Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 6 - Evidence
OTTAWA, Thursday, March 23, 2000
The Standing Senate Committee on Agriculture and Forestry met this day at 9:01 a.m. to study the present state and future of agriculture in Canada, consideration of farm income issues.
[English]
Mr. Blair Armitage, Clerk of the Committee: Honourable senators, it is my duty to inform the committee that the chair and the deputy chair are unavoidably absent today. As clerk of this committee, it is my duty to preside over the election of an acting chair. I am ready to receive a motion to that effect. Are there any motions?
Senator Chalifoux: I should like to move that Senator Fitzpatrick be named as temporary chair.
Mr. Armitage: It is moved by the Honourable Senator Chalifoux that the Honourable Senator Fitzpatrick be the acting chair of this meeting. Is it your pleasure, honourable senators, to adopt the motion? I see agreement. Honourable Senator Fitzpatrick, would you please take the Chair?
Senator Ross Fitzpatrick (Acting Chairman) in the Chair.
The Acting Chairman: Before I introduce our witness today, I should like to summarize the committee's work for those who may not be familiar with what we have been doing over the last year or so. In 1998, the Senate Agriculture Committee held hearings in Ottawa and in the Prairies on a bill that amended the Canadian Wheat Board Act. During the course of those hearings, the committee became concerned by the number of farmers who told us that farm income was plummeting and that they feared for their future.
One of the problems singled out at that time was the international subsidies. Those subsidies were blamed for the depressed prices in grains and oil seeds. The Senate Agriculture Committee undertook a review of international subsidies, targeting the World Trade Organization ministerial talks in Seattle last November as a vehicle for organizing our thoughts. The committee's report, "The Way Ahead: Canadian Agriculture's Priorities in the Millennium Round", was tabled in August and given to the Honourable Pierre Pettigrew, Minister of International Trade, and the Honourable Lyle Vanclief, Minister of Agriculture, to use in formulating their policy positions for those talks. In addition, the chair of this committee, Senator Len Gustafson, and the deputy chair, Senator Joyce Fairbairn, accompanied the ministerial delegation to Seattle to lend their support and advice to their efforts.
Currently our committee is focusing its attention on the continuing farm income crisis and how income safety net programs performed in the past. The committee intends to draft recommendations for consideration in developing future programs. With us today we have Mr. Don Dewar, President of the Keystone Agricultural Producers from Manitoba. Welcome Mr. Dewar. We appreciate your coming to Ottawa and appearing before us today. Please proceed.
Mr. Don Dewar, President, Keystone Agricultural Producers: Mr. Chairman and honourable senators, it is a pleasure to be here in Ottawa to speak with you, although the topic that I bring is of great concern to us in Western Canada and in Manitoba in particular. Keystone Agricultural Producers represents all the farmers and farm commodity groups in Manitoba. We are the mini-CFA, or mini-Canadian Federation of Agriculture, of Manitoba. We have all the commodity groups as representatives. Most recently, the bison producers, the elk producers and the hemp producers have applied for membership to the organization.
I have a fairly lengthy presentation, but I do not intend to read it to you. I hope you have all had a chance to peruse it. I want to highlight some parts of it and I look forward to a discussion following that.
The most important issue to understand is the effects that the government policy has had on Western Canada in the past. I will speak primarily about the Crow rate that we enjoyed as an export subsidy to transport our grain until 1995. When that subsidy was withdrawn, the cost of transporting our grain changed by about $30 a tonne or 82 cents a bushel of wheat. When you look at the costs of production that we have on one acre of production, that 82 cents is a very looming figure.
There is also the drop in prices that we have seen caused in large part by the subsidies in other countries that encourage over-production. Those countries then drive down the world price for the commodities that Canada is attempting to compete in. As producers, we would really love to get our incomes from the marketplace. Unfortunately, in the last three years, the grains industry in particular has been suffering terribly. The single biggest cause of that was the change in the Crow rate.
The Crow was a subsidy to the producers of Western Canada, but it also was a subsidy to industry in other parts of Canada. I do not intend to start an East-West debate, but the sheer fact was that it was cheaper for me to send feed grain to Quebec or Ontario from Manitoba to feed hogs than to feed hogs in Manitoba and then ship them to Quebec or Ontario. That drastically affected how agriculture developed in Canada, not just in Western Canada. Now we are seeing a drastic shift and a need for a shift because now it is cheaper to process that grain on the Prairies, close to the production centres, and then transport the carcasses, the value-added commodities, to the market.
The Crow was much more than just a subsidy to help establish the railroads. It was to help build a vision from sea to sea. Those things happened, but it also drastically affected how agriculture developed in Canada. We have had three or four short years to adjust to that change.
We outline the difference in the support levels. For every dollar that Canada spends supporting producers -- and those are through our safety net programs -- the United States spends $2.35, the European Union spends $2.65 and Japan spends $3. We are trying to deal in the international marketplace in those. If you break it down to just wheat, which was our primary export commodity, the American subsidies are four times higher than Canada's. In some cases those people are farming just across the road from our Manitoba producers. That is the difference that we have to deal with.
I included some costs of production for 10 of the major crops grown in Manitoba. There are some bright spots. The expansion in potatoes and the expansion in vegetable crops that have happened have really helped in some cases, but we do have 10 million or 11 million arable acres in Manitoba. We cannot afford to flood the markets of the special crops. We know that other countries will continue their support. That has been spoken. We have seen it in the United States. In fact, it is not a secret that, with an election looming in the United States, their support has increased dramatically in the last few months. Their farmers are definitely feeling that. American producers seem to be constantly receiving another cheque. Sometimes they do not know why they are receiving it, they just take it. I do not blame them. It is a nice way to be.
What is happening in rural Manitoba, rural Western Canada, is that we are seeing a shift as our margins are dropping; we are shifting increasing acreages, trying to squeeze a little more out. That is a Catch-22, because, as we try to increase production, when there is an overproduction, it does not really solve the problem, except in the short term. In the longer term, we are very afraid that this income problem that we are looking at today will be a major social problem in the future. Initially, acres will just drop out of production. Some land will be taken over by larger producers and some will drop out of production, and when that happens, we will start to lose our status in the world marketplace. The target of 4 per cent of the world market in agri-food products that was set by the Canadian Agri-Food Marketing Council and adopted by our provincial and federal governments will not be attainable if we do not have a sound and solid primary production base.
As people leave the farms and even as larger farmers take over, our communities, our infrastructure, our schools, our hospitals, the businesses that we have in our communities are all affected. We have seen a gradual shift in the last 30 years. We were 34 per cent of the population about 50 years ago, and now we are 3 per cent on the farms and dropping. That 3 per cent can afford to support only so much infrastructure in the country, and it is a problem.
I mentioned that we have been expanding production. With 53 million acres we can grow some potatoes; we can grow edible beans. Manitoba has almost as many potatoes as Prince Edward Island and will probably overtake P.E.I. in potato production. The edible bean production used to be in Ontario; it is now in Manitoba. We have a thriving forage seed production sector. We do food peas, canary seed, corn, buckwheat. We export forage hay into the United States for dairies. We thought we had or were going to have a thriving hemp industry; it seems recently to have stalled, but I think there is still potential for that one.
With the vast number of acres in Manitoba and Western Canada, we can overproduce any one of those markets so quickly that we must still consider that we are going to export some of our high-quality grains and our wheats and canolas that we can do so well in malt and barley. We need to have supports to have that production and to allow it to happen.
There is the history of where we are and the importance of a sound safety net program. The trapeze artist does not need a safety net unless he is up performing, and a farm safety net is not a lot different. For a safety net to work, we have to assume that we are in a viable industry. We have to have a viable industry in the first place, and the safety net reduces the risk and catches you when you fall. Lately we have not been able to perform, and we need programs to help reduce costs. I do not like to use the term "income support". It depends on the long-term goals and the long-term vision. We ask our governments what the long-term visions are for agriculture in Western Canada so that we can work towards the same goals, because if the export industry is to be part of that, then we need some solid safety nets.
When I started farming quite some number of years ago, if I lost a crop, in two years I could make that back. Now if I lose a crop, I will be out of business. But if I were debt free, I would earn it back in about 12 years. That is why we need to mitigate those risks. That is why we need sound safety net programs to support us. I will cover some of what we have for safety nets and some of the suggestions we might have to improve them.
In Manitoba we have a crop insurance program. Crop insurance is production insurance based on a producer's historic production. It does not have a price component other than market price, so you can insure 70 per cent to 80 per cent of your production at market price. It does not cover the cost of production. It does mitigate some of the risk.
The Net Income Stabilization Account or NISA account has been looked at by some people in governments -- I do not want to accuse this committee of being part of that -- as being an unused savings account. There is almost $3 billion in the NISA accounts. There was twice as much taken out in 1999, based on the 1998 income year, as in previous years. In 1999 we will see drastic reductions again. When NISA was put in place in 1991 to stabilize small fluctuations in agriculture, it was thought that the account needed $10 billion to $12 billion to truly be a stabilizing account. We have $3 billion and it seems to be causing a problem with some people.
The third leg on that chair is the much maligned AIDA program, the Agricultural Income Disaster Assistance program. We waited about eight years to incorporate a disaster program into the safety net package. It was talked about when NISA was put in place. It works on a calculated previous margin and supports 70 per cent of that level. It was designed within the last year; therefore, it is mandated that it must fit under the WTO rules as being non-countervailable. As major exporters in Western Canada -- one-third of our production is exported in Manitoba -- we recognize and insist that our programs be green so that we can keep our export markets and particularly the United States as the home for most of that production.
With respect to companion programs, there is funding that provincial governments can use to put programs in place that are unique to their provinces. We have a wildlife and water foul compensation package that insures or repays producers for 100 per cent of the damage caused by deer, elk, geese and ducks in the migratory season and predators to livestock herds, such as wolves and coyotes into sheep, dairy or cattle herds. That is what Manitoba does for companion programs.
The last small part of it available across Canada is the cash advance program, which is really a loan against the production that the producer has, with a portion of that loan being interest free, so there is a small cost to the government. I believe it is about $25 million a year of the interest portion that is used across Canada in the cash advance program.
I do have more detail in the presentation about each of the programs and I look forward to any discussion that you might have on those. We have worked with the government and I personally have been part of the minister's National Safety Net Advisory Committee. A year ago it recommended that negative margins should be covered in the disaster program. We had said that a better way of evaluating the inventory should be put into place. They needed to address expanding farms because many people have expanded to maintain a margin, and if you add more production, you are in fact reducing your margin. They have allowed for those calculations and they have improved AIDA, but it took a year for that to happen. It has been an administrative nightmare. The two-year costs are now projected to be approximately $70 million, and of course that comes out of the program.
The major problem for it to address the grains industry is that it is a very short reference period. It is based on the previous three years, and we know where grain prices have been for three years. The grains cycle is generally a cycle of eight to 10 years, whereas livestock cycles are usually five years or less. That is a major concern of ours because that regulation or rule is mandated through the World Trading Organization.
Another issue that has come up, particularly in southwestern Manitoba and southeastern Saskatchewan, is the excess moisture. Over 2 million acres were not seeded last year in that area. The Disaster Financial Assistance Arrangements have been used in recent times: the Saguenay River flood in 1996, the Red River flood in 1997, the ice storm in 1998. Each time it was recognized that that program had some shortcomings. Programs were added to it to make it more effective in each case. We were told immediately following the ice storm that the Disaster Financial Assistance Arrangements would be rewritten to properly address regional disasters of any kind. The program has yet to be opened; that has not been done. The disasters in southwestern Manitoba and southeastern Saskatchewan have yet to be addressed by the federal government.
You have heard of the vast expansion: Maple Leaf Meats Inc. has a new hog processing plant in Brandon that has just recently come on line, and J. M. Schneider Inc. recently announced a new plant in Winnipeg -- an expansion. The plant in Brandon cost $125 million. The government helped them locate in Manitoba with approximately $10 million in programs. Producers have to invest $1 billion to fill that plant. We have yet to see any help or incentives to help make that happen.
As we get into the points that we see that we need from our government, both for the export market and for the adaptation, we will see that we need some support. Because of the traditional low margins in grains, producers have been using equity and they have run out of bank accounts to invest in diversification and value added. We need to know what the Government of Canada's vision is for Western Canadian agriculture, and then we can work towards it.
If we are going to be part of the export industry, then we have eight suggestions for the government to help us. The first is direct financial support to compensate for the losses in the commodity prices today. We cannot perform at this level. They have the opportunity to lower the present transportation costs that came with the elimination of the Western Grain Transportation Act in 1995 and the implementation of the Canada Transportation Act in 1996. Since then, it was found that the railroads were charging producers $5 a tonne more than they would or should have been allowed to under the WGTA. The government has an opportunity to follow the recommendation of Arthur Kroeger to reduce that and return some of it to the producers.
We need to support our road infrastructure. It is interesting that the same transportation study suggested that the fuel tax be sequestered to pay for roads. The excise tax on gasoline should be returned and used for infrastructure. I know governments do not like to sequester taxes, but we have a major deficit in the billions of dollars in Manitoba alone in our road infrastructure, and we need those critical transportation links to move our products.
The Government of Canada could eliminate the excise tax that we pay on our fuels -- farm fuels in particular. There have been recommendations to enhance and improve the crop insurance program and the NISA program, as well as the disaster program funding. We need to improve the programs and adequately fund them.
We have always been told that the WTO will solve our problems. We know now after Seattle that it will be at least 10 years. We cannot wait that long.
With respect to cost recovery, the grains industry alone in federal government cost recovery has lost 2.5 per cent of net income. That was a study done by the Department of Agriculture, yet they continue to maintain the policy. If cost recovery were eliminated, those cost-recovery measures would be trade neutral and green and not countervailable.
I have not mentioned increasing support to agriculture research, but I do explain it in my submission. The Government of Canada has chosen to use a matching investment initiative in research, which requires private money to be matched by government money. The technology or the result of that research then belongs to the private company, and the producers pay heavily for that. We as producers do invest in research through various vehicles, but we cannot afford to invest at the levels that the Monsantos and other such life sciences companies can. The government should rethink its research process. Again, research is green.
There are a number of suggestions to help the diversification of the industry. We do need to flow capital somehow, possibly low interest. We cannot just put grants out. We need programs that will assist in the capital cost of diversifying. To grow our value added, we need support for water, natural gas, in particular in Manitoba, and telecommunications; we high-speed Internet services to be made available.
We need to rethink our supply-managed quota allocations. I do not pretend to be an expert on the supply management industry, but I do know that the federal act that allows supply management to happen also says that regional advantage must be recognized. If there is a regional advantage for production, and if there is growth in that industry, then we believe it should be growing where there is a regional advantage. If that happens to be in Manitoba or Saskatchewan or Alberta, then so be it; if it happens to be in Ontario or Quebec, then so be it. It depends on the commodity and on the advantage.
The next point is effective safety net programs for our livestock producers. I spoke of the safety net programs that we have; of those, only AIDA will work for livestock producers. We need the livestock safety net programs to continue so that we can continue the production of the feed grains and export grains.
We need market development programs. I have often wondered myself why the Americans, who are major exporters of beef, are our major market for beef. How much of our beef goes through the United States to someplace else? Why can we not be doing that?
I also mentioned research and product development and of course the end to cost-recovery programs.
Senators, I realize I have gone on too long already, but I have tried to highlight what I think are the most important points. I want to repeat again that we must know the commitment of the government to the industry. We have to help shape that vision and move quickly to get vehicles in place so it can happen. If, on the other hand, the plan is indeed "tough love" and we have to cut the industry loose to fend for itself, we as producers need to know that so that we can plan our futures outside of agriculture and the government can decide how they can most effectively reintroduce the tall grass prairie and the buffalo.
The Acting Chairman: You did not go on too long. It is a critical and important question certainly to your farmers and your farm organizations and to this country and the government. Thank you for providing us with such a thorough and comprehensive report.
Senator Stratton: Each group has its own determination of how to solve the problem. They vary slightly, but essentially they are not that far apart. You are talking about developing a long-term safety net program. It took seven years to negotiate the last GATT round and there was a 10-year work out after that. This is essentially the same kind of thing, so potentially we are looking at something anywhere from 10 years to 20 years out there in the long term. We should look at a solution for that time frame.
Considering all the different programs that have been and are still in existence, we really need to have something based on production, I would think, on a five-year average or whatever. If you had something to put forward that you think could meet the needs of the grain farmers, for example -- livestock would be a separate issue hopefully -- what would be the key elements that you would have in that program, recognizing that we have this long-term problem and that the program would have to work over that long term?
Mr. Dewar: We are basically on track with what we need. The problem is the grains industry, as you mentioned. We have to support the adaptation better. Keystone Agricultural Producers do not want to mask producers from the marketplace. We do not want to grow wheat just because there is a program on wheat, so it is difficult to design a program to support that through a safety net. You have to think of it as income support. If there is a program in place, then people can farm the program. It almost must be after the fact and a surprise that it is coming, almost like the $100 million that was announced recently for Manitoba. That is a significant amount of money, but when you put it to $10,000 per producer, it does not go far. Given a 40 per cent rise, the increase in my fuel bill this year will be about $10,000. That money certainly helps, but it does not bring you out of the hole.
We could increase the crop insurance, as I have suggested. We could have a 90 per cent crop insurance. That would cover more of the costs. It could be a 6 per cent NISA program, or a better disaster program that would be more responsive. AIDA is a lot better designed now than it was a year ago when, quite frankly, the government was not going to spend all the money. The government had approval for $900 million -- we still hear that number -- and less than 40 per cent of it has been paid out. That is a problem. However, it was poorly designed in the first place. It has been improved because they were faced with the problem of not spending all the money.
I think we have to design programs and then fund them. We have to ask what we need. What is the minimum we need? The Canadian Federation of Agriculture, of which we are a member, put a number I think of $1.4 billion for a safety net package and that was just before the government came up to the $1.1 billion. We are not suggesting that we need a lot more money in the safety net package; however, we do need something outside that package for disasters and situations like the excess moisture. We need something outside to support incomes in the short term. Again, that depends on what our vision is of the rural landscape. There has been attrition forever. Where do we think it should stop?
Senator Stratton: I harken to the farmer who was here who drove his combine from Dawson City. His name was Nick Parsons. We met with him and a few other farmers on Tuesday. They expressed quite clearly how difficult and hard it is. There were even a few tears, which were particularly hard to take. I am not trying to pit urban against rural, but there is an attitude in the cities. For example, individuals from Brandon, Manitoba, were in to see me about another issue. I asked how things were going out there and what the perception was of the farm crisis. I am not referring to them directly, and I hope they forgive me if they see this, but it is an example of what is happening out there. Being city dwellers, they said, "Yes, there is a farm crisis, but it is tough to have a great deal of sympathy when you go to the Keystone Agricultural Centre in Brandon and there is an Agribition on or whatever and you see all these new 4x4s and trucks when I am driving a five- or seven- or 10-year-old car." That really struck me; it was an attitude I did not like to see, particularly from Brandon, which relies on agriculture. I did not expect to get that response and it rather floored me.
We have this perception problem in a lot of cases. We have a selling job to do to folks in the urban areas. They have heard of this problem for years. In the 1980s we had the drought. I do not know whether they are becoming simply inured to it, or whether it falls on deaf ears now or what. How can we sell it better to those folks in urban areas who are getting, in my view, a little hard-hearted about it, to put it bluntly?
Mr. Dewar: We ask ourselves the same question. It has to be an education process, and that is something we try to do if we can get the press to tell our story. We cannot afford to buy pages and pages, but I think we do have a good rapport with the press in Manitoba. But how do you explain? To me a 1977 Ford truck and a 2000 Ford truck look the same. They do not change a lot over the years. The 1996 truck was a little different, but then it looks like a 1989 Ford. Those farm trucks will have 200,000 or 300,000 kilometres on them in three or four years. I have a brother-in-law who leased a truck for use in his business in Selkirk who turned it in with less than 30,000 kilometres on it after a three-year lease. Mine has 130,000 kilometres, and it is three years old. We do not use it as a car; it is a farm truck. It is just on the road. That is one thing they do not understand. Most of those trucks are workhorses. Especially if it is in a livestock show, pulling a trailer with cattle or livestock in it.
It is an education process. It is a function of the fact that we are 3 per cent of the population. Even 20 years ago, almost everybody in the city knew somebody on a farm. That does not happen anymore and that is what we are lacking. It is not personal anymore. There is not the corner grocery store anymore. People think, "The government does not support my business, why should we support the farm business?" The major difference is the fact that we are price takers, on our input side as well. We do get into how the costs of inputs, the demands are increasing, as a direct function of the subsidy. The Americans want to grow more wheat to get more subsidies. Their demand for fertilizer drives up the price of our fertilizer to do a basic production job. It is education, and it is trying to personalize it. I think Nick Parsons helped do that. It shows his level of commitment. I would not want to sit in a cab of a combine and drive it down a highway that far.
Senator Stratton: Absolutely. That trip to come here cost $10,000. They raised all the money along the way, so that was pretty good.
Senator Robichaud: I hope he does not have to drive it back.
Senator Stratton: I asked that question, and they were taking a flatbed back.
Senator Oliver: This is an excellent paper. On three occasions you talk about the Canadian government's vision for Western farmers. However, you do not define what that vision is. You really do not come to aspects of the vision until near the end of your paper with the eight points. You say that the Canadian government must do this or that to help us with our vision, give support for transportation infrastructure, give support for research, and so on. What was missing in those eight points, it seems to me, is what the farmers are going to do. Those eight points are what you want the federal government to do by way of giving money for research and transportation infrastructure and so on.
I guess I am being a bit of a devil's advocate in asking this question. In response to Senator Stratton you said that farming is not personal anymore, and I agree with that. It seems to me that in the aspects of farming in Canada that are really lucrative these days, it is not personal; it is a business and it is highly mechanized. A poultry barn is no longer a barn with straw and stuff in it. It is a highly mechanized computer that is used to control the heat, humidity and light, and with that they can enhance their productivity and make more money.
My question is this: What are the farmers out West that you are here talking about doing to make their farms more mechanized, to use E-commerce, to use computers and the modern technology so that they can enhance their productivity and become more competitive with the modern technology? I did not see that in the eight points of your vision.
Mr. Dewar: Our Manitoba Farm Mediation Board deals with farmers that are in financial difficulties. Ten years ago we were dealing with farmers who had negative equity or $20,000 or $40,000 worth of equity -- the very small half-section farmer who should not have had any debt, and when he got some debt it was his downfall. Those farmers are gone. Now we are dealing with farmers who have $500,000 of equity theoretically, but they have a cash flow problem. They are doing everything they can to try to reduce costs. They use whatever technology is available. Part of the problem is that technology is very expensive to upgrade. How do you finance that on the returns that we are looking at?
I refer to the Manitoba income figures and Saskatchewan projections. Saskatchewan is much worse off. I think that is because Manitoba is more diversified. We have more special crops. I mentioned the potatoes and edible beans, and that is what people are doing. We grow 12 different crops on our farm, not because we want to, but because we have to. It is quite a headache managing the different crops, but it is to spread our risk and to try to find a market for something. All the producers I know are trying to maximize their resources. We weaned out the inefficient long ago.
That is where I disagree with our agriculture minister. I recognize that he went through some tough times. That was when we were doing the weeding out, and he took some risks. I do not know his personal situation. He talked about losing his tomato crops. He took some risks with the tomato industry and he did not make it. We are taking risks in the potato industry in Manitoba; we cannot grow tomatoes. The weeding out has occurred in all of Western Canada.
Senator Oliver: There are a number of farmers in Saskatchewan who are now raising deer. I went to New Zealand over Christmas, and while I was there I met and talked to a number of farmers. Deer used to be a menace, a major pest, a multi-million dollar hazard in New Zealand. They have now caught the deer and fenced them in. They now have 1.5 million deer, and they are selling them to Germany and other places in Europe. It is an incredibly lucrative crop. They cannot grow them fast enough for the market.
Why do western farmers not look at that as a cash crop, because there is a high demand?
Mr. Dewar: It is happening. In Manitoba, however, deer is not an agriculture beast. They are considered natural resources. What we have are government departments and various sectors of society disagreeing about deer. Only recently in Manitoba did we start elk production.
Senator Oliver: You can get around four times as much per pound for venison as for beef. Why not produce that?
Mr. Dewar: We would if our provincial governments would allow it. We are growing the elk and bison industry. The bison industry is thriving, and it is expanding. They are looking at building a new slaughtering plant in Manitoba -- I hope it is in Manitoba.
Senator Oliver: In the vision you have given us today, I would have thought that you should have been looking at things like the mechanization process that they have in the poultry industry, which is not doing too badly, and looking at crops that the world wants. Europe wants more venison; the United States wants more venison. It seems that with the availability of land out West for growing -- and deer will produce not just one but normally two calves -- the opportunities are great. Why not include things like that in your vision?
Mr. Dewar: When I refer to the adaptation, we need support for that. Adaptation would include going into deer or venison or bison or whatever. That is the only part we do refer to. I will give Keystone Agricultural Producers credit for recognizing and talking about the demise of the Crow and the effect it would have on Manitoba. We discussed it in 1990, so producers heard it for five years.
If you look at the charts, we have been growing our hog and cattle herds, and we can only keep so many females back each year. We have been growing in Manitoba by leaps and bounds. The elk industry has recently expanded, and the deer industry is coming. I mentioned earlier that the elk and bison producers want to join our organization as a commodity group. They are small in numbers but they are already having problems. A new bill -- and I do not know too much about it -- is being brought in by the provincial government to further regulate the industry, make it difficult for them. One of the things they want regulated -- it is allowed in Saskatchewan -- is penned hunting. They do not allow that.
Senator Oliver: I read in a newspaper article that the American tourist will come up and spend U.S. $10,000 a week to hunt a deer. It is a good business.
Mr. Dewar: They do that in the United States. I visited a manufacturer in Atlanta who was going pheasant hunting the day after our meeting, and he was going to spend $2,000 to hunt on land that was owned by Gulf, or some other oil company. If he got a bird, it would cost him more; but that was not a problem, he just wanted to have fun. We need to allow things like that.
Senator Oliver: Their meat is low in cholesterol, so a lot of food-conscious North Americans are interested in eating that kind of food.
Mr. Dewar: I grew up on venison. We got it at all different times of the year -- but they frown on that now.
Senator Stratton: In the past, programs have been discontinued. Would any of those programs, or parts thereof, be useful today?
Mr. Dewar: The program most often referred to is the Gross Revenue Insurance Program, which was terminated in 1995 in Manitoba. We are not sure whether it could have been in force over the last five years. If we implemented it now, we would be in trouble. One of the WTO rules is that once you terminate a program you cannot reinstate it. It would have to come in under the new rules. We did not have to lose 100 per cent of the Crow rate. We had to reduce by 30 per cent on 40 per cent of the volume -- I think those were the numbers. It was a budgetary measure, and they chose to do it in one fell swoop.
Ontario has revenue insurance, but Ontario does not export, so even if the Americans do not like it, they will not respond to it. However, Manitoba exports; one third of our agriculture production goes south. If the Americans even think it smells of an excuse to close the border, they will do it. The Canadian cattle industry spent $5 million fighting a frivolous complaint because we were supposedly selling below the cost of production. We were, but everybody in the world was at that time. But to the Americans, under their trade law, that constitutes dumping. That fight cost us $5 million.
It is the same problem with PEI potatoes.
Senator Stratton: We talked about a national safety net program and what the essential elements might be. How long should a program of this nature continue, if we create it? I believe I heard you say that the time frame should be 10 years; is that correct?
Mr. Dewar: I would like to have a good disaster program in place and never need it, but one that is there and adequately funded when it is needed.
Senator Stratton: A permanent program, one with no end date; is that what you are saying?
Mr. Dewar: That is right. It would be there to mitigate disasters. Many producers do not understand AIDA. They are suffering financially, but with AIDA you need to have a 30 per cent reduction before you receive any support. I never want to collect AIDA. Older farmers, those who have been in the industry for a while, will try to find a way to use a program that is there. They think that they should be able to participate, especially if they are hurting.
AIDA is such a low slung program. We will spend that $1.6 or $1.8 billion for 1998 and 1999, and that will not, in our minds, adequately cover it because negative margins are not fully covered. We will spend all that money, which is indicative of the hurt in the industry.
Senator Stratton: What level though? If the contention is that we need to have a disaster program, one with no end date, how much are we talking about, federally and provincially?
Mr. Dewar: To be an adequately funded disaster program, the $500 million that was allocated federally would be sufficient. They have made that commitment for the next two years, but there is a meeting, as we speak, at the Delta Hotel to try to whittle that down.
Senator Stratton: So the $500 million over two years would be adequate for the two provinces?
Mr. Dewar: That is nationally.
Senator Stratton: I wanted folks to clearly understand the difference between the $500 million you are talking about and the $400 million that was recently announced.
Mr. Dewar: The $400 million is a separate issue. That was a transportation adjustment. I referred to the $30 a tonne extra, or the 80 cents a bushel, in freight for 1996 crop that we did not pay in 1995. The excuse was that the moneys that were paid out in 1995, the one-time payment, was not adequate so this was supplementary to that.
We have always said that we have three jobs to do around safety nets and incomes in Manitoba. One is designing an adequate safety net package. The second relates to things like the disaster in southwest Manitoba and in Saskatchewan concerning unseeded acres. The third relates to addressing chronic low incomes. That purpose of the $100 million in Manitoba and the $300 million in Saskatchewan is to address chronic low income, so we still have two of our jobs in front of us yet.
Senator Robichaud: With respect to the permanent disaster program, are you not concerned that if this type of program were put in place a lot of things might creep in; for example, in those years where there was no disaster, that other things would be channelled in there? In other words, if there were a permanent program in place, farmers would want to use it even if there were no disaster. Then, when a real disaster does strike and governments expect the program to meet the needs of farmers, what happens if there are insufficient funds in the program?
Mr. Dewar: I should like to think that it could be funded the way I work on my farm, that if I do not need it here this year, I use it some place else. However, governments like to pigeonhole the money, specify that it is for such and such a purpose. Perhaps they will have to allow the fund to build up in "disaster-less" years; in other words, if they only spend $100 million and $400 million is left, let that $400 million sit in the fund. The next year, more funds will be put into the program. That would continue until the fund is large enough to handle a major disaster; in other words, there would be no reduction in funding to the program over this period. Then you might assess the fund and decide that there are sufficient funds in the program, that the level of funding can now be reduced. If that were the case, the government would be putting in place a whole separate fund for disasters, if that better suits the budget process of government. I would let them take it back; I do not want to use it.
However, the government should put the program in place and fund it when we need it. That is what they do with the DFAA. I do not think there is a budget line for DFAA, but when it is kicked in, the federal government is there for 90 per cent.
Senator Robichaud: You stated that the rural population is decreasing and that we will see a different farm. You also said that acres would go out of production. Are acres going out of production now?
Mr. Dewar: In the year 2000, yes.
Senator Robichaud: So it is just starting?
Mr. Dewar: Yes.
Senator Robichaud: The farming industry is still alive. There are products galore in the stores; granted, they are not all from Canada. However, the buying public checks prices at the grocery store.
As an aside, there was a recommendation in the forestry committee that those acres that are no longer needed and which are not top agricultural land should be turned back to forestry, where they could be put into production. However, that is beside the point.
You are telling us that acreage in the year 2000 will be going out of production. To what extent?
Mr. Dewar: That is hard to say right now, but I know producers who have had land offered to them to rent for almost nothing, just to pay the taxes, and nobody is renting that land. Some producers are deciding to summer fallow land. Mind you, that land would be in areas of lower productivity in the province. That is one of our major problems in Manitoba. The eastern half of our province, the Red River Valley, which is very productive, as far west as Portage la Prairie had exceptional crops. The average yields in Manitoba are above average for 1999. The problem is that the western half had virtually nothing, poor quality and very low yields. The hurt is bigger on that side of the province, and that is where the land will sit idle.
You mentioned returning some acreage to the forestry industry, where trees would be planted on that land. Our organization has proposed to the government a set-aside program. There was a permanent cover program five years ago, which helped producers take some land and put it into forages, permanent cover. We suggest that forestry be part of it, that land be turned back.
Where I live, Louisiana Pacific built a huge waferboard processing plant. They haul from about 150 miles around. It will regrow, but we could be planting for some of that. We do have land that 100 years ago was broken but probably should not have been.
Senator Robichaud: And it should be returned, too?
Mr. Dewar: Yes. Some of that will happen. We have talked to the minister about a program to make it happen. In fact, I saw something about a plan that is being developed by Secretary of State Andy Mitchell; we hope it is forthcoming.
Senator Oliver: It normally takes 30 or 40 years for a tree to grow. What do you do for cashflow in the meantime?
Mr. Dewar: That is true. It would take about 25 years to grow the poplar that Louisiana Pacific needs.
Senator Robichaud: We could also move into hemp for the fibre. What is happening with hemp production?
Mr. Dewar: My home is Dauphin, Manitoba. I am not a member of the hemp producers, but we did grow hemp two years ago. They contracted about 12,000 acres of hemp with Consolidated Growers and Processors. Consolidated is an American company that contracted the crop, the fibre, and the seed, and their intention was to build a plant in Dauphin to process it. About three weeks ago, they went into receivership. Hence, the producers are out about $6 million in their contracts. The seed market in particular is flooded.
I agree, there are some great opportunities for hemp, and those opportunities are still there. All of the fibre products that can be made, and those that are being proposed, car parts, for example, can be made from flax straw. Currently, we burn acres and acres of flax straw because it does not incorporate well into the soil. Some flax straw is used for tissue; for example, Scott Paper uses it in its production of tissue. However, much of it is just burned.
It will require an effort to develop the hemp industry, and some companies are involved in that. I hope we see a vibrant industry down the road, but it will not be a million acres. We cannot compete for the long fibre, the cloth textile, with China. They hand harvest their hemp. By hand harvesting the hemp, they end up with a nice stalk, a good fibre. We put ours through a thrashing machine, a bailer or a combine. The quality is not the same. Hence, we cannot compete with the Chinese as far as the textile is concerned. Hemp is heavier than cotton denim and much more durable. However, who wants to market a pair of blue jeans made out of hemp because the blue jeans would last 20 years? No planned obsolescence.
Senator Robichaud: There was some opportunity there and some efforts were made to produce it. Hemp cannot be produced in the States, and it seemed that there would be a market there for that product.
Mr. Dewar: They closed the border in January. They went to zero-THC tolerance instead of 0.3. I read in a paper just after that that two marines tested positive for THC; they said they ate a hemp chocolate bar. That was a more original explanation than our snowboarder gave.
Senator Robichaud: In your recommendations as to how government should look to agriculture, what it should do in the future, you mentioned research. In terms of research, the government puts out some money and then various corporations, associations or producers will match that funding and then direct the research. I remember when it was supposed to be a lot more efficient, when research would be done in response to what the industry really needed and, thus, there would be more likelihood of it being used. Is that not working out?
Mr. Dewar: In our view, it is not. There is some core public research being done. However, in terms of matching initiatives, producers do not have the funds available. Even the Western Grains Research Foundation does not have enough funds to compete or to buy research as Monsanto can. If Monsanto partners with government money, Monsanto will still own the products of the research and Monsanto will command a repayment.
Producers do not have the public varieties to choose from. We have private varieties, which are developed by different companies in conjunction with government research on government research stations, but we do not have the public varieties. Therefore, I cannot choose and say that I do not want to support, for example, Monsanto -- and that is a bad example because their varieties are very specific to their chemicals. However, I cannot say that I do not want to support company X for their seed, that I want to use this other variety for a lower cost. The other variety is just not there to help keep the cost structure down on the private varieties.
Canolas are the best example, and not just a genetically enhanced variety for a specific chemical. There are something like 50 recommended varieties of canola in Manitoba. There may be only four of them that are public varieties, so there is not enough competition to keep the price down. Public research would give a choice to the producers. If private research were yielding a better product, then it would probably command more, but to be competitive we need more public research.
Senator Robichaud: That would work with the associations that bring producers together.
Mr. Dewar: If we could help direct it. We have advisors on all the research stations. We have a research committee. There has been a change in the focus. We help direct the research. I have spoken to research stations at different times about what we think we will need five or ten years down the road. They do not want to waste their resources. The directors of the research stations must be answerable. If their research is partnered with a private company, the private company gets it. Our producer groups do not have deep enough pockets to partner with the research stations.
On the other hand, the Saskatchewan Pulse Growers have been reasonably effective in doing that, but they have a check-off system that is mandatory and non-refundable. Some producers end up paying a lot of money into that. They have decided they will fund research and make it available to producers in Saskatchewan free of charge on edible bean varieties, pea varieties. That helps regulate competition so that the other varieties are more reasonably priced in the marketplace.
Senator Robichaud: Why is it not happening elsewhere?
Mr. Dewar: It takes a lot of money. Manitoba is trying to do it, but they do not have the ability for the check-off. Do producers have an extra $1,000 per farmer to put into research? No. We just do not have the resources.
Senator Rossiter: On page 4 of your presentation, you refer to the European Union in Japan and their attitude towards subsidy programs, recognizing the multi-functionality of agriculture; that is, that producers not only provide a secure food supply but protect the environment and ensure that the rural countryside is populated, and conserve wildlife habitat and open green spaces as a counterpoint to the cities. We do not seem to look at it in the same way here. Is there any way we could get around to adopting that point of view about the subsidies?
Mr. Dewar: We have mentioned it.
Senator Rossiter: It is falling on deaf ears?
Mr. Dewar: Yes. One part of our safety net package in Manitoba is compensation for wildlife damage. We continue to say that we do not think that is an agriculture budget line, that it should not be an agriculture line. The reason we are compensated for feeding the public's animals is that they will not let us go out and slaughter them. In our eyes, they are pests, but they are not pests to the people who live inside the Perimeter Highway in Winnipeg.
Senator Robichaud: We have that problem with seals also.
Mr. Dewar: I did not refer to multi-functionality, but that is what the European Union is doing in particular. Instead of subsidizing production, they are providing money to the producers to be there.
Senator Rossiter: To keep them on the farm.
Mr. Dewar: Just to keep them on the farm.
Senator Rossiter: That keeps the rural communities alive, the hospitals, the farm equipment dealers, the schools, all the life that is in a community.
Mr. Dewar: That is why we in Western Canada cannot go against the government vision, or where the government leads us. I explained how the Crow, with all its good intentions, drastically affected the development of agriculture in Canada. Government policy will drive what we do.
Senator Rossiter: There have been recent discussions about the banks closing branches. If a bank leaves a small community, then something else will go because the people will get in the habit of going a little further afield to do their business. So if you lose one key business, the downhill run will begin.
Mr. Dewar: Almost 20 years ago, a friend of mine bought a butcher shop in a small town in Saskatchewan. He looked at the previous owner's income statement and it looked like it was a viable business. The one thing he did not know is the bank had closed just before he bought the business. This small community was 30 miles from Moosejaw, and everybody had to go to Moosejaw to do their banking. When they went to Moosejaw to do their banking, they bought their groceries. His business did not last a year. It is exactly what you are saying.
We have witnessed what you are talking about. If you drive, even fly, over Western Canada, you will see where these towns were. All that is left is a cluster of houses. The grain elevators are gone. You can still see where the siding was. Where will it stop? The advancement of technology has provided us with ability. One person can seed 300 or more acres in a day. When I started farming, all that was possible was 80 acres.
Senator Rossiter: You worked full tilt.
Mr. Dewar: I got up with the sun and was out till after dark. I remember a day like that, because it was one of the best days I ever had. I was putting in a canola crop, where I did not have to stop and fill the seed box very often. With wheat, it was more like 50 acres a day.
Senator Stratton: In terms of Monsanto, and others like Cargill and Midland, what can you use to increase bargaining power with those folks?
Mr. Dewar: That is the public research, particularly the Monsantos. Cargill is not that heavily into it, but others are. That is the alternative we need. If a Monsanto variety or another variety of canola is equal to a public variety, then the Monsanto cannot command more than the public variety.
Senator Stratton: Second, do you recall an old program that was discontinued, the Canadian Rural Transition Program?
Mr. Dewar: I recall that one. It served its purpose well at the time. It demanded that you be exiting. We have suggested that there should be a rural training program to help farmers do something else. It could be part of an e-business, if we have the technology available, the high-speed Internet that we need in the country.
KAP is sponsoring a program, which has some funding from Jane Stewart and the Red River Community College. I know many people who have used some of the HRDC funding, and it was well spent.
The KAP program that I am referring to trains rural people. They must be from a farm, and the training takes place at Red River Community College in Winnipeg. I believe that it is legal secretaries that they are short of in southern Manitoba, so we are training them. The class is small, but it will help eight families.
Senator Stratton: We talked to a farmer on Wednesday who had 5,000 acres, and he was going under. If those types of things continue to occur, would not a transition program or an exit program help those people? Rather than have the market forces drive them out -- which may be tough love, and I accept that -- is there some transition help for them? These folks are 50 years old; they will lose everything.
Mr. Dewar: There will be a lot of that in the western half of Manitoba and into Saskatchewan in the next two years. Will someone pick up that land and put it to use, rent it or even buy it at the market price? As grain farming, in particular, moves from being a good way of life to a business -- because if you are managing 10,000 or 15,000 acres it must be a business -- how much are you willing to invest in that business? On the other hand, if you spent three or four hours a day on the Internet, you might be able to get 5 per cent on your money instead of .5. I think farmers may be discouraged from investing in their business if it does not make their money work for them.
Senator Carstairs: I have an increasing frustration about farm programs. When they are first announced, everybody says they are wonderful. Everybody pats the Minister of Agriculture on the back. Three months later, they are not what the farmers thought they would be. Why? Where is the breakdown here?
Mr. Dewar: Maybe you are referring to the AIDA program?
Senator Carstairs: That is a good example, but there have been other programs as well.
Mr. Dewar: When AIDA was finally released, about a year ago now, in February, a letter was sent to the minister from his advisory committee that advised him that the program was poorly designed. Four of the five "should haves" that were recommended by the advisory committee are now incorporated into the program. It took a year, however. People applauded the fact that we had a disaster program, that we were moving in the right direction, but it was driven by the money constraints.
For years, we have said that, if we design the right program, if we decide that this is the right program to do the job, then it must be adequately funded. There comes a point when the money is not doing the job, that it is doing it so poorly that maybe we should not try. I am not saying that with respect to AIDA, but if you put too much of a funding constraint on the program, it will not do the job. That is one extreme; the other is to overfund.
Senator Carstairs: In this case, the money was there; it just could not be accessed.
Mr. Dewar: It is still only 40 per cent paid out.
Senator Carstairs: Exactly. Some farmers have said to me that problem with some of these programs is that, yes, the big announcement is made, but the regulations follow the announcement three or four or five months down the line. The problem is the regulations, not the concept of the program. The problem lies in the enforcement of the program.
The farmers I have spoken with have said, "Don't announce anymore of these programs unless the regulations go hand in hand with the programs." Is that your feeling, too?
Mr. Dewar: It would be good. We have been part of the development of programs as long as we have existed. The government does not like us to know what is being developed. We could not be part of the process until later into the process. It is a political way of doing things.
Senator Carstairs: It is a bureaucratic way of doing things. The bureaucrats like to be able to control the program after the program is announced.
Mr. Dewar: One of the major problems in Agriculture Canada is a bureaucracy that continues to say that there is no problem in agriculture. They continue to advise the minister that there are no problems. I feel sorry for our Minister of Agriculture. We deal with this bureaucracy.
One of the good things about the American system is that they change the top 200 or so bureaucrats after an election. Our system does not work that way. We are dealing with the same bureaucrats we dealt with 12 years ago.
Senator Robichaud: If the government introduces a program, and the regulations are all written, then you are strapped. With respect to AIDA, there was not enough flexibility to take into account special circumstances.
On the other hand, if a program has some flexibility -- for example, at HRDC -- a program that allows bureaucrats to fund very good programs and projects, there will be people who will abuse it. That is the case everywhere. The HRDC minister is being grilled for that flexibility. It is like being between a rock and a hard place.
Mr. Dewar: I agree. AIDA is a good example. They want to make sure that not one penny goes to somebody who does not need it. Therefore, people who need it suffer because of the inflexibility in the program. Given the criteria, either you are down 30 per cent or you are not.
The Acting Chairman: Thank you. Mr. Dewar, we have kept you here a long time, but it has been very worthwhile.
The title of the Senate committee report is "The Way Ahead: Canadian Agriculture's Priorities in the Millennium Round." We must work very hard with farmers and with the government to try to define that way ahead, because obviously it is a major problem, one that encompasses the very fabric of our country.
We appreciate your attendance here today, and we thank you for your excellent report.
The committee adjourned.