By 2015, Quebec agriculture will need to function under a new entrepreneur-based policy, “it’s a question of survival,” according to Michel Saint-Pierre, the man Quebec has appointed to reform the province’s financial assistance program as part of the Commission sur l’avenir de l’agriculture et de l’agroalimentaire québécois.



The myth that America subsidizes agriculture more than La Belle Province, especially in terms of corn production, is completely untrue. “Quebec devotes more resources to sustaining its agriculture than any other part of North America. With a much lower level of financial aid, Ontario generates nearly twice Quebec’s income. Can we do better?,” questions Michel Saint-Pierre as he made public his plan at the end of March 2009 during an event held in a Hilton conference
room, barely a hop, skip and a jump away from the Quebec parliament. His belief is that if Quebec’s generous assistance gets through WTO it’s because it has been diluted in Canada’s overall farming aid.

On March 31, 2008, Quebeckers had to inject more than $1.4 billion dollars to support one segment of the province’s 30,000 farming businesses and “if nothing is done, we will be digging ourselves into a 2 billion dollar hole.” However, according to Mr. Saint-Pierre, there’s no talk of abandoning this type of provincial aid within a context of serious competition from big green giants such as Brazil, the U.S.A. or even the European Union. But the aid needs to be revised and corrected to give “Quebec’s little Nordic garden” an entrepreneurial culture that will open up to a plural and multifunctional agriculture. If Quebec is three times the size of France, only 2% of its land is suitable for agriculture, in other words, an area 14 times smaller than our French cousins.

Michel Saint-Pierre proposes a major reform of the Farm Income Stabilization Insurance Program (in French it is referred to as ASRA), the main instrument of Quebec’s agricultural policy. The program was initiated in the early seventies and was designed to fill a income gap between farmers and professionals equal to 45%. Mission accomplished. This financial instrument has also been providing Quebec with a positive commercial agricultural balance since 1998. But over the past 30 years, the agricultural landscape has become polarized. A small number of farms (26%) produces most of the crops (80%) destined for the mass market. While a large number of small farms (54%) serve local or proximity markets or offer high value-added products that contribute to the health of the regional economy.

In fact, the Farm Income Stabilization Insurance program was used for all kinds of purposes by various consecutive governments: to maintain and develop certain crop productions, to deal with crisis management, for land occupancy….consequently producing a multitude of distorted effects.

Distorted Effects
First and foremost, among these effects is the lack of market indicators: “Market price has been replaced with a stabilized price,” explains Mr. Saint-Pierre. Even during periods of crisis, lamb, pork or corn production experienced a huge boost in volume varying from 300% to 450%. Furthermore, ASRA did not help promote performance! An analysis performed in 2007 for three types of production receiving the lion’s share of ASRA – corn, finishing pigs and fattening calves – depicts a great divide between the highest and the lowest producing groups. For example, in terms of swine production, the spearhead of Quebec’ agricultural exports, the best producers needed 40¢ for each pig while the least performing producers needed some $37.55 per pig. And yet, Saint-Pierre reports that they all received the same compensation per animal.

Michel R. Saint-Pierre, Executive Council Deputy Secretary General

Another distorted effect is corn and soy cover most of the province’s agricultural landscape. Doubtful choices led to sowing these two crops, covered by ASRA (among 17 other possibilities), in regions with limited potential rather than opting for crops that “would have been better received in the market.” This financial instrument also emphasized regional inequalities. “It’s a fact,” states Mr. Saint-Pierre. Four regions – Montérégie, Central Quebec, Chaudière-Appalaches and the Eastern townships – received 70% of all ASRA aid over the past ten years.

Precarious Indebtedness
However, the most distorted effect of ASRA, according to Mr. Saint-Pierre, is without a doubt the average debt rate of Quebec farms. The rate – three times that of American producer sand twice that of Canadians – undermines this province’s commercial future. “This translates into payments of $25,000 to $30,000 per year. That’s too much! It makes our farms weaker,” states Saint-Pierre. .

The false sense of security generated by ASRA and by the other pillar of agricultural revenue protection, supply management, combined with an overabundance of credit has led to this situation of debt overload also qualified as a ‘stalemate’. “When your banker or feed supplier calls every week in an attempt to settle outstanding accounts, what you get is added stress and psychological distress. It’s all connected,” says Mr. Saint-Pierre.

The author uses the expression made popular by dairy production specialist, Raymond Levallois, from Université Laval: “We are facing more of a debt crisis than a crisis in revenue.” The professor explains dairy farmers’ reactions to a drop in revenue under 3% the result of the depressed market for cull cows following the discovery of a single case of mad cow in 2003. In the course of a protest in the Saguenay–Lac-Saint-Jean, a desperate dairy farmer slaughtered a cow with a bullet to the skull in full view of television cameras.

According to recent studies quoted in the Saint-Pierre report, 20% of Quebec businesses were under significant financial stress at the end of 2006, and 28% of swine producers were under significant stress. If interest rates are, at this time, at a historical low, we would rather not think about how high they could go in an effort to counter inflation linked to a global financial and economic recovery. In the eighties, rates went as high as 12%. Easy credit and Quebec farmers’ love of tractors contributed to their massive debt loads. The capital (tractor) per hectare harvested in Quebec is three times higher than the Canadian average, a tendency that gained particular favour between 2001 and 2006. In addition to the “tractor index”, Quebec also stands out in terms of farm transfers via bank loans where young couples acquired debt often exceeding $500,000 including significant intangible assets such as quotas. According to Mr. Saint-Pierre this is “a unique model in North America.”

Change of Culture
Michel Saint-Pierre proposes an adjustment and a contraction on the part of ASRA, which covers 17 crops overall. When establishing production costs, we would “stop dressing everyone” and remove from the stabilized income calculations the least performing group (25%): this would introduce a notion of efficiency in the system. And, without establishing a $150,000 ceiling of assistance for each business, as was suggested in the Pronovost report, the alternative would be to increase participation in ASRA contributions, which, for the time being, one third is paid by farmers (33.3%) and the remaining two-thirds (66.6%) is paid by the State. “If you own a farm with 5,000 pigs, which represents the reference model for this type of production, your contribution is 33.3%. However, it would increase to 40% if you owned 5,000 to 10,000 pigs, and again increase – to 50% - if you owned more than 10,000 pigs, which represents twice the number of animals in the reference model.”

ASRA would end by 2014 and focus on a new generation of financial support programs. Quebec’s new agricultural policy would be the first line of defence and would include a national risk management program (Agrinvest and Agristability); one offered to every Canadian farmer and generally covers market variations. But Québec would have, as early as 2010, a complementary self-directed risk management program, a (PARA), which refers to covering as in the French word ‘parapluie’ or umbrella or ‘paratonnerre’ as in lightning rod. The PARA would provide better protection to producers. “It would be the equivalent of an RRSP account (self-directed retirement savings plan). La Financière agricole would subscribe to an annual contribution based on the business’ overall revenue and deposits would be tax-free. This way it would allow farmers to keep their money compared with the current fiscal plan that promotes spending to avoid paying taxes. We would be in a cautionary mode instead of a spending mode”, states Mr. Saint-Pierre.

Not only would this result in a lower debt load, a PARA would have the advantage of diversifying Quebec agriculture, especially in outlying regions. “It’s a more equitable program that takes us out from the ASRA cover. Farmers, regardless of their production, from game meats to berries to vegetables or emerging crops, would be able to manage their risk and develop their own business strategy according to their market. Management would be based on entrepreneurship,” states Saint-Pierre.

Abolishing ASRA to implement PARA would take place over a critical transition period of six years. How? Thanks to a myriad of complementary technical and management measures to carry out the cultural change combined with a targeted financial aid varying from $50,000 to $100,000 per business. Financial support would also be granted for regional initiatives. “Instead of waiting for a cheque to come in the mail, an advisor would drop by the producer’s home,” explains Mr. Saint-Pierre. Asked if MAPAQ intended to commit itself to new resources, he pointed out that the technical force of impact would come from three sector expertise centres, one of which would be specialized in management and would receive new funds representing some $350,000 per year. The Ministry’s resources would become a second resort.

Multifunctional Agriculture
Inspired by the European eco-conditionality model, the Quebec’s new agricultural policy would also consist of multifunctional agriculture contracts (MAC) designed for small farming businesses with, for example, assets and personal property totalling less than $1 million and established in underprivileged areas. The Quebec model remains to be defined, but these types of aid, up to $10,000 per year, would be distributed on the condition that certain eligibility criteria are respected, such as maintaining the landscape and water flow, observing a specific animal concentration, or carrying out a diversification project that reinforces environmental protection. The minimum length of a contract would be three years with the possibility of an additional annual $5,000 awarded for marketing certified organic products. The goal is to set up a pilot project as early as 2010. Equipped with an initial financial envelope of $5 million, the amount would triple after three years in operation.

Michel Saint-Pierre submitted his report and his recommendations to the Charest government in February of this year. The result of more than 50 meetings (600 people), examination of existing documents including the Pronovost report, two specially mandated studies and 38 years of personal experience, the report stipulates that the proposed change is essential if we are to save Quebec agriculture. We’ll just have to wait and see where the Premier intends to lead this “green revolution” with agriculture’s main players.

Lack of accurateness and half-truths are words the president of the UPA used to define the report prepared by Michel Saint-Pierre only a few days after its release to the public last March. “The report puts forth information that doesn’t hold up and that we’ll be in a position to destroy it at any time,” stated Mr. Lacasse during an interview.

Quebec agriculture is not as subsidized as America’s farming industry, maintains Mr. Lacasse as he responded to one of the report’s conclusions. “In Quebec, support for individual farmers is a little less than $200 and in the United States it exceeds $300…..,” wrote the union central as it too responded to the Saint-Pierre report via a press release. Yet Quebec farmers can fill a grocery cart at the same price as its powerful neighbour to the South, despite Nordic growing and farming conditions.

Mr. Lacasse refuted the argument in which the Farm Income Stabilization Program (ASRA), covering some 17 productions, masked market prices and kept producers commercially ineffective. “Throughout the past seven years, farmers generated productivity gains around $700 million by improving the efficiency and performance of their businesses,” stated the UPA press release.

As for Mr. Saint-Pierre’s suggestion that the main instrument of Quebec’s agricultural policy be abolished, well that’s borderline heresy. “We agree with expanding income security programs to other sectors, but there’s no need to get rid of ASRA. This program has had structuring effects on Quebec agriculture…”

The president of UPA emphasized that, thanks to ASRA, Quebec farmers are better off than those in other provinces where, because of recent issues (mad cow, fresh pork), farmers have been showing negative incomes. He further stated that “abolishing ASRA would undermine family farms and produce a lack of structure in an economic sector that is the basis of 7.5 billion dollars per year in sales, 650 million dollars per year invested in regional economies as well as 60,000 direct jobs.

Mr. Lacasse also maintained that ASRA is doing its job. He provided corn as an example where recent price increases, generated by US demand for bio-fuels, have allowed an account that is deeply in the red to be repaid. As for the hundreds of productions, such as cattle, where ASRA has been in the red for the past 30 years, “it’s a choice that must be made. Finishing veal and lamb play an extremely important role in maintaining activities in certain regions.”

The UPA president categorically refused to talk about the debt load of Quebec producers described by Mr. Saint-Pierre. “It’s clear that a Quebec farmer, whose average age is 47, will be deeper in debt than his American equivalent, whose average age is 57. Evidently the debt load won’t be the same since one of these farmers is operating a business in full expansion while the other is on the verge of retiring.”

The president of the UPA explained that Quebec farmers’ debt overload was due to significant investment in environmental protection compared with those made of producers in other provinces and in the USA. As for the capacity of Quebec farmers’ to repay their debt, they are better off since they get a bigger share of market revenues.

Nonetheless, Mr. Lacasse intends to continue to work as part of the UPA-government bipartisan committee, which includes representatives from MAPAQ and the Conseil du trésor, and which has set itself a September 2009 deadline for coming up with a new agricultural policy inspired by Mr. Saint-Pierre’s hard work.

If the (PARA) risk management proposal as presented by Michel R. Saint-Pierre is retained, income security would no longer be connected to production, therefore it would no longer be connected to a set production cost (ASRA logic).

In this type of context, the farmer chooses the type of production/ he wants to develop without taking into account revenue guarantees related to this or that type of productio

In this type of context, the entrepreneur or business dimension related to managing an agricultural business would become a primary asset. But what exactly is a farm-entrepreneur?

He is a farmer who adopts a global approach to his farm. He focuses his efforts on technical management as well as financial and human resources management or marketing management, if the product requires such.
He is a farmer who envisions his business in permanence within its context. No business, even agricultural, can survive and thrive without being concerned with evolving as part of its environment (technical, economic, regulatory, and societal, etc.) and making the necessary adjustments.
He is a farmer who makes decisions with cost-effectiveness in mind. He is not a speculator making investments even if they are not profitable then closing his eyes to reality with the belief that these same investments will eventually rise in value. He analyzes each of his investments with the notion of improving the business’ profitability. If the investment is not profitable, it is carried out with specific objectives in mind and its consequences are studied and accepted.
He is a farmer who is aware of the risks and makes decisions to build up the strength of the business making sure that it can withstand eventual financial troubles. From this perspective, he avoids drowning his business in debt and maintains a healthy safety margin. Sadly, over the past few years, this dimension seems to have been forgotten by many farmers and interested parties.
Finally, he is a farmer who always keeps in mind the needs of consumers so that he can adjust his business,

In fact, this farmer is more than a simple cultivator, he’s an agricultural entrepreneur. However, we shouldn’t translate this label as being automatically associated with big expansive business. It is more of a state of mind, a way of approaching farm management. There are all sorts of entrepreneurs, some with small and medium farms and others with large farms. The entrepreneurial spirit is not connected to a single dimension of business; it is part of the way business management is approached.

This type of farmer already exists and he is already favoured by the current income support program. However, with this new proposed policy, an approach to managing agricultural businesses would become even more critical. This new policy should contribute to the development of an entrepreneurial spirit in the world of agriculture.


BENOIT GIROUARD
Rabbit farmer and president of Union paysanne

“I approve 100 % with the Saint-Pierre report. It was all about large-scale production after the Second World War. Today, we’ve reached another phase. We are at a point where we are doing better instead of doing more. There is some urgency to act in terms of Quebec farmers’ debt load, which is double that of Canadian farmers and three times that of our American counterparts. Farmers will feel threatened because the new program will require greater involvement in development and more hands-on management. But it will lead us to improved diversity and greater farm efficiency, notably with assistance paid almost entirely by the State. The new plan expands beyond the usual production niches and supports production as a whole. I also applaud the Multifunctional Agricultural Contracts (MAC), which basically reflect the vision of the Union paysanne. The CAM targets the active occupation of land with the condition that a few recognized practices be respected as they related to sustainable development. I heartily invite agricultural producers to read this report, because we all need to see Obama’s intentions to realize that this new program for Quebec is not beyond our grasp. The President of the United States has put forward that any farmer earning more than $500,000 not receive any type of support and that payments to farms be limited to a maximum of $250,000.”

 

JULIEN BÉLANGER
Pork Producer, Honfleur

“If the proposals in the report are applied as is, it will be disastrous for the pork production industry. This means that contributions will increase if we exceed the 271 sow model. This keeps our businesses from consolidating. And that’s not very encouraging for the next generation who want to start their own businesses. By remaining small, revenues aren’t high enough to pay for an employee. Young people don’t want to work in a business where they have to work seven days a week. They want a family, a life and the possibility of taking a vacation. Why is that in agriculture can’t also enjoy this lifestyle? On the one hand, we are offering the next generation low interest rates while on the other hand, we are asking for higher contributions. If that’s how it is, young people will leave this industry to go into other businesses. Even before the report was made public ASRA was announcing funding cuts representing $42,000 less for a farm with 250 fattening sows. The new recommendations will result in lower production in Quebec. What will happen with our slaughterhouses? Who will supply them? What about jobs? This report merits some serious discussions.”

 


CLAIRE BOLDUC
President of Solidarité rurale du Québec

“We greeted the recommendations made by Michel Saint-Pierre in his report with optimism since it recognizes the importance of land occupation and its development. The report acknowledges that there are notable differences in producing capacities and difficulties between the various territories and recognizes the non agri-food contribution of farmers in maintaining these territories. For example, I’m thinking about preserving our streams and rivers, maintaining the landscape or planting windbreak hedges. These actions benefit Quebec society as a whole and are valuable contributions. The proposed changes recognize the efforts of agricultural businesses that take part in developing plural agriculture. Over time, some recommendations that will correct the negative impacts on land development resulting from our previous methods and ways of doing. However, we need to recognize that changes are troubling. But the proposed changes will be a major force in helping Quebec agriculture move forward and will begin a movement that we can all adhere to.”

 

YVAN LACROIX
President and chief executive officer
Association québécoise des industries de nutrition animale et céréalière (AQINAC)

“Overall, it’s a rather accurate account. We can’t deny the conclusions stating that ASRA messed with market indicators and led to a lack of farm efficiency, as well as a high debt load. But certain elements in the report are disturbing. During the 2010-2014 transition, beyond the proposed model, the report recommends a significant increase in contributions without corresponding market compensation for producers, particularly pork producers. Believing that income security and marketing are separate and cab worked independently is misleading. The entrepreneur works within an indivisible whole. These two aspects are an integral part of the entrepreneur’s strategies, his entrepreneurial spirit! It is completely unfair and goes against the 1998 policies to develop agriculture. The relationship is broken. The pork marketing model that exists in Quebec will need to be reassessed so as to allow producers the choice of working through a sales agency or doing it themselves. On the one side we are promoting entrepreneurship while on the other, we are limiting it. The State will have to take a stand when it comes to pork production. What is the business plan for the next five years? Increase or decrease? Just tell us. We’ll work accordingly. If we want development, let’s work alongside and with producers based on an entrepreneurial work ethic, which is not the case in the proposed model.”

 

RÉAL LAFLAMME
Dairy, pork, poultry and field crop farmer, Saint-Hyacinthe

“The report requires consideration. But first of all, the support that we want to provide to outlying areas to develop agriculture is an excellent proposal since there are all sorts of related activities that contribute to the economy. I support the idea of making our aid programs respect WTO requirements. We cant’ ignore what’s going on in the world. But I disagree with cutting funds for agriculture. For the past 10 or 15 years, this sector barely represented 1% of Quebec’s budget. And it has generated wide-ranging economic activity. Agriculture is not appreciated at its fair value. Either we want it or we don’t? The government has to make a decision. It’s true, some producers are not as efficient, but if we remove 15% or 25% from the model, who will be left at the bottom? There will always be some who are less efficient. I have been part of ASRA since 1975. And I made the money I received work for me. I built, developed, and put people to work. I have two sons and one daughter who will be taking over. Other aspects that trouble me are debt load and machinery. How can we come up with corn at a price of $110 or $115 per ton, just like in 2005-2006, the price we had some 40 years ago? In 2008, at $195, I didn’t need ASRA to make my payments. At that price, my debt load is not too heavy. The American model doesn’t interest us. They’re big corporations and only represent 6% of farm owners marketing 70% of all food products. The remaining farms in America often struggle with conditions and workers that we don’t want here. I produce, as part of a partnership, 12,600 pigs per year. Our animal production results are at a superior level. But with the weak market prices and the rising cost of inputs, we need support. We shouldn’t take money away from agriculture, quite the opposite. And at the very least, keep what we already have.”

 



     
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