become more profitable in raising cattle or establishing grain farms to take the pressure off the good grain producing lands.
Someone once told me that for every bottle of beer brewed, less than one penny goes into the barley producer's pocket. If we were to put a tax of 1 cent on every bottle of beer purchased in Canada, we could achieve $5 barley, which is at $2.50 now. That would not hurt the consumer in any way.
We have to educate the public that, when a final payment is announced in the millions of dollars, each farmer is not a millionaire overnight. I do not know why everyone even needs to know what the total payout is on a final payment, because it does not come from the public purse. That money is farmers' money and should have been received a year or a year and a half ago.
There are many farm dealerships closing down in Assiniboia, the area I come from. Businesses are hurting. Farming affects every one. If you look after farming, the rest will look after itself. All people, not just those from Saskatchewan, depend on the success of agriculture. There are hundreds of jobs in the Coronach area, which is a little farming community 30 miles south of us. There is also a power plant and a coal mine. I used to think that those jobs would always be there. When I think of the exodus of our young and middle-aged people leaving the farm and the province to find jobs, the phrase which always comes to mind is, "The last one to leave Saskatchewan, please turn out the lights." That is coming true.
If farmers were to receive a cash injection of $40 per acre, then we could pay last year's expenses, and perhaps some of this year's expenses, for putting the crop in. However, the way our tax system is set up now we cannot average. If we lost money two years ago, but next year we make money, then we have to pay income tax because we cannot bring our farm income down below zero. We cannot catch up, because as soon as we start making money we have to pay income tax. We have a $65 exemption to work on. Those are 1960 prices. Utilities are at extreme highs. We just cannot live on those kinds of exemptions. We have to bring the exemptions up. We have to be able to average our losses from last year into this year. We live in a "next year'" country. We always say, "Well, maybe next year." However, next year is not coming, because we cannot use next year's income to help us pay for last year's losses.
Mr. Lee Cook, Saskatchewan Farmer: Mr. Chairman, honourable senators, I am here today as both a U.S. and a Canadian farmer. We farmed in the Bengough area 90 miles south of Saskatchewan. We raised our first crop in 1974. My father raised myself and my brother on a farm approximately 150 miles south of Regina, just 14 miles south of the Canadian line, where we raised small grains and cattle and collected government payments. Out of 1,000 acres of farmland, approximately 800 of it is in the Conservation Reserve Program. The previous 10 years' contract gave us about $35 an acre U.S. Currently those contracts have been renewed at $29 an acre U.S., and there is quite a bit of competition to get those contracts.
The future of farming is not bright in the United States. The future of farming is not bright in Canada. In the United States, our Congress has given us a farm program through which we receive market transition payments to bolster the price of grains to us. It is made on an acreage payment; it is not made by a bushel payment. It is based on the past histories of our farms.
When those programs provided insufficient funds to maintain our farms, Congress stepped forward with an aid package in 1998 of $11 billion to provide additional moneys to farmers and ranchers. When we look at those programs, we say, "Why do we need all that money? Agriculture should be in good shape, at least in the U.S. We get all those payments."
In 1998, wheat markets hit a 30-year low. From 57 to 60 per cent of the wheat, corn, and soybeans are processed by the four largest firms. They also control 59 per cent of export facilities. Cargill, Archer Daniels Midland, Continental Grain and Bunge are all familiar names to you.
In 1998, cattle markets in the U.S. hit a 26-year low. From 80 to 87 per cent of cattle are killed by the four largest packers. In 1980, they controlled only 36 per cent of the kill. Iowa Beef Packers, ConAgra's Beef, Cargill's Excel and National Farmland Beef are those packers.
In 1998, hog markets hit a 60-year low, and 60 per cent of hogs are killed by four packers, Murphy Family Farms, Carols Food, Continental Grain, and Smithfield Foods.
It is not too hard to understand when we look at production in agriculture that we have not seen prices like this since those of the Great Depression. U.S. farmers take home 2.4 per cent of the return on a food dollar. Processors take home 17.8 per cent. Retailers take home 18 per cent. Yet we farmers are stuck at 2 per cent, many of us with investments of $500,000 to $1 million. All we can expect is a 2 per cent return on our investment. I am telling you that we cannot make it.
Ten years ago, 15 companies did 85 per cent of the crop protection business. Today, eight companies do that business.
From the documents that I have provided you, if you have had the opportunity to read them, you can see that with very little effort U.S. farmers could have collected in the neighbourhood of $40 to $50 U.S. per seeded wheat acre. We had the opportunity to collect through the Livestock Assistance Program approximately $35 a head on our mature cows. Pork producers had a chance to collect, I believe, $8 dollars a head if they produced less than 1,000 head of pigs a year. These are all things that the United States Congress has done to try to help our farmers through what can be said is one of the most difficult times that we have ever faced.
The farmers that we have have survived the hard times of the 1970s with 20 per cent interest rates. We survived the drought and the hoppers of the 1980s. The people who say we are inefficient and not the best have not lived through it. There are not that many of us left.
South Dakota last year lost 2,000 farms. North Dakota lost 500. Montana did not lose as many, because we have a large livestock base and the livestock sector has not been hit as hard as small grains. It was estimated that until this U.S. disaster program came out there might be 1,200 farmers in North Dakota who would be unable to meet their financial needs to plant this spring's crop. It is not a bright picture.
When you look at agriculture across the three prairie provinces, it would be easy to say that to make things right we need a $7 billion cash injection. We need a farm program that will solve this problem for years to come. The $7 billion dollars would be a bitter pill. It is probably not doable. I am guessing, but in order to meet the immediate financial needs of farmers in Saskatchewan, if we could get about $1 billion, we could plant this year's crop.
In my 43 years, we have seen 50-50 farming, where we fallowed half our ground to save moisture to raise crops. We had two to three inches of fall moisture last year. We had snow this spring. You can push a soil probe into the ground up to four feet. We have ideal conditions for growing crops. That is what farmers do. We grow crops. However, we will not be able to grow those crops because we cannot afford the inputs to plant them. Many of us have scaled back to planting two-thirds of our acreage and fallowing a third, because we do not have the money to put into inputs. I see more people talking about going back to 50-50 farming. That is the wrong direction.
The United States, with the conservation reserve program, is currently idling 31.3 million acres of production agriculture. We have a cap of 34 million. There has been talk of increasing that cap by another 9 million acres. Those acres have allowed people to bid in portions of their farms and maintain their survivability.
I do not know how we help ourselves out of this problem that we have got ourselves into. I think it will require a political solution. I do not think that we are able to do that. We are not able to compete in a totally open and free market. You will see the resurrection of the economic enhancement program in the United States. There is a clamour for that, and that may help our market prices here as we deliver many of our crops into the U.S.
I thank you for putting forth the AIDA program and for trying to help farmers, but as we get the forms off the Internet and look to see if it will help us, very few of us will qualify for it. We are within two weeks to three weeks of putting in the majority of our crops. We will not to be able to buy fertilizer. We cannot look forward to buying chemicals. We cannot look forward to buying seed, if we do not have it. Our fuel suppliers and seed suppliers are stretched to the limit with credit, much of it unpaid balances from last year.
I have heard from several sources that if $1 billion were to come to Saskatchewan, and that would mean approximately $1.4 billion across the three prairie provinces, that would give us approximately $20 an acre. If we could get that $20 an acre, we could plant our crops. It would be an acreage payment. It could be done quickly, and that would allow us to get into this year.
That is essentially what the United States Congress did with their disaster designation, and it gave people a chance to get into the next year until they could politically sort out the problems that we are dealing with at GATT and the World Trade Organization and the European Economic Union.
There are big problems in agriculture, problems that we as farmers cannot solve, but problems you as politicians can solve. I would ask you today to see if you can find that money to let us survive. If we do not get it, rural Canada will take a hit like you have not seen since the 1930s. You wonder where you will put 15,000 Saskatchewan farmers when they cannot stay on their farms. You wonder what will happen to equally that many business people when they do not get the money from those farmers to survive.
Those are the problems we are facing in the U.S.
As I said before, 2,000 farmers in South Dakota will not have a chance to plant; 500 in North Dakota will not have a chance to plant; and in Saskatchewan, I believe, something like 26,000 farmers since the 1970s have not had a chance to plant.
Many farmers are of retirement age, and we cannot afford to buy their land. They cannot afford to retire. They need money from their land and from their equipment -- the equity that they spent their entire life building -- so that they can retire. They are entitled to that. We will lose a lot of that if we cannot get in the neighbourhood of $1.4 billion to the three prairie provinces to get this spring's crop planted.
Mr. Bob Thomas, Saskatchewan Farmer: Honourable senators, I have been farming for 30 years south of Regina, Saskatchewan. I am married and have three children. I farm a three-section farm, and I have cattle. I am also a trained mediator and have been dealing with farm debt in Saskatchewan for a period of 10 years. My expertise is in finance and the problems that farmers are having. I also work with people who have small businesses.
I am honoured to be here today to speak to you. I was asked to get involved with some farmers in the Bengough area earlier this year. The group contained not only farmers, but small businessmen from the area. They felt that, if something was not done, not only would farmers suffer in Saskatchewan, but also every business related to farming would suffer. The impact in Saskatchewan is not related just to farmers; it is related to businesses as well.
In your booklet, you will find documents from several businesses and organizations, such as PIMA, which is the Prairie Implement Manufacturers Association; and there is a letter from the Prairie Agricultural Dealers Association, in which they state that they are in deep and dire straits. You will see documentation from fuel dealers, fertilizer dealers, and the multitudes, clearly stating that they are also in dire straits.
Before I left small-town Saskatchewan, I received a call from a fuel dealer informing me he had received his thirteenth bankruptcy notice out of 100 clientele. He is expecting to receive 13 more before the end of spring. In essence, one-quarter of his farming clientele in Saskatchewan will be declaring bankruptcy.
When we look at farm debt and the problems facing farmers today, in 1998 it all came to a head. If you look at the chart for 1997, farm debt in Saskatchewan was slightly more than $5 billion. My prediction for the field in which I am involved is that farm debt will double by the year 2000 if something is not changed. That will surpass the debt that the Province of Saskatchewan presently owes to its creditors.
The problems in farming are grave and should be addressed. When we heard the recently announced Agricultural Income Disaster Assistance program, it was thought that the program was well designed and accepted. Upon reviewing the program, which is in essence a copy of the Alberta disaster relief program, we soon discovered that there were many flaws within the program. It did not truly address the farm situation. It did not address, in my estimation, 86 per cent of the farmers within Saskatchewan. Because of the criteria set down, it only addressed 14 per cent of them.
Farmers who are in the northwest corner of the province have had drought for three years. In all estimates, if moisture conditions do not improve, they will be facing a drought for the fourth year in a row. I have been told by the people in that area that it is not just 15 per cent to 20 per cent of their farmers who will depart from farming; they estimate that 80 per cent will depart from farming, not by choice, but by being forced to depart.
I also deal with people such as the gentlemen who are sitting with me today. Mr. Michael Cayer, as he has informed you, has a cattle operation. He works off the farm utilizing his trucks. This program dictates that since he has other sources of farm-related income, they are put into the same package. That is not being fair.
When I worked with farm debt and the multi-aspects of farming, I subdivided each and every one of those entities. If there were hogs, grain and livestock, I simply segregated each segment of that particular operation to determine what part of that operation was losing money. This program does not do that. It says it is all right to rob Peter to pay Paul. However, you cannot do that, because you are not giving a true picture of agriculture. You are giving a false picture, especially in the grain industry today.
In front of you is a document produced by Saskatchewan Agriculture and Food. It is entitled, "Crop Planning Guide 1999." I just received this document from the Province of Saskatchewan before I left. I wish to draw your attention to the crop production cost per acre of the dark brown soil zone for 1999.
The Department of Agriculture in the Province of Saskatchewan just produced this document. It is easy to follow. Each section is broken down by revenue per acre and estimated yield. I will draw your attention to three areas. I would have you look at the estimate of yield, which is the top figure. Under the "Spring Wheat" column, you will see a yield of 33.7 bushels to the acre. Beside the heading "Returns Per Acre," you will see that by growing that amount of wheat at present levels, that particular crop will lose $12.45 cents per acre.
I will not go into the per acre production aspect on each particular crop, but for a crop of durum wheat, that person will lose $16.33; for CPS wheat, the loss is $8.51; for barley, it is $33.53 cents. The only bright spot is lentils. Peas will lose $81.02; flax will lose $21.97; canary seed will lose $31.63; and on canola we will make a $3.37 profit per acre.
When you take the nine crops, only two crops show a profit, one being a substantial profit. However, when we look at the commodity most grown in Western Canada, which is wheat, we find that all three categories are in the negative.
At the bottom of the document, you will see the break-even price per pound or bushel. I would draw your attention to the very bottom of the document and the heading "To Cover Total Expenses." Spring wheat shows a figure of $6.87 cents per bushel. Presently in Saskatchewan, the price is $2.95 per bushel.
When we look at durum wheat, the Province of Saskatchewan is saying that the break-even price is $6.77 per bushel. In rural Saskatchewan, the price is currently $2.90 per bushel.
When we look at CPS wheat, the break-even price is $5.71 cents. Presently in Saskatchewan, we receive $2.80 per bushel.
The break-even point on feed barley is projected at $4.20 per bushel. It is now $1.80 per bushel.
The break-even point on lentils is 21 cents per pound. At present in Saskatchewan, the price is 17 cents per pound.
When we look at feed peas, and this is an interesting point because we see a substantial loss of $81.02 cents, the break-even price per bushel is $9.17 cents. In Saskatchewan right now, feed peas will only bring $3 per bushel.
The break-even point with flax is $10.93, and all we receive is $8.50.
I could go on, but this document is proof positive of what is happening to agriculture, especially in the wheat sectors in the prairie provinces right now. This was produced by the Department of Agriculture of the Province of Saskatchewan.
I have briefly discussed the AIDA program. It has been scorned by farmers in Saskatchewan. In your documentation are letters from chartered accountants throughout the prairie provinces describing the complexity of the program and questioning the underlying reasons for the program.
Senator Gustafson sent me copy of the GATT agreement as it pertains to agriculture and I question the priorities of the federal government with regard to many of the programs that it currently has in place. We believe that the concept of the GATT was good, but it has failed in the long run. The people in Alberta, who initiated the program from which the AIDA program was copied, have explained that it was a disaster program, not a support program. It was never designed to be a support program.
There is one aspect of the GATT which deeply concerns me, that being the statement that part of the goal of GATT is to retire producers of agricultural products in this country. That concerns me greatly because someone is dictating that I should go out of business.
In the material we have provided to you, you will see that we have requested, in place of the AIDA program, a program based on acreage payments. In previous administrations, a number of programs initiated with regard to agriculture were based on acreage. Governing us in the western provinces is the Canadian Wheat Board. The Canadian Wheat Board has all of the statistics pertaining to every farmer in Western Canada. The Canadian Wheat Board can print an acreage payment to farmers in a 30-hour time period, utilizing computerization.
Why would we enter into a program such as AIDA, which will cost between $5 million and $10 million to administer, when the Canadian Wheat Board can do the job well?
As Mr. Cook has explained to you, by Thanksgiving of 1998 the United States, without any applications or formal documentation from any farmer, put money into the hands of farmers. Farmers are producers of grain and commodities. We are not chartered accountants. We hire chartered accountants to do this work for us. We have heard from a multitude of sources that it is costing farmers from $300 to $1,200 to produce applications for the AIDA program. Why does it cost so much? Farm income tax is based on cash earned and cash expenses. The AIDA program is based on the accrual method, which does not follow a farm income tax form, so a conversion must be done.
We represent 50,000 farmers in Saskatchewan. There is no other organization in the province that represents that many people. The three men seated before you here represent 50,000 farmers and farmers' spouses who work off the farm in Saskatchewan.
As Mr. Cayer pointed out, we have experienced a high level of stress. You will find in your documentation a letter from the stress line that the Province of Saskatchewan set up. We have consulted with the clergy. They are seeing a high level of this problem in their parishes. They are finding a breakdown in rural Saskatchewan.
I estimate that only 14 per cent of farms in Saskatchewan will be successful in getting funds under AIDA because of the complicated criteria. I was a guest on several radio programs in the province recently and I offered to buy dinner for anyone who actually received money under this program. One gentleman called to say that I owed him dinner, but that I did not have to pay for it. When I asked why, he said that his accountant figured that he would get $400 under AIDA, but it would cost him $700 to get it. So I did not have to buy dinner.
Farmers are getting very upset. We compare AIDA to the very simple acreage program in the United States. We cannot understand why we need a 40-page document to do such a simple job. The American farmers receive the money without producing any documentation.
We are asking today, on behalf of our organization, for $80 per cultivated acre. That may seem high, but several banks and credit unions in Saskatchewan have calculated that the cost of production is $40 per acre. In 1998, farmers did not recoup their cost of production. Therefore, they experienced a $40 loss in 1998. In 1999, they will earn half their cost of production. We sincerely hope that the federal government will come forward with a long-term agricultural policy. We have also calculated that the loss prior to 1998 was $20 per acre. That is how we arrived at the figure of $80 per acre. That may sound to some like an unreasonable amount. However, farm debt in 1997 in Saskatchewan was well over $5 billion. Eighty dollars an acre will not even cover that debt.
We will be living in a world of subsidies for four years. The United States program was implemented in 1986 and will continue through 2002. There will be subsidies for the next four years, of either the Europeans or the Americans, and we will have to deal with that.
We want to suggest to the federal government long-term solutions. A group of us sat down and did a lot of soul searching. We did not want to be unrealistic and bring forward unreasonable programs. We want to suggest, as long-term resolutions, old programs that were very well tailored by previous administrations and which worked well for Canadian farmers and the rest of the Canadian people.
Our first resolution is the return of no tax on farm fuels utilized for farm use. Tax-free fuel could be used by a farmer while hauling grain, but not for a trip to town. The savings under this would be enormous. I can currently go into Regina and buy gasoline for my farm more cheaply than I can have it delivered to my farm in Milestone, Saskatchewan. We had purple fuel in Saskatchewan when I started farming in the 1970s. We suggest to you a return to that program.
Second, in 1991, I believe it was, the PFRA brought out a permanent cover program. Farmers were paid to seed the land back to grass and keep it in grass for a period of either 10 or 21 years. Mr. Cook explained to you a program similar to that in the United States.
We have an extreme amount of marginal land in the southern part of Saskatchewan, all through the province and through Western Canada generally. Indeed, if we are overproducing wheat in this country, then this would be a strong solution to that. In North America we are presently sitting at a 35-year low in numbers of cattle. If Saskatchewan were to double its herd we would not even dent that figure, so it would not hurt.
The third resolution I bring forward to you is that each and every one of the people you see sitting before you today has children who would like to enter into agriculture; however, at present you also see parents who will not allow their children to enter agriculture because we will not allow them to go through what we have gone through.
What we are suggesting to the federal government -- and to the provincial government as well -- is that they adopt the last three resolutions, which will guarantee that these young people, if indeed they enter into agriculture, will be stepping into an industry that will have stability and a future, and will be something that they can grow upon and hand over to their children when it is time.
We are suggesting that, for a first-time farmer or young farmer, a loan program be set up. At present there is a program of sorts in the Farm Credit Corporation, and we did have a program in Saskatchewan called Farm Start. However, those programs could be updated to the point that a young farmer could buy land, machinery and livestock, and basically be diversified. For example, on a land loan of $100,000 over a 20-year period, for every dollar that the young farmer pays in principal and interest the federal-provincial governments would match that dollar and pay down the principal. In essence, a 20-year loan would be paid off in 7.5 years, and we would see that young farmer getting a good start.
Of course, in the second go-round he would have to enter the banking world; however, he would already have a credit rating and he would also have assets that he could utilize for borrowing.
In my 10 years of mediation I have seen many fathers who have, with all love, helped out their sons and daughters to get them farming and, since agriculture has gone as bad as it has, not only has the son or daughter lost the assets but the father has also lost his assets because he used them for security. This can no longer continue.
The safety net will be built into this for the young farmer. We must always worry about the bad years in rural Saskatchewan or Western Canada. What would happen, hypothetically, if in his third year of farming he received a crop failure and could not meet his obligations? The federal-provincial obligation from the previous year would be brought forward and brought up to make his principal and interest payment. He would be penalized to the point that it would take him one more year to pay that loan off. In essence, given a couple of bad years, or even three bad years, during the 20-year period, he would neither become delinquent nor lose the assets that he was working so hard to gain. It would also be an incentive for this particular person to work off the farm and ensure that he paid it off in 7.5 years. That would give him good banking practices and good logic as far as farming goes.
When looking into grain farming, in particular in Saskatchewan, as you can see from the charts before you, we find that there is no stability. Just about every commodity you see on that chart is a negative. That explains what is happening in Western Canada. Hardly a crop that is grown has stability, except for possibly two, including lentils, and not every part of Saskatchewan can grow lentils. I will admit to that one. I cannot grow lentils on my land.
What we decided at that time was that we must create a program that was bankable. We heard that the AIDA program was bankable, but, as you will see by documentation from a credit union manager, it is not bankable. You will see documentation from chartered accountants that it is not bankable. It is not something you can take to the bank, for which the bank manager will say, "Good, I know what your income will be."
The last two resolutions are bankable -- and they are not resolutions that have not been discussed or programs that have been utilized before. We are strongly suggesting to the federal government that for the first 10,000 bushels of wheat -- including canola, because we must deal with Northern Saskatchewan which grows primarily canola -- a base price of $10 per bushel be paid. Every farm in Saskatchewan, if it could produce 10,000 bushels, would have a guaranteed income of $100,000.
For most people in this room, that sounds like a great deal of money. On my farm, for that part of my farming operation, it would cost me $65,000 in production costs alone. The only thing that I would get out of it would be my cost of living and my cost of production. The balance of the production over and above the $10,000 would be sold at market value.
I have been questioned on this in several areas of concern. First, would this program be abused? No. If, for example, a farmer were to seed twice the acres that he would need for this program, he would come up with 20,000 bushels. He would sell the first 10,000 at $10 per bushel, but for the remainder he would receive only $3 per bushel. Therefore, in the next year's planting program it might occur to him that he should grow something else. He could diversify, but he would have one product, one thing growing on the farm, that would be stabilized, and that would help to create more diversification.
In the case of Mike Cayer, for instance, no doubt he would grow the 10,000 bushels of wheat; however, he would probably turn a large number of acres over to the re-grassing program or the permanent cover program, and he would go back into cattle production and streamline his operation more. I would do the same thing. I might grow a few specialty crops on the acres that I do not utilize for wheat; however, I would turn many acres back into grass.
In Northern Saskatchewan the farmers are very strong in flax production from the Regina plains north. The farmers there would grow the 10,000 bushels of wheat, but they would go very much into specialty crops with the balance of their land.
In agriculture today, we must have one crop that is stabilized in order to make farming bankable: so that we can go to the bank each year for an operating loan; so that we can say to the fuel dealers and fertilizer dealers that we can produce $100,000 plus worth of grain sales on our farms; so that we can take a risk on cattle; so that we can take a risk on the specialty and the other crops. However, we must have one that is completely stabilized.
The fifth and final resolution that I set before you today is to ask for a return of the GRIP program, which ended in 1995-96. The GRIP program was essentially a gross revenue insurance program. Clearly, we would like to see the return of that type of program, in which a farmer could buy a level of guaranteed income per acre at a cost borne jointly by himself and the two levels of government.
They have that program in the United States and will be implementing it in such a way that it will be even stronger.
I am suggesting that if a farmer wants to ensure his crop for a $150-per-acre return he should be able to do so, and when he applies to a bank or goes to buy anything, then with the "10 and 10," or the guarantee under insurance, he will be guaranteed a level of income on that farm. That is stability, which is what you want in every business. Having been involved in manufacturing for five years, I can tell you that you need stability. You must have that.
Honourable senators, there are approximately 50,000 farmers in Saskatchewan; if we cannot turn the situation around there, then, as a very conservative estimate, I would say that 15,000 of those farmers will not be farming this year, and I will predict that in attached industries well over 20,000 people will not have jobs. Just look at Flexicoil in Saskatoon by way of example. Flexicoil was a very large manufacturer with 1800 employees; 1,400 have been laid off this year. Approximately 400 employees are left and I have been told that, if things do not turn around in 1999, there is a good possibility that those 400 employees will be let go. The company will have no choice. They are hoping that their foreign markets will hold them; however, there is no guarantee.
The Chairman: Mr. Thomas, could you bring your remarks to a close? We have many questions and we have other witnesses.
Mr. Thomas: Honourable senators I am almost done.
The statistics that I have just stated are not unrealistic. They are well-founded.
I thank for your time today, and I thank you on behalf of Mr. Cook and Mr. Cayer. We are all in the midst of our calving operation right now, and our wives and children are at home looking after them.
The Chairman: Thank you for a very in-depth view of the agricultural situation on the Prairies.
We have many questions. What I am hearing from the farmers is that an acreage payment on cultivated acres is necessary to alleviate the immediate problem. We have the immediate problem and then the long-term problem. Would you like to make a short comment on that? I believe that is what the farmers are calling for. That is what I am hearing.
Mr. Cook: I would like to address that. In this crisis, our main concern is to get that land taken care of. That is what we do as producers; we take care of our land. Without the money to seed this crop, we cannot take care of our land. If we cannot take care of it, that affects whoever takes that land over from us. It is just a simple matter of economics. We have one crack at today's sunshine, and that window of opportunity will soon be slipping past us. For an acreage payment of approximately $20 per acre across the Prairies, we can get that crop in the ground and that will allow you to do your job of figuring out the long-term solution to this.
It might be closed co-ops so that farmers can share in the processing end of it. We have seen that processing generates 18 per cent revenue and farmers at basic production are at 2.4 per cent. We might be able to share in that. You may be able to set up a long-term program based on crop insurance indemnities where, if you have indemnities collected in three out of five years, similar to the Crop Loss Disaster Assistance Program in the U.S., you would get paid. The people who manage to raise the crops and do not need the money would not qualify for it. Those who have the identifiable crop losses would indeed qualify. Right now, we need approximately 1.$4 billion to get this crop in the ground.
Senator Sparrow: There are a number of questions and I will cover a couple to start with and then come back, perhaps, Mr. Chairman, later.
The AIDA program had with it a number of problems. One was the actual application form. I have tried to analyze it myself and have discussed it with accountants as well, and I suppose my immediate reaction to it is that that form is a mad dog's breakfast. I accept your criticism of the application form itself.
I in turn have letters from accountants who say that the program is a disaster in itself, before we get to the disaster of the farmers.
What concerns me is that you are asking this morning for $80 per acre. I think that is unrealistic. That would mean a program of $4 billion to $5 billion. The federal government is not going to accept jumping from $1 billion to $4 billion or $5 billion for the province of Saskatchewan. We have to ask for something that is a little more realistic. I hope you would temper your requests bearing that in mind.
You also spoke about a permanent program guaranteeing $100,000 for the first 10,000 bushels of wheat. If that figure was used, I would get rid of everything I have in my operation, take 320 acres of land and farm it. We could just farm the program. If you get $10 per bushel for the first 10,000 bushels, that would be an insertion of money into the province of about $5 billion yearly. It is pretty difficult to accept that as a reasonable approach. As I said, it would be foolish for a person to have 1,000 acres of land if he can farm that from that program.
Where do you expect this $3.5 billion to $5 billion extra money going into Saskatchewan would come from? Would it come from the federal treasury or from a special tax on bread or a special tax on some other commodity? Of course, if you put that heavy tax on, say, a loaf of bread, it would be easy to import those products into the country unless we did away with free trade.
I will leave it at that, Mr. Chairman, for answers.
Mr. Thomas: I guess there are two ways in which you can approach this particular question. In the 1970s, we had two-price wheat. One aspect was all wheat used for domestic use. We could also include barley used for domestic use.
I just received this information from the Saskatchewan Agriculture and Food Statistics Branch. It clearly states that for all wheat for what they call domestic disappearance, there are approximately 6,000 bushels per every farmer in the province of Saskatchewan. In relation to barley, it works out to approximately 5,000 bushels of barley utilized for domestic disappearance. Domestic disappearance means it is utilized for either human consumption or cattle or livestock feed.
In relation to just domestic use, there are well over 2,000 bushels for every farmer in Saskatchewan utilized for human consumption. There is also an additional amount of approximately 900 bushels for every farmer in Saskatchewan that is sent to the United States as product for human consumption.
In relation to barley, 4,000 bushels of barley for every farmer in Saskatchewan are utilized for human consumption, primarily in the production of alcohol.
We are saying that that is possibly one way to address the problem. When we look at the actual cost on two-price wheat utilized for human consumption, wheat would tally out at approximately $18 per bushel, if we basically followed the old formula and brought it forward.
As to barley, I believe the figure is approximately $7 per bushel.
That would be one area we could explore, and it would almost pay for this particular type of program.
The other way that has been suggested, which would be acceptable under the GATT, is that the Government of Canada could enter into a food tax which would be like the old federal sales tax, which was a hidden tax based on the manufacturing aspect. That could be used to support a program such as this and, again, it would be acceptable under the GATT because the bulk of the production would be used for Canadian consumption and not put on the world market.
Senator Sparrow: Did you say that the amount of 4,000 bushels of barley was per permit book holder?
Mr. Thomas: These are statistics that I got from the Province of Saskatchewan.
Senator Sparrow: There is something wrong with the figures. That is 260 million bushels of barley.
Mr. Thomas: We must remember that barley is used in other forms.
Senator Sparrow: The point I am getting at is that, in terms of human consumption, we are only talking about 10 per cent of that figure being used for malting barley.
Mr. Thomas: It is utilized for other foods also.
Senator Sparrow: But that is just for livestock.
Does that money come from the livestock producer? Does the livestock producer pay for that difference in the price of that barley or does it come out of the federal treasury?
Mr. Thomas: It comes out of the federal treasury. This is the amount of grain utilized in Canada for human consumption. I am also saying that it is used domestically in the livestock industry also. They call it "domestic disappearance." Basically, it is utilized within food production or for food in Canada.
Mr. Cook: I wish to make a comment about the food tax. If you can generate the revenue at the retail end, then consumers share. In the United States, about 10.7 per cent of our gross income is spent on food, which is one of the lowest percentages in the world. However, even with the exchange on your dollar, Canadians spend a lower percentage of their gross income on foods than they do in the United States. In India, they spend about 50 per cent of their gross income on food, and many of the EEU countries spend approximately 20 per cent of their gross income for food.
As producers, we are subsidizing consumers with the cheap production of food. It would only seem fair that, perhaps, they could help to stabilize our industry with some sort of retail tax.
I have shown in my figures that, with the integration that we face with the big grain companies, they will not pay us for our grain. We are only paid in times of natural disasters such as in the 1980s, when the price of wheat went below $2. The Chernobyl nuclear disaster in Russia drove the price of wheat above $2. In the United States, the use of their economic enhancement program moneys artificially raises the market price and, because of NAFTA and free trade agreements, you are able to deliver in our markets. That helps you because our treasury subsidizes the price of your wheat. Farmers here are not able to take advantage of that price.
I like the idea of the Wheat Board better than anyone else because I do not like to be taken advantage of and I would like to have someone do a good job of marketing my wheat. However, over the last seven years the Wheat Board has given up in the neighbourhood of 40 to 70 cents per bushel, according to the USDA charts. When you consider the fact that you have a 45 per cent rail advantage in the Prairies over us in Montana and add that on to the amount, that is 85 cents to $1.10 per bushel U.S.When you then add the exchange to that figure, it is $1.20 to $1.60 per bushel of inefficient marketing. If those dollars had come to us as producers over the last seven years, on 20 bushels to the acre, that would have been significant. It amounts to almost $200 an acre that we have been unable to capture. We have subsidized both the consumers and the large grain corporations. That money has not come to us.
Mr. Thomas: We have probably all seen the statistics, but the oats growing on the Prairies are put into cereal. Basically, we receive $1.50 a bushel. If you calibrate that into a box of cereal, it works out to $170 per bushel.
The Chairman: On that point, the grain companies have made good money. We will have representatives of three of them before us here in a few minutes. They have made record profits while farmers are going broke. Today, the Weyburn terminal is fighting over the shares of how much money they have made and whether they should take a crack at it or bail out and take their money. These grain companies have made big money and certainly none of it has gone back to the farmers. They have become conglomerates themselves.
Senator Spivak: I was particularly interested in the idea of a tax on food. Some years ago, a former agriculture minister, who appeared before us during the initial hearings on the future of agriculture, talked about a fair share. It is quite obvious to anyone who can see that the benefits from the products that producers produce are not being distributed fairly.
Apart from the short-term kind of things that you are talking about, what can the government do to make it more equitable in the long term? It simply is not equitable and it casts quite a question mark over the state of competition in the food industry and free trade. Those are the things that we were always being told were the solutions for a wonderful market economy. However, if it is not working and it is not fair, that is not the case.
I understand the short term, and the questions there are more technical in nature, but what are your comments about the long term?
Mr. Cook: First, there are the tax breaks. We are in a very cyclical business. Some years we may make some money; some years we may not, because of weather conditions and things beyond our control. Market conditions worldwide is one factor -- the failures of the Asian and Russian economies, which account to a large degree for what we sell. There is also the fact that the U.S. uses food as a weapon.
Currently, we have problems with about 80 countries, which is 11 per cent of the global market. It costs U.S. farmers approximately 65 cents a bushel just because of the people that we embargo, and that directly affects you.
What will help us is income averaging. Although they threw that out a few years ago in the States, because they thought that it did not work, they have brought it back, and they let us average our income out over five years. When we make money and we lose money, we can average that out. That helps us.
You can also look at helping us with information, tax breaks, and things on closed cooperatives. North Dakota has a group of farmers called the Prairie Pasta Producers. They mill durum and they turn it into noodles. They have agreements with food processors to sell them. I showed that we could expect about 18 per cent return on food processing. They are experiencing a return rate of about 25 per cent. They manage to buy cheap durum from Canada, turn it into noodles and sell it to consumers. As a result, they are making about a 25 per cent profit. United Spring Wheat Processors in Georgia is another closed cooperative. You cannot be a consumer off the street to belong to these cooperatives. You must be an active farmer and you must own land and have an investment to belong to them.
Senator Tkachuk: That is why you call it a closed co-op.
Mr. Cook: Yes. You must be a farmer to benefit from it. You have technology and people in this country who are capable of setting up those co-operatives for us. A group tried not too long ago to do that and the Wheat Board said that they would not let those people buy the product directly from farmers; they would have to buy it from the Wheat Board.
Let us have some Wheat Board reform. If they have been marketing poorer than we have been in the United States, let us get that back up. Let us get some people in there who will use some of the features, options and tools that are available to get that money to the farmers. If they do a good job of marketing our wheat, we will all do better and you will have not have to subsidize us.
Senator Spivak: Do you have any thoughts about restrictions on the sale of land? We visited Finland, for example, where the forestry industry -- comprised of huge companies that are very profitable -- is not permitted to buy the lands of small woodlot owners.
If you see a future in which agribusiness will buy up all of the land in Canada, do you see any policy for government to restrict the sale of those lands?
Mr. Thomas: You will have an organization addressing you here in the future that has gone into agribusiness or corporate farming. In Saskatchewan, the average age of a farmer today is 60 years of age. That number is growing fast, because young farmers are leaving agriculture. Every year we gain approximately two to three years in that age aspect.
As has been pointed out, farmers will have to sell their land at rock bottom prices, because that is the only way they can get out with any dignity. If corporate farming were to come into Saskatchewan right now with the right kind of dollars, they could buy the whole province and we would probably sell. That is what is on the books for Saskatchewan.
Senator Tkachuk: Are they not forbidden by law right now to do that, unless they live in Saskatchewan?
Mr. Thomas: I live in an area that has a large amount of German and foreign investors. They do not live in the province. They have one family member living in the province and that is it. There are ways around it.
Senator Tkachuk: They are getting around the laws.
Mr. Cook: I wanted to address one more thing about corporate agriculture. We hear the term GMO, genetically modified organisms. The large companies have used GMO to increase the amount they can charge us for seed by 400 to 1,000 per cent. If they could do it tomorrow, they would have hybrid wheat so we would not be able to use seed out of our bins. They want us to purchase every bushel from them. That would lock us into buying the chemical from them to spray only that crop. We are really getting handcuffed here. It is an extremely dangerous situation with which we are faced. I do not agree with it. They are showing us every way that they can squeeze a dollar out of us. You can only use one chemical. If you use it, it would be cheaper for you to produce. But the input costs are so high that we cannot afford them.
Mr. Thomas: There is one product for canola that costs $142 per acre.
Senator Whelan: Mr. Cook , listening to your presentation, the plight of the farmers sounds worse than anything I have ever heard before, when you consider that the rest of our society is living on a pretty high plateau. I have heard it referred to as the Asian economic flu -- the economic flu that we got from the Asian Pacific. I talked to the new President of the Chrysler Corporation, who is here today for lunch with members of Parliament. They have not suffered one iota because of this problem. Yet the most important producers, and you stated it so well, the producers of food, get it right in the forehead. The economists seem to accept this as part of that ancient law of supply and demand.
Mr. Cook, you farm in the United States. I read an article the other day which pointed out that the U.S. Secretary of Agriculture is suggesting that they go back to their old wheat system of supply management. You use the term "conservation," as the Europeans do. We had a program called LIFT, meaning "lower inventory for tomorrow." I was more or less against that at the time. We only used it, if you remember, during one year, because then we had to give the farmers tax breaks because they had wheat grain stored on their farms for three or four years without any compensation at all. We finally had to change the law so that they could deliver it, because the world demand for grain became so great.
I have a clipping from yesterday's paper, which says that genetic engineering starts to reap harvests. The writer says that he sees corn plants that kill their pests, vegetables whose oils contain less cholesterol and bananas that fight infection. The article says that all those biotechnology wonders will make real money.
Do you know who said that? You all know him very well. He is a former Minster of Agriculture from Saskatchewan, Lorne Hepworth. But he is in the business of making money instead of helping you, as far as that goes.
I have strong reservations, as some of the other members of the committee do.
We talk about where you can get the money. We all wonder when we look at the profits of the grain companies and the cereal manufacturers and the meat packers, especially in the pork industry. I think your figure was the lowest price in the States for 60 years. The consumers have not got any benefit of these low prices, or hardly at all. There is no significant lowering of any of those commodities that they buy in the stores.
If anyone is to get any money for you, I can think of one place we could go to right away; we could go to the grain handlers. UGG is a big stockholder company; Saskatchewan Wheat Pool is another big stockholder company. They will make lots of money in that system. Perhaps they should share that with the farmers, because farmers do not have any money to throw around and buy shares at the present time.
I want to ask you a question. I have strong reservations about globalization. Today, the world is not only in economic turmoil; it is in turmoil with wars, and is worse off than it has been in decades. Do you have any feelings on the effect of globalization? Everybody is talking about globalization; I call it "gobble-ization."
The figures you gave us show how much of the economy the food companies control and how much chemical companies really control. And then there are the processors and retailers as well. I saw a figure the other day that said that by the year 2003 there would be four or perhaps five large companies controlling over 80 per cent of the food business.
Mr. Cook: Those are not my numbers. I wish they were. I am not that brilliant a person. I read a few things and I clip a few things and I put a few ideas together. I believe it was a farm journal editor for a large farm paper in the United States who said that the crisis of the 1980s in farming was caused because we stuffed $9.3 billion into Asian economies with poor banking practices. We built up their economies and they became the areas that were going to buy and eat all the food that we could produce, because they had the people. When the crash happened there in the 1980s, we saw what it did to the world price of wheat. It really depressed it. We are now in the 1990s, about three years past the Thai-Baht incident in the Asian market. Instead of $9.3 billion, we stuffed about $93 billion plus into those economies, with their loose banking practices. We built their economy up again, but when somebody noticed that something was not going so well and decided to look at the books, it was found that there were no books. Boom! There goes the money and there go the exports. We fed our own exports by giving them money. When that market disappeared, we suffered.
We need a stable and sustainable agriculture in Canada and the U.S. That means that what we produce today can be produced tomorrow with no injury to the environment and no injury to the people who benefit from those products.
Under globalization, we are forced to compete with the fellow down in Brazil who can throw out a match and torch off rain forest and seed it until the land becomes so barren it will bake as hard as brick and they are no longer able to farm it. When talking globalized agriculture that is what we have to compete against. You are talking about low cost. When those products come here, we have to compete with them at that low cost. We cannot do that and be sustainable. However, we need sustainable agriculture, so that we can keep the land in production and we can keep the people on the land. Otherwise, the whole economy will slide down with agriculture.
Senator Fairbairn: There are so many questions here today that there is not enough time to broach them. As a preliminary comment, as of June I shall have been a senator for 15 years. During most of that time I have been a member of this committee. This story just keeps rotating, rotating and rotating, whether it is through drought periods, bad pricing or the farm debt. It has been like a solid rock there for all these years.
During this time, however, this committee, through the people who have come and gone on it, has maintained a strong supportive attitude toward the maintenance and the sustainability of the family farm.
We in Canada have not endured war nor famine on our land and so we do not have the same fierce protection of our ability to supply our own food, as do those in other countries, particularly the Europeans. This is reflected in all the negotiations of the World Trade Organization and of GATT. They have lived it; they are living it today. That ability becomes much more precious to them than it seems to be in terms of individuals and support in this country.
I listened carefully as you talked about the large corporate farmers. We have had large corporate farmers here. It haunts my recollection, going back several years, to have heard one group say that they do not believe in national borders; for them, there are no national borders any more. If that is their attitude in coming in, then the plight of the Canadian farmer is of little concern to them. I would like your views on that.
These corporate entities want to have good business and good farming in Canada; they want a productive state, but what about the wellbeing of individual farmers, such as those Saskatchewan farmers of whom you say 15,000 will not be able to plant? Will some farms actually disappear under the stresses and the strains of the present system? Is that at the heart our discussions here today? Are there forces which have become so big, through this so-called globalization, that even our individual farmers, with government support, will have a hard time surviving?
Mr. Thomas: We must remember that in rural Saskatchewan the farmers support a number of industries. If we enter an era of corporate farming, the corporate farms will buy all their fuel and bring it in. They will not buy from local dealers. They will bring in fertilizers and chemicals. They will not even buy groceries from a local grocery store. They will not market products through any other organization but their own. They will take their products to their markets, whether they are in the United States or Europe or wherever. The Canadian Wheat Board will be no more, because the corporate aspect does not believe in orderly marketing. It will destroy what we enjoy and reflect upon in rural Saskatchewan. It will destroy the total picture.
Senator Fairbairn: As we here are struggling to have meaningful hearings on the future of farming and farm policy in Canada, where is the relief? There is really a huge block there. We talk around it, but in listening to you today I find that there have been big injections of cash into the system, as there were in Saskatchewan many years ago. Still we do not seem to be able to buck the trend.
I am expressing my own concern and frustration that, in terms of food production, these are elements that strike at the heart of our farmers' struggles to survive. What is the incentive for young farmers to carry on?
Mr. Cayer: There are many reasons why we are not getting ahead. One reason is that the little amount coming in will cover last year's bills and may help some of this year's bills, but as soon as I make any money I must pay big income tax. I will not be able to pay all my bills this year. Farmers are faced with not being able to pay their bills, but yet having to pay income tax. We are not allowed to average. That is why we say that we have to bring back that averaging. It is next year's country.
Mr. Thomas: In farming we used to have an averaging program where we could carry losses forward, et cetera. We have lost that.
The acreage payment will be a short-term resolution. The government must bring in a long-term agriculture policy similar to that in United States. Their policy, which is called "Freedom to Farm," began in 1996 and will go through and include the year 2002. We are looking at a program that is in place for six years.
Mr. Cayer: We have been holding on to our farms with off-farm income. My household had off-farm income of $40,000, but it all goes back to the farm. Now I am losing more than that every year. The off-farm income is not enough.
Around my place, there are no other farmers living on the farms. In my township, six miles square, only one family is living on the farm. People in Ontario here cannot understand that. There is nobody for 6 miles. If my car quits on the way home, I have a few miles to walk unless I have a radio or a cell phone. There is nobody around.
In my community, 95 per cent of the people work off the farm. The people who are not working off the farm are keeping the farm with old money, with an inheritance or something. I am glad they have that ability, but everybody else is holding on by off-farm work. If a confectionery store owner were losing money, he would not go and get an out-of-store job to keep the little store; he would just close it down. The farmers are not letting go so easily, because of the three or four generations who have lived there.
I do not want to let my farm go. My father walked off that farm and had enough money to build a house. We are not paying him big money. He could have sold it to somebody else 10 years ago for $500 an acre. He walked off that farm with a little money and we gave him a little bit of money for the farm, but then he could not collect his old age pension. I am not sure of the details, but he could not collect his pension. Now he is living a life of poverty after 50 years of hard work on the farm. My parents cannot go on all the trips that they wanted to take. They budgeted their money very carefully, just to keep us on the farm.
If I could go back 15 years, I would not be on the farm. I would have stayed at my job off the farm and somebody else could have had the farm.
Mr. Thomas: I had a young couple come to me. She was a nurse. He worked at a profession within the city. They had $100,000 worth of RRSPs. Now, after farming for ten years, they have no RRSPs left and they are $26,000 in debt.
Senator Fairbairn: Just to go back to Senator Sparrow's comment, there is a lot more at play here than just the money. We, as a committee and as partners together, must look at other things besides cash injections. There are other processes that need to be examined. Pure cash injections are limited for the institution of government.
Mr. Thomas: As we always say, you cannot borrow your way out of debt.
Senator Fairbairn: That is right. It becomes unrealistic at some point.
I wish to remark on something that struck a chord with me; I refer to Mr. Cayer's comments about stress. I do recall the situation, not too many years ago, particularly in Saskatchewan, but in other areas too, where the pressures were so great that, as I recall it, special stress meetings and seminars were held to try to help people. There was the issue of the breakdown of families and threats of suicide. The whole thing was just horrendous at that time.
Obviously, this problem is something we all have to be very conscious of. It is not just a matter of dollars and cents; it is the human cost.
Mr. Thomas: A minister from the northwest corner of the province phoned me to tell me that he has eight families in his parish that are on suicide call. He phones them every day.
Senator Fairbairn: People who go to supermarkets do not understand this.
Senator Tkachuk: I am visiting here today. I thought I would add my perspective from my experience on agriculture policy in Saskatchewan.
In the 1980s, our provincial government had to make certain decisions -- and we made them -- to save the family farm. At that time, the province was racked by drought as well as by low commodity prices.
I agree that the program is too complicated. It should not be that way. It is not a question of inefficient farmers but of low prices. It is not the fault of the wheat pool or the UGG, who are terrific corporate citizens. Those who have held on to their shares in the wheat pool have done really well. Farmers should have held on to their shares in the wheat pool and in the United Grain Growers. We should not run around looking for enemies. We have to look at ourselves. The reason that the farmer is not making any money is that the price of grain is low. There is too much of it in the marketplace. One can buy cheap wheat and barley. It is not a very complicated situation.
The multinationals we have been talking about can buy wheat cheaply. It does not have to be bought from Saskatchewan, which is why they can buy it for approximately $2 per bushel. We in Canada have to make a commitment in terms of a national agriculture policy as to whether we want to maintain strong individual farm communities in Canada. That is what we have to do. We know where the problems are. We know it is the European governments that are subsidizing and filling up the marketplace with subsidized grains and other products. We also know that large areas of new farmland around the world are starting to be used, such as in Brazil's rain forests. Consequently, we now have too much product; that is the problem.
I do not want to listen to a bunch of people blaming everybody else for the problem. These people are looking for solutions. I agree with them. Do not say I am against using government money to help farmers. However, I do not see a lot of devils out there.
The Chairman: I have heard for 20 years that if the Europeans and the Americans quit subsidizing, it will be all over. You will hear it for another 10 years coming out of the trade talks internationally. This committee was just in Europe. I do not know whether other members who were there will back me up or shoot me down, but the fact is that they will not get off subsidies. They stand behind their farmers 100 per cent. The U.S. stands behind its farmers. I have come to the conclusion that it is time for our governments, both provincial and federal, to stand behind our farmers.
I believe you said that at the beginning of your comments, Senator Tkachuk. The second thing you said, senator, was that these big companies are not making big money.
Senator Tkachuk: No, I did not say that.
The Chairman: We just had some cost figures for a box of Wheaties; Wheaties cost $3.50 per box. The farmer receives three cents from that $3.50. You tell me if that is fair.
There are some serious problems that need to be answered.
Senator Taylor: One thing that has bothered me for some years is the price of farmland. As a general rule, you can assess the health of the real estate industry by looking at the price of lots. In any town, you can tell what the lots are going for. If it is booming, the lots are up high; if not, they are low. However, for some reason, farmland stays very stable. In fact, it increases. You mentioned $500 an acre in your area. Something is wrong when the operator of the enterprise goes around and says they are starving to death and they cannot get by, yet the price of the enterprise stays level. Someone is buying your land. In fact, you are coming in here asking for loans for young farmers to buy land. I think the same thing applies in the U.S.
What is it that keeps farmland prices level or even increasing, when farmers maintain they are going to the poor house? What is going on? Who is paying the money?
Mr. Thomas: At present, in Saskatchewan, if you want to buy farmland, you have to borrow money, and the term "service of debt" comes into play. No matter what crop you grow, you will lose money. Thus, there is no serviceability.
In my particular area, land has traded mainly because of native purchasing. It basically ran at $70,000 per quarter as a high.
Senator Taylor: When you say "native," do you mean aboriginal people? Are they buying land?
Mr. Thomas: Yes.
Senator Taylor: It is about time they started doing that.
Mr. Thomas: They bought about 100 sections in my neck of the woods.
Mr. Cayer: They are being given the money to buy it.
Mr. Thomas: Since they have stopped buying land in that area, the price has dropped to $30,000 per quarter section. It is now sitting at $16,000 per quarter section, and no one is buying it.
Mr. Cayer: The land that is being bought is being bought by farmers with paid land. The paid land and old money is what is buying the land. In my area, the youngest farmer is 33 years old. I am 40 years old now. I do not think there are 10 farmers under 40 years old in our whole area.
Mr. Thomas: I am the youngest farmer in my area and I am almost 50.
Senator Taylor: People are buying land and paying big prices. Are we just listening to the failures? Someone must be making money to pay for land.
Mr. Thomas: No, you are not listening to the failures. I have heard from different governments that we must get rid of the non-productive farmers. I worked in mediation in the 1980s where there was drought and grasshoppers in the multitudes. I heard the terminology "inefficient farmers." By the time you have gone through the 1980s with its high interest rates, drought and grasshoppers, you know there are no dumb farmers out there. They have survived 20 years through very negative times. What has kept the land artificially high in my particular area is foreign investment and native purchases, but as to young farmers coming in to buy and escalate that land price, that is non-existent. As I said, I am almost 50 years of age, and I am the youngest farmer in my area.
Senator Taylor: You would just be a kid in the Senate.
Mr. Cook: I want to address the land price issue. In Montana, land prices fell to something relatively stable, largely due to the fact that we have livestock more than crops, but also due to the fact that we subsidize our farmers. We have cash injections from our government that still allow us to stay in the picture. Up here, without those cash injections, the price of land has dropped. In 1974, we bought that land at $75 an acre. If we could get $150 an acre now, we would be doing well. With most investments, you look at doubling your money every seven years. From 1974 to the present is 25 years. If I could get $150 Canadian an acre for that land, $100 U.S., I would be lucky. That same land south of the border would be worth $300 an acre in my county, and in the neighbouring county, where there is some oil money to push it around, it would be worth $400 an acre.
We have taken that equity from farmers. That equity should be there, but because of low commodity prices and no support, that equity is gone. When we go to our bankers to get operating lines or need money to fix equipment, they say, "You do not have any equity," and they are right. It has disappeared. It is gone. We have lost half our equity in our land. We have lost half our equity in our machinery just because of the low prices. There is no support for us.
The Chairman: I thank you gentlemen for appearing. I am sure we could spend another hour on this without any problem. It has been a very good exchange this morning. I appreciate your coming and bringing this situation before the Senate committee. Thank you.
Mr. Thomas: On behalf of the three farmers here, I thank the Senate for inviting us here. We do not represent every farmer in Saskatchewan, and we will never take that title, but in the last two and a half months we have been well noted throughout Saskatchewan as representing a very large percentage of farmers, especially those who are working off the farm. In the province of Saskatchewan at present, 50,000 farmers and farm wives are working off the farm. If we could turn the farming situation around, we would have well over 40,000 to 45,000 of those people returning to the farm and, thus, creating jobs in Saskatchewan.
The Chairman: I will now call to the table Mr. Brian Saunderson, Mr. Marvin Shauf and Mr. Blair Rutter.
Please proceed, gentlemen.
Mr. Brian Saunderson, Vice-President, Agricore: Honourable senators, I am the elected vice-president of Agricore; I am also a farmer in the southwest corner of Manitoba in the Souris area. I thank you for inviting us to the meeting.
Agricore is a brand new, farmer-owned, co-operative; it was created through the merger of the Alberta Pool and the Manitoba Pool. We have about 50,000 active farmer members and over 2,000 employees. In Manitoba and Alberta, we handle over 50 per cent of the grains and oilseeds -- special crops, traditionally -- delivered to the country elevator system. Across the Prairies, 23 per cent of capacity is now Agricore capacity. Alone or in partnership, we own and operate terminal elevator facilities in Vancouver, Prince Rupert and Thunder Bay.
A large part of our business is the supplying of agri-inputs, such as fertilizer seed and crop protection products, to prairie farmers. We are a co-operative, so all our business is directed by our farmer members and farmer owners. The benefits of these activities are returned to farmers.
I cannot resist commenting on the comments made previously about the profits of the grain companies, although I forget the exact words. We do not publish our profits until the end of the year, but I know that UGG and Sask Pool publish quarterly. Those are not high profits. Every grain company is suffering a lot of hurt this year. No one will show a good bottom line on the return for their assets. I wanted to clear up that misconception, and I am sure my colleagues will as well.
The Chairman: I will intervene with a comment on that later.
Mr. Saunderson: The birth of Agricore fits in well with the approach that Canada has taken to making advances in the Canadian economy. Agricore was created to position itself to compete in the domestic and international marketplace on behalf of farmers, and we are looking forward to growth both at home and overseas. We will help farmers to produce more. With luck, we will handle higher volumes with greater efficiency. We will market and process more, and we will export more, given the right conditions. Our co-operative and our members, we hope, will thrive into the future. We know it can be done.
In 1995, the Government of Canada set a $20 billion target for agriculture and agri-food exports by the year 2000. In one year, with the help of a swing in market prices, we reached that target. Another target has been set by the Canadian Agri-Food Marketing Council at $40 billion by the year 2005 -- in other words, capturing about 4 per cent of world trade. We must be ready to meet that challenge, but we will need some help. We cannot make those significant breakthroughs without some significant changes and gains in the next round of trade talks.
We had high hopes for the Uruguay Round when it was announced in 1986. It was historic. It was the first time agriculture was included. However, as we approach the end of the implementation period, we still face insurmountable barriers to access, export subsidies, depressed world prices and trade distorting domestic programs. It is still encouraging an oversupply in certain markets. No one expected the extent to which some countries would go to use health or our environmental concerns to be a trade factor or to block exports.
As we look to the start of the next round of negotiations, we must establish as a primary goal the achievement of freer and more open access to international markets and the elimination of unfair trading practices. In addition, we must do it more quickly than we did in the last round. The last round took seven years to negotiate and six years to implement. We must get results faster than that. The negotiation period must be condensed, as well as the implementation period. Countries should be expected to implement a major portion of their commitments early in the transition period so that farmers can see a significant gain early on. Those negotiations should be conducted on as broad a basis as possible. The larger the scope, the better the chance for significant gains.
I wish to spend some time talking about what Agricore thinks should be included in Canada's negotiating position. Keeping in mind the overall objective of the achievement of greater access to world markets and the elimination of unfair trading practices, we urge the government to focus on the following areas.
First, we must make significant gains in market access. The Uruguay Round took a major step in this area when import restrictions were converted to tariffs. However, owing to the level at which some of the tariffs were established, plus the aggregation of products and the creative way that some companies have administered their commitments, we have not achieved the access we anticipated out of the last round. In the next round, we, as Canadians, should hope to achieve the maximum possible increase in minimum access commitments. Those commitments must be disaggregated -- that is, they should apply to specific products or tariff lines, rather than a broad group of commodities.
We need to eliminate the in-quota tariffs or the in-quota duties. The purpose of those minimum access commitments was to allow the importation of a certain amount of product. Yet, some countries continue to apply tariffs to that in-quota amount. The in-quota duties are inconsistent with more liberalized trade, and their application should be prohibited.
We need to achieve the maximum possible reduction in overall tariffs. We have to achieve real gains in access and higher tariffs. Some that are very high in the world should be exposed to higher cuts.
Some countries are administering their access commitments in such a way that either their commitments are not filled, or the access is skewed to favour certain suppliers. We must pursue clear and binding rules for the administration of those tariff-rate quotas.
The practice of tariff escalation must be stopped. Many countries apply a much higher tariff to value-added products than they do on the raw products. An example is the Japanese oil tariff. Canola seed enters Japan without duty, but canola oil is still subject to a very high tariff level. Refined oil is subject to a higher tariff than even crude oil. This places our value-added industry at some disadvantage.
Second, we must achieve the elimination of export subsidies in the next round. The Uruguay Round attempted to bring some discipline in the use of them, but they continue to depress world prices, even at this late stage of the last round.
Honourable senators will be familiar with these figures coming from Europe. Just as an example, the EU is currently providing the equivalent of $36 U.S. per tonne on subsidized wheat exports. The export subsidy on barley is over $78 U.S. per tonne, and the subsidy on oats is around $70 U.S. per tonne. This is allowed under the current agreement. The United States has budgeted -- although I know they have not used it -- $320 million U.S. for their Export Enhancement Program in 1999. That is a vehicle in their arsenal.
In contrast, we have completely eliminated our only export subsidy for grains and oilseeds. While we might have wanted to set a good example, what it has really done is forced our producers to compete in heavily subsidized markets without tools of their own. Export subsidies suppress world prices; there is no doubt about that; and they must be eliminated.
It is also important that other measures that we contend have become substitutes for export subsidies should be under some discipline. We are talking about export credit. It is a very useful tool for all exporters, including Canada, but it has escalated without clear rules. It could be part of a trade war.
I must say that food aid is a very commendable activity, and we support the provision of food aid to assist hungry people around the world. However, when it is used in commercial markets, it becomes an export subsidy. We were very concerned when the U.S. government purchased large amounts of wheat from its producers and then donated it to Indonesia, because in 1996 Indonesia was Canada's fourth largest commercial cash customer for wheat. We need some rules to enforce this area so it does not go into an export subsidy.
Third, the allowable spending on trade distorting domestic support programs must be significantly reduced. While the last round reduced some controls on domestic support, the U.S. and the Europeans were able to move away from direct price support, but it still allowed very high levels of spending on their own programs.
For example, and again, you have probably heard this recently, the European farmers receive an equivalent of $175 Canadian per acre just to plant a crop. In addition, the European wheat producers are guaranteed a price of $205 Canadian per tonne. That is probably over $6 per bushel. That is well above where the global trade is right now. That has resulted in the highest ever government-held stocks in Europe. The next round in the negotiations must result in maximum spending cuts in these amber support programs.
As well in the last round, they introduced the "blue box" category at the eleventh hour of the round. This is also production stimulating and we must address this kind of activity in the next round.
Fourth, sanitary and phytosanitary rules of modified organisms must be based on sound and proven science. I recently heard a trader say, "Give me a high tariff anytime; at least that is predictable." The growing use of environmental health concerns to block access in international markets is unacceptable and it is unjustified. We need clear rules that are based on science, not emotion or politics.
I have based most of my remarks on trade, but there is obviously a direct tie to farm income. Canadians do not have the support of the government treasury to compete with many of our competitors in Europe and the United States; so we must be vigilant in this next round of trade talks to achieve the maximum liberalization in trade rules. Our Western Canadian farmers depend heavily on that.
Mr. Marvin Shauf, Vice-President, Saskatchewan Wheat Pool: Honourable senators, thank you for the opportunity to address the Senate committee on an issue that is of vital importance to the agriculture industry in Canada.
I welcome your commitment to addressing these issues on an ongoing basis. The Saskatchewan Wheat Pool has more than 70,000 producer members. We recognize the importance of trade negotiations to help define Canada's role in future talks that we have around trade, because most agricultural commodities produced in Canada are dependent on trade.
I should like to provide you with a quick overview of the Saskatchewan Wheat Pool. We are Canada's largest publicly traded agri-food co-op and Western Canada's largest grain handling company. The pool handles more than 30 per cent of the grain, oil seeds and special crops delivered to country elevators on the Prairies, operates terminal elevators in Thunder Bay, Vancouver and a jointly owned facility at Prince Rupert.
While our core business is grain handling, the Saskatchewan Wheat Pool's operations include flour milling, oat processing, livestock production and marketing, pork processing, oil seed crushing, organic milling, ethanol production, barley malting and production of bakery supplies, as well as crop research, biotechnology, aquaculture and publishing. In total, we employ more than 3,000 people across Canada.
The Saskatchewan Wheat Pool is a co-operative. We have close links with our farmer members. We work closely with the organization to develop policy that benefits all the stakeholders in the system, including the primary producer. This year many of those primary producers are in a very vulnerable financial situation. In Saskatchewan, net farm income for 1998 is predicted to drop by approximately 50 per cent, to $356 million. Agriculture Canada predicts a further decrease next year to only $59 million.
Manufacturing companies are also feeling the effects of the prolonged crisis. Some companies are decreasing production levels and reducing staff, which further deepens the crisis in rural communities.
A number of areas need to be addressed to improve the farm income situation. Today, we are here to talk about one of the key issues, that is improving the international competitiveness of the Canadian agriculture food industry to ensure that we avoid situations like the one that we are experiencing this year.
As to international competitiveness, the Saskatchewan Wheat Pool firmly believes that the agri-food industry holds significant potential for commodities and value-added exports. However, for the industry to realize its full potential we need a level playing field in the international marketplace. We need improved market access and a commitment from the Canadian government to provide a sustainable level of domestic support. In combination, these factors will help to stabilize farm incomes over the long term.
Agricultural producers derive income from only two sources. The first source is market receipts earned from the sale of crops and livestock. The second source of farm income is government programs and payments. That is global.
In the past, Canada has reduced its program payments substantially, meaning that producers have had to follow market signals more closely. Producers in this country have demonstrated their willingness to compete in that marketplace by diversifying into new crops and reducing wheat acreage. As I said before, Canada has reduced its payments to producers substantially. However, our global partners did not follow suit. That has left producers vulnerable to a distorted marketplace, as well as experiencing reduced support from their government.
Instead of following suit, the United States and the European Union have continued to provide large amounts of support to their producers, which has distorted price signals and has led to overproduction. For example, as was earlier pointed out, Europeans have export subsidies that have paid up to $139 per tonne for barley malt. That level of subsidization makes it impossible for a Canadian producer to compete on a commercial basis. As a result, Canadian offshore sales for barley this year are basically non-existent.
Wheat volumes and prices are also dramatically reduced because of a similar subsidy that impacts the international price of wheat. Subsidies that tie support to production are also damaging, as they encourage producers to grow large quantities of product even though there may already be a surplus in the marketplace. As a result, commodity prices are being driven down and Canadian farmers are suffering from the impact of that as well.
To further compound the problem, both the U.S. and the EU argue that the WTO permits them to utilize unused subsidy provisions from earlier years. Europe is in the process of doing that right now. With stocks increasing, the potential exists for an unrestrained subsidy war that rivals the late 1980s and early 1990s. Canadian farmers cannot afford another subsidy war and neither can the Canadian economy. The simple fact is that Canadian producers cannot be expected to compete with the treasuries of other countries. Trade distorting subsidies simply cannot continue. The Saskatchewan Wheat Pool strongly encourages Canada to seek their elimination in the next round of World Trade Organization negotiations.
That being said, we do not want our government to remove any existing programs that assist Canadian agriculture unless and until other countries do. These programs comply with existing trade agreements and are funded at a level that is well below allowable limits for Canada.
While the Uruguay Round left both the United States and Europe with capacity to heavily subsidize exports, Canadian grain producers today are paying the full cost of transporting their own grain to export position as a result of the elimination of WGTA, at an extra cost of about $560 million per year for those farmers. At the same time, federal cost-recovery initiatives have increased costs to Canadian producers totalling about $150 million per year. These fees support regulatory changes such as the Canadian Grain Commission and the Canadian Food Inspection Agency. In addition, since 1992-93, federal funding for safety nets has dropped by close to 80 per cent.
The other countries have not made these reductions; so the two sources of income for Canadian producers have been significantly reduced, one source being the government and the other source being commodity prices, which have been reduced because of some of the export subsidies and the trade-distorting subsidies that have continued to go on in the international marketplace.
As a result, primary producers in this country are at a competitive disadvantage. The long-term consequences of lost competitiveness in agriculture cannot be ignored.
To ensure the long-term viability of our agriculture sector, it is important for Canada to ensure secure and adequate funding for infrastructure expenditures, for research, and for safety nets for producers.
Canada's safety nets should include a nationally available companion program to deal with extended and dramatic price declines or unusual weather patterns that result in multiyear revenue losses.
Producers also need additional and more secure access to international markets, reduction in tariff levels, and greater transparency in administration of tariff rate quotas. This should relate to raw commodities, consumer-ready goods and value-added products such as canola oils and meat products. Furthermore, Canada needs to focus trade negotiating efforts on developing and accessing profitable markets for the high quality products our farmers produce.
This year we have seen American producers attempt to block the free flow of agricultural products into the United States. They see Canadian products coming across the border in trucks -- whether it is livestock, canola or grain -- and demand that their government block our products from entering the United States. They fail to notice that U.S. product is also coming into Canada, and they need to realize that trade has to work in two directions.
We must also improve the dispute-settling process and ensure that the new agreements negotiated are put into place quickly. Canada moved very quickly to adopt the conditions set out in the Uruguay Round, but, as I said before, other countries did not follow suit. For trade agreements to work, everyone needs to follow the same rules and those rules need to be implemented at the same time.
Beyond WTO agriculture negotiations, several other trade-related issues that arise from multilateral discussion will impact on the sector. Canada will face pressure to accept restrictions on the operation of the state trading enterprises such as the Canadian Wheat Board. We must resist being drawn into making such concessions. The Canadian Wheat Board is a key component in the Canadian marketplace and numerous investigations into the board's operations have always shown it trades fairly.
Canadian producers cannot afford to accept restrictions that would place them at a commercial disadvantage, nor can they afford to limit the board's ability to operate a price pooling system.
Food safety will gain prominence with consumers in years to come. Countries must not be allowed to use sanitary or phytosanitary barriers to block access to their domestic markets. Sound science, not emotion, should determine market access.
Further developments arising from both the WTO Committee on Trade and the Environment and international negotiations related to the biosafety protocol will also impact Canadian agriculture. These issues must be addressed from the standpoint of ensuring an internationally competitive agri-food industry within Canada.
I would like to close by stating that Canada has what it takes to compete in a global environment. We have a tremendous ability to produce food in a clean environment that is respected internationally. At this point, we need to adopt clear, universally applicable trade rules that will result in a more predictable, stable trading environment from which farmers can benefit. Canada must not agree to other countries using trading tools like export subsidies that Canada, itself, has no intention of using.
The Saskatchewan Wheat Pool and our members rely upon the economic opportunity generated by the international trade and will continue to work for positive change.
Thank you for the opportunity to be here today.
Mr. Blair Rutter, Manager, Policy Development, United Grain Growers: Honourable senators, I would also thank you for this opportunity to appear before you.
United Grain Growers was founded in 1906 as a farmer co-operative. Seven years ago, UGG farmer delegates voted to take the company public. Our shares are now traded on the Toronto and Winnipeg stock exchanges.
UGG operates about 140 grain-handling facilities, eight feed mills and numerous farm service centres throughout the Prairies. We also operate two port terminals at Thunder Bay and one at Vancouver.
UGG is governed by a 15-member board of directors, 12 of whom are elected by farmers. UGG's policy positions are formulated and driven by UGG farmer members. What I say today reflects the resolutions and views put forward by those members.
Your committee's decision to hold hearings on this subject is timely and relevant. In particular, it is important to emphasize, as you have done, the linkage between trade reforms and farm income. Ultimately, the success of Canada's negotiations in the next round will be judged on whether greater prosperity is restored to the farm sector. Throughout these negotiations, the government must ensure its eye is firmly focused on improving the farmer's bottom line.
At UGG, we see expanded and liberalized trade as key to restoring a viable and more prosperous farm sector. UGG has always been a strong advocate for free and fair trade. This position was reaffirmed at our annual members' meeting held last November, when 170 farmer delegates unanimously passed a resolution urging UGG, and I quote, "...to fight for a level playing field so Canadian producers can compete in the global market."
As you can guess, our members are serious about trade liberalization -- and so they should be. Canada's prosperity is very much linked to a liberalized trade environment. For the Canadian economy as a whole, exports account for almost 40 per cent of our gross national product. In agriculture, the importance of exports is even greater. Over the past five years, agri-food exports have averaged 65 per cent of gross farm receipts.
As you are aware, the growth in farm incomes has not kept pace with the growth in agricultural exports. While there are likely several explanations for this, we believe that the combination of subsidies and other trade-distorting activities is one of the key factors in driving down farm prices, particularly for grains and oil seeds.
For the remainder of my presentation, I will talk about those issues that we think ought to be the priorities in the next round of trade negotiations.
Our first priority is the elimination of export subsidies. As well, the WTO should establish clear rules and disciplines governing food aid and credit terms so that these programs do not become disguised export subsidies.
As noted in your committee's report on its fact-finding mission to Europe, the EU continues to make extensive use of export subsidies on wheat and wheat flour. This is also true for barley, where export subsidy levels have routinely been in excess of $100 per tonne.
The problem is not confined to wheat and barley. Western farmers are also being hammered hard by EU export subsidies on oats. This is particularly frustrating, given that we have seen tremendous growth in oat exports and domestic oat processing since oats were removed from the jurisdiction of the Canadian Wheat Board some 10 years ago. Oat exports have averaged almost 1 million tonnes annually over the past five years, compared to an annual average of 150,000 tonnes in the last five years under the board. We have also seen substantial growth in domestic processing of oats and steady growth in Canadian oat acreage over the same time period.
The success of our oats is jeopardized by the high level of EU subsidies. In 1998, the EU sharply increased the subsidized tonnage and dollar subsidy level. Virtually all of these subsidized oats are shipped to the U.S. These subsidized shipments are displacing Canadian oats and are driving down North American oat prices. In 1998, we saw Canadian exports to the U.S. drop by about 400,000 tonnes. With a corresponding increase in EU exports to the U.S., it would appear that these subsidies are continuing unabated. For the current crop year, export subsidies have been authorized on 521,000 tonnes of European oats at even higher subsidy levels. The issue of these EU oat subsidies was included as part of the Canada-U.S. Record of Understanding signed last December. However, we are not convinced that the Canadian government is doing all it can to address the issue.
The second priority is to address trade-distorting domestic farm support programs, particularly those in Europe and the United States. While these programs may fall within their WTO commitments, they often encourage the overproduction of certain crops to the detriment of all other grain producers. For example, in Europe, the intervention prices for wheat and flax are such that they are encouraging farmers to grow more of these crops. This overproduction leads to lower world prices and hurts export opportunities for Canadian farmers. In the U.S., the situation is similar. For example, the loan rate for soybeans under their LBP program is well above the prevailing market price. As a result, U.S. farmers are likely to plant more acreage to soybeans than they would otherwise. The higher expected soybean acreage in the U.S. is contributing to lower prices for canola here in Canada. The increase in soybean acreage will also lead to increased soybean supplies, which means that the price recovery for soybeans and canola will take much longer than it would otherwise.
The U.S. crop revenue coverage program for winter wheat, spring wheat and durum also distorts production and trade. The high support price for durum is expected to substantially boost U.S. durum acreage. This, in turn, lowers future prices for durum in both the U.S. and Canada. To the greatest extent possible, these kinds of production- and trade-distorting programs must be eliminated or, at the very least, be decoupled so that income support is paid directly to farmers and is not tied to specific commodities.
A third area of concern is state-trading enterprises. In our view, state-trading enterprises, whether importers or exporters, should be subject to competitive market disciplines. The only effective way to achieve this is to make participation voluntary.
We firmly believe that prairie farmers should be free to sell their own grain to the buyer of their choice. Compulsory provisions of the Canadian Wheat Board Act prevent farmers from getting higher prices and limit their ability to form a contract or engage in other profit or risk-management activities. A recent independent study conducted by the Organization for Western Economic Cooperation found that the price that Saskatchewan farmers have been receiving at the farm gate have been much lower than the prices received by their counterparts in North Dakota and Montana. In 1995-96, the estimated Saskatchewan farmers alone suffered a loss of $500 million. The results of this study are consistent with the findings of a study that UGG had undertaken three years earlier as part of the grain marketing review process.
In addition to barley profits, it should also be recognized that Canada's intransigence on the wheat board monopoly will make it much more difficult for us to gain concessions from others. How can we legitimately argue for reduced government intervention on the part of others when Canada remains unwaveringly committed to state intervention on wheat and barley? Quite frankly, we do not expect the government to change its position on the monopoly. However, we hope they begin to appreciate that clinging dogmatically to this marketing model entails significant and mounting costs to the rural economy in Western Canada.
The final priority that we wish to raise with you is to ensure that non-tariff barriers are not used arbitrarily to block market access. For example, with respect to genetically modified organisms, we wish to ensure that any restrictions are based on sound science. In this regard, we are concerned about the lack of progress in gaining access for genetically modified canola into Europe. Genetically modified soybeans have been permitted into the European market since 1996. However, for whatever reason, Canadian trade negotiators have not gained acceptance for genetically modified canola. This should continue to be a priority.
In a similar vein, UGG is also concerned about recent attempts by the State of North Dakota to introduce legislation that would prevent the import of any Canadian agriculture products that utilize pesticides that are not registered in the United States. While the legislation was vetoed two days ago by the state governor, the action suggested that efforts to harmonize pesticide registration with the U.S. should be accelerated. We might also add that the Canadian government's decision to seek NAFTA consultations on the matter likely played a role in the governor's decision to veto the legislation. We commend the Canadian government for its quick response in taking this pre-emptive action.
To summarize, UGG believes that the manner in which international trade matters are resolved will have a tremendous bearing on the prosperity of farmers and other players in the industry. Specific objectives should include the elimination of export subsidies, the elimination of trade-distorting domestic policies, greater disciplines on state training enterprises, and improvement on trade rules to ensure that trade barriers do not represent unwarranted restrictions on trade.
Canadian farmers have demonstrated their ability to compete and compete profitably in open and freely traded markets. We urge your committee to take whatever steps it can to liberalize world trade. Thank you for the opportunity to share our views.
The Chairman: The meetings that the committee had in Europe indicated clearly to me that they will not remove the subsidies. We heard that and we heard it repeatedly. Since then, I have had an opportunity to talk with one of the representatives to the trade talks out of Austria. He said exactly the same thing, namely, "We will not get off the subsidy."
We have heard that for 20 years. Will we hear it for 10 more years? We know what the outcome will be if we do not. Mr. Fisher told us in meetings with him that the subsidies from the European Common markets amounted to $71 billion. That is a lot of money. We are facing a major problem here. We hear from groups such as those who are before the committee today that that is the answer. I have practically come to the conclusion that perhaps Europe and the U.S. are doing the right thing and it is time that we look at it. If the talks in Seattle and the year 2000 planning for the next five years is not positive, we will have big trouble.
I do not like to be negative, but I do not see any hope in this situation or any bright lights. That is a comment and not a question, but I will ask Mr. Shauf to respond.
Mr. Shauf: Two things are included in your comment. First, there are subsidies that are far less trade- and price-distorting.
The number one price-distorting subsidy internationally is export subsidies because they put things on sale. It pulls the price down and attracts purchasers.
The second thing is that Europe has agreed by both price and volume to decrease those subsidies. They never said they would get right out of them. They said that they were prepared to decrease them in two ways through the WTO agreements. That was their commitment, they have also made some commitment to restructure some subsidies. We are saying that Canada needs to continue to work on those issues to be able to make things better for the Canadian producers.
Canadian producers have a huge ability to produce food in a small population base within this country. You heard some numbers earlier on. It is very difficult for Canada to compete on a subsidy basis with the other countries because of our large ability to produce and our small population.
Canada has no choice but to work aggressively on those issues in conjunction with whatever subsidy vehicles we are able to put together in Canada. Our agricultural producers must be able to compete in the international marketplace because it exists now.
Senator Whelan: I first wish to thank the three representatives for their well-prepared and presented briefs. I am sure that they all have some knowledge of my history. When I see history repeating itself in the world economic situation, I go back to a man by the name of Mr. Katz who was the chief negotiator for first the Democrats, then the Republicans and then again for the Democrats. He has been around Washington ever since I can remember. He said some months ago that we have a surplus and that we must have more free trade. He said that we must get rid of our surplus.
I dealt with three U.S. Secretaries of Agriculture, Butz, Bergland and Block, for nearly 12 years. They did not care much what they did to anyone as long as they got rid of their product. They used to say that we were piggybacking on top of them with their programs.
Mr. Glickman said the other day that he was going to go back to those programs because they work better than the new ones. Many of the congressmen and senators are considering them seriously, too.
Do you think they will get rid of the export subsidies? The Canadian Federation of Agriculture seems to be pounding on that. Do you really think that is the sole answer?
I can give you the rest of my questions, if you would like. In terms of domestic subsidies, you heard earlier that we had subsidized canola. One of those big companies researched lentils, too.
In essence, you could say that it was a subsidy to agriculture because it came from the treasury. However, we are now the lentil capital of the world. They have moved in with this new amazing canola that will be the saviour of all people.
I believe it was Mr. Shauf who said that you do not want these artificial trade barriers, that you want good science. People have said that Senator Whelan is against biotechnology. I have said it before and I will say it again; I am not against good biotechnology, I am not against good science and proper testing.
You probably heard me quote earlier from the former minister of agriculture in Saskatchewan who said that genetic engineering is the place to be. You do not force something like that on society. Do not tell me that is a trade barrier.
With rBST, for instance, we found that the lack of testing, manipulation and all of these things were so horrible. It is hard to believe that this occurred.
We had a significant amount of public research. We spent a significant amount of money on canola, lentils and the new varieties of wheat. That was done by Agriculture Canada working with some of the provinces and universities. We developed a very good system.
Also, when you spoke about this new world order, I believe it was Mr. Saundeson who said that we will come out of this. I remember the first bad year we had in beef, my economists told me not to worry, that there is one bad year out of five. However, we had four bad years out of five. Then we had five bad years out of six. They had no answers.
Our economists are taught a certain philosophy in economics and all the people that we have hired today have that in their mind, that they must abide by what they have been taught because nothing else will work.
I want to ask you, do you really believe that we can overcome the terrible chaos or the collapse that took place in the Asia-Pacific area? That was the place to be. Those were the economic drivers. Those were the people who were doing so great. They were telling us that three years ago in foreign affairs.
The greatest economic sector in Canada is the auto industry. It has an $11 billion surplus, but it is not free trade. It is under the Auto Pact or we would probably not have an industry here at all. It is not free trade.
Do you believe that the people who handle, process and retail our food products are making too much compared to the farmer? Do you believe that we acted too quickly in reducing our subsidies, such as the Crow rate, et cetera?
I have many other questions. I know the time is limited, but those are my few comments at the present time.
I remember going to the OECD meetings. The current President of France was the Minister of Agriculture then. Some of the same things that were said in the 1970s were said again in the 1970s.
You criticized the government for the stand it took on different things. I can ask where the farm organizations were when they were reducing these subsidies? Did they go along with it? Did they believe that they should just cancel all our subsidies, et cetera, because they were going to be the pure people in this World Trade Organization, in this new organization about which I have so many reservations?
When people from our government and our main negotiators say that we had 131 countries against us, over 75 per cent of those countries could not trade a chicken, yet they are telling us what we will do and what we will abide by. I do not know if any of you were at those trade negotiations. I was not; however, I wish I had been.
Mr. Saunderson: I do not know if I can cover all the issues you touched on, senator, because, as usual, you covered a significant amount of territory in a few minutes.
I will address the trade subsidies and the comment about the optimism that I showed in saying that we will come out of this current situation.
My optimism was based mostly on my confidence in Canadian farmers to be efficient and adaptive producers of food. We faced tough times and challenges in the 1980s, too. Some tough changes came out of it. However, I am sure that everyone would agree that farming at the end of it was more efficient than it was at the start of the 1980s.
I would echo most of my members in saying that, sure, the challenges are formidable right now and many of our members are not very happy now as they face seeding. However, most believe that somehow we will come out of this and that we will adapt to it.
On Asia, that is no doubt cyclical. The Asian countries will come out of their slump and will buy more of our exports in the future. I do not think that there is any doubt of that and there are signs of it happening now.
Regarding profits in handling and processing, I am not sure what we can say to convince you, other than to show you the books at the end of the year. The profits are not acceptable in our companies right now. The return on the sizeable investment we are making for the benefit of farmers, by the way, is not adequate this year.
The profits in handling and processing are not there. None of the companies achieve our posted tariff -- put it that way -- on handling Wheat Board products, for example. There are so many other factors that enter the competitive picture. I will leave my colleagues to make further comments on that.
Where were we when we lost the WGTA and the Crow rate? Many of our organizations fought long and hard for that retention. We all know that its loss was led mainly by the Department of Finance. Deficit reduction deep-sixed the WGTA.
Finally, are we hanging our hat too much on reducing or eliminating export subsidies? That is not the whole answer; you are absolutely right. However, a large part of the world community is speaking in the same way about export subsidies. The Europeans are probably the only ones off side. The Americans agree that we must eliminate export subsidies.
There is a significant chance in the next round to gain support among the players of the WTO on eliminating export subsidies. That is why our organization, CFA, is hitting that one very hard. We cannot let up on that one.
There is no doubt that domestic support programs are a large part of it, too. Whenever producers are paid money from their government that masks market signals, it ends up in an oversupply of those products and we must pay much attention to that.
Mr. Rutter: I will comment on two or three areas. We consider export subsidies to be the most damaging of all the types of trade-distorting vehicles that are out there. There is an opportunity in this round to make real progress here because the U.S. has put their export enhancement program on the shelf. They have had it on the shelf for the last three years, since July 1995. They have only used it once since that time and that was as a retaliatory measure for shipments of 30,000 tonnes of European-subsidized barley that they shipped into California. The Americans retaliated with a 30,000 subsidy shipment into markets that are usually served by the Europeans. That did bring about a truce. The Europeans have not subsidized barley since that time and the Americans have not used their export enhancement program again. We have an ally here in getting export subsidies eliminated.
Further to Senator Gustafson's comments, I fully agree; I do not think we will get the Europeans to stop subsidizing. The key thing is that these export subsidies and these production-distorting subsidies should be converted into direct payments. That should be our main objective. We want to keep them from distorting trade.
If they wish to give large subsidies to their farmers or any of their citizens, that is their business. We should draw the line on trade-distorting payments.
Senator Whelan mentioned the subject of research. I agree that government has a strong role to play in public research. We would like to see more of that. Private industry is also doing a significant amount in this regard. Our company has two scientists on staff to develop Linola. In the last five years, we have seen acreage of Linola increase quite significantly in Western Canada to over 100,000 acres.
These two scientists on our staff are doing tremendous work in developing this crop and making it an attractive alternative for farmers. There is quite a bit of private research that is filling the gap that has been left on the public side.
Senator Hays: In the next round, should we seek to negotiate on a sectoral basis in agriculture as opposed to a comprehensive basis? Should we try to achieve a results-based agreement so that we are not tied to commitments if the expected results do not actually occur? What do you mean by a short round? How long should it be?
Mr. Saunderson: On a short round, I believe that the indicators are now that it would culminate in 2004. That was the intention of the last round but, as we all know, it was extended and extended. There should be discipline in countries in keeping to the commitment of four years.
Senator Hays: So four years is sufficient?
Mr. Saunderson: Yes.
Senator Hays: We start at the end of this year with services in agriculture, which are sectors. The agreement in the end is a comprehensive one, but we could seek to promote the idea of a negotiation on the agricultural sector. It seems that some think that we would be stronger on that because we have done things that we should do and we do not think others have done. That has produced a poor result for us.
We want to start out by asking for what we negotiated in 1994. However, the minute it is tied to services, manufacturing, exports and so on, then, as Senator Whelan says, we face being the only country out of 134 that is holding out.
Do you think we should try, because some other countries might be interested in doing it as well, to deal with agriculture sectorally? On results-based agreements, we agreed to do certain things, as did everyone else. However, the agreement was rather full of holes. Blue boxes, direct payments and so on were allowed.
Everyone had a general expectation at the end of the Uruguay Round that it would produce freer trade and that certain things would happen. There is nothing wrong with attempting to negotiate on the basis of results.
In other words, we may not achieve access, for whatever reason, in the case of the fill rates on the access granted because of in-quota tariffs or because of other means. We do not have good fill rates on the access that we negotiated. Apparently, we gave that access.
Those are my three areas of concern.
Mr. Saunderson: With regard to the sectoral issue, we would approach that by asking if it should be a narrow round, a wide round or a comprehensive round. Even though the negotiation will probably be on a sectoral basis, if we make it a wider round then we can make the gains we need to a greater extent on a sectoral basis.
For example, we might not make the sectoral gains on access into Japan, unless they get some of what they want in intellectual property gains. That is why I say that there must be crossovers, even though they will be negotiated separately.
I was the one who made the comments on leaving it up to market access commitments. Obviously, in the last round, the WTO did not have the teeth to discipline the countries that were not allowing that 5 per cent minimum access. That is something we must look for in the next round. Somehow there must be some enforceability on those countries that are not living up to their commitments.
Senator Hays: For instance, if we do not achieve the negotiated access, then our commitment to provide access might be reduced or changed. Do you support that idea?
Mr. Saunderson: You are saying that we should change the rules in midstream and in the middle of an implementation period.
Senator Hays: If I heard the witnesses correctly, they used the term "fill rate of access granted," that is, the 5 per cent or whatever it was that was negotiated. They used as an example the United States giving butter oil options to Jamaica as a way to meet their obligation to provide access; but it was not really a serious attempt to fill the access that was available and that was negotiated as part of the Uruguay Round.
Apparently, Canada has filled the access by giving everyone who has the potential to export into this market an opportunity to do so. If, four years or so after the fact, you see that that has not been achieved, should the negotiation include a provision which states, "We did not see the level of access fill that was granted by the United States. The Canadian position is that it is only 50 per cent or whatever the fill rate of the other parties was." I do not have time to refine this point.
Do you support in any way the idea of a results-based agreement? Much of our experience today four years after the fact is a disappointment with how the blue box worked. Green programs and direct payments are also a disappointment. The fact is that really nothing has changed. We have an agreement. However, we left enough options for the countries to do the things that they were doing anyway with, it seems, the same result in terms of more commodities than we can clear on the world markets.
Do you support the idea of a results-based agreement? That is to say, we are tied to do certain things only if the results we negotiated materialize and we are forgiven our obligations if those results do not materialize.
Mr. Saunderson: I think I capture your question now. You are asking about legitimizing in the round that countries could retaliate two or three years down the road, if they see other countries not fulfilling their commitments.
Senator Hays: I am asking whether they could retaliate or be forgiven obligations that they have made.
Mr. Saunderson: That could be done by reducing their access.
Senator Hays: That is just one example.
Mr. Saunderson: I do not agree with that. Commitments are made when a round is negotiated. I would expect our country and our producers to live up to those commitments. It is when other countries do not live up to theirs that I say there must be some teeth in the WTO to discipline those countries. I do not think that countries would be moving in the right direction if they start reducing their access commitments just because the global community is not living up to theirs. I would prefer to have some kind of discipline imposed by the WTO rather than us not living up to our commitments.
Senator Whelan: You heard the other witnesses today talking about the package that the government put forward to help farmers. Do you think it is adequate? Do you have any comments to make about it?
Mr. Shauf: Will it be adequate to meet the needs of farmers in Western Canada? I think you would find general agreement that it will not do that.
Mr. Rutter: In retrospect, you can look at the design of this program and think that the money could have been delivered to farmers in a much better way. The NISA vehicle probably would have provided a better vehicle for getting money into the hands of farmers more quickly.
Mr. Saunderson: I can only add that it will not be adequate to address the needs of certain farmers in certain areas.
For example, if a farmer or a farm had suffered some very poor years through drought or some adversity in 1996-97, for example, then he will not have the reference period built up to trigger a 30 per cent drop in payment. He might need the payment worse than anyone, but he will not qualify.
Senator Taylor: Your main income is derived from grain and oils. You have been asked here because we want to get your input on what we should try to do in the next round of trade talks. We have just come back from Europe where we saw what they want to do in their trade talks.
Concerning the 5 per cent double-cross that people talk about, they do not think they double-crossed us. I think that is a case of our negotiators not being as sharp as they should have been -- or that theirs were sharper.
The committee is greatly interested in hormones, genetic modification and subjects such as these. The Europeans tried to give us the impression that they felt quite strongly that we were asleep at the switch when it came to labelling.
I think they have backup for that. They feel that it is incumbent upon the consumer, in Europe or anywhere else, to buy your product just because you say it is okay scientifically. They want to make the decisions, after mad cow disease, thalidomide and everything else that has happened in the last 25 years, on so-called genetic modification or hormone injection. The consumer is starting to say, "The hell with that noise. We do not care whether you produce a car or a bushel of wheat or canola, we want you to label it, and we will decide whether it is healthy to eat." North American producers, whether they produce beef or oil, seem to be insisting that it is scientifically fine, so we should take it. We need to wake up and smell the coffee, although we do not grow any here, and realize that the consumers of the world are saying, "No more."
You cannot just put in genetic modification and hormones and things like this without selling it. Certainly you can sell it. If your children were going to grow a foot taller and be football players and acquire good-looking mates, I am sure everyone would buy genetic modification, but it would be up to you to sell it. Time and time again I hear, "You prove to me that it is scientifically bad, and we will take it out." They do not want to do that. They want us to make the decision.
My next question is on negotiation. I want to see just how selfish you are. What tradeoffs would you make? We are going to an agreement. You will not get everything you want. What do you want to throw out to the wolves? Supply management? Do you think we should give up on some part of Canada in order to get a better access on grain?
Mr. Shauf: In regard to your first question, the consumer will have the power in the marketplace, but it is difficult to recognize a sincere fear of genetically modified plants when one genetically modified plant is acceptable because we need it and another genetically modified plant that we happen to produce a great deal of is not acceptable in our marketplace. It is difficult not to recognize that as a trade block.
Senator Taylor: Their argument against canola was quite valid once we heard it. It had nothing to do with consuming or eating. It had to do with planting it. If you grow a crop, that is not the end of it. It blows all over. They have small fields over in Europe, and so people in the neighbouring field were suddenly turning up with this beautiful yellow weed that would not respond and could not be killed with Round Up. It had nothing to do with the consuming. Farmers said that they were getting weeds, and that sounded pretty logical. We would not be happy with that either if our fields were that small.
Mr. Shauf: There is a different issue around production and producing than there is around consumption. Many of the issues are going to be whether canola goes into Europe or not, but they have been accepting for consumption genetically modified soybean since 1996.
Senator Taylor: But it does not volunteer.
Mr. Shauf: If you are accepting it for human consumption, it will go into human consumption, and the volunteering issue is not an issue. If you round out the whole argument, there is a trade issue relative to genetically modified canola. That is a trade issue because they have the capability of growing European canola.
Senator Taylor: What about beef that has been treated with hormones?
Mr. Shauf: There may be some different arguments with the hormones, and I am not as familiar with them.
Relative to trading off different commodities within Canadian agriculture, I do not think that there is any win in doing that. Canadian agriculture needs to stand together in the international market and in international negotiations. We need to achieve the best deal that we can for each. If we start trading each other off, we will come out of it where we will all be losers. Canadian agriculture needs to be strong and must stand together. We have many of the same issues in the marketplace. There is no win for trading each other off.
Mr. Saunderson: If I could just add to Mr. Shauf's comments on the GMO issue, we would agree that the customer is always right. Right now we are shut out of Europe on our canola because of the GMOs, and we recognize that fact.
The research is ready to go to a GMOP, to use much of the genetics that went into canola, and the industry collectively said no because of their experience in Europe. Even though that technology was there, they said not to go that route and to close ourselves out of a European market. Therefore, until the marketplace is ready for it, we must put a few brakes on.
Having said that, we must also get the story out there that some of this technology now on the canola side, for example, actually results in a less active ingredient of chemical on the soil. If that is not of concern to all consumers, I would be very surprised. Some of these other sides of the story must be conveyed to them. That would be an asset from the consumer and the farmer point of view in terms of advancements and technology.
On the tradeoff question, I addressed some comments in my speech. I do not think that we should play by any different rules as we approach this round of trade than other players. We are not the only country with sensitive domestic industries. Other countries have them too. I will use, for example, the United States. What about their dairy, sugar and peanut industries? They protect those as fiercely as we do some of our commodities in Canada, but they are still out there saying that we must eliminate tariffs.
Let us play by the same rules. Other countries protect, too.
Senator Spivak: I can understand that labelling may be bad for your business, but it is not a non-tariff barrier. To put that position forward stirs the pot more in terms of what people think. Your consumer gets a significant amount of labelling, more so in the United States than here, on many types of ingredients in every product. To suggest that we should not label whether an organism has been genetically modified as a non-tariff barrier is not the correct way to go at this problem, especially since the last biodiversity convention.
I would like your views on that convention. Most countries were absolutely for the labelling.
I believe there were 136 countries and only five, which house the big multinational life-sciences companies, opposed the labelling. I do not think you can win on this issue when the Internet just shoots around the world and there is increasing antagonism to it.
In terms of the issue of genetic modification, there are huge companies with goals to sell more products, and when some of those companies' results are spotty they know that sometimes science is on the side of the consumer, and not always on the side of their product. Therefore, how do you propose to navigate through this murky area? By that, I mean in terms of the genetically modified organisms. There have been scientists in the United Kingdom who have had very bad results. Unfortunately, I cannot tell you what the tests were in terms of first-time genetically modified organisms. Therefore, it is a question of how you will address this issue? To simply say that the customer cannot have labelling will not do.
Mr. Rutter: I do not think that any of us said that we have a problem with labelling.
Senator Spivak: It is right here in the Agricore submission. It says that these kinds of labelling requirements raise consumer concerns and serve as non-tariff barriers to trade.
Mr. Rutter: I should only speak for myself. We have nothing to hide in terms of labelling. If that is what consumers want, then we should endeavour to provide them with it. However, it has to be recognized that labelling can lead to segregation, which in turn leads to higher costs. As long as the consumer is prepared to pay for that, we can do it. We have seen this happen on the organic side. Organic produce is labelled "organic," however, since the farmer has a much reduced yield, he needs to raise prices to compensate for the loss. Consumers will have to pay for the identity preservation and will also have to pay farmers a higher price. Some consumers are willing to pay a higher price, which is good.
Senator Spivak: Surely you are not speaking against the principle.
Mr. Rutter: That is right.
Senator Spivak: You are simply saying that it will cost more. The cost is not an issue when you are looking at legal action.
Mr. Rutter: If consumers are prepared to pay that extra cost, then I think we can accommodate them. However, let us not forget the interests of the farmer. Since genetically modified or herbicide-tolerant canolas have appeared, they have been embraced by farmers in a big way. This year, 50 to 60 per cent of the canola that is to be produced in Western Canada will be herbicide-tolerant varieties. The farmers are seeing the agronomic and economic benefits of this technology. We cannot say that it is something we are imposing on farmers.
Senator Spivak: Are you still referring to labelling?
Mr. Rutter: No. Part of your question was about the huge corporations and how they have an interest in pushing this on farmers.
Senator Spivak: Is the terminator gene in the interest of farmers?
Mr. Rutter: I am not qualified to comment on the terminator gene, which, like a copyright, protects intellectual property. It is a way to protect their investment. We have seen technology-use agreements. They have been used, and farmers have a choice to either use or not use these canolas. They have chosen to use them because they see the economic benefits. We are interested in improving farmers' incomes, and I believe that is also the goal of this committee, in which case we should not be looking at imposing new costs or making it more expensive for them to get their crops to market.
Senator Spivak: How will you deal with this, because it is also not in the farmers' interest to be shut out of the European Union market. I am only suggesting that this will not go away, just like the export subsidies. Understandably, the consumer is concerned about these efforts. You cannot take the position that it is simply a phenomenon that is not right and should go away.
The Chairman: Senators, this is a subject for a full day.
Mr. Saunderson: About the labelling reference, the customer is always right. If the customer wants labelling we will have labelling. However, the other aspect is the need for discipline and worldwide labelling standards, which would have to be enforced. You could not have one country imposing their own standards on labelling, which could be a non-tariff barrier. They could say that we want this labelling in all the languages that our people speak in order to close out the product to them. Universal standards on labelling is a huge area, which, by the way, comes at a cost to the consumer.
Senator Fairbairn: First, as we go into these trade negotiations, there has been a concerted effort in the interest of a strong position on the part of Canada. We want to develop as much of a consensus as possible in all of the related industries, with their diverse opinions. Are your organizations actively involved in this pre-negotiation period to try to work as part of a consensual approach for Canada to go in?
Second, throughout your briefs and others, there are parts of past agreements that have not worked out, perhaps the way they were thought they were going to or which have put us at a disadvantage. Is there any point in these negotiations, in the areas that you have identified, where you would see Canada walking away from the table?
Mr. Shauf: I do not think that Canada can walk away from the table. Trade in Canadian agriculture is too important because we have a large ability to produce and a small population. We need to be able to get access to those profitable export markets. Are we actively involved? Yes. We have sincere concerns about the financial health and viability of producers. Producers have, for a long time, been income-starved because of some of the trading practices in the world. Canada, as a country, has not matched other countries in terms of domestic support. We need, desperately, to find better places in the world to trade Canadian products, so that our producers can be financially strong.
It is important not only for producers, but also for our organizations, and the economy of Canada, that producers have adequate incomes. This can be achieved from appropriate negotiations in the international marketplace.
Senator Sparrow: It seems to me that in the trade negotiations we traded away our future in agriculture in a number of areas. I appreciate that you are saying that we have to be vigilant in the next round of negotiations. It does not matter what result the negotiations will bring if the end result is that we lose our production capacity and our farmers in this country.
The hearings today are excellent and the long-term plan will be most helpful to us. However, at the moment, there is a serious situation in agriculture in Western Canada, particularly in Saskatchewan.
I am reluctant, Mr. Chairman, to have the heads of these organizations leave without telling us more about the seriousness of the situation in agriculture now. We have a disaster in Saskatchewan and in Western Canada. A program called AIDA is being proposed by the federal government in cooperation with the provinces. There is so much criticism of it that it may not be helpful to the majority of the agriculture community. What is wrong with what is happening? What is wrong with the AIDA program? What can be done about it? We cannot wait for next fall for the funds to flow. We have an impending seeding situation, and we seem to not be doing anything about it.
Accounting firms say that the program itself is a disaster, in addition to the disaster in the industry. Others tell us that it will only assist a small percentage of the farmers.
Negative margins are and have been a fact of life in the agriculture community. There is a cycle of negative margins for three years, and then there is a little profit for three years. At the moment, Saskatchewan has had a great number of negative margins.
What is wrong with what the federal government is doing with respect to the AIDA program and what they can do now? Can they just scrap that program and say that it is a mistake and a disaster? Can we do something about it now so we can get some funds into the hands of those farmers?
I appreciate that the farmers are not happy about an acreage-based payment. They are not anxious about that, but at least it is a start, where funds could be made available quickly. Financial statements could be submitted at a later date. We cannot survive if we say that negative margins do not exist. They do.
It is not fair for the Minister of Agriculture and the Department of Agriculture to say that they will not subsidize inefficient farmers. We have been talking about that for years. We have few, if any, inefficient farmers left. We got rid of them. We have talked them out of the way for the last 30 years. If we continue to talk this way, in a very short time we will be left with only one farmer. Then someone will say that he is inefficient, at which point they will be gone. That is really what is happening.
We have the best farmers in the world, and they are not inefficient. However, given the weather aspect, we cannot compete with international markets and then be hit with international pricing, be it for hogs or other agricultural products.
We at least have some hope of keeping 30 per cent of our farmers from going into bankruptcy now.
Mr. Shauf: I appreciate the question, but I am not certain how to answer it. You asked about this in this program. The problem is that it is based on 70 per cent of a three-year average gross margin, including negative margins. However, if you lost money this year, you have to bring that to zero. Hence, the formula for doing the calculation discriminates against the producers. That is a big issue. Given that you have to include your previous year's history in the average, you have to include your negative margins. However, you do not get to include it if you had a negative margin in the year for which you are applying. In other words, the formula discriminates.
The other problem with this program is that producers' incomes have been relatively low in past years, which holds a person's average down. When you take 70 per cent of an income that is barely adequate, 70 per cent leaves it inadequate.
The third issue is that this program is designed more to withstand a shock than it is to react to a gradually declining income. This program picks up once income declines sharply to 70 per cent.
The most serious of these factors is that the formula discriminates against the producer in terms of being able to supply money to producers who have had income problems in the past number of years. I think the program could be fixed.
Senator Sparrow: How?
Mr. Shauf: Taking out the discrimination would be a large step.
Senator Sparrow: Is there a simple method of making an application so that this can be turned around rapidly? The system simply cannot work. Accounting firms say that they cannot even handle requests from the farmers. There are too many requests, and the farmers cannot do it themselves. These firms say they cannot handle the program because it is so confusing and time-consuming.
One letter states that this is the most irrational program ever to be developed and that it is a disaster. That comes from a top accounting firm in Saskatchewan. They claim it would take them 4,000 hours to look after their farmers. They cannot do that. They have to get another 20 knowledgeable people into their firm to do that between now and June 15. It is an impossible situation. It is fine for someone to say, "Well, my wife made out that form, but I cannot make it out myself." It is just too detailed and asks for too much information in the 40 pages of instructions that come with it. We did the Crow rate in a one-page instruction and application. We have done other programs in a simple way, and I think a system can be worked out rapidly to do that. Am I on the wrong track here?
Mr. Shauf: There are ways to simplify the form, but I am not certain exactly what that would entail. My understanding is that much of the information one needs in order to fill out the form already exists in NISA, for the people who belong to NISA.
That is what I have been led to understand. As far as simplifying the form though, we need to ensure that a simple program for grain, oilseeds, hogs and all of the other commodities -- while it is ideal from a producers' point of view -- does not attract a countervail with trading partners so that we end up putting government dollars into producers' pockets. The benefit of them would then flow to someone else. We need to have simplicity; we need to have the program as effective as possible; but we also need to ensure that we do not lose the program's value because it attracts a countervail.
Senator Sparrow: You referred to the NISA program. If you belong to NISA, then the problem is solved. The accountants do not say that. The Department of Agriculture says that. However, the Canadian Federation of Agriculture is not saying that any more. The accounting firms are not saying that all the information is in NISA. It is not there because of the inventories and so on that are involved, or so they tell me. We are repeating what is in theory a lie, or whatever it is, saying it is simple. We may have this problem about countervail, I do not know. We talk about the trade distortions taking place all over, and our farmers are suffering because of that. We use some excuse that we cannot get money into their hands because of such and such, so let them go broke. Wait until next fall when some of the money comes.
The Canadian Federation of Agriculture tells me that of the billion dollars they are talking about, with the program and the way the forms are designed, they will be lucky to be able to distribute half of that money. The money is there to be distributed, however, they will only be able to distribute half. The balance will be left in the fund at a time when we are absolutely desperate for immediate cash insertion into that agriculture community.
Senator Robichaud: I appreciate the answer you gave to Senator Taylor's question, that agriculture should stay together and not negotiate one sector against the other because this would have major consequences for regions and for the country. The three of you put much emphasis on export subsidies. My colleagues who have been to Europe say that the Europeans will stick to those and have no intentions of doing anything about changing those levels. You said that the Americans have mentioned that they are willing to look. They are free traders as long as everyone is free and they do not need to do some of the things they say should be done.
If I were a betting man, I would bet that the Americans will use the Europeans' determination not to change or to do anything on export subsidies so that they can keep theirs. Are we beating the wrong drum here, or do you think that we can really accomplish something on export subsidies, given the Europeans' determination to stick by them?
Mr. Saunderson: You addressed this, and I am not sure whether Senator Gustafson or someone else addressed it as well. Yes, there is a huge wall there -- a tradition of supporting farmers in Europe. They do not intend to soon give that up. However, just because the challenge is big is no reason for countries such as Canada not to say that this is wrong, that it is distorting world trade. Canada could encourage many other players in the world community to join in saying that this is not encouraging liberalized trade. Perhaps we can even reach the consumer in Europe with a bit of that message, because you were probably told that Europeans, since the last war, are very sensitive to not being self-sufficient in food. They have gone way beyond being self-sufficient to creating stockpiles of food. That is an issue for the taxpayer and the consumer of Europe.
Where was the initial mandate to be self-sufficient? Did they give that up and try to create mountains of food now that they dump on the world? I used the word "vigilant" before. I again say that we must be vigilant, keep up the campaign, get allies and so on. It is too important not to put many resources into this export subsidy issue.
Senator Robichaud: That begs the question. We have heard farmers say that they are in a very awkward situation right now, that their incomes are way low. Could not the European farmer use this argument for their governments not to move away from those export subsidies because it would put them in the same situation that some of our people are in?
Mr. Shauf: Export subsidies will not affect the European producers' income. The export subsidies only have an impact on the rest of the world because the Europeans are protecting their producers from the impact of those subsidies.
Senator Robichaud: You also said that it encouraged them to produce more.
Mr. Shauf: Domestic support and commodity-specific programs encourage them to produce more. The export subsidy only has the effect of putting their overproduction on sale. Europe has already agreed to reduce both by value and by volume the amount of export subsidies that it uses by the year 2000-2001. They have already agreed in the last round to do that.
Senator Taylor: Is it not in effect an export subsidy when they have an intervention price which they pay the producer and then they put product on the world market at less than what they paid the producer? Is that not the same as an export subsidy in order to get rid of any surplus?
Mr. Shauf: You really have two subsidies in that.
Senator Taylor: Yes, but that is the export subsidy, the price that they sell less than the intervention price. I just thought I should explain that.
Mr. Shauf: There are really two subsidies in there. One protects the producer from the international marketplace by supplying them with domestic support, and the other one puts that commodity on sale, and that affects everyone else on the face of the globe in terms of what it does to the price of the product that they produce. Those two subsidies together are significantly damaging Canadian producers because they are left far more at risk to that international marketplace than are our competitors. The marketplace is returning less to our producers than it would if it were not for the effect of the export subsidies, which reduce prices.
The Chairman: The problem here is that we are gun-shy. We put everything on the table, the Crow rate and so on, and Canadian farmers got burned very badly. We wonder if this will happen again and, quite frankly, from what we heard in Europe I am convinced that it will happen again. I should like to think that it will not, and I should like to think that, as grain companies, your suggestions are good. I should like to believe the government and trade people who tell us that this will not happen again. However, I believe we are gun-shy.
Mr. Shauf: There is a difference between the rules and what happened.
The Chairman: No one followed the rules. That is the problem.
Mr. Shauf: The agreement that was put in place stated that you need to be doing these things over a period of time. Canada reduced immediately but Europe continued to subsidize. They transformed some of their subsidy, but they have kept the levels strong. That is where the differential is found. The rules exist so that Canada can still subsidize like the other countries do. However, for budgetary reasons, Canada reduced those subsidy levels immediately. That is what created the differential and the problem for Canadian producers.
The Chairman: I want to thank you for appearing here today to put forward your views and for answering our questions.
We must hear now from the representatives of the National Farmers Union. I will ask Mr. Ollikka to take a seat at the table at this time.
Mr. Cory Ollikka, President, National Farmers Union: We welcome this opportunity to present on behalf of the National Farmers Union. With me today are Ms Shannon Storey from Saskatchewan, Fred Tait from Manitoba and Stewart Wells from Saskatchewan.
The Government of Canada and most provincial governments have embarked on an agricultural strategy of deregulation, privatization, trade liberalization and the promotion of increased agri-food exports in the hope that some of the export-generated dollars will find their way back to the farm gate. For farmers, this strategy has failed. This failure is demonstrated when Canadian agri-food exports are compared to the total realized net farm income since 1970. Farmers have clearly not been the benefactors of this huge growth in agri-food exports. In fact, Canadian realized net farm income per farm, adjusted to 1998 dollars, has witnessed a steep downward trend to 1940 levels.
Realized net farm income per farm in Canada is well below the levels of the last 50 years. The problem is worse on the prairies but is clearly not a regional problem. Crop and livestock farmers in all provinces will be hard-hit by disastrously low world market prices. Statistical data on this lumps winners and losers together, unfortunately, and gains by producers and supply-managed sectors mask and offset significant losses by hog, grain and oilseed producers. Again, despite the relative financial stability of the supply-managed sectors, Canadian farm income is at record lows.
Saskatchewan farm income, dominated by grain farms, is expected to be the lowest since Statistics Canada started keeping records in 1926. Realized net farm income per farm is estimated in 1998 to be just $3,408; and, in 1999, is anticipated to be negative $3,047.
While Agriculture and Agri-food Canada's medium-term policy baseline, dated April 1998, projects Canadian net port exports to nearly double between 1998 and the year 2007, the same publication of Agriculture and Agri-food Canada forecasts that hog farmers' incomes will plummet over the same period. Using a benchmark, a Central Alberta farrow to finish hog farm with 140 sows and 640 acres will see its net farm income drop steadily for the foreseeable future.
Farmers are not to blame for the current income crisis. They have not been passive victims, either, having aggressively invested and diversified in attempts to capture the best prices in a shifting world market. The problem seems to be that the markets themselves seem to fluctuate wildly in the short term and drift ever downward in the longer term. High subsidy levels in the U.S. and the EU indicate that farmers worldwide are unable to earn a safe and adequate income from the marketplace. Those governments have therefore responded. Such subsidies clearly exacerbate the hurt that Canadian farmers are feeling with their safety net system unable to respond to the existing catastrophe.
While there is little evidence that trade agreements and increased exports actually increase farmers' incomes, there is much evidence that the orderly marketing of supply management agencies endangered by those agreements do increase farmers' incomes. As an example, a 1996 report calculated that the Canadian Wheat Board increased wheat producers' incomes by an average of $265 million annually for the period 1981 to 1995. Also, the Schmitz et al report "The Canadian Wheat Board and Barley Marketing" found that the wheat board increased barley producers' incomes by $72 million annually for the period 1985-86 to 1994-95. Additionally, Agriculture and Agri-food Canada's medium-term policy baseline projects steady growth in the incomes of a benchmarked dairy farm in Quebec. Agencies such as the Canadian Milk Marketing Board, the Poultry and Egg Marketing Board, the Canadian Wheat Board and the Ontario Wheat Producers' Marketing Board give farmers power in a marketplace that is increasingly dominated by huge agri-business corporations. They help to increase and stabilize farmers' incomes.
The NFU is not opposed to trade. It is, however, strenuously opposed to trade that undermines and impoverishes farmers while at the same time leaving millions without sufficient food. The current agri-food trade system does just this.
The NFU is a founding member and the North American coordinator of the Via Campesina, an international movement of 69 farm organizations in over 37 countries around the world. The NFU has benefited greatly from its work with farm groups around the world. Through its international work, the NFU and its members have been able to gain an international perspective of an increasingly global agricultural production, processing, distribution and trade system.
The Via Campesina issued the following statement on the WTO in its May 17, 1998, meeting in Geneva:
The loss of national food sovereignty within the WTO is dangerous and unacceptable. Via Campesina strongly objects to the conduct of negotiations in agriculture under the terms of the World Trade Organization. The WTO policy is above all organized in the interests of multinational companies that dominate international trade destroying our capacity of food production, our communities, and our natural environments.
International trade must serve society!
The document went on to demand that government and international organizations remove all negotiations in the area of food production and marketing from the WTO. This indicates the level of distaste and dissatisfaction among world farmers with the WTO process.
The NFU recommends that the Canadian government take advantage of international dissatisfaction with the WTO process to strengthen its negotiating position across the board. Further, the NFU recommends that the federal government of Canada take a clear pro-farmer position in the upcoming round of the WTO negotiations and align itself with nations around the world who are working to change the focus of those talks.
Ms Shannon Storey, Women's President, National Farmers Union: The NFU also recommends that the Canadian WTO negotiators defend Canada's unconditional right to create, maintain and expand orderly marketing and supply management agencies.
These are the only agencies that have produced any kind of security for Canadian farmers. The November 19, 1998, issue of The Western Producer quoted the U.S. agriculture undersecretary, with regards to upcoming negotiations, as saying that Americans will demand lower domestic subsidies, reform of state-trading organizations and tighter controls over export subsidies. They also want to lower the tariffs that protect sectors like Canadian dairy and poultry. This was said in spite of the fact that the Americans are one of the worst offenders with regard to export subsidies.
Clearly, the U.S. will target Canadian programs and agencies that currently serve and protect farmers. High over-quota tariffs were established to protect import sensitive sectors of Canadian agriculture -- namely, milk and feather supply-management sectors. We expect that these tariffs will be the prime target for reductions in the upcoming WTO negotiations. Any reductions in these tariff levels will destabilize the supply management sector and lower farmers' incomes. I should point out that these are areas in which we do not trade very much internationally. We are not stepping on anyone's toes outside of this country with those supply-managed industries.
Butter oil is a prime example of the negative impact that low tariff imports have on the Canadian dairy sector. In the absence of a tariff rate on butter oil-sugar blends, imports have increased dramatically. Imports increased from less than 2 per cent of Canadian ice cream butter fat use in 1995 to a projected 20 per cent in 1997. This has cost Canadian dairy farmers close to $50 million annually in lost revenues. The NFU recommends that Canadian negotiators refuse to yield to demands to reduce the tariff that safeguards supply-management sectors.
The Canadian Wheat Board is not a state trading enterprise. It is a market-oriented, non-subsidized and non-trade distorting body. It is a farmer-centred alternative to huge and growing transnational grain companies. It is farmer controlled through the newly elected board.
Several countries, including the U.S, are pushing for a new, very broad definition of agricultural export subsidies which would treat benefits received through price pooling arrangements as a form of indirect export assistance, even though no government funds are involved. The administration of those funds are paid by farmers, and for the most part by very willing farmers. Canadian negotiators should do what they can to curb export subsidies but must aggressively and successively counter any attempts to expand the definition of export subsidies to the point where it might include the activities of Canadian farm-management or farm-marketing agencies.
The NFU recommends that the Canadian government protect the ability of Canada and other countries to support farmers through the use of domestic support tools until such time as the larger problems within the agri-trade system are remedied. Both the U.S. and the EU have demonstrated a commitment to maintain their production bases and maintain their status as major agricultural exporters. Furthermore, the recent actions of South Dakota and other states, threats of U.S. country-of-origin labelling, and repeated bilateral trade disputes call into question the possibility that Canada will ever gain significant or secure access to U.S. markets. The European Union is also determined to maintain its domestic production capacity and, as a result, its exports.
In conclusion, farmers have identified that increases in agri-food exports under the WTO agreement have not improved our net farm income situation. In fact, the agreement has made it worse. The NFU has recognized historically that a strategy of gaining market power for farmers is a more profitable strategy than one of gaining market access at the expense of farmers' marketing agencies. They are what give us the power.
The Chairman: Thank you for those presentations.
Senator Fairbairn: Your position on supply management is consistent and very clear. I asked questions of the witnesses who preceded you. I will try them out on you, as well. One question concerned the degree to which all of the various spokespeople, or groups within our industry, are trying to work together with the government to have the strongest possible position at these upcoming talks. Hence, my first question regards the degree to which the NFU has been able to be part of that process.
I do not even like asking the second question; however, you approached it within your comments. Is there a point, in terms of your concerns about supply management and export subsidy definitions, that Canada puts its foot down and says that it will not be part of that? It has been said in these discussions, and in others, that our entire economy is so immersed in trade that we cannot afford to walk away from something like the world trade negotiations.
Ms Storey: We should point out that when you look at the entire trade question -- that is, how much food we export and how much food we import, there is really not a big differential there. We only come out $4 billion ahead on exports when you consider the whole range of things that we import and export. We are importing some things that we used to produce here. We are importing some things that we still produce here, and very often those are things for which we are having trouble getting decent prices. I will let Mr. Ollikka go into more detail on that.
Senator Fairbairn: Could we please have examples of that?
Ms Storey: It includes a lot of fruits, a lot of vegetables, beef and pork. Certainly the increased import-export pressure on beef and pork is one of the reasons that we are in the current price crunch with pork. That price crunch is not over yet. It has improved, but it is not over yet.
Mr. Ollikka: The NFU is not suggesting, of course, that we pull out of negotiations. We are not opposed to trade. We think trade is a good thing but it must benefit society. It is our view that you do more good being there and fighting for producers and the industry than you do excommunicating yourself from the process. We must be very clear-minded about what we take into that process and our negotiating position. Negotiation is a two-sided coin, so you need to approach it with a very strong position right off the bat. That means that you do not move anywhere without certain things.
In a negotiation, we must have two sets of things. We must have a set of guiding principles that will not be compromised, and a set of things that you might be willing to move on somehow. We are suggesting that that set of guiding principles include some of the cornerstones of Canadian agriculture that actually protect farmers' incomes.
Senator Fairbairn: And no trade-offs?
Mr. Ollikka: There are no trade-offs in those things. Clearly, the single-minded focus on increasing exports in order to increase farmers' incomes has not worked. I have with me a graph, which I will provide to the clerk, from the briefs that we presented to the House of Commons committee on agriculture last November. Hopefully, you will be able to see this graph from where you are sitting.
The pink line indicates the sharp increase in Canadian agri-food exports in the years from 1970 to 1998. This black line at the bottom, with the downward trend at 1998 onwards, is the realized net farm income. This graph shows us the effect of the single-minded approach. These statistics are from Agriculture and Agri-food Canada. The single-minded focus on exports is just not paying the bills on Canadian family farms. Therefore, you do not go into the next set of world trade negotiations with anything that looks like you need to refocus even more on increasing exports.
The proof of the pudding is that over the last 28 years it has not worked.
Mr. Fred Tait, Vice-President, National Farmers Union: What concerns us is that Agri-Food Canada has indicated that its objective over the next decade is to redouble Canada's agricultural food exports. That is a stated policy.
To do that, they must negotiate market access. To negotiate market access, you must have something you are willing to negotiate with in return. What is left to negotiate with? There is supply management, there is single desk selling in the Canadian Wheat Board. The indication to us would be that those are the two things that they would probably be willing to negotiate away in return for redoubling agricultural food exports. However, the record has shown that that strategy has not worked in the past 30-odd years. We would expect that it will be as much of a failure in the next decade as in last 30 years. Therefore, why are we even discussing pursuing that avenue?
It has also been pointed out that the successful areas of agriculture are the ones where we have been able so serve the domestic market under supply management, and the areas where we have been able to increase our returns above world prices are in the areas of single desk selling. I believe that those two areas will be traded away in the next round.
Senator Fairbairn: You believe that, sir?
Mr. Tait: How else will you double your agricultural food exports, which demand that you gain market access? You must have something to trade. If it is not those two things, then what is it?
The Chairman: What areas of the marketing board are represented by this panel of witnesses?
Ms Storey: We are all in single desk selling areas. A dairy producer was unable to come. We are able to speak on his behalf because he has given us his stance at great length on many occasions.
The Chairman: The government faces the problem that you are only dealing with the domestic market. How many chicken producers are there in Saskatchewan?
Ms Storey: Not many. I am not even sure.
The Chairman: There are 300. How many dairy producers are there?
Ms Storey: No more than that.
The Chairman: What will you do with the rest of the farmers?
Ms Storey: However, in Eastern Canada, many dairy producers are members. Those of us who produce grains ensure that we and the rest of the farmers have a strong single desk selling, grain-marketing agency that can get us market share in the high-quality end, which is where our strength as Canadian grain farmers lies.
The Chairman: That is exactly the problem. We are getting $2.90 for wheat and it is not paying the bills. That is what this committee has been talking about here all day. How do we solve the problems from here on in? We cannot continue to grow wheat at $2.90. We were relying on canola, and you know what happened to the canola prices. I sell canola myself. I tried to get $7 the other day, and it was impossible. We were getting $9 on canola.
Ms Storey: Farmers in other countries are saying exactly the same thing. They are going through exactly the same problem of not being able to get adequate returns for cereal crops.
At the same time, the world needs cereal crops. In any crop rotation, you must have a cereal crop. For technical reasons, we cannot stop producing grain. We can reduce what we have been producing, but we cannot stop.
You need to go into world trade negotiations with the knowledge that the world needs cereal grains because many people are not getting what they need to eat in spite of the fact that enough is being produced. You must bear in mind that farmers must grow cereals in their rotation. Discuss with other countries what you can do to enable farmers to grow the cereals that the world needs at a rate that gives a return to farmers. You must look at larger social issues.
The Chairman: That larger social issue is this: Russia and the Southeast Asian and South American countries cannot afford our grain.
Ms Storey: They cannot.
The Chairman: You then have a problem that has not been discussed here today, that those countries that need our product have no money.
Ms Storey: Yes.
The Chairman: In this -- should I say -- sophisticated day and age, we have never figured out a way to put food on the tables of those people who cannot afford to buy it. That is a major problem. There is no question about that.
Senator Spivak: It seems to me, also, that in the long run, the answer to the low price of grain may lie in trade negotiations. Are you a party to those negotiations? Do you feel that there is enough transparency about what our negotiators are prepared to give away?
We heard here some time ago that the major thing that Canada has to offer is the fact that it has already reduced its subsidies. Therefore, when you go to the negotiating table, you definitely have a strong case.
It seems to me that in the short run the answer to the low price of grain lies in domestic policies. We heard some evidence on that issue this morning.
I am sure that you were here when that issue was addressed and I wonder what you thought of it. I do not know how you attack the fair share issue. Even though we heard the companies say that they were not getting an adequate return, no one is getting a less adequate return than the producer.
Therefore, that aspect must be addressed. Things such as closed co-ops, tax breaks and other measures were suggested.
I have two questions. First, are you happy with the amount of transparency that the negotiating process has at the moment so that you know what we are doing there? Second, which, if any, of the domestic policies do you think are the best in the short run to keep farmers in existence and not turn the land over to agribusiness?
Mr. Ollikka: To respond to the second question first, the NFU has been proposing three things. The third proposal deals with world trade, which we will probably spend the majority of the next half-hour discussing. However, the first two things were an immediate cash injection and a long-term comprehensive safety net package.
In the farm community, we have been relatively successful in gaining some sort of a cash injection commitment from the federal government. Although from a farmer's perspective right now, it appears as though it is the incredible shrinking farm disaster program.
I was just talking to one of our organizational experts on safety nets who, on a six-hour plane ride from Saskatoon to Charlottetown, Prince Edward Island, started working his way through the forms and got about 20 per cent through them. He estimates that it will take him 24 to 30 hours to work his way through them. He is our resident expert on safety nets.
It is the government's responsibility to legislate and move on behalf of its citizens. Sometimes, unfortunately, that means spending money. While you have a responsibility to spend money wisely, you also have a responsibility to not put moral hazard at the top of your list. Effectiveness in policy and program delivery should be at the top of your list and you must see to it that money gets to where it is needed in a timely and efficient manner.
As far as a longer term safety net policy, we and other organizations have been encouraging a focus on the year 2000 and beyond when the federal safety net envelope is renegotiating and those federal safety net programs are re-evaluated and a new direction is chosen. In this regard, we have found some favour with a couple of provincial ministries of agriculture.
We should go with a comprehensive safety net package that pools risk across all commodities in all regions of the country. It should not be the first and primary focus to adapt a program like that to the WTO process, given that the United States and the European Union are on subsidies -- not necessarily export subsidies, but domestic programs.
Even within those restricted guidelines of 70 per cent, as dictated by the WTO, we can accomplish a comprehensive safety net program that actually fills the need. NISA is just not doing the trick. I forget the first question.
Senator Spivak: The first question was whether you feel the negotiating process is transparent enough that you can have input. Do you know what the Canadian position will be? It seems that most times we do not know what is happening there. We have been told that it will be a very transparent process.
Ms Storey: The short answer is that we certainly hope the process is more transparent than it was last time. To tell you the truth, transparency is perhaps not the biggest problem we had with the process last time. It was that the groups who actually directly represent and are directly funded by farmers had a disproportionately low share of the influence on the outcomes of the negotiations.
This was a problem not just for Canadian farmers' organizations but for farmers all around the world. When I say farm organizations, I do not mean corporate-funded entities. I do not mean umbrella organizations that do not have direct farmer members and which may be as likely or more likely to represent agribusinesses than actual farmer groups.
I mean groups like ours, which are member-driven, member-funded and member-led. Those groups in every country you wish to name had very little influence on their country's positions.
Senator Spivak: Thank you for pointing that out. That is an excellent point. It is also true at the international organizations like the Codex Alimentarius and others. That is a major problem.
Ms Storey: Yes, it is.
Mr. Stewart Wells, Saskatchewan Coordinator, National Farmers Union: If there is one thing I could change about the negotiation process, I would want a guiding principle that actually linked the well-being of citizens -- or in our case, farmers -- to the outcome of the trade agreement. Then we would have something to use as a measure, say, five years from now.
That negotiation in itself would be an interesting exercise because if you came up against organizations or other governments who were unwilling to tie the well-being of their citizens to their trade negotiations, then you would know that there is something wrong with the process.
Mr. Ollikka: It may not necessitate a duplicate process whereby you would have to set up a separate set of fora on social issues. All of these things are combined. I think that speaks to Senator Gustafson's earlier comments. We have these social issues and we must deal with them.
Senator Spivak: I have a final request. That graph is very good. It might be good for the front page of a report. Will we get a copy of it?
Mr. Ollikka: Yes.
Mr. Tait: Another thing, Senator Spivak, is very disconcerting to us about the process. You talked about transparency. Part of the process is to develop what is called a consultative process, which is well documented in a little pamphlet put out by McGrath. It describes how to get the public to agree to a predetermined decision. You exclude from discussion those people who disagree, and those people who are not vocal in disagreement are said to have disagreed.
This has been repeated in the farm community in areas of discussion. The transportation talks were conducted in that manner. The grain marketing panel was conducted in that manner. We will be at a conference in the early part of next week, the next round of WTO discussions, in exactly the same sort of format, outlined to dissolve public concern. It removes the citizen and the citizens' groups from having an effective voice in this process. It does not give one much encouragement.
We have said repeatedly before provincial and federal governments that the priority of our farm organization is the well-being of farmers and our communities. Everything we have done in trade negotiations has damaged us economically along with our communities. Why are we being asked to again pursue the same direction?
Senator Fairbairn: You mentioned some discussions in which you, as the NFU, will participate next week.
Mr. Tait: Yes, the WTO discussions will be here in Ottawa.
Senator Fairbairn: In my experience over the years with the NFU, I cannot imagine the NFU not feeling free to have an aggressive and persuasive attempt at going after what we are talking about here today. I do not have any indication that supply management and the Wheat Board are on the block at these meetings. I would encourage you to aggressively go after that when you are having your discussions next week.
Mr. Tait: The process will be such that it will be very difficult, if not impossible, to do that. That is exactly the way the grain marketing panel was constructed so that one is limited in influence. The same thing happened during the transportation talks. KPMG organized the transportation talks, the Western Grain Marketing Panel and they are organizing the WTO talks for farm groups next week. All are using exactly the same agenda, the same format and the same restrictions in excluding the public voice.
Senator Fairbairn: As your own independent self, are you going around to these particular fora and making your position very clear to members of the government who will be involved in these talks, like the Minister of Agriculture and the Minister of Trade?
Ms Storey: Oh, yes. The problem though is the tendency by KPMG to apply what is called "the Delta process," whereby questions are set and there is a very structured agenda for discussion of questions. That does not completely stop us but it certainly reduces the overall effectiveness of such consultations, particularly since these consultations happen not with farmers but with industry. Profit-making corporations are generally able to send more voices to those tables than groups that are actually funded by farmers.
Senator Fairbairn: I hear your point. Good luck.
Senator Robichaud (Saint-Louis-de-Kent): I understand you to say that when we sit down at the negotiating table, we should have a strong pro-farmer position. Does that say, at the same time, that you are not confident that we have such a position right now? At the meeting next week, will you be able to work in this attitude or this position?
Mr. Ollikka: Senator, there has been an increasing trend over the last decade or two toward using destructive language. We do not hear the term "consulting with citizens" very much any more. We hear the term "consulting with stakeholders."
Senator Fairbairn: Citizens are the most important stakeholders.
Mr. Ollikka: Yes, however, the term "stakeholder" goes back to feudal times and prior, where the greater your stake, the more influence and votes you had. I personally am uncomfortable with that language. When you have the processes that are set up to consult with industry, again there is a disproportionate share of industry representatives there and a disproportionately small share of citizens and farmers. We are extremely willing to be part of that process.
I was part of a process on food biotechnology at the University of Calgary, which asserted the citizen's role and diminished that of organized, powerful industry. It was a very empowering process for citizens. When dealing with WTO negotiations, international trade and these types of things that have huge ramifications at the grassroots level, you need to involve the citizenry in every way and to the greatest extent possible.
I am not sure if that has answered your question directly.
Senator Robichaud: Yes and no.
Ms Storey: Perhaps I should give another example of things that are happening in the development of agricultural policy as a whole. I am looking specifically at two recent reviews: the Estey review on transportation and an internal review done by the Canadian Grain Commission on its policies and governance.
The Estey review on transportation ended up by suggesting changes that have come almost entirely out of the mouths of railways. We made presentations, as did other progressive groups, which are completely contrary to a number of the key recommendations in that report. That is largely because they are almost guaranteed to reduce farmer income and farmer influence on the system.
At the same time, the Canadian Grain Commission is supposed to represent primarily the interests of farmers. They have conducted a review that farmers did not ask for, which makes recommendations that have some very serious implications for our ability to maintain our edge on quality in the international marketplace. These sorts of things seem to keep happening.
When legislation comes down, it tends to water down or eliminate the things we need in order to keep ourselves viable. Of course, the so-called Agriculture Income Disaster Assistance Program is another example of just that. It is almost designed to shut out of the process the farmers who are having the most trouble. Senator Sparrow made our case very well for us on that point a few moments ago.
There is a pattern here that we do not like and which gives us a lot of difficulty when we are trying to trust the process. It is very hard to trust the process, given everything that seems to be happening in policy.
Senator Robichaud: How do you get everyone involved? There is always the question of time. It has to be done within a certain time. You represent and are governed by farmers. Are you saying that your voice is not heard to the extent that it should be? Do you not have the weight that it should carry on behalf of the farmers?
Ms Storey: If we had the money to lobby that the railways have, we would have a better chance.
Mr. Tait: The issue of time is often used as a justification for not having to consult with people in a democracy. It is an anti-democratic argument.
The argument that is always put forward is one to design a far more efficient farm community. If you were to look at that from the point of view of an agricultural economist, it would mean that you would have fewer people producing more product at a lower net return. That is a definition of "efficiency."
As a farm leader who is looking at a definition of efficiency that would serve the needs of my community, that hardly fits. The discussion has been oriented not from us, but from other interests, to serve their own interests. We are having an increasingly difficult time voicing our concerns.
A good example of this is what will happen on Monday. There will be a conference, which is fine. However, it is to take place in the third week of April. That is the beginning of seeding in the Prairies. Is that the time to consult with prairie people?
Last fall, there was another consultative process before we entered into the trade negotiations with the U.S. on outstanding agricultural trade disputes. They called farm leaders to Winnipeg on a Friday night. Negotiations were to begin on Monday morning in Washington. They were going to consult with us on Friday night, as if the negotiating team had not been briefed as to the position that would be taken.
It is becoming a joke. However, again, it was a question of time. It is not reasonable for a government to call farm leaders together on a Friday night to discuss a negotiating position for a negotiation that starts on Monday morning.
Senator Robichaud: You have answered my question.
Senator Fairbairn: That is a telling, not a consulting.
Mr. Tait: The decisions have been made. The consultative process is to get us to accept the results. We are always told, "We did not get it perfect, but we did not have time."
Senator Taylor: I am intrigued by the negotiating aspect. In our recent tour of Europe there was certainly much more talk in the presentations to our committee by farm groups and also by politicians about the social responsibilities of assuring income to the rural community. That is a very dead issue here.
This may sound almost anti-Canadian, but have you thought about making an alliance and working with your farm friends in France, Germany, Brussels and Luxembourg? You could make a common cause for world farm policy that looks into that social thing. In other words, are you not letting the economists, along with the bureaucrats and lawyers, run the day at these meetings, rather than the food producers? There is certainly much more talk in Europe about the social responsibility of ensuring that income goes into the community and to the farm producers, even in terms of making environmental payments if necessary.
You might have a friendlier group over there than you have in Ottawa.
Mr. Ollikka: Senator, that is actually happening. As I mentioned in the presentation, we are members and the North American coordinators of the international farm movement.
Senator Taylor: All you need is France. We got the impression over there that no one crossed a French farmer and got away with it.
Mr. Ollikka: That is no secret. The fact is that it goes back to the process. In 1996, I believe it was, there was a food summit in Rome. It was a parallel process that the farmers of the world put together to the last GATT talks and the WTO process. Why does it need to be a parallel process? The point is that when we as farmers are marginalized from that process, we find alternatives. There have been alternatives that we have been following both domestically and internationally. While those parallel processes are great to raise awareness of other citizens, of fellow farmers and of legislators, they are not actually part of the legitimate process that makes those decisions. We wind up the benefactors of the decisions that are made on behalf of the stakeholders in the industry, and the industry is largely represented by a handful of rather large players and not the citizens.
Senator Taylor: That is where you are making a mistake. What came through to me, particularly in France and Italy, and less so in the other countries, is that they are looking at the landowner as being the caretaker of the environment. That means wildlife, game, recreation and parks. To tell a landowner that he will be paid on the basis of how much wheat he grows is not the right way to do it. Are we doing enough of that over here?
You are trying to get compensation for the social responsibilities you all have on a food product. Perhaps there is a much wider base you should be looking at to get your compensation from.
Mr. Tait: You talked about our contact. At the APEC summit in Vancouver two years ago, the people's summit, I had the privilege of welcoming 15 out of the 18 Asian Rim countries that sent delegates from people's agricultural organizations. What coverage did it get outside the meeting rooms? The people's agenda was not exposed.
You talk about the larger social implication. Every one of those delegations came with the same message: that unregulated free trade in agriculture destabilizes their communities, causes social unrest, et cetera. It was a standard format that they explained.
You talk about the larger social implications of what we are doing here in Canada. We are removing expertise and people from the land and replacing those people and that expertise with what we call the high-tech inputs or genetically modified, chemical input, fertilizers, high capital investment and hormone injection. From every signal in my community, everything I read now in the press, everything I hear from consumer groups, someone is starting to push the caution button regarding out-crossings of genetically modified organisms (GMOs) in the weeds.
We now have resistance to most herbicide groups, and to the most commonly used chemical groups in some of the broad-leaf weeds. We have chemical resistance in wild oats and green foxtail. Everything that we have been relying on to create this industrial scale agriculture, not to mention consumer resistance, shows visible signs of collapsing. What do we then do as a society if it does collapse? Where are the people to fill in the gap? Where are they going? Will they be encouraged back to fill the gap? It is unlikely.
For us to proceed in this direction in the name of efficiency is the height of folly. For us to even be contemplating going into another round of trade negotiations to further this agenda that shows every sign of failure is absolutely ludicrous. I am not an academic. This is an observation I have made from watching this unroll.
Senator Spivak: You are right. The Internet is a marvellous democratic tool now, and it is through the Internet that the MAI talks were derailed. There is not much balancing the tremendous power of multinational corporations, and the press is also owned by multinational corporations, except through citizens' coalition groups. These groups are now more powerful than government. Even if governments want to do the right thing, it is pretty hard.
Mr. Wells: I am very interested in the discussions you had earlier with the witnesses about the genetic modifications and genetic labelling and that kind of thing. A statement was made that the use of genetic material is optional by the farmers; that it is the farmer's decision if he or she wants to plant genetically altered canola. That is not true, however, because there is out-crossing of genes and the spread of pollen by bees. We have genetic pollution, where the organic industry and the non-genetically modified industry, which are two separate industries, are very much at risk because of this genetic material floating around free in the air.
Senator Spivak: Is it that widespread?
Mr. Wells: It is becoming more widespread, and with all the other varieties and types of grain that are coming on the market that have been altered, it will only become more widespread. We have an organization of organic producers in Saskatchewan, and they are cautioning their members against seeding canola. This is infringing on the livelihood of growers of organic and non-genetically modified produce.
Senator Spivak: There is some indication that organic farming or produce in the United States is growing exponentially. There is a desire for organic foods. It is just not being helped along by anyone in government very much.
Mr. Wells: The whole industry is being put at risk because no one is addressing this issue of genetic pollution.
Senator Spivak: Today's proceedings have depressed me.
Mr. Ollikka: To follow up, to those producers and to many consumers, the choice between genetic pollution and chemical pollution is not a choice at all. Moreover, it becomes even less of a choice, especially in the developing world, because the companies that are providing those products also have a near-monopoly on the purchase of those products. Mexican farmers were shocked to learn that most of their tomato crop is genetically engineered at present. Why? Because the corporate control over those products and supply of them is so great. That is unfortunate.
Senator Spivak: We used to be able to have a whole bunch of types of chickens. Now we have just two types. We cannot get different kinds of chickens.
The Chairman: I thank the Farmers Union for appearing today. I also thank senators for a long, but very good morning. Thank you to all of you.
Senator Fairbairn: This committee historically has rarely had discussions without including the National Farmers Union.
Mr. Ollikka: We are aware of that, too.
The committee adjourned.