Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 4 - Evidence
OTTAWA, Thursday, March 19, 1998
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-4, to amend the Canadian Wheat Board Act and to make consequential amendments to other acts, met this day at 9:07 a.m. to give consideration to the bill.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, this is our first meeting, other than hearing the Minister, on Bill C-4.
This morning we have with us witnesses from the Canadian Wheat Board Advisory Board. Please proceed.
Mr. Art Macklin, Chairman, Canadian Wheat Board Advisory Committee: Honourable senators, thank you for this opportunity. With me today are Vice-Chairman Wilfred Harder, our representative from southeastern Manitoba; Robert Ponto who represents central Alberta; and Bill Nicholson who represents western Manitoba. I represent northeastern British Columbia, all of the Peace River district, and most of the area north of Edmonton.
To give you some background, the advisory committee is mandated under the Canadian Wheat Board Act. Eleven members are elected for a four-year term. These elections are accomplished by use of a ballot mailed out to approximately 120,000 permit-book holders in Western Canada, so virtually every farmer in Western Canada has the opportunity to participate once every four years in the election of an advisory committee to the Canadian Wheat Board.
The advisory committee meets with the Wheat Board commissioners and the senior staff generally on a monthly basis. Our task is to look at the operations of the Wheat Board and to give advice to the Wheat Board and the government on policy affecting Wheat Board operations.
The advisory committee has the knowledge and experience to understand how these changes to Bill C-4 will affect not only farmers but the operations of the Canadian Wheat Board. Mr. Harder and I are in our third terms. We have been on the advisory committee now for almost 12 years. We have had the opportunity to learn and gain some understanding of the Canadian grain industry and the operations of the board. Mr. Ponto and Mr. Nicholson are in their fourth years. The advisory committee as a whole has experience and knowledge probably as good as any group of farmers in Canada in understanding how this bill will affect the operations of the Wheat Board.
We are pleased to say that the brief that you have before you has the unanimous support of the advisory committee. In previous months, there has been some publicity about splits in the committee, but that was more a split in strategy than a split in policy. On this brief, we have the unanimous support of all committee members.
Bill C-4, whether it passes or not, will not end the debate in Western Canada over grain marketing. It will not reverse the pressures on the Canadian grain industry coming from deregulation, from the loss of the transportation subsidy, from globalization, and from world trade talks. These pressures will continue. The advisory committee feels there is a need for change in the Wheat Board structure. Our previous positions have indicated some of the problems we saw in Bill C-4 that prompted us to suggest changes and even the withdrawal of the bill. Nonetheless, the bill has passed third reading in the House of Commons. We are here to put forward some positive amendments that the Senate could make to this bill in order to make it more acceptable to farmers and less dangerous to some of the fundamental pillars of the Canadian Wheat Board.
Regarding corporate governance, we feel the CEO should not be a member of the board of directors. We are quite concerned about that. In most of our experience with farm organizations such as the prairie pools, the CEO is not a member of the board of directors. The directors should be making the policy; the CEO should be administering it. There should be a division of that responsibility. We do not think the CEO should be a member.
We also feel that an another elected farmer should be added to the board of directors to make it 11 elected instead of 10 elected. That would accommodate the removal of the CEO from the board of directors. It would also mean that the elections would basically follow the current advisory committee geographic areas.
We do have a major concern about the size of these geographic areas in Western Canada. With the proposal currently in Bill C-4 for 10 districts, some districts cross three provincial boundaries. The northern district in which I reside would have British Columbia, all of northern Alberta, and northwestern Saskatchewan. It is difficult to represent farmers when you have such a huge geographic district.
We feel that farmers are used to the current geographic boundaries of the advisory committee and that it would make sense to keep those current boundaries, to elect 11 board members, and to move the CEO off the board of directors.
We are concerned about the appointed directors and the appointed CEO. We recognize that the federal government has a legitimate right to have some power in this structure. As long as the federal government is backing the borrowing of the Canadian Wheat Board, they have a legitimate right to have representation and the necessary powers to protect legitimate financial and Crown interests. We do not question that at all. However, we are worried about patronage political appointments to these positions, and we are concerned about the "at pleasure" aspect of the appointments.
We feel that farmers should have a right to agree on the appointees. We cannot see a problem in the government consulting and obtaining the agreement of the elected directors when choosing people for the appointed positions. The government would still have the power to make the appointments, but it would give farmers a feeling of some power and consideration if both the government and the elected farmers were required to agree on the CEO and the appointees. We think that is an entirely legitimate and reasonable request. The government would still have the power to make those appointments and to ensure that they had competent, knowledgeable people with experience to put into those positions. It would also allay our concerns about any wholesale changeover if the government changed or an appointment for a reason other than the ability and competence of the person to fulfil the function.
We feel all people elected to the board of directors should be bona fide farmers. That would require an amendment to the proposed legislation. We feel the appointments should be on a term basis and not at pleasure.
Bill C-4 states that the directors have a duty to comply with this act, with all the regulations that apply to the act, and with all the by-laws. We have asked the Minister to clarify that point. We sent him a list of questions about three months ago, and we still have not received answers to those questions. We requested clarification on whether the cabinet, through Governor in Council, has the right to override any of the decisions made by the board of directors. If there is a confrontation between the federal government and the board of directors, whose will shall carry the day? In a confrontation, will the board of directors have the power to make a decision at the end of the day? We would like clarification on that.
The areas of power and responsibility for both the government and the board of directors should be clearly defined. We again recognize that the government, as long as they are backing some of the borrowings, has a right to have the final say in some issues. In other areas -- for example, whether the Canadian Wheat Board will get involved in cash buying -- we think farmers should have the final say. Some clarification of those powers would be helpful to us.
The bill states that directors should set their own per diems. This should be amended to say that per diems are set in consultation with the government. As a farmer, I do not like signing a blank cheque. The committee feels the government should still have some responsibility for the Canadian Wheat Board and that there should be some consultation on the remuneration for the board of directors of the new Canadian Wheat Board.
Those are our points on corporate governance.
Mr. Wilf Harder, Vice-Chairman, Canadian Wheat Board Advisory Committee: Honourable senators, before I begin, I want to say that we appreciate the fact that Senator Gustafson and any other senators whom we try to contact from time to time actually return our phone calls. That is very important.
The advisory committee feels very strongly about the inclusion clause -- the ability to put crops under the Wheat Board if so desired. In fact, I think the advisory committee had a great deal of influence in originally adding to Bill C-72. We feel that if there is democratic process to remove crops from the Wheat Board, then there should also be the same parallel process to put new crops under the board.
The committee believes that the way the current legislation and exclusion clause are set up is unworkable. We have complained publicly about the inclusion clause. It is not that we do not like it. We like the notion of an inclusion clause, but we simply think the way it is worded now is totally unworkable.
The current inclusion clause would need to be triggered by commodity organization. This could result in battles over which organization is representing a particular grain. In fact, it would stir up a fight within the farm community, and I do not know that it could ever be resolved.
The committee also feels that the current process for including grain is far too cumbersome. Adding a grain requires the support of any particular commodity organization, the board of directors, and then the farmers. Then, after all that, the federal government would be under no obligation to pass the necessary regulation.
The current exclusion clause, on the other hand, would allow for exclusion of significant grains from the Wheat Board without even a producer vote. This is both undemocratic and dangerous, as there is no clear definition of what are significant grains.
In our view, this whole relationship is simply unacceptable. The process should be parallel for removing crops from the board or for putting crops in the board.
We looked at the minister's proposed amendment at the conclusion of the debate in the House of Commons, and it appears as though it would have alleviated many of the concerns with the inclusion and the exclusion clauses. The minister at that time stated that he was prepared to drop the current inclusion and exclusion clauses, provided that the opposition agreed to let the government introduce a motion requiring the current and future ministers responsible for the Wheat Board to consult with the board of directors and hold a vote amongst producers before adding or subtracting grains from the Wheat Board mandate. In the opinion of the committee, this change would give farmers the power to make inclusions or exclusions. As well, farmers would have to vote on all grains, not just those deemed significant.
Within a fair and objective framework, a new board of directors of the Canadian Wheat Board might be able to function also with less political pressure.
We also feel that a vote to change the authority of the Wheat Board should be carried by a minimum of a two-thirds majority. If the Wheat Board it is to be effective as a marketing agency, its powers and jurisdictions must be respected. It would therefore seem responsible that a significant number of farmers should be required to support a change in the mandate.
I would remind you that, in 1972, the vote to put canola under the board required a two-thirds majority. That seems to be consistent with standard procedure. If my memory serves me correctly, at that time, it was over 50 per cent. Some 60 per cent voted to have canola under the board, but it was not done because it did not carry by two-thirds majority.
I want to make it very clear that there should be both an inclusion clause and an exclusion clause.
Senator St. Germain: There are various issues here with respect to the inclusion and exclusion clauses. When you took that poll, was that amongst the actual canola producers?
Mr. Harder: I do not recall at that time if it was. It was all the farmers.
Senator St. Germain: Why would you include all farmers in a situation like that? If I decide to produce canola or beef, I would not solicit sheep farmers.
Mr. Harder: We are not soliciting sheep farmers. I should remind you that the barley vote held last year was done for only barley producers and anyone who had grown barley in the last five years.
I am not sure that we are set either way, but I can give you the rationale for allowing all permit-book holders to vote. Many people perhaps do not grow canola because they do not like the way it is marketed. Can you tell me those people should not have the right to vote? This is not a major part of the debate. If it is deemed that only the canola producers can vote, fine, but the rationale for allowing all permit-book holders to vote is that farmers change crops.
Senator St. Germain: I understand that, but I find it hard to believe that you should have a vote if you are not a producer. I am not arguing with you; I am just saying this is my perspective.
Mr. Macklin: As an advisory committee, we are quite prepared to go with whatever seems reasonable, and that may change from time to time in the farm community. We have had no objections to the criteria for the recent barley vote where people who had produced in the last four or five years were the ones who were eligible to vote. Whenever a vote is held, it is the responsibility of government to determine what is a fair electorate. There is generally some discussion with the farm community and a general acceptance of the criteria. I do not think it is a big issue.
As Mr. Harder says, though, there are people -- and I am probably one of them -- who do not grow very much canola because they do not like the marketing system. However, I can certainly grow canola on my farm just as well as the next person.
Senator St. Germain: I am not questioning that. I could produce beef on my operation, or sheep, or whatever. That is the analogy I am using. Perhaps it is not a good analogy.
You refer to a bona fide producer. How do you reconcile a bona fide producer? I have been and still am in the farming business. Do you have a distinct description of a bona fide producer?
Mr. Macklin: No, we do not. I think you can use a number of criteria. In the case of Canadian Wheat Board advisory committee elections, you must be a permit-book holder in order to vote. That might be one reasonable criterion. That is part of the regulations that the government will have to come up with in terms of determining eligibility, and I do not want to get hung up on trying to make that definition at this point. If you have some real financial interest in the farm, you are probably bona fide and entitled to participate in the selection or to run for this new board of directors.
Instead of the term "bona fide", we used the term "full time". We considered that and thought that whoever was on this board of directors would be required to put a lot of time into being on the board of directors. Perhaps "full time" is not the best term there. We changed that to "bona fide". It is a matter of definition and still must be decided. Ultimately, that is the responsibility of the government relative to regulations.
Senator St. Germain: My biggest concern with this proposed legislation is the inclusion and exclusion clause. That is the most controversial section in the bill.
The Chairman: In my farming area, the subject of inclusion and exclusion is the most divisive thing in the whole bill. There is a great deal of concern about it, and I am wondering whether it is worth it.
Mr. Macklin talked earlier about the stresses of farmers and the changes in freight rates, and all these things that are happening at once. Why would you now bring this into the bill when, by the democratic process, you could include any crop at any time if that was the wish of the farmers? It seems to complicate the bill and is very divisive.
Mr. Harder: Naysayers of the Wheat Board who do not like the Wheat Board legislation are drawing far too much attention to it. If you look at the inclusion clause the way it is presently written, the odds of it ever being included are pretty slim. These naysayers are drawing attention to the bill to make it a political issue. They are using it as a political football and they are spreading stories around such as, "Once you have a new board you will put the crops under that board." That is simply not the case.
On a matter of democratic principle, although we support the inclusion clause, that does not mean that people around our table necessarily feel that more crops should be included under the board. If we represent a democratic organization, how can we not support an inclusion clause? It is a fundamental principle. It is there, and that is the end of it.
The Chairman: For many farmers, the canola crops and the specialty crops have been the saviours of their farming operations. Especially at this time, when wheat is down to $3 a bushel, farmers are very concerned about that. They are fearful of losing something that has saved their farm. That is the practical reality of the situation. This is very divisive. I have said enough on that.
Mr. Bill Nicholson, Manitoba Member, The Canadian Wheat Board Advisory Committee: In response to some of the comments on the value of canola as a crop to farmers, I agree that is the case. The success of canola is not due to its particular marketing system but because it is a high quality vegetable oil that is in an era of increasing demand. It has not been affected by the absurd subsidy wars that have occurred in relation to wheat. In fact, the advisory committee has had the board do some work on looking at canola and how the Wheat Board could market it. This research indicates that it would benefit from the same expertise that the board has in marketing wheat. Studies would indicate that this means hundreds of millions of dollars in additional benefits to farmers because of the Wheat Board marketing system. It is for farmers to decide whether they agree with this and would like the board to market canola. Some Wheat Board opponents would try to create the impression that high prices for canola would disappear if it was marketed by the board. The indications we have are that the board could do a better job of marketing canola at a lower cost than what the open market system has done. Again, this is a matter for farmers to look at and to decide on their own -- whether it is inclusion or exclusion.
Senator Stratton: Concerning the inclusion-exclusion clause, when we talk about the potential of adding canola to the board's responsibilities, if you have, as Senator Sparrow pointed out, a certain level of distrust amongst farmers about the operation of the board, particularly as it is being structured, then you must gain a degree of trust. You are torn between a group that wants to do away with the board and a group that wants to maintain the board. Supposedly, this is a compromise.
In order to achieve a certain level of trust or the beginnings of trust with the board, surely it would be better not to have the inclusion-exclusion clause, simply on the fundamental basis of allowing for those individuals who do not want the board. They are afraid of the board. They are free traders, and they do not want anything to do with it. If you impose upon them the condition that was described this morning, namely, that you can add canola, that automatically raises their suspicion and mistrust. That is the nub of the issue.
Mr. Robert Ponto, Alberta Member, The Canadian Wheat Board Advisory Committee: The bottom line is that it would be the farmers themselves who would vote in favour of doing that, not the board of directors. It would only implement it after it was voted on.
Senator Stratton: For example, as Senator St. Germain mentioned, if you state that all farmers who produce all products would vote on including canola, where does that leave the guy who produces canola as his major crop? We are trying to look at a sense of balance. The farmers who grow wheat or something else that is marketed similarly say, "All right. We will throw in canola."
The problem with trust is fundamental to this issue. You say it is democratic. It is democratic to a degree, but it is the tyranny of the majority over the people who want to grow canola and sell it independently. They fear they will be controlled by the majority. You say, "Well, it is a democratic process." It certainly is, but who protects the minority rights of those canola growers? That is the fundamental issue here.
Mr. Macklin: As Bill C-4 currently stands on inclusion, one of the commodity groups, generally the canola growers or the flax growers, must trigger the process by requesting it. You then must have the minister in favour of it and then the board of directors in favour of it. You then must have a producer vote. In fact, you have quite a few hurdles to jump. The people who have generally been distrustful of the board control the trigger mechanism or the key to this whole process.
Even if producers voted overwhelmingly in favour of putting a crop under the Canadian Wheat Board, the minister still has discretionary powers as to whether the regulations will apply Parts III and IV to the act. There are quite a few hurdles in the current proposal which would protect the interests of those who do not want a crop under the board.
There are crops other than canola, but canola does have some price discovery mechanism in the Winnipeg commodity exchange and so on. Other crops like rye have no price discovery mechanism. Many producers of a crop like rye would like to see it handled by the Canadian Wheat Board.
We recognize the divisiveness of this issue of inclusion and exclusion. We feel that the amendment the minister made at the conclusion of second reading, which did not get put in, would alleviate some of the problems of those who distrust the proposal as it is in Bill C-4, as well as alleviating our concern that the exclusion part of the current legislation allows a board of directors and the minister to remove crops without a producer vote. We feel that Mr. Goodale's amendment would be an a positive change, protecting both those who are worried about inclusion and those of us who are worried about exclusion of grains that would be deemed to be not significant. We would strongly support the minister's amendment. We feel it is a positive amendment that would improve this legislation for both sides of the debate. We are very strong on that position.
Mr. Harder: There seems to be some misunderstanding because we said an "association". We are not necessarily saying that those who have never grown canola should vote. We would accept the fact that it would be canola growers who would vote. Just in case you do not know, of the 11 advisory members, probably 10 of us grow canola on our farms on a consistent basis.
Senator Stratton: How many of those want to put it on the board?
Mr. Harder: That is a question of personal choice. If half of them do not want to put it under the board, that is fine, but under the democratic process they should have the right to vote on it.
Senator Stratton: As long as it is the canola voters.
Senator Sparrow: Mr. Macklin, you stated that you have not grown canola because it is not under the Wheat Board. I think that is what I heard. Is that just a philosophical approach? It sounds to me unusual for a person who could get $8 a bushel for canola and $2.50 or $3 for wheat to say, "I am not going to take the $8." That is the message that came to me. You said you would not grow canola because it was not under the Wheat Board. Perhaps you could explain that to me.
In addition, you are talking about inclusion and exclusion. Parliament, through the minister and through the government, has the power to change that Wheat Board Act at any time it so desires. The existence or non-existence of the inclusion clause would not affect the minister's ability next month or next year to bring in legislation that would put canola under the Wheat Board. Parliament can do that. There is no question about that.
If there is such division out in the community, why not leave it to that process? If there is enough movement among those who produce canola once in five years, if that is the case, then there would be enough movement in that group to request the minister to do something. Politically, if he thought that it was beneficial to the producer and to the country, he would certainly trigger something. He could trigger a vote on his own as the minister, without legislation. If there was sufficient reason to change legislation to incorporate canola or any other product, then certainly he can do that. It seems to me we are dividing up the producers in Western Canada over something that is quite simple to adjust to make it a little more palatable to the whole community.
Mr. Macklin: On the personal question of why I do not grow very much canola, I would say that, to an extent, I take actions based on my philosophy, and that is part of it. Canola also takes more expensive chemicals for weed control, and I view it to be hard on the land. In the kind of rotation that I have on my farm and the way I want to care for my land, I do not grow canola very much. It is a little bit of a cultural practice and a little bit of philosophy. Quite often I wear my philosophy on my sleeve.
Senator Sparrow: At great cost.
Mr. Macklin: At some cost sometimes, but I am still farming, and I expect to be farming for a long time.
You make the point that the inclusion-exclusion clause is quite divisive in the farm community and that the government at any particular point in time has the power to change legislation. That is correct. We view the amendment that the minister suggested but which did not receive unanimous consent at second reading as accommodating what you are saying. It takes this debate on inclusion and exclusion out of the realm of the board of directors. It would be very divisive for that board of directors, and it would also be very divisive in the election of the board of directors. It takes it away from that and puts it back in the political realm between farm groups and the government. That is where it ought to be.
We think that the amendment suggested by the minister accommodates what you are saying, and that is why we support it.
Senator Sparrow: Could we take out, then, that the minister has the power in that particular case as well? If we are incorporating it in the total concept of he can bring it in at any time anyway through the parliamentary process, then take it out so it does not affect anyone. It takes out his power, or at least you do not restrict his power to not have it there.
Mr. Macklin: My understanding of the amendment that was put forward by Mr. Goodale was that all changes to Wheat Board jurisdiction would require a producer vote. That clearly puts the power in the hands of the producers.
Senator Fairbairn:I am quite sure as our committee moves across the West that what we have been discussing in the last few minutes will be a major part of the discussion, whether we like it or not. Your brief is quite clear on what you would consider to be an achievable proposition.
On the question of who votes, whether it would be all farmers or, as in the barley vote, just the group on the commodity in question, how would you see that decision being made? By the minister? By the board? What would be your guidance to the minister on this?
Mr. Macklin: I would have to check the act, but I understand at this point in time that the regulations for an election like that would be the responsibility of the government.
Senator Fairbairn: Yes.
Mr. Macklin: It seems to me that that is the process. I believe that the recommendation coming from the advisory committee on this is that whoever votes in those kinds of decisions should be a producer of that particular crop. I think we were quite satisfied with the fairness of the recent barley vote where they said that if you have produced a crop in any of the last three or five years, whatever it happened to be, that in fact you have a right to vote. We would have no problem with that being the criterion for any of these votes. The affected producers are the ones who should make the decision.
Senator Fairbairn: Thank you.
Senator Hays: Would you not agree that the provision which gives the government authority to make regulations is fairly straightforward? To trigger an inclusion process, there must be a written request by an association, the members of which are producers of the grain in the designated area.
Mr. Macklin: I think the provisions of the current proposed amendments are clear. What is not clear, and what will cause much divisiveness in Western Canada, is the credibility of the organizations that claim to speak for particular crops. Does the Alberta Barley Commission speak for barley growers in Alberta by virtue of the fact that takes a check-off from us all and gets perhaps five or ten people to its district meetings? Does the canola growers association, which is also funded by a check-off, speak for canola producers? I can see pro-board and anti-board groups creating a multitude of farm organizations which purport to speak for the growers of particular products and which want to trigger an inclusion or an exclusion.
The minister's proposal eliminates that and puts it back to a simple vote of affected producers. The triggering of the mechanism is then a political process between the current farm groups and the government, which is where that discussion should be.
If this goes through the way it currently stands, there will be a scrap between pro-board and anti-board people in the election of directors. It will be a highly politicized board of directors while it should be a board of directors concentrating on running a $6 billion business.
That is why we are supportive of the minister's amendment. We think it puts the responsibility back in the political realm and that, at the end of the day, the producers whose livelihoods will be affected by this decision will be the ones who vote.
Senator St. Germain: Would the Wheat Board be under any threat if it did not have the inclusion factor? We are experiencing changing markets throughout the entire world. Many companies are changing their strategies for maintaining their positions in the world markets. Do you feel that your organization would be threatened if the inclusion aspect were not part of it, due to changing crops, et cetera?
Mr. Macklin: I do not think inclusion threatens the current existence of the Canadian Wheat Board. Under the exclusion clause, a vote is not required on grains which the board deems to be not significant. That, I think, would pose a threat to the current powers and mandate of the Wheat Board, and that would concern us.
There are other factors which we believe pose a serious threat to the continued existence of the Canadian Wheat Board as the single-desk selling agency and pooling agent on behalf of farmers. Many foreign transnationals have recently entered the Canadian grain sector, almost in anticipation of the demise of the powers of the Canadian Wheat Board, and that concerns us. I think that the pressures which will be put on the Canadian Wheat Board through the next round of the WTO are a real threat. Other problems for the Wheat Board are the changes in transportation regulations and the pressure to make it a port buyer instead of being involved in the logistics of transportation from the country through to the port. I do not think that the inclusion clause itself poses a threat to the current existence of the Wheat Board, but the exclusion clause certainly does.
The Chairman: On your point of multinational corporations coming in, I see that as being both a positive and a negative. Archer Daniel Midland has bought 48 or 49 per cent of the shares of United Grain Growers. Yesterday I learned that United Grain Growers has bought out Pioneer at Stoughton, Saskatchewan, which is a fairly large elevator system. There is now a big yellow elevator with "United Grain Growers" on it. In Saskatchewan, ConAgra built three major plants that can load 100 cars in eight hours. Louis Dreyfus Canadian, a French company, is going to build three plants in Saskatchewan. The Saskatchewan Wheat Pool is building a new plant in Northgate, North Dakota. The Alberta Wheat Pool built one in Montana. We have a changing industry. I and many other farmers see that as being very positive, because it gives farmers an outlet to the global market. Those companies would not make that kind of investment in Canada if they did not believe in the farmers.
This gives the minister some great challenges. I sympathize with him because there must be changes to accommodate this. There seems to be two extremely opposed groups, and there will have to be some changes in order to give farmers the opportunity to get into the global market and realize the benefits that are ours due to the fact that we can produce the best grain in the world.
I think we are blowing the problem with the inclusion clause way out of proportion. I wonder why we even have it at all.
Mr. Macklin: I would agree that the inclusion clause is blown way out of proportion. Frankly, the minister's amendment would put it back into proportion and put the responsibility where it should be, with the farmers in a vote on either inclusions or exclusions. It would put the whole discussion back into the political process between current farm groups and the government, and leave it at that.
On your point about the entrance of transnationals into the Canadian grain industry, the Canadian Wheat Board sells, on behalf of Western Canadian farmers, the wealth that farmers produce in wheat and barley, which amounts to about $6 billion a year. I believe the clerk has distributed to you a pie chart which makes my point. The Canadian Wheat Board returns to producers 97.44 per cent of total sale proceeds. There is no profit taken by the institution. The Wheat Board operates as efficiently as it can and maximizes the returns globally in 70 countries. It does a wonderful job of promoting Canada and returns 97.44 per cent to the producers.
ConAgra and ADM have not come into Canada to return 97.44 per cent to producers. They have come in because they see that the Wheat Board may be under threat and that there is an opportunity for them to get a substantial cut of the $6 billion wealth that we producers create. I am not opposed to these others coming in and providing service. However, if we lose the Wheat Board and they become the middle man, buying our grain and selling it to create profits for their shareholders, we will not see 97.44 per cent of the proceeds coming back to the farm community.
Mr. Harder: I have to get into this one because they talk a lot about trust and reputation.
We talk about a credibility issue for the Wheat Board, but it always surprises me that no one ever talks about the credibility of the Winnipeg Commodity Exchange. There have been many scandals there in recent history with circle trading and canola futures. We do not worry about what these guys get paid. We do not have any famous MPs here in Ottawa wanting to investigate their salaries. That group has had much less credibility than the Wheat Board. We have never had any scandals like that at the board.
We talk about ADM and ConAgra. ADM just paid the largest fine in U.S. history for price fixing. I believe it was $100 million. ConAgra was fined $10 million for adding a little bit of water to soybeans. They did not share that increased productivity with the producer. We are talking about how credible and nice these guys are and that they will be the saviour for Western Canadian farmers, and frankly it gets me angry when we support those kinds of things.
The Chairman: On that point, where does the Wheat Board sell most of the grain?
Mr. Harder: It sells to 70 different countries.
The Chairman: Through whom?
Mr. Macklin: Some are direct sales. Some are through accredited exporters who work as agents on behalf of the Canadian Wheat Board under the regulations and the authority of the Canadian Wheat Board Act and the Canada Grain Act.
The Chairman: Are you telling me they would sell no grain to Cargill, ADM, or ConAgra?
Mr. Macklin: Cargill, ADM, and ConAgra are acting as agents for the Canadian Wheat Board under the authority of the Canadian Wheat Board Act and under the quality controls established by the Canada Grain Act, but those acts are all under pressure.
Mr. Harder: The Wheat Board markets for farmers; it does not sell. It markets on behalf of farmers.
The Chairman: I will not argue with you on the terminology.
Senator St. Germain: I do not think any of us are saying anyone is any better than anyone else. We are trying to get clarification. That is what we are after. We want the best deal for Canadians. I am concerned that we would be remiss if we do not recognize the changes taking place globally, such as in the WTO and elsewhere. I am sure you are cognizant of this. I know what the ADMs and the Cargills are like. Cargill did not get big by giving stuff away.
Senator Rossiter: Something intrigues me: The information that I have says the Canadian Wheat Board definition of "producer" includes "any person entitled as landlord, vendor or mortgagee to the grain grown by an actual producer, or to any share therein." It would appear there are producers and then there are actual producers.
Mr. Harder: Yes.
Senator Rossiter: You would think technically anyone holding a mortgage would come under the definition of "producer" because it says "entitled as landlord...to the grain". Has that ever presented a problem? It has been there for some time, apparently.
Mr. Macklin: When considering eligibility to vote in an advisory committee election, if you are the owner of the property and renting it out to someone, you are what I think they call a "Suffix B" on the permit book. "Suffix A" relates to those people who are actually doing the operation. They may be the renter of the land, the tenant. Both are entitled to an interest in the grain. Therefore, both get a vote in the current advisory committee elections. No one has complained as producers that this is unfair. It has been generally accepted that the landlord and the actual operator both have a right to participate because they both have a financial interest.
Senator Rossiter: Is that not presuming that the landlord would be another farmer-producer who might not be using his land for that purpose at this time? What about someone who had bought the land? How does that work? Where does the book come into it?
Mr. Ponto: This can get quite complicated. It gets worked out, basically, at the time.
For example, in Alberta a year or two ago, there was a barley vote. You had to apply for a ballot, and they sent you an information package. You then signed an affidavit that you were a producer or that you were entitled to receive income from that particular crop.
Going back to what Mr. Macklin said, this thing with the mortgagees has not been a problem, and I do not foresee it being one.
Senator Rossiter: In the case of a family corporation of four people, would they all be entitled to vote because they would all be farmer-producers?
Mr. Ponto: With that particular vote in Alberta, I do have a family corporation, and the two shareholders, myself and my wife, were both allowed a vote.
Senator Rossiter: A family corporation that had, say, three sons, a son-in-law, and the big boss, would they have two votes?
Mr. Ponto: I think the criteria would depend on each individual vote, the regulations, and who was putting that vote on.
Senator Rossiter: I hope there would not be any in-fighting in the family.
Mr. Harder: They can vote differently. It happens.
Senator Hays: On the governance issues, you are concerned about the qualifying condition of being a farmer to be eligible to serve on the board. Does that apply to all 15 board positions?
Mr. Harder: No.
Mr. Macklin: No, just the elected ones.
Senator Hays: Even so, given the possible evolution of the Wheat Board to a more market-driven organization, is not that a necessary restriction? If someone is a good board member and is elected within the district they are designated to represent, is the fact they have retired from the farming business or perhaps are involved in an aspect of the grain business which does not see them farming the land not an unnecessary restriction?
Mr. Macklin: I certainly think there is merit in your comment. However, the distrust of the Canadian Wheat Board and the level of the relationship between the Canadian Wheat Board and farmers is a concern. In all of the discussion that has gone on around changes to the Canadian Wheat Board Act, farmers are of the understanding that they will be putting their representatives, farmers, on to this new, elected board.
I agree with you that many non-farmers or retired farmers could make a good contribution to a board of directors. However, it has been put forward politically that farmers will be in the driver's seat, and I think the expectation is that farmers will be the ones elected to this board of directors. Based on that, we suggest that it should be farmers. I believe that many farmers, who are actually bona fide producers, also have the ability and the skills to be good representatives on the board of directors. Your point is well taken, but given how the whole thing has evolved, we feel that it should be farmers.
The Chairman: Honourable senators and witnesses, I must slip away to get a budget so we can travel. I will ask Senator Hays to take the Chair for a while.
Hon. Dan Hays (Acting Chairman) in the Chair.
The Acting Chairman: Thank you for the answer. I will not debate it with you. I do observe that the people voting for the director in their district or however it is finally determined that that will take place will probably have reasonably good judgment. That is still my bias, notwithstanding your criticism.
I would like to revisit the issue you raised with respect to the politicization of the board. This bill, assuming it is passed in its present or an improved form, will not solve that problem. The issue still exists. Senator Stratton, with disarming honesty, has said that there are those who do not want the board and those who do want the board. Those who do not want the board sometimes say they do want the board, but a different board. I am not sure exactly what they mean by that, but I assume they mean essentially a privatization of the board. That is the dual marketing issue.
The government has had some difficulty, we have seen, in mediating or resolving this issue, and the debate becomes sharper and sharper. In fact, there is a bit of acrimony, by my observation, between these two interest groups. I do not know that any board will be able to escape becoming involved in that. Perhaps they should have responsibility for that. I know you question that, but I would like your further comment.
Mr. Harder: You said who should have responsibility for what?
The Acting Chairman: We have seen a vote on barley without a question on dual marketing. It is the classic question of where does the Wheat Board go from here. Some would like to see the board evolve in a different way than others. Some like the pooling aspect of the board's role; some do not. That political issue is articulated in different ways. Without getting into that, because there are many semantic nuances, the hard question is, do we have the pooling concept or not? If we do not have the pooling concept, who knows what the board might look like after that, but it would be very different than the one we have. If we do have the pooling concept, it will change, but it will look quite a bit like it looks today.
Who decides which path to take? This bill would turn that authority over to a board of directors, ten of whom are elected, eleven if you get your way, and five of whom are not. How do you take that job away from the board? You say they should be elected to run the board. Inevitably, when they seek office, they will become involved in this political issue. What is wrong with that?
Mr. Macklin: I think your observations are quite correct. The advisory committee's position we put to the House of Commons agriculture committee and which we have been advocating for over two years is that we do not like this structure of an elected board of directors because it would be, in our view, inevitably a very political kind of activity. The advisory committee elections have always been highly political. I do not see that these other ones will be much different. It is a hot issue in the Western farm community between those who support single-desk selling and price pooling and those who oppose it. The real issue is not so much the pooling as the single-desk selling, because it requires discipline in terms that everyone has to be in or else you have nothing. You either have a monopoly or you do not have a monopoly, period. There is no halfway measure. It will be hard to avoid politicizing the new board.
Our feeling was that if you removed the inclusion and exclusion from the board, that would help somewhat in terms of an election process. Our original proposal was to elect some sort of farmers' council, and then the farmers' council, along with the federal government, would appoint a small board of directors whose job it would be to run the board. That would have been a clearer separation of responsibilities than the structure under Bill C-4. We were not successful in the past two years in getting the ear of government to bring that into play, so we have before us this bill. It is our feeling that, yes, it will be difficult to avoid having hot political debates on this whole issue, but you have a responsibility here to run a $6 billion business in the interests of western Canadian farmers and the economy of Canada.
You will not avoid the divisiveness of the debate about the board. You might alleviate it somewhat by removing this inclusion-exclusion clause in the way it is written and by putting it in the form that Mr. Goodale had suggested in his amendment.
The Acting Chairman: My last question has to do with the government's appointment of the five members of the board "at pleasure" as opposed to "during good behaviour". You, as I understand it, would like those appointments to be made by the government from lists agreed to by the elected members.
I guess we all have reservations. I suppose mine were closer to the surface when I sat in opposition than they are now that I sit on the government side. The government has been appointing the commissioners through the years, and I have not heard many complaints about that as having created patronage problems. Correct me if I am wrong. Why are you worried about this?
Mr. Macklin: There are two aspects to this. One is who does the appointing, and the other is the criteria of the appointment. Under Bill C-4, the five appointed directors, including the CEO, will be appointed at pleasure. There is quite a difference between "at pleasure" and "on a term" or "good behaviour". The current commissioners are appointed on good behaviour. Once appointed, they have some independence and some ability to act on their best judgment without being fired or threatened to be fired by the government, and that makes a big difference in their ability to stand up to a government which may want to interfere in the operations of the organization. We are suggesting that it should not be an "at pleasure" appointment but a term appointment.
We feel that, to give more accountability to producers and to give them a greater feeling of ownership of this structure, having a consultation with the elected producers in terms of selecting these people would be a good thing. That could lead to ensuring that good quality people with the expertise and experience and knowledge that is necessary would be appointed to these positions. It would certainly alleviate our concerns of any danger of patronage appointments or appointments where, if the government changed, all of them can be fired at the drop of a hat. Governments in the past have blatantly made patronage political appointments which perhaps have not been the best. I am not referring to the commissioners at this point, but there have been well-publicized examples.
We just do not think that is appropriate for an organization which has as much influence on the western economy as does the Canadian Wheat Board.
Mr. Harder: Senator Hays, I must respond to some of your comments. You made an implication which may not have been intended. You said that this new world will be more market driven. The implication is that the Wheat Board is not market driven. I know you did not mean that; however, in case some people took it that way, I want to assure you the Wheat Board is probably more market-driven that any other group.
We have disagreed publicly with some of policy statements made by of the commissioners and with some of the staff people. It is a democratic process. However, there is no doubt in the mind of anyone on the advisory committee that the commissioners and all the staff know for whom they work and for what they work. Their objective is to pay the farmer as much as they can on the initial price and to sell high. That is diametrically different from the commodity exchange whose objective is to buy low and sell high.
No one can say the board is not in with the 1990s. We were there 60 years ago, 60 years ahead of our time. We hope we can stay there.
I respect your comments on governance. You told me once in Winnipeg that the Senate had done a study which indicated that the advisory committee needed to have a little more influence on who was appointed as commissioners and then we would not need to do all this changing. Essentially your position was the same as our position, but I think perhaps it was much too simple. The proposal was not complicated enough, so nobody bought it. That is all that was needed. Since then, we have spent millions of dollars travelling to Ottawa and achieving very little.
The Acting Chairman: The report of this committee was made when the current government was in office. Bill C-4 is taking the issue in the direction we suggested but more slowly and in a more awkward way than perhaps we might have seen had we started at the time of our report some years ago.
Thank you for clarifying the issue of market. I will not debate it.
Mr. Bill Nicholson, Manitoba Member, Canadian Wheat Board Advisory Committee: Mr. Chairman, the next section moves more into the operational field of the future Canadian Wheat Board.
Cash buying and the very broad provision in Bill C-4 for unrestricted cash buying or cash trading could signal a very dramatic change in direction for the operations of the Canadian Wheat Board. This is of great concern to us. This issue has the potential to create a conflict between the board and the farmers in the pool, farmers who sell for a cash price. It also has the potential to create inequities in distributing the benefits of the monopoly to all farmers. In that way, we feel it could very much undermine the farmers' support for the board.
We have repeatedly stated that we do not support this initiative. However, if it becomes law, we feel it is important that it be limited to the original suggested use. In 1994 and 1995, the board encountered difficulty sourcing feed barley, and cash trading was a suggested method of remedying that situation. If the board could have gone to the off-board domestic market and buy the required supplies in that situation, it could have prevented some losses and delays and allowed sales to go ahead.
Since that time, there have been some improvements made particularly in feed barley on tightening up contracts with farmers and in the ways that the board commits barley for sale. In fact, those systems probably would have prevented that problem from re-occurring anyway. In any event, we feel that it is important. Feed barley is the one area where this problem may re-occur. It is the only crop that requires cash trading provisions. It is not a problem in wheat or durum or malting barley. Because of the divisiveness that could be caused and the possible undermining of the principles of the Wheat Board, we feel it should be restricted only to feed barley.
We would request that the cash buying provision allow for forward-pricing contracts based on the pool return-out. This is a little different situation. There has been some indication that there may be a desire for this with other crops, but it does not bring in the inequity that could exist with cash trading where certain producers would receive far more than the pool price. That can do nothing but undermine the pooling system and the single-desk selling itself.
There is unanimous agreement among the advisory committee and the board itself that if cash trading was pursued on an ongoing, continuing basis, that the pooling system simply could not be sustained. These are not complementary systems. They cannot exist side by side. Eventually, pooling would be destroyed. The Wheat Board is something that is widely supported by farmers and should be maintained.
Bill C-4 also allows provisions for a shorter pooling period. This is really the same thing as cash trading. Taken to an extreme, you could have a pool that is one day long, which is really a cash price. These same risks can be brought to a head with shorter pooling periods. We are recommending that they not be permitted. In the case of feed barley, if it does become necessary to make a one-time entry into the market to buy barley on a cash basis, well, that can satisfy the problem in that particular grain.
The advisory committee also notes that Bill C-4 is very open-ended on its provisions for cash trading. It would allow the board to buy grain outside of Canada and market that. While an argument could be made that the board could make money doing that, we feel that the purpose of the board is to sell Canadian farmers' grain for Canadian farmers' benefit and that cash trading should be restricted to that activity. The authority to originate out-of-country grain should not be permitted.
Mr. Robert Ponton, Alberta Member, Canadian Wheat Board Advisory Committee: Mr. Chairman, this bill allows for the creation of a contingency fund to backstop for cash trading and to replace the government guarantee. We believe that the government should continue to guarantee the adjustments so that a fund is not required for that purpose. The government and the Canadian Wheat Board have significantly speeded up the approval for the increases in initial payments in recent years, and we do not think that it is giving up. For the time factor, it is not really worth the imposition of having a contingency fund.
We feel that this contingency fund at farmers' expense will infuriate producers, whether they support the CWB or not. It seems like we are plagued by check-offs. Maintaining the guarantee is very important.
One of the problems with pooling is that it does not allow for cash flow to come through as quickly as producers would like. They have to wait until later in the year, as I am sure you are aware. We feel that could be alleviated by an amendment to allow for a pool account equity advance. This would be a loan to producers against their equity in the final, realized pool. The proposal would ensure that farmers receive the full value of their equity and eliminate the need for pool cash-outs or producer certificates. It could be done with a loan agreement. If they got too much of an advance on that equity position, it would have to be paid back from subsequent pool accounts or whatever.
If the CWB wished to make forward price contracts available and to participate in cash buying outside the pool accounts, the risk of losses would be borne by those using the program rather than by a contingency fund established at the expense of all producers.
Mr. Macklin: This proposal to give a loan against the value that is in the final payments is, in our view, a very positive idea. It was put forward by the Canadian Wheat Board in their presentation to the House of Commons on Bill C-4. It would basically be an at-cost loan against the value of the final payment. It would take pressure off the Canadian Wheat Board in terms of that cash flow aspect.
The criticism has been that, when you sell to the Wheat Board, you get your initial payment, and then you wait 18 months to get your final payment. This would allow the Wheat Board to advance money against the value of that final payment perhaps nine months earlier in the crop year. The loan would probably be at just a fraction of a percentage interest above what the Wheat Board itself is paying, just enough to cover the risk factor and administration costs.
As a matter of fact, Mr. Nicholson and I met with some of the senior Wheat Board finance people yesterday to refresh our memories on this issue. It is very workable. It would be very simple. It would be far less complicated than the pool cash-out proposal. It would be less dangerous to producers who may lose their value if they go with these tradable producer certificates. Tradable producer certificates were used in the past, and they were discontinued because farmers did not know the value of them and it was possible to take advantage of the farmers.
Senator St. Germain: Is this basically a check-off system? Are you saying, with these certificates, that a farmer would have to make a loan?
Mr. Macklin: No, I had better explain this. If I deliver grain to the Canadian Wheat Board to sell on my behalf, I get an initial payment which is an advance against what the Wheat Board will eventually receive for that grain. That may represent 75 per cent of the sales value of that grain. There is 25 per cent of the value left in the pool account which I will get when the pool accounts are closed.
The criticism has been that, because of this system, some farmers who are in critical need of cash flow cannot get their money when they need it. The Wheat Board is proposing to give a loan against the value of that final 25 per cent. It would be, basically, an at-cost loan. It will allow producers who need that cash flow to access the money nine months earlier in the crop year. It is the producer's money that is tied up still in the pool account to which the producer would then have access.
Senator St. Germain: This bill proposes something else, does it not?
Mr. Macklin: This bill proposes an early pool cash-out or transferable producer certificates. The transferable producer certificates would allow a producer to sell that right, in exchange for the final pool return, to anyone who wanted to buy that. It is like a tax discount system.
Senator St. Germain: I understand.
Mr. Macklin: They had it in the past. They discontinued it because they found producers who were under financial pressure did not realize the value of that negotiable certificate and were, in fact, being ripped off by people who were in a position to do that.
This would remove that pressure. There would be no risk to the pool accounts. Farmers would receive their cash basically at cost. It would be a very simple program to administer. We think it is a very positive amendment that the Senate could put into this bill to allow for loans against the final payment.
The Acting Chairman: Can we have some explanation later about the history of the government guarantee in terms of when it has or has not been used?
Mr. Macklin: Sure. I also want to underline that contingency fund. The contingency fund is in the bill in order to provide the financial backstop for cash buying and for the loss of the government guarantee on the adjusted initial price.
Farmers do not like check-offs. If you want to get producers angry at the Canadian Wheat Board, establish a contingency fund and require that it be funded through a producer check-off. That will guarantee to make farmers pretty cranky with the whole Canadian Wheat Board structure.
The guarantees for the initial price under Bill C-4 and under these proposed amendments will continue to be with the federal government. Bear in mind that when the initial price is set at the start of a crop year, it is always set conservatively low. As sales are made and the pool accounts become more secure, the Wheat Board, in cooperation with the government -- basically it is the government that has taken the responsibility so far -- increases the initial price and gives money to the farmers against their value in the final pool return.
This bill proposes that the government will only guarantee the initial price and will not guarantee adjustments. To my understanding there has never been a deficit in the pool accounts caused by adjusted initial prices. Therefore, the government can guarantee these things without any cost to the government, but if the farmers are required to guarantee this adjusted initial price, we must create a fund and maintain that fund and that will require check-offs.
We would like the government to continue guaranteeing both the initial and the adjusted initial prices. Then we feel we would not be required to create this contingency fund, something which would be a very big issue with farmers.
If you put in place this loan system against the final payment, you would take that cash flow pressure off the Wheat Board and the government. We think those would be two positive changes and we would like to see the Senate consider them.
The Acting Chairman: Why can they not borrow against the certificate now with a bank? Is it prohibited? It puzzles me as to how a farmer would be prohibited from using that as security.
Mr. Macklin: I cannot give you a definitive answer. My impression is that it is not allowed under the Canadian Wheat Board Act. We had discussions with some of the senior finance people yesterday who said the act must be changed to accommodate this loan against the final payment. We do not claim to be legislative drafters so we have not identified the section and the terminology. We are hoping within Ottawa here there are people who can do that. We are talking about the principles and that is what we wanted to explain to the Senate.
Bill C-4 would be very divisive to the western farm community. It will directly affect the livelihood of Western Canadian farmers. It will affect the economy of Canada. There has been criticism that an eastern dominated government is imposing this on western farmers, so there are the issues of alienation and unity.
As a result of the importance of this issue and the controversy over it, we recommend that the government consider putting the final bill to a vote of western producers. I will say no more about that. Simply, we recommend that the government consider that for the reasons we have stated.
The advisory committee has looked at this bill in depth with Wheat Board staff. We have studied it as much as anyone, and we are very concerned about the damage that could be done to the board if Bill C-4 is passed as it stands by the House of Commons. The Senate has the opportunity to make some positive changes which will make this bill more acceptable to the farm community and will decrease its potential to undermine the price pooling and the government relationship. We respectfully request that you seriously consider our recommendations. We hope that you will return the bill to the House with some of the amendments that we have outlined.
Thank you very much for the opportunity to present this morning. If you have further questions, we will be happy to answer them. I again emphasize that ours was the unanimous presentation of all 11 advisory committee members.
Senator Stratton: You gave a good explanation of the contingency fund. Has the government ever explained to you why it wants a contingency fund?
Mr. Macklin: As you know, we submitted to Mr. Goodale a number of written questions at the end of October or beginning of November in an attempt to get some clarification on these issues. There has never been a written, definitive explanation given to us on why the government would want out of guaranteeing the adjustments to the initial price and would want to create the contingency fund. It is obvious that there must be some financial backstop if the government is not able to act as such on these guarantees.
Senator Stratton: Did you said that that has never been the case?
Mr. Macklin: There has never been a case of a loss.
Senator Stratton: So why have it?
Mr. Macklin: Exactly. That is why we think the Senate can amend this bill to make it far more acceptable to western Canadian farmers by ensuring that the government will continue to guarantee adjustments to the initial price.
Senator Stratton: Perhaps we should take a little water with the wine, as it were, with respect to the exclusion-inclusion clause, and perhaps we could convince the government to start the contingency fund small and put a cap on, because it will never be used. If a problem were perceived, we could remove the cap and increase the cash.
If we did this on the three issues on which you have been focusing, do you think we would remove some of the controversy so that the bill would be more palatable? Our greatest concern is the emotional, head-to-head debate that we have seen. Doing the things that you suggest will remove some of the anger. We are obviously going through an adjustment period, and it will take time to go through that. Perhaps we should try these modifications and see how it flies, because we can always come back. Would you agree with that?
Mr. Harder: You have asked us why the government is going this way and why we have never received a written explanation. We can only speculate that the Department of Finance would like to get this off their books, although it has not cost them anything. We can speculate that in World Trade Organization talks it would be a little easier for them. We can speculate that this would provide another tool to chip away at the Wheat Board. We worry about that.
We know from talking to Department of Finance people that they would like out. We assume it is obvious that in the last year the federal government guarantee has meant close to $80 million to the board and has essentially not cost the government a penny. It covered the entire administration costs of the Wheat Board, which was approximately $48 million. We do not think it is too much to ask the government to do that.
For the government to say that it does not want to have any responsibility for Western Canadian farmers is ludicrous. The Americans have not used export enhancement, but their domestic subsidies are up almost as much as their export subsidies have declined. European farmers receive almost $200 an acre subsidy on hard wheat and $300 an acre on durum. We think that this is only a very small thing the government can do for us. It is a win-win situation for all sides.
You asked whether, if the Crown agency status was left in the bill, it would make the bill more palatable. Yes, it would. Many of us would feel much come comfortable with that. That is a very critical part of the bill not necessarily addressed by all groups.
Senator St. Germain: I have been asked by Senator Gustafson to give some assistance on this although I am not currently a regular member of this committee.
I am confused as to why an amendment proposed by the minister responsible for the Wheat Board would not go through. Did the Department of Finance win the day against him?
Mr. Macklin: My understanding was that the inclusion-exclusion clause was creating much controversy in the House of Commons during second reading debate and the minister, at the 11th hour, proposed the amendment which is now before you. However, due to the timing, it required the unanimous consent of the House of Commons in order to be accepted at that time. Unanimous consent was not received and, therefore, it could not be considered.
However, it was put on the public table. We have studied that amendment closely and believe that it would be an improvement to the bill. We therefore suggest that the Senate use its authority to make that amendment.
Senator St. Germain: Do you believe that this amendment would be acceptable to opponents of the Canadian Wheat Board?
Mr. Macklin: I am not in a position to speak on their behalf. The advisory committee is very strongly in support of the principles of single-desk selling, price pooling for the Canadian Wheat Board. I would not claim to speak on behalf of the coalition groups that are opposed to Bill C-4 and opposed to the Wheat Board.
Senator St. Germain: If some of these amendments that you recommend go through, and with what is happening at the World Trade Organization and the various other negotiations, do you think that it would not put your particular organization in greater jeopardy?
Mr. Macklin: No, it would not. The discussion paper that was circulated in December by Mike Gifford, among a number of farm groups on the issues that will be dealt with at the next WTO round in 1999, discussed a number of the issues, and a number of these were pertinent to the Wheat Board. First, regarding the power as a state trading enterprise, it does not matter whether the Wheat Board is a Crown agency or mixed enterprise. If there is any legislation that gives it a marketing advantage, it is deemed to be a state trading enterprise. It does not really matter which way it is under Bill C-4, whether it is a Crown agency or a mixed enterprise, it is still as vulnerable to attack as a state trading enterprise.
A number of other issues, such as price pooling and the Wheat Board price discriminating in international markets, will be issues as long as there is the ability of the Canadian Wheat Board to price pool and discriminate between markets. It really is not going to make the Wheat Board more or less vulnerable, however these changes happen.
The concern we have is that many of the changes in Bill C-4 are going to undermine the ability of the Canadian Wheat Board to provide benefits to producers. They are going to cost producers more money. We may, over time, see the government withdraw from some of its guarantees because this opens the door to allow them to do that. They are not doing it right away but it opens the door to allow that to happen in the future. If, in fact, you undermine producer confidence in price pooling by engaging in cash trading, if you charge producers a check-off to fund the contingency fund, all of these things will contribute to less producer satisfaction with the job that the Wheat Board can do on their behalf. That is our concern.
We feel that if some of the amendments that we have suggested here are put in place, they will lessen the potential for damage, and it would be a far more acceptable bill to producers than if this bill is put through as it came out of the House of Commons.
Senator Hays: I have a question on cash trading. Your presentation anticipates presentations we will hear on the idea of a quarter of the wheat crop being released for cash trading. Your concern would be addressed if the Bill C-4 prevented that from happening. Why is the board not the best decision maker in determining whether or not that should happen?
Mr. Nicholson: Some of the proposals put forward for different scenarios for cash trading, in particular the 25 per cent cash pricing of wheat, bring up many difficulties. The proponents of these types of proposals seem to anticipate that the Canadian Wheat Board would simply go on producing a price forecast for an overall pooled price. They would then be able to look at that price and any time they see a price higher than that, it is an obvious signal to sell some wheat on a cash basis. Of course, the greater the extent to which this is done, the less reliability there is in the Wheat Board's pool return forecast.
Also there is a loss of markets, since the board at the same time would be selling at prices that may be far higher than posted U.S. elevator prices or Internet prices or whatever, but the individual farmer only sees that signal that there is a price higher than the pool price, which he decides to take. It could be costing him money, costing the board's pool accounts money, and, therefore, costing all farmers money. While it might be of short-term advantage for the few people who wanted to cash into it, it is not a long-term workable solution for pooling. In the end, the pooling system would suffer and could not be sustained.
That is why we have suggested that if any cash trading does take place, it be more or less on an emergency basis when needed to fulfil a sales commitment when, for whatever reason, the supplies cannot be procured through the pooling system. That has only happened in feed barley and we would expect that, if it were to recur, it would only do so in feed barley.
Mr. Ponto: You mentioned this 25 per cent. I think that has to do with more of an option of forward-pricing. The other reason that is in there is that producers want a little control over their expected returns. At this time of year perhaps they could forward-price against the returns that they would receive in the next year. The proposed legislation will allow for the Canadian Wheat Board to offer this option and under the board's proposal it would be based on a projected pool return outlook. You would be able to lock in a certain percentage of your crop against a projected pool return outlook based on today's information. That would be in there already.
You mention this issue of the 25 per cent. Was that the issue you heard about from the Western Canadian wheat growers?
Senator Hays: I know we are going to be hearing a representation when we travel suggesting basically -- if I could be as frank as Senator Stratton -- that a quarter of the wheat crop be released from the pooling or from the discipline of single-desk monopoly, and that this would be a good idea. I want to give you an opportunity to comment on that proposal. You seem to have anticipated it in part but you have not answered the question directly on why that is a bad idea and why the bill, as you believe it is presently structured, would allow the board that would come into existence if the legislation goes through to make a decision to do that. You are saying the bill should prevent them from being able to do that and I want you to clarify that.
Mr. Ponto: What we are saying here is that if a contingency fund is needed to back some of that, it should be paid for by the people who are using the program.
Mr. Macklin: Just to clarify a little bit, you are correct that we are anticipating a request for other uses for cash buying, and we are saying that, in our view, cash buying poses real threats to the continued existence and successful operation of a pooling system, and, therefore, it should only be used, as was suggested in its original purpose when the Wheat Board asked that this be included, to originate feed barley in extraordinary circumstances, as well as to provide for the option of forward-pricing some of the crop. However, forward-pricing is different from cash-selling a quarter of the wheat crop.
The fact of the matter is that you either have a monopoly or you do not have a monopoly. If you in fact release 25 per cent of the wheat crop to float around and compete against the 75 per cent of the wheat crop, you no longer have single-desk selling and you no longer can expect that you are going to get the benefits that come through single-desk selling. It is one way or the other. They are not complementary. You make your choice. You either have a monopoly or you do not have a monopoly.
Senator Hays: I understand. I will not pursue that. I have a couple of other questions. I think you have answered the question on the advance for this certificate that represents the final or adjusted payment.
Have you any comment on how that would relate to the advance payment for grain storage? Do you see it as part of that kind of initiative? That is an advance guaranteed by the government, secured by stored grain. You are talking about grain that is no longer in storage but is sold. There is value to it that is not determined, and you want to use it as security for a loan. Could that not be rolled into a program like the advance payment of grains, which is better than trading-in the certificate?
Again, I am not sure why the legislation or whether the way the board issues that certificate prevents it from being used as security for a loan.
Mr. Ponto: We are talking about two separate issues here: Tradable PCs and being able to get an advance on your equity. Taking this advance or loan on your equity would make the tradable PC's redundant, and that is what we would like to see. There is no reason a producer would use something that is discounted to take him right out of the pool when he could probably get that same amount on an advance loan.
Mr. Nicholson: If I understood, you were referring to the possibility of the cash advance program and this equity advance on the pool accounts being one program. I would point out a distinction there. The cash advance program is a payment considerably less than the full value of grain lent to farmers against the grain that they have stored on farm, which could be the entire crop. The equity advance on the pool account would be an advance on grain that has been sold. Any loan the farmer had received under the cash advance program would have been deducted at the time of sale. The equity advance program might be offered at a time when the farmer had only delivered half of his grain for the year, so it is an advance against different amounts of grain, and the other program would be accounted for.
Senator Hays: I understand. It is a way of helping grain farmers realize on unrealized value that they have either, because they have grain they cannot sell or chose not to sell, or because they have sold grain and are awaiting a final payment or an adjusted payment and would like to take advantage of that value in getting money in advance to continue operations. You do not agree that they should be related to one another, and that is good.
Mr. Macklin: They are distinctly different programs. The government program for cash advances is applicable to all crops in all regions of Canada. It is one piece of legislation. It is a separate piece of legislation. This would be operating under the Canadian Wheat Board Act. It would be specific to the Canadian Wheat Board, and it would be specific to grains the Wheat Board handles. If, in fact, this amendment could be put into Bill C-4, it will facilitate better cash flow, and it will be a far simpler program to administer for the Wheat Board than if we have the pool cash-outs or the transferable producer certificates. We think that it is just far more simple, far less risk, and is specific to the Wheat Board Act.
Senator Hays: My last question is on the contingency fund. I understand you do not like it. I do not like it as a farmer, either. However, the government is in sort of a different mode than it has been at certain times in the past. It does not want to take as much risk, and it wants to ensure that, in terms of its pursuit of fiscal responsibility, it has the means of being whole at the end of any particular day. That is my understanding of the reason for the contingency fund requirement.
I suppose another approach might be to charge future returns on grain accounts with any shortfall that might have occurred as a result of the government guaranteeing. The situation as we have it now is that the government simply takes the loss, and the people who have received the final payment benefit because the government does not require a repayment of that.
If the government did require a repayment and charged future pools or charged individuals, would that be a better approach than anticipating in advance through development of a contingency fund a way of making themselves whole at the end of the day if there is a loss on an account? Do you like it the way it is?
Mr. Macklin: Western Canadian farmers bear substantial risk from a number of factors -- weather, markets and government policy of competing countries. There have been only a couple of losses to the pool accounts over the entire history of the Canadian Wheat Board. Those losses in most cases were caused by the government policy of our competitors -- for example, the U.S. with their Export Enhancement Program where you could not predict that they would put on such a huge export enhancement bonus and therefore drop the world prices.
If farmers must take all the risk on all aspects against competing foreign governments, we think that is a little unreasonable. Given the history of the pool accounts, the financial responsibility of the Canadian Wheat Board, and the fact that there has never been a loss on the pool accounts on adjusted initial prices, we think it is entirely reasonable for the federal government to continue those guarantees. We think it is quite unreasonable of them to expect that farmers will have to pay a checkoff. The only figures we have been able to get on this suggest the possibility that this fund could be as high as $600 million and that you could be looking at $1-a-tonne or $5-a-tonne checkoffs to build it up. This will be a real cash flow on producers and will not endear the Wheat Board or the federal government to Western Canadian farmers.
Senator Hays: That is why I am suggesting that there be no contingency fund, but that there be a future charge made to those who receive either an initial payment or an adjusted payment where there is a shortfall. Do all of the same arguments apply?
Mr. Macklin: If we put legislation in place that allows for loans against the final, realized price, that will alleviate some of the cash flow pressure. The government and the Wheat Board could continue being quite cautious and conservative in setting initial prices and adjusted initial prices because farmers will be able to realize a loan against the value that is there. In fact, if the loan they receive is more than the value, there are mechanisms whereby that money can be recouped in future years by future deliveries to the pools.
We do not see a need for a contingency fund, and we think the government should take some responsibility for a bit of this risk in the international market when we all recognize that wheat is political and that foreign governments, regardless of trade agreements, will support the producers in their countries for their own domestic reasons.
Senator St. Germain: There is an initial payment, an adjusted initial payment, and the final payment. Is that it?
Mr. Harder: An initial payment is always set at the beginning of the crop year. It is usually quite conservative. The amount of adjustment payments is entirely related to what the market will do during the year.
Two years ago when wheat prices were up, we had a record of adjustment price. We were getting these cheques in the mail all the time. Wheat prices were going up, and the board reacted very quickly. We must have had three or four adjustments that particular year.
One of the benefits that the producer has, on the other hand, is once the initial price is set -- and that is why it is so conservative -- it can never go down. It can only go one way, and that is up. The initial price is there, and that is our guarantee.
The Chairman: I have one question on the contingency fund. I asked a question in the Senate as to amounts owing to the Canadian Wheat Board, and I got a very prompt answer two weeks ago. The amount is $6.6 billion. If the farmers were forced to pick that up, that represents a whole year's crop.
We have gone through the freight rate debate. We have had other pressures as well. That is why there is this nervousness, in my opinion, about the contingency fund, because it is a beginning.
I read last night about the Australian Wheat Board and how they are dealing with their contingency fund, which seems to be a prototype of what I see coming here. Do you have any comments on that?
Mr. Macklin: First, on the international debt owed to the Canadian Wheat Board, that debt is guaranteed by the Government of Canada. It was authorized under the authority of the Government of Canada in many cases for foreign policy reasons more than maybe market reasons. As I understand it, that program is available to exporters of many products in Canada, where the government picks up some of the risk in selling to various countries. I assume that would be the same for atomic energy in Canada, as well as wheat and many other products.
As producers, because we have the federal government guarantees for the borrowings of the Canadian Wheat Board, and because the Canadian Wheat Board receives the interest on those debts from countries such as Poland and Russia, there is a positive difference that goes into the pool accounts. Last year it was $79 million. That is a benefit Western Canadian farmers receive because of the connection we have with the government and the government credit rating. We recognize that as a significant benefit, and we want to continue that relationship. We think it is beneficial to producers and Canada.
When competitors like the U.S. are prepared to give export credit, sometimes on far more favourable terms than Canada, if we want to be in the market, the Government of Canada must make the conditions possible for that to happen.
You mentioned the contingency fund in Australia. They call it a wheat industry fund. It has a value of about 500 million or 600 million Australian dollars. It is used not only to guarantee some of their cash trading and payment proposals, but it is also used as a market development investment fund.
When the Canadian Wheat Board put forward to the government over two years ago some of the changes they would like to see to the act, their proposal was to have a fund that could be used for market development purposes, possibly, for example, going into a foreign country and putting facilities into a flour mill to help develop a market for Canadian wheat. This bill does not allow for that to happen. This bill only allows for the off-loading of government risk on to farmers. That is the purpose of the contingency fund.
The cost to government is very small. There is some risk. If farmers have to directly bear that risk, the cost to farmers will be quite great.
Senator St. Germain: Mr. Harder said that on three occasions the government has had to pay. Do you know what those amounts are?
Mr. Harder: No. I know one of them had to do with the U.S., which was the most recent one. It was during the time Charlie Mayer was the minister. There were flogging wheat below world prices.
I have to say that there was never any interference from the government, and the board kept on marketing into those markets. I do not recall the other occasions.
Mr. Macklin: One of the occasions was when the commodity of oats was taken off the board with no notice. The board was left with unsold stocks and no longer had single-desk selling. Therefore, it could no longer capture premiums, which disrupted the planning process. There was a loss on the oats pool in that year. I believe the other one was related to subsidy programs, and I am not sure of the third one.
The Chairman: What happened to the price of oats?
Mr. Harder: It went down.
The Chairman: Not on my farm.
The action of the Ontario Wheat Board in the last two weeks now allows a farmer in Ontario to market his wheat directly into the United States. He may have to get a piece of paper from the Canadian Wheat Board, but western farmers are asking where the fairness is in this situation.
Mr. Macklin: I did not have the opportunity to attend the March 4-5 meeting of the Ontario Wheat Producers Marketing Barred, but I did get a report on the happenings there.
As an advisory committee, we have not made any statements or comments about this because many details need to be understood before assumptions can be made as to what happened.
As I understand it, the Ontario producer will be able to make a decision as to whether they participate with the Wheat Board and participate in domestic sales to domestic producers, which is the big part of the market, or whether they want access to the U.S. market and be excluded from the pool process in the domestic market. This will pertain to winter wheat. They must make the decision on winter wheat in November, which is about a month after they plant it, and it will be for the coming crop year. It is not just a matter of choosing either market. They must make a choice and stick with it. They will be excluded from the domestic market, which is the market where most of the premiums are achieved.
The Chairman: It raises the subject of choice to producers of durum wheat on the Prairies, especially along the border, for instance, where there has been a high price premium in the United States.
Mr. Macklin: I agree that there will be political ramifications of the decision made by the delegates to the Ontario Wheat Producers Marketing Board. I am not familiar with the mechanisms that the Canadian Wheat Board and the Ontario Wheat Producers Marketing Board may have to work out in order to handle the issue of export permits. Until we see how that mechanism can be made workable, I do not wish to comment too much about what about happen there. I am not familiar with that at this point.
The Chairman: My understanding is that it will only require a licence from the Canadian Wheat Board. In fact, the Ontario Wheat Board has opened the door to it.
Mr. Macklin: Again, we will have so see what the mechanics are in this situation because it is too early to comment definitively on how it will be done.
Senator Hays: Senator Gustafson, our chairman, farms near Macoun and prices grain there regularly. He also prices at Crosby, North Dakota, and the prices are always higher in Crosby. Why does the Wheat Board not sell all their durum wheat into Crosby? I do not know what their capacity is, but it is obvious that the price is higher at that delivery point. Perhaps you could comment on that.
Mr. Macklin: I am not an expert on pricing. However, I listen very carefully to what the Wheat Board officials tell us at our regular monthly meetings. I believe they give us good, straight information. I have never found any contradictions over the years in the information they give us.
Our understanding is that the Canadian Wheat Board marketing staff monitor prices all over the world and direct the product to the market that will give the greatest net return, considering transportation costs and the market price. At times, the U.S. market is not the attractive market. Saudi Arabia may be the attractive market for feed barley at a particular point in time, and at other times it is the Pacific Northwest.
The U.S. is generally an attractive market for Canadian durum wheat, but there are many times when the supplies we have are better sold to Algeria. The U.S. market for one reason or another may be higher than the Crow, but it may not be the best market. Farmers do not see the total world situation generally; they see what is on their farm and what is across the line.
The Wheat Board has done much spot checking on U.S. prices. Frankly, what is posted in a U.S. elevator for durum may be quite different from what the producer will actually receive if they take a truckload across the line and deliver it. In some cases smoke and mirrors are pervasive in these so-called prices across the line.
Senator Hays: Farmers and parliamentarians owe you a debt of thanks for your efforts on behalf of the people you represent. You are elected and do not receive much compensation for your efforts. It is somewhat like being a politician. I am sure you receive a significant amount of criticism from some quarters.
You have given a good answer, but I should like to know when you are advising the Wheat Board whether you are drawing attention to the fact that they do not always seem to pick the highest price.
The Chairman: On the durum wheat situation, there is first-hand experience from farmers who have a certificate from the Wheat Board to deliver it across the line. My son delivered some across the line. I said whatever you do, do it legally, and he did. At that time, I believe durum wheat was running at about $7. He gets a cheque for $7 a bushel, mails it back to the Wheat Board, and they mail him a cheque for $3 and some cents. He said that was the last time he would do that. The indication was that the rest of the money will go to the pool. Of course, the pool comes out and you probably get about $1 a bushel. That is why there is some concern.
I did some research through the Library of Parliament on durum wheat. I happen to think that durum wheat will be an important crop to grow. Algeria is the first largest buyer; Italy is the second largest buyer; and the U.S. is the third largest buyer.
However, the important factor is that all of these countries have money. One of the problems we are having in the hard wheat area is that many of the countries buying the hard wheat do not have any money to buy the grain. I think that is a major challenge.
Most durum wheat, because of the climate, is grown right along the 49th parallel.
Mr. Macklin: Up until the last several years, much of the world trade in hard wheat has been in cash. With the recent instability in Asian money markets, we will see a reversion to more credit sales because some of these countries will have a hard time coming up with the cash. A high percentage of business in recent years has been conducted on a cash basis.
In terms of production, Canada and the U.S. are the major durum wheat producers in the world. Between them, they probably control 70 per cent of the world export of durum wheat. If we could get some cooperation there, we might be able to do something to the mutual advantage of both Canadian and American producers.
Mr. Harder: The governor of North Dakota suggested we market durum wheat jointly. I think there was a paper out on that.
When you mentioned that some of the other countries we sell the wheat to are financially not secure, that only emphasizes the fact of board marketing. Farmers seem to think that if they have their own marketing, they will always sell to the people who have the cash and other farmers will do the rest. That only signifies the importance of board marketing.
We too have an elevator in North Dakota that is always quoting prices that are much higher than its American counterparts. We ask them why they do that, and they say that they get many phone calls and they find out who has the grain out there. That is a marketing tool for that elevator company.
Regarding the buy-back price, when the board was criticized so heavily in 1993, I know a producer who went through all the motions of buying through the board. He got a Wheat Board payment and did very well.
On the durum wheat issue, producers have faired quite well in the last year through the Canadian Wheat Board, and they will continue to do so.
Mr. Macklin: We are not here as an advisory committee defending the Canadian Wheat Board. If the Canadian Wheat Board cannot deliver the benefits that we as producers have traditionally received over the years, I will be the first one to criticize them.
Our discussion on these issues is from the point of view of what will be good in our farm communities and on our farms and what will be good for western Canadian producers.
Currently, the Wheat Board, in our view, has been able to deliver significant benefits. Our concern with this bill, if it passes the way it came out of the House of Commons, is its ability to deliver those benefits will be diminished. We would like the Senate to make changes so the Wheat Board legislation, when it is finally passed, will continue to deliver the kind of premiums and fairness to the western farm community that we have had and enjoyed in the past.
The Chairman: That is a very fair statement.
There are very few farmers who do not support the Wheat Board. However, most farmers or many of them want more choices from the Wheat Board. That is where the difference lies. Will we have more choices or will we not? Will we be able to meet the future and the challenges out there in the global market?
I can count on my hands the number of farmers who would say, "I do not want the Canadian Wheat Board," but they do want more choices.
I wish to thank you for an in-depth presentation this morning. On behalf of all senators, thank you for being here. We have your presentation, and it will be tabled with our clerk.
Mr. Macklin: On behalf of the advisory committee, we very much appreciate the opportunity to make this presentation and wish you well in your deliberations and hearings out west.
The Chairman: Our next witness is Mr. Philip de Kemp.
Welcome. Please proceed.
Mr. Philip de Kemp, President, Malting Industry Association of Canada: Thank you very much, Mr. Chairman. I am pleased to appear before you today. Our industry is on the value-added side of production. The last time we appeared before the Agriculture Committee, we appeared with witnesses from the baking industry, the flour milling industry and the pasta industry. We all had the same concerns and were allotted 20 minutes for our presentation, including the question and answer period.
The second time we appeared was after the election. With us that time was the Canadian Oilseed Processors Association. We had about an hour between us and the inclusion-exclusion subject took up most of the question and answer period.
I am appearing today for the malting industry, but the issues I will be talking about have been raised previously by other value-added industry representatives.
There are two things which we wish to put forward for consideration, and I do not think we are being at all frivolous. It only makes sense to have checks and balances within the system, or a recognition of the inherent benefits of the value-added side, particularly in the case of malting.
We want to talk about things which we believe are extremely important and absolutely necessary in order to reflect and, more important, recognize what I believe is a general natural consensus of the need to foster and expand value-added food processing.
Throughout the years, we have all heard of the importance of value-added processing to the economy and also to producers. By extension, what we have seen in the last four years makes our industry extremely nervous, particularly because we are not sure whether the winds will change, be it with regard to barley marketing or governance issues. There does not seem to be a great deal of security in the final outcome.
The malting industry in Canada is made up of four companies: Canada Malting, which has operations in Calgary, Thunder Bay and Montreal; Prairie Malt in Biggar, Saskatchewan; Dominion Malting in Winnipeg; and Westcan, an operation which has been in existence for about three years in Alex, Alberta.
Until about a year ago, a good portion of the industry was Canadian owned. That has now has changed significantly. Canada Malt was the largest malting company in the world. It is now 50 per cent owned by ConAgra and 50 per cent by Tiger Oats, a brewing company in South Africa. Westcan is now owned by Rahr, a malting company in the United States. Dominion in Winnipeg is shared equally between ADM and a Japanese company. Prairie Malt was owned 51 per cent by Schrier of the United States, 45 per cent by the Saskatchewan Wheat Pool and the remainder by the employees. A 51 per cent interest has recently been purchased by Cargill, which came as a big surprise to everyone.
Senator Rossiter: Who owns the rest of Prairie Malt?
Mr. de Kemp: Cargill owns 51 per cent, Saskatchewan Wheat Pool owns about 44 per cent, and the remainder is owned by the employees.
Currently, 70 per cent of all the barley grown in Western Canada is of malting barley varieties; that is, barley that can be made into malt and sold either domestically or internationally to beer makers. What cannot be used for malting due to the high standards of our customers is used for feed.
I heard much discussion this morning about marketing. Our industry has always maintained that you are either in or out; that barley stays completely within the board or is completely out of it. Continental does not work. If we have an overabundance of malting barley, we could sell it to someone else. You cannot visually distinguish between malting barley and feed barley. If we do not buy it, it is simply that we cannot use any more of it. It can still be used.
Therefore, if we got in a dual market system, the product could go south of the border at feed prices, be malted, and then moved offshore to our customers.
The Chairman: What percentage of the total production of barley do you buy for malt?
Mr. de Kemp: About 12.5 million tonnes of barley is currently grown in Western Canada. Of that, about 2.2 million tonnes is selected as malting barley. Of that 2.2 million tonnes, we buy over 1 million tonnes. About 45 per cent of that is used domestically. The majority goes to export customers. The Saskatchewan Wheat Pool has developed six-row barley to go under contract to Coors and Anhauser-Busch in the United States. The other 600,000 is bought by the board. We buy about 40 per cent. I hesitate to guess what amount the board markets itself, but I would say that 80 to 90 per cent goes to one customer only, that being China.
Ideally, we could handle much more. In export performance, the industry has put its money where its mouth is in the last ten years. Ten years ago, we were only exporting about 40,000 tonnes. Since then, we have spent close to $300 million on new plants, plant capacity expansions, et cetera, and we are now exporting 600,000 tonnes. We are now the second largest exporter of malt in the world, next only to the European Union.
Senator St. Germain: What is the difference in price between malting barley and feed barley?
Mr. de Kemp: It could be from $60 to $100 per tonne in a given year. In many cases, the barley is good enough to be used for malt, but we cannot purchase it because of lack of capacity. That is why we have been increasing capacities. There are occasions when, if we could make the decisions quickly with the cooperation of the board; that is, ensuring that we have competitive prices on a timely basis, we could take advantage of that. That is part of the reason I am here today.
The Wheat Board Act is one of the strongest pieces of legislation ever written by the Government of Canada. It has withstood the test of time for 60 years. When the act first came in, section 7.1 said that the board shall sell and dispose of grain acquired by it for such prices as it considers reasonable with the object of promoting the sale of grain produced in Canada in world markets. Sixty years ago there was no value added; there were no flour exports or malt exports. It was basically a domestic industry.
We believe that there should now be recognition of the importance of value-added in generating economic spin-offs and that more grain should be sold in value-added form. We are trying to convince the Department of Agriculture to recognize value-added in the legislation with wording to say that it would be sold for prices that are considered reasonable and competitive. Our objective is not only the promotion of the sale of grain. Because we have to buy from the board, inherently, we cannot sell offshore unless we get a competitive price for it.
There are two issues that we would like to put forward for consideration. That is all we are asking for in the first instance. Without the ability to continue to work with the board on that issue, it will not happen. Sitting here today, I got a little nervous about a few of the things I heard from the Wheat Board Advisory Committee. This pertains to the second thing that we included in our document, something which was not there 48 hours ago. There is good reason for that, but it is there now. It was part of the original presentations we made to the House of Commons committee on agriculture dealing with governance and accountability.
All along, the value-added industry, certainly the malting industry, has said: Look, we have worked pretty closely on this, but when we see the legislation, it does not inspire any confidence for those companies. It makes no difference if they are Canadian companies. Some people have issues against multi-nationals. If there is an ability to have a producer-controlled majority on the board -- and that is fine, it is their operation -- there must be a balance at some point.
I wrote down these words; if I heard them once I heard them a dozen times: The Wheat Board is there to maximize returns to producers. Nowhere does the proposed legislation state that, ever. If you look at the history of the board, the board is there for a good reason -- for pooling, to allow all farmers the ability to benefit collectively and equally in opportunities across all three prairie provinces.
I heard the word "premiums" today many times. I have heard that perhaps we should get together with the U.S. to discuss durum to see if we can get a better price. That does not sound like an ability to be competitive. It sounds like a monopolistic position to almost extort higher prices.
That is where I get nervous. Certainly the industry and the CEOs do it. Accountability is great, but what if at some point it affects the ability to be competitive. What if, for some reason, the board of directors gets involved in the day-to-day operations of pricing? They have no experience there nor on determining marketing or values, nor basically in how trade is done and how the business is developed. What if they give an edict to the board saying, no matter what the price is, that they must get a certain price because world prices are dropping and they want this price or nothing?
We get a little nervous on that issue, certainly. There are many examples I can give not only from our industry, but in others areas where that has happened in the past.
With governance and accountability, we are simply saying that we need -- and we have heard no one give a reason for opposition to this -- an arbitration body or an ombudsman for processing companies, be they in the flour milling or baking or pasta arenas. They need a body that can address any direction which affects their ability to compete. Much of our product goes export so we need recourse to get some answers if a certain negative course is being taken and to discuss alleviation or accommodation. This legislation does not allow us to do that.
In the past, if we had concerns, we could talk to the department or to the minister. There could be some moral suasion to go back to the commissioners and ask what is really going on. We will not have that in the future.
I have known Mr. Macklin for a long time. He said this morning they would like to get rid of the CEO from the board and add an eleventh farmer. That may be because there are splits even within the farm group. We have seen how politicized are the farming community and the advisory committee.
They want to ensure that they could agree amongst themselves and rubber-stamp and approve the appointees on the non-farmer side. Our industry and everyone else has been lobbying to say that we need a voice at that table, if that situation evolves. Our members are experienced in marketing, in legal issues, and in managing huge multi-million dollar corporations.
That conflicts with Mr. Macklin's comment that the farmers want to ensure that the appointees are right for the job and have the experience for it. Do farmers have the experience in managing legal issues and multi-million dollar corporations and in marketing? We get nervous when we hear that. We have no problem with the majority provided there is an ability at least to talk to someone.
When supply management first came into effect many years ago, there was a recognized concern on the part of the federal government that much power was being given to supply-managed producer groups. If any discrepancies arose, whether in quotas or pricing, processors would at least have the ability to have some review. Federally, we had the National Farm Products Marketing Council. The producers may not get what they want, but there was an ability to have things reviewed on a quick and timely basis.
Provincially, the only body of dispute resolution is in the Province of Ontario with the Farm Products Appeals Tribunal. If a discrepancy arises between a commodity group, particularly a monopoly group and a processor, the tribunal is available.
With the Wheat Board legislation, that review ability is not there, whatsoever. We were concerned to hear today, regarding governance and accountability, that the advisory board members even have a problem with Orders in Council. They do not want the government to use an Order in Council to respond if they do not like a certain direction taken by the directors. That tells me the Wheat Board legislation is extremely powerful. It has withstood the test of time, including many court actions. Where alternatives does our industry have? Where does a minority group go? Where do we go for help if they say it is their way or the highway?
That is all we have been requesting. It has been explained to us over the last two years, in writing, too, but there are conflicts. The Department of Agriculture, in giving advice to the minister, says that we do have recourse because the Minister can direct the board if he sees fit. That was in a letter dated about one week ago. Then we pull out from the files a letter from the department dated six months ago stating that is not the case, that the minster cannot direct anyone and that power is not in the legislation. There is allowance for an Order in Council.
I can only speak about our business, the malting industry. All the malt sold by any country on export is affected by one short time period. I cannot reach f my members for about two months because everything is priced world-wide within the eight-week period between when the barley comes off, around the end of September, until the end of November. If something stupid happens or if the board says they can get "X" dollars from China and will go there, then we must accept their price or nothing. We cannot react. Eight weeks does not allow you to talk to the minister or to review an Order in Council. We will miss the boat, as we have in the past on certain pricings.
So we need the ability. If farmers, who would be in the majority of the board, had a concern with that, why would they have a concern that there is a second opinion that is non-biased?
Included with that is the fact that, as we all recognize, when members of boards of directors are appointed to some sort of company, it is not that they have a vested interest in that company. They do not work for that company. If it is in the banking industry, the director may come from the pulp and paper industry, so there is no conflict of interest.
Is it a conflict of interest when decisions that farmers will make on the board of directors will impact their incomes and how they determine what to do on their marketing side? It could very well happen if producers are appointed to the board. Technically, the fiduciary responsibility of a board of directors is to keep their hats at the door so that there is no conflict of interest. I cannot see that happening on any side.
Board advisory committee elections have been hotly contested. If someone is running on a mini-platform dealing with barley marketing or wheat marketing, the issue will become are they running because they are trying to do what is good for the board or because they want to dismantle X, Y, and Z? I think you will see divergent opinions on that, depending on provinces or areas within a province, on a wide range of marketing issues.
Getting back to governance and accountability, all we are saying is that we have to have the ability, if for some strange reason something happened, to have the minister on a timely basis, say, "Well, I have an ombudsman position here," or for me to be able to call up to say, "You settle this." They have that for arbitration in football, baseball, basketball and hockey. They have it under supply management, at least to review things under legislation. Are we not going to have the ability to do that under a $6 billion corporation? If we do get that, it will be by order in council, and if it gets to that, that means it has become a political issue. It should not be political. Someone who is not even involved in the industry should determine whatever the issue may be. That is only fair. If farmers say they do not like that, one must ask why. Is the reason that we have this new structure coming, which we all agree is important, for accountability and some transparency and to have some ownership in determining a variety of issues?
Real directors do not get involved and do not spend almost full-time sitting on a board of directors for a company. I heard Mr. Macklin say they were going to be spending a lot of time at it. They are there to set policy and give direction, but if they are not going to let their own managers, meaning the Wheat Board officials, do the buying, then I have a problem. I heard that, and I wrote it down, twice here today.
If people think I am being overly cautious or dramatic about this, I can give you a perfect example of what happened in the past. These things are public now but they affected the competitiveness of value added industries. I was with the Department of Agriculture at the time. It was when two-price wheat came into effect. The reason this occurred is that we had a closed border, so neither wheat flour nor wheat could come into the country. However, we had a serious income problem with producers because of what was happening in the world markets. It was decided that for domestic purposes we would increase the price of wheat to the flour mills, who will increase it to the baking industry, to $7 a bushel, which was almost twice what the world price was. That was fine for the flour milling companies because they could pass it on to the baking industry, because the flour mills did not have to compete with U.S. flour mills because you could not bring the flour in.
The problem was with the baking industry, which was upset because it had to buy expensive flour that had no relationship to the real prices but yet Canada is allowed to have imports of baked goods from the United States in retail-sized packages. So they were between a rock and a hard place. They were losing. There was a quarter of a billion dollars worth of baked goods coming in from the United States, yet they were forced to buy flour from the flour mills which has its prices dictated by the board. That is a perfect example of the question of what policies are coming in for what purposes.
When WGTA was finally removed, we as an industry were given an edict from the board saying that for two-row malting barley, you will pay $7 per tonne more, as opposed to $6. We asked why, and were told that they had to recoup part of the difference on the WGTA.
The beer industry went through the roof, simply asking, how do you determine what the real value is? They were told that is what the board believes it is, so that is what it will be.
We have worked closely with the board. Maybe it is better being safe than sorry. All we are saying is that we do not care who is at the table, we do not even need to have a place on the board of directors, as long as there is, first, some recognition of value-added in the proposed legislation, and more importantly, because of the strength and power of that bill and of that board of directors, that there is at least the ability to resolve disputes that should not have to become political. Ministers should not have to deal with them. They should not even have to direct orders in council. What I am referring to is processors. I am not talking about individual concerns that farmers may have, because they will be lined up, I suspect, from here to eternity.
We all know the board has serious concern about the direction of transportation policy, having to deal with two railway companies and whether or not there is the ability to ask, "Well, what are the prices going to be in the future?" If they are worried about that, at least they have two railways to go to. We are not even going to have that. That is all we are asking for.
What made us nervous is that when we finally got responses back from the department, they said, "If you do not like where this may lead, you can buy your barley south of the border." We received that letter not too long ago. The CEOs of these companies got pretty nervous because of the fact that the department or someone was not doing their homework. If they had been, they would have realized the United States does not grow two-row barley, so we cannot go to the States and buy the two-row barley to make into malt to sell to our customers. We developed two-row market. We have never operated with a subsidy. We fought tooth and nail for those markets. If that is the view, that we can go south to buy our barley, that really scares us. They do not understand what our industry's concerns and issues are.
This is all tied up to the issues of where barley marketing was and whether barley should be in or out of the board. I can give you a perfect example again of the issue of distinguishing between feed barley and malting barley. You cannot tell the difference. Last year for the first time we lost a sale of two-row malt -- which is made out of two-row malting barley -- to Japan. The reason we lost it is that it was sold at prices that were considerably less than a U.S. competitor, and it was Canadian feed barley. That is the issue. If we cannot use it, it can go as feed. We could probably increase our capacity by another half million tonnes.
As far as these new targets for export, we have done a big share of that. We can move much more within the system, but that has been tough and it will get even tougher if there are directors who feel that it is their obligation to be there on more than a part-time basis to help direct the board.
This reminds me of a story told to me about ten years ago by Senator Bob Dole during a conference in the States. It deals with the importance of acts and laws and legislation. He used the analogy of the elephant who wanted to date a butterfly. On several occasions the elephant sought and followed advice from a wise old owl who encouraged him along until, months later, the elephant and the butterfly were engaged to be married. Upon realizing the problem he faced in consummating this marriage, the elephant returned to the owl again for advice. The owl responded, of course, that he only made policy; he did not implement it.
That may be the problem with the Wheat Board. They have great policy but when it comes to execution and implementation, there are a lot of contradictions. It is great to have the producers manage, if they want, but there must be some recourse. If recourse is directly to the minister and an Order in Council, it will not happen and, frankly, it should not happen.
Senator St. Germain: I would like some clarification on pricing. Did you say you must price eight to ten weeks in advance?
Mr. de Kemp: No. All our international sales are done in an eight-to-ten-week period. There is a big flurry of activity from the Canadian malting industry, as well as from the French and the Danish, because all our export brewing customers match prices very quickly. They know the crop and they know the quality. It is a matter of who will get the best quality at the best price from everyone's market. It is like a revolving door for the various breweries. Everyone is at your front door within an eight-week period.
They book it to ensure their costs and their supplies are settled 12 to 14 months in advance. Our guys, along with every other competitor, will sell all the malt made from malting barley. It will be priced in October or November and those deliveries will continue until the end of 1998. Many times, we are buying old barley in the bins from the Wheat Board in September to fulfill the contracts we have priced.
Senator St. Germain: If you know your orders, you know how much barley to buy.
Mr. de Kemp: Yes.
Senator St. Germain: They cannot monkey around with the price.
Mr. de Kemp: That is the point. We know the quantities but we do not know the price.
Senator St. Germain: Can you not set the price on barley?
Mr. de Kemp: It would be nice if there were a market in the world where you could reflect the true value of malting barley, as there is for wheat. Because of Minneapolis, the Kansas City wheat exchange and the Chicago futures market, you can know the prices for grains. There is nothing like that for malting barley. There is no price-determining market where you can buy grain and hedge it on a futures market. All we have to look at are the prices our competitors are paying in France or elsewhere.
Senator St. Germain: Can you not tell the Canadian Wheat Board that you have orders for "X" amount of malt and that you need "X" tonnes, ask the board's price for today and then set that price for the whole calendar year?
Mr. de Kemp: We can tell the board that we need to price 200,000 tonnes in the next 48 hours for two breweries in Brazil at a certain price level. The board may say they believe that price is too low because, in the last few years, the Chinese market has shown they will buy at a higher price. That is fine, but we cannot sell malt into China even if the board can sell malting barley into their closed system.
The negotiations go back and forth. If there were an edict in the future to the Wheat Board, such as for two-price wheat, telling them never to sell any grain below "X" price, no matter the world market conditions, we would be locked out.
We get into these problems often with the Wheat Board. For the most part, things have worked out, but the mechanics will change quickly in the next 12 months.
Senator St. Germain: Are you concerned because this will be so producer-driven as far as the board of directors is concerned?
Mr. de Kemp: Absolutely.
Senator St. Germain: Are you now dealing with the five commissioners of the Wheat Board?
Mr. de Kemp: We never deal with the commissioners. We must in the end, but we deal first with the marketing groups.
Senator St. Germain: Are you worried about the fox running the hen house?
Mr. de Kemp: That is a concern. We need the ability to talk to someone who is not involved in the industry. Supply management has that. Why can we not have it? That is the issue.
In the eight-week flurry of activity, we have lost sales because of prices. We are just about at full capacity right now, but we are taking it on the chin on capacity performance.
Senator St. Germain: What percentage of the barley crop is malting barley?
Mr. de Kemp: Of 12.5 million tonnes of barley grown, from 2.2 million to 2.4 million tonnes are selected as malting barley, so about 20 per cent. However, that is a little misleading because 70 per cent of all barley grown is of a malting barley variety.
There is sometimes a poor malting barley selection because of agronomics. The barley must have a certain level of plumpness and protein. Bad or wet weather will affect the crop. We germinate a living organism and then extract certain ingredients necessary for beer. If the protein or the heat goes up, you will not get the germination. A lot of barley is grown, but if we cannot buy it or it cannot be sold to China, it is sold as feed barley for $100 less.
In many years, there is more useable malting barley than we have the capacity for. If we do not buy it, it goes south as feed and ends up in the Japanese market. That has happened.
Senator St. Germain: Are you protected more under the present single-desk system than under a pooling system?
Mr. de Kemp: Barley is pooled right now.
Senator St. Germain: What if it were not pooled and they could go outside the pooling system?
Mr. de Kemp: If it were outside the system, we would have to ask for barley to be completely removed from the board for two simple reasons. First, if there is a will, there is a way, and farmers will find it. I grow corn and soybeans and we know all the tricks in the business. If farmers cannot sell it in Canada, they can sell it as feed barley at a bit of a premium to a malter in the States. That malter will offer a $15 premium knowing he can get another $25 or $40 by going offshore, because you cannot tell the difference between the two.
Second, most of what we buy now is used for export. We are the largest value-added exporter of any commodity group in Canada by percentage. Over 50 per cent of what we produce now goes to export. That is not true of beef or hogs or chicken or dairy or canola oil.
There are two different markets, which is confusing. The price on the North American market is determined by what Coors and Anhauser-Busch will pay for their six-row. We pay an $8 premium from the board to buy two-row wheat rather than six-row. Brewers in Canada mostly use two-row wheat because that is where the world market went, but there is one price in North America.
In some years, the North American price can be $50 or $60 a tonne higher than export markets, simply because of subsidies in the European Community or the U.S., although it is affected more by the European Community than by the U.S. In other years, the international market price for malting barley will be a lot higher.
If there is no pool and producers are allowed to pick and choose from whom they will buy, one-half of a load of malting barley could be bought at a $50 premium because it is to be malted and go to Japan, and the other half could be subject to a $50 discount and go to Labatt or Molson, because that is where the North American price is set. How do you get two different prices on the same day at the same delivery point for the same grain?
The various governments and departments recognize that, as does everyone involved. Three or four years ago, there was an issue with continental barley. You can only do that if you can arbitrage by yourself and decide not to pay $200 in one market and $150 in the other, but pay $175 in each. You may lose money on the export side, but you will gain it on the domestic side with a blended price. We cannot compete with the Wheat Board on continental feed or with a farmer who can either sell south as feed or will be given a $50 premium by the Wheat Board because 600,000 tonnes can be moved to China.
China is an artificial market.It has nothing to do with international true value prices. A good example of that occurred this year. Malting barley was being sold privately and a good portion was being exported to China. The former state trading agency in China told the Wheat Board that they would not buy as much malting barley and wheat from us unless the board did something about the private exporters moving malting barley to their competitors in China. The Wheat Board told the exporters that from then on malting barley would go through the board.
These things happen all the time. That is well documented since it became public knowledge. It is fine to deal with a monopoly as long as everyone is trying to sell at reasonable and competitive prices.
I have heard the word "maximize" many times today. It is not found anywhere in the legislation. In the past, the Wheat Board was accountable more to government than to producers. That will change now.
Sometimes we are our own worst enemies. The Wheat Board advisory committee is trying to do good work, although they are not all in agreement on many things. I think it will get worse in the future. We need to know what is happening for our business planning. We need to know that there is someone to whom we can talk about our concerns.
We may be wet behind the ears here. Sometimes you cannot see the forest for the tress and you must step back and look at the situation objectively. That is why an arbitrator or an ombudsman would be helpful. For example, even if it is decided to hold a plebiscite on a particular issue, that still leaves no recourse to discuss concerns. In a monopoly situation, you will always extrapolate premiums. However, having a monopoly does not mean you are a great marketer.
Senator St. Germain: Would the ideal situation be the exclusion of barley?
Mr. de Kemp: Until now, the industry has been supportive of Wheat Board operations. We are in the process now of taking a good hard look at the next step, depending upon what happens. If the Wheat Board is not working with us or trying to do the marketing, that will give the farmers more power and ability to do what they want to do. The industry will ask for that.
Senator Chalifoux: You are asking that the proposed amendment to section 7.1 of the Canadian Wheat Board Act be changed to read, "for such prices as it considers reasonable and competitive with the object of promoting both the sale of grain and value-added grain products produced in Canada for both domestic and international markets." Is that one of the things you are requesting this committee to do?
Mr. de Kemp: Yes, with one caveat. At first glance, it looks as though, under the bill, the Wheat Board would be responsible for not only the promotion and sale of grain but also the sale of value-added products. That was not the intent. We are saying that it is responsible for the promotion and sale of grain, but because of how they operate, they are involved in the promotion of value-added grain products. We are always looking for competitive prices. There is a big difference between the old wording, which was "prices that are reasonable", and "prices that are competitive". "Reasonable" and "competitive" are two different things. As long as the prices are competitive and there is no interference, we are fine. This affects not only the association I represent but every other group concerned about value-added grain products that appeared before the other committees.
Senator Chalifoux: How would you change it?
Mr. de Kemp: I would leave it up to those people who are able to change it. We know that prices will be competitive. The Wheat Board does not sell only grain. It sells grain so that we can sell value-added grain products. There must be a recognition of the importance of value-added grain products in the whole system. We have never had that.
The second issue involves the ombudsman.
Senator Chalifoux: You say in your brief:
We propose that the same sort of infrastructure/entity, with the same intent and dispute resolution mechanism granted to supply managed value-added processors be established/granted for value-added users of CWB grains.
Mr. de Kemp: That is one and the same. It is an ombudsman or an entity or structure, although you do not even have to go to an entity or structure. We repeatedly talk about pricing, but it is not only pricing. Pricing has worked out reasonably well up to now. I do not know what other kinds of things could happen in the future. I can only go on past experience. It is not checks and balances. It is not that we do not think the producers should be there. We think that they absolutely should be there.
There is only so much money that these companies can spend each year. If they know there is some uncertainty, they may decide to build their malt houses south of the border.
Senator Chalifoux: Your top priority at this hearing is to establish an appeal mechanism to be included in the act?
Mr. de Kemp: Absolutely. If everything worked out well with the board, we would never have to use it, which would be wonderful.
Senator Chalifoux: But it would be there.
Mr. de Kemp: Yes.
The Chairman: Thank you for your appearance, Mr. de Kemp.
Our next witness is Jack Wilkinson from the Canadian Federation of Agriculture. Please proceed.
Mr. Jack Wilkinson, President, Canadian Federation of Agriculture: Thank you very much. It is a pleasure to be here.
I should like to run over our presentation quickly. It is not very long. I will highlight some of the points to leave time for whatever questions senators may have. We do not have many points to make.
On the governance question, we have always been supporters of the election of the majority of members of the board, to influence the direction of the Wheat Board.
It is our view that a number of the issues which have come up in the last few years probably would have been dealt with in a much better political environment and probably would not have become the large issues they did if we had had an elected board. The board would have adapted to meet the market conditions and maintain the support of their membership. In that way, evolution would take place in a slow and progressive way.
We are pleased that this legislation starts to reflect that with two-thirds of the positions on the board being elected. I know that others are concerned that it will not be a wholly elected board. I believe that this is a huge corporation moving from one style of governance to another. Having the majority elected will offer some stability and I believe that in the future we will have a fully elected board.
It is our desire that this move ahead fairly quickly. We have talked about this general concept for a long time and this draft legislation has been kicking around for quite some time. We would be disappointed if we missed another market year. I know that time lines are tight to meet that deadline, but it makes real sense to move as quickly as possible to get the election process in place before planting season. We know that will be difficult, but we think it is possible.
We believe that the president or CEO should be responsible for the direction and management of the business and day-to-day operations of the corporation, as directed by the board of directors. The CEO must also be fully accountable to the board. The CEO should not be a member of the board of director. In just about every other farmer-based organization, the CEO is not a member of the board but is accountable to the board. We suggest that as an amendment to the legislation.
That logic must be extended to the appointment of the president, particularly in the first board. However, as long as the board has the power to terminate and deal with those questions, it will be very obvious to the president or CEO to whom he or she is accountable. That is an important aspect and we are disappointed that that was not included in the proposed legislation.
In our written brief we have listed some recommended amendments.
With regard to the chairperson, we appreciate the amendment concerning the choosing of the chairperson of the board of directors. It is in keeping with the Wheat Board's new status as a quasi-private organization that the chairperson be selected from the members of the board, by the board.
We are opposed to the removal of the federal government guarantee on adjustments to the initial price. This is a very small financial risk to the federal government and we are quite concerned that we are embarking on a path that is not in the best interest of the producers.
I have had a number of conversations with producers and producer organizations in Australia. It seems that on this issue, as well as some others, we are following the Australian model. I do not think that is appropriate in this regard. We believe that this is the slippery slope.
As well, with regard to the contingency fund, if the government were still involved in the guarantee, the contingency fund would have a totally different concept, meaning and usage. We are worried that the contingency fund will simply substitute for the guarantee, that the fees will continue to rise, or that the guarantee will continue to ratchet down until it is of little value.
There have been only two occasions on which the government has had to make payments. In both those cases, even though there was much rhetoric from the United States and other trading partners with regard to it, the support of government came at a time when there was such a dramatic drop in prices that at the end of the day it was really not a trade issue. It was a point of conversation more than a trade irritant. It is inconsistently used and market prices drop greatly before there is government intervention. We would like to have that issue dealt with.
Failing this, the CFA requests that the contingency fund not be permitted to go into deficit, requiring changes to subsection 6(4) and other relevant sections. The CFA would also request that a low level cap be placed on the contingency fund through regulation to help ensure that the fund is used only for the appropriate purposes.
With regard to interprovincial and export trade, we support the provisions of clause 24 in the bill which would protect Canada's identity preservation system and give producers more say in any decision to exempt any type, class or grade of wheat from the restrictions of export and interprovincial trade. We are also pleased with the safeguard provisions which have been included in this version of the bill to ensure that there are no adverse effects on those products, such as domestic feed grains, which have already been exempted from Canadian Wheat Board control.
We know that the inclusion issue is a major point of contention for some. We believe that the wording in this version of the bill deals successfully with that question. We have always had some concern about the lack of definition of what would trigger a vote. However, as a general principle, it is fair to say that if you can exclude a product, you should be able to include a product. No legislation should be enacted that would not allow for the future introduction of other commodities because market forces and/or attitude may some day dictate that there is a desire to add a particular product. As long as the process is clear and leads to a vote of producers, it will probably be a better system than the past system of lobbying the government of the day.
We believe that the inclusion of the word "all" before "producers" would alleviate any fears with regard to which producers would qualify to vote on a particular commodity.
In conclusion, it would be useful to have this legislation move forward rapidly. This is not the end of the process of transformation through which the Wheat Board will go. The legislation includes some very positive steps, including having the majority of the board elected.
The issue surrounding the CEO is a serious one. We appreciate the desire of the minister and the government to maintain control, but there are precedents in other boards with similar powers to those granted to the Canadian Wheat Board where the president and/or CEO is a directly responsible and even hired by the board. Those organizations have followed guidelines which have not put the government at risk with its guarantee, its credit sales or for payment. Therefore, we do not think that kind of protection is required under this legislation.
The more quickly we move forward, the better, in order that the board can be put in place. The sooner the board is in place, the sooner a host of other questions raised by numerous task forces and reports can be addressed. It is not appropriate that these issues be resolved prior to an elected board being put in place and that the board be then told to run the organization now that the political changes have been made.
It has always been our preference to put the board in place, even though not all the issues have been resolved, and to let the elected board have a consultative process with producers to deal with the current day-to-day concerns and those which will come up in the future. They are the best people to deal with these questions.
It is a major change, but it is our goal to maintain orderly marketing in the hands of producers. We think producers should be able to choose their marketing system and amend it as appropriate to meet domestic and world conditions. Let them have the authority to do it.
Thank you very much for having us here. We would be happy to answer any questions.
The Chairman: You have made considerable comment about the board. My understanding is that the position of board member will be only a part-time rather than a full-time job. There are some who say the board will be just a glorified advisory committee.
Mr. Wilkinson: Perhaps a glorified advisory committee which has legal authority. A board is as effective as it chooses to be. They very clearly have a line of command given to them. They are responsible to the group which elected them. I see no reason why the board would not set policy very cleanly and give it to the CEO and the bureaucracy to carry out. We do not see the need for full-time board members. There is a balance, as you have heard from other presenters, between the hands-on approach of boards of directors setting policy in an open and transparent way and having the administration deliver on that. I do not think it will be a glorified advisory committee.
The Chairman: My question was just on the part-time issue. This is a $6 billion business.
Mr. Wilkinson: The directors of many large corporations do not have full-time positions. Very few of them do. Otherwise, how could ex-cabinet ministers sit on so many boards at once? I think this is in line with that tradition.
The board sets policy. The administration is the check and balance to that. In this case in particular, there will be a lot of producers monitoring the operation of the board because they will be selling their product. It will be equally important for board members to be in the communities which they represent to hear from their constituency. I do not think it has to be a full-time job.I just do not see what they would do on a full-time basis. I think that if they were full-time positions, they would be tempted to become hands-on managers, and I am not sure that is what is desired.
Senator St. Germain: My understanding is that there are currently five commissioners working full-time at this. You support the Canadian Wheat Board in principle as it is. If five commissioners are required full-time, maybe the organization requires this type of hands-on direction. It is nice to have farmers' representatives representing their various regions on these boards, but perhaps the expertise required is that of marketing.
I used to be part of the poultry industry. After only six months in the business, I became chairman of a particular marketing board that was run solely by producers. There was so much infighting that it was scary. I found out very quickly that the marketing aspect of the industry does not necessarily have that much to do with raising chickens.
The same is true here. I know your organization is a great supporter of involvement of producers, but that is not necessarily the best answer. I would like more evidence that a totally producer-controlled board would be that much better than the five commissioners that have done such an excellent job, as you pointed out.
Mr. Wilkinson: The commissioners do a host of things other than the day-to-day operation and management of the board. They go on trade missions, which I believe take a great amount of their time. Commissioners are constantly moving around the world looking for new markets, as well as trying to sort out market access questions, tariff questions, and a host of other things. Many of the commissioners -- the chief commissioner in particular -- have very little to do with the day-to-day operation of the board but more to do with a host of existing problems.
Individual board members may choose to do some of that work, but there will be more of them. Obviously there will still be some role within the bureaucracy for some of the work that commissioners currently do with their marketing expertise. That balance will be sorted out in the future.
The interesting question, which is very difficult to resolve, is what is meant by a full-time board person. The presidents of some very large provincial commodity associations may be considered full-time by some standards and part-time by others.
I am not trying to be evasive. It is a very difficult question. The point is that this will not be an overly bureaucratic system. It will be a part-time board which will set policy and there will be an administrative structure to run the day-to-day operations of the Canadian Wheat Board.
I do not see that as a problem. The balance will be found. It is difficult to prejudge, as you indicated. You gave a set of circumstances where an approach had to be changed, but it may have gone back, after things became sorted out, to a different working relationship.
Senator Stratton: It appears that the contingency fund exists because of pressure from the WTO and NAFTA to diminish perceived government subsidies. With that in mind, and recognizing that the board is to be composed of ten elected and five appointed members, would a combination of government guarantee and a contingency fund fly? In other words, the producers would put in a certain amount and the government would give a certain amount of guarantee, with a cap on the amount provided by producers. Or do you think that would not diminish the animosity?
Mr. Wilkinson: Frankly, the United States is misguided in its belief of the amount of government support that exists within the Canadian Wheat Board. Anyone who has tracked the changes that have occurred over the last decade can see that it has become more and more transparent as a trading entity, to the point that it is more transparent than almost any other state institution doing business around the world.
That still does not meet the perceived goal of the United States. I do a lot of travelling and I am of the belief that you will never satisfy the United States until you have a system equivalent to theirs. Even then, they would not be satisfied if you get the trade deal they wanted. They presume that, because we choose this system, there must be some hidden government benefit. That is almost a quote from many American farm leaders. I have been told by numerous people, "Do not explain how it operates. We prefer to live in our ignorance so we can say what we want about the Wheat Board regardless of the facts."
It has paid out only twice in the history of its operation, I believe; both times when there were massive downturns in prices. In fact, if it had not been for the initial guarantee, it would have been government support coming from the federal government because there must be a reduction of over 30 per cent on a conservatively estimated 12-month pricing period. Those sorts of downturns on gross sales mean the elimination of net incomes on the farm. There would be resources flowing to protect the individuals anyway. It is a bit of a red herring.
The government is backing out of its responsibility to support income stabilization in Canada. That follows in track with the reduction in support of farm income programs, a reduction from $2.5 billion to $660 million over the time period. This is a further reduction in support, in my view, and it is being disguised as being needed for trade related reasons. I have not seen anything from our people that says that it is required.
Senator Stratton: The government will say it is there because of NAFTA, FTA, or WTO.
Mr. Wilkinson: The government is not telling the truth if it says that.
Senator Stratton: I appreciate that. That being the case, do you believe that a compromise could be worked out by using a portion of a government guarantee with a contingency fund contributed to by the producers, with a cap?
Mr. Wilkinson: No, because I do not think that solves any of the problem. First, if the truth is not that it is a government support coming to producers in drag, then we do not have to make amendments 50-50 to meet the opposition that is not truthful. Second, it is still the slippery slope of a reduction in government support. It will not please the United States. Frankly, after this is removed, the United States will still have problems with the legislation. We can be very sure of that, with their history and their track record in relationship to anything that is not Cargill owned and driven.
Senator Stratton: They do not give up. They never quit.
Mr. Wilkinson: There is no reason to assume they would. That is why we need just as much resolve on our side in pushing for the structures that we want for our producers and our marketing conditions. We do not think their model will benefit in Canada. In fact, we are concerned that we would not maximize a return in the marketplace with being such a small market and whatnot. It is fair that they have their opinion; it is fair that we have ours. We have gone a long way to make ours transparent and open. I do not think we should worry about trying to appease them totally by gutting it until there is no benefit, because we do believe there is a benefit in collective marketing.
Senator Rossiter: Would you suggest that there be another farmer-producer elected member on the board to bring the number back up to 11?
Mr. Wilkinson: We would not want to see the producers' position diminished. If we are going to have the same size board, yes, we would want that slot to be taken by a producer. We understand the stability question that is being put forward by government, but I think that over time it will be shown that producers can manage their affairs with the assistance of a good bureaucracy.
Senator Fairbairn: As I understand it, your concern about the appointment of the president by government is not reduced in any way by the undertaking to consult with the board; the power of the directors, after a president is chosen, to evaluate performance and, if it is felt necessary, recommend dismissal; and the ability of the board to control the salary of the president. That does not cut it with you, I gather?
Mr. Wilkinson: They are all good steps toward having the board be responsible for the appointment and the firing of the CEO. We have never understood the government's need to appoint the CEO. There were ways of dealing with this question, which is a transition question. It is a very large corporation and there are concerns, by some within government, that to move to a fully elected board was a risk. Hence, the maintenance of close to 40 per cent and the control of the CEO.
My experience as a farm organizational person in Ontario has been that most commodity boards, some with as much authority, seem to be able to manage fairly well by having elected boards and appointing the CEO and president that they choose. If the government wants to do some of these things, we would think it would at least maintain things like initial price guarantee to help in the transition.
Our organization thinks that the government is being over-protective and that there is no need for it. At minimum, the board should have the ability to dismiss unilaterally, if they are displeased with the CEO, and not have to negotiate with the minister about that. That is a partial compromise and should be the minimum, in our view.
Senator Fairbairn: From the government's perspective, this is a very substantial change to the Wheat Board, and a good one. Perhaps you are right that this is a transitional period. However, on the government side as well, there had been concessions to the involvement of the board of directors in the position of the president.
Mr. Wilkinson: Those have been good changes, but our sense is that there is still a question, under the current system, of who is really in charge. If you or I were members of the board, we would like to have a sense of ownership in the CEO, as we had the ability to hire and fire. I would be surprised if on any board people would not want to have that authority.
We see that as the proper way for a board to operate; that the board of directors would have control. The sooner we get to that, the better. At minimum, we would like the board to have the ability to fire in the event they do reach an impasse with their CEO.
Senator Fairbairn: We have been talking during your presentation as though the only rationale for the contingency fund has been world trade considerations. Other considerations put forward as part of the act are the flexibility measures contained in the act, if the board chooses, in terms of how farmers will be paid for their grain. The other argument, whether accepted or not, is that with the extra flexibility comes an additional bit of risk which would be taken care of with the nature of the contingency fund as a sort of insurance policy against that risk.
These are arguments being made other than the external argument that this is all just due to world trade pressures.
Mr. Wilkinson: Yes. Our view is that a fund to purchase grain outside the pool would come from normal operating capital and/or lines of credit that the board would develop as time goes on, depending upon how much it wants to get into that line of business, and that a contingency fund would not be the appropriate place to raise that sort of capital.
The question is whether having a contingency fund to offset the cost would deal better with initial pricing and take some of the risk out of it, because it may become riskier, as I assume you are trying to point out, if they move forward in some of those areas.
Some provincial boards have the ability to offer initial price guarantees. They do those negotiations with the government. They do not have the unilateral right to sit down and peg the 12-month market period and the price level that they want. There is an assumption that farmers will automatically say that wheat should be $400 a tonne; therefore, put the initial price guarantee at $300 because they make up the board. However, I think history has shown, in areas that have had that authority, that that is not the case. People who are in the business of farming and see the benefit of having their board are usually the most conservative, in an apolitical sense, when it comes to jeopardizing the authority of the board in the future. They know the benefit. I have been on numerous boards which were very reluctant to let the initial price go above where it should be because the last thing they want to do is to call on guarantees. They know that will put them in bad stead with the government and with trading partners.
We must keep in mind that every trade action has a bigger impact on the producer than it does on members of Parliament, senators or CFA presidents.
Again, I think it is an over-protected question that does not need to be there. The initial guarantee would have been a negotiated process set on real market forecasts, trends and sales. This is really what it is. It is a downloading of the government's responsibility in a serious market condition, putting the responsibility of cost recovery on the backs of producers. It is nothing more than that, in my view.
The Chairman: The Canadian Federation of Agriculture has been a very strong supporter of marketing boards and orderly marketing in general. I am sure that you must be aware that in the west especially, where the Wheat Board has its authority, there are many changes. I will give you an example.
Of all the farmers in Saskatchewan, only 72 produce chickens. Their quotas are not very large. The NDP government of Saskatchewan has asked those producers if they are missing out on the global challenge. We have a change of freight rates, so there will be a cleaning of grain on the Prairies and a different use of feed grains. Many in the NDP government admit that their hands are tied with respect to taking advantage of the global economy, particularly the Asian economy.
Mr. Wilkinson: I thought you were going to say that they were tied by not being able to gut the powers of the farmer-elected board.
The Chairman: No. In fact, these 70 farmers voted to protect their turf. These changes are coming, and they have hit the west and the Prairies. Farmers are challenged to produce value-added products, to get into other areas and to improve their income. We are talking about pig barns. We are talking about feedlot cattle. There is some question as to whether there will be enough cattle raised to meet all the needs of the feedlots, and so on, which raises the question of barley.
How aware are you of these issues?
Mr. Wilkinson: I travel a bit in the west. Just because I come from northern Ontario does not mean the CFA does know about what happens in the west.
The Chairman: There are some major changes taking place. Before you arrived this morning, we went through all of the changes happening in the grain industry and the different players. There must be change, not just for the sake of change, but to accommodate the importance of being able to adapt and to reach out to the global economy, even the North American economy.
With respect to the B.C. market on milk, they have 3.5 per cent of the quota with 14 per cent of the population. They are concerned and have raised the possibility of importing milk from the U.S. There are many questions out there.
Mr. Wilkinson: Part of it has to do with the legislation in front of you, and part of it has to do with the overall question in relation to where the agriculture and agri-food industry develops in the next number of years. As you said, with the elimination of the Crow rate, feed freight assistance, and a number of other areas, massive changes have been forced on producers with a very short time period to adapt. This has seriously changed the margin of profitability on their operations. Everyone is searching for what they can do on their farm to make it viable, if it is viable at all, and to give some order to their primary production side of the business. You know that when you eliminate that kind of support on transportation, coupled with the elimination of rail lines and a host of other issues, it shapes what the future will look like.
With respect to the legislation, we think this step, for example, will be more positive in responding to some of these pushes that will have to be resolved by moving quickly to an elected board and putting as much power as possible in that elected board so that they who live there do their business. They are the ones making the decisions as to the marketing structure versus what could possibly be viewed as an eastern political party with a cabinet minister in charge. All of these things are very good steps from our point of view.
I know you are aware that the historic format within the allocation quota was to put production close to the population base so that there would not be an unfair, competitive advantage in a few areas of the country that could produce more cheaply and ship to the Maritimes and other areas and eliminate production. The goal was this -- by province, allocated.
Those rules no longer hold the same emphasis they did before. We are in the middle of making many changes. Many exports and supply-managed commodities are being toyed with. As well, there is some shifting and sharing of quota auctioning so it can move from one region to another. I would hazard a guess that changes taking place there outstrip changes in any other industrial sector.
We only signed the GATT deal a very short time ago, given the massive restructuring that has taken place in agriculture. We must keep in mind that the goal at the end of the day for my organization is to make sure that changes will lead to a stronger agriculture sector rather than a weaker one. If we are just going to produce chickens with no market and no market conditions, thus destroying the current structure, we are not moving things forward. No one wants to go toe-to-toe with Tysons, their processing plants and the way they do business. We think we can run a better system in Canada.
I am in favour of leaving the decisions to the chicken board, to the elected chicken producers, and an elected Wheat Board. We want to get this bill passed with a couple of amendments quickly so that the elected people can start making the decisions.
I am not trying to be evasive on the other question.
The Chairman: Can a province not opt out? Could the Province of Saskatchewan say, "We will opt out of the chicken marketing board"?
Mr. Wilkinson: Anyone can opt out. B.C., as you can tell from history, has opted in and out of a number of supply management commodities. If too many provinces choose to opt out, the entire national structure would disintegrate.
When I started farming, my dad taught me that sometimes your first loss is your best loss. To sell grain that is below market price into a market that you create where you put chicken at below cost of production is not, in my view, the smartest thing to do. We need to be more creative.
I am not disputing your point that things should move quickly. However, we should resist against levelling the playing field by pulling the profitable sectors down. Let us try to do it the other way around by solving problems for the non-profitable sectors, to raise it up so they, too, are making money, and let the other things change as time goes on.
When world prices were strong, supply management said you could not play that game. You had to restrict your production to the domestic market. It is not fair to say that they are voting to protect their own turf. In fact, they have chosen not to pull out of the agency and to try to deal with the questions internally in an effort to solve this. My sense is that there will be a dramatic shifting of production in supply and management over the next number of years to respond to some of these pressures.
The Chairman: With regard to the Americans' fast track on trade, President Clinton said in a news release that if Canada did not open its doors to the feather industry and the milk industry in free trade, they would get tough on beef and grain. That points a finger at Western Canada, and many of our western farmers believe that we are being traded off in the west against the east.
Mr. Wilkinson: With all due respect, it shows how little Clinton knows about the trade deals he signs. When he became President, we tried to talk our Prime Minister into having a discussion with him in Vancouver or Seattle when there was a G-7 meeting. The Right Honourable Jean Chrétien reported back that he tried to have a discussion with the President, but the President just did not know anything about what really happens in trade. I think that statement he made shows that.
They are restrictive. They destroyed the sugar beet industry in Manitoba with a big stick. They managed to keep this off the discussions in the last go-around. We could blow them out of the water in beet production with no trouble at all, but they have the biggest protective market. They have the biggest protective market in peanuts as well.
Their milk shed system in the diary sector is more protective than ours. In fact, we give clean market access to them.
They do not know what they are talking about in a number of these areas. On the one hand, they cannot say you should have a negotiated, world-rules-based system and, on the other hand, as soon as they get done that conversation threaten to ban our wheat sales, cattle sales and hog sales in the United States because we can compete better than they can. This is just political rhetoric to appease the right wing protectionists and others in that country that he is having to play games with right now. If we were in the situation he is in now, we all might be saying things to try to make friends. However, that should not be trade policy, and we should not pay too much attention to it.
The Chairman: You must admit, however, that the reality is there.
Mr. Wilkinson: We never traded off.
The Chairman: What if the Americans were to get enough in the cattle industry?
Mr. Wilkinson: You could give them supply management, sir, and they would still play the same game. You know that.
The Chairman: The point I wish to make is that if they became tough in the areas of grain and beef --
Mr. Wilkinson: We would take them to a panel.
The Chairman: -- the price of beef, for example, would drop in a week because that is where our beef goes.
Mr. Wilkinson: I know, but they are like a school yard bully. You know exactly how it works. Someone comes up, pokes you in the chest, and says, "I want your lunch money." You can be sure that, if you give them your lunch money, the next day they will be asking for more.
My view is that we have a set of rules. The beef industry is not subsidized. We have negotiated market access between them. It would be a problem while it got sorted out, but on the other side of the coin, they have market access in eastern Canada where they ship in massive amounts of processed beef that would be closed down the same day that anything was closed down from the west. We do not want to encourage the rhetoric to go in that direction.
This is not unusual conversation coming from a senator. It is disheartening when a president engages in that kind of rhetoric because their advisors should give them advice other than that, but we cannot appease those threats or we would not produce anything.
The Chairman: We have to look at the reality, though. Grain producers in Western Canada produce far more than what we can consume in Canada. We are an exporter. The Wheat Board is not a marketing board -- it is a selling agency, a marketing agency, or whatever.
Mr. Wilkinson: Agreed.
The Chairman: It is not a marketing board in the sense of the milk and chicken marketing board.
Mr. Wilkinson: Agreed.
The Chairman: The same is true with the cattle situation. We sell on a world market.
Mr. Wilkinson: Are you implying that any place we have any border measures, we should unilaterally give up because the President muses out loud about reciprocal access to the United States? That is what I am hearing.
The Chairman: I am asking you, as the Chairman of the Federation of Agriculture, whether you are aware of the feeling out west.
Mr. Wilkinson: Yes, I am.
The Chairman: That has exemplified itself in the political implications you see in Ottawa today.
Mr. Wilkinson: I am very aware of the feelings in the west.
The Chairman: My point is that the farmers believe they are being traded off.
Mr. Wilkinson: My point is that they are not being traded off. These issues must be sorted out. Gutting a supply-managed board to take on the world price in the short term is a knee-jerk reaction to a very serious problem in the grain sector. We should look very carefully at where we want to go and move as quickly as possible. However, simply eliminating and moving on to the world price for chicken does not necessarily solve the income problems of grain farms and other family farms in the Prairies.
There is a serious debate going on as to where we should go. I think the federal government needs to keep some resources in safety nets and adaptation programs to allow for rapid and sensible change. I do not think knee-jerk reactions are useful.
I spent about two months recently attending all the annual meeting in the west. Half of our board of directors comes from farm organizations and cooperatives in the Prairies. We are kept informed constantly of what is going on out there. I believe that the situation in that part of the country is just as serious as that of the potato producers in the Maritimes, in Ontario, and the trade issues in relation to Mexico. We must deal with the sectoral problems and solve them as they come along. Trading off against another sector is a mug's game and everyone loses.
The Chairman: What do the changes with respect to the Ontario wheat board in the last two weeks mean?
Mr. Wilkinson: It means that elected boards sometimes move faster than others, and I am not being flippant about that.
The Chairman: What does it mean in terms of farmers selling wheat to the United States?
Mr. Wilkinson: I think it is a dangerous game to compare. I am often asked, "Why can the Ontario board do this, when we are beset with all sorts of restrictions?"
Frankly, I do not think those markets are the same at all. On the domestic Ontario market for milling wheat, there was a time when we had a two-priced wheat system and the Ontario board exported soft wheat to 15 or 20 countries around the world. After signing the NAFTA, hardly anything has sold, other than to U.S. mills. It affected a continental market, which is not the same as the wheat situation in the west. If we tried to put that kind of wheat volume into the United States, the reaction we saw a number of years ago would be there in spades.
There is a desire to move into new markets. If you move into 30 or 40 world markets, you need a different structure. I do not pretend to be a marketer, but you need a different structure to do that if you want to develop and maintain long-term international markets.
I think this elected board is a good step because the board will make the determination on how fast it wants to move to meet the demands of the producers in the Prairies. They are the best people to judge it.
The Chairman: Again, you make a good case. On the other hand, if you are out in the west trying to sell wheat at $3 a bushel, and you know your counterpart in Ontario can sell directly into the U.S. market, you have questions about fairness, and rightly so.
Mr. Wilkinson: I do not believe the price discrepancy purported by some advocates of gutting the board is accurate. What is often quoted is the initial price, not the final price. It becomes not a discussion of information and fact but an extension of rhetoric on whether you believe in orderly marketing systems or an absolute free-market system.
We have had some votes in the past with respect to an elected board, and I think that is the type of marketing structure we should have. We can all count the votes. We know what they wear. We know it will not appease those people who want further changes. We recommend moving to the elected board quickly, with the majority of members being producers in control of their destiny. We believe that is the best step to meet the demand for change.
Markets are different and require different marketing structures. The Ontario wheat board has never been in the same market as the Canadian Wheat Board, never had the same volume for exports, and has never been in the direct equation.
Ontario soft winter wheat is an entirely different crop than that grown on the Prairies. Anyone who studies that knows it. It is often used as an example.
I do not want to pass any more judgment than that. You know from our document what we think should happen with the Canadian Wheat Board.
The Chairman: For argument's sake, I was with Mike Wilson and Bill McKnight when we went to the GATT with Mr. Dunkel. Our instructions from a Conservative government -- and you would not think a Conservative government would ever do this -- was to protect Chapter 11 at any cost. We sat down with Mr. Dunkel, and he said, "On the one hand you want an open market, and on the other hand you want a protected market -- make up your mind."
That has not changed because Ontario has 103 seats and Quebec has 85 seats. Western Canada does not have the seats to compare with that, and the Liberal government will not do anything differently.
Mr. Wilkinson: You will not find a country that does not have import sensitive commodities in agricultural production as well as export. If you talk to the Australians, you will see how their sugar and pig industries work. Try to export hogs into Australia and you will find out how open their border really is.
This is a game that people like to play with Canada. They say, "You guys want it this way and you want it that way; it is schizophrenic." I say, no, it is not schizophrenic, it is sophisticated. It is where the reality of the world exists. It is like every other sector. Let us talk about cars or textiles for a while. We have sensitive commodities that will move to world conditions at a different pace than others, and trade is about advancing your self-interest. That is a fact of life. Other self-interests are different. We just have to reflect it in our trade policy and advance it as quickly as we can. I do not think they are at odds.
For many years, the problem has been the elimination of the transportation support, which has totally changed economics in the three Prairie provinces that are in the export business.
The Chairman: It took a third of our bushel of wheat.
Mr. Wilkinson: I know it did.
The Chairman: That just hit the farmers now.
Mr. Wilkinson: I appreciate that and it will be a problem in the interim while new markets are being found, processing is put in place, and value-added takes hold. It is moving quickly, but I honestly do not think that argument can be solved with the Wheat Board legislation.
The Chairman: I want to thank you for appearing today.
The committee adjourned.