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Flaherty’s budget confirms ag spending plans

(Resource News International) — Finance Minister Jim Flaherty’s 2009 federal budget, announced in the House of Commons Tuesday, confirmed $550 million in agriculture funding as had been announced Friday by Agriculture Minister Gerry Ritz.

That amount is split between a $500 million agricultural flexibility plan and $50 million to improve Canada’s livestock slaughter capacity.

The agricultural flexibility plan is meant to help farmers develop new technologies and promote environmental sustainability, according to the budget.

“It will drive innovation, environmental change, marketing opportunities and we’re looking for new and better ways to control input costs. This will be the proactive side rather the reactive side that the safety nets already provide,” Ritz had said on Friday.

Tuesday’s budget allocates $190 million over two years to support its proposed agricultural flexibility program, to be funded from “existing unallocated Agriculture and Agri-Food Canada resources.”

The announcement of funding for a “flexibility plan” follows calls from groups such as the Canadian Federation of Agriculture (CFA) for a federally-funded “AgriFlex” program that allows provinces and territories the flexibility to distribute money according to their requirements.

The $50 million slaughter enhancement program is expected to make federal matching funds available alongside private sector investments in “sound business plans.”

Eligible plans would aim at cutting costs, boosting revenues and improving operations of meat slaughter and processing facilities in Canada, “with a view to ensuring that Canadian livestock producers have viable and sustainable slaughter options available to them.”

“Not clear yet”

CFA second vice-president Ron Bonnet said the early reaction to the budget was mixed.

A preliminary look at the budget showed positive changes to the payment plan for emergency loans and changes to farm loans as well as welcome tax cuts on investments.

“But we’re not really clear yet that the flexibility program they announced is what we had been calling for,” he said. “I’m not convinced that it mirrors what the CFA had wanted. It sounds like there might be restrictions on what the money can be used for, and that the money might be stretched over quite a period of time.

“It’s a mixed reaction at this point and we’re going through the budget right now in more detail,” Bonnet said.

Not all reactions were mixed, however. Stewart Wells, president of the National Farmers Union, ripped the budget’s agriculture line items as “a veritable drop in the bucket compared to the magnitude of the farm income shortfall.”

Of the $500 million earmarked for agriculture, he said, “only $190 million is new money,” with the rest sourced from unallocated funds from the federal agriculture department.

Of the $50 million slaughter support package, the NFU said there was “no provision to ensure these funds do not simply end up in the pockets of Cargill, Tyson and XL, the big three packing companies which together control over 80 per cent of Canada’s beef processing facilities.”

“The big three packers manipulate prices at the farm gate through captive supply measures,” Wells said, suggesting that the Conservative government instead impose a ban on packer ownership of cattle, and set up tax incentives to help reduce the size of the Canadian cattle herd.

Credit availability

The budget also calls for amendments to the Farm Improvement and Marketing Co-operatives Loans Act to help make credit available to new farmers, support inter-generational farm transfers, and modify eligibility criteria for agricultural co-operatives.

“Currently, credit availability under the Act is limited to existing farmers and product marketing co-operatives fully owned by farmers,” the budget noted. “The proposed amendments will support the renewal of the sector workforce and enable co-operatives to better seize market opportunities.”

As well, Flaherty pledged $225 million over three years toward a strategy to extend broadband coverage to unserved communities. “Canada remains one of the most connected nations in the world, with the highest broadband connection rate among the G7 countries,” Flaherty’s budget noted. “However, gaps in access to broadband remain, particularly in rural and remote communities.”

The budget will also provide $1 billion over two years for a community adjustment fund that will “help mitigate the short-term impacts of restructuring in communities. This support for communities in all regions will be provided through regional development agencies.”

On tap also is a “clean energy fund” to invest in clean energy research development and demonstration projects, including carbon capture and storage. The government also pledged to consult on identifying specific assets used in carbon capture and storage, with an eye on accelerating capital cost allowance for those investments.

The budget also proposes to “permanently eliminate” tariffs on a range of machinery and equipment used in a variety of industries, such as forestry, energy and food processing, which must purchase specialized equipment from overseas.

Market volatility

The government’s overall spending plans in the budget were ripped as irresponsible by the Fraser Institute, the Vancouver-based think tank known for its support of reduced taxes and reduced government intervention.

Niels Veldhuis, the institute’s senior economist, said in a release Tuesday that Flaherty’s budget contained a “massive, $30.5 billion increase in government spending over the next two years (2009-10 and 2010-11) to ‘stimulate’ the economy. The increase in spending is an attempt to appease nearly all special interests including seniors, aboriginals, farmers, the auto industry, forestry, tourism, arts and culture.”

Flaherty’s budget projects deficits of $1.1 billion in 2008-09, $33.7 billion in 2009-10, $29.8 billion in 2010-11, $13 billion in 2011-12 and $7.3 billion in 2012-13, leading to a modest $700 million surplus in 2013-14.

In his outlook, Flaherty noted that the volatility in commodity prices seen in recent months has brought “significant uncertainty” into the outlook for nominal gross domestic product (GDP), and therefore into the fiscal planning framework.

“Over the near term, the risks to the commodity price outlook are tilted to the downside, reflecting uncertainty over global economic conditions and continued financial market dislocation,” he wrote.

While the past year’s volatility makes it important to assume a “prudent path” for commodity prices going forward, Flaherty also noted that private-sector economists expect commodity prices to recover over the medium term, given the expected recovery in global demand coupled with tight supply.

Flaherty also noted that as part of its strategic review, Agriculture and Agri-Food Canada is “replacing or reducing programs that no longer meet the needs of clients and further aligning its programs with its mandate and the new Growing Forward policy framework.” Those measures are expected to save $130.2 million in 2009-10 and more going forward, he projected.

(With files by Farm Business Communications staff)

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