Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 4 - Evidence

The Standing Senate Committee on Agriculture and Forestry met this day at 12:17 p.m. to examine international trade in agricultural and agri-food products, and short-term and long-term measures for the health of the agricultural and the agri-food industry in all regions of Canada.

Senator Leonard J. Gustafson (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we are pleased today to have before us the Honourable Lyle Vanclief, Minister of Agriculture and Agri-Food Canada. He has with him a team from his department. We are pleased to welcome you all. We have some time constraints today. We would like to be done by 1:30. My deputy chair says that we must be done. We will start with your presentation, Mr. Minister. I know you will keep your answers short, and we will try to keep our questions short. We will cover a lot of ground today.

Hon. Lyle Vanclief, Minister of Agriculture and Agri-Food Canada: I am pleased to be back before the committee today in order to make some comments, but also to hear your questions and comments on, I am sure, a number of issues. With the officials here today, hopefully we can answer your questions. If we are not able to do that today, certainly we will be more than pleased to have officials and others follow up on matters that may be of interest to you in this ever-evolving and increasingly complex issue of agriculture and agri-food, not only in Canada but around the world.

A lot has happened since I was here with you a few months ago, senators. I welcome the opportunity to update you on a number of issues that the government has taken on and needs to consider in responding to the challenges and the opportunities facing our agriculture and agri-food industry, not only domestically but also on the international front.

We are all familiar with the increasing complexity of the global agriculture and agri-food industry. More and more, what happens beyond the farm gate and beyond our borders has profound ramifications for our industry. The reality is that consumers are driving the market as never before, and not just in Canada. Consumers worldwide are raising the bar on quality and safety, for example. The farm issue is important to all of us. However, farm income is about much more than safety net programs provided to farmers. Safety net programs are a part of farm income, but they are certainly not all that can affect it.

We face the challenge of ensuring that consumers want to buy what Canadian farmers can produce. Consumers in Canada and around the world are making discerning choices about how they spend their food dollars. Those choices are telling us how we need to respond as an industry.

Consumers are telling us that we must be absolutely vigilant about food safety. There is no question about that. We must also ensure that we use our water and our soil resources sustainably. We need on-farm food safety systems that will provide information about farm practices and catch problems before they get into the food chain or affect the environment.

The ability of our industry to meet these demands and stay ahead of the pack in the world market will allow us to capture new niche markets and improve the income and security of the sector.

Senators, we have the challenge and the opportunity to increase returns for farmers by branding Canada as the number one country in the world in producing safe products in an environmentally responsible manner.

Canada already has a solid reputation around the world for food safety that is virtually unmatched by any other country. However, that reputation cannot be taken for granted. If we are to maintain the confidence of our existing customers, and attract new ones, now is the time to act. If we do not, make no mistake about it - the consequences could be severe. We must meet those exacting market demands; in fact we must exceed them. If we succeed in doing that, we will maintain existing markets and find new ones. In other words, we will succeed in expanding our profitable agri-food trade.

Many provinces, for example, are already putting environmental regulations in place. Some farmers are also working on this. They have implemented on-farm food safety systems and have taken action to address environmental concerns on their farms. Commodity groups are moving to establish tracking and tracing systems and on-farm food safety systems. Some farmers are already exacting premium prices by producing commodities that meet specific market demands, especially with respect to quality and environmental considerations. We need to encourage more of this and extend it right across the sector to as many commodities as possible. This will become increasingly important as consumers tailor their demands to food products with specialized attributes related to quality, health, and medical benefits.

In pursuing these goals, we must invest in research so that we have access to the best science available for improving our products and processes. We are making sure that agriculture ranks high on this government's innovation agenda because we recognize that industry cannot do all this alone. It is in the public interest for governments, federal and provincial, to assist industry with the science, the systems, and the financial resources needed to respond to the increasing consumer demands. We acknowledged that role in the Speech from the Throne, which stated:

The Government will help Canada's agricultural sector move beyond crisis management - leading to more genuine diversification and value-added growth, new investments and employment, better land use, and high standards of environmental stewardship and food safety.

Our objective, senators, is for every farm to have an environmental plan in place within the next five years, along with an identity tracing and tracking system for its products. In order to do that, we need to push forward with a coordinated, national approach that will cover the entire spectrum of the food production system and lead to real consistency across the country. This will put us ahead of the international competition, in that we would be the first country in the world to do this in a coordinated and consistent manner.

This objective is directly linked to one of our fundamental aims, which is to expand our profitable agricultural trade and increase farm income. As a net exporter, Canada needs to consider international rules and standards. That is why we are working through the World Trade Organization to improve access for our agri-food products and to eliminate trade-and production-distorting subsidies in other countries.

The early stages of the WTO agriculture negotiations are currently underway in Geneva, where Canada has put forward all of the elements of our initial negotiating position. That position calls for, in brief form: the elimination of export subsidies; significant reductions in or the elimination of trade-distorting domestic support; and real and substantial market access improvements for all agriculture and food products.

During the first phase of the negotiations, we continued to argue for real solutions to the unlevel playing field that hurts all of our producers. We will continue to put forward Canada's case during the next phase of the negotiations, which begin next month. As in the past, we will consult closely with the industry and the provinces as the negotiations proceed in the months and years ahead.

In pursuing these long-term objectives, Mr. Chairman, we recognize that government assistance is important in making the transition to a more competitive agri-food industry that increases public confidence and responds to market demands.

Overall, the Canadian agri-food sector is quite healthy. Arrears on Farm Credit Corporation loans have levelled off. In fact some sectors, as we know, are performing very well. For example, the beef and hog sectors are currently experiencing very good, steady returns. However, other sectors, particularly the grains and oilseeds, are experiencing cyclical downturns and our safety nets are responding.

Government has worked and continues to work with farm organizations and the provinces to stabilize farm incomes. In the past five years, the federal and provincial governments together have invested $7.1 billion in safety net programs.

The long-term safety net agreement that we signed with the provinces last summer committed the federal government to an annual investment of $1.1 billion for three years. With the provincial shares added to that, this amounts to $1.8 billion a year, or $5.5 billion over the three years of the agreement. As you know, senators, a few weeks ago I announced an additional $500 million in new federal funding.

We are now looking to the provinces to contribute their share of the incremental funding that we put on the table last month. Based on the traditional 60/40 federal-provincial cost-sharing formula, which was included in the framework agreement of last July, I am confident that the provinces will partner with us to deliver this new money to farmers. When we include the provinces' share, the new funding adds up to $830 million for Canadian farmers on top of what was available just one month ago.

The government has also more than doubled the amount available in interest-free loans to farmers under the Spring Credit Advance Program, raising that from a maximum of $20,000 to $50,000. Last year, 31,000 farmers participated in that program and borrowed $356 million. We anticipate that with the positive experience of that program and the higher amounts of the loans, it will be of even greater assistance to more farmers this year.

Even if we do all of this, there will be some farmers who will need other types of assistance. There will be some farms that are too small, or that are situated on unproductive land, or whose operators lack financial resources or they will be individuals who require management skills training.

We will be looking at on-farm diversification opportunities to increase revenues. We will be looking at skills development programs, and we will be looking at such things as a permanent cover program that puts fragile or unproductive land to better use.

There is not one solution to fit all. We need to ensure that we have the right tools in place, and work with producers as much as we can on an individual basis as they face today's challenges and realities. We also must remember one important fact: As I said earlier, there is much more to farm income than safety net programs.

To sum up, Mr. Chairman, there are six key areas that we need to invest in: The first is our ongoing safety net programs. The second is maintaining and enhancing the safety of our food, right across the chain. The third is putting systems in place at the farm level to protect and conserve our natural resources. The fourth is that we need to invest in the science that will help make this all possible. The fifth is that we need to press forward on trade negotiations and trade development. Last, Mr. Chairman, we need to provide the right tools to help some producers make the decisions that they need to make in terms of the challenges that they face today.

With those comments, Mr. Chairman, I turn the floor back to you for questions and comments from the members of your committee.

The Chairman: You mentioned crisis management. I am pleased to see that you have indicated that there is a crisis, especially in the grains and oil seeds area, but you also indicated that you are pressing for elimination of export subsidies.

As farmers, we have been hearing this for 20 years - in fact, one article I read said 100 years. Living close to the U.S. border, I can tell you that there is no indication that they are about to move off subsidies. In fact, they have already moved into the new crop year by changing some of the subsidies that were on durham wheat and hard wheat, and they are moving quickly. The same thing is true of the Europeans.

What happens if the subsidies are not eliminated? I spoke yesterday to a soft wheat producer in Ontario who told me he was getting $1.17 a bushel for his wheat. We are getting as low as $1.90 for durham wheat on the prairie. It does not factor when it comes to input costs. This situation will take some serious changes on the part of government.

The dollars put forward by the federal government and the provincial government of Saskatchewan, according to the minister of Saskatchewan, will be in the range of $3,500 a farmer to $7,500 a farmer. There will be an average of probably $5,000 a farmer. That will not even cover the increase in the fuel costs, let alone the fertilizer prices that have doubled. That is the crisis we are in as grain producers.

Mr. Vanclief: Mr. Chairman, you have been in agriculture all your life and I have, too, and there is no question that there is always a crisis someplace in agriculture in Canada, in a country this large. I guess it depends on the definition of "crisis," but there is no question that that is the word that we want to use. This is not the only government that has tried different approaches to address such crises.

I had a good meeting with my provincial and territorial counterparts a month ago. Without exception, every one of those provincial ministers around that table agreed that the provincial treasuries and the federal treasury together cannot match the United States in the level of support that it gives for individual bushels of grain and bushels of oil seeds. That is primarily where they put it in the United States. They agreed that we clearly needed a longer-term plan. They agreed, as I said in my comments, that safety net programs are a part of that plan. However, we need to look at the competition. As the old saying goes, if you cannot meet the competition, then you must find ways to beat the competition. That is an approach I touched on, clearly, in my comments as well.

Mr. Chairman, you made some specific references. If we are talking $1.17 a bushel for wheat, we should make sure we have that clear, for those reading the transcript or watching the hearing, that that is probably what the individual got on his or her initial payment for an unfortunate situation where it was sample wheat that came to them because of unfortunate weather situations. Let us not leave the impression out there that that is what the farmer got. The farmer will not get very much for that wheat, but he will get more than $1.17. Unfortunately, it is not grade one or grade two wheat. Nevertheless, let us not leave the impression that that is what the farmer will get. Let us put it in the proper perspective of what it is.

In the Province of Saskatchewan, if you divide the money in the safety net envelope by the 60,000 farmers in that province, you will probably get those numbers. I will not debate them. What I do know is that with the Canadian Farm Income Program and, with the recent announcement, the safety net envelope in the Province of Saskatchewan this year, between the federal government and the provincial government, will be $400 million of government support. That is added to the government support for safety nets in NISA, crop insurance and companion programs. The estimates for the Province of Saskatchewan this year for realized net farm income is a little over $500 million. How much of that $500 million-plus comes from government? Over 700 of it comes from government. Therefore the governments are there for the farmers. The only way that the farmers could have more realized net farm income in Saskatchewan this year is to have governments put more money in.

Senator Oliver: Can we check those numbers again? You said of the $500 million, $700 million comes from government?

Mr. Vanclief: There will be a realized net farm income, per my estimates, in Saskatchewan this year, of over $500 million. The federal and provincial governments will be putting over $700 million in safety nets into Saskatchewan this year. If it were not for federal and provincial safety nets in the Province of Saskatchewan this year, there would be minus $200 million instead of plus $500 million.

Senator Tkachuk: Is that outside of wheat farming? Is that total agriculture?

Mr. Vanclief: That is safety nets for NISA, crop insurance, companion programs, Canadian Farm Income Program and the recent announcement of the Saskatchewan share of the $500 million and their matching 40 per cent.

Senator Tkachuk: When you talk of farm income, then, are you talking about beef farming?

Mr. Vanclief: I am talking about all farm income for the Province of Saskatchewan. With the most recent announcement, if I understood how Saskatchewan distributed some of their money in February or March of last year, they sent that to all farmers as well. They did that I think. Perhaps, Mr. Chairman, you could correct me? I think it was a NISA top-up or something like that.

The Chairman: I just have one word on this subject. I was a part of a government that put $1 billion into Saskatchewan alone, and that was when the agricultural budget for Canada was something like $6 billion. That has dropped very significantly. In all fairness, you must admit that, since 1993, the government has not put the kind of money into agriculture that was previously contributed, and that should be put in given the fact that agriculture is providing to the economy about 26 per cent of the gross national product of this country, according to the Federation of Agriculture. The numbers they gave to us is that about $14 billion in profit acrues to the Government of Canada. Certainly you must look at the broader spectrum. It makes no sense not to save this industry.

Mr. Vanclief: I am not saying that it does not, Mr. Chairman. Let us put things in perspective again. Agriculture and the agri-food industry accounts for 8.4 per cent of the gross domestic product. There is no question that that is a major portion.

Mr. Chairman, you mentioned that you were part of a government. You were part of a government that took in $120 billion a year, spent $162 billion, and had a $42-billion-a-year loss. Unfortunately, Mr. Chairman, Canada could not continue that way. All Canadians, including farmers, have put their shoulders to the wheel in tackling the deficit. We needed to deal with that reality, Mr. Chairman, as we acquired the resources. When I became minister in June 1997, the federal safety net envelope was $600 million a year. It is now $1.6 billion a year.

The Chairman: In defence of my argument, you must admit that you are part of a government that has a surplus and that cannot afford to allow the losses in agricultural people that we are currently experiencing, especially in the grains and oilseeds sector.

Senator Fairbairn: Thank you, Mr. Vanclief, for being here and giving us an informative presentation on where things currently stand. I do take note of the efforts that have been made and continue to be made in the safety net area, both at the federal and provincial levels.

I should like to be a little parochial on two issues. You will be well aware of both them. We have been meeting with a number of agricultural groups in Ottawa in the last week. One group, which met with me and others, and I believe with people in your department, is the dehydrators. We have talked about this association for some time.

When you acknowledge that in reality some farmers will fall outside the safety net and need other types of assistance, I appeal to you on behalf of the dehydrators. This group is a hybrid in terms of qualifying for one thing or another because of what they do. Is there any optimism for them, particularly in Alberta and Saskatchewan, where some of the operations have shut down? They are important in the areas of the provinces in which they operate.

Is there some encouragement that you can give them, hybrids though they are, to provide support to get them through a transition era that was started originally by the downturn in the Asian markets? They have been climbing back up, but not to a degree that gives them any comfort about return to the landowner. They are seeking some modification that will enable them to receive some of the funding that is available to others, as they did through the transition fund and the transportation issue some years ago.

Mr. Vanclief: Senator Fairbairn, you raise a critical issue. I have met with them, and officials met with them as recently as this morning. We have met with them before. I have also discussed this in a broader context.

The Canadian Farm Income Program specifies that one is not eligible if there is less than 10 per cent ownership. That in itself creates a problem for some producers. There are certainly more than 10 owners in some of the dehydrator operations. The other problem is, for lack of a better way of saying it, that they have vertically integrated their operations from being farmers and processors.

I even said to them back when I was parliamentary secretary to Minister Goodale - and I do not want this to be taken the wrong way - that if they want the advantages of vertical integration and being a partner all the way along, they must accept the realities that go with that. If they separated their straight farming operations from other aspects of their business, the support could be there.

We must be careful, as more producers get involved in value-added, that farm safety net programs will also support those vertically integrated operations, so that more than just the income from the farm is taken into consideration.

We are observing, we are discussing, and there must bemire than one agreement. If we are to change, for example, the 10 per cent ownership, we will need to change it right across the board in fairness to other types of operations that exist or may develop.

There is a possibility for companion programs. Those are also provincial, and certainly the provinces have the opportunity to support the dehydrator industry or whatever - in this case that is the one we are talking about - with companion programs, as long as they meet the criteria. Those criteria are not the same as the 10 per cent ownership in programs like CFIP. The province can use its companion program money, 60 per cent of which comes from the federal government, but it is allocated to that province in either the safety net envelope or in the companion program envelope. Therefore, the provinces can also work with the industry, and they may be doing so.

You mentioned the change in the market, and we recognize that. I believe that nearly every year there have been contributions from Agriculture and Agri-Food Canada, from our agri-food trade programs, and the AIMS program to assist them with market development.

We are working on the problem. It is not an easy one to solve because it is unique. Any changes must affect all of those kinds of situations, and can we address that?

I know it is not easy, but I wish that they could find ways of separating their farming operations and saying, "Okay, the farming operation goes this far, the product is here, and then we sell it over there." That is simplistic, but some have said clearly to me, "We do not want to do that." We will try.

Senator Fairbairn: I appreciate your answer. I know it is difficult. These are also people who have responded to encouragement to diversify from both levels of government.

Mr. Vanclief: There is no question.

Senator Fairbairn: In doing so, they slip out of the net. My message is that I am glad to hear are you still working at it. It is an important part of the landscape in areas of the west where there are difficulties.

Even though there is snow on the ground in Alberta, I think they need something akin to Noah's flood to create a surge of optimism in the dry areas, both in the south and in the north.

I know that the federal government supported the cattle industry last summer when we experienced a drought. I know that your department will be keeping a sharp eye on what is happening. This may be a brutal summer, and I hope that the federal government will be as proactive as possible, should severe difficulties occur, because this is getting beyond being cyclical; it is happening every year.

Mr. Vanclief: Although we do not claim to be as aware of the situation as the people who are on that dry ground every day, we are fully apprised of what may be developing. I am sure the producers are taking every precaution with regard to crop insurance and proper management of what little water there is. The cattlemen recently joined the NISA program. The Canadian Farm Income Program is also available to them, as are various others.

If cattlemen have to sell some of their breeding stock, we will certainly consider tax concessions, as we have each time that situation has arisen. It does not usually develop until later in the year, but unfortunately, it may arrive sooner in Alberta this year. There is usually some moisture after the winter. However, that is not the case this year in a large part of Alberta and some areas of Saskatchewan.

Senator Wiebe: Thank you, Mr. Minister, for appearing before us today. I will take a slightly different approach. I have been actively farming for 42 years. I have now been a senator on Parliament Hill for 12 months. I do not think that I ever have been more frustrated in my life about agriculture than I am now.

Every time there has been a problem in agriculture over the last 40 years, succeeding governments have attempted to solve it by throwing money at it. We then debate whether the amount thrown was sufficient.

We have been going through exactly the same exercise here for the last six months. It is time that we all - farm organizations, governments, and this committee - started looking at long-term solutions rather than having knee-jerk reactions every time a crisis arises.

I must take exception to some of your comments relating to the subsidy war. I asked this question of the Minister Responsible for the Canadian Wheat Board on Monday, and of members of the wheat board yesterday. Are we being honest with farmers about subsidies? If the Europeans, the Americans, and the Canadians removed all subsidies tomorrow, how much would the price of grain go up? I believe that it might go up 3 cents. The age-old problem with prices in agriculture is oversupply. We produce far too much. Our farmers are doing a fantastic job adjusting with the tools they have in grains and oilseeds. In order to adjust to the cost/price squeeze, they try to produce more per acre of land. Our agrologists are encouraging them to find new ways to produce more per acre. That may help the bottom line for a short while, but it generates oversupply. It is argued that the world oversupply is only 90 days, but that has been said that for the last five years.

Many farmers pray at bedtime for the subsidy war to end so that they will be able to get back on their feet again.

Governments and farm organizations have to find ways to make better use of farmland. We need better husbandry of the land and of the parts of the industry into which we are diversifying. We are calling on farmers to diversify, but if they all go into chickpeas, which are currently very profitable, we will have an oversupply and the price will drop.

In poultry, for example, a quota of 1,100 chickens would have been sufficient for a farmer a number of years ago. Today, that same farmer needs a quota of 1,400 birds. We need to look in depth at long-term solutions to problems in agriculture rather than short-term ones.

You told us that we must provide the right tools to help producers. As I have said, the producers have tried everything. You must remember that a producer is one individual. Most of the farm organizations do not have the financial resources to do the research and development that is required. Your department has the resources for that, and I am wondering what your departmental officials have been doing. They have the expertise and the knowledge to do the necessary research to give individual farmers the tools to make the right decisions about their operations.

Mr. Vanclief: I have addressed that to some extent and I will expand on it. I said that safety nets are part of farm income, as insurance is part of everyone's financial security, but it is not the only answer. Without question, as you say, for decades we have been injecting money when crisis situations arose. However, that certainly has not always been the answer. It has been a stop-gap measure, although not enough of one for everyone.

That is why, at the federal-provincial-territorial meeting a month ago, the ministers agreed that we will work together with the industry to put a longer-term plan in place. They agreed to address environmental issues, the desires of the consumer, the food safety issue, skills training, and transition, be that transition on the land or otherwise.

That is what we must to do, and that has been the goal in the past, whether with safety net programs or through other means. When NISA was established, people thought it would eliminate many of the ups and downs, as it has for some, although not for everyone.

I do not think you are saying that we should not strive to further level the playing field with regard to subsidies in other countries. In her first major speech two or three weeks ago, American Secretary of Agriculture Ann Veneman told American farmers that they had to farm the marketplace. I told her that, particularly in grains and oilseeds, her farmers were farming the mailbox. She did not deny that. I said that as long as the mailbox makes more money than the marketplace, and they are good business people - which they are - they will farm the mailbox. We have to continue to push on that front as well because no one place that we push will contain all of the answers.

Senator Wiebe: My question was not whether we are or are not putting enough money in there. In terms of programs, NISA was one of best designed programs that was ever established, and still is. I am saying that what farmers want is research and development. The tools do not necessarily have to include money. The tools involve knowledge about what a farmer should do with his parcel of land. That is lacking. Farmers do not have that knowledge. They are frustrated. They are sitting there saying, "We have done everything that the governments and the universities have told us to do." They have diversified and started growing different crops, but their bottom line is still bad. They want ideas.

I hope that department officials are working in the area of research capabilities. We must look at the long term rather than the short term.

Mr. Vanclief: Department officials have a role to play in that respect, as do the provinces and the individual producers. We know that these individual producers are very clever people and are looking at opportunities as well. I do not want to be a part of a government that tells the farmers, "You should grow this." What we need to do is provide as much research as we can.

We have producers on the research advisory boards of all of our 19 research stations. When we have advisory boards, the producers are there. There is a role to play in that regard. Private enterprise is involved in the industry as well.

Senators, I would refer you to the last sentence that I had in my speech; we have to help producers make the decisions that they need to make in order to meet the challenges and realities of today. That is why we need to do more.

The provinces get a little edgy when the federal government uses the word "extension" because that is more their jurisdiction. However, if some people do not have a resource base that is profitable to use in today's reality, that is when we start looking at programs such as permanent cover, trees and other things that they may be able to do with those resources.

Senator Oliver: Mr. Minister, I would like to welcome you to the committee once again. I wish you had more time, and I hope that you can come back again soon. I have all kinds of questions to ask you about mad cow disease and GMOs.

Senator Fairbairn asked what she called a parochial question, and mine will be parochial as well because I am from Atlantic Canada. Very often, this committee deals with farming problems in the West, but I would like to discuss the problem of potato wart fungus. As you know, this fungus poses no threat whatsoever to human health, but the U.S. FDA imposed measures to prohibit the movement of P.E.I. seed potatoes and table stock.

Minister, you produced a series of press releases. In one of them dated December and January of last year said, "Agriculture Minister Vanclief condemns the United States today for refusing to allow table stock potatoes from P.E.I. into the country." As we know, the ban continued and potatoes had to be destroyed. Farmers lost a lot of money and that particular industry is now in a crisis.

You have given these farmers some money, Mr. Minister, but my question is this: What has been done to date and what will be done in the future to assist this devastated industry? What steps are you taking now in the administration to make sure that this will not happen again? We know that the potato wart fungus is not really a problem; it is more of a trade problem than a personal problem. What will be done to ensure that this does not happen again this year?

Mr. Vanclief: None of us can be naive enough to think that the present administration of the United States has not already shown it will be very protectionist. This issue, which started under the previous administration and has continued under the present administration, is a good example.

I have had a number of phone calls with my counterpart, Secretary Ann Veneman, on this issue. I met with her face to face on this issue. Our officials meet each week. We continue this dialogue on almost a day-to-day basis. There is absolutely no scientific basis for what the U.S. administration is doing, and I have stated that clearly. It is nothing but a protectionist issue.

There is a similar case, for example, with the European Union and beef being produced with the assistance of hormones. There is no science on which to base that case, and they said, "That's it; you are not getting it in." In that case, we went to the WTO. We established a basis on which to retaliate, and retaliation is taking place.

However, that was a situation where beef from all of Canada, for example, was not allowed in. What we have here is an unfortunate situation where potatoes from one province are not allowed in. Potatoes from the rest of Canada are allowed into the United States. I am not saying the situation is that simple because we cannot simply phone up and say we are coming through with truckloads of Prince Edward Island potatoes.

We are studying this issue, senator. I spoke personally to the secretary about establishing an off-ramp before we continue any further in the NAFTA process. My view is that they would love to move this issue into the NAFTA process because they could keep it there for a year or two. We have to try to get it off before we go into that process.

The Prime Minister has already spoken to the President about the matter. The Minister of Trade has already spoken to U.S. Trade Representative Zoellick. They will speak again on the issue in the very near feature.

As recently as last Wednesday, we sent the United States a letter outlining conditions that Prince Edward Island producers said they could live with. The United States came back and said no, that was not acceptable.

Senator, I make no bones about the fact that we are frustrated. We will have to look at taking this dispute into the processes that are available, recognizing that it may be the only way to reach a resolution. For example, the U.S. took a technical team to Europe a few weeks ago. A Canadian observer was part of the team. Our observer was of the clear view - and I am confident of this as well - that what we are doing in Canada is above international standards as far as the way we are handling and protecting this little area in P.E.I. where the potato wart fungus was found, which is the size of a football field. The United States will not share that scientific justification. They are just saying, "It is a new disease that you have not had before, so we would like to conduct more studies."

I am not pointing fingers, but it is like being in the courts. If they want to drag it out, they can drag it out. Shy of taking the issue into NAFTA, which we have started to do, we would like to have an off-ramp so that we do not have to go there, which would be far better for our producers.

Senator Oliver: When you use the term "off-ramp," are you saying that there is no strategy in place to ensure that this problem will not flare up again immediately?

Mr. Vanclief: The U.S. has said that it will not allow Prince Edward Island potatoes into its market.

Senator Oliver: What about government protection for the P.E.I. farmer? What is the long-range plan to help the farmers?

Mr. Vanclief: There was $12.6 million in aid to help with disposal in an environmental way. I am talking about that market being lost, for whatever reason. I used to farm. If I lost my tomato contract, I did not plant tomatoes for that processor. If individual growers who have had a portion or all of their production going to the U.S. market are not confident at planting time that there will be a market, I doubt that they will plant for that market. They may develop markets in the rest of Canada or elsewhere, but that is a business reality. If I am selling widgets and my buyer does not buy them anymore, I had better not keep making widgets for that buyer.

Senator Oliver: As minister, given the talks that you have had with the Americans, are you holding out any hope that this ban will be removed?

Mr. Vanclief: I know from being a potato farmer in Prince Edward County that we need to get this ban removed by the middle of May. We want to get it removed, but if we do not succeed by the middle of May, it will not mean anything to the farmers for this planting year.

The Chairman: I will ask both the minister and the senators to keep questions as short as possible.

Senator Tkachuk: Minister, obviously you have a lot on your plate. You were talk talking about the hog and beef industry being in pretty good shape in this country. Do you have a plan in place in case of an outbreak of mad cow or foot and mouth disease in Canada?

Mr. Vanclief: The Canadian Food Inspection Agency has that plan. I believe they will be tabling it with the with the Standing Senate Committee on Agriculture and Forestry. Or did they do that this morning?

If you read the speech that I made in the House last night in the special debate on this subject, I outlined a lot of what is contained in that plan. For example, they have full communications with what I still call emergency preparedness teams across Canada, which immediately brings in not only the provincial governments but the RCMP and the DND in all of those areas. The Canadian Veterinary Association has had consultations, discussions and meetings with organizations such as the Canadian Cattlemen. I could go on.

They must continue to develop that plan even more, and all of the time. With something like foot and mouth disease, you never know if it will land, or where it will land, and to what extent it will land. However, the Canadian Food Inspection Agency has comprehensive plan to deal with foot and mouth disease. We are members of a large vaccination bank, I think it is a North American Vaccination Bank. Therefore, we are prepared if the decision is made to vaccinate. You know that there is a debate going on around that practice in the United Kingdom. I am not saying that that would be the approach, but all of those types of considerations have been and are being made.

Senator Tkachuk: Is that being done with the ministers of agriculture with each province?

Mr. Vanclief: The provincial officials are fully aware, and have been involved. It is the Canadian Food Inspection Agency's responsibility to do all that we possibly can, and the provinces are kept aware of developments.

Senator Tkachuk: It is your responsibility.

Mr. Vanclief: They report to me, yes.

Senator Tkachuk: The point that you made on net farm income, the $500 million and the $700 million, was a little confusing to me. You said that the $500 net farm income in Saskatchewan included all agriculture. Was the $700 million assistance both provincial and federal?

Mr. Vanclief: Yes.

Senator Tkachuk: How much of it was federal?

Mr. Vanclief: Sixty per cent.

Senator Tkachuk: That would make it $420 million?

Mr. Vanclief: Sixty per cent of $700 million would be $420 million.

Senator Tkachuk: That would be for Saskatchewan, or all of Canada?

Mr. Vanclief: No, just Saskatchewan.

Senator Tkachuk: Did most of the assistance go to the grain farmers? This federal assistance number, is this basically -

Mr. Vanclief: There is a higher percentage of grain farmers in Saskatchewan than any other province. I think that 80 per cent of farmers in Saskatchewan are grain farmers. They may have livestock as well, but 75 to 80 per cent are grain farmers. About 90 per cent of farmers in Saskatchewan participate in NISA. There is a high percentage of farmers in Saskatchewan who participates in crop insurance, I believe. It is nearly two-thirds. Then, or course, the Canadian farm income, or the AIDA program, that is a whole-farm program, and that is open to any type of farmer to trigger the criteria.

Senator Tkachuk: This $700 million includes NISA payments and what else?

Mr. Vanclief: It includes the contribution to NISA, to crop insurance and companion programs.

Senator Tkachuk: Of that $700 million, did the farmers pay into that any amount?

Mr. Vanclief: Yes, they pay into NISA. For every dollar the farmer puts into NISA, the federal government puts two dollars and the provincial government puts one dollar.

Senator Tkachuk: How much of that $700 million was put in by farmers?

Mr. Vanclief: None. I have said it over and over again: that number is approximately the value of the federal and provincial contribution to the safety net funding in Saskatchewan this year.

Senator Tkachuk: Would there be income tax paid on that $500 million?

Mr. Vanclief: On the $500 million realized net farm income? It would depend on the individual operation.

Senator Tkachuk: About how much tax would have been taken from agriculture in Saskatchewan to the federal government?

Mr. Vanclief: I could be corrected if I am wrong, but I think the total income tax paid by farmers in a year in Canada is only about $285 million. The amount is $285 million for all kinds of farm operations in the whole of our country.

Senator Tkachuk: Saskatchewan would be what?

Mr. Vanclief: I do not know. If it is $285 million for all of Canada, there would have to be some calculation or research done to see how much of that came from Saskatchewan. Let us say it was 25 per cent. Therefore, we could estimate that $70 million dollars was paid. The government contribution, federal and provincial, is $700 million.

Senator Tunney: You might know, but perhaps you do not, that the minister and I are next door neighbours by county - Northumberland and Hastings. I do call him Lyle, and he will call me Jim, but I will be quick because we have to be back.

The remark about the price of wheat, a dollar and something, has no place in this discussion, in that it is really garbage product. My neighbours were afflicted with Fusarium, a fungus that attacks wheat kernels, and renders the wheat almost valueless.

Nobody mentioned the Farm Debt Mediation Service or the Farm Consultation Service, which used to be the Farm Debt Review Board. I mention this only because there is not much activity there. One of the reasons there is not much activity is that a large percentage of farmers do not know about it. They think that it ended its life several years ago, in 1996. This is a successful program for those who choose to use it.

You may understand that the Farm Debt Mediation Service is an option for a farmer who is either in bankruptcy or whose debt is being realized upon. The success rate there is high. It is something like 80 or 85 per cent in Ontario. I am told that it is higher in some other provinces. The Farm Consultation Service comes into play when a farmer wants some good management.

Senator Tkachuk: We have to be back at 1:30. We have had two major addresses here by Liberal members that would be great in the Senate chamber, but I am not sure who is testifying here.

The Chairman: Will you get to the question?

Senator Tunney: I am prepared to end this discussion.

The Chairman: I will call order here. Senator Tunney, continue. Would you please ask your question?

Senator Tunney: If you want to take a minute to comment on that program, it would be fine with me.

Mr. Vanclief: I will give you some statistics on the use of the program. We do all we can through farm organizations such as the Farm Credit Corporations in the provinces to ensure that farm producers out there are aware of two programs - the Farm Debt Mediation Service and the Farm Consultation Service. In the year that ended March 2000, which was a year ago, there were 644 FDMS applications in the previous 12 months. In the 12 months ending right now, there were 667 applications. Applications went from 644 to 667, which is fairly level.

With respect to the FCS, in the previous year there were 764 applications, and this year there are 762 applications. The use of those programs is level.

As well, the loan arrears with the Farm Credit Corporation have been level over the last two or three years. Arrears have always been around. The numbers were higher back in the late 1980s, but in the last number of years only 5 per cent of loan accounts have been in arrears.

Senator LeBreton: Mr. Minister, you made the statement that the Canadian agri-food sector is healthy overall. You said that arrears on Farm Credit Corporation loans have levelled off. The previous witness from the Canadian Federation of Agriculture pointed out to us that this is somewhat misleading. In fact, those arrears on Farm Credit Corporation loans have levelled off only because the loans have been renegotiated. Can you comment on that?

Mr. Vanclief: Loans are always renegotiated. I would have to ask the Farm Credit Corporation as to what percentage of loans they have renegotiated.

Senator LeBreton: I would like to know that.

Mr. Vanclief: I will get that information from the Farm Credit Corporation.

When we look at the realized net farm income in Canada for the last two, three, four or five years, there has not been a great deal of change. It is not as high as any of us would like to see. Certainly, if you are a grain and oilseeds producer, yes, there has been a change. There has been a decrease.

We all know about the stability of the dairy, egg and poultry industry. I know that a year and a half ago the pork industry went through a big low. I also know that in the last three or four months, pork has gone from $1.40 per kilogram, dressed, to $1.97 in Ontario last week.

A press release out of Prince Edward Island this week stated that beef prices for cattle in Prince Edward Island are the highest they have been in history. They are up to about $2 per pound, dressed. Hog prices are high as well. This is typical agriculture. Prices are up and down. They are cyclical.

In the grains and oilseeds industry, never before have there been five consecutive bumper crops in a row in the world. It does not matter whether you are in agriculture or not. If there are five consecutive bumper crops -

Senator Oliver: Without bumper prices.

Mr. Vanclief: Bumper crops do not cause bumper prices; that is the problem. Does that make someone wish that one part of the world would have a crop failure? We do not want to think that way, but that is a reality.

That raises another question: How is pricing done? We will not get into that. I do not think we know.

Senator Tkachuk: I would like to follow up on the $500 million you mentioned, Mr. Minister. Could you provide us with numbers on the net farm income for the grain industry versus other kinds of agriculture in our province? I do not need it now. Could you send those figures to us?

Mr. Vanclief: I do not think we can break it down within a province, no.

Senator Tkachuk: Could you do it just for the Prairies, then? Could that be done?

Mr. Vanclief: We can give you the figures for each province. Those numbers are ascertained in cooperation with the provincial governments. There is cooperation between our officials and their officials on calculations based on what they see coming for the year, but I do not know how they break it down.

Senator Tkachuk: This is quite intriguing. You can break it down for the country as far as net farm income in grain versus beef versus pork versus truck farming.

Mr. Tom Richardson, Director General, Farm Income and Adaptation Policy, Strategic Policy Branch, Department of Agriculture and Agri-Food Canada: We cannot break it down by commodity because so many farms have two or three commodities. When we look at farm income for a province, we look at the whole economic activity at the farm level.

Senator, you would have to define what you mean by farm income for grains. Do you mean farmers whose grain activity accounts for 51 per cent of their business? Do you just mean grain farmers? There is no easy way to calculate the net income from grain production in a province because everything is mixed together.

Senator Tkachuk: Could you give me approximate numbers?

Mr. Richardson: We can give you market receipts for grains by province. We can show you the history of market receipts.

Right now, grain receipts are down about 15 per cent from the five-year average. We can give you that kind of information, but we cannot give you a net figure.

Senator Tkachuk: Do the best you can for me, at least for the Prairies. If you can provide a figure for Saskatchewan, that would be great. Perhaps we can find other ways to get the information. Perhaps the department should look at providing this information because there are permit books for Wheat Board grains. There must be ways to assemble the statistics.

Mr. Vanclief: Permit books would not give us the income.

Senator Tkachuk: I am saying that there is evidence of deriving cash receipts for farmers in relation to the Wheat Board.

Mr. Vanclief: Mr. Richardson said that we could get overall grain receipts.

Senator Oliver: When I was asking my questions about potatoes, Mr. Minister, you did not have a chance to answer the part of my question about what farmers can expect to come down the tube by way of further support.

Mr. Vanclief: In the way of further support, they have access to the Canadian Farm Income Protection Program. On average in Prince Edward Island, the farmers have $75,000 or $80,000 each in their Net Income Stabilization Account. I do not know whether the province plans to adopt any companion programs.

What we have done is help dispose of the surplus potatoes from this year, in an environmentally friendly way.

We must also keep in mind that, on average over the years, only 10 per cent of the production of P.E.I. potatoes is sold in the United States. What happened this year is that a voluntarily decision was made not to move any of those potatoes for a period of time into the rest of Canada so they would not disrupt the whole Canada-U.S. potato relationship.

The Chairman: Many farmers are saying that any moneys that flow through to the farmer seem to be going directly to the fertilizer companies - companies such as Monsanto - and the fuel companies. These companies have large profit margins and the farmers are going broke. The $500 million in federal government assistance will not cover the increased fuel prices in Canada; yet, oil companies are making money, hand over fist.

Mr. Vanclief: That raises the question of whether it is the role of government to control fertilizer prices and fuel prices. I have not seen a government prepared to do that yet.

Fertilizer prices are international prices, as are fuel prices. I am not defending farmers in the United States, but what has happened to fertilizer and fuel prices in Canada has happened in the United States. It has happened in other countries of the world as well.

I recognize that input costs have gone up; there is no question of that. However, I also recognize that the federal and provincial governments have made available $2.6 billion of assistance this year. The loan program is certainly of value to individuals this year. Compared to even a month ago, there is another $830 million available. That money will go a long way.

The Chairman: In addition to that, we are buying John Deere tractors with a 63-cent Canadian dollar, which can work out to be pretty expensive.

Our time is up, Mr. Minister. We appreciate your time with us today and look forward to hearing from you again.

The committee adjourned.