My Speeches

Bill 8 - Feeder Association Gaurantee Act, Committee of the Whole

Posted on Apr 15, 2009

The Deputy Chair: The hon. Member for Battle River-Wainwright.

Mr. Griffiths: Thank you, Mr. Chairman. It’s a pleasure to rise
today to address some of the questions, particularly the ones that
were raised during second reading of this bill. A few members of
the House expressed some concerns and questions, and I appreciate
having this opportunity now to provide some clarification and
further details. With members’ indulgence I’ll review the questions
they have now and get back with answers later on. As some of the
comments and questions that were raised in second reading by
different members were similar, I will attempt to address those in a
more collective answer rather than point-by-point responses to
members on particular issues. I’m confident that with further
information and understanding there will be support for this
legislation, which serves to strengthen our agricultural industry and
by extension Alberta’s rural communities and beyond.
The livestock and meat industry is a significant sector of our
agricultural industry, and it makes an important contribution to our
province’s economy. Preliminary estimates show that livestock and
livestock products in 2008 accounted for just over 42 per cent of


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Alberta’s farm cash receipts. Specifically, Mr. Chairman, cattle and
calves were 30 per cent of farm cash receipts and estimated to have
a value of just over $3 billion; that’s with a B. We’re, in fact, the
largest cattle-producing province in Canada, and nearly two-thirds
of all Canadian beef processing occurs right here in the province of
Alberta. Legislation and programs that support the growth of this
commerce are, of course, of great value to all Albertans.
As shared in previous readings, Mr. Chairman, Bill 8 provides a
rewriting of the existing act, and there has been debate over the
merits and reasoning for that. To provide some context, the current
act has been amended numerous times over the years, and the
language used in that text is currently outdated. As the agricultural
industry has changed and grown, many of the definitions and
terminology used are now limited in their capacity to accurately
describe or fully capture the scope of that business activity. Updated
text will bring clarity. Since these wording improvements were
needed throughout theact and its amendments, legal counseladvised
that we create an entirely new document rather than adding further
amendments. Simply put, it is more user or, honestly, reader
friendly. Let me make it clear. The new act does not introduce
wholesale changes, Mr. Chairman. The fundamental principles of
the act remain the same.
Another question raised concerns about what is covered by
legislation versus what is covered through legislation and if more
jurisdiction is being given to regulation as opposed to legislation.
That’s not the intent here, Mr. Chairman. In fact, the only thing
being moved from the existing act to regulations is the activity for
which the loan may be given. Originally the act specifically limited
the program to the acquisition of livestock for growing or finishing
or both by the members of a feeder association. However, as the
scope of activity of feeder association members extends further into
the value chain, we require legislation and regulations that reflect
that extended role.
Given the rapid pace of change in the industry, Mr. Chairman, we
have anticipated that we may need to update the description again in
the near future. Moving the description of that activity from
legislation to regulation will allow this change in a more flexible and
timely manner without having to reopen the act. With the new
definition offeederassociation,which includesthewords“otherwise
deal with,” the proposed act will allow regulation to specify that
activity, ensuring a more current and accurate reflection of it.
On the same subject of legislation versus regulation we did in fact
move one item from regulation directly into the new act itself. The
requirement for a security deposit would be entrenched in the
legislation, ensuring that that element of risk mitigation protection
is always part of the program.
I also want to stress that as in all legislation, regulation does have
an important role to play and is not something deliberately subversive.
Defining and detailing all things in legislation is just not
feasible or realistic or effective or allowing flexibility. The process
of developing regulation is absolutely nothing new in any government.
There was also some discussion in the last reading about whether
this new act is transparent and accountable. We have added section
9, which clearly articulates the powers of the minister versus the
rights of individuals or businesses. This demonstrates transparency
and accountability, Mr. Chairman.
Also, let me state that the new act does not change the way these
loan guarantees are granted by the government in any way, shape, or
form. The criteria for guaranteeing a loan to a feeder association
were never written in the act before. The process for this activity
remains at the regulation and policy level, with the ministers
responsible – both finance and agriculture are responsible –
continuing to be involved in the order in council process. To answer the
question of why we have removed the requirement
to renew the act every five years, which was brought up in second
reading, commonly referred to, Mr. Chairman, as the sunset clause,
and the inference that this somehow means less accountability, it
changes nothing about a very solid accountability of the program.
Government remains responsible for ensuring that the established
policies and procedures are followed. What is accomplished by
removing the renewal requirement is that it strengthens the program
and the security that the program will exist.
The need to renew the act has the effect of creating a degree of
uncertainty among lenders and the associations themselves. Indeed,
every five years when this issue came up, I got a record number of
calls to my constituency office asking if we were going to get rid of
the feeder association program. That’s undesirable for an industry
that we are trying to grow and advance. If we have learned anything
from the current global economic situation, it should be that stability
is critical to the financial world. Certainty is critical to the business
world and those who depend on it.
In terms of who this program benefits, Mr. Chairman, there was
some question of how it relates to cow-calf producers. I want to
point out that the program has been serving these members in the
industry for years. It has allowed these producers to effectively
retain control of their calf crop for an additional 12 months. This
allows them to get needed cash flow in the fall and still add value to
the weaned calf by feeding home-ground feeds. The program will
continue to serve cow-calf producers in this way. Nothing is
changing about that. The program also supports these producers by
providing a market for their calves and a link in the supply chain to
the larger finishing lots.
As for who qualifies as members of a feeder association, the new
regulation will establish criteria for associations to use when
considering membership; however, it will be the feeder associations
themselves, not government, who makes those specific decisions,
and rightly so.
In response to the question of whether the proposed act focuses on
processing and marketing oflivestock products and not just purchasing:
not at all. The program will continue to play a role in providing
capital to purchase cattle. However, it will now extend to processing
and marketing, allowing producers to further participate in the
supply chain, giving them more power over their finished product,
and adding more value to the product they grow themselves. Those
who want to retain ownership of the product through to the meat
retail stage will have that ability under the expanded program.
Let me provide an example of why this is desirable. Producers
who are differentiating their product with special attributes such as
organic production practices and so on need to create a continuous
link to their customers in order to capture the higher value. Having
to pay off a feeder association loan before they have sold their
inventory would be an undue financial hardship and, indeed, keep
them from entering themselves farther up the value chain.
Let’s be really clear. Businesses that only process and market
meat products would not – not – be eligible for this program, nor
would the loan guarantee be transferred from one business to the
next as the livestock moves through the process from cattle to meat
product.One member of this House raised the concern that the new act
would allow corporations to be members of feeder associations,
extending support to large operations, which would give them an
advantage over smaller ones. Certainly, as with many businesses
there are benefits to economies of scale; however, if the concern is
for what we like to call the family farm, let me point out that a
significant number of family farms are now incorporated and have
grown substantially in size.


Alberta Hansard April 8, 2009
582

An Hon. Member: So they’re not family.

4:40

Mr. Griffiths: But they’re still owned by family members, and the
majority of family farms now are incorporated.
It’s really an emotional argument that has nothing to do with
reality. Members who made these arguments should perhaps leave
the city once in a while. The program simply reflects the current
business model that a large number of producers have chosen, and
in fact my own family and our farm chose it in 1972. [interjection]
Pardon?

The Deputy Chair: Just looking at your tie. That’s okay.

Mr. Griffiths: Yeah, I know I have pigs on my tie. Thank you for
pointing that out, Mr. Chairman. It’s an agriculture tie.
Another area of concern raised in the previous debate was whether
this program and the proposed legislative or regulatory changes
present a high or a higher risk to the viability of these feeder
associations. Let me state for the record that this has been a highly
successful program. Over the life of the program the payouts under
the guarantee have amounted to only 0.06 per cent – that’s 0.06 per
cent – of the amount of financing provided to the industry. That is
less than one-tenth of 1 per cent, an incredible success story. None
of the changes proposed have any effect on that. In addition, it
should be understood that there are very effective risk mitigation
practices in place with this program that the feeder associations
utilize.We have done our due diligence in recognizing that we will need
to adapt the mitigation procedures to be appropriately applied to any
program changes, such as how they apply to corporations. As
anotherexample,feederassociation memberschoosingto participate
in the equity draw options to be defined in the regulations will be
expected to use some sort of price protection mechanism to ensure
that the value of the livestock is ultimately realized at the time of
sale.The cattle price insurance program, or CPIP for short, being
developed by the Agriculture Financial Services Corporation would
be one such mechanism. As far as the liability of the program as a
whole, the current maximum is set at $55 million, and there is no
desire or need to increase this amount of the guarantee at this time.
Overall I would say that Alberta’s tax dollars are well applied and
protected under this program, and it does wonders for the beef
industry.As you know, Alberta’s agricultural industryis export oriented,
so
we highly value our trade relationships and work to ensure that those
remain on a good footing. There was a question of whether this
program puts our trade relationships at risk of retaliatory action.
First, there is no subsidy of interest rates under this program. Feeder
associations get their financing from commercial financial institutions
at negotiated rates. Also, it’s worth noting that this program
was included as part of a very thorough review of our beef cattle
programs by the U.S. department of industry, trade, and commerce
in 1998 and 1999. They deemed that it was not significant enough
to be of any concern to them at this time.
To sum up, as I stated earlier, the agricultural industry makes an
important contribution to our economy and our rural communities.
This particular legislation and program is an appropriate support to
the economic development of the province. The program has been
in effect in one form or another since 1936 and has been an effective
catalyst for growth. The legislation and program simply lays the
foundation, Mr. Chairman, and creates a stable environment for
feeder associations and financial institutions to develop a solid
business relationship. They are the business units involved, not the
government. Government’s role is limited to providing the loan
guarantees and responsible and effective oversights such as audits
and inspection services to make sure that everything is working
effectively.Overall, Mr. Chairman, I would stress that they have a very
strong
foundation for this program. The new act will add clarity to the
legislation, enable improved and new regulations that support
program enhancements. Therefore, I encourage all member of the
House to support Bill 8 through Committee of the Whole and at third
reading, where I would be happy to answer anyfurther questions that
come out of Committee of the Whole.
Thank you, Mr. Chairman.