Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 15 - Evidence - Meeting of June 12, 2008
OTTAWA, Thursday, June 12, 2008
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill S-228, An Act to amend the Canadian Wheat Board Act (board of directors), met this day at 8 a.m. to give consideration to the bill.
Senator Joyce Fairbairn (Chair) in the chair.
[Français]
The Chair: Good morning, honourable senators, our witness and all of you watching our Standing Senate Committee on Agriculture and Forestry. Today, the committee continues its study of Bill S-228, An Act to amend the Canadian Wheat Board Act (board of directors).
There are a number of bills, as you know, on the CWB currently under consideration by Parliament. One of them is Bill S-228, and this has been introduced by the Honourable Grant Mitchell, a senator for Alberta. This bill proposes to enhance the powers of the board of directors on policy changes to the Canadian Wheat Board. It proposes to reduce the number of government appointees to the board of directors from five to three. It also amends the voting process and the question to be asked for the consultation required when government wants to make changes to the Canadian Wheat Board's jurisdiction.
Joining us this morning via videoconference is Peter W. Hogg, Professor Emeritus, Osgoode Hall Law School, who will give us an insight into some aspects of the bill. We are delighted to have him here.
Peter W. Hogg, Professor Emeritus, Osgoode Hall Law School, as an individual: As the members of the committee know, I have been asked to talk about one little corner of Bill S-228 and that is clause 22. Clause 22 is the provision that replaces section 47.1 of the act. It replaces it with a slightly different provision, although the two are very similar.
Essentially, the purpose of section 47.1 is to provide that no bill is to be introduced into Parliament that would exclude wheat or barley from the Canadian Wheat Board Act or would extend the act to any other grain unless two steps have been taken. Looking at paragraph 47.1(c), the first step is that the minister, or whoever has introduced the bill into Parliament, ``has consulted with and received the approval of the board for the exclusion or extension being proposed.'' Approval of the board is the first step.
Looking now at paragraph 47.1(d), the second step is that the producers of the grain that is affected ``have voted clearly and democratically by secret ballot, in favour of the exclusion or extension being proposed.'' The provision then proceeds to make some provision for the process of conducting the vote of the producers.
I should have said earlier that I have prepared a written submission, which I gather has been translated and distributed to everyone. I will just pick out the bones of that submission.
The general idea of clause 22 is that no one could introduce a bill of the kind specified — adding a grain or taking away a grain — unless that person had obtained the approval of the Canadian Wheat Board and the approval of the majority of the producers of the affected grain. Therefore the idea is to fetter Parliament's ability to make any changes of those kinds unless the change has the approval of two bodies outside of Parliament: The Canadian Wheat Board and the producers.
The question for my opinion is, is it constitutional to make a provision of that kind which limits Parliament's abilities in that way. The short answer, which I will elaborate on, is that it is constitutional to do that in the way in which section 47.1 has been drafted.
The key to understanding my point is that the limitations imposed by section 47.1 on the introduction of a bill to change the Canadian Wheat Board Act do not apply to section 47.1 itself. Parliament could change section 47.1 without the prior approval of the board and without the prior approval of the grain producers. In that way, Parliament's authority is not really fettered.
I will give you an example of a very similar situation — I am looking now at my submission, page 3, last paragraph. We have a precedent in Ontario. Senators will remember that the Progressive Conservative government of Premier Harris enacted the Taxpayer Protection Act, 1999, which prohibited any member of the executive council from introducing a bill to impose a new tax without first holding a referendum on the proposal and obtaining the approval of a majority of voters voting in the referendum.
You will remember there was then a change of government in Ontario. When the government changed to the present Liberal government of Premier McGuinty, one of the first things the new government did was to introduce the new Ontario health premium, which is a health tax, and they did that without holding the referendum that was required by the Taxpayer Protection Act.
They did it in this way: The Liberal government first introduced and secured the passage of a bill that created an exception to the Taxpayer Protection Act for the health premium that was going to be introduced later in the session. As soon as the first bill had been enacted and the exception to the Taxpayer Protection Act was enacted into law, the government then introduced the second bill, which imposed the health premium tax. Neither bill was preceded by any referendum.
The Canadian Taxpayers Federation, whom you may also recall had obtained a solemn promise in writing from the premier that he would respect the provisions of the Taxpayer Protection Act, brought legal proceedings in the Superior Court of Justice in Ontario claiming that the tax was invalidly imposed because it had not been preceded by a referendum.
The court decided that the requirement of a referendum applied to the imposition of a new tax, but it did not also apply to the provision that imposed the requirement of the referendum. Therefore, the first bill, which created an exception to the Taxpayer Protection Act for a new health tax, was validly introduced and passed without the referendum. Once that exception had been enacted into law, the referendum requirement no longer applied to the second bill, which was the one that imposed the health tax. It followed that the health tax had been validly enacted by that two-step process without holding a referendum.
That case shows that for a truly effective limitation on Parliament's powers, the limitation must be self-referencing or doubly entrenched. It must apply to itself so that you cannot change the procedure by the ordinary parliamentary process. If the provision is not doubly entrenched in that way, it is easy to evade the procedural requirement in the way that the Ontario legislature did with the Taxpayer Protection Act.
That is the situation with section 47.1. It is the situation with the existing section 47.1 and it remains the situation with the proposed 47.1. The proposed 47.1 is stronger in many respects but it does not apply to itself. It does not prevent Parliament from directly changing 47.1 if it wanted to amend the act without getting the approval of the board and the producers.
On page 4 of my submission, I have a quotation from a recent case in the Federal Court of Appeal, Canada v. Friends of the Canadian Wheat Board Act (2008). Although the court did not need to decide this for the purpose of that particular case, the Federal Court of Appeal said of the old section 47.1, ``It does not stop Parliament from enacting any legislation it sees fit to enact, including legislation that amends or repeals section 47.1 itself.'' It seems to me that last phrase is the key. As long as Parliament is free to amend or repeal section 47.1, there is no unconstitutional fetter on parliamentary sovereignty.
Senator Segal: Mr. Hogg, thank you for making time this morning. We always appreciate your learned counsel and distinguished advice.
Could you either agree or disagree with my conclusion, which is based on your brief and on your oral presentation this morning? First, it is not possible for a single piece of legislation, unless it is framed in the broader context of being a constitutional amendment — which would require approval by other legislatures — to impede the ability of Parliament to legislate in the future because that single piece of legislation could always be amended by a subsequent Parliament should that be the will of Parliament at that time. Is that a fair reading of what you have said?
Mr. Hogg: No, I do not think that is a fair reading, Senator Segal. There are two points buried in your statement. On the last point, you can cure the problem of making the special requirement inapplicable to the requirement itself by changing the drafting of the legislation. In other words, a provision like 47.1 could say ``and no change to section 47.1 can be enacted, except in the same manner and form as is needed for the addition or exclusion of a grain from the act.'' Therefore, as a drafting matter, it could be cured.
Senator Segal: What I want to nail down is the notion that any one bill introduced by any Parliament or any government could, by virtue of a statutory provision, seek to limit the capacity of future parliaments to change that statute and head in a different direction. I think it is a principle that is larger than this bill and would raise a very serious constitutional spectre about the sovereignty of Parliament.
Let us assume for a moment that this bill were to pass for whatever reason; the balance is on the issue and the balance in Parliament were to change; and a subsequent Parliament wanted to change the bill. Would that Parliament have any other duty beyond bringing in a piece of legislation that had within it a provision to amend the provision of this bill that they do not agree with? Why would they have to work any harder than that?
No piece of legislation changes the Constitution or the rights of Parliament. What am I missing?
Mr. Hogg: You are not missing anything. You are articulating a view that is conventional in the United Kingdom and is held by some constitutional lawyers here.
Here is what I think the majority view is, if you can talk about a majority view among constitutional lawyers. The essential proposition that you make is correct. It is quite wrong for Parliament to be able to say, on the one hand, we will have a GST, for example, and then, on the other hand, to say no future Parliament can ever change that no matter what its policies are, no matter how public opinion has changed. You cannot do that.
Everyone agrees with that and that is part of what you are saying. What causes disagreement is the question of whether Parliament can impose some procedural constraints on its future behaviour.
For example, in New Zealand — my home country — there are provisions that the Electoral Act could not be amended except by a special majority, in this case, a two-thirds majority. You could make changes to the Electoral Act but you needed some form of inter-party support to build a two-thirds majority. I think most constitutional lawyers believe that is valid, although there are some who disagree.
Senator Segal: The first point that you made was very eloquent. I thought you said that the reason this bill does not have a prophylactic effect on future legislation is because clause 22, which amends section 47.1 of the Canadian Wheat Board Act sets out the terms that must be followed prior to any amendment of some of the provisions of this bill, is itself not protected from future amendment.
Mr. Hogg: That is what I said.
Senator Segal: On that basis, if a future Parliament or government thought that the provisions of the amended section 47.1 of the Canadian Wheat Board Act were egregious or problematic for whatever reason, they could bring in legislation to amend section 47.1 and Parliament would either accept or not accept that proposition. That option would still exist if I understand correctly.
Mr. Hogg: Yes.
Senator Segal: May I ask a question, which is not as constitutional, but raises some interesting issues about delegated authority?
We have general legislation that establishes the role of the Canadian Wheat Board. We have governance provisions within existing legislation going back many years about the role of the board, the participants on that board and how they are to be chosen. However, the notion that Parliament would effectively limit, through this legislation, its ability to take action by deferring to the authority of another delegated authority established by another statute strikes me as a very interesting provision.
It would be like a bill saying that the Broadcasting Act could not be changed without the approval of the board of the Canadian Broadcasting Corporation. I am not suggesting that anyone would ever suggest that — I should be careful, I can think of a few people who would suggest that. However, it has a similar feel and I am troubled by the notion. We have enough constraints on what Parliament can do now by — not inappropriately — the Constitution, the Charter of Rights and Freedoms and judicial decisions over time.
Would you be worried about a trend where one Parliament tries to assert its capacity to govern from the grave over future parliaments by tying the freedom of future Parliaments to approvals that take place in organizations created by Parliament but that are, in fact, at arm's-length?
Mr. Hogg: Yes. I think in principle that is a very serious problem. If you agree with my point that establishing a special majority is something that Parliament could do — as I think they could. I think it is a very different situation to make Parliament's approval contingent on the approval of the CWB, which is not a parliamentary body, or of the vote of producers, which is not a body representative of the population as a whole.
Even if the referendum provision in Ontario's Taxpayer Protection Act is valid — and that is an interesting question —, at least the referendum invites a vote of the same people who vote for the legislature. However, I think that once you step outside the structure of Parliament itself and outside the general population, those forms of fetters on parliamentary sovereignty are probably unconstitutional for exactly the reason you give.
All I have to say with regard to section 47.1 of the Canadian Wheat Board Act is that we do not need to reach that point.
Senator Peterson: Thank you for your presentation, Mr. Hogg. I think the dilemma we have here is the situation of minority versus majority government. If the situation were different, we would be looking at something different.
If Bill S-228 is passed, do the provisions of the proposed amendments to section 47.1 of the Canadian Wheat Board Act have to be followed in terms of the plebiscite and the majority of the producers required? Are they still involved?
Mr. Hogg: To avoid the question that Senator Segal put to me on whether they are unconstitutional, which they may very well be, you can do that by going through the two-step process that the Ontario legislature did with the taxpayer protection bill. Therefore, first Parliament would pass a law changing or repealing section 47.1 of the Canadian Wheat Board Act without any referendum or approval. Then, it would be free to enact whatever law it wanted without the requirement of the approval of the board or of the producers.
Senator Peterson: If the Senate passes Bill S-228 and the bill goes to the House, would it stop there and this provision you are talking about would be done prior to dealing with the bill further.
Mr. Hogg: No, it could be enacted in its present form assuming that no change was proposed to the grains covered by the Wheat Board. Then it would sit there — this is what is bothering Senator Segal and rightly so — as an attempted restraint, in effect, on the ability of future parliaments to change the Canadian Wheat Board Act. That restraint could be avoided if Parliament were to follow the two-step process and still make a change to the act.
Senator Mercer: Professor Hogg, I should preface my question by telling you some good news and some bad news: I am not a lawyer.
I do not quite understand how this is a restraint on future Parliaments if you follow the simple two steps that the Government of Ontario took in respect of the act that you referenced.
Mr. Hogg: You are quite right. If the two-step process is taken, then the restraint is ineffective. For those of us in Ontario watching this occur, it was not as easy to impose that health tax as it would have been in the absence of the Taxpayer Protection Act. Politically, it was a controversial policy for Premier McGuinty to make because he did not go to a referendum as he had promised to do and received a great deal of political flak as a result. However, he has recently won re-election so the political difficulties obviously faded away. However, it makes it politically more difficult to do but you are quite right in that it is an ineffective restraint legally.
Senator Mercer: Politically, politicians should never sign such promises in the heat of an election campaign because it might come back to haunt them. You made one reference to New Zealand's two-thirds majority on amendments equivalent to our Elections Act.
Is there any reference in Canadian law, other than the Ontario reference you used, whereby restraints are put on legislative bodies similar to those in Bill S-228?
Mr. Hogg: There are a few, I believe. Ontario's Taxpayer Protection Act is one reference, which is still on the books. I remember that after the failure of the Charlottetown Accord, the Liberal government introduced a regional veto statute. Although it is not exactly the same as what we are talking about, it is similar. The Regional Veto Act essentially says that no minister is to introduce a resolution into Parliament to amend the Constitution, unless the consent of various provinces has been first obtained. A kind of regional amending procedure is pasted over the existing amending procedure. For example, if a prime minister were to propose an amendment to add property rights to the Charter of Rights and Freedoms, he would not only have to abide by the amending procedures in the Constitution, but also the Regional Veto Act would require him to secure the consents of a certain combination of provinces in addition to that. That is a similar kind of restriction.
Senator Mercer: Is there not an exception to that rule as well, if the constitutional amendment affects only one legislative body? I am thinking of the amendment made to the Constitution concerning Newfoundland schools.
Mr. Hogg: Yes, the provisions that are completely exempt are those that affect one province only. You have passed several amendments bilaterally — the federal Parliament and one province. Newfoundland has had three of them and Quebec has had one. They are not captured by that provision. However, a larger amendment would be captured.
Senator Mercer: There are no provisions in any legislation that I have seen that has the special majority requirement, as you referenced in New Zealand, other than a vague reference in the Clarity Act, which makes reference to a clear majority. I do not believe that it is actually defined in the act, obviously for political reasons. Am I correct?
Mr. Hogg: I do not know of any special majority provisions, but it is difficult to be confident that there is not one lurking somewhere in some statute. I have not made any attempt to do a complete survey but somehow I think I would know about them because constitutional lawyers like to talk about these things, and it would probably have arisen. My guess is that you are right in saying that we do not have any special majority provisions.
Senator Callbeck: In Bill S-228, it says that the minister has to consult the CWB. Does the board have to agree to this or do they just consult?
Mr. Hogg: Under the version that is before the committee, the board has to agree. It says, ``has consulted with and received approval of the board.''
Senator Callbeck: You are talking about Bill S-228.
Mr. Hogg: Yes, that is in Bill S-228, not in the old version.
Senator Callbeck: The old version says, ``consult the board.''
Mr. Hogg: I will check that but I am almost certain that you are right.
Yes, under the old version it is simply consult.
Senator Callbeck: Under the old version, they consult and the producers must approve. Is that right?
Mr. Hogg: Yes, that is right. Under the old version the producers have to vote in favour but the board does not have to approve.
Senator Callbeck: You are saying that if Bill S-228 were to pass, Parliament could get around that board approval by doing what they did in Ontario to the Tax Protection Act.
Mr. Hogg: Yes.
Senator Callbeck: Parliament could bring in an amendment to section 47.2, or Parliament could appeal it, or bring in whatever they like.
Mr. Hogg: That is right, yes.
Senator Gustafson: I speak as a farmer to the situation in Western Canada. As everyone knows, this has become a big concern for farmers. My fear is that this bill only adds to the confusion already out there.
The farmers are very protective of the fact that it seems everybody else wants to make the decision for them as to how things will be done. I do not see where this adds or strengthens this issue. I think it only will confuse the situation that we already have on the Prairies.
Many farmers are looking for the ability to make a choice as to how the grains are marketed. We are moving into a global society, especially in the grain industry as it relates to food and so on. I feel that this is no time to complicate an already difficult situation that the farmers are feeling in Western Canada. Frankly, they feel that the whole of Canada would impose its wishes upon them. I use the example of the Ontario Wheat Board, which has the right to sell the grain to the board, sell it into the United States or wherever.
There are many farmers who feel they have that right. To complicate it as we have here even this morning. It has become a lawyers' debate, which Senator Segal and yourself thoroughly understand. I just do not think this is the time for such a debate.
Senator Segal: This is a point of privilege. My mother would wish that Senator Gustafson was correct and that I was a lawyer. She would prefer that I was both a lawyer and a doctor but I am neither. I would like to put that on the record.
Senator Gustafson: I do not have any further comments on it; I think the timing is bad for this given the stressful issues our farmers are already facing. No one is saying we want to do away with the Wheat Board. Farmers are saying they want choice.
The Chair: Professor Hogg, you have definitely stirred all of our minds and we are happy that you took the time to bring your wisdom before us. We wish you all the best.
Mr. Hogg: Thank you, senator. I have enjoyed appearing before you.
The Chair: Our next witnesses are from the Grain Growers of Canada. Jeff Nielsen, Vice-President and Richard Phillips, Executive Director, will give us their views on this bill.
Jeff Nielsen, Vice-President, Grain Growers of Canada: Good morning, honourable senators, and thank you for allowing us to speak to your committee today. This is a matter very close to my heart and my business.
I own and operate a 1,350-acre grain and oilseed farm near Olds, Alberta. Along with being Vice-President of Grain Growers of Canada, I am also President of the Western Barley Growers Association. My experience in agriculture includes being elected by farmers to the board of directors of United Grain Growers and to the board of Agricore United.
On behalf of the Grain Growers of Canada and the Western Barley Growers Association, we do not approve of the proposed Bill S-228. With respect, we currently have before Parliament Bill C-46 and Bill C-57 that will add clarity and amend the Canadian Wheat Board Act to reflect the wishes of Prairie producers. In the recently released Canadian Wheat Board producers' survey, the farmers' wish for marketing choice was clear.
Barley production in Western Canada averages 10-plus million tonnes a year. Of that production, roughly 44 per cent comes from Alberta, 43 per cent from Saskatchewan, 8 per cent from Manitoba and 3 per cent from the Peace region of British Columbia. Alberta and Saskatchewan produce close to 100 per cent of the malt barley production due to disease factors in Manitoba.
In marketing my malt, I am forced to go through the Canadian Wheat Board and pay freight costs to Vancouver, even though, where I farm, I have access to two Canadian malting facilities within a 100-mile radius. The wishes of barley producers echo the calls from the Malting Industry Association of Canada, whereby producers and maltsters need the ability to deal directly with each other on malting varieties, quality, quantity and pricing contracts. These contracts then allow producers a bankable contract and the maltsters the barley they require to run their facilities.
For 10 years, the Canadian Wheat Board has conducted surveys, and for 10 years barley producers have supported marketing choice. In all of the 10 years, support for the complete Canadian Wheat Board control on barley has never exceeded 36 per cent.
CashPlus is the Canadian Wheat Board's answer to 10 years of barley producers asking for marketing choice. The majority of malt producers and our malting industry soundly rejected CashPlus. This program still has the Canadian Wheat Board playing an interfering role as an unwanted middleman.
The inability of the Canadian Wheat Board to give producers adequate, clear pricing signals is currently the major impediment for maltsters to get barley into the facilities, thereby threatening their operations as barley is the only product they can use. I would note that in Alberta alone, there are over 1 million acres of barley production whose producers do not have Canadian Wheat Board permit books. That means 1 million acres of top quality barley that our malting industry cannot touch.
The need for more malt in the world is growing. One of Canada's largest malt processors made it clear in late- January here in Ottawa that they are expanding and growing their operations. Yet due to the Canadian Wheat Board, they will not invest in Canada. More malting facilities here would create more value-added and greater economic returns to all of Canada, yet we see have seen new builds that should have been in Western Canada go to the U.S.
As a feed barley producer, domestically, I have choice. I can sell directly to an end user such as livestock operations. If we had true barley marketing freedom, we would be able to react to all the barley marketing options quicker and bring that value back to the farm. An example of this is the 800,000 tonnes our Canadian grain trade sold internationally last spring, speculating that the CWB monopoly would end August 1 of last year. At the same time, the Canadian Wheat Board refused to participate in that market.
As a Western Canadian market producer, I am frustrated with being forced to use this monopoly when fellow farmers in Ontario, Quebec or the Maritimes can export for free. In support of the Canadian Wheat Board, I believe it can transition into an entity that will allow those who wish to market through it that option. Perhaps a new-generation cooperative could be an avenue to look at.
We are all aware of the possible international changes that are fast approaching. If we do see consensus at the WTO in the coming months, the Canadian Wheat Board will lose its government guarantees in 2013.
The Canadian Wheat Board's marketing expertise and international reputation will successfully carry it forward under its evolved entity, even without the monopoly control. Barley producers have support for marketing choice from the three provincial provinces — B.C., Saskatchewan and Alberta, Market Choice Alliance, the Malting Industry Association of Canada, Ice Futures Canada, the Western Canadian Wheat Growers Association, the Alberta Barley Commission, the Grain Growers of Canada, the Western Grain Elevator Association and the Brewers Association of Canada.
I respectfully ask all senators to vote against Bill S-228 and speedily vote for Bill C-46 and Bill C-57 when they are brought before you.
Richard Phillips, Executive Director, Grain Growers of Canada: I am currently the executive director of the Grain Growers of Canada. My wife Sally and I own a small seed farm in Saskatchewan where I have produced seed for over 20 years. In addition, together with my father, we own a couple hundred feeder cattle.
Prior to this job, I worked off farm with the ecumenical Canadian Foodgrains Bank and with the former minister of the Canadian Wheat Board, the Honourable Reg Alcock.
Bill C-228 touches on governance; and I want to touch on one point quickly, which is reducing the number of appointed directors from five to three.
When I sat on the board of directors of United Grain Growers, we were a large cooperative and we were struggling financially. Prior to taking the company public, we had 100 per cent farmers on the board of directors. When we went public, we brought in outside directors. I cannot say strongly enough how important it is to have outside strength on your board of directors.
We have seen from history, even with the wheat pools, that the one challenge of some of these organizations is that we have too many farmers. I say that with the greatest respect as a farmer because we do not necessarily have that board strength of assessing human resources and international currency risks. There are also other things at play that we as farmers do not experience on our farms. Therefore, we think this bill is a step in the wrong direction. You need that bench strength if you are to compete in the global grain trade.
The gist of the CWB debate and the bills come down to two key issues as Mr. Nielsen mentioned. First, have farmers clearly expressed their desire for change as required in the act? Second, can the CWB successfully be part of an open market?
I have circulated the actual questions asked in the plebiscite and the results. I am here following up on what the Canadian Wheat Board and the minister talked about. People say the questions were not clear and even if they were clear, the CWB cannot operate in an open market. I would like to take a couple minutes to address that.
The first option was that the Canadian Wheat Board should retain the single desk for the marketing of barley for domestic human consumption and export markets. It is very clear that you are voting for the Canadian Wheat Board monopoly. The second option included the option to market my barley to the Canadian Wheat Board or any other domestic or foreign buyers. This, again, is clear for the farmers. It will be an open market, but we want the CWB as part of it. The third option meant having nothing to do with the Canadian Wheat Board.
The results indicate that 37.8 per cent wanted the monopoly, 48.4 wanted an open market with the Canadian Wheat Board as a player and 13.8 wanted no CWB whatsoever. What the minister looked at and what we would look at is that combining option two and option three, about 62 per cent of the farmers want no CWB or they want the Canadian Wheat Board only as an option. It is clear that the majority of Western Canadian farmers want the ability to market their own barley or to market through the CWB as an option when it is competitive with its prices.
Another issue, though, is whether option two was even a valid option. That is what you hear from the CWB and others: We cannot compete and cannot add value in an open market. I heard them bring that point forward here before the committee.
We feel strongly that they can add value and provide a great service to farmers even without the monopoly. If you look at the numbers again, and I believe Senator Callbeck raised this point, over 80 per cent of the farmers want the CWB.
If you were in Senator Peterson's real estate business back in Regina and 40 per cent of the people wanted to deal only with you and 50 per cent of the people would like you to be their option, you would be ecstatic to have that sort of corner on the market without having 100 per cent of it.
Approximately 86 per cent of farmers want either the CWB monopoly or the board as a strong option to deal with. They have a huge base of support that already wants to deal with them. Yet they say they cannot compete or add value. However, we think people will deal with them. Forty per cent of the farmers will still deal with them and, probably, exclusively with them. That is a huge volume of grain.
There is the voluntary wheat board in Ontario. They, too, handle a large percentage of the grain every year because they add value.
Another issue that the CWB and others raise is that the Canadian Wheat Board does not own facilities so how can they compete with the private grain trade. If the Canadian Wheat Board went to tender and asked who wants to handle all the CWB barley that they will buy this year, those grain companies would jump all over each other trying to buy that grain. It is a volume driven business and people want to put as much grain as possible through those grain elevators. It is a very competitive business. You would have Cargill, Viterra and Canadian companies like Parish and Heimbecker, Paterson Grain and James Richardson International falling all over themselves to bid and trying to get that business through their driveway. Having to own the facility is a red herring. There are many people out there willing to handle that grain for them.
I sat on the board of directors of a grain company for a number of years. Another thing the CWB does not understand is that the margins are razor-thin in the grain trade business. If they think owning a facility to handle only CWB grains will make money, they are wrong. They will lose hoards of money doing that.
You have to be able to handle canola, peas, lentils, flax or whatever crops are needed at a port position. You need to have the flexibility to handle all of that and not only the CWB grains. My prediction is that they would go under in record time. They may take issue with that. However, you have to be flexible in that business to make a living.
In summary, first, we feel strongly that farmers have spoken clearly. They want change and they want choice. Second, we believe the Canadian Wheat Board can add value and be a strong competitor in an open market.
Senator Mahovlich: Bill S-228 proposes that two of the five appointed directors be chosen by ten elected directors rather than by the government. Will they be elected by the producers?
Mr. Phillips: Yes.
Senator Mahovlich: In other words, it is fair.
Mr. Phillips: If we were to move to the middle ground on this issue, I would say that there needs to be some sort of joint approval for those five outside directors. The board could recommend names, the government could recommend names and together they could find common ground. I think that would be the preferred method. At this time, the government appoints all five members. They may appoint people whom the board likes or does not like. Likewise, maybe the government would change and the new government would appoint all five with a different view. We feel that joint decision-making would be the best way to shake out this issue.
Mr. Nielsen: On the election issue, 10 members are elected by farmers. Currently, there are regulations on how to obtain a ballot and Bill C-57 is looking at that as well. Many producers do not vote in Canadian Wheat Board elections because they do not grow board grains at the current time. Therefore, the minister is looking at changing that in Bill C-57.
Senator Mahovlich: How would this improve the governance of the Canadian Wheat Board?
Mr. Phillips: Anything that would strengthen your outside directors to have truly competent people in their areas of expertise would be good. I think what the elected board members could best identify, along with senior management of the Canadian Wheat Board, is what areas of expertise are needed on the board of directors rather than picking the appointed directors. Then the government can look for names of qualified people.
For example, if the CWB said we are missing accounting and auditing skills on our board, then the government could go to Deloitte & Touche or elsewhere to find that expertise, which they recently did by finding an ex-financial officer of one of the largest grain companies in Canada. Another example is if they said they need international currency management to hold the management accountable in those areas. I think those directors should be identifying the areas of expertise rather than picking people. The perception would be that some of the people on the board would only want to pick people who think their own way politically and that the government would choose the same like- minded people. Therefore, I think a joint process would be best.
Senator Peterson: Do you think there was ever a time when barley producers wanted to be part of the Canadian Wheat Board?
Mr. Nielsen: The 10-year survey show it has not been there and in Alberta, it is probably closer to 20 years where their voice has supported marketing choice. I remember the day when I had to market all of my barley through the board.
The whole marketing system and the marketing environment has evolved into something completely different from what it was 10 or 30 years ago. It is evolving constantly. Our markets are changing and we have to see the opportunities to market into new environments quicker. Unfortunately, the Canadian Wheat Board cannot respond to those opportunities as quickly. We saw that with 800,000 tonnes of grain last spring.
Mr. Phillips: Things have changed a lot. If you go back 20 or 30 years as a farmer — I am old enough to do that — we did not have access to information. We did not have the Internet or the ability to know what grain prices were. There was a time when people loaded up their trucks with grain, drove to town and the elevator companies offered them a low price. They accepted the price offered because they were not about to drive their grain all the way back to the farm. Today, farmers phone ahead, send a fax, or check on the Internet to learn the price of grain. We farmers are better able to price our crops, the same as we do with flax, oats, peas and lentils. When the CWB started, there was a good role for it because the farmers were getting ripped off by the grain companies. However, that has evolved with the move to the information age because farmers are no longer in a position of feeling beholden to the grain companies in the same way.
Senator Peterson: On the recent plebiscite with the three questions that you handed out, do you think that there would have been a great deal of confusion when people were voting? Might they have thought that it was more than a barley plebiscite and that it was about the Canadian Wheat Board in the bigger picture?
Mr. Phillips: I do not believe so. Some people made allegations that it was the start of the slippery road to getting at wheat. For the purposes of this plebiscite, it was clear that it was only about barley. It was clear in the media announcements and letters to the editors that it was about barley.
Senator Peterson: Would it not have been better had there been fewer questions? The results depended on which side of the fence you were on and whether you added one and two to get your percentage or added two and three to get your percentage. It is unfortunate that it comes down to that.
Mr. Phillips: We do not disagree with you, senator. One or two questions would have been clearer. The people who voted for option three probably would have voted for number two; then it would have been either the Canadian Wheat Board or an open market.
Senator Peterson: Do you think that in trying to revolve this matter, it would have been better to make barley a separate discussion rather than bring the CWB into it? Would that have been the way to do this?
Mr. Phillips: With respect, it was clear to us that it was about barley. Perhaps I am misunderstanding your question.
Mr. Nielsen: It clearly involved barley. Due to the three questions, you would have to check with Minister Ritz but Minister Strahl was obligated to offer the three choices. You would have to talk to Minister Ritz to obtain clarity. Out of the 10 million tonnes to 12 million tonnes of barley crop produced in Western Canada, only 2.8 million tonnes are handled through the CWB. We have a struggling but dynamic feeding sector in Western Canada. The only barley that the Canadian Wheat Board has ever handled has been for the malt market. Last year, there was an opportunity for the feed market and a private grain trade saw that opportunity and took advantage of it but decided to deal with the Canadian Wheat Board to move those tonnes through the system. The Wheat Board handles only 10 per cent to 20 per cent of the barley crop. Dealing with them is a real thorn in the side of barley producers when it is such a small percentage of their business.
Senator Mercer: I go back to political science class many years ago at university when a professor told me that figures do not lie but liars figure. As Senator Peterson said, the results depend on which two numbers you add together. I would disagree with you that the elimination of question three would bring any clarity. The elimination of question two would bring greater clarity on what the producers want. There were substantiated allegations in the media that a large number of voters were dropped off the voters' list just prior to the plebiscite.
Mr. Nielsen: Yes, that happened in the last director elections, and I believe Bill C-57 addresses that. Many producers vote in the director elections that have no actual ties to the production of the grain, and the minister at the time was trying to clarify that. To define ``producer'' is what we want. As Minister Ritz said, you do not want your banker or someone else with a special interest having a vote when he or she does not have any direct contact with how you manage your own business. Many farmers need to have a land base and have multiple landowners. They are on a cash share basis and lease out their land for cash. Even though I am paying cash to rent from them, they do not have a right to tell me how to run my business. If they have a crop share whereby they are paying part of the cost of producing the crop and receiving a return for the crop, then maybe then they can have an opinion, but that is a dicey area too.
To clarify, you want actual producers on the voters' list. You do not want a retiree, no disrespect intended, from Florida or Arizona sending a CWB ballot back when he or she is not on a farm in Canada delivering the grain to an elevator.
Senator Mercer: That might be true but I am not sure that I feel comfortable having the Minister of Agriculture making some of those decisions either. That needs to be clarified. Free advice is worth what you pay for it, but I will give some anyway. This has to be cleared up as this debate on the Canadian Wheat Board continues because it will receive a rough ride in this town if we do not feel comfortable that everyone involved has had a say.
I like your reference to finding quality board members. Farming is not a simple business. Some of the best entrepreneurs in the world are farmers. You have to be because you take the biggest financial risk of anyone. You take more risk than anyone on Bay Street each spring when you put the seed in the ground. You take the risk all year long in an environment that you do not control because you never know what the weather will do. We have talked many times before about how things can be going along fine until a hail storm hits in mid-August, and it is over just like that. Quality people for your board members are the farmers but the provision of some appointees will allow you to fill any gaps. Having worked with many boards of directors during my career, I know that the additional expertise at the table is not necessarily the elected members of the board, whether they are farmers or appointees. They are your senior staff and if you hire well and pay well, you will receive good advice. I do not think you need to have all of them at the table to vote but having them in the room giving quality advice can be invaluable. I apologize for giving a speech.
My concern is that you start down this slope of dismantling the Canadian Wheat Board, although you say it is not that it is perceived that way because this is a perception business. Adding the results of questions two and three together and following that number would bring us to the edge of that slippery slope to dismantling the CWB, which has served Canadian farmers very well historically. Certainly, the board needs to evolve into something but I am not the expert on that.
You gentlemen have your crops in the ground now. What happens if you do not have the Canadian Wheat Board and we have a worldwide glut of grain and barley and the price tanks? Senator Gustafson has helped educate me about the price of wheat. When I came to this committee, the price of a bushel of wheat was $1.50. It is not $1.50 anymore.
What happens if the price of barley drops because of a world glut of barley or wheat? What if producers worldwide have good crops?
Mr. Phillips: I do not think it would be much different with or without the CWB. The Canadian Wheat Board is selling into a world market and many other people are selling the same crop. Whether there is a Canadian Wheat Board or a world glut, the rising tide floats all ships and likewise, with the grain prices, everyone goes down together.
Farmers have diversified away from CWB crops so that we can manage our risk and be more profitable. It would be no different than if there was a glut of oilseeds with my canola crop, flax, peas, lentils or any other crops that we grow. We manage all of that risk ourselves, follow the pricing signals and market all that grain ourselves.
If there is a global glut of barley, the CWB will not make any more progress than anyone else would make in terms of moving it at a better price. In the world market, they are just price takers, competing against Australia, Brazil, Argentina, Europe and the United States. It is a global marketplace even for them. There would not be much of a difference for us as producers from the grain price side.
I would like to go back to the line of questioning concerning the plebiscite questions and whether option two should have been eliminated. There has been some debate concerning this option. Some have asked if indeed, option two was a valid option. Some have asked should question three have been eliminated and leave options one and two only, which would leave the monopoly either for the CWB or leave the CWB in the open market along with everyone else.
The question has been whether the Canadian Wheat Board can operate and add value for farmers in a competitive marketplace. We believe it can. There is no reason the Canadian Wheat Board cannot operate just like the Australian Wheat Board operates in the open market. The Ontario Wheat Producers' Marketing Board competes against the private sector. I believe they are holding close to half the grain in Ontario because farmers want to deal with them because they add value.
Not all farmers want to market their own grain. Some people say, ``I take enough risk pricing my canola, peas and lentils. I like to put some grain into the CWB and let them do the marketing for me.'' Many farmers want that. That is why we are not saying we should end the CWB. We are saying the Canadian Wheat Board has to be strong and it must be there, even in the open market. People want to do business with it.
The discussion the CWB will not engage in is what tools might you need to ensure you will be strong and competitive in an open market? That is where the debate has never gone. We have asked the Canadian Wheat Board to let us have that discussion. However, they are afraid that is the start of a slippery slope; if they engage in that discussion, it is as if they are admitting they will move to an open market. That is unfortunate.
Senator Mercer: You did not comment on my reference to the quality of the board members and the quality of senior management, which helps the board make its decisions.
Mr. Phillips: I will return to when I was on the board of the United Grain Growers. We were a publicly-traded company and, suddenly, there was a hostile takeover bid. As farmer directors, we bring a lot of strength from the customer side of how the business needs to be. We were fortunate to have Jon Grant. I do not know if you know of him, but he was on our board and he fought off a hostile takeover with Lac Minerals.
There was that outside expertise that is absolutely critical. As grassroots farmers, no matter how risk-oriented we are, no matter how entrepreneurial we are, we do not have that expertise or that history or knowledge of some of those issues. Therefore, it is critical to have that expertise.
I will talk about senior management. The reason you have those outside directors on your board is so you can actually challenge and ensure your senior management is following things, doing things properly and ensuring they have appropriate risk management tools in place. That is hard to assess when you are a farmer on a large board like that.
There was a CEO named Brian Hayward on the board of the United Grain Growers. He was making excuses why the company was not making money or meeting its budget. Art Mauro, CEO of Investors Group was on the board, and Mr. Hayward said to him, ``It is a unique business.'' Mr. Morrow said, ``Horseshit, young man. If I had a dollar for every CEO who said he was not making money because his business was unique, I would be a rich man today.''
You need that strength. We, as farmers, were appalled. How does one talk to a CEO like that? However, that is what you need on your board to strengthen your farmer directors to ensure management is on track, doing what they are supposed to be doing and delivering on the goals.
Mr. Nielsen: I agree with that comment. With Agricore United, we had Allen Andreas, CEO of Archer Daniels Midland at the time. His wealth and experience brought wonders to that board. He added value and quality questions where they were needed.
All of the Canadian Wheat Board directors have taken director training. I took the course myself when I was where Agricore United. At the end of successful completion of the course you receive a ``diploma'' saying that you are a chartered director. It is a very intense session where you learn about corporate governance, financial management and social responsibilities. I find it frustrating that having taken the course myself, that some of the directors from the CWB do not follow the teachings of that course.
That is why we need strong appointed directors, whether a joint advisory board selects the directors or not. You need them on the board to add their expertise. There have been politicized issues before the board and we need strong directors that do not involve themselves in politics. We have to move forward into the future.
In the latest Gandalf Group survey, the farmers were asked two questions. They were asked if they had to choose between two different approaches in marketing barley, which they would prefer. Would they prefer the one that was solely Canadian Wheat Board or one that was open market? Three years out of 10, the CWB had a slight margin: however, the seven years out of 10, including this last year, was 52 per cent voting for an open marketing system. That was the Canadian Wheat Board's own survey.
Senator Callbeck: You said you are not for Bill S-228 but that you favour Bill C-56 and Bill C-57 that are in the other place.
I want to ask you a question on Bill C-57. Right now, as I understand it, to vote for a director, you have to be a permit book holder. Under Bill C-57, that will be changed. You would have to produce 120 tonnes of grain within the last two years. The reason I am asking you this question is that, in 2005, a panel recommended 40 tonnes. One-hundred and twenty tonnes is three times what the panel recommended. Does that mean that a lot of small farmers will not have a vote?
Mr. Phillips: I will touch on a couple of things; one is: How do you vote today? In the permit books that you have, the actual producers are listed, as are interested parties and land owners. For example, if Senator Gustafson passed away tomorrow and left his land to six children, all six of them would have ballots whether they were schoolteachers in Kelowna, B.C., or local producers. Anyone that was listed at all had ballots.
The other way is: If you did not have a permit book, you could swear an affidavit that you were a farmer and you could get a vote. Therefore, anyone who did not have a permit book could still have a vote. That is what is happening today.
I was instrumental in Minister Alcock's office in getting up and running the panel that brought forward the 40- tonnes. The minister's office came forward with the recommendation for the 120 tonnes.
I think we could live with either one of those requirements. We think 120 tonnes is likely a more realistic number of what we would call a ``commercial farmer.'' As an organization, we are trying to get at saying, ``Whoever wins the Canadian Wheat Board elections, wins the elections. However, let us have the actual producers who make a living from farming do the voting.'' How do we get to that stage? Forty tonnes of grain is very small. Only a small hobby farm would produce that amount.
We are trying to move away from having interested parties who do not have farms or who just have small hobby farms, and say what is the minimum amount of grain? Senator Peterson and Senator Gustafson are from Saskatchewan and they would know that 120 tonnes of grain is roughly a quarter section of land. You can still be a pretty small farmer today and still have 120 tonnes of grain. Even that is a relatively low bar by today's standard.
Mr. Nielsen: Generally, if you have 120 tonnes in a given two-year period, you cannot be a farmer because you would not be economically viable if that is all you produce. You would need to have an off-farm job. In a sense then, you are not really a farmer.
Senator Callbeck: This strikes me as strange that a panel would come up with 40 tonnes, and the legislation would come in saying 120 tonnes.
Mr. Nielsen: The panel actually had a wide range. I know the Grain Growers of Canada appeared. The wheat growers wanted 500 tonnes and a ballot for so many tonnes after that. To condense it down, that is the figure they came up with at that time.
Mr. Phillips: We could probably live with either number, as the Grain Growers of Canada. The 40 tonnes takes 30 per cent to 40 per cent of the names off the voters' list that senator Mercer referred to as being reduced a little bit. I believe that the percentage is a little higher than that for 120 tonnes, but perhaps not significantly. It does take many names off people who do not actually farm, whether it is 40 tonnes or 120 tonnes.
Mr. Nielsen: Once again, it still allows those people, if they want to vote, to get a statutory declaration and say that they have an interest in the farm. You do not get the ballot mailed to you, but you can apply for the ballot.
Senator Callbeck: If you grow less than 120 tonnes, you can still vote?
Mr. Nielsen: Sorry, if that bill passed, no, but —
Mr. Phillips: The issue is these voters' lists. There is not a really good voters' list out there. The best voters' list is those people who report farming income, but Revenue Canada will not release that information for privacy reasons.
If you go to the Canadian Wheat Board list and mail out to all the people with permit books who deliver 120 tonnes or more, it will take a lot of people off who do not deliver that much grain. If Jeff Nielsen does not have a permit book and still produces 120 tonnes of grain, it would still be available for him to get a ballot by swearing a declaration to that effect in front of a notary. Anyone who does not have permit books would still be able to get a ballot and vote as long as he or she meets the minimum qualifications.
Senator Callbeck: Making it 120 tonnes will take many people off that list, which will have an effect on the voting — that is the bottom line. I would think most of those people at the low end would want the Canadian Wheat Board.
Mr. Nielsen: You could give that argument, but it comes down to the fact that we want a successful Canadian Wheat Board that will work for the majority of producers. If you look at your past speakers, Minister Ritz, Mr. Banack and Chairman Hill, they all have large operations — or Minister Ritz had one at one time. To be successful in agriculture, you need a large land base to produce the grains and you need to be diversified in crops to balance the risk over that with the different crops. Some farmers balance it out with livestock production. I will go out on a limb and say that you cannot live off a quarter section of land.
Mr. Phillips: Who do we want directing where we go in agriculture? I think we want business-sized farms. Who are the people who are going to make this industry grow and thrive? It will not be the people who produce under 120 tonnes or 40 tonnes. People that are only producing that amount will not make this industry grow into the future. Those are not commercial-sized farms.
Senator Callbeck: Mr. Phillips, you spoke about the importance of the board being strong. If the government gradually moves more grain products into the open market and you have fewer people dealing with the CWB, will that not weaken the board? Will it not be difficult for the Canadian Wheat Board to be in competition with the multinationals?
Mr. Phillips: It is not fair to say it is the smaller farmers that support the CWB. We see support for the Canadian Wheat Board all the way up to very large farmers. There will be lots of people who still want to do business with the board. It needs to show it is adding value — if you deal with us, here is what we can do for you.
The Wheat Board has a number of tools in its toolbox that the private sector does not have. They have some government guarantees and the ability to pool prices so that the farmer does not have to worry about picking the high or low. He can put it in there and take a pool price.
They offer a lot of strengths that a lot of farmers, large and small, will still want to take advantage of. That is why you see roughly 40 per cent of the farmers want to deal only with the Canadian Wheat Board. They have a huge customer base that will continue to deal with them, which will not lead that strength in the board to go to the private sector.
There also are people who want out of the CWB, so let them go to the private sector. You still need the board to be strong and effective. It cannot be trying to operate and somehow be neutered in this world. We would like to see the CWB engage in that discussion, as to what tools they might need to ensure they remain strong even in an open market. What is it that you need? That is the discussion we would really like to have.
Senator Callbeck: Do you feel there will be any problem with the Wheat Board competing with the multinationals?
Mr. Phillips: We are only talking barley here, which is 15 per cent of their business. They will still have the monopoly on wheat, which is 85 per cent of their business. The Canadian Wheat Board will still be a strong entity. The question is can they compete in that barley market?
I would say they have a huge head start on the multinationals. They have the customer contact list for anyone who has bought barley from the board in the last 20 years, which the private sector will not have. They have government guarantees for their sales. In some of these cultures where you do business, especially in the Asian ones, it is about relationships. It takes time before you make a sale because you have to build a relationship. The wheat board has all those relationships. They are way ahead of the private sector, and I think they would still be very strong competitors.
Mr. Nielsen: On the handling side, grain companies are bidding for business. They need to have the turnover at their facilities, whether inland or at the port. When it comes to the wheat board saying we have a 100,000-tonne shipment to Saudi Arabia, who wants to bid on it, it will be picked up fast. Then that company will be able to source it from producers and move it through their facilities. The competition for moving the grain will be phenomenal.
Senator Gustafson: This Senate committee is a strong booster for farmers. Like farmers, we do not agree on everything, but I think this morning we found your views very invigorating, especially from younger farmers — I do not know where that cut-off is, but I view you as younger farmers — and that is positive.
My questions are on the global situation and what you are finding. I know you are on computers and probably following these things closer than most. In the global economy, we are hearing of food shortages, grain shortages and high input costs. What do you see in the global economy and where do you see this thing moving?
Mr. Nielsen: That is a very interesting question and one that we probably can speak on all day. We are in such a changing environment. This can come back to the Canadian Wheat Board on barley. We are not seeing the advantages and growth on barley that we could if we had changes there.
You look in the U.S. and in Eastern Canada here, where a lot of corn production is, and you see the phenomenal growth in corn due to plant research and breeding. We have not seen that in barley.
What we can do in this world, and what we do in Canada, is grow a lot more grains. However, as some of the respected witnesses before me stated, we are landlocked. It costs a lot of money to get our product to an export position. Transportation costs are high, and the fact that we need to make a good living at it, makes is hard for us to be the breadbasket to the world because we need to see a proper return back to us.
We try to add value to our grains here and diversify into that; and then hopefully try to add value to other countries with research and development and encourage them to help them to grow some more of their own crops.
Mr. Phillips: I will touch on the point of the food versus fuel debate, which is a global issue.
I believe, and I think someone else said it previously, the best cure for high grain prices is high grain prices. Grain prices will spur production and some of this will be resolved quickly. The biofuels industry has been clear that it is not only biofuels driving grain prices, it is also speculation on shortages. We anticipate seeing a higher base price on most of our grains for a number of years to come.
The last time we were here, we asked about hog prices and we boldly predicted that hog prices would turn around. I would like to point out that hog prices went up the very next day.
Senator Gustafson: In your opening comments, you mentioned the Canadian Foodgrains Bank, which provides food for Third World countries and does tremendous work. Can you give us an update?
Mr. Phillips: It is an organization to which farmers donate grain. A farmer anywhere in Canada can go to his grain elevator and donate part of his crop. That is then transferred to the Canadian Foodgrains Bank, which then uses it to receive a four-to-one match from CIDA to provide food aid anywhere in the world.
We would like to thank everyone involved with the untying of food aid. Although farmers are giving grain to the Canadian Foodgrains Bank, the cost of shipping grain overseas today is too high and the time it takes to get there to respond to a crisis in Ethiopia is too long. Untying the food aid has been a tremendous benefit for everyone in the international community.
The more resources we use as Canadians to support local markets in Africa to strengthen African farmers and the farm base, the more we benefit those at the bottom. The more we do that in the world, the better world we will leave for our children.
Senator Gustafson: If a farmer donates a bushel, what does the government provide?
Mr. Phillips: CIDA provides up to $20 million at four-to-one matching.
Senator Gustafson: In other words, it is four bushels from the government to one from the farmer.
Mr. Phillips: Yes. When I worked at the Canadian Foodgrains Banks, one farmer in Alberta donated a quarter section of land. I said that is generous, but why would you give us land? He said he had paid taxes to the federal government all his life and he thought that this way with the crop from that land every year the government will have to pay all the taxes back and do something good with it. If I wanted all the land in Alberta donated, that would be my marketing campaign.
Senator Gustafson: The Canadian Foodgrains Bank is an NGO that the past government held in high regard. I am certain the present government feels the same way about the Canadian Foodgrains Bank.
Senator Peterson: Do you have the breakdown on the sales that the Canadian Wheat Board makes to line companies versus sovereign countries? You said the CWB sells a lot to line companies or they buy it when there is an auction.
Mr. Phillips: The CWB does not have facilities per se. However, if there was an open market and the wheat board did not own grain elevators, they would make an estimate that they will handle, for example, 75 per cent of the barley tonnage for malt barley. Therefore, it would be X number of tonnes. They would put that up to tender and the grain companies would bid for the right to handle the CWB tonnage.
That is one model that may occur, but it is not actually what you are getting at.
When the minister appeared, he talked about line companies selling CWB grains directly overseas and the Wheat Board selling some. Only the Wheat Board would have those internal numbers. For example, Parish & Heimbecker, a small Canadian company may have a relationship with General Mills in Minneapolis and they may sell wheat board wheat or barley directly to them. In that case, they would buy it from the CWB and sell it. I do not know percentage the CWB sells directly versus their authorized or accredited agents. I do not know what that split would be.
Mr. Nielsen: All grain companies that are sellers of CWB wheat and barley for export are agents of the wheat board and shall be Canadian based whether they are U.S. or Canadian owned companies. That is how it is termed in the Canadian Wheat Board Act. These companies have sellers for canola, pulses, oats, et cetera. If they make a deal on oats to Japan, the buyer may say he or she also wants X amount of wheat. The company would work on behalf of the Wheat Board to sell the buyer that wheat. They would get a price from the CWB and facilitate that deal because they are licensed agents of the Canadian Wheat Board.
Senator Peterson: If the wheat board makes a major sale of 2 million tonnes to China, does it arrange for transportation?
Mr. Nielsen: The Canadian Wheat Board goes to producers and signs contracts to buy certain qualities of wheat. Then they make the sale and ask the elevators to bring in a certain amount of wheat of that grade into their facilities for export. Through the Canadian Wheat Board Act, you are paid handling fees by the producers for those facilities to handle that grain on behalf of the Canadian Wheat Board.
Senator Mahovlich: You mentioned that the Australian Wheat Board is competitive. Are there other countries in the world that operate on more of a sure footing than Australia or is Australia a good example?
Mr. Phillips: Australia is a fairly good example. They have a small domestic market and an export market. Many countries have varying types of monopolies. New Zealand has a producer-owned co-op for exporting dairy products called Fonterra. Other countries have bits and pieces of monopolies, but there are many state trading enterprises remaining in the world.
However, Australia would be one. New Zealand's Fonterra would be a more modern version of marketing board for producers.
Senator Mahovlich: What about Russia?
Mr. Phillips: I do not believe they would not have a state exporting agency. However, I could be mistaken on that.
The Chair: Thank you very much. This has been a very good discussion and very helpful. I think you both want to say a final word.
Mr. Phillips: People are concerned and there is always fear of change. When oats were removed from the Canadian Wheat Board that industry exploded. We have seen value-added processing facilities develop across the Prairies. Entrepreneurial farmers came together, found markets and added value to the product. It has been a tremendous success story on the Prairies.
We also see now an additional 3 million tonnes of additional malting capacity for barley around the world. Not one single tonne is being built in Canada because the maltsters will not invest here until they have an ability to analyze what they want for malt and buy directly from the farmers. Until producers can deal directly with the malting companies on this, separate from the Canadian Wheat Board, we will not see any malt plants built. The industry has been crystal clear on this point. Canada grows some of the best malt barley in the world and it is a shame that we are not seeing that value added processing put in place here.
Can the Canadian Wheat Board compete in an open market? When we look across the Prairies, I would say other agricultural co-ops compete. We see the United Farmers of Alberta, which is a very large organization, sell fuel and farm supplies. They compete directly against the private sector. Federated Co-operatives Limited, which operates one of the largest companies in Western Canada, competes with Wal-Mart and Canadian Tire and go to head-to-head with these companies.
We see credit unions and caisses populaires compete. If you want to talk about trying to deal with the big grain companies, try to deal with big banks. Yet, they operate successfully.
We see examples of cooperatives operating in the open market all across Canada in all sectors because they provide service and value. People who do not have to deal with them, they choose to deal with cooperatives.
We feel that if the Canadian Wheat Board put its mind to it, it could do the same job that these other cooperatives are and they would be very successful at it.
Mr. Nielsen: I echo the comments of Mr. Phillips, especially in terms of barley and malting barley. At one of our malting facilities in Alberta, the grain buyer there can stand on his facility and look over hundreds of acres of barley production surrounding him and cannot buy an acre of it due to the fact that those producers do not wish to go through the Canadian Wheat Board. They built that plant in the higher barley country to source that barley.
I need to build the relationship with the maltster regardless of what company it is and have the contracts in place where I know what quality, quantity and price I can get. I can take that to the bank, do my financing for the year and work through it.
I cannot work under possible price scenarios such as a pool return outlook. I do contracting with my pulses and oilseeds. I may not hit the peak of the market and many times I do not. Last year, I got $8.25 per bushel for canola when I sold it. When I took it to the elevator, it was selling for $13 per bushel. At the time I was doing my financial plan, it showed me that I was making money at $8.25 per bushel. This year, I have contracted some canola for over $13 per bushel, so I am looking forward to that.
I look forward to your support on the bills that are currently in the House of Commons where the actual wishes of producers are better reflected.
I would remind you that barley is a minor crop that the Canadian Wheat Board Act handles. They can still add value to it if they choose, but they are restricting it greatly at the moment.
The Chair: Thank you. This has been a very good discussion today. We are pleased that you came and gave us your time. We have learned a lot.
The committee adjourned.