2004 CORN AND SOYBEAN CONFERENCE HIGHLIGHTS
by David Morris

Committed to Strengthening Agriculture - Hon. Bob Speller
In a positive address to the 2004 Corn and Soybean Conference, federal Minister of Agriculture, Bob Speller reiterated his commitment to work with producers to strengthen the Canadian agricultural industry. He acknowledged that the current crises within agriculture are having devastating consequences, both to farmers and to rural communities which depend on agriculture. Yet, despite the dismal situation currently, he has found much optimism among the farmers he has met since becoming Minister. "As I go across the country and talk to farmers about these down times, they also talk about opportunities," he said. "They say to me, "Next year will be a lot better." That's farmers! They are always looking for opportunities, and I believe that there are opportunities in agriculture, even today."

Although many challenges, both domestic and international, lie on the road to realizing those opportunities, Mr. Speller indicated that he believes they can be overcome. "If we face the challenges and deal with them now," he said, "we can assure a future for Canadian agriculture for generations to come. If we ignore them, the agricultural industry will not be able to respond to the needs of its producers and other rural residents. I want to compliment the Corn Producers and the Soybean Growers for the work that they have done already to meet some of these challenges." In particular, he noted the contribution of these two organizations, through the various coalitions of which they are a part, in helping agriculture seize the opportunities that lie before it.

The Minister sees a need for yet more co-operation within the entire agri-food sector. "Everyone, along the entire value chain, has to work together to meet the demands of the consumer. If the various links in the value chain, fight amongst themselves, the challenges will overcome us. Government, producers, retailers and consumers all have to work together on this."

The federal government is now better positioned to respond to the needs of agriculture, according to Mr. Speller. "I believe that the Agricultural Policy Framework, the report of the Prime Minister's Task Force on Future Opportunities in Farming, and the report of the Standing Committee on Agriculture focus the government in the right direction," he said. However, he went on to add that he believes that the federal government needs to do much more to address the income crises faced by Canadian farmers. He pointed to the fact that, in 2003, total Canadian farm income was the lowest ever. Despite government contributions totalling almost $5 billion, realized net farm income was negative.

Part of the solution, he believes, is in stronger promotion of Canadian products overseas and building on Canada's reputation for quality and safety. "We need to do a better job of telling the world that we produce some of the highest quality food and some of the safest food available anywhere," he said.

Mr. Speller was also clear that high priority must continue to be placed on achieving a satisfactory resolution to agricultural trade issues. "As I have said before, I believe that there is no such thing right now as free trade or fair trade." The Minister feels that Canada can make an important contribution to the on-going negotiations because it has staked out the middle-ground between some of the combatants. In particular, he highlighted the United States and the European Union as needing to make significant shifts in their positions. "We have got to move the United States off its strong domestic supports and Europe off its export subsidies," he said. "It can be done but it will take a lot of work to get them back around the table ready to talk seriously about moving the talks forward. We only have a few months to get things moving again. However, we can do it if Canada can join with other like-minded nations. Strength will come through co-operation. Working on that will be a high priority for me - working to leverage our strengths around the world."

Mr. Speller concluded by re-iterating his commitment to addressing issues related to farm income. "The government needs to be able to respond faster to farm income challenges. We have got to move beyond emergency aid and create a more stable income picture for farmers. I am committed to working with you so that your voices are heard. I am committed to helping you secure access to those in government whom you need to reach in order to advance your plans. You have good plans for building your industries and you are a lot farther advanced than many organizations. I am committed to continuing to work to ensure that the Government of Canada truly recognizes the importance of your industry."

U.S.-Canada Agriculture Trade Issues - The U.S. Perspective -Gary Groves
In describing the relationship between Canada and the United States, Gary Groves, Agricultural Minister-Counselor with the United States Embassy in Ottawa, quoted the late John F Kennedy. In 1961, President Kennedy said, "Geography has made us neighbours; history has made us friends; and economics has made us partners."

From lejt to right: Gary Groves (LISDA), Diane Francis (National Bob Peden (UPI Inc.)

Agricultural trade between Canada and the United States is big business on both sides of the border. Mr. Groves reported that American agricultural exports to Canada have been growing at the rate of about 5% per year and totalled $2.3 billion (US) in 2003. Much of this expansion has been a result of NAFTA, of which U.S. agriculture has been a major beneficiary. Since the agreement was implemented in 1994, Canada and Mexico have been the most rapidly growing markets for American agricultural products. Together, they account for about 30% of U.S. agricultural exports. Canada is now the leading foreign market for U.S. agricultural products, as we have surpassed Japan. Mexico ranks third. If Ontario was a separate country, it would be fourth.

Canadian agriculture has also benefited greatly from NAFTA, according to Mr. Groves. Canadian agricultural exports to the U.S. have doubled since 1994. In 2003, Canadian agricultural exports to the U.S. were valued at $10.3 billion (US), giving us an agricultural trade surplus of about $1 billion.

In many other markets, however, American agriculture has been losing ground. For example, Mr. Groves noted that while European sales to the U.S. have been rapidly expanding, American exports to Europe have been static. Today, the European agricultural trade surplus with the U.S. is almost $3.9 billion (US) and Europe is about to become America's largest supplier of agricultural products. Needless to say, this is a situation that the Americans want to see changed.

With respect to the WTO negotiations, Mr. Groves indicated that the U.S. has a willingness to be flexible in its position on all three of the major areas where progress is required: export subsidies, domestic support payments and market access. He said that the U.S. has offered to eliminate export subsidies but pointed out that almost 90% of all the export subsidies in the world come from the European Union. In the case of domestic supports, the U.S. would like to see the playing field levelled. Here again, Mr. Groves depicted Europe and Japan, as having the farthest to move. Their domestic subsidies are roughly double and triple those of the U.S., respectively. Groves also indicated that the U.S. is willing to review some of its "green-box" programs that are currently listed as non-trade-distorting, but which are a cause of concern to some other countries.

With respect to market access, Mr. Groves said that the U.S. is seeking substantial improvement, especially in the developed countries. He noted that import tariffs in the E.U. and Japan average 31% and 58%, respectively, and that the world average was around 60%. Canada and the U.S. came in at 23% and 12%, respectively. Again, the Americans want to see the playing field levelled with countries having the highest tariffs cutting the most. The U.S. also wants a cap placed on high tariff levels and the development of a common method for reducing them.

Many non-tariff issues also need to be addressed. Groves identified barriers to the importation of GMOs as a specific challenge where Canada and the U.S. have a common interest. The U.S. government maintains, as does Canada, that sound science should govern the approval process. He pointed to the trilateral agreement on biosafety among Canada, Mexico and the U.S. as an agreement that is working well and one that should serve as a model for the rest of the world.

As important as world trade is, Mr. Groves reminded the audience that security is the number one priority for Americans right now. He said that Americans do not feel that their perception of the threat is overblown and related that, when travelling overseas, many Americans feel that they have a bull's-eye on their foreheads. He made it clear that the U.S. government will do whatever it feels is necessary to protect its citizens. Nevertheless, there is certainly recognition that the border with Canada must be kept as open as possible to facilitate the free-flow of goods.

Despite some well-publicized disputes, Mr. Groves said that he believes that the spirit of co-operation on agricultural trade between Canada and the United States is very strong. "There are a multitude of groups and committees working continually to resolve any differences that arise between us. Everyone recognizes that we both have a lot to gain by having more-open markets. Generally, these mechanisms to resolve trade issues between Canada and the U.S. are working well. We are in this together and we might as well get used to it."

During the question period, Mr. Groves was asked, with this being an election year in the U.S., whether we could anticipate a flurry of announcements in the U.S. to attract the farm vote. He commented that the needed programs are already in place and not much more needs to be done. He also pointed out that given the current budgetary situation in the U.S. (i.e. an ever-increasing deficit), it will be hard for farmers to get more government aid. In the longer term, he expects that the government will be able to convince farmers to expect less support, in return for improved access to foreign markets.

Invest In Your Future - Tom Cox
Ethanol has undergone a tremendous period of growth over the past two decades. Most of this growth has occurred in the United States where today there are 76 operating facilities, producing 12 billion litres of fuel ethanol and 14 more plants under construction. Ninety percent of the plants under construction and half of those built in the last decade have producer ownership.

Recently there has been some good news on this side of the border. Under the first round of the federal government's Ethanol Expansion Program, seven plants in Canada were eligible for special loans to assist in the construction of 750 million litres of new ethanol production. However, only one of those ethanol projects was farmer-owned. Congratulations to Seaway Valley and Bud Adkins for their success. Six other companies, including two petroleum companies, succeeded in getting a commitment of Government funds to help them build ethanol plants. With gasoline prices pushing near record levels and federal and provincial governments pushing renewable fuels, is it any wonder that big petroleum has caught on to the sweet smell of ethanol? Smells like money, doesn't it?

We have a brief opportunity now to change this picture. Corn ethanol plants offer producers the chance to invest in something where profits are inversely related to the price of corn. It is like buying a lifetime put option on a portion of your corn production. Instead of complaining about high gasoline prices and worrying about low corn prices, you have a chance to smile every time you see gas going up another nickel or two at the pump. You could take comfort that, for every dime that corn prices drop, your ethanol plant will earn another million dollars in profits. It seems to make sense to me. It certainly seems to make sense to Sunoco and Husky who have announced their plans to invest a quarter billion dollars in the Canadian ethanol industry.

The recent wave of Ethanol Expansion Program announcements have made it clear that this sector will grow in Canada. As corn producers, we have a unique opportunity here to become part of a growing value-added industrial sector that depends upon corn. Much of the future of the ethanol industry in this province will be decided in the coming weeks and months. Round two of the Ethanol Expansion Program is slated for later this spring. Tens of millions of dollars are available under this secondround of ethanol funding. Agriculture deserves to have a significant share of those dollars and for Ontario producers, projects like the IGPC project are a vehicle to obtain our share. However just like NISA, just like CAIS, unless you put something into it you will get nothing out of it.

Pursuing a value added opportunity like IGPC will pump new dollars into agriculture and will help reduce the commodity price risk of those who have ownership in the plant. We have seen them do it in the U.S. Tens of thousands of U.S. farmers today are owners in the 45 odd farmer-owned plants built or under construction in the U.S. These plants have generated and returned millions of dollars in processing profits back to the owners who built them. We can have the same thing happen here. This is one part of the playing field that we have the ability to level.

It has been said that opportunities for major changes in how we do business come about only once or twice in a generation. I think farmer-owned ethanol plants represent one of those generational opportunities for the corn producers in this province. We have a chance to build something here that is fundamentally so much more than just another corn-processing business in Ontario. We have a chance to change forever how corn farmers relate to the market for their corn. Together, we can make this happen. Your support will make the difference.

Agriculture In The Global Economy - Diane Francis
Ms. Francis referred to the year 2001 as an "inflection point" in history - a year in which world trends changed dramatically. She highlighted two pivotal events: the terrorist attacks on September llth and the collapse of Enron. These events, she said, have given rise to a new epoch of governance - political, economic, corporate and military. Many of the subsequent changes have been beneficial in helping to clean up shady business practices, government mismanagement and corruption. However, they have also stimulated the United States to wage economic warfare on what she called "Enron countries" -ones that the US government perceives to be presenting a false economic picture to the world. It is especially targeting those whose currencies appeared to be artificially under-valued because of government policies. Ms. Francis described this struggle as "Fortress America versus Fortress Europe."

Agriculture is a major battleground upon which this economic war is being played out. Ms. Francis explained how she believes that much of the anti-Americanism in Europe stems from their resentment of American agricultural policies. "In the European Union, agricultural subsidies are what bind together a diverse group of countries that just 60 years ago were killing each other. Sixty percent of the budget of the EU goes into agricultural subsidies through programs designed to prop up thousands of French farmers on their tiny holdings. And they are not about to let that go. The Europeans know, that in the absence of subsidies, North American producers have a tremendous production advantage, given their infrastructure and good land. The French in particular are determined to stop North American farmers from gaining that advantage. This is a major reason why the world trade talks have been derailed."

According to Ms. Francis, this economic war is also a major factor in the decline of the US dollar over the past year. The American government has a strategy to devalue the dollar and make American imports more attractive overseas. "They are deliberately talking the value of the US dollar down", she said. "Smaller countries, like Canada, get caught in the crossfire." However, she also noted that this battle is hurting the economies of both the United States and Europe. "Subsidies do not create wealth. Government policies need to focus on creating real wealth, not on propping up inefficient producers."

Ms. Francis implied that things could get worse before they get better. There is a growing mood of protectionism in the United States and Canada is not going to be exempt from the fall-out. Unemployment is a major issue in the American election campaign and as much as many Canadians would like to see a change in the White House, a Democratic win in November would not necessarily be a good thing for Canadian agriculture. John Kerry, the likely Democratic candidate, is talking a whole lot tougher on trade issues than is George Bush, and Canada is seen as just another country to which American jobs are being outsourced.

However, Ms. Francis indicated that Canada does have bargaining power because of the world energy situation. The United States is desperate to get off Middle Eastern oil. Congress has recently enacted a Bill with sweeping powers toward that end. Demand for renewable fuels will continue to mushroom. Plans are in the works for two gas pipelines through Canada from the Arctic - one coming from northern Canada, the other from Alaska. The Alberta tar sands represent a bigger reserve of oil than does Saudi Arabia. All of these things can give Canada considerable clout in its dealings with the U.S.

Ms. Francis also sees agriculture as having more political clout than it realizes. Most Canadians still see having a healthy agricultural sector as being important to the country, for economic reasons, for strategic (self-sufficiency) reasons and for nostalgic reasons. Thus, agriculture has an advantage over other industries when it comes to getting assistance from the government. Help usually comes when it's needed.

However, as Ms. Francis put it, "Agriculture does have to realize that the geo-political thing is not going to change. The economic war between Fortress America and Fortress Europe is going to continue, and Canada needs to realize that, like it or not, it is part of Fortress America. Agriculture needs to recognize that nothing is going to stay the same and get beyond expecting the government to 'fix it' when things go wrong. I applaud the actions that producers have initiated to vertically integrate, through projects like meatpacking plants and ethanol plants. Get in on that movement. As a country we all have to stop selling logs and start making furniture. You have got to find new ways to make a living and right now that means 3 things - ethanol, ethanol, ethanol."