Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 8 - Evidence - October 5, 2010
OTTAWA, Tuesday, October 5, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 5:08 p.m. to study the current state and future of agriculture and agri-food in Canada.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I see that we have a quorum and I declare the meeting in session. I welcome all of you to this meeting of the Standing Senate Committee on Agriculture and Forestry.
[Translation]
It is my honour to welcome the witnesses to the Standing Senate Committee on Agriculture.
[English]
My name is Percy Mockler. I am a senator from New Brunswick and chair of the committee.
Today, honourable senators, we welcome witnesses from four groups. On behalf of the Senate committee, thank you again, witnesses, for accepting our invitation. You play an important role in Canada.
Today we welcome witnesses from the Grain Growers of Canada, Mr. Richard Phillips, Executive Director; and Mr. Jim Gowland, President, Canadian Soybean Council.
[Translation]
We are pleased to welcome Mr. Ron Bonnett, President of the Canadian Federation of Agriculture.
[English]
From the Canadian Cattlemen's Association, we have Mr. Dennis Laycraft, Executive Vice-President; and John Masswohl, Director of Government and International Relations. Welcome.
[Translation]
From the Union des producteurs agricoles du Québec, we have Mr. Marcel Groleau, President of the Fédération des producteurs de lait du Québec, and Mr. Idriss Ettabaa, Coordinator, Agricultural Policy and Research Directorate.
[English]
As you can see from the organizations that we are hearing from today, honourable senators, the committee will be hearing about agricultural issues and challenges today.
As we have been studying the forestry sector for a while, we have decided to spend at least one meeting catching up on what has been happening in the agricultural sector, and we will ask the Senate to give this committee the mandate to study the agricultural sector of Canada.
Before I ask the witnesses to make their presentations, I will ask senators to introduce themselves.
[Translation]
Senator Robichaud: I am Senator Fernand Robichaud from New Brunswick.
[English]
Senator Mahovlich: I am Frank Mahovlich from Ontario.
Senator Fairbairn: I am Joyce Fairbairn from Lethbridge, Alberta.
Senator Plett: I am Don Plett from the capital of Canada.
Senator Ogilvie: I am Kelvin Ogilvie from Nova Scotia.
Senator Eaton: I am Nicole Eaton from Ontario.
[Translation]
Senator Rivard: I am Michel Rivard from Quebec.
[English]
The Chair: I am informed by the clerk that the presentations will be as follows: We will start with Mr. Marcel Groleau, followed by Mr. Ron Bonnett, Mr. Dennis Laycraft, Mr. Richard Phillips and Mr. Jim Gowland.
Mr. Groleau, please proceed.
[Translation]
Marcel Groleau, President of the Fédération des producteurs du lait du Québec, Union des producteurs agricoles: I would first like to thank the senators for welcoming us and for allowing us to share our point of view on issues that are very important to us: agriculture and the negotiations that are currently taking place at the WTO and between Canada and Europe. My presentation will be in French.
I am here as the representative of the Union des producteurs agricoles du Québec (UPA). UPA includes 16 regional federations and 25 groups specialized in dairy, poultry, meat, maple syrup production, beekeeping, and so on. As an administrative body, UPA counts on the direct commitment of more than 3,000 producers. Its involvement goes as far as Europe, in WTO-related activities, and in Africa, in the development of collective marketing through the UPA Développement international corporation. We also belong to the Canadian Federation of Agriculture.
UPA has 49,929 Quebec farmers. Quebec has 30,000 farms, mainly family farms, which provide jobs to 59,000 people. Every year, Quebec's agricultural sector spends close to $6 billion on the operation of its companies. So this economic sector is very significant.
UPA is a tool that allows farmers and forestry workers to control their own destiny. They are proud to work together on the noble task of farming for and feeding Quebec, while making a significant contribution to its sustainable development.
My presentation will focus on supply management, since it is important to know how it works in Canada, and on bilateral and multilateral negotiations. The Union des producteurs agricoles is aware of what these negotiations mean for Canada. However, UPA is still worried about these negotiations and their impact on productions under supply management, which are primarily meant to meet the needs of the Canadian market, without any financial support from the government. In addition, the ministers of agriculture in the various Canadian provinces have been keeping a close watch on the negotiations and they have even travelled to Geneva on numerous occasions to defend supply management.
Supply management is surely one of the major features of Canadian agriculture. It has been used in Canada for almost 40 years, ensuring high quality and affordable dairy and agricultural products and allowing family farms to make a living from the market without any government funding. In Canada, supply management encompasses more than 19,000 dairy, poultry and egg farms, as well as farm revenues amounting to a total of $6 billion, or 20 per cent of Canadian revenues and an economic activity of over $42 billion. In Canada, 250,000 jobs come directly from the production and processing operations of supply management sectors.
In November 2005, Canadian parliamentarians showed their support for supply management in a very real and tangible way by unanimously adopting, in the House of Commons, a motion that does not accept any reduction in tariff or increased market access for products under supply management, as part of a new World Trade Organization (WTO) agricultural trade agreement.
Supply management is founded on three key pillars. The first pillar is production planning, which ensures that each producer has a share of the Canadian market, which he undertakes to provide and respect. Import control measures, for which the government is responsible, limit the entry of imported products so that the needs of the Canadian market are fulfilled mainly through Canadian production. This allows us to better manage what is imported. Over 7 per cent of cheeses consumed in Canada are imported. So there is no lack of imports. It is a matter of effectively controlling imports in the Canadian market. Having a pricing policy guarantees producers a decent income without a government subsidy.
This appropriate and original regulatory approach allows us to control overproduction and to avoid shortages, which were two major plagues on Canadian producers before its adoption more than 40 years ago. In addition, supply management does not cause any distortion in international markets because there is no dumping. Something else worth noting is that it protects all links in the food chain, from farmers to consumers, against volatility of prices on international markets.
For example, the crisis currently being experienced by European and American dairy producers in a highly deregulated climate did not affect Canadian producers last year. Large milk quantities were thrown away during demonstrations in Europe. During his recent visit in Canada, Mr. Vilsack told Minister Ritz that, although supply management is criticized internationally, we have to admit that it is less expensive than the American policy that is in effect to maintain dairy production.
A number of studies have shown that, in some jurisdictions where dairy markets were deregulated, lower prices for producers were never passed onto consumers. That is one of the specifics of agriculture: prices to producers and prices paid by consumers are not always connected. Supply management, as the system favoured by the Canadian government for four decades now, is a perfect example of a country's ability to choose and establish its own agricultural policies.
Let us now talk about the multilateral WTO negotiations on agricultural trade. In 2001, all WTO member countries adopted the Doha development agenda. They recognized that the vulnerability of developing countries and the members' commitment to sustainable development, as described in the previous Marrakech protocol, had to be taken into account. Ongoing since 2001, the Doha round negotiations on agricultural trade have not resulted in an agreement for all sorts of reasons.
The latest WTO texts on agricultural conditions provide for a significant increase of up to 6 per cent in access to Canadian markets, if nothing changes. Parliamentarians had taken a position of ``zero additional access to Canadian markets''. And now, the plan is to give an additional 6 per cent of the Canadian market for products under supply management and to significantly reduce tariffs, by roughly 23 per cent, which would cause serious dumping of the products in question on the Canadian market. Ultimately, the anticipated major cuts in internal funding would affect all other produces.
Canadian producers who are subject to supply management are not the only ones to condemn this plan. Leaders of farm organizations from the four continents also expressed their indignation in a collective declaration on July 22, 2008. The food crisis cannot be resolved through the WTO agreement. Those farm organizations that are active in all four corners of the world, as much in developing countries as in emerging and developed countries, expressed their fears about the specificity of agriculture not being taken into consideration. They are afraid that WTO proposals will undermine many countries' ability to provide their citizens with food security and stability, which are so desperately vital.
I would like to talk to you briefly about the 2010 WTO Public Forum, which took place in September.
At the WTO Public Forum, with ``The Forces Shaping World Trade'' as the main theme, the leitmotif of all the sessions addressing agriculture was the issue of food security in the context of the 2008 food crisis, the spike in the global food demand, the increasing volatility of prices and climate change.
To address food insecurity, all speakers were going in the same direction, discussing the necessity for greater consistency between what is happening at the WTO and the goals and objectives of other international forums, including the FAO and the UN, and on all environmental issues.
More specifically, this forum was an opportunity to point out the inconsistency issues between trade agreements and fundamental human rights. Mr. Olivier De Schutter, United Nations Special Rapporteur on the Right to Food, did so eloquently. Governments and international organizations are no longer hesitant to talk about the need to revisit the governance of the food system by adopting food policies that will foster sustainable agriculture so that farmers in every country can make a decent living.
France's permanent delegate to the WTO, like other permanent representatives to the WTO, talks about the need to create a global forum on agricultural stability and on the need to regulate agricultural markets. This point will probably be discussed at the next G20, which will take place in France next March and will specifically address agriculture.
Representatives from farm and subsistence farming organizations from the four continents also had the opportunity to talk about the topic. In their speeches, a number of them pointed out that it was important for countries to be able to exercise their sovereignty on farm and food policies in order to feed their people. Among the proposed solutions to prevent the volatility of prices — which is the main issue — they suggested increased regulation of international and national markets. Some even asked WTO for an agricultural exception because of the unique character of agriculture and food products.
UPA and its partners took advantage of the opportunity at the WTO public forum in Geneva to emphasize the mobilization efforts made by farm organizations in order to address the lack of consistency between multilateral trade agreements and countries' other rights and obligations. At the right time, farm organizations would also call for consistency to regain their place in the context of international trade regulations, human rights, food security objectives and the power of states to develop and maintain their own farm policies.
The 2008 global food crisis was an eye-opener for many international observers and leaders in terms of the extent to which extreme free trade and deregulation policies enforced by the International Monetary Fund, the World Bank and the World Trade Organization have destroyed subsistence farming in the world's poorest countries.
More and more voices are asking that the agricultural exception be recognized and that governments take steps to regulate the agricultural sector. The dairy crisis that affected producers practically everywhere around the world in 2009 is a perfect example of the agricultural exception issue. There will be no long-term solutions to these issues without recognizing countries' right to adopt their own agricultural policies and to exercise their sovereignty in their food policies.
As to the last point, more specifically the Canada-Europe negotiations, UPA has recently held consultations with federations specialized in the Canada-European Union comprehensive economic and trade agreement plan. A number of concerns and expectations came up in terms of internal support, market access, non-tariff barriers, export subsidies, rules of origin, and state monopolies and geographic indicators. I will not get into the details of each of those, but I just wanted to point out that all those aspects concern the various federations to a greater or lesser degree.
Right off the bat, I want to say that the UPA cannot comprehend why domestic support for the agricultural sector is not on the bargaining table. It is important to remember that while Canada was reducing its domestic support pursuant to the agricultural agreement, Europe was increasing its green decoupled support. Here — and I want to make this clear — that decoupled support is not considered to have a distorting effect on trade because it falls within the category of green supports, and it continues to subsidize their exports.
Therefore, the UPA recommends that tariff negotiations be dealt with exclusively at the WTO, as set out in the other free-trade agreements negotiated by Canada. So we do not want to negotiate piecemeal tariff reductions with Europe only to have further tariff reductions imposed on us when WTO negotiations resume.
At the same time, the UPA asks that the European Union respect the WTO's decisions regarding the European community's ban on the marketing and importing of meat and meat products treated with certain hormones.
Furthermore, the UPA is of the view that Europe should first and foremost remove its numerous non-tariff barriers, which genuinely prevent a number of Canadian producers from accessing the European market. In the field crop sector, for example, the issues primarily have to do with GMO products and affect all countries that sell soy or soy derivatives to Europe. At issue are the approval process for genetically modified products as well as the regulations regarding traceability and labelling.
I want to say something about geographical indications. A number of food and agriculture industries have said that extending the protection of geographical indications under the Canada-Europe agreement could potentially have significant negative ramifications on the sector.
In addition, it would go against Canada's negotiating position during multilateral talks at the WTO. The UPA is therefore opposed to extending the protection of geographical indications as requested by Europe.
In conclusion, the recent financial crisis brought to light the importance and benefits of a strong regulatory regime in this market. Canada's banking sector came out of the financial crisis in much better shape than that in most countries where the market is not regulated.
Similarly, Canada's industry was able to overcome the global dairy crisis this past year without having to resort to government subsidies, which demonstrates the benefits of our model.
It is clear to the UPA that Canada must demonstrate leadership, the leadership needed so that producers subject to supply management can continue to draw all of their income from the market based on their production costs, which includes fair compensation for their work and the capital they have invested in their business.
It is important to bear in mind the Doha round for development. It began in 2001, in a completely different context from today's. There have been a number of successive crises since, in the energy, food, financial and economic sectors. As a result, the circumstances that served as the basis for the negotiations no longer apply. That is why a number of stakeholders at the WTO public forum preferred to wipe the slate clean and restart negotiations based on a new set of conditions, ones that reflect today's challenges, with a focus on local farming, in particular.
I will close with some remarks made by former U.S. president Bill Clinton during a speech he gave at a ceremony commemorating World Food Day on October 23, 2008.
He said it was necessary for the world to admit that, for 30 years, everyone had blown it. According to him, all governments, including his own when he was president, had blown it. He said that the world had been wrong to believe that food was like some other product in international trade. Acknowledging that there would still be a global market for wheat, rice and probably corn and other crops, he stated that, over the long run, the world should go back to a policy of maximum agricultural self-sufficiency.
That is what Bill Clinton said.
On behalf of the UPA and all of Quebec's agricultural producers, I want to thank you. I will be available to answer any questions.
[English]
Ron Bonnett, President, Canadian Federation of Agriculture: Thank you for the opportunity to present. It is encouraging that the Senate committee is looking at agriculture to see where to position itself as agriculture moves ahead.
Today I am speaking on behalf of the Canadian Federation of Agriculture. I am the current president, but I am also a farmer; I farm in Northern Ontario. The Canadian Federation of Agriculture represents about 200,000 farmers across the country. It is quite a mix, with different commodities around the table. As well, we represent people from different geographic areas around the country. One of the strengths of the organization is to try and pull this geography and the different commodities together to come out with some common positions moving forward to decide how to position agriculture.
My comments today will be focused primarily on the future of agriculture and positioning agriculture for where we are going. I will leave behind a document that speaks to that.
The Canadian Federation of Agriculture has started working on the concept of a national food strategy, looking at where we are now and where we see some of the opportunities going and trying to discover the mechanism for capturing some of those opportunities.
The bottom line from the producers' side is how we can enhance profitability. We must build profitability into our operations so that they are sustainable economically and can meet the needs of the future.
If you look at some of the conditions and trends coming, the projections now are for the world population to go from 6.8 billion to 9 billion by 2050. That will put increasing demands on the ability to supply. Climate change will affect production patterns. Fossil fuel reserves are being depleted, and the price of fossil fuels is going up.
There are ongoing economic challenges facing other countries than Canada, as governments try to balance budgets. We will have to look at how we position ourselves. The concept of taking a strategic look at agriculture is very different from what we have done in the past. We have had policies and programs. The Growing Forward documents are predominantly a budget document to try to match the resources to some of the needs. Stepping back and taking a look at a long-term strategy, we will look at what the demands will be domestically and what is needed to fill those. What will the demands be on the export side, and what do we have to do to capture some of those opportunities?
It starts looking at things like the regulatory framework, the support programs, the marketing systems — whether it be supply management or non-supply management — and figuring out the best way to capitalize Canadian opportunities on both the domestic and the export sides.
I was reading a document on the way in today about changing eating patterns. That will become more and more of an issue, where people start to look at solving their health concerns by making choices with their food. How can we position Canadian product so that it is the preferred choice of Canadians as they choose the product they are buying?
We have been working fairly closely with a number of other groups. The Canadian Agricultural Policy Research Institute is doing some work on integrating health and agri-food and is looking at how to combine these. We have to take a broader look at things so that instead of thinking of food in isolation, we think of it as part of the overall budget. Right now we see an expanding budgetary requirement to service health care. We believe that if the proper choices are made in agriculture and food, through diet we likely can offset some of those costs.
We held our first consultation in Toronto in June. A number of groups around this table were there. There seems to be widespread support for the concept of stepping back and looking at where we will go. It also gets a little broader sometimes than just food. I mentioned earlier that one of the trends is the change in pricing and the availability of fossil fuels. There is an opportunity in the future for farmers to provide some of the energy requirements. Farmers could also provide some of the industrial products that are now being supplied by the petroleum industry.
The cornerstone of a national food strategy must be sustainability. When we talk about sustainability, we are talking about sustainability from an economic perspective, from a social perspective and from an environmental perspective.
That being said, in positioning ourselves to look at what the strategy should be going forward and working with all stages of the industry, including the processers and the retailers, we have to take some steps as well to ensure that we still have farmers there to supply that market. I do not think it is any secret there have been a number of strains in the last year. In Western Canada, with the weather-related conditions there, some programs do not seem to be responding the way they should. We have to ensure that we make interim corrections to some of the support programs as we go along and ensure that they are moved forward.
We have been asking for some changes to the current suite of risk management programs. I know there are supports from some of the other organizations about adjusting negative margin tests and making some changes to have either the top 15 per cent of the referent margin coverage used or participation in AgriInvest, looking at taking the Olympic average. This means taking some of the high and low ones out to get a better average.
The other thing we should look at is the issue of AgriFlex ability funding. We have been asking for that for some time, recognizing that there are differences among the provinces about the types of programs to put in. The government did move forward and provided some flexible funding. However, they did not allow it to be used by individual provinces for businesses' risk management programming, and we feel it should be allowed to be used for that.
The other issue that primarily affects western producers is the cost of rail transport for grains. Work is being done now on a service review for rail lines, looking at what is provided by railroads now versus what was provided in the past. Along with that we must look at the cost and see whether realistic freight prices are being charged to producers.
There are several other things I would like to touch on that should be considered when looking at agriculture. One is the area of research and science. The aspect of innovation will help position Canadian agriculture to take advantage of opportunities as we move forward. If you look at the whole healthy food initiative, if you look at biofuels, if you look at creating new products from agricultural production, the research and science must be behind that. That must be one of the core considerations as we move into the next round of programming.
On the environment side, it should be recognized that agriculture does a lot for clean water, clean air and healthy environments. We actually provide habitat for a number of different species at risk. There must be a mechanism to reward producers who are providing these benefits. If society is getting the benefits, a mechanism must be developed so that farmers can be rewarded. Europe is quite a piece ahead of Canada in making that recognition, and it is an area that must be looked at.
My last comments would be around trade, both the World Trade Organization, WTO, and the bilateral agreements. Mention has been made of the WTO. The main concept from our perspective is not to trade off one commodity or sector against another. Every country going into negotiations, whether it be WTO or bilateral agreements, is trying to improve export, but they do not give up what is working in their country. Mention was made of supply management. It is a tool that has worked very well in Canada. However, that should not be held ransom against some of the export commodities that have some great market opportunities. I was in Europe recently and looked at some of the prices of agricultural commodities there. There is a huge market opportunity for our export commodities. When we head into these relationships, we must go in as tough negotiators and recognize that we will not give away stuff that is good and working for us. At the same time, we should be going in there like everyone else and trying to seize as much opportunity as we can.
The other thing that was mentioned earlier is that you need to be especially conscious when you are heading into bilateral agreements. It is not just about tariff reduction. In some places they have subsidies and supports that give their producers an unfair competitive advantage. If we do not ensure that we are recognizing those issues as we go forward, then we put our producers at a distinct disadvantage.
I would like to close leaving with you some of the documentation we have under the national food strategy. We believe strongly that we must take a strategic look at how we position agriculture in the future going forward, or else we will not be able to actualize the opportunities that exist. It is fair to say that many producers now do feel that there are opportunities out there, but if we do not have the right tools and we do not have the right strategy, Canada will not be the one that takes advantage of them.
The Chair: Thank you, Mr. Bonnett. Mr. Laycraft, you have the floor.
Dennis Laycraft, Executive Vice-President, Canadian Cattlemen's Association: First, thank you for the invitation to appear before the committee again. Over the past several years we have had a number of occasions to report to you on the situation in the Canadian cattle industry. Senator Fairbairn and I get to travel on the same plane with more frequency than I suspect I would have believed a few years ago. We do appreciate and are grateful for your continuing attention to our industry.
We have had a number of difficult years over the past decade. It seems like every major challenge that an industry could face, we managed to face. Today I am pleased to tell you that we are seeing a light at the end of the tunnel. As demand begins to stabilize after one of the worst recessions, we are already starting to see a shift in North America to higher-value cuts again on restaurant menus. The supply of cattle is down and not only in North America. The U.S. is at its lowest level in over 50 years; we are down to our lowest level in 20 years. I just came back from Argentina, where they have contracted by over 20 per cent. That is over 10 million head of cattle in the last several years, and it is continuing to contract. All of this is creating a situation around the world where, as supplies are tightening, demand is beginning to improve. This year we are finally beginning to see some improvement in the marketplace, and we are waiting to see how the grain crop comes off. It is a big factor in our pricing, but 2010 looks like the first year in many where there will be a measure of profitability back in many parts of our industry, including the cow-calf sector.
We are different from what you heard earlier. We are the third-largest live cattle and beef exporter in the world. Global trade is vitally important to our industry. Being a domestic or an export industry is no longer important. You are either a larger or a smaller industry if you are in the cattle industry. In order to get full value for an animal, you must be able to sell all of the products, which are over 200 that come off of every animal. When you are trying to find a premium market for liver, beef lips, short-cut feet and tongue, that market is not normally found in Canada. In order to get full value out of every animal we produce, we probably have to sell in 15 different countries and have more than that bidding on those products to get the value that will create the sustainability we need in our industry.
We have faced the challenge of our currency. If you take a look back at the early part of this past decade, we were around 70 cents. As we now compete at near par, it begins to show some of your competitive weaknesses. It is vitally important for our industry to have the best possible competitive business environment in Canada if we are to be able to continue to compete successfully.
As indicated, a major element for our competitiveness is viable market access. Initially, BSE — bovine spongiform encephalopathy — caused us to be shut out of most markets around the world. We have slowly but surely gained most of those markets back, and in almost all of the markets where we have full access, our post-BSE sales have exceeded our pre-BSE sales. We know the demand exists for the quality of beef that we produce. We are one of the two major high-quality beef producers in the world. It is grain-fed beef production, and we compete with the U.S., which is also our largest customer. Whatever is done there to ensure there is no border thickening or any border measures with the U.S. is vitally important. I will come back to that.
We believe the government is on the right track. Minister Ritz continues to travel on our behalf, and his efforts, along with the efforts of Minister Van Loan and the Prime Minister, have led to critical increased access. This past year we have been able to recover full access into Russia, and we have seen the beginning of access back into China and normalized trade into Hong Kong. If you take a look at the growth in economies around the world, those will be some of the most important markets as we move forward. We are continuing to pursue and believe that we are within reach of improved access into Japan, Korea, Mexico and Europe, which I will come back to, and a longer process in China and in Taiwan.
In recent months we have worked with the government on the WTO dispute over the U.S. country-of-origin labelling law. First, I want to praise the teamwork on our behalf in the federal government. They did a good job in Geneva two weeks ago. We continue to work closely with them. As we move forward, if we do win that case it will still take a strong advocacy effort to ensure they make the necessary changes to comply with the decision down there.
As we move forward, there are still some issues as a result of BSE that are impacting our competitiveness in addition to market access. We have a more rigid feed ban in Canada. We remove the tissues that contain potentially infective material or specified risk materials. We have a much longer list than the U.S., and it costs more to process cattle in Canada as a result of that list. Every day we have Canadian and U.S. bidders bidding on the same cattle. We have recommended a multi-faceted approach to deal with it adequately.
This past year, and we would certainly advocate that it continue, the costs of disposal were offset by some support in the previous budget to allow a more level playing field with American processors. If there is one thing we learned in 2003, it is that you do not want to get overly dependent on processing outside of your country. It is important to us to have them bidding on our cattle, but we want to ensure that we maintain a strong and viable processing industry in Canada.
We know various efforts are being made to reduce the costs of this, but they take years to implement. We look for some continuing support with our processors to offset those costs. In the longer term, our ultimate goal is to harmonize our regulations with those of the United States, but we believe it will take a number of years before we can achieve that.
While I stand by our remarks that 2010 is a better year than most for cattle producers, certainly some areas of the country are not realizing this. We have had some of the most extreme weather conditions you can imagine. Who would have thought we would see the degree of flooding that occurred in Saskatchewan? We had meetings in March about how severe what appeared to be record dry conditions would be in that very same region. There is flooding in other areas. We have even seen a bit of drought in Northeastern Alberta.
With all of this volatility, as Mr. Bonnett mentioned, some of the various tools to help with risk management remain important. I agree with Mr. Bonnett about the areas to be improved.
We have also advocated for another program. The Province of Alberta has implemented a price and basis insurance program for producers. This allows you to pick your level of coverage and insure the price, and the risk is to be covered by the premiums that producers pay. They are using other tools to try to manage that risk, but this provides another tool for producers to give some more security in their business. We would like to see a similar program rolled out across Canada. I believe that would be a useful tool to have in place.
Again, repeating some of what Mr. Bonnett said, our long-term competitiveness will be influenced by our ability to develop and implement new technologies. We are in the midst of implementing a new Beef InfoXchange System. We hope that in years to come you will become more familiar with that program.
We are currently in the process of implementing the most modern beef grading system in the world. With that system, we will have tremendous information that we can finally share all the way back to the cow-calf producers, who have largely been left out of the information loop. We believe that as we do that, we will improve not only the quality of our product but also the efficiency. All this contributes to improved sustainability in an industry. I can say, having looked at systems around the world, that we will lead the world with this state-of-the-art system.
Ongoing funding for research and development remains very important. We are one of the first commodities to participate with the Beef Science Cluster.
I do need to make a few comments on the European Union and the negotiations occurring there. The WTO and improved access is very important to us, but Europe is particularly important to us.
When I first started, Europe was our third-largest market for Canadian production. There were a number of reasons why they put in place the technical barriers that were unjustified. As we move forward, Europe is now a deficit production area for beef. When we first started, they had one million tonnes in frozen storage. Now they are importing over 500,000 tonnes, moving up to 600,000 tonnes, which is half our annual production.
If we could get a significant level of access into that market, without tariffs, we would be one of the few countries in the world that could achieve that. This would create an enormous benefit to every producer in this country, particularly considering the challenges in Eastern Canada and trying to keep the plant viable in Prince Edward Island. It would be the nearest market and would offer the ability to produce. We think that is one area that could potentially add a great deal to the future prosperity and sustainability of our industry.
With that, again I would like to thank you for the opportunity to appear before you.
Richard Phillips, Executive Director, Grain Growers of Canada: Thank you very much for the opportunity to be here. With me tonight, and sharing our time, is Jim Gowland, a farmer from Ontario and President of the Canadian Soybean Council.
I have been involved with the Grain Growers of Canada for four years. We represent the interests of over 80,000 successful wheat, barley, canola, corn, pulse, rye and triticale growers. My farm is in Tisdale, Saskatchewan, where unfortunately we received record rainfall and were only able to seed one third of our land this year. We are not finished combining the canola we did get in, but it will be a thin crop.
We did receive some AgriRecovery money, $30 an acre for our unseeded acres, which will help pay off some of our bills. We would like to recognize both the Government of Canada and the Government of Saskatchewan for turning around that program so quickly and putting the money out.
Today, I would like to raise three key areas that are important for Canadian farmers. First is research. The private sector is a huge investor in research and innovation in Canada and has made tremendous advances in three crops: corn, soybeans and canola. In comparison, though, there is limited private money going into cereal grains, special crops, forages or pulses.
Farmer check-offs on grain sales and public research have historically funded all of the work in these crops, but investment in public research in Canada is 40 per cent lower today than it was in 1994. The public sector is important to us because it often invests in areas of research and risk where the private sector does not go.
For example, in cereal grains like wheat, oats and barley, as well as pulse crops like peas, chickpeas and lentils, it is almost exclusively public sector and farmer check-off dollars that would fund that research. The public sector often does work on core agronomics and diseases where there may not be a commercial return, and without that return there is limited incentive for the private sector to invest.
Increased funding for research is one of few policy areas where all farmers can agree, from all parts of this country. We are asking for an increase in investment of $26 million per year for 10 years, to take us back to our 1994 levels, and a certified seed tax credit to encourage more use of new seed.
The second area that is important to farmers is rail transportation. Although recently service has improved due to the slower economy, which freed up engines and crews for grain, we know that when things pick up again, service will drop. When service is poor and the availability of railcars is sporadic, then farmers lose out. For example, with regard to our pulse processors, there are often premium prices in the international market for pulse crops, but one of two things can happen: The processor either does not bid because he cannot predict if he will be able to get the grain to port on time, or they lower their price to farmers to allow for penalties for late deliveries. Either way, those premiums in those international markets do not flow back down to the farm gate.
After a long battle in Parliament a couple of years ago, we finally got a federally appointed panel to look at the service problems. Their recommendations are due out this Friday, and hopefully they will recommend the serious changes that the Grain Growers of Canada and other organizations have suggested need to happen to balance the negotiating power between the shippers and the railways.
The third area that is important to farmers is trade. While our preference is for an aggressive solution at the world trade talks, the reality is that until the U.S. and other large players engage, progress will remain stalled. Therefore, it is critical that we continue to negotiate bilaterals and smaller multilaterals to ensure that Canadian farmers have competitive access to our markets.
However, a trade deal is only as strong as your ability to enforce it. Therefore, in all negotiations it is critical to ensure that proper dispute resolution pieces are put in place and, second, to ensure that we negotiate reasonable tolerance levels so we do not see issues like we have with canola to China or flax into Europe.
We would like to recognize the government for its work in the many trade deals it has initiated — the European Union, Turkey, India and Panama — and we would like to recognize both the Liberals and the Conservatives on the Colombia trade deal, where the two parties worked together in the House of Commons to get that through.
I will go off my notes for a second. Mr. Groleau mentioned other countries and farmers. I think a trade deal like Colombia can be a good deal, because what the Colombian farmers want to export, we do not grow in Canada, whether it is coffee or tropical fruits; and some of what we want to export, they do not produce enough of. Wherever trade deals line up that way, both countries win and farmers in both parts of the world win.
At the Grain Growers of Canada, we believe that the government does not owe farmers a living. However, it does owe us a policy environment where we can make a living. Invest with us in public research to keep us competitive, work with us on transportation so we can move the grain, and encourage trade so we can access those markets. We can and will be successful.
Before I turn it over Mr. Gowland, I want to say that as farmers, we are always meeting with members of Parliament, but we also work closely with the bureaucracy, the staff. I just noticed that some of the people I have worked with over the years are sitting back in the observers' section. As farmers, we really appreciate the hard work the Agriculture and Agri-Food Canada staff do for us on a daily basis.
Jim Gowland, Farmer, Grain Growers of Canada: On behalf of the Canadian Soybean Council, I would like to thank the Senate committee for inviting us to participate in the discussion concerning the current state and future of agriculture and the agri-food sector in Canada.
I have been the chairman of the Canadian Soybean Council for the past five years. Our organization is very new. I guess I was the founder, the starter of bringing some provinces together to talk about national issues as the commodity grew across this great country of ours.
The Canadian Soybean Council now represents the interests of 30,000 soybean growers in Manitoba, Ontario and Quebec. I am a cash crop farmer from Bruce County, near Walkerton, Ontario. I farm 2,300 acres of soybeans, wheat, corn and edible beans in partnership with my wife, Judy. The combines are rolling down the field as I speak this afternoon.
We are very fortunate, unlike some of our counterparts in the West. I have two daughters that do live in the Western provinces and are seeing first-hand the devastation this past year. We are quite fortunate in Ontario and in Eastern Canada that we have had favourable growing seasons. We are seeing production that is above average in all of our crops to date so far.
Soybeans have been grown in Canada for over 60 years. Soybeans are mainly grown in Manitoba, Ontario and Quebec. Recently, due to advancements in plant breeding, soybeans are starting to be grown in the Maritimes and Saskatchewan. Sixty years ago, soybeans were started in Ontario. It has been basically an Ontario crop for many years, but the in last 10 to 15 years, the public and private breeding in this country has made it possible for this crop to expand rapidly across the country and provide some value-added opportunities.
This past year approximately 3.5 million acres of soybeans were planted across Canada, making soybeans Canada's sixth largest crop in terms of overall production. Soybeans were ranked in 2009 as Canada's fourth largest source of crop farm receipts, with a total value of approximately $1.2 billion. Currently, 65 per cent of soybeans in Canada are genetically modified or GM. The remaining 35 per cent are not genetically modified and are predominantly destined for export markets.
Over the past 13 years, our industry has demonstrated that we are skilled and experienced in developing and implementing protocols that can segregate specialty soybeans from bulk handled grains. The investment of time and infrastructure was crucial to support the coexistence of GM and non-GM soybeans, addressing the needs of the industry's key market segments. This system has allowed us to differentiate our products in world markets and at the same time has created tremendous value-added opportunities and premiums over and above commodity prices for growers.
Science and innovation have played a very important role in the success of our industry. Public and private investments into plant breeding have allowed Canada to capture opportunities using both non-GM and GM technologies. These opportunities help Canada's soybean growers add value to their farm operation in both the domestic and the international markets, but we see that continued investment is needed in Canada by both the private and the public sectors. This will certainly result in the development of new varieties that have not only production advantages for producers but also direct consumer benefits.
Maintaining our current markets and accessing new markets will continue to be a challenge for the Canadian soybean industry. Many countries, including Canada, have a zero-tolerance policy regarding unapproved events that are developed through biotechnology. It is impossible for our industry to guarantee zero contamination of any GM trait in those grains.
Approval of new GM traits in our key export market establishes thresholds that our industry can meet through quality assurance systems, such as the Canadian Identity Preserved Recognition System, or CIPRS, that is administered by the Canadian Grain Commission. In the case that an unapproved GM trait is identified in a Canadian shipment, there is a zero-tolerance policy, and a possible action could be the closure of that border. This could directly impact the competitiveness of our industry as Canada exports almost 50 per cent of its soybean crop annually; we ship out approximately 2 million metric tonnes annually.
Establishing low level presence agreements with our key export markets and working toward the harmonization of international approved processes for GM traits need to be a priority to help ensure the competitiveness of Canadian soybean growers.
In summary, the investment by growers, industry and government in the areas of science and innovation, market access initiatives and domestic and international market development will help develop strategies that will keep Canada competitive in our ever-changing global marketplace. With that I would like to thank the Senate committee again for the opportunity for the Canadian Soybean Council to speak here today.
Senator Plett: I will keep my preamble short because I have a few questions. I thank all of you gentlemen for taking the time to come out and present here today. I will ask questions of three of you. I will try to keep it short and if you keep your answers equally short, it will allow other senators to ask questions as well.
I will start off with Mr. Groleau. I have a couple of questions, mostly related to supply management. I am not necessarily fond of supply management. I believe that supply management allows for somebody who is inefficient to make money, and I do not necessarily support that. However, I would ask you two questions.
In Quebec I think you said 7 per cent of cheese is imported and that there are some restrictions on importing. Do you feel the same about exporting as you do about importing?
I have had many of the cheeses in Quebec and they are wonderful. I believe the cheese that New Bothwell, Manitoba, makes is the best cheese in the world, but I am probably a little partial there. I certainly would like to buy the cheese that I think is the best, no matter where it comes from. Could you explain a little bit about your feeling about import versus export?
I would like to ask you also whether you believe that we should have supply management in all types of livestock and not just in the ones that we have now.
[Translation]
Mr. Groleau: It is a matter of imports versus exports, as Mr. Bonnett mentioned. Most countries that negotiate trade agreements have defensive and offensive interests, especially in the agricultural sector. In the current round of WTO talks, Europe, for instance, and even the United States, will no doubt include dairy products in the sensitive products category, even though Europe and the United States have offensive policies to export their dairy surpluses.
There is something that sets dairy production apart. Milk is produced all around the world, in every country. It is not a production sector, as Mr. Phillips explained, where a country can say they are importing milk or exporting it. Everyone produces milk. Most of the world's dairy exports, therefore, originate from New Zealand and Australia, where production costs are the lowest. It is not a matter of quality, but truly low prices. In order for Europe and the United States to be able to export dairy products, they have to support producers and the price of milk paid by producers so they can compete in this market, something Canada chose not to do. Canada chose to produce for the Canadian market rather than fight for a share of those markets.
We are beginning to export a few cheeses from Quebec to the United States in certain niche markets. Clearly, it is small quantities being exported, and currently without any export subsidies. That is my preference, that we continue exporting without export subsidies.
I am not claiming that all production sectors could operate under a supply management system. I do not see that as a solution for Canada's beef or meat producers, or for grain producers. But, as for the producers currently operating under that system, I think it has proven its effectiveness.
I am a milk farmer. I run the farm that my father bought in 1946. I do not see myself as an inefficient producer, but one who does not benefit from any direct subsidies or export support — which my counterparts in other countries receive from their governments. That is why I do not export.
[English]
Senator Plett: Thank you.
Mr. Laycraft, what a breath of fresh air — we had a farmer here who did not ask us for anything.
Things are looking good in the cattle industry. I am not sure why you have to work hard at finding a market for cow tongue. I believe it is one of the best parts of the cow, so it should be pretty easy to sell.
Senator Robichaud: It is not as good as cod tongue.
Senator Plett: That is right.
Two questions for you, sir. I want you to tell me how you feel about supply management and whether it would help your farming operation if there were supply management in the cattle industry. The other question I have is about this monopoly we have only in Western Canada and not in Eastern Canada. It is called the Canadian Wheat Board. Since you are from Western Canada, is the Canadian Wheat Board a benefit to you as a cattle farmer, or would you be better off with farmers being able to simply sell their grain or wheat to you directly if they chose to?
Mr. Laycraft: Thanks, senator, for the easy questions.
For many years our industry members have felt strongly about their preference to compete in the free and open market system. There are a number of inherent problems in trying to put an industry like the cattle industry under a supply management system. Our size is the first of them.
For our cow herd we use most of the land that is either not suitable for cultivation or that probably should not be cultivated, such as the marginal lands that are highly susceptible to erosion or saline problems.
Due to our ability to compete, we export almost half of our production. With supply management we would not be able to continue to export that level of production, so we would have to contract to a smaller industry.
As I indicated earlier, much of the extra value we get — everything from hides to inedible and edible products that we trade around the world — adds a considerable amount of value back into what each animal we produce is worth. We have had very difficult conditions over the last number of years, and when I say things are improving, it is as I once said: When you are laying flat on your back, everything looks up.
Things are looking fundamentally stronger moving forward. We are seeing the improved supply and demand conditions. We believe that if we had the right policy environment, the next number of years would offer good potential for the cattle industry in Canada.
Our view on the Wheat Board has always been that farmers should have choice similar to what cattle producers prefer. We are able to get feed grains. That has been out from underneath that board. There is some choice there now. We have producers in Ontario and Eastern Canada who clearly favour their ability to have more choice than producers in Western Canada.
I have already been in enough hearings on countervail that we know not to say what we view our specific impact is of the Wheat Board on prices. However, we do whatever we can do to support the grain growers and what they are saying about improving the varieties that they can produce and the choices that are available. We have seen a dramatic improvement in corn efficiency that certainly has given the United States an advantage in feeding cattle and hogs. That is growing at a rate faster than we are able to satisfy with some of the feed grains we grow in Western Canada.
In order to narrow that gap, we need to be able to have grain farmers optimize the choices they make and the type of products that they seed and produce. At the same time, we agree with the need for significant investment in research in that area.
Senator Plett: Thank you very much. I am certainly happy to see that the worst is behind you. I spoke to one of the largest hog producers in Manitoba today, and he told me they are making $20 a hog in Manitoba now, so things are looking up there as well. I appreciate that. Nobody here was talking about the hogs, so I will leave those questions for a different day.
Mr. Phillips, let us go a little further with the Wheat Board, since you are with the grain growers. I read today that when the elections happen for the Wheat Board, you have to sell 40 tonnes of wheat to the Wheat Board in order to get a permit book. I believe is the way it is worded. I knew some of this but I did not know the exact figures.
Forty tonnes, I am told, is about 40 acres of land. That is what you have to farm to do that. My friend here farms 2,500 acres of land. In Manitoba, the average grain farmer has probably about 2,500 acres, and there are some who have much more.
Here is someone who farms 40 acres of land, and he can vote with one vote. Somebody that farms 10,000 acres of land has the same vote. I would like your opinion on that voting system and your opinion on the monopoly of the Wheat Board.
Mr. Phillips: First off, the 40 tonnes is a proposal; it is in Bill C-27, which would change it. If we go back just a tiny bit in history, a panel was appointed to review the voting processes at the Canadian Wheat Board and make recommendations. There was a member of the Alberta Grain Commission, the Agricultural Producers Association of Saskatchewan and Keystone Agricultural Producers. They tackled that very difficult issue of balancing off a farmer who farms one quarter section of land and a farmer who farms 100 quarter sections of land.
They had a few challenges. Either you scale the votes up the more you have, or you bring up the bottom up to trim off the people who are not viable farmers and who are often just hobby farmers.
The decision and the recommendation at that time was that, rather than scaling up and giving one farmer more votes than the other, they would simply trim the bottom up. That bill intends to do that. It takes a substantial number of voters off the list.
We would probably support that. Politically in Western Canada we have a long history, if you remember your local co-op in Landmark, Manitoba. Everybody who does business at the co-op gets a vote there, or at your local credit union. There is a history of that.
In a corporate world, of course, if you have more shares, you get more votes. However, I think we would be comfortable if there was a minimum tonnage set that simply trimmed off all the hobby farmers. Frankly, if you have not produced 40 tonnes of grain in one of the last three years, you are not much of a farmer. I will say that on the record; you really are not.
We would support this legislation going forward.
On the monopoly itself, I go to the Wheat Board's own polling numbers. The government and others have done some polling, but I go to the Wheat Board because they do their own polling. They poll their own permit book holders, which are only the farmers who deliver to them, and that polling shows very clearly that farmers want marketing choice, in barley especially. It is really clear.
The Wheat Board is doing itself a disservice when it says it represents farmers when it does not start to take some proactive steps to deal with what farmers want rather than wait until it is legislated on them. If that does happen, it will be a much more unworkable system than if they were to be proactive.
I would encourage the Wheat Board to accept the results of its own polling with its own pollster and their own questions, and start moving towards changes farmers want.
Senator Plett: Thank you very much, sir. I believe that someone who farms 40 acres of land is a hobby farmer.
[Translation]
Senator Robichaud: Mr. Groleau, if we did away with supply management, how many dairy producers would be left in Quebec?
Mr. Groleau: The way we see it, if tariffs were reduced by 23 per cent and market access went up by 6 per cent, it would mean that the farm-based dairy industry would suffer an annual loss of $1 billion out of some $5 billion in sales. So that is 20 per cent less in farm income. How many producers could handle that? Few. Some producers would remain, but it would have a serious impact, primarily on the smallest producers, those farthest away from consumer areas.
It would have the effect of concentrating production on the most fertile land. A bit like cattle producers, dairy producers are scattered throughout the province because the land is often not conducive to grain production and is used for forage crops.
Quebec currently has 6,000 milk producers. If you took away supply management, in my opinion, about a third would be left, perhaps less.
That does not include the assistance that the government is supposed to provide. In 2009, during the dairy crisis in Europe, additional subsidies of one billion euros were handed out, not including the payments made by certain other countries in order to support the price of milk during the crisis, and that was in one year alone. Nor does that include the direct payments that producers already receive year after year.
It is impossible for the dairy sector to take part in international trade without extremely sizeable subsidies for producers. We live in a northern country, with all the effects that entails. So that is the situation currently.
Senator Robichaud: In other words, it would be disastrous?
Mr. Groleau: Yes.
Senator Robichaud: You talked about the four continents and the right of the states to develop and maintain farm controls in order to promote regional production. But it has not been possible to reach an agreement?
Mr. Groleau: It is not the countries that have those positions; it is the farm organizations. Take, for example, the organization that represents Europe's farm producers, Copa-Cogeca, one of the largest organizations of its kind in the world. It is extremely concerned about the proposals on the table at the WTO. Some sectors may benefit, but others will suffer the consequences.
Europe has already revised its export subsidy regimes with respect to non trade-distorting domestic support, so- called green box measures, and despite that, European producers have been in constant crisis ever since. Four of them are still on a hunger strike because they are not able to cover their production costs or support their families. When producers are driven to such actions, in addition to all the milk you saw spilled in fields — people do not do such things simply as a form of protest — it is because something very serious is going on.
So right now in Europe, the future of all family farming has been thrown into question. That is an incredibly important part of the social fabric. The consequences on the social fabric may differ from one country to another. When we went to Geneva, a number of agriculture ministers from the Maritime provinces attended because they were very concerned about what might happen.
Senator Robichaud: It should be pointed out that not only would dairy producers in Quebec be affected, but so would those in the Maritimes.
[English]
Other witnesses spoke about research and innovation. There is not enough in there, and you would like to see more.
Is the agricultural community putting its share in so that the government can add on and then move in the direction that the community wants it to go?
Mr. Phillips: On the grain side, one challenge, which goes back to the Wheat Board, is that the check-offs for wheat and barley currently only come off the final payments. Therefore, unless the wheat or barley has actually gone through the Wheat Board, a check-off is not being made. A lot of grain now is going to ethanol plants and directly into feed lots. As producers, we must step up to the plate and increase the breadth and perhaps the amount of the check-offs. We are prepared to do that, and we are willing to have the difficult conversations to convince other producers to do that. We would like a sign that the government will be there with us.
Senator Robichaud: By ``check-offs,'' do you mean that a certain amount is taken off?
Mr. Phillips: That is correct. Upon the final sale of the grain, a certain amount is removed for canola, pulse, wheat or barley.
Senator Robichaud: That money is directed to research?
Mr. Phillips: Yes.
Mr. Laycraft: We were the first commodity to have a national check-off to fund research promotion and market development. We have been collecting funds, which is an important part of this. We have been using that money to match government funds.
The other part of the private sector funding is private sector companies. We have done some analysis on why Canada has been lagging behind, and there is a range of reasons for that. We looked at the approval of certain new varieties of grains. The approval procedures in Canada were so difficult that we were seeing good research completed in Canada, taken to the United States and made available there years before it was available in Canada.
There has been an effort to improve that. Through the value chain round tables there has been an effort to work with industry and government to improve those procedures, but as we are trying to get the private sector to invest in these, we must ensure that we have greater harmonization with the U.S. If you are commercializing a product, there are 10 times as many customers next door, so you have to make a decision on where you will spend your money licensing and where you will get your patents. Many would prefer to do it in Canada if they could have access to Canadian, U.S. and other markets around the world.
Mr. Bonnett: Going back to the idea of being very strategic about the way we are looking at things, we must identify some of the core areas of research that we need to do. It might be in genetics or in developing draught-resistant crops. Key to that is giving organizations the ability to collect check-offs so that they can pool enough money to make the contribution there.
This goes back to the comment Mr. Phillips made. Senator Plett referred to so-called inefficient management supply producers, but they invest heavily in research.
I have an interesting perspective as I was in supply management for a number of years and am now a beef producer. You must recognize that those organizations are doing a very good job of representing their producers, but we need to ensure that they have the proper tools to do check-offs and identify priorities, and then ensure that they have the resources to put partnerships together to get the research done.
Mr. Gowland: In the soybean industry, typically 25 per cent to 30 per cent of the member provinces' check-off fees and licence fees are contributed to research. The growth of the industry is due to that research over 15 years bringing approximately 1 million acres of production up to nearly 3.5 million acres. The economic side has been very important. The soybean industry focuses on whole-market utilization and the research we can do on different types of products and initiatives, from biodiesels to industrial products, to new food products, to fractionated products. The economics side is heavily invested, but there is equal investment in utilization to ensure user benefit in the end. The growers invest many dollars in R&D promotions.
Senator Robichaud: You represent the industry, and you seem quite convinced that this is the way to go. How do your members agree with the check-offs and the way you would like to go?
Mr. Phillips: As I said before, this is an issue within the Grain Growers of Canada. Even in the political spectrum, we have some very right wing groups, some moderate groups and some groups to the left of centre. Funding research and innovation, whether for better feed varieties for beef cattle, hogs or dairy cattle, unites all farmers across the Prairies through Ontario and Quebec to the Atlantic. It is the one issue on which everyone can agree, and it is critical to moving forward.
Mr. Bonnett: With research, farmers see an immediate return. When I started in supply management, my production per cow was about 20 pounds. By the time I was finished, it was 45 pounds to 50 pounds per cow because of a combination of genetic research as well as research into feed efficiency, how to feed cattle and how to balance rations.
Do farmers see the value of research? They see it in their own pocketbooks. Mr. Gowland mentioned soybeans, and genetically modified soybeans, which so many farmers are growing because they see the value of that investment in research because it can improve their bottom line.
Senator Robichaud: With the indulgence of the chair and other senators and witnesses, I would like to add that we were in Williams Lake, B.C., as part of our study on the forest industry. Some cattle people came around and told us that we should study the cattle industry in relation to that because cattle graze everywhere. They came to the meeting we had afterward and told us that we were overlooking one of the issues. I would like to have their views before we write our forestry report. Mr. Laycraft, perhaps you could comment.
Mr. Laycraft: I was talking about every possible thing across the country. B.C. has had tremendous problems with forest fires and pine beetles, which have decimated forests. The cattle industry is usually a critical component of multiple-use lands, such as forestry and wildlife habitat. You can look at a whole range of sustainability issues, like the value of native pastures and the many various species. Often there is an integral relationship between the two. The comment is valid.
It is interesting that in other parts of the world they have created increased sustainability because ranchers and farmers are allowed to make more value from the fact that they manage the resources that contain wildlife as well as the recreation opportunities and so forth. I would not disagree with her observation.
Mr. Bonnett: It ties in with the idea of the environmental benefits that agriculture provides in the livestock sector with everything from fencing back wetlands and other such work. You must remember that there are differences depending on the location. In Ontario I have to fence my cattle in, whereas out West they can just let them roam.
Senator Eaton: Gentlemen, it has been fascinating. I will carry on with Senator Robichaud's question on technology and innovation. I spent some time at the University of Guelph. A little knowledge is always dangerous, but I discussed crop diversification with agricultural people. How risk averse are Canadians to try new crops and diversify away from the tried and true? Do we still have huge farms that do a monocrop, or are we getting better at diversifying our food basket? You talked about Canadian tastes in food. Are we trying new things?
Mr. Bonnett: I think if you look at the innovation that has taken place, you will see that we are doing amazing things, but I do not think we are doing a good job of telling the story.
I would use the example of Saskatchewan during the dirty thirties when they used summer fallowing, ordinary tillage techniques and very little herbicide. When the drought hit, all that soil blew away. A few years ago, they had rainfall records that were less than what they had in the dirty thirties, but by using no-till technology and the proper use of herbicides, they not only saved the soil but also had some yield. That is an example of innovation. I do not think we are doing a good job of telling people about crop rotation and integrated pest management.
Senator Eaton: Are we getting into bio-crops?
Mr. Bonnett: Yes, some of that is starting to take place as well.
Mr. Phillips: Canadian farmers are quick to adapt. If there is a chance to grow a new crop, there is always someone in every community to be the leading edge thinker and try it out. You can grow only as much as the market will bear, and in Canada we are blessed with a lot of land. People in the Prairies grow many spices, and there are many small niche markets that people are quick to fill. You can only grow so much before you flood the market and the price goes down.
Senator Eaton: Is that because we need to spend more time on new markets? I know that Minister Ritz is spending time trying to open new markets. Do you see hurdles in the way of that? Do we face huge difficulties trying to open new markets, or will it be straightforward? I am not thinking of the EU and the U.S. because I know about the way they subsidize their farmers. I am thinking more of China, South America and India.
Mr. Bonnett: Part of the combination is opening markets for existing products, and the other part is opening markets for new and innovative products. I can remember when they first started licensing the growing of hemp for fibre. The biggest challenge was to get a critical mass built so that there were the processing facilities to take that product to the end use. The car industry had expressed interest in using the fibre. When you get into new products, you have to look at the whole chain. There has to be innovation at the farm level to grow the crop, and the processing requirements have to be met. You have to ensure that the venture capital is in place to build it to the critical mass so that there is enough crop that a farmer can grow it. That goes back to strategic thinking to determine where the end market will be for the product and what pieces are needed to put it in place to access it. Part of it will be, as you say, going after some of those exports markets and trade markets. That is good for existing product, but for the new products coming along we have to build that whole capacity through the chain.
Senator Eaton: Finally, I have one last question dealing with international markets.
The Chair: I think Mr. Laycraft would like to say a few words on the same question.
Mr. Laycraft: Senator Eaton, you have asked a very important question. As we deal with introducing new technologies and as we are going into different markets, we have found that non-tariff barriers become the new means of interfering with trade. It used to be tariffs and voluntary restraint or quota measures, but now they have other tools they use. We worked hard to get a new agriculture Market Access Secretariat that is dedicated to working on technical market access issues, and I know it has been working effectively for many sectors. Addressing those technical barriers is very important.
In order to satisfy some of these new demands, every time we look at potentially even feeding a GMO product in Canada, we have to consider whether there is a country around the world that might say it does not want to let the meat from those animals in, even though there is not a single scientific reason that that should happen.
Senator Eaton: Do we have a campaign fighting against this GMO ignorance that is out there?
Mr. Laycraft: We are returning from a five-nation, which may be a six-nation, beef conference where we were talking about how we work together to communicate around this. There is the long footprint of the cattle industry. That was based on the worst possible research out of the least efficient area in Africa. It was not even based on what you would normally do for highly efficient commercial agriculture. We have come back with the realization that we have to work together as producers in various countries to make people better informed about the benefits of technology and at the same time address some of these other issues that are coming back and indirectly causing these negative attitudes.
Senator Mercer: The one thing we have all agreed on is that there is a need for more R&D, and how we pay for it is a discussion. I am a firm believer that we must have government involved in this through everything from the Central Experimental Farm here in Ottawa to our agricultural stations across the country.
I believe farmers in the agriculture industry have been probably the most innovative in the country. We have had to change so much. Everything has changed. Even the Senate has had a major role to play in the study that Senator Sparrow did quite a few years ago on soil use, and it has changed a lot of how we do farming, not just here but around the world. That is important.
Mr. Phillips, you talked about transportation being a little better now because of the downturn in the economy. I put my other hat on as a member of the Standing Senate Committee on Transport and Communications, where we did a major study on containerization. When we talked to pulse producers in Western Canada and exporters of pulse products, the big complaint was the availability of containers, whether rail-side in Saskatchewan or at the port in Vancouver. Has this been involved? If so, do you think it is temporary?
Mr. Phillips: Regarding the utilization rates on those containers, at one time when pulse people were ordering they were down around 20 per cent of the orders filled. Now they are at 90 per cent. I was talking with Pulse Canada today; they are quite pleased. Those of us who have been around longer have seen ups and downs in the economy. What happens is that the railways will maximize their revenue, and if there is a lot of grain to ship and other things are not moving, then we get the crews and the cars. Our concern is that when things turn around again and there is demand for other container freight, other goods and services, then we will be left at the wrong end of the pig, so to speak.
Senator Mercer: One issue was that we ship most of the stuff west through the Port of Vancouver, with the addition of Prince Rupert to the mix; we are doing potentially one million twenty-foot equivalent units, TEUs, in and out of Prince Rupert. We are certainly bringing them in. There is lots of room for export. Has that been a help in moving the pulse products west?
The issue in the Port of Vancouver of course is labour disruptions. There are constantly disruptions. It might not be longshoremen; it might be truckers or checkers or someone else. There is a strike or a labour disruption every couple of months whether you want one or not.
Mr. Phillips: Prince Rupert is an outlet, and it handles some surge. In the long run, though, the work being done in the Pacific Gateway to improve the transportation through Vancouver to get to those ports will probably do us more good. The railways are doing some things; for example, in the Lower Mainland in the Fraser Canyon, there is directional traffic, so that all the trains coming in will go in on CN and will all come out on CP, so they are not always pulling over and stopping to let the trains go by on each track. Some improvements are being made.
Again, we have made presentations at the rail service review committee and we have said that as shippers — and this goes for any grain elevator in the Prairies — if a train is dropped off you have eight hours to load those 100 cars or the penalties start. However, if the train does not show up at all and the farmers are lined up to deliver the grain and the staff are there for loading, there are zero reciprocal penalties back. There must be some sort of legislative power balancing. We know the railways need to make a good income, and we are in favour of everyone in the value chain making good money, but there needs to be something for the shippers to help balance that power off.
Senator Mercer: I think this is an entirely different subject, but I agree with you. It is something we should talk about in the future.
Mr. Laycraft, I was fascinated by your comments on what is happening in the cattle industry. My first days on this committee quite a few years ago were at the beginning of the BSE crisis, and people were coming before this committee from parts of Canada we never thought we would see asking for our help; the most independent people in the country, cattle producers in some wonderful places out West, particularly in Alberta, came to this table almost into tears needing our help. I am so pleased to hear you say things have turned around.
How sustainable is it? Is it a short-lived turnaround, or does it have some life to it?
Mr. Laycraft: There is a company in Paris that takes a look at what is happening around the world. We are seeing, for instance, the cattle herd decline significantly in Russia. Just before the recession hit, Russia had grown to be the largest beef importer in the world, along with the United States. Europe continues to decline. As we look around the world, those numbers are tightening. We are seeing the pork supply come back into balance, and as indicated there is some profitability back there. As economies improve, and as economies grow, particularly in regions, we have seen demand for high-quality protein increase. It probably will not increase as much in India, but it will probably increase some in India as well; there is a large Muslim population there. We believe that in China and Indonesia there are a number of markets. As they continue to grow demand for beef products, we will grow along with that.
We believe, as one of the premium producers of high-quality grain-fed, they will be willing to pay more for the beef products they eat as well. It is this combination of tighter supplies at the same time economies will grow in certain parts of the world. Those economies are still growing. We will see recovery in the rest of the world, and all of that should contribute to some improved returns in our industry.
One thing happens in the cattle industry: Once you hit a certain point, then you start to retain breeding animals, which means you further shorten the supply of cattle that is being worked through the system. We are getting close to that point. If the economies continue to improve, we will start building a herd, and that will further tighten supplies around the world.
For a number of years, the fundamentals look good for the industry.
Senator Mercer: That is terrific news. I wish your comment about pork was true across the country. It is certainly not true in Atlantic Canada, where Senator Robichaud, Senator Mockler, Senator Ogilvie and I are from.
My final question, and probably the most important one, covers the whole gamut of agriculture. Mr. Bonnett, you talked about a national food strategy. Those of us who have been on this committee for a while have heard about a national food strategy, but when we visited the United States on a number of occasions and met with people from various aspects of the industry who work both sides of the border, they continued to talk about the farm bill. Is that what you are talking about under the name of a national food strategy? Are you talking about the Canadian farm bill? I know that Senator Gustafson, himself a farmer from Saskatchewan, who was for many years on this committee, was a big supporter for the need for a farm bill.
Mr. Bonnett: A Canadian farm bill would likely be part of it, but the farm bill in the United States is primarily a budget tool. It talks about the programs that they provide for support. They have their commodity loan programs. Even their food aid is built into that overall bill, which could be a component of what comes out of the discussion on a strategy. If we step back far enough and look at the strategy and decide what we need to do to capture some of the highest-value markets in the domestic supply and on the high export side, we will get into a number of issues.
One is the regulatory framework. Mr. Laycraft mentioned that the regulatory costs for processing livestock in Canada are higher than in other places. If you are going to be a player, you have to have a competitive regulatory system.
Regarding research, we have to target and focus the research to those products in which we want to be the world leaders. Everyone would likely agree that we do not want to be the lowest-cost producers supplying the lowest-cost buyers somewhere in the world. We must position ourselves to do a better job.
A farm bill concept would be part of it, but what is a greater part of it is the strategic thinking, looking at where the markets are, looking at the tools that must be put in place to get there, and organizing the chain, not just primary producers but also processors, exporters, domestic sales people; everyone must realize where the end goal is and put the pieces in place.
Senator Mercer: I think you are saying — I do not want to put words in your mouth — that if we start taking the business of agriculture seriously and look at it as a long-range business plan, there are tremendous opportunities out there for us in many areas from pulse to beef to potatoes to apples from Nova Scotia, et cetera.
Senator Ogilvie: I want to thank the witnesses today. This is the most constructive dialogue from the agricultural sector that I have heard at any one time in a long time, from the point of view of competitive industry, producer-based competitive industry. With some notable exceptions, you were looking at it from a situation where you were not focusing on subsidies directly and those kinds of issues but rather on the kinds of factors that can make you, from your own point of view, a highly competitive industry.
The emphasis that you placed on R&D was particularly pleasing to hear. I am aware of the world leadership we have had, particularly in the area of beef. In the initial development of elite embryos and our ability to ship around the world, Western Canada was a world leader. Biotechnology has had an enormous constructive impact, and you have adapted in many areas.
I would love to have been able to follow up on Senator Eaton's questions in these areas to you because they are enormously important. Rather, I will step back and look at the larger issue of the research component, R&D support.
Historically, in the agricultural area, Canada had arguably some of the most competitive and leading federal agricultural research facilities in the world. Over a 10-year period, beginning in 1994, the previous administration carried out a deliberate reduction of funding in the federal laboratories in general, and agriculture was hit directly.
You mentioned that in one agricultural sector alone, there is a $260-million deficit today, relative to 1994. I was on an expert panel that looked at all of the federal research laboratories, and that included the agricultural areas. Over this period, in addition to the federal research laboratories in agriculture, universities have developed and expanded their own direct primary research efforts in a number of areas, and the private sector has developed some clear research facilities.
As we move forward and try to get the kind of support you have alluded to in your comments today, do you see a new model emerging of how the private sector investments in research work with federal laboratories and include other specialty research areas in universities that is different from that old historic model of the federal research laboratory sitting out on its own and not directly organizationally involved in the new private sector research facilities and the university research facilities? Is there a new model that could speed up any new investments translating into getting the kind of expertise that has not been acquired in the federal laboratories over the last decade available to meet the objectives that you have outlined?
Mr. Phillips: Yes. Much work has gone on over the last year at the Grains Innovation Roundtable. One of the key issues we looked at was funding of research. We looked at what Australia has done. Australia is virtually light years ahead of Canada, starting years ago with taking larger check-offs, funnelling the money into research and encouraging public-private partnerships. In Canada we have lagged, and maybe there has been too much turf protection, whether in Agriculture and Agri-Food Canada or in the private sector. To encourage those partnerships, the public and private sectors need to sit down and say, ``What exactly are you trying to do here?'' Sometimes the public sector is trying to develop varieties to go all the way to commercialization, so those varieties can be marketed and sold and then the money flows back in. The private sector is doing the same thing. We have been at odds for too long. I would see the new model would be where perhaps Agriculture Canada would do the core agronomic research and take things so far, at which point the private sector would have to partner with them and take it through. They can then negotiate whatever share of dollars from the sale of seed comes back to the public sector that did the core versus the private sector that finished it off in retail.
For canola, which is a huge success story in the West, virtually all of those core agronomics that Monsanto and others are all selling came from Agriculture Canada laboratories. We have really good people who dedicate their lives to public research, but somehow we just have to put it together better. I think we can and we will.
Mr. Bonnett: A key thing at the core of your question is the issue of setting priorities. We have to look at how we set priorities. We have to have all of the partners at the table in that discussion — farm organizations, universities and researchers — to identify the key areas of focus. Going back to your concept of a new partnership, research must be very outcome-based. You will likely find that there are new partnerships coming up with different people bringing different expertise and facilities to the table. The key at the start is setting the priorities right, identifying what the outcomes would be, and then putting the partnerships together to meet those outcomes.
Mr. Laycraft: I have a few observations. I have worked with federal infrastructure for several decades. Rather than broken, I would say it has become depleted.
We used to have a group of leading scientists working in places like Lacombe both on meat quality and on forages. Over time they retired and they were not replaced. Those people carried out a tremendous amount of research that was difficult to apply in a way that any one individual would get commercial advantage from it, but it tended to raise the water level for the entire industry. We certainly need to ensure that these types of researchers are still employed by Agriculture and Agri-Food Canada and working with the Canadian Food Inspection Agency to fulfill the basic research roles.
We are working with this new beef cattle research cluster. I think it is too early to declare it a victory, but the intent is to pull what is going on with universities, what is going on with the provinces and what is going on with the private sector interests together into a common priority setting and look at how we can take what dollars we do have available.
We can share with you that our national beef cattle check-off agency just conducted an analysis of the benefits of the national check-off that looks specifically at research as well as at promotion and market development. There are some significant returns on investment in that area.
Senator Mahovlich: Have you taken a look around the world at which country does not have a problem as far as rail goes? Is there a country? I am sure that Australia and China have rail problems.
Mr. Phillips: The Australians have a different model in some ways. They are so close to port position that you could virtually truck a lot to port position. The countries most comparable to us would be Brazil and possibly Argentina to some degree in terms of distance to port. The U.S. has many issues. They have the Staggers Rail Act, which virtually protects the railways from antitrust. I do not know whether there are any other successful models out there.
The railways are capable of providing better service, but they are responsible to their shareholders, and the shareholders demand that the CEO maximize the profits to the shareholders, not always service to the customers. We need a bit of a legislative hammer on this to say that there must be an equal balancing so that we can sit down and negotiate. If the cars will not get here on time, for example, if there is a landslide in the mountains or a snowstorm, fair enough. In that case, you should not have to pay a penalty. However, if you cannot put those cars there on a regular basis within a day of even when you said you would, there must be some penalties.
Senator Mahovlich: At one time Canada was a leader in rail. It joined our country. They do not have the roundhouse in Timmins anymore. We will have a problem eventually.
Mr. Phillips: We made a suggestion that they simply put a Global Positioning System, GPS, device on the rail cars so that when you are the shipper, you can go online to see where the train is at. If Canada Post can track a parcel, surely CN can track where a train is located. You should be able to log on to their site. If they say it will be there in eight hours and you are in Northeastern Saskatchewan and the train is in Calgary, then you know it will not be there. You do not line up the farmers to haul out their grain. We clean out the bin yards and push aside the snow. A lot of work goes into filling those trains, and it all comes out of the farmers' pocketbook. Every time this does not work and they have hired extra staff, it all comes out of the elevation fees, which is right out of the farmers' pockets at the end of the day. We need a bit of a hammer, though, or we will not get there.
Senator Mahovlich: About 50 years ago, I could go down to a restaurant in Toronto and order a corn-fed beef steak, but it came from Chicago. They were selling it to us and we were buying it. We thought it was a better steak.
Does Canada have any corn-fed beef? Have we done enough research to find out that corn is good?
Mr. Laycraft: Some people prefer corn, some prefer barley. That is the good thing about customers.
Ontario has worked for a number of years on an Ontario corn-fed beef program, and it is a good program. At the same time, Chicago has kind of fallen off the beef production circle. Beef production has moved further into Kansas, Nebraska and those other areas. We just completed some work in the U.S. because of country-of-origin labelling. We presented product from Canada in various parts of the U.S. Almost without exception it got as good a score or a slightly better score in every place we went and did that testing. We need that to show the retailers and restaurateurs that we want them to buy Canadian beef. We are pretty proud of how much we have improved our product. I think you will find ours as good as anyone's in the world, and we like to think better.
Mr. Phillips: Did corn-fed beef make you skate faster?
Senator Mahovlich: That is true.
Senator Robichaud: Better stick handling.
[Translation]
Senator Rivard: My question is for Mr. Groleau. It is too bad that Senator Plett has left. I would have challenged you to put the Riopelle from Îles-aux-Grues in front of him and compare it with the best cheese from Manitoba. But I will pass along the message.
Could you tell us the average income of a Quebec farmer as compared with that of a farmer in a province where the population and production sector are comparable? Is it about the same, or is there a difference?
Mr. Groleau: The income varies from one year to the next. We have had some hard years. The crops were better this year, especially in Quebec and Ontario, as Mr. Gowland mentioned. As a result, the average income will certainly be higher.
I am a bit caught off guard by your question, as I do not have that information handy right now. I know that in recent years, the average net income was down in Canada. But in provinces such as Ontario and Quebec, which had a larger production under supply management, producers pulled through relatively better, on average, for the reasons I explained.
Senator Rivard: It was not due to government assistance.
Mr. Groleau: No.
Senator Rivard: It was primarily due to the quantity of the crops. The temperature from one province to another means that the one that produces the most earns the best income. The cost of feedstock and seeds is comparable.
Mr. Groleau: Temperature is the deciding factor in farming and can mean the difference between making money and losing it. This aspect may not be as critical in the livestock sector, given that you can compensate for supply. When it comes to crop production, the outcome is often determined by temperature. That is another factor we have in common.
Senator Rivard: And, of course, you agree with me on the Riopelle?
Mr. Groleau: Of course. You can add to that Tomme de Grosse-Île, from the same cheese factory, and Mi-Carême. By the way, we are beginning to export those products to niche markets in the U.S. such as Boston and New York, and elsewhere. People are buying these cheeses and often prefer them to French ones.
[English]
Senator Fairbairn: Thank you very much. This has been extremely interesting. I am sure you all want to hit the door rather quickly as it has been a long conversation. However, Mr. Laycraft, I could not let you go without asking a question. As you have heard from Mr. Laycraft, he is very much on top of the weather and on how it is dealing with everything around it in the area out in Western Canada where we live.
You were talking about the cattle, and I do remember those dark days several years ago when everything was going wrong because of mad cow, and so on. You did quite a job on that.
This winter I had heard, and I had felt, that in that part of Southern Alberta where the cattle is forever, it was one of the roughest winters we have had for a very long time in the mountains. I know that we could not even land aircraft in Lethbridge. Towards the end, when things were kind of getting out, all of a sudden there was that period where a whole bunch of young cattle were being killed. I have never quite understood it. The cattle were being killed, presumably, by some creatures who themselves had not been able to get anything to eat during the winter, so they were going after the cattle right away. This was in Southwestern Alberta. That was very vigorous, open and frightening.
Could you give us a picture of that, and the degree to which the changes in the mountains contributed? As you know, our universities are working night and day on that. This also gave the other part of agriculture a rough time too, the growing up before they could ever get started. Could you give us an idea of whether that was just a snap, or will this be ongoing with those gorgeous mountains?
Mr. Laycraft: I am not sure anyone really knows the answer to that question. I can remember that when I was in school we had three feet of snow at the end of April and it created kind of the same conditions, where there were record losses. That was in 1967. It is not the first time this has happened. We did have a tremendous set of blizzards that went through, and there were heavy losses among some of the operations that were impacted by that.
I made some comments earlier about some of the business risk management tools that are available. Certainly, with some of the volatility we are seeing in climate, having some of those tools available is important. When you go from the driest conditions that have been recorded in March to the wettest conditions by August in the same area, it gives you a sense of whether that might be longer term. There is quite a bit of debate on that.
Certainly this is creating greater challenges for all of agriculture, as you have heard here today. Being able to manage those risks is something that each of the groups here have brought forward recommendations on. We would appreciate it if some attention were given to that as well.
The Chair: Before we adjourn the meeting, I would like to bring to your attention, witnesses, that you have been very informative and educational.
I have two questions, which you do not have to answer now. We will follow up with a letter to each of you. In agriculture, with any commodity, we have quite a challenge in terms of retiring farmers. I would like your opinions on that.
Second, the Growing Forward Agricultural Policy Framework is expected to expire in 2012. We would like to ask each of the witnesses what should be improved in the next Canadian agricultural policy.
Before we close, we will ask Senator Robichaud for a wee question.
Senator Robichaud: I want to thank you for coming today and for giving us a general picture. Our work here is not done. Would you have any suggestions as to what we should concentrate on when we are done with forestry, or even at the same time as we work on that? You do not have to answer right now. If you could send to the chair some suggestions as to how we could help the agricultural community, it would be appreciated.
Mr. Bonnett: I would suggest not going in with any preconceived notions about everything from supply management to marketing structures to what the markets will be and having a constructive dialogue to take a look at what is working, what is not working and what has the potential to be fixed. Sometimes we go into these discussions without really examining what we already have that is working and we make the mistake of charging ahead and not really knowing where we are going. That would be one piece of advice going forward.
Mr. Phillips: One thing you heard about today was research innovation, whether it is the dairy producers making the herds more efficient, or their feed conversion, or all the crops. I would suggest that you may want to think about talking to the House of Commons Standing Committee on Agriculture and Agri-Food to determine who should take the lead on looking at the funding of research. How much are farmers putting in? Can farmers put in more? What are the funding models? What roles do the private and public sectors play? Is there a hand-off? I would encourage you to talk to the house committee to determine who should take the lead and go with this.
[Translation]
Mr. Groleau: I do not like to hear that supply management and other production sectors are at odds. They complement one another. Each system was developed based on the market conditions at the time and reflects the choices made by producers and governments. I buy grains. I sell calves to stock farmers. So we are all, to some extent, integral parts of a Canadian agricultural policy that contributes to our success and, on occasion, our misfortune.
We are colleagues. I am willing to help my colleagues in other production sectors discover markets because I can benefit from that down the line, but not if it will have an adverse effect on my own production. I think we can all find ways to work together to improve the situation of farm producers in Canada. It is not a matter of being at odds with one another. We are part of an integrated system in a number of cases. All of these production sectors exist in Quebec, and they all have Canadian associations that rely on their participation and contribution. My hope is that we can work harder to understand and complement one another, rather than being at odds with each other and giving the impression that there are two solitudes.
The Chair: Thank you very much. In closing, Mr. Groleau, thank you for your excellent presentation on supply and demand. No doubt, we could have also covered eggs, chickens and turkeys.
[English]
Witnesses, thank you very much. We appreciate what you have shared with us, and no doubt we see the leadership you are providing. Together, as a team, we will continue. With this, I declare the meeting adjourned.
(The committee adjourned.)