EDITORIAL: Peace in the countryside

Laurent Pellerin

UPA President

On the eve of the Christmas holidays and after many years of waiting, the government finally made a commitment, through an agreement, to slow down the increase to agricultural producers’ tax burden and to put in place the necessary measures to achieve it.

In part, this decision answers our requests. Following this, the UPA’s general council gave the word to give snowmobiles and ATVs access once again to farmland throughout the province.

One of the essential elements of this agreement is that agricultural producers will be able, starting in 2007, to pay their fair share of taxes directly to their municipality, as we have been requesting for years. The agreement also stipulates that the government will give the Tax Reimbursement Program a distinct envelope in the MAPAQ’s budget, which will prevent dipping into the ministry’s budget for other activities, another one of our essential requests.

Added to this is the possibility of applying a reduced taxation rate, called “variable rate,” in order to slow down the transfer of the tax burden on the agricultural sector. A follow-up committee will be created to supervise the application of this measure by municipalities as well as its impact on the tax burden of farms. The UPA will be part of this committee, as will the government and municipal sectors. The role of this committee will be crucial, as it will guide the government in bringing the necessary corrections to ensure the commitment is followed.

After this announcement, the members of the UPA general council wanted to point out the support given by the snowmobile and ATV associations as well as by tourist associations, who recognized the merit of the requests made by the agricultural sector in the difficult issue of municipal taxation. It should be pointed out that farmers were reluctant to block access to their farms, as they always had a good relationship with snowmobile and ATV users.

With this and the commitment made by the government in mind, the UPA general council made the commitment to its partners to not give the word to use this pressure tactic in the future.

At this time of year, when winter and its white blanket of snow brings a feeling of peace to the countryside, my colleagues Martine Mercier, Denis Bilodeau and myself would like to take this opportunity to send our best wishes to everyone. And to remind each and everyone that it is not only the holiday season that brings us together at this time of year—it is also our dynamic agriculture, which provides us with many excellent local products to “garnish” our festivities.

The Doha round survives and supply management is saved– for now

Jean-Charles Gagné

In Hong Kong, farm leaders as well as Quebec and Canadian ministers had to work hard right up to the end of the sixth Ministerial Conference of the World Trade Organization, held from December 13 to 18, to ensure that supply management in agriculture remained intact.

The final agreement does not include any new concession to the access to markets or any tariff decrease for Canadian dairy products, poultry and eggs.

Saved—but for how long?

“This agreement does not constitute, for the time being, a threat to the supply management systems,” declared Laurent Pellerin, president of the UPA and spokesperson of the GO5 Coalition, directly from China on December 18. “To our great satisfaction, the Canadian ministers respected the commitment unanimously voted not only at the House of Commons on November 22, but in many provincial legislations as well.”

The safekeeping of supply management did not come easily. Once again pressure was needed to remove a sentence (previously removed in Geneva in the summer of 2004) that would have prevented the integral safekeeping of supply management. “The sentence stated that we had to provide increased access to our markets, even those under supply management, and lower our tariffs. Its elimination is due to strong arguments from Canadian representatives, supported by the GO5 Coalition and unanimous motions from the House of Commons and the Quebec National Assembly,” declared Pellerin.

Farm leaders saluted the work of the Quebec ministers of Agriculture and Economic Development, Laurent Lessard and Claude Béchard, and of Bloc Québécois MP Pierre Paquette, who accompanied the Canadian delegation led by the ministers of Agriculture and International Trade, Andy Mitchell and Jim Peterson. From Hong Kong, Minister Lessard said he was proud to have contributed to this important victory for Quebec producers. “This is a victory over powerful countries that shows that we can influence negotiations in favour of agriculture with a human dimension when we are well organized and when we have a work plan,” he stated. Lessard also commended the excellent work done by Minister Mitchell.

Other progress

Apart from safekeeping supply management, the final agreement includes other good news for farmers. Among them is the elimination of farm subsidies to exportation by 2013, which would virtually allow the Doha round of talks to remain fully in place. “It is attractive for producers from Quebec and Western Canada who are facing unfair competition,” declared Pellerin. The principle had been adopted a few years ago, but for a many years the European Union resisted before accepting a date that finally coincided with the renewal of the Common Agricultural Policy.

The agreement also allows the Canadian Wheat Board to continue operations on the condition that it is not subsidized by the government. “This sanctions the right of producers to regroup and to market their products,” noted Pellerin. Moreover, developed countries made the commitment to import, beginning in 2008, 97 per cent of the products of some 40 least developing nations (LDC) without custom duties and quota. These countries currently have only one per cent of world trade. The opening of the market will be well supervised to ensure that multinational companies do not establish themselves in these countries to capitalize on the situation. The agreement stipulates that as of 2006 the United States will have to end subsidies for the exportation of cotton in 2006. However, while this remains good news for African countries, the decision was marred by an announcement that domestic support given to American cotton producers will continue.

Not everything is solved

“We leave here with conditions enabling us to continue negotiating without giving up any part of Canadian agriculture,” said Pellerin But not everything is solved. “We agreed to continue negotiations. Everything that was at risk remains at risk,” he explained. The Doha round aims at improving access to markets, including those with sensitive products, which include products under supply management.

Pellerin pointed out that producers were led to believe that their income would improve following the Uruguay round in 1994. In reality, the opposite came true. “Canadian farmers suffered a great deal from 2002 to 2004. One thing is for certain: they will not wait another ten years for favourable results from the WTO negotiations because they will no longer be there,” he added. According to Pellerin, food independence is becoming more and more a part of the negotiations at the WTO and the differences between countries are increasingly recognized.

Yet Pellerin finds the situation optimistic, stating that access to markets will be finalized by April 30, 2006. Apart from Pellerin, the following federation presidents represented Quebec farmers in Hong Kong: Marcel Groleau (dairy), Yves Baril (poultry), Serge Lefebvre (consumer eggs) and Gyslain Loyer (incubation eggs).

A win-win solution for farm taxation

Jean-Charles Gagné

Municipal farm taxation will have a new look starting in 2007.

The provincial government, farmers and municipalities finally reached an agreement on December 21, putting an end to the blockage of snowmobile trails that had avid fans of the winter sport (and the regional tourism industry) worrying. The Liberal government finally held its electoral promise of reforming farm taxation and succeeded where the Parti québécois had failed.

The government denies giving in to farmers, contrary to comments made by Minister of Municipal Affairs Nathalie Normandeau, and is instead speaking of a win-win solution.

In short, farmers obtained the recognition of the taxation imbalance, the direct payment of their fair share to the municipality, a distinct and increasing budget for the program supervised by MAPAQ, the continuation of the current reimbursement rate (85 per cent for land evaluated at more than $1,500 per hectare) and a follow-up committee to supervise the application of a tax at a variable rate by the municipal sector.

For municipalities, the advantages are the continuing management of the program by MAPAQ, the optional aspect of a distinct tax on farm buildings, the complete payment of tax reimbursement to farmers before the end of April, and the integration of the agreement to a fiscal pact that should be renegotiated before the end of February 2006. The government obtained the control of the program cost increase and an administrative streamlining.

A simpler program

The program will be simpler for farmers and for the government. Municipalities will send the tax invoice directly to MAPAQ, which in turn will write a single cheque per municipality for the reimbursement of farming taxpayers. Producers will then receive from MAPAQ a notice stating the share (approximately 25 per cent) that they must pay directly to their municipality.

The agreement includes a limit on the increase of the program costs. The maximum increase authorized will be seven per cent in 2007, six per cent in 2008 and five per cent for the following years. The cost of this increase will come out of the government’s budget and not MAPAQ’s. If the real increase of the program exceeds these percentages, farmers will foot the bill, unless the municipalities use a taxation rate for farm buildings that is different than the residential rate in order to avoid any transfer of the tax burden onto farmers. This measure is optional, but a follow-up committee (where agricultural producers will sit) will assess the situation during the next three years and will report to the government.

The current program will still be in effect for 2006, with a ceiling of $1,500 per hectare and the rapid payment of 90 per cent of the reimbursement from the previous year. The total cost of the program will be approximately $104 million, which includes $95 million spent in 2005 plus an eight per cent increase.

An acceptable compromise on farmland taxation

Jean-Charles Gagné

The Union des producteurs agricoles (UPA) and municipal unions reacted with caution and moderation to the government’s compromise on farm taxation. However, it remains to be seen if the government will resume a useful dialogue that could help relations with rural Quebec after years of tension.

UPA President Laurent Pellerin saluted the slow-down in the increase of the farmers’ fiscal burden brought by the government. “The government’s decision meets the agricultural producers’ expectations in a fairly substantial way,” said Pellerin.

But UPA 2 ^nd Vice-president Denis Bilodeau shied away from claiming an all-out victory for producers. “We cannot really consider this as a victory for farmers,” he said, explaining that the program remained with MAPAQ and that the distinct tax for farmers was not compulsory. “However, we have the tools to reach our objectives, if we use these tools well,” he added. Bilodeau pointed out that farmers absorbed $25 million of MAPAQ’s budget during recent years because of an increase in the value of farmland due to the government’s regulation. “This is good news as a separate dossier will prevent any increase in the program costs being taken from other programs intended for the development of agriculture,” he said. Bilodeau added that farmers, still responsible for paying their tax bill, would have to remain vigilant and continue to demonstrate that the assessment roll is overstated in places. “The value of farmland showing on the assessment roll is often very far from its economic value,” he added. Bilodeau pointed out that the UPA’s commitment of not blocking snowmobile trails is not indefinite, but on the condition that the objective of reducing the farmers’ tax burden, backed by the government, is reached.

Follow-up committee

The presidents of the municipal unions, Michel Belzil (FQM) and Robert Perrault (UMQ), said they were pleased with the acceptable compromise proposed by the government. Their objective of keeping the tax reimbursement program for farmers at MAPAQ was reached, as was the optional nature of the variable tax rate.

Some say that the follow-up committee will single out the municipalities that did not use the variable rate tax for farmers, thereby justifying the Quebec government to deem it compulsory in three years. “The committee is not there to tell municipalities what to do. It is the municipal council that will decide if it applies a different tax for farmers in order to assume, in total or in part, a tax surcharge. We musn’t assume that the government will make this different tax compulsory after three years of assessing the municipalities’ behaviour,” said Belzil. However, the FQM president believes that the government’s commitment to settle, by the end of January 2006, the touchy issue of setting a tariff for the Sureté du Québec’s services (which represents between 25 and 30 percent of the municipal tax bill) will continue to alleviate farmers’ tax burden. On the other hand, Belzil recognized that new assessment rolls—that contain a significant increases in the value of municipal land—do not bode well.

The tourist and snowmobile industries declared that they were relieved that the crisis is finally over. Regional economic spinoffs of $1.5 billion were at stake.

$75 surcharge per tonne on American corn

Thierry Larivière

As of December 15, the Canadian Border Services Agency has decided to impose countervailing and antidumping duties of no less than $65 US ($75 Cdn) for each tonne of non-processed corn imported from the United States.

It is an amount greater than expected that could seriously limit imports of American corn at a time when important discussions were taking place in Hong Kong regarding farm subsidies and access to markets.

Important stocks and a larger-than-expected crop should supply Canadian users with local corn for a good part of the year. The surtax represents approximately 75 per cent of the price of $100 per tonne set the night before in Markham, Ontario.

Substitution grain such as barley or feed wheat could also be used in feed. The market for most of these commodities will be changed, but it is difficult to say what will be the exact increase in price for corn in Canada, which should nevertheless be under $65 US. The Fédération des cultures commerciales du Québec (Cash Crop Federation) mentioned only one transaction at $150 per tonne for the producer and a number of other transactions between $120 and $140 per tonne as of December 20. The market will be hesitant while a new balance is found—and taking into account the contracts already signed. Canadian corn producers, who originated the complaint, saluted the decision and stated that it would allow for a “compensation” for the harm done by American subsidies.

Outcry

“These are extremely difficult times,” said Claude Corbeil, president of the Fédération des producteurs de porcs du Québec (FPPQ), who added he had reports of corn purchases at $180 per tonne at one farm, and of $205 per tonne delivered in the Saguenay and Côte-du-Sud regions. “At that price, we are no longer competitive,” explained Corbeil, who thinks that many pork producers could decide to buy American corn anyway in the hope of being reimbursed for the temporary surtax if it is deemed invalid by the authorities on either March 15 or April 15. The FPPQ president also suggests buying from other countries in the meantime, and stated that after pork producers, the second victims of the continuing subsidies could very well be grain producers. Corbeil also mentioned that the FPPQ is clearly above the replacement value requested by cash crop producers. Talks are expected between the two groups in the coming days.

“It is the entire breeding sector that will be affected by the imposition of this tariff,” declared Yvan Lacroix, director of the Association québécoise des industries de nutrition animale (AQINAC), by strongly denouncing the new tariffs that could, according to grain mill owners, increase production costs by $12 to $15 per hog. AQINAC is asking for an intervention from the federal government to find a solution to the problem associated with the corn production costs without affecting the profitability of animal productions, which represent 75 per cent of agriculture in Quebec. “We just took ourselves out of the market,” explained Claude Lafleur, chief executive officer of the Coop Fédérée, a member of AQINAC.

The Canadian Pork Council is calling for $20 more per pork. The current price in Quebec, at less than $130 per 100 kilograms, is already below the production costs of $167 per 100 kilograms before the surtax.

The Canadian Cattlemen’s Association expects a production cost increase of $100 per head for regions using corn.

Ethanol plants and corn processors, such as Casco in Ontario, will likely have to review their supply strategy, which relied heavily on American corn. Some manufacturers have already threatened to close their operations.

Corn market is looking for new balance

Thierry Larivière

The president of the Fédération de cultures commerciales du Québec (FPCCQ), Denis Couture is wondering what the real reasons are for the high price paid by some corn users who spent as much as $205 per delivered tonne.

The FPCCQ president mentioned that many contracts signed at $120 or $125 per tonne are still being delivered and that other transactions set at $130, $140 and $150 at the farm were also reported after December 15. “It’s not normal for corn to be sold at $200 per tonne. This is the same problem that happened during the mad cow crisis,” said Denis Couture, who suggested that the profit margin of some middlemen was artificially inflated following the announcement of a $75 per tonne surtax on American corn on December 15.

A group of some 40 corn producers is also trying to offer corn directly to breeders with farm purchases at $165, primarily in the Montérégie region. A meeting between the Fédération des producteurs de porcs du Québec (FPPQ) and the FPCCQ allowed for an agreement to be reached on information exchange that will allow a comparison to be made of the price paid by consumers and the price sold by corn producers. Both federations hope this will give them a more precise picture of the overall market.

“We will take advantage of the surtax to put in place our marketing tools and perform direct sales,” stated Denis Couture. A committee including corn consumers should be created in early 2006 to discuss marketing conditions that will be put in place.

The FPCCQ said it was pleased for the time being with the decision taken by the Border Services Agency as it exposes the damage to the industry that the FPCCQ has been denouncing for years. By basing itself on the amount of $75 per tonne, the FPCCQ estimates the impact at $225 million per year for Quebec corn producers and at $300 if the other grains are added.

Caution on the market

For the time being, the price paid to corn producers seems to be around $135 per tonne in the Montérégie region. However the real situation may only become apparent in a few weeks’ time, when demand will be greater, to fully comprehend the impact of the countervailing and antidumping duties. “In the last two weeks, the number of transactions has been very limited,” said Richard Villeneuve, Market Specialist at Comax, who talked about an increase of $20 to $25 per tonne over the former price. “There is an effort to try to reach a new balance,” stated Laurent Bousquet, 2 ^nd vice-president of the Coop fédérée and corn producer, who added that his organization is not trying to get supplies abroad.

“We are looking at what we can import and at what price,” indicated the Pierre Dagenais, president of Bunge, Leblanc and Lafrance, who believes that the new replacement value will be greatly below a simple addition of a $75 dollar surtax on the former price.

According to some, Argentina and Ukraine are the two favourite countries to buy corn. “There is still American corn being bought,” indicated Pierre Dagenais, who explained that some users are hoping to get some kind of reimbursement for the new duties on exported pigs. However, the Border Services Agency would have to determine what percentage of the exported pigs are fattened with American corn that is included in the feed. In the long-term, the duties could also be reimbursed if the surtax is cancelled or reduced after the current enquiry by the Border Services Agency.

Will the CDC keep its promise?

Jean-Charles Gagné

Canadian dairy producers are disappointed and outraged by the Canadian Dairy Commission’s decision to provide an increase of only 1.79 cents per litre at the farm for processing milk starting on February 1, 2006.

“The CDC failed to keep its promise—made in 2002—to allow half the Canadian dairy producers to cover their production costs starting on February 1 ^st, 2006,” said the president of the Canadian Dairy Producers, Jacques Laforge, and vice-president of the Fédération des producteurs de lait du Québec (FPLQ), Gilbert Perreault. However, John Core, president of the CDC declared, “The commission is completely fulfilling its commitment.”

On December 15, the CDC announced that it would maintain the support price for butter and increase the support price for skim milk powder. That’s the price at which the commission buys and sells butter and skim milk powder in order to balance the seasonal variations of supply and demand on the domestic market. These prices are used as reference point by provincial authorities to set the price given to producers for milk used in the fabrication of dairy products such as yogurt, cheese, butter and skim milk powder.

At a special meeting held last November, the FPLQ estimated the gap between production costs and the actual producers’ income at just over three cents—taking into account the dilution effect due to less lucrative special classes of milk. “By giving a little more than one cent per litre, the CDC missed a great opportunity to solve the problem. Quebec dairy producers will not give up until the CDC finds a way to give the necessary increase to fill the gap,” added Perreault.

“The commission made the commitment to fill the gap between the production costs and the producers’ income, without taking into account the mad cow crisis and the dilution factor, which were added by the FPLQ in its calculations,” declared the CDC’s spokesperson, Chantal Paul. The CDC set the average production cost at 67.43 cents per litre and the income from milk production at 65.64 cents per litre, hence its adjustment of 1.79 cents per litre.

Moreover, the support prices announced no longer contain compensation for the financial impact resulting from the mad cow crisis, estimated last year at $15,000 per Quebec farm. Last year, the five-cent increase per litre included a 1.6 cent compensation included specifically for that purpose.

“The CDC is not maintaining this amount even if the price of dairy replacement cows is still low,” stated Jacques Laforge.

Chantal Paul retorted that “the amount was not taken away from the support price but was used to fill the gap.”

On February 1, 2006, there will not be any adjustment to the butter support price. “It is the first time that the support price is only for skim milk powder,” said Paul. After studying the market, the commissioners decided not to increase the support price for butter due to the decrease in demand.

The president of the Conseil des industriels laitiers du Québec, Pierre-M. Nadeau, pointed out that this year’s slight increase will give a break to consumers. Last year’s strong, rapid increase affected the market and resulted in a consumption decrease.

A good example of cooperative zoning

Julie Mercier

While farmers and municipalities regularly bicker over farmland protection, two regional country municipalities (MRCs) are demonstrating that it is possible to combine green zone sustainability and residential development.

The Quebec Farmland Protection Commission (CPTAQ) has just authorized the first two collective requests. In September 2003, the commission had to reject the request made by the Memphremagog MRC due to a lack of approval from the MRC and the Union des producteurs agricoles (UPA).

As stipulated in article 59 of the Farmland and Agricultural Activities Protection Act, a collective request allows an MRC—and thereby also a municipality—to manage the residential use on the overall territory of its agricultural zone without resorting to the CPTAQ. For the organization, this approach avoids case-by-case studies and has the advantage of giving a long-term vision for the green zone. The first MRC to make a collective request is the Les Laurentides MRC. The eight unstructured pockets targeted by the request cover 45 hectares, divided in the municipalities of Arundel, Brébeuf, Labelle and La Conception. To avoid cohabitation problems, the CPTAQ is taking precautions, and new residences will not be included in the calculation to determine the separating distances for odour management in green zones.

The Les Laurentides MRC had been preparing its collective request for years. In 2002, it reviewed its development plan. Two years later, it conducted a study on the unstructured pockets. “The close collaboration with representatives of the agricultural sector before the submission of the request must be commended,” said a member of the CPTAQ. “I am particularly proud of this agreement that was approved by the CPTAQ. It is a first in Quebec,” said the president of the Outaouais-Laurentides UPA Federation, Richard Maheu.

Common vision

Less than two months later, the CPTAQ gave its approval to a second collective request, this time from the Haut Saint-François MRC in the Eastern Townships. This request targets 23 unstructured pockets distributed over 12 municipalities. It covers a total area of 334 hectares with a potential of 336 land entities.

On top of requesting the possibility of filling in unoccupied spaces, the MRC asked for the authorization to issue residential construction permits on vacant lots of ten hectares or more located in the rural zone (where tillable soil is scarce and agricultural activities are marginal). The Eastern Townships UPA approved the request, on grounds that it will further protect existing and potential agricultural operations.

Residential construction in agricultural and rural zones is now banned for residences not associated with a farming or forestry operation. For the CPTAQ, it is an important—if not determining—factor in favour of a collective request. The fact that the fragmentation of lots is banned in the MRC’s development plan also convinced the CPTAQ.