Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 1 - Evidence
Ottawa, Thursday, March 21, 1996
The Standing Senate Committee on Agriculture and Forestry met this day, at 9:00 a.m., to organize the activities of the committee.
[English]
Mr. Blair Armitage, Clerk of the Committee: Honourable senators, as clerk of the committee, I am authorized to preside over the election of the chairman of this committee. I am ready to receive motions to that effect.
Senator Taylor: I nominate Senator Gustafson.
Mr. Armitage: Are there any other nominations?
It is moved by Senator Taylor that the Honourable Senator Gustafson take the chair. Is it agreed, honourable senators?
Hon. Senators: Agreed.
Senator Leonard J. Gustafson (Chairman) in the chair.
The Chairman: I thank you for your confidence. This has always been an exciting committee. Senator Hays has done an excellent job at chairing this committee. We will miss Senator Olson who always gave a spark to our work. We welcome Senator Taylor as a new senator and a member of the committee.
We have many areas to cover in agriculture and forestry.
Senator Spivak: Is that a joke? Are we actually going to cover forestry?
The Chairman: We will have some discussion about that when we complete our agenda.
I call for nominations for Deputy Chairman.
Senator Rossiter: I nominate Senator Hays as Deputy Chairman.
Senator Gustafson: Are there any other nominations? Is it agreed?
Hon. Senators: Agreed.
The Chairman: Carried.
The next item on the agenda deals with the steering committee. I understand that that can be left up to the Chairman and Deputy Chairman.
Senator Rossiter: I move the motion to that effect.
Mr. Armitage: There are actually four parts to the motion regarding the subcommittee. Would you want to move all four of them?
Senator Rossiter: I so move.
The Chairman: Senator Rossiter has moved:
That the Subcommittee on Agenda and Procedure be composed of the Chair, the Deputy Chair and one other member of the Committee to be designated after the usual consultation;
That the Subcommittee be empowered to make decisions on behalf of the Committee with respect to its agenda and procedure;
That the Subcommittee be empowered to invite witnesses and schedule hearings; and
That the Subcommittee report its decisions to the Committee.
All in favour?
Hon. Senators: Agreed.
The Chairman: Carried. The suggested number of copies of committee proceedings to be printed is 470.
Senator Spivak: I so move.
Senator Rossiter: Are 470 copies now being printed or can they be sent out on the computer?
Mr. Armitage: At the beginning of this session, I believe proceedings will also be posted on the Internet. For the time being, they will still be printed in hard copy.
The number 470 was devised by a members of the committees and legislative services staffs after careful analysis of past usage. This motion will give Senator Gustafson certain flexibility to adjust to print more or less as demand requires.
Senator Rossiter: The 470 is a maximum.
Mr. Armitage: That is an average.
The Chairman: Senator Spivak has moved:
That the Committee print 470 copies of its Proceedings and that the Chair be authorized to adjust this number to meet demand.
Is that motion carried?
Hon. Senators: Agreed.
The Chairman: Carried.
The next item is authorization of the Chairman to receive witnesses without a quorum. That does not require any explanation. There are times when a witness appears before the committee and, if there is no quorum, it could be very embarrassing not to hear them.
Senator Spivak: I so move.
The Chairman: Senator Spivak has moved:
That, pursuant to Rule 89, the Chair be authorized to hold meetings, to receive and authorize the printing of the evidence when a quorum is not present.
All in favour?
Hon. Senators: Agreed.
The Chairman: Carried.
The next motion is:
That, pursuant to Rule 104, the Chair be authorized to report expenses incurred by the Committee in the last session.
Senator Taylor: I so move.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: Carried.
Research officers assigned to the committee are recruited through the Library of Parliament and externally.
Mr. Armitage: Right now, since we do not have a formal order of reference, you would go with the motion which asks that the Library of Parliament assign research officers to the committee.
Senator Anderson: I move:
That the Committee ask the Library of Parliament to assign research officers to the Committee.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: Carried.
Mr. Armitage: We also require a motion:
That the Chair, on behalf of the Committee, direct the research staff in the preparation of studies, analyses and summaries.
Senator Rossiter: I so move.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: Carried.
I have had a chat with some of the research staff. They already know the direction we will be taking. I understand there will not be many changes in that direction. We have had excellent support from the library and their research people.
We then need a motion for authority to commit funds and certify accounts.
Senator Spivak: I move:
That, pursuant to section 32 of the Financial Administration Act, and Guideline 3:05 of Appendix II of the Rules of the Senate, authority for certifying accounts payable by the Committee be conferred on the Chair, the Deputy Chair, and/or the Clerk of the Committee.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: Carried.
Next we have travelling expenses and living expenses for witnesses.
Mr. Armitage: This motion allows for two witnesses from any one organization. Sometimes committees prefer to limit it to one witness per organization. It is entirely up to the committee.
The Chairman: This issue arises in terms of cost. Yesterday I attended the House of Commons committee which heard the pulse growers. I have a particular interest in that committee so I sat in. I suggested to our library research staff that our committee could hear some of these people as they come in to address the Commons committee.
They heard from some excellent witnesses yesterday, who brought the committee up to date on the new happenings in pulse crops. It is quite exciting. It would really save a lot of cost if, we could coordinate hearing these witnesses with the House committee. They would not need to fly to Ottawa twice.
Senator Rossiter: It would be more convenient for them as well, and we would not get the same submission that was given three months previously.
The Chairman: Can we have a motion on the travel and living expenses for witnesses?
Mr. Armitage: Is the motion to go with two witnesses from each organization?
The Chairman: Once in a while, we do hear three witnesses.
Senator Rossiter: Is there something to that effect in the internal economy guidelines?
Mr. Armitage: It suggests two witnesses.
The Chairman: If they bring three witnesses, then they are responsible for the costs of the third witness.
Senator Spivak: I did not realize that restriction existed.
Senator Rossiter: It has been so for some time now.
Senator Spivak: What happens if there are three and they really cannot afford to pay? Is there any way of getting around that situation?
Senator Rossiter: If they get the expenses paid for two, surely they can pick up expenses for the third one.
The Chairman: Yesterday was a good example. Pulse grower representatives came from Alberta, Manitoba, and Saskatchewan. All three were there, and they represent quite different areas. For instance, the grower from Manitoba spoke about the bean area which is new for them. The representatives from Alberta and Saskatchewan did not know much about that whole area.
Senator Rossiter: I think we have to follow the internal economy guidelines.
The Chairman: I understand from the clerk that there are others ways to bring people in, if necessary. This motion covers the general principle.
Senator Taylor: I move:
That, pursuant to the Senate guidelines for witnesses expenses, the Committee may reimburse reasonable travelling and living expenses for no more than two witnesses from any one organization and payment will take place upon application.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: Carried. We should discuss time slots for a regular meeting, for those of us who must travel some distance.
Senator Spivak: Tuesday morning is not good because it would mean, for us, that we must come the day before.
The Chairman: It takes seven or eight hours to get here from the west. The same is true for late Thursday afternoon; we need to get out by six o'clock. I am sure it is true for Albertans.
Mr. Armitage: We presently have nine o'clock on Tuesday and Thursday.
Senator Spivak: I move that we keep the 9 a.m. slot on Thursday and try to get a noon time for Tuesday or after the Senate sits.
The Chairman: We can ask permission to sit if there is nothing urgent happening in the Senate.
Senator Spivak: That would be great.
Senator Rossiter: Are we looking at two time slots?
Senator Spivak: If we can get them. We do not always use them.
The Chairman: Wednesdays are not a problem. Most of us are here anyway.
Senator Rossiter: Wednesday morning is taken up with caucus for both sides.
Senator Taylor: The aboriginal committee sits at five o'clock on Wednesday. I do not know how many of us would be involved with that committee.
Senator Spivak: If we can get a time slot on Tuesday, we need not have one on Wednesday.
The Chairman: We could sit any time after the Senate sitting. If it recesses at three o'clock, we can begin immediately. When witnesses are coming, you need a definite time.
Senator Riel: Thursday morning is usually free for everyone, and nine o'clock is a good time.
The Chairman: In addition to the Thursday morning, we will ask for Tuesday afternoon or evening, if necessary. Do you have any problem with an evening sitting, such as eight o'clock? I do not.
Senator Rossiter: Do not forget that everybody else is looking at that, too. We may get one and not the other.
Mr. Armitage: When I talk to my director, I will make Thursday at 9:00 a priority slot and then talk about Tuesday when the Senate rises.
Senator Spivak: I notice there is another committee room being built downstairs in the Centre Block.
Mr. Armitage: Yes, that is why the Committees Branch is moving to 56 Sparks Street, to make space for senators being displaced from Centre Block. I do not think that room will be on line until 1997. I could be mistaken.
Senator Spivak: I do not understand what could take so long.
The Chairman: Perhaps someone could put a motion for Tuesday afternoon after the Senate sits and Thursday morning. We can be flexible on Wednesday.
Senator Spivak: I so move.
Senator Rossiter: Perhaps we should leave further discussion on the matter to the subcommittee on agenda and procedure.
The Chairman: All in favour?
Senator Anderson: That is for Tuesday afternoon after the Senate or Thursday morning at 9:00?
The Chairman: It would be both.
Senator Riel: That is if our work forces us to sit twice a week. According to your experience, has it been necessary to sit twice a week?
Senator Spivak: Sometimes.
Senator Riel: Perhaps we should indicate a preference for Thursday morning at nine o'clock. If need be, we can sit also on Tuesday afternoon. We can plan on Thursdays and be on notice that we may also need to sit on Tuesday afternoons.
The Chairman: That is understood, yes.
Mr. Armitage: That makes it easier to schedule officials. Because "when the Senate rises" is a very flexible time slot.
The Chairman: Is it agreed then?
Hon. Senators: Agreed.
The Chairman: Carried.
The last agenda item is an opportunity to discuss other matters.
The committee continued in camera.
Ottawa, Thursday, April 25, 1996
The Standing Senate Committee on Agriculture and Forestry met this day, at 9:00 a.m., to consider future business of the committee.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: I call our meeting to order.
I communicated with Senator Hays' office earlier, and it was suggested we might have some discussion this morning on the proposed direction of the Farm Credit Corporation as laid out by the Standing Senate Committee on Banking, Trade and Commerce. I have circulated some of the press clippings from farm papers in Saskatchewan, and I must say that there is some concern about the Farm Credit Corporation being combined with the Business Development Bank. Our farmers are saying that agriculture is quite different when it comes to financial needs. However, they are not suggesting that there is not some importance to tightening up administration where there are additional costs that could be removed.
First our researchers will give us a brief history of Farm Credit. I understand that it came into existence back in 1929. The name has changed over the course of history.
One of the suggestions by Senator Kirby was that it was unfair competition to the banks. Quite frankly, I do not think that too many of us are crying for the banks. Agriculture is quite different. We have good years and we have poor years. In Saskatchewan, many young farmers would not be farming today if Farm Credit had not given them the opportunity.
Perhaps the researchers could begin their briefing.
Mr. Jean-Denis Fréchette, Researcher to the Committee: As you said, the FCC was established in the 1920s, just like the Canadian Wheat Board, and for similar reasons. Farmers had problems at that time getting credit, and marketing their grain. The government became involved, at the request of farmers, and created a marketing agency, the Canadian Wheat Board, and a credit agency, the Farm Credit Corporation.
Until 1993, the FCC dealt with farming operations only. In 1993, if you remember, this committee passed a bill that allowed the Farm Credit Corporation to expand its operations beyond primary agriculture to value-added goods, a little bit beyond the farm activities.
The Standing Senate Committee on Banking, Trade and Commerce report made a recommendation that the FCC be merged with the Business Development Bank. A few months ago, the Minister of Agriculture, Ralph Goodale, said, just after the budget, that legislation would be coming soon to change the mandate of the Farm Credit Corporation. That legislation has not been tabled yet. It will be soon, apparently. That is basically where we are with the Farm Credit Corporation, whether or not this bank which historically has served farmers will serve small businesses and get into even more value-added activities and so on.
Recently, Mr. Penny, the President of the Farm Credit Corporation, said that for as long as the FCC exists its primary activity will remain giving credit to farmers. That is what he said, and it is on record. We do not know what the legislation will do to that mandate and the capacity of the FCC to serve farmers.
Senator Landry: With regard to fisheries loans, one of the problems with the Federal Development Bank is that it is costly. Their interest is not out of reach, but they want everything that you own. They want the hair on your head, if you have some. Their legal costs are several thousand dollars. If they guarantee a $1-million loan, they charge 1 per cent and it costs you $10,000 a year. Last year, they went to 2 per cent, and this year they have gone up to 3 per cent. It is quite plain that they want to get out of it. You pay $13,000 for a $1-million guarantee, and you still pay your interest at the bank.
Senator Hays: Do they do that just for the fishery or for farmers as well?
Senator Landry: I do not think they do it for farmers, but that is a good question. When it was 1 per cent, you could survive. Fisheries and agriculture are similar in that you have good years and bad years. Potato farmers on the Island could buy a Cadillac one year and the next year be broke.
The Chairman: Can you fill us in about that? Farm Credit is national, I believe.
Mr. Fréchette: That is true. It is still a national agency, even though in some provinces there is a provincial bank - for example, Quebec, has l'Office de crédit agricole du Québec, which has the same kind of operation as the FCC. In some provinces, the FCC is not as involved in farm credit as in other provinces, but it certainly is true that they are involved in the prairies, in Saskatchewan particularly.
The Chairman: Saskatchewan's position on farm credit has probably been quite different than Manitoba's or Alberta's. In the case of bankruptcy, the provincial government protected the farm for six years under legislation. As a result, banks would not extend moneys to farmers on the land.
Senator Landry: They could not foreclose.
The Chairman: They could not foreclose. This came about particularly during the drought years. I believe this is the concern of our farmers. Will the small Business Development Bank be as lenient and understanding of the farmer's position when farmers get into those difficult positions? I read an article by Sally Rutherford, indicating that they were very concerned about diluting the situation in banking because agriculture is quite different and has different needs. I am open to comments.
Senator Hays: I have a comment and some questions. When I saw Senator Kirby following his report, I indicated that it might be a good idea provided that the name of the amalgamated institution is the Farm Credit Corporation. He did not seem to think much of that.
I am not sure of the relative size of the two organizations. However, if the FCC has the same mandate as the Business Development Bank, their argument may have some merit. The question then is, should it be the same? I do not think it should. We have CMHC as well. I am not sure whether they made a recommendation for Canada Mortgage and Housing Corporation. At one time, the FCC had a more narrow mandate, and that was to finance acquisition of land and capital goods, but mostly land, and they had it on a rolling basis.
In any event, I am not sure of the relative size of the two, but that would be a question. Where would the FCC fit into an amalgamated institution? If it were very small, then Mr. Penny's commitment could not be kept because the larger of the two would dominate.
It raises the question of what policy we have in Canada to support development in rural areas. The broadening of the mandate of the FCC seems to be a recognition that rural areas thrive on more than strictly farming and that to serve the farming community you need to have more flexibility than simply making a land loan. I understand that. However, rolling the FCC into a bank that has another purpose, namely to help small and medium-sized business, might take away a great deal from the traditional rural focus of the Farm Credit Corporation.
I do not think we should support that proposal without some compelling arguments, arguments that support the role of the FCC in rural interests, though perhaps a little broader mandate than that.
One other thing that motivates the broadening of the mandate of the FCC is the great transition. We have this exodus from rural areas and people moving into town. My classic example is the guy who quits farming and buys a car wash somewhere. Should they be able to help him?
During the Growing Together policy development, we had these rural transition programs. I have forgotten the exact names. They were done in association with these debt review vehicles which really have gone by the boards in terms of their relevance, either because the transition has occurred or, increasingly in the grain economy, because the economy is now strong enough that it has stabilized and we are through that period of serious adjustment in farm debt.
I do not know what the current farm debt is. What is it now? Do you remember? Is it about the same as it was?
Mr. Fréchette: It is approximately $20 billion. It was $22 billion.
Senator Hays: That is interesting. This committee did quite an extensive study of the farm debt situation, which I think might be useful to us. I have forgotten what we said about FCC, but it would be worthwhile to look it up.
That is a general comment, Mr. Chairman. I am kind of lukewarm on this proposal because it does not fit with what I think Canada should be doing, and that is developing a policy to serve the needs of rural areas in light of current changes that are occurring. The evolution of the farm business has been fairly rapid and dramatic. I am interested in your comments on that point.
The Chairman: If you turn to page 37 of the report entitled "Crown Financial Institutions," the recommendation is very straightforward.
The Committee recommends that, in order to achieve a more efficient delivery of programs to business and to simplify access to government institutions by their private sector clients, the Business Development Bank of Canada and the Farm Credit Corporation be merged.
That is the direct recommendation that has been made by the Banking Committee. It does not really answer the question that you raise, Senator Hays, in terms of whether Farm Credit would be lost in the shuffle.
Senator Anderson: I agree with Senator Hays that we need more information on this proposed merger. I just know what I have read in the press, and we now have this report to read. I should like to check further with the agriculture people at home to see what they think. I know that the Farm Credit Corporation has been an important organization for farmers. I will check this weekend to see what they feel about this proposal.
The Chairman: Frankly, this headline took me by surprise because I had not heard any discussion on it. It seems to be quite general in terms of the maritimes, ACOA and so on. We need more information on what is expected and what in fact will transpire.
Senator Hays: Do you want to call some witnesses and do a little report on it? Looking at the actual text, I see that the Banking Committee has quoted the President of the Canadian Bankers Association, Mrs. Helen Sinclair, who suggests they should simply move all the money for Farm Credit into export development and asks why we need the FCC. I do not know the Farm Credit Corporation portfolio on farm loans, and I am not sure of the relative sizes, but the FCC was activated to respond to credit needs that were not being met by the banks.
Taking away by provincial legislation the right of banks to recourse against individuals who had given their land as security has made the banks a little bit wary of lending to buy farms. I do not know about other provinces, but in the province of Alberta, that legislation is still on the books. You still cannot sue an individual having realized on a mortgage that was given to secure a loan if it is a farm loan, or even on a residential loan for an individual, other than CMHC loans, where the federal government has gone in to change that legal effect.
The Chairman: In Saskatchewan right now, the banks are reluctant to loan against the land. They will loan against livestock and grain that you have on hand, but when it comes to lending against real estate, they will do it for long-term security, reluctantly. Farm Credit has been very conciliatory in this regard, especially with young farmers who would not otherwise have gained a start. In Saskatchewan, Farm Credit would take on a farmer with as little as 15 per cent down, whereas the banks were demanding 40 and 50 per cent. The concern is that this may be the first step in a phasing-out process, and the banks will end up having more control.
Senator Kirby made the statement that it was unfair competition with the banks. I have some problems with that, especially given the kind of money the banks are making today.
Senator Landry: I feel that any small business like that needs some assistance.
The Chairman: They should have special consideration.
Senator Landry: Fisheries and farming are similar in that they have good years and bad years. Only three years ago, I lost $1.5 million, and I had a bad year two years before. Last year we had sales of $52 million. We survived without them, but we went to the Japanese for some help. Someone had to help us, because the banks are fair-weather friends.
The Chairman: Senator Hays raised the question of what this committee should do. Looking at the schedule, on May 2, we have witnesses on the hopper cars issue; on May 9, Agriculture Canada officials; the Minister of Agriculture on the May 14, and the Canadian Federation of Agriculture on May 16. These people will be versed, I would think, on the issues involving Farm Credit.
Senator Rossiter: Why not have them in earlier?
The Chairman: That could be part of our questioning to them. They could give us a rundown on how they view it, particularly the minister and the Canadian Federation of Agriculture. I am sure that by May 14 and May 16 there will be considerable feedback from across the country on this issue. Does the committee feel that is adequate?
Senator Hays: Hearing these witnesses may give us a basis for a decision as to whether there should be broader opportunity for the people served by the FCC and various agencies which serve agriculture to appear.
The Chairman: I raised this possibility with the deputy chairman of the committee in our caucus. He said that the committee had heard from quite a broad range of witnesses. I suppose some of it is in this report, in the fine print.
Mr. Fréchette: I would like to comment on the May 9 meeting with the Agriculture Canada officials. I remind members of the committee that the Farm Credit Corporation is master of its own destiny. I am not sure the Agriculture Canada officials will want to comment on the FCC. If this committee wants to hear comments from the FCC, I would suggest that the committee invite FCC officials, instead of Agriculture Canada officials, on May 9. I am sure that the clerk of the committee has time to contact and invite the FCC officials.
Senator Rossiter: On page 19 of this report is a quotation from a witness from the Canadian Bankers Association expressing serious concerns about the expanded mandate of the FCC. They go on to say:
The other thing I will mention is that Canadian banks have about 2,000 branches in rural Canada. And if Farm Credit was to attack that business and price it lower than the market, the livelihood of those branches is put at risk. If a number of loans leave those branches the branch will need less employees. If the deposits go somewhere else, they will need less people. All of a sudden these rural branches will be at risk.
That is just looking after your own.
The Chairman: Will this change?
Senator Rossiter: Bank branches are being closed everywhere. We have ATMs and all the rest of it.
The Chairman: I do not think it has anything to do with Farm Credit.
Senator Rossiter: Neither do I, but it is in here.
The Chairman: In Estevan, which has 10,000 people, more and more banking information in coming out of Regina. I can foresee the day when all we will have in Estevan is a plastic card. That seems to be the trend in rural communities. They give a lot of lip service to decentralization, but everything seems to be centralizing in the bigger centres. Our rural farm communities are changing quickly.
Senator Rossiter: The FCC would not impact that much on the kind of business that a small rural bank does because people still use the banks, if they are there to use.
The Chairman: Your recommendation was that we call the Farm Credit People because the Agriculture Canada officials will not really get into this issue.
Mr. Fréchette: No.
The Chairman: They must have looked at this.
Mr. Fréchette: Do you want me to comment?
The Chairman: Why not? We will not hold your job at stake here.
Mr. Fréchette: As a personal comment, when I first looked at this report, my reaction was that there is a trend, as you mentioned, away from farm development toward rural development. We are not talking about farmers any more; we are talking about producers. It is a subtle distinction, but the distinction exists. Perhaps the problem with the Farm Credit Corporation is with their name. It could be the Rural Bank of Canada instead of Farm Credit Corporation.
There is a trend, and more and more people are talking about rural renewal. They are not even talking about rural development. I am not sure what rural renewal is, but there is a rural thing happening here. It is not farming issues any more, but rural issues. This is part of this global debate on rural development. It is not farm development any more, and it is not the Farm Credit Corporation any more. It is the "Rural Credit Corporation" or something. That is what I see in this report from the Banking Committee.
That is probably what this committee can expect from the department. Members of this committee know that the department has this policy on rural renewal, which is fine, and perhaps this is part of the strategy of having rural renewal instead of farm development.
Senator Landry: I would hesitate to take out the word "Farm."
Senator Rossiter: Rural development itself can almost mean urbanization of the rural area, if you go far enough.
The Chairman: The problem I see in Saskatchewan, and I believe Manitoba and Alberta, is that rural development is not happening. I can think of farmers who have started up a fertilizer business and are selling fertilizer to other farmers. That is fine. I understand what the minister is saying when he talks of the need to expand and have added value and so on. That is positive.
In the town of Grenfell, which is on the main line, they had an International dealership. They moved it to Yorkton and now they are closing it. My understanding is that John Deere has a certain plan for Saskatchewan, and they will have only eight dealers in the whole province. The so-called rural development is really urban development. It looks like we will be trucking our tractors into Regina to get them overhauled and to have repair work down. That is happening quickly. I happen to know, first-hand, that both International Case and John Deere, which are the major companies, are centralizing dealerships. Grenfell was right on the Number 1 highway, and they had a good little business there.
Senator Rossiter: Is it not more or less a vicious circle? People are leaving rural areas to live in more urban areas, or closer to urban areas. As a result, there are fewer children to go to school. Rural hospitals are closing. It just goes around and around. If one thing reversed, maybe the others would all reverse too.
Senator Landry: On the other hand, we have to keep those farms going. There is only room for so many senators here. Some one has to work the land.
Senator Hays: It is interesting. The minister's vision for agriculture is driven by a desire to see our exports increase to the $22- or $23-billion level by sometime early in the next millennium. Using an industry with which I am familiar, the beef industry, we have seen the Alberta government trying to serve this end by assisting two large U.S. companies, Cargill and IBP, in becoming a presence in the processing side, a very dominant presence, with a view to them becoming successful exporters.
They do not need the Farm Credit Corporation. I suppose that is, to a degree, the point of view of some of the people who appeared before the Banking Committee. They do need export development support, and they do need the kinds of subsidies that they have had. They are relatively small, given the total capital expenditure. In the case of Cargill, there was a subsidy to build their plant, and in the case of IBP, heavy subsidies to create Lakeside and then forgetting about that and selling to this U.S. company.
They are very powerful, and they have a lot of market power. Perhaps the Government of Alberta is not right in that approach, but that is the approach. Clearly that leaves FCC out of it. I do not see them directly managing the land base which is needed to supply the feed stock, which goes into their processing which ultimately ends up in the export market and increases our exports to the $20 billion plus level. The management of the land base is being left to individual farmers who are traditional farmers. In my view, they will still need some help, and ultimately they will need market power of their own to ensure the viability of their businesses and thereby their communities. It is too much to expect of a large corporate entity, whether it is a bank or a big food processor, to worry about that. In fact, we see much evidence today that they are more concerned with producing a good bottom line than they are about anything else.
That is why I am not clear on rural policy. It relates to a lot of things. You have heard me talking about them before. We are talking about the banking business and Farm Credit, and I will confine my comments to them as vehicles to support the continued presence of people and thereby economic activity in rural areas, and the necessary infrastructure, such as health, schools and so on.
The Chairman: You just raised Iowa Beef Producers and Cargill. Quite frankly, Iowa Beef Producers controls 75 per cent of all the processed meat in North America.
Senator Hays: It is a combination of IBP, Cargill, and, Montfort.
The Chairman: I have visited Garden City, Kansas, and the operation is mammoth. There is no question that they have moved into Alberta, buying Lakeside Feeders, and expanding there. In this downturn of beef prices, the farmers are getting the going rate. The profits of these packing plants are absolutely unreal. You circulated an article a few weeks ago.
I am all for exports. I believe that we are dealing with a global market that has challenges, and I support Ralph in every way in terms of his vision of expanding the export of Canadian products, but I am concerned that we may lose sight of the needs of the rural community and especially our farmers.
Senator Anderson: I have to leave. I just want to mention before I go that I would be very interested in hearing from the Farm Credit Corporation people. Why not hear from them on May 7, if we could, and the Agriculture officials on May 9?
Senator Landry: The same thing is happening on the Island. Two large companies are controlling everything. There are two fertilizer companies now, one owned by McCain and one by Irving.
The Chairman: The price of fertilizer has doubled in the last two years.
Senator Rossiter: I have no complaints against Irving or McCain, but big corporations look at the bottom line. Who looks after the land? Western Canada went through a period where they were bringing marginal land into production, and now they are getting away from it. There is now a lot of land being put back into production in P.E.I., land that has not been in production for a long time, and it is simply for potatoes. The traditional crop rotation is four years; therefore, it takes 500 acres to keep 125 acres in potatoes. I am told that if they go to a three-year crop rotation, it will not be long before the soil will be much less productive.
Senator Landry: The big corporations went out and found the market, which is good. However, I do not think it is good to have an oligopoly with just two large companies.
Senator Hays: When you have that much strength in the purchaser and processor, you sometimes find the tendency to exploit that power.
Senator Rossiter: Even though, on the Island, we have land ownership.
Senator Hays: Good New Brunswickers would not do that, but some other big companies might.
Senator Rossiter: We only have room for two.
The Chairman: Could we come to an agreement to call the Farm Credit Corporation, either on May 7 or 9, if that is possible?
Senator Hays: I so move.
The Chairman: Thank you. Senator Riel, you wanted a raise a subject in regard to dairies and cheese, I believe.
Senator Riel: Yes. I believe Mr. Fréchette is quite aware of the problem, and perhaps he could bring us up-to-date on this situation.
Mr. Fréchette: Certainly. If you do not mind, I will speak in French. Speaking in English on the FCC is easy, but talking in French on raw milk and cheese is easier for me.
[Translation]
On March 29, a proposed amendment to the regulation concerning cheese made from raw milk was published in the Canada Gazette. That modification - in fact, it was a proposed amendment to the Regulations which was given notice in the Canada Gazette - resulted from pressures exerted by the industry. I am talking of Canadian dairy producers as well as processors, that is of Canadian cheese producers who had been asking since 1991 that the regulation concerning cheese made from raw milk be strengthened.
May I remind you that, in the interest of enhancing the assurance of public health protection, a regulation was adopted in 1991 in order to prohibit the sale of raw milk, with the exception of cheese. The importation of cheese made from raw milk is still legal in Canada. Those imports come mainly from Europe. The manufacturing of cheese from raw milk is also legal. Back in 1991, that industry was very marginal.
However, between 1991 and 1996, particularly in Quebec and also in Manitoba, the industry developed a niche market for cheese made from raw milk. It has become today a product rather in demand, a luxury one, which really found its niche within a certain market. So, the announcement of that proposed amendment caused an outcry among interest groups, particularly from Quebec, and especially among Quebec milk producers and processors of cheese made from raw milk.
So, pressures were made and demonstrations took place. The protesters argued that while they do not deny that there may be a risk for health, they compare that risk with the problem associated with the consumption of ill-cooked hamburger meat, which causes the hamburger disease. Now, those who would like to see the regulation modified claim that the proposed amendment is too restrictive. For them, it is overly harsh to prohibit bluntly the use of raw milk in the manufacturing of cheese and to make illegal the imports of cheese made from raw milk. What they are essentially asking for is the mandatory printing of public warnings like those printed on hamburger meat and oysters packs, whereby consumers are noticed, as in the case of oysters for instance, that such products may be dangerous for pregnant women and young children, and so on.
That's mostly where the problem comes from. This is mainly a Quebec problem, which also affects a number of producers from Ontario, and a few from Manitoba, specifically goat-milk cheese producers in the case of Manitoba. They all ask that the proposed regulation be made more flexible.
[English]
Senator Landry: You are talking about raw milk before being pasteurized.
[Translation]
Mr. Fréchette: Essentially, what the proposed regulation says is this : Until now, it was actually legal to take raw milk directly from the cow and use it in the making of cheese, without pasteurizing it. The Roquefort cheese was a good example. It was the best known of all. That cheese is not made from pasteurized milk. The Parmesan is submitted to a preheating process not equivalent to pasteurization. Now, the proposed amendment says that raw milk which has not been pasteurized must be submitted to a preheating process; in other words, that milk must be held for a period of not less than 16 seconds at a temperature of 63 degree Celsius.
[English]
Senator Landry: Is most of that cheese exported?
[Translation]
M. Fréchette: That cheese produced in Canada is not exported. It's a product made locally and sold on the domestic market. There are some imported cheeses coming from Europe.
[English]
Senator Rossiter: Is not there something about the length of time of aging?
[Translation]
M. Fréchette: There is also something in the proposed amendment to the regulation which says that in addition to the required preheating at 63 degree Celsius during 16 seconds, the cheese must stored to permit aging. For those connoisseurs of cheese, a good cheese is just like a good bottle of wine; it must be aged. Cheese made from raw milk must be aged for a minimum of 60 days.
[English]
Senator Landry: I can see a problem of listeria. For listeria, you have to go to 85 degrees, even for a very minimum time. The United States is becoming very strict about listeria.
Senator Rossiter: Is that in the fishing industry?
Senator Landry: Yes. Some of the packers are pasteurizing instead of cleaning. It is easier. The bad thing about listeria is that you have zero tolerance. If you ship something over the border and it is held for roughly 10 days before it goes on to market, you have to ensure that you have no listeria. We are fighting to get a tolerance, but now there is zero tolerance.
Senator Rossiter: Is that cooked lobster or live lobster?
Senator Landry: That is cooked lobster. It is the ready-to-eat product. You can cook hamburger and you can cook popsicle lobster, but the problem of listeria arises when you have a ready-to-eat product.
The Chairman: Senator Riel, what are your dairy producers saying on this issue?
Senator Riel: At the moment, in the province of Quebec, everything coming from Ottawa is regarded as an attack. The cheese situation is presented in the newspapers as something against the farmers of Quebec.
Senator Landry: It is an old tradition.
Senator Riel: It is an old tradition, but it is much more prevalent than it was in the past. They say that this is a fabrication that was developed. Some of these people in Ottawa say we are the counterpart of the west. Some people in Ottawa want to kill our own development. So even if the Fédération des Producteurs laitiers du Quebec asked for it, you have to understand that they are very close to the separatist movement. Mr. Proulx, the president, is a strong activist for separation. Everyone is mixed up. That is why the Bloc had a reception the other day. The Bloc is now protecting the Quebec farmers, and they say there is nothing in it. It has always been accepted, and we have had no big incidents reported. They say it is obvious that at this moment they want to kill this production in Quebec.
My reaction is that if it is not so important to have this provision, even if the farmers asked for it some years ago and have forgotten that they supported it, does the department need to go ahead at this moment, because it is just creating another reason for complaint? I understand discussions have started, and perhaps they will come to a satisfactory conclusion.
Senator Landry: If the market is strong enough that they do not have to export, there is no problem. They will say, "We have eaten it all our lives, and we are still alive."
Senator Riel: That is no problem, but if the by-law is put in force, it will create a problem.
Senator Landry: If they export, they will have trouble.
Senator Riel: Yes, but they do not export. The market is in Quebec.
The Chairman: There is a strong feeling that the health regulators in Ottawa are trying to control the Quebec industry. Is that what you are saying?
Senator Riel: Not only control it, but kill it.
Senator Hays: That is the perception.
Senator Landry: We have a similar law in the fishery. A fisherman can salt his own fish in a building that is not controlled by the Department of Fisheries, but if he wants to export it, he cannot get permission to export. The same thing would apply here.
The Chairman: What is the suggestion from the committee?
Senator Riel: We hear rumours. Mr. Fréchette informed me that it is possible there will be a solution, but I want to monitor the situation closely so that, if we have to, we can intervene with the department. If it is not of great urgency, if production is small, and if there have not been any accidents, why should we force the issue? People are drinking alcohol, and we know that it is not good for their health. People are smoking cigarettes, and they put a little printed message on the packages that indicates that smoking is dangerous. I believe that we should know what is going on. The Department of Health has apparently made this order. We have not been made aware. We should monitor the situation closely so that, if need be, we can intervene.
Senator Landry: Those producers should have a licence and there should be an inspector to ensure that they follow certain laws.
The Chairman: How long has this been going on?
Senator Riel: I understand that in 1991 production in Quebec was small, but it has increased since. It is not comparable to Kraft or to a big corporation. It is a domestic production.
The Chairman: Should we call the dairy producers and Health Canada people to give us some information on this issue?
Senator Riel: Perhaps it would be easier to have our clerk or researcher contact the department to indicate that we are interested and that we must be kept informed. Before they put anything in force, we should be informed and have time to intervene and to examine the situation. I do not know who is examining the situation for the parliamentarians.
Senator Hays: Is the House committee doing anything?
Mr. Fréchette: The House is not doing anything. The Minister of Health will appear before the Standing Committee on Health, and perhaps some questions will be asked at that time. Keep in mind that it was published in the Canada Gazette on March 29, and that there is a period of 75 days to examine the situation and to hear input from parliamentarians, industries and farmers. Seventy-five days from the end of March is about mid-June. Around June 15, the government should then say, "Okay, we are proceeding," or, "We are changing the proposal." Right now, the signal that we are receiving from Health Canada is that they are talking to the industry about perhaps labelling instead of having strict regulation. Keep in mind that that was the problem. It is not that they do not say it is not dangerous or that there is no listeria problem linked to the consumption of raw milk cheese. They say that the proposal is too strong. They do not need such strong legislation. They need something in between.
Senator Landry: There should be some norm to be followed.
Mr. Fréchette: They have standards. Just on that point, 35 per cent of the imports from Europe last year were stopped at the border. That means that 35 per cent did not enter Canada.
Senator Landry: Was that due to listeria?
Mr. Fréchette: I am not sure. That is a good question to ask the Health Canada officials. It was for public health or sanitary reasons, although I do not know the precise reasons. Controls exist, and standards exist.
Senator Hays: Were they stopped on the basis of not passing some test on the presence of bacteria in the cheese, or were they stopped simply because the cheese was produced from unpasteurized raw milk?
Senator Landry: If there is no bacteria in it, it would not matter.
Mr. Fréchette: It is not only that. Again, I am not a specialist. I like cheese, but I am not a specialist on cheese production. All of those who like cheese know that you have a date on the cheese. After that date, it is not considered to be good cheese, but you can still eat it. If the cheese is made from pasteurized milk, it is not a big problem because the bacteria level is lower. In the case of raw milk cheese, if you go beyond this period during which the cheese is supposed to be consumed, then you have a problem because the bacteria continue to develop.
In some cases of the imports that were blocked at the border, it could have been because the water content in the cheese was too high, which means that that was a good environment for the development of bacteria. That is another standard. You must have a low level of water and so on. Those are good questions to ask Health Canada officials.
Therefore, I recommend to this committee that perhaps it have one session with Health Canada officials. At the same time, you could hear the other side from the dairy producers. In a press release published on April 16, the President of the Dairy Farmers of Canada, who is also the President of the Quebec Dairy Producers, said that they would like to have a public forum on raw milk cheese.
Perhaps this committee could give the industry the opportunity to talk openly on that matter. You could have one session with Health Canada officials to get the government side, and then hear from the dairy producers and maybe one cheese manufacturer.
The Chairman: I am informed that no committee has been looking into this.
Mr. Blair Armitage, Clerk of the Committee: I just spoke with the Clerk of Scrutiny of Regulations, and it has not come to their attention yet. No one has mentioned it to them.
The Chairman: Senator Riel, perhaps you could raise the concern with the chairman of the Regulations Committee.
Senator Riel: Yes, I could, but that would not prevent us from asking the Department of Health to send someone here, and we could ask the milk producers to send us some one. When could we do that?
The Chairman: Would you care to make a motion? We will find out when they would be available.
Mr. Armitage: According to the draft schedule, if we put the Farm Credit officials the week after next, there will not be a lot of room until as late as early June.
Senator Riel: That is very late.
Mr. Armitage: It is very late. It could well be that everything is resolved by then.
Senator Hays: The 75 days are running.
The Chairman: We could hold two meetings by starting a little earlier and tightening things up, could we not? We have done that before.
Senator Hays: We have two meeting times per week.
Senator Riel: If we have the Farm Credit people on May 7, maybe we could have these people on May 9.
Mr. Armitage: I will look into it.
The Chairman: So we have that motion.
Senator Hays: Agreed.
The Chairman: As to the trips to Winnipeg, to meet with the Canadian Wheat Board, and to Washington, what is the desire of the committee in terms of numbers? Apparently we are supposed to submit a budget to the Senate. I spoke to the table officers about it, and they said that it is a good idea to get your request in early. If all the money is spent, Agriculture could come up on the short end of the stick. What is the committees wish in terms of the numbers attending those two meetings?
Mr. Armitage: If I could have an indication of how many delegates you would like to send on a mission to the Canadian Wheat Board and to Washington, and how many staff you would like to accompany that delegation, that would be helpful.
Senator Hays: I think the last visit is a good precedent, and that could be used for this budget.
Mr. Armitage: There were six members and two staff.
Senator Hays: Unfortunately, only one staff member went, but we could probably have two this time.
Mr. Armitage: Could I have an indication of whether you prefer it to be a fact-finding mission as opposed to formal committee meetings? I will then not have to contract for interpreters or translation.
Senator Hays: We have never engaged in a formal hearing in the past. I do not see any reason why you would want to on this occasion.
The Chairman: On the grain issue and the many issues surrounding it - transportation, the farm bill and so on - the situation is heating up on the prairies. Our rural papers are carrying articles on it on a weekly basis. In the Estevan area and across the border in Manitoba, about 40 trucks have crossed the border, and that is just since the last news releases. There is also an organized group in Alberta that will run grain across the border, I understand. It is in no way dying down. In my observation, more and more people are becoming involved all the time.
It would appear that the officials really do not know what to do about it. For instance, in the Manitoba situation, they had seized 39 trucks. A snow storm came up, and they had these 39 trucks sitting on the highway. What do you do with them? You clear the highway. They told them to get in their trucks and go home.
The minister has made some strong statements that the law will be obeyed and so on, but I think it would be very good to hear in Winnipeg about the direction being sought and so on.
In addition to that, just this morning, CNN indicated that wheat prices had hit an all-time high of $6.67 U.S. a bushel. That is putting it up over $8, so the pressure will increase as these prices rise.
Senator Landry: I do not quite understand. Why are they not supposed to ship to the United States?
Senator Gustafson: That is the question the farmers are asking. However, all the barley and wheat in Western Canada is marketed by the Canadian Wheat Board. It is actually against the law. You can sell grain for seed or for feed. If you market grain across the border, you are supposed to get a permit from the Wheat Board, and they give you the Canadian price. If you get additional money from the American side, you send that money to the Wheat Board. They then distribute that in payments to the producers. The last run of grain that went across the border was in the form of durum wheat, and it netted the farmers, according to the paper, $8.67 a bushel Canadian. They are getting $4 at the elevator. If you get a written permit from the Wheat Board and take the grain down, you get your $4.50 or whatever, and then you get your payment. No one will do that. A few farmers have done that, and they say, "Well, it doesn't make sense." That is what we are faced with.
There is also a strong feeling in Western Canada that the grain industry has been traded off against other interests. It is a mounting problem. If farmers continue to do this, they will get into some very serious trouble, but it also creates a real problem for the Canadian Wheat Board.
We are also behind in the movement of grain. I do not know what the case is in Alberta, but certainly in Saskatchewan grain has not been moving. Perhaps the Wheat Board feels there is a better price down the road and they are waiting to get that better price for the farmers. They were indicating that it was because of the cold winter and the fact that several grain trains had gone off the rails.
Perhaps we should come back to the matters of timing and preparing a budget to be introduced in the Senate.
Mr. Armitage: During the steering committee meeting, there was some mention of a conference on rural development in Winnipeg. I have been told it is from June 25 to 27. I do not know if that is delaying your Canadian Wheat Board hearings too late, but did you want to have the coincidence of those two events?
The Chairman: What is the wish of the committee? I personally do not think that this problem will be solved tomorrow morning or will go away.
Mr. Armitage: The other possible travel time for a fact- finding mission is the week of May 20 when the House will recess for a week. Depending how much legislation is before the Senate, it usually stays away another week after that until more legislation comes in. It could go either the week of May 20 or the week of May 27. Chances are that the Senate will not be sitting that week.
Senator Hays: Has that been indicated on this draft meeting schedule?
Mr. Armitage: That shows the recess and the possible recess.
The Chairman: I think we could go into June.
Mr. Armitage: June 25 to 27 is the week after the House is supposed to rise. The Senate often has a backlog of work at that point, and perhaps they will be asked to stay another week. If that is the case, you will be whipped fairly heavily in terms of final votes on legislation. I do not know if you want to risk that.
Senator Hays: Do you mean to travel to Winnipeg or Washington or both? We have to do it, if we can, when the Senate is not sitting. In each case, we will be away two days or so.
The Chairman: In the case of Winnipeg, could that not be covered in one day?
Senator Hays: Perhaps it could be less than two days. Your purpose for going to Winnipeg is to get an update on the Wheat Board response.
The Chairman: We should hear the Wheat Board and the Grain Exchange while we are there, because the Grain Exchange is really the policeman of the whole situation. It would be good to hear their position.
Another thing we should take into consideration is that, if there is to be any direct farm input, we are having a late spring, and, from today on, farmers will be hard pressed to appear. We were in Winnipeg last year in May. One gentleman came out of the field. He said it was so important that he was willing to take the time. My thinking is that later on in June would probably be better. I would like to get a few Liberals out of the Senate so we could win a vote or two, you see.
Senator Hays: No comment. On your comment about the feeling in Western Canada that the grain industry is being traded off against other interests, obviously you have in mind the supply management sector which is dominated in Eastern Canada. The only time I have seen that issue arise was with respect to the agreement between Canada and the United States with respect to wheat exports. I am not sure of the status of that arrangement, but I think that hindsight would indicate that the agreement did not create any unusual problems in terms of volumes. I have never heard the argument that the Wheat Board monopoly has some relationship to supply management. Is that starting to be argued?
The Chairman: This comes more particularly from groups like the Wheat Growers and so on, and I will not quote them directly on it, but when they meet with American officials or counterparts, the message seems to come back that the Americans are saying, "You open your marketing board products - cheese, milk, eggs, and the feather industry - to free trade, and we will have no problems with grain."
Senator Hays: Is the grain issue not between farmers who support the Wheat Board and farmers who are against the Wheat Board in Western Canada?
The Chairman: It has come down to that because of the trucks going across the border. It is interesting that if the grain is shipped by train to various parts of the U.S., there does not seem to be a problem. However, if trucks line up at the border, then, perhaps because you have farmers right next to the border, it becomes a political issue.
Senator Hays: It becomes a political issue with the Americans. They do not want the trucks crossing. In my opinion, the Americans want an open market, because they want to supply most or many of the products we produce under supply management. In terms of the interests of Canada, we should ensure that we do not fan the situation. We should do something to calm or to disabuse people of the wrong-headed notion that the Canadian Wheat Board, which has existed for most of this century, and supply management, which goes back to the mid-1960s in dairy and the early 1970s in the feather industry, are new issues that can be juxtaposed against one another and that one can be traded off against the other. That is a wrong-headed notion.
The only time I ever saw a flare-up was with respect to the volumes of wheat that the Americans would accept. Americans are always out for Americans, and I do not blame them for that, but we should not fall into the trap of dividing ourselves to serve their purposes. If we do these things and if you want to hold hearings on that, I would be interested to know what people think.
The Chairman: I am telling you what I have heard from farmers, particularly those within 100 miles of the U.S. border. However, that is not the case when you get north of Saskatoon, because they do not feel they have the same access to the American market as the farmers who can truck the grain across the border.
Senator Hays: They should not be blaming dairy producers in Quebec for that.
The Chairman: Frankly, they feel that the Government of Canada, both when we were in government and the present government, is more supportive of the 12 million people in Ontario and the 7 million people in Quebec, and that the 1 million people in Saskatchewan and the 1 million people in Manitoba do not count when it comes to votes. Let us not insult the dairy industry, the feather industry and the marketing boards. It is just not good political sense.
Senator Hays: They feel that way about everything in the west.
The Chairman: You asked the question, and I am answering it. That is the feeling. Rightly or wrongly, that is the concept that is out there. The Wheat Board faces that attitude constantly.
Senator Hays: If it is wrong, we should be helpful in changing that attitude. We should get to the truth. The truth will help us here.
The Chairman: Not only that, we, as a committee, have a responsibility to all facets of agriculture, to get the best results we possibly can. You know as well as I do that that is exactly what the Americans were saying to us when we were in Washington.
Senator Hays: It was not because it was a valid problem or proposition, but because they have certain trade objectives, and they are hard bargainers.
The Chairman: There is no question about that.
Senator Landry: Is the Wheat Board doing a good job?
Senator Hays: That is a good question, but I do not know the answer.
The Chairman: The answer to that question can be very difficult.
Senator Hays: They think they are doing a good job, but some do not.
Senator Landry: There is something wrong in that situation. I can say that I would do the same thing, load my truck and sell for more money.
The Chairman: Do you want us to quote you on that?
Senator Landry: You can if you want to. It is tempting. Why is there such a difference with price?
The Chairman: This is the question our farmers are asking.
Senator Hays: We do not even know until the final payment whether there is a difference.
The Chairman: The projections would indicate quite a difference.
Senator Landry: Sometimes those boards have a lot of feet dragging.
The Chairman: That subject has come up. Has the Wheat Board been aggressive enough in international sales and competition? It is hot subject out there. Unfortunately, the older farmers who remember the difficulties of the 1930s and the positive approach that the Canadian Wheat Board took in helping them during those years support it. The younger farmers, often in the same families, are, for the most part, taking the other position. Younger farmers are saying, "Look, dad, this thing worked in your day, but it is not working today."
All right. Is there anything else? The Clerk has instructions to give us a budget. Senator Hays indicated we could probably follow the guidelines of last year.
Senator Riel: If only one of these people can appear on May 9, I am ready to sit to hear his or her version. Then we will have the other party some other time.
The Chairman: The clerk will keep us informed.
The committee adjourned.