Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 13 - Evidence - Meeting of December 12, 2006
OTTAWA, Tuesday, December 12, 2006
The Standing Senate Committee on Agriculture and Forestry met this day at 7:02 p.m. to study the present state and future of agriculture and forestry in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Good evening, honourable senators and witnesses, and welcome to all who are watching our Standing Senate Committee on Agriculture and Forestry on television.
Tonight we have with us representatives from the Canadian Wheat Board — President and Chief Executive Officer Adrian Measner, and Allen Oberg who was elected last week as one of the 10 elected members of the board of directors. He comes from Alberta.
Canadians will have heard and read a lot about the Wheat Board in recent weeks. We thank you for taking time to come back here to Ottawa and appear before our committee on an issue that is of critical importance to our farm community in Western Canada.
For the last 71 years, the Wheat Board has been the single-desk seller of wheat, durum and barley for producers in the West. Annually, it sells roughly 22 to 24 million tonnes of wheat and barley domestically, and to 70 countries around the world.
As we all know, the world wheat market is highly competitive and dominated by a few large grain companies that most often dictate market conditions. Because it sells their products, one group of farmers argue that the Wheat Board gives them real power in a market that usually lacks competition and leaves them with little today on the price of their products. However, another group would like to see a more flexible board to take advantage of opportunities in the open market. These differing views are at the heart of a very vigorous, current debate on the future of the Wheat Board.
Over the years, the board has gone through many changes. Today, it is controlled by a group of 15 directors, 10 of them being elected by farmers and five of them appointed by the federal government.
Tonight, we have about 1.5 hours with Mr. Measner and Mr. Oberg. As always, I urge committee members to keep their questions as brief as possible to allow our witnesses to respond fully so that everyone can contribute to what I know will be a lively discussion.
Gentlemen, the floor is yours.
Allen Oberg, Director, District 5, Canadian Wheat Board: It is a pleasure to be here this evening to meet with your committee. I run a cattle and grain operation with my brother, John, near Forestburg, Alberta. This past Sunday, I was re-elected for a second term to represent farmers in northeastern Alberta and northwestern Saskatchewan on the Canadian Wheat Board's board of directors. With me tonight is our President and CEO, Adrian Measner.
I would like to preface my remarks by saying that we are under an Order-in-Council which prohibits the organization from expending funds to advocate on behalf of a single-desk, so any remarks I make in that regard will be of a personal nature.
As I mentioned, I am recently off the campaign trail. I spent a good part of the fall personally speaking to between 200 and 300 farmers in my district about their concerns and opinions. I ran on a clearly stated platform of support for the Canadian Wheat Board's single-desk. The dominant issue, the issue that clearly distinguished me from the other candidates, was without a doubt the single-desk and, for farmers, the ultimate future for the whole organization.
I am also aware that this situation was not unique to my district. Regardless of where candidates were running — whether it was southern Alberta, northern Saskatchewan or western Manitoba — the key topic on everyone's mind was, indeed, the single-desk.
What does it mean when four or five candidates are elected on the single-desk platform and they receive over 60 per cent of the popular vote? It says to me that grain producers in Western Canada are sending a simple message. They are stating in the clearest possible terms that the single-desk has broad support. They are also stating that a majority of farmers prefer to sell their wheat and barley through a single agent.
The Conservative government believes it has a mandate based on the federal election results last January but, clearly, I feel this is not the case. Farmers in the Cyprus Hills-Grassland area voted in the last election for David Anderson, the Parliamentary Secretary to the Minister of Agriculture, but in that same geographical area in this recent election they voted overwhelmingly for Larry Hill, a strong advocate of the single-desk. There is an apparent contradiction there.
I intend to take the message farmers have given me into the meetings that I attend, into the strategy sessions at the board, and into every other discussion I have with my colleagues around the board of directors. The seven other directors who, like me, were elected on that platform will be doing the same. Therefore, I believe the government needs to understand that any president or CEO who is put in place to work with our board will have to do everything in his or her power to uphold, maintain and strengthen the marketing power of farmers. Refusal to do so will place that person directly at odds with the eight elected directors who support the single-desk and with the majority of Western Canadian farmers who have elected them.
At the Canadian Wheat Board, we currently have a president and CEO in whom we believe and who has devoted all his efforts to serving the majority views of farmers. He has been a model of integrity, whose wisdom and counsel we appreciate and value. This is not only the opinion held by the board of directors and farmers of Western Canada. In the past weeks, a series of letters have flowed into our Winnipeg office with testimonials from our customers here in Canada and throughout the world.
Allow me a moment to read a few quotes from some of the letters we have received:
From Warburtons Limited, a miller in the U.K.:
With our concern over the position of Adrian and the Board in general, we feel that we would ultimately be forced to look elsewhere in the world in order to confidently ensure a continued supply of high quality wheat into Warburtons.
From COFCO, the China Cereals Oilseeds and Foodstuffs Corporation, our highly successful partner in China of 46 years with whom we have done over $11 billion of business:
We hope a consistent leadership at the Canadian Wheat Board is retained for the sake of our mutual business interests.
Finally, from A.D. Plowman, Vice-President of Agro-Hall Ltd. in Montreal:
Mr. Measner has always been a most distinct, important and valuable asset to the CWB, in all facets of its operations, from the individual farmer, right through to the final, ultimate consumer — and to everyone and everything in between.
As a director, I have mixed emotions when I read these letters. On one hand, I feel extremely proud that the president and CEO I have supported is held in such high regard by the industry. On the other hand, I am very disappointed, both as a farmer and as a director, that we are about to lose him to this unfortunate battle between the farmer-elected board of directors and the Government of Canada.
I am disappointed also as a director because it is our responsibility as a board to provide good governance to the corporation and ensure it has the best possible leadership but, as a farmer, it disturbs me deeply that long-standing customers — both from the point of view of the quantities they buy and the premiums they are willing to pay — are about to start looking elsewhere for their grain because this government is playing politics with my grain marketing agent.
I can not afford to lose customers for my crops — not good customers, not customers who are willing to take product year after year. Mr. Measner's dismissal as president and CEO is bound to put these sales in jeopardy.
The same can be said for the elimination of the single-desk but you do not have to take my word for it. Take the word of the customers I have quoted above and take the word of Prima Ltd., an important customer in Southeast Asia that has bought over $1 million tonnes of wheat from Canada in the last 12 months. They also sent a letter that states:
We are more than happy to do business with the Canadian Wheat Board, despite our closer proximity to Australia. We have come to appreciate and value the single desk concept in Canada. We believe that with a single desk, as in the CWB, we will be able to cultivate and develop a special long-term relationship. This is important from a buyer's perspective. The CWB understands our needs and at the same time, has the ability to provide all grades of Canadian wheat to meet our requirements.
There have been many accusations that the CWB put out propaganda just to save its own skin, and that the whole debate is about the Canadian Wheat Board and not about farmers. The letters from which I quoted, which will be tabled with you tonight, clearly demonstrate that the elimination of the single-desk and Adrian's firing will be all about the loss of farmer control, the loss of farmer power and, ultimately, the loss of farmer returns. Farmers are the ones who stand to lose and we are also the ones who, accordingly, should have that final say and decision.
Thank you. I will you turn it over to Mr. Measner.
Adrian Measner, President and Chief Executive Officer, Canadian Wheat Board: I wish to express my gratitude to committee members for extending this invitation to the CWB.
The customers Mr. Oberg mentioned are people I have known and worked with for many years. I have built relationships with them one visit and one sale at a time. I have worked hard at this because I could see the importance of business partnerships built on trust, respect and integrity, and because I could see how important such relationships are for the farmers of Western Canada.
Building such relationships was always a part of my job that provided me with a great deal of satisfaction. So was improving the programs and services that we offer to farmers. During my tenure as president and CEO, I have worked closely with the board of directors and the staff to develop and offer services to farmers that enhanced their ability to manage their own price risk and deliveries. Farmers can now price off the commodity markets, off U.S. elevator prices, and they can lock in their prices in advance. They also have more control over deliveries than ever before, with programs like guaranteed delivery contracts and the delivery exchange contract that we are piloting this year in areas of Saskatchewan.
By focusing on these two priorities of improving services to farmers and strengthening customer relations, we are moving this industry forward. We were shifting the debate away from the old issues of ideology and politics and getting people to talk about how to further improve the system, how to streamline logistics, how to give farmers even more flexibility, and how to support and enhance value-added opportunities for farmers.
Unfortunately, the momentum and the energy that we were channelling into these types of positive initiatives are currently being put at risk by the old arguments that have been brought back to life, as if none of the reforms of the past 10 years had actually taken place.
The government's view of the CWB is stuck in 1996. Their CWB is still some kind of government agency with no elected farmer directors and no farmer oversight of everything from sales to finances. They refuse to see that farmers actually now run the organization, that they can look at all the sales. They refuse to see that farmers called in the Auditor General of Canada, that they gave her the mandate to look at how the organization was run, and that they acted on her recommendations.
They refuse to acknowledge that the farmers of Western Canada have the same rights as farmers in Ontario and in Quebec. The farmers in Ontario, through their elected representative on the Ontario Wheat Producers' Marketing Board, decided to eliminate their single-desk system of marketing. Prairie farmers, through their elected directors like Mr. Oberg, can do the same. Grain producers in Quebec have recently voted to institute a single-desk system for the marketing of wheat. In fact, the only course of action that would actually discriminate against the grain producers of Western Canada is if the government moved unilaterally without the board's consent.
The current government also refuses to talk about the options that farmers now have, about the flexibility it gives them to get spot prices, to lock prices in advance, and to get more of their money upfront.
Lastly, they continue to perpetuate myths about value-added processing in Western Canada, as if it was true that we were lagging behind the Americans and the rest of the country. The opposite, in fact, is true. The policies we have put in place and the fairness with which all processors are treated by the CWB have created an environment where value- added processing has experienced sustained growth.
The reform of 1998, which turned control of the organization over to the elected farmer directors, was a major milestone in the CWB's history. They put in motion a renewal that was both necessary and positive. Rather than setting the clock back a decade or more, the grain producers of Western Canada want to build on this renewal. They want to pursue the enhancements that have been initiated under the leadership of the farmer-elected directors.
Senator Gustafson: The last three years for farmers in Western Canada have probably been the toughest three years in history. The Americans right across the board have had the three best years in their history.
How much grain was the Wheat Board able to sell last year? We have piles of unsold durum wheat still on the ground. We hear that world market prices are supposed to be going up but we certainly do not see that. If you deliver two semi-loads of wheat, it will bring you exactly $3,200. You end up with $6,000-plus, but the rest is handling charges. It has become very difficult for farmers to grow wheat and make a living. How do you account for that?
Mr. Measner: First, the United States farmer has many subsidies from the government that Canadian farmers do not have. Mr. Oberg will probably want to comment further on that. That creates an unlevel playing field.
Senator Gustafson: They get that price right at the elevator.
Mr. Measner: Yes, they have guaranteed prices. They have a loan deficiency payment that ensures they get an adequate price, and the government makes up the difference if they do not.
We have tried to ensure that if farmers want to take advantage of those spot prices, they have the ability to do so. We put in place a daily price contract for wheat so they can fix their prices based on the U.S. cross-border price. If farmers want to take the risk of fixing a spot price — it will go up and down, sometimes above and sometimes below the pool price — they can do that. We give them the option. I go to farm meetings regularly, and I always hear that prices are higher across the border. Therefore, we have created a pricing option that allows them access to that price. It still maintains the strength of the single-desk but allows them to price on that basis. This has been a major step forward. This year, we put a limit of 500,000 tonnes on that program. This is the second year the program has been in place and it is subscribed to the maximum.
Senator Gustafson: It is only a pilot program.
Mr. Measner: It is building, but it was subscribed to the maximum the second last day of the program, and we will look at expanding it next year.
I want to comment on the durum. Durum is an important crop, and we have over 50 per cent of that export market on the durum side. Last year, Canada had over 8 million tonnes of durum alone, and the total international demand for durum is 7 million tonnes. We had more supplies in Canada than the whole international market. In discussions with the board of directors, we undertook a disciplined selling approach not to drive that price down to feed values because, if you try to push 8 million tonnes on a 7-million-tonne market with five or six other major competitors there, you will push that price down. We took a disciplined selling approach to try to keep that price up there, and we had a record year of exports on the durum side. We did over 4.2 million tonnes of durum exports.
This year, our goal is to market all of the durum wheat. There was carry-over last year, but our goal now is to take that carry-over in the production this year and market it all. It will be marketed at a higher price than last year.
The farm-elected board made some strategic decisions which allowed us to create as much value for farmers, and this year we will create additional value.
Senator Gustafson: The grains that have carried the farmers through the difficult times have been canola, mustard and peas — all off-board grains, most of which have been sold directly into the United States. They have saved the farmers. It has not been wheat, and it has not been durum because the price has not been there. I hear again and again farmers saying, ``I will not grow anything that the Wheat Board buys.''
The farmers want two things: choice and the same opportunities as the farmer in Ontario gets. The farmer in Ontario has a local market, a market into the North American market, into the Great Lakes market, through the United States, an international market, and they also have a lot of grain moving through CIDA, the Canadian International Development Agency.
Our farmers in the West are saying, ``Why should we be different? Why should we not have the same opportunities that an Ontario grain farmer has?''
Mr. Oberg: I can respond. To your first question about which crops give better returns to farmers, I am a farmer myself and I guess that varies from year to year.
Last year, there were many complaints about the price of canola and high basis levels. To say that one certain crop has carried the day as the income earner for farmers is too simplistic.
Senator Oliver: Do you grow durum?
Mr. Oberg: No, I grow spring wheat, barley, canola and peas.
Senator Gustafson: Do you grow wheat?
Mr. Oberg: Yes, wheat is one of our biggest crops. In fact, last year, wheat on a per-acre basis was probably my largest earner. That varies from year to year and from area to area.
The Wheat Board can earn a better price in premium markets for wheat, but it can not alter the entire wheat market; that is set by world supply and demand.
As to your question about Ontario, those producers have exactly the same opportunities as producers in Western Canada. We are certainly not being discriminated against out here. They chose several years ago to go away from a single-desk system. That was their decision as farmers. Clearly, farmers in Western Canada have the opportunity to do just the same. In fact, they had that just a week ago. In every district up for election, there were candidates purporting marketing choice or the open market. They have that same opportunity.
As an aside, producers in Quebec decided the other way. They chose a single-desk regime for marketing their volumes of wheat in that province.
Senator Callbeck: Mr. Oberg, you gave some testimonials in your presentation which indicated that all this uncertainty about the board is having a negative effect on sales. In other words, potential buyers are starting to look elsewhere. That is exactly what Ken Ritter, the chairman of the board, said when he was before the House of Commons Committee on Agriculture and Agri-Food:
The current uncertainty that hangs over the CWB is very negative to that reputation and we are beginning to suffer the consequences.
I want to ask you about something else he said, as follows:
As well, there is a need for an in-depth economic analysis of the consequences of having an open market for wheat.
The government appointed a task force in September 2006 on dual marketing, which they reported in October, I believe. However, there was no analysis of the impact of market choice. Do you know of any analysis that has been done? Has the government indicated any willingness to do this type of analysis?
Mr. Oberg: Probably the most notable study on the benefits of the single-desk was done by Richard Gray and Hartley Furtan out of the University of Saskatchewan. The numbers were over $200 million of extra premiums for the marketing of wheat and $57 million for barley. That is probably the most notable study that is out there.
With respect to the task force that was commissioned this fall, you are right. It did not come up with any in-depth analysis as to how a marketing choice system might work. Our problem with that, from the Wheat Board's perspective, is it would force the board to operate as a grain company. With very limited assets, the board would be put at a tremendous disadvantage with the players already in the trade and would be reliant on those players who would then be our competitors to execute sales. That was the weakness we saw in the task force. That is why we are saying the idea of a dual market, which the task force itself admitted, is not possible. You can either have a single-desk system, as we presently have, or the Wheat Board as a minor player or a small grain broker in the business. That is the choice farmers need to make.
Senator Callbeck: Do you think there is a need to analyze it further?
Mr. Oberg: Yes, I would welcome the opportunity and farmers would as well.
When you do economic studies, it is always difficult as a layperson to determine whether the material is relevant. The best method we have to go on is peer review. I can tell you that the Furtan and Schmidt studies had excellent peer reviews, and some of the others, the Carter and Loyn study for instance, did not fare so well in that department.
Senator Tkachuk: Mr. Oberg, you mentioned a minute ago what would happen if there was a choice in the marketplace. You talked about the consequences and one is that you would be just a small player in the system. What would be wrong with that?
Mr. Oberg: Depending on one's perspective, there might be nothing wrong with that.
Senator Tkachuk: I am talking about the farmer. What would be wrong with that?
Mr. Oberg: If you believe the open-market system is the way to go, that is something you would like. My concern is we are seeing a system where the grain trade is increasingly controlled by four or five major players in the world. Over 70 per cent of that business is controlled by those five players.
As a farmer, I would like to see an agency that can work and speak on my behalf, not only market my grain effectively, but counterbalance the increasing influence that not only the grain companies are acquiring but the railways have always had. It is not only on the marketing perspective, but in the area of counterbalancing that power where I see the Wheat Board as being important.
Senator Tkachuk: The Wheat Board's reason for being is to counterbalance, to provide competition to the other potential customers out there, but at the same time the other customers can not compete because you say farmers can only market through the Wheat Board. I do not understand that but perhaps you could help me out.
Mr. Oberg: The Wheat Board is not a buyer of farmers' grain. It sells grain on their behalf.
Senator Tkachuk: There is no choice to the wheat farmer; he must sell it to you. He has no choice.
Mr. Oberg: No. There are a number of choices within the Wheat Board. He can use the pooling option, and there are a number of options that Mr. Measner mentioned. He can price off Chicago, off U.S. elevator prices, and all those options virtually mimic an open market. Really, the situation farmers have today is the best of both worlds. To me as a producer, that is a choice I like to have.
Senator Tkachuk: Let us talk about that for a minute. You mentioned in your election that you won with 60 per cent of the vote; 40 per cent of the vote was opposed to you. You thought the main reason the 60 per cent voted for you was because you advocated a single-desk system, as I understand.
Mr. Oberg: That is right.
Senator Tkachuk: Obviously the 40 per cent who did not vote for you voted for the opposite, which is choice in the marketplace. Why should the rights of 40 per cent be sacrificed to meet the needs of 60 per cent? Why should their rights be sacrificed, as producers in the marketplace?
We live in a free country. If I am marketing a widget, a product, and I do not want to market with you, your logic would lead me to believe that 40 per cent of the people do not want to market with you. That is a substantial amount of people. You are saying in this country we should force that 40 per cent so the 60 per cent could be happy.
Mr. Oberg: The rights of the majority are one of the primary concerns in any democracy but I represent all the farmers, not only the ones who voted for me but all the members in my district. The problem with providing choice for those 40 per cent that you are talking about is that, as I mentioned earlier, the Wheat Board would cease to be a choice for the 60 per cent who wanted it, because it would have a difficult time surviving in that open-market environment.
Senator Tkachuk: Let us put that aside. I do not buy that. If you are as good as you say you are, then people who wish to continue to market through a single-desk system I believe will continue to do so. A large percentage of the grain, some would say 80 per cent, is grown by 20 per cent of the farmers, so distortion in the actual voting is also a bit of a problem. Here in the Senate, we have always talked about minority rights being very important. As a matter of fact, a lot of the senators on both sides say that is the basic reason for our existence. The first thing we throw out is the fact that how we treat minorities is a very important thing.
Here you are saying that the group who did not vote for you and obviously voted for a dual-marketing system have no rights whatsoever, unless they decide not to grow wheat or barley, which I think over the years many farmers have decided not to do.
Mr. Oberg: If you look at some of the changes the Wheat Board has made since 1998, and they are considerable, there is nothing status quo about the Wheat Board. If you look at all the options that, as I said, virtually try to mimic the open market, providing that pricing flexibility for those producers is what we have done to address the concerns of the minority you talked about.
Senator Mercer: I really appreciate your being here. I know these have been trying times for both of you and other members of the Canadian Wheat Board.
I apologize in advance. I tend to over-politicize things. My colleagues will jump in and say that is true. Sixty per cent is a pretty impressive number that you were able to win by over this past weekend. As Mr. Oberg said, his job is not to represent just the 60 per cent who voted for him but to represent the 100 per cent of people in his district. I have a great deal of understanding and respect for that.
I am concerned, though, that you are spending an inordinate amount of time coming to talk to us, and last week to the Commons committee, about the governance of the Wheat Board and how we market grain in this country to the world, when you are supposed to be somewhere else. Where were you scheduled to be tonight?
Mr. Measner: Last week I was scheduled to be in Japan.
Senator Mercer: Last week you were scheduled to be in Japan to do what?
Mr. Measner: Talk to customers.
Senator Mercer: That was to market wheat — is that right?
Mr. Measner: That is right.
Senator Mercer: In your absence was anyone there?
Mr. Measner: Yes, the chief operating officer of the Canadian Wheat Board went.
Senator Mercer: However, it did not have the weight of the CEO of the Wheat Board; rather, your second in command was doing something.
Mr. Measner: Japan is a very important market for us and for farmers so we give it a lot of attention. I normally travel there once a year in the fall but was not able to attend this year.
Senator Mercer: I congratulate you for the support you received over the weekend, but I also recognize there is a minority that is opposed to a single-desk. Have you made any special efforts to accommodate those people to ensure you are servicing them better in their minds than you may have in the past?
Mr. Measner: Yes. We have put a lot of effort into that. Since the new board took over in 1998, we have been in the process of change in the organization and trying to listen to all farmers.
It is an economic issue and I understand the concept. Farmers will not support the single-desk 100 per cent. It is an economic interest that farmers voted to maintain. It is the farmers' decision and we need to respect that, as I do.
We tried to accommodate the wishes of the broader group of farmers by introducing new pricing options. They do not have just a pooling option. I mentioned the daily price contract based on U.S. elevator prices. That is a powerful pricing option farmers like.
We have a fixed-price contract and a basis-price contract which fluctuates daily with the futures markets in the U.S. We had 2.2 million tonnes of grain signed up on the fixed-price contract this year. They went in the fixed-price contract.
We had 800,000 tonnes signed on the basis contract. They pick the day they want a price at, based on the fluctuations in the U.S. futures market. We had half a million tonnes in the daily price contract. Those had over 3 million tonnes of wheat.
We have early payment options so farmers can get a higher cash flow earlier in the year. They lock in 80 per cent, 90 per cent or 100 per cent of the expected final pool return.
There are variations that allow farmers to better manage their business.
Senator Mercer: There are three options if I heard you correctly?
Mr. Measner: Yes. Those are three major options.
Senator Mercer: General options.
Mr. Measner: Yes.
Senator Mercer: Who does better economically? Who makes the most money?
Mr. Measner: It depends on the pricing decision. That is the difficult thing. Some farmers will do better if they pick a good time to price. Those prices fluctuate on a regular basis. Some farmers will do worse and the pooling option will do better.
Farmers make that decision every year based on their judgment in terms of where they see the market going and whether they think they can benefit.
I do not think there is an answer. There is not one group of farmers that always does better or one group that does worse. It will fluctuate. It depends when they make their pricing decisions.
Senator Mercer: When did Ontario move away from the single-desk?
Mr. Measner: They went through a slow process of opening it up. They had an exemption for 100,000 tonnes, then they moved it up to 150,000, and they continued to move it up. That started six or seven years ago. I am going by memory.
Senator Mercer: How long did it take Quebec to go the other way?
Mr. Measner: They voted about two years ago to go back to the single-desk. It is a recent move by Quebec.
Senator Mitchell: After how long?
Mr. Measner: They did not have a single-desk before that; they were marketing through an open market.
Senator Mercer: They are new converts to the single-desk concept?
Mr. Measner: Yes.
Senator Mercer: I am still miffed by why we are in this situation in the first place. What percentage of our grain grown in one year do we market in one year? How much reserve do we have to market in subsequent years? I am a poor boy from Eastern Canada. I do not understand the massive amounts of grain. I think in bushels of apples.
Mr. Measner: Our goal is to market all the grain that farmers sign up in any given year. That is not always achievable because there is the durum market where there is too much supply for that marketplace.
Normally, we would be taking 100 per cent of the wheat signed up. Last year we took about 95 per cent service. Our goal this year is 100 per cent. In the last couple of years, we would have taken 100 per cent of the wheat.
Last year we took 70 per cent of the durum because there was a gigantic crop. This year we plan on 100 per cent. It will fluctuate year by year. Most years we will market almost all grain. Our goal is to market it all. It depends on the marketplace and the logistics we have to move the crop.
Senator Segal: Welcome, Mr. Measner and Mr. Oberg. I have some regard for people who are elected. The 60-per- cent margin is impressive.
Of all the people around the table, I probably have the least agricultural experience, except I am an end-user. Beyond that, I do not have formal agricultural training or experience on the farm. I come at this differently than my colleagues who have benefited from that experience.
There is an elephant in the room that people do not want to discuss. The elephant I remember is people being prosecuted, and rallies across the Prairies for people being prosecuted, because they did not want to play by the rules or the law. I am not critical of the time frame.
My sense is that the animus that developed between those who wanted freedom to market on their own, and not through the Wheat Board, and those who believed in the other system, as you clearly do with immense sincerity and integrity, is that people believed there should be some choice.
I do not question how hard the Wheat Board has worked to produce different options for people who hold permit books. Is it beyond our ken to understand that some farmers believe in their right to choose, and that they can not imagine why we would have a system where they do not have the freedom to make that choice? Does that cause you any difficulty or sense of discomfort?
Mr. Measner: First, the talk about farmers going to jail. That happened around 10 years ago.
Senator Segal: I remember that.
Mr. Measner: Prior to the new board of directors taking over. It is important to put that in context. It was not because they moved grain across the border. There were some Customs charges. It was not under the Canadian Wheat Board Act, it was under the Customs Act. They could have paid the fines. They chose to spend time in jail instead.
The emotions are strong. I do not disagree. My job is to work for farmers. I work for the board of directors. In 1998, the organization was turned over to farmers so they could make the decision whether to market on the single-desk or open market, and to get decisions in the hands of the people with economic interests.
Since that time, we have executed the direction of the board of directors. Every two years, five of those directors are elected, so new issues are coming to the table. The board adjusts with the elected farmers and puts in programs and activities that respond to everyone's concerns.
It is an economic issue. It is an issue on which farmers need to give direction. I think we are responding appropriately. Up until the last few months, it was not the emotional debate of 10 years ago. Farmers respected the fact they were running the organization and making the decisions. That was positive for Western Canadian agriculture.
In the last six months, the emotional debate has been back on the table.
Senator Segal: Correct me if I am being unfair. Have we not seen resolutions from farm organizations across the Prairies for 10 years calling for choice and freedom? Is that something I read and no one else has read? Am I hallucinating?
Mr. Oberg: That is true. There are resolutions from farm organizations that want choice. On the other side, I can name organizations that are very strong supporters of the single-desk.
On the broader question, as Mr. Measner mentioned, the pricing options we offer have done a lot to respond to that criticism.
The issue for you with the Wheat Board is individual freedom. I am not going to argue. The Wheat Board does infringe on individual freedom. A marketing board is even more restrictive on individual freedoms.
I have to look at what the majority of producers tell me. They say it is worthwhile to give up a little individual freedom for the common good or benefit of the collective.
James Chatenay holds his views strongly. For him, the issue is not the best price. It is an issue of individual freedom. When farmers believe in that strongly enough, some are willing to go to jail.
Senator Segal: Could I ask a follow-up question? One thing has always struck me about the federal government and government or non-government agencies, as the case may be, and I understand you are in that other category because of the nature of the board of directors. Sometimes, perhaps more intensely at the federal level, one gets an institutional commitment to the means by which something is achieved. We have had great debates in Parliament about the Canada Health Act. The Canada Health Act is not the goal of public health policy, but the means by which we hope to ensure that people get great health care and access based on their medical need, and that they live healthy and independent lives. It might be that sometimes institutions have to change.
Are you comfortable that we are getting caught up in a debate about the institution and the framework and are becoming a little disconnected from the outcomes and the ends for the farmer, the farm family and the choices they face? It is fair for you to be critical of those who have engaged at various levels by being critical of the board. That is a fair and legitimate comment. However, I stand back and wonder if there is not a farmer who will say he farms today the way he farmed 20 years ago. There are few organizations in our country that operate precisely the same way or in the same framework of 20 years ago. The world has changed.
When I read letters from wholesale clients saying they are happy with the single-desk function, the first question that occurs to me is whether it is good for them or good for us. It might be great for them but I am not 100 per cent sure it is always necessarily good for us. Mr. Oberg, what do you say to the electorate in your district about the kind of fundamental change the CWB needs? Perhaps you are of the view it does not need a fundamental change because it is doing a good job.
Mr. Oberg: We do not farm like the way we did 20 years ago but the Wheat Board is not what it was 20 years ago. The important change to the Wheat Board occurred back in 1998 when it was turned over to farmers. We had an elected board of directors of 10 and five appointees.
The crux of the debate, our reason for appearing tonight and all the discussion that is occurring, comes down to the fact we are seeing a reversal of that today. We are almost going back to the old commissioner system when it was run strictly by appointed commissioners. That is at stake which is why emotions are running high. A question needs to be asked — is this a farmer-controlled organization as was intended in 1998 or not? That is the issue at stake.
Senator Segal: What do I say to the independent farmer who says to me, the uninitiated, ``If you loved Joseph Stalin, you will love the Wheat Board.'' What do I say?
Mr. Oberg: I would suggest that he vote in the Canadian Wheat Board elections. In every election since 1998, there have been candidates from one end of the spectrum to the other. There has been no shortage of views and different people to vote for. Although the Canadian Wheat Board's democracy might be improved upon, it is certainly a definite improvement over the old commissioner system. It is farmers' money and farmers who use the board. Certainly, they are the ones who should control it and make the decisions. That is the advice I would give to him.
Mr. Measner: I have two comments. You are being unfair to farmers to say we have not changed. The new farmer- elected board has taken this organization on a massive change. The organization is totally different from what it was 10 years ago. Farmers should be proud of the directors they elected to the board and the changes they made because it has made us a stronger and better organization. Ultimately, farmers are controlling that, which is the important part. It is not the institution but the farmers wishes that we respond to and will continue to do so.
Important from the customer perspective are service and quality. They want to ensure they are buying products that add value to their organization so that they benefit from the products they are buying. We survey our customers regularly and brand the products worldwide that are grown by Western Canadian farmers. Our last survey indicated that about 90 per cent of the customers believed our products were as good as or better than the competition and that 80 per cent to 95 per cent believed our service was as good as or better than the competition. We received top marks on that side and farmers should be proud of that. I am proud of an organization which can provide that kind of service. We have a different organization than they have south of the border, but we have been successful, in particular for farmers.
Senator Peterson: The Canadian Wheat Board has moved along. It has close to a government-to-government or country-to-country relationship in selling our product. Countries like China and India, who buy a lot, are drawn to it by the quality of the product and the security of supply. On the sale structure, there is an initial payment and a final payment. If there is a shortfall, it is my understanding that the Wheat Board takes the hit and not the farmer.
Let us suppose that tomorrow there is no Wheat Board, it is gone. What would the scenario look like? What would the farmer do to sell his product?
Mr. Measner: Without the single-desk in every other country with an open market, that grain is marketed by the four or five large companies Mr. Oberg spoke about earlier. They dominate that international trade. The farmer would have to deliver to one of those companies in the country and they would market his grain for him. It will not be marketed as a Canadian product but as a commodity. It would be part of their larger international network which markets grain from countries around the world. We would take a different perspective. Farmers or farmers' organizations would not market the product but rather some large international players would market their products. Farmers would compete against one another because the same product would be marketed into these same countries by different players. Currently, the single-desk controls that marketing so we can extract premiums from certain marketplaces. We use the power of that single-desk system of one seller and extract as much value as we can for farmers. In that new environment, there would be four or five large companies selling the same product to those buyers which would erode the overall price structure that would normally be in place.
In such a scenario, farmers would deal with those companies rather than with their own marketing agency.
Senator Peterson: In futures markets, would they have the same structure that you talked about earlier in choices of farmers? Would they basically set the price themselves according to what they are prepared to pay?
Mr. Measner: With other crops that are not marketed under the single-desk system and in other countries, they would receive the price they are given when they drive up to the elevator with their product. The price would be whatever the company is offering on any given day. Farmers would not have the options we have provided. Basically, one price would be offered and they would have to accept that price or take their product elsewhere.
Senator Mitchell: Mr. Measner, I am sorry about the way you have been treated. It has been thoughtless and unbecoming, given the service that you provided farmers and Canadians. I am sure it is difficult for your family and I want you to know that many of us are sorry.
If this is a farmer-controlled organization then, clearly, the minister does not have a right to step in and do what he has done to Mr. Measner. Has it not been the tradition that the board makes the recommendation as to who essentially makes the decision? Does it not make sense for the board to hire a CEO with whom they are comfortable?
Mr. Oberg: That has traditionally been the case in the past, although since 1998 we have only had two CEOs. Before that we had a chief commissioner. However, since then that has been the process. After consultation by the minister with the board, an extensive search was done by a professional firm before Mr. Measner was hired.
You are correct that we need a CEO who has the support of, and can work with, the board. That is the situation we are in now. Mr. Measner has the support of his staff as well as the board. It is making a number of us on the board uncomfortable that we may have a new CEO, as we do not know what will happen. That is creating uncertainty not only at the board, but also throughout the organization and for international customers. It is a very precarious situation and one that, for the good of everyone, needs to be settled.
Senator Mitchell: The minister can not fire the board so he fires Mr. Measner as the proxy. He is being fired for doing what his bosses, the board, tell him to do and he does it very well. It is a horrible situation to be in.
An issue that keeps coming up is the idea that farmers are somehow disadvantaged because the Canadian Wheat Board does not get them an adequate price. However, every study I have seen, and you have alluded to this, shows that they get better prices and make more money. On the other side, I hear anecdotal evidence from farmers who say, ``I could have driven my wheat to Portland and would have made $1 more.'' I have never seen concrete studies that say it is better. I would like to know whether you are aware of such studies.
Although the 40-per-cent minority is a minority, it is not as though it is being disadvantaged price wise; it is not as though its rights are being discarded. Yes, the 60 per cent are getting what they want, but everyone is getting a good price and probably a better price. Are there concrete studies that would defend the arguments from the other side of the table that somehow you can do better elsewhere?
Senator Tkachuk: I did not say that.
Senator Mitchell: No.
Senator Tkachuk: Ask the question in the right way.
Senator Mitchell: That is the argument people on that side of the argument often use.
Mr. Oberg: The studies most often quoted to illustrate that single-desk does not provide good returns are the Carter and Loynes studies. Those two studies were commissioned by the Government of Alberta. They did not receive good peer reviews and they did not have access to all the Canadian Wheat Board sales data. That is another weakness of those studies.
Senator Mitchell: I have heard farmers argue that the Wheat Board's costs are too high. Do you have evidence of how your costs compare to the costs of Cargill or ADM, Archer Daniels Midland?
Mr. Oberg: The administration costs of the Wheat Board are well known. They are $60 million per year.
Cargill is a private company so you will not learn those numbers. Producers must always keep in mind that there are administrative costs and costs of handling grain in the open system as well. I think the Wheat Board is sometimes overly criticized because our costs are transparent. On a cash ticket or grain cheque from the Canadian Wheat Board every cost is listed. That amount of detail and information is not on an open-market ticket.
Senator Mitchell: Of course, with the Canadian Wheat Board, if farmers are concerned about costs, they can vote for someone who will do something about them. With Cargill, what can you do?
Mr. Measner: We have done a lot in the last few years to ensure that we are as cost effective as possible. We did a corporate review of the Wheat Board and reduced our work force by 20 per cent. We looked at how to do things better and more effectively. We streamlined our top management, again trying to ensure we were as cost effective as possible for farmers. We restructured our benefit program and moved to cost sharing because those costs were increasing and we wanted to ensure that we have a viable, long-term organization. We have tried to respond as adequately as possible but we must still have a staff to run the business. I think we are very cost effective and that our costs are in line with any organization.
Senator Mahovlich: I am from Ontario where we have single-desk selling. Is that for convenience? I do not think our farmers are any wealthier than farmers in the West. Is it because we are more conveniently located to the Great Lakes and the open markets?
Mr. Measner: That is part of the reason. Ontario has a tremendous location advantage over Western Canadian farmers. We are servicing some of the same customers, but we have to move our product by rail to Thunder Bay and by laker to the St. Lawrence. Ontario farmers certainly have an advantage there, and there is no problem with that. They are also closely situated to the United States market. They grow a lot of soft wheat. They do not grow the quality wheat that is grown in Western Canada. They have chosen to focus more on yield than on quality. Most of the population of the country is in Eastern Canada and they have ready access to the mills there.
Someone mentioned the CIDA program. I have a problem with the fact that we do not get much of the CIDA program because our prices are higher than those in Ontario, but that is the nature of the business. Ontario has many advantages on that side. Ontario farmers have chosen not to go the branded route. We brand our products around the world. We have a quality product and extract premiums for that. Ontario has chosen a different route and I respect that. They have decided that is the best route for them and they must believe it is working at this time.
Senator Oliver: I am interested in numbers. I would like to return to the numbers cited by Senator Gustafson who is a farmer from Western Canada. He knows a bit about durum and grains. I would like you to respond to the figures he put on the table.
He said that the gross amount a farmer receives from the Wheat Board for two loads of grain is around $6,000, but that when you deduct the handling charges, you end up with $3,200. The farmer must deduct from that his input costs for fertilizer, seed and so on.
If that is the case, how can a farmer make a profit by selling durum wheat to the Wheat Board?
Mr. Oberg: I am not sure how big Senator Gustafson's truck is. That is the first thing I would like to know.
Senator Gustafson: It holds 1,100 bushels and I was speaking of two loads.
Mr. Oberg: I would be the first to admit that farming is a tough business. There are many commodities that earn money in some years and do not in others.
Senator Oliver: You made that point and I understand that. I am asking a specific question on these numbers. How can a farmer make a profit?
Mr. Oberg: It is being inferred that having a different marketing system would somehow drive up the price of wheat. I think that is a rather simplistic argument because the Wheat Board does not control the entire...
Senator Oliver: That is not what I am asking.
Let us assume the numbers are correct. From a gross cheque of $6,000, a farmer gets $3,200 after removing the handling charges. That does not include his input costs of seeds, fertilizer and so on.
If that is correct, how can a farmer who grows durum wheat make a profit selling his product to the Wheat Board?
Mr. Oberg: Those handling charges seem a bit high. As I said, there will be times when farmers are operating below the cost of production.
Senator Oliver: So they can not make a profit by selling their product to you?
Mr. Oberg: That is sometimes the case in commodities that are not handled by us as well.
Mr. Measner: I am not sure I agree with the approach being taken here. Farmers will make a decision each year in terms of whether or not they grow durum wheat, wheat, peas or whatnot.
Senator Oliver: Most grow fixed. Go ahead, please.
Mr. Measner: We have been seeing farmers grow more and more acres of durum wheat. It must be yielding a higher competition than the other wheat or they would not be growing it.
Last year we had 8 million tonnes of durum wheat because farmers wanted to grow that crop. They were getting a better return and I guess it was better than the options. It was more durum than the whole international market could handle.
They are making those decisions on a regular basis and they must decide durum wheat is a profitable crop or we would not see those kinds of acres or production in Western Canada. When they deliver into the primary system there are the handling costs at the primary elevator which are normally around $10 a tonne. They are also deducted the freight cost to move to port position which is normally around $35 to $40 a tonne. Those are the deductions the senator is talking about.
You see those deductions on CWB grains and not on non-CWB grains. They just give you one price and you do not see what is freight, handling and so on. You must decide if you like that price. We are trying to be transparent so farmers do see all the deductions on those grains. The other awkward thing is that the initial price is only part of the final payment. That is part of the reason why the payments are so low.
Senator Oliver: There is a cheque in addition to the $3,200 cheque?
Mr. Measner: Yes. You get your first payment at time of delivery and that is your initial price. We do adjustments through the year as more and more of the pool is sold. That is returned to the farmers and then we do an interim on the final payment when the pools are closed. They all continue to get payments from this organization. What they receive when they deliver into the pool is the initial payment at time of delivery.
Senator Oliver: When you answered this question the first time you told us about the excess durum grown last year. You said it will be sold this year and marketed at higher prices than last year. How do you know that now?
Mr. Measner: We do projections for farmers, and last year for the one quad grade, we achieved $195 a metric tonne. Our current pool return outlook for this year is $210 per metric tonne. That is $15 higher. I have given you our projection today. We are not through the crop year so that can change; however, normally, we are fairly reliable on the projection.
Senator Oliver: You do not think it will be lower?
Mr. Measner: No, the market has been fairly strong and I believe our return is reflective of what farmers will receive.
Senator Gustafson: Statistics are showing us that we are losing our young farmers because it is so difficult. Can you tell me why Americans are so opposed to the Canadian Wheat Board? What is causing this animosity against the Canadian Wheat Board? I, for one, believe that is costing us because I think they are more concerned about the political reality of what is happening than they are the economic value. When I have been down to Washington they say, ``Trade is a two-way street. You open the border to us on the different commodities and we will open the border to you.'' We know that historically the Americans have sold our cattle to the world. The minute the border closes down the cattle price plummets.
Why are Cargill, Archer Daniels Midland and other large companies building plants in Canada right on the U.S. border? That is happening in a big way.
Mr. Measner: On your first question — why the U.S. does not like the Canadian Wheat Board — in my view, it is a much different system in Canada. My perception is based on talking to customers. I think we do a better job in marketing, before and after sales service, and we have better products to sell to them.
Senator Gustafson: Do you not market through Cargill and ADM? A farmer could do the same thing.
Mr. Measner: I will get to that.
In one of the letters, they say they do not like buying American grain, they prefer to buy Canadian because they know what they will get. I hear that from a lot of customers.
We use a combination of accredited exporters and direct selling when selling our product. It is normally around 50 per cent, 60 per cent direct, and 40 per cent, 50 per cent through accredited exporters. We do that for a couple of reasons. One, it is very cost effective. We have two offices around the world that cost between $600,000 and $900,000 a year. We have a choice. We can put a network around the world with 40 or 50 offices or use the services of some of the international companies. We do that but we control the price. The most important thing is that we are controlling the price of that grain and where it is sold; it is the same way we do it on a direct basis. That is an important part to understand. We are not abandoning farmers here. We are saying, ``If you want to buy the product, it will be at this price.'' That is the only way we will sell it and then they will market it for us.
Certain markets in Iraq are high risk for marketing into. We will only do that through an accredited exporter or one of the large companies because of the politics in those markets. That is why we use accredited exporters. They are a good balance for farmers and we think it is a good cost-effective way to do the job for them.
Senator Gustafson: But as far as the farmers being able to sell their grain, they will be able to sell it.
Mr. Measner: They would sell it to those companies. It is a different system. That is what the U.S. farmers use. Ultimately, senator, I respect farmers' decisions on this. If they want to market through the single-desk, that is what we do. That is what they have chosen to do.
In terms of the plants across the border, I am not sure what you are referring to. There are a couple of malt and barley plants; those are the only ones I know that are across the border.
Senator Gustafson: For example, ADM owns 25 per cent of Agricore United. They are a big player. In fact, the canola goes right across the line to ADM in North Dakota. Many times they will pay a premium of a few dollars on canola plus they will truck it for nothing.
Mr. Measner: I can not speak for the canola market. If they are building south of the border, they must have a market.
I can only speak for CWB grains.
Senator Gustafson: You are aware that the Saskatchewan Wheat Pool put forth a bid to buy Agricore United, which is made up of Alberta Wheat Pool, Manitoba Wheat Pool, United Grain Growers, 24 per cent of ADM, and so on.
Have you had any dealings with the idea of taking Agricore International and the Wheat Pool and so on and combining that with the Wheat Board and making one strong Canadian company that could compete against these international players? They will be there whether or not there is a Wheat Board. They will be there. I contend that our Canadian farmers would sell Canadian if they were getting the same prices they are from ADM or any other international company.
Have you had any negotiations on that kind of idea?
Mr. Oberg: No. We have not had any negotiations in that respect. Our legislation as it currently sits would prohibit us from holding those types of assets.
The thing you must keep in mind is you talk about a Canadian company but would that company — and you already stated it is 24-per-cent owned by ADM — have enough financial capacity to do the marketing? I think not. I think they would need a U.S. partner such as an ADM to have a capacity to do that.
Senator Gustafson: But I see ADM being in there as an asset because they have access to the world market. A point in question was the Weyburn Inland Terminal. The farmers voted against selling 49 per cent to ADM. What happened? ADM came in, did a contract with one of the grain companies about 30 miles away, picked up that market and the farmers got nothing.
Mr. Measner: The Weyburn Inland Terminal is a very successful farmer-owned facility and they focus around CWB grains. That is an important part of the culture in Western Canada right now. There are a few farmer-owned facilities — very few — but they do focus on Canadian Wheat Board grain.
I think the point you are making is that these large companies are buying some of the facilities and we are losing our Canadian identity. Certainly, the Canadian Wheat Board is part of that Canadian identity. It markets Canadian products and brands them as Canadian products.
Senator Gustafson: I think there is an avenue here we should be investigating.
The Chairman: I should mention that, given the importance of having these extra questions, the discussions we were going to have vis-à-vis our rural poverty tour will be on Thursday morning so that those remaining may ask their questions.
Senator Tkachuk: I have a question concerning the domestic market. Why does the Wheat Board find it necessary to not allow the Prairie farmer to sell his grain domestically outside the Wheat Board?
Mr. Measner: Are you talking about to flour mills and so forth? The feed market is open now.
Senator Tkachuk: If you have a customer in Ontario or Quebec, or Halifax or Vancouver, why can a farmer not sell that domestically?
Mr. Measner: Again, this is part of the single-desk concept right now. For domestic human consumption, it is sold through the Canadian Wheat Board. We have a stable pricing option for domestic processors, which has allowed them to be successful and grow. I mentioned about the growth on the flour side, the growth on the malt side in Western Canada.
It is marketed through the CWB and is part of the single-desk concept. We have a domestic human consumption price, which is based on the U.S. market price, being that flour mills can import U.S. wheat. I am not sure if I understood your question. Is that what you are asking?
Senator Tkachuk: Yes. The farmer can not sell directly to a flour mill; he has to pay you.
Mr. Measner: It is based on our domestic human consumption price. He can deliver it directly —
Senator Tkachuk: That is a nice name for it, but really he can not sell it directly here in Canada, let alone in China or somewhere else.
Mr. Measner: He can deliver it to the mill directly, but the mill pays the domestic human consumption price to us and he is part of the pool.
Senator Tkachuk: He delivers and pays a commission to you.
Senator Gustafson: So he buys it back.
Mr. Measner: No; he becomes part of the pool or he takes a pricing option, the same as if he delivers to the primary elevator or a mill. It is the same; he is in the pool.
Senator Tkachuk: It is hard to escape. I know there were a number of farmers bright enough to see the future of organic grain and wheat farming. Europeans are big on that. In our province, they identified the market and grew organic grains, but they could not really grow organic grains without the Wheat Board being involved.
Maybe you could explain to us, not what you do now but how that all started, and what you forced the organic grain farmer to do to sell his wheat to Europe. Did you not force them to sell it to you and then they bought it back? It never left the farmer's bin and then he or she had to sell it to Europe on their own.
Mr. Measner: There are a couple of different options on that.
What happens is that he has to do a buyback based on the conventional price of wheat — not with the organic premium. He keeps all of the organic premium himself, but he does a buyback with us for the conventional price of wheat — the price we are selling into the U.K. marketplace, if that is where he is marketing his product to. He will have to do a buyback...
Senator Tkachuk: He or she is marketing it there themselves; you do not have anything to do with it.
Mr. Measner: In some cases we do not and in some cases we do. There are several models.
Senator Tkachuk: You are getting into the market now because by controlling that part of it, you are finding out their customer base and then you are going to their customers and selling underneath them.
Mr. Measner: In a lot of cases, it is the same customers we are dealing with now. We have passed a lot of those customers to organic growers. We have tried to work with them and facilitate the sales they are undertaking. However, your question was, do they do a buyback simply on the conventional price? They do not; the organic premiums are theirs to keep and they do what they want with them.
Senator Tkachuk: Let us be clear with all this ``buyback'' and ``pooling.'' What happens here is that the organic farmer who identified a new market and developed a product that was obtaining extremely good prices outside of Canada was forced to sell the product back to you — it never left his bin — buy it back and then market it himself to Europe. Is that not what happened?
Mr. Measner: Again, he pays the buyback on the conventional price — whatever price we are marketing into that market. We are selling it to the same mill, so it is the same price.
Senator Tkachuk: That is all I wanted to ask.
Senator Mercer: I am still not sure about some things, but I want to talk about the major companies that Senators Gustafson and Tkachuk made reference to. Who are the big companies that you would be marketing to or, if the Wheat Board did not exist, that farmers would have to sell to in Canada?
Mr. Measner: The larger companies are Cargill, ADM, Bungee, ConAgra and Dreyfus. Those are the five largest.
Senator Mercer: I want to remind the committee that Cargill is the same company mentioned when we went through the BSE crisis together. Cargill was the same company that made a lot of money off the BSE recovery program when farmers were forced — because the program was not right the first time — to sell their cattle to Cargill, which made a not-so-small fortune. Can someone help me with that? Am I right on that?
The Chairman: We do not really know.
Senator Mercer: I remember there being an asterisk in their annual report indicating that the profit in that quarter was up because of the BSE recovery program in Canada. So I really feel comfortable with people like that who have done so well by our farmers in Western Canada.
Are these companies all American-controlled?
Mr. Measner: American or European. I think Dreyfus would be European.
Senator Mercer: European meaning German, French, British?
Mr. Measner: French.
Senator Mercer: Principally French, with the largest being Cargill, which is U.S.?
Mr. Measner: Yes.
Senator Mercer: Is the second largest ADM?
Mr. Measner: Yes, and they are also U.S.
Senator Mercer: What was the third one you said?
Mr. Measner: Bungee or ConAgra; ConAgra is also a U.S. company.
Senator Mercer: Is Bungee the French one?
Mr. Measner: Dreyfus is the French one.
Senator Mercer: I ask that question because I think it is interesting that they have an opportunity to continue to market through Canadian-controlled or Canadian-operated organizations like the Canadian Wheat Board, and the other option is to go to our good friends at Cargill, with whom we have done so well in the past.
I am miffed. I wrote a bunch of questions before we started and I will ask the first question I had last. Why are we here? Why are we in this situation? Why are we having this debate?
We have members of the board who were elected by farmers in recent votes — 60 per cent to 40 per cent — certainly a much larger mandate than the current government has. It is certainly a larger mandate than any government in recent days has had in this country and it seems like a solid mandate.
Why are we in the situation we are having this debate? Why are we in the situation we were talking about, that the chief executive officer of a very successful organization is being fired by a group of people who are not really his boss but seem to think they have control? I am curious as to why we are here. I do not understand it.
Mr. Oberg: There is no doubt that there are people on both sides of the issue. If you go back to what I said earlier about why this issue is so emotional, what is at stake is that an organization that was turned back to farmers in 1998 is now facing the possibility that we are reverting back to an organization that has more control from Ottawa. I think that is what has farmers upset.
There is no doubt that there are large players in the industry — the ones that you mentioned. I think they see it — if the Wheat Board were to go — as an opportunity to make better earnings. However, I would remind farmers and the people here present that, in the grain business, there is only one way they can increase their earnings, and that is to have farmers make less. I would ask farmers to think about that.
There is no doubt that a company like Cargill would like to add Canadian wheat to its menu when it goes out selling wheat worldwide, and that is the one thing they can not sell.
Senator Mercer: I appreciate both you gentlemen being here, particularly under these very trying circumstances and times for you and the entire Wheat Board.
Senator Callbeck: I want to ask about the plebiscite in 1997. Roughly 63 per cent of producers voted for single-desk for barley. When we have the plebiscite in 2007, do you think that figure will increase or decrease?
Mr. Oberg: It would depend a lot on voter eligibility. Who is allowed to vote? Would this be all grain producers or just barley producers? I am hearing that a weighted ballot might even be possible, and those with more acreage or more tonnes might have more votes. None of that has been announced and all of it would have an effect on the results.
There is no doubt that, in the Province of Alberta, there is the least support for marketing barley under the Wheat Board, and that grows stronger as you go eastward. On the other hand, I am hearing amongst farmers, and I saw this in the election, that people are starting to look at this plebiscite on barley as not being about barley at all. It is about, if the Wheat Board loses barley, will it be a stronger or weaker organization? If you support the board and the answer is weaker, they are starting to think that will influence perhaps how they will vote. The question may not be to some people about barley at all. It is about can we have a strong and effective organization to work on behalf of and market grain for farmers.
Senator Callbeck: Who do you think should be able to vote in this plebiscite? What conditions would you like to see set out?
Mr. Oberg: My personal view is that it should be all inclusive. The Canadian Wheat Board Act presently defines voter eligibility as any producer capable of growing the six major grains, which include wheat, barley, oats, rye, flax, canola. My view is that it should be fairly inclusive. I am against having a weighted ballot. I think that one person one vote is the democratic way of doing things. For a smaller producer, although his tonnage and everything is smaller, the issue is just as large to him as it is to a guy who has 5,000 or 10,000 acres.
Senator Callbeck: You say all inclusive. In 1997, I think if you delivered once in five years, you could vote.
Mr. Oberg: I can not remember what the criteria were then, but I think it should be fairly all encompassing. I would be in agreement with that.
Senator Mitchell: One of the questions alluded to an earlier issue and it is something that is always kind of floating out there. I heard it in Hong Kong when I was there with the WTO, World Trade Organization. There are those who think that if we did away with the Canadian Wheat Board and maybe supply management — my feeling as an aside is that if we do away with the Canadian Wheat Board, the government will go after supply management — that somehow Europe with its huge subsidies to its farmers, and the U.S. with its huge subsidies to its farmers, would just capitulate on their subsidies and that would be that and we would have free trade. It is almost too absurd to believe.
Are you aware of any rational negotiation that would ever give us what we want from the United States by giving up the CWB or giving up supply management? I just can not imagine it. That is a rhetorical question.
Mr. Measner: There is a structure in Europe, and the U.S. has built around those subsidies. I would view it as a cheap food program in the U.S. They are trying to keep prices down, and they subsidize their farmers. Certainly the single-desk will not be a negotiating chip for them to change those subsidies. They are negotiating. Their agricultural industry has been built around them, and they will do the things that are right for their agriculture industry. Whether the single-desk is given up or not will not change their stance on that. They are taking a strong stance on those subsidies, and I do not think that will change.
Senator Mitchell: Exactly. One point that I think you just alluded to, Mr. Oberg, is that everything else being equal, if Cargill's prices or costs are the same as the Canadian Wheat Board's costs, Cargill still has to make a profit, which the Canadian Wheat Board does not. Who pays that? Our farmers would pay that, I assume.
The government has really neglected — I am being kind when I say ``neglected'' — our relationship with China. In fact, they have provoked China on a number of occasions, doing things that everyone knows provokes China. However, you worked very hard to develop that Chinese market. Is that being impeded by what the government is doing? Are you getting help from the government?
Mr. Measner: It is early to know. We have had a tremendous relationship with China and, as probably mentioned, since the early 1960s, we have sold and bought 120 million tonnes of wheat and barley. It is a fantastic number. They have been a tremendous customer of ours. They like Canadian quality. We are opening up a technical centre in China this coming year in a joint venture with COFCO, the partner we deal with. That is in motion. We are trying to get stronger in that marketplace. I am hopeful that there are not the sorts of things that happen from a broader perspective that damage that relationship, because it is one of the strongest ones we have, and it is very beneficial for farmers.
Senator Mitchell: I have heard something and perhaps you could confirm it for me. I am not sure that it is true or just speculation. If we went double to choice and the Canadian Wheat Board failed because of structural problems — one of which is capital and so on as you mentioned — under NAFTA, would we ever be able to recreate the Canadian Wheat Board?
Mr. Oberg: Just to respond to your second question, you are right. The Canadian Wheat Board is the only organization out there that can make the claim that its mission is to maximize returns to farmers. There are no outside shareholders to pay dividends to. That is really why, in an open environment, the Wheat Board would have a hard time competing. If the Wheat Board had been a grain company all these years, which it has not, it would have been retaining earnings, keeping things back from farmers, buying assets and corporate facilities but it has never done that. It has never been a grain company. Every year, all that has been paid back to farmers, minus the costs of marketing and administration, and we start a clean slate. That is why, in an open system, we would be at a major disadvantage to people who have been in the business for 60 years.
To your question about NAFTA, you are correct. Once a company has access to a market under the NAFTA agreement, if access to that market is then removed, they can take legal action and that is why it would be very difficult.
Senator Mitchell: So there is no coming back if the government is wrong about this.
Mr. Oberg: It would be very difficult — perhaps not impossible, but very difficult.
The Chairman: Colleagues and witnesses, I thank you for coming. These are difficult days, and it is a tough and emotional issue. I think our committee has handled it very well indeed.
Senator Tkachuk: You have handled this meeting very well. You did not allow anything to get out of hand. I thought this was a great debate and a very interesting discussion on both sides of the issue. We did not even get mad at each other.
The Chairman: That is a good thing.
Senator Mitchell: Merry Christmas.
The Chairman: Witnesses, we wish you the very best. I know it is tight times. It has been a very good discussion tonight. I want you to know that this committee gets along extremely well, and I think that is one of the reasons why we maintain a very good relationship with the farmers.
Just for your information, we recently put out a report on grains and oilseeds, because we had spent so much time on the cattle industry. One of our suggestions in that report was that perhaps the time has come where we have a Canadian farm bill. We will work on that because it could be helpful.
On that note, thank you. Have a good trip home.
The committee adjourned.