Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 5 - Evidence - Morning sitting
BRANDON, Tuesday, March 24, 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: Before I ask the first witnesses to take their place at the table, I just want to make a few announcements.
There is translation at the back of the room. As you know, the Senate committee is here to hear presentations, especially from individual farmers and farm groups, on Bill C-4, to amend the Canadian Wheat Board Act. We will proceed by calling four or five different presenters to the table. You will each be given five minutes for your submission. Then we will open up for questions from the senators. The time for each allotment is about an hour. We will try to be as rigid as we can so we give everybody a chance to make their submissions.
Starting on my left, I will ask the first witnesses to introduce themselves and tell us a bit about where you farm and so on.
Mr. Larry Maguire: Good morning. I farm at Elgin, Manitoba, 45 miles southwest of the City of Brandon.
Mr. Delory Nestibo: Hello. I farm 80 miles southwest of Brandon in Waskada, Manitoba.
Mr. Grant Maddess: Good morning. I farm about 65 miles southwest of Brandon at Deloraine.
Mr. John Husband: Good morning, Mr. Chairman. I farm at Wawota, Saskatchewan, an organic farm, in partnership with my wife.
The Chairman: I will ask the senators also to introduce themselves, starting with Senator Spivak.
Senator Spivak: My name is Mira Spivak. I am from Winnipeg. I grew up in the Stony Mountain area and farmed -- and, believe me, the land in that area is not the kind of farmland that you have out here in Brandon. It is the Interlake country, with a lot of stones, a lot of leafy spur.
Senator Stratton: My name is Terry Stratton. I am from south of Winnipeg. I do not farm.
Senator Fairbairn: I am Joyce Fairbairn. I come from Lethbridge, Alberta, which is down in the southwest corner, a city surrounded by farming.
Senator Taylor: I am Nick Taylor from northern Alberta, Redwater. I live on a non-profit farm, subsidize it with the Senate, and am very interested in what you have to say.
The Chairman: I am Len Gustafson, a farmer from Macoun, Saskatchewan, and I still farm.
Senator Hays: I am Dan Hays from Alberta, and I farm as well, near Landry Lake, Alberta.
Senator Chalifoux: I am Thelma Chalifoux. I am from northern Alberta, from Morinville, and I live out in the bush.
[Translation]
Senator Robichaud: My name is Fernand Robichaud and I come from southeastern New Brunswick in the Maritimes.
[English]
The Chairman: At this time we will hear from our first presenter, Mr. Larry Maguire. You have five minutes.
Mr. Maguire: I would like to first of all welcome all of you to Brandon, and thank you for making the Wheat City your first stop in your Senate hearings. Today I wish to speak to you as an individual who will be seeding our family's 29th crop this spring: cereals, oilseeds and pulse crops. During that time there have been a lot of drastic changes in cultural practices in our farming operations, and in information technology and communication flows. Research has been a big asset in survival of much of our agriculture as we know it today. There have been changes to the mechanisms used by the Canadian Wheat Board to try to satisfy farmers' needs. I know. I spent eight years on the Canadian Wheat Board advisory committee, but the bottom line is that it is still a monopoly and that farmers still do not have choices in how they sell their grain.
Do you know what it is like to farm for nearly 30 years and to only be able to sell your wheat and barley to one buyer? As I said, many other aspects of our farm businesses have changed. This whole process began because farmers wanted more choice in how they sell their products, not less.
Now, the government has made many good efforts to help us in agriculture. This government signed the GATT. That was a plus for our industry. It privatized CN rail, and I rather doubt that our American neighbour would have been very happy if it were still government-owned when they tried to buy a chunk of Illinois Central a month ago. Surely, allowing farmers to sell a little of their own wheat and barley is not a national security risk.
I mentioned change. Nowhere is it taking place faster than right here in Brandon and western Manitoba. That is why I, as an individual farmer, wanted to make a presentation to you this morning.
With the Crow benefit gone, our industry is scrambling to adapt. Farmers will not continue to pay $1.25 a bushel for freight and handling for hard red spring wheat and feed barley in the future. Our freight cost has increased in this area from the $10-per-tonne level to exactly $37 for hard red spring wheat, and to over $40 for feed barley. That is just on the freight side.
More value-entered enterprises are being developed thus, and I guess I can say welcome to the highest rate zone in not only Western Canada but in all of North America. More of our grain will be used domestically and sent to the U.S. for further processing. The mills are already established there. Manitoba and Alberta will be feed-deficient within the next four or five years, and most likely no grain will be shipped offshore from Manitoba by then either. Notice that I said "offshore." It certainly will be travelling north-south.
This background tells you why farmers want choices in marketing their wheat and barley, and why it is so imperative that changes be brought about in Bill C-4. We have been dealing with this bill, with the whole process of change, for many, many years; in fact, decades. But the issue was brought to a head because the farmer sought more choices during the Western Grain Marketing Panel in 1996.
However, since that time Bill C-72 came forward, and now there is Bill C-4. A number of band-aid solutions, if you will, have been proposed. I was one of those who made a presentation to the Standing Committee on Agriculture last October in Ottawa, but a tremendous event in Ontario has superseded all of these recommendations. I will get to a few of the proposed solutions in a minute. But certainly the newly declared off-board alternative that Ontario wheat farmers voted themselves, in the last week or two, is certainly a prime initiative that is needed here in Western Canada. It must be implemented as part of this bill when it goes back to the House. Otherwise, a double standard will be prevalent in Canadian agriculture in the wheat and barley industries. If this issue is not dealt with, farmers in Western Canada will not have an opportunity to sell some of our own wheat and barley.
Ontario farmers have voted themselves the ability to sell their wheat in the United States. I do not know if you are familiar with the whole clause, but certainly here in Western Canada we still not have that option.
I just want to touch on two or three of the issues that I feel very personally must change in this bill. Of course, the inclusion clause must change. It was not there in C-72. It came in at third reading just before Parliament recessed for the election. It must be removed as part of Bill C-4. The minister recognized this change at the very last moment, after closure was embarked upon; therefore, the government recognized that it does need to be removed. I suggest to you that you recommend that it be removed.
If it is left there, however, we need to be looking at a weighted vote, as they do in Australia. Farmers there get one vote for the first 33 tonnes that they deliver; up to 500 tonnes, they get another one; and another vote for each 500 tonnes thereafter. We need to look at a two-thirds majority like the Ontario Farm Products Marketing Council has for inclusion or maintaining crops within and other supply management commodities in Ontario.
Second, all barley should be removed completely from the Canadian Wheat Board. I was not of that opinion originally. However, the minister himself called for a vote last February -- 13 months ago -- and the outcome was 63 to 37. In spite of the fact that malt was included in this vote, 37 per cent of the farmers said that they do not want the Canadian Wheat Board to handle barley at all. If we had rules across Canada that were similar to the Ontario Farm Products Marketing Council's recommendations of needing a two-thirds majority to keep a crop, we would already have an open system for selling our barley in Western Canada.
The third mechanism that I think needs to be looked at is one that I have helped work on through another association. It is a proposed compromise mechanism whereby 25 per cent of a farmer's crop could be hedged against a bona fide commodity exchange in order for farmers to be able to manage their own risk, which is one of the prime reasons that we are seeking choices in our farming operations today. That is because we do not have the same kind of controls over our input costs and our freight any longer. We need to be able to manage our risk, and we need to be able to do that sometime prior to harvest and when pricing opportunities arise. Our mechanism will allow farmers to do that hedging, and it will allow the board to keep the monopoly on the exports of the product as well.
I can make more information available to you and will tomorrow in the presentation in Regina. The board still sets the basis levels as well, however. But farmers could access the price, and that is the key component in this mechanism. It is not 100 per cent of what I would like to see, but it certainly is a step in the right direction.
There are other problems; certainly in the governance area, with this bill -- the CEO being appointed, four other appointees. Ontario has a fully elected board of directors. I do not see why we cannot have that in Western Canada. They still have a guarantee on initial prices in Ontario. We are told that they need to have these appointees in Western Canada because of the guarantee on initial prices. I do not believe that the guarantee on initial prices is benefiting us in Western Canada the way it may have been at one time. In fact, it may be an unnecessary influence on price at certain times during the year. That is not to say that the government could not still guarantee export credit sales to our customers in offshore markets. Of course, the present business plan would have to be put before the government and the newly elected board of directors is responsible to the board, not to farmers. We think that that should be changed as well in our operation.
The Chairman: Mr. Maguire, I would ask you to wrap up in one minute, please.
Mr. Maguire: That is all I have to say. In my opinion, those are areas that need to be changed. Bill C-4 requires a lot of amendments, a lot of positive change, to become legislation that will help farmers in Western Canada.
Let me stress again that the issue that supersedes all others is: Why are farmers in one area of Canada able to market their product in a fully open market when the majority of us who are producing the wheat in Western Canada, which is obviously the majority of wheat in Canada, do not have that same option? We need to have those same mechanisms. In fact, in 1993 we had 40 days of open market movement, with regard to barley, in Canada as well.
Mr. Husband: Thank you for the opportunity to speak to this bill. As I stated earlier, our farm is an organic one. The entire farm has been certified organic since 1990 and it provides our livelihood. We grow a wide variety of crops, which we market in a variety of ways, including forward contracting. In general, we are able to achieve excellent and profitable prices.
The Canadian Wheat Board does not market organic grain, yet we are forced to sell to the board and then buy it back from them. The buy-back costs are arbitrarily set by the board. They are unpredictable and often expensive, and no service is provided. On occasion, we have been unable to make organic sales because the profit would have been taken by the Wheat Board.
Rotations are extremely important in an organic system. Wheat and barley are well suited to the Prairies and are important organic crops. They are in demand. Yet, because of the Wheat Board, we avoid growing wheat and barley whenever possible.
More generally, the Wheat Board and the organic industry are incompatible. Organic principles are worldwide, emphasizing farmer ownership and independence, while the board is government ownership and control. Organic grain is usually sold in small individual lots, always identity preserved under a strict organic audit control. In contrast, the Wheat Board marketing involves large volume generic pooling. Organic beliefs give priority to domestic markets, while the board emphasizes exports, limiting Canadian consumers to lower grades while exporting the best, as has been done by the board.
Bill C-4 does not make the needed changes. It is clearly unacceptable to a large percentage of farmers. It does not make the Wheat Board accountable to or in the interests of producers. It will continue to inflame divisiveness and unrest among producers. It is incompatible with the current world trade environment.
Bill C-4 is also in violation of Canada's commitment to United Nation's agreements, in three particular ways: One, the forced placing of private property into public ownership with arbitrary compensation violates Article 17 of the Universal Declaration of Human Rights, which states that no one shall be arbitrarily deprived of his property.
Two, the Wheat Board discriminates against prairie farmers in violation of Article 26 of the International Covenant on Civil and Political Rights, which states that the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as property or other status.
Three, by defining a designated area, the Canadian Wheat Board Act segregates a part of Canada into a territorial trust and places a very economically important part of the segregated area under the control of Parliament. This is a form of imperialism, violating U.N. covenants that state that all peoples have the right of self-determination; that all peoples may, for their own ends, freely pursue their natural wealth and resources; and that in no case may a people be deprived of their own means of subsistence. It is important to understand that these covenants have been signed and ratified by Canada. They are legally binding obligations.
Producers need to have a choice to opt out. This can be accomplished with a very simple amendment. Rather than repeal paragraph 46(b) of the Act, which clause 25 of Bill C-4 recommends, paragraph 46(b) should be changed to read: The Governor in Council may make regulations regarding the terms of exclusion for producers who choose not to sell to the Canadian Wheat Board under section 32(1)(a) and who then have the same status as producers outside of the designated area. This removes the aspects of confiscation and discrimination, while the Act basically remains intact.
Senators, Bill C-4 should make changes to the Canadian Wheat Board Act that are sound, supported and sustainable. Government refusal of self-determination for farmers creates a climate of intense and determined resentment. The board cannot be sustainable in a climate of ill will.
Mr. Nestibo: I am a grain, oilseed and pulse crop farmer, located about 80 miles southwest of here in Waskada, Manitoba. I want to bring to your attention concerns of myself and thousands of other farmers in Western Canada about the marketing of wheat and barley under the monopoly of the Canadian Wheat Board, and also needed amendments to C-4 to amend the Wheat Board Act.
My wife Jan and I have been farming for 22 years. We have three sons whom we would very much like to have a future in the agriculture industry. We are voluntary members of the local farm supply cooperative store; as well, we are voluntary members of the Manitoba Pool Elevators. In the last few years, myself and other farmers, working in cooperation with each other, have built a large farrow-to-finish hog facility to create jobs and add value to locally grown feed barley. I have also joined with other farmers to dehull and process sunflower crops in southwestern Manitoba.
There are many local processors of other commodities such as peas and lentils, but there is no value-added industry to grains that are under the control of the Canadian Wheat Board. To process and export these grains just is not financially feasible because the Canadian Wheat Board requires farmers to buy back their own wheat and barley at unreasonable prices. This buy-back process simply takes away the profit. Can you not agree that we are behind in value-added industry in Western Canada?
Many Western Canadian farmers now have the information, knowledge and the sophistication to market their own wheat and barley, just as they have marketed, added value to, and created jobs with non-board crops such as canola, oats, feed barley, peas, lentils, sunflowers, flax, rye. Senators, why not malt barley and wheat?
I cannot envision the founders of the cooperative movement in Western Canada ever anticipating that farmers would be arrested, charged with crimes, dragged into the court system and thrown in jail in handcuffs and leg irons just because they wished to sell their own wheat and barley outside the monopoly. I believe history will show a black mark on the cooperative movement in Western Canada because of the federal government's heavy-handed monopoly over wheat and barley exports. The Canadian Wheat Board monopoly has long since outlived its usefulness.
I believe that what the federal government has done to the economy of Western Canada through the Canadian Wheat Board is a tragedy. It is time for you to listen to the progressive and forward-thinking minds of Western Canadians and not the socialist status quo stuck in yesterday's mindset. It is a big, big world out there, senators.
Former agriculture minister and current Wheat Board minister, Ralph Goodale, has lost the respect of farmers because he has refused to listen to demands for changes in the grain marketing system. A prime example of this is the Western Grain Marketing Panel Report that was handed to the minister approximately two years ago. Mr. Goodale claimed that it was going to be the answer to the heated debate about grain marketing in Western Canada. Most farmers could have lived with the report. It was written by nine very distinguished, experienced and knowledgeable people in the agriculture industry, and it was completely ignored and rejected by Mr. Goodale.
Mr. Goodale has completely misled farmers by telling us that if we pull a grain out of the monopoly it can never be reinstated because of international trade agreements. Then came Bill C-4, and in that legislation there is an unbelievable and completely unacceptable inclusion clause for further grains to be strangled under the Canadian Wheat Board monopoly. This inclusion clause must be removed immediately.
Clearly, Mr. Goodale has been blatantly misleading farmers for years; therefore, he cannot be trusted and should resign his office and let a person of integrity deal with the Canadian Wheat Board issue and its legislation. The inability of Mr. Goodale to compromise on this issue will definitely lead to the complete demise of the Canadian Wheat Board. Heavy-handed forces of the Canadian Wheat Board are being rejected by more farmers daily.
What this legislation needs is a one-year opt-out provision for farmers who find this system unacceptable. It would work the same as it does for Ontario farmers. I have attached details to the back of your handout concerning the Ontario Wheat Board. They are soon going to have the option of selling all their wheat and barley to the board or all to the open market. A one-year opt-out in the new legislation will bring an end to this controversy surrounding the Canadian Wheat Board monopoly. With the current contracting system for grain, this opt-out is the simplest, most effective way to end the forced compliance of monopoly.
Senators, as you know, last winter there was a vote of the barley marketing preferences of Western Canadian farmers. Mr. Goodale's underhanded methods led him to do secret polling on those preferences in barley marketing. Those secret polls told Mr. Goodale that farmers would be 55 per cent in favour of a voluntary Canadian Wheat Board. So he decided not to give us that option on the ballot. He rigged the question so he could win in favour of the monopoly; therefore, farmers did not have the proper options to vote for.
We in Western Canada despise being treated as second-class citizens. We have the right to express our opinions, right or wrong, in a free and democratic society. There should have been a third option on the ballot, an opt-out or a voluntary Canadian Wheat Board option. Politicians or directors of the Canadian Wheat Board should not be allowed to rig the question so their biased opinion will win.
This new legislation has to include an amendment which outlines out how the question will be asked and all the options farmers will be voting for.
This concludes my presentation. I wish to express my thanks and appreciation to you for you coming out to Brandon and listening to farmers' concerns.
Mr. Maddess: Honourable senators, being a grain farmer from southwestern Manitoba, it is reassuring to have you consulting the people that Bill C-4 will dramatically affect. As has been reported, almost no one is satisfied with this legislation, including myself. Today we are operating in an era of numerous end-users needing specific varieties of grain at specified times. The delivery and handling of these grains is extremely difficult for the Canadian Wheat Board to coordinate because the Canadian Wheat Board was designed to source, for lack of a better term, generic grain, such as a certain grade of hard wheat, but not a certain grade of hard wheat as well as a specific variety. In my operation, I have been contracting hard wheat for the past several years.
Each year, when inquiring as to these contracts, the usual answer has been: "The company is working with the Canadian Wheat Board to satisfy its requirements before they can start contracting with the farmers." This bureaucratic hoop-jumping costs the customer extra money and causes frustration; as well, it leaves the farmer in a quandary as to his cropping plans.
If there were a dual-marketing system, the customer could deal directly with the farmer, saving costs and eliminating frustration for both. Since the loss of the Crow benefit, we, as farmers, have been bombarded with advice to add value to the grains that we grow because the cost of transportation is too high. There has been intense promotion to increase livestock production to take advantage of the added value as well as the reduction in volume for export. I agree with the concept. I am investing in a multi-investor hog barn to help diversify my farm with livestock production. All of the feed for these livestock operations can be purchased without having the Canadian Wheat Board involved.
In our area of southwestern Manitoba, we are not high quantity producers of grain, but rather high quality producers of grain.
There is presently a study into the feasibility of a pasta plant being constructed in northwestern North Dakota. Initiators of this proposed plan are investigating sites very close to the Canadian border because they are wanting to create employment in an area where there is very little to offer young people entering the workforce. The plant, if built, will be a new generation co-op or closed co-op. The proponents of this plant have made it crystal clear that they want and need Canadian farmer participation in order for the plant to be viable in this location.
If a farmer invests in this operation, he is obligated to deliver a certain amount of durum to the plant. With durum being one choice of cereal crop that we are required to grow for rotational purposes, investing in a venture of this type has great appeal to me. Problems: First, the investment in a closed co-op in another country; second, how to handle the delivery obligation, which is a required part of this investment. Presently I would have to sell my durum to the Canadian Wheat Board, buy it back at whatever price the board deems respectable or responsible for an individual to pay, then pay a licensed grain company an administration fee for the paperwork. All of this just so I can deliver my durum to my pasta plant. It is a great way to encourage value-added production.
The irony in all of this is that if I am raising livestock for value-added production I can take my grain out of my bin, grind it, feed it to my animal, slaughter the animal with federal health authority supervision and take the meat and sell it to anyone that I wish, but I cannot take my durum to my pasta plant and sell it without Canadian Wheat Board involvement. Where is the justification in this? Bill C-4 will do nothing to address this problem.
The inclusion clause in this legislation is also of great concern because companies who have an uncertain supply source will be very reluctant to invest in major plants.
Those are just a few of my concerns about Bill C-4, which, to me, is just an attempt by Minister Goodale to say that he is helping farmers have a more accountable Canadian Wheat Board, when in reality the Canadian Wheat Board will still be accountable to the federal government, not to farmers.
The Chairman: I want to thank you, gentlemen, for your presentations. We will now take questions from senators.
Senator Taylor: Mr. Maguire -- or anyone else who wishes to jump in --I am having a little trouble wrapping my mind around the fact that the Wheat Board just sells for human consumption, not non-human, yet you mention that Manitoba has become value-added. Naturally that diversification seems to be falling into the non-human consumption, in other words feeding -- no matter how much you like them they are still non-human -- whatever you have on the farm.
What is the relevancy of the Wheat Board if indeed they are not in the feed market? You have to diversify by feeding, so where does the Wheat Board come into your total equation?
Mr. Maguire: Very good question, and your analysis is correct. I believe that it will become less relevant in the future in regards to, as I said, farmers exporting crops out of Manitoba. They will be going north-south or be consumed here domestically.
However, as we have seen in the barley market to date, under the present program, having the board involved -- and let us use barley as that example -- is still an interference in the pricing mechanism, or an influence on the pricing mechanism or on the price that farmers get in the country, because we do not know whether they will be moving product offshore or not. At these prices -- and I will give you an example. The estimated return for next year is $1 a bushel for barley on our farms, on the low end of the EPR that just came out.
We want more pricing information on our farms daily, but we can get that now through satellites, mechanisms that are available in our offices on our farms. We can see the futures markets and all of the markets that are here in North America. We know what the domestic trade is on our farms daily.
The domestic price of barley was two and a quarter times that at the particular time of the announcement. In spite of the fact that it may not be used, it is still interference in the pricing mechanisms on our farms.
Senator Taylor: Mr. Maddess, you decry the idea of a third party telling you about where you can market your organically grown grain. How is organic grain identified? Do you just declare yourself that something is organically grown, or is something declared organically grown by a third party?
Mr. Maddess: There are a number of certifying bodies. In Western Canada, there is a group by the name of Organic Crop Improvement Association, OCIA. OCIA is a certifying body that is probably in 30-some countries, mainly in North America. There are local chapters. In Saskatchewan, there are eight local OCIA chapters. I belong to Chapter # 1, which is in the southeast. We have a certification committee. We send out an qualified organic inspector, usually in July, who does a thorough analysis of the farm. He then makes a recommendation to the committee. The committee decides whether certification is appropriate and, if so, this international body provides certification.
Senator Spivak: It has always been a mystery to me how the price of wheat can go down but the input costs never go down. My question is this: In order to get around this, of course, the solution is diversification and value-added, and all of that, but is there not still a terrific market for hard wheat and grains?
My next question is: How will changes to the Wheat Board impact high input costs? The second part of the question is what is the profitability of wheat going to be like in the future because there is still a great demand for it? If we diversify ourselves totally out of that market, is that a good thing?
Mr. Maguire: Thank you very much for those questions. Certainly with the changes that we are looking at, we would like to think that we can influence our input costs down, but we have to live with many of those. They are developed in a competitive mechanism. What we, as farmers, want today is the ability to manage that risk, because everybody's input costs and land values -- that is mortgage and interest rates -- are different. Each individual knows what is necessary to arrive at break-even prices for their farming operations. It might even make it more profitable on some of those farms to grow hard red spring wheat and durum in the future.
You are absolutely right, we will continue to grow some high quality hard red wheats and durums. It may not just be here in Manitoba, though. Durum wheat and high hard red spring wheat, high yielding, high protein, traditionally are grown in that southern Saskatchewan basin, the old Palliser triangle, and they will continue to be grown there. They will continue to be exported, as we have seen, in a direct line from Moose Jaw to Minneapolis. The rail line goes that direction. There will be more of it processed in the United States in the future. That depends, though, on the cropping practices of our American neighbours as well; how much land they have in their set-aside program; how drastically they phase out their seven-year farm bill. A number of those kinds of things will certainly impact on it. But we are seeing lower seeded acreage in the U.S. this year, and we will see lower seeded acreage in hard red spring wheat in Western Canada this year as well.
The transportation enters into one of the costs that we have to bear now, and it is a big cost. In fact, it is the biggest cost on our farms today. Therefore, if we have access to some of those mills in Minneapolis, farmers in Manitoba and southern Manitoba particularly -- actually, I would say all of Manitoba because the Swan River Valley is only 240 miles from the American border, and in many other areas of the prairies that is considered close. Those are the profitable markets for the quality product that we are growing.
As these gentlemen have all indicated to you -- I am involved in a hog operation myself -- the landscape is changing out here very quickly. As well as those crops, we will be looking at other higher yielding varieties of grain that will be grown for feed here in Manitoba as well.
Senator Stratton: If I may, I would like to go back to the fundamental principle of the Wheat Board itself. Obviously, you folks would like to have freedom of choice. But the question has always been that once you have freedom of choice, the future of the Wheat Board itself is put into question; that what is likely to evolve over time is that, as we move into autonomy in the local area to producing value-added products, the need for the Wheat Board will diminish over time.
If you had a vote on the future of the Wheat Board, would you like to keep it at a two-thirds majority or a simple majority?
Mr. Husband: I believe in freedom of choice. If, for instance, 15 farmers in southwestern Manitoba build a big pig barn, or if half the farmers in Western Canada want to get together and hire somebody, let us call it the Canadian Wheat Board, to market their grain, I believe they should have the freedom to do that.
We are not calling for the elimination of the Canadian Wheat Board in any of those votes. What we are looking for is an opt-out provision for those who cannot live under the monopoly, the forced compliance. If a group wishes to continue to cooperatively hire somebody to sell their product, I believe they should have that choice.
The Canadian Wheat Board has a monopoly in buying grain in Canada; they do not have a monopoly in Japan or China. There are many other marketers in the market over there. The only people that are forced into the hands of the Canadian Wheat Board are the Canadian farmers.
Senator Stratton: I will repeat my question. If you had a vote on the future of the Wheat Board, would you vote for a simple majority or would you want a two-thirds majority?
Mr. Husband: Well, that is a dicey area. Many farmers that I know do not believe there should be a vote on whether a person in Canada should have freedom or not. There are many people who feel that there should be an opt-out provision in the Canadian Wheat Board, a one-year declared opt-out, much as the Ontario people will soon have, and there should not be any kind of vote. There would not have to be a vote if there were an opt-out provision, and you would not have to get into these numbers games.
Although, there is an opinion out there that for somebody to be forced into complying with the Canadian Wheat Board monopoly, it should have the support of two-thirds of the people. It is pretty hard to force 49 per cent of the people to do something they do not want to do. You will have a stable industry. You will have dissension and constant arguing, like we have in Western Canada.
Mr. Maguire: I would like to reply to that as well. I think the rule should be the same across Canada. We would like to see a two-thirds majority to put a new crop in and two-thirds to keep one there. It is that way presently at the Ontario farm products marketing board.
Senator Hays: I would like to have a clarification from Mr. Nestibo. The comment in your text is that under the Ontario Wheat Board you have the option of selling all your wheat to the board or all of it on the open market. The text from the board documents at the conclusion of your paper indicates that a producer would file a declaration for off-board marketing, and off-board marketing is available for U.S. sales only. I just want to make that clarification.
Mr. Maguire: Yes.
Senator Hays: At the same time I would ask you, or any of you, to confirm your view that the Ontario board is a good precedent for the Canadian Wheat Board.
My second questions is: Assuming the bill goes through and there are elections -- I understand the objections in terms of the five appointed board members -- how do you see the election of board members going ahead, at least 10 of them, in terms of the environment for the campaign, and how you would play a role in that?
Mr. Husband: The Ontario marketing board will give the option for export sales only to their farmers. If you opt out, you cannot sell to the domestic market in Ontario. Fundamentally, that will not work in Western Canada because, as Grant was saying, if a group of farmers wanted to start a cooperative to process their durum, under the Ontario situation, if you can believe this, they would have to go into the United States and set up their factory; all the farmers would have to opt out and deliver their grain into the United States into the cooperative. To me, that is absolutely ridiculous. Why would not you set up your plant in Canada and create the jobs and economic and construction activity in Canada?
It is absurd to think that a farmer would have to opt out of the Canadian Wheat Board, could not deliver into a domestic mill, and would have to set up his factory outside of Canada. That is one thing about the Ontario legislation that I totally disagree with.
The Chairman: You failed to answer the second question.
Mr. Husband: Do you want to repeat the question?
Senator Hays: Well, it is the process. If this act is passed, at some point in the near future there will be an election for 10 or more, depending on how the legislation looks at the end of the day, board members. Of course, one of the purposes of this initiative is to involve producers in a grassroots way in the important decisions about change. How do you see that process unfolding? Do you have comments about your own roles in that?
Mr. Maguire: As the bill is being presented today, it is a good thing that some farmers are being elected to the board of directors of the Wheat Board. I do not understand why it cannot be exclusively farmers, although some of our industry members have concerns about that, in the processing sector particularly.
I think what you will have is a situation where the people who are running are anti- or pro-monopoly, and these people will be involved in the political side of it rather than in managing a $6-billion corporation. It is a travesty that the political decisions are not made in the House of Commons by the ministers, rather than through the board of directors. The role of the board of director should be to manage the affairs of the Canadian Wheat Board in the best interests of farmers. That is not the way the act is stated today.
Mr. Nestibo: I would like to agree with Larry. As he said, the Canadian Wheat Board is a $6-billion corporation. You want people in there who know how to manage money and know how to market grain. You do not want people with a political agenda in there.
Senator Fairbairn: I would gather from the comments this morning that the inclusion clause is not a big hit among you. As you know -- and I think you made reference to it, Mr. Maguire -- Mr. Goodale put out a suggestion that did not become part of the final decision in the House of Commons. And although that did not become part of the legislation, it is still out there for consideration. The committee is very interested in hearing responses such as yours to it.
You made a comment, however, and just for my own information I would like you to explain it to me. You said that if the clause were left in, it must be a weighted vote. I think you chose an example from Australia, was it? Could you explain that to me in more detail?
Mr. Maguire: Sure. The situation there is that if you deliver grain and you deliver it anywhere in Australia you would end up with one vote for the first 33 tonnes, another vote when you hit 500 metric tonnes, and another vote for each 500 metric tonnes thereafter. As well, they have Class A and Class B shares. They are moving towards the privatization of the Australian Wheat Board.
So when we look at changing boards around the world, and that is what we are talking about here, not at was referred to earlier, the elimination of it, we want to find mechanisms that will allow us to satisfy the needs of the farmers on the prairies who seek a choice and provide mechanisms for those who want to continue to use it as well, as is taking place in other sectors.
Senator Fairbairn: How long has this been in place in Australia? Has it got a track record? How has it worked?
Mr. Maguire: It is part of the mechanism for the privatization of the Australian Wheat Board that is going ahead right now.
Senator Fairbairn: Right now. But it has not actually been used?
Mr. Maguire: I do not believe so.
Senator Taylor: On the issue of the buy-back procedure and the fact that you get stung -- and I notice that most of the complaints seem to come from close to the border -- I suppose the buy-back makes it non-profitable because all of the deliveries are pooled, from the far north of Saskatchewan down to the border. How would you handle the fact that some farmers are close to the border and can spot these open markets and so on? How about your brothers, or do you even think of them as brothers, up there in northern Alberta, northern Saskatchewan and northern Manitoba, who are not as enthusiastic as you are about reaching a U.S. market? It takes them a long time just to get to Edmonton or Swan River, let alone down to the U.S. market.
What would you do for them?
Mr. Husband: If you are talking about going to a dual market situation, an open market situation, what you would have is called arbitrage. The price across the United States, from the international price in the United States or the world price, would arbitrage with the Canadian price. A lot of people feel that if there were a dual market, everybody would rush into the United States, and that is just not going to happen. The Canadian system is not going to just shut down and head for the North Pole; we can compete.
We can beat the Americans in value-adding and shipping, but our private companies have to have the ability to operate in an open market. They cannot have their hands tied by the Canadian Wheat Board monopoly. The only difference between the Canadian price and the world price that would be available in the United States would be shipping. That is exactly what it should be.
Senator Hays: Just a follow-up. I am thinking about your answer that the board should not be concerned with so-called political decisions, and I assume only business decisions. I am trying in my mind to distinguish between political and business. You did not use the word business, but whatever is left after political. I am having a hard time with this; maybe you can help me. In your opinion -- because the political people have been unresponsive to many people, including a lot of people in this room -- is it a good idea to leave the so-called political problem-solving with that group of people? Would it not be a better idea to have the board involved in those kinds of things? If I could just press you a little further on that.
Mr. Maguire: Well, if we had the same kind of structures as they have in Ontario, let me say that I would not be here making a presentation to you. I rather doubt that many of you would even be here because we would not be debating this point.
The board, presently, is a Crown corporation. Under a revamped mechanism that is proposed in Bill C-4, there would still be five appointed directors by the government, one of them, of course, being the CEO. Therefore the government will still have a great influence in the operations of the Canadian Wheat Board. I would see the board of directors, the farmers particularly that are on this new board of directors, coming to six, eight or ten meetings a year, perhaps even monthly, but they will not be hands-on in the day-to-day operations of the board as it is today.
From my experience as a Canadian Wheat Board advisory member -- I was looking at the shipping numbers, being able to see the freight, being able to see the timing of deliveries, being able to see the quality of grain in the country, being able to tie it with the pricing of grain in different markets in different areas of the world, according to the quality that was there -- I think the board of directors of the Wheat Board, farmer-elected, should be very interested in that.
How are you going to get a board whose mandate is to act in the best interests of the board? The board presently has a monopoly. In their view, it may be in their best interests to keep the monopoly. Therefore, if they are making the decision on whether or not the four of us have a choice or even want a vote in some of those other areas, why would they grant it to us? We need that fallout to be able to go back to the minister and say, "We need you to make these decisions." Surely, in the interests of the country, we should be able to do that at a parliamentary level and let the Canadian Wheat Board deal with the day-to-day operations and sales, deal directly with the buyers, without having to worry about whether or not they will have to sell canola tomorrow, or whether they will be able to sell barley as well. That is my response.
The Chairman: On behalf of the committee, I would thank our witnesses for appearing and for the detailed information they have given us this morning.
Before I call upon the next group of presenters, I was amiss in not recognizing Mr. Borotsik, the Member of Parliament from Brandon who has joined us this morning. I would also recognize Mr. Glen McKinnon, a former Member of Parliament for this area.
I would ask our next presenters, Mr. Sims, Mr. Sambrook, Mr. Radcliffe, Mr. Bell and Mr. Davison to introduce themselves and then perhaps Mr. Sims would start off.
Mr. Neil Bell: Good morning. I farm southwest of Killarney, Manitoba, which is about 60 miles southeast of here.
Mr. Bill Davison: Good morning. I farm with my son about 45 miles northwest of here in Kenton, Manitoba.
Mr. Bernie Sambrook: Good morning. I farm with my wife and my father in Medora in southwestern Manitoba.
Mr. Curtis Sims: Good morning. I farm at MacGregor. By way of background, I am a farm producer representative who deals with transportation issues at various committees in Canada.
Mr. Lorne Radcliffe: Good morning, Mr. Chairman. I live and farm at Cardale with my wife, my brother, and my brother's wife.
The Chairman: Mr. Sims, perhaps you would lead off.
I would ask each of you to restrict your presentations to five minutes, and then we will have questions.
Mr. Sims: I would congratulate you on recognizing the importance of this issue, and especially the phenomenon where the government of the day is emphatic about passing a bill, even though those directly affected are not represented in that government and where, in fact, those who are impacted by the legislation oppose it. Senate intervention is most appropriate in this instance.
Senator Taylor: That is how politics works.
Mr. Sims: My paper is entitled, "Canadian Rights Lost in Bill C-4." The premier axiom in the real estate industry is: "If you can't sell it, you don't own it." As a wheat or barley grower, I clearly cannot sell my grain as I wish. It is therefore obvious that I do not really own it. Consider the paradox: A farmer makes all sorts of expenditures on his farm, stakes his family's well-being on the outcome, and ends up not really owning the grain he has been growing. No other sector of the Canadian economy would tolerate such a situation. Indeed, the present government has gone out of its way to promote entrepreneurship, free marketing, export trade by private companies, free trade agreements, and so on. Yet, in Bill C-4 and its predecessor we have a throwback to collectivism and state enterprises, the antithesis of everything else the government is trying to do. These two economic theorems are mutually exclusive. Both cannot be right.
What is the Canadian Wheat Board? It is government selling our grain for us, like it or not. I say that for a variety of reasons. In a recent legal case, the government argued long and loud that it, the Canadian Wheat Board, had no responsibility whatsoever to get a good or even any price for farmers. It won the case. That is, the Canadian Wheat Board can expropriate grain from farmers and have no price responsibility to them. By definition, that is "confiscation."
Under the provisions of Bill C-4, the government connection is even more ironclad. The government is to appoint the CEO. The government will appoint the five directors. These puppet directors must act in the best interests of the Canadian Wheat Board, not the farmers. That is what is in the bill. This will mean that, in practice, they must maintain the principal tenets of the status quo. Should a director dare to attempt to step out of line, he can be fired by the minister.
Only the government can fine and imprison people. Hundreds of farmers have been fined, some very heavily; and some have even been jailed and put in chains for defying the Canadian Wheat Board scheme. Make no mistake, this bill is about deliberately denying property rights to farmers. It is about state control, and the old collectivist ideology, discredited in Canada and worldwide as a catastrophic failure.
Consider the way the confiscation scheme is operated. To start with, an inherent conflict of interest is obvious. To allow farmers and others to export with a licence, directly diminishes the Canadian Wheat Board's volumes and indirectly raises doubt about their abilities, hence questioning their power and prestige. Yet, the Canadian Wheat Board is given total, absolute and final authority, despite this conflict of interest. It would be intolerable anywhere else in Canada.
There is no appeal process, no information, no reasoning given; just yes or no, or ridiculous prices that mean "no." Bill C-4 does nothing to establish a more normal or transparent system with normal judicial or appeal safeguards. Indeed, we have documentary evidence of buy-back prices that suggest, at best, incompetence and, more likely, deliberate manipulation on occasion.
I have followed the U.S. -- read that "world" -- prices for quite a while. Further, we have exported into the U.S. for higher after-cost values. In the interests of avoiding a long discussion, I will simply state that, on the basis of all the information available to me, it is clear that the Canadian Wheat Board is not getting a superior price; in fact, it is generally lower.
At this time I would digress slightly to one important point. Even the Department of International Trade in Ottawa did not initially have this figured out. In the event of the removal of the Canadian Wheat Board monopoly, no great flood of Canadian grain would go south. Rather, the U.S. international price would come here. Transportation patterns would remain substantially as they are now. The gradual exception would be the engenderment of value-added processing here at home.
Yes, there are some components of the current system that I am content to see survive on their own merits. Some farmers really like the psychological comfort of a price pooling system rather than making all their own decisions. Therefore, let the Canadian Wheat Board operate as a voluntary Crown trading corporation. Those who wish to deal with it can vote with their trucks.
The positive aspects of Bill C-4 are, in general, that it would allow the Canadian Wheat Board to act more freely as to pricing and purchasing arrangements; that is, to operate more like a private trading corporation. Certainly, it would not be fair to open the market up to competition and then ask the Canadian Wheat Board to operate under the stricture of the old act. Why is it so afraid of competition under the potentially new arrangement?
I will not touch on price pooling in an open-market scenario, that is, a voluntary Wheat Board. Producers who deal with the Canadian Wheat Board could still price pool. The difference is that all producers, like it or not, would not be forced to price pool.
Two fundamental, ethical issues in any democracy must be addressed. In Canada we have a tradition of specific constitutional legislated rights to protect individuals and minorities. Yet, the Canadian Wheat Board systematically and deliberately suspends these protections for wheat and barley farmers. Suppose for a moment that a thin majority of farmers do want a monopoly Wheat Board, does that make the scheme right? Remember, in Nazi Germany, 90 per cent of the population wanted the other 10 per cent dead. Did that make it right? Of course not. Be sure the principles in this bill are right.
On a related subject, consider and contrast two incompatible events. Despite the ethics and morality our country espouses regarding individual rights, many farmers have been heavily fined, even jailed and chained, for selling their own grain. Concurrently, time and time again, the Canadian Wheat Board, Minister Goodale, and ardent Canadian Wheat Board supporters constantly and ardently insist that the Canadian Wheat Board is making them more money -- they think -- meaning this repression is justified. Remember, in a democracy, we are all responsible for our laws and the impact of their enforcement on our citizens. There is only one logical way to integrate these two items. Their ethics are for sale on this item.
My purpose in being very direct is not to antagonize anyone or to take some perverse pleasure from making such comments, rather, it is to encourage compulsory Canadian Wheat Board supporters and this committee to stop and evaluate all the profound and fundamental values most of us hold as Canadians, and examine whether the positions they are taking are consistent with these values.
To conclude, all other areas of our economy operate on the basis of individual initiative, sometimes exercised as a voluntary group or association. The GNP goes up every year. It is not a zero sum game, and neither, subject to Canadian Grain Commission regulations, would wheat and barley marketing be in an open environment. We, as farmers, and the economy around us can all do better financially and ethically.
Mr. Sambrook: With respect to my position on the Canadian Wheat Board, I am not now and never will be a supporter of forced collectivization. The monopoly Wheat Board is just that. The Canadian Wheat Board has always been hailed as a truly Canadian cooperative institution. Forced collectivization and voluntary cooperation are not the same thing. In fact, they are complete opposites. Yet, the Canadian Wheat Board has managed to survive for all these years because it has been able to delude the people into believing that they are the same thing. The true evils of the Wheat Board can be found in the deliberate perpetuation of this myth.
With regard to my particular farm operation, my first choice is to grow non-board crops, but because I can only grow them in rotation, I must continue to grow cereals. I farm in an area which typically grows quality, not quantity, and these crops, which are a natural fit for my particular agronomic conditions, unfortunately, are also crops on which the Canadian Wheat Board holds an exclusive monopoly. I have tried growing the feed grade wheats to escape the board but, because of disease, I have had to abandon those varieties. Growing oats and barley for feed in my drier area is generally uneconomical. Thus, even though I despise their monopoly provisions, because of agronomic considerations, I must grow Canadian Wheat Board grain.
In 1996 I made a presentation to the Western Grain Marketing Panel in which I proposed an opt-out provision to the Canadian Wheat Board. I would like again to ask the Senate to consider such a proposal, to be offered as an amendment to Bill C-4.
Quite recently, delegates to the Ontario Wheat Board have voted 90 per cent in favour of adopting an opt-out system for farmers in Ontario. All interested parties were consulted in making this proposed change and concluded that farmers should have an option available to them for marketing their own grain. Why will wheat farmers on the prairies not be offered the same type of choice? Why will we continue to be discriminated against and forced to continue surrendering our grain to Ottawa's Wheat Board?
An opt out or a declared off-board marketing alternative amendment to Bill C-4 would allow those prairie producers who, like myself, wish to market their own grain, to do so. Farmers would be given the opportunity, probably before seeding time, to choose either the open-market option or the Canadian Wheat Board option. Once that choice is made, a farmer is bound to it. This amendment would make pro-choice farmers happy; this also makes farmers who prefer to pool their grain happy, because that option would still be available to them. This is a constructive and compromising approach to this very political issue. Of course, this means the end of single-desk buying, but it does not necessarily mean the end of the Canadian Wheat Board. If farmers flee the board en masse, the Canadian Wheat Board probably should not survive anyway.
All I am asking for is the ability to take responsibility for my own marketing decisions. I have no real desire to stop others from pooling their grain and dealing with the Wheat Board. I believe it should be none of my concern how others choose to conduct their business. All I ask in return is for others to respect my choices and not try to force me into doing something totally against my will.
On the issue of accountability, exactly how will electing farmer directors to the board make this board any more accountable to farmers than what we have now? Farmers will still be forced, by law, to surrender their grain to the board, no matter what the performance of this new board is. These new directors will, by law, have to function in the best interests of the board, not in the best interests of farmers. After passage of Bill C-4, there still will be no duty of care to farmers, only to government. If a person is responsible to act only in the best interests of this monopolistic corporation, it is unlikely they will ever recommend any removal of their power, but only an enhancement of their power if, of course, they are to truly act only in the best interests of the board.
If accountability is one of the things that Mr. Goodale is truly after, and if this bill has been designed to achieve that, I must make clear to this committee that he is way off the mark. Only when farmers are given the opportunity to market their grain outside the Wheat Board's iron grip, will this industry become accountable to them.
With respect to flexibility, I would simply state that many farmers, myself included, are not interested in better living conditions at the jailhouse. We simply want out. All the well-meaning changes that may be proposed will not come close to addressing the situation that now exists out here on the Prairies. Our demands for market freedom will never be pacified with anything except our outright release from this forced collective system.
Mr. Goodale, all along, has indicated that a partially elected and a partially appointed board of directors will solve all our industry's ills; that this newly elected board will be able to shape the industry according to farmers' wishes. Reality suggests otherwise. What is being contemplated here is the creation of a new class of "yes men" for the minister. We must not delude ourselves into thinking this board will be anything but that.
The removal of the inclusion clause, in my opinion, is just common sense, but as far as I am concerned, the inclusion clause is nothing more than a red herring. The real issue always has been the monopoly, and until the monopoly issue is adequately addressed by this government, then this contentious and very political issue will only intensify and create greater polarization among farmers.
I wish to thank the Senate, and especially those senators who are members of this committee for taking the time to come out to the Prairies and speak with those who will be affected by this proposed legislation. I am sure you will be hearing many different viewpoints on this issue and on this particular bill.
I have brought forward a solid, free-enterprise proposal, born from my desire to be free to pursue wealth and happiness, and in the belief that, when others are free to do likewise, our society will be far better off. Others, I am sure, will speak only of preserving a system that forces their preferences on everyone else; a system that is out of touch with the modern information age and the new global trading realities. Others may even straddle the fence and go along with these cosmetic changes, claiming this is at least a start in changing our antiquated system, a start that will allow farmers time to adjust. The problem with that type of thinking is that, at the speed things are changing in our industry today, this new Canadian Wheat Board will still be too agonizingly slow to react and to offer farmers any meaningful change. I am not prepared to wait that long.
Mr. Radcliffe: I do not support the group that calls themselves the "Coalition Against Bill C-4." That group serves as a political arm of the Winnipeg Commodity Exchange -- open market. The coalition's policy statement is well known to committee members. Having said that, I can say that I do support the latest proposals to your committee by the advisory committee to the Canadian Wheat Board.
On one hand, the proposed contingency fund has its merits, in that it reduces some of the risk to our federal government and places it on the producers. This should please the critics who falsely believe that the Canadian Wheat Board is an arm of the Canadian government. On the other hand, I would suggest that you look at the latest round of price subsidies in France and assess how that is affecting world barley market prices today.
In the past, the Canadian Wheat Board paid its internal operating expenses with money garnered from savings accrued by borrowing operating funds, with our government guaranteeing those borrowings. The cash-buying feature was asked for by the Canadian Wheat Board in its original submission to the Western Grain Marketing Panel. The Canadian Wheat Board had recently sold a large cargo of barley abroad and, when it came time to deliver, it was determined that the barley had been cornered. Supplies were extremely tight. I believe that certain players in the open market had anticipated that this would likely happen sooner or later, and their efforts to catch the Canadian Wheat Board short resulted in some losses to the board and to western barley growers.
If the contingency feature remains a part of Bill C-4, it will be rarely used and does not, in my opinion, pose a major threat to the pooling concept.
The inclusion clause in Bill C-4 is a plus, in my opinion, and should remain there. The open marketeers -- and "marketeers" is spelled with two Es just like "racketeers" -- are the latest and the loudest opponents to this concept. It is my canola that they want to buy for less money. I take strong exception to that. In the past we have seen canola prices drop $72 per tonne in 72 hours. The governors of the open market met around the clock. They resorted to suspending trade. They changed the rules in an effort to correct the fiasco.
I have told Premier Filmon in a letter to the editor that the open market is as predictable as a yo-yo on a bungee cord. That is how strongly I feel about this clause. I believe that I speak for thousands of the silent majority who rallied very strongly in the recent past.
The big rally in Winnipeg approximately two years ago was in direct response to the panel report where barley was thrown to the wind. In one man's opinion, "The baby was thrown out with the bath water." This rally was in support of the single-desk concept. Although it was organized on very short notice, hundreds of people from Winnipeg turned out. In fact, thousands of people from Western Canada rallied in support of the single-desk concept.
I feel duty-bound to continue supporting the best marketing organization in the world today, one which is the envy of many growers in North Dakota.
I thank you sincerely for letting me voice my opinion.
Mr. Bell: On behalf of my wife and son, who farm together with me, I would express my appreciation for this opportunity to express my views on Bill C-4 and how it will affect our business.
By necessity, I must start with an explanation of how the Canadian Wheat Board monopoly impacts the prairie grain sector. The monopoly status of the Canadian Wheat Board is a disincentive to value-added processing. Investors have refused to risk capital in an environment where they can only buy raw product from the Canadian Wheat Board. The evidence is in the contrast between the healthy processing sector and the non-board crops versus minor investment on the prairies for value adding to board grains. These investments seem to have gone south of the 49th where pasta plants have sprung up and flour mills flourish.
The Canadian Wheat Board is not accountable to farmers. The advisory committee is just that, it can only advise. It has no control over the Canadian Wheat Board. Nowhere in the Canadian Wheat Board Act or Bill C-4 does it say that the Canadian Wheat Board must work in the best interests of farmers. The fact that the Canadian Wheat Board is exempt from the Access to Information Act and the scrutiny of the Auditor General means that it is not only unaccountable to farmers, but to everyone else.
Finally, the best opportunity for accountability is lost because of the Canadian Wheat Board monopoly status. In a dual-market environment, all players would be forced to compete and strive for efficiency.
The Canadian Wheat Board monopoly denies prairie farmers the marketing freedoms and property rights that all Canadians enjoy. I ask you the question: Why? Who is benefiting at our expense? I wonder why our government criticizes other countries about human rights' violations yet ignores injustices at home.
Canadian Wheat Board pricing policies remove the price signals I need to gauge and respond to the market-place.
The Canadian Wheat Board has failed to provide the marketing options I need to satisfy cash-flow needs.
The Canadian Wheat Board is an increasing trade irritant in a world market-place that has long been moving to an open market, free trade environment, which the present government has endorsed. Bill C-4 compounds these problems for producers by creating the possibility of non-board crops to be brought under this monopoly through the inclusion clause. This has created an unnecessary cloud of uncertainty over the entire non-board crops' sector. Our Japanese customers have said they want us to leave canola in an open market. Premiers Klein of Alberta and Filmon of Manitoba are both opposed to the inclusion clause.
I believe the monopoly costs the western economy untold millions of dollars through poor planning, lost marketing opportunities, and a reluctance to change. The reason for this is because, simply, there is no system of rewards and penalties in place -- rewards for good performance and penalties for poor performance. Producers give up control of their grain at the elevator or railcar, but are still subject to the risks until it reaches the customer, no matter who makes the mistake.
Bill C-4 fails to address any of the above inadequacies of the Canadian Wheat Board monopoly. The introduction of Bill C-4 demonstrates that the minister responsible for the Canadian Wheat Board has ignored the concerns of his own handpicked Western Grain Marketing Panel.
Through this whole process, Minister Goodale has refused to listen to Prairie farmers and has ignored the interests of the west to achieve his own personal agenda. I believe Bill C-4 will impair our ability to compete in the global trading environment of the future, and my ability to maintain a successful grain business or farm.
For the above reasons I ask you to protect the future of Western Canada by rejecting Bill C-4 and urge the Canadian government to legislate the marketing environment we so badly need, which is a dual market for barley and wheat.
Mr. Davison: I do not propose at this time to make a presentation which specifically addresses the pros and cons of the Wheat Board. I think that has been done very appropriately, very adequately and very passionately. I suspect that, over the next week, you will continue to hear these sentiments expressed, and just as passionately.
I would take this opportunity to say that I think we have been looking at the trees and that we should rise up and look at the forest -- the forest is Western Canada. In fact, the Canadian Wheat Board is Western Canada.
I have a nephew who lives and farms in North Dakota. I periodically visit him there. I do not believe that his production or his ability to farm is any better than that of any farmer in Manitoba and Saskatchewan. Whether or not we have continued to outperform the United States is because we have the Canadian Wheat Board, I cannot say. Perhaps it has something to with our form of government.
I believe that we in Western Canada, whether we have the Wheat Board or not, are being disenfranchised. This morning, a number of speakers expressed that view. Our disenfranchisement is extreme. At one time, Manitoba and Saskatchewan combined had approximately one-seventh of the population of Canada. Today, they have one-fifteenth of the population, approximately a 50-per-cent reduction.
There has been a further erosion of our ability to have a say in what is going on in this country. The move from rural to urban areas has increased tremendously, with the result that we have about a quarter of the representation in Parliament than was the case previously. I do not know how to correct that problem. I am hoping there is a possibility that such an organization as a democratically elected, responsible Wheat Board or marketing board or grain congress, whatever you want to call it, might fill that need.
This committee has come out of the Ottawa frying pan into the western fire. I congratulate you on your having the courage to jump into this. This is a tough issue. Western Canadians have a lot of problems.
A couple of weeks I was at a meeting in Yorkton where 25 angry farmers were sitting around the table. These farmers represent not southern Manitoba, but northern Manitoba and they are very upset about the loss of their rail lines in northern Manitoba. They believe that they are being very badly compromised in their operations. The responses they are receiving from the Canadian National Railway are relatively absurd -- that you cannot equate distance with efficiency and you must be efficient. If we have to be so damned efficient, let's look at the ordinary staircase in an ordinary house. That is not very efficient. We might put in a slide or an escalator, but will we remove the staircase because it is inefficient? No, we will not. Will we to rip up the sidewalks because they do not make money? No. I am sorry, I digressed slightly. I wanted to make the point that in that group of people there was some extremely angry farmers. You do not see that too often because farmers are a very accepting kind of people.
Why has there been such depopulation in Western Canada? The reason is, of course, bad prices. Farms grow geometrically from one section to two sections to four sections to eight, to 16, and the reason they do this is because farmers are trying to make a living, and if you have a two section average, that is what you have to buy.
The only people who really benefit from low prices and high production are the railways, the elevator operators and the people who sell the inputs that we have to put on our farms. I do not know how we will solve that problem -- how we can decrease our costs.
I have one analogy which indicates how absurd the prices are that we receive for our produce today. I spoke to a grain buyer who purchased grain in 1934, and he claimed that he was paying an average of 37 cents a bushel for wheat, probably No. 1 Hard Spring. My father told me that at that time he was paying men about 10 cents an hour. Today people are sneezing at getting $10 an hour. That is 100 times as much. Now, what would happen if we took 100 and multiplied it by the price of grain in 1934? You would get $37 a bushel. Let's look at the realities of life. Everybody pays taxes. Some pay 50 per cent of their income in taxes, so let's cut that in half. Farmers, generally speaking, do not make enough money to pay a lot of taxes, except hidden taxes. Let's cut it in half and say that the grain is worth $16.50 a bushel. Then we would be getting about what we got during the Dirty Thirties. Unfortunately, nobody knows this outside of the people who are seeing their farms abandoned, their villages abandoned, their churches falling down, and whose roads are being destroyed by the huge volume of trucking that has to run on those roads because the rail lines have to be profitable.
I do not know, maybe -- just "maybe" -- an elected board might work. I am not talking about an appointed board with a chief executive officer who is responsible to only the board.
I would like to make one small point and it is this: Most of us have our RSPs in mutual funds because we do not have the expertise or the time to assess the stock markets. We leave the management of those funds to financial managers, and we pay them $800,000 a year because they are doing such a good job. Gentlemen and ladies, the Wheat Board does that for us and we do not pay them $800,000 a year.
Senator Hays: We have had more mixed presentation from this panel than the last. I gather that some members of this panel feel that an elected board, 10 out of 15 or something like that, might have some value, and other do not. Directing this question to those of you who do not, one of whom referred to it as the "Ottawa Wheat Board," could you elaborate on why the board would not be responsive, given that it would, at least, be elected by farmers? Why would not it be responsive, in a political sense?
Mr. Sambrook: I believe that I should have a freedom to do certain things in this society. It should not matter too much whether my neighbour likes what I do or does not like what I do. Free speech would be considered one of those things. Freedom of religion might be another. The right to own and enjoy your own property is also one of those rights.
I do not know why I should subject my decision making and surrender my business capabilities to a committee of my peers. Are they going to tell me that I cannot grow Canola this year, or that I should be driving a John Deere tractor instead of a Ford tractor because they voted in favour of that? I am of the opinion that my freedom should not be restricted because of that vote. It is a right. Canada supports that position. In my written presentation I referred to Canada celebrating, this year, the 50th anniversary of the Universal Declaration of Human Rights. One of those rights is the right to own and enjoy property; the right not to be deprived of it. Yet, I have been deprived of my rights to that property by the Canadian Wheat Board. I do not have the right to do with it as I wish.
Therefore, I do not believe that the Canadian Wheat Board is the answer. The answer lies in politicians making a decision respecting that monopoly.
I have no problem with having directors overseeing the board's business. As far as forming policy on whether this crop is in or that crop is out, I do not agree with that.
Mr. Sims: Fundamentally it makes little difference whether they are elected or appointed, other than it may affect the small details, because basically the status quo is preserved. That would be their job, as defined in Bill C-4. The CEO is appointed and five members are appointed. Even the elected members will, basically, serve at the good grace of government. They have to support the status quo, support the Wheat Board, which would be interpreted to mean, "support it as it is."
Perhaps an optimist would suggest that some of the day-to-day operations and some of the relations with the farmers might improve, but the fundamental tenets are still wrong. Electing producers will not fix that. I am afraid we may end up with even more politicization and polarization. That, we do not need.
As a farmer and as one who has very modest involvement in farm groups, I would like to see our efforts in the farm community go towards building a new and better world for us and our children, and not into a whole lot of cross-purpose, political debates. A lot of energy is burned up leading us nowhere. If we simply operate on a voluntary basis, in a competitive environment people can work for the general good rather than getting into all these political situations.
Mr. Radcliffe: I can support the election of directors. However, I would support a district system for individual directors and a delegate system within a district, so that a director from that district would be elected from a group of delegates. This would reflect some grass-roots' input.
Senator Hays: Mr. Sims, in your presentation you deal with a concept with which I have difficulty. That is, if we started exporting a lot of grain to the U.S. we might run into problems such as those we have already experienced with the U.S. Congress, and particularly those Congressmen who represent border states, making things difficult for us. You say that it would not happen, that we would not export any more grain, but rather that we would have a different pricing system simply because there would be no monopoly. Could you elaborate on that?
Mr. Sims: Yes. People say that there would be a big movement to the U.S. because the price is different, and that you can run your DTNs or whatever. Certainly the price in North Dakota has consistently been better. On the face of it, we could assume that all the trucks would go south to the States. However, there are two things wrong with that assumption.
One relates to the arbitrage issue, specifically, that their price would come here. Oats are the same price, less freight, whether they are in Minneapolis or Manitoba. You can list the grains and commodities on the same basis. There would be a price equalization effect. It only takes a few loads to straighten that one out.
The other is that grain will go to markets that need it. There is a very practical reason to import our wheat, in certain combinations or blends, in the U.S., but they only require so much. They can grow wheat too. I do not see it happening for that reason.
On the transportation side, I see the same patterns continuing. Only the prices would change. Our transportation system may have to make some cost-structure adjustments. Frankly, in many respects the costs are too high, and we could talk about that for quite a while. I do not see any fundamental change in that regard. I do not see somebody from Swan River having to haul their grain in their truck to North Dakota. The trucks will not take over. They will stay with rail transportation and most of the grain will be transported in much the same way as it is now. The pricing will be different and, in fact, the separation, segregations, or identity preservations will be enhanced. There will be less of this averaging of price, averaging of qualities, and so on. We can do some specific things to try and improve our lot as farmers and to improve the whole economy.
Senator Stratton: Mr. Radcliffe, you expressed support for the contingency plan as it is described in the bill.
Mr. Radcliffe: Yes, I would support that clause if it would take some of the pressure off the Wheat Board as being an active arm of the federal government, and bring in more involvement by the producers. A levy is suggested there, but I do not think we need worry about the cost. We have absorbed costs before. It is nothing more than a hidden tax.
Senator Stratton: That is what I am fundamentally getting at. If you have a contingency fund that is inputted only by the farmer, that is an added input cost. Would you argue that there should be a cap on such a contingency fund?
Mr. Radcliffe: Has it ever been suggested that there would not be a cap on it?
Senator Stratton: No, but my concern is that the cap could be set very high and, as a result, your input costs would remain as a contribution to that contingency fund for quite a while.
Mr. Radcliffe: Surely, if we have an elected board of governors of the Canadian Wheat Board, they would have some respect for that particular cost, bearing in mind that they might want to be re-elected.
Senator Stratton: You would agree that there should be a cap on the contingency fund; is that correct?
Mr. Radcliffe: Yes, definitely.
Senator Stratton: Mr. Sambrook, you gave the strong impression that you are a free trader, which I can appreciate. Has Mr. Goodale explained why Ontario was given the right to opt out and not western grain farmers?
Mr. Sambrook: Mr. Goodale has been consistent in saying that any kind of voluntary system is unworkable, no matter how it is devised. The assumption has been made that that automatically means the end of the Canadian Wheat Board, period. He has never given me, personally, any indication why that is the case. I have no idea. I think this is a solid proposal that would work out here in the Prairies as well as in Ontario. Certainly there are different circumstances involved, but the concepts are the same. The desires of the farmers are the same. I think it can be done here on the Prairies.
Senator Stratton: My concern is that, once again, we are pitting the east against the west. We are giving the east the right to opt out but not the west. Ultimately the country will pay a price for that. I would argue that we should be consistent. Would you agree with that?
Mr. Sambrook: Yes, I would agree.
Mr. Sims: Perhaps on this occasion the east is leading us to a more progressive future for a change.
Mr. Bell: On the issue of east versus west, there has already been a separation, a division in policy, because, although Ontario producers had to get export permits to market their wheat, they were not required to pay for them. To my knowledge, no export buy-back provision was imposed on Ontario producers, which is different from the situation on the Prairies.
Senator Taylor: Mr. Davison described how things are going to hell in a hand basket, you might say. As you know, there is a real free market, and that is the price of farmland. Farmland keeps going up in price, and that increases the interest payments farmers must pay their bankers if they want to buy more land. That is probably the farmer's largest single cost. Why is farmland going up in price? Are the farmers in a suicidal mood?
Mr. Davison: They are not suicidal; it is a matter of survival. Many farmers are forced to pay whatever the traffic will bear in the hope that they can continue. I do not know whether you are aware of it but, in Manitoba, the Hutterites recently bought a section of land between Neepawa and Minnedosa and paid $1,700 an acre for it. On a farm five miles east of that a corporation bought a section of land, which will grow potatoes, and paid $3,000 an acre. Your question is well put. What is happening may imply that the future is here. It seems that it may be a little late to save the west for the westerners; it is now ready to go into the hands of the corporations.
On the television this morning I heard a man talking about the fact that in Newfoundland the trawlers took the fish away from the fishermen. Here I hope that somehow we can save the land for the farmers.
Senator Taylor: Mr. Sambrook, you talked about the freedom to opt out. That was central to your point. As you know, farmers do very well under the dairy and poultry boards. How do you expect the producer-type of co-ops organizations, such as the Wheat Board, to survive if people who share your views tell them to go to heck because they want freedom to do as they please?
Mr. Sambrook: There is a different scenario in the dairy, the chicken, and other marketing boards. They are all within Canada. They, in the true sense, manage supply. These supply-management systems can literally dictate the price whereas the Canadian Wheat Board cannot do that. They do not have a monopoly in the world market-place. They have maybe a 20-per-cent market share worldwide.
As to how the Wheat Board would survive if everyone who shared by views came forward, I would simply ask this question: If there are that many farmers like myself who, once they have the opportunity, would flee the board, then maybe that is a signal that should be heeded.
The Chairman: I asked our researchers to look up what the return on investment was to farmers across Canada. The latest statistics on that were compiled in 1994, and indicate that there was a 3-per-cent return on investment. Not many people would live with that, besides the farmers.
In any event, it is a good thing that I am the chairman here or I might get into this whole subject.
Senator Stratton: Do Ontario farmers have the right to opt out?
Senator Taylor: Only for U.S. suppliers. Their volume is insignificant. Mr. Sambrook probably produces as much as all the Ontario export market.
Senator Stratton: I understand that, but it still flies in the face of the principle that, if one group has a right, a similar group in another part of the country should also have that right.
Senator Spivak: I am concerned about the definition of "producer." Technically, a producer could be a bank holding the mortgage. Do you think the wording should be changed so that actual producers are the only ones who can vote?
Mr. Sims: At least as reported in the press, Bill C-4 does not include the regulations for who can vote in the election.
Senator Spivak: We are here looking for that information.
Mr. Sims: In the press a comment was attributed to the musings of government; to the effect that the voters' list would consist of the Wheat Board permit book holders. Lots of farmers who grow a lot of grain are not Wheat Board permit holders. We will have a serious problem if that holds up.
The other issue that you have to remember is that within the grain-growing industry are a lot of farmers whose main livelihood is running a feed lot or a hog operation, or maybe growing potatoes. A farmer may grows one or two fields of wheat, just a sideline, but his money and his heart may be in the potato business. As well, lots of people farm a bit, but their hearts are in their off-farm jobs. They are, more or less, hobby farmers. Lots of people do, technically, grow grain. Should their vote be equal to that of a person whose heart and livelihood are in grain production? Should their vote be equal, even though the real core of their interest is, as is the case with this corporate situation you have raised, in other money-making ventures?
Senator Spivak: As they say, "the devil is in the details." I think this is a very important provision which will determine how the legislation will actually work.
Does anyone else have any suggestion as to how the regulations could be adapted so that only actual producers vote?
Mr. Bell: I agree with you that, who will vote is a real concern. For example, on the barley vote, which incidentally did not ask the right question, monopoly interests wrote the rules of the game. My wife, my son and myself farm as a corporate entity. We hold one permit book, as do many of my neighbours. The statistics prove, I believe, that corporate farms tend to be the larger farms in Western Canada. As Mr. Sims pointed out, they tend to have a lot more at stake in the grains industry than many of the smaller farms. Of the three people in our business, only one got to vote because we held only one permit book. We were promised that, if we produced barley in the last five years, we would get a vote. We got one vote.
Senator Spivak: Mr. Davison, you mentioned northern farmers. It seems to me that southern farmers might have a different view of the real problems facing farmers. That may be mainly related to the costs of transportation.
My other question is more general. No one may be able to answer it. Why are all the mills moving to the U.S. and not here. Is that a result of the Wheat Board and the way it has been operating?
Mr. Davison: I will attempt to answer your first question, but I do not know the answer to your second one.
Farmers in the north would very much like to ship their grain through Churchill. They are finding that difficult to do because the Canadian National Railway supplies grain to The Pas, and from The Pas, Omnitrax carries it north. They have a different kind of need.
We have heard that the corporate farmers may be the larger farmers. As such, they have their own interests and their own needs. The needs of northern farmers, those who farm between 500 and 1,500 acres, are somewhat different. They are not attempting, at this time, to get into hog production. They will continue to make a living out of shipping grain. In all likelihood, they will continue with traditional farming.
It raises the issue of value added, which is something we should very carefully monitor. If I grow grain and I ship it, the price that I receive will be, let us say, the Wheat Board price. If I grow grain and I feed it, I may be able to increase the value added but I will make that decision, based on whether I can make money. If I grow grain and I sell it to a feed lot for a large hog operation, they may agree to pay me $5 a tonne over and above what I would get, including my transportation costs, and then I would have to decide whether or not that $5 a tonne is sufficient to be called "significant" value added. Perhaps that is something we should take into consideration.
The Chairman: Gentlemen, thank you for your presentations.
I call on Mr. Kevin Archibald, Mr. Chris Tait, Mr. Glenn Pizzey and Mr. Don Bromley.
Mr. Kevin Archibald: To begin, what is wrong with Bill C-4? From our perspective it just gives the illusion of farmer control. When the government still appoints five of the 15 members of the board of directors as well as a CEO accountability and direction is not there for the farming community.
Another problem is the inclusion clause, which hangs like a dark cloud of uncertainty over investment in any of the value-added or secondary processing industries that we vitally need out here.
We have lost the western grain transportation subsidy and we pay full freight now on the Prairies. What farmers really need is more processing ability. The last thing we need is to be discouraging any investment in those facilities. No investor is going to risk investing millions of dollars in a business environment that is just far too uncertain.
For western farmers the greatest flaw in Bill C-4 is the failure to address the need for more marketing choices.
From a business point of view western farmers live in a world that is full of risks, but the Canadian Wheat Board system of compulsory pooling does not address the risk management needs of most farmers. To us the greatest underlying flaw in Bill C-4 is that it does not offer the kind of risk management choices, marketing choices, that farmers are asking for.
I strongly believe that barley should be totally and immediately removed from the monopoly. Barley has no place in the Canadian Wheat Board system. That system does not add any value to the marketing of barley whatsoever. This is not a comment on the vote that was held the past couple of years. Referendums are a poor way to determine how marketing systems should be handled. Opinions can change overnight. In fact, I think the last census showed that the average age of farmers in western Canada is about 58. We are soon going to have a turnover to the next generation en masse. Are we going to need another vote every time we get a generational transfer to see what marketing system fits the new generation?
As technology advances, as we use the Internet more and more for marketing crops -- and that is happening very rapidly -- do we have a vote every year, every two years, every five years? These referendums are expensive and they are very divisive.
Another positive change to Bill C-4 would be the removal of the inclusion clause but the retention of the exclusion clause. There has been evidence that farmers want more marketing choices. Farmers have been thrown in jail for trying to get these choices through the legal system. There are the efforts of strong lobby groups like the Western Canadian Wheat Growers Association. The Western Grain Marketing Panel, when it brought out its report in 1996, found that open market crops were very happily handled under the present system. They recommended some fairly sweeping changes to our wheat marketing system, as well as to barley marketing. Those recommendations were all geared towards taking crops either partially or completely out of the system.
The work of the panel is very important. They surveyed all the customers. I feel that their work should have a great deal of weight here. The reason I say that the exclusion clause should be retained is that there will be a new round of trade talks with the World Trade Organization in 1999. Keeping the exclusion clause would send a signal -- the right signal -- to Canada's trading partners that we are moving towards more liberalized trade. Adding the inclusion clause sends the wrong signal. More importantly, for farmers it threatens to take marketing choices away at a time when farmers are definitely looking for more choice.
I believe that the governance system the government is looking at in this bill should be changed and that all directors should be elected.
Western Canada is very large. Ten directors elected by the producers of the region will make for very poor representation. There is a huge mass of land out there that these people are going to be responsible for. Personally, I do not think 10 will do. Fifteen would barely be enough. Maybe a delegate system might help. I do not address that in my brief but I strongly believe that all directors should be elected to even come close to approaching accountability.
There are some options that the Canadian Wheat Board should look at offering whether they are in a monopoly or in a competitive situation.
One would be to offer a forward or cash pricing option.
Compulsory pooling is a process that greatly impacts western farmers. When you are issued an initial price and then an adjustment price, and you do not get all the money for your commodity until you get the final payment some 18 months later, you cannot possibly cover the cash costs of producing wheat in this country. Whenever you incur a cost supplier is looking for payment within 30 days after the invoice has been issued. When a farmer gets an initial price it is based on 70 or 75 per cent of what the final projected price might be. It cannot come close to covering that cost while maintaining a family or having any hope of expanding or saving for the future.
Offering a cash pricing option would allow a farmer, even within the Wheat Board system, to sell a futures contract on a recognized futures market that exists right now, deliver the grain to the Board and either have the Board close out the futures position on behalf of the farmer or have him do it himself. No matter which mechanism is used the farmer has locked in a price and it would be a full cash price. If the monopoly remains the Canadian Wheat Board would still have the wheat to market. Very importantly, it would address the concerns of the northern farmers who do not have access to the U.S. market.
Essentially, what this pricing option does is offer a type of spot cash price to farmers, no matter where they are in the prairies, that is very similar to what North Dakota farmers are receiving.
That's where the friction comes from. North Dakota farmers are looking at a system where they get their money up front. They do have the opportunity to lock in their prices when they wish to but their spot cash prices are, on average, much higher than what the Canadian Wheat Board ever offers. It is just a function of the market-place.
This pricing option would address that. It is workable. I have had meetings through my work with the Western Canadian Wheat Growers Association with the Canadian Wheat Board on this, as well as with Agriculture Canada, and there is some interest. I feel that this should be a required part of the legislation.
I say that because the board of directors, when it is elected, will still be political in nature. The debate on marketing we are having with some of the witnesses here, and that has taken place for the last decade or more, will move to the Canadian Wheat Board boardroom and there is very little chance that an option like this will be considered. The directors would probably have to vote unanimously, or very close to unanimously to pass something like this. The chances of that happening are very, very small.
This is a system that would take away a lot of the pressure that we are feeling today. It would start farmers down the road to realizing what this choice would mean. This is a method of showing them and the world that dual marketing can work.
The final positive change to Bill C-4 I would like to suggest is to allow a declared off-board alternative, as the case in Ontario. But rather than copy the Ontario situation, where export to the U.S. is the alternative, I feel it is more important for the off-board alternative to be domestic as well. Definitely to the U.S., but domestically as well so that the very important value-added industries that we desperately need here in western Canada can source the supply and the quality they require from farmers on a one-on-one basis.
Mr. Glenn Pizzey: I approach this topic today from the perspective of an active farmer and of a processor of our farm's production. My experience not only involves growing the product but also processing it and moving it in finished form right through onto the shelf of the grocery store.
My family has farmed in western Manitoba for over a hundred years. In the last 10 to 15 years we have looked at and become involved in the processing, milling and baking of our grain-based products. This has now become the major side of our business.
This additional focus in our business is affected by two certain global realities. First, global trade in bulk agricultural commodities has seen zero growth since 1980. Virtually all of the growth in the industry has taken place in the form of finished products. I believe that the magnitude of this increase has been in the neighbourhood of three times. Every indication is that this trend will not only continue but will become more pronounced in the future. I think this is very important to remember as we go through these discussions. If we are going to grow in this country, we are going to process.
I have two major concerns about this bill. The first concern is the continuation of the monopoly of the Canadian Wheat Board. The second is the inclusion clause.
In our experience the continuation of the monopoly of the Canadian Wheat Board in the sale of wheat and barley will continue to have a negative impact and will preclude the development of any meaningful processing of these grains in Western Canada.
In 1990 when our company, Pizzey's Milling, was getting established and processing wheat and flax for the baking industry 90 per cent of the grain used in our mill was wheat, which is a Board grain. Today we no longer process Board grains. The change in focus had nothing at all to do with the markets we were selling to or with the potential we saw for wheat or barley in the many new products that we were excited in developing. It had everything to do with the impact of the Canadian Wheat Board monopoly.
I will elaborate on some of the practical effects that the monopoly would have on an operation such as ours.
First, there are the buy-back implications. Before we can begin to process our wheat or barley we have to go through the Board's buy-back system. This means that I have to load grain that I might have in storage right beside my plant and haul it to an elevator 15 miles away. Once I get there I have to sell the grain to the board and buy it back at a significantly higher price and pay the grain company an administration fee, even though the product never leaves my truck.
The second concern with the monopoly is the restricted access we have to our own grain. We have on more than one occasion run into situations where there was no quota or contract call for the particular kind of wheat that we wanted to process. This means that we cannot sell it to the Wheat Board, which means we cannot buy it back, so we cannot get our export permit, so we cannot mill it. If we want to stay on the right side of the law we go nowhere.
The third issue is the one of discriminatory pricing. The monopoly system allows the Wheat Board to pursue discriminatory pricing practices that are extremely negative to domestic processing. I recall on one occasion going to the elevator to do a buy-back and being surprised at the buy-back price I was offered. It was lower than what we had paid previously at a time when global wheat markets were rising. I asked the agent to double-check the price and to make sure that the people at the Board knew that this was for milling and not for export in the raw form. As it turned out, they had made a mistake and they came back wanting an extra 25 cents a bushel on the wheat over and above the price I would have paid if I had been just exporting the raw wheat. This tells me that I am not welcome as a processor in Manitoba and would have in this instance been 25 cents a bushel further ahead to have had my plant located somewhere else.
The fourth thing that I want to touch on is the overall logistical hassle. In addition to the logistical problems, the time required to get the export permits secured and to establish the buy-back prices became unacceptable to us if we were to respond to our customers in a timely manner.
The next issue that concerns me is the inclusion clause. Overall, we have been pleased with the development of our milling business. In the past eight years we have gone through four expansions and have gone from producing a few loaves of bread on the kitchen table to a modern 10,000-square-foot production facility. Marketwise, we have gone from selling in a few local farmers' markets to the point where 90 per cent of our business is done outside of the country.
The thought that I want to leave with you today is that this kind of thing could not, would not, and will not happen under the Board system.
We have been extremely fortunate to have been able to switch to flax, which is a non-Board alternative. The inclusion of flax under the Board would ruin our company, leaving no future for our family, our employees and the spin-offs we create.
Our plant employs 10 full-time people. Just last month a trucking company in western Manitoba bought one new semi-trailer unit and is already talking about one more just to service our account -- an example of the type of spin-offs that occur, over and beyond the jobs that we have created.
I defy anybody to show me or anyone else how this sort of involvement in the Canadian flax industry is impoverishing the country, yet this bill flirts with a mechanism to include flax under a Board monopoly system. This would not only finish our business but would choke off the prospect of any other export-oriented, grain-based business becoming involved in processing in Western Canada.
In summary, I would say that the preservation of the monopoly and the inclusion provisions of the bill need to be dropped. Western Canada has so much opportunity in the food-processing sector, but that sector cannot develop, exist or flourish in a monopoly structure.
I am firmly convinced a Board and a non-Board system could coexist and, in fact, become quite complementary. I also believe that we have enough bright and innovative minds in this country to work out an appropriate structure to make this happen.
Mr. Don Bromley: I grow cereal, oilseeds and pulse crops in the Brandon area. I feel that my opinions are similar to most of those producers in my area and beyond.
Bill C-4 provides more direct producer input into the operations of the Canadian Wheat Board while retaining the federal government's ability to fulfil its obligations with respect to financial guarantees, and it also retains the CWB's monopoly on the domestic and export wheat and barley markets for human consumption.
This bill will give the CWB the flexibility to adjust to a changing grain industry and to provide a middle ground for those whose who would support the status quo and those who would see the CWB completely disappear.
If there is to be a process of exclusion of grains from the Wheat Board's mandate then to give balance there must also be an inclusion. The procedure described in Bill C-4 would prevent special interest groups and minority producer groups from overriding the wishes of the majority. The possibility of an inclusion of the grain commodity under the CWB would probably give the grain companies an incentive to deal a little more favourably with producers.
However, the debate over the inclusion clause has taken focus off other issues. To develop a strong and flexible Wheat Board it is very important that the right people be elected as directors. I would support an election system that uses delegates to select the 10 directors. Each electoral district could be divided into 10 to 15 sub-districts. Producers in each sub-district would select a representative who would have their proxy in selecting their district director.
This type of system is familiar to farmers because it is already used by several organizations in Western Canada. While many producers may be unfamiliar with a provincial director, most will know the local delegate. This would create a ready-made focus group able to provide a director with feedback on policy and a direct line of communication between producer and director.
A delegate system of election would ensure that a director would have a clear 51-per-cent majority to win. A delegate system would reduce campaign rhetoric and advertising. This system would also make it difficult for third-party interest groups to influence the outcome of an election. Voters and candidates for a delegate's position should be involved in primary agriculture and should hold a CWB permit book. Candidates for a directorship should have 50 producer signatures on their nomination papers from the district in which they are nominated. Candidates must not be involved in any conflict of interest that would reflect negatively on the Canadian Wheat Board. Terms of office must be staggered to ensure continuity on the Board. A ministerial appointee as the chief executive officer would be acceptable in the short term, but it is very important that the CEO be responsible to and accountable to the board of directors. The establishment of a contingency fund should be at the discretion of the new board of directors. However, it must not give cause to the federal government to withdraw the initial price and loan guarantees. A possible source for this fund could be annual interest income, that is, profits from countries which are not repaying their principal but are maintaining interest payments.
The argument as to the future of the CWB will continue. With the establishment of a producer-elected board this debate would take place at the boardroom level, thus eliminating much of the rhetoric, media hype and fear-mongering that exists today.
Western Canada must have a strong and progressive grain marketing organization to protect the interests of the Prairie grain producers and to take us into the next millennium.
Mr. Chris Tait: I am a young farmer. I am interested in seeing that we learn from history, instead of repeating it. I am interested in seeing that we design our agricultural policy based on what the majority wants and based on the interests of Canadians, not based on the interests of a minority and not based on the interests of the international grain trade.
The Canadian Wheat Board represents common sense and financial stability to my farm and to my community. I am concerned that some of those who are calling for change in the Canadian Wheat Board are, in fact, opponents of the Canadian Wheat Board who want to see it destroyed. The Kraft, Furtan, Tyrchniewicz report proved that the single-desk selling of the Canadian Wheat Board earns farmers an average of $265 million annually. A subsequent study proved that the Canadian Wheat Board marketing of barley increased returns for producers by $72 million annually. Serious analysis should begin with facts as a foundation. The fact is that the Canadian Wheat Board earns farmers money as it is currently structured, and the majority of farmers support that structure.
The inclusion clause, which is proposed under subsection 47.1, outlines a process whereby producers can democratically decide to add grains to the Canadian Wheat Board purview. This is, in my view, a useful amendment. Some groups, such as the National Citizens Coalition and the Canadian Federation of Independent Business, rabidly oppose the inclusion clause. The reasons that such non-farm interests should want to interfere in the debate should cause the committee concern. Why these groups should so vigorously oppose democracy should also worry the committee.
The inclusion clause should be strengthened by including general farm organizations rather than just commodity groups as organizations which can trigger an inclusion.
With regard to price pooling, it is threatened under Bill C-4. Farmers fought very hard to establish price pooling and benefit from it. Subsection 39.1 of the act would give the Canadian Wheat Board the ability to buy from any company, for any reason, at any time, at any price. This clause is a very dangerous solution to an infrequent problem.
If the Canadian Wheat Board bought barley from the trade, for example, and if that price eventually proved to be higher than the price it paid to farmers, farmers would be justifiably upset. Subsection 39.1 should be deleted from the act.
Bill C-4 jeopardizes initial price adjustments in the partnership that the Canadian Wheat Board has had with the government with regard to guarantee of prices, borrowings, operations and credit sales that saved farmers $60 million per year. Bill C-4 revokes the federal guarantee on initial price adjustments.
In this situation it would be the Canadian Wheat Board's desire to set the initial price as high as possible to avoid the necessity of upward adjustments for which it would be liable. The government, on the other hand, will want the initial price for which it is liable set as low as possible. Initial payment adjustments have never incurred a deficit in the history of the Canadian Wheat Board.
The contingency fund, which farmers must pay to create, may be a first step in severing the guarantees the government provides on borrowing and on the initial price. The fund will also be money out of farmers' pockets. The government guarantee on adjustments should continue and no contingency fund should be established.
Bill C-4 would amend the act so that the Canadian Wheat Board is no longer an agent of Her Majesty or a Crown corporation. The government guarantee of borrowing, Canadian Wheat Board prices and the costs of the Canadian Wheat Board are thus endangered. If the structure of the proposed board of directors has to be modified to maintain Crown status it should be modified. The act should be amended so that the Canadian Wheat Board is kept as an agent of Her Majesty.
With regard to pooling periods, Bill C-4 proposes an amendment to section 31 of the Canadian Wheat Board Act to allow for shorter pooling periods. If this were used for quarterly barley pools it could be damaging. For example, prices tend to rise as the crop year progresses. With quarterly pools there would be an increased incentive to hold barley for later, possibly higher, pools. This would make it difficult for the Canadian Wheat Board to draw barley into the system in an orderly and timely fashion. The amendments to create shorter pooling periods should be deleted.
Canadian farm families should be the ones who design farm policy in this country. The minority of farmers who seek to destroy marketing structures in the farm community should be treated as such, as a minority. A minority does not rule in the House of Commons or in the Senate, and it should not rule anywhere in this country.
It would be a great mistake to let those who want to weaken the Canadian Wheat Board to get their way by passing legislation which jeopardizes price pooling, initial price adjustments, guarantees, Crown status and the principle of price pooling.
Senator Taylor: With respect to Mr. Archibald, all through your presentation you stay very clearly away from government guarantee. Of course, this is probably the main reason the government wants to have five out of the 15 directors in there. Did you forget the guarantee or do you think it is valueless? Is there a place for the government to guarantee Wheat Board sales?
Mr. Archibald: My opinion is that the guarantee from the government should remain with, however, an elected board of directors. Some control over the guarantee could be maintained in a similar manner to the way in which the government guarantees initial prices in the Ontario situation.
In Ontario the government guarantees initial prices for the Ontario Wheat Producers Marketing Board. They look at the price being offered as an initial price. If the government policy's people feel that that price is unreasonable they withdraw the guarantee. That same approach could be used in Western Canada as well. An elected board could look at the initial price being offered every year. If it is out of line, withdraw the guarantee. That leaves the Wheat Board totally at risk. That, I believe, is the right way to handle it. It is an important feature and I believe it should be maintained.
Senator Taylor: Mr. Bromley, you said the chief executive officer is still put in by the government. The way I read it is that they may put him in but the majority of the board, which is controlled by the farmers, sets the salary, so you really have a check and balance process. Were you aware of that? The government can hire the chief executive officer but without pay he or she is not likely to hang around. The farmers have control of the money.
Mr. Bromley: That would give the board some control as to the CEO. What I was getting at there was that the initial CEO could be appointed by the minister to maintain some sort of continuity in the interim between the situation as it is now and the new governance. I think there will be quite an upheaval and some sort of continuity is necessary for the protection of all the interests involved.
Senator Hays: We have a common position between Mr. Alexander and Mr. Tait. At least I interpret it that way. I think Mr. Archibald put it that votes were a poor way to decide marketing decisions. But you each come at this from a little different angle. Why are they a poor way to make a marketing decision?
Mr. Archibald: Conditions change and the barley vote is the prime example I can cite. The barley vote asks the question, Do you believe in the Wheat Board as a single-desk seller or do you not. Thirty-seven per cent were in favour of the open market, which is substantial. But if that vote had been held when the initial prices were announced in the fall of 1997 there is no doubt that, overwhelmingly, barley would have been taken from the Canadian Wheat Board. This was just a few months later.
Generations change, technology changes. Even a market change can influence how producers would vote. Let us say that tomorrow the canola market tanks for whatever reason. Producers get mad. It directly affects their pocketbook. If a vote was held right then people would vote for canola to be under the Canadian Wheat Board. But in times of strong markets people are very happy with the open market. Votes are only a snapshot of how people feel at the time. There is emotion connected to votes. I do not feel it is the way to solve this debate at all. It should be a political decision done with leadership, and with consultation, but votes are not the way to do it.
Mr. Tait: I am quite intrigued with the Western Canadian Wheat Growers' version of democracy. After losing the barley plebiscite so massively the response was the 37 per cent is a significant minority. I trust that in their own elections in their own organizations if 37 per cent of the people vote for one candidate that is going to be considered a significant minority and that they arrive at their policies accordingly. It is quite a puzzling process.
I think in any democratic forum we have seen quite consistently where farmers stand. We had the Wheat Board advisory elections, where 11 of the 12 were strong Canadian Wheat Board single-desk selling supporters. We had the barley plebiscite. What else do we need? I think any movement we can have towards establishing a democratic forum for farmers to decide on their marketing structures is very positive.
Senator Hays: It is significant to me that you didn't identify electing a board as being included in your reservations. Mr. Pizzey, we have heard about the buy-back in a negative way from everybody as having a chilling effect. Is there something the Wheat Board should be doing or could easily be doing to address that problem that would remove your concerns?
Mr. Pizzey: It seems to me that a lot of it could be done administratively. For example, why do not I report my wheat usage over a period of 12 months, just like I report my income tax or my GST? It is all subject to audit. These other systems seem to have served the country well. We have suggested this to the Board but apparently nothing has happened. I think there are alternatives, but that is the one alternative that would streamline the paperwork. On the other hand, there still is paperwork. On a lot of these deals we make around the globe you have to respond to a customer with a price. You have a very short time frame in which to do it. Even the uncertainty of it will, in a lot of cases, kill the deal.
The bottom line is we have tried very hard to make this work. The fact is we started out in 1990 as optimistic young people. We were going to work within the system. We were going to make it happen. Quite frankly, it just does not work. We have tried every which way we can. Sitting where we do in this part of the world we cannot make a value-added processing business work with a Wheat Board involvement.
Senator Fairbairn: Might this not be a transitional bill in terms of getting to a point where there is a fully elected board? It is starting with two-thirds. Is it not possible that this might be one of the most vigorous, lively, free-wheeling elections of almost any in this country? This is an area in which farmers have very strong views. Is it not possible that we could have a very representative activist, two-thirds majority on the board, is it not possible that this might turn out to be a very open, active Wheat Board with elected representatives of the farmers and a direct input of the views of the farmers?
Mr. Pizzey: In the global scheme of things, this really is a very, very small part of the problem that we have at hand.
Mr. Archibald: The farmers I talk to have lost so much faith in the process that many of them, unfortunately, are not going to participate in an election.
Mr. Bromley: I support a delegate system. This debate has become very polarized. I can see that system as a way of reducing that polarization.
Mr. Tait: My concern with an elected board is that as it is currently structured in the act it eliminates the Crown status of the Canadian Wheat Board. We have very little of value that we are gaining if we lose that Crown agency status.
Senator Taylor: If the free market is working you must be getting a good price for your grain. You are the producer. Otherwise you would have a influx of whole processors in here.
Mr. Pizzey: My response, and the response of every other processor, is that we leave, because we still have to process our product and move it across the border. If we could do it at a cheaper price we would probably stay here.
Senator Taylor: Why should the producer have to supply a processor, just because he is Canadian, with a cheaper product?
Mr. Pizzey: No, we are saying at a competitive and at the same price. It is very short-term thinking for the producer to think that he is getting an advantage by screwing the local processor, because what happens is they leave.
Mr. Archibald: A lot of the problems of processors like Mr. Pizzey have to deal with are not necessarily price related. It is also being unable to deal one-on-one with a customer when he needs to access a product. The Canadian Wheat Board is that one extra cog in the wheel.
Senator Spivak: At the beginning of this government's term we were looking at the future of agriculture. The two main areas were rural depopulation and diversification. Surely, the objective of maintaining the rural economy and maintaining rural population is terribly important?
Mr. Tait: I share your concern over rural depopulation. I think local processing would be wonderful. In my own community what is a disincentive to local processing and to population staying is that net incomes have declined. It is very laudable to talk about industry and development. Let us not destroy the Canadian Wheat Board in the process.
[Translation]
Senator Robichaud: I have a question further to Senator Spivak's comments. Would it not be possible at some point in time to make changes which would enable this processing and value added industry to develop and prosper in the region, given all of the resources that we have? This would help to resolve the problem we have with declining population and with people leaving either to work or to find work elsewhere.
We do not seem able to find a way of resolving the job shortage situation. Depopulation is occurring because people are leaving for urban areas where they can find work and make a better life for themselves.
Would it not be possible at some point to make these adjustments without destroying the system that we have in place?
[English]
Mr. Pizzey: We do not have to destroy the Canadian Wheat Board. I think the processing industry cannot coexist with the Wheat Board. What we need to do is to remove the monopoly of the board and we need to spend our time and energies on trying to make the two systems work.
[Translation]
Senator Robichaud: Could I get Mr. Tait's reaction to this?
[English]
Mr. Tait: I would have to see some convincing evidence first that the Canadian Wheat Board in any way hampers value added, and I have not seen it. What we see fairly often in this country is that processing develops where markets are, and there is not a significant market here as there is compared to a place like Toronto. That is the reality of the country. The other reality is, is the majority of what we produce is exported from the country. I think the final point we have to realize is we are talking about a bill here for farmers. I think farmers quite often get left out of the political debate. We are a small majority and we are not strong politically. I do not think we should be designing farm policy in this country for processors. The processing industry, for the most part, is a very profitable industry. The farming industry, the net farm income has declined over the last few years. Let us worry about farmers first.
[Translation]
Senator Robichaud: I am tempted to say that farmers have never been neglected and that decisions have never been taken without considering the impact that they would have on farmers. The farming community has always managed to make its voice heard and it will continue to do so. No government, in my view, would make decisions without consulting the farming community.
[English]
The Chairman: I want to thank you for appearing before the committee.
The committee adjourned.