Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 16 - Evidence
OTTAWA, Thursday, November 24, 2005
The Standing Senate Committee on Agriculture and Forestry met this day at 8:30 a.m. to study the present state and future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: The Standing Senate Committee on Agriculture and Forestry will have the pleasure today of hearing from Mr. Wayne Easter, who has been on our list for some time. He was asked by the Minister of Agriculture and Agri-Food to do a review of agriculture in all parts of Canada, and he did that earlier this year.
We have been eager to hear from you, Mr. Easter. As you know, we have just completed a major study on the BSE situation in Canada, and we are looking to begin a new study. We want to learn from you exactly what is going on in the various aspects of the industry across the country in order to help us decide the direction for our new study.
The Honourable Wayne Easter, P.C., M.P., Parliamentary Secretary to the Minister of Agriculture and Agri-Food with special emphasis on Rural Development: Thank you. It is a pleasure to be here. I will give you an overview of the report and the reasons behind it, and then take questions. I believe you have a copy of the report.
I want to thank the committee for the invitation to appear before you. It feels somewhat like old times. I used to appear before the committee often when I was a farm leader. I am a member of the House of Commons and of the Committee on Agriculture and Agri-Food, but as a farm leader and after 12 years experience in the House of Commons I have always believed that Senate reports are good reports. They refrain from partisanship more than the House of Commons is able to. I want to congratulate committee members on that.
The report entitled Empowering Canadian Farmers in the Marketplace came about as a result of the recognition that farm incomes have been in a state of crisis for a number of years. Minister Mitchell asked me a little over a year ago to conduct a series of consultations to better understand the problem of declining farm income, to identify what works and what needs to be done, and to work together with the farming industries to recommend and develop solutions.
As a result, a farm income symposium was held by the Canadian Federation of Agriculture last November in Ottawa, at which time we started to look in depth at the farm income issue. A series of consultations with primary producers were held in every province in January, February and March. After that series of meetings, three regional roundtables were held in April to compile the information from the initial meetings and send it back out to producers. We determined priority areas on which we could move toward agreement. The results of those consultations are posted on the Agriculture Canada website.
The report goes into considerable detail on the events that have resulted in a huge negative impact on primary producers. Equally as important, it makes recommendations on what actions the federal government, working in cooperation with all stakeholders, provinces, and producers, could undertake to respond to the issue.
There is no question that our farmers are among the most efficient in the world. They have made the necessary adjustments to improve their productivity. Our farmers are producing more and the country is exporting more. That speaks well of the nation's farmers.
Upon close examination of our agriculture industry one sees that every economic indicator is positive: production, revenue, exports, output per acre, output per farmer, cost per unit, et cetera — every indicator, that is, except net farm income. The figures are included in the report.
Over the last 30 years, as farmers have produced more efficiently and exported more, they have been rewarded with less. If these are the facts, the question is whether the genesis of the farm income problem is on the farm, and I submit that it is not.
Farmers have generated massive wealth and opportunity for the nation. Figures included in the report show that the agriculture and agri-good industry contributed $81 billion, or 8.2 per cent, to Canada's GDP in 2002, and it is considerably higher than that today. In 2003, the industry provided one in eight jobs in Canada. We are the fourth- largest exporter of agriculture and agri-food products in the world. Cultivated land in Canada increased from 58 million acres in 1941 to 90 million acres today, and agriculture and agri-food exports increased from $10 billion in 1990 to $25 billion in 2003.
Agriculture had led almost all sectors with an annual productivity growth of 4.6 per cent since 1984 and 1995, as is outlined on page 11 of the report. That is more than the mining, manufacturing, construction, transportation, communications, trade, finance and industrial sectors. Productivity and efficiency certainly exists in agriculture.
That is an important point because even within government itself, both federally and provincially, many economists have said for years that the problem is inefficiency and poor management. The report clearly shows that is not the case. The problem is not efficiency or management on the farm; the problem of low farm returns lies beyond the farm.
The report is direct. It states the case as farmers and producers have expressed it to me.
There is an imbalance between those who are gaining financially and the primary producers who, in my view, are in the middle. The primary producers generate the wealth in this system. The input suppliers are on one side and the output suppliers are on the other, yet the primary producers, who are in the middle, are suffering terribly.
There will be some reports coming out in the not-too-distant future that will show that those in the agri-food sector have had among the biggest profits they have ever had, so there is an imbalance.
I do not want to leave the impression that it must be all one and none of the other, but we have to find a better balance in the system.
There is an important quote in the report by William Heffernan that makes you think when you are looking at agriculture policy, not just nationally but globally. Mr. Heffernan says, ``Economic power, not efficiency, predicts survival in the system.''
I put it in the report to give us something to think about. Is the problem a lack of market power? In fact, that is why the report is named Empowering Farmers in the Marketplace.
Farmers have been earning less, and this is a trend. A problem has been going on for three decades in which prices, returns at the farm gate, have been declining in real dollars while production, exports and debt have been going up.
I do not have the paper in front of me, but George Brinkman presented a paper to the CFA farm income symposium that showed that income in 2003 was around $3.4 billion and debt loads were approximately $7.8 billion.
In 2003, in the same constant dollars farm income in Canada was negative $2 billion. That includes the supply management industries, which were doing okay. Debt loads were about $47.7 billion.
Governments have continued to come in to try and bring farmers above that break-even line. Governments have come in with record payments: The year before last, $4.6 billion; last year $4.9 billion, both federal and provincial; and this year we will definitely be between $5 billion and $6 billion. You have income at the farm gate going down, debt loads going up, government payments increasing, and still primary producers in rural communities in trouble. It is a serious matter, and not one that can be solved at the local level. The problem requires global solutions.
The report contains some 46 recommendations, which range from short-term to structural. I suggest increasing farm market power by shifting Canada's farm policy emphasis on agri-business to one more centred on primary producers. I want to make a note of caution on that point. It cannot be exclusively so, but we have to have better balance.
In terms of determining farm policy in Canada, we absolutely must think of the primary producer. There was tremendous emphasis in recent years on value-added, and that is good. We need value-added. However, when we are talking value-added, let us not think that the raw material that the primary producer, be it the corn that may go into ethanol or into corn flakes or wheat that goes into bread, does not have value. It has to have value too and the people who produce that must receive fair returns for what they produce. In terms of our policy approach, provincially, nationally and globally, we need to consider the balance of the industry as a whole.
The report proposes restructuring the Competition Bureau and strengthening the Competition Act to analyze corporate mergers for their impact on primary producers.
I believe that the recent spike in energy prices has brought more credence to this argument. The federal government has moved quickly in terms of trying to strengthen transparency and strengthen the Competition Bureau in terms of energy prices. We need to be looking at the same thing in terms of farming and primary production. The report suggests direct government investments in key areas such as slaughterhouse infrastructure to increase slaughter capacity. We suggest government involvement in research at the primary production level, and not just at the value- added level but further up the food chain. We recommend that the government help to establish new generation co-ops of which ethanol and bio-diesel production are examples.
Concerning ethanol and bio-diesel production, I believe that the American policy is a good one. The U.S. utilizes the farm bill, their Clean Air Act, and their energy bill to look at ethanol and bio-diesel as part of national energy security. The U.S. ties farm policy and energy production. It emphasizes co-ops; 60 per cent of the production comes from co- ops, and they are 51 per cent controlled by primary producers. We need to take a serious look at that area.
Concerning technological investments, I do not mind admitting that it bothers me that the general perception of farmers is people in bib overalls and rubber boots. This industry always has been at the cutting edge of technology; whether it is computer feeders for dairy operations or GPS systems in seeders, sprayers and combines. Go into any processing plant today and you will see technology that is cutting edge and always moving to be further at the cutting edge.
We need to maintain that system. It is a system that works and can be a model for rural development around the world. It is an area that we should not only be defending at the WTO but also promoting as a system that can provide farmers fair returns in those products targeted to the domestic market. That system can be a model for rural development.
I mention in the report that farmers' positions could also be improved by addressing the expense side of the equation. Among other recommendations, I include user fees and a pest management agency. I think we need to aggressively look at the Pest Management Regulatory Agency, which falls under the Department of Health. We must also look at standardizing regulations with the United States in veterinarian drugs and pesticides, et cetera. It is ridiculous that Canada cannot use a product because it is waiting for the completion of the reviews. We have a safe food system in this country and it needs to remain that way. We need assurances that other countries meet our high standards.
We are not allowed to use a pesticide or herbicide on a crop, yet a cabbage produced in another country with that same herbicide can end up on our grocery store shelves. That situation makes our farmers less competitive. We need to look at that problem and address it.
If farmers produce for the benefit of society, I recommend in the report that if a policy is in place for the public good, maybe the public should pay.
Senator Gustafson will know clearly that when we propose environmental plans or food safety initiatives, the theory is that the farmer or the primary producer will follow these additional practices, and the consumer will pay that cost. That is not how it works. How it works is the price is backed down and the primary producers end up paying the cost. If it is there for the public good, then consideration must be given for the public to pay. That relates to food areas, food safety, environmental plans and Kyoto commitments.
I do believe there are tremendous opportunities out there in the industry with Kyoto. There are opportunities in carbon sinks. I recommend that we should look at areas such as land set aside for alternative uses. The public needs to be involved in those areas as well in terms of the costs related to that use.
I will admit what I am about to say is a bit controversial, and that is a good thing. The report suggests developing an international food industry similar to Canagrex, which Senator Gustafson will remember, was slightly controversial. I am not suggesting developing something exactly like Canagrex, but I talk consistently with producers who need assistance in terms of finding export markets and financing to move into export markets. We need to find efficient ways to assist our farmers in that area. We need something along the vein of helping establish markets in the interests of producers and accrue economic markets back to producers and the country as a whole.
I believe we must start looking beyond the WTO. The WTO is where it is at. The Government of Canada is negotiating as tough as it can in terms of the three principle points of the negotiations, as well as trying to defend and protect our supply management industries with the Canadian Wheat Board.
Even beyond the WTO, if we had full agreement, there will still be difficulties for farmers. What the WTO is doing is fencing rules around countries. It is not fencing any rules around the traders that trade on the high seas.
They talk about the magic of Brazil. There is no magic there. They are clearing lands and using cheap labour to do so, and they do not have the environmental rules or labour standards that we have in this country. If we are going to have an international trading system, it must be based on fair trade rules on a real level playing field and not the kind of assumptions out there at the moment.
I suggest in the report that maybe the agricultural ministers themselves need to be meeting internationally. I know that is a huge step. Aside from the trade ministers, we need to look at global food security, national food security within countries and rural poverty.
I attended a meeting with North, Central, and South American ministers of agriculture in Ecuador this summer. You would think I was back home 15 years ago because they were discussing how to avoid rural poverty by being more efficient and better managers. We have been doing that in this country for 30 years at the farm level, and it has not solved the problem. There are less farmers and undermined rural communities. We need to take a somewhat different approach.
There are 46 recommendations in the report. I admit that the solution of empowering primary producers locally, nationally and internationally still eludes us. If we recognize the problem as a lack of power in the marketplace, we can eventually move forward and find solutions for it.
It is what we did with the supply management industry when it developed in the 1960s. Primary producers across Canada recognized they had a problem. The marketplace was not working for them, so they established fair rules and a balance of power in that marketplace.
The provinces brought in enabling legislation, the Government of Canada brought in the national legislation and it allowed that system to operate. The supply management system has been operating since then, in which you had relatively stable farm incomes for producers and supply management commodities, there were strong economic components of rural communities and you had a system in which the government, federally or provincially, did not have to subsidize producers. It worked.
I think the reason it did work and balanced that power is why we are seeing a huge attack on our system of supply management from those negotiators at the WTO. It is a system that works, it has found a balance of power for primary producers and they do not like it one bit because it balances the power with them and they are going to do everything they can to undermine it. We must do our best to stand up against that.
The report was tabled with the federal and provincial ministers of agriculture at our meeting in July. They are reviewing the recommendations. The recommendations have cut across federal and provincial departments. Letters have been written to ministers and deputy ministers of the various other departments that have an impact on farm policy in Canada. Farm policy as a whole has been communicated across the board.
The report and the recommendations are out there, and we are constantly getting feedback. The government is working hard to see what can be done in terms of the adoption of some of the recommendations, and we are constantly getting feedback from the farm community. It is forcing a debate in the farm community, and that debate is much needed. I think it should move us some steps ahead.
With that, I will stop and provide as much time as possible for questions. Mr. Foster has joined us from Agriculture and Agri-Food Canada. He is involved with the safety net programs within the department.
The Chairman: We are all pleased to know that your reputation as a straight shooter is still alive and kicking.
Senator Tkachuk: Maybe I did not find it in the report as much as I would have liked to because when we talk about lack of farm income, in our part of the country in Saskatchewan, too much product is on the marketplace. Wheat prices are low because there is a lot of wheat. When cereal grain prices are low, we suffer the most. We know the cattle industry had income problems, but that was due to the BSE scare and the related issues. You cannot solve a problem of oversupply. You get out of the business, find other product, deal with it in some way or else say that oversupply is due to subsidization, which I think it is. It is not Brazil and other countries that are causing the problems; it is Europe and the United States with their subsidy programs. They believe in their subsidy programs and the United States has an agricultural policy that sees agriculture as important to national security. They will subsidize and compete with that until the Europeans figure it out.
How do we deal in that marketplace? There is nothing new. This is all great information about competition and we already know how great the farmers are at what they do. How do we deal with the subsidy issue?
Mr. Easter: I will come to the outward production point in a moment. In fact, you are right. If you have oversupply, then prices go down. However, there has been the assumption of boom and bust on the farm scene for 30 years or more. While the farm crisis this year was caused by overproduction in wheat, the last couple of years it was BSE. In other years it is drought in one area or flood in another. When you start to analyze the real numbers, you will find, regardless of all those issues, returns at the farm gate, especially on wheat, have consistently declined in real dollars over time, whether there is over production or not.
That is why we are negotiating so hard with WTO. We do have to get rid of those export subsidies. The worst players in that game are the European Union and the United States.
In 1988, I spent a month in Europe studying common agriculture policy in the context of the international grain price war. Europe has a different mentality, in that it is ingrained right into their populace that, as a result of their experiences during World War II, they will never go hungry again, and they will support the farm community to ensure they do not. That is why they are so hard on the policies they have in place that they will ensure they have national food security within the nation.
In the WTO and in other areas, we have to certainly convince them that you cannot — and it is what is right about the WTO — pay producers to produce a commodity that already is in oversupply, and that is happening now. We have to find ways to control the supply. We have done it domestically in Canada. In our supply management industry, we have matched production to meet demand. There must be ways to manage that globally as well.
If you have 5 per cent oversupply the price of the 105 per cent goes down the tubes. We would be better off as primary producers around the world finding ways and means of disposing of that five per cent and getting paid for what we produce. Last year in P.E.I., the industry itself got together and bought 8,300 acres out of production with their own money and paid producers not to produce. This year, potato prices are reasonable.
I am saying let us not get trapped in the oversupply question. There are ways and means of managing supply if we work at it internationally.
Senator Tkachuk: Are you advocating some sort of world supply management system?
Mr. Easter: I am advocating that countries need the right to have food security within their nations, and we can talk of over supply all we like. With respect to the reality of the world, go anywhere in the world, and you will find malnutrition and hunger because of lack of access to products. That is due to wealth distribution to a certain extent, but I am advocating the right for food security, as a nation, to ensure that people are fed and food security, as a world, and food security within nations.
Senator Tkachuk: Is it not the poor countries of the world that want access to our markets with agricultural products, and is it not supply management keeping them out?
Mr. Easter: No, it is not.
Senator Tkachuk: You are saying somehow there will be a world organization that would somehow manage the price of cheese, milk and wheat. That is what you are saying, which I find quite incredible,
Mr. Easter: That is not what I am saying. I am saying that could be one of the possibilities. I am outlining a problem that we have to address. We are driving primary producers into poverty globally and it cannot continue; we have to find other solutions.
Some of the free marketers and economic thinkers may not like that out there, and that does not bother me. It is an area of concern, and we have to address it and find solutions to that problem.
Senator Gustafson: Welcome, Mr. Easter. I have respect for your positions. I do not always agree with you, but I do believe that you have demonstrated that you hold agriculture at the heart of your work.
The problem that is facing us is low commodity prices. Just for the record, a year ago canola was moving at between $8 and $10 a bushel. Today it is at $5. Flax was as high as $15; today it is $6. The initial price for wheat is about $1.70, which is less than the price in 1972. We are facing low commodity prices and the value of the farm. It is severe, and I was glad to hear you say that it is at a crisis level, because it is, in the grains and oilseed sector. With prices low, Ontario corn producers have not made a profit in years.
Our problem is that we have low commodity prices and high input prices. Fertilizer will go up by approximately 25 per cent. Farmers cannot recapture their input costs. It is very serious.
Another thing that is happening involves quarter sections of contract land. I am getting reports that farmers who have been farming 100-quarter sections of land in Saskatchewan, Alberta or Manitoba will be dropping about half of those sections. They will not farm them.
What you have there is a number of smaller farmers who sold their machinery and felt they could retire on monies from rental on their lands. They are in a position now where they have lost their pensions. That was what they relied on for their later years. This is a very serious situation.
Land prices are dropping like a stone, at least in Saskatchewan. That may not be the situation around Edmonton or Calgary. The banks will look at this in the spring at which time they will likely be reluctant to finance the farmers to put in a crop and pay the input costs. That is a very dismal picture.
The global situation concerns me and I was glad to hear you say that we must look at this from the global situation. However, we have bought the lie that we will get the Americans and the Europeans off subsidies. As long as we keep telling our farmers that and they buy it, we are in trouble, because that will not happen.
Our farm is 20 miles from the U.S. border. Americans are paying U.S. $5 a bushel for peas while our farmers are getting a little over Can. $2. The farming of peas is a new crop to North Dakota, South Dakota and Montana. It was a niche crop on which Canadian farmers were depending.
France doubled its wheat subsidy. I have heard for 20 years that we will get these nations off subsidies. I have been here for 26 years and I have heard that for 20 years. The truth is that farmers have not really made a profit since we gave away the Crow Rate under the WTO. There is where we are today.
I suggest that we study this from a global situation. Are we going to have Canadian grain and oilseed farmers? Should we follow Herb Sparrow's advice and get out of the business? This is very serious. It is a crisis.
Mr. Easter: There is no question that it is serious. I believe Minister Mitchell, who is my minister, needs to be congratulated for saying to me to go out there and not put any fluff on this issue. If there is a problem, let us admit it and try to target a solution to the problem. The debate is important.
I have two points. Prices are almost at a historic low. Corn prices are in fact at a 100-year low. What you say is absolutely correct. I know many people in Western Canada and many of those people are dropping their leased land next year. I think we will see idle land in Alberta and Saskatchewan next year.
Do we have to wait until there is good productive land sitting out there idle, not in a land reserve that will benefit us in terms of the environment or Kyoto, or taking marginal land out of production? Some of our best land could be idle in the situation in which we find ourselves. Do we have to wait until the land is idle before we recognize that the system that has been in place for 30 years is not working appropriately?
My second point involves the issue of a corn countervail, in which corn producers across Canada get together and put in a corn countervail issue, which may result in putting in a place a corn countervail.
The processing sector, such as Maple Leaf Foods and others, are worried, and rightly so, that they will become uncompetitive on the processing side if a corn countervail comes in. That could affect jobs in our plants, because the Americans will have a cheaper raw input than the Canadians have.
As I said to them, for years we have operated on the assumption that farmers can carry the cost. We are at the point where they no longer can carry that cost. You cannot base an industry on cheap farm labour. I recognize the problem on the processing side and we must try to deal with it, but we are all in this together. The industry as a whole and the country as a whole will have to come together and recognize that farmers must have income, too. That is what is good about this debate.
We have had safety net programs in place. Mr. Foster probably knows the case program better than anyone in the country. It is there for safety nets. Four billion dollars has come out of that program in the last three years to primary producers. Even with it, we had to put in place a $1-billion farm improvement payment last spring. There was $755 million yesterday targeted to the grain and oilseed sector. That still does not cover the losses. However, that is the reality.
Senator Gustafson: There are 37,000 oil and grain seed producers and that will amount to around $10,000 a farmer and the smaller ones will not get very much. It is welcome, but it will take about $3 billion to lift this thing. The public sees the farmers getting these little payments and think it is great for them. What the public does not understand is that the agricultural sector creates jobs in Canada. Farmers buy trucks and cars. General Motors is in trouble. We will have to start looking at this thing from a positive standpoint.
Do you think we should be moving into the global area and trying to understand what is happening? The Americans and the Europeans dominate the global market; there is no question about that. If they do not change, we will either have to do something to deal with the fact that they are not changing their subsidy policies or lose our farms.
Mr. Easter: We have been moving into the global arena, in fact. Canada is an exporting nation whether we like it or not. We have a small population, a big land base, tremendous productive ability and we are an exporting nation. World trade rules are extremely important to us. We have been a key player in terms of challenging the exports subsidies, the domestic supports and lack of access by both the Europeans and the United States.
What I think we do find frustrating about the current WTO talks is the worst abusers in terms of the world trade system and those who do not follow the rules have been the European Union and the United States. Yes, they are they are big players, but now they tend to be driving the WTO agenda again. That is problematic. Canada has stepped up to the plate. Our negotiator has said it, but the rest of the world must join us and face them head on.
Senator Gustafson: We heard that in Seattle 10 years ago and nothing has changed.
Senator Peterson: There is no question that the state of agriculture has gone from disturbing to alarming. You are right when you identify net revenue as the problem. At both ends of the equation, the producers have no control on input cost and what they get for their product. Maybe it is time to start over, scrap everything, recognize the fact that our trading competitors will not move off the mark and if we want food security and if we want to feed our nation, we have to accept the new reality. We cannot go to the quick fixes year after year when there is a crisis.
Mr. Easter: We do not live in that world. We are a trading nation. Agriculture is an extremely important part of our trade economy. We have huge exports in many natural resource commodities in terms of services, technologies and capital. That is one of the reasons why I suggest that maybe we need to look at the agriculture and primary food and food security system somewhat differently, separate and apart from trade ministers. That is not our present situation. We are one player among many and, in terms of your suggestion, it is impossible to go to that step at the moment.
We ought to recognize that we have safety net programs and a number of marketing institutions in place to try, while the WTO was negotiating, to ensure we are there for primary producers in their time of need. Some are starting to recognize that there are also profound structural issues within the primary production community that is not the producer's fault but certainly, it is a structural issue in terms of the imbalance of power that we have to look at ways of addressing that over the long term, both nationally and internationally. I hear what you are saying, but, as a trading nation, it is not that simple.
Senator Peterson: I am not for a second saying we stop being traders. I recognize that. We only consume 20 per cent of what we produce. I am saying that should all be taken out of the context to try and solve the problem; otherwise, it will get worse.
Senator Mitchell: Mr. Easter, Canadian governments support agriculture today to the tune of about $4.9 billion. You said that figure would increase next year. Can you give me an idea of what the split is between federal and provincial support?
Mr. Easter: I will ask Mr. Foster to answer that question. He has the exact numbers. There are quite a number of national programs for sure, but typically we have 60-40 split. Yesterday $755 million was announced to be targeted specifically at grain and oilseeds. We hope the provinces could come in with 40 per cent, but it is not a condition of that money going out there.
Danny Foster, Acting Director General, Business Risk Management Program Development, Agriculture and Agri- Food Canada: Mr. Easter is right. For major programs like the production insurance program, and so on, under the agriculture policy framework, we have a 60-40 cost sharing agreement with the provinces. On top of that, we do our own initiatives like the announcement yesterday, which was solely federally funded. Provinces have their own initiatives as well. In terms of the $4.9 billion that went to producers in 2004, we are probably close to 60-40, but we do not have the exact split. The producers received $4.9 billion in the 2004 program year. They received $3.4 billion in the first six months of 2005.
Senator Mitchell: Is that figure related to federal programs only?
Mr. Foster: No, that is $4.9 billion total program payments from government programs. Most of that was from federal-provincial programs, but there are solely federal and solely provincial programs in there as well.
Senator Gustafson: What about the administration costs?
Mr. Foster: Those costs vary from program to program.
Senator Mitchell: It sounds like we will never get the U.S. or Europe to do away with tariffs, but let us say we had free trade and we had done away with the tariffs. Will that solve the problem? I am trying to get an idea of the impact as we approach Hong Kong and the Doha round.
Mr. Easter: Would it solve the problem? I believe that it would certainly improve it a heck of a lot. One of the points I make in the report applies beyond the WTO if we are to be realistic about it, is that there is an imbalance of power from the primary producers' position versus all the other players in the system.
Yes, WTO would approve the situation immensely, but we must worry about and ensure that there is that balance of power in the marketplace. You have many producers. You have a concentrating world in terms of the agri-food sector itself.
I will give you an example of what happens in this country. You talk about efficiencies in the system. A number of producers used to provide horticultural crops to the chain stores in Sydney, Cape Breton Island. During a certain period of time they could provide that supply. The policy changed about two years ago. At that time, the producers we no longer allowed to provide products to that particular chain. They would put their produce on a truck, and transfer it close to Moncton, run around the warehouse a few times, load it back in the truck, and haul it back to Sydney. All of that took about 10 to 12 hours on the road plus around the warehouse. You have the trucking, the fuel and the labour costs. The product on the grocery shelf may be local, but it went to that warehouse first. The costs get back to primary producers. That is not about efficiency; that is about control.
I had a consumer come to me about six or seven weeks ago who could not buy Nova Scotia corn in Annapolis Valley in a certain chain store. Why not? Because the store had a contract with a supplier that only bought Ontario or American corn. In your own community with a local store there, you can not buy local produce. That is about control, not efficiency. We must address this issue.
Senator Tkachuk: Do you mean that people will sacrifice prices for control?
Mr. Easter: No. The way the system works, they are not going to sacrifice price for control.
What happens in this system, if there are extra costs on their end, they back that cost down to the primary producer. The producer pays the cost of trucking to Moncton because the producer is the one without the power in the system. That is the reality.
Senator Hubley: Thank you for being here. It is always a pleasure.
I think your report is valuable in that we have to look at our industry from time to time so we do not fall back on the clichés and point to the problems of the past. I think many of those things have been clarified for us.
It is interesting to find out that a producer that has a market for his goods is told that he cannot market those goods to that store. There is something wrong with that picture. However, this has been going on for a long time. The imbalance is what impressed me about your presentation.
You noted for the last 30 years, income has been going down where production is been going up, and all of the indicators are positive. The debt is rising, unfortunately.
There is something wrong, but how do we get the money back into the farmers' hands?
We had an opportunity to see a couple of models when we traveled in Europe. It is unrealistic to think that the United States or any other country that has a viable farm industry will change their system if the farmers are happy and busy making money. I doubt we would change our system if our farmers were happy. We would be fighting like heck to support the system.
The one thing that impressed me on one of our trips to Northern Ireland was they were able to integrate best farming practices, which in some instances meant no farming. They made that decision because it was the best decision for the industry. The farmer was willing to put in environmental controls, and some of them were taking areas out of production so that migratory birds would have a better chance of survival.
This seems like pretty basic stuff, but it is at that level that our farmers are concerned about our environment. I think Kyoto is going to open up opportunities for our farmers.
I would like to discuss the issue of food tax. I wonder if we honestly think that taxing the food in the supermarket will get that tax back to the farmer's gate. I noticed that the Agricultural Institute of Canada endorsed applying tax on food so revenues would help farmers.
Has that idea come up in your travels as you have talked with farmers?
Mr. Easter: The idea of food tax came up in three of our consultations. The idea, as you said, is to get the tax revenues back to the primary producers. One suggestion was to put the tax on the food just as there is a five-cent deposit on a bottle. We did discuss this possibility.
In a strictly personal point of view, I do not believe that is the answer.
Senator Tkachuk: Not before Monday, anyway.
Mr. Easter: We believe the opposition will come to its senses before Monday.
That was not our recommendation. Primary producers want to receive the returns from the marketplace. They want the structural changes set up in the system so that they may. There are others out there that believe if you have the playing field half level, then let us at it and we will survive.
I want to emphasize the point that this is not just a problem in Canada. Somebody earlier had mentioned the U.S. farm bill. The U.S. itself is in an extremely different position for their 2007 farm bill versus their 2002 bill.
In 2002, they were in a surplus position. This year, and I do not are the numbers in front of me but their debt is in trillions. Their annual deficit is huge. They cannot continue to go down this road, either.
Farmers are declining everywhere. If we are going to have rural economy, you have to have farmers.
To make a point on the record, there has been a steady decline in the farming populations throughout the world, both in developed and developing countries.
Eight per cent of farms disappeared in the mid to late 1990s. France has lost 50 per cent of its farmers in the past two decades. The United Kingdom has seen a loss of 78,000 farmers and farm workers in less than a decade. Germany has seen its farm population decline in the past decade.
Brazil's market is growing. It is a huge producer right now both in grains, soybeans, cattle, and pork. Although it is one of the most rapidly growing agriculture producers, it has seen its farm population decline from 37 per cent of the total workforce two decades ago to 17 per cent today.
This leads me to believe that even though Brazil is forcing products onto the international marketplace and causing price declines, it is not the small primary producer who is doing the production.
Senator Hubley: Perhaps it is time for Canada to host a global agricultural minister conference to share the global difficulties.
Senator Mercer: My theory is that control of retail distribution equals the control of low prices to producers, high profits to the big retailers and processors, and poor-to-mediocre service to the consumer. That is why I recommended to this committee a study of into the control of distribution of agricultural products in Canada.
As we go into this unnecessary election, we will be sending a team of people to Hong Kong to talk about world trade issues. I want to ensure that we are sending as powerful team as we can send or that we would send if we were not heading into an election. I would like you to comment on that.
What can we possibly expect out of this round when we are preoccupied with our domestic and political situation and the rest of the world is not as concerned about taking care of their own backyards?
Mr. Easter: I do not make any decisions concerning the meetings in Hong Kong from December 12 to 18. The current government will be doing the best that it can do to have strong representation at those meetings. Likely, there will be representation from the provinces as well. I would hope that a federal minister will attend.
You have to understand the reality of the WTO and the rest of the world and the way in which they would look at Canada if the government, in their opinion, has lost the confidence of the people. That is what a confidence vote in Parliament is all about. We would not have the credibility at that conference that we would have otherwise, even if a strong minister were there to represent Canada.
Put yourself in the shoes of the world looking at Canada, having lost a vote of confidence in the House but sending a minister of that government, and you will not look at Canada with the same credibility as you would if the government had just won an election. That is the reality but it is not to say we would not have influence.
One of the most influential people at this round of discussions has been Minister Mitchell. He is phenomenal in terms of proposing alternatives to what is currently on the table. I hope that we can continue to achieve gains on his proposal that there be a sensitive products category for countries. In our case, it would be the supply management industry. Every country has sensitive products in terms of their domestic affairs. That is an important agenda item. That proposal makes a great deal of sense. I hope that it continues to gain favour.
Canada has always punched above her weight in terms of the WTO. Minister Peterson, Minister Mitchell and the government as a whole will continue to negotiate hard in the interests of Canadians. However, there would be an underlying problem if we go into an election at that time in terms of the perceptions of our minister toward our ministers as seen by other countries. .
Senator Callbeck: I commend you on your report tabled in June. I want to ask you about one of the main findings. We all know net income is a problem for farmers. I want to ask about the expenses.
In your report, you mention that government should help with the cost of environmental farm plans and on-farm safety programs because the public benefits from these and it is not fair that the producers should be paying the full shot.
What steps have been taken to reduce these producer costs? Is the department reviewing inspection fees?
Mr. Easter: Certainly, inspection fees on the cost recovery program are not paid 100 per cent by the farm industry. Perhaps Mr. Shenstone or Mr. Foster can answer about the cost recovery on full inspection fees.
Is the whole issue behind food safety and the various inspections and so on, a food safety issue only? Who should bear the costs?
At the meetings, primary producers were concerned about user fees and environmental farm plans. The general public in Calgary likes to take a drive through the rolling foothills and look at the landscape. The primary producer, as a rule, farms that land and keeps it in order and there is a cost to do that. Should there be some benefits to the farm community?
There are opportunities in the future in terms of carbon sinks, as per the Kyoto agreement and the benefits that primary producers create for society for which they have been unable to recover their costs. That is the thrust of the argument.
Senator Mitchell: It happens you have touched on things with the mention of carbon sinks. Are you aware of BIOCAP, which is a national organization looking into how to measure credits under the Kyoto Protocol that could be created through agricultural enterprise in the country.
Mr. Easter: I will meet with representatives of BIOCAP at some time today. I have met with them on numerous occasions. They have acquired expertise that is the best in terms of the credits and debits relevant to carbon sinks and the Kyoto Protocol. To be honest, I do not understand it. BIOCAP is a valuable entity in terms of the expertise that they are developing.
Governments have to move more rapidly in that area or opportunities could be lost. It is a highly technical area that crosses many departments and has an impact both federally and provincially. It is not a simple solution, but BIOCAP can certainly be a vehicle to help us get there.
Senator Tkachuk: When you mentioned Mr. Mitchell's sensitive products, you were talking about protected products, is that right? It is a nice word. I kind of admire the man or lady who came up with it.
Mr. Easter: I am talking about those products where we had the wisdom in the late 1960s and early 1970s to come up with a system that managed supply to meet demand. It is a system that works — it has been good for Canadian producers and consumers.
I would not use the word ``protection.'' It is a system that works, and there are opportunities for other countries to take on that system as well.
Senator Tkachuk: You said there was a great increase in agricultural exports from Canada. What products were they?
Mr. Easter: There is quite a list of them.
Senator Tkachuk: It was not cheese, was it?
Mr. Easter: There is some cheese and some other products. There is everything from wines to wheat, barley, canola, potatoes and French fries. Most of our agricultural products move in one fashion or another.
Senator Tkachuk: All of these free market products help our balance of payments.
Mr. Easter: There is no question about that, and that is what I say in the report. We cannot lose sight of the fact that agriculture and agri-food products bring a lot to Canada's balance of trade. The real generator of that wealth is the primary producer. That is the key sector in terms of this production and contributing back to Canada's balance of payments.
I think you would agree with me that the primary producer's should receive economic benefits because of their labours and investments. That is the dilemma at the moment.
Senator Tkachuk: I have one more question about this whole concept of public good — that it should be paid for by the public rather than the producer. I remember we had a person from France, an agricultural representative of the common market, who referred to the public good, which is just a fancy word for subsidy. Why do not we call things what they are?
I am of the view that we should not be fooling around anymore. If we know that the European Union and the U.S. are going to subsidize wheat until we finally talk them out of this other ridiculous program, and we want to preserve rural Canada and the farms we have in the Prairies, why not just pay people per acreage and quit all this fancy stuff? Why not set a price, pay them and flood the world markets? Maybe they would come to their senses. with all this product that nobody wants, so it would be 50 cents apiece and maybe Europe will come to its senses. It will bankrupt them. Why not just go ahead and do that instead of coming up with all these things? It is like Ireland, where they pay people to look after hedges. That is ridiculous.
Mr. Easter: Largely, subsidies are in the eye of the beholder. When I look at farm incomes over the last 30 years, and how so many in society have benefited, I could make the argument that farmers actually have subsidized everybody else in the system for the last 30 years. I could make that argument and I do not think I would be far off base.
The reality is that we in the farm community can no longer continue to subsidize the rest of the world on the backs of our investment, our families and our communities. The system will have to change to prevent that from continuing to happen.
When I was over in Europe in 1988, looking at common agricultural policy, there was a policy in the Alps where farmers were paid to have sheep graze. There was not a very good return if they depended on the marketplace for their labour, but the government felt this was a legitimate policy because the sheep ate the grass that undermined the snow cover and therefore prevented avalanches. It was an interesting concept.
Canadian farmers can no longer continue to subsidize the rest of society.
Senator Gustafson: Do you think we should be looking at distribution in a global sense? There are many hungry people out there; we see that on television every night. Worldwide, we are able to do different things and accomplish things as nations, but we cannot seem to distribute the food or get a reasonable price for it. One of these days, if this continues, it is going to have some serious repercussions.
You mentioned Brazil, yet the farmers down there are American farmers that took the big equipment and moved down there. They are making big money at farming in Brazil. That is one reason why the Americans will never get off subsidies. We have to be realistic about this situation and start from some point or we are not going to have an industry.
Mr. Easter: Senator, you are absolutely right about what is happening in Brazil. It is not just American farmers; there are German farmers and big multinational corporations in Brazil as well.
We do not have a level playing field. Brazil is considered an underdeveloped country, which does not have to abide by the same environmental or labour rules, as we have to do. In my view, that may be free trade, but it is not fair trade.
Do we want an international trading system that is set up where we continue to go down this road? As a nation, we would have to depend on other nations for our food supply. I think not. We have productive capacity, and if we are given a level playing field, I believe we can compete in the world markets.
The general part of your question relates more to wealth distribution around the world, which is an altogether different problem.
Again, just let me come back to the WTO. At the moment, we are trying to fence rules around countries. We are not fencing rules around the people who trade the product, or around the Cargills or Archer Daniels Midland Company. We are not arguing that they should not be able to make a profit. They should be able to make a profit, but they should also have to abide by some rules. They should not operate in a system that exploits people and resources around the world. There have to be rules established around them too. They should be following the kind of trade rules that the rest of us are asked to follow. I think that is the important part of the debate.
Senator Gustafson: Cargill, ConAgra Foods and Archer Daniel Midlands Company, which are big companies, have built big terminals in Canada. They just sprung up overnight. For instance, Archer Daniels Midland owns 49 per cent of the United Grain Growers. They are making lots of money along with Weyburn Inland Terminal handling the grain. The farmers, since they lost the Crow, are losing money every year. That is a reality. We are now in the position where we have to play ball with these people because they own the terminals.
Mr. Easter: The efficiency argument included the theory that these new inland terminals would be efficient. The fact of the matter is that under Saskatchewan Wheat Pool and the others pools, it might have been a wooden elevator system. It had branch lines going into many of the communities with elevator systems on there. It was fully paid for by producers since the 1920s. The Saskatchewan Wheat Pool was supposedly a co-op run by producers. They got into a game where they went out and acquired debt to build these in high-throughput elevators. The railways closed down many of the branch lines, and now there is debt in the transportation system for a system that was fully paid for by producers in the past. There is just debt there now, and farmers are continuing to pay that debt.
Senator Mitchell: Back to my very first question on the proportion of federal versus provincial contribution to overall support payments in Canada, could you please give me what that proportion is in Alberta?
Mr. Foster: Again, in terms of the programs that are named under the agricultural policy framework, the Canadian Agriculture Income Stabilization Program, production insurance and other programs inside of the BRM envelope, it is 60-40, so 60 per cent federal government and 40 per cent provincial government, in this case, Alberta. That is consistent across the country for those national programs. The provinces still have the leeway to offer their own provincial programs. As noted yesterday, the federal government came out with a federal only program. In those other programs, it would be 100 per cent provincial or 100 per cent federal.
Senator Mitchell: If you added in all the exclusive federal programs, if there are any, and all of the joint federal- provincial programs and all of the exclusively provincial programs, what is the proportion?
Mr. Foster: I do not have that number, but I will look for it and get back to you.
Senator Mercer: As you can detect, this committee could sit for days and talk about these problems. We understand many of the problems but we do not have many solutions, and that is a frustration of mine.
You mentioned some numbers that I found shocking, most especially, the decline in the labour force and the decline in the number of practising farmers around the world. If anything will bring about a crisis in the production of food worldwide, it will be that decline. Suddenly, we will not be able work the farms around the world.
What can we as the Government of Canada do to encourage more young people to consider agriculture as a career?
This committee saw a film produced by students of Olds College in Alberta at the height of the BSE crisis. That film illustrated the frustration of students who have chosen agricultural careers but who question whether their decision to do so is wise given the world situation. If we do not talk to this now, we will pay the price in the end.
I spend a fair time talking about consumer issues, but I am also concerned about the lack of young people entering the industry. Do you have any suggestions?
Mr. Easter: BSE is an issue where, yes, there were some losses and some loss of producers, and there was tremendous amount of economic turmoil during that crisis. However, the Government of Canada has been able to turn that crisis into opportunity. We were there with about $2.4 billion during the crisis. We need to get breeding stock and cattle over 30 months into the United States. We have put funding in place to increase our slaughter capacity in the country. As a result, we have really moved forward aggressively in terms of slaughtering our own cattle in Canada. We have increased close to 7,000 jobs in Canada on the processing end. I believe we have turned that crisis into an opportunity. We have had to do that for the agricultural industry as a whole. At the end of the day, we have now an increasingly improving healthy livestock industry. We need to go further. We have opened up markets in other countries. There has been aggressive work by the Agriculture Minister on that issue and by the Prime Minister as well. We have made gains, but that is not to say that there was not a lot of hurt throughout the system.
The bottom line reality and that is why the report is the way it is, is that there is clearly a problem in terms of young people coming into the industry, but the industry at the primary producer level has to be healthy economically. There needs to be some security — not absolute security, but some security — in the industry for young people to come in. That is why the report clearly says we look at the facts out there as they are and lay them on the table, and we are now seeing a debate that will eventually lead us to solutions. I have suggested some things, and there are certainly other ideas out there that would make a lot of sense. I believe that is where the debate can lead us.
The Chairman: Thank you very much Mr. Easter, for giving us the extra time. We certainly appreciate the efforts that you have made during your meetings and with your report. We are ever hopeful that something might come through in the WTO meetings. It is encouraging to hear from you that we will be represented by a minister who is deeply involved in the issue. We wish you well in for your work.
Thank you, colleagues, for a very active meeting. I look forward in the future to going on these issues again, particularly post WTO.
The committee adjourned.