Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 9 - Evidence
OTTAWA, Thursday, May 4, 2000
The Standing Senate Committee on Agriculture and Forestry met this day at 9:05 a.m. to study the present state and future of agriculture in Canada, consideration of farm income issues.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, before we hear our witnesses this morning, I want to mention that the International Grains Council Conference will be in Regina from June 14 to June 16. We will keep that in mind. I should like to be there, as would probably Senator Wiebe and some others. This will be an important conference certainly.
Mr. Blair Armitage, Clerk of the Committee: I will send a memo around on this to ask for your interest and then convey it to the steering committee.
Senator Wiebe: Do we have to advise that we are attending? What is the protocol?
The Chairman: It is good to know.
Mr. Armitage: I will send a memo around. Basically, the committee will cover your conference registration fee and accommodations and other related costs.
The Chairman: I should like to welcome Senator Wiebe from Saskatchewan to this committee. He will be a great support for the agriculture industry. His knowledge of agriculture will be a real lift to the committee.
So welcome, Jack Wiebe. You might be on the wrong side of the desk.
Senator Wiebe: I am looking forward to it.
The Chairman: This morning we are pleased to have witnesses from the Saskatchewan Association of Rural Municipalities. Please proceed.
Mr. Sinclair Harrison, President, Saskatchewan Association of Rural Municipalities: With me this morning I have Arita Paul, Manager of Agriculture Services of SARM. We want to thank you for the invitation to appear here this morning. It appears that this is Mr. Wiebe's official indoctrination into this committee. Senator Wiebe and SARM had a good relationship when he was lieutenant governor for Saskatchewan. In his first year in that term he brought about an award that was presented at the SARM convention each year. That carried on through the six years that he was lieutenant governor, and the new lieutenant governor, Lynda Haverstock, is continuing on.
The Chairman: I understood lieutenant governors were always non-political.
Mr. Harrison: That is right. We always found him non-political.
We do apologize for not getting our presentation down to you ahead of time for translation. No excuse is good enough, but it did save you staying up late last night having to read it. There is an executive summary at the beginning of our presentation.
There are 297 rural municipalities in Saskatchewan. They represent rural local government. SARM is a voluntary association. All 297 rural municipalities are members of SARM. We attempt to look after the interests of rural Saskatchewan. Since we do not have a broad-based agriculture organization in Saskatchewan like the Ontario Federation of Agriculture or Keystone Agricultural Producers from Manitoba, our members have chosen to voice their opinion through resolution to our convention, and that is one of the reasons we are here before the Agriculture Committee. Certainly we have a strong interest in local government, a strong interest in what occurs in rural Saskatchewan.
Most recently, over the last six weeks, our organization has been totally consumed by discussions with the province over amalgamation of municipalities. We know that people in Quebec are also facing that situation. We believe we have a framework put together in Saskatchewan now where we can sit down and talk about the future of rural Saskatchewan and all of Saskatchewan in a meaningful way. It appeared, to start with, that the province would bring in legislation in April of this year forcing amalgamation. We are strong believers that you should not force anyone to cooperate. Cooperation should take place on its own merits.
While the cattle industry is doing well and fortunately the hog industry has rebounded over the last few months, agriculture producers on the Prairies are facing difficult times, particularly those in the grains and oilseed sectors. The reasons for that include natural disasters caused by drought and flooding, rising costs, and low commodity prices, caused in part by subsidization from other countries. Realized net farm income in Saskatchewan in 1999 was forecast at $96 million, or an 87 per cent reduction from the previous five-year average. Saskatchewan is the only province that shows negative farm incomes over the 2001-2003 year period. Bankruptcies in Saskatchewan in 1999 increased 8 per cent, while the national average decreased by 1 per cent.
We from Saskatchewan feel that the next couple of years are critical as to the future of agriculture in Saskatchewan, especially the grains sector.
Transportation is a key element to the export-based western grains industry. We are currently awaiting recommendations on transportation reform from the government. This has been going on for some time now starting with Estey and then going to Kroeger. We have all been involved in a lobby effort for the last few months, and if something does not happen within the next week or two, we realize that our window of opportunity for change has vanished for this year. It will mean we will spend another year of lobbying and dealing with the government of the day, trying to bring about proper changes to grain transportation.
The desired outcome of the reforms is lower freight rates, achieved through rate reductions and real competition. A rate reduction of at least $5 per tonne is realistic and would save Saskatchewan producers in the order of $100 million per year. Farmers should become the owners of the government's 13,000 hopper car fleet, thereby conferring on them the opportunity to obtain efficiencies and reduce costs for farmers.
The issue of the hopper cars was dealt with by a parallel process; it was not part of the Kroeger process. It is not that the farmers of Western Canada want to play railroad. They want a meaningful place at the transportation table, and unless you have some assets, you are sort of treated as a trivial group in the exercise. If you own what would be seen as half the rolling stock that transports the grain, certainly you would have a meaningful place at the table. So that is an issue we would like to see dealt with in cooperation with the grain transportation reform.
Furthermore, the road system has borne the brunt of the federal policy changes that have caused a rapid consolidation of the grain handling and transportation systems and shifted grain haul patterns. Saskatchewan alone requires $65 million to cover the incremental damages to roads from grain truck haul. The federal government should reinvest a considerably greater portion of its fuel tax revenue in the provincial transportation infrastructure.
Anyone who has been into Western Canada, and especially Saskatchewan over the last few years, will see the consolidation of the grain handling system. Large concrete elevators are replacing the wooden structures. Our road system has not kept pace with the change. It will take a major investment by all three levels of government -- federal, provincial and local. None of us are doing the job we need to do to put our road infrastructure back into place. It is affecting safety, with greater distances having to be travelled by our ambulances and our school buses. The traffic counts are increasing and our road surface is not what it should be.
Infrastructure is a requirement for development. If rural sustainability and development are truly goals of the federal government, we would like to see a firm, five-year commitment to infrastructure investment. Other government programs that have an important role in the agriculture economy include the Agri-Food Innovation Fund, the Farm Consultation Service and the Farm Debt Mediation Service.
While we are encouraged by the strong performance of the cattle industry, there is a need to meet the opportunities that still exist for expanding the livestock sector in Saskatchewan. It is estimated that Saskatchewan could increase its cattle herd by about 60 per cent without having to increase pasture area. Packing industries and associated economic spinoffs would be soon to follow.
A complete safety net package, including a long-term program that provides income support or cost of production recovery, will be an important part of agriculture's future. Safety net funding will serve as a bridge to provide the necessary capital to assist farmers through the periods of low incomes, so they will be able to invest in value added processing opportunities in the future. The current national safety net package includes three aspects: national programs such as NISA and cash advances, crop insurance, and companion programs. Disaster programs, like AIDA, are outside the regular safety net envelope. These programs serve certain needs but contain gaps. For instance, NISA was designed to assist producers through price variations, not long-term low prices, and it is of limited use to beginning farmers.
Finally, the inequitable treatment of the western provinces, particularly Saskatchewan and Manitoba, must stop. Examples of this type of treatment include the refusal to designate droughted and flooded areas in these provinces as disaster areas; changes to the national safety net funding allocation formula that give all other provinces a funding increase while Manitoba and Saskatchewan receive the same level of funding; a reduction in the 2000 disaster funding at a time when producers in these provinces need it most; and treating the transportation adjustment payment as income, which will reduce the disaster payment to these provinces.
The government's role should be one of providing a clear vision for the future and clearing the obstacles out of the way. The national safety net package will be an important component of the government's efforts to facilitate the way to a prosperous agriculture future.
We have a number of recommendations, which you may want to question further on in the meeting. The recommendations are the following: First, introduce a transportation package that would lead to reduced freight rates. Further to that, we do not want to see the implementation of the 4.5 per cent freight rate increase that has been suggested by the CTA, the Canadian Transportation Agency. Second, support producer economic development initiatives by ensuring that barriers are removed. Incentives for these initiatives should also be considered. Third, preserve programs like the Agri-Food Innovation Fund to keep Saskatchewan's diversification efforts on track. Fourth, reinvest federal fuel tax revenues in transportation infrastructure in the province from where the funds came. Fifth, remove the federal excise tax on farm gasoline and diesel, which represents approximately $47 million to Saskatchewan farmers. That action would be undertaken on a national scale, therefore being fair and equitable to all farmers across Canada.
Sixth, make a commitment to funding rural and agriculturally related infrastructure. Seventh, expand human resource development to train workers for value-added processing facilities. When you look at the demographics of Saskatchewan, you see that certainly the fastest growing sector of our province is the First Nations people. Twenty years down the road, those people will make up a major portion of the work force. It is imperative that we work closely with the First Nations community in training and bringing them into the workforce for the future. Eighth, designate flooded and droughted areas as disaster areas and provide the financial assistance that accompanies that designation. Ninth, reconsider the position of safety net funding allocation. Saskatchewan and Manitoba are the two provinces that have been hardest hit by low world prices. If any provinces are to see an increase in safety net funding, it should be those two. Tenth, complete the safety net package by adding a long-term element that would provide support during prolonged low incomes. The program should have a component that provides income insurance or covers the costs of production.
Senator Chalifoux: I should like to thank you for this very informative summary. I had a delegation meet me in Alberta last week regarding the new regulations coming down for small meat processing plants. Everybody is interested in food safety, but the smaller processors are saying that the regulations are so strict that they are causing bankruptcy as the smaller processors are being forced to close down. Sixty-five people are involved in the processing plant that met with me. This is small agricultural business. It is in a small community. Are you finding the same issue? They said the only one able to meet the regulations for processing plants was Cargill. Have you met the same in your municipalities?
Mr. Harrison: There seems to be a worldwide phenomenon that everything should be big. With regard to our amalgamation of municipalities, there seems to be a feeling that as long as you are bigger, you are better. We feel there are niche markets, especially in the bison and the elk industries. We would suggest that sometimes regulations are brought about without thinking about the costs they place on small packers and other specialty industries. I would suggest that these comments are well founded and certainly they are concerns of our municipalities.
In our discussions about amalgamation, certainly economic development was at the forefront. Our provincial government seemed to think that our municipal structure was standing in the way of economic development. We have proven to them without a shadow of a doubt that that is not the problem. None of us likes to take blame for anything. We think it is federal and provincial regulations that are standing in the way of economic development in the Prairie region, not our municipal structures.
Senator Chalifoux: Did you know that there are agricultural societies and organizations in First Nations and Métis and that they are working diligently trying to become involved and participate in the industry and finding it very difficult because there is an assumption that everything is under Indian Affairs? That is not right. Have you been in contact with any of those organizations?
Mr. Harrison: We have a forum called the Federation of Saskatchewan Indian Nations Local Government Round Table. Certainly it has not been as active as it could have been, but because of the Treaty Land Entitlement lands that are being purchased in the Prairies and especially Saskatchewan, specific claims, we have quarter-section reserves and half-section reserves scattered throughout the province, which are federal jurisdiction. For things like bylaw compatibility, it is creating great problems. Somehow, federally, provincially and locally, we have to make this situation better than it is today because it is causing hard feelings. On one side of the fence you have federal jurisdiction, and on the other side it is provincial. Provincial law does not apply. In the traditional reserves as we knew them, there were large blocks of land. They grew in partnership with the RM system and things worked well. However now, now we have these small pockets of reserve land and the situation is creating poor neighbours, and we have to eliminate that.
Senator Chalifoux: What about the Metis? There are large Métis settlements and communities in the Batoche, Prince Albert and northern areas there. Are you in contact with them? Are they working with you on the issues we all face in Saskatchewan and Alberta?
Mr. Harrison: Our association at the present time does not have a working table with the Métis community. That is something we should be working at also.
Senator Wiebe: I certainly want to thank you for your presentation. Your brief is really a mirror of what the agriculture individual is thinking in Saskatchewan. The councillors who sit on those local boards of the 270 municipalities that comprise SARM are directly involved in the agriculture industry. They know the agriculture industry because they are there day in and day out. Those representatives represent every possible spectrum on the political map of the province of Saskatchewan. As well, they represent every field of agriculture involved. Senators, if you want a good understanding of the problems and concerns in the Province of Saskatchewan, you have it right here. It is refreshing.
The largest problem in agriculture is that we all know what the problem is but it is difficult to get the various farm organizations together to come up with a unique solution. SARM does a wonderful job in attempting to do that.
My first question is in regards to the first point in your recommendations: transportation. It is my understanding that, because of competition and the rapid desire for market share that our elevator companies have demonstrated during the last number of years, we are now consolidating a tremendous number of elevators throughout the province. They are moving into larger centres and building huge concrete inland terminals. It is now to the point where we have far more storage capabilities in the province than we have grain we can produce. That will create a lot of competition amongst the different elevator companies to get the farmers' grain, which will mean a tremendous amount of long distance hauling on the infrastructure that is there, which could cause a further drain with the costs of upkeeping and upgrading those roads. Is that your feeling?
Mr. Harrison: Most certainly. We would say that at this point we should be stopping the pouring of concrete to build more elevator space. With the expansion of the hog industry and hopefully the expansion of the cattle feeding industry, our long-term projection on grain production is that the grain production will probably increase but the export will decrease. We are not sure what the elevator companies are basing their projections on, where the additional amounts of grain will come to pay for those elevators.
As the senator points out, there will be fierce competition in the grain industry to fill those elevators. We are not opposed to competition. However, the way that competition will come about is through providing trucking incentives to haul grain long distances to fill an elevator. That comes at the expense of the transportation system, the road system. The two are in conflict. We like the competition, but it is at the expense of those who are responsible for the roads: the provincial government and the local government. Our road system is deteriorating faster than we can replace it now, and we feel that the decrease in wooden elevators and the increase in concrete elevators will be to the detriment of rural Saskatchewan.
We have had one encouraging sign over the last few months. A year ago wooden elevators were being torn down, burned down. You could not purchase them. If there was a branch line, the elevator companies refused to sell those wooden elevators to farmers so that they could set up a short line, load producer cars and do what was right for their community. We have seen a dramatic change, especially at Sask Wheat Pool. They have now said they would sell their wooden elevators to communities. We would like to think we had some influence over that decision. We did take the elevator companies, all of them, before the Competition Bureau. The Competition Bureau investigated what was going on there. They have not come out with a final ruling yet, but we would like to think that perhaps just the fact that they were investigating influenced Sask Wheat Pool to change their opinion on this. We would hope that the other elevator companies in Saskatchewan and in the Prairie region would also consider selling their wooden elevators to communities.
There is an idea floating around now that maybe having a regional railroad that would tie all the branch lines together under one umbrella makes more sense than having 40 or 50 small short line companies set up operation. It is a nice idea to have a short line for your community, but certainly if you can use some cross-subsidization from a regional railroad concept that would be good. That is being explored at the present time federally, provincially and locally.
The Chairman: Transportation is probably the biggest cost and was the biggest loss to farmers in the amount of return you received for your grain. For example, from my own farm, I shipped a load on a B-train that brought $3,600. By the time they had taken off all of the costs, I got $1,400 on a B-train of wheat.
The companies that are trucking grain are saying they can no longer truck grain for the price they have been trucking. They must up the costs. We are hearing that now. The farmers are further away than ever from being able to truck their grain with their own trucks. The whole industry will be commercialized, I think, with few exceptions. What pressure will that put on the farmers? You mentioned the short line operations. Do you think that could only be a transition tool or is there something stable about that?
Mr. Harrison: We all know if the branch line disappears, it will never be rebuilt. We do not know which branch lines are sustainable and which ones are not. One comforting thing in purchasing a short line is that there is a salvage value. We have some problems with a ruling that the CTA came down with recently, but putting that aside for a minute, if you can purchase the line for net salvage value, you have not risked anything except the interest on your investment.
Recently, we approached the province regarding the regional railroad concept and stated that maybe someone, like On the Tracks, the group that bought the Churchill line, should step up to the plate and purchase all the branch lines, providing the railroads will sell them. We would keep the ones that are viable in co-operation with the communities, and those that are not an advantage to the Prairie region would be taken up and salvaged. That is a reasonable approach, if they are taken off one by one.
However, a situation we are faced with now and do not agree with is segmentation. Out of a 100-mile line, the railroad company will shut down 25 miles; they shut down that 25 miles and then the next 25 miles. If you can purchase the 100 miles it is a viable operation. The segmentation of the branch lines has to stop. We feel that the railroads, in cooperation with the Prairie region, should, if they are not prepared to run the branch lines, say that they will run the main lines and haul the grains to the port, and someone else can bring the feeder lines in. That will be explored fairly aggressively over the next few months.
The Chairman: On the hopper cars, the railroads do not like to stop and pick up 12 cars loaded by the local elevator. How will they stop and pick up two cars loaded by a producer car or by a farmer?
Mr. Harrison: The railroads like to pick up 100 cars at one time if they can, so if you can get a short line operator or regional railroad operator to put 100 cars together on a branch line and bring that into the interchange, that should be no different to CP or CN than stopping on an inland terminal. Time is a concern, and certainly there will have to be a lot of cooperation on that branch line, but we see it working. It is something we should be exploring.
Senator Rossiter: Thank you for this presentation. It is very clear.
Mr. Harrison: Could I ask the senators to identify where they are from?
Senator Rossiter: I am from P.E.I. We do not have the same type of problems you have.
In your presentation you stated that the inequitable treatment of the western provinces includes the refusal to designate droughted and flooded areas in Saskatchewan and Manitoba as disaster areas. I am amazed by that statement. How much worse would the situations have had to have been before they would have designated those areas as disaster areas? They were horrendous.
Mr. Harrison: That is what we felt. I guess they did not have the dramatics of the ice storm. We certainly sympathized with the people in the ice storm and we feel the federal government did the right thing there. Certainly the flooding in Manitoba was devastating also. However, when you have drought that carries on for a number of years, you do not have the same impact on TV, watching people leaving the land and families being destroyed. It took a lot of lobbying on behalf of the Prairie region for the federal government to come to the realization that there was a disaster. We appreciate the help that was given, but it was not as immediate as the ice storm or the flooding.
Senator Rossiter: You also stated that the transportation adjustment payment is treated as income.
Mr. Harrison: That is one of the things that is devastating Saskatchewan. When we indicate the period from 2001 to 2003, we are looking at negative farm income. It is not because our farmers in Saskatchewan are poorer farmers than those in Alberta and Manitoba. It is because the transportation costs are much greater. We export 80 per cent of our grain, whereas Alberta feeds a lot of their grain. Manitoba is closer to Thunder Bay. The transportation costs, as Senator Gustafson pointed out, are having a major impact on our producers.
Senator Chalifoux: It is interesting that you bring this up. I was in Grand Prairie in northern Alberta and I received the same information. The transportation cost is causing the suffering. This is the fourth year of drought in northern B.C. and in northern Alberta, so it is the same issue. Also, the Minister of Agriculture made an agreement between Saskatchewan and Manitoba and left Alberta out. Alberta farmers are very upset, too.
Mr. Harrison: We did ask Alberta to come to Ottawa with us last October when the two premiers came. They chose not to come. Once relief was provided to Manitoba and Saskatchewan, certainly they felt they were being dealt with unfairly, but, on the other hand, they chose to stay at home when they should have been in Ottawa.
Senator Chalifoux: I am just talking about the farmers.
Senator Fairbairn: When you talk about the regional railroad, who would you be looking at to take the lead in putting such an entity together? I can understand the notion of trying to get the railways to have a position on short lines, branch lines, that kind of thing. Who would you look to for investment? It sounds like a really good idea. The only snag I saw as I was reading through your brief would be who would invest in it. Who would take charge and make that happen?
Mr. Harrison: We have not crossed that bridge yet, but we would open it up to proposals. There are a number of companies in the United States, although we do not always like to look south of the border.
Senator Fairbairn: By "we," do you mean your organization or a coalition of farm organizations?
Mr. Harrison: Collectively, we hope to sit down in the next two or three weeks with all the interested players. There is a group called the Western Rail Coalition, which is a group of interested communities in Manitoba, Saskatchewan and Alberta. The forest industry is also interested in this concept. We hope to sit down collectively and see if the regional railroad makes sense to start with. If it makes sense to the interested parties, the provincial government and federal government, then the next step would be to call for proposals as to who is interested. Just because it is a good idea does not mean anyone is interested in bringing money to the table. I suggested On the Tracks, not that they are preferred over anybody else, but they do have a presence in Saskatchewan and Manitoba, and certainly they are promoting this idea because of their own corporate interest. The fact that they are floating the idea does not mean to say it is a closed shop. It would be opened up. The provinces could purchase the branch lines if they wanted to, although we have asked them to do that in the past and they have chosen not to. By opening it up to proposals we may have some new ideas come to the surface. Maybe it would be two or three companies. There is nothing cut and dried as yet. However, as I said, once these branch lines are torn up, they will never be replaced. Most of the railroads in North Dakota have been torn up, and it has not been to the advantage of the rural areas.
Senator Fairbairn: Keep us posted on that because it is an innovative thought with a hugely difficult issue. I am sure this committee would want to know.
Mr. Harrison: Before we leave that, the other thing we are probably just on the cutting edge of is the environmental issue and greenhouse gases. We all know that it takes more fuel and energy to truck grain than it does to rail grain. That is a new dynamic that is being considered now. The more grain we can keep on the rail system, the better it is for our roads and our environment.
Senator Fairbairn: Keep pushing Ralph Goodale on that. He might have a good idea.
I am from Alberta. Did I understand you correctly that expanding the cattle industry into parts of Saskatchewan would seem to be a very good idea? Certainly in southwestern Alberta we are up to feed lots and cattle in an enormous way. Is it the question of regulations that is preventing you from doing this, or are there other reasons as well that would prevent you from expanding in your province and having the people in place who would be prepared to shift and change in order to do it? Is it regulations or is it more than that?
Mr. Harrison: It is more of a mindset. Traditionally, we have shipped our cattle and barley and kids to Alberta.
Senator Fairbairn: You want it all back.
Mr. Harrison: Some of them. I am not defending the federal government's decision to change the grain transportation subsidy, but it is one reason that it seems to make a lot of sense for us to keep our calves, our barley and our kids in Saskatchewan.
The Chairman: You would need a packing plant.
Mr. Harrison: Yes. There is a lot of pressure in Alberta. I do not know whether you have come to the limit of feed lots, but you can only have so much concentration of hog barns or feed lots in any particular area before you get resistance from the general public. One thing we do have a lot of in Saskatchewan is wide open space. It is somewhat ironic: We say that people are moving out of rural Saskatchewan and some people say there is nobody left out there, but you cannot find a place to put a hog barn because you meet resistance from the general public. There is lots of space for feed lots and I think we will see more feed lots in Saskatchewan in the future. Our Saskatchewan people feed your cattle for you; we can certainly do that at home. That is one reason, perhaps, for building more concrete elevators; if we build enough of them, we will feed more cattle and hogs. Certainly we will grow more grain with new technology, but I do not think the technology will surpass what we feed in Saskatchewan.
Senator Fairbairn: That is obviously an interesting plan for the farm community in Saskatchewan. Your point about the environment also is right on. Of course that has become an issue, and it is an issue in Alberta. However, on the other side of that coin, there have developed technologies certainly in our province and elsewhere that can mitigate the negative side of that development, so it is certainly worth a good shot -- not that we do not want you to come to Alberta.
Mr. Harrison: We may see some changes in the future in the way we have treated farmland ownership in Saskatchewan. At the present time, all the land that a person outside of Saskatchewan borders can own is 320 acres. We almost treat people from outside of Saskatchewan as foreigners. That has not perhaps served us well for economic development in the last few years. Outside the country, all you can own is 10 acres. Those regulations are provincial regulations. They are under review.
The Chairman: I should like to pursue that. If a quarter section of land just north of where we farm is selling for $35,000 Canadian, that would mean that an American could come in and buy a quarter section of land in Canada with about $22,000. This will be quite a topic of discussion. Since my grandfather farmed there, we sent the Americans home broke three times. It is happening in Manitoba. They have large investments from German sources and so on, especially in the potato industry, but it certainly will be a question of sovereignty. It has been a major question in Saskatchewan, no doubt about that.
Mr. Harrison: Your viewpoint varies whether you are selling land or buying land. If you are selling, you want as many buyers as possible.
Senator Robichaud: On the livestock industry, just how much promotion is being done to invite people to move in that direction? That seems to be a positive point. I mention that because we hear a lot of negative things happening in the farming sector to the point where some people might be led to believe that it is a losing proposition.
In Atlantic Canada, we went through that when there was the collapse of the groundfish, the northern cod and so on. People believed that the fishing industry was something of the past. The reality is that it is a very active and prosperous sector, if you look at lobster, shrimps, scallops, snow crab and other species. However, because of the negative feeling that was propagated, people started to believe that it was a losing proposition, that there was no use moving in that direction.
There are some positive things that could be done here. How much work is being done on that? You say it is a mindset. That takes a long time to change. How actively are you pursuing that so that people get the impression that there are positive things that can happen and certainly we can look to the future?
Mr. Harrison: Certainly the mindset must be turned around. The average age of farmers in Saskatchewan is in the neighbourhood of 56 or 57 years. I happen to be in that category. I say am still a very young man. However, to take on a new mindset or to start moving into the feed lot industry when you are 57 or 58 years old, perhaps you just do not have the energy to take on a new enterprise like that. We have to bring new people, young people into the herd.
I had the opportunity of speaking at the convocation at the School of Agriculture in Saskatoon last week. There were certainly some bright individuals there, and I tried to paint a rosy picture for them to stay in Saskatchewan, things like the feed lot industry and the hog industry, and certainly the grain industry has to support it.
I am somewhat familiar with what goes on out in the Maritimes. Our president from the Federation of Canadian Municipalities comes from Newfoundland, so he keeps us up to date as to what happens out there. Certainly we have to have the right mindset. You must pencil things out. If you do not make money at the end of the day and you cannot raise a family on the farm, it will not work. We must encourage our young people to stay at home. I would suggest that all three levels of government have not done a good job helping change that mindset.
Senator Robichaud: It is certainly not easy to encourage the young people to stay on the farm when they are actually living through this period of hard times. I am not saying that this would be easy, but I still say that the effort is well worth putting out.
Your seventh recommendation is to expand human resource development to train workers for value-added processing facilities. I really like that one. There are programs, and you can apply for those programs and qualify. The program at Human Resources Development Canada had a lot of flexibility, but some people are killing it. It will come to a point where this will be the regulations. It will be so difficult to access if the opposition does not get off the few bad projects that have gone through. It will come to the point where you will not be able to help associations who will who want to access that and do a lot of good work. These are very good programs.
Mr. Harrison: One bright light over the last year is that the province just passed some legislation on new generation co-ops. There have been some good new generation co-ops in other places in North America. It is a positive note. However, governments should do what people cannot do for themselves. Unfortunately, we see governments meddling in things that people can do for themselves. Sometimes we lose sight of that. They should probably stay out of some of the areas they are in and become more involved in some of the things they should be involved in.
Senator Rossiter: What do you mean by new generation co-ops?
Mr. Harrison: It is investment by producers themselves. New generation co-ops are run by producers themselves. There are some benefits.
Ms Arita Paul, Manager, Agriculture Services, Saskatchewan Association of Rural Municipalities: The co-ops vary. Their structure is similar to that of a traditional co-op. However, there are some key differences, and that is why they have the title "new generation" co-op. It is a closed cooperative where the farmer must buy a share and contribute a certain amount of production to that structure. There are some slight differences, but it is similar to the older structure.
The Chairman: Does it come under that umbrella?
Ms Paul: Yes.
The Chairman: One of the problems has been to strike a deal with the Canadian Wheat Board to buy the durum wheat at a reasonable price so that they could process it.
Mr. Harrison: We have worked with the Canadian Wheat Board as has Keystone Agriculture Producers. At our March convention, a resolution was passed that new generation co-ops be given an exemption from the Canadian Wheat Board so that farmers can process their own produce through a new generation co-op. We see the Canadian Wheat Board as being essential in the export market, however it should not be standing in the way of progress or of farmers processing their own products.
The Chairman: From what I have read lately, it appears that that whole process may collapse.
Mr. Harrison: There are three groups, one in Swift Current and two in the Weyburn area, that are looking at the pasta industry. It is my understanding there are some discussions occurring amongst the three of them now to assess whether they can do something collectively. I am not sure where their discussions are at the present time.
Senator Robichaud: I understand that the new generation cooperatives are production cooperatives. It took a long time for people to realize that they could just not make it work. The problem in my area was that it was always somebody else's responsibility to do a certain task. The job was just passed around. I am a member of our very successful retail co-op, but there were some problems on the production side.
Ms Paul: There are only a few in Saskatchewan that come under the new generation structure. There are some set up in the United States, and from what I understand, they have been quite successful. It may have something to do with the fact that the producers have a vested interest in that they contribute a certain amount so there is an incentive to make it work.
Senator Robichaud: How different are the new generation co-ops from the old generation co-ops?
Mr. Harrison: As I understand them, in the case of the pasta industry, the farmer must be a durum producer and he must commit to a certain number of bushels per year so that there is a guaranteed supply. A farmer from P.E.I. would not be eligible because those farms do not produce durum. The Canadian Wheat Board, in an effort to facilitate new generation co-ops, is switching stocks. By that I mean that, if a farmer from Alberta wants to become a member of the pasta plant in Weyburn he or she can do that and the Canadian Wheat Board will switch the stocks. They will use the durum from Saskatchewan for the commitment. It is a legal, paper transaction and it allows anybody in the prairie region to become a member of a particular new generation co-op. That is certainly a benefit.
Senator Wiebe: It is my understanding too that, because of the high capital required to establish the new generation co-ops, they are set up under the cooperative structure of one share, one vote. There are some allowances now regarding the value of any one share. For example, an individual may be allowed to put in 10 times more than another individual. That is done in an effort to raise the capital which is required to get the co-op off the ground.
Mr. Harrison: That is right.
Senator Oliver: I want to understand the business case regarding your suggestion about the hopper cars. In your brief you state:
Farmers should become the owners of the government's 13,000 hopper car fleet, thereby conferring on them the opportunity to obtain efficiencies and reduce costs for farmers.
Do you envisage that the farmers would pay fair market value for these hopper cars? If so, what do you believe would be the cost of maintaining these used cars and so on? Where is the financial benefit to the farmers? It is nice to own equipment, but if you cannot afford to and maintain it, where is the business case for ownership?
Mr. Harrison: We had no problem with the federal government owning them and supplying them to the grain industry at no cost. A decision was made some years ago that they would sell the cars. The fleet is currently being maintained in CP and CN shops. We have no trouble with those operations. However, farmers are paying in the nieghbourhood of $4,500 per car to maintain the 13,000 federally owned hopper cars. The industry average for maintaining a hopper car in the grain fleet is in the neighbourhood of $1,500 per car. There alone, if we were to own those cars ourselves, maintain them in shops wherever, there would be an $80-million savings.
Senator Oliver: Who will you have do the maintenance at $1,500 and not $4,500?
Mr. Harrison: Throughout the Prairie provinces there are several private shops with excess capacity for maintaining cars. There are shops in Regina, Saskatoon and Moosejaw. Sultran is a corporate partner of the Farmer Rail Car Coalition. The coalition got together to purchase the cars and it has excess capacity in Calgary, so there would be no problem in finding someone to maintain the cars.
Senator Oliver: Do they have enough capacity to do maintenance on 13,000 cars?
Mr. Harrison: A lot of maintenance is done on-track now. We do not believe that maintenance of the cars will be a problem. If there is not enough capacity out there, we will build a plant in Saskatchewan. Maintaining a hopper car is not a difficult exercise. If you talk to CP and CN they will suggest that it is very complicated. However we have visited the plants in Hamilton and Nova Scotia. Farmers maintain computerized combines, tractors and other complicated equipment. When you compare the maintenance of that kind of equipment with the maintenance required for a rail car, you will see that the maintenance requirements for a rail car are not very sophisticated.
Senator Oliver: Why does it cost CP and CN $4,500?
Senator Sparrow: That is what they charge. It does not cost them that.
Mr. Harrison: We also ask that question. We are paying the bill, but they have a closed set of books. That is the bill we pay every year, and we have no control over it. If you own the asset, then you have control over who maintains it.
Senator Oliver: How will the farmers finance the purchase of these 13,000 cars? Will they borrow the money and make payments on that loan on a regular basis? Can they afford to carry the cost of owning these hoppers?
Mr. Harrison: The final details of that have not been figured out. It would seem reasonable that there would be a surcharge per tonne of grain that would be put towards the purchase of the cars. In that way, the producer who ships the most grain pays the most for the cars. They would be an asset of the farmers of Western Canada. We have set up a non-profit co-operative to hold title to them, if we should ever have the opportunity to purchase them.
Right now the main stumbling block to the purchase is the first right of refusal which CP and CN have on those cars. The federal government served notice two years ago that they would sell the cars. It is a five-year agreement, and the agreement has three years to run. We have suggested to the federal government that they should move ahead, dispose of the cars, and if they want to do it as an auction sale, we will come to the table. That is not our preferred option. We feel that, if they put them on the auction block, someone from outside of Canada may purchase them, and then they will not be dedicated to western grain as they should be. The federal government purchased those cars back in the 1970s because, at that time, the federal government said they needed more rolling stock. CP and CN said they did not have the resources, so the federal government went out and bought the cars. If we sell them to the States, we would be right back in the same situation with no way to move our grain. We suggest to the federal government that whoever purchases them must dedicate them to western grain.
Senator Oliver: The purpose of my question is to determine whether you have worked out the details of the business case to make sure you are not buying something you cannot afford. In your opinion, because you can do the maintenance 75 per cent cheaper than you are paying now, and if you owned it you could dedicate it to your use, it is a good business case for the farmers.
Mr. Harrison: It puts us at the table with the federal government, provincial government, CP, and CN in a meaningful way.
Senator Sparrow: I want to express my appreciation for your attendance here today. I also want to publicly commend you and your organization for the effort you put into the AIDA program to try to make it work better for the farmer. I appreciate that perhaps your efforts were not entirely successful, but at least your efforts did some good, and I appreciate that.
On the grain car issue, when did we provide the first right of refusal to the railroads and why? Do the wheat boards themselves have cars? The Saskatchewan government has cars, the Alberta government has cars. What is happening to all those cars in the system?
Mr. Harrison: The first right of refusal, as we understand it, was provided by the former federal government in 1991, in 1990, or even before that. No one seems to want to take credit for giving that away. It was one of those things which was negotiated, but it certainly was not in the best interest of the federal government or the producers of Western Canada. It is in the agreement, and it is a confidential agreement. Our lawyers working or acting on behalf of the Farmer Rail Car Coalition have seen the document, and that provision is there. The federal government has served notice on that first right of refusal now, and the railroads do not want to give it up. I suppose it could be bargained away, and I don't know what they would want in return. However, the first right of refusal is seen as being the holdup at the present time.
The Wheat Board owned around 2,500 cars; the Saskatchewan government owned about 1,000 cars; and Alberta owned 1,000 cars. The Province of Saskatchewan has told the Farmer Rail Car Coalition that they would be prepared to sell their cars to the coalition, providing they receive the federal cars. Alberta has not given us any indication that they have any desire to sell their cars. That is who owns the cars in Canada right now. In a year when there is a lot of grain, CP and CN lease cars in the open market to fill the void.
Senator Sparrow: The federal government bought the cars and put them in the system free of charge to anyone, including the railways. It was a great boon to the railroads to have those cars, as well as to the agriculture community. Is any consideration being given to donating those cars to the agriculture industry, since they actually gave them to the industry a long time ago but kept title to them? Are they considering that?
Mr. Harrison: We made that case right from day one. It is to the benefit of all of Canada to have the grain transported to export position as cheaply as possible. Mr. Martin has suggested that he would like some money out of those cars. Each year that passes by, they depreciate a certain amount. They are about halfway through their useful life. They could be refurbished to haul greater weights. The cars which are being built today are of a different design from the federally owned hopper cars, and the railroads try to make the case that the federal fleet is obsolete or of very little use in the transportation system. However, we believe that there is a lot of useful life left in the 13,000 cars.
Senator Robichaud: Do the railroads still want them?
Mr. Harrison: Certainly. When the federal government said that they were going to sell them, the railroads thought they could obtain them and that there would be no other bidders. Senior executive officers, made the recommendation that the cars be sold to the railroads for $100 million and we pay the bill. That did not sit very well with the farmers of Western Canada. That is how the Farmer Rail Car Coalition came into being. They have at least kept the federal cars out of the railroad's hands and in the federal government's hands since that time. The fact that they have remained with the federal government means that they are an asset of anywhere from $20 to $25 million of the producers of Western Canada.
Senator Sparrow: Perhaps you could give us more details about the first right of refusal for the rail cars. You mentioned that this was contained in a confidential document. Perhaps, Mr. Chairman, we should find out more about this.
The Chairman: Yes.
Senator Sparrow: In the agriculture industry, there is a mindset developing rather rapidly, and that is: to keep the farmer in poverty, and if not, get him out of farming. That is the direction we are headed. We are no further ahead than we ever were towards establishing a system for cost of production.
The amalgamation of communities, the rural community as well as the small urban communities in Saskatchewan, is not really a federal issue. However, we could touch on it in recommendations as it affects the Saskatchewan farmer. I appreciate the stand that you and the association have taken as far as the amalgamation of the rural municipalities is concerned. You negotiate with the government. However, it would be devastating to the rural communities and the rural fabric of our country if we did away with 1,000 urban and municipal governments, or however many there, and reduce their numbers to, say, 100 or to 17. Of course, if that happens, your organization would no longer exist because of inadequate representation. It would rapidly further destroy the fabric of the rural communities and would allow for total integration, that is, the bigger companies could come in and buy the land. This is a crucial issue. When we are considering this aspect, we should at least touch on what would happen to those rural communities if that should take place.
I appreciate your stand. Please continue your fight on that issue. There is nothing wrong with voluntary amalgamation with municipalities.
Mr. Harrison: Over half the RMs in the province held a referendum on May 1. The result was that 98 per cent support SARM in their position of forced amalgamation. There are some disincentives for voluntary amalgamation. Small communities, if they revert to hamlet status, which is a natural regression, would lose funding from the provincial government. They would also lose their potash sharing grants. For a number of years we have told the province that, if they level the playing field, many of these amalgamations will take place. There are liability issues in small communities such as leaky lagoons and buried fuel tanks. If for some reason an administration has not been conducting itself properly and issues arise after an amalgamation, who is responsible for any liabilities? We hope that the framework we have set up now with the province will address those disincentives, that a natural evolution will take place, and that there will be a great amalgamation of urbans and urbans, rurals and rurals.
Senator Sparrow: I am not suggesting it should not happen. We continually ask that injustices in the system be corrected, be it transportation or whatever. There is nothing wrong with that. We, as a committee, must zero in on the issues and determine what should be a long-term plan. Do we want an agriculture industry in this country operated by farmers as such? If so, we must establish that mindset. It appears we are gradually hiding the real agenda which is to establish a strong agriculture industry. That is important for our security of the nation. It is important for the health and welfare of our nation. Do we want that? Can we do it without the farmers we have today?
Whatever happens in Saskatchewan will eventually happen across the country. We tend to forget that by saying that it is just a Saskatchewan problem. It is bigger than that. Saskatchewan should be monitored so that we can ensure that the disintegration does not spread across the country. Perhaps together we can at least go a step in the right direction.
Mr. Harrison: Speaking to that long-term objective, the federal government announced the federal, provincial, municipal infrastructure program. It starts this year and then runs over five years. We commend that. Unfortunately, the way that money is split up is by population, and again, Saskatchewan comes out on the short end of the stick. If they would look at the miles of road that we must maintain as compared to the rest of the country, that would make some degree of sense. If they would look at the acres of cultivated land that we must service as opposed to others, that would make sense. Certainly, you must consider population, but I would suggest that it has more validity in an urban setting than it has in rural Saskatchewan. Many federal programs are based on population. Even our own provincial government bases many provincial initiatives on population. With decreasing numbers of people in rural Saskatchewan, but increasing costs of infrastructure, it works against us.
Senator Sparrow: You mentioned the First Nations people and the problems with reserves. It is a festering problem in Saskatchewan which is just below the surface and which will erupt, if it has not already. It is a crucial issue for all communities. We are moving towards the creation of urban reserves, which I believe is a very serious direction to take in that there will be grave repercussions. The rural communities are suffering because there is no tax structure for tax collection on those rural reserves. They pay an advanced payment of 17 times the yearly taxes. A number of municipalities have made that type of deal. Now, in perpetuity, no land taxes will be paid to the municipalities. The same situation applies to the urban community.
Just recently a leaded document revealed that the Department of Indian Affairs is expected to increase the reserve land by 50 per cent. My concern is not only economics, it is racial. Racism is raising its ugly head. It is also an agriculture issue. The native population has the incentives, the financial viability to progress and to invest, but that should not be done by pushing our native people further into reserve status. Do you have any comments on that?
Mr. Harrison: Under Treaty Land Entitlement there are two categories of land. The Treaty Land Entitlement was those lands our native people were entitled to at treaty but which they never received. The number was 22.5 the year's previous taxes. The tax loss compensation fund is to compensate for Treaty Land Entitlement land. That was an agreement signed in 1991 between the federal government and the province. That was seen as adequate compensation for rural municipalities for road services.
Specific claims were made against those lands that were granted to Indians under Treaty Land Entitlement but which were taken from the Indians fraudulently by federal agents. That happened during the 1920s and 1930s. The Indian bands have proven their case and they have been granted a block of money. They can purchase land, apartment blocks, or casinos. They can do whatever they wish with that money.
Our concern is those specific claims lands, and our association has been in negotiation with the federal government since 1987 about those lands. Our concern is the tax loss compensation for those lands. We were promised by the federal government of the day, back in 1986, 1987 and 1988, that whatever we ended up with for Treaty Land Entitlement, we would also receive for specific claims. After the Treaty Land Entitlement agreement was signed, the federal government reneged on the agreement. We have a document signed by a former Deputy Minister of Indian Affairs and Northern Development. We took the federal government to court over this issue. It went on for two or three years. It would have been headed to the Supreme Court of Canada 10 or 15 years from now. In light of that, the federal government and our province on behalf of SARM negotiated an agreement for tax loss compensation on specific claims. It is considerably less than TLE, which is an irritant to our association and our members. Yet, to take the federal government on in court for the next 10 years did not seem like a productive effort either, so the agreement was signed. There will be an official signing in Regina on May 27. It is in the neighbourhood of 15 times, not the 22.5 times we received in Treaty Land Entitlement.
If a municipality has a quarter -- specific claim, reserve land on one side of the road, and a quarter of TLE on the other side, it should receive the same compensation. Unfortunately that has not been the case. They are being treated differently. That was a judgment call made by ourselves and our members. At least we are no longer in court with the federal government. That was causing irritation regarding other issues. The agreement will be signed and we can move on to dealt with some of the other issues that you discussed.
[Translation]
Senator Gill: I am tempted to pursue that last question, but I will let it pass. I want to check the validity of a perception that I have about agriculture in general.
I come from Quebec where the situation is probably rather different in the area of agriculture, cattle breeding, and so on.
My perception is that farms were family businesses and there were many children. As a general rule, the children were taking over the farm. Today, families are not as large and the young people do not necessarily stay on the farm and do not take over from their parents.
According to your document, there is a high and indeed an increasing number of bankruptcies. I conclude from this that there are fewer and fewer land owners. Consequently, the land is owned by a reduced number of people. Is that really the case?
We export a lot. In fact, would it not be advisable to make an in-depth study of what is going on in that area? Is it profitable to continue on the present course?
You said earlier that we must make changes and amalgamate. These amalgamations would reduce the number of owners. The impact of amalgamations will be that fewer and fewer people will earn a living in agriculture because properties will be larger. If we produce more, we will export more. What is the impact in Canada? Will we generate more commodities for this country or for foreign consumption? I understand that we must share. What is to be done?
[English]
Mr. Harrison: The size of families is becoming smaller, but that is out of the control of SARM. Farms are becoming bigger. That is natural. When I started farming 30 years ago, the size of our equipment was much smaller than it is today. I can farm 10 times as much land as I could 10 or 30 years ago. It is reasonable to assume that family farms are bigger. We have enormous family farms. A father with three or four sons and son-in-laws can farm a lot of land.
With all the technology which is available today, we will see increased production per acre.
The place that corporate farms will assume is a complicated issue because some incorporated farms are owned by families. They may have two or three corporations. They may have a livestock operation, a grain operation and a hog operation, with all three set up under a corporation. When we say we are against corporate farms, we are saying that we are against family farms because a corporation is owned by a family farm, not by a multinational entity. We must be careful when we interpret the term, "corporate farm."
The mindset we adopt is important in trying to determine where we will be in five or 10 years, and who will own the farm land. If we do not attract young people back to the farm, and it is placed on the auction block, someone from another location may buy it. There is pressure on farm land in other parts of this world. We have nothing against bringing people in from other parts of the world. If we cannot replace the farm stock ourselves, very good farmers from the British Isles and from Europe will move in. They are being forced off the land because there is no more land. Perhaps we should do a better job of bringing some families back to the Prairies. Our forefathers came to the Prairies to farm. There was an abundance of land. We must replenish our stock and, if we cannot do it from within the herd, we must look outside the herd.
The Chairman: It is time that Canada, our nation, our people, our governments at all levels recognized the spinoff benefits from agriculture. Agriculture creates a lot of jobs and wealth for this country. Can we afford to lose that industry? I live on the US border. As the crow flies, my farm is 15 miles from the North Dakota border. The situation which exists there is so different from what you have described. I just read in the New York Times, that Congress has just approved an additional expenditure of $7 billion for agriculture. That was on April 14. Going by the amount of money farmers are receiving as subsidies to keep the American agriculture system rolling, if we do not do something in Canada, they will take us over.
Most of the terminals being built by ADM through United Grain Growers and by the different companies you mentioned are being built with American international money. The Saskatchewan Wheat Pool is faced with the question: Will we survive? As a country we must take a long-term perspective of what is happening. Will our safety nets help us through this crisis?
Mr. Harrison: Close to 50 per cent of our grain is grown in Saskatchewan. Value added processing, however, is only about 2 per cent. There is lots of room for expansion. Not only the federal and provincial governments must consider this, but also local governments and producers must come together and change the mindset and encourage the involvement of young people. Saskatchewan has a lot to offer <#0107> there is lots of fresh air and lots of raw materials, but we have not been able to put it all together into a package that provides us with a buoyant economy.
The Chairman: With an 85 per cent decrease in income, how long can we survive?
Mr. Harrison: You cannot do anything without money. You can have lots of great ideas, but if you have no money to go with it, you can't do much.
The Chairman: I want to thank you for appearing before our committee this morning. You have provided broad coverage of what is happening in Saskatchewan. I commend you for taking the stand that you do. As a result of the stress farmers are under, you have been under some attack. However, I believe that SARM must play an important role in assisting the various levels of government solve some of these very serious problems.
You do bring some solutions and suggested solutions to the problems, and we appreciate hearing those in this committee. I am sure that the government welcomes suggested solutions that come from the grassroots, and you represent every facet of agriculture.
The biggest portion of our land tax goes to education. It does not go to the municipality. Would you comment on that?
Mr. Harrison: I believe that two-thirds goes to education and one-third goes towards running the rural municipality. Unfortunately, throughout this winter, we have seen a number of tax revolt meetings. Local producers are frustrated with the system. They seem unable to get the attention of the federal or provincial governments, so they have chosen to take out their frustrations at the local level. At these meetings they admit that their problem is not with the local council. They admit that it has to do with the burden of education tax on their land.
The province, after 30 years, has attempted to at least address the situation in a small way. They announced in their budget a month ago that they will provide relief of 25 per cent on the education tax on farm land this coming year. At least that is a start. It is a provincial problem, but as far as we are concerned there is way too much reliance on agriculture property for education funding. Our land is not growing any smarter, no matter how education tax we pay.
Senator Robichaud: They will have to obtain the money elsewhere. It is still the taxpayers who will pay.
Mr. Harrison: We have some suggestions about where they can find that money.
I want to invite you all to the International Grains Conference in Regina. Four or five of our board members will be in attendance. It would serve us well if as many of this group as possible could attend that conference. People from all over the world will be there talking about the grains industry. We will have first-hand information about what is occurring in the world.
The Chairman: Thank you for your attendance and for sharing your suggestions about solutions to the problems we have discussed.
The committee adjourned.