Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 8 - Evidence - February 14, 2007
OTTAWA, Wednesday, February 14, 2007
The Standing Senate Committee on Transport and Communications met this day at 6:18 p.m. to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, east coast container ports and central container ports and current and appropriate future policies relating thereto.
Senator Lise Bacon (Chairman) in the chair.
[English]
The Chairman: Today, we continue our study of containerized freight traffic. We are pleased to welcome as our witnesses from Pulse Canada: Mr. Lloyd Affleck, Chair; Mr. Gordon Bacon, CEO; and Mr. Greg Cherewyk, Director of Market Development. Welcome to our meeting and to our committee.
Lloyd Affleck, Chair, Pulse Canada: We are happy to present to you. We in the pulse industry and the trade association, Canadian Special Crops Association, rely heavily on transport. It is our major source of getting to port, both east and west. Today, we would like to explain some of our issues, our problems. Without carrying it much further, I will let Greg Cherewyk, our transportation committee director, take over. Before I do that, our executive director, Gordon Bacon, is with us also. With the three of us, we hope to be able to present to you the story that we feel needs to be considered. Thank you.
Greg Cherewyk, Director of Market Development, Pulse Canada: I appreciate the opportunity to be here today to talk to you. It being Valentine's Day, I am not sure my wife appreciates this opportunity as much as I do. I thank you, because we have rescheduled for Friday, so that buys me two days to make it up to her.
Senator Dawson: We will send her the transcript.
Mr. Cherewyk: Let us talk about the Canadian pulse industry. There is a package of presentation slides in front of you. I thought I would be able to put them up electronically, but that is okay. We will work with what we have here.
You will notice in a few cases, the map I have electronically did not print out on the handout. I apologize for that. I should be able to describe it fully as we go through the slides.
First, I will explain who we are as an industry and the crops that we represent. I will then get into, as per your request, the countries we market to, the ports we market through, as well as the mode of transport in terms of getting our product to those markets.
Then I will explain some of the challenges faced by the industry and what we are doing as an industry and industry association to address those challenges and opportunities; including the roles we see for government in addressing those challenges and opportunities as well.
We are a non-profit national industry association that represents approximately 35,000 growers of pulses from the provinces of Alberta, Saskatchewan, Manitoba and Ontario. We also represent the trade and the processors and exporters of those products — located everywhere from Vancouver through to Quebec — who are members of the Canadian Special Crops Association. We also consider the Government of Canada, particularly Agriculture and Agri- Food Canada, a major stakeholder in our organization as we receive considerable support from them to run some of our programs, which I will be talking about today.
Slide 2 on page 1 shows pulses are, by definition, the dried seeds of an edible legume plant, including peas, lentils, chickpeas and beans.
If you refer to slide 3, you will see that pulse production in Canada has dramatically increased since the early 1990s. The only blip you see in 2002-03 is related to a drought we experienced over the course of two years, which had a major impact on seeded acreage as well as overall production. The trend line is a steady increase to the point we are at today, in 2006. This increase has led us to become the largest producer and exporter of peas and lentils in the world and a leader in the production of chickpeas and beans.
I will explain the details of our industry that are relevant to our discussion today. We are talking about four crops — peas, beans, lentils, and chickpeas — but within each crop there are a number of different types of product. That is relevant because when we are talking about containerized freight, it means this industry relies heavily on the ability to ship small lots to various countries around the world.
On slide 4 you will see there are ten different types of beans grown in this country. Beans are grown primarily in Manitoba and Ontario and a small amount are grown under irrigation in Alberta. These beans are destined for various markets around the world and make their home in some 100 different countries.
Turning to slide 5, you will see this is also the case for peas. There are five different types of peas grown in Canada, all with different markets and end uses that include both human food as well as animal feed.
Slide 6 shows there are six different types of lentils grown in this country. There are very distinct markets and buyers in different areas of the world for each type of lentil.
In slide 7, you will see there are two different types of chickpeas. The same goes for chickpeas with different customers and markets.
I will get into the different markets we service, some of the unique characteristics of those markets, how much we export to them, what the mode of transport is and which port is utilized in most cases.
Asia is primarily a market for peas and beans. It also holds enormous potential for feed products, particularly feed peas. The growing livestock industry, particularly in China, holds great potential for our industry. The livestock sectors in South Korea, Japan and Taiwan are also very significant. The other important characteristic to this market is it is home to one of our major competitors. China also produces beans and lentils. They are producing better quality beans at a lower price, more each year, and they are competing with us in some of our traditional markets in Europe.
Referring to slide 9 — I apologize you do not see the map. The point here is that Asia, including China, Japan, South Korea and Taiwan, represents nearly 10 per cent of our export market.
In slide 10, we are basically talking about peas and beans. Yellow peas are moved by container through the Port of Vancouver for the northeast of China. There are approximately 250,000 tonnes a year moved by container. That figure is projected to grow to anywhere between 300,000 tonnes and 400,000 tonnes.
In the case of beans, the market is primarily Japan. It is a specialty type of bean. It is a small bean grown primarily in Ontario used for paste inside various pastries. Japan is our fourth-largest market in the world in terms of dollar value for export of beans. Again, this is a containerized product through the Port of Vancouver.
Turning to slide 11, Southeast Asia is not an enormous market for the pulse industry, but is an important market for us. Quality and price have made Canada a major supplier, the dominant supplier of a snap pea to this market. This is what we would call, in the industry, a niche market for pulses. The opportunities to increase market share in this region are primarily in the areas of peas for starch, the same market that we service in China, as well as an emerging feed market in countries such as Vietnam.
Looking at slide 12, you will see that less than 1 per cent of our overall tonnage is exported to this region. I stress that it is a unique product of which we are the dominant supplier. It is a product that obtains great premiums in the marketplace as well.
Referring to slide 13, the Indian subcontinent is, without question, Canada's largest market. It is characterized by highly price-sensitive buyers of peas, lentils and chickpeas. Our main competitors in this market are France, Australia, Turkey, Myanmar and Nepal.
Slide 14 shows, in terms of tonnage, that this region represents 35 per cent of Canadian exports of pulses. Last year, up until the end of November, we exported over a million tonnes of these products to the Indian subcontinent.
Referring to slide 15, you will see that 45 per cent of our total pea exports ends up in this region. The unique part of this country is that this is one of our major bulk markets, so bulk peas through the Port of Vancouver to India make up the overwhelming majority of the pea exports. In terms of lentils and chick peas, however, these are containerized shipments that also move through the Port of Vancouver.
Slide 16 shows that the Middle East-North Africa region is a key market primarily for Canadian lentils. It is highly competitive and price conscious, and it represents a great potential for a growing part of our industry. Canada is the dominant world player in green lentils, but we have an emerging industry in red lentils. We are just an emerging player, not dominant in the area of red lentils as yet, but the Middle East-North Africa region holds great potential for this product.
Slide 17 and slide18 focus primarily on the Middle East, which is about 7 per cent of our export market in terms of tonnage. It is primarily a market for lentils and chick peas. The major markets there are Turkey and the United Arab Emirates. The product is shipped with an end destination being listed as Dubai, but that product is then transshipped, split and moved into other countries, such as Iraq, Iran, Kuwait and others within the region. Again, these markets are overwhelmingly containerized markets serviced through the Port of Montreal.
Slide 19 refers to North Africa; the major market within this region is Algeria. Depending on the year, Algeria is our number one or number two market for lentils. This region absorbs 15 per cent of our total lentil exports. It is also a fairly significant buyer of chick peas.
In terms of Europe, slide 20, Canada has a well-established market base in this region. Nearly 30 per cent of all Canadian pulse exports are destined for Europe. It is a traditional market. It has demands for high-quality, safe products with increasing demands for traceability. This is a significant point that we will come back to later. One of the unique characteristics about Europe for us is that it is a market for each one of our pulses, including feed peas.
If you refer to slide 21, you will see that between 20 per cent and 40 per cent of pulse exports, depending on the crop type, are destined for Europe. The majority of peas headed to Europe are in the form of feed. Those will be bulk shipments. Some of those move through the Port of Churchill or Thunder Bay. This is destined primarily for Spain and some parts of the northern Europe, where feed peas are recognized as the mainstream feed ingredient.
Slide 22 refers to South America. Our price-value relationship in Canada has allowed us to establish a majority of the market share. In many cases, in countries such as Ecuador, Colombia, Brazil and Argentina, we are the number one supplier, with almost 100 per cent of the market share. The only real threat to this market share for us is the aggressive pursuit of free trade agreements by the United States.
Slide 23 shows that South America represents about 7 per cent of our overall export tonnages. The only bulk markets in this region are Colombia and Venezuela. Those are serviced through the Port of Vancouver. The rest of the products destined for South America are exported by container through the Port of Vancouver.
Mexico and Central America, in slide 24, is an important region for Canada in terms of pulse and special crops, and the importance is increasing as we look forward to January 1, 2008. The significance of that date is that a NAFTA quota for beans, one of the only quotas remaining under NAFTA for agriculture and food products, will be eliminated entirely. Prior to this point, Canada had a small share of the bean market — it was limited to roughly 3 per cent. The lion's share of the market was given to the United States. On January 1, 2008, that quota will be eliminated, and we will be competing on a level playing field. That means our exports could potentially jump from the neighbourhood of 3,000 tonnes to 4,000 tonnes all the way up to — if we were to assume half market share — 40,000 tonnes after January 1, 2008; or perhaps more, depending on the competitive abilities of our companies.
On slide 25, you will see some of those statistics. There is a relatively stable market for exports of lentils and peas. The potential for growth is in the area of beans. Much of the product shipped from Canada through to Mexico could be bagged and moved by boxcar. Some of it may be moved through export ports and via container into Mexican sea ports as well.
That wraps up my quick overview of markets for our products around the world and the modes of transport.
As you look at slide 26, I need to stress that the containerized freight system for the pulse and special crops industry is, in fact, a need. It is not simply "nice to have''; rather, it is an absolute need for this industry. We are the world's largest supplier of pulses. We move nearly half of our overall export tonnages via container, and this percentage is growing each year. We service thousands of buyers around the world. These buyers do not have the capability to handle bulk vessel shipments, nor do the distribution channels in these countries have the ability to move bulk shipments of product.
These customers also demand more from us each and every day. They demand more in the way of food quality and food safety assurances, as well as food traceability. Everything we see points more and more toward identity preservation in this industry. The reality is that if this industry is to remain competitive and sustainable in the long run, we need to lead the world and be the best at offering these assurances. That means we must have an effective and efficient containerized freight system in this country.
My next point is that there is a real need for a convergence of visions between the agriculture industry in this country and the transportation industry. The Government of Canada — through the Department of Agriculture and Agri- Food Canada — and the agriculture industry in this country is driving toward product differentiation and adding value at home. The Canadian pulse industry, partnering with Agriculture and Agri-Food Canada, is investing heavily to increase the functionality of our products, increase and enhance the competitiveness of these products and, as well, look into other functional characteristics — health and nutritional aspects — of our products that will help us out- compete other nations that produce pulses. All of this means we will need to deliver on food quality and food safety, offer traceability and be able preserve identity in this system. This points not only toward an effective and efficient containerized freight system, but also one that offers us the ability to load and seal our products at point of origin on the prairies. That is the vision of this industry.
The transportation industry in this country is clearly driving in the opposite direction. The transportation industry is offering incentives to move bulk commodities in large unit trains of 50 to 100 cars at a time. The transportation industry provides disincentives to the players in the industry that move smaller shipments. They provide disincentives in the lack of available equipment. When I say that, I mean lack of rail cars and lack of containers available to this industry. They also provide disincentives in the way of the longest transit times from points of origin on the prairies to our ports, as well as the greatest amount of schedule variability. These are facts that have been documented by the government-appointed grain monitor, the Quorum Corporation.
If we do not address this contradiction in the system, we are realistically staring at a threat to sustainability and competitiveness in the long term for the pulse and special crops industry. We at Pulse Canada believe we need to take a systems-based approach to this problem, to addressing the challenges and to identifying the opportunities.
If you refer to the challenges on slide 27, one of the best ways to illustrate this for you is to walk through a very simplified sale of product from a point in Saskatchewan to a buyer in India, indicating the choices that must be made at each step of the way, the challenges we face, the opportunities that exist and what needs to be done to address these aspects.
The first — and this is a recent, emerging challenge for our industry — is the delivery date. When a sale is negotiated, we used to be able to rely on an average shipping time of approximately 30 days. The reality now is that 45 to 60 days is the norm, and, in some cases, that is up to three months. Buyers around the world are telling us this is absolutely unacceptable.
Yesterday, I had a call from one of our major shippers, who said that his buyers in the U.K. are now sourcing product out of Pakistan and India, primarily because of delivery dates and inconsistent and unreliable delivery of product. They are sourcing their product from third world developed countries over Canada. That is the first challenge.
The second challenge as a shipper, assuming one has been able to make that sale, is to determine whether or not to load the product at the plant or put it in a rail car and move it to a transloading facility at the port.
There are three factors one must keep in mind when making that decision. The first is the economics. Is it cheaper to load at the plant or in Vancouver? The second factor is the availability of containers. Are there containers, from past experience, available on the Prairies? One reason we are here today is to address the lack of available equipment on the Prairies. It is not so much that there are not enough containers in this country; however, it is definitely the case that there are not enough containers available for use on the Prairies.
The third factor to consider is the demands of the consumer. Do they demand identity preservation? Do they demand that that container is sealed at the plant and unsealed only at their end facility in the market to which it is being shipped?
Assuming that all those factors do not align and it has been determined the product will be transloaded in Vancouver, meaning it will be shipped by railcar to a transloading facility and then put into containers, there are a whole host of other factors to consider. In order to have a time booked at a transloading facility in Vancouver, one must first go through something called terminal authorization. A slot for the product needs to have been booked on a vessel.
Once that has been confirmed, a slot is given at the transloading facility, and only then will the railways determine if we will get our car allocation — the number of cars we will need to move our product to the port stuffing facility. All these decisions must be made based on a wide range of unknowns. There is much uncertainty and variability in that schedule, yet very narrow time frames still must be met in terms of stuffing containers at the port and getting those containers on to a vessel that is waiting.
Assuming we have been able to make that estimate, that we have our vessel slots allocated, our stuffing facility booked and waiting for our product, the next challenge we face is the actual allocation of railcars from the railway.
Our industry, in the last four to five months, has received 10 per cent to 20 per cent of their requested cars. This is an industry that is trying to service the needs of its buyers around the world and being allocated 10 per cent to 20 per cent of its cars.
The large grain terminals recently reported, through the Western Grain Elevator Association — these are the big, high through-put elevators that move 50 cars to 100 cars at a time — that they were only receiving 75 per cent of allocated cars — not requested, but what the railways decided to allocate. They were only receiving 75 per cent of those. If terminals of that size were only receiving 75 per cent of allocations, you can imagine what has been happening to a small industry, such as the pulse and special crops industry.
Assuming we get some of the cars that we have requested at our plant to load our product en route to Vancouver, the next problem is the condition of those cars when they arrive. This is something that surprised me quite a bit. The reality is that these cars arrive at any given time of the day. The shippers must have extra staff on hand to clean them because they are still coated with the other export product that has been stuck inside. They have doors, hatches, hinges and latches that are broken, which will not allow them to close, yet we are given one day to fill them with the product and get them to the port before we start to incur demurrage or extra fees.
Not only must we have extra staff on hand to clean and service these cars, but also we must do it in a narrow time frame or else incur extra costs.
Let us assume we have been able to pull this off, seal the car, put our product in it in a condition that is acceptable to get it to that transloading facility in Vancouver. We now hit the next problem for this industry, and I mentioned it before: transit time. Quorum Corporation, the grain monitors, noted that the transit time for pulses and special crops was, on average, 16 days. The average for board grains and canola was 11 days and 9 days respectively.
Even more of a concern than this is the variability in that transit time. Shippers will tell us if we give them a consistent transit time, they can work with that and make estimates based on consistency. The key factor is variability. That is, again, the area in which the pulse and special crops industry has the worse record. Sixteen days of average transit time, plus eight days of standard deviation, meaning that our cars could either arrive in Vancouver in eight days or in 24 days. Mind you, we had to have our transloading facility time slot booked as well as our vessel. With that amount of variability, we operate with many unknowns.
Let us assume that those railcars arrive at a transloading stuffing facility in Vancouver. If they do not arrive because of variability in that schedule — say they arrive in the 24 days instead of the 16 we anticipated — the odds are that our shipment will land on top of many others and we will not have our products stuffed on time.
We get one day to unload that car. It does not matter whose fault it was that it arrived there eight days later than expected. If the stuffer cannot unload it on time, because it did not arrive at our booked time, then we start to incur demurrage.
Assuming that eventually those containers do get stuffed, we now have to contend with the fact that we likely missed the vessel we had booked. We get something called a point nine rollover, meaning we have to wait for the next available vessel. Our container, which has been sitting there loaded late, now sits there and incurs demurrage from the steamship line — yet another fee. We have incurred demurrage potentially at loading, at unloading and while waiting for a steamship line.
What is the net result of all this uncertainty, variability, unreliability and inconsistency? It is the Canadian brand. It is inconsistent and unreliable. There is no question that that is our brand in the international marketplace.
Pulse Canada and Agriculture and Agri-Food Canada have undertaken studies recently called benchmarking studies. These studies aim to determine how our product stacks up against and functions compared to the competition. When we direct research into improving our products, we need to know how we stack up against Australian lentils, for example. How does the seed coat split? What is the moisture compared to it? These are factors we need to consider. We were not asking whether transportation was an issue with these buyers, but they were offering the feedback — which, unfortunately, each one of these benchmarking studies has revealed — that transportation overshadows the performance of our product. That begs the question: Why invest into improving our products? Why invest into differentiating and enhancing the competitiveness of these products by investing in research and development if we cannot deliver the product?
Right now, our brand faces another major threat, and that is something with which you are all familiar: the CN strike. This strike comes on the heels of a disastrous fall and winter shipping season. We had many weather-related delays on the West Coast.
This strike comes only 18 months after a container trucker strike in Vancouver that halted all movements of containers for the summer and backlogged the system well into the fall and winter. With this strike coming on the heels of those two major events, we risk permanently branding ourselves as inconsistent and unreliable. Companies that reported to me in the last week that they had 10 per cent to 20 per cent of the rail cars they needed allocated over the last four months now tell me they are getting zero. This means that farmers have delivered a product they will not get paid for because the product will not move. If the product will not move, the buyers will walk on the contracts, and in the future, the growers will walk on those contracts. These are major issues for this industry. Those that try to get around it and try to establish some cash flow are actually trucking their product to Vancouver.
I heard from an exporter last week who was moving 1,500 tonnes of lentils by truck. That takes 37 trucks. This is not a sustainable alternative; it is very costly. Some of them are considering part of their long-term risk management strategy. What kind of impact will moving the product by truck have not only on the environment, but also on our provincial roads? Thirty-seven trucks as opposed to 16 rail cars. The biggest pulse industry in the world tells us that they will start to shut down their doors and lay off staff because of the transportation system. That is quite a statement.
What can we do? I will begin with what the pulse and special crops industry is proposing to do on slide 28. We need to be seen as solution providers. We will not gripe from the sidelines, demand better service and simply lobby and advocate for improvements. We are taking a proactive approach to be seen and act as solution providers for these problems.
One of the first courses of action will be to address the need for market intelligence for our industry. That means assessing worldwide-transportation trends to identify where trade flows may present opportunity for us and where we may be actually working against a current trade flow. That could mean, for example, looking at opportunities to move the product in 40-foot containers as opposed to 20-foot containers, or to identify clearly where we do not work in the system. We also need to stay on top of anything that either can cause or may lead to congestion. Whether that is a labour shortage or a weather-related delay, this office needs to keep on top of that for this industry, so that the decision makers can make decisions based on best available information. We also need data. We need to know seasonally where our products move, how much of it moves and by what mode of transport. This is information that is being demanded by the shipping lines and the railways, and it is information that this industry needs to gather.
I am happy to say that, as of a couple of days ago, we have a commitment from Statistics Canada, in the International Trade Division, to gather those statistics. They are not readily available today, but we will make our best possible effort to make them available.
We also need an action plan for ancillary charges. You heard me mention demurrage a number of times; it is a major problem for our industry. Incurring demurrage at load and unload and then waiting for vessels is adding undue cost to our industry. We need an action plan to address this problem.
We need to forecast demand better. We are seen as a feast and famine industry — that is, one where the service providers know what we need in the harvest time in the fall, but, apparently, do not know well enough what we need throughout the rest of the year. As an industry, we will try to coordinate ourselves and accurately forecast demand on a frequent basis, so we can address this challenge.
We will put all efforts into tracing rail cars, even if it is, at first, on a pilot-project basis, so that we know exactly where transit times are an issue, why they are an issue there and where the greatest amounts of variability are located. We need to know with absolute certainty, so that when we are searching for solutions, we know where to begin.
We need to develop an advocacy strategy. We need to know where our problems and challenges are and what solutions exist, and we need to take them to the federal government, to provincial governments, to the steamship lines, to the railways and to the freight forwarders. We need to get our challenges and opportunities in the face of these people who have the ability to effect change.
We need to conduct an infrastructure needs assessment, so that when Asia-Pacific Gateway initiative funding is made available and they consult with the industry on the best place to spend it, we have a good idea where the best place to spend it would be for the pulse industry.
We need to create a transportation committee that looks at daily problems for our industry; for example, documentation, electronic billing, tracing containers and all of the aspects that are seen as day-to-day inefficiencies. We need a forum for discussion, and we will create that committee from freight forwarders and steamship line representatives, as well as the railways. We need to organize meetings after all of this has made some headway. We need to organize meetings between key decision makers, so we can start to look for the solutions we have talked about.
Finally, for those who say that some of us in this industry — from the small-to-medium-sized export perspective — are unsophisticated, we need to address that challenge and say that we are prepared to provide training programs for our small-to-medium-size exporters to help them address challenges, capture opportunities and contribute to overall system-wide efficiencies.
On the last page of our presentation, slide 29, we address what the can government do. I believe government needs to continue to consult with industry with respect to infrastructure investment requirements. We have been consulted on the Asia-Pacific Gateway initiative funding. We know a lot of funding is being put toward the ports, but it is important to recognize it is a system-wide issue. There are inefficiencies throughout this system that extend right into the centre of this country. If there are investments to be made to create efficiencies, they could be made beyond Vancouver.
We need government to address regulatory barriers. We need a regulatory environment that fosters competition and growth in this country. In terms of the Canada Transportation Act, we had unparalleled cooperation amongst the shipping community in this country. The forestry shippers, the mining sector, the chemical producers, the grain producers and the pulse and special crops producers all came together at the request of Transport Canada to recommend amendments to the Canada Transportation Act that would address some of the inefficiencies. We did that and we negotiated with the government in good faith back in May of 2006 and proposed a number of amendments. Some of them were slashed, some of them were modified and some were revised. There was an agreement in May 2006 to introduce amendments to the Canada Transportation Act, which would address some of the challenges the industry faces. Our fear today is that those amendments will not be made in the next rail freight bill. Our fear is that the railways have effectively lobbied for changes that will not amount to anything significant for the shippers in this country.
In terms of cabotage regulations, I understand you have heard from experts in this area, whether it be from Mr. Prentice from the University of Manitoba Transport Institute or others. For example, the grain monitor and corn corporation have pointed to archaic laws that exist under cabotage regulations, which limit the movement of containers in this country to 30 days, whereas in the United States, containers can move freely for 365 days. Apparently, these laws simply need political will. We simply need to consider harmonizing with the U.S. in the environment where there is a lack of available equipment and where we need to foster growth and innovation in this industry. We need to do everything we can to ensure that steamship lines can leave their containers on the Prairies.
Finally, we need to conduct a level of service review. I believe we all agree that small changes to a few regulations here and there are steps in the right direction, but they will not overcome the major challenges that I talked about today. We are being compared to a developing country with respect to our transportation system, and, because of it, we are losing customers. If that does not warrant a level of service review, I do not know what will.
Finally, we need to address immediate threats such as the CN strike. That will have an enormous impact on the reputation of the agriculture and food industry, our industry in particular. We need to understand that impact and ensure that these situations do not continue to limit our ability to service our customers and uphold our reputation. We need to look to the future, to contracts that will expire in the spring and to a container trucker agreement that expires this summer, to ensure that we have proactive strategies in terms of potential labour disruptions, because two more labour disruptions on the heels of the last two will kill us.
I have given you an overview of the potential future for containerized freight traffic handled at major inbound and outbound markets served by Canada's Pacific Gateway container ports, East container ports and Central container ports. I have given you a picture that tells a story about an industry that requires an effective and efficient containerized system, one that is not simply based on the movement of containers, but relies on a number of different stakeholders that impact the movement of containers.
I thank you for your time and welcome any questions.
The Chairman: Thank you very much for the information you have provided. I found on your website, in the research section, the following statement:
The Canadian pulse industry has developed a national research strategy that will support the industry to adapt to rapid changes and be proactive in leading research. The first task is expansion of research programs to provide the needed support for the Canadian pulse industry to maintain the position of leading global exporter. Further activities will involve developing and implementing a plan that proactively outlines the research needed to strengthen the industry.
What are your research initiatives on the issue of container traffic, and what is the level of consultation between the pulse industry and various stakeholders, such as provinces, railways and port authorities? Were you involved in past consultations led by Transport Canada on container traffic?
Mr. Cherewyk: Yes, we were involved in the latest consultation on containerized freight. Pulse Canada was handed the responsibility of the transportation file in the fall of 2006. Since then, the trade requested that one full-time staff person be put in charge of the transportation file, and that person is me. The first step in addressing these challenges was to determine the priority issues. There are dozens of them, but we need to get at the ones on which we can actually effect change.
In order to do that, we assembled an industry advisory group. We brought in eight of the largest shippers of pulses and special crops and a grower representative from each province. These growers and traders created a list of the priority issues with respect to transportation. We categorized them as issues simply of interest to the industry, aspects that we recognized we could not change, but that needed to be monitored and reported on; issues that we felt we had the ability to influence, either on our own or in cooperation with other stakeholders; and issues over which we felt we had the ability to exercise control.
Having done that, we needed to develop our end objective, that is: What do we want? We want a brand. We wanted to be considered the world leader in a reliable and consistent supply of pulses and special crops. That is our brand promise.
From there, we had to determine what we needed to do in order to achieve that. I listed some of the courses of action we need to take. We need to gather effective market intelligence, forecast demand and trace and monitor the shipments of our product, in addition to other objectives on the list I spoke about.
This all requires involvement of the other stakeholders, as you mentioned. What did we do to consult them? We have created the outline, the basis for our strategy. The demand on our staff has always been to introduce this skeleton or outline to the broadest range of stakeholders possible. This month and next, I will travel to meet with representatives of railways, steamship lines, freight forwarders, port authorities and transloading authorities. We will go over this list of objectives and determine whether I have accurately described the issues, whether I prioritized them properly, whether the action plan I have identified for achieving the targets that will lead to that brand promise is accurate, whether we can do it and whether I have missed anything. That consultation process has already begun, and it will continue at least until the end of March.
The Chairman: Container traffic in Canada is concentrated in three principle ports — Vancouver, Montreal and Halifax. Since most agri-food products transit through the Port of Vancouver, what is the anticipated impact of the Pacific Gateway Initiative with regard to the Canadian pulse industry? What is the importance of ports in Montreal and Halifax for pulse products? What share of agri-food production, and pulse production in particular, do Montreal and Halifax have?
Mr. Cherewyk: Pulse product movements through the Port of Vancouver account for almost 60 per cent of our total exports. The remaining 40 per cent of exports move out through eastern ports. Much of that leaves through the Port of Montreal. To my knowledge, very little, if anything, would leave through the Port of Halifax at this point. Halifax is located a little too far from our growing regions. The inland freight cost makes it non-competitive.
Having said that, with the projected congestion in Vancouver, moving product through the East may become an alternative in the future. We know there is available equipment there, and we know that moving product to as far as India and Southeast Asia through the Suez Canal is becoming an option. I cannot say, today, whether that will present a long-term option for our industry, but there is talk about product going backwards out the East Coast because it cannot move through Vancouver.
The Chairman: What is the modal share of rail, truck and water respectively for Canadian pulse products?
Mr. Cherewyk: I do not have that data.
The Chairman: Could you furnish it to us?
Mr. Bacon: For clarification, are you looking for movement to port or movement out of the country by those different modes of transport?
The Chairman: Out of the country.
Mr. Cherewyk: As I mentioned earlier, we have been discussing this with Statistics Canada. The data is not gathered that way. It is gathered by Harmonized System, HS, code. It shows us that peas were exported to India, for example. We need to go to the various port authorities to determine how many peas went through the Port of Montreal. Some of them gather that data by container and by bulk vessel, but it is not comprehensive; we have to piece it together ourselves. There are a number of different agencies and institutions that gather data. The Canadian Food Inspection Agency issues phytosanitary certificates on all product that leaves the country. From those certificates we know whether it went by bulk vessel or container. The Canadian Grain Commission grades all product that moves in bulk out of the country, so they know how much moves in bulk.
We are trying, in cooperation with Statistics Canada, to see if we can aggregate that data, so that we will know how much moves to which country month to month and by what mode. That is what the steamship lines and railways are asking of us.
Senator Mercer: I have an advantage over my colleagues in that I also sit on the Standing Senate Committee on Agriculture and Forestry, so I am familiar with the activities of the pulse industry from that side. I believe this is a very good news story from the agriculture side. It is when we come to the transportation side that it is not such a good news item. I look at it as the good, the bad and the ugly here. The good news is we are great producers of pulse products. The bad news is the industry is treated badly by the transportation industry, and the ugly is the fact that Canada's reputation is being damaged.
I would suggest though that, in all those slides that show Pakistan, India, Bangladesh, Latin America, South America, et cetera, if you were to ship your product to Halifax, there are containers sitting there. You may spend extra transportation time on the land, but when you got there the product would be loaded into containers, put on ships and out of there in record time. To help me prove that, how much money do you lose per whatever unit you measure by, as it sits waiting for that container in the Port of Vancouver?
Mr. Cherewyk: I do not have the daily demurrage rates. I could furnish you with that. It was one of the first questions I raised when I was put on this file. I attended a conference where an expert in transportation, John Vickerman, who works with TranSystems Corporation, spoke in Vancouver about the congestion on western North American ports. He spoke of how, with projected product movement into the country, the capacity of the ports could not keep up with the traffic. In that presentation, he said it has to flow out of the East, out of Halifax. The Asia-Pacific Gateway initiative should not just be about Vancouver, it should be about the impact on all ports in Canada. That is a question I asked: Will this present an opportunity for pulses? The quick answer from our industry was the inland rail freight cost to get the product to Halifax was too much and uncompetitive.
Senator Mercer: I would suggest your cost accountants have another look at that option. There is a line called China Lines, which is now calling on Halifax, that carries freight destined for Canadian Tire. Wal-Mart Canada will be coming through Halifax as well. These ships arrive with containers, and there is lots of room on the ships on their outbound journey through the Suez Canal, so I would suggest you do that.
You have said that maybe after January 1, 2008, under the new trade arrangements, that perhaps 50 per cent of the market is not out of the realm. Can you meet the demand to go to 50 per cent of the market in Mexico and Central America if the transportation problems were solved? Can you provide the product? Is there enough product being grown in Western Canada and in Ontario?
Mr. Cherewyk: Absolutely. The ultimate objective is to service this market. This holds great potential. It will become the single largest one-country market for beans if we are able to obtain at least half of that market share overnight. Are we capable of producing the quantities that are required? I believe we are.
Senator Mercer: That is in addition to what you are already shipping now. I am not talking about robbing the Asian and South Asian market to support Latin America and South America.
Mr. Cherewyk: Yes, I believe in recent years the acreage in Ontario has declined slightly because of lack of markets and competition from other crops. Manitoba has cut its acreage of edible beans in half and directed some of that into soy beans. These present opportunities for increased production of edible beans that would be destined for Mexico.
Senator Mercer: I also believe that helps Montreal and Halifax on short sea shipping to Mexico and the east coast of South America as well. I believe you would want to keep that in mind.
I find it amazing that we have a many empty containers floating around in this country. We know there are thousands and thousands. You mentioned some numbers in relation to the number of cars you asked for and the number of cars you need. Whatever the number, it is a significant problem. In my discussions with some of the exporters, they have admitted that they lie to get what they want. They say they need 25 containers in Vancouver on a certain date, knowing full well they may get 10 and 10 may be around what they need. We have created an issue here. Is that accurate? I do not want you to say that your members lie, but one of your members has told me this. Is he or she the only one doing this?
Mr. Cherewyk: We call that risk management.
Senator Mercer: That is pretty good.
Mr. Cherewyk: It is the reality. It has magnified a problem that exists. If we are consistently under-allocated, there is some padding to the estimates. We do this in order to just get maybe 75 per cent of what we need. The reality is, when we do that, of course, there is a reaction on the part of the service providers. They know that perhaps we have overestimated what we need, so they will over book a vessel. When we actually do show up with our product they have assumed we did not need as much as we had.
Senator Mercer: I understand when that happens, when you arrive and a vessel is over booked, that it is the pulse products that get bumped because pulse products — most times — need to be repacked at the Port of Vancouver. The problem you mentioned with containers being that if you cannot close the door, the peas are going to run out no matter whether you have a good line or not. Is that true?
Mr. Cherewyk: Yes. I mean these are problems, if a vessel is overbooked and we are bumped to the next one we still incur the demurrage.
Senator Mercer: You also lose money every day that your product sits on the dock in Vancouver.
Mr. Cherewyk: Absolutely. Every day that it sits there, we are not only incurring demurrage, but we are getting further and further away from our contracted delivery date.
Senator Mercer: I would encourage you to look at the Port of Halifax. At least one of the terminals in Halifax will tell you that the product will arrive, be loaded onto the ship and out of there without touching the ground, which I believe is the way the business is supposed to work. The containers are not supposed to touch the ground; they are supposed to go from railcar to ship.
The Chairman: Of course, Senator Mercer is from Nova Scotia.
Senator Mercer: I believed they figured it out.
Senator Dawson: Now speaking from the Port of Montreal, we have Senator Dawson from Quebec. Half jokingly, because Senator Bacon asked the question, what percentage goes east and what percentage goes west of all your products? Is it a 60 per cent/40 per cent split? Is it mostly Montreal and a little bit Halifax?
Mr. Cherewyk: None of our product goes to Halifax.
Senator Dawson: What is the percentage between your train partners?
Mr. Cherewyk: I could provide that data for you. I do not have it on hand today. I know that CN reported at our last conference. I believe the figures were that we represented 6 per cent of their overall revenue for movement of agriculture products and about 10 per cent for CP. I believe those were the figures, but I will confirm those, as well as provide you with the split for our industry.
Senator Dawson: In the situation where you are being held hostage to the West Coast at 60 per cent versus 40 per cent, having more options, whether Montreal or Halifax, certainly puts you in a better situation vis-à-vis your deliveries. As you mentioned, the Suez Canal can bring you to most places in the West.
That is why we are here. When the committee began its study, one of the first questions asked was about electronic tagging to find the containers. Months ago we mentioned the fact that if we had an electronic tagging system in Canada, rather than know only that containers were out there, we could know exactly where and how many could be brought back to the West for usage. We have heard about it before and it might be part of the solution, as well as how the shippers, CN and CP, will want to share that information. That is one of the objectives we have been trying to put forward.
We are travelling to British Columbia in two weeks to look at the Pacific Gateway situation. Having two options in Canada, one on the East Coast and one on the West Coast, gives you the option of not being held hostage to a strike in either place.
The committee would like to hear your recommendations for the creation of a better and more competitive atmosphere in which you can work. When you ask what the government can do, they should consult the industry because you have recommendations in this regard. We have been told numerous times by officials in the Department of Finance Canada that there is not that much of a problem at cabotage or in getting that kind of support, but you are telling us that it is a big problem. You might be consulted, but they might not be listening to you. You said earlier that you had been consulted on the changes to the legislation, but that you have not seen those changes in the bills. Was that reference to Bill C-11?
Mr. Cherewyk: Part of the reference was to Bill C-11, but it was primarily the rail freight provisions under the old Bill C-44. Consultation began in January 2006 when a group comprised of the Western Grain Elevators Association sat down with Minister Cannon and looked at ways to improve the rail freight bill. The minister at that time said that, historically, one of the problems is that the shipper community cannot get its act together and reach a consensus on what needs to be amended and put into act, so nothing ever happens. The challenge was put to the shipping community: If you can reach a consensus on amendments that will make a difference, we will do our best to introduce them in the next rail freight bill.
The shippers got together in Winnipeg in April 2006 and hammered out a series of proposed amendments for hours. They left only those that they thought were reasonable and had the ability to be introduced. On May 5, 2006, representatives of that rail shipper coalition got together in Ottawa with Transport Canada staff and Minister Cannon's staff to further discuss the needs for proposed amendments. The list provided by the industry was, as I mentioned before, modified, revised and some issues were removed. At the end of the day, there was a clear indication that the minister and his staff would crawl through crushed glass to introduce those amendments.
It was not until the summer that we realized this was not moving forward. Suddenly, the railways appeared with something called the "commercial dispute resolution package,'' which basically said that the legislation did not have to be changed, but that we needed to reach some kind of commercial dispute resolution agreements. They presented these agreements to industry stakeholders one by one and were rejected outright. These agreements were unacceptable alternatives to legislative change. Yet, we heard time and time again from Transport Canada that the end result would be a combination of amendments to the act and commercial dispute resolution agreements. That basically meant that industry had to arrive at commercial dispute resolution agreements in order for us to introduce amendments, which was never part of the deal when industry sat down and achieved these compromises.
In addition, for government to ask the shipping community to achieve further compromise after being asked on two separate occasions to come to Ottawa with a short list meant that all the cards had been played, and there was no further compromise. Any additional compromise meant amendments that would not effect any change.
We have been told time and again that these amendments will be made and yet it is the middle of February and nothing has been introduced. The process has been effectively scuttled. I can provide all of those amendments to this committee through the clerk of the committee for your review.
Senator Dawson: We will eventually be reporting and if there are recommendations that we can make to the Senate and to the government via the Senate, we will be glad to do so. That could apply pressure to the government if you believe that you have not been given the proper opportunity. You have been heard, but you have not been listened to. We will try to support you.
You are in a competitive market. What do other countries do differently that we should be doing to support your industry? Is there a model of a government with an arbitrage system to determine who should get the containers? Is there a better way that this committee could recommend? Is there another country doing what we should be doing?
Mr. Cherewyk: Part of the strategy that we have developed and the task that I have been given is to try to answer three questions: What can we do better? How can we do it better? Is someone else doing it better? We have some inherent challenges in Canada. Our growing regions are located the furthest away from the ports compared to any of our competitors. From the get-go, we have that challenge to overcome.
Containerized product comes into this country, moves through Vancouver and services the Eastern Seaboard where the big markets are located. The objective of the owners of the containers is to get the containers back as quickly as possible, fill them with high-value commodities and send them back to North America. The challenge for our industry is to figure out how we can utilize some of those containers that move back empty to move our products to their export destination.
Currently, we need to find ways to fit their economic models. It comes down to basic economics for them. If leaving a container in the Prairies means foregoing one more trip back from Asia, it simply does not fit their economic model. We need to find ways to reduce the cycle times — the amount of time that containers wait on the Prairies loaded with pulses and special crops — but factors such as the variability in our schedules complicate that picture. If the industry could act more cohesively and start to attract attention based on a critical mass equation, then perhaps we could attract those containers and turn them over more quickly. We are addressing those issues through our transportation strategy, which I need to develop over the coming year.
Senator Dawson: We heard from Regina representatives, who came before the committee two weeks ago. They suggested that they should have the inland ports. They would be closer to your product than the coastal ports.
I know you are following the work of the committee, so if along the road you have recommendations for the committee to consider, feel free to pass them along to the clerk.
The Chairman: The minister said that the rail shipper bill is supposed to be tabled in the House of Commons before March.
[Translation]
Senator Chaput: This morning I was in touch with some firms located in Saint-Jean-Baptiste, Manitoba, specifically with Parent Seed Ltd, Sabourin Seed Ltd, which markets on special crops, and Roy Legumex Inc., an exporting company. It was very interesting to hear what you had to say, because it ties in with everything I heard, with the exception of one point.
The exporting firm of Roy Legumex buys from several producers across the country. The company has two plants in Manitoba. It buys peas, lentils and special crops and exports products to Europe, Latin America and elsewhere in the world.
The company leases containers at the point of export. You are correct when you say that often the containers are in poor condition. Often the company exports the products that it buys — products that arrive by train or at the port — generally to Montreal or Vancouver. When it ships products by train to Vancouver, as Mr. Lafond was telling me this morning, it must often deal with congestion problems. When the product sits for a time, quality is adversely affected, and even more so if the container is not in good condition. These are two obstacles that we face in our quest for quality products.
This ties in with what you were saying. Mr. Lafond shared with me one of the concerns he has as an exporter. He has been in the business for a long time. The first person who managed the company is now retired and his has taken over from him. A trend seems to be setting in and pulses are no longer as lucrative as they once were. Growers seem to want to grow crops that produce a higher rate of return, such as crops from which ethanol can be produced. If production is down, so too then are exports. Have you heard anything about this?
[English]
Gordon Bacon, Chief Executive Officer, Pulse Canada: That is one of the issues facing our industry and why we have focused on transportation and other cost centres, to try to ensure we retain long-term competitiveness in export markets, but also that we are positioned as a crop that is attractive to growers across the West.
Certainly, the interest in biofuels, both ethanol and biodiesel, that exists in the U.S. has driven commodity prices up for soy, canola and corn. It is good news for farmers because it provides them with a crop that, in turn, provides them with higher return. It will compete with acres with other crops that might be less suited directly.
From a pulse perspective, we have a story that needs to be told. This is a crop that fixes nitrogen. It takes nitrogen from the air, as opposed to requiring applications of commercial nitrogen, which is produced from natural gas. It is an interesting story, perhaps a little off the transportation theme, but it is a point I would like to make, if you will allow me.
Biofuel delivers an environmental benefit for Canadians in that it lowers greenhouse gas emissions by using a renewable source of fuel. It is a good news story for farmers as well. It is a government policy that has created a demand for product.
There are perhaps other government policies that we need to look at, which will also provide environmental benefit for Canadians. It is an area we will be exploring — again, a crop that fixes nitrogen. It is something that, in the long term, will be of value not only to Canadians, but also on a global basis. It is something perhaps a Senate committee on agriculture in the future or other individual senators will want to talk about. It is an area we are launching into.
Mr. Lafond has addressed a concern all of us have, namely, that we must do everything we can to keep our industry competitive globally and keep it competitive with the suite of crops to which farmers have options.
We provide rotational benefits. We will get into the issue of agronomy and other value. Pulse crops have played a major role, as Mr. Cherewyk mentioned in his presentation. The area has grown substantially because they have provided a value to farmers not only in the return from the pulse crop, but also in how it complements the other crops they grow. That is why we are looking at solutions to the problems that challenge our industry, and transportation is clearly one of them.
Senator Johnson: You have a great industry, especially in terms of the lentils, the beans and the other markets everywhere.
Did you say that we are viewed in Canada as the worst transportation crowd in the world? Is that how we are viewed everywhere?
Mr. Cherewyk: I was speaking to the President of the Canadian Special Crops Association, the Vice-Chair of Pulse Canada, Mr. Murad Al-Katib, who is also the President of Saskcan Pulse Trading in Saskatchewan. This company is the largest splitter of lentils in the world, and he would very much like the opportunity to speak to this group, by the way. Unfortunately, he could not because he had to be at a show in Dubai this week; he is travelling throughout Europe as well.
When I spoke to him two days ago, he told me that, without question, all things being equal, we are the least preferred supplier of pulses and special crops because of transportation.
Senator Johnson: Not because of the product.
Mr. Cherewyk: The largest value-added processor in our country and the largest pulse industry in the country are telling us we are the least preferred supplier of this product because of our transportation.
Senator Johnson: How long has that been the case? Do you know? Is it the last 30 years?
Mr. Cherewyk: The situation has gotten progressively worse over the years. This is a relatively young industry. From 1990 through to today, we have expanded to become the world's largest. In the early days, there were many incentives for this industry to develop the intermodal mode of transport in this country. Railways were not charging steamship lines to store their containers on the Prairies. They were not charging to reposition them. They were trying to establish this business. It went hand-in-hand with the pulse and special crops industry.
Now we see the tables turning where they are not fostering the development of that as much as the industry is starting to look for different alternatives.
It is also worth noting this same gentleman's company has had to make a decision to expand and develop its next processing plant in North Dakota. The comment he made to me is that 95 jobs are going to North Dakota instead of Canada because of the transportation system. He gets more reliable transportation in the United States.
There are other factors, such as government domestic support programs that encourage pulse products; there are U.S. aid programs that purchase pulse products. At the end of the day, one of the critical factors was transportation and the availability to move products throughout the U.S. and the Port of Seattle.
Senator Johnson: Having said that, Transport Canada told our committee that it has been working with the Western provinces, railways, port authorities and others to establish priorities in investment, regulatory reform and to plan future growth respecting container traffic.
How involved have you been in these discussions led by Transport Canada with a view to improving the situation?
Mr. Cherewyk: We have been in a good position. We are a relative newcomer to these discussions. We have not had a full-time staff person dedicated to transportation. This is only months old.
In those months, I was able to meet and connect with the Transport Canada team that travelled across the country. They spent five days travelling across Western Canada and finished in Vancouver, and, of those five days, they spent three days with pulse and special crops people. In addition, they spent days at those pulse and special crops plants. There are individuals within Transport Canada who I can pick up the phone and speak to at any time, whether it is about the Canada Transportation Act or about our transportation strategy.
Recently, Mr. Bacon stepped in and presented a transportation presentation to another industry government group called the Special Crops Value Chain Roundtable. This group has finally included some Transport Canada staff and also acknowledges the need to increase capacity amongst Agriculture and Agri-Food Canada staff in the area of transportation. We are getting attention, and we are allowing our voice to be heard with this new interest in the pulse and special crops industry.
Senator Johnson: Was it in September that the government gave you a $525,000 grant to support the international strategy for Pulse Canada? It is supposed to go to March 2008. Are you developing an international strategy? What part will transportation have in this?
Mr. Cherewyk: The strategy you are referring to is the Canadian Agriculture and Food International Program, CAFI. The monies directed to Pulse Canada are matched funds. The sum of $562,000 over a two-year period is essentially matched 50/50 by industry dollars.
These programs have to meet specific criteria — market development, market access, and growth and innovation criteria — in international markets. There is no transportation funding within that program.
I had raised the question with Agriculture and Agri-Food Canada: Is there a way we can add a component here that addresses one of the key pillars to sustainability of our industry? We were told it was not a fit. As a staff person with a small budget from our industry, we are looking for additional funding from other programs. I will be submitting an application by the end of this week under a different funding program to get support to launch this transportation strategy.
Senator Johnson: That is good. It may not be a fit — I do not know what their criteria are — but it certainly is essential.
Mr. Bacon: I believe there are other programs where it is a better fit, so I am quite optimistic. As Mr. Cherewyk mentioned, the government has been a great partner for the pulse and special crop industry.
Senator Johnson: In terms of the intermodal mode of transport you mentioned earlier, what are the advantages to using intermodal containers for shipping pulses domestically and internationally instead of the other modes?
Mr. Cherewyk: As I mentioned, this is an industry that services thousands of buyers. I was told there are probably only seven buyers in the world that could handle a bulk vessel of lentils. It is just not possible. These are thousands of buyers that do not have bulk-handling facilities at ports of entry; and, as I mentioned, distribution channels within these countries do not support bulk product. They support containerized product, bagged product. This is a cornerstone. Containerized movement of product is key to our industry.
Senator Johnson: What is the cost differential of the intermodal containers as opposed to the bulk system of elevators and hopper cars? What percentage of the price received by the growers, for example, does this range of cost represent?
Mr. Affleck: I can make a comment on intermodal containers. That is only internal; it cannot be shipped on water. That is just from our source load, so it must be reloaded into containers. That is the same as taking it by rail by bulk, or boxcar. It is the same situation, and the cost goes up again because we are shipping less intermodally than we are per car.
Mr. Cherewyk: In terms of the difference between shipping bulk versus container, traditionally it has been cheaper to move product bulk than in container. In recent years, within the last two years, that has swung. The difference has been that it is cheaper to move product in container.
The customers, who were at one point taking a bulk product during those years, made a switch and started receiving containerized product. I would say within the last two years, there has been a trend toward containerized product. They have found that it is more well-suited to their business models. At port of entry, they can receive smaller shipments. They are easier to handle, store and split. This is something they got a taste of when freight rates were advantageous, and now they continue to purchase containerized product and move more toward a just-in-time process.
Senator Johnson: You were working in Taiwan?
Mr. Cherewyk: Yes.
Senator Johnson: Can you tell us something about the knowledge you gained there in terms of the Asian marketplace compared to what you are doing now in Canada, in terms of our marketplace?
Mr. Cherewyk: We have focused on the Taiwan market for feed. They are not a large purchaser of other food pulses. We have been targeting their feed industry.
If I could use Taiwan and my experience there as a bit of a model for how we have approached China, I feel it taught us much about doing business in China.
China has emerged as our third-largest market for product — peas in particular — over the last two years. This has grown dramatically. We have spent a lot of time there over the last number of years developing both the food and feed market. China has become a critical component of Canadian pulse markets.
We have effectively substituted peas for a traditional ingredient there. They manufacture vermicelli noodle, which you might know as a glass noodle. It is a clear noodle, very stretchy. They used to use mung bean starch as their ingredient. Now, through some work that had been done by the manufacturers, as well as through support that we had provided through the Canadian International Grains Institute, they have found a way to replace mung bean starch with yellow pea starch, at a much cheaper cost. Pulse exports to China went from an average of 50,000 tonnes to 60,000 tonnes to 250,000 tonnes.
Senator Johnson: It should be huge for us in the future too.
Mr. Cherewyk: China is a dominant player now in the vermicelli noodle market. They export to Japan, Europe and back to us.
Senator Mercer: In most of our hearings, we have had discussions and heard witnesses talking about inland ports. It would seem to me that the industry that most lends itself to the success of an inland port is an industry based primarily in Western Canada. We have had presentations from the City of Regina proposing that there would be an inland port in Regina.
It seems, from the layman's perspective, at least, that this may make some sense for the pulse industry. Would it make sense for there to be an inland port in Regina where processes would come together? The containers would be there, you would do the packaging, the trains would leave from Regina to Vancouver — assuming that you continue with your 60 per cent of product leaving from the West Coast; and then it arrives in Vancouver ready to load aboard the ships as opposed to having to be repackaged in Vancouver.
Mr. Cherewyk: I have spoken to the Saskatchewan Agrivision Corporation about this plan. They definitely have involved the people that need to be involved if something such as this is to be successful. The lead consultant is John Vickerman, from TranSystems Corporation, who was involved with the feasibility study at the Kansas City SmartPort.
The model exists; it is workable. Will it work in Canada? I could not tell you today whether I believe it will work. There is a lot of skepticism within the industry as to whether this type of inland port would work in Saskatchewan, primarily because of the wide range of stakeholders who would have to buy into this. It is not something the pulse industry could decide unilaterally — this is what we need, this will work — without having the buy-in and support from all the other stakeholders, who are necessary to make something such as that work. I feel that is where we are at now in terms of the minds of our industry: Where is that support? Show us that they are at the table saying that this will fly.
Senator Mercer: We are not just talking about inland ports, but about the entire transportation problem for pulse products. I get the impression, as we go through this study, that we — and that is the collective "we'' of we Canadians, whether government, industry or John Q. Citizen — really do not have an appreciation for the fact that our transportation system is, as you have described it, like that of a third world country. There is a huge impediment to the growth of industries that are on the verge, as pulse is, of greatness. It is already great, but on the verge of being even greater. We have lots of land to grow lots of pulse products, and we have lots of markets, but our single biggest problem is not being able to deliver the products on time and of the quality that is meant to be received. Is that an accurate statement?
Mr. Cherewyk: It is very accurate. We only have to look at something as recent and specific as a strike, which is bringing our industry to its knees in the last week. Where is it in terms of attention from the media? It is buried on page 3 of the business section of The Globe and Mail and we do not hear about it on the national news; yet millions of dollars are lost every day. People are shutting their businesses and laying off employees because of this strike.
Mr. Bacon: If I may add a comment on that, we are a big country, and we have all kinds of business. The railway is involved in many kinds of business, but Pulse Canada is part of a coalition of shippers who share a concern; it is not just the pulse industry that is raising the concerns.
Certainly, we are not an industry that moves 50- and 100-car trains, but we play an important role for people at St. Jean Baptiste in Manitoba or many towns across rural areas of Ontario, Saskatchewan and Alberta. We want and need to see a transportation solution that works for bringing container traffic in from Asia to large distribution centres. We also want to see container ports that can move the wide range of products that Canadians produce.
We want to emphasize, in this presentation, that container ports are like the doorway out of an assembly plant. They are also an entrance into that assembly plant for product coming into Canada. We have tried to highlight that there are problems with the assembly line back behind the door. We need to fix those problems to justify an investment to make a better, bigger, more efficient door. If we do not fix some of those problems, we will not realize the potential value of making the investment at those gateways.
The Chairman: Are there other questions, senators?
Thank you very much for an interesting meeting. Feel free to send us more information if you feel that we need more information from your presentation tonight and the answers you gave us. As for the gentleman you mentioned, he has already contacted our clerk, so he will be invited to appear before us. Thank you again for your presence.
The committee adjourned.