Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 6 - Evidence - Meeting of June 11, 2009
OTTAWA, Thursday, June 11, 2009
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-29, An Act to increase the availability of agricultural loans and to repeal the Farm Improvement Loans Act, met this day at 8 a.m. to give consideration to the bill.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, good morning.
[Translation]
Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.
[English]
Minister Ritz, we thank you and your staff for taking the time to come to our meeting.
I welcome everyone watching today. I am Senator Percy Mockler from New Brunswick. I would like to start by asking the members of the committee here today to introduce themselves. I will start on my left.
Senator Martin: I am Senator Yonah Martin from Vancouver, British Columbia.
Senator Mahovlich: Good morning, I am Senator Frank Mahovlich from Toronto, Ontario.
[Translation]
Senator Poulin: Good day. My name is Marie Poulin and I have represented Northern Ontario in the Senate since 1995.
[English]
Senator Carstairs: I am Senator Carstairs from Manitoba.
Senator Eaton: I am Senator Eaton from Ontario.
[Translation]
Senator Rivard: Good day. My name is Michel Rivard and I am from the province of Quebec.
The Chair: We are meeting today to study Bill C-29, An Act to increase the availability of agricultural loans and to repeal the Farm Improvement Loans Act.
[English]
It is our pleasure to welcome today the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board. He is accompanied this morning by Greg Meredith, Assistant Deputy Minister, Farm Financial Programs Branch; and Jody Aylard, Director General, Finance and Renewal Programs Directorate.
Mr. Minister, thank you for accepting the committee's invitation and for appearing before us this morning. I invite you to make your presentation at this time. It will be followed by a question and answer session on Bill C-29.
Hon. Gerry Ritz, P.C., M.P., Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board: Thank you. It is a pleasure to be here this morning. I want to thank this august group for the work that they do on behalf of farmers in Canada and the great work you continue to do.
This is a small but very important piece of legislation that we have before us here today. As you know, it has been through the House of Commons and through the committee system there. We are looking for an expedient end to this, hopefully later today.
Farming is changing out there. It is big business. It runs on sound business plans, access to credit and cash flow — the same as any other business across this great country. At this particular juncture, with a global economic meltdown, agriculture is facing access-to-credit challenges the same as every other business.
That is why we saw fit in the budget to propose these changes. As you know, it takes a piece of legislation to do that. That is what we have before us today.
I am sure you have studied the bill, as it is only a couple of pages long. The bill will double the credit available to new and beginning farmers from some $250,000 to $500,000. It changes the down-payment from 20 per cent to 10 per cent and gives them quicker access through the chartered banks. As you know, the federal government then backstops 95 per cent of that loan requirement.
It also makes some fairly significant, substantive changes to cooperatives. We did see a tremendous opportunity for cooperatives in the middle of the last century. There is a bit of a rebirth on cooperative ideas; that is, farmers getting together to promote a new seed plant or a processing or handling facility. We are seeing those types of things happening, too.
Under the old rules, a cooperative had to be 100 per cent agriculturally based. That is now changing to the majority, or 51 per cent, will be agricultural based. That allows, then, to access credit from venture capital groups, from outside investors and possibly partner with one of the large line companies when it comes to elevation, et cetera.
This is something for which the agricultural community has been asking. Agriculture has changed drastically over the last couple of decades, and they are looking for government programs to keep up. That is the nature of what we are doing here today.
There is not much more to say about the actual legislation other than it is well received. A number of people out there are commenting that this is what they need to carry forward. A concern has always been farmers taking on more debt, but the latest response from Statistics Canada is showing that the farm debt-to-asset ratio has only gone up by three quarters of one per cent. This is the type of thing that farmers need.
We also have an average age of farmers out there approaching retirement age. This will help spur the way forward for young and beginning farmers to take over the family farm or to expand and move out and get those economies of scale that they need in today's global world.
With these new triggers and new access, this will make some $1 billion in capital available to the farm sector in Canada over the next short term. That is good news. Much of the farm community is welcoming this, including the Canadian Co-operative Association. Some of the large-sector players are saying that this will create an unlevel playing field. I am not sure why a publicly-traded company has to worry about a $3 million co-operative, but certainly we take those situations seriously.
We are all here to ensure the farm gate has as many people bidding for their product as possible. I think any new cooperative that springs up is a good thing and will help further the role of the farm gate.
With that, I welcome any questions you may have.
Senator Carstairs: Mr. Minister, in your remarks you talked about a speedy end later today. What did you mean by that?
Mr. Ritz: I am just hopeful that the Senate takes this as seriously as the House of Commons does. I know this is the one and only hearing that you will have on this issue. I am hopeful you can report back to your chamber later today.
Senator Carstairs: Reporting back does not mean we go through third reading because we have a period where we have to wait until we go into third reading.
Mr. Ritz: Farmers are excited about the passage of this. I will not give you advice, but I would certainly ask on behalf of farmers that you move this through as quickly as possible.
Senator Carstairs: In terms of the letter that you received from Maple Leaf Foods. Let me qualify that by saying that I am a great believer in cooperatives; I come from Nova Scotia originally, although I represent Manitoba. That is the land of Moses Coady. If anyone understands cooperatives, Nova Scotians understand them.
Having said that, they want an answer to their question. They indicate to us that they have not received a reply. Why did you drop the amount from 100-per cent owned cooperatives to 50 per cent plus one?
Mr. Ritz: I covered that in my opening address, senator, in that it allows farmers to partner with other facilities. A number of independent grain terminals have been springing up across Western Canada, handling board and non-board grains. Most of them have partnered with one of the big line companies to give them access to railway service and terminals on the West Coast, and so on.
If we held this at 100 per cent, that would not be the type of situation that could move forward. We have seen that as a successful model, and we want to emulate that for seed plant processing facilities and track-side loading facilities, which could be developed like that. I think it is a good move.
Senator Carstairs: How would you reply to Maple Leaf Foods that says you are putting them at a disadvantage compared to companies such as Granny's Poultry Cooperative Ltd., the Farm Fresh Poultry Co-operative Inc. and Olymel? They are relatively large companies in terms of production vis-à-vis Maple Leaf.
Mr. Ritz: There is quite a difference in the economies of scale. Maple Leaf is a large publicly traded company. They have access to credit at much different levels than a small cooperative would. I make no apologies for promoting the idea of more small cooperatives developing. If it creates competition for Maple Leaf and makes them pay 10 cents per pound more, it is a good thing for farmers. That is what we are all about.
Senator Carstairs: Having received a letter from a major Canadian corporation, why did you not reply to it?
Mr. Ritz: I am not sure that we have not. I am not familiar with the date on a particular item, but I would be shocked if someone did not pick up the phone and call Mr. McAlpine.
Senator Carstairs: They indicate that, as of yesterday, no one has been in touch with them.
Mr. Ritz: I will ensure that is done by noon today.
Senator Carstairs: Thank you.
Mr. Ritz: I would not want to see that hold up the passage of this legislation.
Senator Eaton: Minister, the bill will quadruple the amount of government-backed loans to farmers. Has this crisis driven many farmers out of business?
Mr. Ritz: No, it is surprising. I talked late last week to the chartered banks and Farm Credit Canada, FCC, which is an arm's length Crown corporation of Agriculture and Agri-Food Canada. Farm Credit Canada is probably the largest holder of agricultural loans in this country. They are telling me that at this particular juncture less than one third of one per cent is considered at risk. Farmers are durable. They are a vibrant part of economy. They pay their bills and keep moving forward regardless of their trials and tribulations. We are looking closely at the pork sector, especially with the trials that have hit them with the H1N1 influenza outbreak. We work with them on existing programs to keep them liquid.
Having said that, it is always a constant battle with weather conditions and so on. Senator Carstairs' area of Manitoba is too wet; my area of Saskatchewan is too dry. We would have a great start to the year if we could combine the two. Those weather-related and market-related situations will always be a factor.
Senator Eaton: Are we having trouble attracting young farmers? Is this a dying profession?
Mr. Ritz: I would not say that it is dying, Senator Eaton. However, I would say that it is changing; there is no doubt about it. The two brothers that farm the land I did, plus much more, seeded 32,000 acres this year. The size of farms is getting increasingly larger. Some say that is a bad thing; some say it is a good thing. I know these brothers do a tremendous job on what they till. The average farm in Saskatchewan is still in the 2,000 to 3,000 acre range.
It is a high-cash, intense business to enter. The machinery used to farm that 2,000 or 3,000 acres would easily approach $1 million, and then you need the facilities to handle the grain, to store the equipment, et cetera. That has scared a number of people away. There has been red ink on the bottom line for much of agriculture for a number of years. We have seen some of that change in the last while in the grain and oilseed sectors. The livestock sector has been shaken to the core since the bovine spongiform encephalopathy, BSE, in 2003. We are now seeing pork under duress from market closures over the H1N1 influenza.
We have been very successful in getting approximately 90 per cent of those markets reopened, but having a bad month when you are already having a bad year compounds the situation.
Senator Eaton: What interest rate is charged on money accessed by new or young farmers?
Mr. Ritz: We do not charge the interest rates.
Senator Eaton: You do not charge any interest rates?
Mr. Ritz: No. A 0.85 per cent administration fee is charged to get involved in the program, but the banks set the interest rate depending on the business plan presented. The rate varies. It is a voluntary situation; no one will force anyone to borrow this money.
Senator Eaton: No, but if I am a young farmer and need money, I would be looking at my options.
Mr. Ritz: This is probably your best bet. It is 95 per cent backstopped by the federal government. It gives you a favourable rate at the bank and access to credit that they may turn you down on without that backstop.
Senator Cordy: I think it is a positive thing to provide credit for farmers because these are struggling times. I am not against a bill that would provide credit for them.
However, you mentioned in your opening remarks that farm debt is increasing, and I am very concerned about the debt of farmers. It has grown in the past few years by $5.1 billion and now stands at $54 billion. I read that it is actually four times higher than that of the United States' farmers. The challenge for farmers is to sustain their farm incomes.
We read about farmers across the country — small farms and big farms — where they are basically living hand to mouth. These present economic times are making it even more challenging. The recent crisis in the hog industry is making it more challenging for the pork producers. In my province of Nova Scotia, only four pork producers are left. It also makes me a bit nervous.
Could you talk about the debt? It is great to provide credit to farmers, but the increasing the debt load on farmers already struggling to be sustainable causes me concern.
Mr. Ritz: On the situation in Nova Scotia of only a limited number of pork producers left, when you analyze that, you will find that the pork industry in Nova Scotia was rationalized more or less by the provincial government before this latest situation. Two or three years ago they started to wind down for whatever reasons they had. Farmers will make a decision based on their bottom line and their future capacity as to whether they are viable and will continue.
As always in any business, there is good debt and then the debt load that you have. As I said, we are struggling with our programming to ensure that farmers have access to liquidity to ensure that they can hang on should they decide to do that. The ultimate decision is theirs based on their business practices and future, et cetera.
The hard and fast facts are that in the last decade net value of farm assets increased by almost $200 billion in Canada. I am a little chagrined when I see that the debt in Canada is four times what it is in the U.S. I am not sure where they get their statistics. It is closer than that depending on how you analyze it.
The debt-to-asset ratio in Canadian agriculture has only increased by less than one per cent in the last decade. Farmers are handling this well. Farm Credit Canada is showing less than one third of one per cent of their files at risk where they are working with someone to foreclose. That is a tremendous number when you look at today's economy and the global recession hitting every business, whether it is on Main Street downtown or in the country.
Farmers are vibrant; they are concerned with the future of their industry. They are hopeful that their son, daughter, son-in-law or daughter-in-law can take over the family farm and maintain what they have worked all their life to build. This will certainly help them to do that.
Senator Cordy: I agree with you that farmers are vibrant and extremely hard working, or they would not still be farmers with the challenges that they have had.
Mr. Ritz: It is as much attitude as anything.
Senator Cordy: I agree.
How are we attracting young people? To say that we are attracting young people by starting them off with huge debts is not an encouragement to get into the industry. Is it their vibrancy and mind set that gets them into it? That would be one motivator, but we need more motivation than that. Those of us from urban areas are not always appreciative of the work that farmers do. How do we attract young people into a job where they will be working 16 hours per day and carrying these debts?
Mr. Ritz: Ask any articling law student and they will tell you they work 16 or 18 hours per day; ask any accounting firm and they will tell you their young accountants work that many hours. Anyone who wants to get ahead does not look at the clock. Farmers are typically known for that; they start early and work late to get the job done.
Having said that, the work ethic on the farm is no different than the work ethic of any entrepreneur who wants to succeed. We want to ensure the programs are there to help them. We do not want to distort the market or one area of the country vis-à-vis another area of the country. Everyone needs access to a level playing field whether internationally or domestically.
A number of things are being done. Interprovincial trade barriers harm agriculture disproportionately, or more than not getting a World Trade Organization, WTO, agreement. Work needs to be done on that front. The bottom line is that we need a bottom line.
As you mentioned, being an urban dweller, you must come to grips with the fact that Canadians spend less of their disposable income for their top-quality food stuffs than anywhere else in the world. You may see a rise in your produce and grocery bill by 2 or 3 per cent, and that will make all the difference to Canadian farmers' bottom line. The last thing they want to see is their baskets of groceries go up.
We are seeing that anyway, as people buy more imported goods. Everyone likes a slice of pineapple for breakfast now, as opposed to just bacon and eggs. All those things that add to the cost of that food basket but do not benefit Canadian farmers must be taken into consideration when we do those cost comparisons.
A 2- to 3-per-cent change in your grocery bill on a monthly basis would make all the difference in the world to Canadian farmers. How do we do that?
Senator Cordy: What specifically are we doing to attract young farmers?
Mr. Ritz: We have a program through agriculture; we do it with a number of things. We have a program to entertain and educate young farmers. The first people you want to keep on the farm are the sons and daughters of the farmers themselves; they understand the business.
The old saying, "The world is your oyster," is more true now than ever. Out in my country, it is the oil patch that keeps the farm gate alive; it is the off-farm income. I was a general contractor to pay for my farming habit. My son works in the oil patch, and probably never will have a chance to farm because of the high cost of getting back in.
If he decided to get back in now, he would have a shot because he has half a million dollars available to him that he would never get through a chartered bank with this new program. I doubt that he ever will, which is unfortunate. I will see my farm — which is a third-generation farm — go into the annals of history.
However, this is a business. You have to think with your head not just with your heart at times and analyze good debt, bad debt, liquidity and business plans. Those aspects are all out there. You cannot just work hard anymore and get by; you have to work smart.
[Translation]
Senator Rivard: Mr. Minister, your program includes one billion in loan guarantees for farmers over five years. In your opinion, how many farmers will be able to benefit from this program? Do you have any idea?
[English]
Mr. Ritz: We are expecting some 3,000 or so farmers a year to take that up.
[Translation]
Senator Rivard: Regarding livestock loans, can you explain to us the nature of the losses covered by the program? I ask the question, because I would imagine that if a herd is decimated by illness, compensation will be equivalent to the price paid, and not equivalent to the difference between the price paid and price obtained at slaughter.
[English]
Mr. Ritz: A number of factors lead to losses on a commodity; buying high and selling low will always create a loss. The nature of agriculture is to get out of the cycle.
Predominantly when it comes to fed cattle, farmers generally have their calves in that January-to-March cycle, pasture them out and sell them off as they bring them off pasture in the fall. That creates an inordinate number of cattle coming into the system at that point, which tends to drive the price down. A number of farms analyze that and start calving later. Some are fall-calving now to get out of that cycle. That way they are not in that feast-or-famine cycle. Those are management decisions each farm will make.
When it comes to the case of a herd that experiences disease, we have other programming on our safety-net side that covers those situations and will help offset bank loans, depending on what degree of coverage the farmers have. From there they can get back into the business or stay out; that is their decision.
[Translation]
Senator Rivard: We know that a "farmer" is defined differently in Quebec and Ontario. Can the program be applied as easily in both provinces?
[English]
Mr. Ritz: I do not see why it would not, senator. It is based on the sound business plan of the individual applying, through whichever chartered bank they decide to work through, and then moving forward.
This is a shared jurisdiction between the federal and provincial government when it comes to agriculture; the programming, the application of it and so on. This particular program is a federal program, so they are our rules and regulations administered by the national chartered banks. It really should not have an effect province to province.
[Translation]
Senator Rivard: Thank you once again for bringing in this program to help farmers who are in desperate need of some assistance.
[English]
Mr. Ritz: I would like to take credit for setting it up, but it has actually been around for years; it just needed to be modernized. That is what we are doing here today.
[Translation]
Senator Poulin: Mr. Minister, in response to a question from my colleague Senator Cody, you mentioned interprovincial barriers. What percentage of Canadian agricultural products is subject to interprovincial trade?
[English]
Mr. Ritz: With the odd exception, 100 per cent of them.
[Translation]
Senator Poulin: Are you saying that all Ontario products are marketed outside the province of Ontario?
[English]
Mr. Ritz: No, I am saying that they have a problem. If a producer in Ontario produces a great cut of beef and wants to export it to Quebec or Manitoba, they cannot unless it has gone through a federally regulated plant.
Senator Poulin: What is the approximate percentage of agricultural products in Canada that ends up being sold in other provinces?
Mr. Ritz: I am not sure we break it down to other provinces. Are you asking about international and domestic exports?
Senator Poulin: To start with, I am asking only about domestic exports.
Mr. Ritz: I would have to check to see if I can find that number.
Senator Poulin: What would it be internationally, going to the United States, for instance?
Mr. Ritz: Internationally it would vary between 50 to 85 per cent, when it comes to grains and oilseeds.
[Translation]
Senator Poulin: Would this legislation affect NAFTA in any way?
[English]
Mr. Ritz: Nothing at all, because this does not distort. This is not product-specific at all. This is just general application of credit to the farm gate of any description. It is not specifically targeted at sheep, pork or grain; it covers the gamut. When you have a program that specifically targets and benefits one sector, then you could have trade challenges.
[Translation]
Senator Poulin: One argument that is often raised during the course of trade talks with the United States is farm subsidies. Do you not think that our farmers could find themselves at a disadvantage under the circumstances?
[English]
Mr. Ritz: Not at all, because this is done at commercial rates. It is not half the interest rate or something similar. This does not disturb the commercial agreements between a chartered bank and the farm itself.
The only aspect that could possibly be questioned is that the federal government backstops the loan, but we do that through other facilities when it comes to small business, through Export Development Canada, through the Business Development Bank of Canada and so on. Those types of situations are already there around the world. It is when you get product-specific that someone would have an actionable trade challenge.
[Translation]
Senator Poulin: Earlier, you alluded to our chartered banks. What steps must a farmer take to access this higher line of credit?
[English]
Mr. Ritz: It is not a matter of applying to us. It is a matter of going to your bank for your line of credit or your expansion plans; bringing in your last year's income tax figures and a good, sound business plan as to why you are doing what you are and how you will do it; and showing them how you will repay it — basically what farmers and businessmen across the country do all the time.
The bank will then decide the best course to follow. They may or may not recommend this proposed Canadian agricultural loans act, CALA, as it will be called. They may have something else that will work for you because the banks structure certain things in certain ways as well. Farm credit will not have access to this particular program, but they have other programming that may help.
It is a matter of knowing your lender and what you want to do, and coming in with a good, solid business plan and asking the right questions.
[Translation]
Senator Poulin: Clause 3 of the bill amends the definition of "farmer." The word "farmer" can now mean any individual, partnership, corporation or cooperative association that is or intends to be engaged in farming in Canada. Who determines that an individual intends to be engaged in farming? Would that be the bank?
[English]
Mr. Ritz: The farmer himself will make that decision.
The new reality is that the old definitions under Farm Improvement and Marketing Cooperatives Loans Act, FIMCLA, which has been around for quite some time, no longer fit the reality of what the farm sector is all about.
It now recognizes and takes into consideration that a great deal of farming is backstopped by off-farm income. That was never done before. If they earned money off the farm, they would say that the cash flow should be taken from there and refuse to loan them money on the farm. The new reality is that there is certainly cash flow from there, but you cannot take that from your livelihood and force someone to use it on the farm. This lets the farm stand alone as a business venture and allows those types of situations to move forward.
[Translation]
Senator Poulin: Who determines whether an individual intends to be engaged in farming? Is it that bank, or the department?
[English]
Mr. Ritz: It is a combination of the two. Actually, the definition of "viable agriculture" — or a viable business of any type — is more entrenched in the Canada Revenue Agency, as to what they allow.
Having said that, it is the chicken-and-the-egg situation — pardon the pun — in an agricultural sense in that I have never farmed before and I decide I want to. Am I a farmer until I have produced a crop, or can I be a farmer to borrow the money to produce that crop? That is what we are seeking to level out.
[Translation]
Senator Poulin: For someone who would like to start up a business, this responsibility seems rather unclear.
[English]
Mr. Ritz: It is with the business plan itself. It has to be an agricultural enterprise they are taking on. Mr. Meredith, do you have anything else to add on that?
Greg Meredith, Assistant Deputy Minister, Farm Financial Programs Branch, Agriculture and Agri-Food Canada: To clarify, the bank will ask a new or starting farmer for a plan and a strategy and exactly what they are borrowing the money for in a farming sense. That provision is new in this legislation. In other words, you do not have to come in and demonstrate that you have an existing farm income stream. You have to demonstrate that you have a viable business plan.
Mr. Ritz: That is farm-oriented.
Mr. Meredith: That is right.
[Translation]
Senator Poulin: So then, the bank is responsible for determining whether the application complies with the terms set out in the legislation.
[English]
Mr. Ritz: To a certain extent, yes. However, the parameters within which the bank works are covered under this legislation. They cannot have someone come in and say that he or she wants to borrow money under FIMCLA to open a taxicab company that will serve farmers. That is not a farm business. However, if someone comes in and says that he or she wants to build a 200-sow, farrow-to-finish operation, then that is a farm business. We are seeking to give the bank the clarification of whether a business is considered farming or not, and FIMCLA would not apply.
[Translation]
Senator Poulin: In other words, you will develop regulations to make the job easier for the banks.
[English]
Mr. Ritz: It comes down to common sense. The problem right now is that, as I said before, no definition exists of being a farmer until you have farmed. We are seeking to bring people onto the farms, new and beginning farmers. They could have agriculture in their veins, being the son or daughter of a farmer, or they could have lived in the city all their life but always wanted to move to the country and start a cattle operation. Now they can.
Therefore, you can become a farmer by classification and apply for this money as long as you have a good, solid farm business plan and you will do something that will become farm oriented.
Right now, that is not in the legislation. There was no way for new and beginning farmers to trigger FIMCLA in the old guise. Under the new one, now they can. You need to have something in there that defines the opportunity to become a farmer and borrow the money under FIMCLA.
[Translation]
Senator Poulin: Basically, farming as an activity is not clearly defined in the legislation. The only reference is to an individual who "intends to be engaged in farming." Pursuant to the legislation, will the department move to define clearly in the regulations what specifically constitutes a farming activity?
[English]
Mr. Ritz: I guess we do through the safety net programs that will parallel this. The problem is, in days gone by, a sugar bush, for example, did not qualify as farm sector.
Senator Poulin: That is a good example.
Mr. Ritz: Therefore, now someone wanting to open a new sugar bush could apply under FIMCLA. There must be that type of scope there.
[Translation]
Senator Poulin: That is a very good example. In fact, I was just thinking about the persons with many years of experience who work in our sugar bushes and who have never been able to apply for these loans. I was looking for a definition in the act, and I did not find one.
[English]
Mr. Ritz: We do not want to limit anyone. We will leave the definition as wide as we can.
Senator Martin: I just wanted to take this opportunity to thank you for the work you are doing. It is very encouraging to hear about the robust industry and how important farming is to Canada.
I am also an urban dweller. However, in speaking to some of the entrepreneurs — the business people and developers — in this economic downturn, access to credit is the number one concern for them. Therefore, I would imagine this new program that is modernizing it and allowing farmers to have that access is absolutely vital.
How soon will this program be available if and when it is enacted?
Mr. Ritz: The day Royal Assent occurs, it is good to go.
Senator Martin: That is very good news.
Mr. Ritz: As an urban dweller, as you say, the one thing we have in common with farmers is that we all like to eat. Farmers buy groceries, as well. As we travel the world and open these trade corridors and reinvigorate some, the first questions we are always asked is where have we been, why are we not selling like the Australians, the EU and the Americans, and why are we not beating down their doors like they are.
We have been reticent and shy. We know we have a top quality product, but we are not out there doing the job. We have politically levelled the playing field and allowed industry to industry to make the deals, and we are seeing the benefits of that already.
It is an ideal time to realize the tremendous potential of Canadian product out there in the world. It is very timely that this legislation goes through quickly and that we continue to build on this because there is tremendous potential. We have a hungry world out there looking for good quality product at a fair price, and we have that in spades.
Senator Martin: Within Canada, you talk about the provincial-federal partnership and the importance of working with provinces. Differences exist between provinces.
Will this program be administered in a uniform manner, or will there be some slight variances between provinces?
Mr. Ritz: There will be differences in applications. It is hard to find a good maple sugar bush in Saskatchewan — I say that facetiously. Birch syrup is actually being developed in Saskatchewan, which is very similar. However, having said that, yes, there will be variances across the country because of the variances in agriculture as to who applies.
However, it is a national program; it is a federal program administered by the chartered banks, which, of course, are in all the provinces and territories, too.
Senator Mahovlich: Thank you, Mr. Minister, for appearing. I was just wondering, does anyone ever inherit a farm anymore?
Mr. Ritz: I do not think anyone is allowed to do that to their kids anymore, senator. In all seriousness, it can be done. It can certainly be done.
Senator Mahovlich: I can remember going to school, and my friend came from a farm, and his brother was to inherit the farm and stay farming while he was looking to become a lawyer. They just handed that farm down through the family. However, now it seems as though everyone has to go into debt to own a farm.
In the city of Toronto, as the city grows, the real estate is being gobbled up. We do not have much farmland. I am very concerned. The Holland Marsh is the wealthiest farmland in Canada. Ten square miles can feed the whole of Canada with the Holland Marsh. That is how wealthy that area is, and now the city of Toronto is bordering on that farmland.
Mr. Ritz: A number of provinces take that to heart. The legislation around maintaining farmland is provincial, not federal, because of the jurisdictional situations.
I know British Columbia has the Land Act, and they do not allow development. I know there are tracts of land right within Vancouver proper that are maintained as agricultural land because they are very concerned about that. Certainly, Ontario could do the same thing if they are concerned about the Holland Marsh. They could say that you can build all around, but you cannot build in it. That can be done.
With respect to estates and leaving operating farms to the next generation, it can be done. We made changes in Budget 2007 — I think it was — to extend capital gains to $750,000, which means less estate taxes are paid when that happens.
The fly in the ointment is that an increasing number of agricultural enterprises are becoming incorporated — limited companies — and you leave shares, not the farm per se. You leave shares to your children or to whomever in your estate. That is a bit of a problem when it comes to leaving things in an estate.
Senator Mahovlich: The problem I see for Toronto is that you maximized the loan at $500,000. That would not do much in Toronto. Real estate is much higher than $500,000.
Mr. Ritz: We are bringing this in line with the Canada Small Business Financing Act. It used to be $250,000. Once these changes go through, up to $500,000 will be available.
The chartered bank would look at the asset value of the property as well. They may use this amount of money as a lever to springboard into the next level of borrowing.
Senator Mercer: Mr. Minister, I apologize for being late.
A concern we have heard before this committee is access to credit. Senator Martin also mentioned it. My concern is that we will have this great program in place but still rely on chartered banks to be involved in the process.
I have a great deal of respect for farmers in general, but for young farmers in particular because they are getting into this with their eyes open.
Mr. Ritz: We hope.
Senator Mercer: At least we hope they are.
If you go into any chartered bank in the country with a viable business plan, they will not look at your farm plan by itself. They will want to know that you have an off-farm income. I do not know any other operation or business in the world where people go into business knowing that they will need to have a job somewhere else to support their farm operation. Farming can be viewed as a habit that needs to be supported by off-farm income. I am very worried that not enough money will be available from the chartered banks. What will the department do to monitor that?
We have also heard, in this committee, that in some places interest rates charged have been exorbitant — as high as 20 per cent. We heard that mainly from woodlot operators, but woodlots are only part of their agricultural operation in many cases, particularly in Eastern Canada. How will you ensure that capital will be available?
Mr. Ritz: This is done more through the Department of Finance Canada, senator. Minister Flaherty has had a number of in-your-face discussions with the chartered banks about their bedside manner on what they make available and what they charge for it. Access to credit will help bring us through this recession and stabilize the economy. People need to get back to as close to normalcy as possible. We need consumers consuming, buyers buying and everything running on eight cylinders.
We made available to the chartered banks and credit unions approximately $125 billion in liquidity by buying back the federally guaranteed part of Canada Mortgage and Housing Corporation, CMHC. This was to give them liquidity and to ensure that small businesses, including agriculture, have access to the credit they need to keep moving.
When you hear about exorbitant rates, such as 20 per cent, being charged, please let us know. We will track that down, find out who is loan sharking and ensure it is not the norm. Profit is a wonderful thing, but a fine line is crossed into gouging. We want to ensure that is not happening.
Anyone applying for any credit needs to go in with their eyes wide open. The credit card that gives you air miles points and all these wonderful cash-back things will cost you 20 per cent or 22 per cent. Others at 6 per cent give you no frills. Consumers will have to make that educated decision as to which they take.
We do not control the rates that the banks charge, but we do analyze them. I have had those discussions with the agricultural representatives of the chartered banks already. We continue to offer other programming through Farm Credit Canada that will keep the banks honest.
Senator Mercer: I would suggest you look no further than the recorded testimony before this committee to find a couple of cases that should be followed up on with respect to loan sharking. This is loan sharking by the big five chartered banks. This is not by some guy in the back of the pool hall lending money.
You talked about marketing of Canadian agricultural products. I recently came back from a trip to Europe. I was impressed by the size of the agriculture industry and its health. I know there are subsidies — some obvious and some hidden — in their industry.
However, I am concerned about your statement that people want to know why we have not been out there selling our products. You then referred to agriculture enterprises being out there selling their products. Is it not the job of Agriculture and Agri-Food Canada to be out there selling Canada's products? Is that not one of the fundamental jobs of the government, to be marketing the country to the world whether it is agriculture, automobiles or fish?
Mr. Ritz: I do not disagree with that statement, senator. We have been reticent in doing that. Minority governments are problematic. We need someone from the opposition to pair with to travel. I had to cancel a trip to China because I could not get someone from the opposition to go with me. Then I read a press release from Wayne Easter, the opposition agriculture critic, decrying me for not going to China when he was the first one who rebuffed me about going along. I have a problem with that, as does Canadian industry.
I agree that it is within the federal government's mandate for Foreign Affairs and International Trade Canada, Agriculture and Agri-Food Canada or whichever department to get out there and open doors. I have been in 11 countries doing that — beginning free trade agreements and ensuring that we are flowing through.
A tremendous opportunity exists in Colombia to forward a free trade agreement. The free trade agreement between Canada and Peru will come before this committee at some point. I would urge you to push that through. We need that in place before the American crop is harvested because they have access at a 25-per-cent cheaper rate than we do until we get that agreement in place. It is encumbered on all of us to ensure we are doing our job and getting that done.
Having said that, we will continue to travel the world, level the political playing field and make connections industry to industry. It is then up to industry to carry on with that. I will continue to travel and promote that as well.
Senator Mercer: Mr. Minister, the Canadian people decided that we will have a minority government. We are stuck with it until we have an opportunity to fix it. We will all try to fix it one way or another. You will try to fix it in a different way than I will try to fix it.
Mr. Ritz: The question to you, senator, is how soon.
Senator Mercer: We have what we have. We have to try to make that work.
Mr. Ritz: Absolutely. I totally agree with you.
Senator Mercer: The underlying factor is that people in the agriculture industry need our support. They are the best entrepreneurs in the country. They are the people who have to make decisions every spring that people on Bay Street never have to make.
Mr. Ritz: They are tenacious.
Senator Mercer: It is a very risky business.
Before I finish, I would like to underscore the necessity for you, once we pass this bill and it becomes law, to have a mechanism in place to monitor that banks are, indeed, holding up their side of the operation. We can have a good program in place, but if no money is moving to the farmers who need it, particularly young farmers, then the best program in the world will not help us at all.
Mr. Ritz: I agree with you completely, senator. I will ask for quarterly reports from the banks on how much is going out, what the average interest rate is, et cetera.
Senator Mercer: Would you make those reports public, minister?
Mr. Ritz: I am not sure if I can go public with what the banks give me. I will check that out. If I can, I will. If not, I can certainly report.
Senator Mercer: If you ask for quarterly reports, those quarterly reports would be very timely in the other study that we are doing because access to credit is an important part of that study.
Mr. Ritz: If I can I will, senator.
Senator Carstairs: In response to Senator Martin's question, you said that this will go into force as soon as it receives Royal Assent, although, I cannot find any mention of that in the bill.
Does that mean no regulations are required? If Royal Assent is given next Tuesday, for example, will it go into effect on Wednesday?
Mr. Ritz: Absolutely.
Senator Carstairs: In response to Senator Poulin's question, you said that Saskatchewan does not have much sugar bush — which is very true — but they have Saskatoon berries. I want my Quebec colleagues to know that until you have tasted a Saskatoon, you have missed out. Blueberries are great, but Saskatoons are just that little bit better.
Mr. Ritz: I cannot agree with you more, senator. I fight with the bears on my property every year for the Saskatoon berries, and it is worth the fight.
Senator Carstairs: In terms of the chartered banks, will this mean that cooperative banks will or will not qualify in the protections in this particular legislation?
Mr. Ritz: By cooperative banks do you mean the credit unions?
Senator Carstairs: Yes.
Mr. Ritz: Yes, they will qualify: Caisse populaires, credit unions across the country and Alberta treasury branches.
Senator Eaton: Senator Carstairs was asking you about cooperatives, which is very interesting. Since becoming a senator sitting on this committee, I have learned that, as Canadians, we are not very good at marketing ourselves. We are very shy. We do not push ourselves as much as we might.
For instance, you have farmers, venture capital, processing companies, whatever the cooperative ends up being. Do you see people becoming more market-oriented if it is not completely a farm-driven thing? If it is a farm-driven thing at 51 per cent and the rest is business, do you think we will be better at pushing our products out there, at being more innovative?
Mr. Ritz: Absolutely. I think what stops most business — not just farm gate — is the marketing of it. You can build the best grapple grommets in the world, but unless you have a top-notch marketing firm, they will never leave your factory door. Farmers have the same issues.
We have always relied on someone else to take us up the next rung of the food chain, and then we cry because the processor is making money, the elevator operator is making money, the railway is making money and I am just a price taker. We need to get beyond that hewers-of-wood, drawers-of-water mentality and go one or two steps up the food chain. A cooperative movement can allow you to do that. You can bring in, as a partner, the expertise to run the processing facility, do the marketing to carry on and have a share in that.
Some of the most successful elevator companies in Western Canada at this point are independently farmer-owned, but they are partnered with and have hired management firms and teams that have the expertise to do it.
Farmers can grow the best product in the world in Canada. They do it, and they constantly shock us and surprise us with the quantity and quality they do, but then they fall short when it comes to taking it beyond the farm gate. This will allow them to do that by forming those cooperatives and hiring that outside help.
Senator Eaton: To continue on, once you have a cooperative, can part of my farm business plan be for marketing that product?
Mr. Ritz: I do not see why not. If you are setting up an enterprise, we see more roadside stands and farm markets in certain areas of the country than we do elsewhere.
Senator Eaton: I am thinking of such things as honey, maple syrup and Saskatoon berries.
Mr. Ritz: Sure.
The Chair: Thank you, senators. Before you leave, Mr. Minister, I have a few questions.
I know it is a step in the right direction. You have mentioned sugar bush operations, the maple syrup industry. The farmer who produces seedling trees, would he qualify under this program?
Mr. Ritz: At this point, no, because it is not considered a farm activity. A discussion is occuring between some of the provinces — British Columbia, Quebec and so on — as to whether or not that should be accepted under our safety net programs and then access to this program; those discussions continue.
There is a difference, senator, between what is grown as a nursery or a Christmas-tree farm and what are seedlings for reforestation. That is where the discussion varies right now.
The Chair: Would Christmas-tree growers qualify under this?
Mr. Ritz: Yes.
The Chair: They would?
Mr. Ritz: Yes.
The Chair: If Christmas-tree growers qualify, why would seedling producers not? Is that your ongoing discussion?
Mr. Ritz: That is the discussion. The argument is that the seedling situation is done on a commercial scale and sold to an operator who then goes out and plants them for reforestation, and the money is made further down the line.
The Christmas tree is an actual farm where they have a selected area and is contained. That is where the discussions are stalled at this point. The same thing with a nursery; a tree nursery qualifies.
The Chair: Thank you. Having had the honour and opportunity to occupy similar positions to yours now, minister, could you inform the committee on the consultation process with the industry, and how they were consulted by your department?
Mr. Ritz: I will have Mr. Meredith do that. I know there was a full slate of it. It was up on the websites, and we invited consultation. We talked with all the farm groups and some of the industry officials and so forth.
Mr. Meredith: In 2006, a series of consultations were held specifically on this legislation. The provisions that you see reflected in the proposed law reflect very closely what we heard from young farmers and from others who were really concerned about intergenerational transfer, for example.
We have had a number of conference calls with young farmers, involving groups across the country, and we have had a great deal of feedback from farm groups and farm organizations during our Growing Forward consultations, which were held right across the country a couple years ago in preparation for our new Growing Forward five-year framework.
The feedback we got during those consultations was very consistent in terms of better access, making the loan limits higher to facilitate intergenerational transfer and ensuring that we were accommodating new and beginning farmers. That had been a big gap in the previous legislation.
The Chair: Thank you. Do you have any other questions, senators?
Do you have any concluding remarks, Mr. Minister?
Mr. Ritz: Thank you for the great work you are doing. I look forward to having this passed by Tuesday, and we will put it into play on Wednesday.
Senator Carstairs: However, not today?
Mr. Ritz: Today would be even better.
The Chair: I know you have a time factor, and I want to say thank you very much on behalf of the committee. We will do our job. As I have heard other senators say, it is a step in the right direction. There is no doubt in my mind that the democracy will prevail.
Mr. Ritz: Thank you. It is always a pleasure.
Senator Eaton: A double-edged sword.
The Chair: Senators, we will take a few minutes' break. We will ask the officials to stay, in the event we have additional questions on the procedure of passing Bill C-29.
Honourable senators, we will now consider if it is agreed to dispense with clause-by-clause consideration of Bill C- 29.
Is it agreed?
Hon. Senators: Agreed.
The Chair: Do we have unanimous consent from the senators?
Hon. Senators: Agreed.
The Chair: Shall the bill carry?
Hon. Senators: Agreed.
The Chair: Carried.
Is it agreed that I report this bill to the Senate? This would happen today.
Hon. Senators: Agreed.
The Chair: Senators, thank you very much. Officials, thank you for being here. We have no questions for you.
On that note, thank you very much for being here.
Senator Cordy: Before you adjourn the meeting, we said, at our last meeting, that we would send out a press release on interest rates charged in the forest industry. I have not seen the press release. Could we have a copy of the one that was sent out?
Josée Thérien, Clerk of the Committee: It was not sent out. It was decided that we would hear from the Canadian Bankers Association and other groups. We will be hearing from the Canadian Bankers Association next Thursday.
Senator Cordy: Except the committee decided last week that we wanted the press release to go out last week, is that not correct?
Senator Eaton: Our last witness was here, and we talked about access to credit.
The Chair: It was Export Development Canada, EDC.
Senator Eaton: He was talking about the difference in rates in banks, depending on how high the risk was, if it was one of the big banks, if it was a boutique bank, et cetera.
He said that there were numerous reasons such as whether the person had defaulted on loans before and that was why the rate was high. I do not think it is as black and white as a person just claiming to be charged 20 per cent.
Senator Carstairs: May we ask the officials to leave? This is obviously an issue that has nothing to do with them.
Senator Cordy: Perhaps this should be in camera, too.
The Chair: Yes, we will proceed to an in camera session.
Officials, thank you for being here this morning.
(The committee continued in camera.)