STANDING COMMITTEE ON RESOURCES
Mr. James DeWolfe
MR. CHAIRMAN: We have a quorum, so I will call the meeting to order. We have with us two gentlemen from Pork Nova Scotia. On my right, we have Mr. Lester Palmer, Chairman of Pork Nova Scotia, he is also a producer; on my left is Mr. Henry Vissers, the Executive Manager. Before we go any further, I would like to introduce the members. There are two members still missing who will probably be joining us before long. Perhaps we will start with Mr. Chipman.
[The committee members introduced themselves.]
MR. CHAIRMAN: We will continue on. Normally what we do is we have a presentation from your group. It is my understanding that Lester Palmer is going to start it off. Following that, we can move to Mr. Vissers for some comments. Then we will ask some questions of you. Without further ado, again, welcome to the committee. Start at your pleasure.
MR. LESTER PALMER: Mr. Chairman, I thank you for the opportunity to meet with the standing committee. I think, maybe, this is the first time that the pork industry has met with the committee. Just to tell you a bit about ourselves, we are the marketing agent for all hogs of Nova Scotia. All hogs that are slaughtered are marketed through us, 99.9 per cent of them. Larsen Packers is our biggest buyer. We have two smaller plants, one in Antigonish and one in Kingston. We are divided into three zones in the province. Zone one takes in the eastern end of the province, Ralph Mattie from Mattie Farms would be the director in that area, Hermon Berfelo from the Stewiacke area; central, in the Valley area, has two directors, one is Patrick Ueffing from the Canning area, and myself, Lester Palmer; and the western area has two directors, Gerry VanDyk from Caledonia, and Stanley Boudreau from Concession. If any of you recognize those people from your ridings, you know who to talk to about the pork industry.
We have an office in Truro, and as you just heard, Henry Vissers is our Executive Manager. We have two others on staff, and a part-time promotion lady. We are not very large in numbers, but we feel we have a pretty good organization. We market close to 225,000 hogs a year, through Pork Nova Scotia. With that as an introduction, I will turn it over to Henry Vissers. He can fill you in on all the fine details.
MR. CHAIRMAN: Thank you, Lester.
MR. HENRY VISSERS: I have a lot of information in the book that was handed out. I see that quite a bit of it has been pulled off our website, and we do try to keep that up to date. Part of that book has a weekly newsletter that we publish. The most current issue isn't on there, but it is within two weeks. Any of you who are interested in getting that on a more regular basis, we do e-mail it. If you would like a copy e-mailed to you, we can put you on the list, and you will have the most current issue on the Friday that we mail it out.
I just wanted to bring you up to date on a few issues that we have been dealing with and, as it happens, there are also the issues that you have been dealing with, one of them being changes to the way the budget has affected agriculture. One of the major effects of that budget has been the loss of what we have called the risk management program. This program was in place since 1995. It is based on a cost of production formula that we worked through with the Nova Scotia Department of Agriculture to come up with a cost for producing a Nova Scotia market hog. The plan allowed payments, at the last of the program, of cost of production less $12.50, which we felt was adequate to keep producers in business through the downsides of the market that we have traditionally seen. Normally it runs in somewhere between a 20 and 24 month cycle. We go through a high side and then we go back into a period when we are below cost of production.
The loss of that program, probably the timing was as good as it could be because we have seen a recovery in prices and producers are now producing at above cost of production. The disheartening part of it for the industry was that there was nothing in place once that program was eliminated. It does show in the budget that there is $500,000 a year that is going to pork risk management, but the province has decided that they are going to close the program and that $500,000 per year is meant to pay the loan down that the province paid to the risk management fund over the last crisis period that we had. There was quite a bit of history involved in that.
We had hoped that the agriculture income disaster assistance money that was supposed to come to the province from the federal government would pay a portion of that loan down. We had also thought that we would be able to keep going with that program since it was a three partner program that had contributions from the province, the processor and the producer. So it was a three way program and there were gains for everyone.
That is just a history of the program. We are trying to move on and look for something else to replace it. We obviously need some sort of a safety net to help us through the low parts of the price cycle. We have been looking to the NISA program, the Net Income Stabilization Agreement, that is in place now and I have mentioned a few things about that in the report that I have given you. It is a program that has been in place for a number of years. It works out to a 50-50 share between the producer and the other 50 per cent is contributions from the federal and provincial governments with program money that is by agreement from the federal government. That is a 60 per cent federal, 40 per cent provincial program that has just been agreed to for a further three years.
What we are looking for is an enhancement to this program that will allow producers to increase their contributions to the program, as well as increasing the share of contribution from that federal-provincial agreement, so that it is adequate to support producers through a low-price cycle. It is a change in that we have traditionally looked at industry programs rather than individual programs, but because of WTO considerations and the way the federal government looks at these programs, we have been forced to look at these individual type programs. The upside of that is that it looks at both price and production so that if an individual farm has an issue with production in a particular year, then they would be able to access their NISA account as well as if it is a low-price cycle. So it would be something that would be up to the individual to take care of.
What we would like to see is what we have been calling an enhanced NISA; NISA is based on a formula that looks at eligible net sales. An enhanced NISA would allow us to increase the percentage of contributions that a producer would be able to put into that program. For instance, now it is what they call a 4-3-1, which is 4 per cent producer, 3 per cent provincial and 1 per cent federal, and we would be looking for some sort of a combination that would take it to between 12 per cent and 14 per cent depending on how the formula would work.
Our understanding is that the federal government likes to look at programs that are whole farm, that would involve the whole farm community rather than one particular sector. This sort of a program would work well that way because the formula we would be able to take across all commodities and each commodity would be able to buy that formula and take the percentage that is appropriate for them. It builds some equality into this program that we don't see today and it helps increase the balances in this program so that we would actually have something that would be worthwhile the next time the price falls.
Most hog producers now contribute to NISA, but the fund balances have not been able to build to the point where they will be useful during the next downside. It may sound like a lot of money if an individual producer has $50,000 in a NISA account, but that same producer will probably have a feed bill in the run of a month that runs close to that amount. So it is just not adequate to do the job as it stands now. So that is where we have been focusing with safety nets. As I said, we want to participate in that program because it does
lever the federal dollars which helps the province with their budgets because those commodity ad hoc type programs, obviously, are not acceptable to those federal programs any more so it would become 60/40 rather than 100 per cent provincial money.
The other major budget effect that we have seen is, of course, the loss of the commodity specialists that were involved in the Production Technology Branch. The budget has passed and the reality there is that there is $2.7 million to work with. The province has allowed the federation to appoint a committee to take a look at some of these issues. We are in support of that. We are in support of taking a look at what we can do as far as a core group of specialists who would work with farmers and we are certainly willing to take a look at some new methods of delivery and things like that, but we need the flexibility within that agricultural budget to make some of this happen and to put some of the things in place that we need.
There are different considerations. There are things that absolutely need to be done. There are legislative matters that have been involved in that Production Technology Branch. There are things that are across more than one commodity and then there are things that are specific to each commodity. We need to take a look at all of those and see where we fit and who we need to put in place to make those things continue to happen so that our industry can continue to function and continue to grow. We feel that the hog industry, in particular, is one sector because it is not supply managed, that if we do it properly, is an industry that can grow and create new jobs and new wealth in Nova Scotia.
In talking about that, one of the things that is in the front of the minds of pork producers and Pork Nova Scotia is making sure that we have consideration for the environment and that when we build new buildings, or renovate, or in existing buildings, that we are good stewards of the land and that we protect the environment. In 1998, along with provincial staff, the Department of the Environment, there was a fairly large committee that was established to take a look at guidelines for siting and management of hog farms in Nova Scotia. That has been a guideline that has been in place since 1998 and it has been distributed to municipal and provincial staff and politicians and it is also distributed to all producers.
We have made some modifications to that. We have brought the committee back together again and have taken a look at some of the technical changes that have taken place in the industry. Some of the new investments that have taken place have put new manure handling facilities in place that have a very minimal impact on the environment. There are double-floor tanks that have a small tank on the top and a large one on the bottom that are flushed frequently enough that the odours are minimized, and the impact on the community surrounding these farms are limited. We have given some consideration to people that have made those investments and improved the facilities to that point.
We are talking fairly major investments when we talk about some of these farms. When you are talking about, for instance, a 700 sow/farrow to wean unit, you are talking close to $2 million invested in those structures and the jobs that are involved with both on farm and through the industry with feed companies and support and, of course, packing plants like Larsen.
Those are the things I wanted to bring up. The issue of environmental stewardship is something that we know is going to be ongoing, and we are willing to work with whomever to make sure we do a good job with that.
The last one is one that has been on the back burner for the last while because of the lower costs of grain. We are at an economic disadvantage being at the end of the line as far as transportation costs for grain. The reality is that probably the Maritimes will never be self-sufficient in grain. We simply do not have the climate that is going make that happen. We haven't heard as much about it lately because of the low cost of grain the last couple of years, other than from maybe the grain farmers out West. The fact is, when the price of grain is low, our economic disadvantage is higher, because it still costs $30 a ton to bring grain in, regardless of whether that ton of grain is $200 a ton or $300 a ton. So, it is something we are going to need to address.
We look out over the harbour, and we see we have access to a year-round port, and still, we can't seem to get the volumes up to the point where we can economically bring that grain in by water. There is still some competition between rail and water, so we do have one we can play off against the other. As things progress with CN and they become an international company, we fear that may change. We also think we need a good system of bringing grain into Halifax here in volumes that will allow us to do it for a price we can do it for.
We would like to be able to change that from a disadvantage to an advantage. It is not something that only affects the hog industry. The whole livestock industry is affected by that, and we feel that over the next couple of years that is going to be an emerging issue because, obviously, transportation costs are going to go up as fossil fuels costs increase.
Mr. Chairman, that is a summary of the report that we passed around this morning. Lester and I would be happy to answer any questions on those or any other issue. Lester has a farm in the Annapolis Valley. I don't think he told you that. He has a 220 sow, fur to finish unit. He also has an orchard and about 200 acres of grain, so I guess that is probably as close to a traditional mix of farm as you are going to get. He is in the heart of the Valley, is well respected among his peers, and will be able to answer any of your questions on the industry.
MR. CHAIRMAN: Thank you. Mr. Chipman.
MR. FRANK CHIPMAN: I will ask some more questions later. But I notice hog production in Quebec has increased dramatically over the last 10 or 20 years. Why is that? I know what my suspicions are, but why are they able to make a success, if I may say a success?
MR. VISSERS: They have gone through the last price downturn relatively unscathed because of a program they call ASRA, which gives them provincial government payments up to a percentage of their COP. It is similar to the risk management program that we had, only it was simply funded mostly by the province and partly by the producer. There were no limits on the fund balance. It was whatever was required, so the industry grew over that period of time, and is continuing to grow.
MR. CHIPMAN: So they have a guaranteed cost of production?
MR. VISSERS: They basically have a guaranteed cost of production, and they have a completely separate program for the ADA program at the same time. When ADA payments were made to individuals in other provinces, Quebec was able to cut a deal that returned, I think, $110 million to the ASRA Program in block funds.
MR. CHIPMAN: How much of that money would be federal?
MR. VISSERS: The ADA money was all federal and it was considered that because they supported the industry provincially through that crisis. There was no liability to the federal Crown because no individual producer would be able to apply and receive funds because the ASRA money would have been income.
MR. CHIPMAN: So you can't source any federal money here?
MR. VISSERS: The ADA program did not work well for Nova Scotia producers at all, not just for the hog sector, but for any sector. Partly, for the hog industry, because risk management was considered income so that took us up past the 70 per cent gross margin income that would allow us to trigger a payment, and partly because most of the farms in Nova Scotia are something like Lester's mixed farms, and they have to gather all of their income from their different enterprises before they would apply for something like that.
MR. CHIPMAN: Could I ask a couple more questions, Mr. Chairman?
MR. CHAIRMAN: Ask one more, at any rate, and we will get back to you.
MR. CHIPMAN: You said you realized 60 per cent of your cost for grain, or 60 per cent of the grain is imported?
MR. VISSERS: Grain is 60 per cent of our costs and some of it comes from either New Brunswick or Prince Edward Island, but the vast majority of it would be imported from elsewhere.
MR. CHIPMAN: I talked to a grain producer here a year or two ago and he said that there is some type of agreement with the federal government, they could have brought grain into Nova Scotia from the eastern seaboard of the United States, but they were restricted because of some sort of federal agreement. Are you aware of what that is?
MR. VISSERS: There were some restrictions on whether or not you could actually use a boat that had a foreign crew and there were other issues like that. I think most of those roadblocks have been taken down. The problem is that if there are opportunity feeds out there, we are not able to use the volume of a full boatload on short notice like that. There is a three or four day window where you have to decide whether or not you are going to take it.
MR. CHIPMAN: I don't know if it had something to do with a foreign crew - of course, Americans would be foreigners - it had something to do with bringing it in from New England because I know after they pro rate, when the past rates had expired, that they would try to bring it into Nova Scotia from New England, Maine and that area.
MR. VISSERS: That has been happening.
MR. CHIPMAN: That is happening now?
MR. VISSERS: Some of that has been happening. Usually, it is a rotational crop off the potato land and it is coming right off the field in the fall of the year.
MR. CHIPMAN: Thank you.
MR. CHAIRMAN: Given the high cost of start-up and the high cost of grain as you had previously mentioned, I was wondering, do you see much potential for growth within your industry within Nova Scotia?
MR. VISSERS: If we could ever knock the blocks off of the cost of grain, I would think that we would have quite a large growth in the industry. As long as grain prices are that much higher here than they are elsewhere, I would say probably our growth would be confined to feeding our own population. We are currently only producing somewhere around 60 per cent of the consumption in Nova Scotia so there is an unmet demand there that can be filled before we have to think about exporting anywhere else, so I think there is potential for growth there. We are at 220,000 hogs now, even if we would increase that by 20 per cent to take a part of that unmet need, then that is quite a bit of growth for us.
MR. CHAIRMAN: Where would you have to have your industry bring grain in, for instance, I guess that would have to be done in partnership with other agriculture organizations, but to bring grain in by ship, what . . .
MR. VISSERS: There were so many things tried in the past, I think we have to just step back and take a new look at it. I know that the feed companies have reduced some of the costs in their mills and things like that to the point that probably their margins are fair. They are still doing things the same way that they always have. There doesn't seem to be anyone willing to take a chance to try to do something different. Maybe we need some kind of a program in place that allows them to take some of those risks. I don't have the answer to that, all I have is the question of saying that we need to take a look at it or we are going to, in a couple of years, be saying, whoa, what is going on here? Then it may be too late.
MR. PALMER: There seems to be a reluctance between feed companies to work together. They are very secretive about each other's business and they are not willing to cooperate and bring a vote in together. There is a real reluctance there.
MR. VISSERS: I think there are probably three or four different things that can be done if they would work together. One of them would be spending a little bit more time educating people and working with futures and options and things like that so that there is some security of price before the grain actually hits the dock. The other thing is, like Lester said, some cooperation among the feed mills so that the volumes are high enough that we can bring a boatload in when we need to.
MR. CHAIRMAN: I want to welcome John MacDonell, the member for Hants East. He wasn't here when we did our introductions. I will turn the questions over to John.
MR. JOHN MACDONELL: I apologize for being late. I am just wondering, is it Mr. Palmer? Nice to meet you.
MR. PALMER: We have talked on the phone before.
MR. JOHN MACDONELL: Yes. I will start with the subject that is on - and I will ask a couple of questions and then hope to get back with some more to let other people have a chance - the whole relationship around grain. If you are saying that a fair bit of our grain comes from New Brunswick and Prince Edward Island, and the rest probably from western Canada, then I am assuming we must be able to grow grain. Mr. Palmer is growing grain, so what are the obstacles in this province? You say too short of a season, but people have grown grain in Nova Scotia for years and years, and probably now that the feed freight assistance is gone, I thought that may be an initiative to cause Nova Scotia farmers to grow more grain. Is it really a case that we can't grow grain in this province?
MR. PALMER: It is just not economically feasible to grow straight grain. Most of the grain coming from New Brunswick and P.E.I. is in rotation with potatoes.
MR. JOHN MACDONELL: Right. So it is an extra for them, to try to improve their land, and they are looking to get rid of it.
MR. PALMER: In the Valley we have a real competition for land for potatoes, carrots, onions, vegetables - high-value crop, and land is at a premium in the Valley.
MR. JOHN MACDONELL: So, just to grow it as a grain for feed, it doesn't pay to do that?
MR. PALMER: No. I could rent my land for $100 an acre to a vegetable grower and make a lot more money than growing grain. But I have my manure, and I have to utilize that.
MR. JOHN MACDONELL: What is the relationship to the price that the farmers are getting for pork? In other words, we know that for some time now grain prices in the West have been quite low. If they ever got to where they should be, then what is the relationship to the price you are getting for your pork? If you had to pay that higher price some day down the road, how much more should you be getting for your pork to cover what you could predict to be an increased cost?
MR. VISSERS: I have never graphed it, but traditionally high grain prices have not been bad for the Maritime hog industry, because it means that hog production in some of the larger hog producing areas usually diminishes when the price of grain is high, because they are simply putting the grain through the hogs in order to valuate the grain. We certainly will see a change in costs of production as the price of grain goes up. Of course, everybody is watching the market place now, and it is totally a weather market because the crop is growing in the ground, and they are worried whether or not the grain is going to get planted or come off. It is all based on that, and probably this fall sometime, we will know whether or not the price of grain is going to go up. Certainly it is an issue with producers, because as the price of grain goes up, then that margin decreases.
MR. JOHN MACDONELL: Have the producers ever thought of forming a cooperative or somehow uniting to a point where they could order grain? They could get a boatload of grain themselves instead of hoping that the mills would somehow get together. Has that been fielded?
MR. VISSERS: Probably about 60 to 70 per cent of the industry is buying grain from the feed companies, rather than milling their own grain. There is quite a capital cost involved in putting up a mill. There are restrictions on what you can do when you do have that mill. They are increasing all the time.
Really, we need to work with people who are in place to make something like that happen. We need the cooperation of those plants and those feed mills in order to make that work. They are working cross-species too, they are working with the other livestock sectors and the volumes, as you pull people from the broiler industry or the dairy industry, then of course the volumes of grain go up, and that is what we need.
[9:30 a.m.]
MR. JON CAREY: Just a moment to talk of risk management. Previously, if I am right, it was $7.00 from the three participating parties, the producer, the government and the processor. Then there was some discussion of $2.00 a hog. The $2.00 was eliminated or never implemented, is that right?
MR. VISSERS: Do you mean recently?
MR. CAREY: Recently.
MR. VISSERS: Originally it was $2.00 each, for a total of $6.00. When we saw that the market was collapsing on us, we were concerned that there wasn't going to be enough of a fund balance to carry us through, so then we increased it a couple of times, and eventually to the point where it got to $7.00 each. That was never meant to be long-term, it was just something to get us through the year. As spring approached and the new budget time approached, we did speak to the packers and asked them what their commitment would be for the year. Their commitment was that it would be $2.00, and another $2.00 in credit for a loan that they floated for the risk management fund in December/January 1998-99. In fact, their contribution would have been $2.00.
MR. CAREY: Would that have been long term?
MR. VISSERS: We always went year to year on that, which was one of the problems with the program, not really having a long-term commitment. It would have been until next March.
MR. CAREY: The way it is now the Department of Agriculture has taken over the debt of $3.5 million, so you are starting with a zero balance. Now you are basically on your own to find a way to succeed. I have two questions, I have a little concern as to why we would let the processor off, if he was going to give us $2.00, why didn't we take it? The other question is, every time we seem to get involved in provincial-federal programs, they get up and running, and then the term is so short, there is no stability to it, is this a fear with this new program? I guess it depends on how you look at it, but it doesn't seem really long for stability.
MR. VISSERS: Three years is a long time when you are usually fighting nine months down the road.
MR. CAREY: Maybe it is not bad, but on the other hand, for example, if you are putting in 50 per cent, or whatever, and the feds are going to put in 60 per cent of the remaining 50 per cent, if I understand it, if they pull out, then the same thing seems to happen every time in a lot of federal programs, the province winds up in a position where it has to pick up the slack or cancel the program. Maybe in your answer, do you see much difference with the possibilities in the future with having Larsens with a new owner in the industry?
MR. VISSERS: As far as the NISA program goes, it is what is out there. It is the program that has been in place for a number of years now. It is not good enough for the livestock industry to survive on it alone, as it stands now, which is why we are looking for enhancements to it. I guess we probably would have preferred to stay with some kind of an industry program, along with the NISA program, that would work in combination. We were anticipating repositioning risk management, but we realize we are at the point now where we need to look at trying to get this enhanced NISA program in place, and the sooner the better. We are looking at decent prices now, we are just beginning to look at decent prices, but 20 months down the road, we are going to be back into it again.
Those fund balances need to be up to the point where they are going to help people. We have cut away the pegs, and the province has said to us that this is going to be an individual program, if anything. We need to have something in place so those individuals can protect themselves the next time the price goes to pieces on us. It does exist, it is a program that the province and the federal government are familiar with. We can simply add on to that to make it work for us. That is why we are looking to that program.
As far as three years, that is a long time for us. We would certainly like a longer term commitment than that. It was part of the federal-provincial agreement the last time, and it is a part of this one, so we know it has some history, and it is probably going to have some future. We are willing to go with it, and try to work with it and make it to the point it can help our people.
As far as the second part of your question, the acquisition of Larsens by Maple Leaf, the Larsens/Hub group, we sent hogs to both those plants, both Larsens and a small number to Hub in New Brunswick. We haven't seen any change to the way they have done business. We see some advantages to that takeover because Larsens was dealing with a lot of larger players and not able to do some of the things they needed to do. Sobeys, Loblaws or National, whatever you want to call them, have gotten larger. They basically have three customers. They have Co-Op, they have National, they have Sobeys. As a small company, they were going on bended knee trying to get them to take product. They probably won't have to do that as much now because they are dealing with a larger organization that has
markets outside the local area. So some of the residual product, if they are not able to sell on the fresh market, they can probably sell.
The fear we have is that they will, rather than leaving us with a premium of price over Ontario, try to reduce us to a common denominator across the Maritimes that is lower than where we are at now price-wise. What happens to us then, I don't know. You mentioned the $2.00 that is left on the table from risk management. We would like to see that go to producers now, since it is an individual decision on how you prepare yourself for the next downside. Who knows whether or not that will happen. We don't seem to be dealing with a different organization right now, but probably down the road, as the people that are in control change, we probably will be dealing with a different organization. We do have some fears about that, but we also see some benefits for volume and for the strength of that.
Larsens is a plant that is progressive. Basically, they have put a new plant there over the last 10 to 12 years, and we feel that probably they are going to stay there. They are handling somewhere around 4,000 hogs a week now. They say without changing too many things, they could handle 1,500 more a week. So, there is a place there for increased production if we have it. We don't think Maple Leaf bought those two plants simply to close them and start pushing product down here. They could have done that without buying them. We think they are going to be here, and we are going to do our best to work with them. We have some options we wouldn't like to take if we can't work with them. Our first effort is always to try and work with Nova Scotia plants and to keep the hogs and the jobs in Nova Scotia. That is the mandate of the organization. That is the policy of the board.
MR. CAREY: At the present time, the $2.00 that Larsons are not being required to pay, is there any indication they are going to share that with the producer?
MR. VISSERS: We are going to be talking to them over the next few months and seeing where we fit as far as that leftover money goes. It is a time now when producers are making money, and when the producers are making money, the processors aren't. Unfortunately, that is the way our industry goes. We would all like to see that it was a little bit more at a level, a minimum-maximum place where we could all survive. The nature of the business is that they are part way to where we were about a year ago as far as price goes. There is very little margin in the cut-out right now, and it is probably not a real good time to be talking about that $2.00.
MR. PALMER: Talking about price, Jon, our price is based on Ontario, what Ontario's price was last week, we get this week plus 4.5 a kg. Over the past six months there has been 10 cents or 12 cents difference between Ontario and Quebec. Quebec has been higher. So this is our plan with the processors, negotiating a new price discovery, and maybe we can take the average of those two prices over time, or we can use the USDA price, but we have to look at a different way of pricing, and that is where we hope to gain some of that $2.00 back.
You are talking about the $2.00, the feds are going to support NISA crop insurance and ADA, and they don't want any ad hoc programs. I think this is because of the GATT agreement and free trade. Europeans and Americans seem to be able to pay under the table, but our federal government doesn't like to pay farmers under the table, and this is what they are going to support and I think that is the way we can access some of that money with NISA. The biggest problem with risk management is that we were not accessing federal monies.
MR. CHAIRMAN: The 1990's provided us with an opportunity to witness the good times in your industry, and the bad times. We saw a production increase somewhere around 10 per cent through the 1990's. We also noted that there was overproduction in Canada and a glut in the market which caused the prices to drop from somewhere around $160 down to $58, and bankruptcy looming on the horizon for many producers and so on. So it is an industry that seems to go from one crisis to another. I am interested to find out today, just so we know where we are today - we are in sort of a good time I believe - what does it cost to grow a hog today and what is the value of that hog at market? Just so it will give me a comparison to the way it was in the past 10 years.
MR. VISSERS: As far as this year to last year, the costs of production have not really changed a whole lot. The feed costs that we always track for that program, we are continuing to track and the cost of feeding a hog is still somewhere around $90 for all of the feed costs involved in maintenance of the herd plus the market hog, and additional costs on top of that take the costs to somewhere around $150 per hog. The actual market return that we are seeing now is, this week, $172 a hog, so we are seeing some profits in there.
The cost of production at $150 takes into consideration partly non-cash costs like depreciation and, of course, it is an industry average, so some are higher and some are lower. It is simply what we have tracked to try and get a handle on that. You must understand that there are some efficiencies in some of the newer units that would lower some of their costs but, because their capital costs are higher, probably the interest and bank charges are offsetting some of that right now. We expect to see a decent return for perhaps 20 months; it is a seasonal price and this is the time of year that we will see the peak of the price, like June, July, and then it will tail off through the winter. You can graph it almost exactly. Wherever it is, it usually graphs like this and then goes back into the next season.
MR. CHAIRMAN: I think Mr. Palmer already mentioned that there is another crisis looming in the future, so you are predicting down the road where we are going.
MR. VISSERS: The last time we saw the higher prices there were all kinds of industry analysts who said that the hog cycle was gone and that we were going to see stable prices for the next seven to eight years. That was probably about six to eight months before we were looking at market returns of somewhere between $45 and $50 a hog, so I don't think there will be too many analysts saying that this time. We may see a bit more of an extended period
of higher prices because of the capital costs involved in new construction and the loss of equity that the industry saw over that price crisis, because there are a lot of people out there who probably had some negative equity going on, who actually owed more than the value of their farms during the worst of this, and their lenders were simply keeping them going because they saw something better on the horizon.
Unfortunately for Nova Scotia, as I mentioned, we are only 60 per cent to 65 per cent of our own domestic needs, but we still base our price on a North American price. As Lester mentioned, it is based on Ontario, but the Ontario price is based on the U.S. Department of Agriculture price from the previous week. So really when you get back to where the price starts, it starts in Chicago and that is what we are stuck with. We can try to build some premiums on top of that to allow for some of the additional costs that we have down here, but basically it is a North American price that we are looking at.
One of the things that we have done to try and help ourselves is we have initiated a forward contracting program that is based on the Chicago Mercantile Exchange. We have producers now, through Pork Nova Scotia, who are buying contracts on the CME so they are trying to manage some of their price risks that way.
MR. CHAIRMAN: Thank you. I don't wish to hog all the questions here. Mr. Epstein.
MR. HOWARD EPSTEIN: I have some questions about the price that you are getting per hog and what I wondered was, if you can tell me why it is that the price has gone up again? You were explaining that there was a low price before and that seemed to be tied to large scale production in the United States, but now it is not so clear to me why it is that the price has gone up. Can you explain that?
MR. VISSERS: There is a combination of things that happened to drop the price as hard as it dropped. One of them was the gearing up of the industry in the U.S. and out West and additional hogs that were available for market. The other part was the collapse of the Asian markets.
MR. EPSTEIN: Can we just nail that one down because my understanding is we don't export to the Asian markets, but the U.S. does, is that the idea?
MR. VISSERS: Yes, it does not matter.
MR. EPSTEIN: So because they are tied to the Asian markets, the price was affected then in Chicago and we are part of the North American market so there is a ripple effect for us? Is that what is going on?
MR. VISSERS: Yes, that is exactly what happened and at the same time that the production was gearing up in the United States, there seemed to be a lack of communication with the packing industry and at the same time they were increasing production there was a couple of larger, older plants that closed. All of a sudden there were quite a few more hogs than there was space for them. The processing plants were working six days a week to try to clear up the backlog. A lot of hogs in the States are still bought by auction. There were all kinds of hogs out there. They kept dropping their bids and the price kept dropping accordingly and, of course, it rippled down through to Canada and eventually to Nova Scotia.
MR. EPSTEIN: Okay, so we understand the down part pretty well. What about the up part?
MR. VISSERS: The up part, probably too small to really justify, a small decrease in the herd size in the States, 3 per cent to 4 per cent; no reduction in the herd size in Canada, actually an increase; resurgence of the Asian market, some of the Asian Rim economies and, of course, the North American economy. As the economy booms, people have more disposable income. They change to a higher meat diet and all of a sudden there is more demand than there is supply and the price starts to move, but it is not a real big change in the hog population that does it.
MR. PALMER: Another big factor right now is we have an overcapacity of killing plants with the new plant in Brandon that Maple Leaf built. So they are bidding for hogs. They have to have through-put. Their plants have to be full and they are taking a less margin and keeping their plants full.
MR. VISSERS: There is a little bit of a blip on the Canadian side because of the new Brandon plant and the announcement that Schneider's is increasing their capacity, too, but numbers-wise, it is not a real big change. The guys in the States will say it is all because they are putting bacon on the hamburgers down there but, boy, they must be putting one pile of bacon on those hamburgers to make all this happen.
MR. EPSTEIN: How has this affected prices to the customers in the grocery stores? Is there anything in here to track this? I have not seen anything.
MR. VISSERS: We don't have the funds to do a lot of tracking on that. We do try to follow Stats Can, but it is quite a ways behind and Stats Can does not track specials. So, for instance, in the time when the price was in crisis, we did not see a lot of change in the retail price, but they were not tracking the specials which is where they were pushing the volume through. Economists will tell you that demand for pork from the consumer is inelastic, that for the most part it will not change based on price. It does not leave a lot of interest in the retailer reducing his price a great deal other than specials. We are seeing some increases in the retail price now. The fear is that if the price goes too high and these guys increase it too
much, then the next time the price goes down they will not drop it and we will lose the through-put of the volume again.
MR. EPSTEIN: Did I follow this correctly? Right now you are saying your production costs are about $150 per hog; it is selling at about $172 is the current price. Mr. Palmer, you have 220 hogs?
MR. PALMER: I have 240 sows, 5,000 hogs a year, that is my market. I have about 240 sows a year.
MR. VISSERS: When we talk fair to finish we usually talk number of sows, and the production from those sows is anywhere between 20 and 22 pigs weaned per sow, per year.
MR. EPSTEIN: Okay, that makes more sense.
MR. VISSERS: My target is 5,000 hogs a year.
MR. EPSTEIN: Yes, that makes more sense. I was wondering how you make a living.
MR. VISSERS: Eat a lot of pork.
MR. PALMER: Mr. Chairman, just to get this hog production in perspective in North America, Nova Scotia grows about 2 per cent of Canada's production and Canada grows 4 per cent of the U.S.A.'s production. Am I right on that?
MR. VISSERS: Canada's been growing, but yes, it is more like 4 per cent.
MR. CHAIRMAN: Nova Scotia is 2 per cent of Canada.
MR. EPSTEIN: Canada is 4 per cent of the U.S.
MR. PALMER: It is 4 per cent to 6 per cent, likely 6 per cent now of the U.S.A.'s production. That shows you how small we are.
MR. CHAIRMAN: Very small. We used to hear a lot about hogs on WKRP. Les Nessman used to give us the hog report once a week, didn't he, the Silver Sow Award.
Mr. John MacDonell.
MR. JOHN MACDONELL: I can't say that I know an awful lot about hogs. I have raised a few, mostly for myself and sold one, or whatever, and bought them from Herman Berfelo usually. I have talked to Herman on occasion and I may be a stickler for supply management, but I would like you to explain, in Quebec the process that they have is that they
get cost of production, or at least it is set to their cost of production, which to me would make some sense so, from what you have said, they got slightly more than the Toronto price in Quebec.
MR. PALMER: They are.
MR. JOHN MACDONELL: They are. So they are not tied to that Chicago price obviously. I am just wondering why you haven't moved more in that direction. Why? If we only supply 65 per cent of our own needs, it seems crazy that pork producers here don't get a better price for what they produce. In talking to Herman Berfelo, he seemed to think that many years ago the pork industry was heading in that direction, but it didn't go that way, so I would like to know your comments in regard to that. Do you think that would be a bad thing, and why?
I think NISA is a valuable tool in times of disaster, but I don't see it as good enough to base an industry on. I think farmers deserve to get a price that is somewhere in the range of what it costs them and still make a good living. That is the only way I can see to grow an industry, and to attract people to the industry. So I would like to know your thoughts on that because I can't see that if Nova Scotia wanted to go to a supply-managed system that it would necessarily have to be connected to the whole country, that they couldn't do that and still somehow control price.
It is obvious that Quebec is doing something, although they are probably not calling it supply management, but at least they are getting somewhere close to their cost of production. Would you give me your thoughts on that, please?
MR. VISSERS: The Quebec price is tied to the USDA price. They have a bit of a different system there in that they have an auction every week where the packers have to bid for the hogs, because of the number of packers there and the way their export industry is growing. There is enough demand there that their price is higher than Ontario's is. If you graph it, you can track it pretty close to what that U.S. price is, at a level that is a bit higher than that.
MR. JOHN MACDONELL: Okay, but still following that line?
MR. VISSERS: Yes. So what the Quebec government is doing is supporting the industry between whatever that price is, up to a portion of their cost of production, which is really what we were trying to do with the risk management program that we had in place. I would be surprised if you would even be able to convince the Quebec industry that supply management was a good idea, because every new hog that is produced in Quebec is a hog for export. That is the basis of their production and their processor business.
Nova Scotia, if we could close the borders and say, no more pork coming in unless we say so, and we are going to give every producer a quota, and you, packer, have to pay him that much, that would be great. I don't know if we can do that, without involving some kind of federal legislation, because most supply-managed commodities are based on a federal organization and federal legislation. Where that fell down, as far as the number of years ago that Herman is talking about, is the same thing that happened in Quebec, a lot of this production is export production.
There was very little interest in actually closing the border, reducing production to the point that we were meeting domestic needs and limiting the industry to that, which is what you would be doing. We wouldn't get a lot of support outside of Nova Scotia for that. We have certainly hashed that one around the table on a number of occasions, and if we could do it as a province, it may work for us. To get to that point, when you are talking interprovincial trade and all those sorts of issues, I am not sure whether we would get the support from anyone other than ourselves for that. That is the difficulty.
MR. JOHN MACDONELL: What I would look at, it is obvious that at 65 per cent, it wouldn't be tomorrow that we would be supplying 100 per cent, or maybe never. You were saying a 20 per cent growth would be significant in this province.
MR. VISSERS: It certainly would be.
MR. JOHN MACDONELL: I think if we had a system whereby the rest of the country was still going to supply Nova Scotia with pork, the only thing is that you had an agency that the packers here bought that pork from as it came in, if it came in at whatever the national price was, and the packers bought it at the cost of production to Nova Scotia producers, whatever you set up, then there would be a difference; if that difference went to Nova Scotia producers or somehow could even go into the safety-net program to secure Nova Scotia producers. If we look at the way we sell milk in this country, and now with the target of milk internationally, trying to either erode supply management or Nova Scotia producers selling milk in the United States, there is a little avenue now that allows for that, but I can't see why we can't have a system in regard to pork production that does both, that allows for export but still secures a domestic price, and still gives an avenue to hit the international market.
I have a curiosity, when we talk about the collapse of the Asian market and the high American production that occurred at the same time, somebody ate that pork.
MR. VISSERS: The Asian economy probably consumed a good portion of that, but they didn't have as much money to spend on it, so the price fell. You are right. There were still exports, and there was still pork in the stores in Japan and Korea and places like that, but when their economies collapsed and their currencies eroded, there was less money to spend on it, therefore they paid less.
MR. JOHN MACDONELL: When you consider the amount, as you were saying, 4 per cent of the American pork supply, Canada would have about that much. It really seems to me that we have to be looking at something different, a ripple doesn't seem fair to the Nova Scotia producers here to have to bear the brunt of whatever happens in somebody else's jurisdictions. It seems like they should have more protection than that. I suppose in trying to do that in regard to WTO and GATT and all the rest of it.
MR. PALMER: John, you go talk to Mr. Sobey about this subject, and see how far you get. We have gone to Karl Larsen many times about this price difference between Quebec and Ontario, and he says his competition is Ontario coming in here. For one cent a pound, Sobeys will buy in Ontario rather than Larsens.
MR. JOHN MACDONELL: But they can't buy their milk however they feel like. That is legislation.
MR. VISSERS: National legislation.
MR. JOHN MACDONELL: I am not sure, you guys can tell me if I am barking up the wrong tree, but I don't think there is an impediment. When provinces started supply-management in milk, it wasn't a national program originally. I am assuming that every province had its own system, and then they combined to create a national system. I am not sure you would have to have a national system for one province to do that in regard to their pork production. You might get some screaming, but I don't think it would be necessary. I think it would be better, but I don't know if it would necessarily be that important. I think your comments about what the retailers would say, you certainly would expect that, and you are going to see a lot of leverage on their part to try to prevent it. There are all kinds of good reasons to do it. They would have secure supply.
[10:00 a.m.]
In the case of milk production, I talked to the people from the Dairy Commission, and they mentioned how someone was able to negotiate a contract for milk. They had a constant supply. They had excellent quality in Nova Scotia, and they had a secure price for a conceivably long period. They were able to garner this quite large contract for milk supply, and yet, the individual who did it was complaining about supply management. They said, well, hold on a second, look at the contract you were able to negotiate and the reasons you got it. It never occurred to them that for Sobeys or anybody else, if they had good quality pork, a constant supply at a price they could predict for their business, long term, I think would be an advantage for them. When it is low, they certainly make up the difference, but I think it is the farmer who should be making the difference.
MR. VISSERS: I don't disagree with the theory, but the implementation is the tough part. You would need a real champion and not just provincially but nationally, too, in order to make that work because there would have to be interprovincial agreements on whether or not pork would come in here. There probably would have to be national legislation of some sort, too, because Sobeys isn't buying everything they buy through Larsens, they are just putting reefers on the road, and away they go.
MR. JOHN MACDONELL: You could still let it come in. I am not saying keep it out, because we wouldn't be able to supply our own need anyway.
MR. VISSERS: It is a tough sell. It would be good for the Nova Scotia industry, but it would be a tough sell.
MR. CHAIRMAN: Thank you. We will turn to Jon Carey, please.
MR. CAREY: I just want to touch on, I know Lester is familiar with the Kings County land use, Department of Agriculture and the rural challenge of residential people moving into the land areas and tying that all together with technology for getting the manure on the land. Do you see added expenses here, and are we having this maybe provincially or is it more a Valley-Kings problem? Also, with the right-to-farm legislation that is being looked at, how does this all tie together from an environmental and land use aspect?
MR. PALMER: The whole thing is a challenge, and I think it is more so in Kings County. Kings County is the only one that has the farm bylaws, land bylaws. But, because of major processing plants in the Valley, that is where people want to build their hog facilities, but with new technology, we do have better control over our manure, and they are coming up with new spreading equipment for spreading manure. You being in the equipment business, you know, the biggest reason we are getting the odour spreading is because of our high rpms. Now they are using drop-pipes and so on, cutting down the odour.
MR. CAREY: Is the cost to satisfy the environmental people and so on going to have a major impact on your operations in general?
MR. PALMER: I don't think so because they are so superior as far as management and manpower and disease, healthier herds. It all goes together as far as the building is concerned. They are running a 500-sow unit with two people, total slats, manure is dropped down through the floor and goes in one tank and out the second tank, and there is no odour. The biggest challenge is spreading it.
MR. VISSERS: One of the major issues in the Valley is the constant pressure of urban encroachment in some of the agriculturally zoned land. I believe it is very important to keep that as agricultural land and not allow any of those sorts of development in there. That is certainly a municipal issue. I know they are in the process of going through a review of the
hamlets and the setbacks for the hamlets and things like that. Guidelines we have put in place work well with what they have in place for those hamlets. Our producers simply need to be able to produce pork and make a living under guidelines that are laid out and understood by all, and not try to hit a moving target. If the setback from the hamlet is 1,000 feet, then leave it at 1,000 feet, and allow producers to continue to produce in those areas that are agriculture.
The new Right to Farm legislation has the support of the pork industry in Nova Scotia. We established those guidelines in 1998. Under the new legislation, those guidelines become an integral part of that legislation, because they are considered the best management practices for pork production under that legislation, so we are ready to go as far as that goes.
We do not support anyone doing anything that contravenes the Environment Act in Nova Scotia. We have recommendations in those guidelines on when to spread. We encourage our producers to spread manure and do farm activity through the week and to be careful about long weekends and times when it has a larger impact on neighbours. For the most part, producers have 12 months of storage, so in the spring of the year, if it ever stops raining, they spend a few weeks, spread their manure, and it is done.
If you are going to live in the country, I think it is reasonable to expect people to put up with that. To put up with constant harassment, if somebody feels they have to spread every week or something like that, we don't support that. We support the producers' ability to do what they need to do to maintain their farms and to put that manure back on the land. It is a closed cycle. That manure needs to go back on the land for production. If we are talking about developing organic production and other alternative types of production of fruit and vegetables in Nova Scotia, then hog production and other animal production can become part of that. Those are natural ingredients that go back in the soil to grow food.
MR. CAREY: I know one of the major problems in agriculture is people work their whole lives, and their retirement is basically what they have put into their farms. Most of them haven't large bank accounts. As a sector of that, do you people have any thinking or programming that you are working towards on how to keep the farming industry going, and the pork industry in particular from your aspect, so that when Lester wants to retire, he has a tremendous amount of land that would be great for residential, but is unable to sell it to realize the actual value. Is there anything on the horizon that is going to help solve that, so we can keep people farming and still have proper retirement for people who have put their lives into agriculture?
MR. VISSERS: As far as the production facilities go, we think it is reasonable to expect a return on investment that would allow somebody to retire when the time comes. As far as the value of the land that is in an agricultural zone, a lot of our producers - and we certainly don't have a policy on it written down anywhere - believe buying the development rights of that land is the appropriate way of keeping that land in agriculture. Once you say that
I am paying you so much per acre to keep that land in agriculture, then that money has been paid, and that land should be able to be in agriculture from then on forever more. That would seem like a reasonable way to do that. The next person who buys that property then knows that is agricultural land and always will be. There should be no argument when it comes time to sell it again.
MR. PALMER: I was going to argue the same thing with the first generation, don't you think?
MR. VISSERS: That has already been taken care of. The only thing we need is somebody with a deep pocket. (Laughter)
MR. PALMER: They are doing that in some States.
MR. VISSERS: British Columbia really was the model that started that. Some of the agricultural zones there, development rights have been bought, but it continues to be a struggle to make sure that stays agricultural land, because there is urban encroachment, and there are people who want to use that land for purposes other than agriculture, even after that happens. Every 10 years or so it comes up again - and you know the story in the Valley - and even once this one is settled, it will come up again because people will keep pushing.
MR. PALMER: I couldn't believe reading the paper yesterday that Kings County lost 450 hectares of agricultural land last year to the new school in Canning.
MR. CAREY: Yes, exactly.
MR. PALMER: I couldn't believe that we lost over 400 hectares in one year.
MR. CAREY: As you are probably aware, Kings County is the fastest growing rural county in the province and they are building on agricultural land.
MR. CHAIRMAN: Okay, thank you. In order to ensure that everyone has a turn, I am going to move Mr. Boudreau ahead, followed by Mr. Epstein and Mr. Chipman.
Mr. Boudreau.
MR. BRIAN BOUDREAU: Mr. Chairman, I just have one question. First of all, I want to acknowledge that I don't know much about the pork industry, so I want to express my gratitude to both of these gentlemen for coming in here this morning because it has been very informative and educational, at least for me. I guess the one question I have is, what role do you feel this committee could play to help improve your industry?
MR. VISSERS: I guess probably one of the things that we put at the front of the brief that we distributed this morning was the safety-net issue and the enhancements to NISA. If this committee could encourage government to participate in a dialogue that would look at making changes to NISA that would allow us to make enhancements to protect producers over the long haul. It is only a three year agreement, but our anticipation is that it is something that will be renewed in three years and it is our best chance for stability as far as some kind of a price program that would keep our production at the level that it is and even, perhaps, that sort of stability would allow us to increase it.
MR. CHAIRMAN: Mr. Epstein.
MR. EPSTEIN: There was some talk earlier about subsidies in the United States and I wonder if you could lay out for me just how the system works in the United States? I think I heard you say that there were subsidies that you regarded as maybe not entirely appropriate in the United States. I am wondering, could I hear a bit more about that?
MR. VISSERS: Well, the United States is a signatory to the WTO, and the GATT before that, and the agricultural part of that looked at a reduction in subsidies for agriculture for all countries. Canada has taken the letter of the law and reduced subsidies accordingly. That is why we have programs like ADA and NISA because those are considered green under that international agreement. They are low-slung programs that simply return enough to keep producers in business. Particularly the grain lobby, and somewhat the livestock lobby in the United States, have managed to get their federal government to take a different approach to that. They, in 1998, put $5 billion back into the grain sector and it was almost a bidding war between the Republicans and the Democrats on who could put the most money back into the grain sector and I think it started at $5 billion and it ended up at $7 billion for the next year.
Part of the reason that grain prices have been low and part of the reason that we see such an increase in intensive livestock farming in the United States, is because of the subsidization. We feel that it has gone beyond all bounds of reason and that it has distorted the whole market place for North America.
We are also looking at the European economy that continues to be able to jig the numbers and work their way around subsidization as well, at the same time as we are supposed to be playing on a national level. I am not sure that I disagree with what some of Europe has done, but it is just unfortunate that we haven't done any of it for ourselves. Some of those production costs are similar to what ours are, and they are doing quite nicely under the umbrella of the EU. We haven't really been well served under that last agricultural agreement, because of what some of the larger economies with the bigger pockets have been able to do.
MR. EPSTEIN: Are these inputs in the United States and the European Community designed to keep their producers in business for their own domestic markets or to compete internationally?
MR. VISSERS: Certainly for the States, they are competing internationally with the money that they are putting into their industry. The EU, not quite as bad, except that they are subsidizing a lot of their grain production, and that grain production is going through livestock; more the U.S. than the European economy. A lot of that is being exported.
MR. EPSTEIN: What is the current state of play about negotiations to try to get the U.S.A. and the European community to adjust their practices?
MR. VISSERS: It is pretty constant on a fairly high level that certainly we wouldn't be involved in. They are starting the new talks again now, as you know. We are supposed to start in Seattle. Agriculture is at the forefront of that new agreement. It is certainly on the table. From some of what I read and see, I think Canada got fooled the last time, with some of the formulas that were put in place, and didn't realize it until afterwards. I am not sure if the will is there to do it anymore.
MR. EPSTEIN: Is it the view of the agricultural industry that there is no way to use the complaint mechanisms effectively and that it really has to be resolved through negotiations in the future?
MR. VISSERS: I think probably that is a good analysis of it.
MR. JOHN MACDONELL: Is any of the production in Nova Scotia exported at all?
MR. VISSERS: Some, not a large amount. Some of what wouldn't be considered the prime cuts in Nova Scotia are going to some of the Pacific Rim countries, but not enough to really make a significant difference. We expect some of that will change with the onset of the Maple Leaf ownership, because some of the Larsens production will be in that supply line, but we are not exactly sure how that is going to happen.
MR. JOHN MACDONELL: When I think about pork, I think about what an advantage you have with the product that you have. I have a small flock of sheep. Now if I thought that Nova Scotians would eat as much lamb as they eat pork, then I would say I had died and gone to heaven. I was involved with a small meat store a number of years ago, another guy and I were partners, and I was involved for about a year. I took the meat cutting course at the Agricultural College, and worked my fingers to the bone, you might say. I guess what I noticed in trying to make a dollar at that was that you can sell pork and make a dollar in retail, because there is such little waste - what you have to be concerned about is those cuts that don't move as quickly as others - compared to, say beef, where 25 per cent to 30 per cent goes in the garbage pail when you bone it out.
As far as a product that the public likes, and has very little waste, and is a relatively easy product to move, I just see so much potential for what you raise. I am wondering, whenever I approach the minister - as far as my notions of looking at whether there is legislation that prevents Nova Scotia from doing anything as far as its own price controls or whatever - with any of these ideas, he says, well, the industry hasn't come to me doing that, are you saying that you want to do this without consultation with the industry? That is politics.
If you are not sure, and if you think there is some basis that this would be a good thing for the industry, to have some type of price stabilization along with the NISA, I would encourage you to have the minister or the department investigate what the potentials are. If there are federal restrictions that would prevent that, to have those made clear, and if there are not, to see what the potential is. I would think that if there is not a large export section in the pork industry in Nova Scotia, this is probably a very good time, rather than having the industry grow to a point where a large part of it is export and then try to weave that into the mix, it would be more difficult.
I want to come to Bill No. 10, the right to farm, and you had mentioned it. Had anybody raised any flags in our discussions over the bill? We had some concerns about the powers of the board that would hear the complaints, and that it may be unconstitutional actually for the board to have that power as an adjudicator rather than as a conciliator. So I just wondered if anybody had ever raised that. We were somewhat worried that if farmers felt they really had protection because of this bill, if anybody was to challenge it and it did go higher it may turn out the Supreme Court would say the board was unconstitutional and, therefore, leave somebody in the lurch. We had real concerns about that. Had anybody raised that with you at all?
MR. VISSERS: Not at all, no.
MR. JOHN MACDONELL: Okay. The other one you had mentioned just as an aside to the idea that the manure has to go on the land and the potential for that for growing food, or growing anything, is there anybody in the pork sector who grows organically or even seems to be moving in that direction? I will add another question along with that. I see a lot of pressure in Europe about more open housing, straw, and sows farrowing in straw and these large open enclosures. Is there any pressure from, say, the animal rights side on the industry to move more in that direction, and what complications do you see if you were to have real pressure put on you for that?
MR. VISSERS: We haven't had any pressure from any groups over the last couple of years over any of those issues. There are quite a number of producers who do have that open concept with straw pack. There are both sides of it and it just seems to depend on the producer, which one they go with. As far as what would happen if we needed to do that, anything I see in Europe, like England is the one that has legislated a lot of that and their cost
of production has gone up, so my presumption is that if that is what the consumer wants, then the trade-off is going to be that the cost of pork is going to be higher. Producers do handle their animals in a humane way, do their best for their animals. They are their livelihood after all, and we feel they do a good job and that these facilities are humane. The air quality, and the nutrition, and the water is all up to the best of standards because we want those animals to do well and we want to produce a safe product; those are our goals.
MR. JOHN MACDONELL: You have pretty well answered me. Thank you.
MR. CHAIRMAN: Jon Carey, you had another question?
MR. CAREY: I just want to be clear. When Mr. Boudreau asked about what we could do to try to help, the response was for producers to be able to make enhancements to the funding program, and I guess my question is, to make it as clear as can be: do the producers want to make enhancements without government kicking in their percentage? I know it would be nice if they would, but . . .
MR. VISSERS: We haven't made presentation to government on this yet. We began working on it once we realized that the pork risk management program was gone and that we needed a safety net of some sort. We had enhancements to NISA on the back burner; this new agreement is in place now and there is what they call companion money that goes along with that agreement that could go towards supporting this program. Over the next month or two we will be making approaches to the province for some changes to this program to allow this and we would appreciate support of this committee when that takes place.
MR. PALMER: I have been in the hog business for a long while, and it has always been said it took $8.00 to $10 per head of government money to keep the hog industry of Nova Scotia, either federally or provincially, and I think that is likely still true in one form or another. If we can get it through NISA and access federal monies, we have had these ad hoc programs over the years. One year the feds gave us $10 a hog and then we had risk management and there has always been a program of some sort, sad to say, because of the disadvantage of our grain transportation mostly.
MR. CAREY: How long did it take that $3.5 million fund to grow to that?
MR. PALMER: We paid out $18 million in two years?
MR. VISSERS: The fund balance reached slightly over $4 million at its peak, and over the two years that the price collapsed, we made payments through that fund to producers of $7.8 million in year one and $7 million in year two. It was the $4-some million plus the loan from the province, plus the continuing contributions over those two years from all participants. So that is the equity that would have been completely wiped out of the industry if it wouldn't have been for that program; it was merely a ground-level support to keep people
going. So that was the depth of the crisis, and it was the worst we have ever seen it. Now, whether we are going see a lot of spikes up and down because of the changes to the market place, we don't know. We know that probably the hog cycle is going to be there, but it may move a little differently than it has in the past.
MR. PALMER: Carl Larsen would be the first to say that that kept the hog industry going in Nova Scotia, and he kept his hog plant. He wouldn't have a plant today if it wasn't for risk management.
MR. CHAIRMAN: Mr. Chipman, you had another question.
MR. CHIPMAN: I remember years ago hearing the term mortgage lifters for hogs. It is not the case anymore. I look back and I can name individual farms. One in Canning, I believe Lyndhurst Farms. I don't believe they are into hogs anymore. I know Gerald and Burton Parker, Tim Longley, Jim Deswart. Did you manage to keep going last year because of diversification? You obviously have good management, but is it diversification that your apples support your hogs when the hogs are down and vice versa? Well, I guess what I am saying is, does it pay to have all your eggs in one basket or is it better to diversify?
MR. PALMER: I think if you are going to be in the hog business on a large scale today, you need to be in hogs. My buildings are old. That is part of the reason. My sow barn was built in 1975-76. It is obsolete. It is labour-intensive.
MR. CHIPMAN: Paid for though probably.
MR. PALMER: Not quite. Yes, I don't have the mortgage. I am paying it out in labour, and these new barns like Nictaux that you are familiar with, they have 700 sows, and are running it with two people. Their biggest job is breeding and processing the baby pigs, and everything else; drop feeders and manure drops.
MR. CHIPMAN: I guess I have always felt the guy who does the most work always gets the least pay. The more letters behind your name, the less physical work you do and the more pay you get. I think food is taken for granted in this country. It is the most powerful tool in the world and people don't appreciate it.
MR. PALMER: But we are a family farm. My dad and I were partners together, now it is my brother and I, and now my daughter is home part time, so it is not real labour-intensive.
MR. CHIPMAN: So the three of you right there together, isn't there Doug and Craig Nichols, Tupper Farms, and there is another one right in there on the ridge that grows apples too.
MR. PALMER: Rainforth.
MR. CHIPMAN: Rainforth, right.
MR. PALMER: I live in the small community of Morristown which is south of Berwick. They always said a blind man could tell when he was in Morristown by the smell.
[10:30 a.m.]
MR. CHAIRMAN: Mr. MacDonell, I will give you the last word.
MR. JOHN MACDONELL: Farmers have always said that if you would pay me what I need for what I produce, then I wouldn't need supports in other ways. I think the same thing applies when it comes to the competition for land in the Valley or anywhere in this province - if farmers were being paid well enough, they could compete with other interests for the land that is certainly getting scarce in Kings County, when you just mentioned about how many hectares were taken out of production in the last year.
The other thing I want to just touch on for a minute if you would and that is, and you have mentioned it already, but I have real concerns about the loss of the Production Technology Branch from the department. I would like to know whether or not you had any input with the department into that decision? I would also like to know how you feel it will impact on your industry?
MR. VISSERS: We did not have any input into the decision to do away with production technology. We met with the minister previous to the budget, he asked us for a list of what our priorities were for the industry, we provided him with that list; some he did, some he didn't. We were as surprised as anyone when production technology was eliminated. We expected there would probably be staff reductions throughout the department, but weren't expecting that at all. Certainly there are going to be impacts for the hog industry in Nova Scotia. There are currently two swine specialists who work in production technology, there is a program called PigChamp which is a production record program that is run by those technicians and support staff, plus the other support staff that are involved in that production technology.
As I mentioned earlier there are some people who work across different commodities with forages and those sorts of issues. We don't know what the full impact of this is going to be yet, there are probably lots of things that we are not thinking of that have happened here. We are hoping that we have a chance with this new committee through the federation to try to make sure that some of those essential services stay in place. We are taking the high road and we are trying to work with that budgeted amount of money and make sure that along with the rest of the industry we want to cooperate with the industry and try to put something in place for that. It has been a surprise, it is not something that we expected at all,
but we are trying to move forward on it, the budget has been passed, so obviously, that is what we have to do.
Something that I wanted to mention, Henry, was you mentioned the $2.7 million, but it is $2.2 million, $0.5 million is going to keep those five regional offices open and . . .
MR. VISSERS: Yes, the budget for that is $2.7 million, whether there is an opportunity to jig any of that $0.5 million or not, I don't know. That remains to be seen. We have always just talked about the $2.7 million, but you are right. Five regional offices that have to be established and whatever it costs to do that, whether all of the money has to come out of that $2.7 million or if some of the infrastructure money is coming elsewhere, I don't know.
MR. JOHN MACDONELL: The specialists and those programs associated with them, do you see any possibility of you being able to get that service in the private sector if they are gone?
MR. VISSERS: I expect that probably a part of it we could. Certainly the feed companies have some expertise on nutrition and those sorts of issues, but some of the on-farm management issues that those people have worked with, whether there is going to be somebody out there that is going to be able to consult on that, I don't know. It is doubtful that our industry is large enough that anybody can make a living doing that. We need to put something back in place that is going to do some of that for us.
MR. PALMER: The big program is PigChamp, which a number of our producers use; production and bookkeeping and that was run by the department.
MR. JOHN MACDONELL: Has Pork Nova Scotia sent a letter off to the minister or approached him in any way with your concerns about this?
MR. VISSERS: We have.
MR. JOHN MACDONELL: Have you had a response?
MR. PALMER: We got six months for Pig Champ, for this transition period.
MR. VISSERS: As Lester mentioned, one of the things the casual person who was doing the data entry on PigChamp was to be let go two weeks after the budget was announced and we asked them to extend that while the dust settled and we figured out what was going on and that position was extended six months. The people in production technology are in place now. We don't know and they don't know how long they are going to be there, but they are going to be there for a while yet and we will just have to figure things
out as we move along. Pork Nova Scotia will do what is necessary to make sure these services are met or will work through whatever agency is established to do that.
MR. CHAIRMAN: I certainly want to thank you, Mr. Palmer and Mr. Vissers, for the interesting dialogue that we have had the past hour and one-half, or a little more. I think you both probably realize that many of the members around this table come from rural communities and represent rural Nova Scotia and, indeed, many of us came from farms or are still in the farming business.
I guess it is fair to say that all members of the Standing Committee on Resources support the hog industry in Nova Scotia. We fully recognize the importance of that industry to Nova Scotia in that you are producing in excess of 220,000 hogs a year and some 1,500 jobs associated with it. Also $100 million goes directly into the economy of Nova Scotia as a result of it, and the untold spin-offs that are associated with it as well.
I wish you all the success in the future and I want to thank both of you for providing this committee with your insight into the industry. You will be welcome back again.
MR. PALMER: Thank you.
MR. VISSERS: Thank you.
MR. CHAIRMAN: We stand adjourned.
[The committee adjourned at 10:37 a.m.]
