STANDING COMMITTEE ON RESOURCES
9:00 A.M.
CHAIRMAN
Mr. James DeWolfe
MR. CHAIRMAN: Without further ado I think we will call the meeting to order. I am Jim DeWolfe, Chairman of the committee. With us today from the Dairy Farmers of Nova Scotia are Mr. John Vissers, Chairman; and Mr. Gabriel Comeau, General Manager.
This is our first kick-off meeting of the fall season with the Resources Committee. I certainly want to welcome all our members back - and those who are filling in - to the table today. I trust that everyone has had a decent summer and is full of vim and vigour and all set to face the challenges that are ahead of us in the next coming months.
Without further ado, I would like to start with Bill and introduce the members around the table, please.
[The committee members introduced themselves.]
MR. CHAIRMAN: We may have another member joining us, I think he might be at another meeting but we will introduce him when the time comes. I think you'll see just from the introductions that many of us are from rural parts of Nova Scotia and indeed have dairy farming and various resources in our constituency. So, we're looking very much forward to your presentation and hearing about your industry. I believe John, you're going to kick off, so I will turn the chair over to you at this time.
MR. JOHN VISSERS: I would like to thank you for the invitation to appear before the legislative committee. My name is John Vissers and I am the Chairman of Dairy Farmers of Nova Scotia.
1
Dairy Farmers of Nova Scotia was established on April 1, 2001 and represents the interests of the province's 345 dairy farmers. We purchase and resell all of the milk produced by our members. We license producers, administer the quota system, set the farm gate price with the approval of the Natural Products Marketing Council and license transporters who transport raw milk from our farms to the processing plants.
The province's 345 dairy farms are located across the province with dairy production taking place in all counties except Shelburne, Digby and Richmond. The average dairy farm in Nova Scotia milks approximately 60 cows and ships almost 500,000 litres of milk per year. In total the value of milk production as it leaves the farm is approximately $100 million. In addition to producing approximately 170 million litres of milk per year, the dairy sector produces a significant amount of meat as a by-product of milk production. Due to their size and location, these dairy farms collectively play a significant role in supporting the provincial agricultural service infrastructure including veterinary services, machinery dealers, feed companies, et cetera.
Dairy Farmers of Nova Scotia represents producers on the Canadian Milk Supply Management Committee and is an active participant in what is known as the all milk pooling agreement, whereby dairy producers from Manitoba east have agreed to share revenues and quota adjustments. Nova Scotia accounts for approximately 2.3 per cent of the Canadian milk production.
The distinguishing feature of the dairy sector in Nova Scotia is the supply management system whereby producers have agreed to control production through production quotas in return for the right to regulate pricing based on the cost of production. This system provides stability and income but is dependent on effective government support including border patrols which limits imports.
Environmental issues have gained a higher profile in recent years. As dairy farms get larger and more complex, there will be a need for producers to enhance their role in the area of environmental stewardship. Many of our members have developed environmental farm plans and have voluntarily adopted practices whose objective is to minimize the impact of their operations on the environment. The benefits of this accrue to all of our society.
From the point of view of our members, developing and adhering to environmental farm plans requires an investment on their part in terms of time and money. It is important that government continues to support these activities and recognizes their responsibilities and programs which are being implemented for the benefit of the entire society.
In addition to concerns about the preservation of our environment, many of our customers are also concerned about the quality of our product. We feel that the Nova Scotia dairy industry produces high quality products, both fluid milk and non-fluid dairy products. There are many safeguards in place in the system to ensure that this quality is maintained.
Recently, dairy farmers in Nova Scotia have started the implementation of the Canadian Quality Milk Program on this province's dairy farms. This is a HACCP-type program, which is currently being adopted voluntarily by our producers.
The objective is to put controls in place on the farm to minimize the chances that quality problems will occur. This is not viewed by dairy farmers of Nova Scotia as a replacement for the milk quality activities of the Nova Scotia Department of Agriculture and Fisheries, but rather it complements the activities of the Quality Evaluation Branch. We believe it is important that government maintain its role in this area to ensure that we can maintain consumer confidence in our products.
[9:15 a.m.]
Another issue that has arisen amongst some of our members is the issue of taxation on fuels for farm trucks. As dairy farmers have grown in size, the feed requirements for the average dairy herd tend to be grown further and further away from the location where the feed is subsequently stored and fed. In many cases, the most practical way to transport feed from distant fields to the farm is with truck rather with tractors. This is not only a faster mode of transportation but certainly much safer than having a lot of tractors circulating on our rural roads.
One of the issues is that if a forage crop is transported in a wagon behind a tractor, the fuel is tax exempt. When the same activity is undertaken with a truck, that fuel is taxable and becomes a significant added cost. Our members believe that this situation can and should be rectified so that any fuel consumed in farm trucks in the course of harvesting of crops could be treated as tax exempt.
We also wish to reiterate our support for the exemption of farm land from taxation. This does continue to provide an incentive to maintain good farm land and agriculture use.
On another taxation issue, our association has been concerned about the difficulty in transferring dairy farms from one generation to another. Through our national association, Dairy Farmers of Canada, we will be discussing the possible changes in the income tax regulations with the federal government. But on the provincial side, we believe investment tax credits could be used to assist new entrants into farming, similar to new entrants in the manufacturing sector. Extensions of the ITC to new entrants to farming and a refundable mechanism would assist new entrants with the cost of upgrading or expansion. Another possibility is the extension of the provincial income tax holiday for newly incorporated businesses to new entrants in farming. These last measures would certainly help in maintaining farm numbers in rural areas where there may be limited opportunities for other economic development.
Thank you for your opportunity to present this information and we would be pleased to answer any questions.
MR. CHAIRMAN: Thank you, John. We will start off with Mr. Taylor.
MR. BROOKE TAYLOR: Thank you very much, Mr. Chairman, and John and Gabriel thanks for the presentation. John, this business about taxation on fuel for farm trucks, has there been some discussion with the provincial Department of Finance regarding that? I know the situation out there now doesn't recognize that in a lot of cases farmers must put in fuel that has tax paid on it in their farm trucks. I am just wondering, the situation isn't just unique to one particular farm, it's happening right across the province. I am just curious as to whether or not you have elicited some type of feedback from the department.
MR. VISSERS: At this point, no. I don't know if the federation has taken it on with the government, but I am not sure where it is. I know in our sector, anyway, it is somewhat of an issue because we are transporting further away and it is a cost. Like I said, you see what we pay for marked fuel and what we pay for clear diesel. If there is a way that we can accommodate some of that. It's my understanding that Alberta is an area where marked fuel is used in all the trucks. But I guess the issue here would be how do you police it.
MR. TAYLOR: I think, Mr. Chairman, it would be worthwhile to explore this issue, maybe by way of letter, with the Minister of Finance, just for some feedback, on behalf of his concern because I know I have had as an MLA a couple of situations brought to my attention. Quite frankly, it seems unfair the way it's working right now. Maybe I am just hearing about the what might be a small percentage of cases but I think we should perhaps put a letter together and ask the Department of Finance for comment on this situation to see if we couldn't perhaps assist with the cause. Maybe we can't but we won't know unless we try. I don't know if you need that in the form of a motion, Mr. Chairman.
MR. CHAIRMAN: Is the committee in agreement with that? If you make that a motion, someone care to second it. Seconded by John MacDonell. All in favour?
MR. DAVID HENDSBEE: Can I comment on that?
MR. CHAIRMAN: Okay.
MR. HENDSBEE: With just regard to that, is it possible, and I don't know if the honourable member for Colchester-Musquodoboit Valley would like to inquire, in regard to the impact of the marked fuel, if it was to be eliminated, the impact on the other industries. If we are looking at trying to extend the benefit to another sector, I think we should also look at the other side of the equation as to what the impact would be if we eliminated the marked fuel, what impacts it would have on other industries.
So we have a comparison in regard to, is it beneficial to add a small sector to the benefit or remove the benefit for all and see how it impacts everybody. These folks have already been impacted by not having the benefit extended to them, and perhaps we would like to have a comparison of what it would be if we removed the impact from others.
MR. KENNETH MACASKILL: John, I'm wondering if the association has done any research on once you put marked fuel in a vehicle, if that vehicle is used for any other purpose on the highway, and they do a fuel test and that marked fuel shows up, of course it's illegal. Is it feasible, financially, to have a vehicle just for that purpose, for moving grain or feed from one farm to another?
MR. VISSERS: We use two trucks year-round, and we're either hauling haylage or corn or sawdust. That's all we use it for, the farm.
MR. MACASKILL: The vehicle is used only for that purpose.
MR. VISSERS: Totally. That's all we use it for. I guess it could even be that rather than that marked fuel going in there that the other option could be that it could be a rebate, if you could prove what you used on the farm side of it. That could be another aspect of looking at it. I guess our view is that the marked fuel is there to help keep the cost down for the farming, but the farms have grown to a size where the land base is further away and if there's a way where we've gone more to the trucks rather than tractors for going down the road, if we can find a way of tying those two together.
Your question here earlier about what effect it would have if we had no marked fuel on the farm, it would be quite devastating. We do a fair amount of agricultural work, growing a lot of crops and the tractor side of it. We use a fair amount of fuel in those tractors. The trucking is one side of it, but there's the other side of it too, we try to grow more and more of our own feed to be more self-sufficient. Doing away with the farm's marked fuel all together would be quite devastating.
MR. MACASKILL: What about the small farmer in the rural area who just has a small farm, would they work around the system where they probably wouldn't have one vehicle just for that purpose?
MR. VISSERS: I guess I go back then, maybe some of them would use wagons, some of them would have other people do some custom work for them, the hauling, some farms would do sharing. That's why I said the other aspect of it is that maybe there would be a way of rebating some of the fuel costs, the taxes, rather than putting the marked fuel in their trucks.
MR. CHAIRMAN: I guess the suggestion - just correct me if I'm wrong, to Mr. Taylor, when making this motion - was made that during the presentation that some sort of rebate or exemption be in place for the trucks during the course of harvesting, so you're essentially mentioning the harvesting season. That, I believe, is what we're looking at, isn't it?
MR. TAYLOR: Mr. Chairman, as you know, as the agricultural community continues to evolve almost on a daily basis, a lot of the farms, like John pointed out, a lot of the farmland is further and further away from the farm. In fact, just recently the Nova Scotia Federation of Agriculture started facilitating meetings about agri-food right across the province. One of the complaints that the farmers and their families have is how are we going to keep people in this industry.
We as governments, all governments, all Parties, support - at least I think all Parties do support - the farmland taxation exemption, and we do that, I think, without hesitation. We're essentially talking about the same thing here. They're using the farm truck for farming. That's what the trucks are used for, probably 100 per cent of the time, but yet they have to pay the tax on that fuel. This is why I think we, as the Resources Committee, should - it's within our mandate - send a letter off to the Department of Finance asking them - they will crunch the numbers, we don't need to worry about that, and if we need the information, I certainly have no problem with Mr. Hendsbee's questions.
I think what we should just speak right to the issue and be concise. Maybe we could have Mora take an excerpt out of this presentation, that paragraph, supply it to the Department of Finance. It's very comprehensive and to the point. We're basically following up on a concern that was brought to us as a committee, and it's a concern that has been out there for some time.
MR. JOHN MACDONELL: I agree. I think that we should at least ask the question and find out what the Minister of Finance has to say and why there might possibly be any opposition to helping the dairy farmers. It may be more helpful to get some analysis of the extent of tax on the whole industry. We have representatives from the Dairy Farmers of Nova Scotia but if it was the Federation of Agriculture coming to make the same request it would be in regard to the whole industry. So we may want to make it a little more comprehensive.
MR. CHAIRMAN: Anyone else on the motion? Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried. The letter will be sent.
On our list, we have Mr. MacDonell.
MR. MACDONELL: Thank you, gentlemen, for your presentation. I have a couple of questions. In your presentation, when you talked about the P6 or the pooling, you mentioned dairy farmers from Manitoba, but in the P6 Manitoba is not included. It's the Ontario-Manitoba borders, it's Ontario east isn't it? Or is it . . .
MR. VISSERS: Manitoba is included in the pooling of the prices I gave you.
MR. GABRIEL COMEAU: They are a signatory to the agreement but they don't participate in all the elements of it. So when dairy producers commonly refer to the P6, it refers to the six provinces; three Maritimes, Quebec, Ontario and Manitoba. Essentially Manitoba shares revenue with us but not the other elements of the pool. They are also a participant in the western milk pool. The four westernmost provinces also have their own pooling arrangement.
MR. MACDONELL: Can you tell me how much of a difference there is in the price per litre to farmers for fluid milk in any of the P6 provinces? My understanding is it's about 70 cents a litre to Nova Scotia producers. The reason I ask this is I feel that a few questions are actually - I got involved in a couple of arguments, I guess I might as well say, people were kind of attacking dairy farmers on the screw-top change to the carton. The other one was the recent application for a price increase to the Natural Product Marketing Council. I think farmers have received - correct me if I'm wrong - 7 cents in six years or 6 cents in five years, that's about what the increases have been per litre.
MR. VISSERS: On the fluid, yes.
MR. MACDONELL: On the fluid. I'm just curious as to how close that 70 cents per litre is in all the provinces. Did the farmers get basically the same even though the retail price is different?
MR. VISSERS: It was the same up until - well, August 1st ours went up to roughly 70 cents a litre on fluid milk, which lined us up with New Brunswick, which actually put theirs up February 1st, I think, and Manitoba had theirs, I think, at 71 cents, put up in March, in and around there. The other pool partners are still around 68 cents, roughly.
MR. COMEAU: The western prices are currently a little higher than in the east, the fluid milk producer price, but in the east, Ontario, Quebec and the Maritimes, the entire range from the highest to the lowest would be about 3 cents a litre.
MR. MACDONELL: Do you know what the difference would be in the retail prices across those jurisdictions?
MR. COMEAU: It's much easier to compare the farm price because they're regulated, that's the numbers, so you can . . .
MR. MACDONELL: I just thought you might know.
MR. COMEAU: I'm reluctant to quote prices because really, nobody is regulated any one single number as a retail price, so they vary within each province. I think, generally speaking, if you were to pick a sample of supermarkets in each of those five provinces, they would be higher here than in any of the five. The next highest ones would be New Brunswick and Prince Edward Island, and then they would be lower in Quebec and Ontario.
MR. MACDONELL: And the reason is . . .
MR. COMEAU: Complex.
MR. MACDONELL: I won't pursue that anymore.
MR. COMEAU: That's a good question, as to what the reason is, but there's not one that I can put my finger on.
MR. MACDONELL: Probably I will ask a different group someday. I'm curious - and I don't want to hog all the time here - a friend of mine has been working toward organic milk production. I learned a while ago that in order for him to sell his milk he has to have a quota, the same as other producers. I am a real supporter of supply management but I see the price of quota is becoming a detriment to the industry.
[9:30 a.m.]
My question is twofold, one is around the business of organics because I don't see the possibilities for organic milk production to be enhanced at all if they have to pay $25,000 or $30,000 a kilogram for the quota. I can see what should have been a small operator being able to get a start without the cost of quota, I think this will probably just drive the last nail in the coffin for organic producers. I would like your reaction to that. I would also like to know if you consider the price of quota generally for the industry to be a problem and if you've thought about some mechanism to maintain the investment so that those who paid for the quota don't lose in their investment, but somehow to bring the price of quota down so that it is not quite so crippling, especially to new entrants trying to get into the industry?
MR. VISSERS: I will try it first. On the organic question, the particular producer, the friend of yours, he also was part of the biggest producer in this province. Whether it is organic milk or lactose-free milk, it's still milk within the system. You can't distinguish that as saying, well this is supply management, this is all the other milk. It's different if you are going into soy milks which is a whole different breed of things, or rice milk. Organic is just a different methodology of how you are producing it, more natural supposedly with no pesticides or antibiotics, any possibility of it. The opportunity is still there, he can still take some quota from his farm that he has at his other farm to put there and use for that purpose.
The whole purpose of trying to go organic is you are trying to get a niche market and that pricing is separate so he can still price higher if he wants to, if he can get that market there.
On the issue of quota, it's been an issue for us for quite some time. We did two studies, one nationally a few years ago within the pool, with the pricing of quota. At that time I think it was more to see if there were incentives in one province over the other on the opportunity of buying quota. The next fall we also did a study here with Gardner Pinfold, on quota prices because we were very concerned. That was when it was getting close to $25,000 and at that time they said $25,000 was pretty well the breaking point but quota still continued to rise and the quota prices.
I don't know where we go from here. We have been trying within the pool. One of the things, when we went into this P6 pool was we thought we saw opportunities where we would have access to more quota within the other provinces. That is the one thing that hasn't happened here yet, all of the other things pretty well fell into play. We were in for a short time but then the wheel sort of fell off of that. We still . . .
MR. MACDONELL: Other provinces saw the situation it put them in I suppose by losing quota?
MR. VISSERS: Well, Ontario as an example, they lost two per cent of their quota and it all went to Quebec. They were concerned because they have an industry there and to see too much quota leave one province to the other area there are some issues to it. Our issue was that if a producer expanded, it takes so long to build a by-quota here or you have to pay a high enough price to make sure you get it. There is no easy solution to it. It is like everything else, if you put anything with some restriction to it, it is no different if you have a nice lake and have lots around it, once you start selling a few of those lots, the other ones get to be more valuable because there isn't anymore there.
I think somewhat within the last two years within the industry is that we have been somewhat stalled. We pay a fair amount of money for promotion but as far as within the industry, there has been growth in the dairy industry but we haven't seen it because it has been coming in with other ingredients, butter, oil and concentrates, the other processors are bringing in to circumvent the system. We all pay the price for it because if the market is not growing to our benefit of seeing a little bit of quota going to everybody, then those, as the cows' productions increase and the costs increase, you have to find ways of getting more volume. You are forced really to go out and buy more quota and that all adds pressure and if there's very little on the exchange, that basically means you have to pay a higher price for it. That's part of the reason last year we had an accountant and lawyer do some work with us on trying to find ways of getting the next generation farming.
The issue I brought up was you get the $500,000 capital gains that everybody gets when you sell your farm or any business, but there is no incentive there to keep that farm together. If someone doesn't have any family left to pass the farm off to, they will sell the farm off in pieces. They can retrieve a higher dollar but yet they get the same tax advantage as someone who sells it for a third of the price to the next generation but then the tax concessions are the same. This is why, at least on the federal side, to see if there is the possibility of government looking at some way of giving some tax credits to that farm or family for passing it on.
We also looked at the provincial side when I talked about the tax credits on the provincial side. The province here does do it for other industries, up to 30 per cent of tax investment credits for new businesses. Why couldn't you do that for new entrants, too, as far as farming for the first few years. You pass something like that on to them so that in most cases, when somebody is taking over another farm, the first thing they have to do is some expansion, they have to do some renovating there.
If there was a way the government here could pass some of those tax credits on to them and not just have it as tax credits, because the first few years there's not enough income there that they have to pay taxes anyway. Let that be totally refundable over the first few years, to put a few dollars back in those producers' hands. That would maybe help with the new entrants side, you know you lock it in for five years or something but you tie it in that if in a few years time the farm doesn't keep going that those dollars get paid back to government first.
I always figure it is easier for government to come up with tax credits, in a way, of passing a few dollars that way, than trying to come up with some other way of having some interest reduction loans. It makes the farmer feel better that he's doing something, he has a goal to work towards, than just looking for a handout side. There are opportunities there and also the corporate tax holiday or whatever, why couldn't that be passed on at least to new entrants. So there are some things that can be done on the provincial government side too.
We are still looking at other ways within the quota system like what we can do differently. I don't know. In Europe, quota prices haven't gone up a lot over the last several years but the price of land, it's up to $30,000 an acre. So you restrict one thing or find a way to freeze it but something else, whatever there is a limited supply of, will find its way up.
MR. CHAIRMAN: Mr. Comeau.
MR. COMEAU: I would like to come back to the organic question first, I just have a couple of comments. Part of the reason why the policy is that organic milk is also within the supply management system, I guess our view is that you can't differentiate. If you have a package of organic milk here and a package here that is not certified organic, our view is those two products are of the same quality. If it wasn't included in it, I think, yes, you might
have more organic production but it has a lot of implications. There may be an element of increased sales but it would certainly cannibalize the existing sales.
The other thing is that a producer who attains organic certification, even though they are within the system, they have the capability to realize themselves any premium price that product would get. In terms of participating in the income pool with their fellow producers, it would be priced at the same price as all milk but if they're getting a premium of x number of cents per litre, that premium can go to them.
On the other issue - I think our chairman has covered the issue of quota fairly well - I guess I would just add that the system - I've been around too long - I've seen the evolution of it. There were a lot of policies in place that tried to limit the value of quota, and most of that was done by trying to - for a long time it didn't freely transfer from one farm to another but there were a lot of good reasons why we went to that. The good farms wanted to expand, and if you didn't have an existing dairy farm next door that you could buy, if the quota had to stay with the farm for example, then if you weren't in that situation you couldn't expand.
Gradually, over a long period of time, these were loosened up so that the most efficient farms, those with the lowest costs - and those are the ones who were paying these high prices, they've got to be the ones with lower-than-average costs of production, so it does move the production to the most efficient farms. I think the industry recognizes that it is a problem and the increases in recent years haven't come about because the price of milk hasn't increased that much or the cost of production hasn't decreased that much. What's been happening is that producers are financing purchases of quota over longer and longer periods of time because they want to grow and, as was pointed out, the overall market isn't growing, so that's the only avenue available to an individual businessman who wants to increase the size of his dairy farm. It certainly does make it difficult for new entrants who have to finance the purchase of all of their quotas as opposed to just a little bit of extra quota to add a few cows.
MR. MACDONELL: I don't want people to confuse quota with price. The quota is the right to produce the milk, and you can still have the right to produce the milk with no value on that. I think that the government, the Dairy Commission, whoever at the time, could have ironed out the wrinkles by saying you don't have to buy the farm if you want the quota next door, you can just get the quota. I agree that if people are drinking organic milk or drinking regular milk that they're still drinking milk, and that's what the quota is based on, consumption within your area. If you're changing from drinking five litres of regular milk to drinking four litres of regular milk and one litre of organic milk, you're still drinking five litres of milk.
I think what I'm saying is that to look at a system that is still allowed for quota but may not have allowed for the price on the quota, like a certain amount of quota set aside at a reduced value or whatever, because this would be set out nationally, I'm assuming, for the country.
MR. COMEAU: The quota? Yes.
MR. MACDONELL: So I would think that in that regard it would be possible to still have it under the supply management system because your promotions of milk don't really promote organic milk. Therefore, this person really has to be in a situation of promoting their own milk, but yet they're restricted by the price of the quota of the other milk, really that's the situation I see them in. That's really my point.
I certainly support and endorse the quota system. It's the pricing system that I have more of a problem with. Anyway, I will let somebody else . . .
MR. CHAIRMAN: It's time to move on. Mr. Hendsbee.
MR. HENDSBEE: Mr. Chairman, I have a wide range of questions. Perhaps I would like to go a couple of times around. My first question is quite simple. In your presentation, you say 500,000 litres of milk per year is produced by the dairy farmers of Nova Scotia. Are we meeting the demand for Nova Scotians? We have about a million people in this province. Is that 500,000 litres enough to meet the demand or do we have to import milk from other provinces to keep up with provincial demand?
MR. VISSERS: That 500,000 litres is per farm; it's about 170 million litres a year, produced.
MR. HENDSBEE: Okay. So you make 170 million litres. Are we meeting the provincial demand? Do we have a surplus of milk in this province or a deficit of milk?
MR. VISSERS: Consumption-wise, we probably consume more industrial products than what we produce here; fluid-wise, we meet.
[9:45 a.m.]
MR. COMEAU: Out of that 170 million litres, about 100 million litres is fluid, and that is essentially our consumption. Each province pretty well does that. The non-fluid or what we call industrial dairy products - cheese, ice cream, butter - the quota for that part of it is shared nationally and it was established on the basis of each province's historical share of that production when the system was set up. If you were able to measure exactly how many of those products Nova Scotians consume and how many we manufacture, we probably manufacture a little bit less of those than our consumption. We're part of that quota system,
and the products are available. Those products move both ways. Some of what we manufacture goes to other provinces, and of course some comes in from other provinces. Does that answer the question?
MR. HENDSBEE: So, on fluid milk production we're probably just barely meeting our demand.
MR. COMEAU: We are meeting our demand.
MR. HENDSBEE: There's no importing of fluid milks for consumption in this province?
MR. COMEAU: There's a little bit, it moves back and forth, but essentially we're self-sufficient.
MR. HENDSBEE: In your presentation, your concern about the effective government support, including border controls which limit imports, I was going to ask which borders. Is that from the P6 participants, interprovincial trade or from the States?
MR. VISSERS: That's the country one. More what I'm talking about is the butter-oil that comes in, the butter-oil blend which competes with cream for ice cream, or there are other ingredients which were coming in, the fluid for making cheese, I think some of the proteins that were coming in. There are some plants in Europe and that, they have the technology today that they can take milk and they can take out all the different components of it, and then they sell the components to the different countries.
The problem is, even with our tariffs and that, there is a system in there and they can come under the certain tariffs because they don't fall on the lines. Butter-oil, just for an example, the butter-oil sugar, it's 49 per cent butter-oil and 51 per cent sugar. Some of that comes from New Zealand or wherever, it goes to Mexico or those places, gets mixed up in these drums, and anything under 49 per cent dairy product can go in without any tariffs. That's the type of system that I'm talking about, that's affecting our overall . . .
MR. HENDSBEE: Just for the purpose of Hansard, in your presentation there is an acronym HACCP, could you just explain what that stands for?
MR. COMEAU: HACCP, hazard analysis critical control.
MR. HENDSBEE: In our information binders there is stuff like, provincial and federal governments have indicated a desire to eliminate interprovincial trade barriers. With the pool agreement you have, the P6 provinces, the Maritimes plus central Canada and Manitoba, would the elimination of the trade barriers affect that agreement in any way or is that agreement trying to, right now, have more fluid trade between the six provinces?
MR. VISSERS: That agreement, actually I think when it came into play a few years ago, the concern at that time, even with the GATT ruling, was when a certain amount of products were allowed to come into this country, there was nothing stating that it couldn't all come into Halifax or Toronto or Vancouver. I guess the agreement at that time, on the national side, was that at least if we protect ourselves within the country, wherever the product comes in, that we would still share the gain or fall from it. We also lined ourselves up that if the borders came down provincially within the provinces, that wouldn't affect us.
As producers, we see us as a producer here no different from the producer in Ontario. We're still trying to be treated equally across. The industrial products have always been allowed to move, it's the fluid products that have been somewhat of an issue with the borders. Frankly we would like to have seen, at least in the Maritime side, that that should have moved quite awhile ago. It seems like when the government agreed that the borders would go down, they seemed to go up higher than ever.
We're set as far as with the pool. We're protected so that if milk comes from Quebec, if the borders went down and fluid milk came from Quebec into Nova Scotia it wouldn't affect us initially as producers. I guess the only concern we would have as producers is we would have to truck more of that milk back to Quebec because that's where the processing would be done. I guess that's where we have a little bit of a concern. It still makes sense to have some kind of process within each province, because if you have to do all the transporting back and forth, right now we're pooling all the costs of trucking too, but then it gets to the point of how much we are willing to truck it, then you could just produce it all and send it one way.
MR. HENDSBEE: In regard to the comments on organic milk, could you explain the definition or certification of organic, is it just determined to be free range grazing by the cattle or that there are no GMOs, genetically modified organisms, like bovine steroids or feed, whatever the case may be, could you explain that definition of organic?
MR. VISSERS: My understanding is that organic means that you cannot use any chemical fertilizers on the farm. You have to use your manure, but even your manure has to be compost before you could spread it. You can use antibiotics but you have to dump it I think for twice as long as what it says in there. Then your animal feeds, you have to pretty well grow all your feeds, because you wouldn't know if you bought feed in and somebody else had used chemical fertilizers, well, then it's no longer organic feed. It's the assumption that it is all done natural, I think that more of what it is, is a belief that it's better for you than if it has gone the other way.
MR. HENDSBEE: In regard to the organic milk production, percentage-wise in the province, what percentage would it be in the production of fluid milk?
MR. VISSERS: There has been a little bit of organic milk that has come in over the years, Gabriel, from Ontario?
MR. COMEAU: There's been a very limited amount coming in from outside. In terms of our own production, currently, the farm that Mr. MacDonell referred to, they have at least started on the road to certification. There's an independent body that certifies organic farms. My understanding is that there is no certified organic milk available yet to our consumers, because the certification has to extend not only at the farm level, it impacts on the transportation of the raw milk and the processing of it. All of those steps have to be certified and there are constraints on the products that can be used to clean and disinfect the truck or to clean and disinfect the equipment in the processing plant. So I think this one producer has the intent of trying to get that through all the way to the consumer. But to the best of my knowledge there is no other producer who is currently certified. Although some may be eligible to do so, they haven't chosen to do that because they don't really have a place to extract a premium price from their product at the present time; there is no certified organic processor buying it currently.
MR. HENDSBEE: My last question for this period of time will be in regard to the recent federal agency changes in food processing and production guidelines. The Peninsula Farm experience with yogurt. Are there any other experiences like this being experienced by the dairy farmers and if so, where are they being experienced or do you have a comment on the Peninsula Farm experience?
MR. COMEAU: Although we had some knowledge of that from the media and from some limited discussions with Mr. Jones, I never really had any discussions with the people from CFIA. So, in terms of the details of that, I don't think there is a whole lot that I could add.
In terms of if there is anybody else having similar experiences, we didn't mention in our presentation, there are currently six different processors in Nova Scotia who purchase our milk. Four of them are in the fluid milk business and some of them also have some industrial products, those would be Farmers, Scotsburn, Saputo, the Baxter brand and Cook's Dairy in Yarmouth; then we have two smaller-scaled cheese processors, one in the Annapolis Valley and one in Colchester County. But to the best of my knowledge, they have not had any recent issues with the CFIA. They're subject to inspection and I am not aware of any problems there; the other ones, the larger ones neither. There were some issues I believe at least in CFIA's view that were particular to this one plant.
MR. HENDSBEE: I have some other questions later but I will hold them.
MR. CHAIRMAN: Thank you for that. I drink a lot of milk myself and here in Halifax, if you go downtown, a large glass of milk is $2.15 or $2.50, depending where you go, it's quite expensive and I am told you only get a few cents out of that $2.15 or $2.50.
You mentioned that you get 70 cents on a fluid litre. Does that play out in the bulk that goes to restaurants too? That's your price. How many cents would you get out of a large glass of milk that is sold downtown?
MR. COMEAU: If we assume that that glass is 500 millilitre, maybe, a large glass . . .
MR. CHAIRMAN: I was wondering how many millilitres it would be, it wouldn't be 500 probably would it?
MR. COMEAU: Likely not, probably a little bit less. But let's give them the benefit of the doubt and say, it's half a litre. So when that milk left the farm, our members would receive about 35 cents for it. Now, by the time that same half litre leaves the processing plant and gets delivered to that restaurant, then - I've lost track of those prices now - on a litre basis, it's about $1.50 or something like that for a litre.
MR. CHAIRMAN: So it goes from about 70 cents to $1.50 . . .
MR. COMEAU: That's correct.
MR. CHAIRMAN: Then whatever they make after that is . . .
MR. COMEAU: So we'll cut that in half because it's half a litre, so the person running the restaurant, they might pay 75 cents roughly for that half-litre glass. So the difference between that and what you paid for it.
MR. CHAIRMAN: It hardly seems fair at all. It's like following the cost of a pound of haddock to the retail store from the fisherman's boat, isn't it?
MR. COMEAU: Yes.
MR. CHAIRMAN: At any rate, thank you very much. Howard Epstein.
MR. HOWARD EPSTEIN: I was wondering if you could help me get a better feel for what the overall industry looks like here a bit. I was a little concerned that some of the data was compressed a bit too much. For example, there was talk about the total number of farms and the average size of the herd, but that doesn't let me know the range. Can we start with that? Can you just tell me what the range is and whether there are groupings within that, I mean that gives a better feel for whether the industry is all around the average size or are there a few very large producers and a whole bunch of small ones? I just don't know and I'm not sure if it's in the materials here and I wonder if you could tell us about the different sizes of the farms.
MR. COMEAU: I don't have either with me or even in my head the table that has got them broken down, but I can give you an idea of the entire range. As we mentioned, the average farm produces a half million litres of milk per year. The smallest ones probably produce 10 per cent of that, let's say 50,000 litres per year.
MR. EPSTEIN: I certainly would find it easier if I heard it in terms of heads of cows.
MR. COMEAU: Eight cows might be the smallest one. Not very many of those, but there are some. That would sort of be that end of the range. The other end would probably be somewhere in the range of 400 or maybe a bit more, 400 to 500 cows. I don't think anybody's got more than 500 cows. I will go out on a limb and say that probably the bulk of distribution is around that average of 60, our average farmer has 60 cows and it's probably fairly smooth on both sides of that although now that I have said that, when I get back to the office I am going to plot it out just to see. But that would be my feeling. You only have a few of these really large ones and only a few of these really small ones and the great majority would be between 30 and 75 cows.
MR. EPSTEIN: If you in fact have that data, it would be terrific to see. That would be great if you could send that in. The other thing I wondered about, the nature of the farming enterprise, you have left us with the impression that a lot of these are family farms. Is that, in fact, still the case and if they are, would many of your members actually be incorporated entities even if they were essentially family-owned farms?
[10:00 a.m.]
MR. COMEAU: Yes, that would be correct. I would say, I think, probably half or more for various reasons are incorporated. Some operate as partnerships, some as sole proprietorships, but all of them, I think, I would qualify as family owned. There is no dairy farm that I am aware of that is owned by some outside investors who is just the owner with complete hired labour. In every case, the owner is part of the management and in most cases the labour as well of that farm.
MR. EPSTEIN: The question of employees was sort of next on my list. I wonder to what extent your members do have hired employees. Would you know that as well?
MR. COMEAU: Yes, probably there is some data on that and if I recall correctly, sort of the total, roughly there is a one-person equivalent per 25 cows or so. So if the average farm has about 60 cows, on average there are probably 2.5 full-time-person equivalents, including the owner; this would include the owners. So if you multiply that by the 345 farms or so, it gives you roughly the number of jobs/employment on these farms.
MR. EPSTEIN: Over time has there been change in the number of dairy farmers in Nova Scotia. You gave us the figure of 345, can you give us a general picture, say a 10-year picture, what has happened with the numbers?
MR. COMEAU: Yes, the numbers have declined every year probably since the statistics have been taken. The total amount of milk produced hasn't changed very much in those 10 years but the number of farms continues to decline and it declines, over those 10 years, by maybe an average of about 15 farms per year. So 10 years ago I would say there were probably roughly 500 farms and now we're down to 345.
MR. EPSTEIN: Do you have a feel as to what's happened to the land that would have been owned by those farms that no longer are in the dairy business? Is it a question of that land now being converted to some other kind of use, some other kind of use that might be non-agricultural, or does it go to a different type of agricultural use or is it part of the consolidation of farms? What's the picture?
MR. VISSERS: It depends. In some cases, the farmer in the area may be expanding and maybe rent some of that land, or it becomes available and he purchases some of it. Some of it may get used for sod, some may go into golf courses, some goes into development where there could be real estate. It just depends on where the area is at the time.
MR. COMEAU: The majority of it would still be farm. We do have particular circumstances that it might go out of agriculture, but the majority of it still gets farmed. Sometimes the individual gets out of dairy farming and they raise beef or whatever, that would be a fairly common scenario or, as John mentioned, the land gets either purchased or leased to other existing dairy farmers. A lot of it depends on the quality of the land, the proximity to other farms and sometimes whatever alternative uses there are. Certainly, if the farm is close to a large urban centre, there is a lot of pressure for other uses.
MR. EPSTEIN: Have any of your members gone bankrupt?
MR. COMEAU: As an organization, we have existed for a year and a half. I've been working in the dairy industry longer than that, but I can't think of any occasion where we have been formally advised of bankruptcy proceedings. We certainly have members who run
into financial difficulty and usually a consequence of that is that they exit the industry, but normally not bankruptcy.
MR. EPSTEIN: What can you tell us about the income level of your members?
MR. COMEAU: I can comment, you know, we talked about fluid prices earlier, that the farm gets about 70 cents but the producer receives a blend of different prices. So what they actually get on average probably is somewhere around 58 cents. So the average farm
grosses about $300,000 per year but I don't know what the net income is. All we see is the gross.
MR. EPSTEIN: The net is the relative figure. It doesn't matter what the gross is, if you have huge expenses then the net is . . .
MR. VISSERS: The pressure has been on the last couple of years with the costs going up everywhere. I mean fuel costs alone have gone up, and the other side of it is all the supplies and whether it's stuff for a milk house, teat dips or whatever, they all add a surtax on their fuel, which all comes back on the farmer.
MR. EPSTEIN: The other thing I wondered about in getting a picture of the industry was about the processors. I heard you list six processors in terms, I think you said, of the fluid milk. So does that mean that there are other kinds of processors out there?
MR. VISSERS: There are four with fluid.
MR. EPSTEIN: Yes, Farmers, Scotsburn, Saputo and was it Cook's, did you say, in Yarmouth? Yes. Then you mentioned the two cheese processors.
MR. VISSERS: The other two were both cheese. Then Farmers also processes cheese, they have an industrial plant, and they also make butter powder. Then Scotsburn makes ice cream.
MR. EPSTEIN: Is that it in terms of the processors in the province?
MR. VISSERS: Yes.
MR. EPSTEIN: Of those, which are farmer owned?
MR. COMEAU: Farmers and Scotsburn are . . .
MR. EPSTEIN: They're still co-ops are they?
MR. COMEAU: They are co-operatives, that's correct.
MR. EPSTEIN: So, in fact, your members, as well as deriving income from the sale of their products, would also participate in any surplus that was generated by Farmers and Scotsburn, depending upon which co-op they belonged to, is that right?
MR. COMEAU: That's correct. They might participate in surpluses but they also have some money invested in these co-operatives.
MR. EPSTEIN: My impression is that both of those co-operatives have generated surpluses for quite a long time, is that not correct?
MR. VISSERS: As far as I know, I'm not a co-op member, so I couldn't tell you for sure.
MR. EPSTEIN: What do you do with yours?
MR. VISSERS: Well, I've always shipped to Baxter, which was independent, which is now owned by Saputo. Dairyworld had owned it for two years . . .
MR. EPSTEIN: I meant to ask about that. One does see Baxter in the grocery store as a name, but you're saying that it is owned by Saputo.
MR. VISSERS: It's owned by Saputo, yes.
MR. EPSTEIN: So when you refer to Saputo here, you also mean Baxter.
MR. VISSERS: Right, they kept the trade name.
MR. EPSTEIN: That's not a co-op?
MR. VISSERS: No.
MR. EPSTEIN: That's owned by the Saputo corporation.
MR. VISSERS: Yes.
MR. EPSTEIN: Which is an Ontario company at this point, is it?
MR. VISSERS: No, it's Quebec.
MR. COMEAU: Their headquarters are in Montreal but they are a publicly-traded company.
MR. EPSTEIN: I'm not sure what the limit is, can I get back on the list for later as well? Thank you.
MR. CHAIRMAN: Thank you very much, we're just moving into the second half. Mr. Comeau, are you a full-time general manager, is that a full-time job, or are you a farmer as well or have you been a farmer?
MR. COMEAU: I don't farm and I have not been a farmer, I am the full-time general manager for the marketing board.
MR. CHAIRMAN: You have staff and an office, obviously, that is maintained?
MR. COMEAU: Yes, we have staff, there are three other full-time employees and currently one contract employee. So there are five of us in total.
MR. CHAIRMAN: Very good. Where is that located?
MR. COMEAU: Our offices are just outside of Truro, in Bible Hill actually, in a place called AgriTECH Park.
MR. CHAIRMAN: I know where it is, thank you. If I might just ask a question with regard to the legislative changes that this government put in place in 2001. The elimination of the former Nova Scotia Dairy Commission and creating, today, the Dairy Farmers of Nova Scotia, is there any comment with regard to those changes? I'm just wondering about your impressions about the changes. Could you comment on that?
MR. COMEAU: Are you directing a question to me?
MR. CHAIRMAN: Yes, Mr. Comeau, please.
MR. COMEAU: Well, I got a chance to see both sides of that because I was formerly the manager of the Nova Scotia Dairy Commission, so the changes eliminated my job but created a new one. So it has been fairly positive. I think overall the changes have gone fairly well.
The authority that the marketing board has under that legislation is sort of, we either require subsequent approval of our regulations by Natural Products Marketing Council or else they specifically have to delegate to us the authority to regulate things by ourselves. I think we've had a good working relationship with Natural Products Marketing Council, I think it is safe to say that that part has worked fairly well. There have been some adjustments but overall, I think it has been fairly positive.
It costs our members a little bit more to finance our organizations than what they were paying previously to the Nova Scotia Milk Producers Association and to the Nova Scotia Dairy Commission, when you put both things together. Their costs are still fairly low compared to other provincial marketing boards and I think producers generally are satisfied with what they've gotten out of this. They have more say in their own affairs and a bit more control and it has eliminated the uncertainty that was there in terms of dairy commission funding and everything. I think for the last little while the workload kept increasing at the
dairy commission and the resources kept decreasing and it was not a real good situation. Now we have more resources and from my point of view, it is a better arrangement.
MR. CHAIRMAN: Mr. MacAskill.
MR. KENNETH MACASKILL: Mr. Chairman, I have a couple of questions. First on packaging, there seems to be some confusion about packaging. I recall a few months ago my wife was in the store and there was a lady from out of the country trying to figure out what kind of milk she wanted. She found the packaging very confusing and to some degree it is confusing for many of us. I think the cardboard carton with the cap on it is a great idea but how is it different from the plastic container? Why do we have these two packages that are similar, aren't they? Why do we need these two containers, one plastic and one cardboard with a screw cap on it?
MR. COMEAU: I think our chairman may want to comment on that. The only thing I would say is that that is a good question but one that probably should be asked to our processors if they were here. It is not something we directly have anything to do with but John may wish to add a little bit to that.
MR. VISSERS: I guess I will go back about five years ago when at one point the commission had done a hearing in Truro on the packaging. At that time actually Baxter, just before that, had brought the carton with the screw cap on it because they already had it in New Brunswick so they introduced it to Nova Scotia. It was on the shelves for about three days I think and the commission had to put a ruling in to revoke it out. There was a hearing done on packaging, how we were going to follow through with packaging in the future. Part of the issue was that for the screw cap, that whole packaging, the machinery for that was about $1 million. Baxter already had it and the others didn't. Baxter had actually put the machine in Dartmouth and then had to truck milk for quite a while to Saint John, back and forth.
Through that hearing there were concerns for the environment, for putting these screw caps on and how you were going to deal with all of that. I think what came out of it in the end was there was an agreement with the processors that any change in packaging in the future would not happen without 60 days notice to the commission. The commission wasn't restricting new packaging but the processors needed lead time so one didn't have a big advantage over the other. That was agreed to but it was basically stalled so nothing happened for about four years, nothing changed in packaging.
Last winter they made a request at that time to Natural Products Marketing Council because the agreement was still there that they needed 60 days notice. They had given notice that they were going to come out with the screw caps. Once one processor did it and gave notice for the 60 days, they were all free to do it. In Cook's case, where they are very small, they couldn't afford to put that machine in there for making those packages so in their case,
they agreed to go with the plastic jugs. It was cheaper, more economical for them, they were going to charge a little more for them. That opened the door so that plastic jugs were allowed in this province too, just an agreement really amongst the processors.
[10:15 a.m.]
Baxter saw this as an opportunity, because they already had plastic jugs in New Brunswick, to bring the jugs over here. I think if they had to redo it, I don't think they would go back to where they have come out with all of these packages because they just introduced the screw caps here in late May and I think by mid-June or by the end of June, Baxter had introduced the plastic jugs. The others felt that if Baxter did it, they had to bring them out too so before you knew it, they all had the plastic jugs and they all had the screw caps. Is it economical? I don't think. Like I've said, to them it's another line of product they have to make and transport and there is less shelf space in there for all of the products.
We were in favour years ago with going to plastic jugs but they've always resisted it. Now it fell by anyway and so now my understanding is they've got four-litre jugs coming out too. Whether they will do away with the other ones later, I don't know, but they've made the investment in the new equipment. Farmers actually have a whole new package, their packaging came from Europe, I think. It is more of a tetra pack that is supposed to have a longer shelf life but also costs a little more, different caps and everything. So they've all invested quite heavily in some of this equipment.
Then there is the issue with recycling and I think they have somewhat misunderstood the consumers of what they see as recycling because there has always been a high level of recycling in this province, which has been very pleasing.
MR. MACASKILL: But the plastic container is reusable and recyclable.
MR. VISSERS: The plastic jug is 100 per cent reusable, it gets recycled and it gets recycled in Canada, whether it's in Montreal or whatever. It's the other ones they have to package up and ship them out somewhere else to get them, either they go down to the United States or actually the ones Farmers has, I think they get shipped offshore or something. There is a cost to that recycling.
MR. MACASKILL: Is there a waste in terms of the two packages being almost identical, the plastic and the cardboard?
MR. VISSERS: They claim that the plastic is a little more money to make but like I said, it is 100 per cent reusable and it has been for quite some time; they go back, they get shredded and go into other products again. That's an issue that processors have to deal with, I mean they will have to go back to their shareholders and deal with this one. I wouldn't be
too pleased with having all those products out there with those packages. I don't think there was a need for it and somebody didn't do their homework right.
MR. MACASKILL: If the processors are wasting money on issues like that, doesn't it affect the industry? Doesn't it trickle down to the supplier?
MR. VISSERS: Yes, and hopefully that doesn't affect our side. It has all happened in the last few months but it is going to be a while before they get through this one. They are all just trying to protect their part of the market so whatever product one competition has, they want to have the same containers out there.
MR. MACASKILL: In your presentation, on the second page you make reference that environmental issues have gained a higher profile in recent years. Is that something you see that will be troubling to the big farmers in terms of infiltrating our groundwater supply?
MR. VISSERS: It could be, it depends on how it is managed, partly. There is a fair amount of work done now. I know that on our farm we have had it for quite a few years where they do a more detailed analysis of the soil, of nutrient management. When we do fertility planning for fertilizers, what we need in the spring, we also plan in there where we can use manure. Years past the practice has always been that you always spread the manure - the next field beside the barn is always the one that gets the most but it goes with the issue of potash and phosphorous, the level that's there. It doesn't work as quickly as the nitrogen does and you need to find other places for that.
On our farm we have been quite lucky, we do grow a fair amount of corn and alfalfa
and we're able to rotate a lot of fields, so we actually could use more manure than what we have. We've cleared a lot of land too. But there are farms that are fairly concentrated, and as the farms get bigger, you have the manure issue of where you spread it, then the issue of smell and that if you're in areas where it's close to a subdivision or other wells in that areas. It will be a bigger issue as we go through the next couple of years.
MR. MACASKILL: Well, of course, groundwater is becoming an issue, and the quality of it, particularly the last year or two or three. Do you think the day will come when you will see a limit to the number of head a farmer will be restricted to on any particular farm?
MR. VISSERS: I don't know if you will have to restrict it that way. It will police itself somewhat, because the availability of land that you have in the area, it will come to a point where you can only travel so far. There is only so much good land right around the farm, then you start spreading out, so how far can you really go? I know in Europe and in Holland, they've restricted the number of animals by the acres. You have to have a certain amount of acres. That's why a lot of farmers are selling off and coming to Canada. It's because there they had such a concentration of manures, they were trying to cut the numbers down. You had to have a certain amount of acreage or you couldn't keep that many animals.
Whether that will happen here, I don't know. I know in certain areas, you take the Valley area for instance, I know my understanding in the Kings County area, it's not only a dairy but it's your poultry and your hogs and that, it's the issue there with the manure, what to do with it all. If there's a way that they can somehow dry it down to make it more feasible to move it out, there are other farms that could probably use it in outlying areas. It's that area where it's such sandy soil, you put such a concentration of it on. That's where it gets to be a concern.
We saw years ago what happened in the States. There were some states where there was such a concentration of farming, and that's where it gets to be, that manure, that side of it. It's a great product if you use it wisely. On the other side, it can be a detriment to the farmer.
It's an issue and part of it is that there will have to be big enough storage facilities to store it through the winter months so that you don't spread it through the winter. We tried that the last few years. We put up some satellite pits, we haul enough away late in the fall that we spread through the summer and have enough storage that we try to have enough for the winter so that we don't have to spread any until the frost is long gone. We try to work in the soil as much as we can, so that on any plowed ground we will try to harrow it in right away to get the full benefit out of it. It is to everybody's benefit and it is to the farmer's benefit. The better he can use that to put it in the ground, it cuts his cost on the fertilizer side.
MR. MACASKILL: One more question, if I may. I want to touch on the relief to the farmers in western Canada. Have we in this province been monitoring - while the idea is great and I know farmers want to help farmers, regardless of where they live in the country - our supply of feed, that if we run into a dry summer or we have a severe drought in Nova Scotia that we have adequate feed for our stock?
MR. VISSERS: I know on our own farm the feed has been remarkable this year, the grass just didn't stop growing. We started in the Spring, we're cutting corn now. It's non-stop. The summer is just gone. Overall, most of the farms in the area, the last few years what has happened, because we had some drought, it affected what our feed supplies were, so partly what we do is we go out and access more acreage, put more crops in. Whether you grow more corn, whatever, to get more volume, but at the same time, all of a sudden this year all the fields were producing well. I know on our own farm, we probably have enough storage now for four months ahead next year. We like to have that reserve, because you never know.
The feed that was donated to the West is probably a very small portion of what's out there. I know those who donated - I know we donated some ourselves and it won't affect our feed supply for what we want it - I can't speak for everybody, but my understanding is they had lots of excess anyway. I would only hope that we could have sent more. I think there was lots of feed out there. I even had one woman call me up, she and her husband were concerned, they had heard about the "Hay West" project and they didn't have any hay, they didn't farm, but their neighbour had a field that wasn't cut. They were willing to help make the hay on it to send out West to help keep the price of flour down so that the price of bread wouldn't go up. Just amazing to me, those comments from a woman I had never even heard tell of before. She called me up one day.
I think it was a good opportunity anyway, to try to touch links with other provinces. We've always been viewed as a have-not province, and I resist that. I think there are always opportunities to help someone else. The issue was, well the West would never help us. You just put it in their face and someday they will have to. I always figure you're better to be on the end that you can help than having to receive the help.
MR. CHAIRMAN: John, I was born and brought up on a dairy farm, small scale, around a maximum of 100 head. It was one of the first with open housing. I will give you a tip, pea silage, talk about milk production with the cows on pea silage. It was phenomenal. Who is next on our list? Bill Langille.
MR. WILLIAM LANGILLE: I just have a couple of questions. First, Cook's Dairy in Yarmouth, there's no dairy in Shelburne or Digby Counties and there must be very little in Yarmouth because it doesn't look feasible to me to be dairy land.
MR. VISSERS: What is it, about six producers left?
MR. LANGILLE: Six producers out of 350. Now would those six producers supply Cook's Dairy, is that all?
MR. VISSERS: There's some milk that comes from the Valley.
MR. LANGILLE: It just doesn't seem to be the right location for a dairy. I imagine it goes back in time. I'm not going to go there. It was just an observation. Milk quotas. If you have 60 head of dairy cattle and you sell your milk quota, and you say another farmer is liable to buy that milk quota, or does the government buy it?
MR. VISSERS: No, it gets bought up by other farmers.
MR. LANGILLE: What would a milk quota for 60 head, approximately, be worth?
MR. VISSERS: It depends. I guess if you're going to go out and buy it, kg by kg, the last exchange was just over $30,000 per kilogram which gives you daily production of basically 25 litres a day that you have the right to produce. It works out in kgs of butterfat. I hear what you're saying, I guess I would take it a little bit out of context because if you wanted to start a farm from scratch and you go out and buy 60 cows and buy say 40 kgs of quota, whatever, or 50 kgs to produce that, you couldn't afford it. No different than if you wanted to go to Canadian Tire and buy a car all in pieces. You can't afford to buy all the parts. This is part of the problem I see with the farming side, to pass it on to the next generation, to have the farm go as a going concern, what income it brings in and what income it generates to be able to make it feasible to what's affordable.
The problem with the dairy industry as I view it, it's been great on one side because you can get more credit because the investors know, and banks and that, that they can cash in tomorrow. It's not like if you just have old buildings, it may sit for awhile, but cows can go the next day in an auction, quota can go on the next exchange, the machinery, you can have an auction and it's gone. It's just the land, and a lot of times that doesn't take very long to go.
It's been great for that side, the lending, but it really makes it difficult for those who stay in the farming side. I think that's part of the reason that the price has gone where it is today. Somehow we need to look back and try to find a way at least to recognize that if the farm is going to stay as a going concern, you have to price it that way, but then you have to give some recognition for the farming. If no other family is going to continue on, you still want to have it going.
I know on our farm we milk 150 cows. I have a partnership with my brother-in-law, we took it over from my father. My son and my brother-in-law's son are both there on the farm with us, and someday they will be farming. Our goal is that they would farm. We are not viewing it that we're going to someday sell it for so many millions and walk away. We will probably never be able to get more than some retirement fund out of it but I didn't pick rocks for the last 30 years either to see it go to a golf course or something. I have always taken the view that everything we do on the farm, we do so the farm is still there tomorrow.
[10:30 a.m.]
MR. LANGILLE: I'm just curious because I know one farmer who sold and held up this million dollar cheque for his quota, which is a lot of money. That leads me, if producing farmers are buying quotas and not the government - now in lobster fishing the government buys quotas from the lobstermen - wouldn't this give a monopoly to the farmers already in business now? Like you said, nobody else can afford to get into it, so where are we going?
MR. VISSERS: It probably does in a way but I guess on the other side, part of the way our system is geared up is that we do have a regulated price for producers of what we receive for milk and it's based on a cost production formula. You've got to fall within that line to be competitive and what happens is every time you build efficiencies into the system, it puts that bar a little higher, so you have to be a little more efficient to be in there. Part of it is that you may have to access a little more volume to be able to achieve those efficiencies and the only way you can do it is you need more quota.
MR. LANGILLE: When you have your own quota and you buy a quota, say you buy two other people's quotas, does that mean you only have one quota or can you keep those as three quotas?
MR. VISSERS: It is all one quota. You would have one registration number and if you buy quota or sell quota it is just one number there.
MR. LANGILLE: Can you sell part of that quota off, like say 20 per cent, at a time?
MR. VISSERS: Yes.
MR. LANGILLE: What I'm looking at is 350 and if you keep dwindling down like you are now, that 350 becomes smaller and smaller and the people have more quotas, buying them up, you could get conglomerate business come in and run the milk producing in Nova Scotia, like the cheese factories in Ontario, where they came in and bought up all the quotas for cheese making and now they control everything in the cheese business, your Kraft and Black Diamond and so on. All these little cheese makers which were dotted all over the country have gone by the wayside. Do you see that happening in your industry?
MR. VISSERS: I believe we will scale down in numbers yet. As some of the producers are getting older and retiring, some of those farms will not keep going. There's no way that you could afford to reinvest in some of those farms. But at the same time those who are left in the industry, part of it, they will have to access them with that quota and what ends up happening is they also end up increasing their debt. The problem there really is you can only carry so much debt on the farm because you are still working on a going concern. It ties the farmer's ability up in even investing in some of the new technology. I don't know how we address all of this but this is where there is the real issue, you can go out and buy some quota, it's not that hard to get the funding for it but it is paying it back afterward. You end up having to do it because the costs are high. It used to be you could do it over five or seven years. Now it is 10, 15 years, some are even financing over 20 years just to pay for that quota. What it does is ties up your ability to invest in new equipment, new technology on the farm. Hopefully it doesn't play the other way of affecting in the future the efficiencies of trying to stay within that cost-production model.
MR. LANGILLE: I could go on with this line of questioning for quite a time, in fact I could take up all the time but I won't. There is just one observation, and I know - you wanted to ask?
MR. COMEAU: I just wanted to add a little bit to that last question, if you would permit it. I wouldn't want the committee to be under the impression that there are absolutely no new entrants. I think we recognize that it's difficult for new entrants to go in, but there are some people. In fact, within the last 10 days I've been talking to two people, both of whom are in the midst of taking over dairy farms as a going concern; it's somebody from outside coming in and buying an ongoing dairy farm. It's difficult and the value of quota is one of the barriers that prevents that, but I just want the committee to know that it's not impossible and some people are doing it. There are also, of course, some others who transfer within a family situation, from one generation to the next, where effectively there is a gift of some equity from one generation to the next to facilitate the transfer. The seller is not realizing the maximum potential value from the transfer in that case.
MR. LANGILLE: Just one observation, years ago I remember when you drove in the country, you would see all the Holsteins out in the fields, and now I know that there are some farms where the cattle never see the light of day. It's like the chickens, they're born, they're kept in the barn and they never go outside their whole life. I don't know - I realize it's for producing milk, but why did this come to be this way instead of having them pastured?
MR. VISSERS: Part of it, I guess, is economics. You can probably get more crop off your fields by cutting it yourself two or three times rather than pasturing your cattle. It's labour intensive having them out in pasture. Also, I guess, I know in our point, we do have our cattle out through the summer months, but it's only because there's one field by the river we can't do anything else with and, partly, we have an old barn that can get very hot. Also, we still feed year-round in the barn, the door is still open. When it's hot outside, the cows are all in the barn. We used to have elm trees all around the river and that's where they used to stay, but they've all died over the years of Dutch elm disease, so there's no real shade for them. So they will go out but by 11:00 o'clock, the sun comes out hot enough, they're all back in the barn again anyway.
In a lot of those cases, in a lot of the newer barns, the barns are very comfortable. The cows get to eat, they get the stalls, there's either sand or mats in them, and the cows are very comfortable in those barns. They have them fairly open so they get a good breeze going through.
MR. LANGILLE: One last short observation, and I know you're promoting milk in schools, but you say that you want to promote more chocolate milk in schools. Now, what's in chocolate milk that's not in white milk? Why is this? I was just reading this.
MR. VISSERS: All the nutrients in white milk are in chocolate milk too. Actually quite a few years ago we had done a proposal to the government of trying to have chocolate milk, at that time, included in the School Milk Program, but at that time it wasn't so much the government, I think it was the Department of Health that was not interested in even talking about it. There was a meeting set up, but each time it was cancelled. I wasn't involved in that part of it, this is what I heard afterwards. My understanding is that everything that's in white milk is in chocolate; the only thing chocolate milk has is a little bit of syrup in there but it's nothing that's bad for you.
Would we like to see it today in the School Milk Program? I don't know. I guess the concern is that a lot of schools have chocolate milk anyway, and part of the issue with some of the schools is there has to be a means of doing some fundraising and a lot of them went to pop companies because they get a kickback for that. In this case they still sell chocolate milk at a little higher price, so it does raise a little bit of income for those schools. If you put chocolate milk into the School Milk Program then it's a locked price and there's no money made on it, I don't know what it would do to the program. They would probably have to look at another avenue of achieving some extra dollars.
MR. LANGILLE: So what, in fact, you would be doing is because of the soft drink program, your company would think that yes, they will drink more chocolate milk than white milk, so you can compete with them. Is that basically it?
MR. VISSERS: I think it's just another alternative, that they would have the chocolate. Now most of those schools still have chocolate but it's at a higher price. I don't know. Like I said, years ago it probably would have worked, but in this day and age I don't know if you would want chocolate milk in that program unless there is a way of also putting more dollars in, because I don't think the dollars would be enough to cover that now.
MR. LANGILLE: I think it would be a good idea.
MR. CHAIRMAN: We have four more on our list. I would just ask you to try to keep it to a couple of minutes. Brooke Taylor, you're next.
MR. TAYLOR: Mr. Chairman, I was just going to ask the presenters this morning if they have concerns or information regarding the Prime Minister's decision to ratify the Kyoto agreement, and at least some of the Liberal Government. The oil and gas industry has some defined concerns. I'm wondering if the farming community across the country and especially here in Nova Scotia has any information on the implications to the farming community in terms of the cost implications. It's not a question of whether or not the farmers or foresters or whoever are good stewards of the land, we know they are. Does the industry know of any implications if that agreement is ratified?
MR. VISSERS: At this point I don't know. I have always heard of the issue that the cows are a bigger creator of the methane gas that's out there. Whether there's a way of controlling some of that, I don't know. My personal view is I'm kind of hopeful that they can have some kind of accord come out of this. I hear what the gas and oil companies say, but I guess as a consumer out there, I still see their big goal is the profit line. If we're looking into the future, making sure there is a country when our kids or grandkids grow up, we need to take the steps to put some things in line. They're always quick to say they can't do these things, but they're also quick to raise the price of fuel and oil in a hurry too. It would just be passed on anyway. I guess if we have to wait for some of the other big countries to do it, it may never happen.
On the other side, I don't know what's going to happen, what the downfall would be to the agriculture side, how negative that could be. We would have to follow that through. I think somewhere the steps have to be taken, but on the other side too if we do it in this country, not just across the border, but from what I heard some of the Third World countries or even Mexico and China are looking at being exempt from this. Well, to me they should all be in the same play. If you start to differentiate, it doesn't make fair ball.
MR. TAYLOR: I just wondered, Mr. Chairman, because so many different sectors have expressed the view that they basically don't know enough about the implications. I'm wondering, surely to goodness somebody out there must know what this agreement entails. I understand different provinces are allegedly in support of it without knowing the environmental, financial, administrative, all these cost implications. I would like to think that at some time that information, before now probably if we're going to ratify it, should be going forward to these varying - especially the rural-based - industries that help us to sustain in rural Nova Scotia.
Mr. Chairman, I had a question about the supply-management program and that system. I think it must be difficult to continue to sustain the supply-management system. I know you've faced some challenges in past years, some very public issues. Are you comfortable now that that supply-management system that's here in Nova Scotia is secure? Is there something pending now? For example I know you have NAFTA and GATT and so on, but is there anything that we should be concerned about on your behalf? You talk about the border controls and things of that nature, but is there any specific area that this committee, for example, should be aware of?
[10:45 a.m.]
MR. VISSERS: I don't know.
MR. COMEAU: Again, especially some of these international issues, even though we do have limited staff so it's sometimes hard to stay on top of it, but my understanding would be that as we get into a new round of WTO negotiations - there are kind of two issues at the
WTO. One is kind of a challenge that's been ongoing, appealed and resubmitted and is currently under appeal that was submitted by the United States and New Zealand. If we end up losing that, that will pose some problems.
At the same time, there's the desire to go into a new round of negotiations and make further changes, and from the point of view of the industry it will require the position of our federal government to continue to defend our right to have this domestic system and to allow the type of effective control at the international borders that we referred to in our presentation so that if we have an administered price that's based on a Canadian cost of production, and currently it's tariffs that essentially keep the bulk of those products out, in order for the system to continue, that element has to be there. If there were no tariffs on dairy imports it would have a significant impact on dairy supply management.
MR. CHAIRMAN: We will have to move on. Mr. MacDonell, for a very quick comment. We do have some agenda-setting items to deal with at the very end. I hate to be rushing because it's very interesting conversation.
MR. MACDONELL: Mr. Chairman, I guess I will try to breeze through these quickly. One - and maybe you gentlemen aren't the ones who can explain this but you may be aware of it - is the retail side of milk, the selling. It's my understanding that the retailers, at least the largest ones in this province, are really in a win-win situation when it comes to milk on the shelves. The milk has a best-before date. If the milk goes past that best-before date, the dairies take it off the shelf and replace it at no loss to the retailer. Actually the processors pay the retailers for shelf space. Sometimes in the office there is a stack of cheques that go out to the retailers from the processor for the privilege of being allowed to sell milk or have milk in their space, and the cheque is as high as $10,000 sometimes. It occurs to me that the consumer is paying for this, I would imagine.
So the whole question is, if farmers get roughly 70 cents per litre in the P6 generally but our price here is higher, the retail price is higher than other jurisdictions, that this may be part of the reason. Is this the same system that's followed everywhere, or do we just pay more here, or do processors pay more? Am I right, or how far off the mark am I on what I've just said?
MR. COMEAU: Probably some of those questions should be directed to processors and retailers, I think, to be fair. I don't know all the details about their business or the height of the stacks of cheques or the amount of the cheques.
MR. MACDONELL: No, no, but does that happen?
MR. COMEAU: I think if you look at current regulations of the Natural Products Marketing Council, they regulate a minimum wholesale price, they also regulate a maximum discount or rebate, so there are some limits on those that are fixed in those regulations. I think
what you referred to, my understanding is that it is a common practice, and there is a so-called wholesale price at which the products transfer from the processors to the retailers. I think the main retailers then sell that product at that wholesale price, but then they receive some money back from the processors. In effect, that money that they receive back is sort of their gross margin, if you wish, on that product.
The details of that - I don't know the details other than what I've told you. That would be, I think, a common practice. Is that a common practice in the rest of the country, I don't know that for sure, but my colleagues in the processing sector indicate that that would be the way milk sells in Ontario as well but the prices and rebates may be of a different magnitude there. The practice is fairly common, as I understand it.
MR. MACDONELL: One more quick one, Mr. Chairman. I'm curious if you know, I see in the Superstore, milk from Ontario and I'm just wondering, do you know if those Ontario producers would be paying for quota?
MR. VISSERS: Yes, they would be.
MR. MACDONELL: I guess that will have to do for now, thanks.
MR. CHAIRMAN: Mr. Hendsbee.
MR. HENDSBEE: Mr. Chairman, for the limited time I will list my questions and perhaps the gentlemen may take their time to respond in writing with regard to the questions. I just want to make a comment about those comfortable barns becoming "mootels", I wanted to make sure that was in the Hansard. Anyway, my three quick questions are: Why isn't Newfoundland and Labrador part of the P6 pooling agreement? With regard to the school milk programs, I thought it would be more of an interest to try to promote youth nutrition in our young people. Why isn't there more flavored milk available to compete with the soft drink market? We saw the different flavours like banana, vanilla, strawberry, mocha, coffee, even chocolate-bar flavored milk. I would like to know why is there not a push with regard to having more flavored milk in the schools? Also, with regard to food banks, do you have any powdered milk program to go to the food banks with.
My last question would be in regard to taxation. Exemption of farmland on taxation, could you also clarify if that includes structures or are structures also taxable as a commercial entity or resource entity? When you talk about the release of capital gains was there any possible discussion or investigation in trying to establish a venture capital pool where flow-through shares could be purchased by the general public as an investment into the dairy industry and use that as a resource pool for new entrants or perhaps existing farmers to have as a capital pool to draw upon?
MR. VISSERS: Actually, I will do the Newfoundland one right now.
MR. CHAIRMAN: If you just want to do that one and then respond in writing perhaps to the other questions. You will get a copy of the transcript so you will get all those questions in writing.
MR. VISSERS: Newfoundland and Labrador, they just signed on the end of July, first of August, into the Canadian Milk Supply. Up until that point, they weren't even with the industrial quota. The Canadian Milk Supply really manages the manufacturing of milk within the country. They were outside of that and it wasn't until last year that they finally agreed as a mechanism they would be allotted a certain amount of quota for that, I think they started up at 7 million litres a year. They could get an additional 2 million a year if they request it, providing they produce it for 15 years.
Why aren't they into P6 yet? Because the P6 is also shared within the fluid and industrial both. Right now as you know, Newfoundland producers get, I think 83 cents or so for their fluid milk. If they pooled with us, their price would be reduced down to 71 or 72 cents, unless there's a mechanism that they could keep an additional fee for their fluid, a difference say of $12 or $13 and that may happen. There is a good possibility that it could happen but there had to be step one where they had to get into the Canadian Milk Supply first and they needed to get a feeling for that before they went to the next step within the P6 pool.
MR. HENDSBEE: Is it 12 or 13 cents or did you say $12 or $13?
MR. VISSERS: Per hectolitre, I guess.
MR. CHAIRMAN: Mr. Epstein.
MR. EPSTEIN: I will pass.
MR. CHAIRMAN: Cross-border surveys are indicating that Canadians pay over 20 per cent less per nutritional basket of dairy products than the same basket of dairy products in the United States. I think it's too bad that most Nova Scotians don't know this and all you hear is they are paying too much for a litre of milk at the corner store. Perhaps your organization should be getting the message out there that indeed this is the case. I think that's a good point, would you not agree? It's all about communication sometimes. I think that would go a long way in support of your industry.
In closing I just want to say that I think that Nova Scotia has a dairy industry second to none. We're very proud of the organization, those behind it and the people who are working in it. I have a few major dairy farmers in my area, as you know, in Pictou County; very well-established farms. On behalf of the committee, I thank you both very much for coming here. I think you will agree, by the line of questioning, that we were all very interested in what you had to say today. Thank you again. (Applause)
[10:55 a.m. The committee recessed.]
[10:57 a.m. The committee reconvened.]
MR. CHAIRMAN: All right folks, I promised we would be out of here at 11:00 o'clock, and I like to keep my promise. I believe we haven't received any from the NDP yet but we will next meeting. Perhaps those could be sent in as soon as possible so that we have them to review, and maybe we can deal with them at the next meeting.
You have before you a proposal from myself and our group: the Nova Scotia Fruit Growers Association and the Nova Scotia Turkey Producers, that we could deal with on the agenda. Also possible witnesses from the Liberal caucus: the Nova Scotia Federation of Agriculture - state of the family farm; Nova Scotia Department of Natural Resources - Parks Policy - Abandonment of parks, Pack in pack out policy; and the Department of Natural Resources/Department of Environment, state of the mining industry in Nova Scotia, new projects, environmental approvals, et cetera. Mora, you had a couple of comments that you would like to make.
MS. STEVENS: First of all there was a potential witness item added on when we did our agenda-setting session for the Public Accounts Committee. The item that was forwarded was the Nova Scotia wine strategy. It was proposed by one of the caucuses and there was an agreement of that committee to send it here because they thought it was a better place for the wine strategy to be looked at. They said, if you want to forward it to Resources - so I'm forwarding that from the Public Accounts Committee.
Also, if you look on the second page of your agenda item, I know the one thing that John had forwarded was the Northern Lumber Company, that when things are discussed that is a first-up item on the agenda. I know that is from way back. Also, I had a question. We are dealing with the last of the agenda items that were approved from the last session. There was the Agriculture Development Institute, ADI, and with it was, in conjunction with Jörg Beyeler of DNR, he does the huge 100-year forestry study, and having talked to ADI and Jörg Beyeler separately, trying to set them up for this fall, those are huge meetings. There is no way you could do justice if you had them together, to be quite honest. I was wondering if you would possibly consider separating them. That would give me an October and November meeting date and give you lots of time to look at your list for future items.
[11:00 a.m.]
MR. CHAIRMAN: Is everyone in agreement with that? Okay, that gives Mora the opportunity to get things laid out for future agendas.
MS. STEVENS: That's great, so possibly next meeting the agenda items could be discussed and that would give me a good lead time to get them going.
MR. MACDONELL: Do you have Northern Lumber on that as an agenda item for that meeting?
MS. STEVENS: Yes, that will be on for discussion.
MR. LANGILLE: When is that coming up?
MS. STEVENS: The discussion of the next agenda will be at the end of the next meeting to discuss the lists.
MR. CHAIRMAN: We will allow sufficient time. We will allow 15 minutes or so at the end.
MR. LANGILLE: Northern Lumber, is that the one in my area?
MR. MACDONELL: Yes, it is.
MS. STEVENS: John had forwarded that idea for an agenda-setting session.
MR. CHAIRMAN: Without further comment I suggest we adjourn. Thank you.
[The committee adjourned at 11:02 a.m.]
