2008 OFA Pre-Budget Submission by DerekSchouman

VIEWS: 4 PAGES: 9

									                                             Ontario Agri-Centre, Suite 206, 100 Stone Rd West,
Ontario Federation of Agriculture            Guelph, Ont. N1G 5L3 (519) 821-8883 Fax (519) 821-8810




January 10, 2008

A Pre-budget Submission to:
The Honourable Dwight Duncan, Minister of Finance


The Ontario Federation of Agriculture (OFA) appreciates the opportunity to outline the
priorities of the farm business community in advance of the next Ontario Budget.

The OFA is Canada’s largest farm organization, representing the interests of over
39,000 farm family businesses. OFA’s policy positions are developed and adopted by
members through its elected regional and commodity directors that sit on the OFA Board
of Directors.

The 2006 Ontario Economic Outlook and Fiscal Review stated that: “Ontario’s future
prosperity depends largely on its ability to continue to adapt, innovate and strengthen its
competitive advantage.” We wholeheartedly agree with this statement.

The OFA also agrees with the government’s economic plan to strengthen the province’s
economic advantages and build opportunity through investment in key economic
sectors, while maintaining a competitive tax and business environment.

Agriculture is clearly one of Ontario’s key economic sectors. As noted in the Economic
Outlook and Fiscal Review, “Ontario has the largest agriculture sector of any province,
with sales of $8.4 billion in 2006.” Agriculture is the economic mainstay of hundreds of
rural communities, creating and preserving employment and building stronger
communities across our province.

Primary production has a strong multiplier effect on Ontario’s economy. Over 752,000
people are employed in the production, processing and food distribution business,
fuelling a healthy and wealthy population.

A strong agriculture sector is critical to maintaining the government’s commitment to
building strong, sustainable communities and a healthy economy in rural Ontario.

Continuing public investment in Ontario agriculture remains an important aspect of our
industry’s growth and development for the future. Our agri-food sector’s performance
relies on the latest production technology and marketing techniques. This can only
happen with investments in the industry.




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The OFA will outline investments the Ontario Government should make to strengthen
the province’s economic advantage, investments the Ontario Government should make
to build opportunity, and changes the Ontario Government should make to maintain a
competitive tax and business environment.

Although the budget process tends to focus on investment, the agriculture community’s
success is increasingly dependent of sound regulatory policy as well as fiscal policy.
Investment in the agricultural sector can be rendered less effective if consistent and
supportive regulatory policy is not part of government planning.

The OFA will therefore, also offer priority suggestions for policy that may not require
investment but will serve to spur private investment that will also contribute to a stronger
farm business and rural community.

Investments and policy to strengthen the province’s economic advantage

Ontario’s economic growth outlook for 2008 has softened due to the impact of higher oil
prices, a stronger Canadian dollar and a slower growth outlook for the U.S. economy on
our manufacturing and agriculture sectors.

Export dependent industries with business plans built on a 70 or 80 cent dollar are now
scrambling to reinvent themselves to cope with our surging currency. Some sectors of
Ontario agriculture are not immune to this devastating impact.

Likewise, rising energy and other input costs have required Ontario farmers to regroup.

Overall, the prices that farmers received for their commodities increased from the same
month a year earlier, as strong gains in grains continued to outstrip lower livestock
prices.

Prices for crops were up 16.5% in October compared with the same month a year
earlier, according to the Farm Product Price Index (FPPI), with fruits and vegetables
recording decreases. Prices for grains, oilseeds and specialty crops continued to
increase.

Overall, prices for livestock and animal products were 4.6% below their October 2006
level. This was the fifth consecutive year-to-year decline for these major commodities.
Prices for poultry and eggs continued an upward trend.

Prices farmers received for their commodities fell 3.5% in October from September, as
declines were recorded in both the overall crops index and the livestock and animal
products index.

Generally, the farm economy shows significantly differing results with some sectors
recovering in price to match cost increases while others continue to languish.

Given this, solutions simply cannot be universal. The farm community is proposing
specific ways and means to address the root causes of farm income problems where
needed in the short term while providing long term programming that will ensure a
sustainable future.



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Ontario agriculture can and will provide solutions to many public policy issues Ontario
now faces. Our success is predicated, however, on intelligent and predictable
investment accompanied by supportive policy and a prudent regulatory environment.

Our solutions are as follows:

FARM INCOME PROGRAMMING

Ontario agriculture needs predictable and bankable investments from the provincial and
federal governments. The sustainability of the sector and the near and longer term
prospects for the economy of rural Ontario depends on the commitment of resources to
the present and future agricultural economy.

The Ontario government has recently made significant investments in the agriculture
sector including establishing a pilot Risk management Program for the grain and
oilseeds sector and, most recently, an ANS based investment to mitigate the low price /
high cost squeeze on the livestock and horticulture industries.

However, ongoing, long term programming requirements continue.

Ontario farmers need action and investment as follows:

      A long term commitment to viable risk management and income support
       programs as developed by the agricultural sectors.
      Action on developing production insurance products for livestock and
       horticultural crops.
      A federal-provincial program to buy out Ontario’s tobacco growers, as
       proposed by the growers including a commitment to help stabilize the
       economies of local communities.
      A comprehensive plan to help mitigate the impacts of higher farm labour
       costs.

Agricultural exports have suffered due to the slower growth outlook for the U.S. economy
and the surging Canadian dollar. The stronger Canadian dollar has also depressed
domestic agricultural prices as foreign competitors have benefited from an exchange
rate advantage. While our competitors may not enjoy this advantage over the long-term,
the medium term damage to Ontario’s agricultural economic capacity and structure m ay
be impossible to remedy if ignored.

Fifty-five to sixty per cent of all the pork produced in Canada is sold outside of Canada.
Canada exported over a million tonnes of pork valued at $2.8 billion in 2005. However,
the rapidly appreciating Canadian dollar has significantly affected this sector. Hog
production has gone into decline for the first time in a dozen years. Processors’ plans to
downsize or restructure will significantly reduce processing capacity in Ontario in the
future.

The Ontario government must make strategic investments and establish a
regulatory environment to retain and build Ontario agriculture’s processing and
value-added capacity.




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ENERGY:

Energy remains one of agriculture’s major input costs. Electricity and fuel are needed to
operate equipment, heat production and storage facilities. Fuel is also a significant input
in the production of fertilizers, lubricants, farm chemicals and other crop inputs.

Consequently, energy policy is important to the farm sector for its impact on
competitiveness.

Agriculture is rapidly becoming a significant source of energy for the rest of society
through the production of electricity, ethanol and other bio-fuels. It is estimated that
twenty per cent or more of this year's North American corn crop will go to make ethanol.
The OFA is leading research into the use of corn by-products for energy.

Ontario cannot lag behind other jurisdictions in the production of energy from renewable
sources. Governments play a key role in developing and enforcing energy policy.
Ontario agriculture needs the cooperation of the government to allow it to realize the
maximum benefits from the energy produced by agriculture.

OFA has identified and tested the potential to use grains, corn cobs, hay and straw
pellets in Ontario’s electricity generating coal plants.       Preliminary results show
tremendous potential for such clean, renewable sources. Ontario Power Generation has
started the engineering work to add a bio-fuel feed system to the Nanticoke Power Plant.

OFA sees real potential in the use of corn cobs as an alternative to coal but support is
needed to complete this work. Stripped corn cobs could potentially yield over $100
million in real profits to Ontario farmers and generate 1.5 GW of green electricity for
Ontarians.

Investments in further research on efficient biomass collection techniques and
generating capacity must be conducted to maintain efficient and environmentally
sustainable electricity production at Nanticoke.

Ontario must support the development of energy crops and on-farm energy production,
as well as markets for energy crops and products. This is the basis for sustainable
energy for Ontario and a new market for Ontario farm production.

Production and sale of bio-fuels has the potential to change the economic fundamentals
for Ontario grains and oilseeds farmers. It is imperative, however, in exploiting this new
opportunity for domestically produced energy from renewable sources that the producers
themselves are not also exploited.

Fair pricing regimes for renewable fuel inputs that provide a positive return to
efficient farmers must be developed and contracted.

Fair prices to farmers will yield highly competitive energy production with advantages to
farmers and consumers.

The 2006 Ontario Economic Outlook and Fiscal Review recognized that: “Investments in
Ontario’s electricity infrastructure are essential to supporting and enhancing Ontario’s



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economic competitiveness and promoting a more prosperous Ontario. Predictable and
stable pricing benefits all consumers.”

In order to ensure predictable and stable prices for remote, rural and farm
residents, OFA requests the continuation of Rural Rate Assistance Program so
that residents don’t pay more than 115% of the Ontario average cost for power.
We also suggest smart meters not be compulsory for customers using less than
50,000 kwh per year.

Reducing stray voltage to a maximum of ½ volt in rural areas must be a priority of this
government. Maintaining transformers, increasing capacity and installing ground tap
filters can help to reduce stray voltage. OFA greatly appreciates the Ministry of Energy
directive guiding the OEB to address the stray voltage issue.

The Standard Offer pricing regime must be developed to encourage investment in
electricity generation form renewable sources. Ontario farmers have the capacity and
inputs to generate power but must be assured the investment will be returned.

OFA recommends Standard Offer pricing for power be equal to the anticipated
average market price in five years’ time.

This price would treat both producers and consumers fairly. In addition,

OFA calls for a net meter policy that allows farms and other producers to sell their
surplus power at the monthly average cost of power.

Energy conservation is considered to have contributed to a 2.5% reduction in Ontario
power use compared to expected levels of use. OFA has entered into a memorandum
of understanding with Hydro One, OMAFRA and the Conservation Bureau and has
launched test energy audits and is working on a Best Management Practices book and
other power conservation material for farms.

Energy conservation incentives must remain a mainstay of Ontario’s energy
policy.

Ontario must move to retire the old hydro debt promptly. The present rate contribution to
debt, at 0.7 cents per kwh does not even pay the full interest charge.

The debt retirement charge must be amended in a fair and pragmatic way to retire
debt in less than 20 years.

Ontario must also generate capital to enable investment in new generating capacity.
Without assured liquidity the Integrated Power System Plan leaves the electricity system
in an uncertain state, as a place where investors may or may not appear in a timely
fashion. This uncertainty erodes confidence and the assurance of supply so necessary
for our farm businesses.

The OFA has developed a comprehensive electricity policy that addresses the above
issues as well as providing sound policy advice governing electricity rates, generation
and conservation measures. We will be pleased to further pursue such policies to help
to improve energy costs and generation opportunities for Ontario farmers.


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WILDLIFE DAMAGE COMPENSATION

Compensation levels for livestock killed or injured by predators is inadequate.    The
government’s compensation schedule is close to 25 years old.

The list of eligible livestock and predators listed in the Livestock, Poultry & Honey
Bee Protection Act must be updated to fairly compensate farmers for losses due
to predation.

Farmers should be compensated for wildlife damage to crops. Currently, crop loss is not
covered for wildlife damage, although losses are significant. The provincial government
acknowledges that MNR has the “mandate to manage wildlife in Ontario”. The mandate
to manage comes with an obligation to compensate farmers for crop loss due to wildlife
damage.

Two significant examples of wildlife mismanagement at the expense of the farming
community include the cancellation of the Spring Bear Hunt and the introduction of elk
into Ontario without an adequate management plan.

In both cases, the rapid escalation in each species’ population has caused significant
damage to Ontario farm businesses. In the case of bear, lives are also threatened in
urban environments.

The OFA strongly recommends the Ontario government reinstate the Spring Bear
Hunt in order to control the bear population as well as providing needed economic
activity to northern communities.

The OFA also recommends the government study the elk population with a view
to implementing a controlled hunt for the same reasons as with bear.


ECOLOGICAL GOODS AND SERVICES

Farmers provide benefits to the public in providing food safety systems, environmental
stewardship initiatives and preservation of the rural landscape. Many of these benefits
are positive externalities. Currently, farmers bear the costs associated with providing
these benefits without receiving compensation.

Ontarians are demanding more of these public goods and the Ontario government is
responding with regulations governing land use to preserve species and biodiversity,
green house gas mitigation and source water protection. Farmers, as the primary land
owners affected by such regulation cannot continue to bear the cost of providing goods
and services for the benefit of the public that serve to render the farm business non-
competitive.

The concept of using public funds to purchase ecological services provided by those
who own and manage land has been debated for years, but to date Ontario has no
policy providing guidance on this important issue. Other jurisdictions do have such
public policy.




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The Ontario government must develop a mechanism for establishing the value to society
of such ecological services as carbon sequestration sites, groundwater recharge areas,
vegetative filter strips to prevent sedimentation in surface water bodies and wildlife
habitat.

In today’s increasingly competitive marketplace these services must be valued and
those providing the services must be compensated at a rate that is reflective of their
value.

Establishing a mechanism to value ecological services will present challenges, as will
the need to verify that the contracted services have been delivered. Given its
complexity, it is imperative that the Ontario government establish an advisory committee
to look specifically at the concept of payment for ecological services that
ensures maximum ecological benefit by minimizing the administrative burden. The
advisory committee should involve stakeholders from the agencies that will be
purchasing ecological services (e.g. federal, provincial and municipal governments), and
also stakeholders that will be providing the services (e.g. agriculture).

Ontario must analyze the financial impacts of regulation designed for public
benefit and develop market mechanisms to allow farmers to be compensated for
the public goods and services they provide to society, such as water recharge
areas, wildlife habitat, and carbon sequestration.

The government should establish an Advisory Committee to provide public policy
advice on the compensation mechanism. The objective should be to have a
syste m developed that can be pilot tested in 2009.


COMPETITIVE TAX ENVIRONMENT

The OFA previously sought changes to Land Transfer Tax to ease young farmers’
entrance to farming. The government announced the exemption; however the
exemption does not cover all related eligible persons. Therefore the current exemption
does not achieve the goal of easing a new generation into farming.

The government must extend the Land Transfer Tax exemption to include all
family farms in farm corporations and estate trusts.

Ontario farm businesses need their government to provide a competitive tax
environment. That is, government taxation should not disadvantage our farmers in
comparison to other near-by jurisdictions. Unfortunately, this is not the case with
regards Retail Sales Tax exemptions available to farmers.

We request that the list of farm purchases exempt from Ontario Retail Sales Tax
be expanded to provide a level playing field with farmers in provinces with
harmonized sales tax regimes such as Quebec.

In previous pre-budget submissions the OFA requested that analysis be conducted to
evaluate other means to value farmland for Property Tax Assessment purposes, instead
of the farmer-to-farmer sales approach currently employed.



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To our knowledge, the Ontario Ministry of Finance has not done any research since we
made this request. Meanwhile, New York farmers can continue to apply for an
Agricultural Value Assessment on their farm properties.

Ontario must develop a competitive property assessment valuation method, or
Ontario farmers will continue to be disadvantaged.

Property tax assessment classification issues also must be addressed. Farmers face
great difficulty in anticipating classification changes. Unlike the Canada Revenue Agency
that will provide Advanced Rulings on income tax matters, MPAC does not officially have
a process to advise property tax payers of potential property tax classification changes
associated with changes in a farm’s operations. The issues of value retention and value
adding practices on farm are not well understood and generate significant and
unexpected property tax increases.

We request that the Minister of Finance define agricultural practices for farm
property assessment purposes in regulation.

The Ontario Ministry of Agriculture and Food and MPAC have both been willing to work
with the Ontario Federation of Agriculture to develop a proposed definition. Preliminary
work has been completed.

The current property tax assessment classification system penalizes farmers that are
compelled by the market to “convert” their products into a marketable state (value
retention) or who manage risk by diversifying their operations int o value adding ventures
with industrial and/or commercial property assessment classifications. Industrial and
commercial property tax rates are inappropriate given the lack of municipal services
provided to many of these farm properties.

The 2006 Ontario Economic Outlook and Fiscal Review stated that “Ontario’s future
prosperity depends largely on its ability to continue to adapt, innovate and strengthen its
competitive advantage”. The same can be said for the agricultural sector specifically.
However, the Ontario government has acted more to obstruct innovation than to
encourage it.

We request a competitive tax environment for Ontario’s farmers. A competitive tax
environment means that tax levels must be comparable to those in competing
jurisdictions. This has not been the case.


AGRICULTURAL RESEARCH

Agriculture research is the most cost effective support for agriculture as it directly affects
the need for other support. Case in point, research fueled an 18% growth per year in
productivity that has kept the industry competitive and at least partially able to keep pace
with rising costs in the past.

Research support for agriculture has fallen by over 30% in the past ten years. This
reduced research investment threatens the future of agriculture.




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The OFA calls for the restoration of financial support to agricultural research to a
level of at least $90 million per year with an additional investment allocated
exclusively for on-farm energy research and development.

Delivering higher-quality service in an efficient and effective manner is an objective of
this government’s modernization plan.


SUMMARY

Agriculture is one of the key economic sectors in Ontario. The agri-food industry,
including farmers, processors, wholesalers and retailers, provided 752,000 jobs in
Ontario in 2006. This translates into 11.7 percent of Ontario’s employment. The value of
Ontario agriculture and food exports topped $8.59 billion.

Ontario farm incomes should signal to the government that the agricultural industry, the
second largest industry in importance to Ontario’s economy, requires unique
investments and a supportive regulatory and policy environment to ensure the long-term
health of the industry and its ongoing contribution to the Ontario economy.

The Ontario Federation of Agriculture and its farm business members are prepared to
work closely with the Ontario government to deliver the necessary policies and programs
for the benefit of Ontario’s economy and its citizens.


Ontario Federation of Agriculture
January 10, 2008




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