Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 32 - Evidence
OTTAWA, Tuesday, February 19, 2002
The Standing Senate Committee on Agriculture and Forestry met this day at 12:30 p.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 Leonard J. Gustafson (Chairman) in the Chair
[English]
The Chairman: Honourable senators, we have a quorum. We are very pleased to have the honourable Minister of Agriculture and Agri-Food Canada before us this morning. He has a30-minute presentation, and then we will go to questions.
The Honourable Lyle Vanclief, Minister of Agriculture and Agri-Food Canada: I am certainly pleased to be able to appear before you today. Before I start my presentation, I thank you and congratulate you for the work you are doing. Your committee was in Atlantic Canada last week, and I have read your news release.
This presentation today will be about a new agricultural policy architecture, and the fact that we need to look at a new framework will fall very much in line with the statements in that press release. It is a work in progress and is a long way from completion. The input from the Senate committee, the agriculture committee, the task force out there, as well as an incredible amount of consultation, will all be factored into the final decisions.
I am here today to talk about some of the major issues facing agriculture in Canada, and the development of a new architecture for agriculture policy to ensure this sector's success in the21st century.
As outlined in the January 2001 Speech from the Throne, the Government of Canada committed to helping Canada's agriculture sector move beyond crisis management, leading to more genuine diversification and value-added growth, new investments and employment, better land use and high standards of environmental stewardship and food safety. Federal and provincial governments have been working together and consulting with industry to define a policy approach to accomplish these goals. In June, my provincial-territorial colleagues and I reached a unanimous agreement in principle on an action plan for an agricultural policy framework. The goal of this architecture for agriculture policy is to fundamentally transform Canadian agriculture for the 21st century.
We are talking about an industry that is a major sector of the economy, a sector that generates more than 8 per cent of our gross domestic product. It is the largest manufacturing sector in seven out of ten provinces and accounts for one in seven jobs in Canada. It contributes between $5 billion and $7 billion annually to our trade surplus. For example, in 1998, this represented a full third of Canada's total trade surplus in all goods and services.
Farmers are the foundation of this sector. A large group of business-oriented farms produce the vast majority of our agriculture products and earn 96 per cent of total net farm income. These farmers have the potential to become 21st century leaders. Other Canadian farmers are also working hard to stay in the sector. Some have the potential to become 21st century leaders; others are facing hard choices.
In short, to realize the full potential of Canadian agriculture, we must help all farmers deal with the pressures shaping the future of this sector. Traditional risks, from weather, disease and global market fluctuations, remain important, but these are not the only challenges ahead of us. International competition in commodity markets is intensifying. Moreover, some of our main competitors continue to heavily subsidize their industries, although the victory we secured at the WTO discussions in Doha gives a powerful tool to help level the playing field.
Canadians and global consumers are demanding more information about the safety and quality of their food and how it is produced. After September 11, these concerns have moved to the top of the radar screen everywhere. Advances in science are creating opportunities for improvements in farm productivity, food safety, environmental stewardship and the development of new sources of revenue for innovative products. Agriculture is rapidly becoming a knowledge-based industry, and farmers increasingly need to pursue continuous learning.
The unanimous agreement that I reached with my provincial and territorial colleagues in Whitehorse this past June sets out a new architecture for agriculture policy to meet these emerging challenges head on. The Whitehorse agreement provides for an integrated framework built on common, national goals. It obliges governments to regularly report, in a relevant manner, progress towards these goals. It also recognizes the need for stronger partnership among governments, the agriculture sector and Canadians.
The action plan has five elements: Risk management; food safety and food quality; environment; renewal; science and innovation. Working together in an integrated way, these elements will brand Canada as a world leader in food safety, innovation and environmentally responsible production.
Let us look briefly at each of these elements in turn, reviewing the key features we feel are relevant to a new architecture.
When it comes to risk management, we currently have a patchwork of farm safety-net programs aimed at the same basic risk, farm income fluctuations. However, these programs do not work well together. They do not cover important risks, such as negative margins, in all cases, or interruptions of business. Moreover, most of these programs require little contribution from farmers. Governments pay the vast majority of the costs. They also encourage cherry- picking by producers. We have not established clear rules for participation or how these programs should be used together. As a result, these programs foster dependence on governments.
There is another key issue that we need to resolve in our existing safety-net system. Our safety nets are designed to stabilize income fluctuations. They are neither designed nor intended to meet the needs of farmers whose major problem is a chronically low level of income. Low-income farmers currently do not have any real alternatives to existing safety nets. Thus, they turn to these programs and demand they be enriched to address their situation. In effect, our safety nets are being pulled in two completely different directions: One, to act as a business tool to help farmers manage risk; and two, to act as a passive income subsidy. We need to make a shift from the past approach of safety nets to a risk management approach that promotes adaptation for the future. Governments have long touted the benefits for farmers of innovation, diversification and value-added production, but the reality is our safety nets have done little to encourage these activities, and in many instances have possibly discouraged them. For example, most of the programs fail to recognize actions that farmers could take to reduce their risk exposure.
I want to move to an integrated risk management system with costs shared, as now, between farmers and governments. For example, when setting premiums, we can look at the activities of the farm business, not just a particular crop. We would take into account all of the efforts by farmers to reduce risk and continuously adapt and innovate the business. As a result, we would actively encourage risk management and growth.
Turning to food safety and quality, food safety is essential to national security, and to maintain domestic and foreign markets. Much has been done in that area already, but the focus has been beyond the farm gate for the most part, on food processing and distribution systems. Today, we are seeing more and more situations that could be better addressed on the farm. We need to turn our attention to on-farm improvements in the food safety continuum. Much work is being done there now, but more needs to be done.
Let's listen for a moment to John Kolk, who is the former chairman of the Chicken Farmers of Canada. He says that public concerns started with things like BSE, E. coli outbreaks and situations like Walkerton. It is affecting farmers today. It is not good enough to say that we are nice guys, that we grew up on a farm and that we care about you. We have to do more that that. We have to prove that what we are doing on the farm is good for the consumer.
In addition, if we have a food safety incident, either from natural causes or terrorism, tracking and tracing systems that can trace the origin of the product right back to the farm it came from will be critical. We certainly know from events in different parts of the world in the last few years how important that is. Right now, discovery of a single diseased plant or animal could shut down all our exports of that product from coast to coast. With sophisticated tracking and tracing, we could minimize economic, health and safety risks by quickly closing those regions to which the disease was traced, and provide credible assurance that other regions were unaffected. While a part of Canada would necessarily be closed down until the issue was fully resolved, the rest of the country could continue to export and remain viable.
Some sectors have been moving forward with tracking and tracing systems already. With the assistance of the Government of Canada, the cattle industry has started implementing a mandatory, national ID program to provide ear tags for all Canadian cattle. While this program has just begun and gaps remain, it is an example of Canadian leadership on the important issue of tracking and tracing.
The following is a taped message by Mr. Gordon Mitchell of the Canadian Cattle Identification Agency to explain what they are doing and the importance of it.
Mr. Gordon Mitchell: I think the tag program has two major benefits. One is to the producer in that we can very quickly control and identify those animals that may have become infected by a disease outbreak and eradicate that disease because of our ability to very quickly and easily trace back those animals to the herd of origin and any farms that they may have visited.
We will move next to issues concerning the environment. As agriculture has become more intensive, its impact on the environment has increased, particularly in areas such as water quality and greenhouse gas emissions. Citizens are growing more concerned about these impacts. The following is a taped message by Mr. David Runnalls, President of the International Institute for Sustainable Development:
Mr. David Runnalls: It's interesting to note that every time anybody does any polling, it shows that Canadians actually care about agriculture a lot more than I think anybody suspected. But you also discover very rapidly that one of the reasons they care about agriculture is that Canadians have twigged to the fact that farmers are responsible for a large chunk of our environmental resource base.
I think while the public is actually surprisingly supportive of agriculture, it's beginning to have some quite searching questions about the environmental implications of farming.
Perhaps we have not been focusing on the linkage between agriculture and the environment as much as we should have been. Thus, our capacity to address this problem is lacking. Our scientific understanding is not as good as it should be, or could be, and therefore we need to expand our investments. We do not really know the extent of the problem. A better set of tools is required to evaluate the sector's impact on the environment. Also, farmers are not equipped to make the necessary investments, which in some cases may be expensive.
There is work happening across the country, but it has been on a piecemeal basis. Governments have responded on an issue-by-issue basis. As a result, we risk having a patchwork of programs and priorities. This will not provide the industry with a consistent, national approach, and we will lose the ability to brand Canada as an environmental leader in world markets.
In addressing this issue with provinces, territories and the industry, our approach will be focused on the federal role, including research and development, measuring and monitoring, information sharing and tools for farmers. Where there is a clear link to federal priorities, our approach will be focused on targeted assistance for infrastructure on a cost-shared basis with other governments and with farmers.
Turning to renewal, as I said earlier, agriculture is becoming, now more than ever, a knowledge-intensive business. We need to do more to ensure that farmers are equipped for success into the future. The following is a taped message by Ms Anne Forbes of the Canadian Farm Business Management Council.
Ms Anne Forbes: The difference in our industry today — and in fact, it's different from yesterday — is that it is the dynamics and the speed of the dynamics that are changing in our industry.
So it's very important that we remain flexible and nimble, that we look out and what we need in the skill area is a more sophisticated approach to business. So we will have to form alliances with other entities, perhaps even outside our industry. Not only alliances. We will have to learn negotiation because it's going to be our neck that will be on the bottom line. And we will have to learn the art of developing relationships. And that will be the key to our industry.
The renewal challenge is different for the different demographic groups. We have discussed that around this table before. Beginning farmers require mostly business knowledge, technical skills and access to capital so that they can enter the sector with a solid foundation. Retiring farmers need assistance to ensure the effective intergenerational transfer or sale of their farms. Mid-career farmers fall into two groups: those who would benefit from skills and training that would allow them to diversify their operations or increase in size; and those whose farms would still be non-viable, even with help, and must have access to other options, with a view to remaining in agriculture.
In consultation with the provinces and the sector, we are proposing the following principles under the renewal component of the new architecture: We would work with Human Resources Development Canada and the sector to develop a national view of the competencies required in agriculture. We would use this shared view to develop skills programming, college criteria and other training options in cooperation with our provincial colleagues, educational institutes and the sector. An expanded consultation service would provide farmers with advice, better business planning and options, and would direct them to specialized support services. A key feature of this service is that it would be peer-based, because we have discovered that having farmers working with farmers is the most effective way to change behaviour.
We also want to provide training and living allowances for those farmers who choose to pursue learning opportunities off the farm. We want to be there for them while they work to improve their skills so that they can continue to farm or pursue off-farm opportunities as the best option for themselves and their families.
In the area of science, we have focused on traditional issues in the past, such as commodities, yields and productivity. For example, much of our research effort has been focused on wheat, although its price and share of production have been declining at least since the 1950s. I want to make it clear that I am not suggesting we stop that kind of research. However, I am reallocating research resources in the department to achieve a better balance between this and more future-oriented work, because we need to do both. Some of those comments have been made around this table as well.
Moving forward, we will reorient our focus on the bio-economy to improve food safety and environmental practices; we will develop new products and production processes; and we will pursue new market opportunities. The following is a taped message by Mr. Mordechai Rozanski, President of the University of Guelph.
Mr. Rozanski: These are very exciting times for agriculture and agri-food because the life sciences are opening up new possibilities in that entire sector. The more we learn about the science of living things, the more we can apply that knowledge to create new products out of basic agricultural commodities. This can include renewable fuels such as ethanol, plants that can produce new medicines and even bacteria that can remediate hazardous waste.
The potential list is frankly endless, and so are the potential benefits. And these can include our health, our safety, our environment and our economy, nationally and internationally. The point is that Canadian agriculture can be at the heart of this new life science revolution.
As I said earlier, all elements of the framework are interconnected. To be successful, our farmers must have access to the right tools to ensure that they can meet demands in the areas of food safety and environment; that they are equipped to grow and diversify; that they can access options and skills development through renewal programming; and that they can take advantage of opportunities offered by science.
At the same time, we will overhaul our risk management approach to act as a driver to accelerate action in these areas, ensuring that those who act are rewarded. Together, these new tools and the risk management regime that encourages their use will accelerate the implementation of the new agriculture policy framework and will take us to our vision of being the world leader and branding Canada.
By taking coordinated action on all five elements, we would fundamentally redefine farming so that in five years, there would be such things as environmental management planning and actions on all farms, farm food safety systems in place, and field-to-fork tracking of Canadian food products. Those are all factors that even three our four years ago were not considered, or even on the radar screen as needing consideration.
Risk management would be an everyday part of doing business for farmers. Farmers would have the support they need to make informed choices and assistance to follow through. Continuous learning would keep farmers on top of the latest scientific risk management strategic planning and technical advances. All these factors together would help Canada capture markets. Science will be applied to new priorities to create new opportunities in the sector.
With the new architecture in place, we would have a powerful tool to use on the world stage. In a more fractured international market, we would create a strong Canada brand as a world leader in food safety, innovation and environmentally responsible production. This brand will help us grow existing and new markets. In the post-Seattle world, where civil society is much more active, Canada would take action on food safety and environmental issues in a nationally consistent way.
In a trade environment, where developing countries increasingly feel shut out and technical issues are rising in importance, we would be in an excellent position to provide new development tools and to build alliances that move our international agenda forward.
Let us listen to Mr. John Olmstead, a very successful agricultural entrepreneur from Ontario who is already applying advances in food safety and environmental stewardship to capture premium markets.
Mr. John Olmstead: Also into the future, we're going to need to create some market niche. We need to package ourselves as Canadian individual companies or as a Canadian group where we can go and provide products that are not only food safe but can be displayed by a customer that is more and more reconnected to the farm gate in a way in which we can take advantage of some opportunities that that will generate.
If we do not invest in this new architecture, we will not have the opportunity to capture any of these benefits. I can tell you that many other jurisdictions are starting to move in this direction. Scotland, the European Union, United States, Australia and New Zealand — all of these countries are working to develop integrated approaches to the issues that we are discussing here today. I can also tell you that Canada is the first to develop an integrated, national framework to move forward.
Implementing this new architecture will be an important victory for the agricultural sector. The industry has been very supportive of this new direction. A news release issued by the Canadian Federation of Agriculture following the June Whitehorse meeting stated that, ``this agreement is key in moving the industry to an economically, socially and environmentally sustainable agriculture.''
In the same news release, Canadian Federation of Agriculture president Bob Freisen emphasized that, ``the CFA is committed to facilitate this ongoing process with government and industry in moving the sector beyond this important first step.''
This new architecture will also secure a victory for Canadian quality of life by delivering on important Speech from the Throne priorities. We will move beyond crisis management in agriculture, but that is not all. We will also deliver major improvements in the environment, science and innovation, skills and learning, population health and safety, rural development, and a strong federation.
We need to capitalize on the momentum to date and build on it. At the Whitehorse meeting, my provincial colleagues and I unanimously agreed to move forward with a new architecture to make Canada the world leader. We are consulting and working with the sector on this new approach, as well as with a cross-section of interests – academics, public policy experts, environmental and consumer groups. As I said earlier, work is being completed by the committees of the Senate and the House, and others. A lot of work remains to be done with the provinces and the sector to turn this agreement into reality.
The December budget demonstrated the federal government's commitment to providing its share of funding for a new agriculture policy framework. This commitment will allow us to move forward in partnership with the provinces, the territories, the sector and all Canadians to develop and implement a forward looking, integrated and financially sustainable approach to agriculture policy for the 21st century.
I will speak about my next steps in moving forward with this new architecture. At Whitehorse, we established the broad outlines of the new policy framework. We have spent our time since then getting into the specifics. At our recent meeting of ministers in Toronto, we identified draft common goals for each area that will serve as the basis for continuing to move forward in our work.
On environment, for example, a draft goal with respect to water might be to reduce agricultural risk to water quality by increasing the proportion of farmland that carries a low risk of contaminating water from nutrients, pathogens and pesticides. On food safety, one of the goals could be increased confidence in the safety of food produced in Canada.
We will consult more broadly with the industry, legislators and Canadians over the coming months to discuss these new directions for agricultural policy. These efforts will include workshops with the entire agricultural production chain, commodity by commodity. Consultations will be held with a cross-section of interested people from across the country. A Web site with provincial and territorial links to provide information on the new policy framework will be operated.
While we have a firm vision and direction for the future of the sector, how we get there and the specific path we take are very much up for discussion and dialogue and must be determined by working with industry, consumers and a broad cross-section of Canadians. We do not have all the answers. We probably do not even have all the questions yet. I look forward to any observations and comments that your committee may put forward.
I will also continue to work with the provinces and Yukon on detailed agreements and will be meeting with ministers again in April to advance the discussion. At a Toronto meeting of ministers in January, we mapped out the steps necessary in the coming months to ensure that at our annual meeting, to take place this June in Halifax, we will be in a position to move forward with a formal umbrella accord that will shape Canada's long-term agricultural policy.
If I can leave you with one more thought to conclude my presentation, it would be the importance of taking a comprehensive, long-term approach to the future of the agriculture and agri-food sector.
The Chairman: It seems that the marketing boards in Canada are doing fairly well.
We just returned from the Maritimes, where they do have some problems. One is to get feed; another is some of their input costs. However, the grain and oilseed area of agriculture, which was mentioned in the budget by Minister Paul Martin, is at very serious risk, using your terms.
What specifically do you have in mind to deal with this risk? We are going to lose a lot of those farmers if there is not some injection of capital in the very short term. I realize that things have been done, but they are not adequate to deal with the situation in grains and oilseeds.
Also, you mentioned niche markets. We are quite well aware of that. For instance, oats in Saskatchewan went to $3 a bushel, but no one had oats. If everybody sows oats this year, and there will be a lot going in the ground, the price will be back to 75 cents.
I am not suggesting that we should not head for those markets and try to figure out what is the best crop to grow. In fact, I just mentioned beans. There is a big push in Southern Saskatchewan for beans. Ontario farmers say to not plant beans because the price is not good enough.
What is the answer for the grains and oilseeds in Canada? I think that that is where the committee is finding the most serious problems.
Mr. Vanclief: I agree that there is a serious problem there. There is stiff competition out there. We must look at how we can mitigate the challenges that we have. The bottom line is that we do not have, for example, sufficient dollars in the coffers in Canada to match other countries dollar for dollar in subsidies. That subsidy in other countries is increasing the cost of their production.
Perhaps I could flash a few charts that show some of the realities that we are facing. The chart on page 47 shows the realities of the world price of wheat since 1970. There is the slope of the line. That is a reality with which we are dealing. That helps make your point.
What is causing that? We can put up a pie chart. World demand for wheat dropped off 47 per cent between 1995 and 2000. The world supply has gone up 26 per cent. Yes, subsidies in the EU and the United States are factors, but they are not the only factors. Some people say that is the main problem out there.
Going back to your oats example, we need to have more producers look at risk management and contracting. My son farms differently than I do. He contracts. I used to grow crops and hope that the price would be good in the fall. I did it on the wing. Different approaches are now being used.
The other realities that we must mitigate are those that you mentioned in regards to beans or oilseeds. On the left of this chart is the total cost of production in Brazil. The white portion of that is land cost. The remainder is the cost of production. Brazil, with only 5 per cent to 10 per cent subsidy action, has half the cost of production that we have. That is the kind of competition that we have out there.
There will be more subsidies to the U.S. farmers. The subsidies get capitalized in and the cost of production goes up. The price of the world products is not going to go up, unfortunately, because of supply and demand. The gap becomes bigger.
Mr.. Chairman, there is no single approach that we can take. We have used the numbers, risk management tools and safety nets in the past. As we have discussed around this table, they have not worked in every case. Therefore, we need to take a broader look.
The ministers and I are saying that we should take a look at past history. I am not criticizing it. It may have been well-intentioned. We can analyze it, and that analysis is being done.
Everybody's resources are limited, including provincial and federal governments and the producer. Let's see if we cannot do a better job with those resources and take into consideration how we could mitigate some of those challenges out there. We must also recognize these other concerns about environment, food safety, et cetera, and be able to market our product.
The Chairman: You mentioned in your presentation the importance of agriculture in creating jobs and to the economy and so on. Can Canada afford to lose its farmers?
Mr. Vanclief: The number of farmers in Canada is not currently decreasing at any greater rate than it has for the last number of decades. Economies of scale, efficiencies, et cetera, remain the same. Farmers in Western Canada can now put in a lot more crop in 24 hours or seven days than they could before because of the availability of equipment, different cropping practice, et cetera.
The bottom line is that we are producing more than ever before in Canada and it takes fewer people to do it. Yes, it does. There is no question of that. It takes fewer people to produce an automobile than it did before. It takes fewer people to do most things in Canada than previously.
The bottom line is that we have 2 million more Canadians working than we had about eight years ago. They do, in some cases, move into another sector. Seventy-five per cent of the jobs in the agri-food sector are beyond the farm gate.
I want to comment on the renewal aspect. The renewal element of this is to help people stay on the farm. We want to help them with skills training and management training and help them learn to do something else. If they do not have a large enough operation, the capital or the land base available, they could perhaps do some other things so that they can continue to have that life on the farm. Perhaps, in another way, they could continue that life and contribute to the sector as well.
Contrary to some people's accusation that governments are driving people off the farm, the renewal is just a 180- degree turn from that. The renewal is to help people stay on the farm by developing skills and ways of doing things, managing their risk and diversifying, or whatever.
Senator Wiebe: Thank you, Mr. Minister, for inviting yourself to appear before the committee. I thank you as well for the presentation of what appears to be a very ambitious program.
As you said, we saw today the basic framework. The meat that will be put on those bones will determine whether the program is good, bad or indifferent. That will require the continued cooperation of the provinces, along with the industry.
You asked for some suggestions that may help you along that way. I would like to offer something that you and the premiers might look at when you start to put the meat on this particular proposal.
Last fall, the Canadian Farm Business Management Council presented a brief to our committee. They said something similar to what you said. Some hard choices will have to be made by the agricultural industry in this country. Sixty per cent of our farmers today have the will to make that change and that adjustment. I am sure that the 20 per cent of the farmers who produce80 per cent of our product are among those 60 per cent who are willing to make those changes.
Roughly 40 per cent of farmers are in the group that produces the zero per cent to 20 per cent of all production. Those farmers will not be in a position to make that change because of retirement, debt or other reasons.
I go back to the comment that you made at the start. There is a responsibility to help all farmers.
We are talking about transition within agriculture. That certainly is taking place in spades throughout Canada today. I would suggest that perhaps you look at, for that small percentage that are not going to make that adjustment, some kind of program or means to allow for transition out of agriculture.
Mr. Vanclief: I did say, Senator Wiebe, that we needed to take a look at support to those people that take other training. My exact comments will be handed out to everybody. You will see it there. That is an issue.
That is a delicate issue, because sometimes, as soon as you talk about that type of thing, someone will say that we are trying to chase people off the farm. That is not true.
Our goal is renewal and the work that can be done around that. We want to help people capture their potential. In all fairness, we want to help them assess the realities of their situation, their potential, and then work with them to determine the best thing for them to do.
I will be very candid. If, in some cases, the best thing for them to do is to take some skills training or other training in order to perhaps be somehow involved in the agri-food sector other than as a primary producer, perhaps that is what we should do for a few of these individuals.
By that, I am not saying that want to drive people off the farm. However, we also have to be fair and help them in every way that we can. In some cases, retraining to become other than a producer may be the best help there is.
As I said before, it all starts on the farm. However, we have many jobs in the agri-food sector. We will continue to explore and develop innovation, food processing and value adding.
I was at a facility in my own riding not too long ago. The little village of Wellington has 700 or 800 people. In the last two years, a company came in there and developed a business. They debone 10,000 hams a day. That is all they do. They come in fresh one morning and go out frozen the next day. They are marketing to Australia and Japan. They are looking at markets in Russia. About 40 per cent of their production is exported.
In two years, they have gone up to 220 employees, and they are still looking for 20 more. They have hired 45 people in the last three weeks. That is in a rural community. That is meaningful for the village of Wellington. That is the type of thing that would help. We should look at that across Canada, whether it is in the grains or oilseeds, et cetera.
I was recently in another facility, the Canadian Organic Sprout Company. They ``identity preserve'' back to producers in the chairman's province of Saskatchewan. They identity preserve flax, organically grown flax. They prepaid the producer this year at the rate of two and a half times the market price for flax. They are sprouting that flax and drying it for functional food and nutriceutical and preventive health uses.
Some farmers question how the bio-economy can help them. They want to know what is in IP, identity preservation, of value. They will be using more IP. They are looking at canola and all kinds of products for IP. The potential for IP in flax is 1 million pounds of flax seed.
We have done a tremendous job of changing and moving on and we can produce commodities such as you would not believe in Canada. However, agriculture is no different from any other sector in Canada.
If you are producing automobiles, you had better produce ones that turn the crank of the consumer. If it does not pass the ``scanners,'' as I put it, it is meaningless. We have to help our industry move from producing commodities — although there will always be a need for feed corn and wheat for flour — to turning them into products, thus getting that value-added benefit for our producers and through the whole economy.
Senator Wiebe: I do not want to be hard on the press, but it is time that the press started to realize that there are going to be some big changes in agriculture.
When you talk about transition for that small group who are not going to be able to make the change in agricultural practice, when programs are implemented to aid that, you are basically allowing that group to exit agriculture with dignity. If we are going to address agriculture in this country, we have to realize that. When a government provides an opportunity for an individual to leave a trade with dignity, it is not trying to force people out of agriculture. We are trying to treat them in the proper manner. It is up to the politicians and the press to decide what is right and wrong. Thank you for that presentation.
The Chairman: On solutions, we had the Quebec agricultural people before this committee. They suggested that perhaps we could learn a lesson from Quebec, in that their agriculture in general was very buoyant. The rest of Canada should learn from them. What are they doing in Quebec that we are not doing in the rest of Canada? They were very forceful about that.
Mr. Vanclief: They have a robust risk management approach in Quebec. The Province of Quebec has made the decision to support agriculture, the primary production sector, very strongly.
In most provinces in Canada, for every 60 cents the federal government has put forward for safety net support and companion programs in the past, the provinces have put forward 40 cents. The Province of Quebec puts forward about $1.40 or $1.50 for every 60 cents. They made those decisions within the provinces. Not all provinces are exactly at 40 cents; some are above. They made the decision in the Province of Quebec to do that.
The Chairman: Is this something that you are looking at?
Mr. Vanclief: That was a provincial decision, to support at that level.
Senator Oliver: I also thank you for coming here today, and for your presentation. It is encouraging to see this vision for the long-range future of agriculture in Canada. I was particularly interested to note that you are planning on having what you call an ``umbrella accord,'' and that you will be announcing it at the hub of Canada, in Halifax, in June.
Mr. Vanclief: I noticed you write that down when I said ``Halifax.''
Senator Oliver: I am encouraged to see that. I do have some questions about the regions. What you really told us about today is the unanimous agreement reached in June in Whitehorse. You called that agreement an ``integrated framework with national goals.'' That has nothing to do with regional interests and concerns. I did not hear you talking about any kind of national vision that would take into account regional needs and opportunities.
As our chairman told you today, when our committee was in the Maritimes last week, we heard from dairy farmers, cattle farmers, poultry farmers and others, and their needs are very different from farmers in Ontario and Quebec. A poultry farmer, for instance, may have to pay $50,000 or more a year just to get his feed into Atlantic Canada.
What plans do you have to ensure that that poultry farmer will be put on an equal footing with farmers in Quebec, Ontario and out West?
Mr. Vanclief: Senator Oliver, I farmed for 25 years. There was no way I could guarantee for myself exactly the same input costs as anyone else across Canada. I do not think it is the role of government to guarantee that the price of feed — which may change because of climatic ability to produce it — is exactly the same for every poultry, pork or beef producer from coast to coast. In the supply-managed sector, the Canadian Dairy Commission has a process to set the price to the producer for milk each year.
We are addressing a number of these issues on a national basis. As for our goals to address the overall risk management approach, food safety, environment and renewal, et cetera, it is extremely important that everybody has the same tools available to them. There is no question that labour costs are different in different parts of Canada as well. Certainly that is the case on an international basis.
I will just read the first of six principles that we adopted at Whitehorse.
An integrated policy framework with common goals and effective mechanisms for implementation will be developed to secure the benefits of a consistent approach, recognizing the need for flexibility in how these goals will be reached, and respecting jurisdictions and responsibilities.
Senator Oliver: Perhaps I should not have used the example of feed. Let us take fertilizer. Are you saying that if we have higher freight costs to ship fertilizer down East than the farmer in Quebec or Ontario has, this is not something that will be taken into consideration in your vision?
Mr. Vanclief: I do not think it is the role of government to ensure that the cost of the input is exactly the same for everybody, no matter where they are in Canada, whether you are producing agricultural products or any other product.
Senator Oliver: Are you giving any consideration whatsoever to finding ways to assist with input costs generally?
Mr. Vanclief: We had programs in the past — the feed freight assistance to Atlantic Canada, for example. That program was discontinued. At that time, Atlantic producers had to buy their feed in Canada. When that program was discontinued, they could buy their feed wherever they wished in order to obtain the most cost-effective feed inputs.
I am going to say ``no.'' I do not foresee the government getting into assistance with shipping, freight or feed costs. If we started doing that, in terms of WTO rulings, we would be dead in the water. Those types of policies are not accepted by the WTO. That was one of the problems we had with the Crow Benefit in the West. It was seen as an unacceptable international trade approach.
Senator Tunney: I have a concern about farmers' financial management skills. I have always had that concern. Farmers know how to produce. We always say they know how to produce better than they know how to market. That is easily seen.
I might mention the years I spent on the Farm Debt Review Board. From my experience, many farmers had high levels of production, good machinery, good land, but it could be seen that they were not skilled at watching input costs, debt levels – those kinds of things.
I will just make a suggestion: your ministry, perhaps in conjunction with other ministries, would do well to emphasize that, especially with younger, beginning farmers who may be borrowing from the Farm Credit Corporation. I happen to know, from our cost-of-production surveys, that in Ontario, there are hardly half a dozen dairy farmers whose costs are exactly the same. It would seem to stand to reason that their costs would be close, but they are not. About 20 per cent of dairy farmers are producing milk at a higher cost than the price that they are paid for it. Presumably those farmers go out of business — either that or they shape up. When I began farming — and this is a little history — almost 40 years ago, the Farm Credit Corporation had an excellent bookkeeping and financial management plan for me. I am not sure that I would have survived without it.
Mr. Vanclief: Mr. Chairman, I would like to quickly show the committee another slide. It will allow me to speak to Senator Tunney's comments. In the renewal part of my presentation earlier, I said that beginning farmers needed several different things, and that retiring farmers and mid-career farmers were in different groups and categories as well. We need to look at what happened in the past.
Some work has been done, I believe, in Manitoba, to look at the 20 per cent of similar-sized grain farms that are the most profitable. For example, on the chart, you will see that the yellow indicates program payments that they received through the safety net programs in place in 1996, 1997, 1998 and all the way through to the present. However, you can see that even without those payments, they all had ``some blue ink.''
On the right-hand side of the chart, you can see the 20 least profitable farms. They are similar in size and run the same kind of operation. The yellow on the chart indicates the amounts those farms received from the safety nets. Although in 1997 the safety net payments brought them into a situation of a small profit, and although they received nearly $36,500 from the safety nets, the ones on the right-hand side of the chart were still not in a profitable situation.
We have to look at the reason for this. I am not saying that I begrudge them $36,500 compared to $11,000, on average, for the other side. However, that analysis has to be done. Although the support exists, they are still struggling. We need to work with them to meet their needs, whether it is financial management or something else, through their financiers. I met with the Canadian Bankers Association and Farm Credit Canada last week, both of which are major lenders. I had a meeting one week ago with the Parliamentary Secretary of the Department for Environment, Food and Rural Affairs from the United Kingdom, Elliot Morley. We talked about the levels of subsidies in the EU, and he told me that they do not work. The U.K. has produced a thorough paper, pointing out that the levels of subsidies in the European Union are not working. I asked him what he meant, because we tend to think that that level of subsidy automatically makes it successful. He gave me an example: In the main sheep-producing area in the United Kingdom, the average producer received 30,000 pounds in EU subsidies last year. The average net farm income was 5,000 pounds. I asked him what happened, and he said that the subsidies were ``costed in,'' or factored in, to the bottom line.
Senator Oliver: What would it be without the subsidy?
Mr. Vanclief: That is the point. We need to help people make the transition. We can easily get into the discussion of whether farming is a way of life or a business. It is a business, it is a nice way to raise a family and it is a nice way of life. However, if it is still a business, the bottom line consists of the dollars and cents needed to raise a family.
We need to work with individuals in assessing their resources and how we can help them to improve so that they can make that transition to a more effective and successful business.
The Chairman: I understand the minister's message. There is no question that some farmers do a better job than others, but the bottom line is low commodity prices. The fact is that farmers are price takers — we take what we can get. Canada is a good example of that. We have some of the lowest consumer food costs in the world. We are actually wonderful producers of food for the Canadian consumer. However, that does not solve our problem when commodity prices stay low and as long as the Americans and the Europeans continue to subsidize; and they will continue to subsidize. I state that now, and when we look at this in five years, I am sure we will find that they are not moving away from that, regardless of what is happening at the trade talks. As long as that is the situation, Canada will have to decide whether we will come to the table.
Mr. Vanclief: I said earlier that Canada would probably not influence the world price of commodities, which is based on supply and demand. There are different factors, such as weather, that can affect that supply and demand. There is always a debate about what constitutes the right amount of support.
In essence, I think we all recognize that resources are limited. We have to work with the industry to invest those resources to help to mitigate unfortunate realities such as low commodity prices and how some other countries treat them.
In Australia, they are preserving wheat commodities. If individual producers can crank up that return on a bushel from 20 cents to 75 cents, it is incredibly meaningful to them. There are many reasons why we can help, not only domestically but also on an international basis, to create a demand for what we have.
Senator Hubley: Thank you. I was pleased to see that science, or technology, has a place in the new structure at which you are looking. Last week we toured the Maritime Provinces, where we visited the Nova Scotia Agricultural College. It is amazing just how much work is taking place there to try to address the needs of their farmers. Science and technology will have a new role in the farming industry to help it face, for example, environmental problems such as climate changes. Would you comment on that discussion at your meetings? How will that issue be addressed by the department? Will that mean funding to the universities, colleges and agricultural institutions?
Mr. Vanclief: One of the points I have not made today, and you have now given me that opportunity, Senator Hubley, is that this restructuring or architectural development of the industry cannot be done by Agriculture and Agri- Food Canada alone. Yesterday, I had a visit from Ms Moira Quail, Dean of Agriculture, University of British Columbia.
She is very thankful for the funding from the government several years ago to create chairs. She has two in the agriculture section alone. That is exceptionally meaningful.
In the presentation, I referred to the bio-economy. There is more and more realization, as I said earlier, that there are incredible opportunities out there. In agriculture around the world, we will always be in the business of primarily producing food, but there are incredible opportunities out there in functional foods, health care, industry applications, et cetera.
I will give you an example. When I was young, if someone asked me what corn could make, I probably would have said corn flakes and livestock feed. Now, corn is used for many more things than that, and that is only one example.
I visited a company the other day that is looking at uses for canola seed. Their researchers are looking at health food and functional food uses that have never been considered before. The deputy and our team have been revamping the research money that we do have and trying to redistribute that based on those developments.
You people raised a concern about research availability for the pulse industry. We are taking a look at that and putting more support there.
The wine industry is growing fantastically. We have put more emphasis there. The way we do that and coordinate that research across the country in our 19 facilities, plus their satellites, is also meaningful in order that we ensure that we are not duplicating efforts.
Senator Day: Mr. Minister, I thank you for being here. I have two comments before I ask my question.
I compliment you and your department, Mr. Watson, on the research work that is being done at Ag Canada research facilities. We had the chance to tour two of them last week. One facility is doing work with respect to potatoes, and the other is working with apples. They are doing some very good work. They gave us some excellent research exposure.
I also want to compliment your approach of having farmers make presentations to farmers. We have had over32 presentations in the last few weeks, many of them from young farmers who are quite excited about their future. They are able to point out their challenges and difficulties, but there is a lot of good talent out there to help you in bringing forward your programs.
I am very concerned that we are getting the message that the provinces are not holding up their side of things. I compliment you on your initiative, but if you do not have the provinces with you, this will not work. I am very concerned about that. We are getting indications that many farmers feel that the provincial agricultural departments are downsizing and withdrawing support, rather than providing the same kind of leadership that we are seeing from you. Do you want to comment on that?
Mr. Vanclief: There is no question that provinces are supporting and working with agriculture in different ways from when I was younger. In Ontario, we had an agriculture department and an Ag representative in every county. That is not the case now. There are changes. That is true in many cases.
I pointed out very clearly to the provinces that when they do decide to back out of doing something that they might have been doing in the past, they cannot turn to the federal government and ask us to backfill.
The fact that provinces have limited funds is driving them in their unanimous support of this type of approach. Quite frankly, some of the things we have done in the past, on an ad hoc basis, have not been very beneficial in the long run. The money was needed, and used, in the short term, but perhaps that has not been beneficial in the long term because no one could do long-term planning on an individual business basis. Someone might think to go ahead and do something, and if the year did not go well, that person would hope for an ad hoc payment. We need a proactive approach to risk management that takes all these things into consideration.
I am proud of the work of our research facilities. You mentioned apples, for example. The apple industry has stiff competition from Washington, and probably even stiffer competition from China, with their capacity to produce fruit. However, we support them not only through research, but also in other ways.
You are probably familiar with the CARD Fund, the Canadian Adaptation and Rural Development Fund. The apple industry approached us because of some marketing problems and concerns. They want us to look at their industry to find ways for them to do a better job. We have some ways of supporting them through those kinds of programs that are just as effective. Research is important, but we also need to look at other challenges and opportunities out there so that we help, as much as we can, through many different approaches.
The Chairman: You know as well as we do on this committee that there are some very serious problem areas in agriculture, especially in grains and oilseeds. Senator Hubley wonders if we will receive the presentation. We will.
Mr. Vanclief: Yes, the presentation and the comments that I made as the slides went up.
Mr. Chairman, I thank you for the opportunity to have this discussion with the committee. I know that either individually, or as a committee, you will have other opportunities as we go forward. We are not looking at something that will happen at the stroke of midnight on any particular night. We are going to have to move through this work in progress over a period of transition. There is a lot of excitement about looking at the future of the industry with this kind of eye.
The Chairman: Thank you.
The committee adjourned.