April 26, 1967 (27th Parliament, 1st Session)


John James Greene (Minister of Agriculture)


Mr. Greene:

Mr. Chairman, I think this theory in respect of the pooling of all milk in a single pool certainly is something which should be aimed at. When the manufacturing milk industry is in good shape and when the proportion as between fluid and manufacturing milk is such that it is in the interests of the fluid and manufacturing milk producers to pool, I think undoubtedly this will be the solution. I believe most people in Canadian agriculture would agree with this principle.
I do not believe, however, that this will be achieved overnight. Some of the people in the dairy organizations have indicated that they look forward to a period of possibly ten years before this can be achieved. I think we should move in this direction. I believe that manufacturing milk, on a quality basis, should be brought up to the standards of the fluid milk before this could be possible. The questions which were posed in respect of the removal of fluid milk from the support policy are valid. I should like to point to the arguments made by prior ministers which I think were valid at 23033-978J
Interim Supply
that time, and probably still are valid, to the effect that economically the worst circumstances by and large in the dairy industry were in the manufacturing segment. I believe such probably is still generally the case.
When government funds are available in respect of the manufacturing industry, historically the federal government has taken the responsibility to see that everything possible is done to improve the standards in the manufacturing milk industry and the income of the manufacturing milk producer. As both the ministers I quoted earlier stated, we must attempt to see to it that their income position is brought closer to that of the fluid producer generally.
e (12:40 a.m.)
You might well ask why we paid a subsidy to fluid milk producers last year. In the announcement at that time it was made clear and manifest that we were paying a subsidy to fluid milk producers of over and above 120 per cent of their quotas, because we foresaw that there might be a shortage and we wanted to increase production. It was made very clear that this might be a temporary thing because production was needed last year. I think the views of the experts were borne out by the fact that last year the consumption and production very nearly matched. Surely that should be the object of the game. There was no great surplus accumulated. We disposed of the product and we were not in a situation such as that which existed in 196162, where the price structure created such a great surplus we could not dispose of the product. Clearly that was the right thing to do last year.
This year, with the added incentive of the higher price, the best estimate we can get is that production will be adequate without encouraging further production of surplus fluid milk in order to meet the required need. I think it was made clear last year that the policy announced then was for one year to encourage production and that it would not necessarily be continued. This year it is not deemed that we will need an additional supply of fluid milk to meet the demand of our manufacturing milk market. Let me point out that the policy as envisaged, and to be carried out by the Canadian Dairy Commission, is that the support program will be applied to a global quota to meet the domestic market. In other words, the whole plan is that we will support and pay subsidy on the basis of the estimated requirement to meet domestic needs. I think most Canadians will agree that

April 26, 1967
Interim Supply
this is the proper approach, and quotas are set accordingly. .
Some questions have quite properly been asked in respect of quotas and their purpose. The purpose of quotas is, of course, to arrange things so that we may do what has been done previously in the fluid milk industry. The complaints which have been voiced about the fluid milk producer and his position in respect of quotas can be answered by the fact that he is in exactly the same position as the manufacturing milk producer, and always has been. The manufacturing milk producer cannot get a quota in the fluid industry. We are providing quotas in the manufacturing industry in order to create a situation in which the supply and the domestic demand are as close as possible, and quotas will be established on that basis.
Let me point out further that the entire idea, which I suggest in the long run will improve the situation in the industry, is to use quotas economically to rationalize the industry. Quotas will be used to help the small producer. The hon. member for Rosthern chose to make light of the situation by cracking jokes about the fellow with ten cows. I do not think there is anything funny about this at all. The small producer is the man we want to help the most and that is what this policy is intended to do. It is intended to bring that small producer up to a position where he will ultimately have some 200,000 pounds of quota which will give him a decent income. I think the announcement makes it very clear that the quota will be used for the purpose of bringing the small producer to the point where he has a larger quota and can make a decent income. This has not been possible, as indicated by the figures I cited, when some 65 per cent of our producers today produce less than 100,000 pounds.
I realize that some of the very big producers probably are not too happy about this program because it is not meant to encourage further production or the establishment of huge corporate entities such as those which produce more than 300,000 pounds, as announced by the commission.
The quotas as they become available will be used to encourage the small producer to get bigger, so he can get the kind of income we would like him to have. I know this has never been tried before but I suggest that the experience in other countries and our own experience indicates that this is the best way, by the use of quotas, to bring the small producer into the economic areas.
[Mr. Greene.l
Then there is the question of the value of quotas. I think this point was very properly made. I want to assure the committee, because I thought it was a very valid point and one that should be answered, that the question of making the quotas the property of the commission rather than the property of the individual is to prevent this trafficking in quotas. This value in the quotas themselves, which in some areas of the fluid market has merely upped the price of getting into the fluid business and has ultimately upped the price of milk to the consumer, and the only person who benefits is the quota holder who gets the cash value of the quota.
The purpose is to have the commission deal with quotas at their discretion in the event of dispersal or sale, apart from the immediate family as pointed out in the release. The quotas will be used not to enable the person selling the product to get an extra buck for his quotas but to enable the small producer to become bigger and get himself in a position where he has an economic unit and can make a good income.
There has been some criticism that there are fewer producers. Of course, the dispersal of the herds is quite obviously, again, in large measure due to other producers becoming bigger and creating economic units. The cattle have not dissappeared or been shot. The fact that gross production has been maintained for the country quite clearly indicates, I think, that dispersal has largely been carried for the creation of larger and more economic units than has been the case in the past. With regard to the question of fewer producers, I know no answer to this problem. I do not know any way in which we can have just as many or more people than are in the industry today and still have them all making the kind of income we want them to make.
I think it is an immutable law of agricultural economics that the more prosperous a nation becomes, the higher becomes its standard of living, the more we expect to have in income return, the smaller is the percentage of the population producing the food for the rest of the country. The agricultural producers become more efficient; it is as simple as that. The agricultural producers in Canada in the past decade have been increasing their productivity by some 5.6 per cent per year, which is something like double the rate of increase in productivity in the industrial sphere, and even there it has been very good.
If one wants to go back to having more and more producers or just as many producers on
April 26, 1967

the farm as were there in the past, we have only to look at the situation in less developed countries which have a far lower standard of living than ours. In those countries 30 per cent or 40 per cent of the people are on the land producing the food for the rest of the population, but I do not need to tell hon. members that the standard of living for the farmers and others in that type of economy is far lower than ours. So if we are to have a higher standard of living and a better income, there will be a smaller percentage of the people in the dairy business, with larger units, and making the kind of income we want them to make.
You cannot make this kind of transition painlessly. You cannot make it without the price of change. I think that price should be nullified to the greatest possible degree in those areas where people are going out of the industry. We must do everything possible by way of ARDA programs, manpower training programs and location of secondary industry in those areas where a smaller percentage of the people will be concerned with dairy production. But I do not think we can ever attain the kind of progress we want by saying we have to leave things just as they are and keep the money pouring in and have no incentives or encouragement to create the kind of economic unit which will by its very efficiency give the kind of income to dairy farmers that we want them to have.
I think it is only fair to deal with the criticism of the price structure itself. I believe it is certainly the duty and responsibility of farm organizations to fight, as they have done, for higher prices and returns for those who support their organizations. Farm organizations must have a lobby, just as trade unions. They must work to improve prices for those who are their members and whom they are representing. Our farm organizations have done just this.
[DOT] (12:50 a.m.)
I would point out that it is quite proper for them to try to approach the $5 level, which is what they are after. I certainly do not think it is in any way irresponsible. When one considers that I have stated as an objective to be worked for in the very near future that the economic unit will have some 200,000 pounds per annum. This is the production of, say, 20 to 30 cows. Even at $5 that is only a $10,000 a year gross income, and when one takes all the expenses, taxes, cost of feed, fertilizer, and the capital cost of the establishment, surely this is not too high a figure for which to
Interim Supply
strive, and it is not irresponsible to say that the efficient dairy farmer should have a gross income of $10,000 per annum. However, this cannot be achieved overnight. It is something toward which we should work.
Someone asked what happened to the 11 cents. Again, this being a responsible program as I have said, it is geared to pay a subsidy and to support the dairy farmer for the domestic consumption. Canadians, by the price they pay on the marketplace, and by the subsidy they pay through their taxes, would I am sure want to see that the dairy farmer received a just return for what he sells domestically.
What is sold in world markets must be sold at prices less than our farmers can get in the domestic market. It is a two price system, if you like, and the 11 cents are used to dispose of that surplus product in world markets. It is the farmer's money. As you know, this year we did the same thing. According to my information it was not necessary to spend the whole of the hold-back this year, and there will be a return to the farmer of the portion that was not spent in putting the product in the world market. I would point out that the dairy organizations asked for $5.10. We have achieved $4.64 net, or $4.75 with the export subsidy. In the industrial area we see very sophisticated and highly skilled workers seeking parity of wages with their counterparts in the United States.
Let me point out that the price received by the American producer of manufacturing milk is less than $4 per hundredweight. According to my information prices have dropped even below that. This is why there is trouble in the United States in respect of manufacturing milk prices today.
Again I do not claim that we have achieved the millenium, but it is surely an indication of the fact that we have achieved a responsible price structure in Canada when the price received by the Canadian producer of manufacturing milk is 75 cents higher than that received by his counterpart in the United States. Some of those in the New Democratic Party who laugh should realize that they have not been able to achieve this for some of their industrial workers who are fighting for parity with their American counterparts. Here we have done better than parity in respect of our manufacturing milk farmers.
I do not deny for a moment that there is a great deal to be done, and there is much to be achieved. I suggest that what has been accomplished in four years is an improvement

April 26, 1967
Interim Supply
of some 70 per cent in the gross returns to the farmer. Certainly this far outstrips his increased cost of production in that time. I do not think anyone would suggest that his costs have gone up by an equivalent 70 per cent. The fact that our prices are higher than United States counterparts is surely an indication that we have moved a long way toward bringing the manufacturing milk farmer into the economic position he deserves. However, we should strive to do more.
I have great hopes for the dairy commission, though there are those who criticize it editorially. This commission was formed as a result of just the kind of conclave that hon. members have suggested-provincial people. Dairy organizations formed a committee which suggested a dairy commission of the type we have set up. To my knowledge all farm organizations support the idea of quotas. They appreciate it is the only way to bring stability to the industry.
In addition to this we are attempting to bring the industry, which obviously has been in bad shape, into better economic condition and adopt new approaches to maintain incomes during the period of transition. I suggest we have taken a very responsible step in this direction, and that this program brings the manufacturing milk farmers into a sounder position than ever before.
I admit there is more to be done. I hope we will shortly have a middle or long term plan to lay before the dairy farmers in Canada in conjunction with this year's program in order to show where we are going within the next five years. Our general direction is toward larger units where a decent income can be had. A better price must be offered in the marketplace. The dairy farmer wants a fair return from the marketplace, as does everybody else, and this policy is geared to that end.
In the meantime, while we are rationalizing the industry through the use of the dairy commission and quotas, we have put the dairy farmer into a far better position than he was when we took office. We have improved his income, his returns and his way of life in considerable measure.

Full View