Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 18 - Evidence - Meeting of February 27, 2007
OTTAWA, Tuesday, February 27, 2007
The Standing Senate Committee on Agriculture and Forestry met this day at 7:04 p.m. to examine and report on rural poverty in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Honourable senators, good evening to you and to our visitors. Our first witness is David Marit. He is currently a councillor for Division 3 in the rural municipality of Willow Bunch, Saskatchewan, which I believe is nestled in a picturesque valley near the Canada-U.S. border.
Mr. Marit is also president of the Saskatchewan Association of Rural Municipalities, SARM, an independent association that represents 296 rural municipal governments in Saskatchewan. SARM is the principal advocate for Saskatchewan rural municipalities, and also provides a voice for rural municipal governments at the federal and provincial levels.
After Mr. Marit, we will be hearing from another young man, Mr. Christoph Weder from Northern Alberta, but I will leave that for now so that we can get on with our first witness. Mr. Marit is full of experience, full of great ideas and full of spunk.
David Marit, President, Saskatchewan Association of Rural Municipalities: It is a privilege for me to be here. If my father were alive today and knew I was appearing before the Standing Senate Committee on Agriculture and Forestry, he would be telling his friends at the local coffee shop.
Just to add a point on our organization, one thing we are very proud of is that we are strictly a voluntary organization; all the rural municipalities in the province of Saskatchewan have volunteer members.
With that, I want to say Saskatchewan has a relatively high proportion of rural citizens compared to the rest of the country. Our rural areas are major economic drivers. Our members and rural citizens are significantly affected by rural poverty; any recommendations that result from this committee are of great importance to us.
Rural poverty is a very important issue and one that is not often talked about. This study is a timely and valuable initiative and I want to thank the Standing Senate Committee on Agriculture and Forestry for undertaking this task.
As the interim report states, rural poverty is difficult to define and understand. There is no definite line of poverty in rural areas. Likewise, "rural'' has become a term encompassing more than farmers and ranchers. We think of "rural'' in terms of our smaller communities outside our major cities.
I will focus my presentation on the larger picture of why rural communities are struggling and suggest some possible solutions. I will focus on rural Saskatchewan because that is the area I represent and the one with which I am most familiar.
The problems facing rural Saskatchewan are clear and simple, as outlined in your report. We continue to face a mass population exodus; this is of especial concern because of the number of young people leaving the province. It is increasingly difficult to support infrastructure and services with declining populations. Those people who do stay on farms and in small towns are forced to travel great distances for basic services, and fuel costs add to the overall financial hardships facing rural citizens.
The farm economy continues to be the major economic driver in rural Saskatchewan. However, the last four or five years have seen many areas devastated by natural disasters, such as flooding, drought and frost, and by trade barriers such as BSE, all of which have diminished the ability of producers to make a profit. Crop input costs have escalated to record levels while prices have remained relatively low. Government policies have not been sufficient to support producers through these economic-instability and disaster scenarios.
When farmers are faced with economic hardships, the local economies feel the effects. Likewise, with so many farmers leaving the industry, communities struggle to maintain the population necessary to sustain their local economies. Rural infrastructure is a key to sustaining and building rural communities and a decent standard of living. Over the past few decades, Saskatchewan communities have seen our rural infrastructure drastically reduced owing to varying reasons, such as government budget cuts.
For example, transportation infrastructure is key to the success of the agriculture industry that drives the prairie economy. Changes to the grain transportation policy in the 1990s resulted in rail-line abandonment and elevator consolidation, placing substantial pressure on provincial highways and primary municipal roads. Those changes led to increased heavy truck traffic travelling greater distances on rural roads, creating an unprecedented demand for road maintenance.
There were programs that helped to address that situation and ease the burden on rural municipalities, but those programs have now expired, leaving the required infrastructure incomplete.
As the interim report indicates, rural communities are at the mercy of the provincial governments in many areas and in those areas governments need justification to build or to sustain basic infrastructure services. The major challenge is that small communities are often told that their population is too small to keep a hospital or a school open, and yet it is extremely difficult to attract investment for economic development without the presence of those basic services. Moreover, it is a challenge for towns to attract or even retain citizens without those services.
The same can be said for existing businesses trying to retain or attract employees. When you are trying to reverse a historic trend, such as rural depopulation, the numbers are always stacked against you.
Given the population loss as well as off-loading cost, municipalities do not have the financial resources to increase or maintain infrastructure. Agriculture remains the backbone of rural Saskatchewan, but agriculture, the primary producer, has been in a crisis state for many years.
Net income statistics prove that across Canada producers are struggling to make a profit. Primary producers are price takers rather than setters and no matter what the price at the checkout counter is, the profit to the producer is often lost through the value chain or the cost-of-production increases.
Governments need to make policies that ensure profitability. For example, current business-risk-management programs do not cover the cost of production. That means that if a producer has a disaster year, even with insurance and income programs, he or she still has money owing at the end of year and, as a result, must find off-farm income to support families.
It is no longer just small hobby farmers who require off-farm income, but medium and large-scale producers who normally would survive on farm income alone. As there are few job opportunities within the community, producers are required to travel further to find work and that takes money out the local economy. Also, some of those producers find jobs that could have been filled by new people, which would thus have increased the population of that community.
Economic activity and development is a defining factor for rural success. Vibrant rural communities are those that have economic activity as drivers, and whatever the process, industry attracts the population that grows and sustains communities. The challenge is attracting investment in rural areas and building industry from within the community.
As noted, with depleting infrastructure, it is difficult for communities to attract new investment. It is common practice for Saskatchewan groups to focus on regional economies. Cooperation between local governments, rural and urban, is necessary in facilitating economic development. Grassroots local efforts are common as communities and local leaders recognize the need to take control of their destiny; however, municipalities do not always have the capacity to create or attract industry. Therefore, government support for effective programming and funding is essential for communities to build these initiatives.
While some may argue that this is a futile effort and we should let rural communities slowly die, we see great potential in the future. Biofuels present a great opportunity for rural areas and agriculture. It makes sense to have ethanol and biofuel plants in rural areas because that is where the feedstock is. For farmers to benefit from biofuels facilities there need to be programs in place to ensure producer participation and ownership. Producers need the opportunity to be directly involved in the value chain in order to realize the benefits. Biofuels and other processing facilities will create local jobs.
Saskatchewan rural communities have the primary resources to grow economies, to create jobs and to help prevent local rural poverty. It is a matter of having the programs and policies in place to give the people the tools they need to succeed.
In conclusion, the interim report states that one of the biggest challenges is to convince the majority, the urban public, that rural communities do matter. We are not asking governments to throw money at rural citizens and farmers. We are continually lobbying for long-term solutions to the problem of rural depopulation and the agriculture crisis. There is a willingness and leadership from within the rural communities to improve their standard of living. We are asking governments to work with our communities in order to help them provide the tools they need to succeed, but the solutions must come from the local level.
As with their urban counterparts, there are numerous causes for rural poverty. The issue is complex and there are no easy answers. Governments need to ensure infrastructure and policies and programs that allow primary producers and rural communities to utilize local knowledge and skills to succeed.
In closing, I would like to take the opportunity to thank the committee for inviting SARM here to present. This has been historically an understudied subject, but one that is worthwhile.
The Chairman: Thank you very much, Mr. Marit; we very much appreciate your remarks. As you are aware, this committee is now moving around the country in order to get the various local perspectives. Last week we met in Atlantic Canada and next week we will be in the West. What you have told us today is the sosrt of thing that we are looking to hear. It is very good to have your input on not just what people are worried about but also what they are capable of offering now.
Senator Segal: Welcome Mr. Marit, and thank you for coming all this way and reflecting on the excellent work of the Saskatchewan Association of rural Municipalities.
Thinking about your membership for a moment, what would you say would be the average decline in population that one of your rural municipality members would have been facing over the last couple of years?
Mr. Marit: I would have to say it would depend on what part of the province you are from; many municipalities have had rapid growth also. On average over the last five to 10 years it would be 20 to 30 per cent, and some would be higher.
Senator Segal: Would that depopulation be because of people moving to the cities of Saskatoon and Regina or would it be people leaving the province?
Mr. Marit: I would say that it is the youth leaving the province looking for opportunities elsewhere. In a lot of cases the youth are going to universities and then not coming home.
Senator Segal: Share your thoughts on the impact, positive or negative, of oil and gas and potash and other mineral activities in the province, in terms of the impact on the population base your organization serves?
Mr. Marit: Municipalities that have industries in them are progressing at a good rate, but they have huge issues too in the oil industry. A lot of youth, however, stay there and are working jointly on farms and doing both. That is where you see that.
To some extent those municipalities are doing very well, but where we are having a problem is with the tax structure. The agriculture situation in Saskatchewan has been in decline for a fair number of years and it is difficult for municipal governments to be raising the taxes when we see our neighbours are having trouble and difficulty in farming. It has really had an impact on the infrastructure that way. We are maintaining our infrastructure, but it is not improving.
You see policies made by senior levels of government and what they have done. I look to your report, which is phenomenal, by the way. It is difficult when you see the number of elevator closures and the rail-line consolidation in Saskatchewan. I am a grain farmer and we think nothing of trucking even a hundred miles now; but that is ludicrous, and most of the impact is on rural infrastructure.
Senator Segal: You talked about ethanol in your presentation and you made the case about ethanol plants being located in farming districts because they need the feed stock. There is a debate now about the ethanol industry — first of all, as to how big a plant has to be before it is really efficient, and whether it is owned by farmers or someone else, and, secondly, whether it is efficient to have it close to the feedstock or close to the client's base. There is a debate about that. I want to get your view as to the state of what has been one of the great organizations historically in Western Canada for the farmer, namely the co-op, in terms of the ownership of some of the instruments that make an economic difference on the ground so farmers benefit. What is the status of the co-op movement in Saskatchewan today, as compared to what it was 10 or 15 years ago? Do you see it as a vehicle that might become part of the broad ethanol investment, which would be a good thing for farmers, or are there constraints?
Mr. Marit: There could be some constraints. I would have to comment on the co-ops in Saskatchewan that, if it were not for them, a lot of communities would be shut down today. We can be thankful they are there. Whether that is the avenue this process goes through, through a cooperative or that type of facility, I do not know; we are looking at everything, even partnerships between the producer and the private side. You have to bring the private people to the table with their expertise. They have the management and resource skills to move the product. We are asking for an opportunity, really, for producers to move up the value chain. If their feed stock drops in price, then they are making their profit on the other end with the bio-diesel going out the other end. If you look at the U.S. model and what is happening there, this is a gold mine, and a booming economy to rural Midwestern United States. It is no different from Western Canada. They see a total migration of rural communities to urban areas. If you go to Minnesota and look at the ethanol plants, producer-owned, the money is staying in those communities. They are building schools and pools, putting computers in the schools and doing other things in the community. It is win-win. We would love the opportunity to do that so we would not have to be dependent on senior government levels for funding.
Senator Segal: I wanted to ask about that. You talked about infrastructure and hospitals and schools and roads. Can I zero in on one thing, which is the quality of health care? Saskatchewan is the home of universal health care and it plays an important role in the history of Canada in developing the premise that everyone has the right to health care regardless of wealth. For those who are worse off in the communities that you represent, in terms of access to doctors, access to nurse practitioners, seniors who might be living on their own and might need to call a doctor, what is your sense of how that is out there, and how has that changed in the last decade?
Mr. Marit: That has really changed and is having a huge impact on our rural economies. Ten years ago, when a farmer retired from the farm, he retired to the next closest town. Today they are moving to the next health centre, wherever that may be. In most cases it is the city. That is where the impact is. We have a problem with the senior population out there that does not have the ability to get to those facilities. I must say, "Thank God for rural people.'' They drive their neighbours to the hospital. That is probably the biggest thing. We have no other source of transportation than our friend or neighbour down the street. That is the truth.
If we could improve the health situation, that would be something, but the problem we have in probably the whole medical profession, from what I am hearing in Saskatchewan, is that doctors just do not want to go there. That is not just rural Saskatchewan, but rural Canada in general. The young doctors coming out of the universities now are wanting the Torontos, the Vancouvers, the Montreals, the Calgarys and Edmontons. That is what they want. They want their MRIs, their Cat scans and they want everything there. When you get into rural Canada we cannot offer those facilities.
In Saskatchewan I know of a town of 1,000 people that is paying $100,000 out of their tax base a year for a doctor to come into their community. They are because it is the only way they can get the doctor to come there. From what I am hearing from rural Saskatchewan, the general practitioners are some of the most well paid doctors in Canada. So it is not because they are not making money. That is not it. It is just the overload, because when you do get a doctor into a rural community the workload is overwhelming.
Senator Callbeck: You talked about the need for policies to be put in place so that people in rural areas have the tools to succeed. I see that in 2004 your organization had an initiative called Clearing the Path, which was to help economic development in rural areas. Have any of the recommendations in that report been implemented? If so, have they been successful?
Mr. Marit: After two years we are finally getting it off the ground. We have just hired, on the development side, two resource people to work together with communities to create economic development and work on policies on getting funding from the federal and provincial levels of government. As an organization we have just finished a road map of where all our municipalities coordinated and got together a primary route corridor. We have done it. The map is done in conjunction with the department of highways and leads to primary highways in our province. Everything is a fit. It overlaps and ties into the Prairie Grain Roads Program, which was a fantastic program in Saskatchewan. It had $115 million that the Province of Saskatchewan got from the Federal government, but it levered over $300 million between the province and the municipalities.
The program has come to an end, but it is really only half done. That is the problem. We are ready to go with our primary routes but we are only half way done with the road network and that is the issue. We felt it was a good program, and it was undertaken not only by our organization but by the Saskatchewan Urban Municipalities Association, which is our urban sister. It is a natural fit and we have looked at the issues in the province and looked in the mirror to find out if we were an impediment as municipalities and associations. We looked at that and our members adopted it in full last year.
Senator Callbeck: What are some of the things that you recommended there?
Mr. Marit: We looked at municipalities working together to create economic development. We are living in a global market, and communities of 500 to 1,500 people, along with the municipalities around them, are now working together to try to create economic development. However, you can only do so much. We can bring some resources to the table, but as I said in my submission it is difficult to bring economic development to communities, because when people look at school closures and at health facility closures, it is difficult for them to want to come. We can show them good business plans or anything they want, but it is hard for them to come there. We are lucky in the province of Saskatchewan that we have so many natural resources. You have to come to natural resources sooner or later and that is our driver.
Senator Callbeck: What about immigration? Should the federal government be pushing that to try to get more immigrants to come to rural Saskatchewan?
Mr. Marit: You could, but the policies have to be looked at. We are finding even in Saskatchewan that, if you bring immigration, regardless of the number — and we can debate that number all night, the policies within the immigration system may have them stay only for a short while. They are going to migrate to Toronto, Montreal, Vancouver, Calgary, and Edmonton, to wherever their friends and families are. I do not know how you get around that.
In Saskatchewan, we have done unique things. A German community in Saskatchewan has gone to Germany and sold their community and brought people over. They have done it in the Ukraine, too. The community of Kinistino went over to the Ukraine, and one farm machinery dealer brought eight mechanics over to Kinistino who were not doing mechanical work in the Ukraine. They are all getting top dollars as heavy duty mechanics for a farm machinery company and they absolutely love it. They all came together and they are in a community that has a lot of Ukrainian background to it.
It can work that way, but they need some incentives to bring these people over. I think the trades are where we could really do some good work with immigration.
Senator Callbeck: How many people would there be in that community?
Mr. Marit: Kinistino might have 1,500 or maybe 2,000 people; somewhere in there, I would think.
Senator Callbeck: How many immigrants are there?
Mr. Marit: This was just one incident. I am not sure how many there are in total. Just this one time they brought eight mechanics over. It got a lot of press. They interviewed them and they said they really love it there.
Senator Callbeck: How many years have they been there?
Mr. Marit: Three years now.
Senator Gustafson: Mr. Marit, we are very pleased to have you here today. What I would like to hear from you today, and what I have been trying to communicate for some time, is the status of the farms as they are today. You have to decipher what rural poverty really is, and then you have farmers that are in trouble financially. I will let you tell them about that. I will not elaborate.
Mr. Marit: It is getting to be a very severe situation in Saskatchewan. I hardly know how to express it. Apart from what I have already described, SARM also sits on a committee which we call the Farm Stress Review Line. We sit on that committee. The calls they are getting are astounding. People are in financial difficulties; in some cases it may be their own fault, but in most cases it is not.
We have had situations in my part of the world where a 50-year-old farmer — literally the same age I am — has just thrown in the towel this year. This is probably one of the hardest working men I have ever met in my life. We grew up together. He has farmed all his life. It is not his fault. Input costs and low commodity prices have put him in a situation where he has just had to turn his land back. That is happening more and more.
I do not know what type of policy you bring into being, other than one that has to cover the cost of production. It has to be recognized that this is a federal government issue because the provinces could never bear this. In the United States, and in every other country in the world, it is a federal issue; it is not a provincial issue. If they do not start covering the cost of production through some type of program — and I, as a producer, am willing to participate at a level on that — we are going to be here every year, crying for money in agriculture.
The American Farm Bill is heavily subsidizing the U.S. farmers. I have very good friends on the U.S. side, and they are just laughing at us. They are hauling their commodities into Canadian elevators because we are paying a top dollar, but they do not care what they get for that product because the county loan rate says they are going to make money putting it into the ground, regardless of what they get. That is the truth.
We can sit here and talk all we want about agriculture and where it is going to go, but until the federal government comes to the table and says it is going to introduce a farm bill or some type of farm program it is not going to get better. I do not care if you call it revenue insurance or what you call it; that is where agriculture has to go.
Senator Gustafson: Farmers are not encouraging their sons to get into farming, and it is really a sad situation. Elaborate on that.
Mr. Marit: I can only speak of my own experience. I have a 21-year-old son. My brother and I have been farming together since 1975. Our dad started us farming, and we were willing to start. My son came to us at the end of grade 12 and said, "I see what you guys go through every year. I do not want any part of it.'' He is in fourth year university and he has no intention of coming back.
I think that is going to be the biggest crisis in agriculture, not only in Western Canada, but in Canada in general. There is nobody to carry on growing food — I have to say cheap food — for the rest of the world. Until we address that, I do not know how you are going to do that. Until you see farming as a profit, where I get a return on my investment and I can go to maybe a nephew or someone else and say, "There is an opportunity for you to make a good living here,'' nothing is going to happen. We will continue to get what we are already getting.
Senator Gustafson: Are there many auction sales?
Mr. Marit: Yes, there are lots. There are probably three major companies in Saskatchewan right now — Ritchie Brothers, a couple of others — that are booked solid for the year. I do not think they are taking any more sales this year.
[Translation]
Senator Biron: New farming methods allow farmers to produce fewer greenhouse gases. They can take advantage of carbon credits and increase their revenue. The same applies to those who have animal herds; if they capture and burn the methane produced by the animals, they benefit from carbon credits.
On the Chicago market, one carbon unit costs $4; under Kyoto, the value could be as high as $10 if we had a carbon market in Canada. In Europe, a single credit sells for up to $15. Do you think we should have a carbon exchange in Canada? On a more optimistic note, would carbon credits represent an advantage for our farmers?
[English]
Mr. Marit: Definitely, I am glad you brought that up. I do not know if you are aware of it, but the largest carbon credit deal was signed in Saskatchewan a few months ago, and my understanding is that it is about 5 million acres. It was traded on the Chicago Stock Exchange for, I believe, around $4 a tonne. However, that is in Saskatchewan, because they use soil class on that. To some farmers, it works out to about $1.75 an acre, which is not a whole lot of money but we will take anything we can get.
The thing we do like about it is there are no caveats against those contracts. At one time, they were talking of putting caveats on carbon credits. My understanding is the farmer just has to belong to crop insurance, so that crop insurance can verify his acres, and he has to seed with certain equipment. He has to use no-till equipment and he has to use narrow openers. Those are really the only stipulations. That is what we know of it.
The price, at $4, we think is very low but I guess the stock market will drive that. These are one-year contracts. They are not three or four years. If the stock goes up, I guess you will have the opportunity to sign back in for a higher price.
The way I look at it is that, if somebody wants to give me $2 an acre to do what I am doing, it helps. It pays about one quarter of my taxes on that quarter section.
Is it going to make or break me? It is not going to make me, but it definitely will help. I am always positive on programs that are good for the environment and also will pay the person that is protecting that environment. That is the farmer.
Senator Biron: May I ask you who signed the contract? Which company?
Mr. Marit: It is a company called, I believe, Points West out of Regina. I believe that is their name. Reg Gross is one of the senior partners.
Senator Biron: Do they have the capacity to control the carbon credit?
Mr. Marit: What would I call them? They are similar to a broker. They would be similar to a broker.
Senator Biron: Do they have the capacity to guarantee?
Mr. Marit: Yes, they are guaranteeing it through the crop insurance. That means if I sign up and I put my 4,000 acres into this carbon credit contract, crop insurance will do the audit. They have only done very limited audits, but everything that they have told us through the Chicago Stock Exchange and with what is happening in the United States, everybody is abiding by the law and by the contract. They have had no issue with that at all. They have never had one where a producer was saying he was growing all 4,000 acres and was not. They have not had one case of that.
Senator Biron: Have the majority of farmers in Saskatchewan already signed?
Mr. Marit: No, it was very few. Actually, it was a first-time contract and it was very lucrative to the first farmers who got in on it, because they went retro. They paid back for four years. Some of them got approximately $5 an acre over four years.
Senator Biron: You would say it is not the majority of farmers?
Mr. Marit: No. It will be whatever the Chicago Stock Exchange puts up for contract.
Senator Biron: Would you have an idea of how many millions of carbon credits could be done that way?
Mr. Marit: Well, if you signed up all the cultivated land — not the pasture land, because they will not take native prairie — that land that is seeded every year in Saskatchewan, you are talking approximately 30 million acres. That is what is available in Saskatchewan for that system.
Senator Mahovlich: Thank you for attending, Mr. Marit.
Mr. Marit: Nice to see you again, senator.
Senator Mahovlich: Thank you. In a different capacity.
Mr. Marit: That is right. I was asking the questions that day.
Senator Mahovlich: You mentioned the American Farm Bill. How did that ever come about? Were they in the same position as we are in right now?
Mr. Marit: They were probably worse off or at least every bit as bad. Yes, they were, senator. I think it was through willingness of a federal government that just did not want to see their agriculture community go down. I really think that is the fundamental thrust of it; they had a federal government that was willing to work with them.
Senator Mahovlich: So they propped up their farmers?
Mr. Marit: That is exactly what they did. Many of us have relatives in the United States, and if you talk to them — and I have talked to mine — they are more or less told that the U.S. Farm Bill costs them between $100 and $200 a year on their taxes, or whatever that number is. They just say that if that is all it takes to support the farming community in the United States, so be it. There is a willingness by the consumer, too, on the other side, the taxpayer.
Senator Mahovlich: We have a vast land and huge farms. We have to export a lot of our goods in order to survive. Would passing a bill of some kind to prop you up a bit be a good idea?
Mr. Marit: It would definitely help. I think we have to look at other initiatives; I really do. Look at the U.S. industry on the biofuels strategy. The United States, in 2007, will not export one bushel of corn, not one. Corn acres are going way up this year because their biofuel strategy is going to take it all.
You heard the President's address when he said they are going from 9 billion gallons in 2006 to 45 or 48 billion gallons by 2017. That is phenomenal. Where are they going to get the corn? The varieties are there, but they are going to take other acres out of production where they grow soybeans, or whatever. They are going to grow their $5 corn because that is what they are getting for it.
Senator Mahovlich: Do a lot of Americans own cornfields out west?
Mr. Marit: Oh, yes; there are cornfields in Minnesota, Nebraska, and Kansas. Iowa in 2006 was a net importer of corn. They actually imported corn into Iowa to fill their ethanol plants.
Senator Mahovlich: I always compare Canada to Australia. I think we are similar in a lot of ways. Do they have a farm bill there?
Mr. Marit: No.
Senator Mahovlich: They are similar to us, then?
Mr. Marit: They are a little similar. Their grain industry is a lot different. They have what they call an Australian wheat board that only deals in the international market. It does not deal in anything domestic.
However, they have done different things. They have built facilities over in Europe. They transport their grain from Australia to Europe for the millers to work there.
Senator Mahovlich: They set up office over in Europe?
Mr. Marit: That is exactly what they have done. They are cutting into any market they can. They are closer to a lot of the market we are trying to get. They are close to that eastern market we are trying to get into.
Transportation costs have really escalated, especially ocean freight, but also because we are so landlocked in Western Canada. We are tied to two national railways that really do dictate the freight to us.
To give you an example, I am close to Assiniboia where the terminals are and freight is $47 a tonne. It is over $1 per bushel for freight from Assiniboia to Vancouver. I am only getting $3 a bushel for the wheat and I am giving a third of it away in freight. That is from the elevator. I have to get it there yet. That is the issue.
Senator Segal: Mr. Marit, I want to come back to the cost of production issue that you raised. If you look at farm policy over the last 25 years, we go from commodity crisis to commodity crisis. It is drought, BSE, U.S. subsidies on grains and oilseeds, et cetera. I am interested in your view because you talk about population, the community base and structure. I think we could conclude that the commodity supports have been put in on an interim basis, but whatever they have done in the interim has not changed the long-term problem constructively.
Mr. Marit: That is right.
Senator Segal: The farm options program that was brought in allowed farmers who had, I believe, earned less than $25,000 to apply for some assistance, and I think close to 16,000 farmers received close to $10,000 each, on average, indicating how far below $25,000 they were. That was not tied to commodity prices; it was actually tied to what their income had been the prior year. It was the basic income floor.
If you had to choose between a system of commodity supports, including for cost of production, versus supporting the farm family based on what they need to live, with some measure of dependability, in terms of the stability of your communities that are most likely to generate people who can bounce back from setbacks, what choice would you think makes the best sense?
Mr. Marit: That last question had to be the humdinger, did it not? Leave it to Senator Segal. That is a good question. I still think that we have to somehow tie cost of production to the commodity. I think we do. That is my own personal opinion. I have a board of directors of seven; if they were here, three might say the other side, and three might say this side. I just think it is something that is more accountable. When I look at farm policy today and programs today, I do not see anything that is accountable. I do not see anything that is bankable, predictable. I do not see a program or a document, a living, breathing document that I can take to my banker and to my accountant and say, "Look, if this is what I grow, this is what I am going to get.'' There is nothing there. That is the problem. We can talk about the Case Program. We can talk about all the federal programs we want, but because they all have to be retroactive they all have to look at what I made and what I did not make. It compares that way. If you looked at base model income, as you did in your document at one time, you might ask what the base is that everybody should have. How would you work that in the accounting field and in the field of agriculture, when in most cases in agriculture there is a lot of individual corporate farming? They are doing that just because of the tax structure. How would you do that?
In the farming community, in all fairness, in most cases, if they have turned a profit, farmers will buy what they can to offset income tax. How would you get around that one? That would be some type of an issue that I could see as a problem.
Senator Segal: May I just continue briefly?
The Chairman: Very briefly.
Senator Segal: Under the tax system now, we have for seniors in Saskatchewan and for seniors in the rest of the country a guaranteed annual income supplement, if they fall beneath a certain level. We have had rental supplements and subsidies for years across the country and in the provinces. Are you saying that you think it would be too hard to design something like that, that would be actually bankable and usable for the farming community as you understand it?
Mr. Marit: The way I understand it? I would love to see that for one reason. If you did that, you would have to leave out the off-farm income, because as soon as you bring the off-farm income in, it kicks everybody out. They will not let you collect in this new program that you have right now. I know guys who lost money on their farm, but because they are working at a coal mine making $75,000, they do not qualify. The farm lost money, so they are taking their off-farm income to subsidize it. That is the issue.
The Chairman: Thank you very much. We can have one very quick question from Senator Biron.
[Translation]
Senator Biron: There is a phenomenon in many provinces, namely, cannibis grown by organized crime groups. Are you experiencing the same thing in Saskatchewan? Do you think that the federal government should increase the number of RCMP officers? Do the farmers feel that they are well protected?
[English]
Mr. Marit: We do not see much of it. We really do not. We have had a few grow-ops in remote farming areas where it might be in the trees or something, and you cannot see it by air, where you will get something like that. Increasing RCMP strength in Saskatchewan has not happened. In rural Saskatchewan, the opposite has happened. We have actually lost RCMP through budget cuts, through lack of funding, and through allocation of RCMP officers. We have a province to the west of us that is gobbling up the country, not just our youth but the country's youth, and they are also gobbling up the RCMP. My understanding is that the RCMP depot in Regina, in 2006, was putting out 1,200 RCMP constables, of which Alberta is taking almost half. In Saskatchewan, and I can only speak of rural, in many detachments we have lost some of our RCMP staffing because of that.
Crime in rural Saskatchewan is not growing, but we are very concerned about it because of our drop in our RCMP staffing, and also how easy it is for criminals to move around. I know this is having a huge impact in the resource sector in Saskatchewan, with the oil and gas mining, because of the high salaries being paid to youth. They have got a lot of disposable income to do what they want with. That is becoming a huge concern for us. Yes, it is a bit of a concern, but on cannabis, we do not see it. I am not saying it is not there; we just do not see it.
The Chairman: Thank you. Senator Gustafson, I have just one comment, if I may.
I am interested that you raised the question of crime and what goes with it. I noticed in Maclean's magazine just a very short while ago that a good chunk of the entire magazine was based on that issue as it has been rising in Saskatchewan. It was startling and troublesome.
Mr. Marit: Yes, it is.
The Chairman: Senator Gustafson, you have a final word.
Senator Gustafson: Do you think it would be possible for us to have an organization like the Bureau of Agriculture in the United States, which is the most powerful lobby in the United States. Those farmers are not in there lobbying. They are lobbying through the Bureau of Agriculture. Now, with all due respect for the Canadian Federation of Agriculture, it does not have the power, but the bureau is a large insurance company, which insures all these farmers and has that power. The other thing is that the Americans will fight for the heartland. It does not matter whether they come from Chicago or Seattle, they will fight for the heartland. We do not have that dedication and we do not get through, it seems to me. I would just like to hear your comments on that.
Mr. Marit: That is very true, Senator Gustafson. It is an issue, as I said in my address. How do we educate our urban cousins on what agriculture is really about. What is really involved in it? I think that is where we have to go. There has to be an education process taking place here. They just have to realize that if you want safe food, and I stress that, at a reasonable price, I think they have to value it somehow. Look at our grain industry around the world. We have countries around the world that will only buy Canadian wheat for one reason: they know it is safe. That is number one. It is quality, and it is safe. When we are living in a world of terror, it would not be hard to have an impact on the food chain somewhere along the line.
The Chairman: Thank you very much, senator. Thank you very much, Mr. Marit. I know you have read our interim report. We only had two recommendations. One of them was a farm bill. We are hoping to push that forward. This committee has wanted to do that for a long time.
Thank you very much for coming. We have learned a lot. I would encourage you to sit down and be comfortable and join with us in listening to our next witnesses.
Mr. Marit: Thank you very much.
The Chairman: Colleagues, we will now hear a different story from a new friend I made in Lethbridge not so long ago when he was part of a full day of the ups and downs of agriculture at our community college in Lethbridge. His name is Christoph Weder.
He and his wife, Ericka, operate Spirit View Ranching and Consulting, near Rycroft, Alberta. The Weders graze 250 cows, red and black Angus, along with 180 yearlings and custom cattle. In addition, Mr. Weder travels extensively as a consultant to help other farmers improve their grazing management skills, develop whole farm plans and provide technical assistance with the establishment of pasture and fencing systems.
We welcome you. We have an hour to hear what you have to say and get some of what I think will be pretty good questions in. The floor is yours.
Christoph Weder, Rancher, as an individual: I would prefer to stand when I talk. First, I thank you for the invitation to come to Ottawa and give my perspective on agriculture.
To give you a bit of background on myself, I worked for Alberta Agriculture for nine years as a beef specialist throughout central Alberta. In 2002, we transferred up to the Peace River region of Alberta. We realized that with our costs of production — looking at our business from that standpoint — it made a lot more sense to move to an area of Alberta where the economics of running a cow-calf operation produced returns where we could pay for the land with the cattle.
We realized quickly, though, that you can only go so far, and the previous speaker talked about that. Unless cost of production is being addressed by producers, it is very difficult. A producer can only drop his cost of production so far. After that point, you need to work on the other side and increase your margins for a larger return to the operation.
After we moved up to the Peace River region, we set a goal for our operation. When we started ranching, we decided we would be in the bottom 20 per cent of the cost of production; and the second focus of our business would be in the top 20 per cent of marketing.
At the time, we did not really envision how we were going to do that. We sell purebred bulls, so there was a marketing component to that to other producers. However, a lot of our cattle will not become breeding animals; they wind up going to the meat markets; so we needed to look at that side of things.
In 2003, BSE came along and we realized the vulnerability of being export dependent. Overnight, the borders got shut down, prices crashed and everyone felt helpless. That was a wake-up call.
I had opportunities beforehand to work overseas. I worked in South America in the beef industry there and saw what foot and mouth disease did to Argentina's and Uruguay's beef industry. I knew we were vulnerable.
I was lucky enough to have good relations with some ranchers in the U.S. They filled us in on an opportunity with a domestic grocery chain on Vancouver Island. Because of the media coverage on BSE and what was going on in the industry, they had customers looking for organic beef. If we look at the beef industry in the U.S., there has been a huge growth in terms of natural food products. Canada lags behind the U.S., but we are catching up.
This grocery chain had been looking for a supplier of natural beef. When I say natural beef, I am referring to cattle that are raised without the use of antibiotics, growth promoters or animal by-products. They had been approached to supply Thrifty Foods and they could not find any domestic market suppliers. Therefore, they were about to supply American product into a Canadian market. Fortunately, these guys were having a lot of growth in the U.S. — Country Natural Beef — and they told me that, if I put the right producers together, they would coach me and help me develop my first branded value chain in Canada for a natural beef program.
I was still working for the government at that time, and realized that you can only tell producers to lower their cost of production so far. Going one step further and telling them to drop it even more is an insult. So this was a tremendous opportunity, and my wife and I took it upon ourselves to start this thing.
Fast forwarding three years to where we are now, we are one of the largest natural beef suppliers in Canada. So far, our group has marketed over 4,000 animals through our chain. We have been working hard to try to get other markets and I will talk a bit about that.
This trip today was good for me because I met with a retailer in Ottawa, Farm Boy, who is looking for a similar program. We are probably going to start to deliver product to them in the next little while.
One of the biggest problems we have in agriculture, dealing at the retail level, is we have this cheap food policy that we have somehow brainwashed our Canadian consumers into thinking they deserve. When you ask them about food, they all seem to say that food is too expensive; yet food free day in Canada is February 9. The average Canadian has to work from January 1 to February 9 to put enough money together to cover his food costs — including going out to restaurants. We have the second lowest food costs in the world, next to the United States.
If you look at that in relationship to other products — for example, vehicles — between vehicle costs, insurance and fuel, 25 per cent goes into that. We have consumers who are more concerned about what they fill their car up with than what they fill their stomach up with.
If I was to make a recommendation to the Senate on one thing, I do not watch a lot of TV because I am very busy, but I happen to have been in a lot of hotels lately and I have been watching the ethanol and biodiesel producers doing their spin-doctoring on what a wonderful thing it is for the consumer to be able to buy renewable fuels. It is catchy advertising. We need to be doing a bit more on what the Canadian farmers are doing for the Canadian consumer in terms of safe food products and environmentally sustainable agriculture — looking after our water courses. The farmer has been brought to a level where when you say you are a farmer or rancher, you are looked at as the dumb guy that stayed behind and could not get a job somewhere else.
My wife and I were fortunate enough to win the "Outstanding Young Farmer for the Year'' award for Alberta and, in December, the "Outstanding Young Farmer for Canada'' award. One of the reasons we won was our positive attitude, which we are trying to instil in other producers. However, it is an uphill battle when you are the only 35-year- old farmer in a 50-mile radius and everyone else is going to the oil patch. They look at you like you are a little loony.
You talk about endangered species in Canada, and the worst endangered species in the Prairie Provinces is the 35- year-old farmer right now. You need to find out where they are, make sure they have a good habitat and that they reproduce, because that is the next generation we need to worry about.
One of the things we have had in agriculture is a reverse culling process. If you look at the successful guys that have gone into the oil industry in Alberta, they all have a farm background. If you talk to the oil executives in Alberta, they all want to hire farm kids because they have a work ethic and they are creative. The smart ones are going into that and those are the ones we have to keep in agriculture.
Senator Segal: Mr. Weder, thank you for coming all this way. Quite aside from the quality of your presentation to us, I hope the sales call at Farm Boy was constructive and that it works out well for you.
You talk about the endangered species being the 35-year-old farmer, who, from your own perspective, is creative, optimistic and fully engaged. Tell me about what you see in the farm community. What encourages you about it and what discourages you the most?
Mr. Weder: One of the worst things in agriculture, in my experience, is that if you become successful, you are looked down upon in the industry. For some reason, that is the way it is in a rural setting. The worst thing you can say in a coffee shop is "I am having a great day. Farming is going good and I love what I am doing.''
In our industry, you get a mindset of people going one way. Only 20 per cent of people need to go one way and they will pull the whole crew in with them; people follow like sheep sometimes.
I have had the opportunity to be in a lot of places in the world. I worked in South America and I have been through Africa. When you see corruption in governments, AIDS epidemics and all of that, and then come back home, you realize we may have some crappy things but we have a government that is willing to work with you. That is where my attitude comes from.
Yes, there are things that are wrong, but there is still a whole lot of up-side. My biggest thing is that we need to instil in Canadians in the cities and in our cousins just how important agriculture really is.
I will give you an example. I go into a rural setting, to a meeting, and say, "This is what we price our beef at; it is based on costs of production, a return on investment and a reasonable profit at the producer level.'' They say, "Your price of beef is more than what we are buying it for from Cargill.'' I say, "Yes. They buy it on the commodity market, which has nothing to do with the cost of production, a reasonable profit or a return on investment.''
You almost feel guilty when you tell them how much you need to make on the thing. They own the beef for less than three days and make a 35 per cent margin on it. I own it for two years before I kill it, and I am lucky if I make a 10 per cent margin on it. That is the attitude I really have a problem with.
Senator Segal: What is the one thing that you think government is now doing in agriculture that is actually making things worse?
Mr. Weder: One of the worst things is the regulatory side of the thing, like labelling. We have some very capable people working in provincial and federal levels of government. There are innovative staff who want to help the producers, but the bureaucracy pulls them back. They say that that is not the way it is supposed to be, that they are not following directions.
As an example, some of these producers want to diversify and do a bed-and-breakfast thing. A producer I work with a lot says he wants to do weekend retreat activities, where they come to the farm and learn about sustainable agriculture and opportunities there. He has a cabin and a great rural setting for the retreat. He was told that he could not feed those people from his kitchen but would need to have a separate one built.
There are opportunities in beef, but it is difficult when you become a branded chain like we have become, because you need to find a federally inspected packing plant that wants to work with you. Fortunately, we are with a retailer who can take the volume that we need to put through the packing plant to keep it viable. However, there are other smaller chains that want to work with producers, but there is no way that they can go to a federally inspected packing plant because they do not have the volume. They can take the animals to a provincial packing plant, which is smaller in scale, but they cannot take the animals across the provincial line. What kind of stupidity is that? Is it fine to say it is safe for eating in Alberta but not in British Columbia?
Some of these guys who want to get something done cannot get it done because of the rules.
Another meat processor faces unbelievable specs. He has the ability to do value-added beef products, but he has to spend $2 million to go to federally inspected standards so that he can cross the border into British Columbia. We need to add some common sense to the regulations; and that needed to happen yesterday.
Senator Segal: I have a final question. I will not get into proprietary matters in respect of your business, because you are a competitor and you have competitive secrets like all business owners, but I want your comments on relationships with the bank and the financing community and the cash that one needs to launch a line of natural beef, and I want the associated transportation costs, given that the retailer might take 30 to 90 days to pay for the product.
Mr. Weder: That happens only when you let them do it. You have to tell the retailers on day one that you work on the basis of payment on delivery.
Senator Segal: Are you able to work without dealing with the banks?
Mr. Weder: When we started this, everyone threw money into the kitty. That got the flights going and the meetings set up, and we worked for free. Once you get it rolling, every animal is checked off to cover marketing costs, and there is bank rolling on that. We were fortunate enough to get seed money for starting some of these value chains from the Alberta Livestock Industry Development Fund, for one. I have looked at other successful and unsuccessful programs in the U.S. where they have said that at times the programs mean well but take so much energy and expenditure of time on the business side that they can backfire. Some of these programs can hurt the operations.
That said, we have been able to pool our resources, and that is unique about us. We have 17 ranches that work together. We are spread across Saskatchewan and Alberta with 10,000 head of cattle, 100,000 acres of land represented, and we use one feed lot. It is all the same brand and we all work together. However, it did not happen overnight. It has been a huge commitment of time and energy. Many entrepreneurs will tell you that had they known then what they know now, they would not have started the operation. I might have thought twice about it too.
I was in a unique position because I had a government job and I knew good producers. We pooled our resources — not only cattle and money, but also our knowledge. The combined IQ of the people sitting around the table was great, and we set this up without the involvement of the banks.
Senator Segal: Clearly, you took a serious view of the importance of education, both at the master's level and the doctorate level. What is your view of the role of education, professional development and skill sets for your fellow farmers, either in beef or in other sectors? Do they understand the role? Is it used the way it should be used? Are you the sterling exception to the rule?
Mr. Weder: We were talking about that with my friend from Agriculture Canada. For me education opened up a bigger horizon and gave me a more global perspective. One of the problems with rural poverty is that many people have never travelled beyond their county limits. When you experience and understand broader perspectives, you go back home with a different attitude toward things. When someone points fingers at another, there are always three fingers pointing back to him. We need to take responsibility and look after ourselves to get things done. We can talk about government programs for producers, but there is also an onus on producers to do development or education. The agriculture policy in Switzerland, where my wife is from and where I emigrated from when I was four, is different. Perhaps that is why I have a different outlook. If you want to get support programs you have to get an education. You need to get a diploma and further education to get a different perspective. Yes, if you are going to run a multimillion- dollar business, you need an education. Everyone needs business and marketing courses.
Senator Callbeck: I will go back to the federal and provincial standards, which I have never been able to understand. As you said, the standards are safe for some but not for others. What do the federal bureaucrats say? How do they explain that?
Mr. Weder: I have yet to get a clear answer on this. They bring it up as a food-safety issue. Obviously, we are looking at the interprovincial markets across Canada. I have not had time to dwell on trying to put a square peg into a round hole. If we are to be economically viable, we need to work with bigger packing plants to have the necessary economies of scale. It is a big issue and I cannot fully answer that question. Some producers are trying to launch grass- fed beef programs for niche markets and small butcher shops, which are competing with Loblaws and other large grocery chains and, therefore, need unique products to bring people in. They need to work with those people as well. It entails both sides of the equation and we need to address this. We said it would be addressed during the BSE crisis, but now it is being swept under the rug. They still talk about BSE testing on culled cows, but we are told they cannot do that. Would you rather pay more for a used vehicle or one that is a certified used vehicle? We need to think outside the box.
Senator Callbeck: I agree that it needs to be addressed.
Mr. Weder: If it is safe enough for someone to eat in one province why not in other provinces? Maybe it is the big packing plants that want it that way to keep their advantage, but I am not into conspiracy theories.
Senator Callbeck: You mentioned the next generation. The Department of Agriculture and Agri-Food is holding consultations across the country on the next generation in agriculture. They have been in my province of Prince Edward Island. Have you made a presentation or will you make a presentation?
Mr. Weder: I was asked to present in Saskatoon right after we were there for the Outstanding Young Farmer of the Year program and I had a number of other speaking engagements so I was not able to attend. Fortunately, today, I had a chance to go outside Ottawa to meet with the other winner of the Outstanding Farmer of the Year program. He flew to Saskatoon for that consultation and he had a chance to look at the report. He said that the report was watered down from what they actually said; it was somehow lost in translation. I was not there for any consultations or to give my comments but I did get this feedback from the producers.
Senator Callbeck: I am surprised there is a report out already because they were only in P.E.I. over the last couple of weeks.
Mr. Weder: I have not had a chance to speak at any of these.
Senator Callbeck: If you did have a chance, what would you say? For the next generation, what recommendations would you make to Agriculture and Agri-Food Canada?
Mr. Weder: The first thing we need is a marketing campaign on the importance of agriculture and to let the consumer know that, in Canada, consumers have the second cheapest food in the world. Hopefully, that will spill over. Maybe there needs to be more highlighting, which we see done in the marketing of coffee, for example. If you look at fair trade coffee coming from Third World countries, the producer is getting a fair return on the other side. Maybe we need to indicate a fair return on product labelling: "This is based on a cost-of-production model.''
I am not into getting a government cheque. I would sooner earn it myself, but if the consumer does not want to pay for cost of production, as the previous speaker said, then we have to step in to something like that.
There is a segment of the beef and agriculture industry that is really focussed; this is their business. There are hobby farms and there are groups that are just spinning their wheels, but there are groups that really want to make a living with it.
I look at the dairy industry. We hear supposed consumer groups saying that we should do away with the marketing board because the consumer is getting screwed. They are paying too much for milk. When you go to an area that has a bunch of smaller dairies, however, that community seems to be vibrant because they now have small family farms out there.
I was in Manitoba three weeks ago and was thinking that, if this was the same setting in Saskatchewan, the small town would be dead. But no, they have a bunch of small dairy farms; families are still there. The dairy farmers are getting paid by cost of production and have a return on investment and a reasonable profit. It seems to work on that side, yet it is looked poorly upon on the world market because they are not letting the market fall where it should be.
Senator Mahovlich: You mentioned that you spent some time down in Argentina.
Mr. Weder: Yes.
Senator Mahovlich: Eight years?
Mr. Weder: No. I spent a half a year working in Argentina and Uruguay.
Senator Mahovlich: Did you learn a lot?
Mr. Weder: Yes.
Senator Mahovlich: Did you have any experiences down there that would enable you to help us? Do they work on cost of production?
Mr. Weder: I would say they are more business-focussed than a lot of Canadian producers are. Yes, we have some very good producers that know their cost of production, especially on the grain side. On the grain side it is easy to keep track of it because you are always writing a cheque to somebody else. It is just a matter of adding up all the cheques so you know your cost of production. On the beef side of things, less than 5 per cent of beef producers — and I am talking primary cow/calf producers in Canada — will be able to tell their cost of productions.
In Argentina they are doing cost-benefit analyses all the time on what best suits the land. Do they go into cattle or produce more grain? They are looking to using more of an integrated cropping system by using legumes as part of the rotation for grazing land for four or five years. They have fences around all their croplands so the cattle are around there to harvest any fields that are not worth harvesting or going in after the crops.
On the flip side, you also realize their lack of infrastructure. They had a superior railroad handling system and then they ripped it all out. Now they are dealing with trying to truck everything to market and the roads are deteriorating on them. They have some real issues as well. They also look at the government bureaucracy; they have some major government issues.
Senator Mahovlich: Is that country a major producer of beef?
Mr. Weder: They are the world's largest consumer of beef on a per capita basis. On an export basis, Brazil is number one now in the world. Argentina in fact actually banned beef exports for a while because it was causing inflation problems in Argentina and it was considered part of the inflation measure. So they actually banned it. The producers have it figured out on the farm side, but the bureaucracy of the government has kept them back. Argentina should be a dominant world player in agriculture, but the bureaucracy and all the turmoil they have had in the past has kept them from going there.
[Translation]
Senator Biron: Have you examined the possibility of increasing your revenue through the creation of carbon credits, by capturing and burning the methane that is produced by your herds? Are you aware of any ranchers who have done that? Have you received any offers to buy carbon credits?
[English]
Mr. Weder: We have not had anything to do with the carbon credits and methane. There was some suggestion that there would be $1 or $2 an acre that would be available on some of this cropland, and yes, we look at ruminants as being methane producers; obviously, from a greenhouse gas standpoint, methane is a lot more significant compared to carbon dioxide.
I know there has been a lot of research looking at different feeding regimes to reduce methane production in cattle, but if we are going to save the environment by reducing bovine gas emissions, God help us all on that. I think there are a few other places to look at. You only have so many hours at the end of the day, so you really have to focus on where you want to put your energy. They have evolved. We had bison before cattle, so I am not going to worry about them too much.
Senator Gustafson: How do you handle fluctuation in cattle prices? If you bought cow and calf last July, you would probably pay $1,200 for the cow. If you went to sell that cow today, you might be lucky to get $900, maybe $800. How do you handle that?
Mr. Weder: First of all, we do a flat beef pricing for the entire year. When we go to a retailer, we tell him the price of our beef, because we know the cost to produce it. We did get caught with a little blindside in the last half of the year with ethanol spiking corn up, but since then we have done a price adjustment on that.
With respect to dealing with beef cows in our program, we do not buy calves. All calves have to be raised within the program. As far as dealing with fluctuations in our beef cow value, if I sell a cull cow, she is worth a whole lot less right now; but as one guy told me once, it is not how much you pay for the cow or how much you get for the cull cow; it is how much the difference is in between. When you sell, you just buy back in again and just keep rolling the numbers on it. That is how we approach it.
Senator Gustafson: Most of the cattle prices are controlled by the Americans.
Mr. Weder: That is where the price is set.
Senator Gustafson: I came up from North Dakota a month ago, and I met seven semis loaded with cattle heading for Kansas. If you go down to Kansas and go through their feed lots, a lot of those cattle, the best cattle, come from Canada. There are also Mexican cattle, but they are thin and looking poorly. How do you deal in the international market and get a market for Canadian cattle that is not controlled completely by Kansas City?
Mr. Weder: There is no way I am going to figure out a future for all Canadian ranchers. I am focussing on what I have control over right now, and that is obviously establishing a branded beef program with the ranchers I have in there. I want to grow the market and obviously bring on more retailers. If I bring more retailers on, I can bring more producers in. I do not have the solution for the whole industry.
Senator Gustafson: Do you feed your cattle through a feed lot? At what weight do you sell them?
Mr. Weder: We sell all our cattle in this program finished. One of the mandates is that all our producers grow their cattle as much as they can on forages. As much as our program is about no antibiotics, growth promotants or animal by-products, it is about sustainable land use and sustainable agriculture. As far as I am concerned, feeding cattle for 200 days in a feed lot is not sustainable agriculture, if you figure in all of the fuel, fertilizer and all of those things that go into production. The most sustainable form of agriculture is grass-based, which means forages that are renewable through sunlight, carbon dioxide, water and legumes.
We try to grow the cattle up to 900 pounds on forages on our ranches and then feed them between 90 and 120 days in the feed lot. We feed them to get consistent finish on the cattle. Some cattle might finish sooner than others. Our goal is really what the net dollar yield is out of that 900 pounds, because it is pretty much a break-even proposition when we finish the animal. It is just to get to the end user that we use the finishing side of things. That is basically how we work there.
Senator Gustafson: A lot of it has to depend on what you pay for the grain that you feed.
Mr. Weder: Yes, and we have been affected by that.
Senator Gustafson: A year ago you could buy feed in our area, in Saskatchewan, for $1 a bushel.
Mr. Weder: Yes.
Senator Gustafson: Today it is $3 a bushel, and for barley it is probably a little more.
Mr. Weder: I have no problem paying $3 a bushel if it means the grain farmer is making some money too. The other day I was talking to some ranchers that were complaining that feeder cattle were going up. I told them that the cow/calf guy that is selling those calves needs to make a buck too, otherwise he is not going to be around to supply them with feeder calves.
Everybody talks about value chains. Cost of production, return on investment and reasonable profit should be made by each member of that segment; if it is not, it is more of a "screw-you'' chain. It is one segment screwing the other guy over, because he does not know it. Yes, I have no problem paying $3 a bushel, because that is what we are going to pass it on for to the end user. If it means the grain guy is making $3 a bushel, that is great because he needs to make that. In fact, he probably needs to make more.
Senator Gustafson: Do you buy the land the cattle are on, or do you lease it?
Mr. Weder: I buy it and part of it is leased. I work with a conservation group, Ducks Unlimited. We have done some very creative things, partnering ourselves with conservation organizations. It is a win-win situation. They have done habitat restoration on our land; in return we get to graze some of their land. However, we do own and lease land.
Senator Gustafson: There is a lot of land in our view that the farmer would never pay for due to the price they are asking for it these days. You must be in the watershed western side of the province.
Mr. Weder: I am in the Peace River district. When we ranched in Camrose, I realized very quickly that it did not make economic sense to ranch where we were. But I had equity built up that came on there. A smart business guy would realize that he is sitting on equity, and we have guys in Alberta that are doing that. They come to realize, "I cannot expand here, but I can cash out on this and go to Saskatchewan; then I can pay for the place, lock, stock and barrel, and be debt free.'' All of a sudden you are a lot more viable, if you are debt free. That is what we did. Instead of going to Saskatchewan, we went to the Peace River country.
If someone decides to keep farming in an area that does not make economic, viable, sense and he wants to be a primary producer of commodity beef and then does not make money, that is his fault.
Senator Gustafson: There is no question that the over-inflation of Alberta is going to work out to Saskatchewan's benefit.
Mr. Weder: Right, and there are spill-over effects throughout the province. In one way, some of the guys can be grateful about that. They are going to have some decent money to retire upon. But what tends to happen — and I see it a lot of times, where farmers are getting into trouble — is that, although they do not become better farmers, their land just becomes worth more, and now the banks are going to lend them money. All of a sudden, they get "ironitis,'' where they decide to have this or that machine because of the status symbol of having iron. Then they get themselves into cash-flow problems after they start taking too much of this on.
Senator Segal: There were two comments that you have made in the past. One was about keeping young people on the farm and the second was about the ending of subsidies. Can you give me a sense of what strategies you would recommend with respect to the first, and which specific subsidies you would want to kill with respect to the second?
Mr. Weder: Well, keeping their kids on the farm is the parents' responsibility. I go to a lot of conferences and at one if them one guy was talking about training dogs. I do not want to compare children to dogs, but you basically have influence on your kids until they are about six years old, when they go into grade one. Then they are influenced by other things. I was raised by two parents who obviously gave me a lot of pride and responsibility and encouragement. If you look at all the other members who won the "Outstanding Young Farmer of the Year'' award for their different provinces, they all were given responsibility while young; they were given encouragement, given a sense of ownership of the farm. I think responsibility is important. That is why a lot of these kids work well later on in industry. They are given responsibilities and can run with tasks, and go with it.
How do we keep kids on the farm? Obviously, you want to make sure there is a future to it. Obviously, they have to make some returns. Part of it is the parents' attitudes on how to keep kids on the farm. That is how we do it on that.
On the subsidy side of things, the biggest thing I see is when you have ad hoc dollars that go out. I just spent two and a half weeks in New Zealand because I am partners with some New Zealand ranchers on a venture that we are doing. New Zealand basically ended agricultural subsidies in the mid-1980s. The industry changed around and looked at things differently and those producers are doing financially well. However, it is going in reverse again because land prices have increased so much.
Every time I see problems, I see an ad hoc program. Let us say for example we look at what is going on in the ethanol industry in the U.S. They give price guarantees on ethanol, which obviously is going to swing everybody towards producing corn. What have we seen happen? Urea has gone through the roof again. There is always an opposite reaction. If you want to do something, for some reason it goes in the opposite direction. I cannot see which ad hoc program we need to eliminate. We have had 30 years of experience in how ad hoc programs have worked, and I would say they have not worked.
I can give some of the examples from Alberta, where there was an acreage payments program in the early 2000s. All of a sudden the leaseholder said, "Well, you are getting $10 an acre for that land; I want $5 of that now.'' That is what seems to happen. There always seems to be a grab-back, for every $1 that you get, someone seems to grab it back.
The Chairman: One question. The committee is travelling to the West next week. We will be partly in British Columbia. We will be down in Southern Alberta, visiting outside the city, visiting towns and having open sessions somewhat like this; then we will be in Saskatchewan, then Manitoba, and then back. I expect that we will hear there, and we certainly will in the South again and again, that there is almost a sense of fear among parts of the farm community about the future. From the adults' perspective there is great sadness because they do not believe that their young people, because they have been watching the difficulties of recent years, are going to stay in the industry, or stay on the farm. They want to go to Calgary; they want to be someplace else. In all of your work, and you are doing a very good job here and you were at the community college in Lethbridge, do you ever get out and speak to these people? Have you had an opportunity to sit around and speak with both the parent side and the young people side? You said that it depends on the parents and how they raise the children and everything. When they have watched BSE, when they have watched the droughts and everything else that has happened in our province over a long time, do you think that young people in Canada are going to hang in there and hold up our farm industry?
Mr. Weder: I can speak to the people I work around. I do a lot of consultation and work with producers. In fact this Friday I am visiting with a producer in Wawota, Saskatchewan. I freelance write for Grain News, and obviously you can tell that I say what I think and I also write what I think. I have a lot of producers that contact me on an ongoing basis. I find these 35- and 40-year-olds out there by themselves. They have decided to take over their farm. I feel sorry for them because right now I look at it and I know how tough the industry is. I am trying to get these guys in contact with each other, to give them support groups where they can bounce their ideas off each other and get business planning and get other ways of thinking about their industry.
We have to think differently about how we run our industry, and about land stewardship and things like that. If we look at the amount of land and habitat controlled by the ranchers, and wildlife species on that land, can we take for granted that they just do that?
There is also, at the same time, the question of having to support our national parks. There are different revenue streams for these operations.
For instance, we have banned the right for producers to charge for access for hunting on their land; however, there might be other revenue streams for some of these producers to make money. We are working with some ranchers right now in Alberta who have invested money in land and cattle in Saskatchewan. They are trying to find young guys as junior partners to operate this as a way to get into the business. We have brought some guys from Ontario to Saskatchewan to get into ranching. You need a network to get this going.
The most endangered species is the young farmer. We have to figure out where they are and put their locations on a map. Then, we need to set up corridors to keep them connected. The reality is that it will not change overnight, because it has gone too far already. We need to save the ones that still exist, because they are the ones that will change things and bring their kids into it. The next 30 years will be tough, because it has already gone too far. We should have been doing this 10 to 15 years ago. Now, we are trying to catch up.
The Chairman: Are you confident?
Mr. Weder: I would be stupid not to be confident. I have to be confident. If you are a pessimist and are trying to do this, you will become suicidal after a while. It is true. You have to be optimistic, because there is so much opportunity in this country. At the same time, what we started with this group has not necessarily been only for the money that we have generated from our beef sales, but because we have been able to bring together positive attitudes and positive producers. Those producers share management ideas and pool resources. One guy might have surplus cattle and the other guy might have surplus grass, and now they have a business deal together. Another guy from Lethbridge, Alberta, wound up selling some land to a developer. He said that he could buy a couple of condos in Canmore with the money but he wanted to invest in the dirt of Saskatchewan. He wanted to see black topsoil grow something with his money. He is investing with another young rancher in Saskatchewan and he has venture capital. That is the kind of thing that needs to happen out there.
The Chairman: Thank you, Mr. Weder. We needed to hear about that reality because it is not the kind of thing we have been hearing at committee. Time and again, we have heard from people who are kind of down on that part of Canada's future. Mr. Weder, your comments have been very helpful and we appreciate your taking the time to appear before the committee. We wish you all the best.
Mr. Weder: Thank you. I will tell you about something that I have come to live by after it was emailed to me. It is the story of a rich man and his son who decided to go to the country to see how poor people live. On the way home, the father basically asks his son, "Did you see how the poor people live in the country?'' The son says to his father that, yes, he did. The father says, "We have a fence around our place to protect ourselves, and they have friends that look after them. We have a pool behind our house to go swimming in, and they have basically a creek that goes out with no end. We have lanterns to keep our house lit at night, and they have the stars up above.'' The son then says to his father, "Thanks for telling me how poor we are.''
The Chairman: On that note, thank you and all good luck.
The committee adjourned.