Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 4 - Evidence - Meeting of June 12, 2006
OTTAWA, Monday, June 12, 2006
The Standing Senate Committee on Agriculture and Forestry met this day at 4:32 p.m. to study the present state and future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Honourable senators, I call to order this meeting of the Standing Senate Committee on Agriculture and Forestry. We are pleased to have with us today the Minister of Agriculture and Agri-Food Canada, the Honourable Charles Strahl. We congratulate you on your appointment Mr. Strahl, and good luck with one of the most important and difficult portfolios in any government.
In the last few years, we have seen the worst Canadian farm incomes in our history. Low commodity prices in the grains and oilseeds sector, as well as unexpected events like the BSE crisis and outbreaks of avian influenza in British Columbia in 2004, are some of the major factors that have caused the situation. Farmers have increasingly borrowed money to survive and farm debt has reached $51 billion. The foundation of rural Canada is at risk.
The minister and the government recently took steps to address the situation. An additional $1.5 billion in farm support was announced in the last budget. Changes to farm programs like CAIS and the cash and advance programs have been implemented or are in the legislative stage, and a target of 5 per cent of renewable fuel by 2010 has been set with the hope it will bring new opportunities for farmers. In addition, the government is currently negotiating a new World Trade Organization agreement on agriculture, which I am sure will have consequences for the way we produce and market food here in Canada.
We will be pleased to hear the minister talk about these ongoing initiatives as well as his priorities to address the current farm income crisis.
Accompanying the minister today are Christiane Ouimet, Associate Deputy Minister of Agriculture and Agri-Food Canada, and Mr. François Guimont, President of the Canadian Food Inspection Agency. Ms. Ouimet grew up on a dairy farm in St. Albert, Ontario; Mr. Guimont comes from La Tuque, Quebec; and our minister is from British Columbia, so we are covering the country.
The minister is available to us for 90 minutes today, which is very generous, and then he will have to leave due to demands of his schedule. However, Ms. Ouimet and Mr. Guimont will stay for the final 30 minutes to continue answering our questions.
Hon. Chuck Strahl, P.C., M.P., Minister of Agriculture and Agri-Food: Thank you very much, Madam Chair. I want to thank you for the invitation to be here today. It is always a pleasure for me to talk about agriculture issues, especially before a committee like this. This is my first appearance before this committee. I always appreciate the seriousness with which senators take their work, but I find that people bring a special passion to the subject of agriculture. There is no doubt that people are concerned about parts of the sector that have had some problems, and we are all keen to find ways to ensure a prosperous and sustainable future. I look forward to working with you to find solutions.
I will take a few minutes to outline what we have done in the last few months, to address some of the particular areas in which you have expressed interest, and then to talk about the future.
[Translation]
I believe that we have done some very good work in answering agricultural producers' financial concerns. Their situation has obviously been difficult these past few years, but we are taking steps to solve the problems in the short term and to establish the basis for a prosperous future.
The government has dedicated $1.5 billion to the agricultural sector in the budget introduced on May 2. This amount is three times more than the commitment that we had made in the electoral campaign. The initiatives announced in the budget meet the expectations of producers and farm organizations that had been indicated to us during the consultations held in the past months.
We are determined to meet the short-term needs while paving the way for long-term stability.
[English]
We made three announcements on May 18 that put more than $1 billion into the hands of farmers this fiscal year. The biggest single announcement was that we are changing the method of CAIS inventory valuation. We all know that CAIS has not been as responsive to the needs of farmers as it should be, and we will be spending an extra $900 million this fiscal year. Administrators will be recalculating the CAIS applications of producers for the 2003, 2004 and 2005 program years. If producers are entitled to more money under this method of inventory valuation, they will receive a payment. Using this method ensures that there is no additional paperwork for farmers, of which there is plenty already. All of these calculations will be done in-house.
Also connected to CAIS, we are working with the provinces and territories toward expanding the eligibility criteria for negative margin coverage to provide more help to viable farms with deep losses. This will provide an additional $50 million in federal funds to benefit farmers.
Our government remains committed to replacing CAIS with a program that separates disaster relief from income stabilization. In the meantime, we are making changes to the program that makes it more responsive to producers' needs, as this should pave the way to new and separate programming.
In addition to these changes, we have stopped the deposit requirement and replaced it with a much more affordable fee. We have deferred collection of overpayments and cancelled interest charges on overpayments until January 1, 2007, while we go through these recalculations. These common sense initiatives better meet the needs of farmers and do not burden them with extra paperwork.
The other two announcements we made on May 18 are related and will help farmers now and in the future. This includes our tabling of amendments in the House to the Agricultural Marketing Programs Act, AMPA, which will improve existing cash advance programs by making them more responsive to farmers' needs. I am pleased that the AMPA amendments appeared to have support from all sides and have passed quickly through the House of Commons. That legislation is now before the Senate and I am hoping that it will pass here very quickly as well.
Related to the AMPA changes is the introduction of the Enhanced Spring Credit Advance Program, ESCAP, which will assist producers as early as this spring. With ESCAP we are doubling the maximum interest-free loan for spring credit advances to $100,000 and extending the repayment period for cash advances made under the program to September 30, 2007. This is a very practical program. Many farmers will be familiar with it and it will provide assistance now. We expect the ESCAP will make available approximately $500 million to producers.
We expect the AMPA amendments, which will make permanent some of those other measures I mentioned in the ESCAP program, to provide an additional $600 million in cash advances to producers. This program will not only permanently make the ESCAP type of improvements to increase the amount per loan and increase the upper limit overall, but also expand the number of categories that producers can apply for, including livestock.
In addition to those May 18 announcements, I travelled to Manitoba to announce our new Cover Crop Protection Program, CPP, which will provide help for farmers whose land is damaged by flooding and who have to plant a cover crop to get it back into production. We have committed $50 million to fund the initial year and to cover payments to producers in Saskatchewan and Manitoba who have been hit hard by flooding and excess moisture in the past couple of years.
Immediately upon being sworn in, we moved to improve and accelerate the Grains and Oilseeds Payment Program to ensure farmers received their money in time for spring planting. More than $591 million of the $755 million has been paid out to more than 100,000 producers.
We have also announced that the Farm Improvement and Marketing Cooperative Loans Act, the FIMCLA legislation will continue. It was scheduled to be discontinued. We are in consultations with industry on how to make that program more effective. The FIMCLA is particularly popular in Saskatchewan.
All these changes I have mentioned are about addressing the farm income situation and helping our producers to operate in a more profitable and sustainable basis, as well as giving them the tools to run their businesses in a more stable and predictable financial environment.
At the WTO, as you have already mentioned, Madam Chair, we are currently involved in an intensive negotiating process in Geneva aimed at reaching an agreement on detailed commitments at the earliest possibility. The modalities that we are discussing now are really the nuts and bolts of this Doha round. Canada is continuing to push for a more level, international playing field for our producers and processors, which we believe can be accomplished by eliminating all forms of export subsidies, substantially reducing trade distorting subsidies, and by significantly improving market access. We want an ambitious outcome for Canada. At the same time, like all WTO members, we are no different, and we have both offensive and defensive interests.
[Translation]
We recognize that the Doha round of negotiations is offering us a unique opportunity to free up trade even more in order to increase the prosperity in our sector. Consequently, we welcome the progress that has been made in all areas of negotiation, which will bring about some real benefits to our agricultural sector, including for our exporters.
On the other hand, it is obvious that strong pressures will continue to be exerted on us in some negotiation issues that are crucial for our supply management system. It is important to recognize that the 148 other members of WTO are prepared to accept at least some reduction of tariffs and some increase in tariff quotas for sensitive products. However, our government strongly supports Canada's supply management system and will continue to vigorously defend our interests.
Canada's active participation in WTO negotiations is crucial factor for the sector's prosperity. Hence I can assure you that we will continue to fight hard in the discussions in order to obtain the best possible result for the whole Canadian agricultural sector, including supply managed industries and export oriented industries.
[English]
This leads me to my final point, which is my optimism for the future of the agricultural sector. Canada is in a unique position to be a world leader in agricultural science and innovation. We have 167 million acres of agricultural land and are already internationally recognized for our agricultural research. We have introduced an agricultural science and innovation strategy that will present a number of opportunities for our producers and throughout the value change. I was able to detail some of that at a speech in Montreal a few weeks ago.
In addition, the government is committed to ensuring that all motor vehicle fuel contains at least 5 per cent renewable fuel, such as ethanol or bio-diesel, by 2010. This is potentially an important new market for our grain and oilseed producers. We want to encourage producers to participate in the value-added opportunities that will arise from expansion of the bio-fuels industry. In working with my colleagues from Environment Canada and Natural Resources Canada and with industry and provinces, we will ensure that the government delivers on this commitment in a way that allows producers to derive the maximum possible benefits from the demand that the 5 per cent target will create.
I will be hosting a conference here in Ottawa next Monday with a broad cross-section of industry stakeholders. At the conference, we will hear more of their views on our actions to enhance opportunities for grains and oilseeds producers to ensure that they are part of a renewable value chain and value-added system.
In the longer term, bio-fuels is only one aspect of the range of industrial, chemical and other products that could be derived from agricultural biomass, and we want to support science, research, development and innovation to get us there.
In summary, let me re-emphasize that we are working toward long-term sustainability and profitability for our entire agricultural sector including all the rural communities that support a healthy natural resource sector.
Madam Chairman, I will conclude there. I know you want me to keep my remarks short. I will do my best to answer your questions in the same manner.
The Chairman: Thank you. I very much appreciate your last sentence, where you referred to the communities that are fostered and kept by the agricultural success that we have in Canada. We certainly do not want them to in any way diminish.
Senator Gustafson: It is good of you to appear before the committee, Mr. Minister. I will keep my remarks short. There is no use going into the difficulties that agriculture has been in. I am sure you have heard them. They are serious. I want that on the record.
I have two questions. One is with respect to the negative margins. As you know, some farmers received very good cheques because they had positive crops. Some farmers had hail, drought, and maybe three bad crops in five years and they received very little. In fact, the program was working backwards, to my thinking. How do you turn that around and get the numbers to work? It would mean you have to take from some and give to others. Do you have a formula to deal with that within the CAIS program?
Mr. Strahl: The $900 million that we put into the inventory evaluation system is a federal-only component. We are not expecting the provinces to chip in on it. It is a straight $900 million from the federal government. We will go back and recalculate based on what they call the P1 and P2 inventory valuation system rather than the once-a-year inventory that farmers have complained has never properly valued their inventory. The P1 and P2 system, for almost all farmers involved, will mean more money in their pockets. The funds do not come from anyone else except the federal government. It will not have to be taken from anyone. By recalculating their CAIS program based on that new system, most farmers will benefit mightily.
We have promised that because some sectors might have benefited from the old system and done better depending on their sector and the kind of crops, we will give them the better of the two. We will give them either the new P1/P2 system, which we think will benefit most, or the old system if it is better for them. We will give them whichever system is the greater benefit for each farmer after we make the calculations.
The negative margins aspect is different from the inventory valuation, which is a federal-provincial initiative. The federal portion is about $50 million and the provinces kick in about 40 per cent. That will allow more farmers that have had a negative margin to apply and qualify for CAIS payment.
The inventory valuation and the negative margin coverage were two consistent themes that I heard when I talked to industry groups across the country. They said that right from the beginning it has never worked for them. I am not claiming this will be perfect but it will help many people. We are using this system this year and will go forward with the provinces on negative margins in the coming year. In that way, farmers will have something to count on. It will make it more predictable and should benefit a great number of farmers.
Senator Gustafson: Will this apply to 2005?
Mr. Strahl: Yes, for 2003, 2004 and 2005. The 2003 calculations are in so we will begin those recalculations immediately. Most of the 2004s are in and we will be able to start on those quickly and the 2005s will not come in for a while yet. We will begin on the recalculations for 2003 and 2004 immediately. Farmers will begin receiving their cheques some time in late summer and then another cheque based on the 2004 recalculations and a final cheque toward the end of the year on the 2005 figures.
Senator Gustafson: My next question concerns subsidies. I believe that we will not get the Americans or Europeans off subsidies. I have used pretty strong language on this issue from time to time. The Canadian farm communities have bought that lie for a number of years. Last year, when our farmers were just beginning to get their teeth into a new crop of peas, the Americans more than doubled their support by paying their farmers U.S. $5 per bushel, guaranteed, which equates to Can. $6. At the same time, our farmers were barely able to get Can. $2 per bushel. That has put many farmers out of the pea business, which is unfortunate because growing peas is a good environmental approach to crops because the crop provides nitrogen to the soil. At the same time, France doubled its hard wheat subsidies. We have an American election coming up within a year. I do not believe that they will back off these subsidies.
We have to take a whole new look at the global situation that Canada faces. I know that there are limited dollars to go around but we cannot let our agricultural business go to pieces, and that is exactly what is happening. We are seeing too many farm sales with land prices dropping 100 per cent. This is a serious situation. Certainly, it is not a positive approach and I am afraid that in the future we will be looking at the same thing.
Mr. Strahl: As the Canadian Minister of Agriculture I should be reluctant to mention that I am from Missouri. However, I understand what you are saying. We have heard before that big changes are coming, whether at the GATT or the WTO.
Senator Gustafson: Yes, or for that matter in Seattle.
Mr. Strahl: It is still the right fight to fight. We need to get the Europeans and the Americans, who are the big players in this, as well as Japan, to reduce their subsidies. The numbers they are talking about are 65 per cent to 70 per cent reductions. If we can get them to do it, I will be at Portage and Main singing the alleluia chorus. Certainly, we should be pushing them to make those reductions and we an obligation to do so. I hope that it will happen.
Senator, you are correct in saying that farmers and Canadians should not be under any illusions. It means that you would have long-term predictable planning for our farm programs, our income stabilization programs and a predictable market access to other markets. These would be great things. However, it will not mean that the price of wheat would double overnight. That is not reasonable and people should be cautious about that expectation. It would be a great news story but it would not end all the difficulties. You are right to add a little cautionary note.
Our ability to compete with the Americans on a direct commodity support system is hard to imagine. Last year they put U.S. $8 billion into corn. People suggest we try to match that, but there is not enough money in the system to do that for 167 million acres. The best hope we have is to try to get international agreements to get those subsidies down, get the tariffs down, and get access to foreign markets.
You might have heard Minister Emerson's comments before this committee when he said that we have to spend more resources on our bilateral trade arrangements to try to do what we can to pry open markets elsewhere. I agree with the comment that the WTO is not a panacea for our problems.
Senator Gustafson: We have not worked in the numbers of the spin-off that is lost because agriculture is not moving forward. That could represent quite a number. We might have to take that into consideration when we look at the global situation if the current situation continues for the long term.
Senator Peterson: The short-term programs or quick fixes we talk about are certainly laudable but they keep the patient alive until the doctor arrives, and I do not think we know where the doctor is. My sense is that we have to deal with this on the global basis. I agree with Senator Gustafson that if we continue to layer debt on the farmers, they will go bankrupt and it will cascade down to the support industry, et cetera. I believe that 80 per cent of farmers survive with off-farm income, but as farms get larger, they cannot do that physically.
Brazil is one of the lowest cost producers in the world and yet, it is going to move toward subsidies for its farmers. If they cannot manage to stay afloat, we can well imagine what our farmers are facing.
With all the work that has been done and all the information that we have, can we not, with the help of the experts in the field, try to devise a master plan that would make farming financially viable?
Mr. Strahl: If I could answer that one easily, the farmers would carry me out on their shoulders. There is no doubt that it is a very difficult scene right now. Farmers have faced poorly designed support programming that has not done the job for them. I have heard that time and again. They have not had programming that they have been able to bank on. They were hit with the BSE problem; my area was hit with the avian influenza problem. If you go to Porcupine Plains or Red River Valley right now you would find out that there are excess moisture problems, and that is compounded by the fact they had drought problems a year before. In the woes of the farming industry, one thing seems to pile on another, and combined with a worldwide situation with heavily subsidized foreign products, it is a bad combination.
We have tried short, medium and long-term funding. One method is to try to get some money out in a hurry. That is why we accelerated the payout on the grains and oilseed side. That is why we have tried to make retroactive changes that will put money in farmers' pockets this year. That is why we have brought these changes to the AMPA legislation; if it goes through the Senate quickly it will double the amount of interest-free money that is available for the farmers. These are short-term efforts to try to help farmers quickly.
I have been reluctant to go towards ad hoc programming, where we get a sector that is in trouble and we throw some money at it, and so on. We want to try to give farmers some hope for the medium and longer term to devise programming and work with farmers to say what we can do that will be predictable and bankable and something they can count on in the medium and longer term. That is why we talked about having separate disaster relief programming, for example, so when disaster hits farmers they can get funding in a hurry rather than having to wait a couple of years like they have had to under the CAIS program. We have also talked about fixing our flagship program so that farmers can rely on it and they can understand it so that they do not need an accountant to walk them through the opening pages. We want them to be able to get online and figure out how it works and make those calculations on their own.
Some longer-term planning involves everything from biofuel strategy to a biomass strategy, which means getting more value for everything we produce, whether it is in bio-plastics or value-added products of different kinds. Again, we must open the markets and expand the markets so that farmers have more opportunities here in this country and abroad to make a dollar on their products, and to involve farmers in that money-making part of the deal.
For example, this morning I read an article in the paper where there is evidence that the U.S. will have a corn shortage this year. The price of corn has gone up from U.S. $2 to U.S. $2.55 a bushel and still climbing because of their projected biomass shortage that includes their ethanol program. Again, this is good news for farmers, to create some competition to drive those prices up both domestically and abroad. Hopefully we can get the prices up where farmers can make more money from the marketplace. That is what they want to do, but there is no real quick fix.
We have tried many things over the years and few have been successful. We have some short-term programs for this spring and some medium-term programs involving our science strategy and other programs. We have longer-term programs, which will try to get more value-added money for farmers so that they can make something in the longer- term. I wish there was a simpler answer.
Senator Peterson: I did not suggest it was simple. We have to have the collective will to look for a solution. As you say, if we do not address the biofuel strategy correctly and be sure we have the capacity to produce the crop, then it will have to be imported and our farmers will lose again. It is connecting the dots in all of these things to make sure our producers are the beneficiaries.
Mr. Strahl: I absolutely agree. Two or three weeks ago, we met with Minister Ambrose and Minister Lunn and the provincial ministers in charge of the biofuel components in each of the provinces. We met in Regina. Up to now we have had these stand-alone provincial programs, everything from zero to 10 per cent biofuels programming, and for the first time we agree that we need to work together to have a national program, which will be something all provinces can buy into and under which we can set some national standards and national goals. This would include — and I was very pleased about this — unanimity that we need to ensure that the farmers will benefit rather than just Husky Oil or British Petroleum. I do not have anything against those companies but we are trying to make a program that will be good for the environment and also good for farmers.
Next Monday, I am meeting with industry leaders to discuss the ethanol and biodiesel issues. We want to know exactly what they need to make sure that they are part of the money-making aspect. We want to ensure that they are not just providing low-cost commodities to some other big outfit that will take all the profits. It has to be done right, I agree, and we are making sure the industry is in on the ground floor to ensure that it happens.
Senator Mercer: Our agriculture industry has been blessed with good ministers who have been dedicated to helping solve the problem. We are all on the same page here, but the question is how we get there.
I want to pursue this discussion of biofuels. You talk about a 5 per cent target. In Brazil, the target is much higher than that. Then we talk about the U.S. The U.S. $80 billion in subsidies in corn alone is a frightening number. My theory is that we need to make sure that we engage the farming community not just in the production of corn for biofuel, but also engage them in the ownership of the production of the plants so the profit is recycled in the farming industry and stays in the farming industry. I am very concerned that the big oil companies will swoop in and scoop this up because it will be profitable. As we mandate larger percentages to be biofuels this will happen.
Can you tell me what steps you may be contemplating to ensure that happens and how it will assist farmers and farm organizations?
Second, I want to talk about the WTO. How realistic is it that we will already ever be successful with this issue? You have talked about the election in the United States this year. You threw the U.S. $80 billion in corn subsidies on the table. I do not see that we are ever going to be successful. Is there not a need for us to adopt another strategy? Our strategy has been to try to talk to EU and the Americans off the subsidy wagon and they are not getting off.
Is there another direction that we should be taking to protect our industry, to protect the production of food in this country and to make sure we have a viable agricultural industry in the long term?
I have only been on this committee three years and I am already frustrated. I am sure that Senator Gustafson and Senator Fairbairn are much more frustrated because they have been on this committee a lot longer than I have. We seem to be dancing around this issue. We would like to see you singing the alleluia chorus at Portage and Main. We would like to be there with you, but I am not optimistic.
Mr. Strahl: Certain parts of the agriculture sector are particularly tough. This is always the trouble, of course. I have been to all 10 provinces; I have had industry round tables in every province since I have been minister and I have met with all the provincial agriculture ministers. A person naturally tends to gravitate toward the problems. There are actually quite a few success stories, but when it is going well, farmers do not get a hold of me and tell me about the success. They do not give me the good news stories but I am aware of the successes.
I do not want to paint the picture that agriculture is hopeless. Right now, the grains and oilseeds sector is tough. A number of sectors are doing quite well such as the value-added side and the export markets. The supply-managed industries as well have been profitable and continue to be so. It is not all negative. There are some good news stories out there but, unfortunately, the tough stories are sad and they are not easily solved.
Right now, Canada produces less than 1 per cent biofuels, so 5 per cent is very doable. There are some plants on the drawing board and others will come on stream this year. We have had talks with the canola industry and some other farm associations and they have told us that as long as we can give them a firm commitment as to the requirements, they are ready to produce it and can produce it. There are investors ready, there are people who just need our word on a mandate for a certain percentage of biodiesel, and they will produce it for sure. They are ready to go, but they have never had that commitment. They are looking to us for a commitment and they are looking to move forward.
The industry is looking for a tax regime that is farm ownership friendly. That tax regime would include things like flow-through shares to accelerate write-offs. That is an advantage we have given the mining industry but we have not given to our own farmers. They want changes to co-op legislation that will allow them to have new generation co-ops that will allow them to lever more money and equity from the marketplace. Right now, there is a limit on what they can lever. They want changes to that legislation.
There will be talk bandied about regarding some sort of a per-litre subsidy. I am not sure exactly what it is they will be looking for. In the past, we have already had some direct investment in ethanol plants that the federal government has been involved with, as well as some provincial governments. That has helped to create some plant capacity already. The Ontario provincial government has a $520 million provincial plan for 10 years, I think it is, but certainly, the provinces are eager to get in on this as well. There will be quite a pool of money available. We have to get the right tax levers in place so we do not just make it available to big corporations, but also to farmers and cooperatives and others so that they can benefit directly. It is nice to deliver your crop but it is also nice to get a cheque back that represents some of the value-added.
I mentioned the meeting coming up on June 19. There is also a Canadian Canola Growers Association biodiesel meeting coming up on July 17. It will be held in Calgary. It will be part of our federal-provincial meeting at the end of the month in Newfoundland. It is getting lots of chatter and interdepartmental work between Environment Canada, National Resources Canada and the Department of Agriculture and Agri-Food, to make sure it has a big agriculture component. In every way — federally, provincially, interdepartmentally and industry wide — we are getting the critical mass of discussion and collective political will to make this work.
Concerning the WTO negotiations, I met with Secretary Johanns in Washington, D.C. and we spoke of many things, but this issue was certainly on the table. Last weekend, I met with Pascal Lamy, the chair of the WTO negotiations, while he was in Montreal. These are probably the two most powerful men in these negotiations. If they do not see it going forward, I certainly do not see it going forward.
What I got from both of them is interesting. Both of them have said there are some difficulties. The Americans have just changed their negotiator and that makes handing off the baton difficult in terms of keeping the message consistent. They also are running up against the fact that they have this short period of time where they can have a fast track from Congress to negotiate a free trade agreement. That runs out within a limited time period so we need to get some action in that area.
Mr. Lamy is starting to put out some actual text of what the WTO agreement might look like. He is floating the text and getting comments and reactions to it. He also has called the ministers worldwide to come to Geneva, I think on June 29. Minister Emerson and I will head over for what we hope will be the intense talks that will put this thing over the top.
There seems to be quite a bit of effort to make it happen. On the other hand, we must be cautiously optimistic. We want to see it happen. There seems to be a lot of emphasis, but the big guys at the table have to make some moves. Europe and the Americans have to make pretty significant moves; if they do not, I do not say it does not matter what we do, but we cannot force them to act. If they are not coming along, there is not any one thing we can do to force them. They have to have the political will and the deal that is in their best interest. They have the same political problem down south that we have here.
There is no simple solution but it seems that some of the stars are lining up right now. Whether we can actually make it happen at the end of this month, I am not sure, but we will be heading over there with that intention.
Senator Stratton: It is a delight to have you here, minister. My question to you concerns the European Union. A number of years ago we were looking at agriculture subsidies and we went to Europe. Some countries were adamant that they were not going to diminish subsidies whatsoever and that position seems to be holding today.
Since our trip there, can you enlighten this committee as to whether or not there has been some movement on the part of, say, Germany, who is tired of footing the bill for 50 per cent of the EU budget? Are there some countries in Europe that really want to diminish subsidies? I think Britain and Germany do, with reservations. Can you give me examples — and if you see the stars aligning in some of those countries? That is critical.
Mr. Strahl: Europe has been making a transition on helping out its farmers. One reason they are even talking nowadays is that they have changed their subsidy program quite a bit over the years from some commodity-specific, trade-distorting types of subsidies to more of the whole farm programs. They still have a big subsidy program over there that allows their farmers to stay on the land. On the other hand, it is changing considerably in order to be WTO compliant.
The European Union is expanding and once new countries become part of it they come under the same bailiwick. It is one thing to have the northern industrialized nations that spend 40 billion or 50 billion subsidizing their programs, but every time the European Union hears that Slovakia or another country would like to be part of it, the EU must think about what it means to the European package.
I am told one reason the Europeans are interested is that they need to get this under control as well. So much money is involved considering that 50 per cent of the entire European budget is spent on agricultural subsidies. As other countries come in, it is one thing to say they will spend it all on farming, but the European Union has a host of things on which to spend money, and all of a sudden it is under pressure to make a decision on a hundred fronts about where this money will be spent.
In the same way, the Americans are in something of a pickle, too. Their deficit is $500 billion, and one day, not that I can predict this next year, I guess there will be a comeuppance for it. The shoe will drop, and we had better hope it drops slowly in a measured way. What they are doing in the United States on agriculture is not sustainable. They can throw $20 billion or $30 billion into the system and export it away to other countries in the short term, which is very disruptive to the rest of the world, but can they do it in the long term? The Americans have some systemic fiscal problems and agriculture is one of them. That is one reason they are trying to find a politically palatable way to rein in what has been extravagant spending in the agriculture sector and make it something that is manageable. The numbers are literally up to the 65 per cent and 70 per cent reduction range.
Senator Stratton: Are you cautiously optimistic, or are you still from Missouri?
Mr. Strahl: I am from Missouri. As Senator Gustafson said, he has heard the same promises. I am hopeful although I do not know how optimistic I am. It is one of the things we need to get right, or else it is hard to imagine that whatever we do will work. That is why it is so important. When people talk about the bilateral answer, we may have to have bilateral one-offs with countries around the world. We have a few examples around the world of these bilateral agreements, such as with Costa Rica and Israel, but they are not easy to negotiate either.
We have many people who want to export agriculture, and we have a big export market in Korea. We sell pork, wheat and much more, and some people want us to make a quick bilateral agreement with them. I point out to them that if we sign a bilateral agreement we have to be prepared for the Hyundais. You do not get a free trade deal for nothing. We can say ship our agricultural products to Korea and the Koreans will dump their Hyundais into our market. I wonder if the domestic folks would be okay with that. We would not be talking to this committee but would have to have this discussion with the industry committee.
The WTO is still the best way to do it because it is a worldwide, multi-faceted discussion that would be in the best interests of the entire world, including the developing world. Bilateral agreements may be what we are forced into, but even they are not simple.
Senator Callbeck: Welcome, minister. Toward the end of your presentation, you talked about agriculture research and the fact that Canada has the ability to be a world leader in this area. I want to ask you about organic food production and research. We addressed organic farming in the committee's value-added report. It seems there is great potential in this area and that it can be profitable.
My own province of Prince Edward Island has an organic marketing initiative to help farmers with their marketing and business plans and whatever it takes to make them successful. We are the only province that has that type of initiative. Certainly, research and development would go a long way in helping these organic growers. In Truro, we have an organic centre, but I understand it is limited and not comprehensive because of lack of funding. Is your department considering anything in the way of increased research and development to help organic farmers?
Mr. Strahl: I can say a couple of things on that issue. The Canadian Food Inspection Agency has been developing guidelines for organic products, especially for the export market. We have been working within our own science department and with our international partners to talk about opportunities for organic farmers for the export market. My understanding is the organic industry is working with CFIA, and those regulations will be gazetted. Everyone I have talked within the organic industry is pleased with them and sees this as a step forward.
One problem with marketing organically grown foods has been to have other countries accept it as organic. These regulations will help, and it will be a big opportunity for the organic industry, especially the export marketing part of it.
When I announced this initiative in Montreal the other day, I told the crowd of scientists that our research and science strategy needs to dovetail with our national priorities. The first example that I used was foods that are good for you as a naturopathic way of healthy living. We have to develop and market food to convince our Canadian consumers to eat a more healthy diet than they have in the past. It is a national imperative that we get our health costs down, and one way to do that is to encourage our citizens to take some preventative measures on their own and eat a healthy diet. This must be a national priority.
I suggested that our research and development branch has to help us meet those national imperatives, and included in that would be organic farming and pulse crops, which is another initiative we already fund a little bit. Pulse crops do everything from lowering cholesterol levels to lowering rates of diabetes. There is much research, and we announced over $3 million this spring just to promote the pulse crop industry. That is an example of how, if we can get people to eat a little more of a different type of food, including organics and so forth, we will reap ten-fold benefits on our health care costs if we invest now.
It is the wave of the future, no doubt about it.
Senator Callbeck: Has there been any consideration to expanding that centre in Truro or setting up another centre on organic food production?
Mr. Strahl: I know Truro is keen, and I think I have a letter on file in which Truro has asked if it can be the national centre for organic studies.
All science is now partnering with industry, provincial governments and others. There is a lot of interest in this across the country. Our Assistant Deputy Minister for will have to come up with a business plan. I have laid out the science strategy. The next step is to lay out the business plan as to where that money needs to be spent and how it will be allocated.
There is a lot of competition from many provinces that want an organic centre of excellence. It will be very popular, the wave of the future, and no one province is willing to give it up to another. They want to see their own development in their own region. They see it as a regional issue. The organic products that might be important in British Columbia may be quite different elsewhere. There is certainly no consensus as of yet, but there may come the need for an organic centre for Canada or possibly several.
Senator Oliver: I have listened to what you have said today about your value-added strategy and biofuels strategy. We in this committee, for some time, have been looking for ways to leave more money at the farm gate, or, in other words, ways of empowering farmers to help them get more of a fair share of the food dollar. Your value-added strategy is a good one, as is your biofuels strategy. Can farmers increase their productivity if they make better use of information technology?
I made note that you said today that you were in Montreal at the Canadian Institute of Food Science and Technology, and made an announcement there of a new science policy. Is there anything in the new science policy that is designed to help farmers use information technology to enhance their productivity on the farm and therefore help increase their margins?
Mr. Strahl: In a general sense, farmers have embraced technology like almost no other sector. You have to hand it to the farmers. They have exceeded any other sector in Canadian society on increased productivity per farmer. To their credit, the farmers have embraced innovation and technology. Unfortunately, they get more productive, but when the price drops through the basement, that is the problem.
As an example, I am an old logging contractor, so I like seeing good equipment. When I made the science policy announcement about our cover crop program, we were at a farm just outside of Winnipeg, and a farmer had a new seeder and other equipment. After our announcement, I said, ``Enough of this. I have to crawl over this new tractor of yours.'' He also plants his crops using a GPS system, and he told me, ``I can plant a quarter section, and my row will be straight within four inches over the length of the quarter section.'' He then said, ``The only problem is the satellites went down last week just at the end of planting, and I could barely get my crop in.'' He could barely steer the tractor straight, because they are used to using cutting-edge technology. His air seeder employs cutting-edge technology. However, it is very expensive, but they still use it because they know they have to.
As for information technology, there will be more expectations for farmers to use it. I feel they are willing to use it, especially as it increases their productivity, et cetera. From CFIA's perspective, we are finding an increasing need for better traceability for products of all kinds, being able to trace an animal from birth through to when it hits your plate. People want to know the exact origin of the animal. There is a need for on-farm technology so that the traceability can continue through sales of products back and forth across farms. There is a huge component in biosecurity, which involves technology as well, to keep farms safe and borders open by employing the best type of science and technology.
CFIA not only works with our farmers, but it has more money set aside and will increasingly spend more money on laboratory services, increasing the standards of our laboratories. For example, Canada has just been designated as having the world-class laboratory for avian influenza and E. coli.
Senator Oliver: Where is that laboratory located?
Mr. Strahl: That is in Winnipeg. We have been working with the provinces to increase the standards for their laboratories. Science and technology will not only increase productivity for farmers, but will also increase our biosecurity, which will increase market access for farmers around the world.
This science strategy is part of a national imperative. It is one of the reasons this budget included an extra $195 million for CFIA specifically for avian influenza planning and working with farmers and provinces to prepare for avian influenza, as an example, but it includes a variety of products. This demonstrates the emphasis that we will have to place in the years to come on ensuring that farmers have access to the best science, technology and innovation. They have been willing to adapt to that, and they continue to lead the country. In addition to that, we will have an increasing science, technology and innovation component that will be part of our biosecurity, food security, food safety and healthy foods. All of those things increasingly rely on science to help us make all that possible.
Senator Oliver: Is there any way Canadian farmers can actually sell some of these services to other countries as a way of, again, giving them more money from the advances that have been made in science today? Are these services that can be sold around the world?
Mr. Strahl: Yes, there is some of that. For example, we have a large market in the purchase and sale of embryos, a big industry in Canada that will sell cattle embryos around the world. There is also a need to implant those embryos, to store them properly, to use the genetics properly, and the industry is involved in that extensively already to see it as a way to open markets. There is a lot of interest in the big markets of India, China and others with rapidly-increasing needs for milk products — to use an example again — where they look to the industry to help make that possible. It is absolutely an export opportunity for farmers.
I want to mention that we have copies of the science and technology strategy that we can leave with senators. As I mentioned, the business plan has to be fleshed out by the ADM, but overall it is a good vision for Canada. For the first time, it dovetails our scientific needs with our national priorities. It sends a strong signal that Canada will be a leader in science and technology, not only on the spending side, but also on partnerships with industries and provinces.
The Chairman: Minister, I would not be doing my job if I did not ask you for an update on a major situation in our country, especially in my province, over the last few years, and that is the BSE situation.
I know you have been talking to Minister Johans. Will you give us an update on where we stand with the Americans and, indeed, the degree to which other countries are finding a way to move forward with us on this issue?
Mr. Strahl: Our desire is that the Americans in particular will publish their second BSE rule, which would, of course, open up our markets to our over 30-month live cattle. There has been much effort in the last several years to make that happen.
As I mentioned, I met with Secretary Johanns on April 20 and emphasized that our government has expectations that the second rule will be published, that the markets will be opened as quickly as possible, and that we would make those decisions based on sound science. As Secretary Johanns has said, we do many things very well here in Canada. That was encouraging. He is saying that, based on science, the borders should be open in a reasonable amount of time. He is still hopeful the border can be opened the rest of the way this year. Unfortunately, we have had a couple of BSE cases in Canada this year, but it was scientifically predicted that we would have another case. We will probably have another one or two in the years to come. It is inevitable that the odd case will crop up. That postpones the opening of the border. They have to wait for our report to be published. One report is already up on the website and the second report will be published very shortly. Again, those things were done openly and transparently to show our trading partners that we are being open about the situation, that we have sound science involved, and that they can count on us to be transparent about it. Unfortunately, the second case was in my riding. It was in my hometown. I want to protest to somebody about this; it was very unfair.
The Chairman: Someone has it in for you.
Mr. Strahl: It was on the eve of my visit to the secretary. While he was saying that it will not change their efforts to open the border, it should be open by the end of the year, obviously they have to wait for CFIA's analysis of what happened, the progeny of the cow and its cohorts, and where they went and what happened to them. We have done all that and the second report should be published shortly. They will analyze it, and we are hopeful that the Americans will stay on schedule and that the second rule will be published by the end of the year. That is still the schedule on which we are working.
Mr. Guimont mentioned the feed ban issue, the specified risk materials. Of course, we have had gazetted in Canada for some time now that we have to remove more of the SRMs from the feed system. It has long been banned from cattle feed, but there is always a concern about cross-contamination and cross-species contamination and so on. The OIE has said that we simply have to clean up more of the SRM from our feed system. That is something that we are determined to do. Approximately $80 million is allocated in the budget to help the industry make those transitions necessary when we move to a more complete SRM removal. As we move down that road to a high standard of SRM removal, that will not only keep our American markets open but it will open many markets around the world that would otherwise remain closed to us.
We are taking steps. We are doing it on sound science. As long as we can keep everybody talking science instead of politics, we are likely to get good decisions. The Americans have been talking our language. They had their own cow and we reassured them that we are looking at the science, as I said I am sure they are. We are able to keep the discussion on a high plane. That is not only with the Americans but around the world.
Japan came this spring and inspected eight plants here in Canada. They are fussy and worried about the BSE contaminants, but they inspected our plants. They were pleased with what they saw here. They approved the plants to allow export to Japan. Those decisions are scientific; they are not based on the idea that ``We will do this for your product if you do this for mine.'' It is based strictly on science. When we can keep those discussions that way, it will get the American market open as quickly as possible. Just as important, it will open other markets around the world that see our measured approach and scientific basis and realize we are being open and transparent about the situation. We are really, as Secretary Johanns said, doing many things very well here in Canada. The beef industry is to be commended, as are the officials in CFIA who have ensured that the discussions have remained at a high level. That is the best opportunity to open the market for us.
The Chairman: As you know, I come from an area in southwestern Alberta that is very close to the Montana border. There are periodic ruffles of activity from the organization known as R-CALF to have another run at closing the border. The context is not the same now as it was then. I wonder you and Secretary Johanns are confident that we have put that issue behind us.
Mr. Strahl: Secretary Johanns has been supportive of the efforts to get the border open, including in the R-CALF situation in Montana. We were all pleased when the judge refused to reopen the case, although I hear that R-CALF has appealed it, but I understand their grounds for appeal are less and less likely to be heard or be successful. That being said, court cases being what they are, one is never entirely sure about these things. Overall, based on science, we have the support of the American industry. R-CALF is a small group in Montana that is trying to use the court system. I met with the American Cattle Association when I was down in Washington, D.C., as well as the big meat suppliers. They kept reassuring me. They realized that the R-CALF group does not represent the American Cattle Association; they do not agree with what they are doing. The meat association says, ``We have an integrated North American market; we want your meat, supplies and cattle. We do not agree with what is happening in Montana.'' However, you cannot stop someone from going to court. We have to take some solace in the fact that when these appeals are launched, they are appealed for certain reasons. The reasons on which this group can appeal are narrower and narrower as time goes on, as these other court rulings take place. It is an American court system. I have no influence over it. Most people I talk to are confident they will be able, as they did last time, to counter R-CALF's arguments successfully.
The Chairman: You were talking about the excellence of our science across the country and our various experimental farms. We are celebrating our centennial year in Lethbridge. You might mark that down because they very much would like to have you there.
Mr. Strahl: I am scheduled to be there. Rick Casson has read the riot act and I have adjusted my schedule appropriately.
The Chairman: That is excellent.
Mr. Strahl: It will be a great occasion. The new facilities are opening in Lethbridge and it is your one hundredth anniversary. Those are two good reasons to be there. In fact, anyone who is watching this broadcast should plan to be in Lethbridge at the end of July for those celebrations.
The Chairman: I agree. Thank you for that commercial. It will be a glorious day. I look forward to seeing you there.
Senator Gustafson: I would like to mention a couple of points in terms of research. The first has to do with the air seeder business out of Saskatoon. In that area there are at least five air seeder companies. Those air seeders are being sold to the United States. In fact, they go right past my door. When it comes to research, et cetera, we have done very well in the agricultural sector.
The problem has been that the farmer himself is a price taker. He takes what he can get. Everybody else down the production line sets their price and is able to deal with that.
You talked about biodiesel. I found out that a great deal of our canola goes right down to Archer Daniel Midland Co. in North Dakota. They are way ahead of us. We will have to speed things up if we are to be a player or they will have everything sewed up before we get into the game. I think that is very serious. I would like your comment.
Mr. Strahl: I agree. I understand that the American target for biofuels is 4 per cent by 2010. Our target for our own domestic market is slightly more aggressive than theirs. I am pleased with the target, although I know Saskatchewan and other provinces want to go to 10 per cent as quickly as possible. I have encouraged them to get on the way to 5 per cent before we worry about 10 per cent. However, we need to be aggressive.
Not only our department has been seized with this issued, but NRCan and Environment Canada have also been seized with it. We are seized with it so as to ensure that we have not only a regulatory regime. After all, it is easy to regulate 5 per cent. You can pass a regulation and that is it. If that is all we do, we will be importing cheap Brazilian ethanol in a minute. What we want is a domestic market that can supply our needs.
It is interesting to note that there are some plants tentatively planned for construction along the border. People are seeing an opportunity to sell ethanol to the United States. One thing about the NAFTA agreement is that if the Americans subsidize 30 cents per litre of ethanol, then you can deliver the ethanol and you can get the money.
Senator Gustafson: That is why I raise the point about the air seeders. As far as I know, the Americans do not have a manufacturing system that is making good air seeders. They are coming up to Canada for them. The initiative directed there is tremendous, and they are doing well.
Mr. Strahl: Overall, the production of biofuels needs regulations. We also need to find out how to get it into the system. We must ensure that, on the industry side, they have vehicles that can use it.
This morning, I read an article in The Globe and Mail about E85 vehicles. They do not use just 5 per cent ethanol; they use 85 per cent ethanol. I have one of those vehicles myself. There are increasing opportunities in which industry has to be involved. Vehicles that can burn the product have to be produced. It all has to happen at once.
I agree, senator, we do not want to dilly-dally too long or we will be sniffing exhaust fumes instead of leading the way. That is why the provinces, the federal government and the industry are all keen to do that this summer. They want a framework in place so that we can send all the messages necessary to industry, farmers and others. We do not want a hint at the signals; we want to give them a strong signal so they can get at what they need to do to address the market need.
Senator Gustafson: That is exactly what happened to the automotive industry in Ontario.
Senator Mercer: Recently, I was on a trip to Taiwan, compliments of the Canada-Taiwan Friendship Group. While there we met with senior officials of the Taiwanese government. We also met the president, the vice-president, the minister of foreign affairs and the minister of health. We were a multi-party group representing Conservatives, Liberals and the Bloc. We all pressed the issue of Taiwan's selective import rules on beef, in that American beef is allowed and Canadian beef is not. What efforts are you pursuing on that front? In how many other places in the world do we still have this problem?
It might have been lost in translation but I tried to tell the president of Taiwan that the beef I had the day before could very well have been Canadian beef, even though it was imported from the U.S. because of our totally integrated industry.
Senator Peterson: Does responsibility for PFRA fall under your ministry?
Mr. Strahl: No, it is under Health Canada.
The Taiwanese do not have access to our beef products, which is a problem. We had some assurances that it would be open to us. It was open to U.S. beef in January of this year. We have made representations to Taiwan about the unfairness of it. There are no scientific reasons for it. It is also inconsistent. We will be meeting with them at the World Organization for Animal Health. It will be a meeting on the side to express to them our concern about this issue. We will tell them that it is inconsistent, not particularly scientific, et cetera.
The second case of BSE that we had here in Canada did not help our case. Everyone understands that our system is safe. The beef did not enter the food chain. There was no danger to humans. We have an excellent monitoring system in place and world-class scientific knowledge and laboratories that run checks on all this.
That being said, when the second case came up, Taiwan's fallback position was, ``We will wait for your report and we will have a look at it.'' That report will be published quickly. They will go through it. If they have any questions on it, of course we will be prepared to answer them or to sit down with them and work with them to address any of their concerns. My hope is that once the report is published we can quickly work toward opening that market again.
Senator Peterson: It referred earlier to PFRA.
Mr. Strahl: I was thinking PMRA. Yes, the PFRA falls under the jurisdiction of my department. I misunderstood when you asked your question earlier, senator.
Senator Peterson: In view of the looming water crisis, particularly on the Prairies, has any thought been given to having the PFRA be the lead agency on that file? In view of the work it did in the 1930s and 1940s, it is well equipped to do that work.
Mr. Strahl: From the farm perspective, the PFRA does take a lead role on that issue. The PFRA is one of the most respected and popular agencies on the Prairies. It has the ear of the farmers and the people from PFRA are in the field. Those of us who work so much in Ottawa have to defer to them a little because, to their credit, they are actually in the field working with farmers on environmental plans and so forth.
There is no doubt they would take a lead on it, but these sorts of problems tend to be multi-jurisdictional. They involve everything from provincial habitat to resource issues and farm issues. It is seldom that you can address them all in isolation with one association, even one as popular as the PFRA. My guess is that it will continue to be a shared jurisdiction. In some areas, it will end up being an environmental issue, in others, it will be a water use issue, and in others, it could be an Aboriginal issue. I am sure that PFRA will be in the middle of it. Thankfully, they have the ear of the farmers and the farmers feel that they are listened to when they work with the PFRA.
The Chairman: It will be good for everyone to hear that they have the ear of the minister.
Mr. Strahl: You do not tread on some things. You do not mess with the PFRA. It works well and, as I said, it is very popular. We always have to be careful not to say, ``I am from the government and I am here to help.'' You do not stay on the farm long when you say that, but the PFRA has been able to do that, to the credit of the men and women who work in that organization.
The Chairman: Minister, it has been a great pleasure to have you here today. We have covered the waterfront. Your words today will be useful to us in formulating an interim report on our hearings to date. Thank you very much.
Mr. Strahl: I appreciate your work and look forward to your report. I am sure that with the expertise and passion of this committee for agriculture it will be a good report.
The Chairman: Thank you very much.
The committee adjourned.