EVIDENCE Standing Committee on Agriculture and Agri-Food NUMBER 051 1st SESSION 39th PARLIAMENT Wednesday, April 18, 2007 Le mercredi avril Standing Committee on Agriculture and Agri-Food CANADA [Recorded by Electronic Apparatus] EVIDENCE April 18, 2007 Committee Edited Evidence * Table of Contents * Number 051 (Official Version) Official Report * Table of Contents * Number 051 (Official Version) Témoignages * Table des matières * Numéro 051 (Version officielle) 51 18 04 2007 2007/04/18 08:35:00 House of Commons Comité permanent de l'agriculture et de l'agroalimentaire Standing Committee on Agriculture and Agri-Food AGRI Chair Mr.

James Bezan 39 1 (0835) [ English ] The Chair (Mr. James Bezan (Selkirk—Interlake, CPC)) : I call the meeting to order. Welcome to the table this morning. We have Roger Holland and Richard Mardell, with the Western Cervid Ranchers Association; Wayne Goerzen, who is with the Saskatchewan Alfalfa Seed Producers Association; and Kenton Possberg, with Possberg Grain Farms. We're expecting John Treleaven to join us from Farm Pure Inc. We're going to continue with our cross-Canada tour and study of the agriculture policy framework. We are looking forward to your comments this morning.

With that, I'll turn it over to the Western Cervid Ranchers Association. Roger, can you keep your opening comments to ten minutes or less? Mr. Roger Holland (President, Western Cervid Ranchers Association) : Okay. I'll try my best. I'll give you a little background on our association and what it's about. Our purpose in forming this association was to get the cervid industry under Agriculture Canada as animals of domestic livestock. This would place them on equal ground, rules, and regulations with the beef cattle, bison, sheep, etc.

The health issues that have been raised would also be handled by the federal department, CFIA. The Western Cervid Ranchers Association is asking the federal government and its agriculture committee for a review of CFIA. In the past, trade in this industry was under the jurisdiction of the federal government and CFIA. This is the jurisdiction that all other agricultural livestock and production are under in Canada. There has been a shift into the jurisdiction of provincial control.

The decision to make the change seemed to be made at a lower level of government administration, such as the CFIA field officers and provincial bureaucrats below the ministers. Game farm industries in other countries around the world are enjoying growth and prosperity. With respect to game farm markets and trophy animals, we used to use export documents provided by the Government of Canada, CFIA. If an export document is required for a U.S. hunter now, a provincial document is to be used, if you can get one.

Yet if an export document is needed in any other country in the world, it is issued by the federal department, CFIA. We want to know why there are two systems and standards. What policies or legal changes were implemented in Parliament to justify this? If fish and wildlife departments are allowed to continue controlling game farm trade, this industry will not recover. There was no cry from government bureaucrats to eliminate the cattle or sheep industry when there were disease outbreaks.

The chicken and turkey industries were not under any pressure to be eliminated due to the bird flu, yet the decision of a disease on a game farm results in the fish and wildlife department demanding that game farming be eliminated. All diseases can be managed and controlled in the environment of the game farms. Every domestic country in the world recognizes there is a risk of disease transfer from wildlife and the environment to a domestic stock by way of wind, dust, water, and unrestricted migratory movement of wildlife, birds, and insects.

When a disease is discovered on a farm, it is an indication of what is in the immediate environment and wildlife. The mess is a product of the past Liberal government, and it's time for some accountability. The producers in the cervid industry can and will assist in the process by way of an inquiry or an investigation to bring out the truth. This will help the federal ministers in charge make the proper decisions so that the cervid industry can move forward to a successful future. We can move forward into a successful industry because the markets are still there.

We just need the right authorities to step up and be there for it. The federal government must provide a policy across Canada for the cervid industry that will secure the right to provincial trade, international trade, and put disease under CFIA without any provincial interference. Declare the cervid industry a part of agriculture, with the right to enjoy the same rules of trade as the cattle industry enjoys with government support. Thank you. Richard will speak a little too. Mr.

Richard Mardell (Director, Western Cervid Ranchers Association) : The antler market was one of the main driving forces of the elk industry. With the onslaught of CWD that hit our market—just like the BSE that hit the cattle industry, or bird flu—we eradicated 8,000 animals in Saskatchewan. To this date we haven't made any further progress. Basically, if we find a disease they come in and slaughter our animals, but there is no end result. Korea has closed its borders to our horn market. China, now with world trade, has stopped all imports of food products and antler products into its market.

Right now we're strapped. In the last five years we've gone from getting between $80 and $100 a pound for antlers to $15. Some of it is being processed here. Some of it is being smuggled into China. That's what's left of our market. Nobody has ever stepped forward to help us regain the confidence of Korea or China—to say that our products are safe and clean. So that is where we are right now. The market is still strong in those countries, but we can't get our product there because we haven't had any government backing to help us open those doors again. That is the big problem with our market right now.

I don't know what else to say. Those are the big factors that have really hurt our industry--disease, and no backing from the government to open the doors again.

(0840) The Chair : Thank you, gentlemen. Mr. Goerzen. Mr. Wayne Goerzen (Executive Director, Saskatchewan Alfalfa Seed Producers Association) : Thank you, Mr. Chairman. I'd like to express my appreciation for the opportunity to address this committee. The producers I represent are involved in the western Canadian forage seed industry. Forage and grass seed production in Canada is concentrated primarily in Alberta, Saskatchewan, and Manitoba. Over 500,000 acres are devoted to the production of forage, legume, and grass seed crops in the prairie provinces.

These crops include alfalfa, clover, timothy, fescues, bird's-foot trefoil, and numerous other species, with alfalfa seed representing the largest forage seed crop acreage. Over 2,400 western Canadian producers are involved in the production of forage and grass seed crops, which are a critical link in the agricultural production chain since they provide the seed required to grow the high-quality hay that the Canadian beef and dairy cattle industries depend upon for forage.

In addition to substantial domestic forage and grass seed sales, the value of western Canadian forage and grass seed exports, primarily to the U.S., exceeded $100 million in 2006. A driving force behind increased production within the forage and seed grass sector is the expanding turf seed market, particularly with respect to perennial ryegrass and creeping red fescue production. Forage, legume, and grass seed crops have traditionally been considered special crops on the Canadian prairies, although they have generally received very little in the way of government attention and support.

Government resources have often been devoted to forage hay issues rather than to forage seed issues. As is the case with the production of all pedigreed seed crops, there are high input costs associated with the production of forage seed crops. Producers of pedigreed forage seed must pay careful attention to stand establishment, weed control, and disease control. In the case of alfalfa seed production, producers must also manage an alfalfa leaf-cutting bee population in order to pollinate their alfalfa and thus produce a seed crop.

Forage seed crop production, like conventional field crop production, is subject to wide variability due to weather-related risk. In addition to production risk factors, producers of forage seed crops must contend with price risk due to market-based fluctuations. These risk factors are not under the control of producers and must be managed through the utilization of business risk management tools.

Farm safety net programs currently available to most forage seed producers include crop insurance and CAIS, while ad hoc agricultural support program, which are developed on an ongoing basis, may or may not include forage seed production acres. In the current crop insurance system, not all forage seed crops are covered under all provincial programs. When crop insurance is available, it often does not cover the cost of production. A case in point is alfalfa seed production in Saskatchewan, where the current crop insurance program does not offer a pedigreed alfalfa seed option.

As well, alfalfa seed is the only forage seed crop included in the Saskatchewan crop insurance program. While existing crop insurance programs are of value to western Canadian forage seed producers, these programs must be reviewed and adjusted on an annual basis in order to provide the maximum benefit to forage seed producers. The CAIS program is complicated, expensive to administer, unpredictable, and unbankable for the forage seed producer.

CAIS is designed to stabilize farm income, which works well in times of normal production and price fluctuation, but does not work well within the current long-term trend to lower net farm income. The CAIS program, along with the CFIP and AIDA programs that preceded it, has represented a problem rather than a solution for many producers. Future farm income stabilization programs that are developed to replace CAIS must be more user-friendly and responsive to the needs of producers. National ad hoc agriculture support programs continue to be a source of great frustration for western Canadian forage seed producers.

While the most recent concern on the part of the forage seed industry has centred on the exclusion of forage, legume, and grass seed crops from the commodity list eligible for payment under the grains and oilseeds payment program, or GOPP, the unfair treatment of forage seed crops under national agricultural support programs extends back to the exclusion of all forage, legume, and grass seed crops from the WGTA payout that accompanied the loss of the Crow benefit in 1995.

Since these forage seed crops have been included more recently on a list of special crops eligible for payment under FIPP and TISP, forage seed producers were dismayed to learn that forage, legume, and grass seed crops were not considered as special crops under the GOPP. Western Canadian forage seed producers are continuing to press the federal government for inclusion of forage, legume, and grass seed crops in the GOPP.

Federal government policy states that the GOPP was designed to address the impact of long-term declines in grain and oilseeds prices; and therefore, producers must have sold product into markets that have experienced this long-term decline over the last 10 years. This statement precisely fits the profile of western Canadian forage seed crop production, since virtually all forage seed produced in Canada is sold into domestic and export markets.

(0845) Forage seed crop production has been subject to the same increasing input costs—i.e., land rental, taxes, fuel costs, fertilizer, machinery costs, herbicides, insecticides, fungicides, desiccants, farm labour—as other grains, oilseeds, and special crops. Forage seed crops are produced in the same geographic areas of Canada where GOPP-eligible commodities are produced. Forage seed crops are harvested once per year, and forage seed production is subject to the same weather-related production loss factors, such as frost and drought, as is the production of other grains, oilseeds, and special crops.

According to the agriculture policy framework that governs the GOPP program, agricultural support programs must be designed in such a way that they are fair to all producers, minimize distortion in production or marketing decisions made by producers, and encourage the use of risk management practices. The GOPP program has not followed these principles and is penalizing western Canadian forage seed producers who have diversified their farm operations.

Western Canadian forage seed producers, like all Canadian producers, want to be in a position to utilize their energy and enterprise to run profitable agri-businesses. A recent initiative involving the possible implementation of a new NISA-style program is a development that will be welcomed by many producers. Forage seed producers require that the government set a forward-looking policy that is fair to all producers and that allows each agricultural sector to be competitive in domestic and export markets. Thank you once again for the opportunity to address this committee. The Chair : Thank you, Mr. Goerzen. Mr.

Possberg, please. Mr. Kenton Possberg (President, Possberg Grain Farms Inc.) : Good morning. I thank you for the opportunity to make my presentation. Did everybody get the things I provided? The Chair : If it wasn't in both official languages— Mr. Kenton Possberg : It was. The Chair : It was? Mr. Kenton Possberg : Yes, you bet. The Chair : Yes. Okay, go ahead. Mr. Kenton Possberg : My name is Kenton Possberg. My wife and I operate a grain farm in Humboldt, Saskatchewan, which consists of 13,000 acres. We are a grain-only operation.

This presentation is in regard to production insurance and the lack of coverage, especially in Saskatchewan. I realize that production insurance is a provincial-based program, but the variance in programming between provinces is alarming, and I have come to the conclusion that we need a federal-based program that will level out the differences between provinces and allow for more flexibility from a federal standpoint. In the past five years in particular, our operation has had weather events play a huge role in our production.

In we had drought; in we had severe drought; in there was drought again; in we had frost in August; and in we had inches of rain at the beginning of harvest. As such, we have been reliant on production insurance coverage to try to make up the shortfall in income. We have always insured at the highest coverage levels. I did an analysis between Alberta and Saskatchewan crop insurance programs. The period I examined was from to 2006. I used our actual numbers for production, and also for coverage and payments. I spent a fair bit of time working on the Alberta numbers and consulted their agriculture department.

There may be some minor mistakes made, but the point was not for 100% accuracy, but rather the relative differences between the two. Also, note that I did not include the year 2002, as too much time had passed for me to be able to be confident in my analysis. But this was the year that would have shown an even larger discrepancy due to a severe drought that cut our production by over 60%.

The main differences between the two provinces' programs are the way that a producer's yield is calculated for coverage, the effect that a production loss has on a producer's future coverage levels, and premium calculations based upon production history and claim history. I found, based solely upon production loss, that between and an Alberta producer would have received an extra $454,000 in insurance payments. In addition, Alberta producers also have the ability to participate in a revenue insurance program, which will pay out based upon a drop in grain prices.

This is not available in Saskatchewan or most other provinces. From to 2006, I found the same Alberta producer would have received an additional $288,000 through the revenue insurance program, had they participated. In conclusion, I feel that too much time is spent debating the CAIS program and disaster aid, but not enough time is spent on looking to improve our current programming. A huge reason for the drop in our CAIS reference margin is due to the lack of a proper crop insurance program.

CAIS was not designed to make up for crop insurance deficiencies, but to work in conjunction with a properly working program. I have worked with the provincial department to design a more relevant program, but have gotten nowhere. The only way to get a proper production insurance program is to have a federally developed program that can be designed to fit each production area.

I would like the committee to undertake a provincial comparison of the net benefits from crop insurance for the typical farmer, assuming a wheat yield or canola yield with various levels in drops of production—let's say 50%—over a five-year period, and take into account what the impact of the CAIS program would be, and other programs, so that policy-makers have a better understanding of how farmers in various parts of the country are treated under the programs. I'm not a proponent of handouts or ad hoc programs, and with a proper risk management program in place there would be no need.

(0850) The Chair : Thank you, Mr. Possberg. Just as a point of interest, I used to work for crop insurance in Manitoba. I agree with you, there is a big difference from province to province in the way the program is delivered. Welcome, Mr. Treleaven. We're talking about APF. The presentations or opening comments are to be ten minutes or less. The floor is yours. [ Translation ] Mr. John Treleaven (Farm Pure Inc.) : Thank you, Mr. Chairman. As I only have 10 minutes, I'll have to speak in English. [ English ] I will not be able to make a presentation in ten minutes in French; I'm very sorry.

I wish to thank you for the invitation to appear here today on behalf of a remarkable organization, the Farm Pure family of companies, headquartered in Regina. Farm Pure began as a pedigreed seed company and has grown into much more. The company is farmer-owned, with shareholders from across western Canada. These men and women share a common dream of self-sufficient agriculture, and are motivated to achieve a vision of creating a most rewarding and sustainable value chain for their stakeholders and customers.

We represent the best seed from of the world's finest breeding institutions to create wholesome and energized consumer-ready products. Linked to and owned by a select group of farmers with extraordinary skills, Farm Pure capitalizes on capturing the best nature has to offer. Our core product is pedigreed seed. However, our business is knowledge-based value creation. It is our mandate to produce food, beverages, and intermediate products, beginning with pure grain grown in an extraordinarily friendly environment for discerning buyers.

Based in western Canada, we have global interests and are active in five continents. We are open to partnerships or joint ventures where we create innovative agriculture value-chain relationships. Earlier this year, the Conference Board of Canada issued its Canada Project, which called for the resolution of issues that have been bothering this country for some time if we are to achieve our maximum potential. The authors of that report included a

chapter devoted entirely to the agrifood sector. This

chapter highlights the success of the sector in growing exports. Canada's growth in this sector outpaced growth in global food exports. We took an increasing share of global food exports from until the BSE crisis in 2004. Our trade in this sector is being driven by value-added agrifood exports, from 52% of the total in to 80% in the year 2004.

Against this background, the report notes a number of issues that, if resolved, would carry the industry to the next level of achievement—namely, market- rather than production-focused innovation; the need to strengthen value chains; regulatory regimes facing industry; and a variety of human resource issues. My company agrees with the analysis and recommendations of this report on these broad areas of public policy affecting the future of this industry and, clearly, the work of this committee.

Today Farm Pure produces a range of products aimed at enhancing the lives of millions of North Americans stricken with celiac disease. From an array of pure oat consumer-ready products, a revolutionary new grain-milling technology, and recently patented all-natural beverage manufacturing process for ingredients in beer, the focus of the company and its shareholders is totally consistent with what we have identified as the only sustainable future for agriculture—high value-added, niche-focused, and value-creation reflected.

Focusing on creating food products for celiac sufferers has brought us into yet another key area of innovation for agriculture. The numbers are staggering: perhaps 3% of the Canadian population carries this sensitivity. Of those who do, only 3% have been diagnosed. This leaves the health care system coping with the need to treat symptoms without ever getting to the root cause. The costs are enormous. There is an urgent need to link the health care budgets in this country with agriculture research opportunities and human nutrition.

It is in this direction that we are taking the company, and it is in this direction that I think the government wants to see industry move. In the short time available to me, I would like to highlight one area that is a constraint on my company and on the whole innovation effort in the agrifood companies across Canada, consistent with agriculture policy frameworks I and II. At the very least, entrepreneurs from all sizes of companies have to be able to drive their dreams if they are to succeed. Let me highlight the area of capital formation. As I've mentioned, at Farm Pure our core product is pedigreed seed.

However, our business is knowledge value creation. Across the country today, as our export numbers demonstrate, entrepreneurs are taking a fresh look at this sector and putting their investment capital where their ideas are. On a grand scale, the current battle in the grain industry among Agricore, the Saskatchewan Wheat Pool, and Richardson is evidence of a new look being given to these industries. In this case, even major pension funds are getting involved. And that's a very good thing.

Missing from the picture, however, is a vibrant juniors market of the kind that characterizes both oil and gas and mining industries. It is here that most new ideas are brought to market to the benefit of shareholders and customers. It is from this pool of smaller players that larger companies emerge, or from which acquisition targets draw the attention of larger buyers. The impact of new initiatives in this area is quite predictable and immediately beneficial to all in the sector.

(0855) Increasingly high value-added agrifood businesses will survive and thrive only when they are combined with high-value product and with capital-intensive manufacturing to produce high-value jobs—as one person I talked to recently said, “adding value without necessarily adding people”. Put another way, the success of the industry will depend on its ability to pay high wages to highly skilled workers. The equation requires access to capital for the same reason that energy and mining industries do.

In this country we have supported primary industries, such as the resource industry, with tools to assist capital formation. The introduction of flow-through shares in for individual investors has resulted in substantial capital being raised for exploration and development. It is estimated that in alone, $1.25 billion was raised through flow-throughs. These funds ensure the evolution of technologies for finding, developing, and producing resources that are fundamental to our national income. We now have a world-class resource sector.

Many, if not all, new resource projects originate out of the junior corporate sector. Small companies are much more accustomed to innovation and the risk profile that are essential for development. However, this junior sector is not profitable from production, but has the expectation of profit from growth of the company. This means that many of the exploration and development expenses either must flow through to investors who are prepared to invest in the company, or are lost in the process. Flow-through shares are simply a method of flowing the eligible expenditures that are attached to a common equity share.

These junior companies can now expand their capital base as risk-reward metrics have been improved. In closing, on this subject we simply have to find ways to become more efficient at raising capital if we are to strengthen our position in the global marketplace. Access to capital is the catalyst for innovation and development, a key element in the agriculture policy framework I and undoubtedly agriculture policy framework II. Thank you very much. The Chair : Thank you, gentlemen, and thanks for respecting our time limits. Mr. Easter, you have the floor for the first five minutes. Hon.

Wayne Easter (Malpeque, Lib.) : Thanks, Mr. Chair. Welcome, folks, and thank you for coming out this morning. To the groups who presented, for one reason or another, as I understand it, the federal programs don't fit. Regarding the cervid presentation, there is federal government responsibility for exports. I find it strange that the federal government is not involved, through a number of agencies, regarding antlers, as that relates to the cervid industry in general. Can you explain to me, Richard or Roger, what the situation was ten years ago versus now? Was it different? Was it CFIA at that time?

(0900) Mr. Roger Holland : What's happened here is that for all countries, the export of antlers was taken care of by CFIA. In there was a shift in stuff in Saskatchewan, and the wildlife department kind of stepped in. Here's what's happening today. For an export permit for horns and capes, you go to the provincial government and get a permit, if you can get one. They won't give one to everybody, because they're using it as a policing tool. If you're not in compliance with all their little regulations under their environment department and all of that, you won't get a permit.

If you can get a permit, and you can go across, the Americans can take the horns and capes back. That I found out just yesterday. I've been working on this thing since July. The federal government is not involved in it any more. For the provincial government, it's the Saskatchewan Environment Department that made the agreement with the U.S. Fish and Wildlife Service. There was a personal agreement with them.

The agriculture department wasn't even involved in it in Saskatchewan, but they designated a person in Saskatchewan Agriculture and Food to have signing authority to sign the permit for you, and that's how it's done today. That could be reversed overnight if there were a disease in the cervid industry. If the USDA were involved, that would automatically be thrown back to CFIA instantly. When you talk about the legal things, just imagine if you were an American citizen who came to Canada, and you went back to the United States—and this applies anywhere in the world.

If you haven't got the proper documentation—it's called a document of origin--from the country you shot that animal in, and you're taking those products back to the United States, you can be charged in the United States under the treaty act, and the sentence for that is a jail term. Hon. Wayne Easter : I certainly believe that CFIA or some federal agency has to be involved somewhere, even if it looks on the surface that Saskatchewan's doing it. We'll have a look into that, because that really seems strange to me.

The second question—and I'm going to run out of time here—is you said animals that you had to slaughter? Mr. Richard Mardell : Eight thousand animals. Hon. Wayne Easter : Okay, 8,000. I wasn't sure on that number. Did you get compensation for those animals through CFIA or through the federal government by any means? Mr. Richard Mardell : There was compensation paid to the farmers at that time, but out of those 8,000 animals there were about animals that were infected with CWD.

We approached them to slaughter the animals, test the animals, and sell the meat or start a meat market for us so that we could have a place where we could get rid of our animals if this disease happened again on another farm. But that was never undertaken. To this date, basically their means of testing is to slaughter all the animals, and nothing else is done. It's just eradicate, and then you go ahead and keep feeding and try to survive without any means of promoting the market. They won't give you a clean bill of health. Actually I've been in the elk industry since 1989. We've had no disease on our farm.

I approached CFIA to give us a clean bill of health. They will give you a letter stating that yes, this farm is clean of disease at this time, but never anything more to endorse that you've been a clean farm for to 15 years and no disease on your farm.

(0905) Hon. Wayne Easter : Okay. Mr. Richard Mardell : That's as far as they will go. Hon. Wayne Easter : On the Alfalfa Seed Producers Association, this is an area we worked on, and the same with the dehydrate industry. I think you make the point well that for whatever reason, the federal programming doesn't seem to fit. I worked on this when I was the parliamentary secretary as well. I think it should. It just doesn't seem right to me. Each seed production, whether it's in the Peace River area or whether it's this area, is an agriculture crop, and yet regular programming doesn't seem to fit.

Basically, just so we're clear, you're making the recommendation that alfalfa seeds and basically forage seeds of any type should fit under federal programming? We have some problems, there's no question about that, but the same as other agriculture commodities, grains and oil seeds? The Chair : I wonder if you could hurry up and answer, because Mr. Easter's time has expired. Mr. Wayne Goerzen : Yes, I guess the take-home points here would be, one, there is a forage seed industry as opposed to a forage hay industry.

And the other is that, yes, the forage and grass seed industry should be treated as the other grains and oil seeds, special crops in these national programs, yes. [ Translation ] The Chair : Mr. Gaudet. Mr. Roger Gaudet (Montcalm, BQ) : Thank you, Mr. Chairman. I'm very happy to be here today. Monday we were in British Columbia, yesterday, we were in Alberta, and here we are with you today. The federal government allocates billions of dollars to agriculture. Farmers don't appear to be happy, but from our perspective, you aren't suggesting any ways that we could help you.

Many people argue that Ottawa is far removed from the situation and that public servants only go through the motions Do you have any solutions to propose to us? I'd like to hear what each person has to suggest by way of a solution. Each sector of the agricultural industry is very interesting and important, but each one has a negative side to it as well, whether it be drought or some other problems. What solutions do you have to propose to us, because we only hear about the problems, never really about possible solutions.

I'd like each of you to suggest two ways of improving the situation so that everyone is happy. Anyone can go first. The floor is all yours. [ English ] The Chair : Mr. Possberg. Mr. Kenton Possberg : I've done everything I can. I make my point as clearly as I can and I make it heard whenever I can. I think this production insurance is a huge issue. It's a simple fix, and it's something that will eliminate the need for these ad hoc programs. Nobody wants to survive on these ad hoc programs. These ad hoc programs, even when they're unveiled, never go where they need to go.

This production insurance, if it is properly fixed and managed....That is a huge problem, especially in Saskatchewan. Second, instead of taking statistics and doing a statistical analysis, take real farms, do an analysis based on real farms. That's why in my presentation I used my farm's numbers. If anybody wants, I'd be glad to help in any way and provide my numbers. You have to take specific farms and do a specific analysis rather than a big broad statistical analysis, because that doesn't get you anywhere.

(0910) The Chair : Go ahead, Mr. Treleaven. Mr. John Treleaven : Thank you very much for the opportunity. Eighty percent of Canada's agricultural products are exported. We have to continue our drive to open markets and make whatever changes are necessary in the way we handle the entire spectrum of agricultural issues with that focus in mind. Second, the reality is that the growth in the last 15 years has all been on the value-added side. The second largest manufacturing industry in the city of Toronto is the agrifood industry.

Agriculture in this country is far more important that most Canadians give it credit for, because the image is the vastness of the land, which is, of course, extremely important; that is the essence of the resource. Colloquially, I would say that since Saskatchewan has 43% of Canada's arable land, if you're looking at creating agricultural policy for Canada and it doesn't work in Saskatchewan, then it doesn't work in Canada. In the same way, I would argue that if you're looking at automotive policy for Canada, if it doesn't work in Ontario and Quebec, it doesn't work in Canada.

I think the needs of the international marketplace are what is going to drive agriculture, because that's what's doing it now. Anything that stands in the way of the producer and the global consumer has to be looked at very carefully. I've already dealt with the issue of capital formation in a substantial way. The Chair : Does anybody else want to comment on that? Mr. Gaudet, you have one minute left. [ Translation ] Mr. Roger Gaudet : Let me just say one thing. The automotive industry is based in Ontario, not Quebec. M. John Treleaven : Yes, but before that, the industry operated in both provinces. Mr.

Roger Gaudet : Yes, to some degree. I simply wanted to clarify the situation. Mr. John Treleaven : As far as I'm concerned, it's a question of common courtesy. Mr. Roger Gaudet : I understand. Do you have any suggestions to make to help us resolve the problems in the agricultural sector? I put the question to everyone. Do you have any solutions to offer? [ English ] Mr. Wayne Goerzen : First of all, I look at the problem within our sector of just having recognition, at the federal level, that we exist. That tends to supercede other considerations. We're asking to be included in programs.

We're asking for fair and equitable treatment, but we also believe that government policy should not be based on ad hoc handouts. It should be based on giving every farmer the policy platform with an ability to compete in domestic and export markets. We just want to be able to use our energy to succeed and not have problems with these programs standing in our way. That's about all I have to say. The Chair : Richard, Roger, do you have anything to add? Mr. Richard Mardell : Our elk industry is being linked with the cattle industry.

When there was a payout with compensation for BSE, the cattle industry got a payout and the elk were linked in with them. The program started in August. It started at 45¢ a pound for the cervid industry to a maximum of $125 a carcass when you butchered it. For me, with farming, I'm busy through the summer. You had to have your animals slaughtered before December 15, so we butchered about mature animals and we put in our forms and sent them in, and they said the prices in the cattle industry had risen a little bit, so compensation had dropped. We ended up with 9¢ a pound for our elk.

It was 45¢ in August, and when we slaughtered and got into the program, we ended up with 9¢ a pound, which was about $24 an animal. We had to have an abattoir do it, to register the weights and everything. It cost us $35 an animal to butcher them, $12 to verify the weight, and we got $29 an animal, because they averaged out around pounds. They're not like beef cattle, which are heavier. This is what I'm saying. We just want recognition. If we're going to be linked under agriculture with the cattle industry, we want to play with the same fairness as the cattle industry.

We don't want handouts; we just want a little help to get our markets back. Once we get our markets back, we can survive. It was a good industry. (0915) [ Translation ] The Chair : Thank you very much. [ English ] Mr. Miller, the floor is yours. Mr. Larry Miller (Bruce—Grey—Owen Sound, CPC) : Thanks, Mr. Chairman. Thank you, gentlemen, for coming today. There are a number of questions I'm going to throw out and then let each individual answer them.

Roger, going back to the permit process between the Province of Saskatchewan and the U.S. that you talked about, I'd like to know if the same type of process applies in other provinces—for example, Alberta. To Richard and Wayne, you both touch on the issue of recognition of your industries, and I'm sure there's innovation and change in agriculture all the time where new products come up. I'd like to hear your comments on what kind of process should be in place to recognize that.

Should it be some kind of grassroots advisory board that reviews and passes on to government new crops that are out there that we should be taking a look at? To Kenton, when you were talking about crop insurance, I think you were implying.... And you can verify this. Do you think that there should be some kind of national crop insurance program? I know there are inequities in Ontario, where I farm, as well. Crop insurance doesn't work. There's obviously a large difference between Saskatchewan and Alberta.

Another question is do you think crop insurance should be mandatory in order to collect on government programs? To John, I'd like to hear just a little bit more, if we have time, on what you talked about. I'm very interested in your tying research to health. I'm intrigued by that. I'll turn it over to you, gentlemen, if you could answer them. Mr. Roger Holland : I'll answer you. These permits don't refer to many provinces, because the only hunt farms that operate in Canada are in Quebec and Saskatchewan. I'm not sure what Quebec is doing, but we know what's going on here in Saskatchewan.

If it's under provincial jurisdiction in Quebec, it would be nice to know how their system is operating. I believe there are a lot more hunt farms in Saskatchewan than in Quebec, though. I don't think there are too many down there. Mr. Richard Mardell : I guess when we talk about recognition with our industry, it's basically that before we ended up having the CWD, we didn't need any help from CFIA or anybody. Our industry was growing, and growing fast, and it was promoted by the federal government as a way to diversify.

Now that we've run into the disease problem, what we need is CFIA or federal policies to endorse our industry back again, to give us confidence, to give Korea confidence that we've managed the disease problem well, that we have it under control, just like BSE, so that the borders can be opened back into the markets, into Korea, into China. New Zealand has a very healthy market, into the meat market and the antler market. They deal strictly with Korea or China. Today, the product is selling for $140 to $150 a kilogram, which relates to about $70 a pound.

We were at that price six years ago, and higher, because our Canadian product is superior to New Zealand's because of our growing season here—“northern vigour” is what they call it—the same as Siberia, in Russia. This is what we need. We need the federal government to open those doors again that were closed on us. If they're opened again, we will survive on our own. Mr. Wayne Goerzen : As far as the issue of recognition of an industry like ours, the forage seed industry, is concerned, we have a couple of ways to look at that.

One of them is that or 40 years ago, farmers were being urged to diversify in western Canada. Our growers, particularly the alfalfa seed growers in Saskatchewan, who've been involved in this industry for over 35 years, have often joked that we were encouraged to diversity, we did, and we've been paying for it ever since, through exclusion from various programs. The one that still bothers a lot of guys, believe it or not, is the WGTA payout.

Farmers have a long memory, and we've worked through the different programs, such as AIDA, CFIP, and CAIS, to let government departments know about our industry and about the special parts of our industry. For instance, in alfalfa seed production, we have an entire alfalfa leaf-cutting bee side that has to be considered under CAIS in reference margins. What we find is that it's very hard. There doesn't seem to be a system in place federally to recognize and gather information on an industry like ours. There's no continuity among the officials involved with these programs.

These are some of the problems we've been having. I don't like to talk only about our industry, because I know every farm sector is under problems due to long-term price fluctuation and that type of thing, but for us, the recognition is key. We're not asking for programs as much as asking for equitable treatment with other crop groups.

(0920) The Chair : Mr. Possberg. Mr. Kenton Possberg : On your first question, as to whether I'm suggesting a national program, yes, I am. I think it gives a lot more flexibility when there's one person, one office, that's making the policy and the programming throughout Canada, rather than each different province laying out theirs and whoever has more money to throw into the pot, their program becomes that much better. I think it would also create some cost savings, based on some overlap that's done from province to province, and even through reinsurance.

If you can throw all those acres into the pot, there'd probably be some savings. There would be a way to do it. The CAIS program is done that way. I don't see why crop insurance couldn't be done that way. You could have regional differences based upon specialities or whatever. I don't know specifically how it would be designed, but yes, I would like to see that.

On your second question, as to whether it should be mandatory, I do think it should be mandatory in order to participate in programs such as CAIS and any other programs that are coming out, but I have a hard time justifying that, especially with the program that we have in place this year and in past years in Saskatchewan. We've always insured at the highest levels, and this year we're only ensuring at the 50% level, because the coverage just isn't there. Yes, we have had big payouts in the past, insurance payouts, but it's declining and the risk protection just isn't there. The Chair : Thank you, Mr.

Miller; your time has expired. Mr. Atamanenko. Mr. Alex Atamanenko (British Columbia Southern Interior, NDP) : Thank you very much, gentlemen, for coming here this morning. My first question is for Mr. Holland and Mr. Mardell. I'd like a very quick crash course in the cervid industry, so I'll just ask some questions to get a better idea. Why is CFIA no longer involved in this? You mentioned they used to be up until 1998. Mr. Roger Holland : It's been a shift here. I don't know how to explain it. The environment department in Saskatchewan pretty well stayed out of the picture.

It had a process in the early 1990s, which was the perfect process. It had all the stakeholders in Saskatchewan at a table. They were, short and briefly, what they called the round-table talks, and they were to educate the government on this industry because it was expanding really fast. Those talks lasted a year and a half. The environment department called them off. The reason it called them off was because it never won an argument. The cattle association was there. You just name it, every association was there.

The cattle guys wanted it to be agriculture with us, because they recognized ownership, and you can't run a livestock sector under the SERM department. Anyway, they called those talks off because they never won one argument. Everything stayed a little calm until 1998, and then by order in council they threw us in the Wildlife Act. They've been reaching out for controls ever since. At the present time they have 100% of the control of this industry, and that includes your export permits. I'll give you a little more background of where this industry went really wrong.

In there was a sick animal in Saskatchewan and they didn't exactly know what to do about that. Anyway, in January of they put that animal down, and that was Agriculture Canada, which is now CFIA. That animal was traced out to the source herd in the province with CWD, and that was in the Hillmond area. That animal was imported from the United States, and Agriculture Canada made a mistake. I have no problem with anybody making a mistake, but don't shuffle the dirt underneath the carpet and hope it goes away. They should have taken that diseased animal, which they did. It wasn't a designated disease at that time.

They can do that within hours, get it done and clean it up. But they left that animal, that trace-out herd, doing business in this province for five and a half years. In the meantime, there was another outbreak at Cabri, down in that country down there, and it traced back to that same herd. They didn't do anything. They went to the relatives of that animal, and they grabbed animals and they put them down. Virtually, they were all negative. A few years later, it wasn't that long, and the same farm at Cabri broke out again with CWD, and it was traced back to this Hillmond herd for the third time.

Then they quarantined the herd and put it down. That single mistake destroyed this industry, that alone. The sad part about it is it's a diversification that governments promoted, both federally and provincially. It's an industry that didn't need one dollar from government, never did. The markets are strong and they always have been. In Canada we destroyed this industry ourselves; nobody else did it to us.

(0925) Mr. Alex Atamanenko : So how many producers are there now in Saskatchewan, and does that include hunt farms also? Mr. Roger Holland : I don't know how to answer that. If you get the statistics out of Saskatchewan Agriculture and Food, it's close to farms. In the records that I have—because I do a lot of talking to producers—there are farms gone, and that includes everybody, deer, fallow deer, hunt farms, everything. We've lost that many in the process so far. There's a tremendous number of farms that just have a handful of animals left.

I know lots of farms that would give you their animals just to get rid of them. Mr. Alex Atamanenko : So this is not only elk, it's deer then, deer and elk. Mr. Roger Holland : Deer and elk are involved in this, but there are different markets. Deer are only raised for the hunt market and elk are raised for all markets. Mr. Alex Atamanenko : When you talk about antlers, that's kind of a reusable resource, right? Mr. Roger Holland : Yes, it is. Mr. Alex Atamanenko : Cut the antlers off and—So how long would you keep that animal, assuming things were going well? Mr.

Roger Holland : Those animals will peak at about eight to ten years; they'll peak in those years, and then they go up and they go down. When they peak you grow them out and put them to the hunt farm. It's equivalent to a dairy cow, a Holstein cow: when her milk production starts to go down, you market her. When you sell her to the slaughtering plant, whatever dollar she brings is 100% profit, because she doesn't owe you anything. A hunt operates the same way. Mr. Alex Atamanenko : Okay. There is a market for antlers right now, but you can't export them. Is that right? Are you able to export them? Mr.

Roger Holland : No. Mr. Richard Mardell : You can export them, but we're held hostage by the price. Everybody knows that we can't go into Korea. China has come over here, and they're offering us $15 a pound for it. They export it to Hong Kong, and it then probably goes by boat to China or Korea. They get $100 a pound for it. Mr. Alex Atamanenko : We need the same process that CFIA has in governing exports of other meats. For example, an inspector could come from China, accompanied by CFIA, make the inspection, and fill out the forms. It would then guarantee us a market. Is that what you're saying? Mr.

Richard Mardell : Right now we have Chinese buyers who come right to the farm. I have a Chinese buyer who comes out to our farm. Different producers will bring their antlers to our place. We weigh them, grade them, and store them in freezer units until we get enough to ship the product out. We have to go through CFIA and an exporting company out of Calgary to get all the documentation and all the documentation from the farms to load this container to ship out. Once it's on the ship, they don't care. When China gets it back there, the tags are taken off.

We're told to package it into smaller boxes so that it's easier for them to carry, and to probably hide it on bicycles, and away they go. They move it to wherever they want. To get our product out of Canada with the regulations of our own CFIA, even though the products are coming off clean farms, we are still scrutinized with paperwork. That is the biggest problem. No farm can get a clean bill of health from CFIA, because if you want to export antlers, they have to give you an export of antlers declaration. If you somehow don't fill out an inventory form, they'll say you can't ship it.

It's a producer's problem, and these things can be looked after. CFIA is after us more for rules and regulations right now, instead of saying let's go to Korea, we want to open up the borders again, and our animals are clean. It's what we want CFIA to do, because it's going to be like the bird flu. It's going to be like BSE. CWD is no different. We're going to have a case come up someplace. We have to work with it, and we understand that.

We're not saying we want them to tell us we're all disease-free, but we want them to work with us and we will work with them, because it's going to pop up someplace again, just like any other disease.

(0930) The Chair : Mr. Atamanenko, your time has expired. Thank you very much. I need a clarification. You're talking about the Asian market still being fairly viable. Is that for both antlers and meat? Mr. Richard Mardell : It's mainly the antlers. The Chair : The antlers are selling for $70 a pound. Mr. Richard Mardell : We've tried to set up a European meat market, but we've run into too many CFIA and government regulations in Canada. We'd like to get an EU inspector to come over here, because their regulations are not as tough as ours are, but they won't agree to that. The Chair : Oh, really.

Maybe it's the other way around. Mr. Richard Mardell : They want the CFIA in there first, and then the EU. Our markets have been hampered by that too. The Chair : Okay. Thanks. Mr. Steckle. Mr. Paul Steckle (Huron—Bruce, Lib.) : It's a very interesting topic that both Richard and Roger have addressed this morning. This committee addressed the CWD issue when we travelled to Manitoba a year or two ago. Would you not agree there is a lot of outside pressure on your industry both from wildlife and management branches in the provinces and from the beef industry or this industry?

There are people within those industries and government agencies who want your industry shut down. I know that. I think you would probably not want to admit it this morning, but I would suggest that you recognize it. There's a lot of pressure from those agencies. They would prefer you weren't in the business. Having said that, I think it's important to recognize there may be a way, because the product is accessible and the product is allowed outside this country. Can you briefly explain to this committee how we can address this to allow the product to go from $15 a pound to $100 or whatever it was worth before?

What can we do to address it? Given that we allow the product to go out, the problem is getting the right price for it and bypassing agencies that make up the difference. Can you quickly explain to us how we can do it? Mr. Roger Holland : I'll tell you a little bit of what I know about it. In the five and a half years when that farm was allowed to operate, we actually exported a diseased animal right to South Korea, and that's what slammed the door, right there. Another thing that has been explained to me is when you go to the world trade talks and all countries are there—Well, let's talk about the BSE issue.

There is a platform that all countries agreed upon and a policy that is on paper. I think it is something like if your country has fewer than cases of BSE a year, you can still export into markets. Now, when you talk about CWD, there is absolutely nothing on paper. They have no guidelines to follow at all, and that's what the federal government has told us. That is somewhat of a problem. I know there are people who don't like our industry here. There are people who don't like us raising cattle too. That is the way of life in this world. It's always going to be there. You're never going to eliminate that.

But this industry is based on sound markets, and it always has been. In North America, we have New Zealand selling venison in our backyard, and they are experts over there and their government is behind it. If there is a problem anywhere in their industry, their government is in an airplane and they're over in that country. In our country, we have had CFIA in South Korea over there, but CFIA shouldn't be heading that commission. It should be our trade minister. CFIA should also be there, but let's do it properly. Those are the kinds of things I know we have to get done to do that.

It's not going to be the easiest step, but I have also been told that this summer, in August, our Canadian government is close to signing a free trade agreement with South Korea. I haven't heard anything on that since, on whether it's getting close or not.

(0935) Mr. Paul Steckle : Okay. I want to go to Kenton, and perhaps to Wayne. There is this discrepancy in terms of how provinces deal with programming, particularly on the crop insurance side. My argument, as we've travelled across the country for a long time, has been that we perhaps need to start looking at a directed program from one level of government. I believe that is the federal government, but maybe we need one department of agriculture for Canada. Manitoba shouldn't have to compete with the treasury of Alberta, or Ontario with Quebec.

We're not enemies of one another; we're part of the same confederate family. But we need to work and harmonize our programs so that we don't find interprovincial barriers. We have enough barriers in the business of agriculture today without having to compete against provinces. A farmer shouldn't have to compete against another farmer. If we had that kind of directive, at least we would know where we would go to get it changed. While you may change a federal program, you might not be able to convince provincial governments to necessarily accept those mandated programs in the same way.

I'm just wondering how you would feel about having one department of agriculture for Canada. Mr. Kenton Possberg : That is the way we need to go, 100%, because when there is a localized problem, like the drought in 2002—that really impacted Saskatchewan, and basically it bankrupted crop insurance. If you could spread that risk out—Some 40% or 50% of the arable crop land is in Saskatchewan, and that really hurt things. There wasn't a good program to begin with, and it's been pared down ever since. My contention is always that I don't feel there is a price problem in agriculture because I can control price.

I can do futures, I can do whatever I need. I can always try to extract a higher, better price, but the weather? There is nothing I can do to control weather. Let's say General Motors is making cars and all of a sudden it hailed and 50% of their cars got destroyed. That just doesn't happen. Mr. Paul Steckle : Yes. Mr. Treleaven. Mr. John Treleaven : The issue of interprovincial trade barriers is enormous in this country. Whether the answer is government departments—I'm not sure that is the answer.

You'll know better than I the estimate of what it costs every Canadian family in their standard of living to maintain all these jurisdictions. And one of the industries that is most compromised by this is agriculture, dealing from a national base, where you have to stack a load of hay differently in Manitoba than you do in Saskatchewan. The hidden cost is phenomenal, and it goes straight to the bottom line of the producer, who has to pay all of that. I'm not saying that one department of agriculture is the answer, but I'll tell you this.

What B.C. and Alberta did on April 1—I live for the day when other provinces take the logical decision to say let's join them, because nationally it's a really big issue for all the farm producers in this country and anybody else doing business. We are the only major trading nation in the world that expects our companies to compete globally but routinely denies them elements of the domestic market. No one else does that. We do it as a matter of course, and in agriculture it's particularly serious. Mr. Paul Steckle : This industry can move forward. I believe there are solutions, if we're ready to accept them.

I just can't understand why we can't quickly move in those directions. I think this morning you have laid out for us some very interesting issues. For instance, in Ontario, and I have made this argument many times—this goes to the cervid industry particularly—we harvest 8,000 bears in a year legally. A particular gall bladder is owned by the hunter who bags that particular bear. We do not allow that gall bladder into the marketplace, but we allow poachers—we don't allow, but it happens—into the marketplace, and they supply that market at very high prices.

We could reduce the need for poaching if we allowed those marketable items into the marketplace. They were legally harvested. They're just as legal, just as clean as anything else we do, and yet we don't allow it. We could see real value returned back to the sport—not necessarily to the harvester, but to the sport. I can't get anywhere on that, either. There are some very commonsense solutions to some of our problems, just as there are to your issue, I believe. I totally support it and am pleased to hear that there's at least some feeling of direction in where we go on this provincial-federal thing.

I think we need as quickly as possible to move towards one department of agriculture in Canada.

(0940) The Chair : Thank you, Mr. Steckle. I want to ask a question to Mr. Possberg. You were talking about crop insurance and the problems. What do you think the participation level is right now in Saskatchewan in the crop insurance program? Mr. Kenton Possberg : Honestly, I have no idea. I know it has declined. The main reason producers are in crop insurance right now, probably—anecdotally—would be for the cash advance program. Beyond that—? It may be at the 50% level. I don't think it is a very high participation level.

The Chair : And as we're moving towards broadening the base of crop insurance, or calling it “production insurance” now, there's been a push from the federal government, because the federal government is a partner in all the provincial crop insurance programs. They're paying part of the premiums, and under the agreed-upon formula, they're sharing the cost of the program with the provinces as well. Has there been any consultation in the province of Saskatchewan on how they move forward with production insurance? I look at forage seed. Has there been any consultation with the province on that?

Can you insure weed-cutter bees now? Mr. Wayne Goerzen : As far as production insurance goes, forage seed is an interesting example. If you look at the three prairie provinces—at alfalfa seed production, for instance—in Alberta there is pedigreed alfalfa seed production; in Saskatchewan only common alfalfa seed production is insurable. In Alberta all forage seeds are under crop insurance programs; in Manitoba all forage seeds are under crop insurance programs; in Saskatchewan only alfalfa seed is under the crop insurance program.

When you get within those programs—we've been looking at this as an organization—the Alberta and Manitoba programs are quite lucrative compared with the Saskatchewan program. When our producers in Saskatchewan find out about the structure of the programs in Alberta and Manitoba, without fail their mouths drop open at how rich those programs are. Ours does not cover the cost of production. In some ways, it's a question of the Saskatchewan treasury competing with the Alberta and Manitoba treasuries. It goes back to what the other member was discussing, that some provinces can afford better programs than others.

This is something we're looking at, but I don't have any real answers, other than trying to get more standardization. It's ironic that producers producing the same crop on either side of the Alberta-Saskatchewan border have radically different programs to deal with in terms of risk management. The Chair : You mentioned that on the GOPP payment, forage seeds are—and I heard from my forage-seed producers that they were—excluded from the program. When you discussed this with department officials, or when you had correspondence with the minister, what was the response you received? Mr.

Wayne Goerzen : We're in ongoing consultation with crop insurance, but in our particular case, probably only 50% to 60% of our alfalfa seed acres are within crop insurance. In our particular sector, our producers don't necessarily subscribe to crop insurance, because it costs a lot and doesn't pay out a whole lot. In some ways crop insurance is reluctant, then, to work with us on expanding programs. One thing we pushed for for about six years is a pedigreed seed option, which is common within any other crop types. That's something we haven't been able to get, to this point.

(0945) The Chair : Mr. Holland, one comment has been made that was fairly strong, that the cattle industry is against the elk industry. I'm a cattle producer, and that strikes me as being a fairly strong statement, because I've never heard any cattle producer actually ever say that. I remember when I was involved with the provincial association fighting for recognition in Manitoba of the game farming industry and moving that into a commercial basis.

So I just wonder, have you had any recent conversations with the cattlemen's association, provincially or nationally, and trying to work together, since you guys are facing a lot of the same issues? The Korean market is shut down to both beef and elk. We're talking about a free trade agreement with Korea, and I've heard from cattlemen that they want to make sure this is an opportunity to resolve the Korean market access issue. You both are facing disease problems, BSE and CWD.

Actually, I just read in the paper this morning, The Western Producer , that they're looking at using elk as the basis of a study right now, infecting them with CWD to try to figure out how this disease is working and how that will relate to other prion diseases such as BSE. So I'm wondering what your conversations have been like. Mr. Roger Holland : There haven't been a lot of conversations with the cattlemen's association, just at the round-table talks where they supported our industry. The main thing was that they looked at their situation. They run cattle herds.

They own cattle herds, and they provide for them. They came out and said our situation was exactly the same as theirs. They're a different animal, but the ownership is there. You run them the same way. And that's what they recognized, that we should be under agriculture. I think it was Paul who stated that he's heard that these people don't like it, and he wondered about that. They're everywhere. There are probably some people in the cattle industry who do not like our industry, and there are probably some people in government. We know they're all over.

But my point of view is that it's just like anything else: if you don't like somebody else's profession, you don't go into it. It's a pretty broad statement, but you're going to find those activist people everywhere. There are people who don't like them, guys raising cattle too. That's what I refer to. We have that in every sector—the hog industry, you name it—that we shouldn't be raising the animals for human consumption. That's my say. The Chair : Okay, I appreciate that clarification. Richard. Mr. Richard Mardell : I think the cattle industry was scared, right off the bat.

When CWD struck one of our elk farms, they eradicated the farm, and the fellow went in and put cattle on his pasture. Right away, the cattle industry said, “Get them off there. We don't want any disease to transfer into the cattle industry that would hamper our industry.” So CFIA went in there and eradicated all those cattle that were put on that land. He wanted to put in buffalo, and they said no. So this farm sat for I don't know how many years—Roger might know more—without anything on it. Now we have CWD in the wild, in the deer population.

They're testing herds all over, which are on cattle ranches and all over the place, but it's an accepted thing now. The cattlemen aren't going to say, “Well, we have a deer in this area, so we're going to take all our cattle out of this pasture, because it has CWD.” It has been proven by science—and it's one thing that's good—that it doesn't transfer to cattle and it doesn't transfer to humans. It's just that they don't have a live test for it, but if they come up with one— I don't want to talk too long here. My herd was due for testing, and they assured me.... They were taking blood tests.

We had a person from the States come up to one of our meetings and say that they were doing DNA testing on the animals and that it was one bloodline or DNA marker in our elk that was very susceptible to CWD. So I asked the CFIA, when they did the blood test here just a week ago at my place, to run the DNA on it and see if I had any of these bloodlines. I haven't had CWD. But they were eradicating another herd, so I said to go in and see if the ones they've tested or killed have that bloodline.

Maybe all we have to do is come out to the elk farms and do a simple blood test, eradicate that one bloodline or DNA marker, and it will get cleaned up. But they haven't even done that process. Now, until you say they're looking at doing some more live tests and trying to help our industry.... We are probably ruffling a lot of feathers in the federal government, asking what they are going to do to help our industry. That is, I think, the big reason that CFIA is out there, because we've been probably ruffling a lot of feathers on the higher guys, on their bosses, to get them to do something for us.

Hopefully, we can get a live test. That would be great for us.

(0950) The Chair : Are we close to a live test? Mr. Richard Mardell : The Americans say that this marker carries CWD, and if you eradicate it from your herd, you're not going to get it. We approached CFIA about six years ago, and they said there hasn't been any research on this in Canada. When they did all the killings and eradicated the herds, they never followed up on the DNA side. Now they're starting to do that. The Chair : Mr. Hubbard. Hon. Charles Hubbard (Miramichi, Lib.) : Thanks, Mr. Chair. It seems that the more places we go, the more complicated this whole business becomes.

When I listen to the CWD—and I know we have talked about this in committee before—we are a country. I know that in Saskatchewan, you're saying that your herds are in good health. But we have game herds all across the country, whether in B.C., eastern Canada, or Nova Scotia. With BSE, we all suffered as agriculturalists because of problems in Alberta. When you export beef from this country, it is Canadian beef. It's not Quebec or Ontario beef, it's Canadian. To a farmer in Nova Scotia or New Brunswick, there's probably a great amount of frustration about paying the price for what happened in Alberta.

This is a problem. Regarding the second business, on crop insurance, I hear your arguments and know that we can probably make some suggestions. But in my province of New Brunswick, for example, in the vegetable areas, we have certain crops that are insured and other crops that cannot be insured. If you're growing broccoli, cauliflower, or whatever, you can't be on an equal playing field with somebody who's growing potatoes, for example. So it's quite a significant problem there. When I look at our federal government programs—and the provinces are involved in these—it's very difficult.

I've asked this question before: should there be certain areas that only the federal Department of Agriculture is involved with, and other areas that should provincial? We've heard about disaster relief regarding major problems in certain sectors or regions. We've talked about crop insurance, research, or as John said, the relationship with infrastructure, perhaps as national programs. But is our federal money spread too thin?

Are we involved in too complicated a business federally, where there are too many people in the agricultural sector sending you letters and asking you to respond to so many different ventures? Also, Ken, I have to ask about crop insurance, because when you think of insurance, you think of a program that should be fairly neutral. In other words, when you put money into the program, somebody somewhere else is going to take money out. It would balance out over a period of time. With our present program on insurance, three different groups participate.

You gave us an example of a farm in Saskatchewan that has drawn out for four successive years. If you had a house that burned for four years in a row, would it be insurance? Or are we looking at a program to help farmers who have trouble producing what somebody thinks they could or should produce? How would an insurance program work with a car, if you had an accident every month or at least once a year? How do governments continue to participate in programs that would want a payout? How far back would we have to go with this farm to get a level playing field?

Over a long period of time, insurance should be insurance. I don't mean to put you on the spot; maybe it's your own farm. But do you ever expect to be able to meet the levels you want to insure for? Could you do that three years in a row? Maybe after you answer, others could do so. John, I'm really interested in your programs, and I know that's where we have to go. I have only a few minutes left, Mr. Chair, but perhaps an answer from Kenton, and maybe John, and from others would want to reply.

(0955) Mr. Kenton Possberg : As far as my farm, where we're situated, it's unprecedented— these events just bang, bang, bang. It's not only us; it's all the farms in our area. There isn't anything we can do; it's completely uncontrollable. The crops that are grown are the norms for the area. We are hampered because we can't diversity into new crops, because we don't have the risk management in place for coverage. I grew sunflowers here, but the protection coverage was so low that when something happened, there was no protection in place.

When you get into a new crop—if you haven't grown canola and get into it now—there is no protection in place, because you haven't built your history. Our farm is 25% above area average yield, so we are at a higher productivity level than area averages. Hon. Charles Hubbard : So the government program more or less would be forever. Or do you expect sometime that you're going to meet what you think it should be in terms of your insurable limits? Mr. Kenton Possberg : I never want to collect on my house insurance. I buy it so that I have the protection.

I never want to collect on crop insurance, and I never want to collect on CAIS. But I want it to be in place for when I do collect. It has been unprecedented these last number of years. Before we never had a claim in crop insurance for our farm, dating back to its infancy. It just never happened. It just happened when it did happen...and it's not in place. You'll find other operations where, if they haven't had uncontrollable weather-related events, if they haven't had a claim on crop insurance, even their CAIS, their whole financial outlook is a lot different because of what's happened. Hon.

Charles Hubbard : Does anyone want to reply to the idea that we have too much government involvement in too many places? Would it be better to have some differentiation in terms of what each government should do, or could do, to assist agriculture? The Chair : Anybody? Hon. Charles Hubbard : Is CAIS too complicated, the whole negotiations? Are you satisfied with what's happening now with the program? The Chair : Mr. Treleaven. Mr. John Treleaven : I would suggest that you read the Conference Board's report.

It talks about the regulatory environment faced by agriculture in Canada, about the silos, about the complexity of it all. The reason we the public hire politicians, of course, is to resolve these issues for us. They are intractable issues. Hon. Charles Hubbard : Brad is the only one from Saskatchewan today. He has a big job. Mr. John Treleaven : The key is this: where is this industry going and how is it going to get there?

If you start with the desirable outcome that we will be—and are, in many cases—the agriculture powerhouse in the world, and go back through the policies, figure out which ones in this country are at variance with that outcome, and have that struggle, then one of the issues that would come up would be what I gather is true, that if you want to take a load of hay across the border from Saskatchewan to Manitoba, it has to be repacked at the border. I mean, I don't know that, but that's— So it's a problem.

And that's why there are politicians at the provincial level and at the federal level, to work it out so that this system works. The Chair : We have time for a quick response from Richard. Mr. Richard Mardell : If you had five or ten good years and you built up a wonderful margin on your farm, and then you had a bad year, you would qualify for CAIS. But as Kenton says, when you have four or five bad years in a row and your margin has gone down to nothing, it doesn't help you. There's a lot of paperwork, and a lot of accountants working for you trying to figure it out.

You end up with accounting bills and no payment out of it. Elk is what I'm here to speak on, but my son and I do farm 15,000 acres, and we know what the agriculture industry is. We have to have a cost of production in the bad years. It's just not insurance if we need it but a cost of production. Some farms don't put as much into trying to grow a crop as other farms, and maybe their cost isn't as high. But when you're striving as a business and you want to make money, you have to put money into your production. If you have a weather-based problem, you have no control over it.

We can go into the futures, and peg our crops on into the futures. Some places have

an act of God. If you don't produce that crop, you can get out of the contract. But with a lot of them you can't. So you have to assure yourself that you can grow that crop. If you have a weather-based problem--hail, drought, frost, whatever it is--you can't even help yourself. You've locked in a good price for your product, but if you can't get it off the field, it's twice as bad. You have a crop insurance payment that you can't make and you're not getting much out of crop insurance. So that's our problem--the cost of production.

(1000) The Chair : Mr. Hubbard, your time is up. For the government side, Mr. Trost. Mr. Bradley Trost (Saskatoon—Humboldt, CPC) : My understanding is that Mr. Miller has a few questions. He can finish those up, and when he's done, he'll again split the time with me. Mr. Larry Miller : If I could follow up, Wayne, you've identified a problem and you didn't really answer my question. You've identified that we need recognition, and I recognize that, but how? What process? We need solutions, as Mr. Gaudet said earlier. We need to hear solutions here today from you.

What process should be in place, ongoing, so that these kinds of things, your industry and others over history, get recognized? That's the answer that I need to know. Is it some kind of tribunal or something, based in the grassroots among farm members? I need some suggestions there, and I think the rest of the members do. Mr. Wayne Goerzen : You mentioned before that something could come from the grassroots. Federal departments do have people looking at different sectors. I don't know what to say. A group like ours represents 2,400 producers, 500,000 acres in western Canada.

What we're trying to do is let federal departments know that we're there, not only so that we can be part of programs but so that we can be considered as national policy is developed. As for the best method for that, I guess it's on us to try to make the national government aware of our industry. Mr. Larry Miller : So is the problem, then, in between, in the department, in your opinion? I'm asking, not saying. Mr. Wayne Goerzen : Possibly.

When a program like the grains and oilseeds payment program is developed, consultation with the departmental agencies is used to establish a list of commodities that are included in that program.

Now, if a certain sector is not in the consciousness of those bureaucrats, if they're not aware of that critical sector—and for us it is a critical sector because we produce every forage and grass seed that goes into the ground to produce all the forage that's required by the Canadian beef and dairy industries—if there's just not enough recognition of our sector, then we may be either not included in the program or, as happened in the GOPP, part of the paring down of that process. It's just easy to discard us. Mr. Larry Miller : Okay. Bradley, I'll turn it over to you. Mr. Bradley Trost : Thank you.

When I introduce myself, people frequently ask who I am as an MP, etc., and what I've done. I tell them I was so successful as a farmer that after two years I retired. Now, most people in this province understand precisely what I'm saying, which brings me to a question that I don't know if any of you have particularly thought of, and that's starting out the next generation. Kenton, you look very young compared to most of the guys out there. My general question is this: Do any of you have any thoughts or have you given any thought to young producers coming in, special challenges, any comments particularly?

Guys my age are very, very few out there. As I said, Kenton, even your age, there's not a whole lot. Our age group is just not there. So are there any particular comments on the new generation?

(1005) Mr. Kenton Possberg : I'd just like to say that the reason there are not many people coming back is because there's no risk management in place. You can actually come out with nothing at the end of the year, so all the money that you invest—You need a lot of capital in order to produce a return. If you're going to put $2 million into the ground and you could feasibly come out with zero dollars at the end if everything went wrong, who would go into an industry like that? I have my degree in agriculture, and my wife has a degree in marketing.

We could go and do something else and it's risk-free, and that's what most people are doing. It's the risk. People just don't want to risk their livelihood, their family, everything. It's very challenging. Most other businesses you can at least control; you don't have the risks. You do have a risk that a tornado's going to come and take it, you do have the risk that a flood's going to come and take it, but you can insure that. You can't get a decent level of insurance on this, it's just too—There's a lot of risk. The Chair : Mr. Treleaven. Mr.

John Treleaven : I would suggest to you that for young people in this country, the essence of the argument is the language of farming. Yes, farmers are custodians of the land—that's true—but farmers are business people. The land is an asset. The market is huge. When I deal with farmers in Australia, they never talk about family farms.

Every farm in Australia is a farm business that's owned by a family, and if you look at it from that perspective, it's also a family farm; but it's the outcome and the output and the ability to create value for consumers and differentiate and link food safety, link food and health, get into functional foods. It's very high value added. I talked about the celiac issue. Farm Pure produces oat pasta. Celiacs, only 3% of whom have been identified, have a terrible life. They can't eat. In Regina, there's a plant that produces pure oat pasta. Okay.

Now the issue becomes whether the regulatory regime is set up to reward differentiation or to reward harmony. Farmers are, of course, entrepreneurs. The land in Canada represents an enormous asset for entrepreneurs to dream and work on. Some of the mechanisms in place don't reward that the way they do in other businesses, and I made the case about energy and mining and what not. There are ways the Government of Canada could see investors mobilize capital, as the shareholders in Farm Pure do. Go to an annual meeting of this company. These are people from all across western Canada.

They're dreaming about the future, and they're betting on it. I'm not saying it's an easy business at all, but it is a business, and business and entrepreneurship are about people being able to live their dreams. That's the language that has to be associated with this industry. Saskatchewan Agrivision in this province has a competition to identify the best farmers in Saskatchewan. I think there are some people in Saskatchewan who don't think there are good farmers. That's BS. They're great farmers, and the competition is all about the 501st, because if you come 501st, then next year you want to be in the 500.

When we change the language of agriculture so that the are now are now 10,000, we won't have to worry. Look what's happened to the value of land in this province with the ethanol announcements. It's amazing what's going on across western Canada now on the farm. But are the public structures set up in a way to handle what an entrepreneur needs? Is there a responsive regulatory regime that recognizes differentiation, that cuts the distance between the producer and the end user? It's that kind of environment that I think has to be worked on. The Chair : Thank you, Mr. Trost. Your time has expired.

We still have about ten minutes left if any of you want to ask quick follow-ups. Mr. Easter. Hon. Wayne Easter : I want to get to the specifics of crop insurance, Kenton. You made a point on the lack of risk management. The fact of the matter is there have been absolutely huge expenditures. I know they say the money arriving in farmers' pockets is not enough, but there have been huge expenditures of money from the federal government in the last five years, the highest in history.

But when we compare ourselves to the United States, George Brinkman, who's an economist out of Guelph, compared as a percentage of income Canadian government subsidies with American, and this is where it gets rather scary. I'll quote what he said: As a percentage of income, Canadian government subsidies represent 116% of farm incomes, but U.S. government subsidies represent only 37% of U.S. farm income. The fact of the matter is, if you read The Western Producer of a couple of weeks ago, Barry Wilson indicated that over a 21-year period the realized net income on the farm was $51 billion over that period of time.

Payments from federal and provincial governments were $58.4 billion. In other words, it was negative $7 billion from the market. So we have to really look at the whole structure of agriculture itself, I think. So my question really from that is what the hell are we doing wrong? We've got money going out. It's not getting to where it ought to be getting. You raised the point, John, of land prices. Land prices are going up like hell in some areas, there's no question about it. But our farm debt is astronomical compared to that of the Americans.

And why are we capitalizing that money into land when we can't afford to do so? Anyway, on the crop insurance meeting in November of the ministers, this is what they're proposing, and I want to ask you, Kenton, if you think these levels are correct. On crop insurance, Canada will on average cover 36% of the premiums, the provinces will cover 24% of the premiums, and the remaining 40% will be the responsibility of the participants. On catastrophic losses, Canada will cover 60%. And Canada will cover 60% of the compensation paid for losses caused by wildlife. Are those figures correct?

From my own point of view, I'll be honest with you, I think the feds should be paying about 90% of catastrophic losses that are infrequent, but on the other ones I think I'm relatively in agreement. What levels do you think?

(1010) Mr. Kenton Possberg : For crop insurance at the 50% level, that is actually what it is. As soon as you start paying, if you want to insure at the 80% level, then the producer bears a significant premium of that. And I think the ratio should remain the same the more that's insured, because it's less costly to the CAIS program then, because these other programs are filling in the gaps where they should and doing what they're supposed to do. As far as the breakdowns go, I wouldn't be able to—I agree on the disaster, once in 20 years, once in 30 years, yes, the feds should bear the brunt of that.

But I think if you had a federal program—and I don't know how it would be funded, but it should be a federal program so that you can have the level playing field throughout—and if it's clawed back through—Instead of the province paying for some, if it's through the transfer payments, I don't know how they could ever make that work. But I don't want to hear how it can't happen; I want to hear solutions, how it can happen. The Chair : Thank you. Mr. Atamanenko had a follow-up. Mr. Alex Atamanenko : How much time do I have, a couple of minutes? The Chair : Well, do you have any further questions, Mr. Gaudet? No?

Okay, you get the last four minutes. Mr. Alex Atamanenko : Okay, thank you very much. The question is for Mr. Goerzen in regard to the biofuel industry and your organization. What do you see in the future? What's happening now? And specifically, do you see maybe getting involved in the cultivation of switchgrass, which is a very efficient form of energy, 14 to one or something like that? I thought I'd get your ideas on this. Mr. Wayne Goerzen : I appreciate that question, because promotion and development are the kinds of things we want to be talking about.

Unfortunately, we can get caught up in problems with recognition and risk management. What we're interested in is development, and the development of cellulosic ethanol technology holds great promise for the fibre portion of the alfalfa plant. The big talking point right now in the U.S. is switchgrass, but that's because alfalfa, as a forage crop, although it has a large acreage in the U.S. and in Canada, is not as much on the radar in the U.S. because it competes with corn. One of the big developmental initiatives we're working on now is an interprovincial initiative.

Saskatchewan, Alberta, and Manitoba alfalfa seed grower groups have begun what we're calling the Canadian alfalfa insight committee. Our mandate there is to get as much alfalfa going into the ground to feed as much of the Canadian and U.S. forage industry as possible. But we do see further things down the road, not only the development of cellulosic ethanol, but also the use of alfalfa as a platform for the production of pharmaceutical and nutraceutical ingredients and those types of things. The thing is that right now, we have to go through a cycle.

Cellulosic ethanol is a procedure that's being developed in the laboratory. It's very successful in the laboratory. It has yet to be commercialized, and that is happening right now, but we definitely see value added to our crop in that area.

(1015) Mr. Alex Atamanenko : I guess one reason I'm asking the question is because the big push is for corn in the States, and obviously it's not that efficient as far energy input and output goes. It is going to put and is already putting tremendous pressure on our cattle industry and others. So I'm just wondering if this is somehow not the time to really start pushing this. As you said, it's in the laboratory, but evidently, if it's successful, maybe we should be pushing the cellulosics more, and maybe your organization could play more of a role in this. Do you have any comments on that? Mr.

Wayne Goerzen : That is something we're working towards, and I think the other thing we have to work towards is the environmental value of our crops, particularly perennial forage crops like alfalfa. These crops are fixing nitrogen at an enormous rate and can be used in cropping rotation, reducing, then, dependence on nitrogen produced through natural gas. I don't have to tell you how expensive that's becoming. So we see a role for alfalfa on the whole green side of things, not only in ethanol production, but also in land stewardship, in building up the quality of the land.

And that benefit then extends to other crops in rotation. The Chair : Mr. Treleaven wanted in on this as well. Mr. John Treleaven : This is just a thought. When you're next in Ottawa, go to a very big laboratory called Iogen. Iogen in Ottawa is working on ethanol from waste products. It's in production. Mr. Alex Atamanenko : Thank you. The Chair : I want to thank all of you for your input today in helping us out with our study on APF. We are going to suspend for about fifteen minutes to allow witnesses to clear away and so our next group of witnesses can come to the table. There is coffee and juice for members.

With that, we'll suspend until 10:30.

(1030) The Chair : I call this meeting back to order. We'll continue with our APF study. We welcome to the table now, from the Canadian Bison Association, Terry Kremeniuk and Mark Silzer; from the Canadian Canola Growers Association, Wayne Bacon, who is the president; and from Saskatchewan Pork Development Board we have Neil Ketilson, who is the general manager, and Shirley Volden, who is the vice-chair. Welcome, all of you. We'll start off with opening comments of ten minutes or less per organization. Who is going to kick us off from the Canadian Bison Association? You will, Mark? Okay.

(1035) Mr. Mark Silzer (President, Canadian Bison Association) : Thank you, Mr. Chairman. It's certainly a pleasure to be able to attend this session. For a small industry with not a lot of financial resources, the ability to make this presentation in our own backyard is very welcome. Just as a little bit of background on the bison industry, although bison are certainly not new to North America, the commercial industry is less than 20 years old. The first census, in 1996, estimated there were around 45,000 head on approximately farms in Canada.

Right now, our estimates peg us at around 275,000 bison on fewer than 1,900 farms. That represents a 20% growth rate over the past 10 years. We have provided additional information for you on that. Of the bison in Canada, 90% are raised in the four western provinces. To represent the interests of the bison industry in Canada, the Canadian Bison Association was established in 1983. We currently have six active regional associations, representing Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia, with around members, and we feel we represent about 80% of the actual herd numbers in Canada.

When it comes to business risk management, we feel risk management is important to the bison industry. Being a start-up animal industry sector, it has an income volatility that tends to be more dramatic than that in more mature agriculture sectors. The issues faced by the industry are not unlike those faced by a start-up business, where the supporting infrastructure and risk management tools must be adequate to attract capital if the industry is to grow. Risk management tools should provide a measure of assistance when cash flow disruptions occur outside normal market cycles. Programs must facilitate commerce.

They should assist producers in achieving their business goals, while allowing them to respond to market signals. Producers should have access to a suite of private- and public-sector risk management programs to manage their businesses. Knowing the program impacts on individual businesses and the consequences of participating or not participating, producers can more effectively plan their business strategies. This also means timely program payments. Programs should be structured so that they support producer cashflows in a manner that closely matches business cash flow needs.

Having a mechanism that offers program advances that, on final filing, are clawed back reflects a fundamental flaw in the program design and should be prevented. I think you've heard that already this morning. Administrative simplicity is important to ensure maximum program participation as well as program cost effectiveness. The regulatory infrastructure contributes to managing risk and creating opportunities. An example often cited is the need for regulations that facilitate interprovincial trade in meat from provincially inspected plants.

This is important for developing industries such as ours, where producers are creatively developing products and niche markets for bison that require interprovincial movement of their products. While it is important to have an effective regulatory framework, care must be taken to ensure that regulations do not create excessive costs that make Canadian industries and products less competitive in the world marketplace.

If such regulations are required, it may be necessary to provide assistance to protect the industry and infrastructure until such time as the industry has been able to make the required adjustments, in order for it to be competitive. Timeliness of regulatory changes is also very important. In some circumstances, regulations were established many years ago, when the bison industry was not considered in the process. Certain regulatory changes are straightforward and are supported by all stakeholders, and such changes should be fast-tracked, rather than take two years to complete.

If fast-tracked, very likely the regulatory change would allow producers to obtain greater returns from the marketplace. We feel that programs must also be flexible to address commodity needs. In the bison industry in 2006, an estimated 40,000 animals were marketed. Of these, approximately one-third were shipped to the U.S. for slaughter, with the remaining being slaughtered in Canada, and the meat is marketed both domestically and internationally.

Since this is a small industry, the marketing and price discovery systems do not have the breadth and depth of sectors that have developed over the past 100 years, where millions of animals are marketed annually. Programs tend to be developed for major commodity sectors. The major commodities have a history of data and information and are able to develop program scenarios under different industry conditions. A new industry such as bison does not have the comfort of such information infrastructure.

Resources to invest in data collection and analysis are limited, and consequently, it appears to be easier to include smaller commodities within programs for larger commodities.

(1040) Although this strategy may work in some circumstances, in others it does not. A more effective strategy may be to provide small developing industry sectors with core funding so that they can develop the infrastructure to collect data and contribute to policy development and process. We believe that programs must diversify markets and re-establish markets lost.

The bison is indigenous to North America, making it a unique product for international markets, and based on its nutritional profile and growing consumer awareness of the product and consumer demands, we think it has a tremendous fit for international markets. But the loss of international markets creates significant risks for the bison industry, and trade interruptions not only have an impact on the international marketplace but also on the domestic marketplace. We certainly saw that during BSE.

As a result, the “other ruminant” market development program was established where $550,000 was given to the bison industry to deal with the consequences of BSE. We believe that program was very beneficial in helping some of our local farm-direct marketers as well as increasing some of the domestic markets within Canada and helping us to try to recapture our share of the U.S. market that was lost.

Working with industry, this program, which is near completion, has shown beneficial results and should be considered as a long-term program to support growth in domestic market development until such time that the industry can bear such costs on its own. The bison industry is also participating in the Canadian agriculture and food international program, and we feel that this is a very beneficial program in helping us to establish international markets.

For developing industries, trade regulations are continually evolving, and in some circumstances access is not as well developed for bison as it is for mature agriculture sectors. In these circumstances, government support is critical to obtain market access where barriers exist. Improved market access contributes to business risk management. Government support through the Canadian food safety and quality program has assisted the industry in responding to trends by continuing with the development of an on-farm food safety program and developing a traceability strategy and policies that are beneficial to society.

However, in such programs there are significant in-kind contributions by producers that go unrecognized and an inability to recapture these contributions in the marketplace. Partnerships with government on such programs are important. Recognizing the public good created through in-kind contributions by producers, producers should not be asked to share program costs beyond their significant in-kind contribution. The disaster assistance program option—I think disasters normally do not fit into program structures.

Because events such as natural disasters, disease, and government-imposed trade restrictions are unpredictable, it is important to have a program flexibility to respond and ensure that producers can return to business as soon as possible. Such a program should have an established framework that defines funding parameters, response times, and other details to the extent that this is possible. Because these are unusual events, they should be funded by government resources incremental to those committed to business risk management programs. With that, I would like to thank you once again, Mr.

Chairman, for allowing us to make that presentation. The Chair : Thank you. Mr. Bacon. Mr. Wayne Bacon (President, Canadian Canola Growers Association) : Thanks, Mr. Chairman. Good morning, and good morning to the members. It is a privilege to be here today to discuss business risk management. That is an important topic to the canola growers—not only to the growers in the province, but across Canada as well. I am here to represent the Saskatchewan canola growers; I farm at Kinistino.

But I would like to also point out that our organization is represented at a national level by the Canadian Canola Growers Association. Our position on the BRM provincially is consistent with the position nationally. At the national level, the Canadian Canola Growers Association represents approximately 60,000 growers, or about 95% of the growers across Canada. The Canadian Canola Growers Association is governed by a board of directors of elected representatives from our provincial grower organizations. Our mission is to influence national issues and policies and enhance the profitability of canola growers.

The Canadian Canola Growers Association member organizations include the Ontario Canola Growers, Manitoba Canola Growers, the Saskatchewan Canola Growers Association, the Saskatchewan Canola Development Commission, the Alberta Canola Producers Commission, and the B.C. Grain Producers. Canola is a big business in Canada. Our 60,000 farmers who grow canola on their farms produce about six to seven million tonnes of canola production, and it continues to rise. For example, in 2005, Canadian farmers produced 9.6 million tonnes of canola.

The farm gate value of that canola, depending on price, was about $2 billion to $2.5 billion. This can represent anywhere from one-third to one-half of an individual farm's gross receipts in any given year. The canola industry as a whole generates about $11 billion in economic activity annually. This is just one of the crops and one part of the agriculture industry. When you consider all farmers across all commodities, the latest statistics for show total farm cash receipts in Canada were just over $37 billion. Operating expenses and depreciation amounted to $35 billion that same year.

Today's farming is big business, and it involves significant investments. It involves significant sink funds and variable costs. The bottom line is that financial risks are very high. This is why getting effective policies on BRM is critically important to our farmers. The major sources of risk in my business as a canola grower are crop production risks, price risk, and the price-distorting and production-distorting practices of foreign government policies.

On the topic of production risks, I would like to point out that as the first line of defence, growers actually manage their production risks with good, sound economic practices. We rotate our crops, we fertilize, we rotate the chemicals, scout our fields for insects and disease, and do everything we can do to ensure that the maximum potential for yield and quality is there. However, we are still susceptible to weather, frost, drought, excess moisture. They can all take a toll on our production, and we've seen that a number of times in Saskatchewan over the last five years.

This is where our production insurance plays a very important role, and it needs to continue to play an important role. Production insurance has served us well in the past. However, to ensure that it continues to effectively meet the needs of farmers going forward, it needs to keep current on price and on production levels. There is a disturbing trend in production insurance. Premiums continue to rise and coverage levels continue to fall. This needs to be addressed to ensure that our insurance program remains a viable risk management tool for farmers.

One part of the solution that could be examined is that adjustment be made to the base program to account for the significant impact new seed technology is having on yield. This is very prevalent in canola. With the new hybrid varieties delivering substantially higher yield potentials, the current ten-year average for determining suitable yields does not respond quickly enough to the new realities. Therefore, yield coverage levels through production insurance will continue to lag, unless something is done.

(1045) We need some innovative factors built into the base production insurance model so that it responds to and offsets the risks of today, not of days gone by. The same issues arise on the price side. Specialty oil canola is an example, where farmers grow higher-value speciality oil crops but are not able to insure these crops at high enough values to fully offset the risks and potential loss of opportunities. A concept we are working on as canola growers is that of revenue insurance.

This concept will build on the existing production insurance program and would create a combined price and production insurance model that would essentially offset farmers at market base for any insurance products. We have studied the performance of this concept, and our research to date has shown that it would be an effective risk management tool for farmers. We believe the national market-based insurance program should be used as a foundation for the federal BRM strategy. We should be looking more closely at price insurance, revenue insurance, maybe even weather insurance.

Insurance models, if designed appropriately, will reflect true market signals. They allow farmers the flexibility to select premiums and coverage level options that fit their individual farming businesses. The downside risks in bottom-line coverage are known and are bankable, the payouts are quick, and payouts are in the year of need. These features of insurance are major shortcomings of our current CAIS program, as I am sure you have heard on numerous occasions. Also related to management risks on the price side is the cash advance program.

This has been a very effective program, and I would like to thank the Government of Canada for the recent expansion of the dollar limits of this program and see it extended to other commodities as well. We use this program to cash-flow our business while we market our grains. Without it, we would be driven to market grains for cash flow purposes, rather than focus on maximizing returns from the marketplace. This program is a very useful program for us. Part of the success of the program is that it is effectively administered and delivered by grower groups.

I would encourage governments to consider other programs that grower groups could administer on their behalf. Another point I would like to make is that we really appreciate the government's recent announcement on renewable fuels, and biodiesel in particular. Thank you for that. It is always important to diversify your customer base as a way of lowering business risk. Once the biodiesel industry is up and running, canola growers will have a new domestic market to serve. Now I'd like to touch briefly on the third area of business risk that I mentioned earlier, the trade-distorting policies of foreign countries.

That is a risk I cannot manage on my own, and I feel it negatively impacts upon my farm. There have been studies conducted showing that the international marketplace is distorted by subsidies and tariffs, and these are costing growers real dollars every single day. Estimates are that the trade-distorting subsidies cost Canada's grain and oilseeds sectors $1.3 billion, and tariffs and quotas are costing us another $1.2 billion, every single year. When you look at canola specifically, these distortions are costing us $800 million each year. We need you to fix this for us; we cannot do it.

We need real and meaningful trade liberalization, and also the three pillars of the WTO negotiations: domestic support, export competition, and market access. Bilateral trade agreements have their place, but they do not address the trade distortions and domestic subsidies issues. We need Canada to be active on all fronts, WTO and bilateral, to aggressively pursue trade liberalization for us as exporters.

(1050) The current WTO rules are not acceptable. Countries such as the U.S. and the EU still have substantial room within their existing WTO agreements to increase trade-distortion programs and policies at ongoing risk to the viability and competition of Canadian growers until such time as a new and improved agreement is reached. In closing, I would like to point out a very important linkage between federal programs for risk management and international trade. Any program that is developed must be designed to minimize the risk of countervail actions by other countries.

To do that, the federal programs must be national scope, they must be generally available and generally used by all, and they should not advantage one region or one commodity over another. This is a fundamental principle that the Government of Canada has followed in the past, and we fully support the principle now and going forward into the future. The concept of regional flexibility in a federally funded program quickly takes you down a path of countervail programs. As a major exported commodity, canola could easily be targeted for retaliation measures such as trade disputes arising from these actions.

We do not want to get into a situation where we pay the price for countervail action against a government's program. We are here to discuss business risk management and we ask that the government be diligent in program design so that we do not get caught up in creating new business risks that we do not need. Ongoing consultation with producer organizations is a key to ensuring programs are designed properly. With that, thank you for the opportunity to present our views on the BRM. I look forward to your questions and will now turn it back to the chair.

(1055) The Chair : Thank you, Mr. Bacon. Mr. Ketilson, ten minutes or less. Mr. Neil Ketilson (General Manager, Saskatchewan Pork Development Board) : Thank you very much, Mr. Chair and committee members. Welcome to Saskatchewan. It's our privilege to appear before you today to outline some of the issues that are specifically relevant to the hog producers in this province. Indeed these issues have implications to those right across the country. I want to begin by giving you a bit of an idea of what the industry looks like. We produce about 2.4 million hogs in the province.

That's up double from the last ten years. As a result of the Crow rate change in the mid-1990s, livestock production, specifically hog production, has increased significantly in this province. At the same time that our livestock numbers are going up, the number of producers involved in that business is going down, and going down quite significantly: we had about 18,000 farmers producing hogs in the mid-1980s and we have fewer than today. That is quite significant. The farms of today are quite appreciably different from what they were before.

Even though the industry is very cyclical, both on an annual basis as well as over a four-year period of time, we're presently under a squeeze in terms of high feed-grain prices. We believe there's tremendous opportunity in this province to expand the hog industry. We are blessed with about million acres of cultivated land. We think hog production adds to the grain farming business. It's very sustainable in terms of the application of manure with the grain farms; you get a continuous loop and add value, and it's good for those who want to be involved in that business.

I want to touch on four or five key issues and speak to them. Hopefully they'll provoke a question or two. The first one is with respect to packer consolidation and the lack of competitive pricing for hogs. As most of you will understand, in Canada we have two major packing organizations: Olymel out of Quebec, and Maple Leaf Foods out of Toronto and across Canada. Maple Leaf Foods recently announced that they were closing the Saskatoon plant, the only significant federally inspected slaughter plant in this province, on May 31.

While we respect the right of that company to reorganize and rejig their business so that they are more profitable, it really impacts the producers in the province in a negative way. For your information, during their restructuring Maple Leaf Foods is planning to close plants right across Canada. They sold the one in the Maritimes; they're selling the one in Ontario, selling the one in Saskatoon, and divesting of the one in Lethbridge. They're reducing their slaughter capacity from about 7.4 million a year to about 4.5 million.

When you think about that in terms of the implications to this country and our business, it's huge. It's especially huge to the people in this province. We have about one million hogs within kilometres of Saskatoon. That is roughly the size of the plant that's here. It will force those producers to ship to the Brandon plant that Maple Leaf Foods owns and/or to the Olymel plant in Red Deer. You can appreciate that it will be very expensive: it's a marginal increase of about $4 to $6 a head, as well as the inconvenience that goes along with it.

Not everybody has an exact hogs per week that they can load in a semi, so we're back to the old system of assembly yards and all kinds of stuff as a result of this action. We believe Maple Leaf has an oligopolistic power or a near monopoly power, depending on where you are in this country, given the transportation costs and things like that. Many would suggest and argue that we're the Wal-Mart of North America in terms of hog prices—the lowest there is—and as a result we are seeing a shift in production from market-weight hogs to weanling hogs that are shipped down into the United States to be fed.

We're really exporting the value-added part of this business, and we think that's very much a negative thing.

(1100) Second, the mood of producers in this province has shifted significantly, given the closure of this plant. Guys are very frustrated. They're really not sure where they're going to go with this thing, and many have made the decision that they're going to exit the business, so we would see a further reduction in numbers as well as in the number of producers who are out there. Consequently, we believe we need a packing plant in this province.

If you consider the hog business and compare it to the grain business, it would be equivalent to shutting down all the elevators and having to transport grain to the neighbouring provinces. We find this to be unpleasant and we'd like to do something about it. Saskatchewan people are very innovative and creative, as you know, and tend to take things into their own hands, so we have put a partnership together that we believe is unique.

We've partnered with a first nation community—with a large-scale hog producer, Big Sky Farms—and we have signed up enough investment dollars from producers to build a million-head plant. We are presently going through a feasibility study to determine the viability of that option and trying to find a marketing partner who will partner with us. My point to all this is to suggest that it would be very useful if the federal government had a program to assist producers in gaining a greater share of the value-added markets. That would be very useful.

Next come profitability and competitiveness—if I'm getting too long-winded, speed me up. Farm support is very near and dear to an awful lot of our producers, and it's a very useful program. The CAIS program has worked for many of those people, although payments in a more timely fashion would be extremely useful. Animal health and the threat of foreign animal disease has huge implications to our industry. We have three days, after which, in the case of a foreign animal disease, we would have to start killing animals out of the barns, so that is very significant.

We need a policy, a federal government policy, that is very clearly articulated and put in place prior to a disaster like this so that people know where they are. It has to compensate not only those people who are directly affected by the disease, but also those who are indirectly affected. That's very important, and I'm sure you understand that. A lot of people are very keen on ethanol production and biofuels. The agricultural industry is very supportive.

The hog industry views it a little bit differently, in that it might increase the price of feed grains, and if you look at $4 corn in the U.S., that's exactly what it's done. We would argue that we have to have a win-win situation in this. Therefore, if we are going to support ethanol, we also need to make sure we have the varieties of grain that are going to increase the amount of feed grains across this country so that we can remain competitive as well.

Next is a very important point, and I don't think we can underscore it enough: we need a very level playing field on the regulatory side, and we need that regulatory piece right across the globe. About 80% of our product out of this province goes international. Our trade is very important to us. Let me give you three examples that come to mind. Paylean is a product used in the barns that increases efficiency and gains us about $4 to $6 a head. The United States had the product licensed and in use in their market for six years prior to us; we just received accreditation and licensing last year.

We find that totally unacceptable. We need a system that moves ahead and gets things done. The second thing is circovirus. I think you've all heard about the devastating impact that's had on the hog industry right across eastern Canada, and it's becoming more prevalent in the west now. The vaccine for that is made by a company in France. There is a little side note to this: the withdrawal time on registration within Canada, if you vaccinate sows, is 60 days prior to their being able to be slaughtered; in France, it's zero. Why the difference?

How can we remain competitive if you get those kinds of inconsistencies?

(1105) One of the other things was noted by Dr. Harold Fast, who was just in China, who exports breeding stock over there and just came back. He is partnering with a fellow, a business associate, who built a million-head slaughter plant in China in less than a year for less cost than the consortium in all the west paid in Winnipeg just for the regulatory issues, for a plant that failed in Winnipeg. They built the plant—complete, the whole deal—and didn't spend as much money as we did in Winnipeg just to try to get through the regulatory issues. How do we compete with that?

On the trade issue, the WTO needs to work for us. We need liberalization on trade. Thank you very much. The Chair : Thank you. With that, we'll turn it over to you, Mr. Hubbard. We'll kick it off with the first round. Hon. Charles Hubbard : Thanks, Mr. Chair. Maybe we'll start it off with hogs, then. You present the figures here