The Chair: We have people who have come here from the Essex and Kent Federation of Agriculture. We want to thank them for travelling the distance they did. We have 30 minutes. I would like you to let us know who you are. Spend perhaps no more than the first 15 minutes on your comments so that you have enough time for discussion and dialogue with the members of the committee afterward. Please go ahead.
By the way, there is coffee and other beverages available. Make yourself at home. I suppose once again we do not have Ontario produce there. We have things like orange juice and so on. As I mentioned last time I was here, the last time it was in Niagara, which was just this weekend, there were not a whole lot of orange groves there. I wish we would do something about making sure that at the very least we serve Ontario produce at this committee.
The Chair: Yes. It is some solace that the orange juice is packaged in Windsor. I would rather see grape juices and apple juices coming from Ontario and packaged in Ontario. This will not be subtracted from your time allotment, gentlemen. You would think that with all the well-paid staff here, including staff from the Ministry of Agriculture and Food, something could be done about that, but far be it from me to be critical. Please proceed.
Mr Cowan: I would like first to thank this committee for hearing us. I am going to be very quick with this. We do not have much time to present a very severe problem. Around the first week of August we found there was a very severe financial problem developing in Essex county, exacerbated by the drought, but it was there before we got into August.
We found this spring, before we got into it, that approximately one-third of our farmers were experiencing financial difficulty, which translates to the fact that they could not pay their bills from 1990. With that, the drought came and exacerbated our problem, and here we sit.
What we have done is gathered every commodity organization in our county, along with agribusiness, banking and money institutions, and even our county council. We have a package together. We have no fiction in here and no emotion. We will bring that in later when you ask questions, but what we do have is a piece of paper that we have worked very hard on and of which we are very proud.
I would also like to express appreciation to this committee from not only our farming community but all Essex county residents for this opportunity to discuss with you first hand the financial crisis facing our county. This crisis certainly impacts on our farmers directly, but it is very real for the rest of the county. We rely on the viability of the agricultural community. As this committee is aware, Essex county is predominantly an agricultural community.
In August of this year, Essex county council passed a resolution declaring Essex county a farming disaster area due to the drought conditions experienced this past summer. It is not our intention to discuss with you today the agricultural crisis that exists throughout Ontario as a result of low commodity prices but escalating costs. We know there have been many delegations before this committee that have been discussing that matter. Rather, our purpose is to request consideration from this committee and from the government for extraordinary financial relief from the province for Essex county farmers to save them from the ravages of the summer drought.
The situation experienced by Essex county farmers is different from that experienced by farmers in the rest of Ontario, save for, I believe, our Kent county colleagues and a few other isolated areas. The yields in Essex county are so low that even higher commodity prices would not offer significant relief. We suggest to you that province-wide relief that may be considered would not be sufficient to address the problems of the 1991 Essex county drought.
The delegation this afternoon from Essex county consists of several of the leaders of the agricultural community of Essex county who have been chosen by their peers to plead their cause. Dave Dawson will present the main brief of the committee.
Mr Dawson: We have come here today not to reiterate all the things you have heard previously from other commodity groups. As I see by your agenda, you are going to see quite a few others. We are here to address the impact of the 1991 drought on agriculture in Essex county and the whole economy. You have a situation in Essex county right now that not many other counties would want.
On August 8, 1991, individuals representing agricultural organizations and specific commodity groups came together to prepare a response to the severe drought crisis in Essex county. The committee formally constituted itself by way of motions which were moved and passed, and the committee became known as the drought committee of Essex county.
The committee's primary goal is to properly brief, through the collection of accurate data -- and I want to emphasize "accurate" -- both the federal and provincial ministries of agriculture and their deputy ministers on the effects of the 1991 drought in Essex county. We thank you for the opportunity of presenting this information in this standing committee.
"Crisis" is not too strong a word to describe the financial impact of the 1991 drought. It can be reasonably assumed that a significant number of our farmers will be forced from the land. This will substantially aggravate the worsening economic conditions which have left Windsor and Essex county with the highest unemployment levels in Canada.
Present agricultural programs do not address the financial impact of the 1991 drought. Programs such as crop insurance; the gross revenue insurance plan, or GRIP, and the national income stabilization account, or NISA, while very valuable, will only benefit the farmers who can hang on until 1992 or later. Crop insurance, GRIP and NISA will not provide the injection of much-needed cash by November 1991.
The recently announced advance payment from the GRIP program does not adequately address the Essex county problem. It uses 1992 money to solve a 1990 situation and simply postpones the difficulty to a later date. Many of the crops grown in Essex are not eligible for GRIP.
Essex county has experienced -- and I want to really emphasize this -- three major weather-related disasters in the last five years. We actually could say the last four years, but five years is a crop insurance reference we use throughout our whole document so we will continue using five years. The summer of 1988 saw a drought, and the summer of 1989 a major flood. Now, in the summer of 1991, came another major drought. These disasters have severely hampered growers' efforts to establish an adequate crop insurance average.
The farmers of Essex county have come together as one group with one voice to formally request immediate financial assistance beyond existing federal and provincial programs to allow them to subsist until future benefits of federal and provincial programs are derived.
I have a couple of small data sheets I would like to go through with you -- we have to share our time with our colleagues from Kent -- one of which was presented to the Minister of Agriculture and Food today at a meeting with him in Milton. This is by commodity. The report contains how we calculated it. Again, these are strictly facts.
Even with the low commodity prices that we are experiencing today and the low average crop insurance yields, Essex county has had a $44,926,000 shortfall or loss before a crop insurance payment. We expect crop insurance to pay out $25,480,000 to the farmers of Essex county. That is presuming that 100% of our crop is eligible for crop insurance. We then have a shortfall of $19,444,000. That is Essex county alone. These are very conservative numbers. We are sitting there with apples not yet reporting because they are just getting into their harvest season and we have not determined the loss there. We have a minimum loss of $19,440,000 in Essex county.
People say, "Did you support crop insurance?" We sure the hell did, because 93% of Essex county is insured. We have the second-highest number of crops insured in Ontario -- 4,540. We have the second-highest acreage insured -- 325,000 acres. We have the third-highest liability in Ontario -- $70 million. Again, I apologize; these are 1990 figures we are relating to you. Those for 1991 are not yet available. But in talking to crop insurance, yes, Essex county support is there; 93% of Essex country has taken out crop insurance. We want to emphasize that.
Just as I close and allow our people from Kent county to show their facts and figures, I have a letter here. It happens to come from the department of social and family services from Essex county. I am not referring to Windsor at all. I would really like you to pay attention to this, because it really hit the committee when we saw these numbers and we heard these comments.
"The individuals and families living in our farming community are a very proud, resourceful and hardworking people. These people have helped one another through many difficult times over the past several years. This year's drought will mean the end of farming for a good number of our Essex county farmers who have run out of alternate resources.
"The off-farm-work income which had formerly assisted many individuals and families through the tough times has virtually disappeared. High unemployment is being experienced in most of the employment sectors. This fact alone could increase the demand for social assistance among this traditionally independent segment of society.
Here is where the facts come in, ladies and gentlemen. "The impact of adding additional welfare cases would contribute to the already enormous cost of public assistance and create further local financial problems."
In July 1989, there were 484 cases, with a cost to the county of $3,913,000 per year. In 1990, that grew to 1,223 cases and a $7,784,000 cost. In 1991, it was 2,157 cases, with a projected cost of $15 million-plus for social assistance in Essex county.
"It is my opinion that financial aid be given to our farmers to ensure that they are able to meet their related financial obligations; they remain a source of employment opportunity for those who are in receipt of public assistance; they are able to produce a product which generates tax revenue, personal and corporate income; the family farm remains the backbone of a hardworking, productive community.
"In closing, I would encourage both the federal and provincial governments to help our farming community maintain viable farming operations, as opposed to paying more money for additional public assistance programs."
That was signed by the administrator of social and family services, Donald M. MacLellan. We thought it had a lot of impact; $15 million is not a lot different from the $19 million the farmers have as a minimum loss in Essex county.
Mr Cowan: I would like to add one small thing here, because Mr McGeachy has to speak too. You might have heard the figure where we had $40 million coming out of Essex county before. That was comparing 1989 to this year. Because of the low commodity prices, because of the bad yields we have, we can show in our documentation over $60 million missing from our county this year. If you use the multiplier factor in there, it is close to $500 million of cash flow that we are missing.
As you can tell, Kent county, with over 500,000 acres in production, is not unfamiliar with the problem that is seen in the Essex area. We managed to produce $269 million worth of produce. We have over $1.3 billion tied up in assets. We too have incurred the drought. We must admit to the fact that it is much spottier allocations of drought. In the northern quadrant we see a much higher production, but there are regions in the Kent area that have suffered tremendously.
Our unemployment is astronomical. Out of a 60,000-person workforce, we are currently running about 17,000 people. In terms of welfare, we are now sitting at approximately 1,500 cases. We anticipate that by year-end it will be close to 2,000.
As you flip through the pages of our report, our economic reports are that, on a multiplier effect, $1 from the farm means $7 to the economy. Through the drought, that has a ripple effect -- and I will pull it up for exact figures -- of close to $427 million in the general farm economy. As I will show you here, that has a very vast effect. There are problems now, but they will continue on.
We are anticipating an incline on unemployment through the fruit and processing sectors. As you see, the farming claims have increased, and they will continue to do so until the farming sector has been rectified as to its problems.
We presented the briefs. What you must understand is that we have in the past claimed that this is a farming problem. The problem does not exist just in the farming community. Each and every one of us has a vested interest because we usually eat three times a day. Not only that, 20% of the jobs in this province are related to agriculture. It is not a farmers' problem.
In a report that is very clear, there are numerous agribusinesses that are in financial problems, mainly due to the fact that they are carrying large debt loads under the circumstance that farmers cannot afford to pay those bills. When you help the farmer -- and we are hoping that help will come soon, both to the general farming economy and as well to the drought areas -- you are not only helping the farmer; you are helping the general farm economy.
Mr O'Neil: I believe that is the extent of our presentation. Maybe I would just go along with that last comment. Certainly in Essex county, being a rural agricultural community, there are about seven or eight small towns that are very dependent upon the viability of the farming community. If the farmers are not healthy and the employees of the farms are not healthy, then our towns are also not healthy. We are seeing it right now in the urban areas of the community.
Mr B. Murdoch: I thank both groups for coming here today. Certainly I know this is happening. I am a farmer also, so I understand your problems. It is not only in the crops. We have more beef in our area and the same problems are happening there.
If we get assistance, that is going to help us for the short term, but what are we going to do in the long term? Price is what our problem is. In your case the short-term assistance is going to help this year, but what are we going to do next year if we have a good year but the prices are no better than they are right now? Where do we turn to then?
Mr Cowan: I am not sure what we are going to do. If I knew that I would probably be a wizard at this point. I know that we have major problems in our county, and Scott and I have been talking about it. He has major problems in his county also.
We are looking at the possibility of up to two-thirds of our farmers in Essex county not being able to obtain operating capital for the springtime. Now that is a reality, and that comes from the Ontario Ministry of Agriculture and Food -- I have a little bird in there.
We started to see the problem this spring with some of the statistics from farm debt review and I think different lending institutions, and we said, "We have got to start talking." So we started to talk, and we were labelled as whiners and cryers, so we decided to come up with this.
We have facts here. We are not kidding. What to do? I do not know. What would cure the whole thing is to get a good price in the marketplace, but because of factors way beyond our control, and possibly out of the control of Ontario, we cannot do that. I wish I could answer your question, but I cannot.
Mr McGeachy: There have always been lots of good studies, and I think some warrant further investigation. I speak of the comparative share which was presented in federal cabinet. But we in Kent county were faced with many problems. One of the initiatives we took was to hire a firm to deal with the free trade issue and how we could make use of that in the agriculture sector. We released a report last week. But the essential problem is that the price is not there and, furthermore, some of our businesses are creating dollars in this country that leave.
In seed corn production our counties have been devastated. Because of that, our production of seed for next year's crops has been declining. There are companies that have gone down to the Argentine area to grow 10% to 12% of crop to make up for next year's sales. That is lost revenue, and the farmer can anticipate a higher cost-per-unit just to seed his crop next year.
We need to build a stronger Canadian economy. We need to circulate it through the agricultural industry, because there is no one who can dispute the fact that agriculture is the centre of the wheel. The spokes are the rest of the economy. We have a tremendous ripple effect on that -- transportation, packaging. It just flows right through the entire system.
Mr B. Murdoch: You said we are sick and tired of being called whiners. Actually, if the farmers do not say anything, there are a lot of other industries out there that are not going to survive without the farmers and we seem to be carrying the ball for them. I know what you are saying, because you hear that all the time in the media. They say: "Oh, the farmers are upset again. They are just whining again." But if they do not say anything, there are a heck of a lot of other people out there who are not going to benefit.
I think too governments, both provincially and federally, are going to have to figure out whether they want to have farming in this country or they do not want to have farming and quit fooling around with grants. In this case, for drought relief, that is a different thing. But then we will go around and we will get a grant for this and a grant for that, and you cannot have farmers working on grants. We are going to have to get both governments together to say they are serious about farming. I could be sitting here with you guys, so maybe I will let someone else -- I am just going to tell them what I think.
Mr Trimble: Richard Trimble, political awareness committee, Essex county. I have a simple solution. It is called supply management. Everything is supply management, your cars or whatever you want. It is supply and demand, and that is how it has to be. We have to shut the borders and have supply management.
Mr Arnott: Gentlemen, I would like to thank you very much for your presentation. I am pleased you had the opportunity to come in today to make this excellent presentation. I think one of the problems, when I look at the farm issue and why, in my view, we have not had the support from the provincial government, is that there was a concern for many years in rural Ontario as to what might happen if we elected a Premier who was a resident of Toronto. When you have the very top leadership that does not have a fundamental background or understanding of the farm issues, he has to be educated on those issues, and I think that is where a lot of our presentation has to be made, directed directly to the Office of the Premier. I really believe that. I look at your economy in Essex-Kent and I compare it to my own riding in Wellington county, when we talk about the farm economy, the farming economy is Wellington's economy and when farmers are hurting, the rest of the economy in the area is hurting badly. I would like you to elaborate if you would on that aspect in your own areas, how the fact that the farmers are hurting is affecting the rest of the economy.
Mr McGeachy: First of all, and this is meant as openly as possible, I think one of our problems is the simple fact that we need each and every one of you not to criticize one another, but to work together on this, because whether you are Conservative, Liberal or NDP, you all have constituents who vote, pay taxes and have a viable interest in what we are speaking about.
So let's not start taking shots at one another. That is the key thing that we have done as committees by making a county presentation -- we have made a request that you all work together. We are not in this for any particular party. We are in this for farming, for the farming industry and for the general economy. That is how it has to be seen, because we are not only hurting ourselves. It has gone too far. The perfect example is that in 1986 this article was out and about in the farming country: "Crisis, what is it?" Farmers had that problem back then. I am sure many members here can remember it. It still exists, and why is that? Because there have been too many backshots, too many movements around. We need to deal with it.
You asked for the ripple effect in the farm economy in our area. For an example, the Olinda plant in Leamington was closed down. A good portion of those farmers had to either relocate or close down their operations. They are looking at transportation of tomatoes and produce some 50 miles. That means higher input costs. The ripple effect is that those people who worked at Olinda are out of a job, which means higher welfare, higher unemployment, higher taxes. That is a simple example. I can go into more.
Mr Cowan: A very quick comment on the ripple effect: We have been able to come up with a guesstimate which the University of Guelph will accept and it is a seven factor. As I said, if we get into these numbers and figure it out compared to 1989, which was a fairly normal year for us other than for the fact that we had the large flood, it comes down to that seven factor. So if we are talking about over $60 million times seven, that is $420 million of cash flow in our economy. Now that is a ripple effect and I think it gets everyone's attention.
Mr Hayes: I would like to congratulate the group for coming here and speaking in one voice for the farmers in Essex county and Kent county, and also thank you for including Mr Mancini and myself and Steven Langdon and Jerry Pickard in helping assist in the little bit we did. We were glad to be part of it. I think it is very encouraging that the people on this committee came here with uninflated figures. I do not think you pointed it out there, Rick, but maybe you can allude to that. You did not use the figures per bushel as they would be under the GRIP; these are today's actual prices. Is that not correct?
Mr Cowan: Yes. That is why the number is so low, because we have used this year's prices as of now and we have used estimates that are within percentage points in our major document. Once that document is released, if you want a copy, please get hold of us and we will make sure you get one. The minister is in possession of a copy of our total brief. This is our executive summary which has been worked around a little bit differently for this committee. But in there is proof. It can be backed up four or five times. My friend Mr Dawson here would not give me the factors of those guesses as of 1989, but we can prove undoubtedly that $20-million loss.
Mr Hayes: Yes, I am aware of that and I just wanted to make sure you made that clear here. I do not want to get away from the drought situation, and I can say to you that this government is well aware of what is going on. Of course, I and Paul Klopp and Elmer, the Minister of Agriculture and Food, have looked at a lot of the areas and I just want to assure you that we are well aware and we hope we can do something that will be satisfactory to your committee.
The other thing is that prices really are a concern. If you just take the drought situation out of the way for a second -- and I know Dave was talking about the crop insurance. If farmers had a decent price for their crop and their labour, you would probably have 100% in crop insurance because some of them would be able to afford crop insurance then. Maybe you can respond to that, or maybe Dave or Scott can respond to that.
Mr Waters: I like what Mr Murdoch said about helping you in the short term, but with the long-term goal in mind, I do not think governments have really helped your situation. They have thrown money at it, but they have never resolved the long-term problem. I heard what this gentleman said, so I would take that -- but how can we be on the short term? You are in a drought crisis. How can we assist you in such a way that we know it is going to be you we are assisting, if you know what I mean?
Mr Cowan: We feel the GRIP and NISA programs are very good programs, but as far as GRIP goes, it is only for grains and oilseeds. NISA takes in everyone. Some of the people say that will help horticulture. Horticulture right now is falling through all the cracks. That is one thing I must say. We need some more programs like GRIP for horticulture. I think the other main problem we have now is short-term, to get these people into these existing programs before too many others lose their farms. As we sit here right now, there are people out there losing their farms, and the GRIP and NISA are not going to be any good whatsoever if we cannot get them there.
Mr Hayes: The issue that was raised, the suggestion that more people get into supply management, can you tell us what we could do with your group and other agricultural groups across the province and the government together to go toward that goal? You do know this government is in favour of supply management. It is something that I guess the government does not just want to say, "Here, we're going to hand that to you," or, "We're going to force you into that." What assistance would you give the government to reach that goal?
Mr Cowan: I think right now what we have to do is to make sure we support our federal government, or talk our federal government into supporting the farmers here in Canada. We have GATT negotiations going on and supply management is on the boards right now. There are a lot of factors in this world that want to see supply management go. Maybe it is a 1% profit. Fine, at least there is something there. There is a formula in there so that a person can go and make something out of it, rather than always lose at it. The other caution is that supply management will not work for every commodity. It is an individual thing. Farming is very diverse. It is as diverse as the people sitting in here, so it is a complicated beast.
Mr Mancini: It has been intimated in the brief several times and during the conversation we are having this afternoon that unless the government is able to support the drought relief program as outlined here to us this afternoon to the tune of some $20 million, there will be fewer farmers in Essex county for the next spring planting season. My question to Mr Cowan, the chairman of the committee and the chairperson of the federation, is, what if the government came through with a $5-million program or an $8-million program? What would your response be?
Mr Cowan: Our response at this point is that we started this committee for a reason. We had people who were getting very upset that we were not doing anything. There were threats of blockades, threats of marches and surrounding Parliament Hill and the House. I am not making this up. Mr Dawson can maybe elaborate a bit or say a little bit more about it. That was our concern.
We believe in this process. We have every elected official in our area. Our county council and warden are here. We had an agribusiness representative who could not be with us. Mr Mike Quinlan had a prior engagement he had to go to. Some emergency came up, but I wish he was here to help with some of the questions about whether we going to have farmers or not.
But what we are going to see if this fails is that if we do not get enough funding to help the farmers, then we are going to see something else and we do not know what it is. We do not want to say what it is, because we do not know. That is not the mandate of this committee. Our mandate is to do the proper thing.
Mr Dawson: Can I comment on that, please? We have been in contact with other larger groups of farmers who also are upset with the way agriculture is going. We have chosen the route of bringing accurate information to both levels of government, very factual; if anything -- excuse me -- it is conservative data. These numbers are not inflated by any means. These are the facts.
The drought committee has been asked: "What are you guys going to do if you fail? What happens if you don't get funding, or sufficient funding, to solve the problem?" I guess we are going to have to turn that back into the hands of the farmers who asked the question then. There is a lot of militancy out on the farm. We are not here to threaten. We are not militant people here at this counter or within the committee.
I am an agribusiness person. We have a major stake in agriculture in Essex county, with four fertilizer plants across the county. I have never seen the farmers so despondent in the 18 years I have been involved with agriculture. There is no enthusiasm to this harvest. There is a lot of stress out there. Farm safety is in question right now because of the stress. There is indecision by government and all parties within the government on what the answer is.
We have put together an agriculture resource directory, within this book, and it is open for anyone in government at either level to call. Please call. The people who represent the farmers in Essex county are there. There are lots of names and lots of numbers. You should get an answer somewhere.
One of the comments that came out when we were trying to come up with a recommendation -- and we are referring to the agricultural problem -- was that the solution to our problem will not be easy, will not be cheap and will take some very smart people. Now, we feel that not all the smart people are in Essex county, we do have a few elsewhere, and we would gladly -- and I know our Kent colleagues are the same -- review any possibilities the government may have, either Conservative, Liberal or NDP.
I think the farmers are willing to sit down and work with government with one voice. I think that is a change of heart that you have seen from the past. I have seen it and Rick and our other committee members have seen it. This committee has functioned very well with Mr Hayes, Mr Mancini and our two federal MPs. Everybody has worked hard to make this. We have to solve our drought problem first and then we will come back to you with all the other solutions too, or help in that decision.
Mr O'Neil: The simplest answer is that while $5 million or $8 million is a substantial sum of money, it would not be enough to alleviate the problem and it would not stop the disaster that is facing the farming community and the farms would still be lost. There are $6 million or $8 million worth of payments due November 1 to Farm Credit Corp and for the crop insurance. There are no moneys to meet those payments.
Mr Mancini: First, my question was aimed not so much at what political action farmers would take but what would the financial repercussions be, since it was told to us this afternoon that maybe up to two thirds of our farmers, give or take a few percentage points, may not have cash flow. They may not go bankrupt, but they may not have cash flow to do what needs to be done next spring. That is what led me to ask you what would happen to the Essex county economy if you receive $5 million or $8 million or $6.5 million, or whatever the figure is going to be. We do not know what that figure is. But what would happen to the farm community was more of an economic question than a political question.
Second, since we have spent quite a bit of time on that question, I want to talk about the delivery program. It was said to myself and, I know, to you gentlemen and to others that the ministry is very interested in finding a delivery method if and when it announces funding for the drought relief. The minister even suggested that I help him work out some kind of arrangement when I was questioning him in the Legislature the other day.
What I would like to see, and I was wondering, since we do have professional people within OMAF and they have many years of experience and they have been involved in droughts and floods before, and past governments have responded before in one way or another, if you would agree with my position that the ministry staff, on behalf of the minister, prepare anywhere from five to eight options for the committee to consider along with the farming community and then inform the minister, "Yes, these are probably the two or three most popular options that we have," instead of us, with no staff and with no bank of computers, trying to figure it out on our own. I was just wondering what you felt about that.
Mr Cowan: I do feel we need a delivery system. Our mandate was not to find one but to come and present the problem. We realize we have to have one. I entertain anything that will get that sped up very quickly. As was stated earlier today, it has to be very quick -- weeks and/or days. We are not in a position where we can wait very long.
To answer your economic spinoff effect, what will happen is, if I cannot get money from a bank or a lending institution to plant my crops, I am going to go to Mr Businessman Dave and say, "Will you fly me till the fall?" I am going to go to my fuel supplier and I will probably not pay my municipal taxes at that point. You can skip paying them for three years before they kick you off, so that is the first thing I am not going to pay. That is what is going to happen. I know that Mr Dawson cannot afford to do that. That will be what will happen and then everyone is going to be upset.
The Vice-Chair: I wish to thank you for your presentation. It was a good presentation. I think we all got something out of it, especially your situation where you are in the key areas of drought in the province and are affected a lot more severely than most, I would imagine. As soon as the committee is finished, we will get you a summary of the report.
Just so the people coming before the committee realize this, and I will apologize on behalf of the committee, but in case you are not aware of it, the same discussion is going on in the House today. It is of key importance to the government as a whole, all three parties, so there will be members coming and going because of their need and want to participate in the House debate as well. It is not that we are trying to slight anyone. It is just that it is that important to us as members.
The Vice-Chair: The next group I call before the committee is the Ontario Cattlemen's Association, if you could please come forward and introduce yourselves for the sake of the committee and Hansard. Once again, as with other people who have come before us, I would ask that you try to keep your remarks down to 15 minutes or less so that we can have an opportunity to interact with you. At your pleasure, gentlemen.
Mr Coultes: My name is Glenn Coultes. I am president of the Ontario Cattlemen's Association. On my right is Bob Kerr, second vice-president, and on my left is Graeme Hedley, general manager. I would like to thank you for giving us the opportunity of making a presentation to you this afternoon. I believe you all have a copy there and maybe I will go over that with you.
The Ontario Cattlemen's Association welcomes this opportunity to meet with the standing committee on resources development about the crisis in agriculture. While the focus of attention has been on depressed prices and incomes of grains, oilseeds and horticultural producers in agriculture, the livestock-meat sector has also recorded seriously depressed prices this summer. The perspective we want to bring to this review, however, is the cross-relationship or impact of low grain prices and grain support programs on the livestock-meat sector.
The Ontario Cattlemen's Association represents the interests of commercial beef cattle producers in Ontario. Active membership and participation is at the county-district level in local cattlemen's associations which operate autonomously from OCA but are affiliated for the purposes of representation, communication and policy initiatives. The Ontario Cattlemen's Association is funded by a checkoff on cattle sold through an auction market or direct to packers. However, the association does not have agency powers which regulate how and where cattle are sold.
The concept of tripartite funding by producers, the federal government and the provincial government was pioneered by the livestock sector in the early 1980s and resulted in the formation of the red meat tripartite stabilization program. In the mid-1980s a major thrust of the tripartite concept was to achieve uniformity of price support in all provinces across Canada. In 1988 the original concept of national uniformity in price support was modified to a goal of national uniformity in all government support programs to the sector.
To achieve this, a ceiling of 8% for major producing provinces was established on net government benefits for red meat commodities. While all major producing provinces are below the 8% ceiling, considerable variation in government support still exists and affects not only ability to compete but also market share produced in any province. We believe the best and most likely solution to this inequity is to reduce the ceiling on expenditures set out in tripartite agreements for cattle. To this end, we solicit your support.
This past summer has seen the most severely depressed prices for finished cattle in the last three years. Losses on feedlot cattle going to market this month will exceed $100 per head for many cattle feeders. We expect significant payouts from the stabilization program, even though it is not designed to fully offset losses.
There are major linkages between the grain and livestock-meat sectors. Both sectors are market- and trade-oriented, and consequently not only comparative advantage but also program payments have an impact on competitiveness of Ontario producers and market share of production. Because Ontario livestock feeding is land-based -- grain grown and fed on the farm to livestock -- equitable treatment of farm-fed grains in safety net programs is vital to maintaining the competitiveness of livestock feeding in Ontario. From a policy perspective, that equity has been achieved with the GRIP, or gross revenue insurance plan, program. However, from an administrative standpoint it remains to be seen whether calculations of grain and grain silage crops grown and stored on the farm are accurate and equitable.
Negotiations are continuing with the federal government on the treatment of farm-fed grains in the NISA program and the advance payments program. Essentially, failure to achieve full equity in federal and provincial program payments between grains sold into the cash market and grains fed on the farm to livestock affects the competitiveness of livestock feeding in Ontario. In a market-oriented industry, that failure can translate into lost market share produced in Ontario. That is exactly what has happened during the last five years. Because there is significant downstream employment in food processing, distribution and retailing from the livestock-meat sector, it is important that the impact of these linkages be considered in developing and administering grain safety net programs.
Finally, there is also a significant linkage which flows between the grains and forages sector, where ruminant animals act as the bridging link. According to Agriculture Canada, net benefits from all government programs provide 40% to 50% of the gross revenue from grain crops grown in Canada. These programs have a bearing on decisions for land use. Forages, on the other hand, where the only major use is as ruminant feed in integrated crop-cattle-sheep-goat operations, receive very little program support in comparison to grains and oilseeds. Forages are a critical and vital component of sustainable agricultural production systems, and because their major use is as ruminant animal feed, if we are to give more than lipservice to sustainable production systems in agriculture, it is vital that thought be given to the balance of program expenditure between the grain and oilseeds sectors and the other parts of agriculture.
While we recognize the crisis in the grain and oilseeds sector, if some semblance of balance is not maintained, then the program expenditures in grains and oilseeds will discourage forage/livestock-based production, and that will have implications for value added economic activity, employment in food processing-distribution and sustainable production systems.
Mr Waters: One of the presenters just before you said that horticulture is falling through the cracks and it should be treated like other aspects of agriculture, that other people were accessing government programs to help them out and yet some of these horticulture ones were dropping through. You seem to be concerned that they might end up receiving assistance that you would not be eligible for. Can you elaborate on your discussion on that?
Mr Coultes: Our main concern is that the support would go to the grains and oilseeds sector and not to the crop-producing sectors that produce those crops for livestock. In the past, because we are land-based with farm-fed grains, we have not received the support they have.
Mr Waters: But are you facing the same drought conditions or the same financial fallout of the drought that they are in Essex-Kent? It is basically southwestern Ontario that has been hit so badly, those two counties. Are there very many of your members facing the same conditions who would have the same fallout?
Mr Kerr: It is hard to generalize. The area that is most severely affected is in Kent and Essex county. I understand that the area along the north shore of Lake Erie has also been very dry and there are other pockets of drought. But the counties in the lee of Lake Huron are less severely affected.
Mr Coultes: I would think it would be very similar because the livestock sector is land-based. They grow their own crops. If there is a drought, they will have a reduced yield, the same as someone producing corn to be sold on the market. They will suffer the same way because they produce their crops to be fed to livestock, while the grain and oilseed sector produces crops to be sold on the market.
Mr Duignan: I want to touch on a subject that you mentioned briefly in the opening part of your presentation that deals with the seriously depressed prices your industry is facing this summer. Could you elaborate a little bit on that, and what is your opinion of what that is attributed to?
Mr Coultes: I think there are several factors, but we are in a market-oriented industry, supply and demand, and supply has exceeded demand. Basically the market prices went down from June prices of somewhere over 90 cents to prices in the last week or two of below 80 cents. There is maybe a decrease in consumption, but it is mainly a relationship between supply and demand.
Mr Duignan: I have had a number of phone calls to my constituency office in relation to what a large supermarket chain was doing in relation to importing beef into this country. It was bringing in beef wrapped, packed and priced from Buffalo and just simply putting it on the market shelf. Would that have a bearing on your price too?
Mr Huget: I notice your loss per head of $100. In my opinion, that may be light. It is probably closer to about $125 a head. In light of all the losses that are experienced year after year in the meat industry and the red beef producers' situation, how many livestock producers in the last few years, or in the last year, have gone out of business, out of production of livestock, that you know of? Do you have any ballpark figures about how much that industry lost this year or over the last few years?
Mr Hedley: Yes. If we compare 1990 to, say, 1986, in that time frame production has probably decreased in the order of 40% in cattle feeding. The cow-calf sector, if anything, has increased marginally. The cow-calf sector, in terms of number of cows, has been increasing in the order of 1% to 2% per year for the last four years.
Mr Ramsay: Thank you for your presentation. There is some speculation that the government may be providing some assistance to the industry through the income stabilization programs that are already there. If they do that, is that going to be a benefit to beef producers in Ontario?
Mr Kerr: You are referring to the national tripartite stabilization program. Yes, I think Ontario cattlemen have looked to that program as their safety net. There was some consternation that there were no payouts made for the month of June. We do not know at this point what the size of the payouts will be for July, August and September, but I guess if there is one element of hope that cattle feeders have to hang on to, it is the fact that there will be a substantial tripartite payment for the last three months.
Mr Ramsay: You mention here that the negotiations are continuing with the federal government on the treatment of farm-fed grains in the NISA program. Would provincial participation in NISA help the beef industry in Ontario, do you think?
Mr B. Murdoch: I would like to thank you gentlemen for coming here. I am a beef producer myself. One gentleman mentioned last time that supply management would be the way to go. Maybe you would not agree with that, or would you?
Mr B. Murdoch: All right. You mentioned the tripartite for some, but there are a lot of cattle producers who are not in that either. Do you have any solutions? You might as well keep your cattle as sell them right now. To take them to the open market, you are going to lose a lot of money, especially in the cow-calf. They are not worth selling right at this point.
Do you think we have to set fire to both the provincial and the federal governments to take a serious look at whether they really want to have agriculture in Canada? Do you think there is a movement afoot to say that maybe we should not be in agriculture in Canada? The governments seem to be talking that way. Do you think there is something there? I am talking about both federal and provincial.
Mr Coultes: The cattlemen as a group tend to say they would like to be able to compete and they would like to try and compete, be it with the US or with western Canada. The background statement would be, if they are given the level playing field, they think they can compete. This is maybe one of our major concerns, that we would like a level playing field between countries, between provinces and between commodities, and just to be treated equally.
Mr Huget: Just following on your comments about the level playing field, Alberta, as you know, has taken a great chunk of the Ontario meat-packing business and cattle production. It is almost impossible for people now, I think, to bring calves from the west here. That market is gone. Could you give me an indication of what makes the situation so much more attractive in Alberta than Ontario? What have they got that we do not have? What are they doing that we are not doing?
Mr Coultes: They have government programs, for one thing. When I mentioned the net benefits study as involved in the tripartite agreement, their level of support is somewhere around 6.4%, so that is about $64 on a $1,000 animal. In Ontario the support level is somewhere over 2%. So the difference there is about $40. That has resulted in a major shift of the cattle feeding from Ontario to Alberta.
One of the problems we referred to in the equality of the funding of the grains programs was that Canadian special grains did not include corn silage and it had an effect of considering the western producer ahead of the Ontario producer. I think these are two factors that have made a difference in the cattle feeding between the two provinces.
The Chair: Gentlemen, all of us on the committee want to thank you very much for taking the time to come here today. Your comments were well made and are going to be valuable to all of us in the recommendations that are made. I am hoping you will get copies of that report as soon as it is prepared.
Mr Dmetriuc: My name is George Dmetriuc. I am the chairman of the Ontario Wheat Producers' Marketing Board. On my right is Dave Alderman, our first vice-chairman, and somewhere out in the hallway is our secretary-manager who will be joining us in a moment.
Mr Chairman, I apologize. We tried to get the brief to you earlier. It is fairly extensive, so what I am going to try to do is summarize some of the paragraphs to allow more discussion. If I seem to be jumping around, just interrupt me.
First of all, we would like to thank the committee for the opportunity to appear. Just as a matter of background, our 10-member board is a producer board which has single-desk selling powers as an agency. We take possession of wheat delivered to our appointed elevators and market the crop on behalf of producers. All wheat, except farm-to-farm sales, must be marketed through that system.
The authority and the effectiveness of the board have been fairly stable. We have the ability to market all wheat produced in the province, with about 25% of the total annual production of some 900,000 tonnes sold domestically and the remainder exported.
Our production varies from year to year, but generally, because producers use wheat in their crop rotation and if production patterns are normal, soft white winter wheat is an important factor in their crop rotation and in their marketing.
The other importance of wheat is the early cash flow it triggers in August or September. That is important to give the financial institutions the knowledge that in fact a farmer will have a commodity to sell fairly early in the year. Our initial payments vary from year to year. Our initial payment for this year is $75, which is down from $115 a year ago.
Turning to page 3, I want to dwell a little bit on where we find ourselves as an industry. As a $140-million-a-year industry, we find ourselves in severe jeopardy because of a number of devastating circumstances. First and probably the most important is that wheat is the commodity targeted in the US export enhancement programs and the EEC restitution. Wheat is the number one grain commodity traded in the world. Soft white wheat accounts for about 75% of the world trade.
Just to give you an indication as to the impact of the export enhancement program, refer to the graph and you will note that it varies from a low of $14 in the 1989-90 crop year up to $37 for 1990-91, and recent sales to Algeria by the Americans had an export premium of $65. We also export into non-targeted markets and those are the only ones that give us an ability to get more money out of the marketplace vis-à-vis the US export programs.
Another disturbing factor is that the export enhancement program funding has no cap; it is unlimited funding. The unresolved GATT situation has kept that trade war in place, to our jeopardy in effect, and we see this continuing for some time. Referring again to the export enhancement the US has in place, it has not gained market share but in fact has lost market share and continues to subsidize almost every sale.
Another factor which is very disturbing and difficult to explain is the fact that world production and world carryover of stocks are not increasing and in actual fact are decreasing. In a normal trading scenario, this would mean that prices should be pushed up. This is not happening.
Nearly two thirds of all global trade in wheat and wheat flour is conducted on credit or concessions or gift terms, and that has hampered some of our exporting ability. If we do not get in line at the proper time, we do not sell into some of these markets. Those are competitive factors we have to overcome as we market our wheat.
Another factor that is starting to affect wheat trade is the Canadian monetary policy. With a strong Canadian dollar, a dollar that is strengthening, it is reducing the value of our commodity. I guess we are not the only ones who are caught in that, but it is a factor.
One of the most disturbing is the last item on page 6. In 1992 the United States intends to target export enhancement to all countries. Even Canada may not escape the mark of this program. This is a proposal that has been put to the administration. It appears to have a significant amount of political support. We are just waiting for that outcome. Just to repeat what I said before, the actual dollars in terms of export enhancement affect the price at which we can offer wheat on the international market. It has been somewhere between $35 and $45 a tonne.
Referring to page 7, there are just a couple of charts to show what the Chicago futures have been. You will see the very low trading value of agricultural commodities. The bottom chart shows a three-year decline and the steadying out at the end of 1990, and now prices are starting to be pushed up very slowly.
We appreciate what the government has done to enable the implementation of GRIP. Although we are disappointed that the province is not participating in NISA, it is certainly not putting obstacles in the federal government's position to try and get some money into the farmers' hands. The income shortfall for wheat in the 1990 crop year is about $15 million. This cash injection is needed desperately, not only for wheat but also for corn and soybeans, to ensure the survival of farming operations. The total need, as I am sure you are aware, has been projected at about $124 million.
We have also been faced, as a marketing board, with a number of other issues. We had a three-year supply agreement with Egypt. That was scuttled almost immediately by the US when it offered export enhancement to Egypt. In actual fact, we have not been able to sell into that market at all. We understand the US is offering $80 per tonne to the Egyptians as an export bonus, and that equates to about $65 a tonne for Ontario wheat in the Great Lakes.
We are also seeing devastation of our value added market. Our milling industry has been shut out of all flour export opportunities because of US and EC competition. They have also asked us, as a marketing board, to keep them competitive with US flour and, in effect, grains. We are competitive in terms of US replacement wheat. We are not sure whether the mills are going to be competitive in the flour scenario. They may not. The milling capacity in the US, the efficiency of their plants far exceeds what we have here in Canada.
As I say, we have been able to fend off the importation of milling wheat into our domestic market. We have done it by reducing the price from $265 a tonne two and one-half years ago to $135 today, and this of course equates to lower pool returns.
The present cost of input for winter wheat is about $160 a tonne. It is projected that our pool returns this year will be $100, with a $60-a-tonne shortfall. Although the board and the wheat producers have reduced their income to make sure that Ontario product goes into the marketplace, that dollar value has not been reflected on the store shelf.
On page 11 is just one example of a number whereby actual value of product in a shelf container has been reduced, yet the shelf price has continued to escalate. There are many examples in addition to crackers, cereals and a number of others.
Our industry is at a critical turning point. Our producers are faced with aging technology. The average age of a combine is between 17 and 20 years. That is not our guess, that is a published number. I think most of the other equipment that farmers have would be in that same situation. What they have been doing is fixing, patching and hoping that things will turn around.
What we are being faced with is a situation whereby financing has to be found to bridge a gap between the programs we have had in place and the new GRIP or the new safety-net programs that are coming into place.
The board fully supports the commodity council's report position that has been submitted to this committee. We have attached to the brief a number of Data Transporting Network reports and I will just leave those for your perusal, with the exception of just making a comment about the very last one, and that is the United States Department of Agriculture's interpretation of what our safety-net programs are in Canada. That report is totally distorted.
For a trading partner that Canada is supposed to have, we find it very disturbing that the USDA would take that approach. Basically what they are doing is targeting our GRIP program and saying that what we have here is not what they like. I am going to request the federal minister to respond to this and to correct the obvious errors. However, it does not do very much for our producers when they see this type of reporting.
Just one more observation, and that is on page 14. I refer you to the bar chart -- you may have seen it already -- which indicates what the actual cash situation is in Canada in terms of where we stand on the poverty line. I think you have heard -- and I heard some of the presentations the other day and some today -- that we have a very severe crisis. I hope I did not jump over this stuff too much. I just wanted to highlight it. The members can fill in the blanks when they read the report. We will try and answer questions.
Mr Ramsay: Nice to see you again and to hear from the wheat board. I must say I thought you were maybe a bit too kind when you made the reference to GRIP and NISA and just said you were disappointed. This government did not fund NISA this year, which had been a previous commitment of the Ontario government. Have you done any studies of what impact provincial funding of NISA might have had for wheat producers in Ontario, what the cost might have been and what benefit would have been derived by wheat producers in Ontario?
Mr Dmetriuc: Because of the way the federal-provincial agreement is for 1991, the 1% participation on the part of Ontario would have generated an additional 0.5%. That would mean that every farmer would have a share of $24 million. The provincial government's failure to participate has eliminated that $24 million.
Mr Dmetriuc: There are many ways of delivering it. It is a question of what approach you would take in bridging that financial gap between 1989 and 1991. We would look at and have looked at many different vehicles.
The problem, very simply, is the inability to generate sufficient income out of the marketplace to meet their financial commitments. It is just not there. We as a marketing board cannot generate additional money. Even if we try, we just cannot. We know the other commodities are in the same boat. I guess basically what it needed is a federal-provincial commitment to an agricultural food policy and, in the interim, to have some money injected.
Mr Klopp: On a point of order, Mr Chair: There was not $4 million given to the provincial government. In fact the deal was not even signed at that point. The federal government was still drawing in lines all over the place. But there was not $4 million given to the province of Ontario, in our hands. If there had been, we sure as heck would have got it to farmers.
Mr Dmetriuc: Projections are they will be down about 20%. Not all areas are as severely affected as, for example, Essex-Kent, part of Norfolk and the northern part of Lake Erie, but provincially it would be down about 20%.
Mr Dmetriuc: No, the $160 is OMAF projections. That is government cost of production. Those farmers who have lost because of drought or hail or whatever reason are going to lose twice, in effect. First, they will not have anything to sell even though the prices are low. Second, there is no program to make up for it, other than through crop insurance, and that only covers 80%. I think wheat is probably one of the highest-participating commodities, and we are glad. We support the crop insurance program. But not all farmers had it. I guess that was their decision.
Mr Jordan: Thank you for your presentation. I apologize for being late. Do you see the market opportunities changing to any great extent? For instance, you mentioned Cuba in your report, and of course the conditions in the other republics now. Do you see a positive indication to the market for wheat?
Mr Dmetriuc: I had the opportunity to go with the Ontario government on a trade mission. We were successful in opening a market in Cuba this past spring. We satisfied that requirement. We were able to negotiate a slight premium over the world price. That slight premium really did not amount to a great deal of money. We have markets all over the world for soft white wheat. It is one of the top-quality soft white wheats. The markets are not going to change substantially until there is an agreement in the trade war. If the US broadens its targeting of export enhancement and the EC continues with its $235 or $240 restitution, we are going to be faced with the same thing again next year.
Mr Klopp: Do you think the federal government and the province should be pushing to go back to a two-price system for wheat to prove the point to the government that it has not brought the cereal down to the consumer and it has really not been of benefit to the wheat producers in this country?
Mr Dmetriuc: We had a national two-price wheat system. We asked that it not be dismantled. Consumers were not screaming that cereals were too expensive. What forced the dismantling, although the federal government will not admit it, is the free trade agreement. It is very obvious now, and it was obvious to us, although not crystal clear. But the writing was on the wall. So without the backing and the support and the programs that the US producer had under the US farm bill, which included the export enhancement programs, we were forced to go into that marketplace and price accordingly. We do export into the US and we probably will continue to do so if that is a better place. But I do not know whether another two-price system for a specific commodity is politically acceptable.
I would much prefer that all the governments and I sit on the third-line-of-defence committee at the national level, and we are encouraging them to actually say, "Look, agriculture is important." Yes, it is going to take tax dollars, and yes, we are going to get over this hump till the trade war is completed or finished -- no more. That is the only thing. Otherwise we in Canada -- not just the Ontario Wheat Producers' Marketing Board, but the Canadian Wheat Board has the same problem -- will continue to market the same way as Australia and Argentina and whatever. You get whatever you can out of the marketplace and just hope to heck the farmers do not go around beating up the politicians. That is the way they market. They cannot compete against the US Treasury either.
Mr Waters: I have heard different people come before the committee and they have talked about supply management. My concern about supply management is that when we go to the feds, they will probably, as you indicated, point to the free trade agreement or GATT or whatever. I am even concerned about the fact that we are looking at helping the people in drought conditions and in a crisis now.
It seems that as provincial government, even before this government's time, in the last couple of years every time we have gone to assist the farmers either the feds or the US yelled foul. Is there any way of assisting farmers so that we are not going to have this problem where people are yelling foul, or that the feds will assist us and follow through on it?
Mr Dmetriuc: The Americans are yelling foul because of our GRIP program. We have had the countervail issues on red meats. We have been advising the government to take a reasonable position at GATT and we support the position it is taking. We also think there has to be some type of internal financial support programs within countries. There has to be a value on raw products. We talk about a cheap food policy -- it is not a cheap food policy; shelf prices do not reflect a cheap food policy. What we have is a cheap commodity policy. That is going to take a lot of political will.
A couple of years ago I said to Mr Mazankowski, just sort of tongue-in-cheek, "Why don't you announce an export enhancement program?" He said, "I don't have any money." I said: "It doesn't make any difference. Just say, `If you don't clean up the rules, we are going to do the same thing.'" That is exactly what Mr Mazankowski has had to say, not publicly, but --
Mr Waters: You referred to a cheap commodity policy, not a cheap food policy. With what we are dealing with here in section 123, the crisis in the farm community right now, I have asked of other people and I will ask of you, how do we assist the farm community in such a way that we know the farm community is going to benefit and not someone else within the food chain before it gets to the final retail situation?
Mr Dmetriuc: Whatever programs are targeted, they have to be targeted to the primary producer first of all. They have to be targeted in such a way that this money goes to them and allows them to make the decisions. I was involved in the development of the GRIP and NISA programs and I want to make a comment about them. GRIP, for example, is designed in such a way that producers should not milk the system. NISA is just a straight top-up on your net income.
We as producers, as we indicated in the brief, are already subsidizing the food chain. We have reduced the price of wheat in the domestic market. We have done it to keep our domestic market. We could in fact have a reversal in prices. The reason for the two-price wheat act was not to give producers a lot of money; it was to put a cap on how much producers could sell their wheat for or how much the Canadian consumer would have to pay for it. That is what the two-price wheat act was. As soon as the benefits reversed, there were some politicians who jumped on it and said, "Hey, that is unfair. You should be selling domestically for the same price as world trade is."
I guess that is the job of politicians, to make policy. But when it is done deliberately to hurt the economics of the wheat producer and no compensation and no programs are put in place to replace it, then that is wrong. We have said this publicly. We have said this to the federal government. But as to that decision that was made, they were just hellbent that they were going to do it, no matter what arguments we had.
The Chair: Thank you very much to you and your colleagues for taking the time to come here this afternoon, for the preparation of your comments and for your response to these questions. Our report will be prepared and hopefully you will get it, if not before anybody else does, at least as soon as everybody else does. It is not a promise, because it is one that could conceivably be broken, but we will do our very best.
Please tell us who you are and then proceed with your presentation, trying to reserve at least half the time for some conversation and some dialogue. Mr Waters pointed out earlier that the reason for the traffic in and out is that there is a debate going on in the assembly this afternoon on similar and identical topics. It is not out of rudeness or disinterest, but people want to participate in that debate as well as listen to the presentations. Those who are not here of course will read the transcripts. Please go ahead.
Mr Allison: My name is Bill Allison. I am a farmer director with the Ontario Soybean Growers' Marketing Board. I will get Fred to introduce the soybean marketing board and I will follow up with some comments about the situation.
Mr Brandenburg: My name is Fred Brandenburg and I am on the staff of the soybean board. We thought we would start off with maybe a little bit of background on the soybean industry. Soybeans are kind of an invisible crop. Even though they are the second-largest crop in Ontario, the third-highest-value field crop and the third-largest-acreage crop in Ontario, after corn and hay, a lot of people are not that familiar with them. But this past year, right now, we are in the process of harvesting 1.36 million acres of soybeans, which is about 16% of the acreage planted with field crops. We are estimating the farm value this year to be about $270 million.
On our board, just as on all the other marketing boards, all the directors are farmers who are elected annually, but our powers are quite different from a lot of the other boards. Unlike the wheat board, which you just spoke to, we do not actually control the crop and sell it ourselves. Our powers are limited to negotiating what we call the terms and conditions of sale of soybeans, which includes a formula as to how the minimum price is calculated and some of the maximum charges that the elevators are able to charge. We do not actually buy or sell. We have no price-setting powers and no production control powers.
We are financed by a licence fee which is directly deducted from the producers when they sell their soybeans. As well as our negotiating powers, we also license the buyers who can buy from the producers. We support research at agricultural colleges, at the University of Guelph and at some of the federal research stations. We administer the federal advance payments program. We also have a toll-free price information service for our producers. They can phone in at any time of the day or night and find out what the price is. We also collect data on all the sales and the average price.
As far as our market structure is concerned, as I mentioned, we do not buy or sell anything. The farmer sells directly to his country elevator -- we call them dealers -- and that dealer could either resell to a domestic processor or into the export market. Maybe they are involved in the seed business. That negotiated agreement we have does have a minimum-price formula, but it is based on prices in the export markets. It is really a bottom-line price. The price is directly in competition with the price of US soybeans based in Toledo, Ohio, which is the closest export point to southwestern Ontario.
Maybe I should have mentioned that even though they are grown across Ontario, about 70% of all the soybeans grown are grown in the five counties in southwestern Ontario, so it is quite concentrated in that part of the province.
It was only in 1985 actually that we became self-sufficient in soybeans. Before that time we relied quite a bit on US soybeans coming in to meet the processors' needs. That is reducing, but soybeans are traded freely between Canada and the United States. There are no tariffs, no trade restrictions. You can just take a truck across the border with very little trouble. There have been some tariffs on soybean products through the free trade agreement. Those will be all eliminated by 1995. Most of them will be gone at the end of this year.
Right now we are self-sufficient; 85% of our soybeans are used in Ontario. We did have three large soybean processors or crushers until this past spring when Victory Soya Mills closed down. They were right down on the waterfront here. We still have two plants, one in Hamilton and one in Windsor. They take the beans, crush them and take the oil, which goes into food products mostly and also some industrial products like printing ink. The other part of the bean is very high in protein and mostly is used as a livestock feed supplement.
You might have heard of products like tofu and soybean drink. They are relatively small in Canada. It is a very small part of the market. We do export a lot of very high-quality soybeans for food purposes to countries in the Far East like Japan, Hong Kong, Malaysia and Singapore, so we do have quite a good reputation for quality. Our main competition in Canada is canola. It is also grown for the oil and the protein.
Now to the price situation. Because we are a net exporter of canola and soybeans, all our prices are based on export markets. As you have already heard, those prices have been really hammered and have kept going down over the last few years with the European Community program, the common agricultural policy. They have gone from being the world's largest importer of soybeans in the mid-1980s to a surplus producer of oilseeds. Of course the US, in response to that, has come out very strongly with its export enhancement program and the price of soybeans just keeps going down. Historically, we now are at the lowest level ever when you look at inflation-adjusted dollars, but at the same time, the cost to the producers keeps going up.
We have graph 1, between pages 3 and 4. The grey is the average price to the producer, going back to 1976. The black is the net support level, so that is looking at our federal and provincial government programs. It shows what kind of support has been provided. You can see, going back to 1976, the support level now is not much higher than it was back then; in fact, it has been declining since about 1984. Estimated cash costs are strictly the farmer's out-of-pocket costs. That does not include anything for the farmer's own labour. That is strictly out-of-pocket money for seed, fuel, fertilizers and land rent, that sort of thing.
Our current programs are all based on five-year averages. The support is based on what the prices have been over the past five years, and except for the drought year of 1988, we have had the last five or six years of low prices, followed by lower prices. I guess the bottom line is we feel that Ontario is a competitive producer. We have the right soils and climate to produce soybeans. We do not have a problem there. We have the technology. Our problem is that we cannot compete against the treasuries of the European Community and the United States unless we have similar support from our own governments. I want to turn it back over to Bill now.
Mr Allison: In response to the inadequacy of these current farm income support programs, the federal and provincial governments developed two new income support programs for the producers of oilseeds, grains and other commodities. These programs -- GRIP, the gross revenue insurance plan, and NISA, the net income stabilization account -- will not become fully effective until the next marketing year.
Producers in the 1990-91 crop year have fallen through cracks between old programs -- which, as Fred has acknowledged, are not very adequate -- and have lost their support, and the new programs, which will not come into effect until next year. Waiting for an improved program next year is doing nothing to help a large number of farm families in a desperate income situation in 1991. Creditors are expecting payments for 1991 cropping expenses. Taxes and payments to the Farm Credit Corp are due this fall. Without immediate help, thousands of Ontario farmers either will not be able to stay in business until next year or they will be in such poor financial shape that even the new support programs will not be enough to keep them in business much longer.
Action is needed. Agriculture ministers from across Canada met in Regina last March and made a commitment that "transitional assistance provided in 1991 as a bridge to new safety nets will be directed at providing a transition from income levels attained during the pre-GRIP/NISA period based on those expected with GRIP/NISA."
Calculations made by Ontario farm groups using government data show that the total income for soybeans, corn and winter wheat in the 1990-91 crop year will be at least -- and this number has been quoted to you before -- $124 million below the level that would have been achieved if GRIP and NISA had been in place. This calculation does not include the income losses suffered by other crops in Ontario. Soybean growers alone would have received an extra $33 million in government support if the GRIP and NISA programs had both been in place for the 1990-91 crop year.
Ontario farm groups have recommended several actions which must be taken by governments to address this problem. We are asking the federal government to implement a number of measures, including increased benefits under the Agricultural Stabilization Act program for the 1990-91 crop year, which will be the last year of that program before it is replaced by GRIP. We are also seeking an increase in payments through the first year of the NISA program.
Because agriculture is a shared jurisdiction, the provincial government must take a comparable role in the support of agriculture. The Ontario government has been asked to support the NISA program this year by providing its share of contributions, and also to increase payments under the Ontario farm income stabilization program for the final 1990-91 crop year.
On September 17, 1991, Ontario's Minister of Agriculture and Food announced an interim payment under the 1991-92 GRIP program for grain and oilseeds. While this announcement of an early payment is appreciated, it must be very clear that this is assistance for the crop that is just being harvested and is not the solution to the problem of low prices and support for the 1990-91 crop year. Through the early payment, we are also concerned that we are only mortgaging tomorrow and may threaten the integrity of the GRIP program. Additional assistance for the 1990-91 crop must be provided.
To conclude, after several years of low commodity prices and declining government support, Ontario soybean growers and the producers of other grains and oilseeds are in a desperate financial situation. This desperate state in the rural community has hit the headlines this month with news that a number of farmers in Essex and Kent have recently applied for welfare and three farmers in Lambton county committed suicide within a one-week period.
Unless action is taken by governments immediately, many family farms across Ontario will not survive. Along with the loss of those farmers will be the loss of jobs in the entire agrifood industry, from the farm gate to the dinner table, including transportation, processing, packaging and marketing, followed closely by a rapid increase in the imports of foreign-grown and foreign-processed foods.
Mr Arnott: Thank you very much, gentlemen, for your fine presentation. I think you laid it out in a very logical manner. It was very enlightening. Generally speaking, are most soybean growers strictly cash croppers, or are they a little more diversified than that in Ontario?
Mr Allison: As a general statement, I do not like to generalize like that. I am a soybean grower myself, but I also produce a few beef cattle and I rotate with other crops such as winter wheat, corn, white beans, etc. Generally, in the most affected areas of the southwest, they are mainly a cash crop.
Mr Arnott: On page 3 of your brief, you say, "Our soybean growers are efficient and progressive, but they cannot compete against the treasuries of the European Community and the United States without comparable support from our governments." That is something that has always disturbed me. I often hear the statement that we cannot compete with the treasuries of the Europeans and the Americans. I think we can.
I think we are a very wealthy country, if you look at the amount of money that is flowing into the government. Certainly the Americans have a lot of the same problems as we have. I think we should be able to compete with their treasuries if we are going to continue to keep our farmers in place until we can see some years of positive prices ahead. Would you comment on that?
Mr Allison: That is a very good observation. I thought that way a lot too. When we talk to other governments and present them with that type of idea, they look at us and say, "Look at the amount of exports that, as a total picture, as a percentage, we would have to subsidize to be competitive with the other exporting countries, as a percentage of their total population base."
That is where we fall back. But one thing that I key in on is, do we have the commitment that the other countries seemingly do? Maybe we do not have the population base, but what I do not see is the commitment to the farming sector that they have, especially in the EC and the US. Your question can enlighten a lot of people, but if you focus in on commitment as well as what they can do, that is just as much the key to me.
Mr Jordan: In your conclusion, you have drawn our attention to the drastic circumstances in Lambton county. No doubt there was financial pressure that was being brought to bear on the individuals involved. Was that through the local banks? Who pressures people to that stage?
Mr Brandenburg: I do not think we can really comment. We do not really know each individual situation. It is just that we are aware that three people did commit suicide. One of the directors of our soybean board I think went to two of those funerals, but he really did not give us the details on where that direct pressure was coming from. Certainly it is a very desperate situation right now in the farm community.
One lady I talked to last week said: "We have cashed in our RRSPs. What do we do next? We have been farming for 25 years." They just do not know where to turn next. They are in that desperate a situation. They are asking for some advice on marketing. We try to help them out as much as possible, but it is pretty limited as to what we can do.
Mr Brandenburg: That depends on which part of the province you are in. The situation is different in different areas. Right now, I do not think there is very much farm land being traded, actually, unless you are selling off a 25-acre piece to someone who works in the city. As far as selling it to another farmer is concerned, that market is not very liquid right now.
Mr Klopp: Thank you for coming today. It has been interesting. Two points: One is, we consume about 85% of our soybeans in Ontario. One of the other farm groups came in the other day and requested that somebody do an audit on just how many beans are coming in at certain times. As a farmer, I know a number of years ago there was always a story going around, "The price should go up at the local elevator, but there are just enough beans coming across that they do not force us to put the price up another 10 or 20 cents." Are you people promoting the idea that we should just do an inventory of how beans come in and when they come in? I realize there is free trade and all that, but I am just trying to see if we can keep the honest honest. Are you in favour of that idea?
Mr Brandenburg: Yes, even talking to the two processors. Central Soya, which closed down the Victory plant here, did not import any US soybeans over the past crop year. The other plant is right on the border with Detroit and it does bring in soybeans as it requires them. But we have not really advocated any restrictions on the border.
Mr Klopp: You said we cannot compete with other countries and their subsidies. A couple of years ago a situation came up -- and it hit me very personally because I have tried to follow the markets a little bit, and you mention how you are trying to teach people better marketing -- with the Chicago Board of Trade where supposedly Central Soya was told to sell some product, and that forced the price to go down when it should have gone the other way. In fact, I guess it is even in court in the United States. There are farmers there pursuing that. Whatever happens, happens. Do you think that situation is true, or is this whole thing just a fabrication?
Mr Brandenburg: That is true. There is a farm group which has taken the Chicago Board of Trade to court, but just recently those charges were all kicked out of court by the judge. I think the Chicago Board of Trade took some extreme action because of one company it thought was trying to corner the market, so to speak. It is similar to what happened to the Hunt brothers in the silver markets back in the early 1980s. As farm representatives, we do not like it because that action pushed the price down. But if someone was trying to push the market the other way and doing it unfairly, we likely would have appreciated the board of trade taking action to bring him back in following the rules.
Mr Huget: I noticed in your brief that the tariffs on soybean products -- I assume that means processed soybeans -- will be removed in 1995. What impact do you think that is going to have on growers here in Canada? Is it going to have any impact at all in terms of it being easier to import the processed soybeans and locating a growing industry, if you like, as well as a processing industry in the United States?
Mr Brandenburg: Actually, we are hoping that once the tariffs are off completely it will improve our market situation, because the big problem in the oilseed industry in Canada has been the surplus of canola oil and soybean oil. We have a finite market in Canada. You can only use so much. We have a very large market for the other part of the bean and the canola, which is for protein for livestock feed, so our expectation is that with opening up that market we will be able to export more canola oil and soybean oil to the US. Their prices for oils have actually been above the Canadian levels for the last number of years because they do not have as much of a surplus. We are hoping it will get away from the canola-versus-soybean, east-west problem in Canada and start moving a little bit more north-south.
Mr Cleary: Gentlemen, I think you laid the problem right on the line. I just would like your comments on something. You say in your brief, "Creditors are expecting payment for the 1991 cropping expenses.... Without immediate help, thousands of Ontario farmers will not be able to stay in business until next year." We had the Canadian Bankers Association in here last week telling us it does not see much of a difference in collecting its loans from other years. I would just like your comments.
Mr Allison: As a person in that situation, I just cannot understand how the bankers could make that statement because, as the people before, the Ontario Wheat Producers' Marketing Board, have said, we are at about half the crop and about half the price. I rely on my own personal cash flow from that crop, and this year it is not there. Now we are harvesting a crop with historically low prices and we are waiting for a safety-net program that we have negotiated to come on stream. We are going to get an interim payment in November, which will be a little bit more than our premium. Where is this cash flow coming from that these bankers are talking about? That would be my response.
Mr Brandenburg: The soybean board administers the advance payments program for soybeans, which is a federal government program. It is an interest-free loan you can get if you do not sell your soybeans in the fall but carry them, waiting for a better market.
Over the years we have been seeing more and more applicants who are not dealing with the bank, because either they do not want to or the bank just will not lend them any more money. There may be more of an increase in the credit union area, but we had $30 million go out last year under our program. People were desperate for the money. Maybe the banks have reduced that problem themselves by not financing as many people.
The Chair: Thank you, gentlemen. We appreciate your time in coming here and in preparing your comments. I think the whole committee would agree that you have made a valuable contribution. When the report is prepared, I am confident you will get a copy of it promptly. Have good trips back home.
The Chair: I have a submission now from the Mennonite Central Committee. Welcome, sir. Please tell us who you are and what you want to tell us, and try to leave us some time so that we can ask you some questions.
Mr Gingerich: I will do my best. I am Orland Gingerich from Kitchener. You have before you a brief outline. Unfortunately, I only received this invitation at the end of last week and did not have time to write out a brief, nor did I have time to ask committee members to accompany me today. My comments on paper should not be understood as an official statement representing the Mennonite church or the agricultural concerns committee, of which I am a staff person. However, the ACC has been involved in the farm scene in southern Ontario for the last 15 years, which has given us some firsthand knowledge of what has been happening. Since I have not had time to write my presentation in full or check it with my committee, I must assume full personal responsibility for the opinions expressed below.
Although our Mennonite constituency is primarily located in southwestern and central Ontario, it does represent a fairly diverse type of agriculture and/or horticulture. Consequently, it is impossible to make broad statements on the crisis and its effects. I will attempt to recognize some of these differences as we go along, although I am confident you are all aware of this fact.
First, farm commodity prices have not kept up with inflation. This was recognized by Mr Cleary's motion, of which I have a copy, particularly on the oilseeds and grain sector, but I think that statement holds true for almost every part of the farm commodity situation. In fact, one of the members of our committee indicated recently -- and he did not give me any specifics -- that some of the commodity prices today, taking inflation into consideration, are as low as or lower than in the 1930s.
The second point I make here is that farm input costs have increased substantially over the same period, and those two factors of course aggravate one another -- the fact that commodity prices have not kept up with inflation and the fact that the input costs of farmers have increased substantially.
Third, part of the blame for the crisis is the emphasis on production agriculture, with its high input costs. It is said that farmers are their own worst enemies. They produce too much, consequently prices drop and so they suffer. There is an increased emphasis, I would say, on alternative types of agriculture. I happen to be on a committee which works with the University of Guelph in this area. We are encouraged by the fact that especially the new dean of the agriculture college in Guelph has indicated that institution shall no longer be known as having a production agriculture emphasis, which it has had in the past and which I think is part of our problem.
Fourth, farmers' capital equipment costs are out of proportion to the financial returns. Recently, in the Kitchener-Waterloo Record, it was reported that our local civic administration has some equipment it would like to install to save electricity, but the cost of installing the equipment is too high. They have a policy that they must receive the full returns on their investment in five years. That might be fine for a city, but for farmers, that is simply completely out of line.
I refer here also to quota costs, and I may refer to that later. Part of farmers' capital equipment nowadays -- I am thinking now of those who are under marketing boards and have quota systems -- is that one pays almost double, not only for land but for, say, dairy cattle or chickens or whatever it is to get into the business, to say nothing of equipment, housing, farm equipment and other costs.
In some areas this is acute; in the Niagara area, for instance. I should say our committee has represented members from the Niagara area, from southwestern Ontario, from north of the city here and from central Ontario. You are aware, I suppose, along with some of the MPPs from that area in particular, of some of the problems in the Niagara area, where land is so expensive that it is impractical to farm. Young people are not going into farming, simply because they cannot finance it.
Fifth, farm crises may be the result of vagaries of the weather. That has already been referred to today. Down in the Leamington-Windsor area in particular, they have been hit with very bad weather. There are other places and other areas, the Grey-Bruce area for instance, where agriculture is not so much a mixed farming or special-produce part of the country as southern Ontario. They have problems that perhaps central Ontario does not have.
Let me say a few words about social crisis. Economic crisis invariably affects other aspects of the economy, which in turn affects people, leading to unemployment and increased welfare costs, to say nothing about concepts of self-worth and family relationships. A classic example, of course, is the city of Brantford, which has almost become a ghost town since Massey-Ferguson pulled out of there. Many other smaller communities have lost industries. I am thinking of a small town in Perth county, for instance, which lost one of its main industries and is scrambling to find other ways to improve its economic base.
It has also been referred to that in some areas, due to the social crisis, there are suicides, there is drug addiction, there are other social factors which are a detriment to the province. The latest figures indicate that over 30% of farm women are in off-farm jobs, and in some cases husbands as well, all of which tends to put a strain on family relationships.
I have before me a document produced by Guelph University called Sustainable Rural Communities, which I received very recently. They are now creating a program to study the rural community and various aspects of it to see what can be done to help facilitate and maintain our rural communities. Let me just make a brief reference to a bit of their document here.
There are a few statements that I think are very pertinent for this occasion. One is that agriculture no longer the major source of rural income. Another one is branch-plant industrial development in which key decision-making is not community-based, that is, many companies have pulled out of small towns and the surrounding countryside and have concentrated their efforts in big places like Toronto or other places and consequently rural communities have been suffering. There is industry relocation and shutdowns. The last one I wanted to indicate is that chronic low returns in many sectors of agriculture necessitate off-farm employment among those remaining on the farm. You have heard enough about that, I assume.
Simply moving on, rural communities often suffer, including small towns. I refer to that because of ever-fewer farmers and sometimes because of urbanites moving into rural communities. Again, the study that Guelph is proposing recognizes some of these circumstances and they are hoping to create courses at the university and also initiate research programs to help determine how these matters can be remedied.
High startup costs of modern farming are preventing young people from getting into farming. As I am sure you are aware, and as everyone knows, there are the high startup costs I referred to previously, part of which, of course, are due to land, although prices of farm land are down from a number of years back, but equipment and other inputs on the farm have made it almost impossible for young people to begin farming unless they have a farm given to them. Even that has problems connected with it, especially if a farmer has more than one son or a few members in the family.
Our individualistic, high-tech, self-sufficient type of farming has tended towards higher costs and less concept of farm community. In that respect we have been working as a committee to try to encourage farmers to form farm support groups and, as well, to try to form perhaps more co-ops in using farm machinery to reduce farmers' costs in order to help them to survive.
Towards solutions: Admittedly, outlining the problems is essential. The more difficult part is finding solutions. There is no doubt a place for government to hand out funds in emergency situations, but that is not a long-term solution to the farm crisis. I think we will agree that until we find some more long-term solutions, we will be going from one crisis to the next.
Good farm legislation, whatever that might look like, would certainly contribute to healthy agriculture. We especially, as Mennonites, have been rather apolitical, and so we have no experience in political matters and feel that perhaps we do not have that much of a contribution to make in this area, but we are aware that legislation and the tack that government takes on matters of agriculture do affect agriculture.
While in the past we have been told that farmers must be competitive, we believe co-operation would be a better approach, not only provincially but also nationally and internationally. Emphasis on competition and free trade is a euphemism for, "Those who got get." I say it with a bit of a smirk perhaps, but I think it is too often quite true.
We are obviously in a time of rather dramatic change as far as agriculture is concerned. Farmers themselves will have to work out their own salvation in most cases and practise a more sustainable agriculture. Recently in a farm magazine on agriculture, a statement was made that GRIP ought to stand for getting rid of inefficient practices.
Mr Gingerich: I suggest that to a large degree there is a lot of truth in that statement simply because some of our old-order Mennonite people, as you know, still do a lot of farming with horses. They have a very mixed operation. They are very self-sufficient and do not get government funds of any kind, and they are probably hurting less than anybody else in this province. However, as indicated above, appropriate farm legislation and a greater understanding and co-operation of all of society is essential. Otherwise we all eventually suffer the consequences.
"In the developed and developing worlds, the notion `rural' embraces both the human and natural resource base for agricultural production and country life. It contains other primary renewable and non-renewable resources essential for most industrial production, and also irreplaceable and diminishing natural areas and habitat. These basic `ruralities' are, at present, little valued within a global socioeconomic perspective in which measures of progress and development do not account for waste and loss of social and natural environments. Loss of cultural identity and a sense of community are part of these unmeasured and immeasurable changes."
In conclusion, let me express my appreciation for the privilege of addressing the farm crisis situation. We admire your efforts in attempting to wrestle with problems facing one of Canada's largest industries. We wish you well.
Mr Klopp: It is not really a question. I think you have done a great job of actually summarizing what a lot of farm groups have talked about, which I think is very good. Over the years I have been involved in lobbying governments and fellow farmers, arguing with farmers; some of them were even good Mennonite farmers. I think it crosses all lines -- political stripe, religious stripe. We all like to get the maximum out of it. I like to think I do not beat my neighbour over the head and get on top of him, but there are times when I probably have. I think you also have done a good job of summarizing what a lot of the farm groups have said. I think that is a good thing. The government feels this has a lot of truth in it, and I appreciate your comments.
Mr Cleary: Thank you for your presentation. I have been in some of your communities on occasion. I know the way you operate your farms is somewhat different. There is something I have wondered about for a long time on financing. Do you deal internally or do you deal through a bank or a credit union?
Mr Gingerich: That varies. Our old-order groups pretty much deal internally, although some are involved with a Mennonite credit union which also operates on behalf of farmers and gives loans and mortgages to farmers and this type of thing.
I want to ask you about the report you mentioned from the University of Guelph called Sustainable Rural Communities. I have not seen it and I would like to hear your assessment of some of the things it includes.
Mr Gingerich: As I said, I received it this last week and I just went through it yesterday and today. I am fairly impressed with what they are attempting to do, and hopefully they will do. With government regulations, with farmers' and others' co-operation, we can make a dent in the farm situation.
Mr Gingerich: I am not certain that there are any recommendations for government action. They have issued this document and are asking for responses to it. They have recommendations in it -- it is a five-year plan -- what it will cost and this type of thing. I am not sure whether they know where the money is coming from or not.
Mr Duignan: Thank you for coming along and making an excellent presentation. I could not agree with you more on your point 3 of "Towards Solutions," that we must work together more, on both the national and international levels. Surely to goodness, if we are co-operating on getting rid of mass-destruction nuclear weapons in this world, instead of having a trade war between us, we can co-operate together on having a fair price for the consumer, for the farmer and absolutely having enough food available to feed the Third World.
Mr Jordan: I also thank you for your excellent report. Under "Towards Solutions," item 5, you mention that we are in a dramatic change and farmers themselves will have to work out their own solutions. Would you elaborate?
Mr Gingerich: I also have some friends in industry and so on who have told me that over the years -- it is not only lately, but earlier. Just the other week a gentleman who is in business told me they have had a bad two years. They have really had to tighten their belts. He said he was not aware that they could be so much more efficient as they have had to become. I think that is also partly true for farmers. What we are encouraging from our end is that farmers simply have to try to cut their costs, use more sustainable agriculture, use less inputs, share machinery, any number of possible ways in which I think farmers could cut their costs to be more efficient.
Mr Gingerich: Obviously our food costs in Canada are low -- in North America, if you please -- compared to many other countries. One of the food problems of course is distribution, but the main food problem as I see it is simply people lacking finances to buy food. There is lots of food in our world but people lack -- sincerely. I was at a meeting in the city two weeks ago sponsored by the Toronto food council. We seek to work with farmers and city people more closely. There are 100,000 people in Toronto who use food banks.
The Chair: Sir, on behalf of the committee, thanks for your interest and your participation. I want to try to make sure you get a copy of the report. Again, on behalf of everybody here, thank you very much and have a good, safe trip home.