Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 4 - Evidence
OTTAWA, Thursday, February 17, 2000
The Standing Senate Committee on Agriculture and Forestry met this day at 9:06 a.m. to study the present state and future of agriculture in Canada (farm income issues).
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I will call the meeting to order. We are dealing with the state of agriculture in Canada. We have been specifically dealing with the problems in the grain sector and the severe crisis that farmers are facing. This morning we have with us Mr. Darrin Qualman from Saskatchewan, who is with the National Farmers Union. We look forward to his presentation.
Please proceed, Mr. Qualman.
Mr. Darrin Qualman, Executive Secretary, National Farmers Union: Honourable senators, I should like to thank you for the work you have done in the past couple of years on agriculture and food safety issues.
I have come here today to discuss three things. One is the farm income crisis. Grain, oilseed, and hog farmers are facing an unprecedented crisis. They are struggling with extremely low farm incomes. The second thing I want to discuss is the fact that the common explanation for that farm income crisis, European Union subsidies, is not in fact the cause of that crisis. There is very little evidence that European Union subsidies are the cause of the current farm income crisis. The third thing I want to touch on is the compelling evidence that there is another cause for the farm income crisis, and that is dramatic imbalances in market power in the agri-food chain. I will refer to graphs and figures from our brief to help me illustrate my points.
With regard to the farm income crisis, there is a graph on page 2 of the NFU brief that shows realized net farm income since 1926, per farm and adjusted for inflation. We chose Saskatchewan to illustrate the point, but the situation illustrated in that graph is repeated on grain, hog, oilseed and cash crop farms across Canada. You can see that net farm income levels have fallen to levels that we have not seen since the Great Depression, and in some cases lower.
It is striking that incomes have fallen to Depression-era levels, but in the Depression there were worldwide economic collapse, a stock market crash, mass unemployment and a prairie-wide drought. That is what it took last time to push farm incomes to this level. Today, the markets are booming and employment is fair. I see in The Economist that the Canadian economy is poised to grow at 4 per cent this year, yet we have this type of income crisis.
The current farm income crisis is absolutely unprecedented in Canadian history. We have never seen a crisis like this during times of economic prosperity and stability. The severe and unprecedented nature of this crisis begs a clear and thorough explanation.
The current explanation is that this crisis is caused by European Union subsidies. I am sure that you have all heard that several times. That premise is the basis of our negotiating strategy at the World Trade Organization and other places. Our own provincial and federal ministers, when asked to explain the crisis, point to European Union subsidies. Their claim sounds persuasive and logical. The argument is that European Union subsidies cause increased production in Europe, which leads to oversupply and declining prices in the world market; hence, the farm income crisis.
As I say, this seems logical and has been widely accepted. However, when you look at the data, it turns out that while it is true that production has been increasing in Europe, it has been increasing just as fast in non-subsidized countries. It has been increasing just as fast in Australia, Argentina and around the world, and to some extent even in Canada.
Pages 7 and 8 of the brief contain tables that sum up those production increases. Table A shows wheat production. The European Union production is up but Australian production is up more. Argentinian production is up significantly, as is Canadian. American production -- and we must remember that America is the second most highly subsidized country or block -- is down. It is difficult to look at those numbers and conclude that increases in production are proportional to subsidy levels.
It is even more striking when you look at coarse grains and oilseeds. In coarse grains, over the past 20 years, European production is up only four-tenths of 1 per cent. Australia has seen double digits, almost 50 per cent increases. Canada is up 10 per cent while the United States is down 22 per cent. Table C shows oil seed production, with the European Union up 73 per cent, but with Australia up almost 300 per cent and Argentina up over 500 per cent.
Looking at the data, one must conclude that while it may be true that subsidies cause increased production, it must also be true that the lack of subsidies causes increased production. Thus, evidence for the contention that European subsidies are responsible for oversupply, low prices and the farm income crisis largely evaporates.
This is the most important thing that I have to tell you today, and it is about the argument about European Union subsidies. I do not know if anyone has really looked at that data. You may wish to get your researchers to look at it in different light and from different sources. When we look at it, we cannot find any support for the theory that European Union subsidies cause the current farm income crisis.
Now, if I tell you today that European Union subsidies do not cause the farm income crisis you will say to me: "Well then, what does?" That was the question that quickly popped into our minds when we first saw the data about European Union subsidies. What we did was look at agriculture in a chain.
I will ask you, for a moment, to picture the agri-food chain. It is a long horizontal chain. At one end we have oil and natural gas wells. At the next link in that chain, the oil is turned into diesel fuel and the natural gas into fertilizer. The next link in the chain is the chemical industry, the seed industry, machinery companies. Then you have the banks, and they are giving us credit and capital, and then right in the middle of the chain is the farmer. Downstream from the farmer you have the grain companies, the railways, the packers, the processors, the breweries, the retailers, the restaurants. When you think of farming as occurring as the centre link in a long chain that literally stretches from the oil and natural gas fields to the restaurants, you start to understand why farming is in its present crisis.
When you look at that chain -- and it is in the brief just after page 13 -- two things are very striking. The first is that every link in that chain is dominated by firms several hundred thousand -- in some cases a million -- times larger than farmers. The other point is that every link in the chain is dominated by between two and 10 firms. Therefore, in that chain, you find at every sector a very small number of very large firms. The single exception is the farm link.
At the farm link, there are hundreds of thousands of family farms, which are very small in comparison to multinationals with hundred-billion dollar revenues. If you looked at that chain without knowing anything else about agriculture or economics, you might wonder how those farmers are doing. If every link in that chain is dominated by three or four multi-billion dollar or hundred-million dollar companies, except the farm link, you might say to yourself, "I wonder if those farmers can extract fair and adequate returns from that market." You would quickly have some doubts, and it turns out that those doubts are borne out.
This brief, possibly for the first time, assembles comparable profitability data for every major corporation and the farmers in the agri-food chain. What happens is that those corporations earn return on equity rates of 10 per cent, 20 per cent, 30 per cent, 50 per cent, 100 per cent. Last year farmers earned 0.3 per cent.
What is happening in that chain is that the consumer's food dollar starts making its way back to the farm, and those very powerful firms have market power because they have very few competitors. They are very large. Nestlé is a $73-billion-a-year corporation. They can reach into that stream and pull out enough money to give themselves a good return on equity. That is what they do, and on average they earn double-digit returns. The farmers do not have that market power. There is a tremendous imbalance in market power. Farmers cannot reach into that stream and pull out enough to live on and then have enough to provide double-digit returns on equity.
When a larger than normal amount of money does manage to make its way back to the farm, as it did in 1995-96, the very concentrated, very large players on the other side of the farm, on the input side, have the market power literally to reach into farmers' pockets and pull that money out.
On page 19 of my written presentation there is an example of what "market power" means. The little horizontal bars you see there are the wheat prices -- net wheat prices for Saskatoon -- and you will notice that from the early 1990s through the mid-1990s they go up quite dramatically. That smaller line is fertilizer prices. You can see what happened there. As grain prices went up, as farmers enjoyed increasing returns due to short supply around the world, the fertilizer companies, chemical companies and machinery companies increased the price of their products as well, based on what the market would bear, and they extracted those high returns from the farms such that net farm income barely budged. Despite dramatic increases in the price of wheat and other commodities, farmers did not see the benefit. A small amount of increased revenue made it back to the farm but most of that was taken off the farm.
I will close with one final point and this, I believe, illustrates a little bit of what I am talking about in regard to market power and what you have looked at in terms of input cost.
Since the 1970s, farmers have managed to triple their gross output measured in dollars. They have gone from $9 billion up to $29 billion. Net farm income is the same. What that means is that input suppliers have been able to capture 100 per cent of that increase in farm gross revenue. They have been able to use their market power to ensure that they were the primary beneficiaries of increased productivity, of new technology, of higher outputs, higher yields. Farmers have seen the same net income over 20 years, adjusted for inflation, go down.
In conclusion, senators, I should like you to entertain the idea that European subsidies are not causing this problem. Getting rid of the European subsidies is probably impossible, but even if it could be done it would not solve the problem. The problem is very predictable. You have a chain with tremendous imbalances in market power, and the farm link is the single place where you have a whole bunch of small firms, and it is very difficult for us as farmers to extract fair and adequate returns from that unregulated market.
Senator Fitzpatrick: Your presentation was very interesting and somewhat unusual. Obviously, you have done a significant amount of work and some real research and asked some different questions.
In general terms, are you suggesting that globalization has not happened in agriculture in the way that it has happened with other parts of this chain that you have described with the multinational companies? How would that happen in agriculture, if that is the case? What happens to the farmer? How does that affect the social structure of an area like Saskatchewan, Manitoba and Alberta, and even perhaps, to a lesser extent, parts of British Columbia? I think what you are suggesting is a different phenomenon than what we have experienced historically.
Mr. Qualman: That is a good question. I do not know if you would call it globalization, but certainly the explosive growth that has happened in other parts of the economy has not happened on the farm. The farm is unique in the Canadian, and possibly the North American, economy in that it is the last place that local families individually own the local economy, and they are dealing in an agri-food chain where that is not the case. They are not family firms that we deal with; they are hundred-billion dollar multinationals.
You are right: globalization -- concentration and mergers -- has not occurred in agriculture. How would it happen? We are trying to prevent it from happening, frankly. The National Farmers Union is trying to prevent us from coming to a place where there is only a small number of very large farms left. That, in a way, would be defeat for us as family farmers. We would still have agricultural production but it would belong to someone else. It would not belong to the families of North America.
Senator Fitzpatrick: You must have some ideas as to how you can compete or strengthen this link that you indicate is so weakened for the individual farmer and the farm families. Let me just give you an example. I happen to be in the grape-growing and wine industry. There was a very interesting article in The Economist recently regarding what is happening to the wine industry, and, in fact, globalization is taking place there. The major wineries are getting larger, and they are pursuing a mass- market approach to sell their product. I think that is just the way that the industry is going to go.
Perhaps that same sort of thing will happen within the grain-growing industry, and there will not be an opportunity to preserve the family farm and, therefore, that way of life, which I think would be very unfortunate. I am wondering what the prognosis is for success in the objective that you have indicated.
Mr. Qualman: The first step in success is transforming the debate. I think success is impossible until our elected and economic leaders, leaders such as yourself and others, start looking at the real cause of the problem.
That is not completely your question. You are asking about the prognosis. There are things that we can do. Anything that rebalances that imbalance in market power is helpful to farmers. Anything that gives us power in that market is helpful.
I will give you a couple of examples. Increasingly in North America, pork packing plants own pigs, and beef packing plants own cattle, and they shuffle those pigs and cattle back and forth. They do not go through open auction and farmers do not know the price. When a packing plant owns its own pigs, it does not care whether the price of pigs goes down to zero. It will just make the money at the plant. If pigs and cattle all went through fair and open markets, through fair and open auctions, that would help give some power back to farmers, especially hog farmers who are struggling so much. Any marketing board that would give farmers collective power in the market would be a help.
In our brief, you will find a short piece that demonstrates that there really is not a surplus of grain in the world. If the large, exporting nations of the world worked multilaterally, they could put together a multilateral, WTO-type agreement on grain that would satisfy production and that would probably result in a very rapid increase in prices. It would have the secondary benefit of getting rid of subsidies, because, as the price goes up, subsidies go down.
There are many things that could be done. I do not think I can enumerate them all here today. I have a much more modest hope, that we simply start to change the debate around this issue.
Senator Fitzpatrick: Would it be your view that government assistance, in one aid program or another, is only a short-term solution to the problems that are now being faced by the industry? We hear a great deal about government assistance, whether it is at the federal or provincial level, and the difficulty in achieving it effectively. Are you suggesting that that would only be an interim solution, and that we have to find a longer-term, structural, operating solution to deal with the viability of farms?
Mr. Qualman: Yes, I certainly am suggesting that. Immediate assistance is absolutely vital to get farmers through the next year, but we as farmers know that those dollars always come fairly late and they often come in quantities that are not sufficient. We do not do well when we rely on assistance from any level of government. We need to find ways where we do not need assistance.
Having said that, right now and in the next couple of months, farmers desperately need assistance. We are talking today about the causes, but unless those farmers get some assistance soon, they will not be around for the solutions.
Senator Stratton: I have read your presentation. You have done an incredible amount of work on a rather unusual position. When we were travelling in Europe, we consistently heard that it was the European Union subsidies that were causing farmers in France to earn an income of $50,000 per year on a 40-hectare farm. I have repeated this many times. Our number was $70 billion a year, and I see the number in your presentation is $90 billion a year. Due to the size of farming in Germany, that country contributes nearly half of that subsidy. I think the German government wants to lower subsidies. They did not feel subsidies at that level are appropriate, which I think is contrary to what you are saying.
One thing I should like to know is how many organizations there are representing farmers. I am consistently surprised at the number of diverse voices that we hear. When you hear all those diverse voices representing a specific group, such as canola growers or Western Canadian wheat farmers, you ask to yourself: If it is happening in the agri-business that corporations are coming together to form large multinational corporations, just as is happening in every other industry around the world, why can farmers not get together with an umbrella organization to represent those groups and to speak with one consistent, powerful voice?
I agree with you. You need a solution. What you really have to do is change public opinion, as was the case in Europe. In Europe, they firmly believe that the family farm is vital to their society. It is an integral part of their society. North Americans do not think that, at least in my view.
You have two problems. There is an inconsistency in the message that comes across. If you had an umbrella organization, you could strive to change the public's perception of the farm and the farming industry. Second, you need a long-term solution. As you know, the WTO is off again negotiating. The last negotiation took eight years.
You must come to the table and say to the government: We need not just a short-term solution for this year, but a long-term solution that, hopefully, will resolve the issue. If that were done, you would not constantly be coming back to the government saying, "We need help." After a while, that falls on deaf ears. The Canadian public stops listening because we are constantly hearing that from you.
Mr. Qualman: Senator, you ask how many organizations there are. There are quite a few. You have heard from quite a few. In many cases, that is not the fault of farmers. Provincial governments have a penchant for creating commodity groups. They created a check-off on canola and created an association of canola growers. They created a check-off on peas and created an association of pulse growers. There is but a handful of groups that have been created by farmers. Their number is approximately the same as the number of political parties in Canada. While it would be nice for everyone to speak with one voice in order to get things done, not everyone agrees.
Senator Stratton: Changing the public's perception is not something one individual farm group can do. Since it may take 10 to 15 years to work out this subsidy problem, surely you could speak with one voice on those two issues.
Mr. Qualman: In terms of speaking with one voice and bringing clear solutions to the government, the fundamental frustration we have had is that this federal government in Canada has been committed to the idea that the problem is European Union subsidies. Therefore, our solutions fall on deaf ears. Clearly, the government knows the solution. The solution is to go off to the WTO and get rid of the European Union subsidies.
The first step in bringing forward clear solutions is to dislodge the false solutions that have been put in front of us. That is what we are trying to do here.
Senator Stratton: Let them go off to do their WTO work, something that has to happen. In tandem with that, you should work with them on a long-term solution. Why could you not do that?
Mr. Qualman: Because they are unwilling to work with us. They are unwilling to look beyond the bounds of European Union subsidies and their elimination at the other structural problems in agriculture. I could show you briefs and minutes from meetings where we have met to discuss this matter. We have put forward proposals. We are constantly reassured with the words, "None of that is necessary. We just need to get those Europeans to stop subsidizing and then prosperity will return."
Senator Stratton: With respect to city dwellers, what are you doing to change the public's attitude or minds about the value of the farmer?
Mr. Qualman: We are working directly with city people. We are trying to get the message out that family farm food is locally grown food and that it is safe and reliable. The whole idea of food sovereignty is one that we are trying to cultivate. Frankly, there is a lot of work to be done on that issue. You raise it yourself. Canadians are blasé about their food. They are constantly told that there is a glut of it. They are not particularly worried about it. There are large and very full grocery stores out there. You are right, that is work we have to do.
The Chairman: Is it true that, in many cases, the grain companies organize the farm groups? The Saskatchewan Wheat Pool is basically a grain company. The United Grain Growers is also a grain company. While they indicate support for the farmers at times, which is commendable, their first interest is in buying grain and making money handling it.
Senator Fitzpatrick: Mr. Qualman is not suggesting that the government discontinue its campaign to reduce or to eliminate European subsidies. Are you saying -- and I do not want to put words in your mouth -- that there are other alternatives that, in cooperation with the government and within the industry, farmers could work on?
Mr. Qualman: I think that is correct. To enlarge on it a bit, as long as a Canadian delegation goes to the WTO intent on pushing down those subsidies, there may be other multilateral initiatives, such as a worldwide set-aside program, that get pushed to the side.
[Translation]
Senator Ferretti Barth: You said the government has been giving money to Western farmers since 1995. In 1995, $1.6 billion, tax free, were given in compensation for abandoning the Crow's Nest rate. Each one of the 100,000 Prairie farmers got between $15 000 and $20,000, tax free. The federal government, since 1999, has paid out $600 million through NISA and at least $1.1 billion through AIDA.
In your opinion, how much should the federal government give every Western farmer every year to help him to stay afloat? The farmers give no indication of trying to pull themselves up by their bootstraps. Why does a very small number of farmers not want to participate in the NISA or AIDA programs? Farmers continue asking the government for help. Have they pulled themselves up by their bootstraps? Have they set up a group that could represent them to explain their problems?
[English]
Mr. Qualman: I agree that the federal government has put money into agriculture. At times like it seems that it is not enough, but it is a lot of money. That is why all levels of government in Canada -- that is, all leaders -- should be interested in why they need to continue to put money into agriculture. That is why I am here today. You are told that it is the European Union subsidies; we do not agree.
If you want to reduce the amount of money going into agriculture, you must look at why, year after year, you must put money into it. We are not living very well out there. Even after the tremendous contributions of Canadian taxpayers, we are losing our farms. That is ripping apart families. We are just as interested as you as to why we must continually put money into farming.
Let us turn to what farmers are doing. That is what has us baffled in this current farm income crisis. For 20 years we have heard that farming will be all right if we expand, diversify, market better, add value, grow high-value crops, et cetera. Today, we have huge farms and high-tech equipment. We are growing chickpeas and lentils and raising wild boars. We are using computers and the Internet and global positioning system software. For all that innovation, adaptation and investment, we have been rewarded with the lowest net farm income since the Great Depression. We are just as puzzled as you are as to why this is happening, despite all our efforts. Every morning, we get up and try to pull ourselves up by our bootstraps. It is hard to imagine what grain farmers could do next.
[Translation]
Senator Ferretti Barth: The government will help the provinces and the organizations. I agree with Senator Stratton's suggestion to set up an umbrella organization to cover all farmer's groups. They would only have one voice and have more impact. No witnesses have ever said how much the federal government has to give the farmers so they can pursue their activities. One of the witnesses stated he and his wife had a job. They still wished to keep their farm because they liked agriculture. Taxpayers have to pay to maintain this emotional attachment of people who do not get their lives in order.
You say that the government helps the farmers in Europe. Let us say for example that you are the owner of a shoe factory. You see that in another country there is a shoe factory that is making cheaper shoes. What are you going to do? You will try to find a way to make your shoes even cheaper to stay competitive. Have the farmers shown any will to try to change their way of farming and shipping their products?
[English]
Mr. Qualman: As I said, over the past 20 years we have gone through a tumultuous set of changes. Frankly, right now farmers are sitting in their homes looking at the numbers for what crops they can grow and trying to figure out how they can possibly make a dollar in the coming year. If you look at each crop, you can lose $50 on wheat, $40 on canola and $100 on barley. The will is intense out there to find ways to cut costs still further in Canadian agriculture.
Our brief paints a different picture. It paints a picture of an agri-business chain swimming in money. When you look at the price of wheat, it stayed flat for 20 years. No one else in that chain has been able to hold the line for 20 years. We produce wheat for less money today than we did 25 years ago. The people who make bread have tripled their price; the people who retail it have tripled their price; the people who make tractors have tripled their price. I am not sure that farmers can bleed anymore on this. I am not sure that the solution is, "We need 40 per cent return on equity at the grocery stores and 50 per cent return on equity at the packers. Therefore, farmers will have to go down from 0 per cent return on equity to negative 0.5 per cent on equity." We have already done a lot. I do not think we can do any more, but we are still trying.
Senator Ferretti Barth: Do you think that the government has done enough? You have still not given me an answer.
[Translation]
How much should the federal government be giving the farmers every year?
[English]
Mr. Qualman: The government needs to give $1.3 billion this spring, specifically to farmers in Manitoba and in Saskatchewan, to get those crops in the ground and buy us another year so that we can sort this one out. Frankly, people have not been sorting it out for the past five years. We have seen tremendous carnage out in the country. We need to sort this one out, but we need short-term money to keep those farmers alive.
The Chairman: The Canadian farmer gets 8 per cent support by the government; the U.S. farmer gets 40 per cent of their income from the government; and farmers with the European common market get 66 per cent. We get 6 cents out of a loaf of bread that costs you $1.50. Farmers cannot be more productive. Through trade, we bring big bucks into the Canadian economy. Governments must understand that. For instance, we have a $36-billion surplus in trade with the U.S. Much of that involves cattle. Grains, oilseeds, and so on are selling in the United States. Take that money away from the government. No one mentions that fact.
Senator Comeau: How much of that is by big companies? We are making both sides of the argument here.
The Chairman: Most of our cattle is shipped directly into the United States. The cattle go down to the big feed lots there and are sent back and forth. The cattle industry in Canada would not exist if it could not export beef and cattle into the United States.
Senator Stratton: Perhaps Senator Ferretti Barth should ask the chairman how much the government should give to the farmer on an annualized basis.
The Chairman: The graph in your brief shows that the U.S. has decreased grain production, but oilseed production has increased by 73 per cent. North Dakota right now will sow our cinderella crop, canola, wall to wall. I am getting that information from the people to whom I deliver canola, ADM in Velva, North Dakota. They will sow it wall to wall, because the American government is subsidizing up to U.S. $5 per bushel, which is Can. $7. We are getting $5.20 and we cannot compete with them.
[Translation]
Senator Ferretti Barth: That is why I am asking you how much money you want the government to put into this to compete with the other countries. Nobody is answering that question. Do they want the five dollars like the Americans? We have to be specific otherwise we will just waste time hearing all kinds of witnesses.
[English]
We are here to find out what they want.
The Chairman: I can give you an answer on that. This comes from discussions that Senator Sparrow and I have had on this issue. Since the administration of the Conservative government left, the government took $4 billion out of agriculture. If we are to survive this situation without farmers going bankrupt, it will take at least $2 billion per year in additional money -- not Mickey Mouse money; it cannot be spent in playing games. Both provincial and federal levels have been playing games, holding back on this situation. It will take a couple billion dollars until the commodity prices straighten out.
Senator Robichaud: Mr. Chair, we should get back to our witness here.
The Chairman: I agree.
Senator Oliver: I have several questions that all point to one central theme. If I could just reiterate your thesis, you have three points. You want senators to understand that there is, in fact, a farm crisis and that farm net income is lower than it has been since the Depression. Second, many people think the main cause is the big subsidies given to farmers in Europe, particularly in France, but you say that that is not true. Third, you seem to say that the real reason is that the people in the food chain are taking out proportionally more, while the farmers are remaining constant; they are not getting their share. I think that is your thesis and I understand it.
There is something you have not told us today, and your whole thesis begs this one question. Senator Fitzpatrick and Senator Stratton asked the question in part, but you did not answer. You are the head of the National Farmers Union, a major organization. You should be coming here with a specific set of solutions that your organization wants to put before this committee, which is a committee of the Parliament of Canada.
You were asked, if this is in fact the problem, what should be done about it now? You said that, in the interim, you need some cash to tie you over until you can get the seeds in the ground for the next year. Then you said, what you really want to do here today with senators "is change the debate around the issue."
If I were a farmer making $20,000 a year with a wife and three kids, I would not want the head of the National Farmers Union to come here to change the debate. I would want you to come in with something concrete. What specifically can this committee recommend to solve the problem?
It seems to me you have not done that. You said in response to another senator that you are just trying to get the message out that this problem is here. That is not good enough. I should like to hear you say: Look, this thing is run by supply and demand. Maybe if we held back the supply and we could increase the demand, then we could get our prices up. Maybe we could have a strike. Maybe we could unionize more. Maybe we could do something to flex our muscles, but what specific things would you recommend to this committee that we could take to the Minister of Agriculture or on which we could form new legislation? What specifically can be done to ensure that farmers finally begin to get the fair value for their product?
Mr. Qualman: The NFU and other groups have been bringing solutions for 30 years and they have largely been ignored. We have identified the reason that they are currently being ignored and that is a misunderstanding of the problem -- blaming it on European subsidies.
We are moving incrementally. We do not think that you can plant the seeds of solution in ground that is not even being tilled, if people are out tilling ground elsewhere, on the European subsidies and other things over at the WTO.
The first step is to get people to understand the problem. The next step is to get people to talk about solutions. Having said that, we are not short of solutions. I have proposed one. There is not much grain in the world. Instead of going to the WTO looking for the end of subsidies, just go and look for 15 per cent acreage set aside in the world. The price would zoom up. There would not be a need for any more subsidies.
Give farmers the things they need to have power in the marketplace. It sounds like old hat but it is the same thing -- marketing boards. We need ways of working collectively so that we have power.
Suppose you have $5,000 worth of wheat to sell. A corporation making $75 billion per year can buy wheat from you or from Australia or from Argentina or from Brazil, wherever the price is lowest. Prices will be pretty low.
You need to do things on the input cost side. I know this committee has been very interested in that. The Government of Canada, in its most recent initiative on input costs, stopped collecting the data. If you are going to do one thing tomorrow morning, get the government to give the money back to Statistics Canada so that at least we can know what the input costs are. I do not expect that the government will tomorrow bring in wage and price controls on fertilizer and diesel fuel, but it could at least collect the data.
It is difficult for me to sit here and believe that I can give you a shopping list of things you can do to help me as a farmer when you are going in the other direction. I need help on inputs and the only thing the government has done is to stop collecting the data so that I do not even know what fertilizer prices are any more.
If I am a little hesitant to trot out a shopping list of things that the government can do, this is why. I have them. I did not want to make the brief too long. We can send you a list. If you think there is some extreme likelihood that the government will suddenly do the things that will give power to farmers in this agri-business chain, we will give you the list. The list has been provided year after year, but the government has gone in the other direction.
Senator Oliver: I understand that there is a crisis. I understand your point about the European subsidies. If in fact farmers are losing money to the input suppliers, what specifically can be done to get some of that money that lawfully belongs to the farmers for having produced their product from the input suppliers, who are obviously making an excess profit? Is it that your thesis about these input suppliers?
Mr. Qualman: The input suppliers are making dramatically more money than the farmers. Everyone in the chain is making dramatically more than the farmers. Information is the first step. Helping farmers to create buying blocks that can exercise some power in that market would be a second step.
Senator Oliver: My concern is that the farm crisis is, in fact, a crisis. If we consider just talking about it and not doing specific things about it and a year goes by and two years go by, we will have hundreds and hundreds of farmers going out of the business. Have we got the time? Why are you not recommending more than just some government cash to assist people to get their seeds in the ground now? Why not something more specific for the long term?
Mr. Qualman: I find it odd, Senator Oliver, that for 30 years we have been trying to work with government to get the kinds of programs in place that will keep family farms on the land. Today I come here to do something a little different and I am sort of accused of causing the farm income crisis by not giving you something today that you can do tomorrow to solve the problem.
Senator Oliver: If that is what you got from what I said, I should put it one more time.
If I may, Mr. Chairman, I am not here to criticize him. I am trying to get information from him and he does not see what I am getting at.
Let me put it this way. You began by saying the farm crisis is so severe that many Canadian farmers are now netting less, taking home less money, than they were during the Depression. Second, you said most people in Canada feel that the reason for that is the unfair subsidies given in Europe. You said that that is not the case and that the major problem in Canada is that the input suppliers, the other people in the food chain, are taking a disproportionate amount of money out of the chain and that farmers are not getting their fair share. Am I right? Is that your thesis? You did not tell us today, if that is the case and you are right in your thesis, what a legislative committee should do to assist the crisis. That is my question. Do you understand it?
Mr. Qualman: I have enumerated many things. Marketing boards help. Regulation of industries with monopoly powers helps. The deregulation of the railways that will probably be announced this month will not help a bit. The government simply must stop deregulating agriculture and turning it over to the market on the assumption that the market will deliver prosperity to farmers. As we have shown in our brief, when you look at that market, it is not a bunch of buyers and a bunch of sellers; it is highly concentrated multi-billion dollar firms at every link with near monopoly power and farmers in the middle. The government must be willing to step in and actively rebalance those markets so that farmers are not abused by the tremendous market power of the other players. I hope that will be enough. If the federal government does that, it will certainly make it much better. I hope it will create an environment where the family farm can thrive.
Senator Fairbairn: This is a very interesting brief. I suppose it could be called a radical brief in terms of its departure from the mantra that we usually hear in these farm discussions, certainly vis-à-vis international and European subsidies.
Just to follow on the last questions and answers with Senator Oliver, you are really suggesting that the government should take a deep breath and get into the business of intervention regulation in the marketplace vis-à-vis multinationals. Is that correct?
You are quite right. We have heard all of the things that you are saying for many years. I have been on this committee off and on almost since I became a senator, which is more than 15 years ago. I remember, I think related to the free trade discussions, having one of those multinationals before us. I was asking probably quite a naive question in the circumstances about how the operations that they were so enthusiastically setting out would filter down to the benefit of individual farmers and family farms in Canada. The answer was very swift and very clear: "That is not the way we think. There are no borders. We operate in a world without borders." It is not just Canada that has been inundated by these folks; they are all around the world. In my own area of southwestern Alberta, if you go to the feed lot areas, you see it with your very eyes.
Are you suggesting to us that one of the most important things government can do is to create a situation through regulation that in some way would redirect or curb the activities of these multinationals? I do not think that within our country we have the wherewithal to create competing structures. We have some of our own, but they are fairly small, and indeed they often become part of one of the larger organizations. Is that the kind of thing you are saying?
My other question deals with the railways and the grain handling system. You rightly point out that there will be some decisions on this very soon. I think there is great anxiety on both sides. Once again, we are inundated in Ottawa right now with streams of folks coming in. On the one side, they say you have to keep the Wheat Board as part of the grain transportation system in this country, and on the other side they say we have to smooth this thing out and the Wheat Board should just be a marketer and have nothing to do with the transportation system. We are bombarded with very fierce arguments on both sides of this issue, and that is a big part of what you are saying. If you get to the point where you do plant the seeds and you do get the crop and you take it off, you have to get it somewhere. That is a big piece of the picture.
Would you comment on those two things? I think I know what you are saying, but I do not know how, in this world right now, we get there. I do not know the mechanisms to get there. I think government needs to hear from people. Sometimes the mechanisms it creates do not go down very well either, so we need instructive, not necessarily criticism, but suggestions. We get the criticism anyway.
Mr. Qualman: Grain transportation is a key issue, and in some ways it is very instructive to look at it. We have only two railways, and they form geographic monopolies through much of the western prairie region, at least. For one reason or another, we started deregulating the railways back in 1984. Since that time, the freight rates on my farm have increased seven-fold. Some of those deregulation initiatives were taken because we wanted to cut spending, but other decisions that greatly increased the cost of transportation on my farm did not save the taxpayers any money. Let me give you an example.
Under the old Western Grain Transportation Act, we set freight rates, and we moved them up every year for inflation because fuel cost more and wages cost more. Every four years, we checked the actual cost and asked, "Is this a good representation?" That brought them back down. That was called productivity gain sharing, and productivity gains happen for many reasons. The railways may fire a whole bunch of staff and have lower costs, or they may close some branch lines and have the farmers haul farther so the railways do not have to go down as many branch lines. That is productivity that farmers create in the system. When the WGTA was replaced by the CTA, the Canada Transportation Act, five or six years ago, the government made a decision that we would keep adjusting them upwards for inflation but would not adjust them downwards for productivity. That is costing us $5 per tonne right there.
We are wondering why government cannot continue to share those productivity gains. It is something that would not cost them any money. It would cost the railways money. If you look in our brief, the railways are 10 times or 20 times more profitable than the farmers, so having farmers paying more to increase the bottom line of the railways does not sound like a good idea.
The first part of your question was whether the government needs to regulate some of these industries so that farmers can get a fair deal. Yes, they do, and grain transportation is a key piece of that. There are many things the government can do that do not cost the taxpayers any money, and I have just given you an example.
We fear very much that the next round of changes, where they kick the Canadian Wheat Board out and get rid of the rate cap, will really turn the system over to those railways. I do not need to tell you that the railways are suddenly getting very, very big, with the merger of Canadian National and Burlington Northern. CN is no longer a Crown corporation. CN is about to become part of one of the largest private railways in the world. The government must regulate that railway or those of us who are captives of that monopoly will not survive.
Senator Fairbairn: These issues trouble us all. I think you would agree that, whether on the international sphere or on the issues that we have just been speaking about with the railways, none of the solutions are easy. They are all very difficult. We do need all the help we can get and ideas like yours. I thank you for being here.
Senator St. Germain: You are saying that commodity prices are at 1930 levels, but that European subsidies are not the problem. Yet you say that even if input costs were somehow reduced you would still not get enough return for your product. Can you explain to me what you mean by that? Are you saying that these 1930-level prices are not caused by subsidies?
Mr. Qualman: Yes.
Senator St. Germain: What are they caused by, then?
Mr. Qualman: When a box of corn flakes was sold 25 years ago, the farmer got one-quarter of the money. Today, we get perhaps one-twentieth.
Leaving aside government money for agri-business, there is really only one source of money in the entire chain. All the money goes in through the restaurant and the grocery store and it starts moving through the chain. The grocery store hands it to the processor and the processor hands it to the packer or the grain company, who hands it down the line. It is like a river with many sluice gates. If everyone along the river opens up a sluice gate and takes more from the river for themselves, by the time the water gets to the level of the farm, it is a trickle.
Senator St. Germain: I do not fully understand your reasoning but I will leave it for now.
You spoke of marketing boards. I was the chairman of a marketing board at one time, and that was the scariest thing I have ever seen. That marketing board fostered inefficiencies that I could not believe. There were producers in that industry who did absolutely nothing and yet survived. They ran their operations shoddily and we could do nothing about it. That was the sad part.
I still own a farm. You are saying that farmers should get together. In the Pemberton Valley, where my farm is, we produce some of the best nuclear seed stock of potatoes in the world.
Senator Robichaud: We can argue that.
Senator St. Germain: We are X and Y free and we ship our nuclear stock all over North America. When the producers decide that they are not getting enough for their product, we have a meeting to discuss that. You can be sure that within a day someone will be selling for less than the agreed upon price. I do not believe you can organize at the family farm level, because these are all individuals.
What percentage of farmers do you represent?
Mr. Qualman: We have thousands of members across Canada. I do not know what percentage we represent. You must realize that we are a voluntary organization. There is no law that farmers must belong to the National Farmers Union. The government does not collect money and pass it on to us. We are voluntary. It is hard sledding in times like this. Other groups have large memberships because of government check-offs, but I will leave that aside. We are like you in many ways. When we take a stand on the Wheat Board, we find that 70 per cent to 80 per cent of farmers vote for the same position. They want a strong and effective Wheat Board too.
I can say with confidence that we represent many farmers, not all of whom are members, just as an MP represents many constituents, not all of whom are members of the MP's party.
Senator St. Germain: I sit on both the Aboriginal Committee and the Agriculture Committee in the Senate, and they are both very complex. I will say only that I think we have gone into a state of deregulation in this country that has benefited the majority. I am not sure where the family farm fits in. In the farming industry, in which I am involved, the farms are becoming larger and larger, and that is the only method of survival.
I know this is an emotional issue. People who own small farms, as I do, must face reality. Do you think that small farmers are facing reality and adjusting to globalization? We must ask that question. There is no point in hiding it. Everyone says that we must protect the family farm and politicians campaign on that. However, is that realistic?
Senator Fitzpatrick in is the wine business. The huge California companies are becoming larger and larger, yet there is a lot of cottage industry in the wine industry. It was said that free trade would kill the small wine industry. It only improved wine production in our country.
I ask, not in a vindictive or malicious way: Are we facing reality given the world in which we live?
Mr. Qualman: I will make three quick points. First, in terms of deregulation and how well farms are doing, the sectors that are the most deregulated and the most dependent on liberalized world trade are grains and pigs, and they are doing the worst. The sectors that are the most regulated and are serving the domestic market are milk, eggs, chicken and turkeys, and they have largely been spared the farm income crisis. I do not think we are on solid ground when we try to make a correlation between deregulation and how well farmers are doing.
Second, in terms of world trade and globalization, I have here a striking graph that we did not include in our brief. Canadian agri-food exports have increased from $5 billion to $25 billion since the late 1970s, yet net farm income has gone down. The increase in agricultural trade has been completely irrelevant to the family farm. It is actually inversely proportional. I do not want to blame the farm crisis on increases in trade, but there certainly have not been many benefits.
Third, with respect to saying that with globalization perhaps we should just wave good-bye to the family farm, that perhaps its time has passed, a famous socialist named Thomas Jefferson said that political democracy is based upon economic democracy. He meant that people cannot maintain control of their political nation if they lose control of their economic nation. If you give the assets, all the money, to a tiny fraction of your number, they will want to run things. The Multilateral Agreement on Investment, like other agreements, is an example of those who have the capital and the factories trying to run things.
There is only one place in the Canadian economy where the local families still own that chunk of the economy, and that is the farms. We have lost the convenience stores, we have lost the shoe stores, we have lost the clothing stores, and, boy, the farms are under attack. If we, as a country, think that it is in our national interest to let the farms go too, I suppose we will. That is the discussion that farmers are having right now with the rest of Canada.
Does Canada think that having family farm agriculture contributes in many ways to this country? I do not know what the answer will be, but I think that we give away sector after sector at our peril.
Senator St. Germain: Are you thinking in terms of the inevitable, as an organization? We must all face the realities that are out there. For instance, in British Columbia we have lost our last packing plant but there are still some small custom plants. I was always horrified whenever I shipped my calves. They would go into auction and there would be two buyers. Now I do not know who will be buying cattle there. I expect the Americans will be coming up and buying them.
I look at the situation and I do not see the farmers being able to organize in a way that they can hold back their product to force up the prices.We must face the fact that OPEC countries control the prices of oil and gas by the manipulation of the market. That is the reality, whether you choose to call it manipulation or holding back product or whatever. I cannot see farmers organizing enough. That is the problem. If they cannot organize, what is the alternative? I believe that is what Senator Oliver was trying to extract from you.
Mr. Qualman: Those OPEC countries are countries. Those are nations that made a decision that they would not let oil company A undercut oil companies B, C, D and E. They acted as nations and regulated that industry and then they worked with other nations. That is the example to which we should look. Those are not private companies in OPEC; private companies could not make it work. Those are nations deciding that there are national interests at stake and that they need to intervene and control the prices of those commodities.
The Chairman: I have before me a copy of the newspaper the Manitoba Co-operator. It states that President Clinton, in a speech before thousands of people crowded in Washington Park, said:
I want to ask you to support our efforts to help farmers...
President Clinton then goes on to say that his administration will be asking Congress to contribute an additional $11 billion on top of what had already been given. My calculation is approximately $33 billion. I talked to American farmers who are hurting. They will be getting 40 per cent of their income from the government.
My question is this: If the Government of Canada does not come to the table in this grain industry, will the Americans dominate and control our agricultural industry in the grain industry in a North American common market?
ConAgra is building plants in Saskatchewan. One of the former CEOs of ConAgra has now become the CEO of Saskatchewan Wheat Pool. There is some chance that Saskatchewan Wheat Pool might be taken over by one of the big multi-nationals. Cargill is building plants in the grain industry. You can be sure they are not building plants to go broke. Archer Daniels Midland is taking over 49 per cent of United Grain Growers. Is there not a danger that Canada will lose our industry? We farmers will be there, at least some of us. We are the best producers in the world and some will survive. But who will be in control of the industry?
Mr. Qualman: I am afraid I do not have good news there. You have lost your processing industry. Archer Daniels owns half of the flour mills, the malt companies. Your processing industry has been lost since the mid-1980s and the signing of the Free Trade Agreement. The choice now is whether we hold on to the farms.
[Translation]
Senator Ferretti Barth: You mentioned the transportation problem. The representatives of the Prairie Farm Coalition mentioned in their presentation that if the federal government were to adopt certain measures recommended in the Estey and Kroiger report on grain transportation then each farmer would get an increase of $15,000 per year.
What do you think about that suggestion the coalition made? You have read the Estey and Kroiger reports. Do you think their recommendations on transport will bring about reform in that area? Farmers' incomes would increase by $15,100 a year. To date, that is the situation in Europe. Their transport is subsidized by their governments.
[English]
Mr. Qualman: I have read both the Estey report and the Kroeger report. National Farmers Union members participated in the Kroeger negotiations and I have written briefs on both those reports.
To begin, $15,000 is a ludicrous figure, unless they are talking 5,000- to 10,000-acre farms. No one has proposals on the table that will save that kind of money. Second, everyone wants to save money for farmers. The question is which strategy saves them the most money. If we maintained the current system and re-implemented productivity gain sharing, farmers would see a reduction of at least $5 per tonne. None of the recommendations of Estey or Kroeger -- and you can look at the reports -- recommended cuts in the transportation bill to farmers of that magnitude.
Frankly, we were quite amused when Mr. Estey's report came out. We looked at the recommendations and put them on one side of the page. Then we took Canadian Pacific Railway's brief to Estey and put their recommendations on the other side of the page. It is the same set of recommendations. Willard Estey's report was written for him by CP Rail.
Let me give you an example. Estey recommended a 5 per cent reduction in the farmers' total freight bill. In talking to railway officials, it turns out that they figured out that if you deregulate the system they could get rid of 5 per cent of their track. They could get rid of the branch lines, and their average haul would decrease by 5 per cent. Therefore, it turns out that really they were willing to give up nothing to the farmers. Their rates are already highly inflated because they have not been willing to share productivity, and they are willing to bring them down a tiny bit, as long as they are able to rip up all the branch lines and save themselves that much money. There is very little hope for farmers in the Estey-Kroeger proposals.
[Translation]
Senator Ferretti Barth: Mr. Chairman, would it be possible to call Messrs Estey and Kroiger before our committee?
[English]
The Chairman: We could invite them. I am in the hands of the committee.
[Translation]
Senator Ferretti Barth: At least to know those elements that made them make those recommendations as this is a government report.
[English]
The Chairman: A very good point, senator. We will consider sending an invitation to them, if we are in agreement.
Senator Robichaud: You spoke of the European subsidies. If I were a negotiator going to the trade talks, your position would be a shot right across my argument. The Europeans would use it to say, "Look, that is not a problem for you, so let us not talk about it."
You say that there are ways that we could try to help the farmers, and you talk about controls and regulating, but if the government were to try to bring in, say, marketing boards, which is one of the things you suggested, there would be a major battle. We can barely keep the ones we have now. We have to fight in trade talks just to keep those. Do you think that the government could bring in further controls such as those without having to do away with free trade talks in the present situation?
Mr. Qualman: I would hope so. I would hope it is not the case that, sitting around this table today, we are certain that we have negotiated away Canada's sovereignty to create agricultural marketing boards. I do not know if we have or not. I would hope that we have not. I would hope that Canada is still sovereign and free and that we can market our wheat and our flax and our canola and our cattle and our pigs and our kumquats any way we wish.
Senator Robichaud: You are aware of the fight we have to put up to keep the present marketing boards. I would ask you this, also: How would the producers react to putting more controls in place? When we were out talking about the Wheat Board in the West, I got the impression that there were just as many people against it as there were for it. There was no one in-between. It was either all on one side or all on the other. If the government were to come in and create some sort of institution like that, I think there would be a revolt. We would be shot right on the spot.
Mr. Qualman: I would make two points. First, the National Farmers Union would never ask you to bring that in against the wishes of farmers. We are a democratic organization and any new marketing board would have to be approved by the majority of farmers. You would not be shot. You would either proceed with the majority's consent or you would not proceed.
Second, in terms of the Canadian Wheat Board, you are right: the commodity groups who are funded by check-offs and created by some of the provincial governments have been very good at mobilizing voices to get out to meetings and say that farmers do not like the Wheat Board, but when we have free elections and plebiscites on the Canadian Wheat Board, the story is different. In the election of the most recent board of directors, eight out of ten of those elected were strong, clear supporters who ran on a pro-board platform. It appears that those who support the board are the vast majority.
The Chairman: Does there not have to be, though, a clarification on what the Wheat Board really is? The Wheat Board is not a marketing board. It is a selling agency. It is not like the dairy marketing board or the chicken producers, or so on, where there is absolute control and where they tell you how many farmers there can be.
How many farmers in Saskatchewan are in the chicken business?
Mr. Qualman: That I do not know.
The Chairman: Not too many. Let us look at the dairy industry. Ontario and Quebec basically control the dairy producing business in Canada. This becomes a very controversial East-West situation, which is part of the problem that nobody is talking about. Nobody knows exactly how much money goes into Ontario and Quebec. We know one thing, and that is that 49 per cent of the dairy production and quota goes to Quebec. What has Saskatchewan got? You would end up with only a few farmers left there, and the rest would have to move to the U.S.
Mr. Qualman: With respect, Senator Gustafson, some farmers are doing better than others. We do not think the big problem in Canadian agriculture is that Ontario dairy farmers are doing well. They are not the people who are impoverishing Saskatchewan grain farmers. It is the corporations that we have to buy from and the corporations that we have to sell to that are the problem. We are a national organization. We have members who are dairy farmers in Ontario and potato farmers in P.E.I. and New Brunswick. We are very happy that not every sector of the farm economy is having the kind of problems that we are talking about here.
The Chairman: I agree. The last thing I would want to do is take away anything from the dairy or chicken producers. What I am saying is that we are being traded off as grain growers in Western Canada. We are not getting the same consideration, either from our government or from the system.
Senator St. Germain: If the disaster is as horrific as you say it is, and you people cannot organize now as grain farmers, when will you be able to organize? I hear you, and you may need an infusion, but if you cannot organize in the face of one of the most horrific disasters in farming -- and you are part of it and the other end is part of it -- when will you ever be able to organize as an entity and do something effectively? All we hear is groups from here and groups from there. It is as Senator Robichaud says. We went out on the Wheat Board hearings. I agree with him. I thought 50 per cent were for it and 50 per cent were dead against it. However, if you people cannot organize in the face of this dilemma, when will you ever be able to organize?
The Chairman: I will give you the sad answer to what is happening. Eighty per cent of the grain production is produced by large farmers. Many of those large farmers are saying we should get rid of the Wheat Board. Those same farmers will survive, but there will be a major change in agriculture in the Prairies. That is the approach that we are talking about. We may as well be honest about these things. There is a lot of politics in grain and in agriculture, and let us face the reality.
I have said enough as chairman of the committee. I should like to have an answer from the witness.
Mr. Qualman: Senator St. Germain, it is hard for farmers to listen to this. They have been told for years that they are not big enough, they are not using enough technology, they are not growing the right crops, they are not using genetic engineering. We have been told, "If you just do this next thing, if you just do this next thing, then everything will be fine and everyone will be prosperous." Now we are being told, "Just speak with one voice, just unilaterally rise up and form marketing boards." We have done a tremendous amount to save ourselves. We are sandwiched. We are the meat in the agri-business sandwich right now. One of the reasons we are having such a hard time even hanging on to the marketing boards we have is that companies like CN and CP are down here trying to kick us out of transportation. The American government is at World Trade Organization talks trying to kill the Canadian Wheat Board. We are struggling very hard on our farms, and we need government help here, not just government money, because government money, as I said, always comes too little and too late. We do not really want to have constantly to embarrass ourselves in rallies and sit-ins in the legislature to get more money.
We want structural change in the way agriculture is done in Canada. There is a cartoon in our brief that shows this great level playing field. It has Cargill and ConAgra towering over some little farmers. That is really the metaphor we are looking at here. Governments around the world talk about this level playing field, but they never pay any attention to the size of the players. If you want family farms, this government must do something to change the structure of agriculture in Canada in order for them to survive. Otherwise, just as you have lost the processing industry in Canada, you will lose the farms.
Senator Robichaud: That would mean major changes to the trend that has been taking place. It would mean regulating the size of farms, would it not, so that they do not grow beyond a certain size where they eat up the next door neighbour?
Mr. Qualman: It would at least mean stopping the course of deregulation that the government has currently embarked upon. It would at least mean not going further down this path that has been so disastrous for farmers. It would mean not bringing in further deregulation legislation next week or next month, which has mostly been asked for by the railways and the grain companies. I cannot think of a single meeting in Western Canada where farmers rose up en masse and said, "We need to get the Canadian Wheat Board out of transportation." This is not a farmer-driven initiative; it is a corporate-driven initiative. The government must hold firm in the face of that. If it does not do so, farmers will be lost.
The Chairman: Honourable senators, we have had an excellent presentation this morning. You have indicated exactly the seriousness that is out there. When we look at what farmers really get out of the food chain, it does not really count, according to the numbers you have come up with. We are hearing that, and it is certainly a major problem.
I want to thank you for appearing here this morning. I am sure you have challenged us to do a lot of new thinking about the seriousness that exists in the farm crisis.
The committee adjourned.