Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 21 - Evidence - Meeting of December 8, 2016
OTTAWA, Thursday, December 8, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 8:00 a.m. to continue its study on the acquisition of farmland in Canada and its potential impact on the farming sector.
Senator Ghislain Maltais (Chair) in the chair.
[Translation]
The Chair: I want to welcome our guest, as well as all of the members of the committee. I am Senator Ghislain Maltais from Quebec, chair of the committee. Before continuing, I will ask my colleagues to introduce themselves, starting with the deputy chair.
[English]
Senator Mercer: Terry Mercer, Nova Scotia.
Senator Tardif: Claudette Tardif, Alberta.
Senator Gagné: Raymonde Gagné, Manitoba.
Senator Plett: Don Plett, Manitoba.
Senator Oh: Victor Oh, Ontario.
Senator Pratte: André Pratte, Quebec.
Senator Dagenais: Jean-Guy Dagenais, Quebec.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Chair: Thank you. Today the committee is continuing its study on the acquisition of farmland in Canada and its potential impact on the farming sector.
[Translation]
This morning during the first hour, we have Mr. David Connell, associate professor, Ecosystem Science and Management, University of Northern British Columbia. Mr. Connell, welcome to the committee.
You have a certain amount of time to make your presentation. The shorter it is, the more time senators will have to put questions to you. In an hour, we will probably cover the issue. You have the floor.
[English]
David Connell, Associate Professor, Ecosystem Science and Management, University of Northern British Columbia, as an individual: Thank you and good morning, honourable senators. It's a pleasure to be here to speak with you. The documents you have in front of you — the coloured versions — will be referred to specifically during the presentation. They are there for additional detail for you.
I am speaking today about farmland protection in Canada. I have two specific purposes of my brief talk. The first one is to describe the state of the farmland and the level of farmland protection in Canada and then to discuss its implications for the acquisition of farmland. The two are certainly very well connected.
The point of reference is a national project that is about to wrap up. It's in its fourth year and is funded by the Social Sciences and Humanities Research Council at almost $500,000, which is a good indication of the importance of the topic among my peers. It was six universities across Canada, so it was well represented.
The reality in Canada is that we have been protecting farmland for more than 40 years, yet despite these direct efforts, Canada is still losing farmland right across the country. More important, it's still losing some of its best farmland. This morning, my aim is to give you a sense of why that is the case in terms of some of its pressures and the level of protection that exists.
The factors that influence the loss of farmland are widely known and easily recognized. These are the just the conversion of farmland to other uses: alienation, which is the loss of access to or use of farmland due to non-farm developments; fragmentation in terms of dividing the land base up so that individual parcels of farmland are separated; and then the availability of farmland that arises from non-farmers purchasing and speculating land and then not using it. Those are factors well identified within the field and relate to farmland acquisition as well.
The challenge I have experienced in dealing with farmland protection is that whenever you get into this topic, once you step off that piece of land, you are really dealing with some very basic but critically important questions about society as a whole in terms of where food, farms and farmers fit within our society. It really goes beyond the land base into major policy decisions — but very broad interests in the public interests.
The question then becomes: Where does farmland protection fit among the competing interests and the various public interests that local governments, provincial governments and the federal government must ultimately reconcile in the end?
That was the way we framed our work. In the simplest terms, we were looking at the strength of legislative frameworks — those laws and bylaws, and I'll come back to that term in a second — but the strength of legislative frameworks to protect farmland in Canada. By "strength'' I mean it is strong if it protects farmland and it is weak if it does not protect farmland.
The starting is point is that we do believe protecting farmland is a public interest, so our work was in terms of to what extent; we weren't necessarily judging whether it was the right balance or the right decision but were evaluating overall strength. We were specifically looking at documents as they are written, which is very different from how they might be implemented or practised.
The first page that shows British Columbia in yellow is what I mean by a legislative framework. In that document are several rows and three columns. On the rows, you have provincial and possibly regional and local. More important are the three columns. The centre column is where, at the provincial level, you will see laws, regulations and enforceable regulations. Those are the most critical documents we looked at. Then you get down to local governments and the statutory plans, whether official community plans or municipal planning strategies — whatever they might be referred to — but those are the local statutory plans that express public interest. Collectively, all of these documents are what we used as raw data. That's what we looked at to assess the strength of farmland protection, so we looked at the explicit language and the specific policies.
The next page has a few check marks and some green lines. If you look down each column, you'll see that the pattern of tools and elements that each province uses is different. Just by showing you this, I wanted to indicate that every province chooses a different approach. If you look at the names of each row, you will see there are agricultural zones that are dedicated where agricultural lands are dedicated; there are agricultural commissions; you have what are called PLUPs, or provincial land use policies; and SPIs, statements of provincial interests. There are various tools, but each province chooses to use them differently. That was our starting point in terms of identifying what each province does. The point here is that you can see that each province has its own recipe or formula.
In order to make sense of all those documents, we looked at four principles described in the policy brief I believe all of you have received: maximize stability, which about the strength of language; what is the commitment to protect farmland; how was it expressed; and where is it placed. Is it in a law or is it an aspirational policy? We want to know in which document it appeared. So we have the four principles of land use policy planning. No need to go into those in details, but they are in other documents. Briefly, these principles guided us and allowed us to evaluate the strength.
If you flip to the next page, you will get a sense of how it unfolded.
The next document has a comparative assessment of the provinces. The first thing I want to point out there is that you will see different shades of green. Just by looking at that, again, it reinforces the idea that each province takes a very different approach. There, with the four principles, in that first column, "maximize stability,'' the darker the green, the stronger it is. You can see in the first column that each province has a different level of protection for protecting farmland. Integrating across jurisdictions, which is the second principle, minimizing uncertainty, which is the third and accommodating flexibility are commonly accepted as basic elements of a strong and effective legislative framework. Again, you can see among the shades of green that provinces across each row have a different approach as well.
But in this column under overall strength, you can see by province — and we've broken down Ontario and British Columbia into zones — the overall strength varies from very strong to very weak at that point in time. There is quite a range of levels of protection when we look at the legislative frameworks through these four principles.
The next page shows the pie chart, and the darkest green shows the amount of dependable farmland or the best farmland, also referred to as prime farmland, Class 1, 2 and 3 lands. The pie chart represents all of the prime farmland in Canada, and the different shades of green show the levels of protection. You see in terms of very strong protection, the dark green elements of the pie chart represent 10 per cent of the land base. That pie chart shows that of our very best farmland, only 10 per cent of the land base has very strong protection. The other thing the pie chart shows is that over 75 per cent of our best farmland has only moderate to very weak protection.
To me, this one pie chart speaks to the underlying issues that permeate the system but ultimately affect the price of farmland, the availability and all the issues related to the acquisition of farmland. It shows that most of our best farmland is exposed to conversion, alienation, fragmentation and non-farm development. That pie chart, I think, is the strongest simplest message.
This next page says it doesn't stop there because the pie chart was by province. This next page shows the 20 case studies we did across Canada, and it shows that among local governments, there is greater variation. While 10 per cent at the provincial level is very strong, there is no guarantee that all of the local governments are going to be very strong.
On this chart or the table here with all of the different local governments listed, there are two points. One is that overall strength of local governments varies from very strong to very weak. If you look across those four principles again, just looking at the table as a whole, you will see many shades of green, which tells you at the outset again that each local government takes a different approach. It really adds up to a variety of approaches in terms of the combination of provincial governments and local governments making for an interesting mix of strength, which gets me to that next page.
I believe it should be the last page of your document, and here we just tried to combine those effects and highlight some of the relationships. On the rows, you have the overall strength of provincial legislative frameworks, and across the top you have the strength of local legislative frameworks. Where you see the dark green, in Delta, B.C., for example, you have a combination of strong provincial protection and strong local protection, so that is the best case scenario. The darker shades of green are the better cases, the better place you want to be if you are interested in protecting farmland, and the lighter shades show the areas where farmland is most exposed to non-farm development and conversion.
One other point to make in this chart is that if you look across each row, where the province may be very strong in its legislative framework, you will see that local governments vary. There is no guarantee from the fact that the province is very strong, and you can see from these few case studies that they vary. It's evident in the very strong column and in the moderate column. There is not a correlation necessarily between the choices that local governments make in terms of their expression of interest and what the province has chosen to do.
So that really sums up the approach. It indicates the level of exposure and that the system does orient itself, and that's where issues around farmland acquisition arise. Thank you.
The Chair: Thank you very much, Mr. Connell. For the first round, Senator Mercer.
Senator Mercer: Well, Mr. Connell, thank you very much. It's a very interesting study. You have presented us with some comments on my own province. I will probably yield to my friend Senator Ogilvie because it pertains to Kings County, which is the county he lives in. I'll leave some specific questions to him.
It seems to me that you have talked about different approaches in each province. Are you suggesting, recognizing the federal-provincial responsibilities, that we should try to work to a standard approach across the country?
Mr. Connell: Certainly, if the assumption is that one wants to protect farmland better with a coordinated approach, from our research project, we have recommended that the federal government make a policy statement to protect farmland.
Right now, with the Growing Forward and the Growing Forward 2 document, as well as the Calgary framework for the next policy framework for agriculture, farmland protection doesn't appear in any of those documents. You see statements and goals to double the amount of export values. You'll see increasing local consumption, but there is a disconnect between the economic development of a sector and the need to secure the land base. I think that speaks to our position, which is that it should be and could be better coordinated and framed within a federal statement of interest in protecting farmland.
Senator Mercer: We've consistently talked around this table about the population explosion that will happen between now and 2050 around the world and the need to feed those 9 billion or 9.6 billion people. The number starts to fluctuate. As we get closer to that date, it seems to get bigger, and I guess it will continue to do that. I won't be here, but my concern for my grandchildren or my great grandchildren, at least, is that this many people on the planet will not be happy if we can't feed them, and unhappy people do things that are not good. Has the population problem that we're going to be facing entered your study?
Mr. Connell: Indirectly, it certainly framed the problem. Certainly, there are the two sides. One is the loss of farmland. Land is needed to house and settle those urban areas, but at the same time, land is needed to produce food. As I said at the beginning, any conversation about farmland protection immediately gets deeply involved in broader questions about the public interest and public priorities. I think that a growing population, expansion of urban areas and the need to grow food are irreconcilable. They need to be managed together. It's there, more in the background. We were looking specifically at farmland protection, but that's definitely the environment.
Senator Mercer: Did you also address specifically — and I may have missed it because I was trying to read as you were speaking — the issue of urbanization of farmland that is in close proximity to urban centres, it being converted from productive farmland into subdivisions and high-rises, et cetera?
Mr. Connell: We were looking specifically at the legislation in terms of how it's written on paper, but when you get down to that level, it tends to be local government. But Quebec and British Columbia are the only two provinces that have agricultural zones where agricultural land is identified and protected. Ideally, in those situations where there is great pressure from urbanization, that land is still protected and that's the idea.
There are a lot of mechanisms, and the results show that local governments take different approaches. For those most concerned about protecting farmland, they do have additional tools, very detailed approaches to protect and contain that urban development.
We looked at the legislation to protect farmland, but one general rule of farmland protection is that there is always a corresponding need to manage urban growth. Sometimes the best way to protect farmland is to not worry about that legislation as much and spend most of your time in direct reference to managing urban growth. Kings County is a good example that adopted that approach in 1979, this dual management approach of containing growth centres at the same time as having strong wording to protect farmland.
Senator Mercer: In Quebec and British Columbia, as you were doing the study, did you detect any internal or external pressure on the legislative system to change this, to make it more open or less stringent?
Mr. Connell: Every conversation reveals pressure on farmland. It's not a very academic or specific statement, but to sum things up, I would like to think that the starting point is that the system will consume farmland. That seems to be a general statement, but a healthy or productive place to start. You look at every statement, every policy and every effort to protect farmland as always working against that pressure.
You can see that in Quebec and B.C., where they have the strongest legislation, even those provinces are battling the battle. They are losing the best farmland. Through its application system, B.C. has 300 applications each year that are non-farmland development exclusions. Quebec has a different system but 3,000 applications per year, and these are the strongest provincial legislative frameworks.
The pressure for urban development is strong, but even among farmers themselves there is not consensus. Many farmers are at retirement age, and they see an opportunity to convert that land. They get a higher price if they can convert to it to non-farm use. It's within the ag sector, among farmers, as well as pressure from urban. It's constant.
Senator Plett: You have quite a document here, and at the end I don't see any recommendations. You are telling everyone what is wrong with the world but not how to fix it.
Mr. Connell: Thankfully, I looked at my watch and it showed me I should stop.
Senator Plett: I would like to know what you recommend, in as short a time frame as possible.
Mr. Connell: The primary purpose of the policy brief you had distributed was to set out three recommendations.
The first recommendation is that the federal government should adopt a statement of policy to protect farmland. I mentioned the next policy framework for agriculture, but perhaps more important is there is also the mandate to develop a national food policy. A national food policy, without a connection or recognition that one must secure the land base in order to produce food, to me would be a weak policy. The first recommendation is to adopt a national statement to protect farmland.
The second recommendation is for the Privy Council to build provincial collaborations around the federal statement of interest in order to protect farmland, recognizing it's going to be a collaborative effort. Just like the next policy framework is a long-negotiated process, farmland protection should be and must be negotiated within that same framework.
Senator Plett: I see it your document here now. I think that's fine. I should have read it before I asked the question.
My next question is the chicken-and-the-egg question: Who is the problem? The people buying the land and turning it into big mansions or the people wanting to make money selling the land because they are tired of farming or want to retire on the most money they can get for their land or whatever reason? There must be somebody wanting to sell if there is somebody wanting to buy.
Mr. Connell: It will go both ways. It depends on the circumstances and the context and the age of the farmer and type of farming.
One may, in a particular situation, identify the chicken or the egg, but generally it is dynamic. The buy-sell piece is one, but it does broadly scale up to the question of public interest. Where does farmland protection fit? Again, with the chicken-and-egg, should it be local, provincial or federal in terms of where the strongest statement is? Who needs to make that statement? It is very dynamic, and there is not necessarily a cause and effect.
Senator Plett: I know Quebec has not separated from the rest of Canada yet, but your pie doesn't include Quebec, or am I missing something?
Mr. Connell: It must be missing the label.
Senator Plett: Which one is Quebec on this pie?
Mr. Connell: The largest green piece, the first pie chart right at 12 o'clock.
Senator Pratte: I would like to delve deeper into the respective responsibilities of the federal government and the provincial governments in your recommendation, beyond an aspirational statement by the federal government that we should take care of our farmland. What do you see as the federal government's role in your recommendations? It's clear that it is the provinces that can act, and we can see some have acted strongly and others much less so.
Mr. Connell: I will preface my response by saying that's a question I will be pursuing with a colleague in terms of exploring that in detail. I believe it gets very basic but critical and the essence of the Constitution in terms of what is possible. I really don't know that answer.
It's similar to other jurisdictions where there are shared responsibilities, and ultimately it comes down to a negotiation. The next policy framework is already being discussed and negotiated, where agriculture, farms and farming fit, as well as the food policy. The next policy framework provides the environment for that extended discussion and negotiation.
We have left it as, in general terms, a policy statement. To what degree it's enforceable, I suppose it would be by agreement, not necessarily by being enforceable in the end result. The responsibility for land-use planning is a provincial responsibility, which is dedicated to local government. Constitutionally, the federal government does not have that authority to do land-use planning.
Senator Pratte: You mention in your last recommendation that the federal government should establish a national land-use monitoring program, and something we've heard time and time again here is that there is a lack of data. You have obviously looked into the data. Can you be more precise as to what sort of data we need to track farmland use?
Mr. Connell: Yes. Just to repeat, we had a national forum where we brought provincial land-use planners together across the country on this need for land tracking.
I find it difficult to track how much agricultural land we have. It comes in different forms. The farm census is the land that farms actually report using, but it becomes challenging because it's on a farmer-by-farmer basis, not by land base, necessarily. It's helpful to know some numbers of active farmland, but it doesn't speak to the land base itself.
What is more difficult to find, and you see it in different degrees among provinces, but the starting point would be to document not only active land but potential active land by classification in terms of how good is the agricultural land in the Canada land inventory. Ideally, the first need is to identify not just active land by the farm census, but having a database of potential agricultural land that is consistent across Canada and readily available.
The next piece is to track the use of that. That's the difficult part because it changes quickly.
So, ideally, you have that proper inventory of the land and then a constant monitoring to see how it is being used.
Senator Pratte: Last question: Is that technically feasible and at a reasonable cost?
Mr. Connell: I don't know the cost. From the provincial land use planners that I spoke with, it's technically feasible. Different provinces do it to different extents at this point in time, so coordination across provinces is needed.
The benefits of GIS, geographic information systems, these days are that they are more and more powerful. Databases are there in different forms, not necessarily for the purposes of identifying agricultural land inventory. A good example is the most recent and the best data for agricultural land in Canada was part of a national look at ecological goods and services. A by-product of that was a look at farm uses. They were able to compile that land for that purpose, and, intended or unintended, it was an outcome of that process. That was a few years ago, and that was the closest we have gotten to a good inventory.
Senator Ogilvie: Thank you for your presentation and your documentation. I am going to ask questions for clarification so that I understand the context of each.
With regard to your definition of "protecting farmland,'' we have three or four categories of protection against. The first would be "versus other uses.'' The second would be "versus foreign ownership.'' A third would be "versus corporate and other investors'' — those kinds of things. In your tables, how many of these are included in your definition of protection?
Mr. Connell: I'll back up a little bit to start with the difference between farmland protection versus farmland preservation. We use protection in that legal context of what is written in the paper. The legislative framework in the first page of your handout speaks to that specifically. That would be the land use side, so the first option. Preservation includes things like easements and land trusts. Your home town is very involved with that.
There was a good discussion among provincial land-use planners about where farmland ownership fits. It's very much an important issue. But, legally and just within the legislative domain, ownership is a very different issue from land use. They are two different domains.
Senator Ogilvie: I just wanted to make sure that those were excluded from your definition, as you said in the first part.
Second, and you have touched on this both in charts and in your comments, is the difference between provincial regulation and district or municipality regulation. Most Canadians don't understand with regard to national law that we have federal and provincial, and then the provincial doesn't even have jurisdiction on many things, including some aspects of health at the local level. Municipalities have that under the Constitution.
Your document here outlines these issues. After you have looked at this, go to the province issue. Is there hope that the provinces could have significant legislation that would restrict the ability of municipalities, for example, to move farmland away from farmland to development?
Mr. Connell: If I understood correctly: Is there opportunity to strengthen farmland protection using provincial legislation? The answer is "yes.'' Almost every chart I showed you speaks to that. Ontario, Quebec and B.C. stand out as very strong — parts of Ontario. Among the provinces, there is still a lot of room to improve their requirements.
One of the important ones is on the second page of the handout where there are check marks in the top corner. One of the rows speaks to level of integration. Here is one of the more critical elements about legislative framework: Each province chooses the language — that's the second-last row — it wants to use. It's a deliberate choice in terms of is it to protect farmland, or is it to use farmland to support the ag sector? Every government chooses different words.
Right below that is the statement of consistency. Each province also chooses the words that it wants. You'll see "must be consistent with'' and "shall be consistent with,'' but you will also see looser language around "reasonably consistent with'' or "generally consistent with.'' That's a critical piece that I think speaks directly.
Senator Ogilvie: I have just a couple of other questions for clarification with regard to — which I thought was of course consistent with everything that we are sensing here — a national land use monitoring program. Then you have in your appendix of the document you circulated initially the amount of dependable land — agricultural land, for example. You do make the qualification that this was based on census data. We know that that's an approximation based on a reasonable approach. These tables, then, do not include any Crown land?
Mr. Connell: That's a detail that I have probably lost track of. There were two sources of data to make up those tables. The older one, I believe, was based on the capability of agricultural land, which might have included Crown land.
Senator Ogilvie: The final thing: You have the land in classes. Just remind me of the Class 1 definition.
Mr. Connell: The Canada Land Inventory, CLI, is around agricultural capability. There are seven classes. One is the best and seven is basically non-productive. One is a wide range of possibilities in terms of products that have been grown with very little intervention. It's the best farmland.
Senator Oh: My question comes back to the protection of good farmland. I have been to many municipal or township master plan meetings; every few years they have a new master plan come up. For town planners or urban planners, nobody ever talks about losing good farmland. We need the land for food.
Is there any way we could inject this concept into the cities? How do they implement on protection? Nobody ever talks about this. The city is growing, and the land is competing for area to expand.
Mr. Connell: I'll preface my comment by saying that I grew up in Mississauga.
Senator Oh: We come from the same city. I have seen the city grow and farmland disappear.
Mr. Connell: It may have been my best inspiration for this work that I have done. I say that politely.
It varies. Perhaps in a place like the Greater Toronto Area, there may be more talk about accommodating urban growth. But even within Ontario, there many people talking about farmland protection in different places and perhaps Mississauga. I flew in the other day and there is still active farmland around the airport. That still amazes me. Within Ontario, it's a very active part of the discussion around The Greenbelt Act, 2005, and the growth plan, Places to Grow. It's very active and actively discussed.
But it's up to each of you and each of us — every person — to make that choice in terms of where farmland fits. The view of the project and my view is that more should be and could be done. There are two approaches. One is the one you're talking about in terms of the master plan discussions at the local level. But the other recommendation is that the federal government potentially can play a stronger role as well to make the whole system stronger.
Senator Oh: You think federal government should intervene more? The guidelines should come federally?
Mr. Connell: I believe there is an opportunity for the federal government to make a statement. It seems inappropriate, which may not be the best word. I'm trying to be sensitive and polite here. There is a federal expression of interest in agriculture as a sector. There is going to be a federal expression of interest in food. It seems that it's quite reasonable to expect a federal expression of interest in the actual land that supports both of those sectors.
Senator Oh: At this level, we talk about how important good farmland is for producing food. At the city level, no one ever talks about it.
Mr. Connell: It does vary. I also spend time in the town of Caledon where there is more farmland. It certainly is an active discussion there.
Senator Tardif: Thank you for your informative presentation, Professor Connell. Other witnesses have cited your study in previous appearances, so congratulations on the good work you do.
I notice in your policy brief that was presented to us that a national forum was held in June of this year, in which land-use planners from all the provinces came together to discuss land-use planning. I'm wondering where you are with this. Do you see this initiative continuing in the future? Were best practices identified?
Mr. Connell: The funding envelope for this project is coming to an end. Part of mine and my colleagues' efforts is to disseminate the information, which is why I was in Nova Scotia in Kings County just the other day, speaking to the mayor, councillors and interested people. That's where we're at right now. As individual members, we will carry on with our own interests within farmland protection.
With the national forum, it was an amazing experience. It was held here in Ottawa. It is the first time it brought all the provincial land-use planners together from every province. Most people didn't know each other before they arrived. Literally, it was Sunday night, they were arriving for a reception, and I was asking, "Do you know anyone else?'' And they said no. It was incredible opportunity to bring everyone together.
Since then, we have an e-mail list where they are asking information about property tax regimes and other things. So it's continuing in that way. Literally, we often use the term "capacity building'' somewhat loosely. Ultimately, we did build a capacity to carry on nationwide conversations around agricultural land-use planning. It will continue in that form.
What I'm leading up to is that overwhelmingly, every person in that room asked to reconvene; so the intent is to apply again for follow-up funding to reconvene that same group and actually have a broader audience. It will continue on in various ways, and the national forum was definitely a foundation for providing many opportunities to move forward.
Senator Tardif: Were any best practices identified?
Mr. Connell: Throughout the project, over the three years as we did the work that led to the charts you're looking at, it was surprisingly difficult to identify best practices in a short, nice, compact list. Through the national forum, we asked a question, collected information there, and I would say the list is 15 to 20 items which I won't review here.
To me, that spoke to not so much best practices, but that the best practice is to basically recognize that within each province and local government — I refer generally in terms of the system — the environment will orient itself to that legislative framework. Generally the landowner, whoever it might be, will find that loosest entry point and take advantage of that. What the charts show is the lack of consistency. Each province and local government will have its different entry point.
In that sense, it was challenging to identify some best practices. There are some important ones, many of which we have been talking about already, but linking provincial and local governments is certainly at the foundation.
Senator Tardif: Probably the best practice is, as you were saying, to strengthen the legislative frameworks?
Mr. Connell: Yes.
[Translation]
Senator Dagenais: Thank you, Mr. Connell. You know that Canada is a vast country and that only a small part of its territory is used for agricultural production. Do you think that Canadian producers could expand by using uncultivated lands? Or do you think we are close to our maximum production, given the economy and the available labour?
[English]
Mr. Connell: Very interesting question. An agrologist, someone who works directly with farmers, would probably have a more accurate response to that question.
In terms of the history of Canada, it's interesting to look at the waves of development. Some colleagues have documented how, in the founding of Canada, there was a massive expansion of agricultural land. There have been one or two waves of both contraction and abandoning of farmlands. Some of it is that the early settlements were on land that just wasn't feasible. It was overzealous. Others are economic conditions where contraction has happened because economically it was no longer viable.
I guess it depends on how desperate we get to grow food, but there is a critical underlying economic question in terms of what is feasible. At some point, you reach the point where you can't grow that food on that land.
In terms of looking at agricultural land capability, there is still room. There is documentation of unused farmland out there. It's higher than we think. The number might be 30 per cent, but that just comes out of the air. There is definitely room to grow more with existing farmland, and economic conditions will shift that.
[Translation]
Senator Dagenais: In your presentation you said that the best agricultural lands in Quebec are the ones along the shores of the St. Lawrence. Could we not make some recommendations about these lands, at both the federal and provincial levels, in order to protect them better?
[English]
Mr. Connell: In Quebec, in particular, there is a lot going on. B.C. is very similar in terms of legislation. It has been over 40 years, and I would still describe it as a process of negotiation, so there is definitely always more to do.
Again, because the federal government doesn't have any constitutional authority to intervene directly — I believe that was the nature of your question when you said "we'' in terms of the federal government. I'll go back to the next policy framework. It seems to me to be the best opportunity to inject that. It's the best opportunity to raise the issue of farmland protection. And I will emphasize that in the current documents, we have some amazing frameworks, but we don't even recognize the security of the land base.
The simplest and easiest response is, right, we're not talking about it, we haven't been talking about it, so even if we just start the conversation, that's a positive move forward.
[Translation]
The Chair: Mr. Connell, I am very happy that you are here this morning. I have a few questions for you. Thirty-six years ago in Quebec, the first Canadian law to protect agricultural lands was adopted. It embodied a very commendable objective. At that time, I worked in another Parliament where the debate took place.
Over time, there have been requests for rezoning. The relevance of an act as important as the Act Respecting the Preservation of Agricultural Land and Agricultural Activities should be reviewed every 10 or 15 years. In that way we could ensure that it still has good teeth, so to speak.
This is a provincial government prerogative, because this issue is not under federal jurisdiction. In fact, I want to get back to that point. The federal government is the only level of government that acquires agricultural land. I want to remind you of the case of the city of Mirabel in Quebec, where hundreds if not thousands of acres were expropriated in a cavalier fashion, and villages were shut down and paved over. Today all of that is absolutely useless. And these were the best agricultural lands in that region. I also want to remind you that the federal government took over Forillon Park in Gaspé, and hundreds of acres of agricultural land were expropriated to plant a few little trees and build footpaths.
I don't think the federal government should intervene in this file. These are provincial responsibilities. This is what I'd like: when you meet with the representatives, tell them that the provinces have to take charge quickly. The ecologists and the urban planning specialists are contradicting each other. The ecologists are installing beehives on their roofs. They don't know that by taking these lands, they are depriving the planet and all of the Canadian population of very productive agricultural lands.
There is a contradiction between the vision of the ecologists and the real world when it comes to protecting good agricultural lands. I think this is a message you should convey to them. A person of your reputation probably has more weight than all of us here around this table put together, when it comes to getting the people concerned to understand this contradiction which, in my opinion, is severely affecting Canada's productive agricultural lands.
[English]
Mr. Connell: I don't think there was a question in there; it was more of a directive. I have not used the word "contradiction.'' That's certainly sums up the situation, and it speaks to having a national food policy and an economic development strategy that recognizes the land base as well. "Contradiction'' is a word that sums up many aspects of the challenge. I thank you for your comments and your support for moving this forward.
Senator Gagné: Maybe this not a question, but there is something you said that I think it explains everything. You said that the system will consume farmland. It follows what Senator Maltais was saying. It's always the chicken and the egg, and how, as a society, we plan the future of land use and also the agri-food sector of Canada. I really appreciated your presentation this morning.
Mr. Connell: I'll just take the opportunity to reflect on my opening comments. Any conversation about farmland protection gets to very big questions about the society we want to live in.
From a planning perspective, there is no other profession that has this responsibility to look to the future and ask and articulate what that desirable future looks like. It's an impossible task. You can't fully know that future. But it is in that context where we have to ask the question: Where does farmland fit within that mix?
That's where land use planning really intrigues me. It's certainly a challenge in terms of the system working against that progress.
[Translation]
The Chair: Thank you very much for having appeared before our committee. We plan to present our report on June 30. Between now and then, if you have other recommendations or other discoveries that could be useful to us, we would very much appreciate your sending them to our clerk. Once again, thank you for being here, and have a good trip back.
We are continuing our hearing on the acquisition of farmland in Canada and its potential impact on the farming sector. We will now hear Mr. Emery Huszka, who is a member of the National Board of the National Farmers Union and president of the National Farmers Union, Ontario. Welcome, Mr. Huszka.
I am sure you have some speaking notes for your presentation. The shorter your presentation, the more time senators will have to ask you questions. I thank you most sincerely for being here. Your testimony will greatly enrich the work of our committee.
You have the floor.
Emery Huszka, National Board Member and President of the National Farmers Union-Ontario, National Farmers Union: Thank you, Mr. Chair. It is an honour to represent the National Farmers Union for Ontario and all of the country.
[English]
To begin, it is my sincere honour as a Canadian farmer to democratically meet with our Senate representatives with a constructive purpose, striving to ensure that eaters and producers alike benefit from Canadian farmers producing one of the staples of life: food.
Briefly, I would like to just introduce myself to put a frame of reference on what brings a small-town farm boy before such an honourable body. I farm as a cash crop farmer in southern Ontario. I am a first-generation-born citizen. My grandparents emigrated from Hungary in the late mid-1950s as refugees. With the clothes on their backs, they came to this country. My grandparents, my parents, my sisters and myself worked side-by-side over the years building what we have today from nothing.
It is that opportunity that Canada provided and continues to provide today that has led to many wonderful developments in our country. And on behalf of my grandparents, Pal and Piroska Huszka, köszönöm szépen, which is "thank you'' in Hungarian.
The NFU advocates for thousands of Canadian farms of all sizes and diverse types from coast to coast. Our mainly volunteer grassroots organization advocates for economic, environmental and social sustainability with farmer-friendly policies that help build strong rural communities that form the backbone for a stronger nation we call our Canadian home. We are pleased that the committee has received our NFU report entitled Losing Our Grip as updated in 2015, which provides a useful perspective for a well-rounded discussion, which garners our focus here today.
Much like our world today, this business of agriculture, this social obligation to produce safe, healthy and available food, this calling we refer to as the farmer, maintains one simple and common denominator. Farming requires access to land, land which is capable of farming activity, land which supports life.
With such a critical purpose, the unrestricted commoditization of land as a liquid asset to be disposed of at will is fundamentally flawed. That which serves as the foundation for life itself demands our thoughtful reflection. If indeed we believe in fundamental human rights, including the right to have access to life-giving food, then we must embrace the need for farmers to have access and control over their land.
Farming anecdotally is said to be the only occupation where one buys inputs at retail and sells at wholesale, then seeks additional revenue opportunities to remain viable. To be a skilled farmer is to develop multiple skill sets. One must be an agronomist, accountant, marketer, mechanic, human resources manager, purchaser, veterinarian, engineer, et cetera. One must adapt to becoming multi-faceted.
As part of a strong farm community, these skills evolve and the knowledge is traditionally shared among farming neighbours. As we go down a path of self-sufficiency, though, and instant access to knowledge through technology, as we stand by while farm families march into our history books, our country loses one of our core strengths and that is the farming community itself.
There is a simply a finite amount of arable farmland. Modern efficiencies make it easier than ever to do more with fewer people, but the details reveal hidden dangers under the mask of what we fantasize as a successful example of advanced agriculture. The unsustainable high cost of technology, the need for all production partners to have an entitled profit, the acceleration of land as a stable asset in an investment portfolio or pension plan or liquid asset to attract desired foreign investment create the perfect storm for a race to the loss of our food sovereignty.
We are a trading nation that has embraced capitalism as our favourite economic approach. The NFU simply asks our fellow eaters to engage in a larger societal debate that would ultimately identify the need to keep farmers on the land.
In my own community in southern Ontario, my neighbourhood has changed dramatically. Land ownership, in addition to consolidation, now sees pension funds, investment professionals and non-farm investors gobbling up ground as if it were candy at Halloween. The results are mixed. On the surface, the land is still under cultivation, but further examination reveals the disappearance of families and residences, imperiled schools, churches and small businesses, all echoing the effect of rural depopulation that land-grabbing has served to accelerate. Infrastructure still exists. The province still sets standards higher with greater costs, yet remaining municipal ratepayers face increasing pressures to keep pace.
So when our government fails to deliver on basic needs such as a comprehensive risk management safety net, when unfair trade deals do see food appear on our shelves using processes and products that are not permitted in Canada without the compliance costs that are forced upon our producers, when we fail to protect the fair market price of land, we see farmer after farmer simply give up and take the money, wiping out another succession of future farmers.
I would like to draw attention to the Losing Our Grip report that we have provided. To sum up my initial presentation, we would like to go through the National Farmers' Union's recommendations that are found at the end of the report.
1. Canada and its provinces must enact a unified set of land ownership restrictions wherein farmland can be owned only by individuals who reside in the province in which the land is located or by incorporated farming operations, including cooperatives, owned by individuals who reside in the province in which the land is located.
2. Provincial governments should monitor foreign and domestic ownership, and control of farmland within its boundaries and publicly report those changes annually. Provinces should also consider legislating appropriate maximum size of land holdings per individual, per incorporated family or per cooperative farm or corporation as has been enacted in the Province of Prince Edward Island.
3. Differential taxation rates should encourage ownership by farm families and other local citizens and discourage investors and large corporations from buying and owning farmland. Farmers and other local residents should be charged lower tax rates than investors, foreign interests, non-farm corporations, and large farming corporations with numerous shareholders, should be taxed at higher rates. Investments in farmland investment companies should not be RRSP eligible.
4. Governments should provide incentives and support for land stewardship practices that maintain the land's productivity for the long term, and corresponding penalties for using farming practices designed to extract maximum rents in the short term at the expense of soil health, biodiversity, water quality and other environmental benefits.
5. The Government of Canada and the provinces must set up mechanisms for farm family intergenerational land transfers that do not rely on loans and interest payments. Governments must find ways for young and new farmers to gain secure access to farmland that does not require massive indebtedness. Such mechanisms could include:
a. Community-owned land trusts and land banks to ensure food production by local farmers.
b. Community-based financing options (that retain interest-payment dollars within local communities).
c. Government agencies that support seller-finance options. (Sellers and buyers could self-finance, and the role of the government agency would be to step in to address rare instances when transactions go bad and there is a need to return the land to the seller.)
d. An income-assurance plan for beginning farmers to assist them in becoming established and support their long-term success.
e. A retirement savings program or pension plan specifically designed for farmers —
This is very important.
— that would reduce their need to rely on selling land to fund their retirement.
6. Transferring farmland to non-agricultural uses must be restricted and curtailed. Industrial or residential development on Class 1, 2 or 3 farmland should be prohibited. All provinces should enact legislation to protect their farmland using the laws of BC, PEI and Quebec as a starting point to improve and expand farmland protection across Canada.
In Ontario, we have the greenbelt legislation, which is fairly noted. The consequence of stopping the greenbelt essentially sees the urban sprawl it was designed to curtail simply resume at another geographical location. The NFU has actually called upon the province to enact the greenbelt province-wide to allow time for a proper policy to be implemented and discussed.
7. Farm input suppliers must be banned from tying input financing to delivery contracts.
8. Canadian federal, provincial, and territorial governments must acknowledge governments' role in creating the debt crisis through policies and legislation that allow corporations to externalize costs to farmers. They must deal with the debt bomb that has been planted under the base of our farming system by:
a. Preparing an honest and factual analysis of farm debt and net farm income.
b. Designing effective and targeted farm support programs that allow farmers to gain short-term stability and allow them to manage an increasingly unmanageable debt load; and by ensuring that only active farmers — not farmland investment companies — have access to such farm support programs.
c. Reducing the cap on farm support programs so that public funding will encourage small and medium-sized farms that provide multiple social, environmental and economic benefits to rural communities.
d. Responding honestly and effectively to the farm income crisis and the imbalance of market power that is at the root of that crisis so that farm families can emerge from chronic financial hardship and earn farm-sustaining incomes from the marketplace; and
e. Direct Farm Credit Corporation lending to provide more support to small and medium sized farms that produce food for domestic consumption. FCC should be prohibited from lending to farmland investment companies or to large export-oriented food processing companies.
The problem that we face with loss of farmland in Canada is a very complex one and does not offer a single-source solution. I would like to build upon the previous presenter and echo the need for a national food policy, a strategy developed by society for society that recognizes what exactly society expects from agriculture.
The present system is very diverse. We have multiple models of production, ranging from highly profitable supply-managed sectors to specialized sectors of agriculture that have limited market potential but high-yield returns. Then there is the majority of farmers, at least in our province, who produce this. Corn. If you were around back in the early 1990s, there was a debate over introducing the ethanol policy in Canada. The result of that debate actually provided a market for the end use of that product. I don't know where we would be today had we not implemented that policy at that time.
For the group, I would like to bring some local perspective to the debate. I have included a sheet that is provided by W. G. Thompson and Sons Limited, one of the local input suppliers in my community.
I draw your attention to the first column. This chart attempts to outline the cost of production for a farmer, breaking it down into generalized categories of inputs, ranging from the most essential one, the seed a farmer would plant; through to fertilizers; through whatever protections in herbicides, fungicides and insecticides; and recognizing there are organic farmers who do not have those costs but which is offset against extra tillage and other measures taken. Crop insurance is an insignificant amount in that per-acre calculation. When you get to the bottom line, the cost of land assumes a reasonable, modest price on the land at a reasonable interest rate. A $250-per-acre cost is less money than what some of my neighbours are paying in rent today. It costs $806.55 to produce one acre of corn, as produced, and that's a close figure.
Then we look at the income side of things. Assuming you have a reasonable season, and a 180-bushel yield is a high yield for me on our more marginal farmland — we're more Class 2 or 3. It's more like 150 or 160 bushels. Right away, the next figure becomes critical: The price per bushel. We are close to the U.S. and are strongly influenced off the Chicago Board of Trade. While we use the metric system in Canada, a large number of your farmers don't. We still reference the U.S. It's $4.61.
That leaves a net margin per acre of $23.25. That assumes nothing goes wrong, that assumes we have a reasonable moderate crop and that assumes an average-to-above-average price per bushel.
Any business in this country looking at return on investment would run away, not walk away but run away, from that scenario. Why does a farmer stay? Because it's a long-term process. We are not farming year-to-year. Even though we report for taxation purposes on a year-to-year basis and must respond to our lenders, the buildup of equity and production is a long-term activity. We use the same equipment that my grandparents bought years ago. Some has been upgraded, obviously. Once it's paid for, something that works is still useful. Land costs represent the single-largest element that a farmer faces.
Taking a 100-acre operation as an example, that is not a lot of land if one was to produce specialty products, grow fresh market tomatoes or peppers, whatever model you adopt. For corn and soybeans on 100 acres, we are looking at roughly $2,300.25 net based on these numbers. That's after paying land costs.
That leads to the next thing, and that's entry level. For a young farming family attempting to get into agriculture, to come up with the $300,000 or $400,000 down payment they need in their pocket and then funding acquisition of a mere 100 acres is a significant lifetime investment.
When we talk in our recommendations about access to stable funding, back in the day there was a program called Junior Farmers' Loans, and it recognized that a long-term investment required a long-term solution, so a 25-year mortgage on your home farm operation.
There is a lot of innovative ways to approach that. Investors want land to stabilize their acquisitions and portfolios, so we suggest that perhaps a broader perspective, out-of-the-box way of funding might be in order. A guaranteed bond issue allows individuals to invest in agricultural land and have a guaranteed 25-year interest rate. The land is the security. The government simply facilitates the collection of the investment, returns it to the young farm family trying to access agriculture, and they have 25 years of interest-only payments to build their operation up and eventually pay the principle. That takes the roller coaster out.
Thank you.
Senator Mercer: Thank you very much for your presentation. It was very detailed and has brought some numbers and some recommendations that we have not heard before, and so we do appreciate that.
I also appreciated your comment about asking our fellow eaters, because I think that's really a good line. One of the problems we have across the board is Canadians not understanding where their food comes from, who the producers are and what the return is for producers is on an individual basis. There is a huge educational gap here between those of us who live in cities and those who live in rural areas in understanding what goes on on the farm. That is very useful.
You did talk about a national food policy, which is something that we've kicked around in this committee; we've always made reference to it but never done anything about it. Who do you see producing a national food policy? What should the outcome of a national food policy study look like and how do we lump these problems together? How do we balance the problem of the dual responsibility of federal and provincial governments in agriculture? This is not an easy subject; it's an extremely important subject, one that at some point in time we will have to tackle. I would like your input into those aspects.
Mr. Huszka: Again, starting the conversation is probably the most critical point to begin with. When farm families had children, not all children were able to stay on the farm. Traditionally, they would migrate into the urban areas. They took their farm-learned skills and that community knowledge and that sense of farm community to our urban centres.
We are rapidly moving to represent 1 per cent of Canada's population who produce food, and a national food policy must engage all stakeholders, and as eaters 100 per cent of our population are stakeholders.
Our present agricultural system is largely dedicated to volume production over quality production. I'm not suggesting for one minute that we abandon our current production methods; however, silviculture and those models that allow for more intensive, more successful, but a more environmental base of production are things that we should be engaging in in terms of our discussion. How do we make that a reasonable way?
For the operator that farms 5,000 acres, this is a no-start conversation. That's not in the business plan. As you have entry-level opportunity for young families, a 50-acre or 100-acre operation is capable of sustaining a livelihood and covering input costs on that model.
Senator Mercer: In that small farm of 50 or 100 acres, are you saying that's viable for any type of operation, or are you talking only supply management?
Mr. Huszka: No. Supply management is a whole different pickle. Sweetcorn is a very simple example. Most of us have gone to a grocery store or have eaten sweetcorn. In season, it is $5 for a dozen cobs of corn. There are a lot of cobs of corn in a bushel of corn that we can't get $5 for. The same land produces that corn stock and cob, but because it's a fresh market opportunity, the reward is much better. We cannot all grow sweetcorn; it is physically not possible.
As a national food policy, if we explore what options we are looking for and how we want to identify those opportunities, especially for entrance-level farmers, our future does not lie in exporting our corn and soybeans. Inputs must be replaced. Every cob of corn I take off that land has to have an input replaced, whether it's fertilizer from Saskatchewan or organic matter from another source.
As far as a supply-management system, the NFU is one of the largest supporters of supply-managed systems; however, the monetization of quota allowed greed to corrupt a system that was largely benevolent in nature. You must win a lottery, marry into it or be born into it. You cannot afford the millions of dollars to pay for the quota in order just for the privilege of starting.
Senator Mercer: I should have married for money, but I fell in love instead. You did not address the federal-provincial issue.
Mr. Huszka: There is a respectful relationship between federal and provincial governments. We have cited that individual provinces have taken initiatives — Quebec, P.E.I. Each province has their own approach because there are specific needs. I think it's the purpose of the federal government to initiate the discussion. It's still up to the individual provinces to enact those necessary regulations and protections as they see fit within their provinces. In having the overall strategic plan, if you will, the federal government has the opportunity to lead that strategic planning discussion.
Senator Plett: Let me just say "wow.'' Even though I probably don't agree with one recommendation you have, I commend you for coming hat in hand and asking for something as opposed to just telling us what all is wrong and not giving us any idea what to do with it. I want to ask a few questions here, but I'm blown away by these recommendations.
First of all, sir, what is your membership? How many farmers do you represent?
Mr. Huszka: We represent thousands of farmers countrywide.
Senator Plett: Do you have a membership?
Mr. Huszka: Yes, we do.
Senator Plett: What is the membership?
Mr. Huszka: It differs by province. Each province has —
Senator Plett: What's your membership? You are in Ontario.
Mr. Huszka: In Ontario, we are part of the FBR process. Presently, we are around 1,500 members.
Senator Plett: I have asked NFU probably six times when they appeared before us: What is your membership? They say they represent members, and I'm amazed they don't know what the membership is.
I have a couple comments and then a few questions. If the country and the provinces were to implement Recommendation No. 1, you could probably strike off half the other recommendations. So I'm not sure why you're recommending all of those. No. 3 could certainly be gone. No. 6 could be gone. No. 8 could be gone. Why not just recommend No. 1 and that would take care of it?
Mr. Huszka: First, to the issue of membership, there was a very significant political party at one point that found itself down to a very humble membership of two, and it still turned around to become a majority government. For the National Farmers Union to have an impact, we would love to have every person who eats food be a member of the NFU; however, it's not necessary. As volunteers and as a farmer, I'm here not for a pay cheque but to try and improve the community in which we live.
Senator Plett: Fair enough.
Mr. Huszka: As far as the recommendations go, the complexity of the problem does not bring about a simple one-line answer. Yes, absolutely, we must enact land ownership restrictions, but restrictions are not the only mechanism. You could fix the acquisition and land-grabbing problem today by simply restricting land ownership. You could deplete the valuation of the land down to a very modest amount, but at the same time, you could bring economic havoc to the farming families that still hold the bag. The only ones who have come out winners are the ones who have sold, taken the money and run. The ones that are still producing foods should not be penalized for simply hanging in to continue to produce food in a very community-minded fashion. It's an encompassing problem.
There must be an income. There must be a result that is stable. I don't need to drive a Mercedes, but I need to be able to drive a safe car to bring my family to where they need to go. I don't ask for anything over and above what we should have other than, say, a fair return on investment.
Senator Plett: Let me first correct the comment you made about this political party. The political party actually had thousands and thousands and thousands of members.
Mr. Huszka: Yes.
Senator Plett: They had a few representatives in Ottawa — not 2 but 64, because they were made up of two parties and became one party. So let's be clear that those numbers are not correct.
Mr. Huszka: I stand corrected. Thank you.
Senator Plett: Farmers are among the best businesspeople in the world, without a doubt. We are told that over and over again. Farmers should manage their own resources. Farmers sell. I don't think they run; they sell and move to Hawaii and sit there with their feet up. But that's their business. That's business.
Farmland increases in value every year, and that's good. A lot of farmers say that's how they make their money. They work all their life, like most of us do. We work all our lives and we build up equity in our business and our home. Farmers build up equity in their land. Then they sell. It's their choice to sell.
I have gone on too long, chair, so I will only ask this question that I asked of the previous witness. I used it and Senator Gagné used it: This is the chicken and the egg. The farmers are the ones wanting to sell their land because they want to retire. God love them for that. They have five or six children, and maybe the farm can't support five or six children, but that's the same as any business. Farming today is a business. So who is responsible here? The people who are buying, the people who are selling, or is this all the big bad government?
Mr. Huszka: I think government is not bad; it is certainly big. We appreciate the sincere compliment to the farming industry. Farm families are businesspeople first.
The fact is that we can't stereotype all farmers. Not all farmers are actually looking to sell their land. Yes, your land is equity and it is part of your asset base. It's your leverage you use in order to continue your business.
But our business has changed. It's evolved, and it's had artificial influences that changed our business. We are in a world market, and that world market does present many challenges. With margins being very small, it does influence your decision-making.
That comes back to the national decision: Do we want an agricultural sector in this country? What does that agricultural sector look like at the end of the day? If it's simply the corporatization of farming, do nothing, because we're well on the way. When a company controls not only the means of processing but the means of distribution and also production, you think $8 cauliflower a couple years ago was a hardship? Project yourself to where you think we will be.
That's part of the strategic planning process. As our leaders at the federal level, you bring the greatest opportunity to engage that discussion with all of our country.
Senator Plett: Thank you for bringing recommendations. I appreciate that.
Senator Oh: According to the NFU, farmland investment companies are shifting Canadian farmland ownership from actual farmers to a new class of absentee members, farm landlords. Is it safe to assume that the Canadian farmland owned by the investment company is not being farmed for food?
Mr. Huszka: That's a very good question. The margins, which I referenced in this document, leave very little for additional inputs. Soil needs to be maintained, cared for and nurtured, and not just mined. You cannot keep pulling out and not put back. One of the things I brought with me is an article that was released online on November 3:
Fiera Capital Corp. is taking the next step in its aggressive expansion plans that include adding agriculture and private equity to its current asset class offerings.
The Montreal-based money manager, with C$110 billion ($82 billion) in assets under management, has set a goal of reaching C$220 billion by 2020. To that end, Fiera is creating a joint venture with three partners to invest in agriculture and, at a later date, to add private equity, said Sylvain Brosseau, Fiera's global president and chief operating officer.
That's a fairly significant competitor that is not agriculturally based in the industry. You don't have to be pressured too much more to say "uncle.'' At some point, we do have a significant number of farm families that are getting ready to exit the industry because of their age and their health. We really don't have a national strategy for how that transition takes place and who those new farmers will be. But an investment company with an extra $100 billion to spend represents a very significant challenge, to say the least.
Senator Oh: I know that some of the municipalities allow these big companies to move in and just get someone to come and plough the land in the springtime and get a special lower tax rate for the land. It's not actually being farmed.
Mr. Huszka: It's a challenge. In Ontario, we see a 25-cent property tax rate. Again, that was to represent the fact that only residents send children to school, call on fire services or demand certain municipal services. So to have farmers pay 100 per cent dollar costs on services they are not exactly taking advantage of based on land only was perhaps the main motivator for that specialized tax rate.
But you're right in suggesting that an investment group has only one interest, and that is stabilizing the portfolio and maximizing the returns. Perhaps taxation, as indicated in our recommendations, is also a very good part of our discussion. Should there be a different tax rate for the capital gain on a buyer whose only purpose was never to farm but to take an asset?
Senator Oh: Thank you for your recommendations.
Senator Tardif: Thank you for a very thorough and compelling presentation, and for your report as well. I'm not sure that I understand completely your seventh recommendation. I was wondering if you could elaborate on it. It states:
7. Farm input suppliers must be banned from tying input financing to delivery contracts.
Could you elaborate on that for me?
Mr. Huszka: Again, access to working capital is a very significant element that all farmers must contend with. The farmers out in Alberta that are presently struggling with the tuberculosis issue are facing the annihilation of their herds, and to replace those herds is going to take some investment. Likewise on cash crop farming, our farm suppliers hold a tremendous amount of influence. I'm not suggesting for a minute that this company does this, but as an example, "You buy your seed from me. You buy your fertilizer from me. I'll hold the cost until your crop comes off. You'll bring your crop in here. Whatever the marketplace price is, we'll decide how we're going to sell it then.'' But if you don't have access to sufficient capital in order to run on those skinny margins or you've had a couple of bad crop years due to drought or other factors, then you're at a significant pressure to fall to the unsaid requirement. "We'll fund you with your inputs, provided we get the cut off the selling it to you, but you'll bring your product to us when we're done.'' That's what the tied selling is alluding to.
Senator Tardif: Is it common practice that the people you buy your seeds from or fertilizer from would exact a percentage, is that what you're saying, of the product once it's sold?
Mr. Huszka: A larger company like that has an unfair advantage. I sell seed as well on my farm as a farm dealer, representing a company called Maizex, which is the largest Canadian-owned seed company, and it's out of our area. A fellow farmer can go into their local elevator and buy a competitor's seed on a bulk rate because they lump all of the sales together as one. So the margins are skinnier. They don't have to make any money off the sale of the seed. They can get to sell the fertilizer to you while you're in the door. And the control — really, that's a word that we must seriously look at in agriculture. It's about control more than ownership. So the control they exert is that they have the product. They have the end result of your work, and now they have the ability to maximize the profit on the other end, not only on the input end but on the marketing of the product at the final stage.
The purpose of the recommendation is to acknowledge that the very real potential is there. I'm going to suggest to a degree it exists whether it's a formalized process or it's really just a matter of practice. But to say someone is silly enough to say, "Either you do this or we won't fund you,'' I don't think businesses are quite that naive. If you're not desperate but if you're in a position where hundreds of thousands of dollars are at play and you're a simple, humble family performing this job, you're subject to some pressures.
Senator Tardif: Thank you for the explanation.
[Translation]
Senator Dagenais: Thank you for your presentation, Mr. Huszka. If I understood correctly, farmers who purchase lands for investment purposes could be given preferential tax rates. Could you give us an example of the tax rates a non-agricultural investor would pay?
[English]
Mr. Huszka: As a farming operation, my land costs are part of my costs of production, and I'm able to offset that cost hopefully with income that I'm generating off the land. If I'm successful over my lifetime of producing a reasonable crop, then when I sell that land I have a one-time-only capital gains exemption. That capital gains exemption was increased only in the recent years, which acknowledged that there was a tremendous increase in value on farmland.
For companies that are coming in that are strategically acquiring land to hold and sell only to generate future revenue, that's a one-time transaction. The consequence of that activity, and the consequence is what I'm referencing here of their influence in the market, is who bought that land? Who could afford to buy that land at that increased value? If the land itself is not producing the necessary revenue to actually make those payments, it's a foolish acquisition. It's a game of musical chairs, and unfortunately the last one left holding the chair loses. So, really, who are the prospective buyers?
In our community, a lawyer from Toronto actually owns thousands of acres. For me to be able to buy 50 or 100 acres from him won't happen because if he can't sell the whole 8,000 acres, he is not interested in any sale or divestiture. So that really limits who your potential buyer for that land will be the next time it changes hands.
More critically, those skills that I have learned over my lifetime, to be able to farm and to do it efficiently and effectively, didn't happen overnight. If you eliminate every school, which a farm represents, when the time comes to have that land go into production, you have lost a generation or more of the very people that you're going to call on to feed those people in 2050. Maybe I didn't answer the question completely.
[Translation]
Senator Dagenais: You spoke of the new generation of farmers. Are there enough farmers in Ontario to farm all of the land purchased by investors over the past five years? Are there enough young people who have the training to take over today?
[English]
Mr. Huszka: The question is difficult, only that yes, there are a number of people that can farm and are capable, but the larger the operation, the more susceptible the operation. We're in a historical low interest rate for operating capital. When the margins for the larger farmers are just as thin as for myself, you don't need 20 per cent interest rates in order to have a catastrophic affect. Eight per cent interest rates will bring the next economic time bomb to fruition.
Senator Gagné: Despite the country's size, agricultural land is a scarce resource in Canada. You have identified quite a few gaps in the system. My question is, have you met with Minister MacAulay to discuss the gaps in the system?
Mr. Huszka: Personally, I have not met with Minister MacAulay in the last 20 years. Minister MacAulay has met with members of the National Farmers Union. As to the extent of the conversations, we are a non-political association. We represent members who hold party membership affiliations and non-affiliated people.
Senator Gagné: Is there an interest in a national food policy?
Mr. Huszka: We are strongly asking you to ask that question on our behalf.
Senator Gagné: Thank you.
[Translation]
The Chair: Thank you, Mr. Huszka, for your very instructive and very interesting testimony. We have to produce a report in the spring in which you will find your recommendations in one form or another.
Dear colleagues, this is our last meeting before 2017. I would like to thank each member of the committee for your assiduous presence and your extraordinary work. I would also like to thank the deputy chair, Senator Mercer. We often get together for brief meetings you are not aware of, and once we arrive in committee, we have already discussed the issues. Senator Plett also joins us on occasion. I also want to thank our clerk, our researcher, all of the technical personnel, the interpreters and the pages.
We will meet again in 2017. However, if the bovine tuberculosis crisis has not yet been resolved, we could have to meet in January. I will discuss this with Senator Mercer in January. If the situation has been resolved, all the better. If not, we may have to meet again then. To those who intend to travel to Florida, Hawaii or China — personally I'll be in Quebec — I recommend that you buy your return ticket.
I hope you have wonderful holidays. We will meet again in 2017.
(The committee adjourned.)