<< Return to Articles & Publications Speech to the Ontario Mutual Insurance Association February 19, 2009 Speech to the Ontario Mutual Insurance Association Meeting I’d like to thank the Ontario Mutual Insurance Association for inviting me here today. The mutuals you represent are the backbone of small towns and communities across rural Ontario. I know – our family farm is insured by one of your member mutuals. They also represent something else, something very important in this day and age – the idea that bigger is not always better, that community counts for something and that neighbourly cooperation is the bedrock of our rural communities. Today we are in the middle of one of the biggest economic crises in our lifetimes. And in times like these, it often helps to look back to our past and the lessons learned. When we look back to the past of your member mutuals, we learn that insurance was not possible for farmers on the homestead. In the nineteenth century, insurance companies in London, England or in Montreal, Quebec were often not interested in insuring these farmers. If they would provide insurance, the premiums were far too high or the benefits difficult to collect. So out of this inability to get insurance, and a need to protect farms and homesteads from the ever present threat of fire, farm mutuals arose. The principle of these mutuals was not profit, but self help and neighbourly cooperation. Today – as a result of putting principles such as self-help and neighbourly cooperation ahead of profit – the mutual companies of Ontario are some of the most financially strong insurance networks in the world. So, in an era when many large banks and insurance companies are collapsing, in an era where individual greed too often has trumped the community good, in an era where the short-term quarterly profits trumped long-term thinking, it is good to be reminded of the principles on which your mutuals are based. Its important to take a step back at the short term and look at the long term, and today, I’d like to take a step back and look at the long term of an issue that is of concern to many of your clients and communities, and that is the issue of Canada’s farming sector and the security of our food supply. Two things are basic to any civilization and differentiate us from hunter-gatherer societies. One is shelter. The second is food. Without these two things, no civilization can last very long. And of the two, food is the more important. That’s why ensuring a basic domestic food supply is vital to Canada’s national interest, and vital to our long-term survival as a nation. However, our ability to produce our own food is being threatened by two things: economics and sprawl. The first threat is an economic one, and is a lack of profitability in the agricultural sector. The second threat is urban sprawl. We are ripping up the very land that can ensure that domestic food supply. Let me first start by discussing the first threat to our food supply, that being the unprofitability of the sector. Farming in Canada is not profitable, and from a rational point of view, should simply not exist. I’ve come to the conclusion that the only reason why a domestic industry still exists is because of an emotional attachment to the land and to a way of life. In 2007, the most recent year for which we have statistics, Canada’s 230,000 farms generated $400 million in profit on $40 billion in sales. While on first glance this may seem like a healthy business, this is a sector in crisis. $400 million in net income, or profit, divided amongst 230,000 farms is an average profit of $1700 per farm. These numbers are even worse when you realize that most farmers and their families don’t pay themselves, and rely on their profit as “salary”. In addition, farmers make major investments in their farm businesses, and for many the return on investment has been less than what a GIC would return. No wonder many farmers often have to make ends meet by working off the farm. And the previous years were not better either. In 2006, a $68 million loss was had on $37 billion in revenues and in 2005, 2.3 billion in profit was had on $37 billion in revenues. Thirty years ago, in 1974, Canada’s farming sector generated, in 2008 dollars, $16.5 billion profit on $38 billion in sales. In other words, in 2007, farmers made only 1/30 the profit they made 30 years ago, and 2007 was the best in the last five for Canadian farmers. This drop in income during the last thirty years has occurred despite the increase in population from 22 to 32 million, and despite the per capita growth in the economy. Let’s compare that to the manufacturing sector, which has been receiving a lot of press recently. There is no doubt that Canada’s manufacturing sector has been suffering and the challenges it faces are significant, so I think a compare and contrast with that sector will illustrate how in trouble our farming industry is. In 2007, Canada’s manufacturing sector generated $45B in profit on $600B in revenues. Compare that to $400 million in profit on $40 billion in sales. Manufacturing’s profit margins were 7.5% compared to agriculture’s 1% margin. So which sector is in bigger trouble? Let’s compare farming profits to another sector, the gambling sector. In 2007, profits from gambling amounted to $7 billion, 15 times the amount that Canada’s farmers made. There is something inherently wrong with the setup of a society when gambling makes 15 times the profit that those who put food on your table make from farming. Leaving out supply managed farms like dairy, chickens, eggs and turkeys, Canadian farm incomes have dropped dramatically in the recent years and clearly Canada’s agricultural policies aren’t working. What are the causes? One problem is that our farmers have inherently higher input costs than other jurisdictions, especially in the developing world. We have higher standards, from more stringent food safety standards to stricter environmental controls, and higher land costs. These all create higher baseline input costs for the Canadian farmer. Another problem is low commodity prices, a result of the “green revolution” – the massive increase in global agricultural output due to new technologies. Yet another problem lies in the fact that European and American governments provide greater subsidies and support for their farmers than do we. Some say that the solution is for more productivity. My guess is that the greatest productivity gains have been had. Any additional gains would probably not be sufficient to compensate for the drop in farm income and could likely only be achieved through even larger farm operations, leaving no room for the family farm. Others say that the solution is to move to freer trade by eliminating import restrictions, let the cheapest producers prevail and allow the marketplace to determine what food will be sold here. However, previous efforts – like the Doha round – to eliminate trade distorting policies have failed, and are unlikely to succeed in the future. We have presented many of our farmers, especially those in many parts of Southern Ontario, with a Faustian bargain: Keep farming and make so little money that you have to take one, or even two off-farm jobs to pay the bills, or sell your land for great profit. Given this choice, it is a wonder that many farms still remain. So what are some potential solutions to our farm income problem? The simple answer is that “I don’t know”, but I do have some ideas. First, farm groups and associations have got to merge, in order to provide one powerful voice for Canadian agriculture. There are only 230,000 farms left in Canada, and yet the farming industry is represented by a myriad of different groups and associations, often contradicting each other. Second, governments need to implement a “Made in Canada” branding strategy for Canadian food products, something I’m proud to say that our government is acting on. Third, governments need to encourage greater secondary and tertiary production of food products in Canada. The recent beef border closure highlighted what risks there are in moving food processing outside of the country. Forth, Canadian universities with agricultural programs need to generate ideas on how to return Canadian farming to profitability. Our universities excel in the science of farming, so why not excel in the economics of farming? Fifth, and most importantly, governments need to address the fundamental problem in Canadian agriculture: low farm incomes. Ultimately, the solution to low farm incomes is not going to come from greater efficiencies and lower input costs, but from higher revenue. That higher revenue must come from somewhere, whether that is from governments or consumers. Ultimately, consumers may have to pay a little more for food. With consumers paying only 10% of their household budgets for food, this is not too much to ask. Today, the average households spends about $7,000 a year on food, and as a proportion of total household spending it is the lowest ever. In the 1960s, food represented the largest proportion of household expenditure, accounting for nearly 20% of total spending. However, this proportion has declined constantly since then to just over 10% of total spending today. Let me address one question many bring up at this point: If other countries produce cheaper food, why not simply import? Why even produce our own food? The answer to this question is very simple. No country, no civilization has survived long without the ability to produce its own food. History has shown that a society’s ability to survive is linked to the security and certainty of its food supply. This food supply is at too great a risk of disruption - from trade wars and other threats - if we rely exclusively on imports. Obviously, certain food stuffs, like oranges, and bananas, cannot be grown here, or only grown here marginally, and will always need to be imported. But basic foodstuffs that can be grown here should be grown here. We protect our airlines, our cable companies, our telephone companies, our newspapers, our healthcare, our banks and our cultural sector. These are all protected because they are considered essential to our national interest. What is more vital to our national interest than food? Food and shelter are more fundamental than anything else. Let me now focus on the second threat to our food sovereignty and that is the threat of urban sprawl. One of the biggest threats to agriculture in Canada is urban sprawl. If you don’t have the land to grow food, you can’t grow it. Urban sprawl is a threat to agriculture for the following reasons. First and obviously, urban sprawl is destroying much of the prime farmland needed to grow our own food. While much of the food eaten today is imported and while much of farming is unprofitable, we cannot let the short-term economic problems in agriculture cloud our judgement about the long-term need to produce our own basic food supply. Good farmland, good soil, good climate and consistent rainfall are needed to do that, precisely what we have in southern Ontario. As I said before, we cannot assume the long-term security of our imported food supply. Only 60 years ago Western Europe - one of the world’s great breadbaskets - faced starvation. A disruption to imported foodstuffs would be devastating; Cuba has survived five decades without American automobiles, but would not survive a month without food. Secondly, urban sprawl is destroying thousands of acres of habitat for flora and fauna. Southern Ontario alone is home to over a dozen species at risk of complete extinction, including the Great Egret, the Jefferson Salamander and the Green Snake. All are at risk of extinction due to habitat loss, most of it caused by urban sprawl. Most of this sprawl is taking place in the Carolinian forest zone, an area with the highest bio-density in Canada and in this country found only in Southern Ontario. Why should we care about flora and fauna? In one word, bees. Bees are one type of species that are under threat of extinction if we as North Americans, if we as humanity on this planet continue to destroy habitat. Without bees, pollination of thousands of different types of crops would simply not happen. And the same goes for other types of flora and fauna that are at risk of extinction, flora and fauna that are vital to the production of food. Thirdly, sprawl represents a threat to the Great Lakes. There are signs that the Great Lakes - containing almost 20% of the world’s freshwater - are under threat from urban sprawl. The water levels in all five Great Lakes are below long-term averages and some are at record lows. All this growth is draining our aquifers and destroying our watersheds. Indeed, the biggest threat to the Great Lakes may come not from pressures to divert water to the dry American Southwest, but rather from explosive urban growth in Ontario. A fourth and perhaps strongest argument against sprawl is the global threat presented by rising greenhouse gas emissions. In destroying this farmland, in creating this sprawl, we are constructing a high-carbon infrastructure system of highways and sprawling communities that will not only prevent us from reducing our greenhouse gasses, but will in fact ensure we only increase them. Rising GHGs will have a profound impact on climate and a profound impact on agriculture. Areas previously able to grow food won’t be able to, and areas that currently don’t grow food might be able to. We simply don’t know that will exactly happen, but it will have a major impact on agriculture. Just think about what happens to agriculture in Ontario if the average frost day arrives 1 week later and arrives one week earlier in 40 years. A fifth argument against sprawl is that it is not economically affordable. We must face the harsh economic reality that we have been subsidizing sprawl. Over the last fifty years we have built an infrastructure system of highways and sprawling communities that we cannot afford to maintain. Governments are not charging developers the full cost of development. One study of an Ontario town found that for every dollar in development charges collected, a $1.40 in services were put in. Guess where the other 40 cents are coming from? From existing ratepayers, who are, in effect, subsidizing development. More growth means paying more in property taxes. In addition, our infrastructure system of highways and sprawling communities were built during that half-century period when oil was cheap. Last summer, oil broke through $100 a barrel, and I think that this is not the first or last we have seen of these price spikes. What happens to sprawling suburbia and the commuter lifestyle when oil reaches $200 a barrel and gas reaches $3 a litre? Clearly, urban sprawl is not economically sustainable. Most importantly, this sprawl was predicated on cheap and easy access to credit. That era is over, and the financial carnage of the last six months is evidence of that. So what can be done? At a basic level, there are two solutions – adopt a zero population growth policy or significantly overhaul urban and transit planning. The first solution, zero population growth, does not entail zero economic growth. Scandinavian countries are evidence of this fact. In Canada, we have a below replacement birth rate but a growing population due to immigration. Since our birth rate is below replacement, Canada needs immigration to maintain population levels. A zero population growth policy would entail adjusting immigrations rates so a constant population level of about 33 million is maintained. The other solution – one which allows for population growth while minimizing environmental damage – is to overhaul urban and transit planning. In other words, we need to ensure that the vast majority of any additional population growth is absorbed within the existing built up urban areas in the GTA. In conjunction, we also would need to require massive new investments in public transit systems. These increases in densities and populations are required to provide the level of transit ridership needed to justify the operational costs of major dedicated right-of-way public transit systems. These transit systems do not come without a price. Tens of billions in public monies would be required to build the kind of public transit system needed to move people and goods around these denser cities. This level of investment is beyond municipal means and would require commitments from both federal and provincial governments. But the alternative – more sprawl – comes with an even higher price. The result would be higher populations and densities in cities like Toronto and Mississauga, an easing in the flow of commuters and goods, and in turn, an end to sprawl. A denser population does not necessarily require turning these cities into canyons of towering skyscrapers. These increases in population can be accommodated by building five to eight story densities along major transit corridors throughout the city. Either way – 40 story condos in the core of the city or five to eight story structures throughout the city – these cities would be the better city for it. But what is not viable is building more single unit, tract housing on agricultural lands. We don't have a lot of land. This seems a ridiculous statement to make, until one realizes that much of Canada is inhospitable to human habitation. That's why we have almost 20 million Canadians crammed into the St. Lawrence Lowlands of Ontario and Quebec. Others argue that halting sprawl and creating denser communities would result in more expensive housing. This is true if one is committed to the idea that every family deserves to live in a single-detached home on a large lot. However, families can and do live comfortably in multi-storey buildings across much of Europe and Asia. A condo-townhouse along a public transit corridor costs just as much as single detached home on a larger lot. Arguably, these denser communities - a good mix of residential and commercial supported by public transit - result in a much higher quality of life. Building more single unit, tract housing, on agricultural lands simply cannot continue. The era of building tract housing must come to an end if we are ever to tackle our agricultural and economic challenges. Most importantly, it must come to an end if we are to preserve and protect the land to pass on to our children. Doing otherwise would leave them with a lack of food security and a sprawling infrastructure system they can ill afford to maintain. We can do better than leave this to future generations. Think about it: Protecting our valuable farmlands by stopping sprawl and returning profitability to our farming sector could be the foundation for a new Canadian consensus, a new rural-urban consensus. Rural Canada would support the commitment to invest billions in new subways and rapid transit systems to stop sprawl and intensify our nation’s largest cities, and in return, urban Canada would commit to overhauling agricultural policies and possibly paying more for food to return profitability back to our family farms. So, those are the two threats to our food sovereignty: a lack of profitability in farming and urban sprawl. We as governments, as Canadians, must tackle these problems so that we can ensure that future generations have access to a secure domestic food supply and that Canada’s vital national interests are protected. Let me conclude by leaving you with some thoughts. We must reinvigorate our connection to the land. Our land is beautiful and we cannot ever re-create it. The land has influenced our culture and imbued our sense of identity. How can one read and understand Archibald Lampman, Ross Sinclair, Robertson Davies, Michael Ondaatje, or any of the other greats of Canadian literature if one has no connection to the land? If one has never seen the undulating hills of Wellington County, or the vastness of the Peel-Halton plain, once the breadbasket of Ontario, how can one understand what it means to be Canadian? The land in which we live is intrinsically tied to who we are as Canadians. The way we treat it is a reflection of who we are as a people. As our forbears who started the farm mutuals in Ontario knew, a healthy democracy and a good society require a vibrant agricultural sector. Farming is what settled this country, carving out of the wilderness small towns and townships, counties and cities, building the society we have today. The essential nature of farming was something best put by one of the intellectual forces behind democracy on this continent, who said in 1785, “Cultivators of the earth are the most valuable citizens. 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