Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 5 - Evidence - Afternoon 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 1:05 p.m. to give consideration to the bill.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: We will call our meeting to order. Before us we have Mr. McDonald, Mr. Riley, Mr. Nestibo and Mr. Armstrong. I think someone is missing. If he comes in a little later, we will certainly call him to the table. The way we have been proceeding, you make a five-minute presentation and then receive questions from the senators. We have until two o'clock for this presentation, so we have about an hour. Will you introduce yourselves and tell us who you represent and where you farm?
Mr. Alan Armstrong: I am Alan Armstrong from Cardale, Manitoba, which is about 45 miles northwest of Brandon. I am representing myself as a farmer in the oilseeds, pulse crops and cereal grains.
Mr. Brian Nestibo: I am Brian Nestibo from Melita, Manitoba. I farm in the Deloraine, Goodlands area, down in the southwest corner along the border.
The Chairman: Are you related to Delory?
Mr. Nestibo: Yes, he is part of the operation.
Mr. Tony Riley: I am Tony Riley from Strathclair. I farm there.
The Chairman: We will ask Mr. Riley to begin.
Mr. Riley: Thank you for providing the opportunity for farmers to express our views on the proposed changes to the Canadian Wheat Board Act by way of the Bill C-4 amendments. I am hoping you really want to know what I think, rather than what Ralph Goodale, Preston Manning or global grain pirates want to hear.
I look on all these changes and proposed changes to the Canadian Wheat Board as an aptitude test for farmers. If farmers take the bait and seriously consider any or all of these proposals, the manipulators will know that the farmer has not learned anything yet. They are fair game for more rip-offs. Farmers do not need a set of complicated rules to dispose of their grain. All we need is a Canadian Wheat Board that administers a quota system that divides up the available market fairly among producers, gives a "parity price" when the grain is delivered to the elevator, and a government that puts a tariff on grain and grain products at our borders.
Farmers must be paid their full earned income from the market-place; not a fraction thereof. The economy can only work when all players have the power to pass increased costs on to the buyer. This power has been denied the farmer and, as a consequence, every deserving business suffers because the farmer is not doing his or her share of recycling money throughout the economic system. It should be remembered, the buck starts with the farmers. If the bucks don't start, they will not get to the government treasuries.
Over the last 85 years farmers have been absorbing the shock of inflation. This has sometimes resulted in complete chaos. Farmers sometimes reacted by expanding farm size. This led to poor farming practices, spraying poisons on the food, destroying the fertility of the soil, ripping out shelter belts, and the farmers still went broke. In many cases both the husband and wife took off-the-farm jobs, which caused the depopulation of our towns, and created more problems than it solved.
Our governments are totally to blame for most of our troubles. They encourage big farms, railroad abandonment, road destruction, bush clearing, slough drainage, debt financing, and global pirates who gobble up Canadian companies. Past governments have allowed a great many Canadian companies to die, so that now many are going outside the country to buy equipment that could very well be made here.
The very worst crime of all is that the federal government refuses to obey the supreme law, our Constitution, and issue the country's money supply, debt free. This is what causes inflation and most taxes, all because the federal government unlawfully gave the private banks the power to create money. Now 95 per cent of our money supply is chequebook money, borrowed from the private banks. The interest on this borrowed money has multiplied the cost of doing business many times over. These increased costs are added to the price of goods and services, and the farmers get stuck with them in the present system.
The farmers should not have to pay the interest costs. Why should farmers be expected to subsidize every other player in the economic circle? This must stop. If the feds want to keep this crooked, corrupt money system, then they must give parity in terms of price on all agricultural production. If they want to soften the impact on consumers, they can pick up the interest cost tab on all the things farmers have to buy. If they want to do the right thing on behalf of all Canadians, then they must rub out the debt and, from now on, issue 100 per cent of the country's money supply.
The proper way to dispose of the debt is to add up all the principal that has been borrowed from the private banks since the year 1913, then add up all the interest that has been paid to the banks over those years, subtract the interest from the principal, and pay the difference. The banks never created one cent of interest money all that time. It does not exist. We all know it is impossible to give the banks that which does not exist, so we must be fair to both parties, and only give back exactly what was borrowed.
Once we get rid of this debt money inflation, I believe $2 a bushel would be very close to a parity price for wheat to the farmer. With $2-a-bushel wheat, we would have the upper hand in the export world, and it would be done without any subsidizing.
Many of us are aware that the Canadian Wheat Board is under attack because the global grain pirates want our unpriced grain, and the Canadian Wheat Board in is the way.
The FTA, NAFTA, and MAI legalize the theft of our natural resources by the global pirates, and they plan on getting our grain by hook or by crook, too. We Canadians were handed a virtual paradise. There was no need to lie and cheat. There was plenty for everyone. But all it took to change that was a treacherous government that gave away power to ruthless bankers. We are even threatened by the IMF if we do not impose a GST on ourselves to get interest money for greedy bankers. We desperately need an honest, loyal government that puts Canada first if we are to get on the road to recovery. Thank you for listening, and I hope you feel compelled to work hard at cleaning up Ottawa. There might still be time to save Canada.
Mr. Nestibo: I am not very comfortable in this type of forum, but the Canadian Wheat Board is affecting our farming operation in a negative way, and sitting at home and doing nothing would not help, so here I am. I would like to make some comments for the first four and a half minutes, and then in the last 30 seconds I would like to tell you what you can do with Bill C-4.
A lot of briefs have been presented today, but I think I want to talk more about the dollars and cents of our farming operation and how it is affected by the Canadian Wheat Board. I farm with three of my brothers in southwestern Manitoba, close to the border. We farm around 13,000 acres; most of which is rented. We manufacture, and I will use the word manufacture, cereals and oilseeds. One-third of our acreage, for rotational reasons, grow wheat, durum, and barley, the Canadian Wheat Board grains. We are in a drier area, so wheat and barley grow better than a lot of specialty crops, like canary seed.
My brothers and I have come to the conclusion that maybe we have outgrown the Canadian Wheat Board. It was put together in the 1930s and 1940s, and personally I do not think they have changed that much in their attitude to farmers. To maintain cash flow in an operation our size, it is impossible to work with them. We must have 20 per cent call on our grain inventories to receive initial payments and the rest of our money over 15 months, and this is not good enough to get our bills paid off shortly after harvest. I'll give you an example of what I mean. Three years ago we were hauling oat to Russell, North Dakota. The elevator agent there asked us if we were growing durum. I said, yes. He wanted to see if I would bring some samples over, which I did. He offered me, if I could get it over there, $6.50 U.S. a bushel. With the exchange rate, that came to about $9 Canadian. I had 40,000 bushels of durum at that time. So $9 at 40,000 is $360,000 dollars. Now, remember we farm 13,000 acres. It costs us, if you do the math, about $1.5 million to put that crop in. So $360,000 would give us a start to pay off our bills.
We went back to Canada and checked in with the Canadian Wheat Board to do a buy-back. I found out that I would lose $1 a bushel doing the buy-back through the Canadian Wheat Board; therefore, I was forced to sell my durum in Canada. So I went to my local elevator in Deloraine, Manitoba, and told the man there I needed some money to pay some bills and that I had 40,000 bushels of durum to sell. He tells me I have to fill out a Series A contract to the Canadian Wheat Board. That contract obligates me to sell at least 80 per cent of those 40,000 bushels to them or else a penalty would be imposed.
On the other side of that, the Canadian Wheat Board really can take any amount they want to. They are not really locked into that Series A contract. They can take 20 per cent or 80 per cent, or 100 per cent. It really does not make any difference. So the man told me that there is a 20 per cent call, so I can haul in 8,000 bushels. The CWB's initial price at that time was $4 per bushel. At $4 a bushel, times 8,000, you get $32,000 -- $32,000 compared to the $360,000 I could have received. That money would have helped me to get some bills paid off, to stop the interest clock from ticking. This happens every year. It forces us to sell a lot more of our canola and sunflowers off the combine when there is harvest pressure on prices.
In summary, Bill C-4 has an inclusion clause, which I do not agree with. Actually, I would like to see an amendment to Bill C-4 for an exclusion clause for any farmers who want out of the Canadian Wheat Board. And I am not just talking about grain farmers. No other manufacturer in Canada, and we are manufacturers, who puts his time, money and soul into making a product would turn that product over to a bunch of bureaucrats to sell, allowing him to have no say in it.
We are threatened by law with fines and jail time for wanting to sell our manufactured product to the highest bidder. Just whose grain is it?
Mr. Armstrong: I currently farm 1,500 acres of cereal, oilseed and pulse crops. In the past six years I have concentrated more on oilseeds and pulse crops, whereas previously it was cereals. The strongest influence has been the pricing, payment and shipping methods of the oilseed and pulse crops and the value-added processing within the province, in contrast with the current systems of the Canadian Wheat Board and the virtual non-existence of value-added processing to the Canadian Wheat Board export crops.
By comparison, oilseeds and pulse crops are paid in full at or near the time of delivery, whereas the Canadian Wheat Board only pays a portion. Pulse crops are clean to spec for human consumption markets on a large base, and only clean product is subject to freight cost. By comparison, the Canadian Wheat Board exports are shipped as raw material, with foreign material or dockage to tolerance levels. The oilseeds and pulse crop's dockage or cleanout is used locally, fetching as much as $150 a tonne. By comparison, dockage shipped for export by the Canadian Wheat Board has no value, but the freight is paid for that same dockage to the detriment of the producer.
Being a young farmer with increasing debt load and payments, it has been very necessary to have more cash crops to meet these obligations.
The Standing Committee on Agriculture in 1991 quoted a publication called Farm Debt Update, which stated that in January of 1990 the average Canadian farm debt was $91,000. The average debt carried by a farm in Manitoba in growing cereal, oilseeds and lentils was $88,271, or 97 per cent of that Canadian average.
Since the dissolution of the rail subsidies, the cost of shipping wheat to export points correlates into substantial increased cost to me. I will explain this cost relative to the wheat's value. Using $5 wheat and a $23 a tonne freight increase as my model, I am paying an additional $1.07 per bushel, or 21.42 per cent of its value to get my wheat to market. I was not paying that in 1990.
I can conclude that the average farm debt has increased substantially since 1990. In addition, in comparison to Canadian farmers, it is a foregone conclusion that the Manitoba farmer is paying more in freight cost to get the grain to port; therefore, export wheat and barley in Manitoba is not equitably priced compared to net values in other regions of the country. I can conclude that the average farm debt in Manitoba is now higher than the Canadian average.
The higher freight cost has been detrimental to the Manitoba farmers for we cannot attract processing. Processors are not attracted because they are forced to buy raw product from the Canadian Wheat Board at exorbitant prices.
I have been told by a Canadian miller that they are paying $20 to $30 a tonne more than the Canadian Wheat Board Are we subsidizing exports to foreign interests? The Canadian farmer and miller are not being treated equitably. A group of farmers cannot source their own grain to mill for export without paying the same fee to the Canadian Wheat Board as mentioned above.
Let us turn to the example of money earned on processing. The freight cost on shipping flour to Quebec from Manitoba is approximately 13 per cent of its value, according to a miller whom I recently spoke to. My freight cost of shipping raw wheat to Quebec, including handling fees to grain merchants, is approximately 39 per cent on the gross of the net value.
Recently an oat processor spoke to a group of farmers and related business people, saying that if oats were still under the jurisdiction of the Canadian Wheat Board, they would not have built here in Manitoba. Another miller stated to me in a recent conversation that if he had to do it again, he would build south of the border. These statements are very disturbing to me. We need to be processing and milling our grains and realizing better freight savings and value-added revenues. Wheat and barley produced in Manitoba for export is not economically viable for farmers, processors and millers under the present system of the Canadian Wheat Board.
Manitoba farmers must be allowed to market their wheat and barley directly to processing facilities, bypassing the Canadian Wheat Board and its associated costs, grain merchant fees, and freight costs on raw grain. Millers must be allowed to source the raw product, bypassing the Canadian Wheat Board by the same exemptions as the feed mills. Amend Bill C-4 to allow this to happen.
The inclusion clause must not be allowed. It would kill the processing we now have in place and prevent any future processing, to the detriment of the Western Canadian farmer.
The Chairman: Is Mr. Bradley McDonald in the audience? He is not. Then we will turn to questions from the senators. Senator Hays.
Senator Hays: We frequently hear that border farmers, particularly those who grow durum, have a favourable marketing option in the U.S.. Because of the pooling principles, they are stuck with the problem that you, Mr. Nestibo, have experienced. There is no answer to your problem if we stick with pooling. Let me ask you this: I do not know what your final payment was. Your initial payment was $4 and you probably got another couple of bucks, but it would have been significantly less than the $9. Why does not the CWB supply that market? What is your feeling on that? Your problem is a difficult one to answer. But I ask myself every time I hear this story, and we have heard it frequently between Macoun and Crosby, North Dakota, where Senator Gustafson farms, why the Canadian Wheat Board is not accessing that higher price for its pool.
Mr. Nestibo: I think they are accessing them. In fact, I know they are. In that particular year when I was getting $9, they were touting -- and it was actually in the Cooperator, in the list -- that they were getting well over $10 overseas for this. Fifteen to 18 months later when we got our finals and interim payments, it was down around $8. I do not think it was quite $8 when all was said and done 18 months later.
If you take the average of $9 for some they sold in the U.S. and $10 FOB at the Lakehead, that tells me it is costing us more than five cents a bushel to run the Canadian Wheat Board. They are getting access to it, but for some reason there is more money disappearing. I think it disappears in the inefficiencies of the Canadian Wheat Board.
To me, pooling means selling your grain throughout the year and not all in one shot. We do that a lot of the time with our canola. At this particular time, for $9 a bushel, they could have had my whole 40,000. I would be very happy with that. To me, pooling with the CWB means that they have a pool of our money sitting in the next room, and that if they make a mistake in selling our grain or if they get the wrong stuff to the Lakehead and had to pay the demurrage, they would just have to walk next door, take some money and pay it off.
Personally, I do not like pooling. I think it creates a lot of inefficiencies in the Canadian Wheat Board. In my own pooling, I will sell it three or four times throughout the year.
Senator Taylor: Maybe I could ask you same question I have asked other panels, because Mr. Riley, Mr. Nestibo and Mr. Armstrong have different points of view. How do you feel about electing a board to run the Canadian Wheat Board as a means of expressing yourself as a producer? That would give you an opportunity to see the board evolve in a way that you like, or if it is not the way you like, at least you would have had a fair opportunity to have your say.
Mr. Nestibo: I have fairly strong feelings that there must be an exclusion clause to the CWB for farmers, so that any farmer can opt out. If that is not there, I do not think that the Canadian Wheat Board, even with an elected board, will do anything to satisfy any side of the argument. Now, if they put us in there, with the option of leaving, I would then say that an elected board would be very important. Personally, I feel that unless we are able to opt out of the CWB, no system will satisfy anyone.
Mr. Armstrong: I feel that the mandate of that elected board is dependent on what authorities they have on policy and policy making. If, in fact, they are there just to be listened to by the powers that be, to pass information from one to another through another, it is the same inefficient system we have now.
Mr. Riley: My feeling is that farmers are doing quite enough when they produce the crop. To elect somebody on the board, farmers can be hornswoggled into compromising their rightful earned income and steered in the wrong directions. Of course they are not going to be a power anyway; even if they were going to do the right thing, they would not be allowed to do it.
As I said in my brief, the right way to go is to give a parity price to the farmer and take it away. He has no say in it from there on, any more than any other Canadian. But I do want to emphasize that I think the Canadian Wheat Board is 100 per cent good in concept, not just for the farmer, but for the country, because grain is a very valuable resource. It is also good for the people who import the grain. You can make state-to-state sales and avoid all those middlemen. Global grain pirates gouge and operate kickback systems. I think the National Wheat Board is just a good, moral way of disposing of our grain and we all benefit. But with the way it is run now, the farmers do not get a good price, and that is not good enough.
Senator Spivak: I guess we understood what the freight rate change was going to mean to Manitoba. At the time predictions were made, but these figures are really shocking. I just want to ask Mr. Armstrong to explain a little more. How it is that shipping flour to Quebec costs only 13 per cent of its value and that raw wheat costs 39 per cent? Could you just point out the specific provisions that allow the railway companies to do that?
Mr. Armstrong: Sure. I cannot quote exactly on the price of the flour going out there. The person I spoke to told me that the freight rate on that flour is similar per tonne to what it is for wheat. It takes 1.4 tonnes of wheat to produce one tonne of flour. So when you work in that difference, it comes out fairly equal as far as the freight going out. However, you are shipping a partially finished product, which is of higher value.
Now you mentioned the 39 cents, and I will deliberate on that. When they reduced or did away with our subsidies, I lost $23 a tonne of subsidy at my point in Newdale, Manitoba. I correlate that back to a price per bushel. I will use $5 as a good average for the price of wheat for my model. It is not necessarily the top price of wheat; we ship two and three different grades of wheat at different prices. That correlates into a 12.52-per-cent increase in cost on the total value on the initial price. I add in what I was already paying by the same process of another 5.9 per cent of the value of my grain. Now I add in the handling costs to the local merchants. That is also added into that figure of $18 a tonne from my point. It is only roughly $17 in specific handling charges. There are elevator cleaning charges, CGG fees. I think that comes to pretty close to $18, in or about, or under.
When I deliver wheat in September or October I am working on the initial price. That wheat paid to me at that time is not $5 a bushel. The initial price may be as low as 60 per cent of that value. So I have to factor that back out, then, because I pay the entire freight handling and everything on the entire amount. I have not even factored in the interest yet. I factor back 40 per cent of those handling and freight costs that I have not yet realized on the paid wheat. Over time that will come back to me, over the 15 or 18 months, or whatever time span it is. Over time 11.3 of that will come back to me, which brings me down to the cost of 27.7 per cent of the value of that wheat at the model of $5 for me to ship it to Quebec.
Senator Spivak: You are paying about 21.5 per cent more than you were in 1990 before these provisions went into effect, are you not?
Mr. Armstrong: You're right.
Senator Spivak: I know this is slightly off topic, Mr. Chairman, but it is not exactly off it. What are you suggesting perhaps? What public policy could remove this particular injustice to Manitoba, which is in a geographical disadvantage? Before, they had a system that pooled the freight rates, and now that is gone. I do not think that Saskatchewan or Alberta are in the same position that Manitoba is. Manitobans must pay the highest rates.
The Chairman: Eastern Saskatchewan is also in the same position.
Senator Spivak: We were told by one of the earlier presenters that Eastern Saskatchewan has the highest rates in North America. This committee is specifically addressing the difficulties with the operation of the Canadian Wheat Board for some farmers, but it seems to me that the input costs, and particularly the freight rate costs, are equally important. As Canada is a resource-rich country and far from ports, almost every commodity, natural resource that we have, has to contend with high freight rates. In some cases there have been historical ways to get around that and in some cases there have not. The coal producers in particular and the lumber people are also in that same position. I just wondered whether you had any recommendations to that effect.
Mr. Armstrong: Yes, I do. My recommendations regard processing. Let us stop shipping raw product. Certainly we have closer markets to us, as my learned friend here explained earlier, close to the States. The markets allow the processors, being millers or whoever, to source their grain directly to farmers by specifics. In other words, I will order CPS wheat from you, or Glenlea wheat or extra strong. The CWB would be notified as to what grains are being handled within our own domestic system.
Use Australia as a model. Their own domestic millers and processors do not have to buy grain through the Wheat Board. Only grain destined for export to foreign ports must go through the Canadian Wheat Board.
Senator Spivak: I have to get back to the same question that Senator Hays asked. Why is it that all of these mills are locating just south of the border, and how can we get our own people more involved in this? What is your view?
Mr. Armstrong: My view is to allow them to source the grain. They want our grain and have the infrastructure to handle it. That would save our freight costs.
Senator Spivak: Are you saying that you should allow our local millers to source the grain, or should the ones just across the border?
Mr. Armstrong: We should allow them to source our grain, too.
Mr. Nestibo: That would mean doing away with the monopoly of the Canadian Wheat Board, and I think that is all it would take.
Senator Spivak: There must be more than one way to approach this problem. I do not know if you have to throw the baby out with the bath water.
Mr. Armstrong: If I may conclude here, I was on a project out in our own area. We initially started out with a 12-member group on the board of farmers and entrepreneurs, wanting to build a business whereby we would clean grain to spec, much as we do in the pulse industry, for specific milling markets and still operate within the CWB. We had local interest, the money raised, Manitoba Securities on board, and market feasibility studies done. We ran up against some roadblocks. We wanted to have a multinational company with us, with us having controlling shares. We required that they had the infrastructure for the milling and processing, and their own rolling stock.
We approached four different companies. The particular one that we were most interested in ran up against a roadblock. The Canadian Wheat Board would not allow them to bring a unit train up here and load it with their own bought grain at their own terminal. They wanted their cars and rolling stock integrated with the rolling stock of the CWB: CN and CP.
Senator Spivak: What year was this?
Mr. Armstrong: This just happened in the past year. It was attractive to think of having unit trainloads of 52 or 100 cars at a time, and some of those efficiencies. The railway at the time we spoke to them was offering $3 a tonne, which they were demising to do away with because there was no need for it anymore. They are building high through-put facilities in Saskatchewan like we are building houses here, if you want to coin a phrase. I call them monuments to the Prairies.
It does not matter what size of facility you have, you have to get the grain out the back door. We have a small one in our area that was producing 200,000 tonnes a year in a small grain elevator out the back door, simply because of the management.
Senator Taylor: I would like to pursue the issue of processing. The Canadian Wheat Board argues with a certain amount of logic that the price they charge processors is a high one, because they are representing the producers, and they want to get the maximum price that they can. There is probably a certain amount of truth in it, because there does not seem to be any carry-over. In other words, the CWB is selling all their grain somewhere around the world and extracting a pretty good price.
Now, something is wrong here somehow. You want to process locally and you think that the Wheat Board, by buying back your own grain, deprives those who are selling from farther away, in northern Manitoba and Saskatchewan, from the pool price. In other words, just because you are near the border and can sell your flour right across to the hungry Americans, you do that, but then the price overall would fall. So how would you justify to the rest of the farmers in the west that they are selling their grain cheaper to processors along the Manitoba-U.S., Saskatchewan-U.S. and Alberta-U.S. borders in order to get value-added at the border? Is there not a valid argument that by keeping the price up in Canada, we are doing more good for the overall western economy than we are doing by keeping a number of processors? There is obviously a very limited market for the number of people who will buy the flour or whatever it is along the border.
Mr. Armstrong: I have to disagree on some points. When the Canadian miller is paying a higher, or the highest, price, to subsidize the Canadian farmer, which is what I assume you mean, I disagree. Because while they are paying that higher price, somebody is paying that much less than the average. The "pro" is an average floating price. Who is buying it at less? I would almost guess that we are subsidizing somebody else outside our own interests.
As far as location is concerned, I, as a farmer, cannot afford to keep shipping raw product. I cannot see any opportunity for a processor to come to Manitoba when he must pay the same freight rate to export as a foreign buyer must do. He gets the freight difference back, for from that export point back to him, he does not pay. From my understanding, he has to pay the price that is out there because of the Canadian Wheat Board pro.
Quite simply put, I would sooner ship a pound of flour than a pound and a half of wheat. Whether I am here in Brandon, Manitoba, or Swan River, or points north, for there are some farming districts in The Pas, freight cost savings are freight cost savings no matter where you are. If I read you right, you are saying that we are subsidizing the farmer that is farther away from that same opportunity, let us take that same opportunity closer to the farmer.
Senator Taylor: When you sell feed to animals rather than people, you do not use the Canadian Wheat Board. I am not so sure there is any evidence that the producers of animal feed, because they are not allowed to go outside the CWB, have received much more money for that than the CWB, that does not sell feed. It seems to me, just looking at it as an outsider, that the Wheat Board is realizing more. When I meet with U.S. senators, they grab me by the throat and tell me we must get rid of the Canadian Wheat Board because it is charging them too much. Then I get up here and you grab me by the throat and tell me we must get rid of the Canadian Wheat Board because they are not giving you enough. Now, either the Yankee traders down there do not know what they are talking about or we do not know what we are talking about, or maybe both sides do not know what they are talking about. The fact is that they are not agreeing on the Canadian Wheat Board. In one place they say it is too good, and in the other place they say it is too bad.
Mr. Nestibo: I look at what I end up with in my pocket for my grains at the end of the day. I live on the border, 20 miles away from Bottineau, North Dakota. I see what I can get from the Bottineau farmer's elevator, and that elevator is just a middleman. He will turn around and resell. When I see that I can get $1 a bushel less than what I am getting after 15 months of pooling with the CWB, this tells me there is a terrible problem there somewhere. I know you can get $3 to $3.30 a bushel for barley in Alberta now. I do not think the Canadian Wheat Board will give us anything close for our feed barley, pooling on that one.
Mr. Armstrong: I could probably expand on that from my own experience. The Canadian Wheat Board has openly admitted that they will not sell into smaller niche markets, whether it be into individual states or Ontario, or wherever, if we are allowed that freedom. We are keeping a close watch on what is happening in our own industry or in these niche market crops. I just went through an experience where I sold grain to a Hutterite colony for feed. Good No. 1 wheat, sold as feed, because I am tired of paying the freight costs and raw subsidies. I ended up with an above pro price by doing so. They then in turn shipped barley out to Lethbridge, Alberta and got $3.25 a bushel and were bringing it back in-house here at $2.60. There is too big a difference there.
Now I understand the Canadian Wheat Board is allowing American imports of feed wheat into the Alberta market, which will suppress the feed market, and the barley also.
Senator Fairbairn: Mr. Armstrong, you indicate that you do not wish to see an inclusion clause in the bill. I am wondering whether you think that both inclusion and exclusion should be removed, or should exclusion stay? What is your view on the proposition that with the removal of both, the only way any minister in the future could activate such a notion would be through the request and then a vote of the producers of the product?
Mr. Armstrong: I will not be lengthy on this. I do not want the Canadian Wheat Board to handle any of my grain. I have not shipped a bushel to them in two years, and I do not intend to this year. That pretty well summarizes everything I have to say about it.
Senator Chalifoux: I must compliment each and every one of the presenters today. It has been very interesting and informative for me, as a northern Albertan, to hear of the transportation problems here. I would like each one of you to answer my question. After listening to everyone today and to your presentations also, I tend to hear that you agree with the concept of the Canadian Wheat Board, but it is the administration that is the problem. I would like each one of you to answer that.
Mr. Armstrong: In some regards, yes, I will agree with you. I asked the miller who explained to me that he was paying $20 to $30 over the pro, why? He could not give me an answer. He does not know why. They cannot get answers. The Canadian Wheat Board has a closed-door policy on their economics to protect their clients and markets, as far as I have been told.
Mr. Nestibo: Do I agree with the concepts of the Canadian Wheat Board? I do insofar as it promotes our grain and flour and all that, but the monopoly to me is a big sore spot. I am sorry, but it restricts my freedom. I cannot see any other manufacturer in Canada putting up with what we do.
Senator Chalifoux: What would you like to see in this Act, then, to deal with that?
Mr. Nestibo: I would like the Act to allow farmers to opt out of the CWB. I want the opt out right now. I think if that happens the Canadian Wheat Board might be around in five years. If it does not, I do not think they will be. I do not think anything will change unless we have the possibility of opting out.
Mr. Riley: Yes, I am in full favour of keeping the Canadian Wheat Board, and I approve of the monopoly. The administration no doubt has some faults. But the whole point of having a parity price is that the Board's faults are not going to fall back onto the farmers. If we could protect our own domestic markets, nobody would be able to undermine our economy in Canada. I do not think there is any way that farmers should pay the penalty for what I call the grain guys, the global pirates. That is why there are corporations, because they want to take advantage of people in all countries, not just the ones they buy from, but the ones they sell into, too. I like the CWB. I think it is the hundred per cent way to go but, as I say, we need a price.
Senator Stratton: So if you got your opting out, you would still be a believer in the Canadian Wheat Board?
Mr. Nestibo: I would still believe in certain departments of the CWB. I think they can still promote our product by going to different countries and showing them that our wheat makes great flour. Mind you, that can be done by the Agriculture department in Ottawa, too. As far as the monopoly of the Canadian Wheat Board, I believe that Sask Pool and some of these other companies will follow right in line. If the CWB disappeared today, I figure they could take up the slack and do a better job.
Senator Stratton: All things being equal, I would be looking at an opting-out clause, knowing full well that the Canadian Wheat Board is not likely to disappear. If you achieved that, how would you handle the contingency clause that they now have and the government guarantee that they want a contingency fund built in?
Mr. Nestibo: Are you talking about the farmers bellying up a pot of money, just like they are doing with the provincial governments? I do not agree with it. They have cut the agricultural budget in this country tremendously over the last number of years. You take away the western grain transportation subsidy that cost, in our corner of the world, $30 an acre. Basically a buck a bushel, and we only grow thirty bushels in our poor end of the country there. I never made $30 an acre on my wheat land before. So right now with every acre of wheat I grow I am losing money, but I still have to grow it for rotational purposes, because of our drier area. The governments have downloaded enough. They have taken enough away from us. Please listen. I think and hope that they will keep agricultural guarantees in place.
Senator Stratton: Do you other two gentlemen believe as well that there should be no contingency; rather that there should just be a guarantee on the part of the Canadian government? Do you believe that, if you get your opting out clause?
Mr. Armstrong: We already have a couple of contingency programs in place, such as NISA. The stabilization program that we went through a few years ago, with me coming in on the latter years of it, engendered quite a debate. The trigger was too tight, and the farmers could not get out their money. They then loosened the trigger, and a lot of money came out; and the program was run into the red in its latter years. At the end of the day, many farmers such as myself, being a young farmer who came into the program late, got a bill for money that I had never received. Stabilization programs work when they are run by myself, plain and simple. Pay me for my wheat and I can look after myself.
Senator Stratton: But assuming there is a Wheat Board there, do you or do you not believe in a contingency?
Mr. Armstrong: If the CWB is there, and I assume it will be, then a contingency fund should be there for those people involved in it.
Senator Stratton: Do you believe that the contingency should be funded by farmers?
Mr. Armstrong: Yes, I do.
Senator Stratton: Mr. Riley, what do you think?
Mr. Riley: I do not know whether I understand the issue well enough to give you an intelligent answer. It seems to me that if we have a parity price we do not need any more than that. The formula will look after us. Anything short of that is not good enough.
The Chairman: I asked in the Senate how much money was owed to the Government of Canada on the sales of grain abroad? The answer came back just two weeks ago: $6.6 billion. The federal government puts up the money to sell the grain, which is quite an advantage to the farmers. Now, if there was no cap on the contingency fund, we could find ourselves as farmers picking up the whole load of financing the sale of grain. The fact that the government picks up that load is a tremendous benefit to Canadian farmers, not only in the sale itself, but also in the interest that it takes to carry it through the year. I think that is where the discussion comes in on the contingency fund. Some farm groups are recommending that there be a ceiling, or a cap. Some say it should be put on by a board of directors, and others say that they would like to see it in the Act.
Mr. Armstrong: Mr. Chairman, I am in favour of an opt-out clause. However, producers must also have the option of opting out of that program if they wish. I am not in favour of an arbitrary check-off without the opt-out clause.
The Chairman: I want to thank you for appearing. The Senate committee wanted to have individual farmers, who were not necessarily with some specific farm group. Certainly we want farm groups like the Cattlemen's Association that will be here today, as well as other groups, but we really do appreciate hearing from the farmers who have come on their own initiative and made a presentation before the Senate here today. We thank you very much.
Our next witnesses are Mr. Robson and Mr. Bell. Mr. Winters and Mr. Sotas have not arrived as yet; if they do, please alert the Chair.
Please proceed, gentlemen. You might have a few more minutes than some of the other presenters.
Mr. Ian Robson: I farm 930 acres at Deleau, Manitoba. I have cattle and wheat, oats, canola.
Mr. Dean Bell: My name is Dean Bell and I farm 1,500 acres with my wife at Deloraine, Manitoba.
It is too bad we all have to be here today, but once again Western Canada is fighting for its rights. Mr. Vanclief has given Ontario a dual marketing system; why not us? In my eyes, that makes us second class. Bill C-4 is nothing more than toilet paper. It is supposed to give the farmers more control, not less. The inclusion clause must be removed or we would not be able to sell any grain ourselves. The appointment of farmers to the board will not help because they will be hand-picked by the government. Value added is the big thing now, but as long as the Canadian Wheat Board is in control it has not a chance.
If the Senate wants to make a change to Bill C-4, put in a dual marketing clause and watch Western Canada grow -- or maybe that is not what you want to see happen. Ralph Goodale's travelling road show, the Western Grain Marketing Panel, had some good ideas but Ralph chose to ignore them. Farming is the most efficient business around. We feel that the control of the marketing of the grain should be given to the people who spend all the time, energy, and money growing it; the people who take pride in what they do, the Canadian farm families.
Mr. Robson: I wish to inform you that the Canadian Wheat Board has been doing an excellent job in marketing our grains. No evidence has been presented that there has been any fraud or misdealings carried out by the board against any group. There are farmers here, right today, who are making charges against the board. They are only telling you a part of the story. They are telling you that the buy-back is quite a difficult process; they are telling you that the price of grain is too high in Canada and that somehow millers cannot process the grain; and they are telling you that the grain prices are too high and that farmers cannot make a living. There are a lot of contradictory messages coming from these people who are challenging the Canadian Wheat Board. I wish you would spend the time with the Canadian Wheat Board on each of these points of challenge to understand fully what is going on.
We live in a market-place -- and we should not confuse the market-place as being part of or being a democratic organization. The market-place and democracy are quite different entities. John Ralston Saul, in his book The Unconscious Civilization, points this out when he speaks to managers of business. Now, I am, if you like, an independent business manager. I farm a small farm in relation to some of the farmers who have been speaking here today. The size of their operations is enormous, and yet these farmers want to discount me as an independent operator and suggest that they can sell their grain for more money and that I should be left with whatever amount of market tonnage is left at whatever price that it might turn out to be.
The Canadian Wheat Board was put into place, at the request of farmers, to provide equity in the pricing and in the access to the market. These things must remain. The Canadian Wheat Board is for this purpose our best expression of freedom in the market-place, because freedom is about searching in the market-place for the market that will pay the best price. As independent producers, this is a difficult process. Now, some independent producers can find a market-place, and you have just heard from the last presenters about being able to find a niche market, if they want to call it that, across the border in the United States for their durum.
We must also realize that maybe you are not hearing more of the story, that the United States' taxpayers, through the Export Enhancement Program, are supporting the price of durum to a large extent, which presents an increase in the price to the American farmers. There are acreage set-aside programs, which I am sure people in northern Alberta would love to participate in, and there are all kinds of subsidies, if you want to call it that, in the market-place. These, if you want to use the opponents' terms, distort the market price.
But what is the market price? At any given day, the market price is different. Even if you are talking non-board crops, and especially if you are talking non-board crops, the market price is different. If you want to look at the American model, there are huge differences from one day to the next, from one town to the next on the same day, and you are supposed to listen to the complaints against the CWB and suggest that I, as a farmer, will sit in my farm office and look at a computer screen this day and decide, okay, I can sell my grain today to this market. But if my grain is trucked out and sold, I do not have it to sell anymore; I cannot benefit further from that market. The Canadian Wheat Board pools the tonnage of grain and pools the prices, and I get to share in that increased price because usually what happens over the course of the year is that there is an increase in the price.
One can presently look at the flax market -- and everybody wishes they had flax because it is $12 or $14 a bushel. It is that price because nobody has that product. It could be $20 a bushel and it would not matter to you. I want the same price as my neighbour, but my neighbour says, "No, no, no, I want to get a higher price than you" and vice versa.
This argument comes to the table today because of various actions that have occurred in the last five or six years. My time would be better spent today at home helping calves, raising my income, and doing the marketing. By the way, the marketing of cattle is a very difficult and tedious process, one that the agriculture committee should be investigating for problems in contracting and price levels that are set under private contract arrangements -- which is contrary to what people are coming here today and supposedly asking you for, that is, free market rule. Yet everything else that is happening is leading to independent producers ending up with less marketing power.
The Canadian Wheat Board is marketing power in the hands of producers. Now, it does need some changes. I think that Bill C-4 strays greatly from the intended purpose of the Canadian Wheat Board on many questions. In November 1976 Ralph Goodale mailed me a letter suggesting that they were going to make amendments to the Canadian Wheat Board, which later turned into Bill C-72 and Bill C-4. He stated in that letter that there would be cash purchases of grain. This will cause my price of grain on my farm to be different from my neighbour's price of grain. Under the Canadian Wheat Board, his price for the same quality grain is the same as mine for the same quality grain, and this is justice, if you like.
The level of the price, as you heard in the last presentation, is no where near what the level of the price should be. This price level is the big problem in the economy. The Senate committee itself pointed out that farmers earn 3 per cent on their investment. This is inexcusable, but it is not the fault of the Canadian Wheat Board; it is the fault of the market-place. If farmers will have any effect on the price of their product, they must have the legislation which will help to increase that return.
Reducing the power that farmers have in the bargaining for the price of their product will not cause an increase in our return. You can see that in a number of farm commodities that are managed, like the dairy and the poultry. Those markets have an increased return per investment compared to the grain or the cattle. In the pork market right now, and we hear a lot about pork value added in Manitoba, a couple of years ago the Manitoba government did away with the single desk selling of the pork. This, according to the estimates of the Manitoba pork, has caused a $5-a-head reduction in the value of pigs to the people who grow pigs. Now, if you scale up the processing of pigs into larger and larger units, they will not notice this lost income -- they do not necessarily care about it -- but across Manitoba you will notice it because there will be independent producers.
You might say there may be some more jobs associated with major pig processing. Maybe, but there have been a lot of independent processors taken out of the economy in the meantime. The major issue is: Even if they are larger processors, they did not capture their fair share from the market-place because, by their increase in size, they are admitting that they want to take less from the market-place, which is what has happened if we look at the evidence of the last two years.
I hope that I have talked with you people and not to you people. There are several other problems with the bill which I could go into. Vis-à-vis the contingency fund, we need to maintain the government guarantees across the board. We need to maintain the Wheat Board as a Crown agency. This Crown agency can be maintained without the major change proposed by Ralph Goodale. We can still maintain a sense of producer ownership of the board in a way completely different from what is proposed in Bill C-4. The advisory committee to the Canadian Wheat Board has outlined a number of workable solutions to what should be happening in regard to the Canadian Wheat Board.
I want to point out, too, that the legitimacy of the Canadian Wheat Board advisory committee should not be discounted because, after all, the advisory committee was put into place to recommend appropriate actions to benefit farmers' income by the marketing of wheat and barley. Various people have put their names forward to stand in the position of Canadian Wheat Board advisor on various points of view, and on each occasion people who support the Canadian Wheat Board have overwhelmingly been elected to that position.
I think Ralph Goodale has been dishonest in the process as it relates to the marketing panel. In my opinion, there should be a judicial inquiry into the charges against the Wheat Board; let us see if some of these charges stand up as opposed to pushing a little bit of a bill like this onto us as farmers.
Senator Hays: I understand your point about U.S. programs affecting the price of cereals and other commodities, as do European export and production subsidies, in terms of that product finding its way onto world markets and affecting price, but that is the way it is in Europe and the United States. It is also the way it is that the Crow benefit is gone and the world has changed around us significantly.
How do we deal with changes that we have to make, if we have to make any -- and many believe we do -- to the Wheat Board? How should those changes come about? What about this methodology that we find in Bill C-4, which is to elect a board to make decisions on excluding or including?
Mr. Robson: One of the things about a changing market-place, sir, is that the Wheat Board makes the investigation into what that market is and then makes the appropriate move to deal with whatever the situation that arises. This was highly successful during the period of the "great grain robbery" in the l970s when Canada took the edge on the world markets and the marketing of grain.
The Americans are still smarting from that advantage, and they are saying to you people in government, "Get this advantage away from the benefit of the Canadian producers." They are saying that their private corporations want to make the margin money that right now is coming to my pocket; and I am saying to you, "Defend my rights. Keep an organization that is strong on my behalf in the market-place."
We know that the market changes. This is not something that is new. I will tell you, in fact, having read a Latin textbook recently, that the government in the Roman empire, however good or bad that empire was, provided government money to warehouse grain. Who knows what other despicable things they did.
Senator Spivak: Fed the Christians to the lions.
Mr. Robson: There is one there. I feel like equity is being thrown to the lions by what Ralph Goodale is doing to us.
Senator Taylor: Suppose we were to find out that the board, made up of 10 farmers and five government members, had the right to allow an individual farmer to opt out for a year, very similar to what the Ontario has. I am not positive whether in Ontario it is in their legislation or whether the Ontario board took it on themselves. As a believer in democracy and wanting the dual market, would this legislation look okay to you if the board that was elected by you and your friends had the right to allow farmers to opt out on an individual basis for a year? Would you like it?
Mr. Bell: Yes, I think so.
Senator Taylor: How about you, Mr. Robson? Would you feel that that is a democratic way to operate things, or would you think that that is giving too much power to the board?
Mr. Robson: When Ralph Goodale mailed a letter to farmers -- and I have a copy of it here -- he mentioned that with a dual market the CWB would most definitely be affected, that it would be diminished. When Mr. Goodale says this about a dual marketing concept and then proposes Bill C-4, which would allow, in clause 39(1), for cash buying, which, in effect, is a dual market or, as you say, an opt out, the effect of that on my price is that my price for my product is different than the neighbours, higher or lower. The problem with this is that the prices should be the same for the same product, for the same quality of product.
Senator Taylor: You want pay equity in the market-place.
Mr. Robson: I want pay equity. To get that pay equity, we need marketing power. To get the marketing power, my neighbour needs my bushels of wheat and I need his bushels of wheat, because if he sells them at a higher price or a lower price, where does that leave the two of us? It means that one day down the road there will only be one of us sitting here instead of two.
The Chairman: There are those who believe that we are moving towards a North American common market. It seems that it makes no sense for Canadians and Americans to be underbidding each other on a grain when our opposition happens to be the European Common Market or Asia. We are talking about your neighbour and yourself. That is the big challenge that I see coming. I think it will happen in time; in fact, is happening. The President of the United States is talking about a fast track on trade. I think it was Senator Hays who mentioned that we have been to Washington on different occasions and have met with senators and congressmen; this discussion has been going on for some time. How do you view that, Mr. Robson?
Mr. Robson: The international trade scene, you are talking about the NAFTA or the WTO or the GATT, are you?
The Chairman: We are living in a time when free trade between Canada and the United States is being phased in in different segments of the economy. We cannot continue to undercut and have the political war on grain on the borders that we have had and expect that there will be winners on either side of the border. Hopefully common sense will prevail between the two countries and we will come up with some kind of agreement to cease undercutting each other to the detriment of both countries.
Mr. Robson: Sir, the problem is that undercutting of prices is going on. I think that Charlie Mayer, the previous Minister of Agriculture, mentioned that subsidies, the EEP and the EEC, because of the size of the economy, were detrimental to the producers in Australia and Canada and Argentina. I really do not know what can be done in the international arena to prevent that situation from continuing -- and I hate to say that. But in the meantime there is nothing that is giving farmers more bargaining power for the price of their product, which is the relevant point to this discussion.
I will tell you about "inevitable." If you plant a crop, you would think that inevitably you will harvest a crop, but you may not. So "inevitable," in terms of international agreements, is a rather sad word to use.
Senator Stratton: Mr. Robson, other farmers have stated that their farms are fairly large; I think one group said that their farms were around 13,000 acres. You have stated that you are a small operator.
Mr. Robson: That is correct.
Senator Stratton: Without imposing and getting personal, could you tell me the size of your operation?
Mr. Robson: Yes, I did at the beginning. It is 930 acres.
Senator Stratton: Had you made your position clear, as it relates to the contingency fund? Do you believe it should exist, or not exist?
Mr. Robson: With regard to the contingency fund, again, that will be a checkoff, as I understand, which I see as unnecessary, given the success that has been demonstrated by the way that the Wheat Board has operated under the government guarantees to this date. I have no desire to use the contingency fund to extend credit sales to another country, because I do not think my neighbour here will go down the road and demand payment.
Senator Spivak: Yes. I am pleased, Mr. Bell, that you raised the issue of market power, because I always have thought that that is the reason for the existence of the Canadian Wheat Board; that is, that it is a countervailing force to the excessive market power of what is very close to a monopoly situation in the market with huge firms such as Tyson's and Agri-Food, and so forth. However, while many here have advocated what is essentially a dual marketing position for the Canadian Wheat Board, I have not heard the counter argument as to what that will do, if anything, to the Canadian Wheat Board's market share and to its ability to compete in the global market. I think that is an important issue. It seems to me that there cannot be an argument against dual marketing unless it hampers that ability and then, in effect, the returns to the Canadian farmers.
Mr. Bell: As far as the Wheat Board goes, I think it will make them get their hands out of their pockets and really start selling grain. If you had a monopoly on an item, how hard will you try to sell it? You will do whatever you have to do. But when you split it up and have a dual marketing system, with people working on the same markets as the Wheat Board, everybody will be working that much harder.
Senator Spivak: Forgive me, but I did not think that in the global market-place the Canadian Wheat Board had a monopoly.
Mr. Bell: It does not. It has a monopoly in Canada, on our grain. I cannot sell my grain to anybody else. I have to sell my grain to the Canadian Wheat Board. When you bring in a dual marketing system, where I can sell my grain to my neighbour or to the flour mill next door, the Wheat Board all of a sudden does not have that bushel of grain or two bushels of grain. Their problem is that they are frightened that we will take a market away from them. In that scenario, they will have to try that much harder; and I bet you that the price of our grain will go up.
Our durum is causing a problem in the United States because we have no mills there. Ninety per cent of Manitoba's durum goes to North Dakota to be made into pasta. Why is not there a pasta mill in Manitoba? The answer is: Because of the Wheat Board.
Mr. Robson: I would like to comment on the last response? It is, in fact, possible to do a buy-back and resell your grain when it is to your advantage. When it is not to your advantage, for goodness sakes do not do it.
Now, I want high prices; I want to see value added. I can give you a couple of instances of what has gone on in the past. In the 1900s, in my hometown of Hartney, according to a centennial book about the town, there was an independent miller who set up a flour mill and was doing quite well until he had problems setting the price of his grain and setting the price of his flour based on contracts done in Chicago at the Board of Trade. At that time, the market was much more free-wheeling and much more problematic. However, a group of farmers tried to buy the mill when the man went broke. They were refused money by the bank at the time and the mill was eventually put out of business. Things have bumped along at that level up until the present.
Now, there have been many other successful flour mills across the prairies, but the market for flour is elsewhere. The people who are willing to pay for the flour have been paying more money elsewhere, and it is not the fault of the Wheat Board that this situation has been arrived at.
I know of a man who, in 1983, farmed a large acreage in this area and sold all of his durum on a buy-back into the United States. He received an excellent final payment on the deal simply because the value in the market-place was not at a determined level. Those opportunities occur. If it were not for the buy-back program, the Wheat Board would be trampling on our freedom. However, because the buy-back program exists, no freedom has been trampled on anywhere, and I recommend that you look at various court challenges which have ruled in this case on this matter.
I also would take a moment to mention that I do grow organic grains and have had part of my farm certified as organic in the last seven, eight years. There is a large problem marketing organic products because you have to convince the buyer that they can buy your product at this time. It has nothing to do with the Wheat Board; it has everything to do with negotiating ability and other parameters in the market-place. Now, in the case of wheat, I did a buy-back and it worked very well. No problems at all. At some other time, someone may have problems. You should measure the buy-back against a hedge contract on the open market. Sometimes that will work in your favour; sometimes it will not.
Senator Spivak: You mentioned the single desk hog selling board which was eliminated and you suggest that the price has decreased. Do you have any figures as to how many independent producers went out of business?
Mr. Robson: I do not have any quantitative figures across the province, but I do know a number of people who will be heading out of the business for various reasons.
Senator Spivak: Because they cannot compete, is that it?
Mr. Robson: Because it will be more difficult to compete and because the price has dropped. The market price of hogs generally goes up and down in quite wide swings, and since there has been only a Manitoba hog board there is not enough marketing power on behalf of producers to have a larger effect on the price of pigs in the market-place. So there are a number of those problematic features. The dairy industry has done much better on a national level.
The Chairman: Thank you, Mr. Robson and Mr. Bell. Thank you very much for your presentations.
Honourable senators, we will now hear from the Manitoba Cattle Producers, represented by Mr. Marlin Beever. We have 30 minutes set aside for Mr. Beever's presentation and for questions.
Would you begin, please, Mr. Beever.
Mr. Marlin Beever: I have just a comment to make that is likely ample, Mr. Chairman. We do not have a lot of concern with the bill, but we do have one particular issue that we wish to address. I have a submission to read into the record and I will take questions on that.
In its submission to the Senate Committee on Agriculture and Forestry regarding Bill C-4, the Manitoba Cattle Producers Association would like to make the following points:
The domestic livestock industry is the dominant market for barley grown within the Canadian Wheat Board jurisdiction.
The livestock feeding industry, a significant component of the Western Canadian agriculture economy, accounts for 37 per cent of all farm cash income in the prairie provinces. The beef cattle industry alone accounts for 22 per cent of all farm cash income on the prairies and over 11 per cent in Manitoba.
The Canadian beef industry currently exports 54 per cent of total production to a range of markets. The ability of the Canadian beef industry to compete globally depends on our ability to access feed grains at prices that are equivalent to those being paid by our competitors, particularly the United States.
If the Canadian Wheat Board becomes active in the domestic feed grain market it may significantly impact the price of feed grain in Canada. The Canadian Wheat Board operations should promote the growth of domestic markets as well as export grain markets.
The amendments being proposed by the government in Bill C-4 will erode the competitive position of the livestock producers in Western Canada and will destabilize the domestic feed grain market, and in the long run they will increase the dependence of the Prairie grain producers on a highly erratic and high-cost export market.
The Manitoba cattle industry is expected to continue steady growth in the next phase of the cattle cycle. Our industry is primarily based on cow-calf production, but we are beginning to see expansion in the feeding, backgrounding and finishing sectors.
Last year an estimated 175,000 head were finished in the province. According to Manitoba Agriculture figures as of January 1, 1997, there were an estimated 130,000 head on feed. That growth in the cattle industry could be attributed to the confidence of producers in the future of cattle in this province. Removal of the grain transport subsidies, turnover of marginal croplands to forage and pasture and the provincial government's commitment to promoting value-added initiatives have all had a very positive impact on the Manitoba cattle industry.
It is estimated that in 1995-96 1.8 million tonnes of feed grains were consumed by livestock in Manitoba. We believe that that amount will increase because of expansion in both cattle feeding and hog production. Industry analysts are predicting an increase in demand for feeder cattle over the next few years and a steady increase in beef exports. That indicates that opportunity lies in Manitoba for significant increases in cattle feeding and production. Therefore, the necessity of a stable and secure supply of feed grains for a growing domestic market is obvious.
Livestock producers have no difficulty in Manitoba in competing in a fair and equitable market with export demands for grain. In the case of barley, because it is a relatively bulky and low-value crop, its most economic use is in domestic livestock feeding. The board has made a number of changes to improve its ability to access barley for export, including the establishing of contracts for delivery of grain without making any commitment to actually taking delivery of the grain. This destabilizes the domestic market, because grain producers do not know what price they will eventually get from the board or what grain the board will take, even though it might be under contract.
However, the domestic market cannot compete fairly with a board that is given statutory monopoly powers to access supplies and set prices regardless of what impact that has on the domestic market. If the government wishes to maintain an active role for the board in the export market for barley without destroying the domestic market, we suggest that the government must restrict the activities of the board to its historical use of pooling and the initial price system, leaving the domestic industry to operate unimpeded on a cash market. We also suggest that the board be structured to ensure that the interests of domestic users, specifically the livestock producers, are represented on it.
Those are the concerns that we have. Thank you for listening to our submission.
Senator Taylor: Thank you, Mr. Beever. I am a little puzzled by your submission, because today the question seems to be whether the board will even remain alive, and yet here you have the government maintaining an active role for the board in the export market for feed barley. You have also suggested that the Wheat Board is becoming active in the domestic feed grain market. What is your evidence for that? I certainly have no impression that the board is reaching into the feed grains yet, or even remotely thinking of it. What evidence do you have that that is occurring?
Mr. Beever: Our interpretation is that, if this bill goes through, they will be able to go in and buy barley from the cash market to fill their sales orders if they do not have enough or have not secured enough barley.
Senator Taylor: You are thinking of the "inclusion," that they can vote to bring in --
Mr. Beever: No. It is my understanding that if they have a contract order and do not have enough barley to fill the order, then they can buy from the domestic cash market.
Senator Taylor: In other words, they might sell an amount of barley for malting, say to Korea or somewhere; there is not enough to fill the order so they would go into the feed barley market here in order to fill that order.
Mr. Beever: They would enter into the cash market and draw enough to send for export. Our concern is that we believe we will need a huge supply of feed grain in Manitoba to meet our commitments there. We want to make sure we have that supply available, because we think we can do an awfully good job of "feeding" that barley at home, and paying a decent price for it -- paying a price that is fair and also adding value at home. We just think there are a lot of things that can be accomplished by feeding the grain at home as opposed to exporting it.
Senator Taylor: It sounds a little bit like a bogeyman story; I think somebody has been scaring you at night.
The Chairman: If I may interject, are you referring to section 39.1 in clause 22 of the bill?
Mr. Beever: I believe that is it. I do not have the exact number.
The Chairman: The section reads:
Notwithstanding sections 32 to 39, the Corporation may enter into a contract with a producer or any other person or entity for the purchase and delivery of wheat or wheat products --
which, of course, means wheat or barley products
-- at a price other than the sum certain per tonne for wheat as set out in section 32 and on any terms and conditions that the Corporation considers appropriate.
Is that the clause?
Mr. Beever: I believe that is it, yes.
Senator Hays: The cattle industry is another agricultural sector. I guess many producers overlap, but we are having a hard time achieving a means of accommodating differences between the different points of view within the grains sector. If we add other sectors in, it seems to me that it will become even more difficult. Could you clarify for me how you see the red meat industry, beef and pork, represented in this process? I would like just a little bit more background.
The Crow benefit and statutory rates, which we called the Crowsnest Pass rates, were something that irritated the livestock industry because they created an artificially high price for feed grains, in that they could be moved to an international market and access a price at a port; whereas if feed grains were not subsidized then they would have to be marketed domestically, and that would lower the price. I think probably it did. People who grow grain obviously want to have the best price for their commodity that they can possibly achieve. It is a commodity we market internationally.
With those few words of background, how do you see the red meat sector having a special role in this process that Bill C-4 provides for?
Mr. Beever: I think that ultimately, for barley, the livestock industry will be the major consumer of domestic feed barley or feed grains. We in this province expect to see a significant increase. We are certainly seeing it on the hog side. We are anticipating we can see similar growth in the beef sector. Whether it gets to the actual finishing is up for debate, but it certainly applies in backgrounding and growing them out to move to the final lots. To do that we need a supply of feed grain.
I think all we are trying to express is our concern that we think we can feed the grain at home and that we can add value to it at home. In our minds, certainly, it is good for the whole provincial economy and ultimately for the national economy if we can do that. It makes sense, considering what it costs to ship a bushel of barley today, that by putting it into the yards here and adding that value, there is potential for the grain producer. If we get into a situation where we have that growth and we need the extra grain, I believe that there will be a very good return for the grain producer, because it is a supply and demand market. If we can increase the demand, that will ultimately drive up the price.
Senator Hays: As you know, Bill C-4 provides for producer input into the decision-making processes on the way in which the Canadian Wheat Board would operate. I may have misunderstood you, and I do not remember your exact words, but were you saying in your presentation that you wanted to have some say at that level on behalf of the red meat industry?
Mr. Beever: I don't think that would come from our provincial association. I believe the national association will be meeting and making a presentation before this committee when you are in Alberta, in either Calgary or Edmonton. That would be a position more for the national association to take. No, as a provincial association, we do not expect that that would be our role. We would be involved through the national association on that scale.
Senator Hays: The cattle industry has gone through some remarkable changes recently. I guess the head of the list of things that have changed is a concentration of processing in one province, namely Alberta, to the point where I guess there is a serious question as to whether or not there are the inputs necessary in that area -- namely, feeders and barley or feed grain equivalent to support the processing that is there.
This is a little bit off the topic, Mr. Chairman.
The Chairman: Fine; go ahead.
Senator Hays: I wonder if you would care to comment on that, Mr. Beever, in terms of the way in which it is affecting the prices of those inputs, particularly the price of grain.
Mr. Beever: I cannot necessarily speak for Alberta. I know that barley is worth significantly more in Alberta than it is in Manitoba, but there is a freight issue there. It would cost you money to ship it there, but there is also a demand issue. Similarly, in this province, barley is normally worth more money on the eastern side of the province, where there are intensive livestock operations as opposed to on this side of the province where at this time we do not have them, although the growth and the interest is there.
One reason we believe the potential exists, particularly in southwestern Manitoba and our side of the province, is that Alberta is running into problems. Whether they have already reached the maximum is another question, because in their feedlot situation they actually have environmental concerns. They are certainly putting themselves in a position where they are unable to secure the amount of lands they need for waste disposal for feeds. On the other hand, we have a large area in Manitoba where we can do those growths, which is one of the reasons we believe that potential is there for us.
As I said, we are here just to make sure that in the future feed grains will continue to be produced, that nothing will impact them that would stop producers from producing them, because for the livestock sector to grow we need the grain producer to produce the feed grain. It is absolutely critical.
Senator Hays: One of the earlier presenters indicated that he had sold a milling quality wheat to a buyer that had lots of barley, which they then in turn shipped interprovincially, I assume into Alberta, at $3.25 a bushel. I guess the wheat substituted for that and the market were such that it made sense to do that. Do you know of that happening a lot? Is that a typical transaction?
Mr. Beever: I don't produce a lot of grain and I don't follow the grain side that much; so I don't think I could comment on that.
Senator Taylor: I guess this is sort of an Alberta issue, and I am an Alberta senator, Mr. Beever, but my understanding of the beef industry is that a large consumer of the grain is the feeder, who is, in effect, a broker between the consumer and the cow-calf operator from one point of view. If they cannot pass their cheaper calves down to anybody, they have to take less money; but the grain producers cannot pass it on to anybody either. They have to take less money. Crying to the bank will not help them. So you are in the middle there. Of course, no matter what you pay for grain you are just acting as a broker and you add it onto what Safeway, for example, has to pay for the beef; so is the price of grain really a major factor? Because, if you do get it cheap, Safeway just takes it out of your pocket anyway with your competitors in order to get cheaper beef. All you are acting as is a broker in between, whereas the producers of the calf or the grain are stuck on that side. Now, am I simplifying your operation, in effect telling you that you cannot lose, unless you buy stupidly on calves, because you are always just brokering it off to the consumer no matter what you pay?
Mr. Beever: Just to comment, I am a cow-calf producer, not a feeder, so I know what the price of $4 barley does to my calves. It impacts me immediately.
Senator Taylor: That part does get hurt, but how much percentage in the calf-to-market does the cow-calf operator get before it hits Safeway?
Mr. Beever: I am not sure I understand exactly what you are saying.
Senator Taylor: You have a calf; you sell the calf to the feeder to be fed. What percentage of that calf's price do you receive of the total price when it hits the counters to be bought by people?
Mr. Beever: Well, if I had stopped at the stockyards on the way here, I might be able to tell you a little better. I have some there this afternoon. Normally, depending on the year, for a calf off the cow we would certainly be looking at the dollar-per-pound range and higher. It depends on the weight of the calf and all the many variables that enter into it. The lighter the calf the higher the value.
Senator Taylor: Would you say that a feeder puts on 1,000 pounds?
Mr. Beever: As a cow-calf producer, we would normally see them in the 60-70 cent range for a calf off the cow; then it goes through the feeding system and he may be getting in that 85 cent range. I think the market is in the low eighties right now on a 1,200 pound steer, so you are looking at around $1,000. So he is working on maybe $400, in there, to add the value and pay the costs. Maybe it is something less than that, I would think, in total cost.
Senator Taylor: Is that a real, free, competitive market between the finished beef and the butcher shop or the Safeway or the marketing supermarket chain? Is that a price that floats up and down with respect to what the feeder wants?
Mr. Beever: It moves fairly significantly. A lot of the feedlot operators now are contracting, so they are using the futures. They are tying in their costs or tying in their price; locking in their grains, locking in the dollar. In some cases they may even lock in a loss, but it is better locking in a small loss than a major loss. They are using all those pricing advantages or pricing tools that are available to them to try to minimize their risks.
Senator Taylor: My impression had been that cheap barley, whether you got it even at half the price, didn't make that much difference to the cow-calf operator because it was all taken up on the other side.
Mr. Beever: I don't think we are suggesting cheap barley. I think what we are suggesting here is that we just make sure that the system still allows for the production and that growers continue to grow it, because, with cheap barley, they may back off and they may not grow it and that would be absolutely devastating to our industry. We believe we can compete and, yes, if it gets to be $4 barley it will have a significant impact; but there is room in the system for everyone, and the last thing we would want to suggest is that producers not grow the product, because we need it. The industry needs it. Whether it is beef or hogs, we very much need the feed grains.
The Chairman: Honourable senators, if there are no further questions, I wish to thank the witnesses for appearing. We will now hear from the next group.
Appearing for the Canadian Federation of Independent Business are call Mr. Dan Kelly and Ms Marilyn Braun. Ms Braun is the director from Saskatchewan, and Mr. Kelly is the director from Manitoba.
Mr. Dan Kelly, Director, Provincial Affairs, Manitoba, Canadian Federation of Independent Business: Mr. Chairman, we thank you for the opportunity to present today. As you mentioned, I am the director for the CFIB in Manitoba and my colleague, Marilyn Braun, is the director for Saskatchewan. I will ask Marilyn to make some introductory comments, and then I will conclude our presentation, if that is all right.
Ms Marilyn Braun, Director, Provincial Affairs, Saskatchewan, Canadian Federation of Independent Business: Honourable senators, as the director for the Saskatchewan CFIB office, I have a rural and agricultural background. I actually grew up on a farm. My family operates a mixed farming operation in Beechy, Saskatchewan.
As you may know, the Canadian Federation of Independent Business is a member of the Coalition Against Bill C-4, a coalition of 15 commodity and business groups that have been working together with the common objective of opposing the so-called "inclusion" clause in this act. It is this "inclusion" clause that CFIB will be focusing most of its attention on this afternoon.
To begin, we want to provide the committee with a brief overview of the CFIB and its involvement in agriculture and the agri-business sector. Founded in 1971, we are a national non-profit political action group, representing small and medium-sized businesses. We have 88,000 members across Canada, and represent approximately 5,000 agri-business owners from coast to coast. In fact, we have approximately 2,000 agri-business members in the provinces of Alberta, Saskatchewan and Manitoba, many of whom are grain growers.
CFIB regularly surveys its members on a variety of public policy issues, including surveys designed specifically to gather the views of our agri-business members. Some of these agricultural surveys are confined to the Prairie region, while others are more national in scope.
Many of our farm members have expressed concern regarding the Canadian Wheat Board and, in particular, its monopoly on grain marketing in the Prairie region. Last fall, CFIB appeared before the House of Commons Standing Committee on Agriculture and Agri-Food to present our members' views on Bill C-4. As you know, despite the virtual unanimity of opinion in opposition to the bill, the House of Commons decided to pass it anyway. Because of the significance of these concerns, CFIB felt it was extremely important to present its members' views and concerns on Wheat Board reform to your committee this afternoon.
We also want to make note that we were very disappointed in the manner with which the government chose to pass the bill in the Commons. In particular, we were alarmed that Minister Goodale would invoke closure of debate and then propose a change to the "inclusion" clause only hours before the bill was passed. That allowed opposition parties virtually no time at all to consider the proposal to determine if it would address the concerns that had been expressed.
Without going into further detail or commenting on the sincerity of the proposed amendment, this "eleventh-hour" effort does give the appearance that the government is finally beginning to recognize the serious negative implications of the bill. That came out clearly in the presentations that you have heard so far today. We believe that this puts the Senate in a strong position to have a major role in amending this legislation.
As mentioned earlier, for a number of years CFIB has been expressing its members' concerns on the issue of Wheat Board reform. To gather its members' opinions on Wheat Board issues, CFIB has conducted a number of surveys on this important topic over the last three years. We have attached tables for you with some detailed breakdowns of these survey results for you to review. They provide an analysis by commodity group and by province, and I will just highlight some of those findings that we have attached for you.
In August of 1995, 83.1 per cent of our Prairie agri-business members supported the concept of dual marketing for sales of grain under Canadian Wheat Board control. This support was consistent across all commodity groups and Prairie provinces.
In April of 1996, 86.3 per cent of our Prairie agri-business members voted in favour of dual marketing in the domestic market-place -- that is, confining dual marketing to Canadian markets and local value-added projects.
Last January, nearly three quarters of our Prairie agri-business members rejected the proposal to keep all barley marketing within the Canadian Wheat Board single-desk selling system. Also in that survey, approximately 70 per cent of our Prairie agri-business members stated that they were either somewhat or very dissatisfied with the government's proposed grain marketing changes contained in Bill C-72.
In August of last summer we conducted a survey that found some very interesting results. CFIB polled our general small business membership in Manitoba and Saskatchewan and found that an overwhelming 78 per cent of them said that a healthy agriculture sector was either crucial or very important to the future success of their business. In that same survey, 60 per cent of our general membership in those provinces said that farmers should be allowed a choice in who markets their grain.
Most recently, in January of this year we conducted a marketing board survey, and over two-thirds of our prairie grain members said they were either dissatisfied or very dissatisfied with the performance of the Canadian Wheat Board. Similarly, 75 per cent of our members within that survey said that they wanted to have the option of marketing their grain outside the Board.
That gives you some background of our survey results. As I mentioned, the analysis is provided as an attachment to the presentation.
I will turn the next portion of our presentation over to Dan Kelly.
Mr. Kelly: As is demonstrated by the results that Marilyn mentioned, both CFIB's agri-business members and its general members want farmers to have more flexibility in marketing their products. In every survey that CFIB has conducted with respect to the Wheat Board, on- and off-farm members have chosen a dual marketing option as their preferred approach.
I want to tell you that I was very moved by the testimony of a processor right here in Manitoba, Pizzey's Milling and Baking. He was describing to you, I think, the value-added spin-offs of agriculture here in Manitoba. He also spoke about the benefits that his company provides to other businesses in the local area in terms of increased trucking activity and things like that. It is exactly that kind of approach that is of interest to small and medium-sized businesses, and that is one of the reasons why even our off-farm members are interested in this very important issue.
Our members' disappointment with the previous bill, Bill C-72, appears to centre around the lack of options in wheat and barley marketing. CFIB believes that the government missed an important opportunity to allow barley growers to express their views on the dual marketing concept. The government's decision to ask a black and white question served to further polarize an already strained situation, rather than bring producers together.
CFIB believes it is also important to bring the views of non-farm related business owners to the table on these very important prairie-wide issues. Given that less than six per cent of small businesses in Manitoba and Saskatchewan said that agriculture was without impact on their business, they, too, have a major stake in the future of the Canadian Wheat Board. Grain marketing policy does not simply affect primary producers in rural communities; it also affects manufacturers, retailers and service sector firms in Winnipeg, Regina and other urban centres. In fact, even in Winnipeg, decided small business owners opted for dual marketing by a ratio of nearly four to one. In Regina, the ratio was nearly six to one; in Saskatoon, small firms favoured dual marketing by nearly seven to one.
I think it is important to keep that in mind, because those concerns are just as important in the city of Winnipeg and in other large urban centres as they are in rural communities. For example, the Canadian Wheat Board will often trot out a few businesses and suggest that these businesses are worried about the safety and the clarity of their supply to be able to put their products on the table. They will bring out a small pasta maker or, indeed, a brewer and say that these companies are very concerned that if the Canadian Wheat Board wasn't the one delivering their grain, they would not be able to have the supply that they need to put their products on the market.
Many of our members who are intrinsically linked to this whole question reject that concern. They suggest that, in fact, a dual marketing approach would suit them very well. However, rather than get into the debate with the need to provide increased flexibility for wheat and barley producers, we are here today to present to you the need to maintain flexibility for our Canola, oats, flax and rye growers.
CFIB is alarmed that the federal government would consider any proposal that would create new monopolies, when, in fact, our members and the general agricultural community are requesting fewer. The proposed legislature flies in the face of the reality of the need for greater flexibility and wider access to markets. We question why the federal government would introduce such legislation, when the very groups that represent the potentially affected commodities are opposed to single-desk selling. CFIB is unaware of any significant movement among Canola, oats, flax or rye growers to be included under the CWB's monopoly.
We are also concerned that the process by which a monopoly could be created would be subject to the potential for significant abuse by those that favour a single-desk selling system. The question of who qualifies to represent the affected grain producers will be a matter of significant debate among farmers and government.
We also note with interest that our trading partners are already concerned with the CWB's existing monopoly status. That concern would no doubt increase if Bill C-4 were proclaimed. It would create the potential for entirely new grain monopolies. The potentially included grains represent some of the faster growing segments of the agricultural economy. This growth has spun off a variety of current and potential value-added business opportunities throughout Western Canada. We are concerned that such a radical change to the marketing system may limit these opportunities in the future.
I believe that is the very reason that Premier Klein and Premier Filmon took the time to write to Prime Minister Chrétien with respect to the "inclusion" clause and, in fact, request that it be dropped.
Most important of all, we are concerned that the mere existence of this "inclusion" clause would create further divisiveness within the agricultural community. In fact, at the same time as this bill attempts to increase producer control on the Board, it also proposes to mire it in the debate on the monopoly issue. Elections to the Canadian Wheat Board should focus on a candidate's ability to help run a large grain marketing organization, not on the pro-monopoly versus the anti-monopoly debate. Perhaps that is why the federal government feels it is necessary to appoint a certain number of Board members. Someone will have to mind the store while the attention of the elected Board members is diverted to the single-desk selling matter.
CFIB members strongly support the need for more options for barley and wheat growers, not fewer options for flax, Canola, oats and rye producers. We urge the Standing Senate Committee on Agriculture and Forestry to reject and eliminate the "inclusion" clause as an unnecessary, divisive and potentially destructive element of this legislation, and, instead, we recommend that Parliament focus on the important goal of reforming the Canadian grain marketing system by allowing more flexibility to wheat and barley growers.
Thank you very much for the opportunity to present our members' views to you here this afternoon.
Senator Taylor: You state that the threat of an "inclusion" clause, you feel, will destabilize the market, because the threat is there. Yet, on the other hand, you go on to say that the "exclusion" clause should be thrown out also. Now, wouldn't that destabilize the market for wheat and barley? In the one case, you say it is destabilizing. You are using reverse arguments here. In the other case you say we should throw it out. What is sauce for the "inclusion" gander should be sauce for the "exclusion" goose.
Mr. Kelly: In fact, taking that argument further, one might suggest that organizations such as ours that want to see more flexibility, would, in fact, want to see the "inclusion" clause kept in the legislation, but eliminate the "exclusion" cause only. In fact, to be responsible, we have suggested that both the "inclusion" and "exclusion" clauses be eliminated under the terms of this legislation, and that it be left in the hands of Parliament as to that particular issue on including or excluding commodities.
I think it would be very self-serving of us to suggest that you eliminate the "inclusion" clause but keep the "exclusion" clause in the legislation, or put a better "exclusion" clause in the legislation. We have not elected to do that. We have, in fact, said, "Take both of those; leave the political decisions in the hands of politicians, and leave the administrative decisions in the hands of the elected members of the new Canadian Wheat Board."
In fact, this overlap, I think, is what has mired this debate to the point where we are today. A lot of creative thinking that could have been done on grain marketing issues has been lost because of this "inclusion" clause that is part of the legislation.
Senator Spivak: In your surveys here you have referred to "Prairie agri-business members." Now, who are those and how many are they, and what is the percentage of agri-business members as compared to producers and farmers?
Mr. Kelly: Again, CFIB is a national small business organization. Right from our inception we have represented many farmers within the CFIB. However, over the last year that has been a very rapidly increasing portion of our membership. 88,000 members across Canada. About 17,000 of those are on the prairies. Nationally, we have 5,000 agri-business members, and on the prairies about 2,000 agri-business members.
When we speak of agri-business, we are not simply speaking about primary producers; we are also speaking about other companies, be they crop-chemical dealers or people involved in a variety of other spin-off activities, all directly related to the business of farming.
However, within that 2,000, and I am estimating here, I believe that at least 50 per cent would be primary producers. In fact, some of them were in front of you this morning. Perhaps three or four of the presenters today are, in fact, grain or barley producers who are CFIB members as well. We represent a broad cross-section. I want to make it very clear that we are not here today under the guise that we are simply a farm group, because that is not what the CFIB is all about.
Senator Spivak: Of your agri-business members who are producers, is there a certain size that you have to be to join, or can it be a person who farms 100 acres?
Mr. Kelly: We are called the Canadian Federation of Independent Business, and most people get that wrong and call us the Canadian Confederation of Small Business. We represent only small and medium-sized producers. We represent no large businesses. We represent no publicly traded corporations. All of our members are micro-sized. In fact, 75 per cent of our members, be they farmers or general members, have under five employees. So we represent the smallest of the small producers -- small producers and small businesses in general. Again, 75 per cent of our members have under five employees, and 90 per cent have under 10 employees.
Senator Spivak: So let me get this straight. When you produce these figures, you are talking about approximately 1,000 primary producers. When you say 83 per cent, you are talking about maybe 1,000 people who could be classified as farmers.
Mr. Kelly: Right. I also should say, to be fair, that that would be expecting that every single one of them responded. That is a sample of those producers.
Senator Stratton: If I may ask a question as supplement, at the bottom of page 2, you refer directly to "67.5 per cent of CFIB's Prairie grain grower members", as opposed to agri-business members.
Mr. Kelly: That is right.
Senator Stratton: So you have made the differentiation.
Mr. Kelly: We have, yes. In fact, we can break down our results very finely. We can, in fact, tell you what our members who grow barley said versus what our members who grow grain said. If you would like, I would be happy to provide you with any of that follow-up.
Senator Hays: You said in your presentation that the Canadian Wheat Board produces some small value-added businesses that favour the Board, and, in speaking for your constituency or your membership, you say that that is not typically the case. I wonder if you could elaborate on the reasons on both sides. Why is the Board able to produce small businesses that favour, but your small businesses disfavour?
Mr. Kelly: I should say that within our membership, as any of you may know that know the CFIB, we survey our members on every public policy question and provide the raw results, both pro and con to public policy makers. So we have members within our membership who do favour the monopoly, but that is a very small portion of the overall vote.
Senator Stratton: I understand that, but why, specifically, do some favour the board as is while others do not, from the perspective of a non-grain producing small business?
Mr. Kelly: I don't think I would be giving the whole story if I did not tell you that part of the reason why our members feel this way is philosophical. Let me put it this way: A car dealer, who sells his or her cars to whomever he or she likes, cannot understand why a grain producer, also selling a legal product, cannot sell his or her grain to whomever he or she likes. I think that that philosophical question is very much part of this. Our members, who are small entrepreneurial business people, find it difficult to believe that there are people who are also producing products but who do not have the right to sell to whomever they like. I think that is one side of the equation.
There are also those who have a vested interest in agriculture. In fact, as you can see from the survey, over 78 per cent said that agriculture to small business was either crucial or important to their own business.
Agriculture in Manitoba represents, I believe, about less than 10 per cent of the gross domestic product of Manitoba. That is a lot less than it has been in years gone by. One might think that businesses, particularly small businesses, are not really all that concerned about what happens to agriculture, because it is a small percentage of the gross domestic product. Our results show, in fact, that that is not the case. Our members very much believe that what is good agricultural policy is also good small business policy, and that if the farmer benefits, then they will benefit.
If you run a restaurant in Brandon, a lot of your business comes from the farm. If you run a hotel in Winnipeg, again much of your business comes from farmers. We have to look at the fact that we all are interdependent and at the fact that small business owners depend very much upon a healthy agricultural sector for their business.
On the other side of the equation, there are some people who perhaps believe that the Wheat Board is providing high quality Canadian grain. I am certainly not going to doubt that for a minute. However, to suggest that the Canadian Wheat Board is the only group in Canada able to deliver high quality grain and that if it did not exist somehow the quality of Canadian grain would deteriorate, is, in fact, a red herring.
Senator Hays: Dismissing those who have ideology as their motivation, in terms of self-interest, dollars and cents, money in their pocket, what are the motivating factors for the two sides of the issue?
Mr. Kelly: Well, one of them is that farmers --
Senator Hays: I am talking about your membership, which is non-farming.
Mr. Kelly: As to non-farm members and their interest in this, many of our independent business owners who are not farmers themselves believe that you are a better business person, and you are a more effective business person, if you can handle all aspects of your operation. There is a difference between a farmer who thinks of himself that way and one who thinks of himself only as a farmer. I will not deny that farming is a way of life; I certainly would not suggest that it is not; but farming is also a business and should also be thought of as a business.
People who think of themselves only as producers, who simply grow the grain, deliver it to the elevator; and that is the end of their involvement with it, are perhaps the ones who are more supportive of the Wheat Board, but a large number producers and farmers want to handle all aspects of their operations, right from putting the crop in the ground to delivering it and doing the marketing and every aspect of that. I think our members, those who are not farm-related, view those people as very much like them in terms of managing their businesses, and they see the spin-offs that potentially could happen.
People like Mr. Pizzey, with an operation like his, would have a vested interest in ensuring that something like that happened, because it would help them develop a business that would tend to keep their kids in the community. The world and population question, I think, is very germane to this debate. Very small business people in rural areas do not want to see farm kids continue to move to large urban centres, because they need those families in their communities to draw upon for the labour for their own businesses. So they try to find ways of charging individuals, individual farmers as business owners, to handle all facets of their operation, and many young farmers now would like to handle all facets of their operation. If they do that, perhaps then they are more willing to stay in their rural communities and provide that labour that many rural businesses will need for the future. That is one of their interests.
I probably would not be the best qualified to speak about the debate on the other side. You have had and probably will have other presenters, supporters of the single-desk selling system, who would be better skilled at presenting those arguments to you.
Senator Hays: One of your points is that the Board, as is, is potentially negative in terms of our relationship with trading partners. We all know that our largest trading partner is the U.S., and most of the examples of the Board not serving farmers well are from people who would have a selling option into the States. That option would be more favourable than the one they think they have, or that they do have with the Board, as was illustrated by a presenter earlier today.
When we move away from the market within our own country, we see distortions in the market. There were references to that by witnesses today in terms of the U.S., who are in the process of changing, but whose farm bills tend to have different ways of supporting agriculture. Whether they do it through a conservation reserve program, an export enhancement program or other ways, they are quite imaginative. Although international negotiations are putting pressure on them, the Americans are quite imaginative in finding ways of supporting agriculture, and the Europeans are even more so. I wonder if you could comment on that.
Your organization says Canada should be sensitive to concerns on the part of our trading partners, but our trading partners are not totally innocent. So I wonder if you would comment on that, because you have raised it. I think you are the first ones to have raised it right head on. Should we back off? Should we go the extra mile, when it is not tied to, linked to, or part of a negotiation, in attempting to get some of this type of thing, which hurts us badly, stopped in other regions or in other countries?
Mr. Kelly: I would agree. While Canada may not be entirely clean with respect to subsidizing the agricultural community or with respect to creating structures that can be viewed by our international trading partners as anti-competitive, I agree with your contention that other countries have very little to gloat about and are very far from clean themselves. I would not suggest that Canada should stop pursuing those kinds of situations where they exist.
I think that the "inclusion" clause, though, would make a bad situation even worse. The state trading monopoly that we have in Canada on wheat and barley sales is already viewed fairly suspiciously by our trading partners. I think that even creating the potential to expand that would, in fact, start reinvigorating debate that Canada just does not need. We should be moving to lobby the Americans to reduce some of their subsidies and the anti-competitive institutions that may exist there, as opposed to creating more of our own, and stay competitive that way. I think that is very much in keeping with the former and current governments' commitment to trade liberalization. It is in that context that we raise this as a concern.
I know that other members of the Coalition Against C-4 have, in fact, been contacted by legislators in the U.S. who are interested in Bill C-4 and what implications it holds for the Canadian Wheat Board as an institution. I do not think that the main argument against the "inclusion" clause is that the Americans do not like it. I think there are enough reasons to dislike the "inclusion" clause right here in Canada that call for its rejection; but it is a concern.
Senator Hays: Maybe this is not the appropriate time, but I am just wondering if at some point the Coalition Against C-4 would comment on how it finances itself, and generally how it structures its campaign.
Mr. Kelly: We would be happy to answer that.
Ms Braun: As we have mentioned, the Coalition Against C-4 is made up of various organizations, and it is basically a gathering of all the various interests. Each of us brings the knowledge and concerns of the various constituents. Your question is on the funding of the coalition?
Senator Hays: Yes.
Ms Braun: There is no funding to the coalition. Each group comes independently. Putting together briefs, and so on, is all done within each of the offices. We decide, for instance, that perhaps a brief will be done within our office, and then that time is spent within our office preparing that brief; but, as in any funding, there is no specific funding to the coalition. They are all independent groups.
Mr. Kelly: Our largest expense would be the occasional conference call. We have spent next to nothing. It is kind of a ragtag group of people who have come together with this particular bill in mind -- in fact, the "inclusion" clause specifically, but the coalition makes its presentation to you as a coalition.
Senator Hays: So materials or ads do not come to you? You do not bear any costs?
Mr. Kelly: I don't think we have done any advertising.
Ms Braun: We have done no ads at all.
Senator Spivak: Did you say that some of the people who have presented here are members of the coalition that we have heard from?
Mr. Kelly: No. I am sorry. I was saying that some of the individuals are members of the CFIB, of our association.
Ms Braun: The coalition will be making a separate presentation next week.
Senator Fairbairn: I have a question arising out of your discussion and your comments on the "inclusion" clause, which have been quite clear. As I understood you, you were also saying that as far as your group is concerned, both the inclusion and the exclusion could be removed and you would be satisfied with that. What about the notion that was brought forward by the minister in the dying days or moments of the debate in the House, of the possibility at that point -- and, as we know, it is still out there -- of the removal or the withdrawal of both? What about the statement that others have commented on today, that any movement in the direction of either exclusion or inclusion in the future would be triggered only by consultation with the Board and a vote among the producers affected?
Mr. Kelly: You are speaking of the proposed amendment by Minister Goodale?
Senator Fairbairn: Yes.
Mr. Kelly: We view that has a minor improvement to the "inclusion" clause, but it still is an inclusion and should be viewed that way. It sets in place a process by which new commodities maybe included under the Canadian Wheat Board. We are much more comfortable with the idea that Parliament would have to pass new legislation to include a new grain if, in fact, that were to be the case.
The issue of consultation, I think, is set. I think it would be unheard of for a government not to consult, in fact, with the affected commodity groups if in fact it was planning to include a new grain. We are uncomfortable, though, with the idea that they have to consult with the Canadian Wheat Board. It is like a separation of church and state. We like the idea that, in fact, they would consult with the farmers, not the idea that they would consult with the Wheat Board, which would have a vested interest perhaps in representing that particular group or commodity. We do not want the bill to speak of inclusion at all. We would rather that that be passed through separate legislation. We would like to see the inclusion/exclusion provisions scrapped entirely from the bill, and not replaced by the Goodale amendment.
In our view, with respect to that particular proposal, that does not go nearly far enough, if that answers your question.
Ms Braun: I think we also talk about taking the political debate back to the boardroom of the Canadian Wheat Board. We do not want that. That is not the optimal situation that we would want to find ourselves in.
Senator Fairbairn: I suppose there is another way of looking at the proposal, particularly of going to a vote, in that you are taking it back to the people who are the farmers and the producers. It would be their decision.
Mr. Kelly: I think any decision needs consultation with the farmers, but the idea that we would have a triggering mechanism to cause a vote to be held is a very scary proposition. We would rather see the bill not speak of inclusion or exclusion at all. If that discussion was to be held, that should be a legislative change passed by Parliament, as opposed to having the bill speak of that at all. That has been the position of the CFIB, and, I would put it to you, of many of our similar-minded groups.
Senator Stratton: I think you have spoken to most of this, but on page 4 of your statement, your first recommendation is to: "Reject and eliminate the `inclusion' clause as ... unnecessary, divisive and potentially destructive...". What do you mean specifically by "divisive"?
Ms Braun: I think the point that we are looking at is the triggering mechanism, in that what we are facing today is the fact that the very affected commodities have not asked for the "inclusion" clause, and therefore who, in fact, would be triggering it? There you get the divisiveness of who is making the decision on behalf of the commodity group. The Canola Association, in their presentation in Ottawa back in October, denied that they were calling for this. They said, "We are pleased with how our industry is working now. To have this `inclusion' clause in the legislation is worrisome to us and how that would be triggered." That alludes to the divisiveness from that point of view.
Mr. Kelly: It also, I think, has to do with reinvigorating the debate at the board level. If you put the "inclusion" clause in, let me put it this way: it will be tested. There is no doubt that, if it is in the legislation, some group, somewhere, somehow, will come forward and test that provision. That will reinvigorate a very serious debate.
Even if it is rejected out of hand by flax growers or canola growers, it takes the debate right back to the steps of the Canadian Wheat Board, and takes attention away from getting the best value for Canadian grains, back to the age-old debate of inclusion or exclusion, or the monopoly, or dual marketing, or putting the CWB out of the business altogether.
That, I think, is where the divisiveness would happen. If you put the clause in, it will be used. Even if it is rejected, that will destabilize things more than we figure at this point in time. Getting those headlines in papers around the world to skittish buyers in foreign jurisdictions, over whom we have very little control, can cause damage to the value that we seek for our current grains, let alone for grain that might be concluded under the clause altogether.
Senator Stratton: I am trying to understand why the minister would put this in the bill in the first place. My thinking is that he did it simply because Parliament is too cumbersome a process. For example, if you wanted to add a grain to the Board's responsibility or take one out, the cumbersome process as it proceeds through Parliament takes too long in this day and age, when you may require fast action. Do you have a comment on that?
Ms Braun: We would share your question of why the minister would put the "inclusion" clause in the legislation. If in fact there was a call for a quicker mechanism to trigger commodities under the Board, I guess we could understand that or make more sense of it, but when we look at the four groups that have all been on record as saying that they have not called for this, we have to wonder just why this, in fact, has now shown up in the legislation. That has to speak volumes. We share your puzzled view of why, in fact, it is there.
Mr. Kelly: One theory that has been floated by a variety of our similar-minded people is that perhaps the government is seeking to have this debate shoved off the steps of Parliament and onto the steps of Main Street, Winnipeg. Let us have the protests and the rallies and the fighting take place in Winnipeg, on the steps of the Canadian Wheat Board as opposed to the steps of Parliament. That is a fairly cynical view of the government's motivation in putting forward this "inclusion" clause. I would be lying to suggest that that has not been discussed widely among the people we have be speaking to about this bill. Many of our members have said to us, "Why would the government do this? What is the motivation behind this, given that there does not seem to be a great deal of interest on the part of any of the potentially affected commodity groups to see this happen?"
The most likely theory is that this pushes the debate further away from Parliament and into the Canadian Wheat Board's offices. That that is more destructive than having the debate right now in Parliament. I think the debate should rest with Members of the Parliament as opposed to elected Wheat Board members who are supposed to be out there trying to get the best value for Canadian farmers that they possibly can.
Senator Hays: What I have heard is that it provides symmetry. If you are going to exclude grain or an oilseed you should be able to include a grain or an oilseed. On the issue of who should resolve this problem, I did not ask you this question. I asked everybody else. Why is the elected board not a good body to make decisions on behalf of the producers it represents? In terms of becoming involved in the debate and the decision making what is wrong with involving the producers themselves?
Ms Braun: I think that we had a prime example this morning. You had two different producers with very different views. Then you get into the battle of pro- versus anti-monopoly within the Board. We have a $6-billion Board to run. The day-to-day operations are critical in order to get the best value for the producer. We cannot be having rallies on the front steps of the Wheat Board every other week when there is a critical issue.
Senator Hays: Are not the rallies meant to impress the government rather than the Wheat Board, because they know the government makes the decisions for the Wheat Board? In the pipeline industry in my own province we have the pooling approach on the transmission of gas challenged by the Alliance Pipeline. Then we have Nova and Trans-Canada agreeing to merge. That is a dynamic of business, of big business. Why is it better for the government to be involved in the final decision making in that rather than the big business itself?
Mr. Kelly: We are speaking about fundamental freedoms. Simply because there was a vote held where 51 per cent of farmers suggested that flax should be included under the Canadian Wheat Board does that mean that the other 49 per cent who are selling a legal commodity should have absolutely no choice in marketing their grain to whomever else they might like to buy it. It is that question that lends itself well to being left with our parliamentarians as opposed to board members.
If people had the choice of using the Wheat Board or not using the Wheat Board we would not be scared of the inclusion clause. Would we even be having this debate? I do not think so. Would farmers who wanted to sell their flax to whomever care that the Wheat Board was involved in the industry? They might, if the Wheat Board were given benefits that were not available to other producers.
I do not think anybody rejects the idea that farmers should be able to sell their products collectively to whomever they choose. Should that then be forced on the other group, however small the minority may be -- and I am not convinced that it would necessarily be a minority if you were asking the dual marketing question? Should the decision to market grain simply to one group be forced on everyone if, in fact, there is a sizeable minority, as is the case in the barley decision, where a black and white question was asked? That is why I think that it is better left with Parliament than with the Wheat Board.
I can tell you that the Wheat Board elections would focus more on whether you are pro- or anti-monopoly instead of whether Joe "X" is the best candidate to run a $6-billion corporation. It is that that I want to try to avoid. I do not want the people who are trying to run a $6 billion corporation that my entire livelihood is dependent upon, if I am a grain grower, to focus on what side of the pro- versus anti-monopoly debate you are on. I would rather chose you because you are a skilled business person.
Senator Hays: To use the example of the transmission of gas in Alberta, I do not have a choice as a gas producer about shipping my gas. I do not have a choice about whether or not a gas liquid, such as ethane, is stripped off and sold in the incremental cost of gas to be used to have value-added in Alberta and so on. That has been generally accepted and probably has done the province a lot of good. But things change. The way things are changing there now is that that is opening up and the businesses themselves are making the decisions by making applications to regulators to move the gas by other means and there is a fight. This is only one of the problems that the Wheat Board will face in whatever form it takes. If it has to go to government every time their is a tough decision to be made to get the decision made for them so that the Board does not to have take any heat for it, then it is just a short-term solution. In five or six years we will be back here again when the government has difficulty in making decisions. Surely this is something that should be moved over to the producers.
Mr. Kelly: I hope that nothing I have said has suggested that we want the Wheat Board to be controlled by government. We are speaking of the inclusion clause and the inclusion clause alone. The last thing I want is for the government of Canada to centralize control over the day-to-day decision making of the Canadian Wheat Board. In fact, I would go further by decentralizing the Board and having all those responsibilities based on the decisions of a fully accountable board elected by producers.
I think we are looking at two different issues. The inclusion-exclusion clause provisions should rest with Parliament. All of the other decisions should be left to an elected board of directors.
Senator Stratton: There has been quite a discussion on the inclusion- exclusion clause and opting out. Those appear to be the two hot topics. As we go through this process, of course, we will try to arrive at a consensus within our group, which will be amazing if it occurs. Nevertheless, we will try. If you had to make a choice, if we could propose to the government's side that if you had to live with one or the other, either giving the farmers the choice of opting out or taking out the exclusion-inclusion clause, which would you chose? It is a tough question.
Mr. Kelly: I am not saying that based on my opinion. I am saying that based on every survey that we have done of our members.
[Translation]
Senator Robichaud: I have a comment. I am having some trouble following your argument. On the one hand, you do not want the government to get involved in the business of the Canadian Wheat Board. On the other hand, however, you want us to make a decision immediately and to reject this inclusion/exclusion provision. It is difficult for me to reconcile these divergent positions.
[English]
Mr. Kelly: We have little difficulty with the idea that farmers should have control over the board of directors of the Canadian Wheat Board. That is something that we want to see happen. Western Canadian farmers should have control over the decisions made by the Canadian Wheat Board. What we do not want is the inclusion-exclusion part be part of the legislation. What we are saying is that those decisions should rest in the hands of Parliament. Certainly there is a variety of views on that topic and parliamentarians, of course, will listen to them, as they always do.
The inclusion-exclusion clause should be scrapped and decision-making should rest with an elected board of directors. We are trying to separate, I think, in our minds the issue of inclusion-exclusion from the issue of producer control.
[Translation]
Senator Robichaud: I still do not understand, Mr. Chairman, but I will let it go at that.
[English]
The Chairman: We will call the final witnesses of the afternoon, Mr. Breemersch, Mr. Downie, Mr. King and Mr. Armitage.
I would ask each of you to introduce yourselves. We will have a five-minute presentation by each of you, and then questions from the senators.
Mr. Armitage: I am beef and grain producer from Miniota in western Manitoba.
Mr. Darryl Breemersch: I am from Melita, Manitoba, and I am also a beef and grain producer.
Mr. John King: I am a cattle feeder and a grain grower from southwestern Manitoba.
Mr. Gregg Downie: I am a grain farmer from the Wawanesa area, which is 30 miles southeast of Brandon.
The Chairman: Will you begin, please?
Mr. Armitage: Members of the Senate committee, members of the press, and ladies and gentlemen, Bill C-4 is a very feeble attempt to reform the Canadian Wheat Board. The Canadian Wheat Board is desperately in need of being reformed to ensure its continued existence. However, this is not the way to do it. As we have all heard, the upcoming world trade negotiations will attempt to do away with state trading organizations. Why should we attempt to maintain something which will likely become illegal, according to international trade rules? Perhaps a more pertinent question is: What business does the government have in being involved in the marketing of grain? Is this a necessary government function?
Bill C-4 is attempting to provide the illusion of putting control of the Canadian Wheat Board into producers' hands. This, in fact, will not happen because the minister responsible for the Canadian Wheat Board will have the authority to authorize the appointment and/or removal of the president of the board of directors and to appoint four of the other 14 directors. The government will still guarantee the initial prices. This, apparently, is why they feel they still need so much input into the operation of the board.
What is really needed, in my opinion, is for the Canadian Wheat Board to become a voluntary marketing cooperative, independent of the government. The government guarantee of initial prices should end. However, the government should still be responsible for previous credit arrangements. I believe somebody mentioned that amounts to $6.6 billion.
The Canadian Wheat Board has many strengths which should be preserved. It has an international presence and good contacts, a market development infrastructure, and good marketing people. I suspect that this marketing structure would work even better if it had to compete for the business. I see no need for individual producers to be completely in or out of the Canadian Wheat Board structure. It should be possible for any producer to commit a portion of his production to the Canadian Wheat Board through a firm forward contracting system. I do not have a problem with crops other than wheat and barley being included, if that is done on a voluntary basis.
However, I am very opposed to the inclusion clause as it is written into Bill C-4. It would wreck a perfectly good marketing system for off-board crops, which is now working very well. There is no great hue and cry out in the countryside to include other crops under the Canadian Wheat Board's mandate. Having crops under the present Wheat Board marketing system puts roadblocks in front of value-added processing of these crops. The board of directors of a voluntary Canadian Wheat Board should all be elected by the producers and they, in turn, should hire a chief executive officer to conduct the day-to-day business of the co-operative.
A voluntary Canadian Wheat Board should, of course, be subject to a regular independent audit. If the Canadian Wheat Board is to remain under the control of our federal government for now, it should be regularly audited by the Auditor General and be open to the Access to Information Act.
In closing, I would like to say that the status quo is not an acceptable situation to me. However, Bill C-4 would make no significant improvement. Therefore, I would urge you to defeat the bill and send these legislators back to the drawing board to do it properly.
Mr. Breemersch: I am here today because, as one of many farmers, I am very concerned about the future of family farms on the Prairies. Marketing our wheat and barley is a joke with the existence of the Canadian Wheat Board. If we are bound to sell our grain through the Wheat Board, at which point does our grain become the property of the Wheat Board? Is it after the long hours we have spent planting the crop, or after countless hours of harvesting it, or is it after we have loaded the trucks and hauled it to the elevator? In November of 1996 I delivered two carloads of malt barley, thinking that, after submitting three separate samples of the same barley, that they would all be accepted and my risk should be over. I then waited three and a half long months, only to find out, on February 10, 1997, that my barley had been rejected.
If Mr. Goodale can say at any point of this process that he and the Wheat Board do own our grain, why are we at risk until the grain reaches its destination? Why, after all the hard work and risk-taking, can the Wheat Board step in and take our grain from us?
They say the point of having the Wheat Board is to pool all the grains so that everyone ends up with approximately the same amount of money. The problem with that in the southwest corner of Manitoba is the average yield is much less, but the quality is better.
The Wheat Board wants to pool our quality with the lesser quality grain from the areas that receive more rainfall which, in return, will receive a higher yield. The board will not forcefully pool the yields, which I think is very unfair.
If this works for the farmers, then why could it not work for Mr. Goodale and the employees of the Wheat Board? We could take all their wages, right from the top executives down to the people that clean the offices, throw all the money into a pot, and everyone could have a nice, average wage.
Ninety-five per cent of today's farmers work very hard at what they do. Where the difference comes in is, after the grain is in the bin, a number of farmers, with no cattle or anything to tie them down, enjoy going south for the winter and are content to take whatever average price the board offers them.
A large number of farmers need the extra cash to run their operations and would like the opportunity to get all they can for what they grow. We cannot keep running these farms on $3 wheat and $2 to $2.50 barley, especially when our neighbours to the south enjoy, on the average, $1 more for their wheat and barley. With the existing system, there is no way to make the Wheat Board grain companies, railways and dock workers accountable for what they do. For example, one year ago we had over 40 ships waiting to be loaded, for which the farmers paid millions of dollars in demurrage. The Wheat Board blamed the railway, and the railway blamed the Wheat Board for their incompetence. No matter whose fault it was, we, the farmers, were left holding the bag once again. Could this be why the price of wheat and barley are once again dropping?
As I see it, the only crops we are able to make money on are those that are separate from the Wheat Board's monopoly, such as sunflowers, peas, oats, canola and rye. To allow Bill C-4 to pass, which would give the board's monopoly more power to include these types of grains, would cripple us completely.
I would like to ask for an opt-out option from the Wheat Board. This could work the same as the GRIP program a few years ago. A farmer could opt out for a specified number of years. This would allow us to market our grain for a decent price, or stay with the board and allow them to market our grain. This would work the same as the Ontario board's proposal to allow the farmers to opt out. This would enable me to continue to do what I enjoy most, farming.
I have three sons, aged, eight, seven and four and, with the present system, there will be no future in farming for them.
Mr. King: My purpose in coming here today is not to criticize. I want to do is pose some questions that I would ask if I were in your position. You should ask yourselves: Do I want to be responsible for effectively transferring control of one of our food resources into the hands of Ottawa-based political management? I have not read all of Bill C-4, but the inclusion part bothers me the most. My concern about control of our food resources being in the hands of Ottawa-based political management stems from what has happened in the past. For example, in about 1977, when the Department of Fisheries and Oceans took over the East Coast cod fishery, we all know what happened.
I think a better way of doing it is to have some sort of community-based management of these resources. If the community along the east coast had been allowed to look after the cod fishery I don't think it would be in any worse shape than it is today.
You may say that community-based management of these resources is what will happen because 10 of the 15 members of the board will be farmers. Does the inclusion clause still apply?
Sometimes it is good to take a look at what has happened in the past in order to make a judgment on what will happen in the future. I handed out a couple of newspaper clippings from 1981 in regards to a plan called MAP, the Market Assurance Plan. They state:
In view of the foregoing, and the obvious policy of centralizing power over all marketing in Ottawa, the following extracts from the February 20, 1981 Alberta Report are very significant:
Alberta's agricultural community this month is being presented with a proposal that the federal government assume the same controlling and central role in the production and marketing of grain that it has assumed in the production and marketing of gas... What Alberta's farmers will be presented with this month is called MAP, the Market Assurance Plan... MAP's critics, chief among them the Provincial Government and the cattle industry, see many further and sinister implications. They say that:
MAP will mean that in about two years the federal government will be telling prairie farmers what they will grow, how much they will grow, how much they will sell it for, and to whom they will sell it, making them in effect civil servants at low pay.
MAP will terminate the free market in wheat, oats and barley.
MAP will eventually bring rapeseed and flax under control, though rapeseed farmers six years ago voted down federal marketing of their newly developed product.
Keep in mind, six years ago from 1981 is 1976. The report goes on to state:
MAP will bring the Alberta cattle industry under both federal control and eventually federal subsidy because cattle farmers depend on the free market for free feed grain supplies.
Finally, MAP will make Western Canada more dependent than at any time since the Second World War on decisions from Ottawa, thereby giving the federal government new political clout in the West which it will use to whip unruly Western provincial governments into compliance with federal policy.
The Globe and Mail on April 4, 1986 reported:
Despite a slick six-month public relations campaign, the advisory committee to the Canadian Wheat Board was forced this week to abandon a proposed marketing plan that would have ensured prairie grain farmers a buyer for all they can grow.
The board shelved the Market Assurance Plan, known to farmers as MAP, after stiff opposition emerged from the Alberta Government and private grain traders... At one point in the acrimonious debate, Alberta Agriculture Minister Dallas Schmidt threatened to withdraw Alberta from the board if MAP were approved.
Western farmers would be foolish to think that because this one thrust, known as MAP, has been turned back, this ends the centralist threat. The policy of Ottawa is centralization of power.
It goes to say that it would be proposed again.
I was not involved in agriculture in 1981. I am not that old.
Senator Taylor: I was going to say, "The industry treats you well."
Mr. King: I was farming in 1981, but I was so busy trying to make a living I was not paying attention to the newspapers.
I am also involved in cattle feeding and exporting if you have some questions in that area.
Mr. Downie: I appreciate the opportunity to appear before this Senate committee to assess Bill C-4. I will be commenting mainly on grain trade liberalization and risk management and how that affects the Canadian Wheat Board and, ultimately, my farm.
Commodity-based marketing, as we know it, is becoming a thing of the past. We are moving away from broad-based grades and moving towards tight specifications, such as falling numbers, dry matter protein; particularly in the milling grains. With the advent of genetic modification we have novel-trait commodities coming into place -- commodities that will look like Canola; that will smell like Canola, but that will not be Canola. That is, the oil out of the Canola plant will be a plastic, and will have nothing to do with an edible oil. The same thing can happen to wheats -- it is just a matter of time. There is also the opportunity for nutriceuticals. The point is, can a central desk selling agency handle all these variations in the market?
Farmers have access to a huge amount of technology. With today's systems we can achieve 25 per cent more production, but all we get is lower prices. Government trading agencies all over the world are being wound down in favour of privatization. In the 1980s Canada exported, on the average, 4.28 million metric tonnes of wheat to the former Soviet Union.
As you all know, we are selling very small quantities to a lot of different countries. Iran, I believe, was our largest wheat buyer last year. China is undergoing major transformation to a market-based economy, but Canada still does government-to-government sales in China. This is only because the Canadian system will not allow the Chinese to do it any other way. The Brazilian milling industry, as another example, is now totally privatized.
My belief, which is shared by a majority of others in the grain industry, is that we have to do away with our habits of command and control. The only way that the western grain industry will be able to deliver and respond to the market-place is with contractual obligations and price signals, with the attached risk and rewards.
As government support of grain prices, along with production-distorting insurance schemes, is being reduced and eliminated, it is vitally important that farmers have effective risk-management tools. The only major commodities on which we do not have current futures markets are the Canadian Wheat Board grains, as I trust you realize. The reason is obvious; there is only one buyer and many sellers. The futures market works on the fact there is a buyer for every seller -- or, more accurately, many buyers and many sellers.
If another crop, such as canola, were to be added to the current Canadian Wheat Board monopoly, we would lose a valuable risk-management tool in the Winnipeg Commodity Exchange canola futures contract. How would the Japanese, the Mexicans, and our domestic crushers hedge their purchases? Further, how would I be able to sell a large portion of my canola in the fall to satisfy cash flow requirements, and turn around and buy low-risk call options to capture market rallies later in the year, rather than holding onto the physical product?
Bill C-4 is flawed in every aspect. The most contentious issue, in my opinion, is the inclusion clause. In this era of the grain industry, why on earth are we suggesting that we want more centralized selling of a generic, nondescript bulk commodity of low value?
The inclusion clause will, without question, jeopardize investment in value-added processing. Jobs could be lost. Regional economic growth could be threatened. Further to that, the brain drain of signs and technology could rapidly accelerate out of Canada to countries which are more prepared to accept the exciting changes that will occur within our industry in the next millennium.
The solution to this dilemma is to scrap C-4 entirely. A new bill should be developed and introduced that follow three basic principles. First, the Canadian Wheat Board is to be allowed to compete for any grain for which it has an export sale. Second, the Canadian Wheat Board is to take ownership of the grain at port position. Third, the Canadian Wheat Board is to have no interest or control in the transport of grains and oilseeds from farm gate to export terminal, other than for direct sales from farmer to North American buyer through the Canadian Wheat Board.
The implications of Bill C-4 on my farm are painfully clear; Bill C-4 has the power to eliminate our profitability. It is imperative that I be able to manage my own resources and my own risk, and that I be able to see the market signals to maximize my profits. Most importantly, I must be able to access those markets. In six to eight weeks from now I will be planting my twenty-fifth crop. For the first time in my 25-year career, there will no be one acre of Canadian Wheat Board grains on my farm. There are tremendous opportunities in the grain industry in every sector except Canadian Wheat Board wheat and barley.
I thank you for your time and attention and look forward to any questions you may have.
Senator Stratton: Mr. Downie, did you submit your presentation?
Mr. Downie: I did. I just brought one copy with me.
Senator Stratton: It is very interesting. Without breaking a privilege, what are you growing? If it is none of my business, tell me. I am just curious.
Mr. Downie: I will tell you. I am growing a crop right now that looks like durum, smells like durum, but it is called Triticale, and the Americans love it. I have never had any trouble getting it into The States. That is one of the crops I am using instead of wheat. The others are buckwheat and peas, along were oilseeds.
Senator Stratton: How large is your farm?
Mr. Downie: 1,500 acres.
Senator Stratton: I can understand why you would not want the inclusion clause.
Senator Taylor: Mr. Downie, you talked about all the markets around the world. In grain, wheat, and barley, however, even without the Wheat Board, would you not be stuck selling to the four big companies? Could the farmers survive without a grain board between them and the big corporations?
Mr. Downie: First, there are far more than four exporter-accredited agents of the Canadian Wheat Board. I think that there are more than 30. Second, I have absolutely no intention of hopping on a plane and going to China to sell 100 tonnes of wheat; that is ridiculous.
My point is that with any other commodity I can choose with whom I do business. It is a free-market operation; if I do not like somebody's price, I try to find a better price. If I cannot find a better price, then I have to assume that that is the market. I have no option but to sell my Wheat Board grains to the CWB, and I do not know whether that is my best price, or if they are giving me the best service. If we allow the Wheat Board to compete, these concerns will be addressed. If they have the best price, they will get my grain. If they do not have the best price, somebody else will get my grain. Where is the downside in that?
Senator Taylor: Many years ago, we had the Winnipeg Grain Exchange. In it, we had the free market that you and others have suggested, and it did not work very well. As a matter of fact, farmers got skinned alive. What has changed to make you believe that the free market would now be successful?
Mr. Downie: First of all, the Winnipeg Grain Exchange is not the Winnipeg Grain Exchange, it is the Winnipeg Commodity Exchange. The Winnipeg Commodity Exchange does not trade physical grain; it trades futures contracts on the grain. That is the difference. You are not trading physical grain, you are trading contracts on those commodities. The physical grain is very seldom delivered, nor is delivery taken on those contracts.
The Winnipeg Commodity Exchange exists so that buyers can reduce their risk by hedging their purchases, and sellers can reduce their risk by hedging their sales. Without that operation in place, the way that a buyer hedges his purchase is by widening the basis. I do not like a wide basis.
Senator Taylor: That was not really what I was after. I was talking about the system we used to have. Whatever you want to call it, it was absoloutely free market, and the farmers did not do very well by it. What makes you think that the conditions that occurred under that absolutely free market will not happen again? What do we have in place today that we did not then? Do not tell me just smart farmers, because there were smart farmers then, too.
Mr. Downie: Most Certainly. There is no doubt that I am in no way a smarter farmer than my grandfather was. The difference is the technology; we have no end of information. As farmers, most of us probably have global link and DTN. We can tell you what barge freight is down the Mississippi. We can tell you what ocean freight is. We can tell you what the Wheat Board asking price is at any given time. That is the difference, sir. When my grandfather lived on the farm, the only time he really knew what the price of grain was when he entered the elevator with his horse and buggy. I know what the price of grain is on a 30-second lag time, 24 hours a day. Significantly different.
Senator Hays: I understand the position of all panel members of this panel on inclusion, exclusion. I think that this is the first panel we have had that is speaking with one voice. Let me just ask you to comment a bit on the actual circumstances which would see wheat or barley excluded, or another commodity such as grain or oilseed included. The exclusion of wheat or barley would happen on the recommendation of the responsible minister to the Governor in Council or to the government. I am reading from the act, section 24. This is to excluded grain. The minister would not make a recommendation to exclude a grain unless the exclusion is recommended by the board, and an acceptable procedure, approved by the Canadian Grain Commission is in place for preserving the identity of the excluded grain, so as to prevent co-mingling with other grain. The other, I think, has more to do with the Canadian Grain Commission than anything else.
Therefore, a grain would be excluded on recommendation of the board. To include a grain or an oilseed, however, the minister would not be able to make a recommendation unless a written request were sent to the minister by an association of all the members. These members would have to be producers of the grain, and would represent the producers of that grain throughout the designated area. As is the case in an exclusion, an extension would have to be recommended by the board, and a vote in favour of the extension by producers of the grain would have to be held. The manner of the vote would be determined by the minister after consultation with the board.
It is much harder to include a grain than to exclude one. An association of all members would have to ask for it. There would have to be a vote. For those who are worried about the rapid inclusion of a grain or an oilseed, I would suggest that there is considerable comfort in the fact that an association of all members would first have to agree to request that the process begin.
The alternative, as Minister Goodale said, would be to take both inclusion and exclusion out; to leave it to the board and to the government. Putting dual marketing aside for a moment, could you comment on why it would be better not to refer to inclusion?
Mr. Armitage: The wording does not make me very comfortable, because it does not really specify what the minister would consider to be an association representative of the producers of that particular commodity. There are a lot of different associations out there. I suppose any one of them could claim to represent the producers of that commodity.
Senator Hays: Is that the main concern? Would you give us a definition of association?
Mr. Armitage: For example, the National Farmers Union might say that it represents the producers of canola, and ask for the inclusion clause to be invoked.
Senator Hays: So say you all?
Mr. Armitage: I would not feel that the National Farmers Union represented my view.
Senator Hays: I am not supporting the National Farmers Union. I am just trying to get your collective opinion on why you do not feel that there is adequate protection. You say that association is not defined; I am suggesting that you define it for us. Simply excluding the NFU is not good enough -- we have to have a little more than that. If the term were to be defined, would you be happy with that?
Senator Stratton: Can I ask a supplemental if I may, for clarification purposes?
Senator Hays: Sure.
Senator Stratton: As I understand it, an individual organization is not the concern. The concern is that any group that wants to raise hell could ask for a grain to be included, and then all kinds of problems would start. Is that what you are getting at?
Mr. Armitage: That is part of it. The other problem is that, even if it did get put to a vote of all the producers, and 51 per cent of them voted for it, 49 per cent would not be very happy about it, particularly if it were mandatory.
Senator Stratton: This morning it was said that it would take a two-thirds vote rather than just a 51 per cent majority.
Mr. Armitage: It does not really matter if 95 per cent of them voted for it, the other five per cent would still be forced to go along with it.
Senator Stratton: I understand that. You are saying that even if you had a two-thirds majority of the growers wanting a commodity included, it would still be unacceptable, because 33 per cent would not want it.
Mr. Armitage: As I mentioned in my brief, I do not think that the Wheat Board should be mandatory in the first place. I think that it should be on a voluntary basis. If that were the case, I would have no problem with them including whatever grains they wanted, but I do not want to be forced to sell any particular grain through the Wheat Board.
Senator Hays: If I could recover the floor. I think that Senator Stratton's point is a good one. Even without an exclusion or inclusion clause, it is still possible for a commodity group, representing a grain, to take steps to have it included under the Wheat Board monopoly. This is possible whether the act is silent, or whether it has provisions for such a circumstance. Would you not be happier with an act that had such provisions, as opposed to one that was silent?
Mr. Downie: I think that it is very important that we not separate the issue of inclusion from the way that the Wheat Board works. That is, if the board were to be voluntary, then inclusion and exclusion would be redundant. If it is going to remain mandatory, however, we cannot risk market uncertainty caused by the rapid introduction or removal of a crop from the CWB.
This year, all my grain will be open market grain. If I were growing Wheat Board grain, however, I would not want to plant that seed, and then discover in July that there is now an open market on it. That is too quick. There has to be a process put in place so that everybody is aligned and ready for the change.
As soon as you start legislating inclusion clauses or exclusion clauses you put risk in the market. We do not need risk in the market; we do not need to upset our largest trading partner by looking as though we are moving towards more state trading, as opposed to less.
The Chairman: There seems to be an awful lot of discussion about inclusion. In our case, on our farm it was canola. Without canola, I doubt we would be farming today. So we are very sensitive about that crop, or farmers are very sensitive. To some it is flax. To others it is another type of crop -- yellow or brown mustard, for example There is a very sensitive or protective feeling about the board doing anything that would disrupt what has, in the short term at least, saved a lot of our farms. Flax is now at $11.31. Wheat, on the other hand, as I said in a speech in the Senate, is the same price as a barrel of oil in 1973 -- $3. When considering the inclusion, I think that it is very important to recognize that there is that protective attitude in the minds of the farmers.
Mr. Downie: I think it is more than just a protective attitude. It is economics. You said it yourself; in 1972 a barrel of oil was worth $3 and so was a bushel of wheat. Now a barrel of oil is worth $20 and wheat is still hovering around $3. It does not have anything to do with protectionism; it has everything to do with economics.
Senator Hays: I think I have a better understanding of your position. One last question -- is price the principal reason that you are not growing board crops, or is it ideology?
Mr. Downie: It has everything to do with price. In the last two or three years, our long-term average on canola, flax, buckwheat, and Triticale is $250 or more an acre. In the case of Triticale, it is actually well over $300 an acre in the last two years. Then you look at No. 1 wheat, which we do not grow very often, and No. 2 wheat, which is at $180 an acre. It has nothing to do with philosophy.
Senator Taylor: I have short question for Mr. Armitage. You wanted a voluntary market, yet part of the Wheat Board's success, if you could call it that, is due to the fact that Canadian taxpayers are, on occasion, on the hook for up to $6 billion in credit that is granted to buy wheat and barley. Naturally, if there is a voluntary market, they will want us to take back the guarantee. Your marketing would need to reflect the fact that somebody else would have to cover the credit rating, to take the risk for the buyers that Mr. Downie is so confident are out there.
Iran, for instance, is our big buyer now. Would you really feel happy giving the Iranians some credit to buy your wheat, or taking less for it?
Mr. Armitage: In the past, farmers have certainly benefited from the fact that there is $6.6 billion out there that will quite possibly never be repaid. I am also a taxpayer, and I do not feel very happy about it.
The Chairman: Anyone else wish to comment? Mr. Downie.
Mr. Downie: I think that that is one of the reasons why a lot of us feel that the Wheat Board should take possession of the grain at port position. It takes away the requirement of initial price security by the government -- they will only ask for the grain at port position when they know that the sale has been made. There will not be the incentive or the requirement for the Wheat Board to move the grain off the farm, as is currently the case. Over the years we have frequently seen situations where the bins are emptied and the grain is moved into terminal position, only to have it discovered that it is the wrong grain. We end up with Thunder Bay full of feed wheat on July 31. It does us no good at all, as there is no feed wheat moving out of Thunder Bay anymore. We get the wrong grain in the wrong terminal.
If the CWB became the buyer of the grain at port position, it would reduce the incidence of such situations. It would reduce the Wheat Board's incentive to move as much grain as possible before the end of the crop year. It would send market signals to the farmers.
Senator Taylor: This is more of a supplementary comment than a question. I have seen somewhere, and I do not know just where, that the new Wheat Board will be allowed to pay farmers for storage in order to alleviate that problem. You would be able to keep the grain on the farm. You would not have to rush it into the terminals.
Mr. Downie: Frankly, I would sooner get paid for the grain than get paid for storage. Storage does not pay you much. That suggestion does not achieve anything. It does not send signals to the farmers; it does not tell us what to grow, nor does it tell us anything about marketing. It only tells us to buy really cheap bins. What we need are the market signals to tell us what to grow, what to sell, and where to deliver it.
Senator Hays: In your scenario, how does the grain get to port? Do you ship the grain to port?
Mr. Downie: No. The licenced elevator companies will ship the grain to port, as they now do with canola, flax, peas and the like.
Senator Hays: Walk me through that. You have grown a crop of wheat, and let us say it will be marketed through the Wheat Board, as it currently must be. You would deliver it to your elevator and ask that it go to Vancouver, Thunder Bay, Churchill? You would make that choice?
Mr. Downie: No, I do not think so. I think that the Wheat Board would make a sale, or have the strong prospects of doing so. Then would then put tenders out into what are now the accredited agents.
Senator Hays: You are not doing any speculating in terms of the choice of port?
Mr. Downie: No. I do speculate, but not on the choice of port.
Senator Hays: You are a farmer after all. I understand.
Mr. Downie: I think it works the other way, sir. I think it comes from the Wheat Board back.
Senator Hays: I understand.
The Chairman: Gentlemen, I want to thank you for appearing here. On behalf of the Senate committee, I would like to thank all who appeared today in Brandon. This has been a very useful day. I would also like to thank the press, and to thank the senators for their cooperation.
The committee adjourned.