Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 3 - Evidence
OTTAWA, Thursday, February 10, 2000
The Standing Senate Committee on Agriculture and Forestry met this day at 9:07 a.m. to study the present state and future of agriculture in Canada.
Senator Leonard J. Gustafson (Chair) in the Chair.
[English]
The Chairman: Before I introduce our guest this morning, I would like to make a few remarks. In 1998, the Standing Senate Committee on Agriculture and Forestry held hearings in Ottawa and on the prairies on bills which amended the Canadian Wheat Board Act. Committee members were concerned about the number of farmers who told us that farm income was plummeting and that they feared for their future.
One of the culprits identified at that time was international subsidies, especially in Europe and the U.S. Those subsidies were to blame for the depressed prices in grains and oilseeds. We know how depressed prices have been in the commodity markets, especially in grains and oilseeds.
The Senate committee undertook a review of the international subsidies, targeting the World Trade Organization and ministerial talks in Seattle last November as a vehicle for organizing our thoughts. Senator Joyce Fairbairn and myself were able to attend those talks. To say the least, it was an interesting time. There was some very positive exchange between the countries represented there on the problems in agriculture. I believe that the constructive effects of that will be seen in the future.
The committee report, "The Way Ahead: Canadian Agriculture's Priorities in the Millennium Round" was tabled in August and given to the Honourable Pierre Pettigrew, Minister of International Trade, as well as to the Minister of Agriculture, the Honourable Lyle Vanclief, for use in formulating their policy position for those talks.
This morning, I am pleased to welcome Mr. Keith Degenhardt from the Wild Rose Agricultural Producers of Alberta. We look forward to hearing your presentation.
Mr. Keith Degenhardt, First Vice-President, Wild Rose Agricultural Producers: I am drawn here today by my concern that, without attention to the present situation in farming, there may not be a future for farmers. Less than 4 per cent of the Canadian population is farming, yet one in seven jobs is dependent on the food industry. Agriculture is food. Canadians eat, and the world eats.
Wild Rose Agricultural Producers is a general farm organization in Alberta which is funded by voluntary producer memberships.
Three million people live in Alberta. Seventeen per cent of those live in rural areas and are dependent on agriculture directly. Because of our low population density, 80 per cent of the food we produce is exported. Therefore, we contribute to a favourable balance of trade in Canada. In Alberta, with some key investments in infrastructure and some subtle policy shifts giving incentives -- and I emphasize the word "incentives" -- to farmers, a vibrant cattle industry was developed. Other livestock sectors have also grown and with this slight increase in demand there have been shifts in grain production patterns. Farmers are willing to change.
With all of this, the average income of farmers in Alberta is $36,000, 65 per cent of which is from off-farm income. Alberta's economy is often considered a shining light. The politicians of Alberta say that we have a viable and strong farm economy. Yet, our farmers earn only $12,600 from farming and $23,400 from off-farm jobs. Farmers are producing more at less cost, yet are taking home less money.
Why, with all the efficiency improvements that farmers have made and investments in agriculture by both governments and the agri-food industry, is agriculture in dire straits? Simply put, we are an exporter of food. The U.S. and the EU have destroyed grain prices which are now ridiculously low. Until the U.S. and the EU figure out ways to support their farmers without distorting the price of farm products, the price will not change, unless there is a shortage caused by a weather disaster.
In the immediate crisis, what steps can be taken to help farmers live through the crunch? Wild Rose Agricultural Producers has some suggestions. The growing dependence on off-farm income exists. Including off-farm income as part of farm income, as done by statisticians, is wrong. Do statisticians include income from second jobs as part of the income of any other business? Until it is broken down, farmers in Alberta are seen to be earning $36,000. We would like the true earnings of farmers to be shown.
At present, before a farmer is considered eligible for Employment Insurance, 15 per cent of gross farm receipts are subtracted from his EI cheque. Our margins are nowhere near 15 per cent of gross. Agriculture and Agri-Food Canada and CFA studies have found that even 5 per cent of gross receipts is high. We would strongly encourage your support for a change in this policy, from 15 per cent to 5 per cent of gross farm receipts.
The next issue is transportation. There is a desire to change the freight structure for grains and oilseeds to a more accountable and commercial system. The premise is laudable, and we always want to see improvements. The grain handlers and the railways were part of the Kroeger effort. As well, WRAP, KAP, and SARM, with support from other industry players, developed a position which is the most producer friendly. Its key points are: a smaller revenue cap, based on the CTA three-year moving average estimate of railways 1998 costs, including a 20 per cent contribution to fixed assets; final offer of arbitration, FOA, which is shipper friendly, having a two-tier process with a $2 million threshold. The next key point relates to effective competition which is critical in the rail system. We would suggest that a reverse onus public interest test for running rights would be a step in the right direction. It is also desirable to have an accountable system among all industry parties, in which the Canadian Wheat Board's marketing ability and competitive position in world markets is not jeopardized. We would like your help in supporting this position.
We are by far the furthest from tidewater of any food-exporting nation. When our railways look south at an equivalent length of track, with no competition from waterways in the U.S., the rate is $60 per tonne. That is $30 per tonne more than farmers in Western Canada currently pay, and would make grain exports prohibitive. Without meaningful competition, a low-priced commercial deregulated system is an ideal, not a reality.
In looking at changes to the policies of the present, we must keep in mind the long-term effects. In Alberta, one new "in" word is "value chain" . We must keep in mind that the Canadian Wheat Board is one of the best and largest value chains that was developed by farmers and government in the west. We do not want changes to transportation policies that would cripple this value chain and lead to its demise, or changes to policies which could increase transportation costs from 10 to 30 per cent of the value of our commodities, to 20 to 60 per cent of their value. These increases could cripple the long-term viability of the family farm.
The next item is farm safety nets. We support and need the farm safety net programs. Farmers do business in a world marketplace. Not only is the price we receive for our product based on world prices, which is influenced downward by export subsidies, but the costs of our inputs are inflated upwards because of high domestic support in the U.S. and EU.
One of the comments that has been made is that, if the safety net package is improved and predictable, its values will be capitalized into land and equipment. That captitalization has already occurred, yet Canadians have not had the money to compete in their own nation. Since most of our equipment is manufactured in the U.S. and sold on the North American market, U.S. farm aid programs have already been capitalized into its cost. The European Union's domestic support programs have been capitalized into very high land values. It only takes a few European buyers to raise expectation for land values in Canada, thereby capitalizing European support prices into cost of land in Canada. Our farm safety nets were designed for a situation where farmers were receiving an acceptable return of investment, but where margins are expected to be at least 15 per cent of gross farm receipts, not less than 5 per cent, and decreasing.
We, as farmers, recognize and fully support other priorities for spending, especially health and education but, if we are to remain in these communities, we must survive so that we are there for the day we will again thrive.
The pillars of the farm safety nets are crop insurance, NISA and a disaster program. I will briefly make comments on all three.
Crop insurance protects the farmer against shortfalls in production and is usually run at insured levels of 50 per cent to 80 per cent of average production in an area over a period of years. We are working to make this program more sensitive to individual farmer needs within Alberta. We are hearing from some quarters a desire to privatize crop insurance. We strongly suggest that the continued support by federal and provincial governments of crop insurance is essential to its usefulness as a risk-management tool.
NISA is a good program, and we in Alberta are pushing the Alberta Cattle Commission to change their position so cattle will be part of NISA in the future. Our concerns with NISA are two-fold. If 2000 is as poor a year for farmers as 1998 and 1999, farmers could zero out their accounts, leaving them in a very vulnerable position. We need to develop a mechanism within NISA to build the account faster in a period of good years.
We must actively change the attitude of some farmers, accountants, bureaucrats and politicians who treat NISA as a retirement fund or a fund of last resort. It is a fund to stabilize farm income and, when used properly, works very well.
I now turn to the subject of disaster assistance. AIDA was developed from Alberta's FIDP and Wild Rose recognized some of its weaknesses long before the scrutiny it got when it was developed to become a national program. It works well for a one-time disaster for a single commodity after a good period of years.
Our experience in the cattle industry in Alberta proves this very well. However, if you are diversified, with several kinds of grains and oilseeds and have a period of poor production, like the Peace River area of Alberta, or poor prices as in the case across Canada, it does not offer much aid. Seventy per cent of an average margin results in prolonging the agony, rather than relieving the pain, when our margins are less than 5 per cent.
Our goal in Wild Rose Agricultural Producers is to lobby for an environment that allows for thriving rural communities, supported and made strong by people making and enjoying their living on family farms, in healthy relationships with each other, the community and the earth.
That statement is a perfect example of what farmers are striving for. In no other place is the concept of volunteerism and the willingness to accept responsibility for multiple roles in the community more alive than it is amongst the farm community.
We must develop a mind set that, while striving for free world trade recognizes the need for the well-being of all segments of our society. Just as incentives are offered to other businesses, so too must they be in place to enhance the viability of the family farm in rural communities.
Farmers are looking after the land. They have already contributed to greater carbon sequestration, thereby reducing the greenhouse gas effect, by adoption of minimum till and zero till. This is an area that, with proper policies, could aid not only farmers, by granting carbon credits, but also our major industries which are producers of carbon.
Wild Rose believes that with some long-term policy shifts and the education of the public about the importance of agriculture, the many roles farmers fulfil, the urban population will ensure that their goals of a healthy environment and quality food are also met.
We must consider, as is being done in Europe, the significant role farmers have in keeping the rural environment healthy for people, animals and plants. Incentives could be developed by rural folk and supported by the urban, whereby the whole of Canada takes the responsibility for improving upon our clean air and beautiful landscape. Part of this will be sharing it with the world through tourism.
Agriculture is multifunctional and vitally important to Canada. It is commonly stated in the agriculture communities that, if there is another year like the past one, there will not be another; the pin will be pulled. Our goal, with your support, is to ensure this does not happen.
Senator Fairbairn: Mr. Degenhardt, I have, as you probably know, a long association with your organization, going back to its earlier days as Unifarm. I think it was the first farm organization that invited me to come and speak at one of its annual meetings after I became a senator. I was very pleased with that, although a little uneasy when I found out that I would be following Don Mazankowski that day. I have stayed in touch with your organization for a long time, and I know the important place Wild Rose plays in the province of Alberta.
One of the issues that you touched upon in your remarks, that you might want to expand upon, is one that is obviously of great concern in Ottawa at the moment, that is the whole issue of grain transportation. There have been a multitude of studies on this subject. We have had Estey and Kroeger and now the government is reviewing all of that and will come up with its position.
In a structured, more deregulated system, what would be the importance of the Wheat Board in that system? You have indicated, in terms of the marketing side, that your organization would not wish to see anything that would in any way imperil the Wheat Board.
I am wondering if you could give us your views and the views of Wild Rose as to what role you see the Wheat Board playing in an updated and revamped transportation system that would benefit Western Canada and, most particularly, producers? I know that is a difficult question.
Mr. Degenhardt: I should like to start a little further back on that question, and discuss philosophy.
There are two philosophies that differ in the west. One is that we do not need the Wheat Board, that the Wheat Board has been a hindrance. The other is the philosophy that the Wheat Board is a plus.
When we come to transportation, the Wheat Board issue has really coloured the thinking of many of the people who are discussing transportation.
I omitted from my brief, because of time constraints, comments about the Wheat Board and trade. When the U.S., comes out and states that they do not want a state-trading organization such as the Australian or the Canadian Wheat Board, we must look at the underlying reasons behind that statement.
As you are aware, presently Alberta is benefiting greatly from rising oil prices. One of the reasons for rising oil prices is that the OPEC nations that have decided that they will control the production of oil in their countries. At no time have I heard criticism from the multinational oil companies about this policy, or from the U.S. That is partly because the multinational oil companies are the ones developing the oil resources in these countries.
I will now return to the subject of grain and wheat. Why does the U.S. say that we must get rid of the Canadian Wheat Board and the Australia Wheat Board? The U.S. is the biggest exporter of wheat in the world, but, when you compare apples to apples, that is, U.S. production with the high protein, good milling quality wheat produced in Western Canada, you will find that the U.S. only has a small area of production that can produce that commodity.
The international grain trade may be excluded from that particular market because it does not have control over it; the Canadian Wheat Board has control over that product. They do not like that.
Australians produce a white wheat that is the best in the world for the Asian noodle market. The Americans can produce a white wheat for that Asian noodle market, but it is not the best, the Australian product is the best. There, again, they are excluded from that market. If we look at why there is a push to get rid of the Wheat Board, we must look at the underlying reasons.
I shall now return to the subject of how transportation affects this issue. There are people in Ottawa lobbying for the Kroeger report to be adopted, per se. Wild Rose members, although we have diverse opinions, are on the whole supportive of KAP, SARM and WRAP. That does not mean we do not want change.
For the Wheat Board to stay a benefit, we have to be sure it can still handle that grain in the most efficient means possible to give the most return back to the farmer.
The changes recommended by Kroeger would take a lot of dollars out of the farmers' pockets. They would give the grain-handling companies the blending capabilities, when they have it at spout, rather than at port.
Taking the Canadian Wheat Board completely out of freight, since the Canadian Wheat Board has no storage facilities and no handling facilities, puts the Canadian Wheat Board behind the eight ball. It can physically make a sale, but it must rely on all the other partners in the grain industry to move that grain to port. We have problems with that.
I am not an expert on transportation. I understand the issue as a concept, but there are people in our organization who better understand the nitty-gritty. Unfortunately, they were tied up with other things. As well, there are people with KAP and SARM who are much stronger in this area who can give you details. When we put forth our position, we were looking at a $250 million saving to the Canadian farmer and putting that saving into the Canadian farmers' pocket through either the position put forward buy Kroeger or the Prairie Farm Coalition. There is a third option put forward by the grain handlers themselves which differs from the Kroeger recommendation. Does that answer your question, or have I gone too far?
Senator Fairbairn: I thank you for that. It is very timely to hear what you have to say. As we all know, that there has been a great push to get people to come here who represent various perspectives, and it is very important to hear the perspective of the Wild Rose organization on this. When decisions are made, they are pivotal decisions that affect the future for a very long time. They are not easily shifted. Therefore, it is important to have your views on that on the record here, and I thank you for them.
I have one other question. You talked about the disaster assistance at AIDA. As you would be aware, the Minister of Agriculture made an announcement in Red Deer on January 14, 2000 of an extension of assistance of $1 billion over two years to be shared by the provinces.
From your observations, certainly, having dealt with AIDA, what would your organization see as the most effective method of disaster assistance for the farmers in Alberta and across the prairies at this point? Clearly, there was a lot of criticism about the first effort. Now a second effort has been made. What do you think the federal government and the provinces ought to be contributing to support the industry at this point in time? As the chairman will know, with some frustration, we came close in Seattle. However, nothing was working within the world trade negotiations at the time. The area that came closest was agriculture, but it did not move to where we wanted. The notion of changing the international subsidy issue certainly is long-term, and not short-term, and we are thinking short-term now in terms of assistance in Canada. What would be your views on that?
Mr. Degenhardt: I would have to first ask you a question before I answer that. Throughout this report, I have kept referring to one major problem that we are facing in agriculture. That problem is our very poor margin; our very poor returns on investment. Will we by tying any disaster assistance program to the WTO rule of 70 per cent, or will we look beyond that? That question prefaces how I will respond to your question.
There are farmers in areas of the prairies -- it is not all over because farming is unique -- who are affected. It only takes a subtle shift in certain things to produce a poor crop, a good crop or even a bumper crop. A farmer may have a bumper crop in the same situation and with the same inputs as a neighbour or an acquaintance 200 miles away, but you would have two different situations. There are farmers for whom that 70 per cent rule could work and there are some for whom it would never work.
What is your answer to that question? Are we staying with 70 per cent or not?
Senator Fairbairn: I wish I could answer that question, Mr. Degenhardt. That is a key question. I cannot answer it.
Mr. Degenhardt: I could give you two scenarios, if you wish.
Senator Fairbairn: Give us two scenarios, then we can study them.
Mr. Degenhardt: This is a problem for a person who has not been involved intimately with farming. I know Senator Gustafson has been. On a grain and oilseed farm, you do not have two crops but four or five crops, that could be farmed under the same set of conditions. For example, on my farm, we have a diversified cropping regime. We grow fall rye, oats, flax, wheat -- three types of wheat, in fact -- and canola. 1998, as far as production goes, was a near disaster for us although we did have, if you looked at the moisture conditions of that year, one of the best years on record. We had an East Indian year. From June 29 to July 13, on our farm, we had 16 inches of rain. We live outside of a little community, Hugenden, which is only one mile away. There they got 20 inches of rain. Eight miles in either direction, they got five inches of rain.
We had quite a wide range of production patterns in the crops we raised. We had the worst crop of fall rye we ever raised. It was just too dry, and by the time moisture came, it was too late. Our canola, because of the early germination conditions, was also the poorest on record. Our wheat was one of the better crops.
Senator Oliver: For all three?
Mr. Degenhardt: For all three, yes. Actually, wheat, and traditionally, even fall rye, but this year was unique for fall rye because of that early spring drought. Wheat has been worked on by the agricultural industry for 75 years in the Prairies. It is well adapted to withstanding drought conditions. Canola has not been worked on that long, and it is not adapted to drought conditions.
We had what we consider to be a disaster. However, if you average it out, we would be less bad off than some others. I have not applied for assistance under AIDA. The problem with AIDA, and lets be honest, is that the procedure is very complicated.
I did my NISA in July, and I worked out that I would be eligible for NISA for production for 1999; not for 1998 because then I was working on 1997s production. On our farm, 1998 was on of the best years we have on record for return, but 1999 will be the worst that we have had on our farm.
I may be eligible for a small AIDA.When you consider that that was my worst crop year on record, I find it amazing that I am probably not eligible for the disaster program. This was my worst year on record. I figure that if we took the full capital cost allowance, we could run our farm into the red, and yet I may not be eligible for AIDA or FIDP.
NISA is different because my wife and I, since we operate as a partnership, have built it up over the years. Each of us kicks in $15,000 or $16,000 of income. I do not know if you are aware, but NISA income is not farm income. It is investment income, by Revenue Canada's determination. Our farm will have about $30,000 kicked in by NISA, and AIDA will kick in virtually nothing. That 70 per cent is a real killer.
What can we do if we stay with 70 per cent? First, we have to make the form much easier for a farmer to work with so he is not faced with paying $500 to $1,000 to an accountant to work out the scenario. There should be a NISA package that the farmer can fill in along with his income tax return and know what his situation is, with no increased cost to himself. It is very discouraging for a farmer to spend $500 to $1,000 and get no return on it. That is what happened to many farmers who applied for the FIDP and then the AIDA. AIDA is virtually a slightly transformed FIDP, but AIDA is an improvement on FIDP.
Alberta has had a real problem with NISA. In fact, Alberta is not in NISA. The reason we can do what we can with NISA is because, federally, you have picked up the NISA charge in Alberta. It has been a real plus for us in Alberta that you have stepped up to the plate on that issue where the Alberta government has not.
The first thing you must do is simplify the paperwork.
The second thing is, if we are to keep the 70 per cent, there must be some mechanism for treating it in a way similar to crop insurance. That will be very difficult to do.
We often talk about the three pillars of safety nets. You may have had this described to you, but, at present, crop insurance picks up the first 70 per cent of a loss, from a production viewpoint. Then, if there is an income shortfall, disaster assistance is supposed to pick up 70 per cent. Then NISA can pick up the area between 70 per cent and 100 per cent. That is why they are all essential.
If AIDA is to be improved, we have to bring it back to where the program looks at income from the diverse crops on a farm. I saw in our local press -- again, coming from a different viewpoint than I have -- someone really cursing the Wheat Board and the terrible prices that the Wheat Board had for the 1999-2000 crop. He was only looking at the initial payment. Wheat is actually one of the strongest crops on the prairies right now. It took less of a hit in the international marketplace than did canola. Canola went from between $8 to $9 dollars a bushel to $5 to $6 a bushel. Wheat went from around $4.50 to about $4.10. I am talking about a high protein No. 1 wheat here, not a No. 3. In my area, that is something you can do.
The Chairman: In my area, it was $1.87 for slightly frozen durum wheat.
Mr. Degenhardt: If we do not have that 70 per cent guideline, that is where a disaster program may come in. If we are going to redraw it, we have to bring into it the concept of margins, of decreasing margins, the loss in income because of decreasing margins. The present disaster assistance program does not consider that. If you have a period of declining years, as is often said on the prairies: when you are making nothing, 70 per cent of nothing is still nothing. That is the problem with that program. It does not recognize our declining margins and we have to do that in a disaster program; but in order to do that, we have to go beyond that concept of 70 per cent.
Senator Fairbairn: Thank you very much. It is good to have that on the record.
The Chairman: I would like to go back to a question on rail transportation. What is your position on CNR joining forces with an American rail company? What sort of impact do you think that will have in Canada?
Mr. Degenhardt: This is not just a concern in agriculture. When I was referred earlier to industry support on the KAP, WRAP, and the SARM, part of that support is from commodities other than grain.
In Western Canada, the potash industry, the coal industry, and the sulphur industry have not found the present rules that they are operating under with the railways to be friendly to the shipper. They are hoping for something to come out of the Kroeger report, something that will be better in terms of final arbitration. Also, when you talk to them, they keep harping back on competition. What can you say? We will have less competition. It is as simple as that. Burlington Northern, on an equivalent level of trackage in Montana, charges close to $60 a tonne.
I presume that, if this merger does happen, the railway industry will look quite closely at going to a U.S. style system, which is something that we as farmers will not cheer for but which, I am sure, the grain traders will cheer for because the grain traders in the U.S. have had a whole new horizon of job opportunities open up. With their system of car allocation or car bidding, the grain traders can not only look at a job in government or the grain companies, they can now look at working for the railways. If the grain trader goes to work for the railways, then he is out there, knowing exactly what the market is doing. If corn moves up about $10 a tonne, he knows that to move that corn from point A to point B, he needs another $8 a tonne. He knows that the grain handling companies can afford it. They have an extra $10 with which to work and they can get more money out of moving that freight. Unfortunately, however, when the railway receives that dollar it is not returned to the farmer. Part of our discussion on that issue concerns competition. You are talking about deregulation, but if we have no way of bringing competition into that scenario, we will have a problem.
I will give you another example of this, because there are always examples outside of the grain industry. There is a good example that occurred two years ago in Alberta involving cattle. The two large meat packing facilities for cattle in Alberta are Cargill at High River and Lakeside at Brooks. They handle 95 per cent of the meat packing industry, not only in Alberta, but also in areas of Saskatchewan. About two years ago, these meat packing facilities decided to drop the price that they were bidding by about 4 cents a pound. That is all they were offering at that time. However, they had not counted on two factors. First, unlike the U.S. situation where there is a lot of cattle now going into the U.S., into Cargill and into IBP, those facilities own those cattle -- that is, once they reach about 600 pounds and so on -- and they are fed in their own feedlots. They do not have that situation at this point in time in the western feedlots. Consequently, they do not own those cattle. The larger feedlots in Feedlot Alley around Lethbridge and in our area, where we have a couple of large feeders that feed 30,000 head, looked at that and said, "No way. For 4 cents a pound, we can move these cattle down to the plants in the States." They did that for a two-week period and prices went up 4 cents a pound. If you are left with a duopoly that does not want to compete, then you are at their mercy.
Senator Rossiter: Mr. Degenhardt, would explain the acronyms WRAP, KAP and SARM for those of us who are not westerners?
Mr. Degenhardt: WRAP is Wild Rose Agricultural Producers and KAP is Keystone Agricultural Producers of Manitoba, the general farm organization in Manitoba. With a strong lobby and with a bit of support, as is true in Ontario, they received good financial support. SARM stands for the Saskatchewan Agricultural Rural Municipalities. In Saskatchewan, there is no general farm organization. With the Saskatchewan Wheat Pool going public, many farmers felt that no one was listening to their views. SARM has taken on a greater role, especially on the transportation issue.
There is something that you must understand about Saskatchewan. Senator Gustafson certainly know this. In Alberta, the common saying is: After you make a trip to Saskatchewan, you better get a wheel alignment when you come back to Alberta. That is because of the roads in Saskatchewan. In Saskatchewan, they have about six times the amount of road surface to look after than Alberta, and they have no tax base. We have 3 million people, an oil industry and some other industries which Saskatchewan, at this point, does not have.
I do not know if the chairman would agree with me, but if the current trends continue, the major cow-calf operations will go to northern Saskatchewan. If the grain sector is no longer making money, northern Saskatchewan has the water and the production. They can raise a lot of cattle there if there is no other choice. It is as simple as that.
Senator Rossiter: Would the benefits be offset by the cost of transportation back to the markets and abattoirs for processing?
Mr. Degenhardt: There would be some but, again, it is a choice between two evils. If your margin is 1 per cent instead of 5 per cent -- which is not enough on grains and oilseeds because of changes -- and your margin on cattle is 8 to 9 per cent, you will choose cattle.
The Chairman: I have talked to Iowa producers, the biggest cattle producers in the world. I also talked to a gentleman with the World Bank in Kansas, where the big feedlots are located. He told me that the Iowa beef producers are looking for a spot in northern Canada to capitalize on the cattle industry because of freight rates. In Kansas, they use up all the corn within reasonable trucking distance, in half the year, bringing cattle in from Canada and Mexico. The rate of gain, which is 8 to 1, makes it preferable to feed the cattle where the barley is located, namely, in northern Saskatchewan. My point is that, if our provincial governments, our federal government and our farmers do not wake up, the Americans will control the cattle feeding industry in northern Saskatchewan. I agree with you entirely; it will be big business.
Senator Rossiter: It is a very serious situation, and yet there is a great opportunity here, if, somehow, we can capitalize on it as Canadians.
Mr. Degenhardt: I think it is.
Senator Rossiter: Is the income earned by all members of the family on a farm included in farm income?
Mr. Degenhardt: Yes, it is included.
Senator Rossiter: Is that the case for a 16 year old?
Mr. Degenhardt: Yes; a 16 year old and the wife, if she is working off farm.
Senator Rossiter: Is the husband's income included if he is working off farm?
Mr. Degenhardt: Yes.
Senator Rossiter: Does this happen in any other type of business?
Mr. Degenhardt: No, it does not.
Senator Rossiter: How is it justified by Revenue Canada?
Mr. Degenhardt: I have someone here from CFA. Perhaps he can answer that question.
Mr. Benoit Basillais, Policy Analyst, Canadian Federation of Agriculture: I work for the Canadian Federation of Agriculture. Your question is: Why is it all considered farm income?
Senator Rossiter: Yes. Why is everyone's income included in farm income?
Mr. Basillais: We have been asking the government that question for several years. However, we have never received an answer.
When the government releases its yearly farm income forecast, they always include off-farm income in that forecast. CFA's position has always been that it does not make any sense, because only the farm business should be taken into account.
I do not have anything more to say in response to that question. We do not support that policy. It makes no sense. If there is more off-farm income on the farm, most of the time it is because farmers need more money and they must go outside to find another job. Sometimes you see papers where it is stated that farm income is down and off-farm income is up, the idea being that it is not so bad for the agriculture industry. I am sorry, but it is exactly the opposite. That means farmers are not making enough money and they must go outside and get another job.
Senator Rossiter: Yes, as well as other members of the family.
Mr. Basillais: Yes. All members of the family need to work. Every six months, we write to the minister about that. If you could help, we would appreciate it.
Senator Rossiter: If I were a nurse in Western Canada, simply to keep my registration and experience up to scratch I would have to work part-time. It would not amount to very much and I would be taxed on it. It would all be included in farm income and it would just raise the farm income above the "real" farm income.
The Chairman: That is a very good point.
Senator St. Germain: Has the CFA done any studies at all? If these figures are accurate for off-farm income, and I accept them as being realistic, have there been any studies done to rationalize the farming operations by corporate farming or the family farms linked together to form corporations? I know this undermines the so-called family farm.
I sit and listen, and I read and watch what is happening in farming. I have been in farming, and I am still in farming. I still own 500 acres that produce zero, and nothing as far as real income goes. If I were not doing all the other things I do, that place would go under.
Have there been any rationalization studies with respect to taking an area and developing it into a corporation -- in other words, where Mr. Degenhardt and all the surrounding farmers would become a corporation? I am sure it is happening by virtue of bankruptcies and people capitalizing on misfortune. Are there any studies done on getting ahead of bankruptcies and doing this type of rationalization?
I ask this because in every report that comes before us, people are saying, "Well, you know, farmers are prepared to change." Are they prepared to change that radically? That is the question.
Mr. Degenhardt: I will answer that from a slightly different viewpoint; it is partly from the farmer's viewpoint, but not just the farmer's viewpoint.
One of the statements I included in my brief, but withdrew, was made by the Hudson Institute, in which they said that the most efficient way of running a farm was to run it, not as a corporate farm, but as a family farm, because families are more willing to accept the lower returns.
Going back to the concept of a corporate farm, the Alberta Cattle Commission did not go into NISA, simply because of the resistance by some of them, who said, "We want no subsidies," which is rather hypocritical when you look at the cattle industry in Alberta and how the Alberta government has favoured it. That is another issue we can get into, as well as the feeding industry. They did not want to get into NISA because of its cap. Its cap was too low for many of the feeders in Feedlot Alley, even though the grains and oil seeds sector has been hurt mightily.
With farming, it sometimes depends, not on how good a farmer you are, but on where your grandfather or great-grandfather settled when he first came to this country. The greatest concentration of dollars in the NISA accounts is in the little area along the Highway 2 border of Alberta. That is not because of the cattle industry, but because that area has the richest soil and gets the best moisture. They consider a crop of barley, with similar inputs to what I can put into it, of 65 to 70 bushels a crop failure. I consider it to be a darn good crop if I get 65 to 70 bushels of barley, but that is a crop failure to them. They cannot grow No. 1 high protein wheat, but they can grow 100 bushels of No. 2 prairie spring wheat. With the same inputs, but much greater production, they can return far more dollars.
Getting back to the corporate farm question, farmers have looked into the idea of corporations. I have to tell you about my experience working with the federal government. One of my off-farm jobs from the mid-1980s to the early 1990s was working for the Farm Debt Review Board as a field officer. If you ever want to a see a nightmare on a farm, look at what happens to a corporate farm when it goes bankrupt. There is nothing left of a corporate farm that has gone bankrupt. However, if your family farm goes bankrupt, you can salvage something out of it by law, whereas in the case of a corporate farm, they can salvage nothing.
Mr. Basillais: I do not have much more to add to that answer. There has always been a long discussion as between the family farm and the corporate farm. I can use the example of my father's farm. It is a corporate farm, but who is doing the farming? It is my brother and father; so I still believe it is a family farm. I think the point of the discussion about that is that sometimes farmers decide to incorporate for tax reasons, or whatever, but it is still a family farm. We have to keep that in mind, too.
Senator Oliver: My question flows from Senator Rossiter's and Senator St. Germain's and is on the same general area. On page 1 of your paper, you say that farmers are producing more at less cost and yet are taking home less money. If the average Canadian read that, the average Canadian would say, "Why are you staying in the business?" or "Are you doing the business the right way?"
I want to ask a couple of philosophical questions about farmers and farming. They are tough questions, because you yourself have said that one of the big problems all farmers face is that they are getting a poor return on their investment.
I have been in Japan a few times, and every time I go there, I am told, "If you want to sell Canadian products in Japan, do not send us your raw products, but send value-added products. Add value to whatever you are growing, and that is where you really make your profits and can make your gains."
You should be looking perhaps at other aspects of the food chain. Instead of just throwing a seed in the ground, waiting for it to grow and then, at the end of the summer, putting the harvested crop up for sale, maybe you should be adding some value to that, making a profit, and selling that as a third- or fourth-line product. Some companies in Canada that have done well have been vertically integrated. Instead of just producing one thing, they also produce and own and control the ingredients that go into making the value-added product.
Why are farmers not doing that? If it can be done in other sectors, it seems to me that it could be done in farming as well. Are you still doing the same things in the same way? If so, why not change? I can ask those questions, because I, too, like Senator St. Germain, am in farming. I know a little bit about the input cost of fertilizers and so on. We have changed the way we do things. I want to know why you are not changing the way you do things out West.
Mr. Degenhardt: I will answer that philosophically and then try to go beyond the philosophy.
When I wrote this paper, my wife and I were talking about that. One of the reasons I am here by myself is that some of the other people on our executive are involved with the Agriculture Summit in Alberta. That is an organizational meeting to set up a group of meetings to bring farmers together to decide where we go next in agriculture in Alberta. Various statements have come out of that summit on agriculture; one, for instance, was from a U.S. agriculture consultant talking about the great changes taking place, and so on. It is that sort of thing.
One of the reasons we farmers are still in business, even with the lower returns, is that we enjoy putting that seed in the ground and watching it grow. Even if we are up to our arms in cow excrement, we enjoy pulling a calf that is too big. We enjoy these doing things -- some less than others, of course. Farmers enjoy what they are doing. Because of that, many farmers have made sacrifices in order to keep that enjoyment. Even though they are working harder, producing more and getting less money, they want to remain in farming, because it is something they want to do.
I visited two of our value-added processing facilities in Alberta. One was Cargill's at High River; we were allowed to go everywhere but the kill floor. They would not allow us on the kill floor. One thing Cargill is happy about is the fact that they have had only a 50 per cent turnover in staff, whereas Lakeside, at Brooks, for instance, has a 100 per cent turnover in staff annually. That is because their people do not enjoy their work. As a result, what they have to do every year is retrain staff.
In other words, the point I am making is that the farmers who did not enjoy farming are gone because the returns were not, and are not, there. Unless you enjoy it, you are not willing to make the sacrifice.
Senator Oliver: You have said that gross incomes are averaging $36,000 a year, with 65 per cent of that income coming from off the farm. Is that off-farm income farm-related in any way, or is it just from a separate and distinct job completely? If it were related, it would tie into what I call value-added. Why not enhance and increase your income by getting into more of the value-added things that you like?
Mr. Degenhardt: The "average" disguises many things. On our farm, we are pedigreed feed operators and cow-calf operators. However, along with our commercial herd, we run a few purebreds. My wife and I earn that "average income" from the farm. The reason we can earn that much from the farm is that we have gone into niche markets, which is something farmers all over the Prairies are now pursuing. The niche markets have slightly higher margins. They are making the changes, and they will continue to do so. Some farms have not chosen that option. They would rather produce a single commodity. Our area is quite a heavy oil producing area. There are farmers who can work on well-site batteries for $10 to $15 an hour; or, if they really want to take on the tougher jobs and the more seasonal work, they can work on oil rigs for about $23 to $25 per hour. There are options out there.
In our area, when we talk about a young farmer, we are talking about someone between the ages of 18 and 30. There are areas in Saskatchewan where, when they talk about a young farmer, they are talking about someone my age, because there is not the off-farm diversity there.
Getting back to the question about value-added products, in Alberta, we are doing some value-adding and we will continue to do it. There is some vertical integration going on. The future is not rosy. I find the statements about Japan quite interesting, because if there is one country that is hard to penetrate with food, even value-added food, it is Japan.
Senator Oliver: It is easier with a value-added product than it is with the raw product.
Mr. Degenhardt: It is still a hard country to penetrate, because, even for the value-added product, when they import it, it has to meet their specifications. What they are used to in beef, for example, is a Kobe-type product. To produce that on an Alberta farm takes an extra 9 months to 10 months. That is what it takes in terms of feed to reach that amount of marbling in an animal, along with some changes in genetics. Thus far, it has not been worth the effort. People have looked at doing it. However, it is not worth the effort to produce that Kobe beef. Although it commands a terrific price in Japan, by the time you put all that time and effort into feeding that animal, you have not made a better return than what you can get by producing products for the North American market.
One of the wonderful things about our cattle industry right now is that we live next to the U.S. In the cattle industry, we are not really on a global international market. We may do a little bit of exporting to other countries, but our real market is the North American market. It is the richest market in the world. That has been a plus for that commodity. In cattle, not as much here as in the United States, they do not allow a lot of imports of cattle.
Senator Oliver: If the average gross income for a farmer such as yourself is $36,000, and 65 per cent of that is from off-farm income, what does a comparable farmer make in the Northern United States, who is in the same kind of farming as you are?
Mr. Degenhardt: That figure is not the gross. My gross is somewhere between $250,000 and $300,000.
Senator Oliver: The $36,000 is family net income?
Mr. Degenhardt: Yes.
Senator Oliver: What is the equivalent family net in the United States?
Mr. Degenhardt: I do not have that figure. We could probably get it through the CFA.
Senator Oliver: Is it substantially higher?
Mr. Degenhardt: It would depend on the area you are talking about. This is a casual comment, but, whenever I receive a magazine on equipment, such as New Holland or John Deere, 90 per cent of the articles are based on the family farm in the U.S. If you look at their little showcase in those magazines, it looks as if they are doing better, but that is probably only in areas of higher production.
In an area equivalent to the area in which the chairman and I farm, say in Northern Montana, the farmers are facing a worse freight rate than we are. I think they may be in a rougher state than we are. However, in the area along the Missouri River, which produces 200 bushels of corn per acre, they are in a different situation from what they are in Northern Montana. They are doing quite well.
There are two smaller points I wish to mention. One deals with transportation and the other with incentives. In regard to transportation, quite often you will have comparisons of efficiencies between Canada and the U.S. They will talk about how the grain handlers in the U.S. charge much less. There are two things you have to take into account when they say that. The first is that, in many cases, the storage facility has been paid for by the government. Second, they are talking about corn. They are not talking about eight or nine different commodities broken down even further into three or four classes. They are talking about No. 1 or No. 2 corn.
In other words, if you are only handling No. 1 and No. 2 corn, that is a lot simpler than handling eight or nine commodities broken down into three or four classes. The other thing is that, when it comes to incentives, we are involved in the West and in Ontario as well. This is just a little thing, but, again, it is sometimes the little things that help, as Alberta has shown with the beef industry.
At the present time, Revenue Canada does not recognize the research dollars that the Canadian farmers are putting in across Canada through the different commodities and the different check-offs. We cannot take them as a tax credit, and even though, for an individual farmer, it is not a major thing, since it may only amount to a $300 to $500 tax credit, it is still quite large when you add it all together.
In Western Canada alone, on the Western Grains Research Check-off, which is just 20 cents a tonne for wheat and 40 cents a tonne for barley, $4.5 million of research is funded out of that and yet farmers get no credit for that. The actual documentation for those figures is available. It would be easy to do something about this. All it would need is a change by Revenue Canada to acknowledge it, by saying to the farmer, "Since you are actually investing in your future, we want to give you some credit for doing that."
Senator Oliver: I am sure that Senator Fairbairn is hearing what you are saying and will pass that along to Minister Martin.
Senator Stratton: I want to get back to a few basics. The main problem in all this is simply the extent of subsidies that occur in other countries, as we all know. When we were in Europe, we heard that on a 40-hectare farm, on average, a farmer in France earns $50,000 a year and a farmer in Italy earns approximately $35,000 a year. Until those subsidies end, we will have low commodity prices, period.
In the first round of the WTO talks in Seattle, there were high hopes that something would be done to correct that situation, but nothing was done. I only hope that the people listening, who protested that event, recognized the potential damage to your industry as a result of that.
My concern is that, simply put, if your family farms are to survive, you need help and you need help fairly fast. Why does it appear that our governments are not listening? Why are the governments not saying -- why did they not say a year ago -- that you need more help than they are currently giving you? Why is the message not getting through?
Mr. Degenhardt: I believe part of the problem is the farmers themselves. We might as well start from that point. By not being unified, by coming forth with so many different voices, we have confused the message -- or we come forth with different messages. A month age there was a different message sent by the Western Wheat Growers from what was being sent by other farmers. There is a different message being sent now. That is part of the problem.
Another part of the problem -- and I touched on this -- is that we need to educate the urban population, not only on the importance of farming to the security of supply here and for the world food supply, but also farming's importance in terms of what we do to keep the environment in good order. That is something that we all must take on as a job, and that is where I believe we need to start right now. There are many urban people who do not seem to realize that meat comes from hogs and cattle and that milk comes from a cow. That is alarming.
In Europe, it has become even worse. One of the things that we as an organization are concerned about, and trying to be proactive about, is humane treatment of animals. We must do more in that regard. That is part of the problem, and we must try to educate people in that way.
Another part of the problem, to be honest, is that governments and politicians have many different people coming forward with issues that need to be dealt with, and, obviously, priorities must be set. When you have, as we do, less than 4 per cent of the population involved in an issue, you do not have much voting power coming from there. I believe that is something we must overcome -- being a minor part of the population. Even though we are a major player in our trade and in feeding the world, we are a minor part as far as the population goes; so we have to do a better job of educating the urban communities on the importance of what we do. We must start there. Otherwise, it is not possible to make that big jump.
I actually believe that we in Alberta have a real problem because we live in the wealthiest province in the sense of per capita debt. Our debt is at a zero level now, and we cannot even convince our own government, in some cases, that we have a problem. The Alberta government does not wish to believe that there is a problem in agriculture right now.
Senator Stratton: You are convinced that it is a matter of two issues, the first being that farmers are their own worst enemy because they speak with such different voices?
Mr. Degenhardt: That is part of the problem. In Alberta we have seen that. As Senator Fairbairn has mentioned, she has been involved with Unifarm. In Alberta we have seen, through our commodity organizations, the splintering of the farm voice. Right now it is very difficult sometimes to move forward with an issue because we have such a splintered voice.
Wild Rose Agricultural Producers is involved in the Alberta Safety Net Coalition, and it is much less organized, much less cohesive than the national safety net. I can speak of it because my wife is a member of both those organizations. She enjoys attending the national meetings much more than the provincial, because we have strong splinter groups that are only concerned with their own issues, and to overcome that is rather difficult. That is something that Wild Rose Agricultural Producers must overcome. Unless you present an issue that you can jump on right away and scare the farmer himself, or the public, you have real problems.
Wild Rose had a wonderful issue two years ago. We saved $2,500 for each farmer who had a truck larger than a single axle, because there was to be an Order-in-Council change that anyone with a tandem or larger would need to licence it commercially rather than as a farm vehicle. We had a great deal of farmer support until it came to the financial side of the matter.
Senator Stratton: This is a long-term problem. The last round of negotiations under GATT took seven years. Although the U.S. has said it will take three, obviously that will not happen now. This could be another seven- or ten-year problem. It could be at least ten years, because once you have reached an agreement there will be a workout process over time where subsidies drop over ten years. This is not a short-term problem.
Surely governments and farmers can get together, recognize that problem, understand it for what it is and deal with the issue. What concerns me more than anything is a moral issue, fundamentally: namely, the slow death by a thousand cuts, as it were. The farm business is slowly dying year by year and yet nothing seems to be happening. The approach to the whole issue seems to be, "Well, that's life." Well, it may be a fact of life; however, it is rather harsh, particularly when you have the approach of the Europeans. I do not agree with the European approach and I do not like subsidies of any kind. So long as subsidies exist in the world, farmers will have one large problem for a long time.
I cannot see how that issue will be resolved, given what we are dealing with and talking about. It may on a short-term basis, but a long-term solution is required. We are making ad hoc, hit and miss, problem solving attempts at something that I just do not see working. Do you agree with that or not?
Mr. Degenhardt: I agree with much of that, yes. You have summed up what a lot of farmers have said, especially farmers in Saskatchewan. Alberta had a decent year. Saskatchewan, where they got flooded out, did not. It is not a death of a thousand cuts. Currently, people in areas of Saskatchewan feels like someone took a knife and ran it right across their jugular vein. You see the people at the legislature in Saskatchewan, and I am sure that is how they feel.
It is not an easy problem. We have been working at it and pounding away at it. I do not like subsidies either, but they are part of the world in which we live. Our statement is that we want to survive until we can thrive because, as I said to Senator Oliver, we enjoy what we are doing. We must take the little steps in policy issues to ensure that we are there 20 years in the future when we do reach that goal of getting rid of subsidies.
Some approaches will be ad hoc, but I, as a farmer, have seen a period of quite a few years where I felt I would not to pull the pin. I am going to struggle on. I may end up subsidizing the farm, and apparently a lot of people at this table are doing that. I have expertise and training in other areas, as does my wife. We could work elsewhere in agriculture. We do not have to work in production agriculture, but I would prefer trying to improve the system so we can stay in production agriculture.
Sometimes we will be taking little steps, but, as I said, some of them are not so little. However, they have to be taken in order to improve the system.
The Chairman: I do not think Canada can afford to let the farmers go down. It appears as though we, as farmers -- and I speak as a farmer now -- are coming with our hands out.
When you look at the figures that the Federation of Agriculture just gave me, and which I circulated, the average consumer in Canada works only eight days of a total year to pay for the amount of food that comes out of the family farm -- only eight days. We get six cents from a loaf of bread that costs $1.50. We are subsidizing Canada. Canada cannot afford to allow the producers who are so productive to go down.
It is a national problem. We have to deal with it, and we must deal with it in a proper manner with some reasonable common sense. We cannot afford to lose our agricultural industry. It has been the backbone of Canada, the backbone of North America. The Europeans understand that it just has to be done. It is as simple as that.
Again, I want to say, we are not just a bunch of people with our hand out. we do not like handouts, but the system that we are operating under now does not allow enough profit for a farmer to deal when the commodity prices are where they are.
Senator Robichaud: Senator Stratton was saying that farming is dying but, when we consider what you are saying in here, it seems that we are producing more. There is no shortage of agricultural products. It is very difficult to explain to ordinary people that the farmers are not doing so well, because there is never been a shortage of produce; in fact, there is a little bit more. As Senator Gustafson was saying, you are not paid very much for what we eat.
You also said that one of the problems is that the farming community does not have a unified voice. Many people come up with different solutions. Could that be one of the reasons why AIDA was structured in the way it was, and why it is so difficult to mould it to help the people when they need it?
There is urgency here, is there not? Something has to work or else many farmers will not make it. Is one of the problems that people offer so many solutions that those who are to make a choice hesitate?
Mr. Degenhardt: Yes, I think that is one of the problems. As I say, I am more familiar with FIDP.
The FIDP program was suited for a commodity that is doing well over a period of time. If I were to ask a group of Alberta farmers, or maybe the group around this table, which commodity is doing the best, I am sure you would answer: cattle. Yet, in Alberta the greatest payouts under the FIDP program have been to cattle sector. It has not been to the grains and oilseeds sector. If you have a commodity that is doing well and it suffers a drastic drop in one year, that program works well for you. It worked very well for the hog industry.
The Chairman: It was designed for the hog industry, and then never redesigned. In all fairness, even the governments of Saskatchewan and Manitoba called for it and agreed with it at the time. However, there was not a quick enough movement to deal with the fact that it was not working in the grain industry.
Mr. Degenhardt: That is true. Wild Rose had long been stating the problems with the FIDP program. Resolutions came forward from about the second year FIDP was initiated because our Peace River country really demonstrated where the weaknesses in that program were.
What happened in Peace River country also showed the weaknesses in crop insurance. Crop insurance has pluses, but it has minuses. They had a year in the Peace River country where they could not even get on the land to seed. It was not wet enough to be called a flood, but it was wet enough that they could not seed a crop. If you cannot seed a crop, you cannot insure a crop. Thus, they slipped through a crack.
The problem with designing a program is that something like that could occur: a problem slips through the crack. It is hard to design a program that covers all. It depends where the government is coming from. If it is coming from that 70 per cent, when dealing with the 5 per cent margin, it is just going to be ad hoc, as Senator Stratton said. We need something that recognizes our margins over a period of time, and the present program does not do that.
Senator Robichaud: Let's discuss EI, and the kind of impact that has on the farm. How could we structure it so that it would work for you? Obviously income is made at different times of the season and that might complicate any EI claim. Could you start by telling us just how many farmers receive EI now? You did not mention a figure.
Mr. Degenhardt: I did not say how many farmers utilize EI because that is a difficult figure to determine. I would say that, in Alberta, we would be one of the higher utilizers of EI. I say that because, simply, when you can get an off-farm job at $23 a hour for three to six months of the year, you earn a lot of dollars, and even though you are looking at that 15 per cent of your gross farm receipts before you can get your EI stipend, you can still receive a lot. Because it is so difficult to calculate net for Revenue Canada for a farm, they look at 15 per cent of the total farm receipts and then they divide that by the number of weeks and so forth, and then subtract that from your EI.
Some people bring home cheques of $6,000 to $10,000 a month for the months they are working on the oil rigs. They are probably young people, just getting established in a multigenerational farm with their father. They may only own a quarter or two quarters of land. They may share the equipment, so they do not have the equipment cost. Therefore, all they have showing as farm income is just what they get off their half section, they do not have the expenses there, and they can then collect EI.
However, let us look at a different situation of a farmer who is farming 3,000 acres, his wife is a school teacher and she decides to quit teaching. Because the government looks only at the gross farm receipts from that 3,000 acres, even though she may have taught for 10 or 12 years, she cannot collect EI.
Senator Robichaud: Because her income is considered as part of the farm income?
Mr. Degenhardt: Partly, but from what she would collect in EI, they take off 15 per cent of the gross farm receipts. Since she is part of the farm, when they take 15 per cent of those gross farm receipts, that is a greater figure than what her EI cheque would be.
Senator Robichaud: In that case, then, the woman is not considered to be a person, as such, independent from the farmer husband.
The Chairman: It is a human rights issue.
Senator Robichaud: Although I do not know if it is analogous to the example you are giving us, there was a case along those lines brought by some women in Prince Edward Island which they won.
Mr. Degenhardt: There are similarities, but when you come to court cases, they are almost unique to provinces. In Senator Gustafson's province, a woman lost her case. It was not an EI issue. She was still working and she had been part of, and contributing to, a family farm ever since they started farming, and the court said she was not a farmer. They called her a part-time farmer. She could not go beyond a $5,000 loss, even though she had been a full partner in that farm over the years it was being developed. Cases go both ways.
Mr. Basillais: This issue is very complex and it has been going on for years. We set up a committee to deal only with this 15 per cent rule. We have been working on it for two years, and it is going nowhere. Agriculture Canada has been very helpful on that issue. They did a study a year ago, and they found that the 15 per cent rule is meaningless. The normal return is 4.3 per cent, so the 15 per cent rule does not work. It should be between 4.3 per cent and 5 per cent, so that is a 10 per cent loss.
If you lose your farm job and you apply for EI, they will make a deduction off your EI benefits that is 15 per cent of your gross farm income. It should not be 15 per cent; it should be 5 per cent. In some cases, it is a lot of money and it renders you ineligible to apply.
In addition, the rules are very unclear. What is being done in Saskatchewan is not what is being done in P.E.I., so there is no way to know what rules apply. We have to go to the court to find that out. It is a very slow process. This rule is very unfair to spouses.
I have a farm. My wife works off the farm. She is not involved in the business at all but, if she loses her job, she may not be able to collect EI because she was doing the accounting for my farm. Doing the accounting means you are involved in farming, so you are a farmer and, therefore, not eligible.
Senator Rossiter: She is not involved in the farm work, yet her income is included in the farm income?
Mr. Basillais: They mix everything, and she becomes ineligible. It is very unfair for spouses. Let us say my wife becomes pregnant and takes maternity leave. She would not be eligible for EI. If I were working for the CFA, she would be eligible.
It is very complex and I am having difficulty explaining it. I have some information I can forward to you, but I have given you a good example of the system not working.
The system, in fact, works against farmers. Farmers are already facing big trouble. They are looking for off-farm jobs, and if they lose those jobs, they may be penalized again. They may have no income from the farm and, if they lose their off-farm job, they will get nothing.
Senator Robichaud: If they did get help, how would it assist them? Would it just prolong the agony?
Mr. Degenhardt: With a new farmer or a farmer developing an operation, it would not prolong the agony. It would allow him to get into the farm. By making that change, you would be allowing the farmer and his spouse to get involved in taking over a family farm.
We also have to recognize that CN and CP have been going to farm groups and making representations on changes in transportation. They start out by telling us about how they are losing money hauling grain, and then they tell us that, if the system changes, they will compete and charge us less and make money. It does not quite compute. However, as part of their presentation, when they are talking about the losses, they talk about high capitalization. They say they are a very capital-intensive industry. That is statement that Wild Rose and the CFA both want to examine. It is a statement that is difficult for a farmer to swallow because if you ever want to see a capital-intensive operation, just look at a farm. You have your land and you have your intermediate assets, and that takes up a lot of dollars. I am considered a small to intermediate farmer in our area, and we have capital assets of $1.75 million. We have a gross income of between $250,000 and $300,000. A lot of dollars that flow through our fingers. Unfortunately, very few of those dollars stay in our hands.
In our operation, until this past year, we were netting $60,000 for the farm partnership; that is $30,000 a piece for my wife and I. This year, if I take my full capital cost allowance, I drive the farm into the hole. We are at minus $8,000; 1999 was a really rough year.
EI is one little step towards helping a segment of the agricultural community. Similarly, a change from Revenue Canada on the research credits would be another step.
To get back to Senator Stratton's comments, where is the future? I talked about education. We need to look not only at farmers getting together and coming forward with one voice, but we must also recognize that we are working with the environment. We need to be together on environmental issues. On carbon sequestering, we must look at carbon credits.
During this time frame when we are facing these international subsidies, we need some sort of system whereby money is flowing through the farm from some other source. That would be a source.
We also must educate the Canadian consumer as well as the Europeans have done with their consumers. They know that part of the farmer's role is to look after the rural area and the farm system. One issue now is the abandonment of the railway systems. In the Maritimes, they have begun to create these cross-Canada trails. An urbanite can walk on one of those trails and look at a beautiful farm landscape and enjoy the scene. We should get some credit for that.
Those are little steps to try to get this issue across.
Senator Robichaud: Perhaps we should recommend that you qualify for HRD grants to prepare the part of the trail that crosses your operation.
The Chairman: Honourable senators, we should wrap up our meeting. I apologize to Senator Ferretti Barth who left early although she had questions.
Senator Chalifoux, do you have anything to add?
Senator Chalifoux: I want to thank the witness. This has been one of the most enlightening presentations that I have heard in a long time. It was down to earth and full of good common sense.
My questions have already been asked but, by way of comment, I should tell you that am from Alberta. I come from the background of a farming family, although I have not been involved directly in farming for many years. I understand many of the frustrations and the concerns that you have raised.
Perhaps my next comment is not relevant, but it always bothered me that my sister and her husband had to claim their garden as part of their income for tax purposes. I think all governments should consider what they are charging the farmer.
Senator Robichaud: Was that classed as farming?
Senator Chalifoux: Yes. That was part of their farm income, although they were just using it for their own use. If they butchered a cow, they had to include that. She used to sell a few eggs on a route in Calgary, and the same situation. applied
In your statement, you mention the cost of a loaf of bread. That was the case in the early 1970s, when the farmer was getting less than 10 per cent of the consumer price of a loaf of bread. It has not changed a bit.
Thank you for bringing to our attention so many interesting points which we can hopefully use to start negotiating on your behalf. We need to get some of these issues to the table.
The Chairman: You have done a tremendous job. I have one more question about your views on genetic modification.
Mr. Degenhardt: That could take another meeting. You must take into account my background. I was trained in research, as was my wife. We see two key issues. Genetic modification, per se, is not wrong. It is a plus. We are always looking at improvements, but the other side of that coin is control.
At Wild Rose, resolutions came through last year to the effect that we did not want the Terminator gene because we would lose control. Monsanto, for example, have actually done a run-around and farmers have signed away their right of control by signing that usage agreement. We do not feel that is right.
Senator Robichaud: Monsanto would not do that, would they?
Mr. Degenhardt: As far as the research is concerned, we have nothing against it. However, from our own personal background, my wife and I just shake our heads over the amount of private research in agriculture. There are plusses to that, but there are also minuses. We, as farmers, are actually paying more for research now than we did when Agriculture Canada did the research. We are not seeing any greater success because, through the universities and Agriculture Canada itself, we have available to us the same material that is coming through these companies.
For example, one of the most popular canola varieties right now is standard Quantum, but there is a Quantum with Round-Up resistance which has been available for four years. The U of A, because of the lack of research dollars, must fight with Monsanto to get a bigger share of the pie in order to release that variety to the market.
The Chairman: Plant breeders' rights have backfired on us.
Mr. Degenhardt: Yes, they have backfired on us. The other scary part is that gene patenting is curtailing the research efforts at Agriculture Canada. Agriculture Canada is pulling out of a lot of western grain research programs because of gene patenting. That is, again, a loss of control by prairie farmers and by Canadians.
Senator Rossiter: Are the GMOs basically responsible for the drop in the price of canola?
Mr. Degenhardt: No. Five years ago, in talking about the Canadian Wheat Board, politicians and other people, especially Albertans, were saying, `Look how great canola is." We said then that there was a world shortage of canola oil; there is not a world shortage of wheat. Now there is actually a surplus of oil on the world market. That is why we have a price-drop in canola. Do not ever doubt, though, that the consumer in the end will decide what happens with GMOs and not the farmer.
The Chairman: The Wild Rose Agricultural Producers can be very proud of the witness who represented them here today. Thank you for appearing.
The committee adjourned.