Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 10 - Evidence - Afternoon sitting
WINNIPEG, Thursday, April 2, 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: Our next witness is Mr. Alex McWilliams. Welcome and please proceed.
Mr. Alex McWilliams: Honourable senators, ladies and gentlemen, this is the first time in my memory that senators have come to Western Canada to listen to the public on anything. I welcome you and thank you for doing so.
The Chairman: Thank you.
Mr. McWilliams: First, I apologize for the typing in my submission. I am more skilled with a pitchfork than with a typewriter. This is a very serious matter you are dealing with today. The first few pages of my submission contain photos of truck convoys and show some of the problems that farmers have been having. I will start by giving you the context of these convoys.
Senator Hays: I do not mean to interrupt, Mr. Chairman, but I do not have a copy of the presentation.
Senator Chalifoux: Nor do I.
The Chairman: Continue, Mr. McWilliams.
Mr. McWilliams: I should mention that colleagues who were scheduled to be here today -- and there were to have been several -- have not arrived. There is a reason for that, as there has been some contention within the group following the Farmers for Justice presentation at Saskatoon at which the paper was approved. I have a copy of it here, and while the press said it had been approved as presented, I am sure the intent was that any approval was on the basis of there being amendments injected into it. That has caused some controversy, and some people who were scheduled to be here have not come.
The contents of this paper illustrate marketing problems that grain producers have been having for many years -- such as grain not being sold in years when there was no oversupply of grain in the world; and Canadian grain prices in some years being far out of line with prevailing world market prices, which in many cases forced grain producers to use illegal means of finding a market in the U.S. for their crops in order to be able to service their debt, only to be challenged by Canadian Customs and the Wheat Board, after which they found themselves in a worse financial position than before.
The matter before you today is a very serious one as you will be making decisions affecting the future of agriculture for generations not yet born.
In the picture on the first page, you can see a convoy of 38 trucks hauling barley to Bottineau, North Dakota, to meet an 85 car unit train. This meeting was scheduled and a larger train was put in because the Canadians were coming that day. The price being paid that day for malting barley was $3.30 above the Canadian price, and for feed barley, it was $2.20 above the Canadian price.
I might mention that one of our people was across the border two or three weeks ago and brought back a price of malting barley of $3.37 US, which, when you add the exchange, is in the vicinity of $5 Canadian. Our price today is $2.40. I suggest you compare those prices.
The next page is rather self-explanatory. The RCMP were very sympathetic to the farmers. Customs and the Wheat Board seem to have no end of funds with which to fight the farmers.
On page 3 we see fellows holding their coats over their heads to protect themselves from the cold wind that particular day. They were struggling to retain their trucks. Customs had been instructed to take the first two trucks in tow but the farmers negotiated, held out and said, "No, if you are going to take any, you are going to take them all."
Page 4 shows the oldest truck in the convoy. It is probably not too well known but this was another very expensive day for Canadian taxpayers because 13 very large tow trucks were commandeered from Regina and other places in Saskatchewan to tow these vehicles. Almost all of the heavy tow trucks in southern Saskatchewan were in use that day. It was originally thought that there were 13 farmers' grain trucks; however, six trucks had taken a different road so only seven were seized by the RCMP and taken into tow near Whitewood.
Visibility must have been poor that day, as one of the tow-truck drivers did not see an oncoming train, and the farmer's truck tractor, which was loaded on a low-bed trailer, was struck dead-on and totally destroyed. As it happened, the RCMP had not taken time to check out the registration of the tow truck involved, which turned out not to be licensed nor insured. As a result, the taxpayers of our country paid the truck tractor's owner $40,000 for his rig, on top of which are the costs for replacing the low-bed trailer plus the cost of repairs to the train.
One thing of interest, at least to me, is that the oldest driver in the convoy that day was a 74-year-old farmer from southern Saskatchewan. He was a veteran of the Second World War. He stated, "When we put our life on the line in Normandy, France and Holland, I certainly never thought I would see in Canada what I have seen today." Twenty per cent of the farmers in Western Canada are 70 years of age or older, with the average being somewhere in the fifties.
We had a very bizarre seizure in my home area, which I would like to discuss. I had expected this man would be present today to describe the event himself. This type of thing has happened on many farms.
On the morning of April 10, 1996, the Desrochers family were amazed at 5:15 a.m. when mounties and Customs officials entered their house without knocking and without a search warrant. A total of ten Customs officials, six mounties and two tow trucks had arrived with a warrant to seize two grain trucks which were loaded and ready to join a convoy to North Dakota. Conditions in the farmyard were muddy as frost was thawing. The large 18-wheeler could not be moved but the smaller 10-wheeler, loaded with barley, was taken to the Customs compound at Emerson, Manitoba. Unknown to the Desrochers, the compound was inundated by the Red River flood of 1996. In August, after they had paid to have their truck released to bring it home, they learned that the load of barley on it had disappeared. No one knew where it had gone. It had been tarped over and should have been safe. They only got a few miles on the way home when the truck motor seized. Examination by a laboratory showed that water had flooded the engine and that it was ruined. The Desrochers have placed a judgment against Canada Customs for the price of the engine that was needlessly destroyed. What a waste of taxpayers' money.
Canada Customs and the RCMP could only have timed their raids by using telephone wiretaps.
On another occasion later, their son Clayton was charged because he was driving the truck. He served seven days in jail and was released only after a heavy fine was paid. Their truck tractor was surrendered to Customs, and they must pay a fine of $34,400 before their tractor will be returned. I would ask you take note of the size of the fines and penalties that are involved here.
The Desrochers have farmed for at least 12 years without a Wheat Board permit and would never want one again. I have not had a Wheat Board permit for the last four or five years and I do not want one either. The Desrochers have been growing oilseeds, barley and so on.
Now I should like to discuss our own experience in 1992. We grew 600 acres of durum which produced around 18,000 bushels. By January we had delivered our quota of five bushels per acre. We were then advised that there would be no further quotas for durum in the current crop year. We had heard about grain moving into the U.S., so we took a sample to the grain elevator at Clyde, North Dakota, which is approximately 40 miles across the border from where we are. The sample weighed 59.5 pounds and graded 3 CW. The U.S. grain buyer was satisfied with the grain, said it would grade number 1 and that he would take all we had.
I might mention that their grading system is different from ours. Our grades 1, 2 and 3 would all go as number 1 in the U.S., but then it is further subdivided on the basis of protein.
We learned that an export permit was required from the board. In conversation with the board, we learned we would be required to go through the buy-back process. The U.S. price for the grain was $5.35 Canadian and the buy-back price would be $5.45. We would be required to post the money up-front, which for us meant borrowing the money at the bank and repaying it later from the returns from the grain. Our banker would not go for it.
Up to that point, we had realized about $2.20 per bushel, or $6,000. No one can operate a farm on $11 per acre, so we were forced to take out a cash advance. During the winter of 1993, we made many phone calls to the Wheat Board office in Winnipeg asking them to change the rules so that we could market our grain in the U.S. They did not seem at all concerned about the fact that they had a responsibility to market our grain or give us the right to market it ourselves.
This experience caused us to lose any confidence we had had in the Wheat Board. We later learned that many other grain producers had similar experiences and difficulty with the buy-back marketing process.
We calculated that we lost $50,000 that year on that barley by comparing the $2.20 we received against the $5.35 that we could have got in the U.S. In addition, we would have had the use of the money at the time rather than having to wait for a final payment. We also learned that the buy-back process required a big loss.
I might mention that during the David Bryan court case, which took place here in February, an employee of the Wheat Board who was on the witness stand verified that there is a $2-per-bushel disappearance when the buy-back process is used. Another farmer in my neighbourhood who did grow durum in 1994 and went through the buy-back process ended up with $3.50 per bushel when the price in the U.S. was about $5.60, so he lost more than the $2.
What about the option to bypass the Wheat Board if your grain has not been moved to market near the end of the crop year?
I had lunch with one of our MLAs about two years ago and I complained to him about that problem and suggested that if there is any Wheat Board grain not sold by June 1, the farmer should have the option to bypass the Wheat Board and be able to market this unsold grain wherever he can. He deserves that right and needs the proceeds from the sale of that grain. His reply was, "You are not the only one. In fact, every year in April we get dozens of letters and hundreds of phone calls from farmers with the same problem."
A banker told me it is a major problem. The banks' policy is that a farmer clean up last year's loans before setting up next year's line of credit, so farmers are forced, if they want to continue, to bypass the banking rules so they have the means to plant in the next crop year.
The main problem is that in many years, the majority of the crop goes to market at the end of the crop year, June or July, instead of during the fall months. We wonder what is the reason for this. I think the Senate should investigate as to why there is this delay of many months.
I should now like to mention the experience of a neighbour. Mr. McCannell, the senior partner in the family operation, told me of their experience starting in 1991. They grew a fairly good crop of durum and were only able to market a limited amount. I think it was maybe seven bushels an acre. They had a carryover to the following year and again were only able to fill a small amount of their quota. By the summer of 1993, they could see that all of their bins would be needed for the new crop. This carryover durum must go somewhere. They, too, had considered marketing in the U.S. but were stonewalled by the complexity of the Wheat Board buy-back and so decided to dump it as feed grain. They ended up accepting the best offer they could find in Canada. Even though their durum weighed 64 pounds, which is heavy, and graded as 2 CW, the only market they could find was as a number 5, which is feed grain. A producer car was ordered and filled, with a destination somewhere in Quebec. They realized a net price of $2 per bushel. The U.S. price that summer was around $5.60 Canadian. I did some calculations, and I believe they would have realized somewhere about $8,000 had they been able to market the grain in the U.S. at that time.
In this debate about shipping grain to the U.S., some people argue that the U.S. border could be closed to Canadian grain at any time. We have seen it happen in the past. This is true. Back about 30 years ago, the U.S. border was closed to Canadian grain for a time. Under the Free Trade Agreement, grain should be free to move in either direction, with the cost of shipping being the determining factor. Even if the U.S. changed the free-trade rules, we would still have the rest of the world as a potential market. This global market should always be foremost in the minds of planners, to secure our children's future.
My next topic is the marketing of malting barley. We have never had a proper marketing system, with proper access to the world market, for farmers' barley. The existing system, as near as I can remember, came into regular use around the time of the Second World War, and it has always appeared to favour the malting companies, giving them ready access to the first pick of the barley. While that system certainly gave these companies the opportunity to produce the world's top-quality malt, it did nothing for the farmer who produced very good malting barley but whose barley was not accepted. I might mention that the barley going across the U.S. border in the convoys which have been mentioned was nearly always malting barley that had been turned down, was not accepted, in Canada.
The experience of recent years of trucking barley to U.S. has certainly illustrated to us what we have been missing and has shown us that the world is anxious to buy our barley. Much of the barley that we have been trucking to the U.S. gets resold to off-continent markets. The U.S. companies which paid large sums for our grain turned around and re-sold it at comfortable profits. Where was our Canadian Wheat Board all this time, and why were we not capturing these markets? That is a question your committee might ask.
My next topic is feed barley. We are all well aware that Ottawa has manipulated the pricing policy for feed barley to benefit to poultry and livestock industries in other parts of Canada. Until recently this was not an issue that worried Western farmers, since most of our feed barley was used here on the Prairies and went south in the form of beef or hogs. However, in the last few years, we have watched with concern as the Wheat Board price for feed barley has been getting lower in relation to the price of other grains.
Mr. Lorne Hehn of the Wheat Board stated in a small town meeting in Alberta during the barley vote debate that before large export shipments of barley were considered, we must be able to meet domestic demand. It is one thing to subsidize our consumers at home, as we have done in the past, but with the great expansion being planned for the hog industry in the prairie provinces, an industry based on the price of feed barley, we fear that we will be subsidizing consumers in all the countries to which our hogs are shipped. Do we want to hang the economics of the hog industry on the necks of western barley growers? I just do not think so.
If feed barley is open to market on the world stage, the price will soon find its own level, and both hog producers and barley growers will benefit. When barley prices increase, production will increase accordingly and the world price of pork will find its own level.
The views I have expressed are my own but I believe they are in keeping with the views of the membership of Farmers for Justice.
The next issue I should like to address is that of value-added industries. Manitoba has had the recent fortune of obtaining a value-added industry with the building of the Can-Oat processing plant at Portage La Prairie. This plant, I believe, removes the hulls from oats and makes a more marketable product. Removal of the hulls reduces weight, saving freight charges, and for the milling company purchasing these oats, an expensive part of the processing has already been done. This new industry has created new jobs in trucking and so on, and the new cash crop has provided increased income for farmers.
The main point I would like you to consider is that this new plant could never have happened under the Wheat Board monopoly. Companies just will not put up with interference from government agencies. New companies must have the right to choose the quality of grain they want and to choose the timing of the use of different quality grains best suited to their marketing strategy.
We are fortunate that the marketing of oats was removed from the Wheat Board when it was. Manitoba needs a new industry for the processing of durum into pasta and macaroni products. North Dakota has 14 pasta plants; we have none. We grow durum quite well in much of southern Saskatchewan and Manitoba. We hear that one or more companies would consider locating in Manitoba if they had the right to bypass the Wheat Board and select grains according to their market strategy. It is our understanding that we will never have world-class pasta plants in our province as long as the Wheat Board has its present monopoly.
Your committee has now heard our submission and learned about our experiences. Over the past few days, you have heard presentations from other regions of Western Canada. We sincerely hope that you will take back to Ottawa the firm conviction that the future of western grain production requires more freedom from the Wheat Board monopoly than is offered in Bill C-4.
We further request that you return this bill to the House of Commons with instructions to return to the drawing board and to deliver a new bill that includes the rights of all grain producers, so that those wanting to market through the Wheat Board and those wanting to market or export elsewhere will have the legal right to choose the market of their choice.
The new board must no longer be secretive. It must be answerable to Parliament and to directors elected from the agriculture industry who must be fully informed as to all grain sales, operating costs, purchasing, and sales strategy. The new Wheat Board's only objective should be to realize the best price for grain producers, including by selling through the U.S. grain exchanges if better prices can be obtained in this way.
Thank you.
Senator Spivak: You mentioned the hog industry as an industry that is based on the economics of the price of feed barley. We have heard that before. I am wondering what you think the future of that will be? We will be increasing our hog production here by perhaps a factor of 10.
Mr. McWilliams: Yes.
Senator Spivak: In Alberta, it has been increased by a factor of three or four. What do you think we could do about that situation? Can you suggest any changes to the legislation before us that would help that situation?
Mr. McWilliams: Going all the way back to World War II, when I was a student, Canada has had feed grain assistance going to Eastern Canada, which has really been a subsidy to livestock producers there. It is a result of pricing of feed grain purposely low, well below the world market. That has become very evident to us in the last five years since people have had computers and have been able to tune in on the markets around the world, particularly the U.S. market. I was talking with a man the other day who was having his lunch and watching the prices on the Chicago Stock Exchange at the same time. If we are going to have a sustainable livestock industry, it will have to be based on the world price of feed grain. I argue that our present method of supporting that industry on the backs of our barley producers is not the way it should be done, and I suppose you heard the same argument in Alberta.
Senator Spivak: A variation of it. I would like you to comment on the Wheat Board role in the feed barley issue. It appears that farmers' net incomes from 1971 to 1997 have not gone up, whereas their gross receipts are way up, in the range of $3 billion. Obviously, something is wrong. In regard to this particular problem, could you comment on the role of the Wheat Board, which some witnesses have told us is in keeping the price of feed barley low?
Mr. McWilliams: I am aware there is a policy established by the federal government -- although I stand to be corrected -- to retain 2 million tonnes of feed grain in reserve.
Senator Stratton: Yes.
Mr. McWilliams: That policy has the effect of depressing the price in total. There is a ready market out there. We know this. We see it. If our livestock industry is to be viable for the long haul, we need a price structure that includes a profit for the feedlots and the hog barns, but we also need a profit for the poor fellows who are growing the barley. As to how to go about that, I do not think I can add anything to what I have already said.
Senator St. Germain: I am quite intrigued by the name of your organization, Farmers for Justice, and I do not say this facetiously or sarcastically. I support much of what you have said here today, but could you explain to me what you would see as real justice?
Mr. McWilliams: Ending the Wheat Board monopoly has been the only justice objective that we have. We want the freedom to bypass the Wheat Board monopoly and market our grain at the best price we can find.
Senator St. Germain: I would think that at one time the Wheat Board had a role to play, and it maybe still has. What role that should be is a matter of opinion. That is what we are trying to determine by listening to all of you. I just wanted to know what your version of justice was.
Mr. McWilliams: I am well aware that there is a sizable number of people, particularly the farmers in the northern portions of our provinces where the farmers' union is strong, that have a legitimate argument on the other side. They are faced with losing their railways. The elevators on many of those rail lines are Pool Elevators that came into being during World War II or thereabouts, because that region was bush country originally and was developed later and is different from the plains area. They are taking their position of supporting the Wheat Board, thinking that by so doing they stand a better chance of preserving their railways and their country elevators. That is one thing that I am sure of.
Senator St. Germain: So in other words what you are basically saying to the committee here, sir, is that a farmer's position often depends on where his farm is located. A farmer at Emerson or Altona would face a totally different situation from that faced by a farmer in Meadow Lake, Saskatchewan.
Mr. McWilliams: That is right. Meadow Lake is very remote. Their cause is very justifiable.
Senator St. Germain: How do you think we should deal with this, then? The anomaly is there. As you point out, perhaps the Canadian Wheat Board has a role to play in Teulon or Arborg or other places up north here.
Mr. McWilliams: Yes. The Wheat Board has a role to play here, in a dual marketing capacity, providing a market for those people who want to use it.
Senator St. Germain: There are proponents of the Canadian Wheat Board who say that a dual system will destroy it. What do you say to that?
Mr. McWilliams: I question that very strongly. I have done very little since the new year except research this issue and attend court sessions of farmers versus the Wheat Board, and I have not read anything that has convinced me that dual marketing cannot work. It will have to be scaled down. Certainly our hog marketing boards here in Manitoba have had to make big changes but they are still handling 75 to 80 per cent of the hogs. I believe that co-operatives and other organizations around the country similar to the Wheat Board are still functioning quite well.
Senator St. Germain: When I hear of the drastic changes in freight rates that have occurred as a result of the demise of the WGTA and the Crow rates, I can understand why some would want to keep the Canadian Wheat Board. They feel that it provides the possibility of government involvement and assistance which they may require for survival. That is the dilemma that we face.
Senator Spivak: You mentioned the problem with transportation, particularly the rail lines that are being abandoned. Have you made any submission to the Estey commission review of transportation? We had some requests to delay dealing with this bill until the Estey commission had made its report. Concerns about transportation are certainly well-evidenced and well-known in this province. I think even the minister said earlier that transportation costs have just gone completely screwy.
Mr. McWilliams: Yes.
Senator Spivak: Have you made any representation to the commission?
Mr. McWilliams: No. I have to admit I do not have much knowledge about that. Certainly, the economics of rail lines will be easily evident. The ones that can pay their way will survive, and the ones that cannot, I am afraid, will be gone.
Senator Stratton: You are representing Farmers for Justice, correct?
Mr. McWilliams: Yes.
Senator Stratton: I think the transportation issue is as significant to the survival of the Manitoba farmer as is Bill C-4. With that in mind, would your organization not want to put a submission into the Estey commission? I would think you would, although I am not trying to put words in your mouth.
Mr. McWilliams: It is not something I had considered, but if someone wants to give me the address and some information, I will take it to our organization and see where we go from there.
Senator Stratton: We will see that that is done.
Senator Whelan: I hope you are not advocating breaking the laws of the land. We have laws against growing and using marijuana; some people think those laws are bad. You talked about this veteran saying he never knew he fought for that kind of thing. I just gently remind you that the laws are passed by Parliament, the most democratic institution in our land, and if people break any of those laws, they are generally prosecuted.
Mr. McWilliams: Even a Second World War veteran?
Senator Whelan: That makes no difference. I had two brothers who were veterans and they obeyed the laws. The law of the land is something that you just do not break. You abide by it until the law is changed. That is why we are here. We are reviewing the law now. We do not yet know what we are going to recommend to the government.
Mr. McWilliams: Someone asked a while back about my interpretation of justice, and I think our group might echo the thought that just laws are needed, too, and I am not so sure that the Wheat Board has been too good.
Senator St. Germain: Hear, hear.
Senator Stratton: I agree.
Senator Spivak: We might not agree on which laws are just.
The Chairman: Our next witnesses are from the Winnipeg Commodity Exchange. Would you begin with your presentation and then we will go to questions from the senators.
Mr. Bennett J. Corn, President and Chief Executive Officer, Winnipeg Commodity Exchange: I should like to thank you for the opportunity to express the Winnipeg Commodity Exchange's concerns regarding Bill C-4. I should like to focus your attention specifically on clause 26, known as the inclusion clause.
The proposed inclusion clause would have an adverse impact on the exchange's marketplace and its participants by introducing uncertainty. If accepted, the inclusion clause will create the mechanics for providing the Canadian Wheat Board with single-selling-desk authority for grains currently not under its mandate. This clause would therefore allow one segment of the industry to impose a fundamental change in the marketing structure for non-Canadian Wheat Board crops without the input of the rest of the industry or consideration of what is best for Canada as a whole.
The proposed inclusion clause is a move in the opposite direction from the global, national and provincial trend toward a more open market structure. The exchange's marketplace for futures and options is essential for an industry competing in this global marketplace. Producers, processors and others around the world rely on the exchange's marketplace. The exchange's marketplace depends on stability and certainty in the marketing structure underlying its derivatives to ensure their relevance in the marketplace both within and outside of Canada. The continued ability of the exchange's marketplace to discover prices and transfer price risk is a critical component of a competitive agriculture industry. Therefore, the inclusion clause would undermine the relevance of the exchange's marketplace and adversely affect a broad range of market participants, ranging from value-added processors to producers.
I should now like to discuss the role of the futures market. Futures markets are essential to a competitive marketing system for agricultural products. These markets allow the risks inherent in agriculture to be borne as efficiently as possible, without the need for government participation and intervention. They also improve the competitiveness of markets by providing timely, reliable and visible prices that level the playing field between buyers and sellers. Producers are major beneficiaries of futures markets because they have access to accurate price information that reflects the market value for their products.
The WCE is Canada's only commodity exchange providing price discovery and risk-management tools for the agricultural industry. The exchange offers trading in both futures and options contracts, using the open outcry system. Its mission is to provide a public marketplace for responsive price discovery and risk transfer of commodities with efficiency and integrity.
The exchange is a not-for-profit membership corporation regulated by the Canadian Grain Commission. Its members represent all sectors of the industry and include major international grain trading companies, elevator companies, domestic merchants, exporters, processors, international brokerage firms from around the world, financial institutions, producers, and independent traders.
Futures contracts traded at the exchange include those for canola, flaxseed, domestic feed wheat, western domestic feed barley, oats, and feed peas. Options on canola, flaxseed, feed wheat, and feed barley are also offered.
The exchange is the world's leading marketplace for futures and options on canola and the only marketplace for flaxseed and feed peas. The exchange is an international marketplace attracting buyers and sellers of Canadian grains and oilseeds from around the world. Buyers from countries such as Japan, Mexico, the U.S., Germany, Poland, Australia and many others use the market.
Beyond the direct economic activity occurring at WCE, trade in its products supports a brokerage industry, specialized trading and support staff, and foreign investment. This represents a large investment in trading the WCE's contracts and supporting the trade in those products. Therefore, any limitations to the exchange's products would have a direct impact on the economic activity it creates.
The proposed inclusion clause represents a fundamental change to the exchange's underlying markets. If used to grant authority over canola to the Canadian Wheat Board, it would allow for the price discovery process supporting the canola contract to change from an open market system to a closed, regulated system and eliminate the relevance of the contract as an international pricing and risk-management tool. The futures price for canola reflects the world value of this commodity.
This change in the underlying market, or even the introduction of the potential for the change, will significantly reduce the efficiencies and competitiveness that have been developed in the marketplace for non-Canadian Wheat Board grains and oilseeds. This runs counter to domestic and global trends toward open markets. Governments around the world are being encouraged to move towards an open market structure.
Domestically, the federal government has been moving toward deregulation in the agricultural industry. In support of this trend, the government has contributed significantly toward the development and training associated with the implementation of an options market at the exchange. This training program focused on how to use the exchange's markets to manage price risk, enabling the farmer to become more self-reliant.
The move to open markets is further supported by the move towards more liberalized trade seen in the Canada-U.S. Free Trade Agreement, the North American Free Trade Agreement, and ongoing negotiations aimed at including additional countries. Even broader in scope, the General Agreement on Tariffs and Trade was focused on opening world markets, and the next round of the World Trade Organization talks is likely to pay a significant amount of attention to dealing with state trading. These agreements clearly define the trend to deregulating of markets. In a less regulated environment, market participants must manage their risks more efficiently if they are to remain competitive. Futures markets provide the ability to manage risks.
This bill would eliminate a marketing system that allows for a selection of prices. The exchange's current products allow for a large selection of cost-effective pricing alternatives that would not exist without a viable futures market. The exchange's futures market allows producers to hedge and price their production at any time. This enables the producer to respond to price signals and to allocate resources efficiently, particularly when deciding which crops to produce.
Similarly, a well-functioning futures market allows the customer to send price signals to the marketplace and to direct the production of what is needed. Only a futures market allows all interested parties to participate equally in establishing prices.
This bill would increase the risk to all segments of the Canadian grain industry. This proposed inclusion clause would introduce great uncertainty and discourage future capital investment in product development, processing and handling of non-Canadian Wheat Board grains. For example, the canola processing industry has made a significant investment based on the current open market structure, which could be changed under the proposed inclusion clause without any input from that industry.
This bill could affect an entire industry without adequate representation. The proposed amendment would introduce a mechanism for the producer to impose a fundamental change in the exchange's market and affect all its participants without the appropriate input from everyone involved. The strength of Canada's agricultural industry includes a growing value-added sector. This value-added sector relies on accurate price signals, a dependable market upon which to hedge its price risk, and a predictable market structure for the future. Furthermore, the exchange's marketplace extends well beyond the borders of Canada to offer a universally accepted marketplace to determine prices and to hedge price risks on similar products produced around the world. It is this characteristic of the market that results in relevant price information being available to domestic participants. The inclusion clause will enable one segment of the industry to impose a change that could adversely affect the entire industry and its related market participants.
In conclusion, the adverse impacts of the proposed inclusion clause include: a fundamental change in the market upon which the exchange's current and potential products would be based in the future, thereby creating uncertainty for participants in the exchange's products; a contradiction to the domestic and global trend towards more open markets, including significant federal government investment in supporting a more open, self-reliant Canadian agricultural industry; increased uncertainty regarding the future market structure of Canadian agriculture, thereby representing a significant disincentive regarding investment and product development for Canadian grains-based and oilseeds-based industry; and the introduction of an opportunity for one segment of the market to make a fundamental change to the market structure without adequate representation from all interested parties and without adequate consideration of the best interests of Canada as a whole.
The inclusion clause would damage the well-being of our free and open markets. Furthermore, the Winnipeg Commodity Exchange believes it would be detrimental to the Canadian agricultural industry and the economy, and strongly recommends that this inclusion clause in Bill C-4 be removed.
Mr. Chairman, I thank you and respectfully submit this on behalf of the Winnipeg Commodity Exchange and its many members.
Senator St. Germain: You have focused on this inclusion clause. You most likely targeted this because it is so critical, but is there anything else in the bill that concerns you?
Mr. Corn: I do not believe the exchange has a submission on the other parts of the bill. I think it is better left to other segments of the industry to deal with the various issues we have been following over the last several months, regarding structure of the board and things of that nature. I am sure you have heard from the other segments of the industry. We have concentrated on the one area that will have a major impact to the users of our market, both domestically and worldwide. We feel comfortable in presenting that to the committee but really do not have views, either personal or institutional, on the other aspects of the bill.
Senator St. Germain: So if the inclusion clause were removed completely, you would be satisfied?
Mr. Corn: That is correct, sir.
Senator Stratton: Limiting yourself to the inclusion and exclusion clause is, I think, appropriate, and I thank you for restricting yourself. Your submission is well done and quite clear.
Senator Whelan: I think my views on grain exchanges are well-known. I have often said that in Winnipeg the biggest casino is not the one down at the hotel, it is the one we call the Winnipeg Grain Exchange.
How long have you been head of the grain exchange? Has it been five years, 10 years?
Mr. Corn: No, no. I have been the president and CEO for one year. I have been in the futures industry for a little over 30 years. Prior to my present position, I was president and CEO of the coffee, sugar and cocoa exchange in New York.
Senator Whelan: Your 30 years of experience was not in Canada, then?
Mr. Corn: No.
Senator Whelan: Are you a Canadian?
Mr. Corn: No, I am not.
Senator Whelan: You are not. How many directors do you have in the grain exchange?
Mr. Corn: Right now there are approximately 20 people on the board.
Senator Whelan: Do they hire and fire you?
Mr. Corn: Do they hire and fire me?
Senator Whelan: Yes.
Mr. Corn: They have the ability to do that, yes.
Senator Whelan: There is a lot of talk about the chief executive officer under this proposed legislation, whether that person should be appointed by the government or by the directors.
Mr. Corn: The directors are elected by the membership and they are representative of every segment of the membership. As well, there is a public sector on the board right now, of which there are three farmers.
Senator Whelan: Going to the inclusion clause, I have the feeling that having it in there will keep them on their toes, keep them aware, ensure that nobody would ever want to invoke the inclusion clause if the trade was being fair to, say, the canola producers or the flax producers or whomever.
Mr. Corn: I do not know exactly what you mean.
Senator Whelan: If that clause it was there, it would be a tool, a guarantee, that things would be operated fairly. After all, it was unfair marketing that brought the Wheat Board into existence in the first place.
Mr. Corn: I guess you are referring to whether the exchange was operating fairly or not. In that respect, it is a very competitive environment. No exchange has a monopoly on the products it trades. If it does not provide fair and open markets, those markets will cease to exist or they will go elsewhere.
Just as point of information with canola, there was a rapeseed contract in the MATIF traded in Paris, and there is to be an electronic contract started in Frankfurt, Germany, probably in the next year, which will trade agricultural products, including wheat, hogs and canola. This market can shift anywhere in the world. If you put this under the Wheat Board and the industry feels that they cannot compete properly, then you will see a shift of activity. We are getting investment activity coming into this country from around the world. That activity could go anywhere else and trade on any other market that is either already established or could be established. So it is self-regulating in the sense that it is a very competitive industry for all these products and will continue to be. It is becoming more competitive.
Senator Whelan: You say the Winnipeg Commodity Exchange's marketplace extends well beyond the borders of Canada to offer a universally accepted marketplace to determine prices and to hedge price risk on similar products produced around the world.
Mr. Corn: Right.
Senator Whelan: Do you have a percentage figure on that, comparing it to what is done around the world?
Mr. Corn: I do not know if we can put an exact number on it but it has been growing, in Australia, the U.S., and over in Europe, particularly in Germany. There is a lot of arbitrage activity that goes on between the markets here and in the United States. There is some arbitrage that is now developing between the canola contract here and the rapeseed contract that trades in Paris.
In fact, at a futures industry convention a few weeks ago, a gentleman I have known for over 20 years, who started the DTB for the bank which is starting this Frankfurt exchange, expressed interest in doing something with our exchange with respect to arbitrage trading. The industry is growing. I would say most of the trading activity is done by companies that are here in Canada or close by, but there is significant growth around the world.
Dr. Love, who does our marketing and education every year, meets with these people and is finding that they have an increasing interest in and more need to use our marketplace.
Clearly, the oilseeds industry in Canada has been a big success. It is a relatively small market when you compare it to other futures markets, but it is a developing market that has yet to reach its full potential.
Markets are often based on emotion, and when people see something like the proposals under this bill when they have to make long-term investment decisions, they start to worry about the potential set of rules under which they will be operating. One can draw an analogy with the developments in the milling industry for durum wheat which are beginning now in the Dakotas. That is an industry that could very easily be right here in Canada if there was a free and open market.
Senator Whelan: We spent millions of dollars on researching and developing canola, and our scientists said it was one of the purest food oils that you could use for your health, and so on. I remember distinctly the United States of America held up approval for five years on health reasons until a big laboratory in Chicago finally gave it a clean bill of health. They held it up until after the 1984 election. I have a strong suspicion that they were interfering in our domestic political situation. We spent millions developing canola, and we hired an American to come up and breed the lentils that would grow it, and we are now the lentil capitol of the world. We spent government money doing that kind of thing and we did it without the big companies being involved. They were not really interested in it at that time.
We did a lot by working with the producers and with the provinces to develop those crops that allowed diversification of agriculture, hoping that some of these plants for further processing would be in Canada.
Senator St. Germain: Trading in these commodities knows no boundaries, does it?
Mr. Corn: For the most part, there are no boundaries. When I started in this industry, there were 10 million contracts in total trading in the U.S. They now trade over a billion. The rest of the world was trading maybe 10 per cent of what the U.S. was trading in futures. Now the other markets in the world probably trade 60 per cent of the total futures and options in the world. There are 85 futures and option markets around the world now. A lot are financial and many are agricultural. The big international ones tend to be in the larger industrialized countries, because that is where there is the critical mass. There are some regional markets, but most of them are international. There is a lot of competition, they are self-regulated, and they are very heavily regulated. The markets have to continue to provide facilities and services that are competitive with what the market users are used to having in other markets. That is what we are doing right now at Winnipeg. We are making significant changes to our market structure and dealing a lot with other exchanges, making sure we are providing the best that we can possibly provide. We want to see these markets grow and prosper, because we think they are of significant economic benefit to the Canadian economy. The value-added industry adds a lot to that. As you keep getting more economic infrastructure here in Canada, it is a big plus for the Canadian economy. That is why we are here and why we are concerned. However, you are right, there are no boundaries anymore. This is a global economy.
Senator St. Germain: Some of our colleagues have contributed greatly to the development of these things, but they are having a bit of a tough time accepting the Free Trade Agreement and NAFTA, and I can well understand that.
Senator Whelan: You should too, as a chicken farmer.
Senator St. Germain: Regardless of where you are from, I appreciate your submission and your presence here.
The Chairman: There has been a lot of concern about the inclusion and exclusion clause simply because of the cash crops, which are called cash crops because they have allowed many of our Western farmers to make a dollar and keep their farms. On my own farm, we have grown canola and that has been the only cash crop we have had. What do you see as the future for canola? We will have the canola growers appearing before us shortly, but I should like an answer from you because you have an insight into the international market situation. Canada has had a special place in the canola market. Because of our cold climate, some newer varieties are being developed and planted in North Dakota. Many of my neighbours in North Dakota are starting to grow canola. What do you see for the future and how far can this develop? We have nervous farmers out there.
Mr. Corn: In general, many of the markets we currently trade here have significant potential for further growth. There is a lot of infrastructure work we are doing on the exchange right now, things that are not really germane to the bill before you. If I may give you a brief overview, we have made significant changes in our whole governance structure. We are a not-for-profit membership organization but we feel we can still operate more efficiently, make better decisions, and have a more representative board. That will occur with the next election in November, but a lot of those rules are now going into place.
We are in a process of changing our whole clearing structure, so there will be centralized clearing for all options and derivatives in Canada for the first time. That will be a big plus for the whole industry. Whether it is trading financial products or agricultural products, we will have a very strong, well-recognized, international clearing organization which will clear them all, which will achieve some cost efficiencies by cross-marketing, and which will be able to reach out to other people to bring commerce -- money -- into the Canadian markets.
With respect to canola, we have been reviewing all of our contracts. You have to keep reviewing constantly and making changes to your markets as things change in the cash side.
We are liberalizing our markets and expanding them. As transportation and other things change, we are considering broadening delivery points to keep in step with the changes in the cash markets. I think there is a bright future for these products. After getting our infrastructure in place for our core products, we are then to see if we can branch out in some other products.
There are other raw materials or energy products that are being considered in other parts of the world. Energy will probably be the biggest single traded commodity in the world, if it is not already, yet no one here in Canada is trading in energy product. We would very much like to study that.
We are putting a lot of effort into reviewing new technology, because people want markets to operate beyond normal trading hours so they can reach out into other time zones. We are not the biggest exchange so we are trying to be prudent when we spend our dollars in those areas.
Senator Spivak: I note that your argument about the inclusion clause is based on the premise that the mere existence of that clause in the legislation is enough to threaten investment. We know we need investment. We know about value-added. However, the net income of the primary producer has not increased since 1971. It is basically at the same level. In your opinion, what impact will all this activity and investment and value-added have on the income of the primary producer?
Mr. Corn: The fact that we trade products that are not under the Wheat Board allows farmers certain opportunities for marketing his product directly, and that translates into cash in his pocket. I do not want to get into the bigger issue of free markets, but I think the more competition and the more choices the farming community has up here in Canada, the better it will be for them. It will be very competitive. I think the more things you can do to breed competition as opposed to monopolies will be a big plus for the farmers in the long term, but like in anything, every culture is different.
Agriculture worldwide has been long been supported to a great extent by governments, but that is changing at different rates in different countries. Each country now is doing a self-inspection as to what it can continue to protect and what needs to be changed. We are getting into a very global competitive marketplace where people can go and get product anywhere they need it around the world. I think you want to make your industry as competitive as it can be. I have no crystal ball, but I think one day people are going to wake up and see major changes that will have occurred through market forces.
Senator Spivak: I cannot disagree with what you are saying. The puzzlement I have is that even though those input prices keep going up, the commodity prices keep going down.
Mr. Corn:It is not the case with our markets. I do not want to get involved with the other markets.
Senator Whelan: You do not want to take on OPEC and how they set their prices?
Mr. Corn: Not yet. I have only been here a year.
The Chairman: Our next witnesses are from the Canadian Canola Growers Association. Welcome, and please proceed.
Mr. Bruce Dalgarno, Past President, Canadian Canola Growers Association: I would like to take this opportunity to first clear up a little misconception. We actually have two organizations here, the Manitoba Canola Growers Association and the Canadian Canola Growers Association. They are two separate organizations, but the Manitoba group does belong to the Canadian association. On behalf of the Manitoba Canola Growers we have Mr. Jonothon Roskos, their president. With me is Mr. Ernie Sirski, who is a director of the Canadian Canola Growers.
To start, Mr. Jonothon Roskos will make the submission on behalf of the Manitoba Canola Growers Association.
Mr. Jonothon Roskos, President, Manitoba Canola Growers Association: The Manitoba Canola Growers Association appreciates this opportunity to present our views on Bill C-4 to your committee.
The Manitoba Canola Growers Association represents some 10,000 canola growers throughout the province. Our purpose is to represent the interests of the canola growers of Manitoba in the areas of research, market development and extension, and to liaise with other organizations and government.
Canola has become the main cash crop for growers in Manitoba, with acreage increasing over two-fold in the past decade, from just under 1 million acres in 1987 to over 2.3 million in 1997. Our canola production is destined for both export and domestic processing, with a division of approximately half between the two. The open market system has contributed greatly to the success of the industry.
Canola is currently marketed in the open market where anyone can buy, sell, or process canola. This allows producers to sell any amount of their production at any time to a range a buyers. With this flexibility, the producers can meet their pricing needs, satisfy cash-flow requirements and use competition between buyers to maximize their returns. The current situation allows farmers to pre-sell for new crop, speculate on the cash market, or hedge using the futures market. This provides the producer with the option of profit-taking when they feel the market is in their favour. It also gives producers the ability to better manage their operations since they can budget on expected financial return and not on initial payment.
Manitoba canola growers are very concerned about provisions of Bill C-4 which have the potential to bring canola marketing under the jurisdiction of the Canadian Wheat Board.
Specifically, our concerns are with the inclusion clause. The clause will allow for any other grain to be included under the board's jurisdiction, because under the Canadian Wheat Board Act, grain will be defined as including wheat, oats, barley, rye, flaxseed, canola, and rapeseed.
Under the proposed legislation, before any grain can be included under the Wheat Board's jurisdiction, the following conditions must be met.
First, a written request must be sent to the minister by a producer association which represents the producers of the grain throughout the designated area.
Second, the extension must be recommended by the board.
Third, a vote in favour of the extension by producers of the grain must have been held in a manner determined by the minister after consultation with the board.
These conditions do not clearly define the term "producer association" nor do they spell out who exactly represents the producer. More than one group may claim to be representing the producers of a given grain in the designated area. This could lead to lengthy disputes, as producer associations have differing mandates.
Under the proposed legislation, Canadian Wheat Board directors would make the recommendation to extend the board's jurisdiction into canola. These directors will be elected by wheat and barley producers, and it would not be appropriate for them to be making recommendations for canola growers. These directors would be neither elected by canola growers, nor represent them, so it would not be proper for them to make representations on their behalf.
State trading enterprises are considered to be a trade irritant in the WTO negotiations. The possibility of bringing canola under the board's jurisdiction would only further compromise Canada's situation and hamper future trade negotiations. We are currently experiencing liberalized trade with oilseeds. We do not want to see that situation threatened.
The canola industry has expanded and flourished in the past decade in an open market. It has grown rapidly. Our domestic processing has doubled over the past ten years. The presence of the inclusion clause will cause uncertainty among investors, and investment will dwindle with the lack of free enterprise. We do not want to see our future growth limited, nor the economic activity that is associated with it.
The Manitoba Canola Growers Association strongly recommends the deletion from Bill C-4 of the inclusion clause as it relates to canola and rapeseed, so that there will be no risk of canola being included under the Canadian Wheat Board's mandate.
We thank the committee for the opportunity to express our views today.
Mr. Ernie Sirski, Director, Canadian Canola Growers Association: Mr. Chairman, distinguished members of the committee, the Canadian Canola Growers Association is a national organization representing five provincial canola producer organizations. In the interests of time, I will just summarize our presentation. That will leave a few more minutes for questioning.
Canadian canola growers are concerned about the provisions of Bill C-4 regarding the possibility of canola being marketed under the Canadian Wheat Board. We agree with the prestigious individuals in the Western Grain Marketing Panel who recommended that there be "no fundamental change" in the marketing system for other grains, oilseeds and special crops.
Why is an open market system better?
First, it is open to all participants: producers, processors, and exporters.
Second, it provides competition, thus maximizing returns to producers.
Third, contract arrangements allow for flexible pricing and risk management.
Fourth, cash flow is predictable, and thus marketing can be done based on the needs of the producer rather than on quotas as with the Canadian Wheat Board grains.
Fifth, the majority of our customers support an open market system.
Mr. Dalgarno: Some of the concerns that the Canadian Canola Growers Association has with the inclusion provisions of Bill C-4 are itemized in our brief. We have a problem understanding what is meant by the term "producer association." That needs to be clarified. We are also concerned with the fact that the Canadian Wheat Board directors will make recommendations regarding the possible inclusion of canola in the Canadian Wheat Board.
The Canadian Canola Growers Association is made up of members from five provinces. Would the designated area of the Canadian Wheat Board be expanded beyond the present borders to include the canola growers in Ontario, Quebec, and New Brunswick?
CCGA is also concerned about the implication of the inclusion clause to our trading partners. The value of exports of canola seed, oil and meal to the United States in 1996 was $716 million, whereas the value of wheat exports to the U.S. in 1996, including durum, flour and pasta, was only $446 million. I question whether we should be jeopardizing this market by giving the Wheat Board jurisdiction over canola.
Also, the investment in the canola processing industry could also be affected by this change in marketing. Ten years ago, we crushed approximately 1.5 million metric tonnes in Canada. This year we will crush very close to 3.3 million metric tonnes.
Since the Canadian Canola Growers Association is a canola growers association, we try to deal only with canola issues. Therefore our recommendations are that the Senate committee recommend that the definition of "grain" in the Canadian Wheat Board Act be amended to specifically exclude canola and rapeseed, and/or that the inclusion clause as it pertains to canola be deleted from Bill C-4.
The effect of this recommendation is to ensure that the inclusion clauses, if they remain, do not affect canola and rapeseed. Eliminating canola and rapeseed from the definition would mean that these crops are not in any way associated with the Canadian Wheat Board, and this may be beneficial in future trade negotiations. Regardless of the pressure that may be brought to bear against the Canadian Wheat Board in the next round of WTO talks, we could then be safe and secure in the knowledge that canola and rapeseed would not be affected.
I thank the committee for this opportunity to present our views.
Senator St. Germain: I have some questions relating to value-added. Are we building facilities to add value to the product in Canada in proportion to the increase in production that is taking place?
Mr. Dalgarno: Yes. The processing industry most certainly is developing capacity in Canada. Cargill has a new plant, probably a year old, on stream in Saskatchewan. CanAgra has a plant just south of Winnipeg, which I think is supposed to start up around the end May. We have very good processing in Canada right now. As I said, we will probably be crushing 3.3 million tonnes, which is a little over probably 60 per cent of our production.
Senator St. Germain: Are you concerned about the fact that the huge corporations are coming in and not creating the competition that is necessary to get the producer the maximum price?
Mr. Dalgarno: I think that is one of the benefits of having canola in the open market system. There are contractual arrangements with a great number of companies. There is also the Winnipeg Commodity Exchange, through which the farmer can price his crop at any time or take an options contract. There are several options available to producers to be able to lock in profits at particular times throughout the year.
Senator St. Germain: How big is this market? Are we just scratching the surface with canola and its by-products? How mature is that market?
Mr. Dalgarno: In Canada, canola oil is the primary vegetable oil being used. We are just now getting into the U.S. market. We cannot produce enough product in Canada at this point to meet requirements for canola in the United States, Mexico, Japan, and elsewhere.
Senator St. Germain: There must be a point of saturation somewhere. Do you know where you are along that spectrum, or is that too tough a question?
Mr. Dalgarno: Perhaps you should ask the plant breeders how they are coming along with new traits in canola, because, of course, different companies are looking for specific traits for their particular brand names. I think there are still significant inroads that can be made, particularly into the U.S. market, with our very healthy canola oil as compared to some of the oils that are higher in saturated fats.
Senator Stratton: I have a question. We have heard from many people, particularly from canola growers. How is the Manitoba Canola Growers Association composed?
Mr. Roskos: The Manitoba Canola Growers Association is made up of members that are canola growers within Manitoba. There are no affiliate organization of Manitoba canola growers, but we are a member of the Canadian Canola Growers Association.
Senator Stratton: Do you represent all growers?
Mr. Roskos: We represent all canola growers of Manitoba.
Senator Stratton: Are you aware that other organizations and individuals feel that a permit holder should have the right to vote as to whether or not canola falls under the jurisdiction of the Wheat Board?
Mr. Roskos: Our views on that would be that the people or the growers that are growing canola currently should be the ones voting on its future, as the producers that are not growing it can greatly skew the results of that vote.
Senator Stratton: I was hoping you would say that you should get rid of the exclusion-inclusion clause for that reason.
Senator Spivak: Canola is a wonderful product. It might be called a wonder product, however, I should like to find non-hydrogenated canola margarine.
We are very familiar with the arguments against having the inclusion clause in the legislation. We have heard a great deal about that. Your case is very well made. Could you provide some information as to the spread between the highest and the lowest average price, in 1997, and the distribution of producers? Do you have that information?
Mr. Dalgarno: No, we would not have that kind of information. I do not know if some of the commercial enterprises, such as grain companies, would have that or not. It would depend on when they marketed their grain and what price they obtained.
Senator Spivak: I am basically interested in knowing the average price of canola per tonne would be to a producer and what the spread is. Perhaps if you do not have that information we could get it through questioning another agency.
Mr. Sirski: Senator, we must consider what a producer actually receives for a product, and whether or not it is profitable for them when they sell it. Further to that, we must look at this past year. What happened in the canola market specifically, going back over the last 12 to 18 months, is that the canola producers directly influenced the price of canola on the Winnipeg Commodity Exchange. In listening to farm market reports that come out every day from the commodity exchange, the reports would read something like, the price of canola has gone up because producers have stopped selling. The reason they stopped selling is because they thought there would be a higher price in the future.
Senator Spivak: That information would not be valuable to us, because you are looking at comparisons and best price. Perhaps we can get that from somebody else.
Senator Whelan: You must be happy that past governments have spent so much money on research to develop such a wonderful crop.
Mr. Dalgarno: On behalf of the growers, I most certainly am. We had canola transformed from rapeseed with the likes of Dr. Baldur Stefansson from here in Manitoba, and Dr. Keith Downey. It was to a large extent with the dollars that the federal government pumped into their programs to get this transformation to canola. From a growers' perspective, we certainly do appreciate the input that the federal government had at that time.
Senator Whelan: Many of the growers' organizations now have a proportion of their members' fees which goes to research. Does your organization follow a similar practice?
Mr. Dalgarno: The canola producers in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario all do have a check-off type of deduction. To a large extent approximately 40 per cent to 50 per cent of those dollars go back into some type of research, whether it is agronomic or germ plasma or whatever. They are turning many of those dollars back into research.
Senator Whelan: Your association is also financed in this fashion, is it not? Is it compulsory for every seller of canola to contribute a portion of what they sell?
Mr. Dalgarno: The Canadian Canola Growers Association is not funded through a check-off process. Our membership is comprised of the individual producer organizations, but each of the individual provincial producer groups in Saskatchewan, Manitoba and Alberta may ask for a refund of this amount. The check-off is 50 cents per tonne, and they can ask for that back. In Ontario, it is $3 per tonne and it is non-refundable. In British Columbia, I believe it is one-half of 1 per cent of the receipts.
Senator Whelan: I have strong reservations about what you said about the inclusion clause. You probably heard me say before that I thought it was a good idea to have it there, just to keep people on their toes. I do not believe it is going to affect the trade one iota. When the Japanese indicate their displeasure, this means that the Japanese might have to pay more. They will not be concerned about paying less for it, that is for sure.
Mr. Dalgarno: The Japanese are certainly very astute businessmen. They can price their canola at any time of the year through the Winnipeg Commodity Exchange or, as Mr. Corn said, through the exchange in Paris. They also have the option of purchasing their canola from Australia and, to a certain extent, from Europe. So they do have some leeway as to where they want to buy their canola. They are quite happy with Canadian canola. We have been price competitive in the global marketplace.
Senator Whelan: The five years that Canadian scientists in Agriculture Canada argued with bureaucrats in the United States about the safety of canola oil was costly. As you pointed out, canola is now a large export because it is considered to be one of the most healthy oils that humans can consume. Can you compare the American situation with the one Canada is currently engaged in with the European Union on the issue of genetic cross-breeding?
Mr. Dalgarno: The situation in Europe is a political decision. It is past the scientific level. This issue is now sitting on the politicians' desks. They are not willing to move forward with it.
We hear a significant amount of cross-border shipment rhetoric from the American Senator Dorgan in regard to $440 million worth of wheat being exported to the United States. However, he does not complain about the $716 million of canola being exported.
It is very important that we are cognizant of what the American consumer desires. The inclusion clause would put a non-tariff barrier in place for canola going across the line.
The Chairman: I just have one question. My understanding is that canola in the Prairies is about the third largest crop now produced. Are those numbers right?
Mr. Dalgarno: For the dollar value it will be number two behind wheat.
The Chairman: Thank you for your presentation.
Our next group of witnesses is from the Coalition Against C-4. Would you introduce yourselves, please.
Mr. Kevin Archibald, Member, Coalition Against C-4: Honourable senators, for this afternoon's purposes, let me introduce Mr. Dan Kelly from the Canadian Federation of Independent Business, who is also a member of the Coalition Against C-4. Mr. Paul Earl will also be assisting us.
The members of the Coalition Against C-4 wish to thank the Standing Senate Committee on Agriculture and Forestry for holding hearings on Bill C-4 and for allowing to us express, once again, the objections we have to this piece of legislation. The coalition is a group of 16 farm and industry organizations, representing the interests of both farmers and industry across Canada.
Specifically, our members represent the views of 30,000 individual farmers who are members of commodity groups which belong to the Coalition Against C-4; 17,000 individual enterprises in the prairie provinces which are members of the Canadian Federation of Independent Business, 2,000 of which are either farms or agri-business; 250 grain-related enterprises which are members of the Winnipeg Commodity Exchange and the Canadian Oilseed Processors Association; growers of virtually all commodities in Western Canada; and canola growers across Canada in all provinces.
You have heard from many groups that are members of our coalition already, and I know you will hear from more. We are united as a coalition and this submission represents that.
The coalition rejects any suggestion that it represents a small minority of grain farmers or is composed of marginal groups. Both as a coalition and as individual organizations we have presented our views to the federal government, and have raised serious objections to the bill. However, until your hearings began, our views have been ignored. Bill C-4 has been called the "National Energy Policy of Agriculture," and it is true that there has not been such a blatant disregard of the will of an industry or a region since the energy policy was implemented.
The members of the coalition are not the only organizations to oppose Bill C-4. The United Grain Growers, the Canadian Wheat Board Advisory Committee and the National Farmers Union have all opposed the bill. The federal government has managed to unite all factions of the grain industry against it. On the other side, the bill has received a weak endorsement from several organizations whose credentials to represent either the grain industry or the undiluted views of grain farmers are highly questionable.
We suggest to the committee that the allegation that there is a silent majority in favour of this bill is wrong. We ask: Why does the government not have the courage of its convictions on this bill? Bill C-4 proposes that producer votes be held on any changes to the Canadian Wheat Board mandate. Moreover, the federal government claims that the intent of the bill is to allow farmers the maximum control over grain marketing. Why does the federal government not put Bill C-4 to a plebiscite with a clear question such as: "Do you wish Bill C-4 to be passed or withdrawn?" We respectfully suggest that Bill C-4 would not command the support of a majority of farmers.
In order to ram this bill through Parliament over the advice and desires of those who will be affected by it, the government has grossly misrepresented this bill. Attached to our submission is a fact sheet produced by the coalition, which lists the erroneous and misleading statements made by the federal government in relation to the bill. The government rushed the bill through the Standing Committee on Agriculture and Agri-Food, and had to resort to closure to push the bill through the House of Commons. The members of the coalition were appalled at the flagrant disregard for Parliament and democratic process which the government displayed in dealing with this bill.
The individual members of the coalition have many objections to this bill. Many of them have made or are making separate presentations to the Senate committee. However, the focus of the coalition is the so-called inclusion clause, under which additional crops could be brought under the Canadian Wheat Board's jurisdiction. The members of the coalition, individually and collectively, have stated that the inclusion clause will threaten investment, Canada's trade relationships, jobs and economic growth, will pit Western farmers against each other in bitter plebiscite battles and bring into question the very existence of the Canadian Wheat Board.
All these potential impacts have been explained in the individual submissions of coalition members to the House of Commons Standing Committee on Agriculture and Agri-Food in letters and in answers to questions during our appearances before the committee. I shall outline the main points of argument that lead us to our conclusion.
No current buyer of non-board grains wants to deal with a centralized marketing organization. Accordingly, the threat created by the inclusion clause that these crops may be placed under the Canadian Wheat Board's control will discourage investors from locating processing plants in Canada where they could be forced to deal with the Canadian Wheat Board.
None of Canada's current trading partners purchasing non-board grains wish to deal with the Canadian Wheat Board for these grains. The Japanese, who are our largest buyers of canola, have made it clear that they do not want to buy canola from a single desk seller. Hence, the threat of including canola under the board will cause these countries to seek other sources of supply.
The inclusion clause runs counter to Canada's stance in trade liberalization. It will be interpreted internationally as a signal that we are not serious about our trade position. Moreover, state trading enterprises like the Canadian Wheat Board will be an issue in the next round of negotiations. The inclusion clause, by setting up the possibility of enlarging the scope of Canadian Wheat Board selling, will send the wrong message, and could harm our trade prospects.
The canola industry particularly, through its crushing plants and through the importance of the Winnipeg Commodity Exchange as a worldwide pricing point for canola, is an important source of jobs. With the threat of inclusion, and even the threat of major public disputes over inclusion such as the bill contemplates, these jobs will be threatened. Investors and marketers will seek alternatives.
Regardless of whether the inclusion clause is ever successfully invoked, even if it is triggered, we face the possibility of a plebiscite. As the barley vote showed, plebiscites are disruptive and bitter. Such an exercise will deepen divisions among farmers, cause a bitter public battle and, at the same time, create uncertainties which will discourage investment, jobs and economic growth. In our opinion, if Bill C-4 is passed, this provision will be tested. Some organizations have already made statements indicating that they will use the legislation to attempt to get more crops under the Canadian Wheat Board's marketing authority.
The existence of the inclusion clause will turn CWB director elections into a contest between pro and anti-central market forces, rather than the selection of the most qualified candidates to run a multi-billion-dollar enterprise. The Canadian Wheat Board boardroom is not the appropriate place for policy debates to be fought. By making it so, the bill will eventually destroy the CWB.
The inclusion clause will be a destabilizing factor in markets, particularly in canola markets. Markets tend to be risk averse, and are easily affected by anything that threatens price or supply of a commodity. Any threat that the inclusion clause might be triggered would impact markets, likely with negative effects on farm prices.
Members of the House of Commons Standing Committee on Agriculture and Agri-Food repeatedly asked the coalition how, if the majority of farmers oppose inclusion, it could ever happen, and why, under these circumstances, the inclusion clause is a matter of concern. This question misses three key points: First, the mere existence of the clause will be interpreted as a signal to our trading partners that we have an agenda which is at odds with our trade stance; second, there will be an uncertainty overhanging investors' decision-making and will act to our economic detriment; and third, regardless of the ultimate success of a bid for inclusion, the act of triggering the process will be disruptive and will threaten trade and investment.
The coalition recognizes that the inclusion clause was introduced into the bill to provide balance against the exclusion procedure which the bill contains. In recognition of that argument, we make the following recommendations, and I will ask Mr. Kelly to present that part of our brief.
Mr. Dan Kelly, Representative, Coalition Against C-4: The recommendation is that the inclusion and exclusion clauses of Bill C-4 be removed from the bill. We understand that clause 25 of the bill, repealing section 46(b) of the existing Wheat Board Act, would also have to be removed to leave the inclusion and exclusion provisions of the existing act intact.
We also wish to bring to the attention of the committee the potential impact of the passage of Bill C-4 on the Estey review of grain transportation. There is a strong possibility that the Estey review will recommend changes to the Canadian Wheat Board's mandate in transportation. We suggest, after the dissension that this bill has caused, the re-opening of the CWB Act will not be politically possible in the near future and the implementation of the Estey recommendations may be forestalled.
We also note that Ministers Ralph Goodale and David Collenette have called for a moratorium on branch line abandonment until after the Estey review is complete. We respectfully suggest that the implications of Bill C-4 are far greater than the implications of a handful of abandonments that the railways could effect by the end of Mr. Estey's review. Accordingly, the coalition also recommends that further consideration of Bill C-4 be delayed until after the Estey review is complete. This recommendation also has the advantage of allowing the controversy over Bill C-4 to cool and for all parties to reassess their position.
We close this submission with the message which we have tried repeatedly to impress upon the federal government. The government will be making a grave error if it passes Bill C-4 against the united opposition which has been mounted against it. Bill C-4 addresses the needs and aspirations of no one in Western Canada, and no one in the canola industry, east or west.
We urge the Senate to exercise its constitutional responsibility in its role as the chamber of sober second thought. It has been some time since a piece of legislation more in need of sober second thought than Bill C-4 has come before the upper house.
The Chairman: What is the combined membership of the coalition? I understand there are 16 associations here. Have you got a number on that?
Mr. Kelly: As is on the first page of the brief, we talk about the numbers that are part of the coalition. The 16 groups comprise 30,000 individual farmers. My organization has, in the prairie provinces alone, 17,000 members; 2,000 of which are either agri-businesses or farmers. We have 250 grain-related companies, part of the Winnipeg Commodity Exchange and also canola growers in all parts of Canada, across all provinces that grow canola. At the bare minimum, the coalition represents 30,000 individual grain farmers.
Senator Stratton: I know this is the end of the sixth day of hearings, and I do not know how many representations we have heard, but this document looks awfully familiar. Have we seen it before in Brandon?
Mr. Archibald: Not this one. Definitely not.
Mr. Kelly: The reason it would appear familiar is that a great deal of the content is echoed by the 16 members of the coalition. This is a brand-new presentation on behalf of the coalition as a whole.
Senator Stratton: Obviously, you have presented before.
Mr. Archibald: Yes, I have, on behalf of myself in Brandon.
Senator Stratton: That is what I thought. Mr. Kelly, who do you represent?
Mr. Kelly: The Canadian Federation of Independent Business.
Senator Stratton: Have you also presented?
Mr. Kelly: In Brandon, yes.
Senator Whelan: I just have a couple of questions. On page two, you write: "The Japanese, who are our largest buyers of canola, have made it clear that they do not want to buy canola from a single desk seller." Do you have that in writing from any Japanese buyer?
Mr. Archibald: Yes, we do. Minister Goodale conducted what turned out to be an excellent review of the grain marketing system in 1996. The Western Grain Marketing Panel report encompassed surveys of all the buyers of board and non-board crops. What they found during their extensive research was that the Japanese did not prefer the single desk selling system. They did tolerate it with regard to wheat because it was already in existence. They import 90 per cent of their canola from Canada. They made it very clear that they prefer the system for non-board crops that is in place. As a result of that, the Western Grain Marketing Panel recommended that those crops be left under the marketing system that was in place.
Senator Whelan: Could we have a copy of that, or does Mr. Goodale have a copy of that?
Mr. Archibald: Mr. Goodale does have a copy of it. It was his panel that commissioned the report and he would have, hopefully, several copies for you.
Senator Whelan: It might be easier to get it from you.
Mr. Archibald: We can certainly supply it. You might get it quicker, if our experience shows anything.
Senator Whelan: You say on the last page, "The bill addresses the needs and aspirations of no one in Western Canada." We met quite a few people that think it is pretty good, with some amendments. You had the Manitoba Pool today. You had the farm organization from Manitoba, more or less not endorsing it completely. There have been many people saying to get on with it. Even the minister in Saskatchewan says it may not be perfect, but get on with it and pass it. I would dispute your statement there about no one, because we have been hearing from people who think they are someone.
Mr. Archibald: Senator Whelan, those are very interesting observations. I would have to add to it that although the Keystone Ag producers claim to represent a large group of Manitoba farmers, if their members knew some of the things that they are presenting to you as support for this bill, I suggest that their membership would drop to the point where they would have been delisted as a commodity group.
Most farmers that I have spoken to who are members of Keystone Ag Producers, are not aware that Keystone supports the inclusion clause. This is just an example of how groups can support something on principle, but yet their members do not. Manitoba Pool is a fine example. I have been a member of Manitoba Pool. I have been an employee of Manitoba Pool. My family has always been members of Manitoba Pool, yet we feel exactly the opposite as far as this marketing question goes, as do many of their members. When it comes to saying I support it or I do not support it, we really must question where some of this support is coming.
Mr. Kelly: One of the observations that we have been struck by is that the opposition to Bill C-4 seems to have united farmers on both sides of the equation. Both the NFU and the farmers that might be typically part of the member groups of the coalition have spoken out in opposition to this bill albeit for different reasons. However, that also demonstrates to you that the statement that the bill pleases no one is the case, because both sides of the monopoly debate are united in their opposition to this bill.
Senator Whelan: I disagree with you. There are many people who approve of this bill. The Minister of Agriculture in Saskatchewan, the biggest grain-producing province in Canada, says to get on with the process and pass the bill.
Mr. Paul Earl, Representative, Coalition Against C-4: Attached to our brief is a fact sheet that we put together that lists various things that have been said about this bill. On page 4 of that document, it indicates:
The government says that groups opposing Bill C-4 are doing so for different reasons and there is no consensus between them.
That is absolutely wrong. It is true that right and left have different views about the CWB; however, there is consensus among them on one issue. Both sides feel that Bill C-4 politicizes the CWB, and neither want that to happen. Farmers want the CWB to be focused on the business of the corporation, not paralyzed in policy debates.
When you made your statement that there are some organizations that support Bill C-4, the phrase that stood out was "with changes". Certainly with changes Bill C-4 could command some support. However, this is one issue upon which both right and left are united.
[Translation]
Senator Robichaud: Your argument is primarily based on your opposition to the inclusion clause. Would it be fair to say that if the inclusion/exclusion clause were withdrawn from Bill C-4, you would be prepared to support it?
[English]
Mr. Archibald: The position of the coalition is, if the inclusion clause was dropped, that would satisfy the coalition, per se. As was stated earlier, individual members of the coalition may have their own opposition to other parts of the bill; however, our 16-member coalition, would give tentative support to this proposed legislation if the inclusion clause was dropped.
Mr. Kelly: The coalition was formed around the inclusion clause and the inclusion clause alone. At the very beginning, all of the member groups; some of them with diverse comments with respect to Bill C-4 -- and there are definitely provisions that were more to the liking of certain groups and perhaps less to the liking of others -- but every single member of 16-member coalition was opposed to the inclusion clause. It would be fair to say that the coalition is agreed that we will not take a position towards the bill as a whole, other than in regard to the inclusion clause.
If the inclusion clause were removed, the purpose for the coalition would disappear and the individual groups would bring forward their individual positions on the other provisions of the bill. My organization is before you. There are representatives from the wheat growers. You have met with many of them throughout the process of the hearings. However, the coalition as a whole is focused on the inclusion clause and that element alone.
[Translation]
Senator Robichaud: Do you believe that by appearing twice before this committee, we will give more weight to what you have to say?
[English]
Mr. Kelly: I am not sure of whom you are speaking, however both Mr. Archibald and myself have made presentations as representatives of our respective organizations to this committee. We were also elected by the coalition as the people to bring forward our recommendations to you. Being based in Manitoba, we have the opportunity to do that. There are certainly many other people who could have come before you as representatives of the coalition. For example, I am paid to do this kind of work on a full-time basis, whereas individual farmers and individual business people are out there trying to earn a living. My living is doing stuff like this. I have the time and resources available to do that.
Mr. Archibald: I do not have the same time or resources, but this issue is of such vital importance to our farm that I do make the commitment. The strength of the coalition is showing that the crops that are affected by the inclusion clause have banded together to show the extreme opposition to it. Canola groups, flax groups and oat growers do not have experience with this area. They have been functioning very nicely in the open market scenario that they have been working with. They have not had to go through marketing panel debates and plebiscites for a number of years.
There was a canola vote in Manitoba several years ago which was defeated quite soundly. The people in our commodity groups thought that by banding together and presenting in this fashion we could show you the extreme amount of opposition to this clause and the threat it represents to their industry.
[Translation]
Senator Robichaud: I would like to reassure people that we have made every possible effort to hear all viewpoints on this bill.
[English]
The Chairman: We will now call the Concerned Farmers Saving the Wheat Board. Please introduce yourselves.
Mr. Bill Toews, Chair, Concerned Farmers Saving the Wheat Board: My name is Bill Toews. With me today are Keith Ryan and Tim Groening.
After listening to a fair amount of the discussion up until now, I have decided to change my presentation slightly. I will not be sticking strictly to the presentation I have prepared. It was interesting to hear how the numbers of farmers in Western Canada is growing quickly. I suppose I could come in front of you and suggest that I represent 70,000 farmers across Western Canada. I will not do that.
Senator Spivak: How could we check it out?
Mr. Toews: How could you check it out?
The Chairman: How long has your association been formed?
Mr. Toews: We formed it in 1996. I would like to give you a bit of a preview. I was being a bit facetious since the last panel of witnesses apparently represent me as well.
When various groups throw numbers around, there is a certain amount of caution that should be required, whether it is the Manitoba Canola Growers Association or a coalition.
There has been no method, for example, in the Canola Growers Association, to determine what the opinion of canola growers really is on this issue. I want to back away from that, though, and give you an overview of what we are going to present.
Our written presentation describes who we are. There is a preamble on the Canadian Wheat Board marketing system. There are some suggestions about Bill C-4, about things that we have concerns about, on governance, on the contingency fund, on operational flexibility and on the inclusion and exclusion clauses.
I have put forward in this presentation a suggestion about the future of the Canadian Wheat Board and then, finally, a summary. I will tell you right at this moment that my summary includes a request to pass this bill quickly. Put it through as quickly as you can, unless you feel in your wisdom that there are some serious problems. I believe the problems will become more serious if this bill is not passed as soon as possible.
We have added appendices to our written presentation. We include some commentary on the dual marketing issue and the value-added issue and how the term "status quo" is used.
Finally, we include the concluding statements about the audits that were done on the Wheat Board marketing of wheat and barley. There is an impression that there has never has been an investigation to evaluate the performance of the Canadian Wheat Board and the numbers are there. I have added the summary pages from the reports that were done on wheat and on barley.
I have also included a table from the Western Grain Marketing Panel report which puts Canada's position in the wheat trade essentially in perspective with the other exporting countries. The information in these appendices is fairly straightforward and clear cut. It does not require a significant amount of explanation. I would point out in the table of the rating by grain exporters in that appendix that Canada is seen by the buyers to be the most expensive wheat but also provides the best service and consistency. All of the things that go into marketing grain are achieved by the Canadian system, which includes the Canadian Wheat Board, but also includes our quality control system. I wanted to ensure that this perspective was expressed.
Finally, the final appendix describes who we are. I thought it best to take the front page of the Winnipeg Press and reproduce it and put it in front of you, which describes what really happened on a particular day in August of 1996 when there was so much commotion and so much media attention on the people who were concerned and running the border. We polled in short order about 1,000 people across the province to demonstrate that there is a significant support for the single desk selling system that we are now using under the Canadian Wheat Board. I wanted to ensure that you understood what was in here and more about who we are.
I wish to address some of the points set out in the last presentation, but before I do that I should like to put the wheat industry in perspective. Wheat is not like canola, flax nor oats in the international markets. Wheat is a commodity that has not been enhanced by the political process.
Farm bills in the United States have constantly addressed wheat through things such as acreage controls in order for farmers to receive payments. U.S. producers historically have had significantly higher equivalent subsidy units relative to Canadian producers. During the period from 1985 to 1995, a program in the U.S. called the Export Enhancement Program was set up specifically to raise domestic prices in the U.S. by providing subsidies in the export market. Of course, the Canadian Wheat Board was functioning in the export market.
Since we export something like 70 to 80 per cent of our wheat production every year, competing in a subsidized market was very difficult to do. On the other hand, the prices in the U.S. were raised artificially because of that very thing. Therefore, there was a discrepancy in the market system where the attractiveness of the U.S. market was fundamentally increased because of the political system. That did not happen with canola, flax nor oats. I would suggest to the committee that it is a dangerous game to compare commodities. We must deal specifically with the commodity of wheat.
There are certain people in the industry who appear to have said, "We will develop farm policy, we will do it by throwing as much dirt at the wall as we can and hopefully some of it will stick." That is part of what is happening in this game right now. That is very troublesome because it does attract media attention.
Unfortunately, even the CBC reporters now on the farm program do not have the resources to investigate the news releases that come across the desk. They simply become mouthpieces for people who want to put out a press release. Any small group of people that decides to make noise or put out a press release will receive full media attention. Trying to separate fact and fiction can sometimes be difficult.
I was recently in North Dakota where I made a presentation in Minot to the North Dakota Farm Bureau. A senator was there, as well as some of the people from the North Dakota State Wheat Commission. Their impression of how Canadians function and the concern they have about wheat entering into the U.S. is interesting because they are quite convinced that we are either being subsidized or that the Wheat Board is undercutting prices even though any audits that have been done have shown that to be absolutely false.
In the U.S. spring wheat growing area, the acreage this year will be reduced from something like 19.5 million acres to 16.5 million acres. That reduction is a result of market forces. Wheat is now less attractive in North Dakota than it was a year ago in comparison to alternative crops that they can grow there. It is the same in Canada. Unfortunately, in North Dakota, that is a market force. The market forces are at play. When the Wheat Board delivers that message to Canada, it becomes the Wheat Board's fault and the response is: "Let us shoot the messenger". I am trying to put this whole game in perspective. It is easy to point to the messenger and say there must be something wrong here, you are responsible.
Turning to the export enhancement program, the U.S. was applying during the years when the European Union was heavily subsidizing their exports as well. We suffered significantly during that period as a result.
Some of you are familiar with the program that we call GRIP, the Gross Revenue Insurance Program, which was in place in the Prairies, from at least 1991 to 1995. During that period, there was a support system put in place for which we were very appreciative. The audit of the Wheat Board that was done recently demonstrated significant advantages that the board had in the single desk selling mechanism. If it the board's had not been able to extract money from the export market, both the federal and provincial coffers would have been lower as a result of additional payments made to producers under the GRIP program. No one has really picked up on that, and it is something about which some of the politicians and certainly the taxpayer should be appreciative.
With that introduction, I should like to address the actual presentation and where we are stand on Bill C-4.
There is no doubt that there are questions and some concerns. There are risks attached to everything you do when you make a change. The outcomes are somewhat uncertain. However, at the end of the day you must have some confidence in the people who are either representing us in Parliament, in the Senate, or those regulations that are formed, or those people that we elect to run an organization like the board.
I will not go through the whole bill. At the bottom of the first page, under "concerned farmers" and "preamble", what we are stating is Bill C-4 is enabling legislation. We must keep that in mind. It presents us with some opportunities, along with challenges and risks. We have to weigh them and see whether or not we want to go in this direction.
There is a considerable onus on the minister responsible for the legislation to ensure that there are adequate regulations in place to maintain the integrity of the board operations. Not all of those regulations are in place; there is work to be done.
When this bill is passed and the first slate of directors is elected, this newly elected and appointed board of directors has an opportunity to set policy within the enabling framework, and also within the regulations in a manner that strengthens the CWB and will serve all producers in the designated area. We must have confidence in the ability of producers to elect the people who will make that happen.
As far as the exclusion and inclusion clauses are concerned, certainly there are some concerns and we have heard about those concerns for the last two weeks. In the end, however, there must be a mechanism to make these things happen. The mechanism to be put in place should provide for the commodity organizations that are referred to in the bill to have financial audits available to all the producers. Through communicating with the producers of a particular commodity, and having a mechanism for gathering opinion from all producers of that commodity, there is some reason to forecast success for this legislation.
Unfortunately, I do not believe there is one organization that represents a commodity that is in that position at this particular time. Some work is required for this to occur.
At first glance operational flexibility appears necessary. It would provide for the directors to determine policy within the board to make certain things happen, however there are risks attached to that. There is no question that enabling legislation will expose people to risk. On balance, some decision must be made and, again, it goes back to the confidence that we have in our producers to elect the right people to ensure that this board runs efficiently and with integrity.
The contingency fund is probably one of the most disliked parts of the bill, although I have not heard very much about it here today. There is a sense that a contingency fund is not necessary from a producer or treasury point of view because adjustments to initial payments for which this is intended to apply have never cost the treasury anything. Most producers see this as the first phase of providing a contingency for actual establishment of initial payments, and that is where the real concern arises. When we are suggesting to you that this bill should be passed quickly through the Senate, there is an understanding with the minister in charge that this contingency fund issue will be put aside and not applied until we have had some additional ability to determine whether or not this is a good thing.
Governance is the most important aspect of Bill C-4 and we have made some suggestions on this subject. The most important suggestion that we have is that there needs to be a delegate structure set up in order to do a proper job of getting the election process going. This has general support, or at least support in many areas. It is going to allow us as producers to evaluate our candidates more thoroughly, to have a truly democratic process in putting this forward. We have had enough of the rhetoric of campaigns. We need some solid, thorough thinking about how we are going to make this legislation work. I should like you to put before the minister not changing the bill, but ensuring that this issue of the delegate structure is put before him and is emphasized as being an important way of ensuring that farmers actually feel they have ownership of the corporation.
Finally, I see a strong future for the CWB. Many producers in the current and past environment have blamed the wheat production problems and the marketing problems on the board. I am not going to suggest that the board has done everything perfectly over the years. Obviously, there have been some problems and there have been some policy issues that have not been handled completely correctly. However, I see a future board with an elected board of directors where the board and the producers actually feel as if they are taking charge of the organization; they are taking responsibility as well as ownership.
In that setting, I would hope that there would be an opportunity with future legislation to widen the mandate of the board. I have listed three or four areas where this should be looked at. There should be a more direct involvement in research funding and setting of priorities for the wheat industry and a direct involvement in the seed trade to ensure options for producers as a potential area for the board's involvement.
At this moment the seed trade issue and the issue surrounding how genetics are being dealt with in agriculture is one of the most talked about issues in the farm coffee shops at this particular time.
In the future, the CWB could be making investments in processing, whether in Singapore or elsewhere, but to engage markets for Canadian producers in other parts of the world. This was something that was part of the Western Grain Marketing Panel report, by the way, but somehow it has not been raised again. I wanted to raise it here as something in which the Wheat Board could be involved.
Finally, there is no reason why the CWB could not provide other services for other commodities on a contract basis in the long term. This could occur not necessarily through direct marketing, but perhaps with sophisticated market analysis division or weather surveillance division. These things have a place in the entire industry.
It is important to pass this bill. There are factions of opinion on both sides of the issue, but the concerns about the inclusion clauses are a bit of a red herring. The threat of having another commodity in this type of an organization has always been there in the sense that it just required Parliament to make that happen. It is not as if that threat were not there before. The so-called threat to the industry is not nearly as huge as certain groups may like, however I return to the idea that things change.
The marketing environment is changing all the time; some things more slowly than others. The point is that we do not know whether or not the Winnipeg Commodity Exchange will be around in five years' time, not because there is a threat of canola being applied under the single-desk selling system, but for other reasons. The agriculture industry is consolidating. Strategic alliances are being formed. Smaller institutions may close down and bigger ones may gobble them up. I am not suggesting this is imminent or necessarily going to happen, but anything is possible. Things may change in the feed barley or in the oat industry. That is why producers must have an option to determine how they are going to market their grains. It is not a question of whether you should or you should not, it is just a question of do you have the opportunity to do that.
I will close and be open to any and all questions.
The Chairman: You mentioned the word "option." Are you suggesting that you would give choices to the farmers?
Mr. Toews: With reference to what?
The Chairman: You just mentioned the word "option".
Mr. Toews: I am mentioning that in the sense of a two-sided coin. You either have a single desk selling system or you have an open market. You cannot have both. I would love to have an opportunity to spend some time on that if you wish. A dual market is essentially an open market and that is the option.
The Chairman: I will not belabour it, but I beg to differ with you. If there are not choices given to the farmers, you will not have a Canadian Wheat Board.
Mr. Toews: I would offer the other side of it, and that is, within the single desk selling system, there are some aspects of the open market that can be included. For example, that is the whole purpose of this enabling legislation. There are possibilities of providing options for farmers within that single desk selling system. Things will not necessarily stay the same, particularly with an elected board of directors from the farm community. However, that is where the risk is. If you go too far in undermining the single desk selling system, you lose all the advantages that have been presented in the audits on both wheat and barley. That marketing advantage is essentially why we have the single desk selling system.
The Chairman: In Saskatchewan, where we produce 65 per cent of the grain grown, we have ConAgra coming in and building three large plants, one at Corinne, one at Yorkton and one in central Saskatchewan. They can load out 45,000 bushels an hour, a 100-car train in eight hours. We now have Dreyfus Canada coming in with three plants that they are going to put into Saskatchewan. We know of the situation with ADM. Most of the canola that is grown in my area, whether it is Saskatchewan Wheat Pool or Pioneer Grain, or whether it comes right from my farm, goes directly to ADM in North Dakota. One would have to have their head in the sand not to realize that we are in a time of change. I fear that we are polarizing in two different camps here and it has become a political thing if we do not have some form of compromise that might save the Canadian Wheat Board. Enough said, I am the chairman and I have said very little today.
Mr. Toews: May I respond to that?
The Chairman: I think we must give consideration to this reality regardless of which camp we are in.
Mr. Toews: I agree with you. It is a terrible situation to be polarized in the way we are. We must face reality, and one of the realities is that CWB, under a new governance structure, may be able to find different ways under which producers can operate. I am not going to suggest any at this time, but obviously there are ways and that is what the enabling legislation is all about.
I emphasize that you cannot run the single desk and open market at the same time. They are mutually exclusive. I am sorry, that is just the way it is.
Senator Stratton: Have any of you presented to this committee before?
Mr. Toews: No.
Senator Stratton: Thank you.
Mr. Toews: I am sorry. There is a concerned farmers' group independent of us in Saskatchewan that presented to you in Saskatoon.
Senator Stratton: I look at the paper and it is very familiar.
Mr. Toews: We did no collaboration whatsoever.
Senator Stratton: My question is: If you have inclusion and exclusion, who would get the vote on the inclusion?
Mr. Toews: Are you referring to a particular commodity?
Senator Stratton: Yes.
Mr. Toews: It would have to be a record of the growers. For example, the barley plebiscite was not a big deal in terms of saying anyone that grew barley in the last five years was eligible to vote. You would find it quite easy to sort that issue out if it had to be canola or flax.
Senator Stratton: Did it have to be a producer of the commodity?
Mr. Toews: Yes.
Mr. Keith Ryan, Representative, Concerned Farmers Saving the Wheat Board: A great fuss was made a little while ago by the canola growers that sort of left one with the feeling that they are a sort of individual group that just grew canola. I wish to point out to you that it is an agronomic fact that one can only grow canola once every four years on the same land. What do you do with the other years? You grow wheat, oats, barley or other crops. Therefore, a canola grower is a wheat grower is an oat grower is a flax grower. We are all the same and it may be one year you miss out not growing, that does not make you not a canola grower.
Senator Stratton: I appreciate and understand that. One thing I have learned about in this session is crop rotation.
Senator Spivak: Almost every group which has appeared before us has supported the Wheat Board. There is a numbers game being played, as you said at the beginning of your presentation.
I know you are not going to tell me exactly how many members are in your organization, but can you tell me perhaps a little bit more about it and how you obtained the opinions of the people that you represent?
Mr. Toews: We feel we are representing the 1,000 producers who came to the rally at Oak Bluff. We have been asked from time to time by them to continue doing what we are doing. We are not a formal organization in the sense that we elect directors and so forth. We have communication with the people from time to time that were at the rally. We have kept a registration list and so forth.
Senator Spivak: My concern about the inclusion-exclusion clause has nothing to do with the substance of the clause, it has to do with the clause becoming a lightning rod for the election of the directors. It appears to me that an election might not be fought on who was going to be the best person for the job, but whether that person was for or against a certain position. There are other things in this bill that could trigger that reaction, but the inclusion clause has somehow become the major focus.
If the inclusion-exclusion clause were removed, what is your opinion as to the ability of a producer group, a commodity group, if they were really strongly in favour, to come under the umbrella of the Canadian Wheat Board in any case? The minister has certain powers and the board of directors will have their by-laws and their regulations. I cannot see an elected board of directors not listening to a strongly organized group that wishes inclusion of whatever item, even canola.
Mr. Toews: I would answer your first question, but I have forgotten what it was. As far as the second question is concerned, I do not know what the other possibilities are. However, if the bill remains the way it is, it would force the organizations that are seen to represent a commodity to actually represent that commodity. I suggested earlier that that may not be what is happening now in terms of communication and so forth.
Senator Spivak: I am sure you are right. I have more questions but I will yield in the interests of time.
Senator Whelan: When the Coalition Against C-4 was making their presentation, they talked about a vote in Manitoba. Do you disagree with what they said about a vote, the group for Coalition Against C-4? Also, do you have any members which are organizations? They have the Canadian Federation of Independent Business, the oat growers, the Saskatchewan Canola Growers, the barley growers and the Winnipeg Commodity Exchange.
Mr. Toews: No. I described our group as a broad-based group of producers of all political stripes. It was quite clear at the Oak Bluff meeting that that was the case. These are people essentially that are producers with affiliations perhaps with other organizations. We all have affiliations of one sort or another independently, but certainly not as a group. We are an independent group.
Senator Stratton: The Coalition Against C-4 listed all the canola growers and the flax growers, et cetera, and they stated quite clearly with the deletion of the inclusion-exclusion clause that they would support the bill. It is not that they are against the Wheat Board, but this seems to be the most contentious issue.
For the sake of coming together to reduce this emotional debate, splitting groups into one or another camp, would you not support the deletion of the inclusion-exclusion for that reason?
Mr. Toews: I have made our position quite clear. The assumption that suddenly this animosity, mud slinging and antagonism will go away because of that clause being removed is not the case.
Senator Stratton: You do not think that will happen?
Mr. Toews: No.
Senator Whelan: Can you clarify my question about the vote in Manitoba that was mentioned?
Mr. Toews: I guess I was shaking my head in a sense that if the result was, as it was said to be, soundly defeated, I cannot see what the concern is with having the inclusion clause. I mean, there does not really seem to be a threat there if that poll was correct. Therefore, what is all the fuss about?
Senator Whelan: I agree with you on the inclusion or exclusion clause. If you are going to have a vote of producers, it cannot be put into effect unless you do that. I would think there may be a problem as you are saying you only produce canola, some producers would not produce it every year, if I understood you correctly, because they must rotate it. They can only have it on their land every three or four years. They have to rotate their crops so they may not be in a position that they can grow canola every year. How would they vote, that type of thing? You would have to define a pretty fair system for voting, who is eligible and who is not eligible to vote.
Mr. Ryan: Senator, if for whatever reason I cannot grow canola for just one year, does that not make me a canola grower? There have been funny numbers thrown around here today. The canola growers got up and told you that they represented me. They represent me because they automatically take some money out of my pockets every time I deliver some grain to the elevator, but they have never once consulted me about anything. I support them only in the sense that I like the research that they are doing. If they keep up this nonsense, I will not support them anymore.
The Chairman: Just on that subject, we grow about one quarter of our farm in canola every year, about 15 quarter sections of canola every year, and it is also a rotation. There are many farms in that same type of rotation. They grow peas, wheat durum and canola, but there are many farmers that grow canola every year.
Mr. Ryan: They do not do so on the same piece of land.
The Chairman: Not on the same piece of land, but in rotation. Thank you for your presentation.
We now call the Canadian Oilseed Processors Association. We welcome Mr. Robert Broeska, president. Will you make your presentation, which you have given to us, and then we will go to questions from the senators.
Mr. Robert Broeska, President, Canadian Oilseed Processors Association: I wish to thank the Senate Committee for inviting me to speak to our concerns regarding Bill C-4. You have my written presentation, and if it is appropriate, Mr. Chairman, I wish to paraphrase the position of our industry in a verbal statement to you.
I represent the Canadian Oilseed Processors Association and I serve as president of COPA. The member companies of COPA are ADM, Agri-Industries Ltd., CanAmera Foods, Canbra Foods Ltd. and Cargill Limited. These companies own and operate facilities located in the Prairies, Ontario and Quebec that account for 100 per cent of the oilseed processing capacity and about 85 per cent of the edible oil refinancing capacity in Canada.
Members of COPA are actively involved with oilseed growers, exporters and crop input companies in directing and managing a highly organized industry in all aspects of crop production and research programs, the development of a disciplined marketing system for seed and products and involvement with the federal trade policy negotiators in establishing liberalized rules of trade for oilseeds and products.
By way of background, the oilseed processing industry in Canada was severely impeded in its economic endeavours under the period of the mid to late 1980s. Trade policies of competing nations that limited export market access and encouraged subsidized competition severely hindered Canada's export trade in oilseed products. As well, a domestic freight rate subsidy, the CROW rate, encouraged the export of unprocessed oilseeds but discouraged the export trade in processed oilseed products. The creation of the Canada-United States trade agreement and the North American Free Trade Agreement and determination of the CROW rate and later the repeal of the WGTA have resulted in a radical change in the market dynamics for oilseeds in Canada and as the basis for substantial capital investment in the industry in the 1990s.
Canada now has a world competitive oilseed processing industry capable of competing with the most efficient competition anywhere in the world. Canadian Oilseed farmers now have a domestic processing market for more than half their oilseed crop production. This processing industry provides billions of dollars of economic contribution to the Canadian economy every year. The oilseed processing industry does not rely on government subsidies, but rather it looks to government for the development of commercial policies that foster industry growth and a level playing field in the rules of trade for oilseeds and products.
The members of COPA have serious concerns about the government's Wheat Board legislation that would provide for the marketing of oilseeds under that agency. We have expressed our opposition to the inclusion clause in a statement presented to the House Standing Committee on Agriculture and we had earlier made a statement on oilseed marketing to the minister's Grain Marketing Review Panel. The members of COPA are opposed to the inclusion clause as contained in Bill C-4 and continue to request that it be removed from the proposed legislation.
In this regard I have several points that clarify the rationale for our industry's position. First, the inclusion clause is without constructive merit. The inclusion clause proposes to substantially alter the commerce of oilseed trade in Canada while failing to address the fundamental problems facing this business, those being the challenge of crop competitiveness in the farm field and the protectionist trade barriers in offshore markets. In fact, the legislation sends the message that protectionism rather than liberalization would enshrine the oilseed marketing regime of the future. There is no future for oilseeds or oilseed processing in this scenario. Our industry has faced protectionism and has experienced the benefits of liberalization. Only the latter fosters growth and investment.
Second, the inclusion clause lacks the support of the industry. The minister's Grain Marketing Panel accurately reflected the oilseed industry position on this issue; that is, no fundamental change in the marketing system for oilseeds is recommended. No producer or processor substantially invested in the oilseed business in Canada is in support of the inclusion clause; all are opposed.
Third, the inclusion clause imposes an impediment to the industry. It places market progress at risk. Market achievement for oilseeds and products in continental North America since the advent of CUSTA, NAFTA and the repeal of the WGTA are significant, from a market value of $100 million in 1985 to $1.2 billion in 1997, and most of this is because of market access to the U.S. food and feed market. The U.S. marketplace is highly sensitized to our CWB single-desk selling and we can state with certainty that the inclusion clause is a matter of concern to both investors in this industry and the major user/consumer groups within the U.S.A.. The threat of the CWB monopoly marketing of oilseeds in Canada puts at risk both existing market gains and future plans for expansion and growth of investment.
Fourth, the inclusion clause jeopardizes industry goals for trade liberalization. The oilseed industry in Canada has struggled for more than two decades in working with the Canadian trade negotiators in positioning a policy of trade liberalization in oilseeds into those relevant negotiating forums, some of those being the Cairns group, the APEC, the OECD, the World Trade Organization. Together this industry and the Government of Canada are on the verge of seeing those efforts materialize into world support for a global proposal for a level playing field in oilseeds and products. The government's proposal to provide for central desk selling of oilseeds represents a redirection of Canada's intended trade policy in oilseeds and a potential destabilizing challenge to Canada's trade negotiators.
Fifth is the producer-processor alliance. The oilseed industry in Canada has been developed by a close working relationship between growers, processors and exporters. This has been fundamental to the progress achieved in developing the soybean business in Ontario and the canola, flax and sunflower business in the Prairies. Personnel and industry funding has been provided in substantial amounts to bring this industry to its current position as a world leader. The inclusion clause, if activated, would superimpose the Canadian Wheat Board in between all major participants in this business and compromise the essence of those working relationships which are the success of the oilseed industry.
Sixth, we see an erosion of value-added processing. The oilseed industry in Canada has attracted substantial investment in capital-intensive plant operations in many provinces. As earlier indicated, more than 50 per cent of all oilseed crops are processed domestically and sold locally or to export as value-added vegetable oil and protein meal. This industry submits that this would not have happened under the CWB single-desk selling monopoly. The Canadian Wheat Board is all about the export of offshore sale of large volumes of homogeneous supplies of unprocessed grain to foreign processors. Less than 10 per cent of all wheat produced here is also processed in Canada. The oilseed industry is about the production and processing of higher value products with increasingly distinct biotechnical and nutritional characteristics for exacting market requirements, and mainly within North America for the significant financial benefit of the entire Canadian economy. The two systems are clearly not compatible.
Senator St. Germain: I gather all these major corporations that are listed here are American corporations?
Mr. Broeska: They are not all American corporations. CanAmera Foods is 50 per cent owned by Central Soya U.S.A. and 50 per cent in partnership with Manitoba Pool Elevators and Saskatchewan Wheat Pool. Canbra Foods is a Canadian corporation traded publicly on the Toronto Stock Exchange. ADM and Cargill have head offices based in the U.S.A.
Senator St. Germain: I am not fearful of that. I am more concerned about the legislation that we have, that should we narrow it down to two, say, as opposed to having just four, that we have stronger legislation in regards to competition tribunals and what have you. I am not fearful of this at all. I just asked you that for straight information, sir.
Mr. Broeska: I can address that issue in a couple of ways. Of course, your concern with competition and monopoly control is dealt with under different legislation, but in terms of the existing ownership of this industry I can tell you that all of the plants in Canada that came through the l970s and the 1980s were either sold in financial duress or in desperation because those companies were not large enough to face world competition.
We now have investors in this industry who are world-competitive. They own processing facilities in the U.S.A., in Europe and in Asia. They are there for the long term. They have invested substantially into Canada. They employ Canadians and they buy Canadian oilseeds. They are fully invested for the benefit of the Canadian economy.
Senator St. Germain: I agree with you; however, I feel we are a little bit weak compared to our American neighbours in the area of necessary legislation to control cartels, monopolies and what have you.
Basically, sir, if the inclusion clause was not part of this legislation, would you be here today?
Mr. Broeska: No, sir, I would not.
The Chairman: Do you think it is possible that wheat prices some day may go up to where the specialty crops are? Could competition achieve that?
Mr. Broeska: I am not a commodity price speculator. We can only hope, for the benefit of our producers, that prices of those grains do rise to those levels. The fear in the oilseed processing side of the industry is that at the farm level of production, we are not competitive in terms of yield and in terms of net return to producers. That is our greatest fear. In early 1996 we saw wheat and barley prices spike and, disappointingly, saw canola acres drift away because they were not capable of competing for that acreage and giving producers that net return. That tells us that competitiveness at the field level is not yet there.
Second, if you want to compare, say, the Canadian canola situation to the U.S. soybean situation, soybeans in the U.S. and in southern Ontario are infinitely more competitive at the farm level than is canola. The yield levels of soybeans are such that the amount of oil production per acre from soybeans, which are comprised of only 18 to 20 per cent oil, is equal to the oil that is being taken off of the canola acres in Western Canada. But then when you combine that with the revenue from the meal earned from the soybeans, it is an indication of how aggressive and marginally competitive soybean growers are versus canola growers.
The Chairman: You represent the flax industry as well?
Mr. Broeska: Our industry processes flax, but I do not represent the flax industry as such. There are several organizations, the Flax Growers and the Flax Council which represent the flax side of things.
The Chairman: Flax just last week hit the highest that I have heard of for a long time at $11 a bushel.
Mr. Broeska: Yes, that is certainly right.
The Chairman: It is a much sought-after commodity on the Prairies right now for seed.
Mr. Broeska: It most certainly is, and the acreage this year is expected to be up significantly.
Senator Whelan: Just to follow up on Senator St. Germain's question, I know who Archer Daniel Midland is and I know who Cargill is. Can you give me the breakdown of the CanAmera Foods and ADM and Canbra Foods Ltd., what percentage do they crush?
Mr. Broeska: CanAmera Foods is the largest processor in Canada. It processes over 50 per cent of the soybeans and canola that is processed in Canada. They have plants in the west and the east. They also have a very extensive refinery business.
CanAmera was formed by joint partnership of Central Soya U.S.A. which, in turn, incidentally, is owned by the Eridania Beghin-Say of Paris. Central Soya Group went into partnership with Manitoba Pool and Saskatchewan Wheat Pool to form CanAmera. In so doing they not only combined the eastern and western crushing capacity, they also purchased the edible oil division of what was formerly Canada Packers. They essentially bought their marketplace and so rationalized the industry from processing right through to the end refined product.
Canbra Foods is a publicly traded company. I believe that it is owned approximately 50 per cent by Peter Pocklington in Alberta. The other 50 per cent would be publicly traded on the Toronto Stock Exchange.
Cargill and ADM are private U.S. companies. ADM is traded publicly on the New York Stock Exchange. Cargill is privately owned by the family.
Senator Whelan: Cargill can never be taken over by anybody?
Mr. Broeska: I would doubt that in their present structure.
Senator Whelan: Archer Daniel Midlands have the one plant that I know of in Ontario, in Windsor.
Mr. Broeska: They have a crushing plant in Windsor and they have a vegetable oil refinery in Windsor and, as you also know, they own a very extensive grain collection system throughout the soybean and corn country in southern Ontario as well. They are also developing port facilities in the St. Lawrence River system for import and export of not only their processed product but also raw product.
Senator Whelan: How many oil crushers are there, say in Ontario, for canola that is grown there and also the soybeans?
Mr. Broeska: There are two companies that process in Ontario, and there now are only two plants, the CanAmera plant at Hamilton and the ADM plant at Windsor. Both plants are dual line plants; that is, they will process both soybeans and canola. Both Windsor and Hamilton process canola grown in Ontario, canola grown in Western Canada, canola imported from the U.S.A., and canola imported from Europe.
Senator Whelan: You have heard me say this before, but your expressions that regarding the inclusion-exclusion clause, and indeed my own first reaction, may be somewhat unwarranted. I cannot believe that clause would someone to extent of affecting their decision to come here. If the companies were doing such a good job in marketing processing, et cetera, I can see that any producer group would want to be included.
Mr. Broeska: That is our understanding of the position of the producers today. They do not want to be included under the Wheat Board marketing legislation.
Senator Whelan: You probably have heard some discussion about the wheat producers in Ontario?
Mr. Broeska: Yes.
Senator Whelan: The flour millers are not that big in that area. Archer Daniel Midland is in there but the others are mostly small operators. They want to be kept in the system. They do not want a two-price system. I can understand that. If they know they will all receive the same price, there will be no outbidding each other and forcing cheaper prices.
Mr. Broeska: That is the essence of the crushing side of the industry, too. Currently, this industry processes not only Canadian canola grown from seed on the Prairies and in Ontario but from seed which is imported from Europe and from the U.S.A. So there is cross-border movement of seed and product. Some have said that we have captured this large vegetable oil market in the U.S., and it is true we have now taken over 7 per cent of the edible oil market in the U.S. with our canola.
Do we not fear some form of retaliation from the soy industry? We do. However, Canada is also a huge import market for U.S. canola grown in the Dakotas, Montana, Idaho, Michigan. We are also a huge importer of soybean meal from the U.S.A., 800,000 tonnes in 1997. Those kinds of trade flows, I think, keep the balance in perspective in terms of free border market access.
Our fear under a controlled system is that we might impose some kind of border controls on the import of oilseeds to, you know, protect the Canadian industry. That I can tell you would cause more concern from the U.S. than any canola that is being exported down there now.
Senator Whelan: I can remember when the United States of America had to impose export controls because the Russians had bought soybeans, corn and everything, with no controls, no knowledge of what was being exported, and the market was shorted. They even put export controls on soybean meal to Canada at that time, when we had been a steady customer. We were not going up and down, et cetera, and we did negotiate a deal with United States of America to lift the export control, but that was the closest I ever came to witnessing physical combat at the Canadian Feed Manufacturers Association annual meeting here in Winnipeg. The representative there was furious with us because we were trying to protect our own producers. We had to do it because of what the United States of America did.
Mr. Broeska: The feed industry in Canada, despite the surplus canola meal and the soybean meal that is grown here and produced here, is still highly dependent on U.S. soybean meal imports.
The Chairman: In terms of the crushing plants, there seems to be some concern by the producers here that not enough canola is grown to keep the plants going, for instance, the Cargill plant near Saskatoon. Is that in operation now?
Mr. Broeska: The Cargill plant at Saskatoon is in operation now.
The Chairman: It is in operation?
Mr. Broeska: Yes.
The Chairman: Last fall it is was closed down?
Mr. Broeska: There have been some periodic closures. I believe the closure last fall was also due to partly a rail problem. A train had derailed in their unload house and caused a problem. Plants will choose periods of time for maintenance when board and cash margins are narrow or slim or when, as they are right now, board margins are quite negative. You will see extensive closures from this point until the new crop is harvested but that is sort of the normal course.
Our concern is that if we want to build this industry, we must expand this crop. Six million tonnes of canola will not do it with the crushing plants that are in position now and with present export requirements. We need an 8-million-tonne crop. So we need at least a 25 to 30 per cent expansion in this industry for the existing market demands and this is not counting our friends in China who we expect will have a big impact on not only the Canadian but the world oilseed market demand.
The Chairman: So security of supply is very, very important?
Mr. Broeska: It is very significant now.
Senator Spivak: Did you say that the net income to the producer is not yet what you think it should be? I do not want to ask you what the return on investment has been to any of these companies, but the Chairman points out periodically that the return on investment for the producer has been 3 per cent and the net income of the producer has not gone up. Since 1971 it is basically the same. I wonder if you could comment on how through this wonderful activity and investment and so forth, we could get a fairer share for the producer?
Mr. Broeska: That is a question that I can tell you is of foremost concern to our industry. We are members on the canola side of the business, of the Canola Council of Canada, along with all of the provincial canola-grower organizations and all the groups which provide crop inputs. We work with plant breeders. We work with agronomists and extension people. Our real concern is that, to continue growing the industry, we must continue to get access to acres. In order to continue to get access to acres, producers must be convinced there is return in this business for them.
As I was saying to Mr. Whelan, the yield levels of our canola are not competitive. They are not competitive at all ranges of prices with cereal grains with which they have to compete for acres and they are not competitive with soybeans, which is the major commodity with which we compete in North America and in most offshore-traded markets. The ability to make our producers competitive is going to require increased investment in plant breeding, biotechnology, in agronomic extension work, so that producers can get more out of their investment at the farm level.
Senator Spivak: That is true. I am sure that is accurate, but in terms of the competitive aspect here, competition is supposed to be the best possible solution. I mean we are discussing this whole question, but it must produce better per tonne. Sure, it would be great if they would be more productive and use all this new technology, but per tonne are they getting their fair share? I know that the net income to processors and others has gone up substantially more than the income to producers, and producers are certainly taking a risk.
Mr. Broeska: In the commodity business, of course, anybody who takes a position takes a risk. That is the nature of oilseeds and vegetable oil and protein meal. The prices that processors pay are the prices that are reflected on our publicly traded exchanges. The Winnipeg Commodity Exchange reflects the value of the seed. The Chicago Board of Trade reflects the value of the vegetable oil and the protein meal. It is in those markets that producers and processors trade and hedge and where the buyers also hedge their purchases. Those are the price-determining boards that are used by buyers, whether North American or world-wide and, basically, that is the price that people pay.
Senator Spivak: Sure, I understand that. I guess my comment is that the working of the free market is not perfect if it does not yield a proper return to the producers.
Mr. Broeska: I guess if we could get more out of the consumers, then of course there would be more in it for processors and for producers. How do you do that when you are competing against palm oil, soy oil, cottonseed oil, sun oil and the whole range of vegetable oils in the marketplace.
Senator St. Germain: I look at the oil companies and the way they have dealt with the price of gasoline. I am not thoroughly convinced that when we are dealing strictly with a bunch of majors, be they Canadian, Polish German or American, that the benefits ever feed back down to the producer level. I have been in the beef business long enough to know that the price of meat keeps going up in Safeway, but the price of my cattle, my calves, goes at about a buck per pound no matter what is going on at the consumer level. I take issue with you on that, sir.
Mr. Broeska: I know these processors personally and individually, and I know for a fact that while they all belong to the Canadian Oilseed Processors Association, they cut each other up intensively to get both seed for their plant and market share for their oil and meal. There is not much doubt in my mind that they are competitors because if they do not do the business then somebody else will.
It is true that there is a substantial amount between the marketplace on the shelf and what the consumer gets. I, too, was a producer at one point in my dark history. It is a fact that there are costs in between, not the least of which is our transportation cost. As we all know, after the Crow rate was gone the cost of transporting product essentially doubled. That has been a significant factor in what the producer chooses to grow or to attempt to grow and the activity of processors in investing in these plants.
Senator Whelan: What Senator St-Germain did not tell you is that his chicken prices do not reflect that in the same way as his beef prices.
Mr. Broeska: His chickens are a big market for our soybean meal and our canola meal so I do not want to say anything about that.
Senator Whelan: I am responsible for an estate that has about 50 tonnes of soybean in storage. I should have sold it last December but I was not paying enough attention to it. I was looking after my duties as a senator for which we are being counted absent by being here today. We are bad boys and girls, being out here in the west hearing about Bill C-4!
I wanted to point out that I lost money on those soybeans because of APEC and, how do you say, the corrupt financial world over there. We have lost millions of dollars in the oilseed and grain businesses. The United States has lost heavily because of mismanagement of their economics. So we have no control over that.
Mr. Broeska: That is very true. This industry, not only the oilseed industry but the entire grain industry, should be looking very carefully at the Asia-Pacific and the implications down the road. We have all pitted some very significant, long-term plans on the basis of expansion in Asian markets and especially with expectations about where China may go. That, I can tell you, is very seriously impeding some of the investment decisions in the oilseed processing in this country.
Senator Whelan: I noticed in The Globe and Mail last week, that in Manitoba, Agri-Foods Inc. has signed a $390-million deal to sell all of the crude canola oil produced by its Ste. Agathe, Manitoba plant over the next 36 months. That agreement has been signed with a company in Singapore.
The Chairman: That is very good news.
Senator Whelan: I thought it was good because we did the research and made it available.
The Chairman: Regarding competition, I would point out that we do have people phoning from elevator companies, from oilseed crushers, asking for canola. I wish somebody would be phoning to ask for some wheat.
The Chairman: Thank you, Mr. Broeska.
Our next group of witnesses are ready to proceed.
Mr. Kenneth Sigurdson: Mr. Chairman, my wife and I farm in the Swan River area of Manitoba. We grow wheat, barley, canola, oats. I am a Manitoba Pool Elevators' delegate. I am active in the National Farmers' Union. I am a strong supporter of the Canadian Wheat Board, as I believe are most farmers in Western Canada.
Mr. Edward Cook: Mr. Chairman, I farm just east of Winnipeg at Dugald, Manitoba. I am a fourth-generation farmer on a family farm that was established in 1878 by my great-grandfather.
Ms Lois Edie: We operate Edie Farms just east of Winnipeg. I operate a family farm in partnership with my husband and my son. The farm has been operation since 1873. We have raised dairy cattle, but now we are a straight grain producer with wheat, canola and oats.
Ms Carol Masse: My husband Alec and I farm at Fannystelle, Manitoba. We raise wheat, oats, barley, canola, field peas, flax and broiler chickens. We also run a small business off our farm.
Mr. Andy Baker: I am from Beausejour, just north-east of Winnipeg. I farm with my brother and our wives. We operate a grain farm producing wheat, oats, canola, sunflower and flax. The farm will be 100 years old this year, its centennial year.
Mr. Brad Mroz: My wife Tracy and I have three children. We farm about 5,100 acres of grain and oilseeds with my parents, my brothers and their families. Our farm is located at Beausejour, Manitoba. All of our wheat and approximately 80 per cent of our barley is marketed through the Canadian Wheat Board.
I support the Canadian Wheat Board as a single seller for pure economic reasons. I believe that the Canadian Wheat Board system, price-pooling, single-desk selling, and the Canadian government guaranteed borrowings, along with our Canadian system of quality control gives me the highest returns for my grain.
Mr. Sigurdson: In preparing this brief, I looked first at where we are now. The orderly marketing system for grain has been an alliance between farmers, government and co-operatives. That system has served both the nation and the farmers very well. With the current government agenda of free trade, deregulation and privatization, we see that system crumbling. The Western Grain Transportation Act has been eliminated, rail transportation is being deregulated, and railways can abandon branch lines at their discretion.
Large trans-nationals, such as ADM and ConAgra, are entering Canada. We, as well as Saskatchewan Wheat Pool, are being privatized. We are left with real reasons for concern after recent statements by the parliamentary secretary to agriculture Mr. Harvard and by Mr. Goodale himself about the future of the Canadian Wheat Board with Bill C-4. It seems to me that, by their actions, the government is no longer committed to the Canadian Wheat Board.
Bill C-4 puts the Canadian Wheat Board at risk for a number of reasons. One is loss of Crown agency status. With the election of a board of directors, the Canadian Wheat Board loses its Crown agency status. There are no Crown agencies with an elected board of directors. I believe this will allow the government to withdraw its financial and political commitment to the Canadian Wheat Board.
We have already seen in the bill the lack of support for the adjustments to initial payments. When the Canadian Wheat Board makes sales with other countries, it will no longer be able to say it has the backing of the Government of Canada behind it. I believe this is the first step in cutting loose the Canadian Wheat Board.
The cash-buying provisions were mentioned by the pool elevators today, among other organizations. I believe these provisions will destroy the producers' confidence in price-pooling. The Wheat Board would be allowed to purchase grain on a daily basis from farmers, grain companies or overseas sources. The Canadian Wheat Board Commissioner, Lorne Hehn, estimated the contingency fund could range in size to around $600 million annually. Certainly with this kind of a tax on producers, the board will experience less and less political support in the farming community. Really none of that is necessary because the government could simply not have cash trading and continue to guarantee the adjustments to the initial system.
With the inclusion-exclusion clause, I think it is highly unlikely that, under the terms of NAFTA, grain will ever be added to the board. However, I believe that the exclusion makes it very easy for the government or the board of directors to exclude grains from the board. So the inclusion clause cannot be used in my opinion to strengthen the Canadian Wheat Board, and the exclusion provisions only serve to weaken and destroy the Canadian Wheat Board.
Regarding pooling periods of less than one year, certainly farmers will have less confidence as they try to decide which pool to enter. It is currently run on a yearly basis.
Much has been said about the powers of the elected board of directors. This provision would give farmers some control, but Manitoba hog producers learned how much control they had when the government simply pulled the monopoly away from them. It is the government that signs the trade deals. It is the government that is deregulating transportation, and it is the government that is pulling their financial guarantees from the board. It is the same government that is welcoming trans-nationals into Canada.
Certainly an elected board of directors will not be a harmonious group working for the betterment of the Canadian Wheat Board or producers. Elections will be highly politicized events with third-party advertising by the National Citizens Coalition and some of the groups which have come before you at these hearings. The board of directors will have access to market information that will be of a highly confidential nature, and it would be very easy for those wanting to destroy the board to use that marketing information for their own benefit or to pass that information onto the trade. The board could be very easily undermined from within.
I do not believe we should be holding elections with the potential of selling out the multi-billion-dollar industry which is the Western Canada grain industry. That is what will take place through such an election process. It would only take one director to undermine the whole Canadian Wheat Board operation if he so desired. What I see is that the government is making farmers responsible for the board's ultimate failure.
I believe there are a number of environmental implications for where we are heading in agriculture. In Manitoba we see corporate agriculture in the hog operations such as Maple Leaf. The resulting sewage lagoons are threatening not only our rural environment but our family farms. Corporations such as Cargill and Monsanto are actively working to genetically alter crops and they want to contract production directly with farmers.
The arrival of several large U.S.-based grain-handling giants with their system of inland terminals means the abandonment of many branch lines. It seems ironic that the government is signing agreements to cut fossil fuels and yet allowing the railways to simply abandon lines.
At the back of my brief you will see printed the results of motions made at our Grain Days meetings to seek withdrawal of Bill C-4. These are the meetings held by the Canadian Wheat Board where farmers vote on various matters. You will see that the motions against Bill C-4 were passed by a large majority at most of the meetings. I will also point out that the meetings were supportive of the Canadian Wheat Board in many cases.
In conclusion, many organizations have requested a major overhaul of this legislation and have been ignored. Very few changes have been made. History tells us that when government makes such fundamental changes to the nature of a marketing agency, they conduct a plebiscite with producers to determine what they think and what they feel. I believe that this is a fundamental change.
I know Mr. Whelan used to conduct votes to determine if farmers wanted a certain marketing plan. I believe this is a fundamental change that should require a plebiscite.
I believe the trade policy and deregulation of transportation will continue to undermine the Canadian Wheat Board. The Senate has a responsibility to see that the Canadian Wheat Board, which is envied by other countries' farmers, is not undermined by this legislature. Bill C-4 is flawed legislation that really should be withdrawn.
Mr. Cook: I want to give the committee some of my thoughts on how Bill C-4 will affect my farming operation. Bill C-4 shows the total disrespect the government towards the agriculture industry in Western Canada. Even though the government was presented with views and opinions and suggestions by the industry, it never implemented any of the suggested changes. Farmers have been treated with contempt throughout the whole process.
Second, I am concerned that the inclusion clause threatens my ability to manage the financial risk of my farm business. When I talk about financial risk, I am talking about the ability to forward-sell my non-board crops, such as canola, flax, oats and rye.
For example, I have the ability to forward-sell part or all of my oat production into the future through the futures market or deferred delivery contracts. This gives me many options, such as using the commodity exchanges of Winnipeg and Chicago or any number of the major line companies. I can sell directly to a processor whether it be in Western Canada, the U.S. or any other part of the world.
The inclusion clause could potentially be used to put oats back under the control of the CWB. If that happened, I would lose my option to market my oat crop where, when and how I choose. If I lose that option, it becomes extremely hard for me to manage my financial risk in my oat production. It takes away my ability to go to my financial institution and tell them that I have pre-sold a certain value of oats for delivery during a specific time period. I would lose all of my marketing options. If oats are put under the control of the board, then I must wait for the CWB to tell me when I can deliver and how much I can deliver. I will also have to wait to receive all of my money since the board only pays a portion up front when delivery occurs, with the remainder being paid sometime in the future. The problem is that I never know for sure how much I will actually receive for my production.
Another problem with the inclusion clause is the risk that a group which does not represent the majority of farmers who grow a particular crop, may try to bring that crop under the CWB monopoly. This could result in a fight between individual farmers that could be lengthy and bitter with no real winners. If the question comes to a vote, the voting procedures may skew the results in favour of the Canadian Wheat Board.
Regarding monopoly, I feel there should be a weighted vote to account for the greater impact on some farmers who produce more of a particular crop than on other farmers for whom the production of that crop represents a small part of their business.
In closing, I would say that, on my farm, I need all the options that are presently available. I cannot afford to be restricted in any way that affects my ability to manage my financial risk.
M Edie: Honourable senators, I want to review a little history to see where we are now and what that history tells us. I farm in Springfield from where, in 1876, 857 bushels of Fife wheat went by barge to Duluth. Another 4,000 bushels of American wheat went into Ontario to re-establish the wheat crop there; that was a complete failure. That is a little reminder now of that helping hand from Springfield to Ontario.
Wheat, in 1886, was 90 cents per bushel. In 1998, it is $3.23 net per bushel after elevator costs. I ask the question, have we come a long way? From 90 cents to $3.23?
In 1920, the United Farmers of Manitoba were organized. The farmers' desire to be heard and the requirements for a voice in the development of government and agricultural fiscal policies was imperative. That was 1920. We are still asking for that.
In Springfield, wagons of wheat were loaded into rail boxcars from a loading platform to save the cost of elevator handling. This was 1920. We are still trying to save costs.
In 1935, honeybees became the mortgage lifters when, through dry years, clover grew in abundance and honey was 8 cents per pound. Today, honey brings 17 times that much in the marketplace. Wheat brings 3.5 times as much.
Why has honey done so much better than wheat in the marketplace in the last 50 years? It is not under monopoly marketing by the federal government. It does not pay freight costs to seaport nor demurrage costs for ships. It does not pay for expensive export permits for the United States' market, as is required for wheat in Manitoba, Saskatchewan, Alberta, and the Peace region. It does not have its company books so confidential that the accountant's information cannot be shared with its silent shareholders or be scrutinized by public audit. All those requirements are made of the wheat industry.
In 1935, the Canadian Wheat Board Act was passed in Ottawa. It provided marketing control of wheat in Western Canada, encouraging the exporting of large volumes of grain with little emphasis on flour mills and value-added industry. The mills were built in Eastern Canada and Ontario producers were given the privilege of direct-sell to the mills. Later, the Ontario producers formed the Ontario Wheat Producers Marketing Board. They had direct authority for domestic marketing of wheat with the Canadian Wheat Board authority for export only. That was not so in Western Canada.
During the years following World War II, the federal government realized that western wheat and barley provided an extra-cheap food source with which to barter in the international market and to subsidize these markets with a food commodity where they deemed it necessary. The grain companies became the collection agencies and were treated under Canadian Wheat Board jurisdiction with accredited export permit privileges and interest rate advances in grain movements. Those who moved the greatest volume in rail cars were favoured in car allocation. This still has not been resolved. It is important to know that in the Canadian Wheat Board Act, there is an "A" division governing Manitoba, Saskatchewan, Alberta and the Peace, and a "B" division governing Ontario producers.
In Ontario there are no primary elevator and handling/collecting charges. In the Winnipeg area today, per tonne of grain, elevation adjustments are: Less elevation, $10.09; less cleaning, $3.40; less rail freight, Thunder Bay, $18.40; Thunder Bay to seaport -- this is a new one -- less freight adjustment factor, $11.55. Those costs total at $43.44 for every tonne of wheat that is moved in Winnipeg.
In this heavily regulated, over-$6.6-billion industry with administration costs over $1 million per year and no permitted input by the shareholders, there is an increasing producer dissatisfaction. Existing federal government monopoly regulations inhibit producers in Western Canada from acquiring the best price in the marketplace. This also prevents growth in value-added processing of wheat. We still have very little here in the west.
We now exist in a global community where product can be priced by computer. Honourable senators, Bill C-4 should be tabled until Justice Estey's Grain Transportation Review is presented. He will have transportation recommendations that will affect the act in a positive way.
The minister of the Canadian Wheat Board continues to be appointed by the federal government with total jurisdiction and final authority. There is no change here. This person requires an agriculture degree. That should be the top of the list. The additional appointed and elected directors will create an additional $1.5 million to $2 million in administrative costs. The present advisors have stated that they represent the many permit-holders in their area. It is too large. Other companies are reducing boards. Why is this a necessary change?
With amendments to Bill C-4, the inclusion and exclusion clauses must be removed. The western farm economy has been able to sustain itself with a "honey" of a crop -- canola, for one. Today it is the "mortgage lifter."
Oats, no longer under the Wheat Board jurisdiction, have become a value-added crop without severe restrictions. They can be marketed at the producer's timetable and are finding their way into the world marketplace. Oats also feed our hungry children in our cities.
The NAFTA agreement now dictates the grain economy of Western Canada. Future Canadian Wheat Board jurisdiction should be drafted to offshore responsibilities. The price of wheat is a monitor for the Canadian agriculture economy. It dictates progress and the economic well-being in the communities. Present low producer prices with increasing input costs mean fewer machinery sales, fewer jobs and more farm bankruptcies.
By the year 2000 the new Canadian Wheat Board should become a private company with a highly qualified CEO like Chrysler, and five boards of directors. The shareholders would be the farmers of Ontario and Western Canada who acquire shares through their permit books and production. They would have an actual say in the decision process. The computer department would package marketing hardware. The weather forecast department would sell six-month advance forecasting packs, and the transport division would specialize in satellite communication, rather than expensive legal costs.
In future decisions, the major preference of actual producers as expressed by a democratic vote is no longer a reality. We remember the barley and the Quebec votes. Remember, Springfield saved Ontario wheat producers in 1876. The bottom line -- if it is good enough for Ontario, it is good enough for Manitoba, Saskatchewan, Alberta and the Peace. There should be no difference in wheat marketing regulations. We must get real.
Ms Masse: The area we farm in, the Red River Valley, is considered a very successful area for grain farming with good soil and very progressive and skilled farmers. Yet it is very rare to find a farm family that does not have an additional business and/or one or two adults working off the farm. This double and triple workload has been very hard on farm families and on women in particular. They usually have an outside job, work on the farm, and spend a lot of time and energy transporting children to various activities.
Because the farm alone cannot support families, no matter how smart and how hard the family works at farming, people are burning out. You do not meet them at your hearings and you do not get letters from them. They are just too busy trying to survive another day. The young people look at their parents' life and decide that, although many of them love farming itself, they cannot make a living doing it and they leave. Of course, they are not willing to work two jobs and only be paid for the off-farm one.
In Manitoba the loss of the Crow has further greatly lowered the price of grain and the marketing options. People who live on farms are human beings who are under unbearable stress. The majority need and want a strong and secure Canadian Wheat Board.
The Canadian Wheat Board has provided cost-effective risk management, stability, and fair and equal access to the export market for Canadian farm families. For less than 5 cents a bushel we have been able to hire an excellent team of experts to maximize our profits and minimize our risk. The Canadian Wheat Board is a rock that farm families desperately need in these difficult times of rapid change. World grain trade is dominated by four or five large multinational companies. The individual family farm cannot compete with these giants unless we continue to do it together using the power of our own marketing agency, the Canadian Wheat Board. Bill C-4 weakens the Canadian Wheat Board in the following ways:
Cash buying will destroy price-pooling, an essential component to an effective wheat board and essential for some level of financial stability on the family farm. It is a de facto dual market. The current system of price-pooling is supported by the majority of farmers. Together with forward selling, price-pooling is an effective and inexpensive risk management tool. Commodity marketing hedging is more expensive, and therefore price-pooling should be the risk management tool used.
The contingency fund -- whoever thought of this must have thought that farmers grow money trees in their shelter belts. Farmers do not have any money to put into a contingency fund. It is estimated a contingency fund would cost farmers between $50 million to $100 million. The government has never had to pay on a guarantee on an interim payment, so the government would not be saving any money. Why place this unreasonable burden on farmers?
The pamphlet "Changing the Canadian Wheat Board" put out by the government suggests that having the flexibility to cash out of the market pool early and to cash-sell seems to me a short-term gain for long-term pain. The farmer gets a lower price and the long-term profit goes down. To be willing to do so reflects the tremendous financial burden farmers are already under.
As growers of oats, we are pleased to see the inclusion clause in Bill C-4. We have been aware of the advantages of single-desk selling and have felt the disadvantage since oats were removed from the Canadian Wheat Board. As farmers, we never got to vote on this, so we are pleased to see a recognition of the democratic rights of farmers in this bill.
The pamphlet states that these new provisions are balanced and fair in both ways, either for exclusion or inclusion and that, in either case, the authority rests where it belongs, with the farmers.
I would urge the senators to use their experience and knowledge to see that the formal wording of the bill can deliver this promise in practice.
In conclusion, I would ask the senators to reflect the wishes and needs of farm families to have a strong and effective Canadian Wheat Board by amending Bill C-4 to keep our traditional price-pooling system, with no cash-buying, and to have the Canadian government continue to guarantee initial adjusted prices with no direct or indirect farmer-funded contingency fund.
Mr. Baker: I did not say at the outset that I was a big supporter of the Canadian Wheat Board, but I am. I did not want to use anybody else's figure to tell you why so, in a rush, I went back and took my net farm income figures for nine years. A study was done of the wheat board; you are all familiar with it, I am sure. Several professors from universities in Saskatchewan and Alberta went into the Wheat Board's books and looked at their sales for the previous 15 years and compared them to the open market. They found there was a net benefit of $13.35 per tonne on wheat sold through the board.
I then compared that to what I had sold, which was relatively easy. I just went to my Wheat Board permit book, multiplied the numbers by the benefit, and then put that down as a percentage of the net farm income. It resulted in a 17.4 per cent increase in my net farm income. That is why I am here today.
I am here to tell you that the added 17.4 per cent in my net farm income is extremely important to me and it should be to you as legislators sitting in the Senate. It should be important to all Canadians because that money did not come from Canadians. It did not come from the Government of Canada. It came from an export market and it was brought into the country. If we lost that money, obviously it would have to come from somewhere or I would have that much less money to spend.
Some of the earlier presenters talked about what things are like in the U.S. I was at my parents' home in town the other day, watching a program on cable television all about the American farmers in the Red River Valley. About 50 per cent of them will have trouble getting operating credit from their bankers this year. The Red River Valley is a perfect place to look for comparisons because we, too, farm the same valley. However, we have something they do not have and that is the Wheat Board. Obviously it is a major benefit to us. I do have the numbers here and I have enough copies to pass them around to you.
I did not want to be the one to come here and say that I am against change, that we should scrap the bill and to ask what was wrong with the way the board was operating. Sure, I may not like some of the appointments that are made, but when it comes down to it, this is one of the world's largest exporters of wheat. Their biggest competitor, Cargill, is one of the world's largest exporters of wheat. We have been told the board operates unlike any other and that we must change it; it is not the same as some board of directors here or there.
Cargill is not also totally different from other companies. If you want to find out what is in Cargill's books, though, it is totally impossible.
I did not come here to say scrap the bill, but everybody else seems to be saying that, so maybe it is not such a bad thing to scrap it. Personally I do not think it will happen. We will see some change in the way farmers are elected to the board. Then let us do that. Why are we arguing about inclusion and exclusion and a contingency fund? Let us elect the board. They will decide whether we need a contingency fund. They will decide what gets included. If there are enough farmers there to vote to include something, we will include it. If there are enough farmers to get rid of wheat from the board, we will get rid of wheat from the board.
It is plain and simple. Why are we spending all this energy arguing over things that we can settle by doing just one or two things? We can either leave the board the way it is now -- and it is operating just fine; they are returning a heck of a pile to my pocket -- or we can make the changes to the board of the directors.
We have to keep the government guarantee; there is no question. We will have five appointed government directors, from what I have heard, but let us keep the government guarantee. Let us elect that board of directors and they can make changes to the Wheat Board. Why are we looking at legislation and spending time arguing with each other about how it should or should not be?
Mr. Mroz: Honourable senators, Bill C-4 revokes the federal government guarantees on Canadian Wheat Board initial price adjustments. The setting up of a contingency fund to replace this government guarantee only adds to farmers' costs and puts farmers at greater risk during global trade wars, similar to those which devastated Western Canadian agriculture from 1985 until the early 1990s.
The United States Government and the European Union still have and will continue to use taxpayer-funded export subsidies. The government guarantee of Canadian Wheat Board prices borrowings, operations and credit sales are vital to the Canadian Wheat Board and will save farmers millions of dollars annually.
The Canadian Wheat Board's partnership with the federal government earns farmers over $60 million annually. This savings more than covers the total cost of operating the Canadian Wheat Board each year in administration costs. Each year the Canadian Wheat Board borrows about $6 billion that it uses to pay farmers for their wheat while it waits for payments from the customers. To put this into perspective, consider that the entire Canadian money market is worth about $30 billion to $35 billion. The Canadian Wheat Board's $2 billion worth of borrowings on New York money markets make it the second biggest Canadian borrower behind only the federal government and it borrows at federal government rates.
The initial price adjustments have not incurred a deficit in the Canadian Wheat Board's 61-year history. Based on this performance, there is very little risk to the Government of Canada, therefore Bill C-4 should not amend this section of the Canadian Wheat Board Act. As well, the section of Bill C-4 which allows for the creation of a contingency fund should be deleted.
On the issue of governance, as far as elections go, the only way to elect directors who run for the Canadian Wheat Board should be through a delegate system. I believe that those directors would make the right decisions as far as changes to the Wheat Board if any are required. I also believe trying to make the changes here ahead of time, before these farmers are elected, is not the right way to do things.
I support the issue of the inclusion clause. In a democratic way, it would be the only way for farmers to decide which crops should be marketed through the Canadian Wheat Board. The Canadian Wheat Board is their marketing agency, and those producers elected should have the right, when representing farmers properly, to use the inclusion clause to include crops if they so wish. Without that inclusion clause, I do not think this legislation would provide a fair way to go about making changes.
Senator Whelan: A comment to the representative from Swan River, I visited there in 1974 and I have been famous ever since for my green Stetson which I received there. I like to brag about how well I know my country Canada.
Five members of your panel are supporting the principle of the Canadian Wheat Board. Of course, I have always been a strong supporter that farmers should have some say or should elect someone to have a say for them in supporting their product in the marketplace.
Your comments have been refreshing. You are individuals, explaining your own thoughts. To the young man who wants the free market to look after itself, that may be commendable, too. You said that the head of the Wheat Board should at least have a degree from an agriculture college. I have never had one but I do not think I have done too badly for Canada.
Ms Edie: That was my comment. We feel that position is very important and the person should have some agricultural knowledge. Today a doctor would not be allowed to practise without his degree in medicine. Within education today, people are required to have university degrees. Why not expect a knowledge of agriculture from the person who holds this important position. That is why that statement was made.
Senator Whelan: I agree. But Lorne Hehn, who is head of the Canadian Wheat Board, is a farmer. I knew Forrest Hetland, who was a farmer, et cetera. He went all over the world representing the Canadian Wheat Board, as have other people there who have had agriculture backgrounds. I do not want to downgrade agriculture degrees. I was very lucky as a first-year Minister of Agriculture that every one of my officials were agriculture college graduates. Some of them had their Ph.D. from Michigan or Wisconsin, but they knew agriculture. They were not from Treasury Board. They were not from Finance. They loved agriculture.
When I first went to the FAO, the Food and Agriculture Organization of the United Nations, I was the only Minister of Agriculture who had an agriculture background out of 131 representatives present.
Mr. Sigurdson: The last time I remember Senator Whelan coming to Swan River, he was in a parade and it rained about more than two inches that day. He was thoroughly soaked. He knows the kind of downpours we can get in Swan River.
About giving the farmers more power, I see that farmers with the current system have a lot of power. We have had a system which has operated between co-operatives. It has been an alliance with the federal government. As I see it, that alliance is now being broken down by deregulation of transportation, by the loss of the WGTA, by rail line abandonment and so on. In the new WTO talks, the government may have already given up things like differential pricing and state trading agencies.
Simply putting people on a board does not give them power. The trade deals, the government policies on transportation, those are the things that will affect the board, not simply putting people on the board. I believe farmers really could be put on that board and take the fall for the board's failure.
The Chairman: Mr. Sigurdson, I understood you suggesting we kill the bill.
Mr. Sigurdson: Yes. It is like I said, organizations have made presentations asking for a major overhaul of this legislation, such as the advisory committee to the Canadian Wheat Board. The government simply views those who ask for changes as supporters of the legislation and they go on their merry way. They make no changes.
I do not want to be classified as a supporter of the legislation by asking for changes to it. That is the game the government is being playing. I do not see support in the farm community for this bill. As I pointed out, at the advisory committee meetings, at the Grain Days meetings, farmers voted overwhelmingly to withdraw the bill, as has been suggested by groups such as the National Farmers' Union and the advisory committee.
Senator Spivak: I share the concern of those who are worried about this bill, particularly in the areas that you have mentioned, Mr. Sigurdson, being the World Trade Organization agreements, the guarantees, and the divisiveness that might result in the election of directors when there is a minority who are opposed to the Wheat Board and its current operation. They want dual marketing against those who want to support the Wheat Board.
The chances of killing this bill are probably zero -- not probably; they are zero. We are looking at how we can improve it. The majority of people here support the Wheat Board, including the senators, but we may have different opinions as to how that operation could be improved.
What particular elements do you see that could save this piece of legislation or could mitigate the effects of what is happening. You have mentioned the contingency fund, and I agree the contingency is just a terrible thing.
Mr. Sigurdson: The major thrust of this legislation, in my view, contains bad effects. I outlined them in my brief. One is the loss of Crown agency status. If the Wheat Board can no longer go to the government or if the government is cutting the board loose from government, then the board, when it makes sales, can no longer claim the support of the Government of Canada.
There may be ways to cover that. You could probably elect delegates and have the minister appoint a board of directors from the delegates and then it would still remain a Crown corporation under those terms.
I believe the cash-buying provisions do not need to be there. They are not supported by anyone whom I have heard here today. On the contingency fund, there will be an uproar in rural Canada when farmers find that cost is being deducted from their income.
On inclusion and exclusion, I really do not feel that is the big deal it has been blown up to be. With the present direction of government policy toward deregulation, privatization and free trade and NAFTA, we would have to provide compensation to multi-national grain traders if we were to include grain under the board. So I do not think grain will be included under the board, even though I would see that as a good thing personally. I see the exclusion provisions as being very harmful.
You could remove any kind, class or quality of grain out of the board. It would not require a vote under this legislation. So you could take unregistered wheats, for instance, and not have them under board jurisdictions. So you would have a dual market set-up in that situation.
Pooling periods of less than a year will destroy confidence in the whole concept of pooling. If you have quarterly pools, then farmers do not deliver to the board because they think the prices may be low in that quarter. They will try to jump into another pooling. I believe pooling should remain on an annual basis.
Those are the major concerns. I do not see the need for negotiable producer certificates. I think the board could issue advances on the final payment and get money out to farmers in a quicker fashion in that way.
I do not know if you can tackle all those areas and I do not think you can claim to have fixed a piece of this legislation by fixing one part of it.
Mr. Baker: I did not make myself clear when I was talking about the elected board of directors, that they can choose to include a grain in the Wheat Board. Obviously, I should have said they can decide to hold a plebiscite so the farmers will decide. That is a major decision to make and the farmers can do that.
On this legislation, why do we need to decide anything now as far as a contingency fund? I agree it is totally unnecessary. I do not even know why it was put in there. Was it designed to start this argument? We are arguing unnecessarily. We should concentrate on something that will be productive. If we do have to go the route of electing a board of directors or the delegate system, let us figure out the best way to do that and let us get it done. Give the directors some time to get used to operating under their new function at the Wheat Board and then they can start making the changes that farmers may want.
Mr. Edie: For information at the table, today Sask Pool bought all of the shares of CanAmera. Also, Ontario producers have asked for cash in their negotiations, which is rather interesting. We are sitting here at the table talking about what we have been doing for the last 30 years in Canada. The two women, it is rather interesting, are also saying how difficult it is on the farm with the economy at the present time.
I am saying let us look at the economy. Has it worked well? I disagree with this gentleman to my left very much. My books certainly are different than his in the wheat marketing process that we have at the present time. We must have changes. It has been pointed out that the Canadian Wheat Board has served us well. These changes will be made in final analysis by the minister. We will be the recipients of the decisions, as we have been in the past.
While I am speaking, I remember Mr. Whelan as Minister of Agriculture. He was one of our best, but I also remember that he put canola crushing plants in Ontario when we wanted them in Western Canada. That is just canola.
Senator Whelan: I remember the Manitoba co-operative. I wrote them a letter because we did not put one penny in that crushing plant. We helped the united co-operatives build the grain elevator, but we never put a penny in the crushing plant in Windsor. That was built by Unilever and Maple Leaf at the time. Now it belongs to Archie Daniel Midland. His prime minister sold the grain elevator to Archie Daniel Midland, too.
The Chairman: We can all bring numbers. For point of interest, the Saskatchewan rural municipalities did a comparison on an 1,100 acre farm in Saskatchewan producing wheat and durum, with 1,100 acre farm in North Dakota producing wheat and durum. The net benefit to the North Dakota farmer was $40,000 more than the Canadian. That was done by the SARM of Saskatchewan. If we can get those kinds of prices on wheat -- I live right next to the border -- I will be very satisfied.
The Chairman: There may be flood problems down in Grand Forks.
Senator Stratton, if historically your return on your investment since 1972 has been and is 3 per cent, would you not want to try something else to improve that bottom line?
Mr. Edie: That is right.
Senator Stratton: That is fundamentally my question. If we have not gone anywhere in 25 or 26 years, surely it is time to try something else.
Mr. Sigurdson: It is ironic that people are suggesting we try something different. Organizations such as the Western Wheat Growers were advocating the elimination of the Western Grain Transportation Act, for example. On my farm, with the pooling changes and so on,, it now costs me an additional 85 to 95 cents per bushel to ship out my grain. In many years, that is my whole net income. So trying something different is good if it is beneficial and not detrimental.
I would imagine that SARM study would include a lot of government money in the North Dakota figures. I understand with the new farm program in the United States, when a farmer puts his crop in the ground he gets about $30 an acre in government support just to do that. I do not think it is meaningful to compare some of these things. There is a huge domestic U.S. market that consumes about 50 per cent of the product. If you had some kind of an open border between Canada and the U.S., it would simply cause the price to drop down; there really would be no advantage. The very large trans-nationals of this world would be the ones doing the trading, the companies like ADM and ConAgra who are now setting up in Canada, anticipating that to happen in the future.
Senator Stratton: Sask Pool is doing the same.
Mr. Sigurdson: Sask Pool is no longer a co-operative. It is now a private company. Yes, that is true, they are doing the same.
Mr. Baker: About the numbers from my farm, I used the study that is readily available. You can pick it up and you can look at it. Then I applied my numbers. I will give them to you. If you want to check my books, that is not a problem. You can come to my place and I would be more than happy to open my books. That is all I was saying about my numbers.
The numbers you are using include many program benefits received by U.S. farmers which we do not have. I said that we have something here that the U.S. farmers do not have, and it is the Canadian Wheat Board, and it is a benefit to us.
We also talked about the votes and the weighted vote issue. I was kind of unsure about weighted votes. Were we talking about the number of acres you have produced or the number of acres you have that makes you a successful farmer? Or is it the debt-equity ratio on your farm that makes you successful?
This argument about weighted votes could become just that -- a big argument. You are a producer; you get a vote.
Senator Spivak: It seems to me that, in Manitoba particularly, changes in the rail transportation are having more of an impact than anything that could be done to change the Wheat Board. There has been tremendous impact. I wondered whether anybody had made a presentation to the Estey commission?
Mr. Sigurdson: I do not know how to do that, for one thing. I guess the whole process will not be a public one. You can simply send a written presentation to Mr. Estey. I understand that he has had all the meetings he wants with farm groups.
Senator Spivak: I did not realize that.
Mr. Sigurdson: It is a very serious issue. I live on a branch line off of which there are produced something like 15 million bushels of grain. If we start trucking that grain out of the Swan River Valley we will pound out the roads and use tremendous amount of fossil fuels. None of this is making any sense.
Mr. Mroz: Yes, I would make a presentation to Mr. Estey if he would come out to Western Canada and give us the opportunity. I came to this hearing. I came to the Bill C-72 hearings. I would come to see Mr. Estey if he would come out to listen to us. I cannot afford to go to Ottawa, but if he would come out here, yes, I would see him.
As far as raising our net income, it is ironic to see that the industry, the grain commodity exchange, and everyone is here, and all they are doing is complaining about the inclusion clause. That tells me that the Wheat Board, if it had a chance and if farmers wanted it, would give farmers the right to decide to include a crop under their jurisdiction, to be sold through the Wheat Board. Possibly they could get more money selling these crops to the industry.
I think industry is a little worried that farmers might make more money and that the industry might lose some money. Possibly that is one way for us to increase our net profits. Whatever you do, do not take out that inclusion clause because then we have no hope of standing up to these multi-nationals and these processors.
You can see them all lined up here. Every one of them is paid to write speeches. Every one is paid to represent somebody. It all comes out of my canola cheque and my flax cheque and my oats cheque. I have not got time to pay for all these people. Let us get rid of them. Let the Wheat Board sell my grain. I will have less administration costs. They will borrow money and pay for the administration charges. All these people are worried about their jobs and about whether I, as a farmer, will possibly charge them an extra dime per bushel and it will come out of their net return. I think that might work.
Senator Spivak: They are not getting a 3 per cent return on their investment.
The Chairman: Thank you all for appearing today. To this point we have heard 92 individual presentations from farmers. We have heard from 37 organizations and the three Ministers of Agriculture. It may not be an easy job to bring all of these different ideas to conclusion, but we certainly have listened.
The committee adjourned.