Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 11 - Evidence
OTTAWA, Tuesday, June 12, 2001 The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-25, An Act to amend the Farm Credit Corporation Act and to make consequential amendments to other Acts, met this day at 6:26 p.m. to give consideration to the bill. Senator Leonard J. Gustafson (Chairman) in the Chair. [English] The Chairman: Honourable senators, we have with us today, in regard to the Farm Credit Bill, Bill C-25, Mr. Larry McCormick, Parliamentary Secretary to the Minister of Agriculture, and Mr. John Ryan, President and Chief Executive Officer of the Farm Credit Corporation - or Farm Credit Canada, as it will be known once we are through with this bill. We welcome you both to our committee. I wish to emphasize that this agriculture committee - and not because I chair it - is one of the best committees I have ever sat on. We tend to deal with things realistically. There is good cooperation and understanding here. If our parliamentary secretary from the House of Commons ever has the chance to get here, he will find out that the committee system works very well in the Senate. We will ask him if he would be pleased to convey that to the general public. That would be helpful to the Senate. We welcome you both. We will hear your presentation and then move on to questions. Mr. Larry McCormick, M.P., Parliamentary Secretary to the Minister of Agriculture and Agri-Food: Honourable senators, if I may be allowed a few moments for a preamble. With respect to the committee in the other place, I have said, and I have heard people from different parties say, that we get along better and have better representation there than in any other committee on the hill. I am proud of that, and because of my love for rural Canada, it is important that we continue in that way. I started this job seven and a half years ago, and this is certainly a historic moment for me. It is my first opportunity to sit here. I have attended briefings and listened to and learned from you, honourable senators, and have told Canadians that 98.9 per cent are great working people. It is my honour and privilege to be here, and I thank you. Today we are presenting the proposed amendments to the Farm Credit Corporation legislation as detailed in Bill C-25. We will be discussing the Farm Credit Corporation's role as a federal Crown corporation in meeting the changing needs of farms, families and the agricultural industry today and in the future. With me today is Mr. John Ryan, President and Chief Executive Officer of Farm Credit. He will be here to answer any questions. This is a gentleman who has done a great job with Farm Credit. As my colleagues say, one of the reasons that we do not have to go to the bank for money for all these future endeavours is because of the work of all the excellent people there. As honourable senators will know, the agricultural and financial industries have changed since the Farm Credit Corporation Act was last amended in 1993. These amendments address the gaps in the financial and business services that have merged in the past several years. Last year, Farm Credit met with more than 100 agricultural and financial groups to seek their views on financial services, their needs and how amendments to the act could help them. The majority of the groups were supportive of the proposed legislative changes. I find it interesting that Farm Credit Corporation met with 400 people and they met the more than 100 groups. They certainly took their thoughts to Canadians. After using the feedback to draft the legislation, the federal government tabled Bill C-25 in the house on April 5. The bill was well received in the house and strongly supported by the NDP and Conservatives. Opposition members introduced three proposed amendments to the bill during third reading. One amendment, limiting the amount of time that Farm Credit Corporation can hold land to five years, was passed, and the other two were defeated. I will briefly review the amendments tabled in the House of Commons on April 5. A major amendment is that the corporation's name be changed to Farm Credit Canada to better reflect its federal identity. In French, the name will change to Financement agricole Canada. This change will send a clear message about the federal government's commitment to agriculture in rural Canada. Other amendments will allow the corporation to offer business services to producers and farm- related businesses. These services will complement existing ones. The corporation will often work in partnership to deliver them. FCC employees are recognized for their level of agricultural expertise. Through partnerships, FCC will be able to use its expertise to offer farm families more business management tools to achieve long term success. The end result will be increased access to business services across rural Canada. Bill C-25 will allow Farm Credit Corporation to serve farm-related businesses that benefit agriculture whether or not they are farmer-owned. Since the act was last amended in 1993, FCC has been able to lend to farm-related businesses that were majority-owned by farmers only. However, the restriction is limited to the corporation's ability to finance many farm-related businesses that benefit primary producers and provide jobs for rural Canada. By helping the value-added sector grow, FCC will provide new markets for primary producers and help strengthen rural economies. At the same time, the corporation will keep its focus fixed firmly on family farms and primary producers. The government has included an amendment in Bill C-25 that makes a formal commitment to maintain this focus. The ability to offer equity financing is another tabled amendment that would also help foster growth for the entire industry. The legislative amendments in the corporate structure, and partnering with other organizations or financial institutions, has always been part of the FCC's approach to delivering products and services. For this reason, one of the bill's amendments will clarify FCC's ability to participate in and lead financing syndicates. Financing syndicates allow for the distribution of risk among the syndicate partners. Through its ability to lead syndicates, the corporation will be able to offer producers increased access to a wide range of services. At the same time it will reduce the risk to the existing lending portfolio. One of the amendments would give FCC the power to create subsidiaries. It would essentially provide the corporation with a means of entering into new areas of business, either by itself or in partnership, while reducing risk to the corporation's lending portfolio. In conclusion, the federal government believes that amendments included in Bill C-25 are relevant and necessary to ensure that FCC continues to meet the needs of the agricultural industry. Through this bill, FCC will continue to serve as a stabilizing force in the agriculture industry, providing access to services through all agricultural cycles. I thank you for your attention. Mr. John Ryan, the President and CEO of FCC will be pleased to answer any questions. Senator Tkachuk: Under the precis that I have, one of the points is that the corporation will be authorized to provide loans to businesses relating to farming, both when such businesses are majority-owned by farmers and when they are not. What does "when they are not" mean? Mr. John Ryan, President and CEO of Farm Credit Corporation: The legislation that we have today talks about the fact that we can lend to farm-related businesses that are majority-owned by farmers. The new legislation allows us to provide financing in the future to businesses when they are not necessarily owned by farmers, which means, as long as they are related to agriculture on the input side or the output side of things, and there is a direct benefit to the primary producer or agriculture in general. Senator Tkachuk: Can you give me an example? Mr. Ryan: The fertilizer business would be one example, and a seed cleaning plant would be another example. Over the past couple of years, let us say the last four years, we have had a number of situations where prospective clients would come looking for financing. We would look at the proposal, it would make good sense from the value-added perspective if the financial viability was there, but then we would look at the ownership. If the ownership was not majority-owned by the producer, we would need to say no. We had, for example, an egg grading operation plant in Manitoba. They were in primary production and they moved into egg grading. They wanted to expand into egg grading and they sold off the family farm to put their money into the egg grading operation. However, when they came back to us for a second round of financing, we said no to them because they were no longer a primary producer. We had a beverage operation over in B.C. that was a new business being set up in rural Canada. They were not a primary producer, but someone who wanted to be in this line of business who went out, lined up their product of fruit from the local community, the producers, and came to us looking for financing. We looked at it and said: "Yes, it makes good sense from a business perspective, but because you are not a primary producer, we cannot finance you." Senator Tkachuk: Therefore agriculture processing now qualifies? Mr. Ryan: Yes. Senator Tkachuk: Would Sunripe, the company that makes apple juice in the Okanagan, qualify? Mr. Ryan: We would need to look at it in terms of the size of the business. This new bill does not move into financing the large, multinational organizations. I do not know the size of Sunripe, but in order to qualify, businesses needs to be small to medium-sized. Senator Tkachuk: What is that defined as? Mr. Ryan: There is no specific definition for a small to medium-sized business on which everyone can agree. We need to look at it from the point of view of determining whether a business fits within the realm of what we think is appropriate from the FCC's perspective. For example, we have a limit within the organization that is set by the board of directors, that loans shall not exceed $20 million. We are not interested in financing the major national or international organizations. Senator Tkachuk: How many of the producers in the Okanagan Valley that make juice are not multinationals? They are local producers who actually have manufacturing plants; there are processing plants. Anything to do with processing agriculture now falls within the bailiwick of the Farm Credit Corporation. Mr. Ryan: That is true. Senator Tkachuk: One of the concerns that some senators may have had is that the focus of your organization will change. In other words, rather than the family farm, you are now in the business of financing processing. That basically includes everything. What does it not include, especially in Canada? Mr. McCormick, do you think that is what has happened, or would you be worried about that as a politician? This is a big step. Mr. McCormick: It is a major step, and we hope a step in the right direction. To your previous question, which is part of this, I heard people ask in our committee from opposition parties, and one specific party from the west, whether they would just lend all the money out to Saskpool, or someone like that. That has already been answered because of the limit on the loans. My love of Canada is focussed on rural and small-town Canada. You must be careful what jobs you ask for. I asked for the job of rural caucus chair for the government and I was at it for almost three years. What will I do following this? I will work on behalf of rural and small-town Canada. Access to capital has always been one of the challenges. Yesterday, we had a Secretary of State for Rural Development for the first time ever in Thunder Bay announcing some funding. I was on a task force with that same member a few years ago. We toured much of the country. I kept hearing about the access to capital. I reported every Wednesday to the Prime Minister, as rural caucus chair in national caucus. My challenge at that time was to get through to our own cabinet ministers every week about the challenges that we face in rural Canada. Most of those cabinet ministers are not from rural or small-town Canada. We can move some of these processing plants and value-added establishments. We heard part of it with the questions today. The chair even touched on one of those topics. We will need to watch Farm Credit, as I am sure we will, and encourage them. There is a real role for them to add value with the crops that are produced in rural Canada. That is my honest opinion. We have spent a great deal of time looking at this endeavour, but it can be beneficial and I look forward to that. Senator Tkachuk: I have some concern. I understand your commitment to rural Canada. In the Prairies, we are a large wheat producer. Processing wheat is something of a problem for us because it must be sold to the Wheat Board and then sent back. We know the problems that occurred with the pasta plants, for example. The wheat had to go first to the Wheat Board, and then be sold back. In other words, the farmer could not use his own product on his own farm. Mr. McCormick: Are you asking me about the Wheat Board situation? I would be glad to answer that, too. I would like to talk about that, too. Senator Tkachuk: Talk all you want; you are the witness. I am trying to ask the question, but go ahead. Mr. McCormick: People on the government side, too, have asked questions. I heard the question asked in your chamber a few minutes ago. Go ahead. There are more changes that must be made one step at a time. Senator Tkachuk: We are a large wheat producer in the Prairies. We would be concerned about processing wheat products. This will be focused on other products because wheat products are very difficult to process for the individual farmer, unless he gives the money to people who are in competition with Quaker Oats or something like that. Would you like to comment on that? Mr. Ryan: That is a good question. It has been consistent from the day we started to do our focus group discussions across the country. The agriculture industry has said clearly that they see that changes are taking place in the industry, and that farm credit must change. We have this concern if we are to take our focus off primary production. We concluded it all by stating to the Canadian Federation of Agriculture that, if it were concerned, perhaps it would state the words that it wanted put in new legislation and when that then becomes law, we will make sure that it is incorporated, because we have no intention of moving our focus away from the primary producer. Our position in the Farm Credit Corporation is that you must get behind the organization as a whole. We have 100 offices, all in rural Canada. The people who are working there are from rural Canada. The vast majority of these people were born and raised on a farm, and their heart is in primary production. When Senator Tunney introduced second reading, a lot of clapping could be heard when he spoke. That came from a number of FCC employees who were here on a management meeting in Ottawa and who heard that we were to be meeting today. They told us that this would be a great opportunity to hear, first hand, what goes on in the Senate. I have the utmost confidence that we will not be taking the focus away from primary production. I do not think it is an either/or situation. I think we can do both. Senator Tkachuk: You also mentioned that the corporation will be given authority to incorporate, amalgamate and dissolve subsidiaries. First of all, what subsidiaries, and what do you have in mind to incorporate as future subsidiaries? Mr. Ryan: At this point in time we do not have a specific plan to establish subsidiaries tomorrow, next week or next month. When we looked at our new legislation, our feeling was that, since we have had the original legislation in place for eight years, this new legislation will likely last for another five or 10 years. We wanted to build in flexibility in the legislation and be able to have powers, one of them being the authority to incorporate subsidiaries. One of the new amendments that we are putting forward is for the corporation to get involved in equity or venture capital. We have talked to a number of venture capitalists across the country to determine what their interests might be in partnering with Farm Credit Canada. We feel that because venture capital is a very high-risk option, what we would need is to establish a subsidiary so that we can clearly track and monitor everything that is going on in the venture capital division of the corporation. The subsidiary will be wholly-owned by Farm Credit Canada, but it is a subsidiary that can track and monitor the overall progress. Senator Tkachuk: For the same reason, venture capital? Mr. Ryan: It would be a subsidiary that would provide venture capital. That is all. It would be owned by Farm Credit Canada but provide venture capital, in all likelihood, in cooperation with other venture capitalists across the country. One of the main problems today is that there are many dollars in venture capital. Almost $6 billion went into the economy last year. Less than 1 per cent of that went into agriculture. With our agricultural expertise and knowledge of the industry, and being on the ground in rural Canada, we will be able to attract other venture capitalists. They bring some of their money to the table, and their expertise, combined with our expertise and money, will make some things happen that otherwise have not happened to date. The Chairman: In regard to the financing involved, we have met many farmers through the years who have built the best rockpicker in the world, and John Deere stole it. People in Western Canada have built cultivators. Some of the best equipment has been invented there, such as the air seeder. I know some of those people first hand. Yet those people never really got much out of their inventions. Some big company came along and stole their patent, or whatever. Senator Finestone: They bought the intellectual property. The Chairman: My question is: Did this expand into small manufacturing, where a farmer supplements his farm by building something that works? Mr. Ryan: Most definitely. Perhaps some of the larger organizations came in and bought them out because they did not have the resources to take it to another level. This allows them to take the idea to another level. The Chairman: I can give you examples of that where a farmer built the first air seeder and put it on his disker. That idea was stolen by the big companies and they made millions out of it. The poor guy sacrificed his farm working on an idea. I even pondered asking the question because I wondered whether you had moved that far. That is excellent. Mr. Ryan: The challenge will be to pick the winners, obviously. I think we are close enough to agriculture to have a good understanding of the employees throughout the country who do that job. The Chairman: There are many farm names, for example Frigstead, who built the best cultivators and equipment and never saw the benefits of it. Senator Finestone: Following on Senator Tkachuk's question, input is one thing; you get financial input. How do you measure the output to know if you have picked a winner or not? Subsequent to that, in regard to the chairman's question, how do you know, or are you planning that you will tie in this entire question of venture capital with education or research institutes with the government money, with the new innovation program that is going in? Are you linked together in some way? Do you have access to those funds that are now being given to universities and to university research? Perhaps for the poor farmer who was smart enough to develop the product but did not have enough money to produce it, in today's world, with the innovation strategies that this very good liberal government is putting into place, we might be able to match those funds. Mr. Ryan: That is a very good question, Senator Finestone. First, in regard to picking the winners, I would look at the corporation's history, in that it has probably been close to six years now that we have been involved in providing financial assistance to the value-added side. That has been producer controlled, but still they are value-added companies. We have been able to demonstrate over the years that we can pick the winners. There will be failures because there is a risk associated with that. The challenge before the corporation is to be satisfied that we have the right people with the right skill sets to pick the winners more often than not. When you are in the business of financing, you must know that there will be some who will not make it. In terms of the second question on the venture capital side of things, as an organization we have not yet geared up for this because we did not want to take it for granted that the legislation would be approved. Our plan is to gear up so that we would be able to provide venture capital in the future, and make sure that we are doing it in partnership with others, and that we fully understand what else is out there so that we do not wind up duplicating anything else or losing out on a tremendous opportunity to bring something to the table on behalf of that producer or value-added operation. The short answer is: in time it will come, but we are not there yet. Senator Finestone: You have with you Mr. McCormick, whom I remember very well going to the microphone every week discussing rural caucus in a very heartfelt and knowledgeable manner. If he can bring something and some light to the situation, you are lucky. I am seriously wondering how, because I think that this innovation in technology funding that we are moving into, with high-tech or E-commerce activity, is key to Canada's future ability to become frontline, worldwide. As we are looking to expand beyond the 83 to 89 per cent sales dependency on the United States, and if you have done any travelling you know that they can really use our products in the Far East and in the Asia-Pacific area. I am hopeful that you will be tying up with universities for university research where you can put your people into the research policy end, or research idea end. Are you examining that and pursuing that area with the universities as well? Mr. Ryan: At this point in time, we are not there yet. Clearly, that is the game plan. Over the last number of years the corporation has been trying to leverage whatever is possible, and wherever it is at. We have clearly adopted a philosophy or approach within the organization that we cannot be all things to all people, but we can find out who are the best and the experts, and somehow attract them into some form of partnership so that we can work together and use their skills, abilities and technology and, indeed, the dollars that might go with it. Senator Finestone: You spoke about all of the aspects and places where you can do partnerships. There is one place where it is pretty hard to be a partner, and that is with respect to climate change and the whole question of global warming. Is any research being done so that the topsoil is not getting blown away, or the other kinds of devastation that is occurring that change the agricultural environment? Even with all the good intentions and all the venture capital and goodwill and investment cannot answer for someone upstairs or someone over the North Pole blowing the wrong way. Mr. Ryan: I can only speak for Farm Credit. We have not done research in that particular area. I do not know if Mr. McCormick has a comment. Mr. McCormick: You are a little bit ahead of agriculture by hours or days or months. Senator Finestone: I told you, I only know how to milk the cow. Mr. McCormick: Senator, I am fortunate in being able to go with the federal minister to meet with each and every provincial minister of agriculture this month in northern Canada. We are making good progress. We are working together so that we can label our food with even a larger Canadian label. That made me think that Farm Credit Canada will be their new name if we are successful here. Part of that will be that we can show to other people around the world that we do produce our food in as environmentally friendly a manner as possible. We are also working on being able to track our food so that when there is a problem, we can track it and pull it, and so on. We are much further ahead of our neighbours to the south. That is the way we are heading. I think it will give us some opportunities. It would be good to get together with the universities and tap into the research and development money. We hear from about 1 per cent of the $6 billion that is available in agriculture, and if we could access and double that percentage, it would make a great difference. Senator Tunney: I will be very brief. I feel I have had my say. I wanted to advance an example of something I hope you could consider financing now where you were not able to do so previously. In my neighbourhood, within 30 or 40 miles either way, we have three medium-sized abattoirs. Two of them are on their way out of business, and the third one is struggling in an effort to make itself viable and conform and adhere to the new environmental regulations. It needs quite a lot of upgrading. It is passable at the stage it is at now, but it is not designed for an expansion of through-put. They would love to continue in business. We want them there. Otherwise, we will be shipping livestock from my area about 70 miles north of Toronto to the large abattoirs in and around Toronto. We would then get that product back through retail two, three or who knows how many weeks later. This is just another example I wanted to bring to your attention. You do not need to respond to it if you want to proceed to the next question. Mr. Ryan: I will be happy to quickly respond. If it makes good business sense, that is the type of business we will be supporting. Senator Chalifoux: First, I know several women who want to get into farming. They have gone to the banks. I have experienced the same thing. There is a latent discrimination against women. They will give us a personal loan, but they will not finance anything else. That is the first question. Second, in my region, we have several alfalfa processing plants. Mr. McCormick, you know yourself that we have been fighting to keep them going. In Legal, they are going under. In Falher, they have gone under. This is a terrible situation. Will this bill address that issue? Third, in regard to mushrooms and hemp, people want to grow mushrooms and hemp. Will this bill allow them to get into that market? I am sure you know what HACCP is. The HACCP regulations are literally devastating our value-added processors in our small communities. In Calahoo, we have a meat packing plant which is excellent. It has good contracts. However, because they must spend over $1 million to come up to the HACCP regulations, they will go under. Does this bill help them? Mr. Ryan: I will go back to your first question in terms of women. We do not discriminate. We clearly look at it from the point of view of the economic viability. If it is there, we provide the financing. There is a specific example where we, together with the credit unions, the BDC and one other organization in Ontario, set up a special program for a women's network. The short answer to your question is that there is no discrimination there. Relating to your various examples, the alfalfa processors, the mushrooms, the hemp, as far as processors are concerned, this bill would allow us to provide financing there. Obviously we would need to look at the situations individually and determine the economic viability long term. If we go through our assessment and come to the conclusion that an operation is not economically viable, we are not helping anyone. Senator Chalifoux: We know that. However, will this bill before us now assist the people who want to get into the business? We have had to turn our alfalfa processors away because no one is able to help them. I want to know if this bill, when passed, will assist the processors? Mr. McCormick: The alfalfa people, the dehydrators, come under the label of vertical integration. It did not seem right that the officials were not able to apply the AIDA farm programs in the past. Today, it is the Canadian Farm Income Program. I am pointing at a gentleman in the room, and I think we had better see whether we can streamline CFIP so that it could apply to those people. I thank you for your timely question. I say that sincerely, Senator Chalifoux. Senator Chalifoux: I just wanted to know how this bill will address these issues. Even if you do not discriminate, there is a certain amount of discrimination against women wanting to get into farming. I have been hearing that all along. We heard the same thing on the western task force, too. I know that it is up to your managers and to your staff, but I would really like to be assured that this bill will not discriminate against women farmers. Mr. Ryan: I am very comfortable in saying that it will not discriminate. I talked earlier about having a look at the inside of the corporation. You will find that approximately half of our board members are female. I am not sure what the numbers are as far as employees are concerned. I just came out of a meeting in Ontario today. There were probably more females in the room than males. Those are frontline officers. I do not think for a minute that I have any concerns in saying that discrimination will creep in. Senator Tkachuk: Supplementary to the question on discrimination, Senator Chalifoux mentioned hemp farmers and mushroom processors. If you are funding mushroom processors, then they will be in competition with those who are already in that business who have funded themselves. I am thinking of the Vietnamese, the Chinese and other Asians, especially in the Lower Mainland. I cannot believe the work that these people put in. They have built successful processing businesses from nothing, given the fact that, when coming over to Canada, they could not even speak English. How do they do it and we cannot? Mr. Ryan: If you go in and have a look at our portfolio, you will find that we have financed the mushroom farming operations now. That has been successful. Bill C-25 will allow us to expand the financing and provide it from the point of view that the ones to whom we provided the financing, to date, were the primary producers. In addition to that, they are on the mushroom or processing side of things. In early April, I was in Senator Tunney's area and I talked to the mushroom processing operations about how successful they were in Ontario. Senator Tkachuk: What is the next step in processing? Mr. Ryan: I do not know if we can individually point out that there is one big hole. We do very little on the processing side today. Most of what we do on the exporting side is in bulk. The challenge before us, for the agriculture community, the business community as a whole, is to see where the opportunities are now. They are in almost any sector or subsector in agriculture. Our role is to position the corporation to be able to respond to those requests from companies or individuals who want to add value. Senator Hubley: On Prince Edward Island we have two large processors that handle mainly potatoes. From time to time they do revert to other crops. If they reverted to another crop and processed that, would they then be considered eligible for venture capital on that operation alone, or would you look at their total operation to see if they would then be viable? One operation may be very successful, but they might still be eligible to obtain capital for the second. What are your thoughts on that? Mr. Ryan: You are getting down to individual situations, but if we found that we were financing a multinational corporation, the answer would probably be no, because we are looking at smaller or medium-sized operations. However, if they are a smaller processing operation and they wanted to expand into a second form of processing, we would look at the full package. It is very much dependent on the institution or organization that is, either directly or indirectly, applying for assistance. Senator Hubley: My second question relates to organic farming. Do you view organic farmers in the same way as you view other farmers? Again, I understand that there are a great number of women who are partners in or sole operators of organic farms. I am wondering how this bill will view the organic farmer. Mr. Ryan: Certainly, we have provided some financial assistance already to organic farming. Again, if we look at the business plan and it makes good economic sense that it will be a viable business, we are there to support that individual or farm. Mr. McCormick: In regard to organic farms, I read with interest the press release put out by our Minister of Agriculture on Friday. An amount of $600,000 was put out to the organic people and their groups to help them get their guidelines together. We met with the future farm leaders of Canada the other day, and one person present at that time was the person who legislated - she tried to get everyone together in P.E.I. with regard to the organic movement. Certainly, that is a growing business that is worth $1 billion at present. Senator Wiebe: I had not planned to ask any questions during this hearing because, though I know nothing is perfect, I think this legislation is just about as perfect as it can be. It is certainly long overdue, and I want to congratulate the government for taking this bold step. It will help every farmer in Canada, regardless of whether they run small, medium or large-sized farms. In regard to the comments that Mr. McCormick made, you said that one amendment had been allowed. Can you tell me what argument was used to enforce the inclusion of that amendment, and whether that kind of restriction applies to our banks and our credit unions in Canada? Mr. McCormick: Senator, was that on the five-year amendment we accepted from the opposition side? Senator Wiebe: Yes. Mr. McCormick: You are much more aware of the background of this than I am, I am sure. We were told that, a few years ago and because of certain circumstances, the Farm Credit Corporation did have a sizeable number of hectares or acres of land that they had accumulated and that they did not necessarily want to invest in. I believe it was the provincial government that asked them to divest themselves of this land. I understand that that figure has gone from 1 million acres down to less than 100,000 acres today. This amendment came from the opposition party - I will call it the new party from the west. We talked about this amendment, whether it would limit too much what Farm Credit might want to do in the future, having particular regard to the need for younger farmers, if such farmers did want to access land from Farm Credit. If that happens, Farm Credit, no doubt, would have to come up with another program. It seemed that we could reassure the good people of Saskatchewan, especially, that this would not happen again, and that there is no intention for Farm Credit to ever again have this huge bank of land. This would make certain that they do not. We have heard from Farm Credit that they have no interest in doing that. I will hand over that question to my colleague, Mr. Chairman, for further explanation. Mr. Ryan: Mr. McCormick was talking about the 1.3 million acres of land that we had several years ago. We are now down to a little less than 100,000 acres. Last year we sold about 250,000 acres. Pretty well all of that was in Saskatchewan. When the amendment came forward, we were asked if we had an intention to have a land bank in the future, and the answer to that was no. In regard to how long it takes for us to dispose of property after we have acquired it, we have addressed that question and the time frame is 12 or 24 months, as opposed to five years. We had no difficulty in saying that we could accept that particular amendment. Clearly, we do not want to be landholders. The idea is to get that land back to the farming community as quickly as possible. In answer to your second question, I believe that, other than the legislation that used to be in place in Saskatchewan, the banks or credit unions do not have that same restriction. Senator Wiebe: You say that the banks and credit unions do not have that same restriction? Mr. Ryan: That is correct. Senator Wiebe: As a Crown corporation, one could say that you would be dealing with public funds rather than private investment funds, and having to meet an obligation to sell land within a restricted five-year period, that could be at fire sale prices. Is that a proper way to look after public funds? That is my argument, or my disappointment in that legislation. I can see the history. There was quite a fight in the Province of Saskatchewan in regard to the land bank. The opposition, of course, felt that it was the government's intention to own all the land in the province, and everyone that wanted a farm would be a sharecropper. That has proven to be false over the years. That is the same argument now that they have, and will continue to use with Farm Credit Corporation. It is unfortunate that those kinds of misguided and untrue statements being made about the government's intention will basically put the people's money at risk in this country, just to satisfy some opposition members' wild philosophy on stirring up antagonisms. If you feel comfortable that that asset is being protected, then I see no objections, and would find it pointless to carry the matter any further. Mr. Ryan: We do feel comfortable, senator. I understand clearly where you are coming from. Our projections have us down to a little less than 100,000 acres. By the end of the year it will be 40,000 acres, and as of next year we will be down to potentially 10,000 acres or less. What we have found over the years, if you are unfortunate enough to have to take property back, the sooner you get it back on the market, the better it is for the marketplace. The longer you have to carry or hold on to it, the more opportunity there is, perhaps, for prices to slide. It may be more of an incentive to ensure that we get the land turned around as soon as possible. One of the goals of the corporation is not to influence land values either up or down, but to have them remain at market rate. Senator Wiebe: Again, let me congratulate you on a nice piece of legislation. [Translation] Senator De Bané: I am very pleased to be able to meet you and to see the Farm Credit Corporation's new tools, which will enable you to provide greater assistance to the agricultural sector. I was made aware of the Corporation's work by one of your vice-presidents, Jacques Lagacé, who taught me a lot about it. When you acquire equity in an enterprise, won't the other agricultural enterprises complain that their taxes are being used to create a competitor? How do you respond to that objection? [English] Mr. Ryan: That is a very good question that has come up in the past in terms of the competition of the corporation. If you look at the interest rate structure of the corporation, our interest rates are anywhere from 10 to 25, even half a percentage point higher than what is provided in the private sector. You may find any one proposal where that is not the case. We do track where we provide our financing and at what rates. As a general statement, it is anywhere from 10 basis points to a quarter to a half a point higher. From that perspective, the whole argument of competition is diminished. Senator De Bané: If the corporation invests as an equity investor, are you not concerned that other farmers will say their taxes are being used to create competition for them? Public money is used to help their competitor become more powerful than they are. What do you think about that, with respect to equity investment? Mr. Ryan: On the equity investment side, first of all we expect the majority of activity will be on the value-added side and not on the primary production side. There is a higher risk associated with equity, so one needs to look at a higher return. What we see as beneficial from the primary producers' perspective is being able to establish with venture capital a value-added business that was not there in the past. If that primary producer then has the opportunity to sell its products to that value-added enterprise, it will be a benefit because they will have access to a market that they did not have before. It is to be hoped that proximity will play a role in that. Senator De Bané: From all the information that I have gathered, this corporation has more detailed knowledge about the microactivity of farmers than, with all due respect, the Department of Agriculture. The Department of Agriculture deals with the bigger picture. You deal individually with each farmer. It reminds me of our Industry Department versus the Supply and Services Department which really buys from suppliers, so they know who they are, legitimately. Lenders or bankers know intimately their clients' business. Do you not think, in view of that, that we should have something in the law that says that the corporation also has the mandate to supply its advice to the Department of Agriculture? If you are on one side lending money to the farmers, and you know them intimately, better than anyone else, do you not think that we should include in the law the mandate that you should also give advice to the department? Mr. McCormick: Mr. Chairman, just a comment from me, and then I will turn the question over to Mr. Ryan. Certainly, when Farm Credit Corporation has 100 offices, and most of these offices have field workers who grew up on family farms, what you say sounds so good that I am sure that, by following this, there will be more pressure and/or acceptance to listen more closely and for us to follow that more closely. Mr. Ryan: The only point I would make, in addition to Mr. McCormick's comment, is that we have offered to the Department of Agriculture, at any point in time, when they are getting together to do strategy, visioning for the future, to bring people in from the frontline who understand and work with agriculture day in and day out; we have offered to bring that sensitivity to the table. They have some good people there now. If they are there on the frontline, day in and day out, they can take another value-added, and we have made that offer. Senator De Bané: Our chairman, Senator Gustafson, has told me about the despair of many farmers who have put all their heart into their business, et cetera. If we have a sister federal corporation that has direct access to the policy makers of the department which is mandated by law to listen to the sister corporation when it gives advice, that would provide confidence to our farmers. That is my reservation. Senator Sparrow: Mr. Chairman, I agree with what is happening in the bill. I have continuing concern with respect to corporate farming and the bigness aspect, and doing away with the family farm, actually assisting in the destruction of the rural community, the small towns and villages, which then causes schools to move, students to move farther away to urban schools, hospitals to close, and elevators to close. As an example, when an alfalfa dehydrator moves into a community and it picks up, by lease or otherwise, 40,000 acres or more of agricultural land, as some of them are doing. That same 40,000 acres of agricultural land, within the last few years, could have represented 40 farm families living on the farm. The resulting large operation, after incorporation by the dehydrators taking over the land by lease or otherwise, and the landowner moving into the urban community with no concern about the family taking over that farm in the future, ends in the loss of those 40 farm families. It is not very difficult to now go to 80,000 acres of land if the dehydrated market is in Japan, or wherever it may be. I am using that as an example. There may very well be examples, as Senator Tkachuk mentioned, in B.C. and so on, where we are encouraging the expansion of corporations that are actually doing that, without saying we are doing a great thing because we spend so many dollars investing and extending loans to actually pick up the land that is the very basis of our agricultural communities. That is a matter of concern here that we tend to forget sometimes. Our goal must be to protect the family farm, first and foremost. I appreciate that you will not finance the Saskatchewan Wheat Pools necessarily, but that does not mean you will not, because of the offshoot corporations that they may have, such as the cattle operations, and so on. You might very well finance those offshoot corporations, which would, in turn, reduce the size of the rural communities. I do not know how to address that particularly, but when the senator was talking about your corporation having an advisory capacity to some degree to the Department of Agriculture, the Department of Agriculture does not tend to be looking at that situation as a problem, necessarily. They are looking at it as, "Good, we no longer need to deal with those 40 people, we only need to deal with one person," or whatever the case may be. Mr. McCormick: We had three amendments brought forward. In my comments I mentioned that the NDP and the Conservative Party supported the bill in our House. I should also add the fact that at least two members of the Alliance Party did as well. Senator Sparrow, we all make mistakes. Some of your new neighbours, such as the new party in the West, made a major one. They had amendments that we voted down. One such amendment would have taken the words "family farm" out of the bill. Enough said. Mr. Ryan: I do not know how I can top that, other than to say that clearly our thrust is not in trying to do anything that would result in the destruction of the rural communities. It is to the contrary. When you consider the value-added side, I do not think it would be appropriate to think that it is just composed of large operations. There are many opportunities on a small scale that could employ two, three, four, five people. In addition to that, as we move forward, the new legislation is looking at what new products and services we will be able to offer. Clearly in our sights is what more can we do in regard to the intergenerational trends on the farm. As you said earlier in regard to the farms being leased out, can we do something to facilitate the younger generation taking over the farm, while at the same time ensuring that the parents who are exiting have an income to support them from a retirement perspective? That is something you will see as we move forward as a corporation, in some of our early thrusts with this new legislation, to be able to help in that particular area and not hinder or work against it. Senator Wiebe: With regard to the family farm, I hope the definition of family farm is not 160 acres. Some of the very successful farms in this country are rather large, and they are owned by a father and four or five sons, and they are working out wonderfully. This legislation, with the changes, will allow for a proper transfer of assets and land from father to three or four sons so that they can continue on with that farming practice. If we want to repopulate rural Saskatchewan, it will be difficult to rely on agriculture, as such, to do that. Saskatchewan at one time had 1.5 million people. That was when we had a farmer on every quarter section. We are dreaming if we think we can get back to that again. This particular bill provides farmers the opportunity to get together to build a processing plant in their particular region. That processing plant will employ 50 people. Those 50 people will be moving back into that community. Honourable senators, that is the way that we will repopulate rural Saskatchewan. This proposed legislation will allow that to happen. That is why I say that nothing is perfect, but this bill is as close to perfect as it is possible to be, and provides the tools to allow that process to begin. The Chairman: In terms of equity, if you have a senior farmer, let us say he is 70 years old and he has three sons or two sons, will that farmer need to provide the equity? Let us say he gives you land for equity. Must he provide a personal guarantee, or will you accept the personal guarantee of the son? Mr. Ryan: In many cases we are accepting the personal guarantee of the son. I hate to be in a position where it is all of this or all of that. At the end of the day, the question is how do we sit down with the family members and suggest that it is time for transition; here are the things to be considered and here are the different options. It is then up to the family to determine how best they can transfer, taking everything else into consideration. I would leave you with the thought that if you must rely on personal guarantees to make the loans, you are on the wrong track. You need to be looking at the viability of the farming operation as compared to the personal guarantee. The Chairman: In that case, the generational transfers of the tax system will work, is that correct? Mr. Ryan: I am not an expert on the tax side of things. I would say to you, though, that we have recently joined forces. Senator Tunney spoke about this, in terms of partnership. We got together with Robinson and Company, Meyers Norris Penny and the KPMG's of the world and said we want to tackle this whole area of succession planning. We will be the catalyst in getting it going. We will get the farming community into the rooms. You are the experts in these particular fields, and we want you to do the actual delivery. We have done some pilot testing of it today, but in the fall we expect to be wrapping up in a more significant way. We are counting on these companies having the expertise to be able to address the tax situation on which you just commented. Senator Tkachuk: I just want to clarify this perfect bill. Excuse me if I am not a cheerleader, but that is not why I am here. I will give it a shot, because it is not a bad bill, considering it is a Liberal bill. I must apologize, sir, for that party in Western Canada that gave you some problems on the bill. They did win 50 per cent of the vote in Western Canada, including 50 per cent in my province, of which about 80 per cent were farmers. I must say that sometimes what they say has some meaning. Mr. McCormick: Agreed. Senator Tkachuk: To return to the issue of farm ownership, you always had the right to foreclose on a farm. Earlier, you were talking with Senator Wiebe about the fact that you had accumulated this land. This land was accumulated by way of foreclosures on people who could not pay their bills. The government was concerned that this accumulation was continuing, and that one day the land would be dumped on the market and prices would be driven down. The government wanted you to get rid of that land in an orderly fashion in some way so that that would not happen. The chairman mentioned in his speech intergenerational transfer. Which clause of the bill deals with that directly? I wish to ask some questions on that. Mr. Ryan: That would be under clause 4, where it states: "The purpose of the Corporation is to enhance rural Canada by providing specialized and personalized business and financial services and products..." In the past, we have been able to provide the financial assistance. What we are talking about here is more than financial assistance. It is what I referred to earlier about joining forces with other farms, helping on the succession planning side, actually doing the business planning, the estate planning, the environmental planning, the succession planning. The purpose of the bill is to provide for business and financial services. Senator Tkachuk: Will you be charging for those services? Mr. Ryan: We will be. Senator Tkachuk: Will you be competing against the small accounting firm down the street in Turtleford or Prince Albert or in Wayburn, or the small lawyer's office? Not all lawyers are in large firms. In Yorkton we have a lot of small one-man and two-man shops, and that is their business. They provide estate planning and financial services planning. There are not only the chartered accountants, there are the certified accounting services. There are brokerage agencies in the small towns. Will you be in competition with all of these people? Mr. Ryan: In a perfect world you could say there is always the risk of some competition. As I said earlier, the goal of the corporation is using agri-success as an example to be working in partnership with others. We do not have the expertise in estate planning. Who in the local community has that expertise and how do we join forces with them so that, at the end of the day, such things will be made available? Senator Tkachuk: Do you not have a pretty big stick since you are giving the money to the person who will be taking it over? They will have to come to you and then you get a piece of the action, too, right? They have to get their regular fee. If a lawyer charges $100 an hour, you will need to make money on that, so you will charge up on that and you will be sending a bill to the farmer, but you have a big stick because you are saying, "Come with me, we will give you estate planning, legal planning, accounting planning and, by the way, there is a significant amount of cash here for your son." Mr. Ryan: I do not see that working that way at all. Senator Tkachuk: I do not see any other way that it will work. I am very concerned about this. Mr. Ryan: If you look at it from a legal perspective, and we are not lawyers so we would not be practising law; we are not accountants, so we would not be doing financial statements or forecasts. What we would be doing is saying, "This is essential for you in the operation of your primary production operation, or your business. If you select to go somewhere else, that is fine." However, the role of the corporation is not to be into any type of what I would refer to as a "money grab," the way to make big bucks, something like this. It is much more like can we be a catalyst and bring these services to bear, either directly or in cooperation with others? Senator Tkachuk: Free of charge? Mr. Ryan: No, I do not think we could go free of charge. Senator Tkachuk: I am trying to understand it, sir. You see, first, I am a fan of the Farm Credit Corporation. I know my chairman has said that this is a really good bill and everything is great in it. I am just trying to get some questions answered. It seems to me that it is like the land bank: it sounded like a good idea when it started. The land bank gave a false impression of the cost of land because the government was buying it, so they had no idea what it was worth. They never do. I want to return to that question. If you are offering all those services, I expect you to charge for them. Will you provide estate planning for free? That is really unfair competition. Now you will be taking money away from lawyers, accountants and everyone else in these small communities that you are trying to help. If you will be charging, I want to know, yes, you will be charging, and I want it on the record that you will be in competition with these people in these small communities. That is fine with me, if that is what the government wants to do. I do not have to like it, I just want to know. Mr. Ryan: Perhaps I can try to answer your various questions. First, we are offering direct services. We would be charging a fee for that. Second, when we are offering those direct services, we will want to do it in partnership with others. That does not mean that we need a cut of the costs or price that we charge the farming community. If they are out dealing with XYZ company and that is being addressed, then they get the fees for that and not the Farm Credit Corporation. When I talked earlier about fees I talked about if we are arranging, for example, to set up seminars across rural Canada to talk about the importance of succession planning. There is a cost associated with that. There are costs associated for the room and the meals. We would have to look to recover those costs, as compared to saying that this is a separate line of business for us, and we expect to make X number of dollars or significant profits. Senator Tkachuk: On this five-year issue, was that for land that you bought? I should not say "bought"; it says "acquire." Can you acquire land? Can you just buy a farm? Mr. Ryan: What we are talking about here is the massive amount of land that was acquired but actually given back to the corporation in settlement of debts back in the late 1980s and early 1990s. Then the provincial government of Saskatchewan put a moratorium in place and said, "You have six years in which you must lease that land back to the primary producer." That particular piece of legislation has now expired. We are not into renewing those leases; we are much more into selling the land back to the farming community. Senator Tkachuk: That is great. The five years was for land that you may foreclose on in the future, and you think within five years you would get rid of it? Mr. Ryan: We would hope for a 12-month to 24-month maximum. That is why we did not have a problem with five years. Our goal is not to build up the land bank but to get it back into the hands of farmers as soon as possible. Senator Tkachuk: I understand that, and commend you for it. The Chairman: One point arising out of Senator Tkachuk's question: there is a real need for Farm Credit Corporation or someone else to hold seminars of some kind to inform farmers about what their rights are in different areas. I will give an example: I had a gentleman call me who was 82 years old. He said, "Len, do you think I should use a generational transfer?" I said, "How old is your son?" He said, "Well, he is 62." I know a little about the generational transfer. The land can be transferred to the third generation if they are bona fide farmers, and machinery can be transferred, but grain or livestock cannot be transferred, and that is the law. Very few farmers know that. It is really quite simple. Having some type of a seminar to inform farmers who would come and listen would probably save them a lot of money on lawyers and accountants who perhaps do not understand it either. I wanted to make that point. Senator Tunney: I want to return briefly to an earlier discussion that we had. It grows out of an intervention by the dean of the Senate, who was talking about dehydrators. I had a group of dehydrators in my office about two weeks ago. I learned more about that in that time than I could have in any other way, except going and living with it. That venture was going extremely well and they were highly profitable in most of their ventures. However, the economy in Japan almost shut them down. The market is back now. In fact, they are now working with the dairy herd operators in Japan and Korea who want desperately to increase the production of the herd. As that happens, they build a market for more and more dehydrated alfalfa. They make pellets for poultry and hogs, and they make flakes or cubes for the dairy industry. I want to mention two interesting things that I learned, and then I will be quiet about this. First, they cannot now supply the demand that is there. In fact, they say that this year they will probably be 30 to 40 per cent below the demand that is there. More than that, the U.S. has almost no interest in taking that on. They do supply about 2 per cent of the dehydrated alfalfa and high protein alfalfa that goes to Korea. Japan is the big one. I think it is a wonderful alternate crop, not just because it is rather new but because it gives farmers the option of rotation. In my opinion, and Senator Sparrow would agree, crop rotation is quite important. Just to wind up here, I must tell you how pleased I am with the upsurge of support that we are getting for this bill from Senator Tkachuk right now. Mr. McCormick: Mr. Chairman, may I take this opportunity in this beautiful and most functional committee room to recognize and congratulate my colleague Senator Sparrow for being elected this year to the Saskatchewan Hall of Fame. Hon. Senators: Hear, hear! The Chairman: That is well deserved. Are there any further questions before we go to clause-by-clause examination? Senator Oliver: I move that we proceed to clause-by-clause examination. The Chairman: Is it agreed that we proceed with clause-by-clause examination of Bill C-25? Hon. Senators: Agreed. The Chairman: Shall the title stand postponed? Hon. Senators: Agreed. The Chairman: Shall clause 1 carry? Hon. Senators: Agreed. The Chairman: Shall clause 2 carry? Hon. Senators: Agreed. The Chairman: Shall clause 3 carry? Hon. Senators: Agreed. The Chairman: Shall clause 4 carry? Hon. Senators: Agreed. The Chairman: Shall clause 5 carry? Hon. Senators: Agreed. The Chairman: Shall clause 6 carry? Hon. Senators: Agreed. The Chairman: Shall clause 7 carry? Hon. Senators: Agreed. The Chairman: Shall clause 8 carry? Hon. Senators: Agreed. The Chairman: Shall clause 9 carry? Hon. Senators: Agreed. The Chairman: Shall clause 10 carry? Hon. Senators: Agreed. Hon. Senators: Shall clause 11 carry? Hon. Senators: Agreed. The Chairman: Shall clause 12 carry? Hon. Senators: Agreed. The Chairman: Shall clause 13 carry? Hon. Senators: Agreed. The Chairman: Shall clause 14 carry? Hon. Senators: Agreed. The Chairman: Shall clause 15 carry? Hon. Senators: Agreed. The Chairman: Shall clause 16 carry? Hon. Senators: Agreed. The Chairman: Shall clause 17 carry? Hon. Senators: Agreed. The Chairman: Shall clause 18 carry? Hon. Senators: Agreed. The Chairman: Shall clause 19 carry? Hon. Senators: Agreed. The Chairman: Shall clause 20 carry? Hon. Senators: Agreed. The Chairman: Shall clause 21 carry? Hon. Senators: Agreed. The Chairman: Shall clause 22 carry? Hon. Senators: Agreed. The Chairman: Shall the title carry? Hon. Senators: Agreed. The Chairman: Shall the bill carry? Hon. Senators: Agreed. The Chairman: Is it agreed that I report the bill without amendment at the next sitting of the Senate? Hon. Senators: Agreed. The Chairman: Carried. I thank our witnesses for appearing. I thank honourable senators for some excellent questions. Mr. Ryan: I want to say, honourable senators, how pleased I am with the quality of the questions that came forth, both the last time we were here in April and again today. Obviously you have put a lot of thought into what is important from an agricultural perspective. I can tell you that the members of the staff that happen to be sitting in the Senate this afternoon watched with great interest. I think they might actually be here. We did bring a few of our senior people to hear first hand what the Senate had to say about agriculture and your passion for agriculture. You have treated us with the utmost respect. We thank each and every one of you for the confidence that you have provided to the Farm Credit Corporation, and we look forward to the progress that will be made with regard to the Farm Credit Corporation. In particular, we thank you, Senator Tunney, for taking the lead in introducing the bill and carrying it. The Chairman: Thank you for appearing. Mr. McCormick: Thank you, colleagues, because you are my colleagues. The Chairman: Agriculture is a very important subject. The committee adjourned.