Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 3 - Evidence - June 8, 2006
OTTAWA, Thursday, June 8, 2006
The Standing Senate Committee on Agriculture and Forestry met this day at 8:04 a.m. to study the present state and the future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Colleagues, welcome and thank you for being here at this early hour.
Before we go to our guests, as you recall, last Tuesday Minister David Emerson was here before our committee and he was under some pressure because of votes in the House of Commons. He asked if, in addition to his presentation, we could table his opening statement so that we would have more time to discuss it with him. I would like your agreement to approve the printing of that opening statement in our records, if that is agreeable?
Hon. Senators: Agreed.
(For full text of document, see the Appendix.)
The Chairman: Today we continue our examination of the difficulties of our agricultural community. The last few years have seen the worst levels of Canadian farm incomes in history. Despite increasing government intervention, the farm debt is now close to $50 billion.
The committee has heard that a number of factors have contributed to the current situation, including the BSE crisis in our cattle industry and lower commodity prices, particularly for grains and oilseeds. As well, there are other challenges down the road, such as a continued rise in fossil fuel prices and a new World Trade Organization agreement on agriculture, which may have consequences on the way we produce and market food in Canada.
To address the current crisis, the government has recently made a number of announcements, including an additional $1.5 billion in farm support in the last budget. To talk about this situation in general, we have with us today representatives from the Grain Growers of Canada.
The Grain Growers of Canada is a national organization comprised of major grain and oilseed commodity groups, and it stretches all across our country. They represent the interests of grain and oilseeds producer in national policy development. Through their member organizations, this organization represents every region of this country.
Representing the Grain Growers of Canada today are Christine Moran, Executive Director, and William Van Tassel, Director. Ms. Moran is an Ottawa native and Mr. Van Tassel is from Herbertville, Quebec.
Thank you very much for coming today at this early hour. Please proceed.
William Van Tassel, Director, Grain Growers of Canada: Good morning, senators. Thank you for the opportunity to speak this morning on an issue that is critical to Canadian agriculture and, in particular, to Canada's grain and oilseeds producers. The Grain Growers of Canada is an umbrella organization that serves as the national voice of grain and oilseeds producers. Its sole purpose is to represent the interests of grain producers on policy issues including domestic support, regulatory issues, market access and trade policies, as well as to represent their interests on practical issues such as investment in the sector and transportation.
We have member associations in every region of Canada and represent 90,000 grain and oilseeds producers. My responsibilities with the Grain Growers of Canada include serving as the chair of the working group on domestic support, which is why I am here this morning.
For grain and oilseeds producers, the issue of farm income is a major preoccupation from a number of perspectives, and it represents one of the strategic priorities of the Grain Growers of Canada since we formed this group, which was around 2000.
To speak personally for a moment, I am a grain producer from Herbertville, Quebec, which is northeast of Quebec City in the Lac-Saint-Jean region. I have been farming since 1976, and my operation includes wheat, barley, soy beans, canola, flax and corn for silage. I also have a small dairy operation. In my area of the province, that is a typical farm.
My Grain Growers colleagues from the West may differ in terms of size of operations and sometimes on philosophical perspectives, but we all face the same challenges. We face declining income in the face of soaring input costs. Simply put, Canada's grain and oilseeds producers are in an income crisis.
There are a few reasons for this crisis, but before I describe the problem I would like to outline what we see as the impact of the problem in terms of the Canadian economy. Canada is the world's fourth largest exporter of agricultural products. Agricultural exports account for 10 per cent of Canada's trade surplus and represent 8 per cent of the gross domestic product.
Those figures demonstrate the obvious importance of agriculture to the Canadian economy. Grain and oilseeds production, specifically as a sector, is critical. Agriculture and Agri-Food Canada noted that wheat supports a large Canadian domestic processing industry and is the single largest earner of export revenue of all agricultural products, with annual exports worth about $3.8 billion.
Along with this, Agriculture and Agri-Food Canada concluded that the oilseeds sector in Canada is a major contributor to the economy of Canada in terms of value-added and employment. Total direct economic benefits of the industry to the Canadian economy were $3.2 billion in 2003, which are the most recent figures available.
Given these figures, it should be of grave concern to Canada that the Canadian grain and oilseeds sector faces such a precarious situation that it can only be called a crisis. Farm gate receipts are at an all-time low and producers face soaring input costs. As noted previously, there are a few reasons for the crisis. Fundamentally, these reasons can be reduced to the following: Reduced prices as a result of foreign subsidies and the role of the producer in the value chain, as well as sky-high input costs, as you said before, chair. When the selling price decreases, input costs rise. We have no choice.
That 80 per cent of Canadian grains and oilseeds are exported underscores the fact that the sector is globally integrated. However, equally important is the fact that even those producers who do not rely on international consumers as buyers are reliant on international markets to set the prices for the products they sell.
In my province, we grow quite a bit of corn and, even if we do not export it, its price is based on that of the Chicago Board of Trade. In that way, even if you do not export, you still have an international price.
Globally, the grains and oilseeds prices are undermined and undervalued by the use of trade-distorting domestic subsidies such as those of the United States and the European Union. These subsidies have the effect of overstimulating production and depressing price in key crops such as corn, soy beans, wheat and barley. These production-distorting subsidies have a devastating effect on Canadian grain and oilseeds producers through lower prices and market displacement.
In many cases, Canadian producers are unable to recoup even the cost of production in the marketplace. Saying only ``in many cases'' is being generous. With the low prices these days, in nearly every case you cannot recoup the cost of production.
As well as being unfair, this situation is obviously a source of frustration. Ultimately, it has been the demise of many grain operations, although it is important to note that the real figures are masked by the fact that nearly one half of all farms rely on income from employment outside the farm.
This situation is especially frustrating when we consider the current manner of distributing support to farmers. The current mechanism, called Canadian Agricultural Income Stabilization, CAIS, is designed to be non-production- distorting and non-trade-distorting. It allows market forces to prevail, although it does not adjust for the key variable that prevents the success of grain and oilseeds producers. This variable is the use by Canada's key competitors and trading partners of trade-distorting subsidies that overstimulate production and depress prices.
After the last Uruguay Round of world trade talks, we followed the rules closely, but we are about the only country that did. We came to non-distorting support, but when the prices for grains and oilseeds are continuously going down, the program does not work.
An alarming example of the need to act fast and to have a level playing field is the debt load of Canadian farmers. The debt load of Canadian farmers is nearly double that of U.S. farmers. In the 1980s, the debt load of the Canadian farmer was a little lower than that of the American farmer. Now, the American debt load has been cut in half and ours has increased. Our debt load is nearly that the level of which the Americans were in crisis at the beginning of the 1980s.
The Grain Growers of Canada support the current efforts to improve the responsiveness of CAIS to grains and oilseed producers and is committed to participating actively and constructively in the process to develop the new program. However, we stress the fact that any promise developed to address the issue of farm income must account somehow for the steady decline in prices that grains and oilseed producers have experienced. As well, we stress the need to address the root cause of the decline in reference margins, namely, foreign subsidies.
In this way, Canadian grains and oilseed producers can plan their operations more effectively, to manage their business risk in a stable environment and to compete in their ability to produce higher quality grains than our competitors, rather than compete against the treasuries of another country. To propose anything else amounts to nothing more than a band-aid solution.
The overwhelming preference of our producers is to derive returns from the market, as opposed to receiving ongoing government support. As a way to address this issue, the Grain Growers of Canada has considered carefully the conditions that, once in place, would assure fair returns for grains and oilseed producers. The conditions thereby would eliminate the need for ongoing government support, while recognizing the important role that income stabilization and disaster relief play in agriculture. The following conditions should be considered goals to be met by officials. The first condition is the implementation of a broader strategy to improve producers' position in the value chain, including investments in the infrastructure required to foster the use of grains and oilseeds for non-food use; research and development to spur innovation; and incentives for producers as providers of social benefits beyond food production. The second condition is the elimination of foreign subsidies that negatively affect Canadian prices, through an ambitious agreement with the World Trade Organization, and meaningful market access through the elimination of discriminatory tariffs through the WTO.
Until these market conditions are in place, the Grain Growers of Canada proposes bridge funding to address the needs of the sector. Bridge funding would address the trade distortion caused by foreign subsidies. It should be maintained until there is a full implementation of a WTO agreement, which, brokered and facilitated by Canada, would eliminate the need for such funding by eliminating the foreign subsidies and creating a level playing field. To have that without depleting the budget, you would have to address the hurt where the hurt is — grains and oilseeds. There must be a way to address the hurt because simply pouring money in will not eliminate the problem, and farmers will be back on Parliament Hill as they were last April 5.
In short, grains and oilseeds producers do not believe that the government owes farmers a living, although we believe that the government owes the industry policies that would allow farmers to make a living. These policies are within our grasp. Until we achieve them, we ask that the government respond to the crisis by directing funding at the grains and oilseeds sector to compensate for the trade distortion.
I have brought with me today copies of our February policy paper on this issue. We would be happy to discuss this further.
Senator Segal: Thank you for your presentation and the copy of the February policy paper. Do you have a sense of déja vu today? The news continues to be bad and things do not improve with every cycle. You are a grains and oilseeds farmer that faces the challenges on a daily basis. First, there does not seem to be any evidence that Canada will be able to stop the American and European system of massive unsustainable subsidies, despite Canada's good-faith negotiations at the WTO. It would seem that the results will keep our grains and oilseeds at a depressed price level. I am responding rationally to what we have seen to date. Second, I believe that you would agree that, to some extent in all of our farming operations, there is an issue of scale. Think about potatoes, for example. The individual with 250 acres is having great difficulty making a fair living. The individual with 2,500 acres or 5,000 acres is probably doing a little better, all things being equal, in terms of scale.
The larger analysts, officials from Food and Agriculture Organization, FAO, say that the rising demand for protein in places such as China and India will, over time, put real upward price pressure on grains and oilseeds, specifically those that are fundamental to the feed process for other protein forms — various animal food choices.
Currently, we seem to have a five-to-seven-year hole without any apparent bottom. You might disagree with some of that but, considering all that evidence, I will put to you two policy choices. I would be interested in your response.
I suggest a commodity-based bridging proposition, which is either tied to a kind of per-acreage percentage or previous-year's-income percentage. I believe that has been suggested by the Grain Growers of Canada versus a strategic investment that would require, at a bare minimum, a certain fundamental growing capacity in this country and the people who are prepared to stay in that business through good and bad times because they know that they are treated fairly. When we get to the other end of the bridge as prices increase, those people will benefit accordingly. It is not so much a per-acreage issue but rather a reasonable income-floor issue for the men and women who are now in our farming community.
An example of basic income support can be seen in the auto industry when workers are laid off. By and large, there is a rich federal government auto industry program into which they pay, an income insurance program, in essence. We do not want auto workers to go elsewhere because they will be needed when the companies start up again with the return of the cycle. That program keeps them on a high percentage of their salary for a relatively long period of time.
If you were the Minister of Agriculture and Agri-Food and basically had two choices — income support for the farm family, a basic income floor of a reasonable amount that could sustain them through good times and bad, or commodity-based support programs that come and go as the crisis deepens — which would you choose? You might have another better choice, but which of those two would you choose?
Mr. Van Tassel: I will answer the question but I would like to come back to your comments. As I said before, put the hurt where the hurt is. Addressing the hurt would take the least amount of the federal budget. Certain commodities are hurting more than others and that is why we addressed commodities in our February policy paper. I do not know how to address the matter of a minimum level of income support for the farm family. It could be done but we would have to look at ways to make that work.
Senator Segal: We do it for senior citizens in Canada with our Guaranteed Income Supplement. We look at their pension numbers and if they fall beneath a certain amount, the GIS kicks in to ensure that they have a way to live with some measure of dignity.
Mr. Van Tassel: We could probably look at that. I agree that in the short and medium term we need to keep the farmers going, because in the long term we will need this primary sector. We cannot let it go.
When you look at the economy in terms of the grain sector, the surpluses are going down and yet the population of China, among others, will need more wheat. That is why we need a program until then, which we call bridge funding. That is something to look at. I do not know if Ms. Moran would like to add to that. I never really considered that point before, which is why you stumped me a little bit.
Christine Moran, Executive Director, Grain Growers of Canada: We did have some discussion on that, although we did not examine it thoroughly in terms of how the mechanism would work. The overwhelming view of our members was that our returns should be derived from the market.
The idea is interesting and we recognize that it is a possibility, but our proposal is intended to target funding at what we term ``the hurt'' in the grains and oilseed sector. Certainly, what you referred to as a per-acre payment based on commodity would probably be one excellent way of alleviating that hurt, because we agree with you; this problem needs to be addressed now. We need to prevent the demise of the industry and the sector into the future.
You question whether we are being overly optimistic. It is no surprise that someone would call me an optimist, since everyone has done so since I was young. However, we have examined the issue and, for us, the only way we can get at those subsidies is at the WTO. I recognize there is some pessimism as to whether our trading partners will ratchet down their subsidies — especially on the trade-distorting subsidies — but we are in a different era.
We are looking at the Doha Development Round. We have the engagement of major countries who are also applying pressure. In the Uruguay Round, two major players set the rules. Now many large developing countries are formidable forces in the WTO, and they are also applying pressure.
The approach may seem overly optimistic to some, but it is the only realistic one because it is the only way we can get at those trade-distorting subsidies and ensure that the rules are changed so that they do not distort trade and continue to have that devastating effect on our producers.
The WTO agricultural negotiations are ongoing, and even in recent days, the key negotiators — specifically from the countries that we have named, the EU and the U.S. — are still demonstrating movement on that issue. There is a reason for optimism here.
Senator Segal: Talk to me about rural poverty in the part of Quebec in which you live. What are your fellow farmers living through in that context? Are they making it? Are they barely surviving? Are some living beneath the poverty line but are too proud to let it be apparent? What is your sense of what is happening on the ground?
Mr. Van Tassel: I will give you my personal story. In 2004, I worked many thousands of hours on the farm and I lost $50,000. It was the worst year I ever had. Luckily, the years before were positive or I would not be here.
In grains and oilseeds, we have a provincial program in Quebec that helps us out. It is a little bit commodity-based, but we pay premiums and they are going sky-high. In Ontario, it is even worse and they are having auctions. I received a paper about one recently that was being held by the bank, which means the farmer is not there anymore. It is going badly.
On April 5, when we were demonstrating on Parliament Hill, farmers did not do that for fun. Quebec farmers might be used to it — perhaps we are more excitable — but I never thought I would see Ontario farmers doing it, and they were there. That is because it is really going badly; that is why we are here today.
Perhaps your idea is worth looking at. I cannot really respond to your idea about having a minimum guarantee for the family because we did not do enough work on that issue; but if the Minister of Agriculture wants to talk about it, I am certain we would be ready to look at it.
Senator Peterson: I recognize the difficult situation that you are in, with increased input costs and declining prices, both of which you have no control over. You say you want returns from the market, not from the public purse, which is laudable. Unfortunately, there is a timeline here where you will need this and you talk about bridge funding. Do you view that as further debt, or is it a combination of debt and repayment?
We know the enormous pressure you are already under with the debt load you are carrying. Would this just be more? How long do you think it will be before this market trend starts going upward?
Mr. Van Tassel: If we talk about bridge funding it is because we would need a federal government program. Right now, they are talking about spring or fall advance payments. That measure will just add to the farmers' debt, although it helps us temporarily. We are talking about more than that. We are talking about a program that will alleviate the problem until the factors are there for farmers to live off market revenues. I do not know if that answers your question.
Senator Peterson: It kind of answers it, but can a program be devised that will work? Can CAIS be made to work?
We talk about so many programs and they have so many names now that we cannot remember them all. Is there one we could get our head around? Perhaps we could just work on one that may work.
Mr. Van Tassel: CAIS is more about income stabilization. When grain prices are going down steadily, it will not work. Will you put a patch on CAIS? I am not certain that is the way to do it. We are talking more about a companion program.
Ms. Moran: It is also important to note that there is a very good reason why we propose bridge funding. We see an end to this and we note that there are a number of ways out of this situation.
We require investment in the sector to create a renewable energy sector, which would obviously create a stable, steady, long-term demand for our products. We see that as part of the solution because greater demand obviously means better prices.
We are looking to something that is temporary, although we cannot put a date on it because it is a combination of things. From our perspective, the solution requires levelling the playing field through the WTO. It requires improving the producers' position within the value chain through investment in the renewable energy sector.
It also includes research and development in grains and oilseeds, which is ongoing and which has been a good friend to our sector. Canadian producers have benefited greatly from new technologies that have allowed them to reduce their costs to a certain extent, and increase their yields. We are looking at a number of factors which, when they are met, would signal a lot of improvement in the sector.
I agree with Mr. Van Tassel on the cash advance issue. The cash advance program allows for a temporary relief, but in the long term it digs your hole a little bit deeper. We are looking for a real solution, which includes a domestic renewable-energy sector and also an end to those subsidies that drive the prices down.
It is important to note that the CAIS program is intended to allow those market forces to flow through, and that includes prices, but the prices we are taking are drastically and devastatingly distorted by overproduction in the United States because of their subsidy program.
It is difficult for us to be stabilized against prices that are not set by market factors.
Senator Oliver: I have three quick questions. First, how many acres do you farm in Quebec?
Mr. Van Tassel: I have about 1,000 acres.
Senator Oliver: Second, you said that the price of corn is controlled by the Chicago Board of Trade. What recommendations can you make to this committee to find a way that is fairer to corn growers in Canada than relying upon the Chicago Board of Trade to fix the price?
My third question is the most important one. I was a little surprised that, in the conclusion of your report, you said that you really want infrastructure to foster the use of grains and oil seeds for non-food use. This agriculture committee has looked at the crisis of farmers for many years and has produced many reports. One of the reports entitled Farmers at Risk looked at adding value to farm-gate products. That added value is where you increase your margins and make your profit.
I know that is done in the fishing industry. Rather than sell raw fish today, they make and sell fish cakes, and that is where they make money. I am surprised that you say, ``for non-food use.'' I would have thought you wanted to add value at the farm gate so you can make more profits there and not lose $50,000 as you did in 2004.
That is my main question. Why not add value as a way of enhancing income for farmers?
Mr. Van Tassel: When we say ``non-food use,'' we are talking about renewable ethanol and biodiesel. In the United States, the farmers own part of the plants and have added value in that way.
As to how to avoid going through the Chicago Board of Trade, the borders are not closed to grain. Grain buyers buy where it is cheapest. At times they bring grain into Quebec to create a surplus and bring the price down. As long as the borders are open, we have no option. I have no answer for that.
Senator Oliver: With regard to value-added, years ago some farmers in Saskatchewan began to grow pulse crops as a way to diversify. Then they looked at value-added with different types of canola products. Why is that no longer a viable option?
Ms. Moran: I would not say it is not a viable option. Currently, there is a lot of interest in the renewable energy sector. That interest is not only within the agricultural sector but also in terms of environmental benefits. There is even a greater societal interest in having renewable forms of energy. We see that as one area that is realistic. It was certainly an element in every platform of every party in the last election, so there is certainly a commitment to creatively resolving the problem.
There is an expectation across Canada that, given our role as a major agricultural producer, and also given the interest from an environmental, societal and agricultural perspective, we can fulfil that. We produce a number of grains that are well suited to that sector, and it is certainly a burgeoning area of interest. We do not necessarily discount value-added; renewable energy represents just one excellent area.
There are other areas for non-food use. There is an opportunity for niche marketing of products that are not destined for the food market but, rather, can be used in a number of other areas such as molecular farming. This area is of interest to us as well, since those niche markets could represent high returns for our producers. We recognize that there are challenges, and certainly many issues need to be ironed out and addressed before that is available, but it is something we do not want to rule out. We are not discounting the value-added sector; we are simply looking at newer areas.
Senator Oliver: You are not ruling out Canada being a breadbasket and that we want to produce as much of our food in Canada as we can without relying on imports?
Ms. Moran: Certainly not. As a major agricultural producer, there is that expectation.
Senator Mitchell: I am interested in the issue of value-added for non-food use, with a particular interest in biofuels — ethanol, biodiesel and so on.
The National Farmers Union was here last week. They made a point that I found disturbing. They said that there may not be a relationship between price and supply. Right now there is about a 69-day supply horizon for wheat in the world, which is short, I understand. Therefore, one would expect that demand is high and supply is low. That should be an indicator. Yet, at the same time, grain prices have not really moved. There is a breakdown in the supply-demand continuum on grain prices.
While I am enthusiastic about biofuels creating more market, ergo more demand, for farm products, greater demand may not actually increase prices and therefore, will not necessarily contribute to solving the crisis.
Can you comment on that?
Ms. Moran: In the renewable energy sector, while there could be an opportunity in wheat, it is largely related to other grains where demand is linked to price. Canola, for instance, is a crop for which we certainly would see an increase in price.
I did not hear the NFU witnesses, so I cannot comment specifically on what they may have said, but it is curious to me that an increase in demand would not lead to an increase in price. There may be economists the world over who would take issue with that as well, although I think that sometimes the world of agricultural economics is particularly inscrutable. Our analysis indicates that we would see a rise in demand leading to a rise in price.
Creating a stable, ongoing, long-term demand is part of the key. The demand would be domestic, which is the other important thing to note. We are looking at creating demand domestically for a product in the long term that would alleviate some of the hiccups that we face from time to time in terms of market access issues, non-tariff barriers and those sorts of things.
Mr. Van Tassel: On renewable fuels, if a place in the West produces ethanol, the farmer will save a lot on transport alone, which is important.
In the East the benefit will be a bit less because we will still be competing with American corn across the border. It is very different. That is why, if plants are built in the East, we should ensure that Canadian grain is used.
Thank goodness the price of wheat has gone up recently due to tighter supplies, but there is not the same price movement as we saw in the 1980s. Although I am not an economist, I understand that this lack of movement is due to monetary funds playing in the market, which can mask the real working of the market. The market is hard to read these days, because of the monetary funds that are buying and selling.
Senator Mitchell: You should not diminish your expertise as an economist. Some of the greatest economists I have ever met are farmers, because they have to live by their economic analysis and projections.
I am concerned about the issue of corn in creating biofuels, which is particularly an Eastern issue, and how, if we were to produce ethanol that way, U.S. subsidies will undermine the ability of our producers to use Canadian corn and be competitive. The problem is not really with the Chicago exchange setting prices but rather with the U.S. government subsidizing corn.
How do you address that issue? Maybe you need to expand on something you said with regard to whether we can require the use of Canadian product.
Mr. Van Tassel: That is up to the Canadian government. I will take off my hat as a representative of the Grain Growers of Canada and put on my hat as a Canadian corn grower. The Canadian corn growers brought forward to the federal government a WTO challenge on U.S. corn. It was similar to the cotton case with Brazil. As I said earlier, after the Uruguay Round the Americans did not adhere to what was negotiated, but that was never taken up by the Canadian government. We put forward a countervail case, but it was not successful. It passed the Canadian Border Services Agency, but the Canadian Institute of Traffic and Transportation refused it. We did as much as we could as farmers. It is now up to the Canadian government to find a solution.
Senator Mitchell: As we go down the road of creating biofuels and developing limits of how much ethanol needs to be in gasoline and how much diesel needs to be in diesel, it is important we ensure that farmers get the benefit of this. That raises the issue of production and how to ensure that farmers play a significant role in that production. That raises the issue of incentives and infrastructure support. Can you give us some ideas of what you are thinking about in that regard?
Ms. Moran: We look at a number of factors to improve returns for farmers, and one of those is improving our position within the value chain. As Mr. Van Tassel noted, it is important to involve producers in the production of biofuels and renewable energies, and to ensure that farmers have a place as part of the production, as opposed to just producing the primary input product.
We have not actually considered the issue in terms of how those incentives would work, and at exactly what stage growers need to be involved, but we strongly encourage producer involvement in the set-up and growth of the industry, not only as the seller of the primary product but also as cooperators or part owners of renewable energy plants.
As Mr. Van Tassel noted, there are a number of benefits to having those plants. It is not solely a question of market demand. There is also the practical issue of transportation of product and not having to get it to a port but, rather, being able to keep it within your own province or within the borders of your own country.
Senator Campbell: Thank you very much for being here today.
Although I am from British Columbia, I am retiring to Saskatchewan. For the last 20 years, I have been a trucker during harvest for my brother-in-law. I do not see this as a seven-year dip. I see wheat prices exactly the same as they were in 1982. We farm two sections of land. We do not have cattle. We have grown canola, mustard, canary seed and wheat.
Demand and price are linked, but supply is in the middle of that. We produce more than ever before, and we get less for it, which is why we are having difficulty.
How do you make it work? We have five VRC 8900 combines. They cost us $6,000 each and are 20 to 25 years old. A new combine costs a quarter of a million dollars. We keep buying old ones. When one breaks down in the field, we climb on the next one, and we spend all winter repairing them.
Big farms are not making it; little farms are not making it. The whole community is at risk. How do we keep people farming? My brother-in-law has four children, all of whom went to university. They are all well educated, and none of them is coming back to the farm.
How will we keep our people on the farm if we do not find a way of making it productive so that you do not feel like you are on welfare?
Mr. Van Tassel: I understand very well what you have said. I have one son who is on the farm.
We talk about a level playing field, but it is hard to achieve. I spoke before about the debt of the Canadian farmer. We run leaner operations, but we have to buy new combines sooner or later. I am an optimistic person. If I were not, I would not be a farmer.
I believe that the time will come when the price of grain will be such that we will earn a good living from it. We need bridge funding to hold us over until then because we need to keep the primary industry of Canada strong.
We have brought three proposals for the government on how to get there.
Senator Campbell: With regard to biofuels, we do not grow food per se; we do not grow corn. As Senator Oliver said, our value-added is to take the chopper off the combine, blow the straw out in a swath and then bail it. That cellulose is what a company like Iogen Corporation can turn into fuel. However, we have to get back our inputs, so the costs of fuel and wear and tear on the machinery must be factored in. How do we ensure that Canadian farmers are players in this whole production line? How do we ensure that farmers can take the cellulose, or chaff, off the field and deliver it to a company that makes it into fuel? How do we ensure that farmers get a big chunk of that business? Rather than the interest-free income stabilization program, let us consider an interest-free loan to the community to set up an ethanol plant.
Mr. Van Tassel: The farmers could be part owners.
Senator Campbell: The producers would own it in whole, not in part, and would supply the raw material, cellulose, to a company such as Iogen Corporation. Would that be viable?
Mr. Van Tassel: In the United States, there are many farmer cooperatives and the government has programs to help them.
Ms. Moran: There are many ways to get at that issue and the idea of interest-free business loans to the community is merely one of the many issues that the Grain Growers of Canada is considering to determine what will bring the best returns to our producers. It is important that we recognize the importance of farm community involvement. The GGC is not tied to any one model at this time because we know that it is essential to establish the industry and that the involvement of the producers is critical, but it should not detract from the establishment of the industry. We recognize that we need partners in the energy sector and in the distribution area. We are looking for that creativity and opportunity and we are not wed to one model.
Senator Campbell: At what point do we stop being boy scouts and playing the game when the rest of the world is not playing? Can we even consider doing that in the broader scope of things? You talk about countervail duties. The U.S. would do that to us in a Texas second, and they have done it.
Mr. Van Tassel: We do not do that.
Senator Campbell: Perhaps it is time for us. I am tired of watching the seed go in and then praying for the big white combine to come. For those of you who do not know, the big white combine is hail. We pray for it to come so we can get insurance money to recoup the inputs. We have to get past that attitude.
Ms. Moran: As I noted, it is important that Canada be involved in the WTO negotiations. There is a great deal of discussion about Canada being the boy scout, and that is problematic. Certainly, we lead the charge in a number of areas and Canada has tried to ensure that our farm programs are non-trade-distorting. However, we are in a new era and face pressures from many countries. Canada is not alone because many others seek the elimination of unfair and trade-distorting subsidies. We are not leading the charge on our own because Brazil, China and India, all major agricultural players, are applying pressure as well.
We need to remain committed to that solution. We look for our returns from the market and for a day when we will not need to rely so heavily on stabilization or disaster relief; when we can earn a profitable living from the marketplace through a variety of avenues, both domestic and international. As we noted, 80 per cent of Canadian grains and oilseeds are exported. Mr. Van Tassel explained that even those that are not exported are still reliant on international markets for the prices that we receive.
These negotiations are absolutely critical because subsidies are wreaking havoc with the prices. Until we are able to address those subsidies head-on through the WTO negotiations and through an ambitious settlement, the situation will be uncertain.
Senator Campbell: Thank you.
The Chairman: I am from a glorious place near the mountains in Southwest Alberta. We get the big white combine as frequently as Saskatchewan. Usually, when we have the best crops of recent memory, the hail comes. In recent years, we have had some spectacular floods, grasshopper infestations and then, on top of that, BSE. It amazes me that the community on the land stays there and just keeps going.
You said you have a son who is ready to do that. I will follow up on Senator Mitchell's questions in terms of the people within the GGC. How stressful and difficult is it for them at this time to have that response from their children? It amazes me when it happens because there must be times when they think there is a lot more to life than endless disasters. Perhaps there is something about farming that goes well beyond dollars and cents. I would like to know from both of you, given your broader perspectives, how that next generation is hanging in.
Mr. Van Tassel: Farmers are eternal optimists, otherwise we would not farm. Our average return is not 15 per cent or even close to that. When we have an average return we are happy. We are in it because we are passionate about working the land. The average age of farmers in Western Canada is 60-something. That is alarming. Quebec has the youngest average age, perhaps because it has programs that help farmers. Yes, my son is coming on but I am not selling him the farm because I am giving it to him. We will work together and that is the way it is. We will be together to try to maintain a certain size. With the economy the way it is, I do not want to even think about selling the farm. Times are different. Likely it is because, as I said, we are passionate people who love to do what we are doing; maybe we are a little bit crazy.
The Chairman: You are truly admirable, and everyone around this table wants it to stay that way.
Ms. Moran: Mr. Van Tassel is right in saying that there is a fair degree of optimism within the agricultural sector. That optimism has to do with the fact that we see opportunity. As I noted, 80 per cent of our grains and oilseeds are exported and we continue to seek international markets. As well, we see opportunities with our domestic industry in terms of renewable energy and with non-food uses, such as construction materials, textiles and molecular farming. Those areas hold intense interest for our sector.
It heartens me when I visit our member associations that I continue to see new farmers entering. That optimism remains because farming is still a viable opportunity for many young people. As Mr. Van Tassel noted, at least one of his children is taking over. I still see young people across Canada entering into the industry, although I think improvements could be made in a number of ways to allow the transfer to be made more smoothly.
We have noted in our proposal, for example, some general improvements on tax policy issues, et cetera, that could allow young farmers to enter farming. Now at least there is an acknowledgment that some programs we used in the past perhaps do not take into account young farmers who may not have that two-, three- or five-year history to rely on in terms of a cushion, or even in terms of data upon which to submit their application to the federal government.
At least, there is an acknowledgment there. It demonstrates to me that there are still some young farmers entering farming, although I agree with Mr. Van Tassel that the average age is rising.
The Chairman: If there is a foundation interest or issue within this committee, it certainly would be for the continuation and very fine extension of our farm community forever. Thank you for what you are doing.
Senator Mitchell: Another area of possible market or demand improvement is the area of tradable permits, which, again, has an environmental implication. I know that organizations like BIOCAP Canada, which is a research network across Canada, has been working with major corporations in Calgary, among other places — TransAlta, Shell and Lafarge — who are looking, under the Kyoto Protocol, for places to invest to find tradable permits. They are looking not just internationally, but domestically. The thrust of the research is to find ways to develop existing farm products, or other agriculture products, that would become even greater bio-sinks. Is that something that your organization has considered?
Given that the Minister of the Environment is now talking about a made-in-Canada environmental policy — and that has really stemmed from this idea that tradable permits have been seen to be something international — has the minister consulted with you? Are you meeting with the minister to consider the development of tradable permits through Canada's agricultural industry?
Ms. Moran: To answer your question briefly and succinctly, no, we have not met specifically with the minister on that issue. However, Agriculture and Agri-Food Canada is beginning to examine the issue of tradable credits and environmental goods and services, and has involved primary producers in those discussions.
I think the development of a policy is important, and it is an area that we are interested in examining. We have long recognized the environmental benefits that farmers bring to society. We acknowledge the area in our proposal as one we would like to continue to work on. I think there is a lot of interest, and recognition that farms provide an environmental benefit. We are interested in examining opportunities to compensate farmers for some of that.
In terms of the tradable credits issue, a number of factors need to be examined, and we are interested in conducting that analysis. We have given it a cursory look. We have looked at what other countries around the world are doing and we are interested in that as an opportunity too.
Senator Mitchell: You mentioned earlier the idea of niche marketing, in particular, molecular farming. Can you describe what that is?
Ms. Moran: I am not a molecular chemist, but I will explain it as best I can. It involves using plants as a platform for growing the building blocks of various other products — for example, pharmaceutical building blocks or plastics, et cetera.
It is an opportunity, although there are risks that would need to be mitigated. We are firmly committed to examining that opportunity and to ensuring that we continue to examine these issues under our science-based regulatory system so that we mitigate and manage those risks, while at the same time bringing benefits to farmers and allowing them to explore that opportunity.
Senator Peterson: You often hear the comment, which has always amazed me, why are producers not planting something they can sell? Saskatchewan, with its production capacity, can almost distort the market and we have grown everything — canary seed and sunflowers, et cetera. A large number of producers now study the futures market all winter before they plant in the spring.
What type of assistance do you get, or do they get, from Agriculture and Agri-Food Canada? Another issue is biofuels. Although it will help, if it is not done properly, it is will be a detriment — the mandated 5 per cent by 2010. If the production capacity is not there, the corn will all be imported.
I think it is important from the producers' point of view to be partners in this so you can sell under a futures contract and not be challenged by price distortion. If you do not do that, I do not think it will work. They have done that in the States; 20 or 22 states have mandated that at least 50 per cent ownership has to be producers in these ethanol plants.
On the Canadian Wheat Board, I do not know how it impacts you here, but there have been comments that the board is too restrictive. If you were a producer and you were with a group that, as an example, wanted to build a pasta plant, you would have to sell your barley to the wheat board and then buy it back to put it in your plant to make pasta. Is this an issue, from your point of view?
Mr. Van Tassel: I am here more for a safety net. I do not want to talk about the Canadian Wheat Board. I am from Eastern Canada, from Quebec, where we started a wheat board. Some organizations inside the Grain Growers of Canada have different ideas.
The Chairman: You are a wise man.
Mr. Van Tassel: I am not from Western Canada. I do not live within the wheat board's sphere of influence. There can be many positive points for some and negative points for others, but it is not something I feel up to commenting on. As I said, in Quebec, my organization started a wheat board, maybe for different reasons.
Senator Peterson: Has the issue of farm-stored produce been a factor here in Eastern Canada? You finally get a good crop, prices are down, and you do not want to sell into the market now, you want to wait. Is that anything you have tried to develop here?
Mr. Van Tassel: We have storage in Eastern Canada to keep the price stable, but you are talking about futures. I am looking into when to sign futures from my soybean crop. If you wait too long, it is not worthwhile — even the futures are low. We have storage to keep it, but sooner or later we have to sell it for next year's crop. However, we do not have to sell it at harvest time.
Ms. Moran: If I can add to that, primary producers, and farmers in particular, live and die by their economic decisions. Those issues obviously affect our producers across Canada. We see that marketing grains, and the timing of marketing grains, is important from a business perspective.
On your question specifically on the Canadian Wheat Board, the board brings certain challenges to our members. As an organization, the Grain Growers of Canada supports a greater choice within marketing for grains. I think it would contribute to improving the position of the producer within the value chain. As you pointed out, one very real challenge is in value-added processing, just to name one. Certainly, we would support greater choice.
Senator Oliver: I will ask a couple of questions about the WTO and supply management. I am delighted that we have a farmer from Quebec with us today. You told us that you are involved in wheat, barley, canola, flax and, I believe, cattle, but I do not know if you are involved in dairy or poultry. The WTO is designed to enhance market access to allow, for example, cotton farmers in Africa to sell their cotton in some of the larger markets of the world. To that end, the WTO is looking at tariff reductions. Each time Canada attends the WTO negotiations, people ask whether supply management is distorting the market force. I want to hear from a Quebec farmer with a foot in some of the dairy industry, what would happen if the next round of negotiations is not successful. What impact would that have on Quebec farmers?
Mr. Van Tassel: Yes, I have a small dairy herd but today I represent the Grain Growers of Canada. We have a diverse agriculture in Canada and the needs and ways of advancing it are not always the same. The grain producers have an international market to sell their grains. I am not here today to talk about my dairy operation but, as a grain producer, I look for ways to obtain a better price for it.
Senator Oliver: You both referred to the WTO and some of its challenges. Supply management is a major concern of the WTO negotiations so I thought that it was relevant.
Ms. Moran: One of the key issues for grain producers is trade-distorting subsidies. From our perspective, that is the only way we can ratchet down on those. We want to enhance our market access for the bulk of our grains, which are exported, and to ensure that those trade-distorting subsidies are not used against us to devastate our farm income. As well, the use of export subsidies is highly problematic for us. We see movement in that area and we continue to put that forward as our position.
Senator Segal: I would like specific clarification on the proposal for the Grain Growers of Canada that came out in April with the reference to long-term debt consolidation at lower-than-market available interest rates. In a perfect world, was it your hope that something like the Farm Credit Corporation would produce a new debt-consolidation product that grain growers could use to consolidate their existing debt load into a longer payout proposition with lower-than-market interest rates, thereby allowing them to reduce their monthly debt-servicing costs?
Ms. Moran: Those ideas were the result of a long brainstorming session, or as Mr. Van Tassel might say ``a painful session.'' We looked at as many ideas as we possibly could, including the amount of farm debt carried by our farmers. We will not be tied to any one model at this time but it is under consideration. Ensuring that farmers could consolidate their loans at lower-than-market interest rates to alleviate some of the burden would be ideal.
Senator Segal: The idea has immense merit. Do you anticipate bringing a group of farmers into this process with the blending of all their assets against the total debt load to allow for such a lower interest rate as a result of mutual security implied, or are you thinking more of a system of individual products that individual farmers will access based on their capacity to do so?
Ms. Moran: We have not considered it that far along but your suggestion of collective debt would likely provide a certain cushion for anyone who would take that risk.
Senator Segal: Mr. Van Tassel said that his operation lost $50,000. There are two ways to look at that: First, he ran the operation, put in the hours of work and input costs, and ended up $50,000 behind. Second, he is now subsidizing the wheat consumer by $50,000 spread across whatever number of bushels came off his property. That brings us to the issue of what I call pre-farm-gate due diligence. In other words, is the farmer compensated properly for the due diligence that he or she puts into the product before it leaves the farm gate, in the same way that we want others to be compensated for the due diligence that they have to put into their products? I would argue that part of our structural problem is that farmers have not been compensated for that pre-farm-gate due diligence for a long time. We had hoped that commodity cycles would overcome that. When they are up, they do, but when they are down, the massive escalating farm-debt problem surfaces, which, as our chair mentioned at the outset, is a serious multi-billion dollar issue. I am searching for some kind of instrument whereby we can capture the compensation for the due diligence that is owed to the farmers in a way that does not increase their net debt. That is why I pushed that point.
Mr. Van Tassel: We talked about bridge funding included through commodities and about certain programs that help out. We talked about the increasing debt load of farmers and, personally, I do not want to have another bad year. You can reduce your inputs but you only can do so much. I agree with you and can only say amen to your suggestions.
Senator Segal: What did you have in mind for the infrastructure of agri-tourism? What does that mean? Does the term refer to provincial and federal tourism programs that bring the farm visit into the process? Would it require hard investment in roads and infrastructure to make that possible?
Ms. Moran: The agri-tourism industry is growing worldwide. Our producers are examining new ideas, and thinking outside the box on the issues. We looked at assisting farmers in marketing their operations as a destination, and in setting them up to accommodate visitors for such promotion. Eventually, it could turn into something broader that could be marketed. For now, it is only one of many ideas that we came up with when we tried to think outside the box at non-traditional avenues for consideration. We would welcome further consideration and examination of that as a possibility.
Senator Mitchell: An agreement was being worked out with farmers and government for farmers to own railcars but that arrangement was dropped. Could you comment on that? Should farmers own the railcars?
Mr. Van Tassel: The GGC does not have a position on the railcar coalition and the buying and selling, so I could not comment on it.
Senator Mitchell: Does it affect the grain growers?
Ms. Moran: Yes, the issue would affect us and we do have a working group looking into that, although I am not in a position to comment. I would be happy to provide you with further information. With so many other issues right now, our strategic priorities are bridge funding, WTO and renewable energy. To be honest, I have not paid as much attention to that issue as perhaps I should have. I am not in a position to comment on it.
Senator Mitchell: Finally, one argument made by the National Farmers Union about the problem of supply, demand and price was the concern with multinational agricultural industrial companies and the question of competition. Is that something you have considered? Do you see lack of competition as an issue because it is an oligopoly?
Mr. Van Tassel: There is some concern about the number of farm input suppliers remaining. Using pesticides as an example, there are now three or four suppliers whereas there used to be many. That is a concern but I cannot comment in depth on it.
Senator Mitchell: They made the interesting point that if prices went up, you would be far better off investing in chemical companies because fertilizer prices are the one thing that directly tracks grain prices. You can count on them going up, but the farmer may not make much more money because input costs track them upwards.
I ask rhetorically what we would do about that.
Senator Peterson: If the current round of discussions at the WTO fails, what are the consequences and what is the next step?
Ms. Moran: That question is very difficult. If the current talks fail, that would lead to a great deal of soul searching within our sector. As I noted, 80 per cent of our grains are exported, so if we do not achieve greater market access on some of those issues in price sensitive markets, we would have tariffs that are cost prohibitive. That situation would definitely lead to losing a number of markets, which would be unacceptable.
We also need to do some soul-searching on the issue of export and domestic subsidies, because that is the number- one factor in the steady price decline in grains and oilseeds.
At the end of the day, a number of countries are engaged in the WTO talks and we are looking at the Doha Development Round. There is enough interest in achieving an outcome that we will end up with an agreement. Whether it will be ambitious enough for the grains and oilseeds sector remains to be determined, but I think there will continue to be a decline if we do not address those subsidies, and we will continue to face many tariff barriers in key markets. That would lead to a serious decline in our industry.
Senator Peterson: Is there a timeline on this? I note that one date has already been missed. Do you continue until you cannot reach an agreement? Is there a drop-dead date? How does the process work?
Ms. Moran: Perhaps you should ask some trade specialists about this, but I can tell you that people are striving to meet a number of deadlines. We are looking at coming up with an agreement this summer. There are obviously pressures external to the WTO, and that includes negotiating mandates for certain players. For an examination of the WTO process it would be better for you to speak with the Department of Agriculture and Agri-Foods or perhaps the Department of International Trade. However, we are still working toward an agreement and we look forward to the upcoming WTO ministerial meeting where we continue to be hopeful that there will be progress.
Senator Oliver: I asked Mr. Emerson a few days ago about a drop-dead date and his answer is on our record.
Ms. Moran: Thank you.
The Chairman: We have had a very good discussion today. We are so pleased that you took the time to be here. You started out by reminding us that grains and oilseeds are the foundation of the industry. It is important that not only the industry understands that but that the people of Canada understand that. Your presentation and responses were helpful and we thank you very much for that.
We wish you the very best of luck in the WTO negotiations. We will be pulling for you.
Mr. Van Tassel: This was my first time opportunity to make a presentation to the Senate and I found it interesting. Your questions were interesting as well. I am sorry that I could not answer them all, but I thank you very much for the opportunity.
The Chairman: You did a great job. We will invite you back.
Senators, we must deal with our legislative budget, which is before you.
Senator Segal: I move the adoption of the budget.
The Chairman: Is that agreed?
Hon. Senators: Agreed.
The Chairman: Thank you.
The committee adjourned.