Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 10 - Evidence
OTTAWA, Thursday, June 7, 2001 The Standing Senate Committee on Agriculture and Forestry met this day at 8:34 a.m. to examine international trade in agricultural and agri-food products, and short-term and long term measures for the health of the agricultural and the agri-food industry in all regions of Canada. Senator Jack Wiebe (Deputy Chairman) in the Chair. [English] The Deputy Chairman: Honourable senators, the Senate Standing Committee on Agriculture and Forestry has reached a milestone. Today will be our first meeting transmitted live over the Internet. I would like to take this opportunity to welcome all of those people watching us on their computers this morning. I am very pleased we now have another way of communicating with Canadians on the very important issues dealt with in the agriculture committee. I welcome the Agricultural Producers Association of Saskatchewan to our meeting. This new group has started in the province of Saskatchewan. It has as its objective to represent all agricultural producers in the province of Saskatchewan. From my personal perspective, it is something that is long overdue. With us this morning is the president of that association, Mr. Terry Hildebrandt and Ms Cecilia Olver, Director of the Agricultural Producers Association of Saskatchewan. Mr. Terry Hildebrandt, President, Agricultural Producers Association of Saskatchewan: Honourable senators, it is an honour and a pleasure to be invited to go through our proposal this morning. We are a new organization in Saskatchewan put together with elected representatives to speak on behalf of the agriculture industry. Our proposal has been compiled from information gathered from our producer members in town hall meetings held this past winter. We have set up a structure to help solve the problems with which our industry is faced. I will highlight the Strategic Transition and Agricultural Revitalization for Tomorrow program, the START program, and will answer any questions that you might have. The agriculture producers recognize and state that the grains and oilseed sector is an important and valuable part of Canadian agriculture. This is especially true in Western Canada, and we believe it would be short-sighted to abandon the industry to the difficulties farmers find themselves in. Nevertheless, as producers we realize that there needs to be some rationalization. The START proposal provides an example of producers willing to do to their part to change. The grains and oilseeds sector is currently experiencing a unique set of circumstances that hinders the ability of producers to adjust to changing conditions and to diversify within agriculture. While Canada has programs designed as safety nets, there is a need for long-term strategic plans to facilitate the transformation and the economic development of Canada in the 21st century. START is a three-phrase agricultural strategy built on information gathered from the APAS membership and with suggestions from the University of Saskatchewan. START is designed as a national program. We feel the program can be very easily and economically administrated through the different crop insurance agencies that are set up in the different provinces. In this way, we feel that administration costs could be kept to a minimum. I mentioned STARTs three-phase strategic plan. On page 6 of your brief you will find the basic principles and goals of this program. We feel that individual producers manage their resources better. START supports farmers with a series of environmental diversification and transition incentives that do not handcuff the producer's management options. The Canadian government must not allow an efficient commercial sector such as grains and oilseeds to be dismantled or crippled because of unfair international trade practices by competitors or because of abrupt shifts in the direction of Canadian agriculture policy. The removal of the Crow rate has hurt us. The process of transition and value-added venture must be intensified, strengthened and hastened so that the agriculture sector is better able to cope with future downturns. The present lack of capital and credit is substantially hindering the process transition and value-added ventures within the Canadian farm sector. Any program that creates change in the agriculture sector must be phased in over a period of time. Increased environmental conservation is of benefit to all Canadians and the landowners must be paid for their protection, conservation and cleaning of this environment. START is flexible and will achieve the following goals. It will put money into the hands of farmers quickly. It will contribute to the revitalization of rural communities by increasing economic activity. It will encourage young farmers and families to remain on the land. It will provide funding for value-added ventures. It will allow a level of flexibility to the agriculture producer's management decision processes and help create positive options for transition, diversification and expert growth within agriculture. It will increase net farm income by removing marginal land from crop production while paying producers annual rent for environmental benefits. It will help break rotation cycles and, provide significant environmental benefits for all Canadians, such as enhanced wildlife habitat, wetlands conservation and improved air and water quality. It will help to develop weed resistance. In a nutshell, phase one is an injection of money into the grains and oilseeds sector to set a portion of the production aside. We cannot abandon this sector. We see a need for money to be put into this sector. We also see the benefit in exercising an attitude of an ounce of prevention rather than asking for money to support the situation once the problem already exists. Putting money into the hands of producers will encourage them to diversify or value-add. We are recommending 20 per cent as a cap of this set-aside. It will remove 20 per cent of the risk from this high input-low return sector that we are in right now. START states that producers manage their resources best. START will be a volunteer program where a producer can choose to put in land up to 20 per cent. It will take the pressure off crisis management while providing money to put the rest of the crop in. That 20 per cent, with proper agronomics such as green manure plough downs, will take some of the input costs out of that 20 per cent the second year when it is put back into production. In the second year there will be less need for commercial fertilizer. Phase one addresses the needs of the grains and oilseeds sector. Phase two will provide more incentive to better qualify some of the lower productive land. The Saskatchewan Crop Insurance Corporation informs us there are still some 10 million to 12 million acres of low assessed land which is growing grain and oilseeds. As producers we see the benefit of rationalization of these lands. We want to put these lands into an environmental permanent cover. We want to see the farmers diversify into other agricultural sectors. There is an appendix adjoining our proposal that includes two options to phase one. In the first option of the program there is a difference in monetary figures in this set-aside. In the first proposal we are saying there are enough monies in the set-aside to address the problems in the grains and oilseeds sector. In the time remaining I would like to address the issues of soil productivity and added-value ventures. In Appendix 2 is a graph that we propose to use in this presentation. This draft proposal is set out as a national program. We see this appendix as being useful throughout Canada. All of the provinces do not use the same soil class types as Saskatchewan, but we all do have a way of measuring the productivity of our land. Therefore, an index can be used. In Saskatchewan we use H-land as our base land. That is the average land in the province. We would propose $50 an acre set-aside. Again, we are using a 20 per cent cap with a rotational set-aside of up to 20 per cent. Factors are built in if the land is more or less productive than H class. We offer an alternate payment schedule for land put into permanent cover. Even if the land is poor, if it is put into a more permanent cover such as grass, trees or something more environmentally friendly, it will also receive the base of $50. We go back to the example of M-land that on a regular set-aside would receive $21.99 per acre. In the establishment year of permanent cover the producer would receive payment corresponding to the compensation paid on the base soil class under the Soil Productivity Index. The producer would see payments corresponding to H-class. This is our environmental reimbursement to producers who clean up the air and water. The benefit would continue at a rate of $25 an acre for each of the next four years. These payments firmly establish the concept of an environmental rent for producers who choose to operate their land in a manner that is more beneficial to society. In this alternative we offer a premium for more productive land on the set-aside. We also offer the premium back to the base of $50 an acre on the lesser productive land if it is put into a more environmentally friendly cover program. The example on page four of the appendix illustrates a producer that has chosen to put L-land in permanent cover. In the first year the producer would receive $50 an acre on the land set aside. He or she would receive $25 an acre on the land for years two, three, four and five. In addition to the introduction of environmental rent, we add on the final page of the appendix what we call the Agriculture Diversification Bond. These bonds would be applicable to the producer in years two, three, four and five. It would be a bankable bond and the producer would be able to go to the marketplace and the banking world for added monies for diversification. That bankable bond would be turned into cash value upon proof of actual dollars invested in diversification. Going back to our example of our 200 acre set-aside, the 20 per cent of the one-thousand-acre farmer would receive a $50 per acre agricultural diversification bond. This bond would be redeemable for cash upon proof of actual $10,000 worth of added venture, diversification or transition within the community. This is the most important part of our program. We view this as the seed money to make movement into different sectors. This diversification not only applies to agriculture, but includes other industries such as tourism, golf courses, manufacturing, feed lots, hoggeries, et cetera. What differentiates this program from others is that the producer retains the ownership of his land. In order to obtain the ADB he or she has to do some valued-added within the community. This helps to maintain our rural population, infrastructure, schools, hospitals, and so on. In order to obtain the bonds it must be proven that jobs and value-added venture will be created. They must be created in an industry that is relevant to the land that the bonds are receiving and that environmental rent is being paid on. That differs from some of the other programs. To receive the agricultural diversification bonds the farmer has to invest in the community in a value-added venture. We realize that phase 2 and the ADB provide the incentives to move into a value-added venture. However, it must be considered only as the seed money to reach that objective. The venture capital that will be needed will be over and above that amount. Phase 3 is concerned with capital investments from outside agriculture. It is in its preliminary stages. However, we know for sure that it will involve such things as tax credits for people who invest in agriculture. For the survival of the communities we need to create potential guaranteed investment savings for people to invest in their rural communities. We will meet with Mr. Williams and the Agri-vision group. They have done some work on this with their venture capital. We will meet with them on Friday to further develop phase 3. We are hopeful that this phase will be in place by the fall. In conclusion, we are saying that grains and oilseeds are still important in Saskatchewan. The economics of any country is based on the production of raw materials. People in the agriculture industry know that the renewable resources of food and fibre kick off an economy of handling, freight and other jobs related to the industry. We can diversify and we are looking at how we can value-add in Saskatchewan and across Canada. In Saskatchewan we have 30 million acres on which we can grow grains and oilseeds. The grain and oilseed sector is too important to our economy to let that production diminish. We are prepared to look at change. We are prepared to do our part to change. In phase 2 we suggest how we can start. There is some common ground regarding the present status and where things could be improved. However, no one knows how to get there. We are suggesting this as a start to getting there. We producers are prepared to do our part. There is one thing new in this paper: we are suggesting to Canadians that we have more to offer than wheat, beef and hogs. We have the ability to be stewards of the environment. We have been in the past and we are prepared to do so in the future. A clean environment, which is so important to all of us, can certainly be part of what we have to offer. However, we need reimbursement for our part in keeping the environment clean. As producers, we can sow some of our land down to hardwood forestry, but we cannot afford to wait to reap the harvest in 20 years time. During that time we are removing carbons and cleaning and filtering air. We believe that this is a benefit to Canadians and to the world. We are offering an environmental rent on this basis. The agricultural diversification bond, ADB, makes our program different from some of the other programs in that we retain ownership and management of the land. The only way that we can turn these bonds into cash is by creating jobs or venture industry within our communities. It is important to the Agriculture Producers Association of Saskatchewan that the survival of the independent ownership of our land remains intact. We live in a world that is aware of the importance of clean food and environment. We suggest to you that the most credible way to do that is to allow the individuals to steward that land. Rural Saskatchewan has suffered in its rural life. If that continues, it will be of tremendous cost to the country. The survival of independent ownership and operation within our community encourages our young people to stay and engage in jobs and futures in the rural setting. The average age of farmers in Saskatchewan is 59 years. There are no young people taking over because they do not see a future in farming. We want to change that future. We also want to do our part in changing. I will close on this note. It has been brought to our attention that it is unusual for a farm organization to promote this type of strategy. However, the bottom line is that we are prepared to follow through with this strategy. We are not stuck maintaining the status quo that dictates that we grow wheat and put it in a boxcar in order to make a living. We can grow trees or whatever else it takes. As producers, we would like to be around the table when these decisions are made and have an input in the decisions that are made. We need to have a hand on the steering wheel, instead of being in front of the wheels and being run over. There are things that will happen in the environment and we are simply asking for a place at the table. We hope that you can see some merit in the foundation of the draft that we started. We appreciate that it is a draft that will be changed. It was sent as a national paper to other farm organizations for their input, and we await their responses. We are certain that you will view it as a foundation to a new beginning. We would like our say in how it comes about. We want very much to retain our livelihood in rural Canada. We thank you for the opportunity to appear before you today. We will entertain any questions. The Deputy Chairman: Thank you. Senator Stratton: Not to be impolite, but I am curious to know why we need another farm organization. My concern is how many voices there are in the farm community in Saskatchewan? How many organizations are there in the West? How many organizations are there across Canada? We keep hearing from these different voices, and each voice is different. They do not speak as one. As a result, nothing seems to happen. I am being deliberately hard on you here, and I apologize, because I think it is necessary. Why is your voice going to make a difference over the CFA or any other organization? Why are you different? Mr. Hildebrandt: In Saskatchewan we do indeed have several voices but we do not have a general farm organization. We do have commodity-based groups dealing with commodities and the marketing and breeding programs, et cetera. These groups do not represent more than 2 per cent of the producers in any one commodity. There is huge number of producers that do not have a voice. You made a statement about the number and mixture of voices. We are trying to change that. We have created a structure whereby people are elected from a community or a regional municipality. All the people, no matter if they are growing wheat or beef or if they are left wing or right wing, have the opportunity to put a person forward. This gives them the ability to put their thoughts into the development of policies. This paper started in that grassroots town hall forum. The CFA operates on a national basis. We have been invited to join the CFA. The Saskatchewan Wheat Pool is the member of the CFA. We intend to take this agriculture industry to a national forum. Although Saskatchewan differs from Ontario in some respects we have common ground because we have also opted to jump into the food and fibre production industry. We must become a national industry. This is the reason that we propose this draft as a national paper. We realize that there are several changes that must be made in order to make it work. In theory, we are prepared to make changes as the world changes. We are prepared to do this in order to move forward within the industry. We are not forming just another organization. Eighty-six per cent of the producers in Saskatchewan do not have a voice because they do not belong to any organization that can speak for them. We are trying to put that unified voice together in an elected democratic way. Senator Stratton: Are there similar, comparable organizations in Alberta, Manitoba or Ontario? Mr. Hildebrandt: Yes. Senator Stratton: Is it your hope to build that into an umbrella national organization at the top or would you go through the CFA to do that? Mr. Hildebrandt: Saskatchewan is the only major food-producing province that does not have a general farm association. We referred to the KCAP in Manitoba, the Ontario Federation of Agriculture, the UPA in Quebec and the Wild Rose Association in Alberta. This is the type of general farm association that we are trying to put together for Saskatchewan. Our national business would be conducted through the Canadian Federation of Agriculture. Senator Stratton: I see that phase 1 encourages reduction in acreage planning. I believe that is a good thing because we are planting marginal lands out of necessity. Ducks Unlimited was here a couple of weeks and had a rather interesting proposal. Have you talked to Ducks Unlimited? Mr. Hildebrandt: We have not, sir. Senator Stratton: I suggest that you do because they have a program that recommends that 25 per cent of a municipality's land be set-aside and put back into its original state. In this way more wetlands would be produced. Ducks Unlimited believes that the result would be to create new habitat. It is worth pursuing a discussion with them because I think it is an interesting proposal. I think that it is worth exploring. Does the U.S. have a similar program for set-asides? Mr. Hildebrandt: Yes, they have. We have looked at their programs and that is one of the reasons why we are suggesting a maximum of 20 per cent per year as the set-aside. The U.S. program does not have a cap on it and, as a result communities could return everything to grass and have their envelope forwarded to Florida. It killed the infrastructure. It killed agri-business and service industries in communities. At 20 per cent you could have the same result and have everything set to permanent grass. During those five years you would be diversifying into some sort of other community business. I am not here to run down any other programs. Again, the difference in our program is that we retain ownership and management of the land. To obtain benefits out of the set-aside there must be development within the community. It does not just get set aside. There are environmental benefits under both programs but what happens to the communities. There is no longer a need for people. It is now a habitat for ducks. In our plan we are creating the same environment. Our plan goes further and encourages the economy to grow because people are maintained and there is value-added business. The business could be a fabricating shop to build penning needed to handle the new increased feed lot. It is all jobs and it is economics. Ducks Unlimited now has a rental program whereas previously they had a purchase situation. The problem with the purchase situation was that although you retained your tax base, you lost a great number of people. We do share common environmental and habitat concerns with Ducks Unlimited. Our point is that Canadian land should be kept in the hands of the people who settled and are stewards of the land. Let us keep the environmental rent monies in the hands of Canadians who can appreciate the benefits. I do not know exactly where all the money comes from for these programs comes. That makes me wonder who is really in control of the land. That is a concern. Senator Stratton: I am curious about valued-added. We were talking to four or five farmers the day before yesterday. One or two of them stated clearly that they had tried value-added. One was an oils and grain seed farmer. He had diversified into cattle and something else. His whole family was working, and they needed to work twice as hard because they had cattle. Their bottom line did not change and they were all working much harder. They were firm in their opinion. They had tried diversification and valued-added. They did not believe the opportunity was there. That is their story. I would like to hear your side of it. Mr. Hildebrandt: In my opening remarks I commented on the legitimacy of grains and oilseeds. We are saying also that we should do our part on these lower assessed lands. Let us rationalize a situation to the fullest. We are not saying that value-added is the end all and be all. We could double the cowherds, but in Saskatchewan we would still need to grow 25 million acres or 30 million acres of oilseeds and grains. Sixty per cent to 70 per cent of that crop would still have to be exported. We are saying that is legitimate. We want to rationalize with this paper. This paper is not going to be the solution to one particular thing but it is a ways and means to some solutions. There is potential in value-added. Saskatchewan exports 80 per cent of its calves to Alberta to be fed. Barley to feed those calves follows them and often so do our young people in order to work there. We could achieve retention if we use the value-added option. That value-added could stay at home. We have diversified within grains and oilseeds. This is what these other gentlemen are saying. We have diversified fully. We have taken a pulse industry from low acres to a big percentage of what we do. Through diversification of the grain and oilseed crops and with the amount of land we have in Saskatchewan, we could break into the niche markets and flood the market in one crop production. I am referring to the niche market of spices. The federal government fails to appreciate that. The niche market is a limited market. Saskatchewan has 50 million acres of land and conversations about niche markets and nutra-ceuticals of garden size is often unrealistic. In this paper, we are saying that we are rationalizing some of the crops in grains and oilseed. There were some producers growing grains on land that would be better off in an environmental clean-up program rather than growing grains. This is rationalization. I do not want to get to off the subject. I believe there are two directions that the government can take in regards to agricultural. First, the world talks should address the reasons why grains and oilseeds are in what they call "crisis management." Second, the world should look at what the producers are doing. The solution is not always to switch a grain farmer to beef production simply because there is money to be made in that area. We all know that markets can flip very quickly. This paper makes the argument that to rationalize is good. We make reference to Saskatchewan, but I believe that there are marginal lands in most provinces that would benefit from the proposals set out in this paper. This is a voluntary programme and the numbers set out in the proposals are not written in stone. They may need to be changed in order to suit a different province. It may not be needed in all provinces. We are innovative people. We must be innovative to grow grains and oilseeds. We are innovative enough to look at change. If change means cleaning the environment in order to retain our rural way of life, we are innovative enough to look at that option. I think that the federal government is leaning that way. They are saying that if a farmer lost money in grains for two years or three years, that farmer should get out of grains. Let us rationalize it. When the smoke clears, the raw material production of grains and oilseeds is a big boost. We cannot let that diminish. The Deputy Chairman: I would like to comment on your proposal of the voluntary set-aside that is in the 20 per cent range. My wife farms south of Regina and I cannot envision much of that land being set-aside because it is highly productive. My farm is in Southwest Saskatchewan. There is a tremendous amount of land there that should never have been broken. The set-aside program would encourage that land being left alone. I think it is important that the option be given to the farmer on an individual basis. There should also be some flexibility put in for the percentage to apply province-wide. For example, rather than limiting it to 20 per cent in the Southwest, you may limit it to 25 per cent and reduce the area around Regina down to 15 per cent. We would be setting-aside the land that needs to be set-aside. We would also be giving the farmer opportunity to make that decision on his own. Mr. Hildebrandt: You are absolutely correct. We have areas suitable for niche markets. For example, the climate is good for chickpeas on the west side of the province and the farmers could reap more benefit out of that particular market. The 20 per cent guideline might not work for them. You are right. We have areas that could reach other marketplaces. We have to watch how quickly we would flood that market. That is how small a niche market these crops are. The Deputy Chairman: Diversification and value-added are different things. The value-added is where the processing takes place. We need to find ways in which the farmers can share in the profits from that value-added. Farmers are the greatest innovators in finding ways to diversify. Eventually, you might find a niche market that is successful. My son-in-law, for example, has been growing chickpeas for the past three years. He did extremely well over those years. He has invested everything into chickpeas again this year. Unfortunately, he and many of the chick pea producers feel that by this fall the value will not be as high as it has been in other years. We have oversupplied another new sector that we have gone into. Somewhere along the line we must address that situation Senator Tunney: I am an Eastern dairy farmer who is very much interest in the agricultural plight of the farmers in the Prairies. I would like to follow on a little bit from Senator Stratton's first questions. Are you a farmer yourself? Mr. Hildebrandt: Yes, I am. Senator Tunney: Is there a Saskatchewan federation of agriculture? Mr. Hildebrandt: No sir, there is not. Senator Tunney: Was there ever such an organization? Mr. Hildebrandt: Yes, there was, but it went out with the Crow, I believe sir. Senator Tunney: Is there a farmer's union or other general farm organization in Saskatchewan? Mr. Hildebrandt: There is a branch of the National Farmer's Union. There is a very small membership within the province. They are recognized as the only other general farm organization. Senator Tunney: Are you an economist too? Mr. Hildebrandt: No, sir. Senator Tunney: Some of your work indicates to me that you might be an economist. I would like turn to the value-added matter. Senator Stratton and I had an experience the other night that was a disaster. I had dinner with the farmers to whom Senator Stratton referred. During our conversation I was told something that shocked me a little bit. The farmers told me that in cases where farmers are in serious financial trouble and in arrears with the Farm Credit Corporation, they solve their problem by refinancing their loans. When they are in arrears to the point where it may be necessary to move, they refinance with farm credit, pick up the arrears of the principal and the arrears of the interest, and in actuality, give up more of their equity in the process. This is a terrible alternative to handling their financing and the repayment of it. Yesterday, I had a visit with two members of the Hydrators Association. I call it the "dehydrators" association, but they call themselves hydrators. Dehydration means "taking moisture out of the mass" and hydration means "putting moisture into the mass." However, it was a fascinating conversation that I had. This comment is a lead up to alternatives in agriculture. I did not know anything about the Hydrators Association, which is an incorporated company with shares. They were doing extremely well for years until the collapse in the Japanese economy, which caused a slowdown in the purchase of orders out of Canada. By the way, they had, and have, 98 per cent of that market. They use a tremendous acreage and tonnage of alfalfa to make pellets for feed for poultry and hogs and to make wafers or cubes for dairy cattle. It is a profitable enterprise both for the farmers who grow the alfalfa and for the processing and marketing sectors that follow. The Farm Credit Corporation Act will be amended. The amendment will allow the corporation to loan money to commercial enterprises that have an agricultural appendage. I see many good prospects in that change. I also want to mention hemp as another commodity. Is hemp cultivated in your area? For many different reasons hemp is a commodity that has been neglected. It is a crop that should be considered. You talked about the set-aside, which is the land that is not excellent for grain oilseed or pulse production. However, the set-aside land could be good for hay. It is a simple process to dry the hay, pellet it through those machines and wafer it for shipping purposes. We need to consider alternate crops, as well as set-asides. Set-asides would be for land that is marginal and maybe even less so. It is land that is almost useless for agriculture of any kind. Your proposal is quite complicated. Our ministries of agriculture often get into programs that are complicated and the more complicated they are the more disastrous they become. I am talking about NISA and AIDA programs that proved to be very problematic. Mr. Hildebrandt: Your value-added concept is where we are heading. As the primary producers we realize that the money is in food processing and added- value. We need to be allowed to participate in that process. I want you to appreciate that the industry in Saskatchewan is credit and capital broke. We have been eroding our equity to balance our books. We appreciate the value-added and when the legislation opens up it may allow us into ethanol, for example, so that we can sell Saskatchewan-produced ethanol in southern Ontario. The people and corporations will be ready when the changes occur. The potential does exists. We do not need another cheap place to give our grain. Our bins are not full. There are people that will take it. We need to be part of the value-added. We need to be part owners in those links of value-added, and the diversification bond is the seed money to do that. Phase 3 will provide the capital that is required. The ventures are limitless and the potential is huge. We have diversified into things like elk and speciality bison. We have no specific slaughterhouse that is separate for those ventures. The potential is huge. For example, I have a neighbour who is seeding 300 acres of a cottonwood, hardwood poplar. That is a hybrid tree that grows to maturity in 17 to 20 years. Then it can be harvested. Manufacturing farm equipment is his primary occupation. He will put a portion of his land down for 17 years after which he will reap a projected income of $3.2 million from the hardwood lumber on the 300 acres. He can do that but we cannot all afford to do that. If in those 17 years those acres are cleaning the air we will then steward, maintain and cultivate them. On behalf of Canadians we will then harvest that crop as the market avails itself. The potential is endless. That is our overview. We are prepared to look at that broadly. We are not status quo wheat producers. Looking back at the history of the provinces, we see that pioneers settled in areas with a certain crop in mind. Water is not found in every area of Saskatchewan. There may be water, but it is not proper for livestock. Some of the land was settled with the purpose of growing grains. Saskatchewan was built that way. And that is why it is settled that way. There is some rationalization that may have to take place. Some of the acres are growing grain that should not be. There are unique situations in every province. The potential of the value-added system is tremendous. An Hon. Senator: Where is your farm? Mr. Hildebrandt: My farm is in Langenburg, Saskatchewan. The capital needed to make these kinds of changes has to be appreciated. We are capital poor. For five years or more, we have experienced depressed grain prices. We can now only go to grain companies who will give us credit to purchase inputs to grow more grain. It is a Catch 22. The ADB is the seed money to begin moving in new directions. The Deputy Chairman: We have one hour remaining. Senator Oliver: Mr. Chairman, I will be brief because my question was about valued-added and Senator Stratton and Senator Tunney have touched on it. It was stated that the real economics of farming out west is the production of the raw product. That struck me, but it missed the point about both diversification and value-added. The Deputy Chairman has said there is a huge difference between diversification and value-added. Diversification means different crops and we all understand that. Value-added is something very different. One of my interests in business is in valued-added. I have been in Japan on several occasions when it has been said to us, do not come here as Canadians and try to sell raw fish or logs. If you want to make money here, what our economy needs is Canadian products that have valued-added to the raw product. If the main economics are producing the oilseeds and the grains, value-added should be looked at. I am involved in the business of wood or trees. We do not want to sell just a log, tree, lumber or a prefabricated home. We have to look at things such as toothpicks, chopsticks, paper cups, and cardboard. Those are all the things that can be made from a tree. That is what I call value-added. From what I heard, farmers are not looking at the myriad of things that can be done with products in terms of presenting them for export and for use. Perhaps you can clear up for me the impression I received from your presentation, that you were not really looking at real and true value-added, as I understand it. Mr. Hildebrandt: I do not believe that to be the case. An industry of raw material production is the kicker to any economics. That is done by adding value to a raw material, but without the raw material the value cannot be added. Senator Oliver: There is no money. Mr. Hildebrandt: There is no money here either, if you do not have the tree to make the toothpick out of. The same situation applies if you do not have the grain to make a loaf of bread. As a primary producer of grains and oilseeds we talk about the problems occurring in the world markets due to driven down prices by subsidies. Why has agri-business been able to build in their margins and retain their profit in a $3 dollar bushel of wheat but the person who grows the wheat and creates that value-added and creates that job has not been allowed to have his or her profits retained? We want to look at value-added ventures. However, there can be no value-added without the raw material to make something out of. If the money is not be funnelled to the producer that creates the raw material and it is strictly going only to the value-added, that is fine. We are prepared to go there but we need some assistance to get there. We have no credit to get there but a multinational may. Senator Oliver: What I heard you say is that we need to be allowed to be part of that value-added. It seems to me that if I were you, I would be holding on to the raw product until such time as I was assured that I was going to be getting a part of the money or the real value-added. The profit, the money, the revenues come from whatever it is you produce that has the value-added and that is what the world markets are looking for. They are no longer interested in having just the raw product, particularly in a country like Japan, where costs are much higher than ours to make the value-added. Mr. Hildebrandt: What I will ask you to appreciate is that the minute a product is made out of it, there are some controls over supply and demand to warrant a particular price. We do not have that same luxury with the raw product. We have no control over what it costs to produce it. Nitrogen went up 63 per cent this spring. We have no control. Once a product is made, there is some control. We cannot hold this raw material until we get what we need out of it. As primary producers, we do not have that luxury. Senator Oliver: Farmers cannot continue to produce just pigs or just grains or just potatoes and not potato chips. McCains is doing so well because it is value-added. They do not grow many potatoes on their own. Mr. Hildebrandt: Is it fair that they should do well and the guy that gives the material to make a chip out of cannot make a living? Senator Stratton: In Manitoba farmers who sell potatoes to McCains do well. Mr. Hildebrandt: We are prepared to rationalize some of the situation, and again I refer to Saskatchewan. Ms Cecilia Olver, Director, Agricultural Producers Association of Saskatchewan: The honourable senator is correct, we do have to get into the value-added. That is why part two of our proposal is to give the farmers a piece of the product. Mr. Hildebrandt has stated that the reason we have to look at ABD is because our credit has been exhausted. I would like to show the committee a map of the situation in the area in Saskatchewan where I live. We are full-time farmers in this area and so these are farmers I know. The green portion shows the farmers over the age of 65 who are farming; the orange portion shows farmers at the age of 45 who have left farming in the last three years. We said that the average age of farmers is 59 years old and that will increase dramatically. Senator Stratton: What are you going to do when they retire? Ms Olver: That is why the START program is an interesting concept. The 65 year-old farmer is at the lower end. There are many 75 year-old farmers whose 40 year-old son has just exited and the elder farmer is left with more land than he anticipated. He has debt that he never had before. For him, this set-aside will help because he could set aside a portion of the land. This in turn will help the community because the agriculture diversity bond will create jobs. If there are jobs in the community it will attract young people. Young people might choose to return to farming or at least return to help on the farm. We are having trouble getting help on the farm. The children of people my age have grown and we have lost our slave labour. Let me put it that way. Those kids who were our free help have gone. Now we do not have help on the farm and there are no young people in the community. The ones who are in the community are working in the oil sector. Senator Oliver: Many people are bringing in workers from Mexico. I am from Atlantic Canada and we have to bring in workers from the West Indies. Ms Olver: I would be happy to bring in people from Mexico. Mr. Hildebrandt: Ms Olver's point is that the 65 year old farmer will not start feeding cattle, but he or she will invest in the feed lot or will purchase cattle or shares to bring in young people. We have many young people in the oil business in Saskatchewan and in Alberta who would reinvest their money back into value-added ventures. There are possibilities of investment in the production of biodiesels, et cetera. The whole credit situation and the kind of capital needed to start this kind of venture is not appreciated. If we are to be part of the value-added chain, we want to be sure that we can be. We need assistance or diversification bonds. We will show what we want to do and the bond can be turned into redeemable cash to do that. I would like all honourable senators to appreciate that there is no value-added without a raw material. In food, that is an annual renewable resource. Each crop of calves or each crop of grain is an annual crop. In forestry, harvest may be only each twenty years. In food production, it is an annual economy driver. I think that is a point worth driving home. We are the only players. We are the ones who create all these economic jobs. Yet, that is not considered in the profit margins. We want to change where change is needed. You use the example of Manitoba. We want to rationalize where we must. Manitoba has done a much better job than we have. Nevertheless, grains and oilseeds are the raw material economic kicker, much like potato chips are made. Senator Oliver: I have a fundamental disagreement with the witness because I think that there is no point in growing wheat and oilseeds and leaving it at that. A farmer must turn to value-added if the farmer is to start turning a profit. Ms Olver: We agree with you totally. Mr. Hildebrandt: That falls under the definition of diversification. We have some people in southern Saskatchewan who are looking at a pasta plant for the durum wheat. A prospectus has already determined that there is no room for that pasta plant in Saskatchewan. The big multi-nationals have eaten up that market. Senator Stratton: Did they not build a pasta plant in North Dakota? If the chair were here he would be jumping into this conversation. He would say that they had been trying to build a pasta plant for years. The Deputy Chairman: I was going to wait until Senator Oliver was finished. However, I would like to ask a question in regards to value-added. What is valued-added? The pasta plant that you are talking about is one example of value-added. Part of the problem in Saskatchewan is that there remain some difficulties to be worked out in regards to the Canadian Wheat Board. There is a question on whether that plant will succeed or not. Senator Tunney talked about value-added and the dehydrators. The farmers that produce the alfalfa own the plant. They share from the exports to Japan and Korea. Another example is ethanol. A group of farmers could come together in an area and invest in an ethanol plant. They would produce the product that the ethanol plant consumed and would be able to share in the profit from it. So these are areas where value-added are key. Farmers must look at ways of incorporating value-added into their operation whether it is through a cooperative operation or through partnerships. Mr. Hildebrandt talked about an association headed by Red Williams in Saskatchewan. That group is trying to find the dollars to develop venture capital in order to allow individual farmers to get together and start some of these ventures. I think that governments will need to play a bigger role than they have been in assisting the agricultural community to be able to take advantage of that value-added. I have one request of you both. Would you please meet with our clerk so that we can get a copy of the map you have used in your presentation. He thinks that he has a way to copy the map that you were passing around in a smaller size. All members would like to have a copy of that map. Senator Banks: I admonish the chair to not start talking about reduced markets for chickpeas because some person will set up a chickpea marketing board! I am a city slicker, so I am going to plow some old ground here because I need a better understanding of this topic. I admire that you are setting out to attack the problem from a constructive way and trying to find a new way to solve the problem. We are sitting here saying that it is absolutely logical to have value-added. Alfalfa plant dehydrators are a good example of that. Farmer owned alfalfa plants are a good example of that also. Governments tell farmers to do value-added. They do, and then the market goes sour. As I understand it we now have alfalfa dehydrating operations on the verge of bankruptcy. A government that said do value-added are now saying that those farmers are not entitled to assistance because that farmer has fallen through the cracks. They consider the business as half an operation. Are you not worried about that? Mr. Hildebrandt: I am worried somewhat. However, let me add what is known as the "closing of the loop." It was mentioned here that value-added was a method of being able to cope with down trends in any sector. I will use beef as an example. In that area, we are looking at a new generation of co-ops for closing the loop. It becomes a feedlot of 10,000 animals, which is a minimum to be viable. The entire management is run out of that feedlot. There are several producers raising the cow-calf to that feed lot but the management of the breeding program is done from the feedlot. The management knows what cuts and what breeding are needed. The loop has been closed. These owners of the cow-calf can grow the grain production for this. In this way, you enclose value-added but you enclose the entire scenario. Rather than going from A to B and watching B fall off in two years, you are now a part of A, B, C, and D and managing within that. Feeders, for example, are locking their barley costs a year out and they are futuring their slaughter prices a year out. There are those kinds of controls. The entire process is managed from the root to the slaughterhouse. You can alleviate some of the potential fall out to which you are referring, Senator Banks, when you say that farmers jump products and end up with the same problem. Another point that I did not drive home is with the diversification and who will take advantage of it. You must appreciate that taking a grain farmer and making him or her a beef farmer is a long-term commitment that can take up to ten years. This program allows that a person could be raising both grain and beef with an investment in fencing, pasture and equipment. Comment was made here that in a few years we could have it down to grass, and we will be out of this grain racket. Let us promote that person going there as quickly as possible. Much of that land is marginal and maybe it should be used for beef. They will be one of the benefactors of diversification. You suggest that they are walking on thin ice by choosing diversification. It is possible to control an entire scenario from the raw material to the finished product. Control from within might alleviate some of that hazard potential. Senator Banks: We are talking about vertical integration more than value-added. Mr. Hildebrandt: That is true, to a degree. It would assist with the retention of people in rural communities. It would help to ensure the rural way of life. These are big ventures. You must appreciate that a 10,000-head feedlot is the smallest viable operation. A farmer must have at least that amount in order to get the benefit of the premium that is available. That takes a lot of cows and calves. Senator Banks: A great concentration of feedlots create an ecological problem. Mr. Hildebrandt: It could. Senator Banks: There are ways around it. Mr. Hildebrandt: Saskatchewan has an advantage in that our population is relatively small and our available land is large. Therefore, if we manage ourselves properly, we can avoid the problems that our European friends are experiencing. The potential is there, if properly done, to increase these kinds of value-added ventures. I see that a swing from grains to livestock, hogs or cattle, as one of the quickest ways that we can move. Senator Banks: That can flip around in a matter of weeks. Mr. Hildebrandt: The losses are not as risky if you control the feed costs and the calf costs, and it is all within the structure. Ms Olver will tell you they diversified into specialty crops some years ago. It cost them $41,000 to diversify. However, they had half the equipment already. That is just a header to now harvest these specialty costs. It is a vast cost for an individual farmer to do it alone. We know that beef prices can fall very quickly. We also know the result that just one case of hoof and mouth can have on a farmer. That is a scenario. Senator Banks: Do you anticipate that the bonds to which you referred would be Government of Canada bonds? Who would adjudicate the issuance of those bonds? There has to be some hoops to jump through, some conditions and qualifications for the issuance of those bonds. Further, I have a worry that carpetbaggers will take advantage of the system. I see them jumping through all the hoops and getting the bonds even though they plan to get out of the venture four or five years. My past experiences in other industries have made me aware of these carpetbaggers and the methods they employ. Let us talk about those bonds. This is part of a question that Senator Tunney asked earlier. What you are proposing to do seems very complicated. It may take a complicated procedure to see your work come to fruition. It is going to take a bold procedure, whatever ends up being done. Who would operate those bonds? Mr. Hildebrandt: We see it as money that is split between the federal and provincial governments. We see this funding as the seed to make the movement work. Without these funds we cannot create value-added. The administration of the set-aside portion is simply through our crop insurance and through our infrared mappings. The infrared mapping tells what land is set aside and what is out of production. The bonds are eligible for the amount of cash upon proof of the diversification. This is the grey area you are speaking about. I do not have a specific answer to your question of how it would be monitored or how that part of the program would be set up. There is a way of tracing whether diversification has happened. If I claim to have bought $10,000 in feeders, I will have proof of this. Senator Banks: You did not say diversification was a qualification for the bond. You said value-added was a qualification for the bond. Mr. Hildebrandt: I should be more specific with my terminology. We will refer to it as value-added. We see going from grains to a welding shop as diversifying your operation. Let us call it value-added. To be able to maintain or obtain the cash value of the bond, you would have some proof of value-added; whether it is a manufacturing shop; the feasibility study of a golf course; the actual construction of a golf course; or the planting of trees. Senator Banks: Value-added could be getting into another viable business as opposed to taking a product and doing something to that product. That is the definition of valued-added. I always assumed value-added was growing some grain and making some bread. Are you saying that if I convert my farm plot from growing chick peas to growing cotton wood hybrid lumber, that is considered value-added? That is diversification, is it not? Would that qualify for issuance of a bond? Mr. Hildebrandt: Yes, it would. It would be seen as entering a viable marketplace. It would be creating jobs. It would be creating economics within the community. Senator Gill: I would like to come back to the diversification, but I am going to speak in French, if you do not mind. [Translation] Concerning the diversification or conversion you were referring to earlier, I would like some more explanation. I am a layman in the area of agriculture. You talked about tree planting, for example, and what I understood from your presentation was that in certain cases you are suggesting 20 to 25 per cent land conversion on average, while in other cases it might be 10 or 15 per cent, depending on the land. I would like to know if, for example, you plant trees in one area of the farm, where you would normally raise crops, there would be an impact on the manpower used as well as on the machinery normally used, and therefore, there would be an income shortfall as compared to the normal use, and obviously, some investment would also be necessary. I was under the impression that farmers were ready to do this if the costs could be recovered over a reasonable period of time. Is it possible that this would have a significant impact if you were converting 15 or 20 per cent of your land into a tree nursery? Would this have a significant financial impact on finances, as well as on the labour aspect? It seems to me that you would need the same manpower. You would be obliged to keep the same machinery, and furthermore, it would be used less often. Where would the financing for all of this come from? Could you explain the process to me? [English] Mr. Hildebrandt: I would like to clarify that when we refer to environmental rent we make that rent retroactive to the existing tree lots and swamps. For example, in Saskatchewan we talk about abandoned farmyards. Abandoned farmyards have become an oasis for wildlife. We would make this environmental rent retroactive back to existing fence lines that are retained in that respect. You asked about planting trees and whether there are jobs to be gained or lost by this crop. There are concerns that there may be a loss of some service industries such as the selling of machinery. This could be. You are asking us to look long into the future. By using this example we are saying that trees have a massive potential for cleaning and filtering the environment. There are obvious benefits to growing trees. We need to be reimbursed for more than just growing grains and oilseeds. Employment, our infrastructure and the agri-business has decreased rapidly in the grains and oilseeds already because we have been forced to increase running after a chase of economics of size. One 400 horsepower tractor does double the work that three 100 horsepower tractors used to do. An unfair and distorted marketplace also distorts the economics of size. There is concern for losing the need for dealerships or machinery sales. Four or five abandoned farmyards can be seen in any 10-mile drive through rural Saskatchewan. The decline has already occurred and I foresee a growth in jobs. Perhaps not in the example of the trees, but more so in the manufacturing of biodiesels and ethanols. Trees are a perfect example of helping with carbon sequestering. There is also a world shortage of hardwoods; we have to look at the potential of growing those crops. It all stems back to the false glut in grains and oilseed production. Governments do want to look at that. These are expanding markets as more meat and grains are needed to feed people. I refer to our desire to change and rationalize. As Canadian farmers we are some of the world's most efficient grain and oilseed producers. It is very difficult to be asked to change crops because there is a glut in the one you are growing. I would like to clear up that falsity. There is no glut. There are more people starving. Senator Oliver: There are inventories. Mr. Hildebrandt: World record lows. Ms Olver: Wheat stocks are at 19 per cent and they are expected to be at 12 per cent by the end of the year. That is not a glut. Mr. Hildebrandt: I am rounding the question a little and I apologize for that. There are many facets that we will not be able to understand until we have moved further down the road. If a new marketplace develops for forestry industry hardwoods, we will look into stewarding those forests. However, we need to be reimbursed for that labour. Ms Olver: The question was asked where the money would come from. I believe that industry should pay for it. We hope that Canada continues with the Kyoto Agreement. Under that agreement trees are recognized as a "carbon sink." In some areas of the United States and in certain European countries it has been recognized that funds can come from polluting industries. [Translation] Senator Gill: Do the Saskatchewan departments of forestry or agriculture have reforestation programs to assist people in this area? Are there such programs in Saskatchewan? [English] Mr. Hildebrandt: Not to my knowledge, sir. There have been private movements out of the United States that have come into our province and conducted meetings to suggest the growing of trees or woodlots. Senator Gill: In Quebec, the provincial government has helped farmers who have decided to convert trees. The Quebec government has programs that give small trees and assistance to the farmers to start up this venture. There are programs to assist people who have decided to convert. Senator Christensen: There has been a lengthy discussion on diversification bonds. Certainly we can see the green part of the bond and getting a green tax from industry to be able to offset that. It also appears that you are looking at the diversification bond for other things, such as manufacturing on the property. Where do you see that funding coming from? Mr. Hildebrandt: This reverts to examples of how the gain can be made by taking low marginal lands out of grains and oilseeds and putting them into an environmental rent. There are studies from the United States that show a vast increase in the revenue growth income. Senator Christensen: Manufacturing or other things on that land? Mr. Hildebrandt: If we can gain that by setting those marginal lands aside versus subsidizing them to grow grains, we gain there and then go into any other sector of manufacturing. Manufacturing is taking a raw material and building something. It creates jobs and GDP. Our wish is that this can be done within agriculture or tied to agriculture. We also hope that it be done in alignment with the thoughts of the federal government. We are not so narrow minded enough not to allow the land to become a golf course. If a person wants to take a quarter of his or her land and turn it into recreation land or a heritage museum site. Society will benefit when that marginal land is put it into an environmentally friendly state. Senator Christensen: I was not thinking of golf courses. I was thinking of that as part of the greenbelt. How do you feel about other types of manufacturing or the maintenance of farm equipment? Mr. Hildebrandt: It becomes more than an agricultural portfolio. You are talking about industry and the Ministry of the Environment. We have been instructed that the monies will funnel through agriculture. Some of the comments by the Minister of Industry note that agriculture is industry. I suspect that in rural Saskatchewan much of the value-added, although it can be seen as totally separate, will be built around the need for something to service the agricultural industry. I appreciate where you are coming from with the green consideration. The Deputy Chairman: I sense a mood in Ottawa that programs similar to this will not necessarily be funded out of the Department of Agriculture. The Department of Environment would have a much easier time selling a set-aside program to the Canadian people than the Department of Agriculture would. We will need to look at three or four different federal departments to be able to fund some of these programs rather than having all of the funds being channelled from the Department of Agriculture. Are you advocating that your program replace the current assistance that is available? Or, are you suggesting that such a program be a top up of existing programs? Mr. Hildebrandt: We see it as top up. We do not know if we want it classified under a safety net. We want it seen as more of a strategic plan for change. We would need to retain the safety nets and review them. There would be change once the funds were put in place. You will find a difference between phase 1 in the original document and the dollars in phase 2 in the appendix. You will see a vast change there. In phase 1, the set-aside dollars were quite a bit greater and seen more as a relief to the grains and oilseed sector. In the appendix, we have made the program more applicable nationally. It is more workable as it is tied to the productivity of the land and more relative to the kind of dollars that can be expected. We also appreciate that there must be the other safety net programs. With both programs we still see the need for crop insurance. We support a total review of the safety nets that we have in place now. It is another topic, but the AIDA program does not work in many sectors and many regions. Let us get the money to the hurt area when it needs it and let us not waste the money. Some of the federal money has not been used when needed. To answer your question, we see it as a separate program. We believe that the current programs should be reviewed and changed. The Deputy Chairman: Fifteen countries want to join the European Common Market in order to take advantage of the wind-fall that farmers are receiving under their subsidies program. I do not know whether you saw the announcement two months ago. Great Britain has decided that it could no longer afford to pay their agricultural producers these huge subsidies. They are implementing a set-aside program and a program to convert acreage back into grass for various reasons. Have you had a chance to look at that program to see how it compares to your suggestions? Mr. Hildebrandt: We have not. However, we are aware of what is happening in Europe and in Asia. I do not know if I mentioned this or not. Canada is a major exporter of several grains; durum, flax, yellow mustard, et cetera. A set-aside or a reduction of this production could raise the prices in the grains and oilseed sector. The Europeans are moving away from specifically subsidizing a commodity and looking at what it costs to retain this lifestyle. They are more or less considering what the average European makes and paying that to keep producers on the land. I am not sure how they are addressing the rationalization within that. Rather than a specific grain or wheat subsidy, the Europeans are recognizing that they need producers and are paying them a basic salary. That salary is comparable to the average salary within the country. The Deputy Chairman: I have one suggestion for the program. I am not one who has ever favoured any farmer receiving money to summer-fallow his land. I do not think that that is a proper answer of trying to make a set-aside program. I am hoping that the reward in your proposal for summer-fallow will be very low, and that the dollars for converting to grasses or some other means would be set higher to encourage that transition. Mr. Hildebrandt: To remain in the status quo of grain and oilseed production, we will have to go back to the trough of the government. World projections change. We have incurred fluctuations as great as 63 per cent. The set-aside was an ounce of prevention rather than reacting after the fact. Let us take some of this risk away from the farmer. Let's set aside some of this land. If we produce a little higher price in some commodities, that is good. Let us alleviate some of the problems that are out there and which will continue to be a tax payer's burden if we do not make some change. We promote, in the set-aside, a green manure or a green fallow not a black fallow. We have come to recognize the black fallow as poor economics. Nevertheless, it takes 20 per cent of the risk out, allows some cash movement to do other things and allows a green manure plow down. That in turn takes some of the input costs out of the first 20 per cent of the second year. That is why the set-aside was created. We put more emphasis on phase 2 and phase 3 of rationalization within the grain sector. Do not write that sector off. Let us have a little more constructive use of federal funds or provincial funds within that sector. The Deputy Chairman: A word of caution is that we cannot depend on the amount of land that we put into summer-fallow to have an effect on the price of grains in this country. We are not going to be able to do that. If you want to sell the set-aside program from an environmental perspective, it is going to be much more difficult if you include summer-fallow. Summer-fallow does not add any green to the environment. Second, one of the most economic ways to summer-fallow is to "chem-fallow." In that instance, instead of cutting down on the pollutants, you are adding to them. If you are going to have proper stewardship of your land, it is better to chem-fallow than to use a cultivator or a disker to work the land. If that program is to be adopted, we must be able to sell it. It will be much more difficult to sell it if we are increasing the number of sprays that are used. Senator Stratton: I am curious about a couple of things. You said that you are having a terrible time because your credit has dried up. You say that you do not have any capital. The Farm Credit Corporation Act is about to be amended. Will that help to alleviate your financial concerns? Ms Olver: Will they not require equity to loan you the money? Senator Stratton: In your view, will it alleviate your problem? I hear that there is some money available in the private sector. I hear that some of the banks have money available and you can receive money if you need it. I do not believe that. If I were a banker, I would certainly have farmers on the low end of the lend-to totem pole. It is interesting to talk about diversification. I am old enough to remember the trials and tribulations that we went through in Canada when we pumped money into regions to try to develop them. For the most part, those development efforts failed. Governments have been raked over the coals time and again for doing that. Thus, governments claim that it does not work. They tried and are now tired of being dumped on by the taxpayer for doing it. You are saying now that we should develop these bonds. Do you have an idea that one could make sugar from cellulose. There is a classic example of that from Morris, Manitoba. That city went bankrupt taking many investors with it. I am concerned that when someone gets the bonds, that someone deliberately declares bankruptcy. That is another version of what Senator Banks said. Governments are then labelled with loaning, or giving, money to these groups or organizations that want to develop or diversify into new areas. Over the last 75 years, most of these occurrences have been total failures. Western diversification, which our government instituted, has been relatively successful. In Manitoba, the money has been put to good use. I know of a Manitoba organization that has put money into the development of certain agricultural products. The researchers are working on it now, and hopefully that will succeed. It is not in the city of Winnipeg, but rather it is outside the city. The venture capital companies will invest if the farmer can prove his case to them. That is what these private venture capital companies do. If you can prove your case to them, they will put in money. Why not rely on the private sector to develop these alternative systems? You have to prove that you are capable of doing this, and you have to prove that this is a viable alternative. I am afraid that if the government ends up doing this, we will end up with one disaster after another. Mr. Hildebrandt: I would like to clarify that this paper is the producers' hands on the steering wheel of the vehicle that the Government of Canada is already driving. I am not telling you anything new. This is the direction that the federal government is taking for what they call the "Western Red Bread Basin." It is no longer viable to subsidize that. We have to change, and there has to be movement. We have developed that with a producer's interest at heart. We are prepared to do as much rationalization as possible. We are not suggesting this and then trying to sell it, but rather, we are suggesting that, as primary producers, we need to take hold of a part of that steering wheel, because we want the system to work to ensure that populations remain in rural Canada. It is not a matter of selling something that has a history of not working. This is simply the direction. There was an announcement in the National Post, I believe yesterday, that there will be one more bailout to end all bailouts, but that it will be changed. We appreciate the need for change, and we are driving this as the producers directed us with their concerns and in mind as to how this change should come about. Why do we not go to the private sector? Agri-Vision is looking at this, and we will meet with them on Friday. You have to appreciate, and I am sure that you do, that returns in most agriculture ventures, be they added-value or not, are not huge or quick in their turnaround times. There are certainly other areas where private investors are able to reap a greater and faster return on their money. There are some limitations as well. There are limitations regarding ethanol. There have to be changes made to the legislation that will allow more ethanol in the gas mix or that will allow the interprovincial marketing of ethanol. Private investors will not jump into those kinds of things. We are not here to sell the government on a program. We are trying to add our input to the direction in which the federal government is already headed. Our rural lifestyle is our main concern and that is why we are here. Ms Olver: Farmers have a bigger stake in their investment than perhaps some of your previous ventures have had. If we are to set-aside that land and not reap any cash from it, we will need to get cash from it in some other way. Once we have the cash, we will be careful about the type of investments that we take on. That is the difference. With my money, if I were to receive it, I would likely consider a mutual kind of investment. I would not put all my eggs in one basket, but I would invest in several different ventures, such as a private nursing home and something to do with agriculture. I believe that many farmers will not spend the money just because it is government money. They will consider it their money and they will be careful about spending it. That might be the difference. Senator Stratton: Please appreciate that I am not trying to shoot down your ideas. I am more concerned about the history that we know to date. I agree with you that something must be done. The situation is desperate in the rural areas across Canada. The other concern I have is how to sell this to the folks in the city? They are the people who are saying that the farmers have received enough; no more; and the private sector is essentially saying the same thing. If you could come up with some definitive ideas for your diversification, it would help immensely. You do not have to give us specific ideas, but instead, general ideas that show us the potential for development. Right now, it is hard to imagine where the potential lies. If you could choose an area that is a fair distance from a major centre like Regina, Winnipeg or Calgary, what could you suggest as alternatives? Are there specific examples for any one region or town to ensure its survival? You need to bring that information forward. By doing so, people could catch the magic of what you are trying to sell. Ms Olver: For example, coriander could be grown, harvested and pressed to produce an oil that is a great paint stripper. A local group wanted to initiate that, but the investment was not there. If we had 50 farmers, each with $10,000, there would be enough money to build the plant. You have to couple that with a partnership, with a company such as CIL. You cannot compete with those people. You have to build a product that they will use. We will probably need extra money to research that kind of thing so that we do not jump into something that we should not be doing. The Deputy Chairman: It is now 10:30, and I know that we have questions remaining in the second round, but we did agree that we would end discussion at 10: 30. Thank you for coming. As you can see from the questions and from the number of senators we had to cut off, you have presented a very interesting issue before us. I want to thank you so much for doing that. I know that our committee will be meeting and seeing you both more often in the future. We would like the balance of this meeting to be in camera. The committee continued in camera.