Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 9 - Evidence - Meeting of December 9, 2011
OTTAWA, Friday, December 9, 2011
The Standing Senate Committee on Agriculture and Forestry met this day at 9:02 a.m. to give consideration to Bill C-18, An Act to reorganize the Canadian Wheat Board and to make consequential and related amendments to certain Acts.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, I see a quorum.
[English]
I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry.
[Translation]
I am Senator Percy Mockler from New Brunswick, chair of the committee.
[English]
At this time, I would like to ask each senator to identify themselves, starting from my left, please.
Senator Mercer: Senator Terry Mercer from Nova Scotia.
Senator Peterson: Senator Bob Peterson, Saskatchewan.
[Translation]
Senator Robichaud: I am Senator Fernand Robichaud from Saint-Louis-de-Kent, New Brunswick.
[English]
Senator Mahovlich: Frank Mahovlich, farmer from Timmins.
Senator Fairbairn: Joyce Fairbairn, Lethbridge, Alberta.
Senator Chaput: Maria Chaput, Manitoba.
Senator Plett: Senator Don Plett, Manitoba.
Senator Tkachuk: David Tkachuk, Saskatchewan.
Senator Manning: Fabian Manning, Newfoundland and Labrador.
Senator Eaton: Nicole Eaton, Ontario.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
[Translation]
Senator Rivard: I am Senator Michel Rivard from Les Laurentides, Quebec.
[English]
The Chair: I would to take this opportunity, as chair of the Senate Committee on Agriculture and Forestry, to thank the witnesses for accepting our invitation to be part of the study we are continuing with on Bill C-18, An Act to reorganize the Canadian Wheat Board and to make consequential and related amendments to certain acts.
[Translation]
We are studying Bill C-18, An Act to reorganize the Canadian Wheat Board.
[English]
Honourable senators, this morning we have our first panel for one hour. Today we welcome, from Manitoba, Mr. Drew Baker and Mr. Andrew Dennis. We also have, from Manitoba, Mr. Brendan Sigurdson, as well as Mr. Kenneth Larsen and Mr. Laurence Nicholson.
I am informed by the clerk that the presenters will be, first, Mr. Baker, then Mr. Sigurdson, Mr. Dennis, Mr. Nicholson, and Mr. Larsen. Honourable senators will then follow up with questions.
Senator Plett: Honourable senators, I am not sure whether this is a point of order or a point of clarification. Before we start, I would like to make reference to a witness from the committee proceedings of Wednesday, December 7. I believe his name is Matthew Gehl, and he cited some figures for which we asked clarification. I have received some clarification and I would like to put this on the record.
Mr. Gehl made reference to the impact of employment if this bill were passed, insofar as the Wheat Board was concerned, and he cited some 12,000 full-time employees would be directly impacted by this legislation. I questioned him on that, and I believe he reaffirmed that. I believe, as well, he was referring to PricewaterhouseCoopers.
I have information here, Mr. Chair; I would at least like to read into the record. I am happy to hand this over to the chair after. It is in only one of our official languages.
It says here, in 5.4, on employment, that the estimated employment and labour impacts associated with $72 million in initial 2004 administrative —
The Chair: Senator Plett, one minute please. I am not too sure if you have a point of order or a point of reference to what was said, or a point of clarification. Please bear with the chair. I have a point of order from Senator Robichaud. Senator Robichaud, would you please state your point of order?
[Translation]
Senator Robichaud: Given that the document is available in only one official language, we could ask that it be tabled and distributed after it is translated.
[English]
The Chair: Senator Plett, would you agree that that document could be tabled with the clerk?
Senator Plett: I do not have any problem doing that, Mr. Chair, except, of course, when Mr. Gehl said it he also said it in only one of the languages and that is the one I am using. Therefore, I do not see the harm in my reading this and then, before we table it, it will go out in both official languages.
The Chair: Thank you, Senator Plett.
The chair will now accept the presentation from Mr. Baker to start.
Drew Baker, as an individual: Mr. Chair, I farm 4,000 acres just north of Winnipeg, Manitoba, with my father and two brothers. Our farm is 113 years old and I am the fifth generation to be working on our land. I am not here today to talk to you about the economics of the Canadian Wheat Board. I am sure you have all heard from people much more qualified than I to talk on that subject. I am here to talk about farming and how Bill C-18 will affect me personally, and also how our democratic process is being trammelled by the current legislation.
On our farm, we grow wheat on about half of our land. Needless to say, this is an important crop to our farm. We would be very foolish to make a decision on our farm which would have a major impact on how we sell one of our most important crops without first considering the consequences. In Bill C-18 we have been asked to do just that. We have been asked to trust the minister, that he has done the analysis and he knows what is best.
In fact, very little analysis has been done by the government on what the ramifications of Bill C-18 will be, or even on the benefits of the single-desk at present. All we know for sure is that once the single desk has been removed, it will never be brought back. I for one think that some forethought should be given to this before this bill becomes law.
The funnelling of farmers' money into the contingency fund is alarming to almost all involved in this debate, regardless of what side they are on. The federal government is, in effect, expropriating $200 million of farmers' money to be used for the wind-down cost of the present Canadian Wheat Board, including severance and contract termination penalties.
Currently, no one in the government has been clear with farmers on what will happen to the money that remains, what will happen after the five years are up and what remains if the Canadian Wheat Board is sold to the highest bidder.
Additionally, the new government-run Canadian Wheat Board will not be subject to review by the Auditor General and, instead of 10 farmer-elected directors, only the five appointed government directors will remain. This effectively means that there is no real protection of farmers' interests or their money under the new Wheat Board.
Let me be clear: If the Canadian Wheat Board single desk is ended, it will not mean the end of my family farm. What it will mean is more risk, more work, less control and less return. If the single desk is ended, it will mean more risk in pricing more of our crops on the highly volatile markets and more work in having to now try to market our wheat to a few large companies. It will mean less control in the market because our Canadian Wheat Board, our strongest voice, will be silenced. It will also mean less return to the farmers who once owned our marketing agency.
We have been given no clear answer on many of the farmers' most important questions, even on the most basic levels. This is partly because there have not been any hearings in Western Canada for farmers to voice their concerns and ask the questions that we have the right to have answered. It is also because of this government's refusal to listen to dissenting voices, instead ridiculing us and labeling us the "tinfoil hat and decoder ring crowd." In fact, we are not a small group. We represent the majority of farmers. No matter how Minister Ritz tries to spin the numbers, he cannot change the fact that 62 per cent of farmers voted this summer to retain the single desk. He cannot change the fact that the single desk candidates routinely win eight out of ten seats, and he cannot change the fact that we have the right to vote on the Canadian Wheat Board's future.
We have been denied our vote on what will happen to our Canadian Wheat Board. In the end, why would I or my brothers want to stay in an occupation where there is such a blatant disregard for the democratic will of the majority of farmers who clearly want to keep the single-desk Canadian Wheat Board in place? Minister Ritz has decided to sidestep existing legislation, denying farmers the right to vote on the future of our Canadian Wheat Board.
On December 7, Federal Court Judge Douglas Campbell ruled that Minister Ritz should have held a plebiscite before introducing Bill C-18. Furthermore, Justice Campbell wrote that section 47.1 of the Canadian Wheat Board Act speaks to the unique situation in which democratic values are already implemented in the structure of the Canadian Wheat Board.
Not adhering to those values is not only disrespectful; it is contrary to the law. In spite of this ruling, Minister Ritz has stated that he still intends to push this bill forward despite the illegal methodology used to introduce it. This contempt for the rule of law is unacceptable. This is a vote that will dramatically affect my future. Because the minister has refused to allow me and other farmers to vote for ourselves, we must come to you to ask you to vote for us. I therefore ask you to do what is right for farmers and the laws of Canada and vote down Bill C-18.
Brendan Sigurdson, as an individual: Good morning, honourable senators. I welcome this opportunity to express my views to the Senate of Canada regarding Bill C-18. I am a 23-year-old fourth-generation farmer, and I farm with my family in the RM of Swan River, Manitoba. My family has been involved in the creation of cooperatives and has actively supported the CWB for over 75 years.
The government's plan to eliminate the Canadian Wheat Board clearly demonstrates a hate for the CWB and democracy in general. Ramming legislation through Parliament with no debate, no consultation, no planning and no study is simply un-Canadian. Farmers have been denied a vote on this legislation as required under section 47.1 of the Canadian Wheat Board Act.
This summer, the Canadian Wheat Board conducted a plebiscite among farmers and 62 per cent of them voted to retain the single-desk system for wheat. On August 11, 2011, I attended a CWB meeting in Dauphin, Manitoba, where over 250 farmers gathered. The farmers voted unanimously to support the Canadian Wheat Board single-desk system. The election of eight single-desk supporters of the ten elected CWB directors also indicates strong support for the CWB.
I remind the Senate of the opinion of a great Canadian, John Diefenbaker. In 1967, at third reading of the legislation to make the CWB no longer subject to periodic parliamentary review, John Diefenbaker had the last word. He reminded his colleagues that making the legislation permanent does not, of course, make it permanent; it can be changed by Parliament at any time. However, it will not be changed, Diefenbaker predicted, so long as farmers realize the benefits that flow from the Wheat Board Act.
Clearly Mr. Diefenbaker viewed farmers as determining the CWB's future, not government. By forcing this legislation on farmers, the Harper Conservatives lack respect for Mr. Diefenbaker's counsel and legacy and are ignoring the spirit and letter of the 1998 Canadian Wheat Board Act.
This issue is not about freedom but about who will control the multi-billion-dollar grain industry in Canada. Will it be farmers with the CWB or will it be agri-business corporations? The Canadian Council of Chief Executives represents agri-business corporations such as Viterra, Agrium and Cargill.
In a letter of congratulations to Mr. Harper on his May 2 election victory, John Manley of the Canadian Council of Chief Executives wrote, "As a demonstration of Canada's strong commitment to trade liberalization, we endorse your plan to reform the marketing practices of the Canadian Wheat Board."
He also calls for the end of supply management in the same letter.
A May 23, 2011 news article states, "Cargill calls for an orderly end to orderly marketing." That is kind of like calling for an orderly end to air traffic control. I submit that the Harper government, by eliminating the Canadian Wheat Board, is surrendering our sovereignty as farmers and the sovereignty of the nation to these large U.S.-based corporations. This is un-Canadian.
I want to touch on the importance of the CWB to our farm. We farm 2,000 acres with a rotation of 1,000 acres of wheat and 1,000 acres of canola, and wheat continues to be the most profitable on our farm. In 2011 our wheat yielded 67 bushels per acre on average and our canola yielded 42 bushels per acre. The wheat is No. 1, 14.9 per cent protein average. Our gross return per acre is around $470 for canola and the same for wheat. Canola costs more to grow due to higher seed costs, the cost of fungicides and so on. It costs $50 or $60 more per acre to grow canola. Therefore, wheat is by far the most profitable on our farm. Our records from the past six years indicate that wheat has outperformed canola in terms of net income per acre.
When government politicians make long-winded speeches about farmers switching to crops such as oats, peas, mustard and canola to receive higher returns, they are misleading you. In the Swan Valley area of production, mustard, oats and peas are practically nonexistent in terms of acreage. Wheat and canola are the main rotation of crops.
In the past we have had a CWB contract that marketed our wheat to the British miller Warburtons. This contract paid a $15-per-tonne premium on high-quality red spring wheat. The CWB had a Churchill freight storage program that paid $12 to $15-per tonne which has been eliminated due to this pending legislation.
The removal of the CWB and these contracts means that we will have less choice on our farm. I submit that choosing between Cargill, Viterra, Bunge, Louis Dreyfus and ADM to purchase my grain is not a choice at all. These U.S.-based corporations will be able to source grain globally and will not market grain in the interest of Canada or Canadian farmers. Allowing this legislation to proceed is un-Canadian.
The head office of the CWB is in Winnipeg, Manitoba, and has been the centre of the grain industry in Manitoba for over 75 years. Four hundred and fifty jobs will be gone as spinoffs and transnational corporations relocate their headquarters to Rotterdam, Singapore or Minneapolis.
The CWB is the only user of the Port of Churchill. The Churchill rail line, which is an important line for resupply to the North, is being placed in jeopardy. Shortline railways producer cars and producer-owned loading facilities would be eliminated. Millions of dollars of producers' and provincial governments' money have gone into these facilities. This investment is at risk because of the elimination of the CWB.
There are too many unanswered questions. Now is the time for sober second thought. The government has done no analysis on the implications of eliminating the Canadian Wheat Board. What are the implications to farmers and rural communities? What are the implications to Manitoba? What are the implications to Churchill? What are the implications to produce car loaders and shortline railways? None of these questions have been answered.
To conclude, no consultation, no research, no analysis, no studies, no nothing, except "we are the government and we are bringing freedom." This is not the way to conduct public policy in this country.
The Senate should demand answers.
Andrew Dennis, as an individual: My name is Andrew Dennis, and I am pleased to have been chosen to submit to the Standing Senate Committee on Agriculture and Forestry on this important issue. I farm grains, mostly wheat and oilseeds, in Manitoba on the edge of the Assiniboine Delta aquifer. Agriculture is my family's life, and, of my five children, my wife and I believe we have some potential farmers.
I know that the collective marketing power of our Canadian Wheat Board single-desk monopoly is, year in, year out, extracting the most money for Western Canadian farmers. Not unlike the big agricultural companies that sell us inputs such as seed, ag-related chemistry and fertilizers, we know without question that the fewer sellers there are, the easier it is to negotiate a higher price. If a government tried to take these company's monopolistic powers away, they would be buried in court proceedings and rulings. They would not yield.
I also believe in the democratic principles that we uphold every day — due process, proper procedure and law. This is why I am here. I know that it is farmers' democratic right, and it is law, that we have the vote as per section 47.1 of the Canadian Wheat Board Act. We need to do this or leave it be. There is no other legal option.
This summer, I and two of my neighbours attended all of the Canadian Wheat Board's super seven meetings as put on by the Canadian Wheat Board directors. They were at Regina and Saskatoon, Saskatchewan; Oak Bluff by Winnipeg and Dauphin in Manitoba, and Medicine Hat, Camrose and the Peace River area of Alberta.
The attendance at these consultation meetings was overwhelming. I have pictures of the staff at all these halls trucking in extra chairs — 280 to 600 farmers per meeting. It is hard to get 15 farmers to show up at an ag. company meeting these days. The support for the retention of the single desk was running in the high 80 per cent in all meetings, and as high as 90 per cent in the two northern meetings. In Dauphin, Manitoba, it was asked if there was an anti-Wheat Board supporter in the room by a show of hands. Not one hand went up.
Bill C-18 is cited as the Marketing Freedom for Grain Farmers Act. I recently reread Bill C-18. It was noted that the Minister of Agriculture and Agri-Food is mentioned nearly 50 times in phrases like "the minister will recommend," "the minister will consult with the Minister of Finance," "the minister shall determine, may recommend and may propose," and, "it may be the opinion of the minister." This suggests little consultation and arbitrary decision-making. The word "repealed" was used 25 times, "replaced" 17 times, "amended" 8 times, and there were words like "dissolve" and "liquidator," and the phrase "winding up of our new corporation" — this new, voluntary, strong and viable Canadian Wheat Board. This phrase was used a staggering eight times. Sadly, the words that we know the best, "pool" and "permit book," are used only a couple times in this document. Far more discussion was put into pension funds for the appointed directors and their dependants.
One other interesting part of this act was to do with clause 105.1 of Bill C-18, to do with importing of grain. If you break this law, the government fully expects you as a farmer to pay the fine and do the time up to four years, as per the discretion of a court ruling. That is going to be the law, and it needs to be followed, of course, by this government, they say.
We have been down this road before. Be careful who you listen to. This is quite important. You have to separate the good seed from the chaff. I have with me here a pamphlet from 1990 that is advocating getting a payment for a legendary Crow Rate benefit. Once the Crow Rate was gone, we would have cheaper freight rates, these people said in this pamphlet. There would be more competition and more efficiency. Our freight rates are up 400 per cent. The riddance of the Crow would stabilize Western farmers' incomes and reduce their debts, says this pamphlet. Farm debt has gone up from $22 billion to $67 billion in this time. Stronger rural economies. Wrong again. We lost over 30 per cent of our farms and nearly 65 per cent of our under 35-year-old farmers, and their children, I might add. That is very serious. Most of our towns are dead or dying. Oh, and one more thing: The people who wrote the pamphlet proclaimed we would no longer be vulnerable to trade actions after we got rid of the Crow. Wrong again. Who put out such propaganda? The contributors on the back of this pamphlet include Cargill Limited, Canola and Pulse Grower Association, the Western Barley Growers' Association and the Western Canadian Wheat Growers' Association. I do not know if you have heard of these guys, but be careful who you listen to. Their crystal balls are not too clear.
In closing, I would like to strongly recommend that the Senate not facilitate the breaking of laws in Canada. Request the vote for farmers, or leave well enough alone.
Laurence Nicholson, as an individual: It is certainly a pleasure for me to come before this committee today and talk about the Canadian Wheat Board and Bill C-18. I have spent my entire life working for the grain industry. My background is 30 years with Alberta Wheat Pool, ten years as a manager, 20 years as a pool rep out of the Peace River country, as well as Medicine Hat. Also, I have worked in organizations and putting sessions on with the Canadian Wheat Board, the Canada Grain Commission, Winnipeg Commodity Exchange and Transportation. I spent four years as a director with the Alberta Canola Producers' Commission, Canola Growers of Canada, Canola Council of Canada and eight years as a director with the Medicine Hat Co-op, and three of those years as chairman of the cooperative. I am an irrigation farmer just outside the city of Medicine Hat.
I have many concerns over Bill C-18, and I would like to focus on the dual marketing. If you look at the dual marketing aspect, there is no such thing as a workable dual marketing. Minister Strahl and his own personal task force did a study on this, and they concluded that dual marketing will not work. Also, Murray Fulton did a study and came to the same conclusion. You cannot have dual marketing with a central desk seller as well as other sellers selling into the international market.
I will sidestep my notes and talk about an issue that I have not seen talked about at this table yet, and that is our customers, the 80 countries around the world who buy grain from the Canadian Wheat Board. What are their needs? What are their concerns about a constant, steady supply of grains and oilseeds over a 12-month period? I will give you an example of that. When I was on the Canola Council of Canada, we had pre-consultations, and we have those every year, with the Japanese. Across the table were 18 users of canola, as well as the Deputy Minister of Agriculture from Japan. Through a translator, from 9:00 in the morning until noon, their main concern was having a constant, steady supply of canola over a 12-month period. Their threat was that if we did not provide that, and of course you can talk about unions and all those other things that enter into it, then they would switch to soya, and it would be five years before they would even consider going back to canola. Why? Because of their food labelling in Japan.
We as farmers need to look at what our needs are and what the customers' needs are in the international market. If we do not have a market, we do not need a Canadian Wheat Board. We must as Canadians compete in a global market. The Canadian Wheat Board does a very good job of competing in the wheat market and moving grain. There have only been 2 years out of the 19 years that I have had to carry grain forward, and that was durum. Lo and behold, the last time I carried durum forward, I was selling at $5.50 a bushel. I carried it forward because of the good marketing. There is a difference between marketing and selling. Marketing intelligence is vital in the international market, and I could go through that with you, but I certainly do not have enough time.
This is a complicated, complex issue. You are rushing through it. I was over listening to the House of Commons, and they were talking about their crime bill and the bullying in schools. I have never seen such bullying in my life as with this bill going through the House of Commons and now the Senate.
I attended that meeting in Winnipeg where the judge has ruled that we have the right to vote on how we market our grain. I cannot see for the life of me why we cannot back this up for a year or two and decide how we want to market our grain. We pay the cost, not the government. The only government involvement are the government guarantees and the backing of the Canadian Wheat Board.
My dad, bless his soul, is gone. He worked vitally hard to get the Alberta Co-operative Wheat Producers started. The name was later changed in 1929 to Alberta Wheat Pool. He would roll over in his grave today to see what is happening to this industry. Can we not learn from our fathers of the past?
Good heavens, this took 75 years to build, and since 1998 when we had our elected board of directors, we have changed that organization. We do have marketing choice under the Canadian Wheat Board. Yes, it is not perfect. We do not live in a perfect world and there is not one person around this table who can say they are a perfect person. We do not have perfect organizations, but we need to change with the times and they have done that. I think we need to give them a chance to continue to work for the betterment of the farmers of Western Canada.
Kenneth Larsen, as an individual: Ladies and gentlemen, it is an honour to be here and speak before the Standing Senate Committee on Agriculture and Forestry. I was last before this committee in 1996 when you were holding hearings into the amended Canadian Wheat Board Act. I have bombarded you with paper so you are doubly brave for inviting me. I will attempt to be succinct this morning.
There is a certain air of unreality here. I think we are talking about the fruit of the poisoned tree here with this legislation.
I will quote Chief Justice Fraser. I will not quote the whole sentence:
The detrimental consequences of the executive branch of government defining for itself — and by itself — the scope of its lawful power have been revealed . . . in the tumult of history.
This is an illegal piece of legislation. I do not know how you fix it. I am not a constitutional lawyer, but it needs to be fixed because you are denying us our right. This bill will hurt people.
In this set of hearings, there have been cogent questions asked by some senators. For example, are there studies that show that farmers will be better off without the Wheat Board? I thought that was a sensible question. And Mr. Knubley rattled off a series of so-called studies that purported to show that farmers would be better off.
The next logical question in that sequence would have been this: How many of those studies had direct access to the Canadian Wheat Board's sales figures? The answer to that question would have been zero; none of them did. They were not really studies in the sense that academics think of studies. There are some better studies. There have been academics who have had complete access to the Canadian Wheat Board's figures. I am thinking of Kraft, Tyrchniewicz, Furtan. They have all come back and said the Wheat Board does better than private trade for farmers. That is the silver standard of studies. I prefer the gold standard of studies an adversarial approach that you see in regulatory commissions and in courts, where everything is on the table, everything is subpoenaed, and everything is looked at, debated and examined.
There have been 14 of those studies carried out on the Wheat Board, usually by the U.S. Department of Commerce under international trade law. Every one of those involved the complete examination of all the Wheat Board's relevant sales figures, cross-examined by opponents, examined by experts from both sides, debated and sifted through finally, all behind closed doors because of commercial confidentiality. Those 14 studies have all shown that the board either does as well or better than the open market for farmers.
The one I am most familiar with, which was brought down in 1999, showed that the Wheat Board did better for farmers on barley than the open market in that period of investigation. The other noteworthy one I think is the one on durum wheat, which showed that in 59 of 60 months the board did better than the open market for farmers. Those are irrefutable facts, tested and objective. There are 14 of them. I attached them to the paper that I sent to you.
Be careful when you pass this legislation because it will hurt people.
There was an affable gentleman at the hearing the other day who said, "Well, the Crow rate, we all got along afterwards." I do not think so. We lost between 35 and 40 per cent of our farmers. We lost 40 per cent of our grain elevators. I watched who got knocked out. That raised the bar for sustainability on the farm. Who did that knock out? That did not knock out the little old farmers; they are well set. It knocked out the young farmers who are heavily leveraged and it knocked out a second class of farmer. That is the farmer who wants to produce a lot, is aggressive and is a high producer. They are also heavily leveraged and many of those farmers got knocked out at that point. I suspect the same thing may happen here.
We are also given a lot of wishing and hoping. Value-added will save the day; everything will be wonderful.
We have the canola myth. If you look at what that is, we have heard lots of statements about how wheat acreage is declining; canola acreage is coming up. If you actually look at the statistical tables that come with the Wheat Board audited statement prepared by Stats Canada and track the time when the canola acreage started to come up, you will also notice that that is when herbicide-tolerant canolas were introduced. I can remember flying across the Prairies in the late 1980s and a third or better of the land was absolutely black in the summertime, black summer fallow. That is all changed now. It is all beautiful yellow because of the change to continuous cropping made possible by herbicide- tolerant plants.
We are talking about value-adding. There is value-adding taking place in canola right now. There is a $110 million plant being put in in Washington State to add value to canola from Western Canada. The board has nothing to do with canola marketing.
We have all heard about Alliance Grain Traders, who will build a big pasta plant in Regina. I would like to read you one sentence of their prospectus. I appreciate, Mr. Chair, that I am about out of time.
The Chair: You will conclude with that one sentence, please.
Mr. Larsen: I will conclude, if I may.
The sentence in their prospectus says: "Margin erosion is combated by negotiating lower prices from growers . . . ." "Margin erosion" means they will make their profit by negotiating lower prices from growers.
Senator Plett: The three gentlemen from Manitoba indicated the size of their farms. Mr. Nicholson alluded a bit to that but, for the record, could I know how many acres you seed, Mr. Nicholson?
Mr. Nicholson: A section of irrigation produces anywhere from 40,000 to 60,000 bushels a year, because irrigation is high production. I have had in excess of 120 bushels an acre of wheat. I have also had over 60 bushels of canola on irrigation.
Senator Plett: Mr. Larsen, where do you farm and how large is your farm?
Mr. Larsen: I farm west of Sylvan Lake. I would like to decline answering that and I will tell you why. There is a matter of principle involved here, senator. I believe we are all equal before the law and I do not want you to prejudice or to be prejudiced by whether I am a larger farmer than these fellows or a smaller farmer or an older farmer or a younger farmer.
Senator Plett: Mr. Chair, I will accept your ruling.
The Chair: Just a minute, please. I would like, if possible, the witness to answer the question. If you want to decline, you can do so, but we would like to have it on record.
Mr. Larsen: I think I have given my reasons.
The Chair: The chair will respect the witness. Senator Plett, please continue.
Senator Plett: I guess, given the fact that I have no idea what Mr. Larsen farms and how many acres he farms, I will simply voice my concern about that. He is here representing the farmers so I will not ask him any more questions as a result of that.
Mr. Larsen: Point of order, Mr. Chair.
Senator Plett: I will then turn over to other farmers who, indeed, are farmers.
Mr. Larsen: Point of order, Mr. Chair.
The Chair: Senator Plett, the Chair would like to intervene.
Honourable witnesses, you are here to answer questions. You do not have the privilege of a point of order.
Mr. Larsen: My apologies.
The Chair: Can we, together, assure Canadians that we will continue with fairness to hear from all witnesses who came and are here today to answer the questions of the Standing Senate Committee on Agriculture and Forestry. Bill C-18 is an important process. On this, I recognize Senator Plett to continue with his line of questioning, to be followed by Senator Peterson.
Senator Plett: Mr. Sigurdson, I think you said about half of your crop is canola and half was wheat. Is that correct?
Mr. Sigurdson: Yes.
Senator Plett: I know you said you make more money on wheat, and I accept that, but how do you market your canola? Are you fairly successful in selling the canola, and where do you sell it?
Mr. Sigurdson: I pretty much take it to the elevator and take the price; that is it.
Senator Plett: Are there posted prices that you go to that say here is the price for canola today, and you can decide if you want that price? How do you determine it?
Mr. Sigurdson: I just pull up and ask the price. There is no negotiation.
Senator Plett: Whom do you phone?
Mr. Sigurdson: It is Richardson Pioneer in Swan River and maybe Cargill.
Senator Plett: There are no posted prices that you can choose. One day the posted price is one, and the next day the posted price is something else.
Mr. Sigurdson: I do not see what is the sense of doing anything like this.
Senator Plett: Well, thank you. I will try with Mr. Dennis, then.
Sir, you were in my office a few weeks ago, and we had a wonderful conversation. Many of you shared your concerns and your reasons for having those concerns. I think you also said that you grow canola.
Mr. Dennis: That is correct, yes.
Senator Plett: One of your concerns was the fact that you may sell your canola, and I think the numbers you used were that you might sell your canola for $10 a bushel, and the buyer might sell it for $12 a bushel. That concerned you because someone was making 20 per cent on your canola.
I would like you to explain to me where the concern is and how you would get your price for your canola. We heard from other witnesses that there are posted prices, they can check the posted prices and they can decide whether they want them. Mr. Sigurdson is saying you have to take what you get, yet other witnesses have said there are posted prices. You can choose to sell or not sell for a certain price on a certain day.
Mr. Dennis: I will correct you. I do not think it was me who had that concern about who made the money after it left my gate.
When it comes to canola, it has become interesting lately because they mix the physical canola with things that traders could do in the city.
When it comes to actually marketing the physical canola, you just phone around, and out of three or four buyers that are close to your farm, within a freight amount, you can pick the highest price, and you sell it if your banker needs money at this particular time. You can forward contract and you can do all kinds of stuff. There are some risks involved in that, and I have incurred some of that risk myself. When you forward contract too much and an act of God comes along and you do not get it and you have to buy yourself out of that contract, it is very expensive. I would rather see something like that on a pool price on the Canadian Wheat Board, but that probably cannot happen under the WTO rules.
I do not think I clarified. I do farm 2,500 acres. When we went on these meetings, we were gathering up money for some important challenges. What we found to do with the size of farms is that the youngest farmers who were big and progressive — some of them actually won the young farmer of the year awards at the Red River Ex in Winnipeg — were our largest donators. They have the most to lose on the most acres for the longest period of time. I want to clear that up. That is something I could not get in within my five minutes.
When it comes to marketing canola, you take what you are offered unless you will hold it for a long period of time, and it can go either way.
Senator Plett: Thank you. I think you told me in my office how many acres you farmed, and I should have for the record here asked anyway, but I certainly appreciate that.
Being from Manitoba, I am quite concerned about what happens in Manitoba, and I am happy that we have three Manitoba farmers here today whom I would deem as successful farmers.
Of course, oats used to be part of the Canadian Wheat Board and are no longer. In Manitoba, I believe we have quite a bit of oats, and, as a matter of fact, a very successful company in Portage la Prairie called Can-Oat employs 125 people. Since oats were dropped by the Canadian Wheat Board — I would like one of the three of you to answer — have oats not become a larger product? Have we not started seeding more oats and been more successful in Manitoba with oats? Certainly, in Manitoba, especially, wheat has gone down drastically. Whether or not it is because of the Wheat Board, I will not comment. However, it has gone down. What is your comment on oats?
Mr. Baker: After it was removed from the Wheat Board, we saw the price of oats drop precipitously, immediately, and it is just recovering now from where it was when adjusted for inflation. We are still seeing high volatility in the oats market. I would say the only reason it has recovered is because the amount of acreage in the States has dropped. If we were to see the same acres planted in the states, I am sure the price would drop again.
As for whether or not oats have taken over in Manitoba, I can only speak to my farm. The only reason we plant oats is it works in our rotation. It is certainly not because we view it as a cash crop. There is some land where it just works better than other crops that we have.
The Chair: I will now recognize Senator Peterson, and you being the opposition senator responsible for agriculture, will have the same time allotment as the sponsor, Senator Plett.
Senator Peterson: Thank you, gentlemen, for being here this morning and discussing this issue with us. It is disheartening to hear your young farmers, Mr. Sigurdson and Mr. Baker, with the future of agriculture in Canada, expressing their grave concerns over the loss of the Canadian Wheat Board.
The government would have you believe that when the Wheat Board is gone, revenues will soar and the good times will roll. You have indicated that input costs are growing, margins are shrinking, and, with the demise of the Canadian Wheat Board, do you see the margins shrinking even further?
Mr. Baker: I would have to agree with your statement. We are working harder and harder to squeeze more from every acre of land that we have just to break even now. Any help we can get is appreciated. I do not see this bill as helping us at all.
Mr. Sigurdson: If wheat goes like canola, the Wheat Board has been clear that because our customers do not want GM wheat, they have kept that out of the marketplace. All that will do is increase our costs. Once the Wheat Board is gone, they have free rein to do whatever they want. Canola is about $50 an acre for the seed, and that is only five pounds of seed. That is ridiculous. If wheat goes anything like canola, that will add to our cost and we will get less for our grain.
Senator Peterson: You do not see revenues soaring?
Mr. Sigurdson: No.
The Chair: Mr. Larsen, there has been a lot of discussion about price transparency, posting and farmers being able to check around and get this big price. Do you have any comment on that?
Mr. Larsen: The so-called price transparency comes through the commodity exchanges. It is a question of intelligence. By that, I mean the ability to source information. Whatever sources of information we have available to us as farmers is always time delayed between that and the private market.
The other part about of this is that it is a private marketplace administered by just a few corporations. There is not a lot of price transparency. If you look at what has happened on the Chicago Mercantile Exchange in the last couple of weeks, $1.2 billion worth of futures contracts disappeared. The money is gone because MF Global has gone into receivership. There is not a lot of price transparency there.
On the other hand, when I go to the Wheat Board, I know exactly what my costs will be to get the grain from my farm to port because the Wheat Board publishes all of that. With canola, I can look at the port price and the inland price, but the two do not necessarily connect. I could bore you to tears with the point about inland to port, but I will not.
Senator Peterson: A price can be posted, but what you will get is when you go to the elevator and they tell you what you will get. Is that not the bottom line?
Mr. Larsen: That is the real crux of the issue. Sure, you can have a posted price, but in the U.S., they are lost leader prices to get you to the elevator. That is the case with canola, too. You have a posted price, you go to the elevator and there is always some reason it is not quite where it should be.
Senator Peterson: Since the government has chosen the option to ignore the ruling of the Federal Court, what options do you think you have available to you going forward? I do not care who answers.
Mr. Nicholson: I will try to take a crack at that one. We do not have any other option other than this Senate committee. Whatever you guys decide will be our future, and I am not very happy with that.
Really, in my opinion, you need an accredited study and analysis on the Canadian Wheat Board operation, and I will even go as far as to say the open market, so that farmers can have a fair comparison between the two organizations. That has not been done. I do not know whether you realize what an accredited study is; I have been there, done that, sat across the table from a new post to have a study done and these people come in and bid on it. I notice there is always a question that is posed by the guy who will be doing the study: What is the final outcome you want to see come out of this study? When you tell them that, they zero in on it.
When an accredited study is done by an economist and then given to a totally independent economist and another one after that, then you have an accredited study that is factual. Some of these studies are not totally factual. I would like to see an accredited study done on both the open market system and the Canadian Wheat Board system and then have a plebiscite of producers to vote fairly.
If I may, back in 2006, when this whole issue started to surface, I took it upon myself to hold 30 meetings in Southern Alberta with producers who were interested in knowing the information. I had a Canadian Wheat Board representative talk about all the marketing options they offered. I then took over and asked a question. We have three customers who buy canola from Canada, which are China, Japan and Mexico. Those countries buy the largest volume of raw canola from Canada. How do those countries buy canola from Canada? In all 30 meetings, I could not get an answer because farmers did not know. One guy got up and said, "I think they buy it on the Winnipeg Commodity Exchange." They do not buy one tonne on the Winnipeg Commodity Exchange. That exchange is only a price discovery mechanism that also takes some of the risk out of the marketplace for the grain company.
If you want to get into that, I can put a session on for you, but it will take me more than five minutes.
The Chair: Any other comments on the question of Senator Peterson?
Mr. Dennis: Can you repeat the premise of it?
Senator Peterson: The government has chosen the option of ignoring the court ruling. Having said that, what options do you think you have in moving forward and dealing with this?
Mr. Dennis: I think we are really hopeful. This Senate committee is supposed to be looking at this in a non-partisan way. I am hoping this does not split straight down party lines, because it should not do that.
Will farmers get by? I would say the majority will get by. They will look a lot further afield for input and maybe even groceries. Everything they can do to pull that belt in by two or three holes they will do. That will cause extreme pressure on the local communities in the West. That is what happened with the Crow Rate; it caused extreme pressures and we saw towns die and pavement pounded. We saw all kinds of things.
If you people, if the whole works of you guys could have public meetings in the West, and if you could see what we saw at our meetings — we saw farmers and their sons and daughters, grandma and grandpa, mom and baby all show up. These people do not normally show up at farm meetings; 15 or 20 people usually show up, and it is for the free hat. This, however, was powerful. There is not a person in this room, if they saw what I saw this summer, who would allow this bill to be pass. That I know for sure. I will end there.
Senator Tkachuk: I would like to point out that outstanding young farmers from both Saskatchewan and Alberta support our bill, Bill C-18, the two provinces just to the west of Manitoba.
I often hear the phrase "cash crop." Actually, I think it was you, Mr. Sigurdson, who used that term. Farmers use that phrase all the time. What do you mean by "cash crop?"
Mr. Baker: I will take that question. "Cash crop" is a term that is used on canola a lot because many farmers feel they can sell it right off the field, they have the cash in hand and it is worth quite a bit of money right now. It often trades at a discount to soybeans in terms of oil, but that is never brought up, and the markets used for canola are less than transparent. That is generally what is meant by the phrase.
Senator Tkachuk: It has been used for a long time for other crops, right?
Mr. Baker: Yes.
Senator Tkachuk: Basically, they are non-Wheat Board crops, are they not? Am I pretty close to being right?
Mr. Sigurdson: Well, we make more with wheat on our farm, and that is cash.
Senator Tkachuk: You never refer to Wheat Board crops as cash crops, though. Cash crops are the crops needed to get cash flow into your farm operation, right?
Mr. Baker: I think we are talking semantics now.
Senator Tkachuk: No, we are not. The phrase is used all the time. I am just saying that you need the non-Wheat Board crops to fund your farm so you can have cash flow to grow your wheat. There are not many straight wheat farmers out there.
Mr. Baker: That is not just because of the Wheat Board. Obviously, we need a rotation.
Senator Tkachuk: I did not say it was. I am just pointing this out.
Mr. Baker: I would like to point out that there is a cash advance through the Wheat Board; you can take up to $100,000 interest-free. You have options for cash flow through the Wheat Board. It is not as if you are stuck without your money for 18 months, as some people make it out to seem.
I would also like to point out that with the program being transferred to the canola growers, it will no longer be the case that it is interest-free; they will withhold $3,000 from you.
Mr. Dennis: I would like to make a point on that.
Senator Tkachuk: Go ahead, Mr. Dennis.
Mr. Dennis: Because some people treat some of these crops as cash crops — we have our wheat and cash advances on those as well, but because they treat them as cash crops, they dump a lot of it. Some of these big, progressive farmers who think they are progressive harm our price by dumping all of their cash crops in the fall. We probably lose $1 or $2 per bushel in canola because we are pounding it into the market so fast.
That is my take on cash crops. It is not a positive thing, but it satisfies the banker. It gets you through, and that is why they use that term. I do not think it is a good term.
Senator Tkachuk: You can sell it into the market and get paid for it.
Mr. Dennis: Yes, whatever price is there today, yes.
Senator Tkachuk: Mr. Larsen, you talked a bit about the trade challenges and the examination of our Canadian Wheat Board and extolled the value of the Canadian Wheat Board because of those studies, but really what those studies showed is that there was no trade advantage to anyone else, and that is why we won those cases.
Mr. Larsen: That is not an entirely fair characterization, if I may. It depends on which one —
Senator Tkachuk: You go ahead and answer the question.
Mr. Larsen: It depends on which study you are looking at. Some of them were just equivocal. With the durum and barley, it showed the board was actually an advantage.
Senator Tkachuk: You cannot have it both ways, though, right? You cannot determine there is an advantage and then have a discussion about it, a case resolved and won, which only proves we do not have any advantage.
Mr. Larsen: Not all those examinations looked at the same grade of grain and that sort of thing. They were looking at different aspects of our export grain market.
Mr. Nicholson: I attended a meeting in Medicine Hat where we had Catelli up from the United States, a large pasta company that uses a lot of durum. The CEO and the controller were there, as well as the grain manager. In their presentation they indicated to the durum producers in Medicine Hat that 100 per cent of the durum in their pasta plant comes from Canada and the Canadian Wheat Board. He put on a very good presentation.
During the question period I knew the question was going to come, because I knew who was in the audience and most of the producers in there because I had travelled that area for 20 years. The first question was: You use 100 per cent of your durum requirements from the Canadian Wheat Board. Do you pay a premium price for that durum?
The answer that he gave was that the Canadian Wheat Board is a tough negotiator when it comes to price. By our decision, because of quality control and getting 100 per cent of our requirements from the Canadian Wheat Board, we think we are giving you a premium.
I knew the next question as well, I could have asked it myself: If we do not have a Canadian Wheat Board, will you still buy 100 per cent of your requirements from Canada?
The grains manager got up and said: By buying the wheat from Canada, the Canadian Wheat Board can go to any designated area, where we can get the quality that we want. When we order, for example, 14.2 per cent durum, that is what we get. We do not get 14.3 or 14.4, we get 14.2. We cannot do that by sourcing it direct to farmers.
I live in a city that used to have three flour mills, Medicine Hat. We only have one now. Of the wheat going in there, hard red spring wheat, 97 per cent comes from the elevators. Why? Quality control. Again, when they order 14.2 or 14 or 13.5, that is what they get. The elevator companies supply it.
They do pay a premium price to me as a producer if I deliver there, and when I put that grain in the bin, I sample it every year when it goes in. However, when it comes out of the bin, one load will be 13.7, the next 13.5, and that is not what the mills want. When they order 13.5, that is what they want and that is what they get.
The quality control system we have between the Canada Grain Commission and the Canadian Wheat Board, without question, markets grain for Canada. The Certificate Final of the Canada Grain Commission on exports, in particular, guarantee the amount of grain, the quality of grain, and the buyers love it.
Senator Tkachuk: I have one more question. There has been lots of discussion about the plebiscite held by the Canadian Wheat Board. There has been quite a bit of debate in front of the committee about the validity of the list and the vote itself. One thing I know for sure, there has been a lot of talk about democracy.
Another thing I know for sure is that 60 per cent or thereabouts — the wheat farmers, not the barley farmers — of that vote, about half the people voted of the 68,000. That would be about 34,000 people, not necessarily farmers. The 60 per cent voted to keep the single desk, and 40 per cent voted not to keep it. There was no question on the dual- marketing system.
From my way of thinking, what the 60 per cent needs is the 40 per cent. In other words, the 20,400 farmers said we want the single desk and we want to force the 13,600 other farmers who do not want the single desk to be part of the system. No matter what their democratic right is to have a farm and to sell where they want, we want to force all those farmers so that we can have the Canadian Wheat Board. How does that fit within the democratic description of what you are trying to tell us today?
The Chair: Thank you for the last question, Senator Tkachuk. Mr. Nicholson and Mr. Dennis, and then we will move to Senator Mercer.
Mr. Nicholson, your answer, please.
Mr. Nicholson: You raise a very interesting question. When I was chairman of the Medicine Hat co-op I took that organization through a strategic renewal. On that issue, the only way to really solve it is to set up a committee within the industry, three from each side, and there has to be compromise on who gets the vote.
When I would go into the coffee shop there was always coffee-shop talk about farmers. When we have a cash renter, should he be allowed to vote in the Canadian Wheat Board? The discussion around the table was no, because he has no interest in the grain. When renting on a crop-share basis, should the landlord have a vote? The answer was, you are damned right, because I still have a vested interest in marketing grain, even though my renter is moving it. He is getting a cash flow, either for his pension or whatever from that grain, so he should have a right to vote on how it is marketed. Then you get into the whole debate.
A Hutterite colony lives close to me. They are huge. They farm two townships of land. Mike told me before I came here last week that they have 1.2 million bushels of hard red spring to market, let alone their durum and other crops. They have 10 brand new John Deere combines, and they support the Canadian Wheat Board. I said to Mike, by you having that much grain should you get 1.2 million votes on the Canadian Wheat Board? No, he said, I am satisfied with one, but I want to make sure that the ones are heard and we design a system that is in the best interests of the majority of farmers.
Will you get 100 per cent? Never. You do not get 100 per cent of anything. We have a government in power right now with only 40 per cent of the vote.
Democracy is one person, one person, no matter which way you look at it. That is the only fair system. If you do not have that, do have you democracy?
The Chair: Mr. Dennis, a short response, please.
Mr. Dennis: We are talking about choice here. I want to make it clear that choice is not democracy. What we have here are people who want open market, they want the private market, and the majority of the people want single desk. We know that nothing in between will work. Chuck Strahl said it would not work.
Eight times in Bill C-18 it talks about wrapping up this thing that we know will not work. We know that the government of the day knows it will not work. We have to go to committee of the whole to do these kinds of decisions. That is the way it is. We cannot set speed limits based on how much money the guy has and whether he has a car that goes fast. We cannot do that. We have to go to the committee of the whole. Everyone cannot be the captain of the hockey team. In those kinds of issues, that is what democracy is for.
I want to just touch quickly on Canadian Wheat Board trade challenges. Because the Canadian Wheat Board was grandfathered in and we know that it creates a premium, the trade challenges were based on having a premium; is it being done fairly? That is what we won on. We proved that it was being done fairly. If we give up that premium, we cannot, because it was grandfathered in. If we give it up, we cannot get it back. If what we were doing today was creating a premium, the same trade rules would not let us do it. That is the proof that this bill is not going to do anything positive for farmers.
Senator Mercer: Mr. Larsen, talked about things being factual. Facts do not play a big role in things around here these days. It is more ideologically driven.
This committee did a study a number of years ago on rural poverty. As we travelled across the country we concluded that in rural areas of Canada suicides are up, family violence is up, family split-ups are up, bankruptcies are up, and all because of the inability of rural communities to survive in the modern world today.
With that background, when Bill C-18 comes into play, if it does pass and receive Royal Assent, do you see those three or four things that I have mentioned getting worse in rural Canada, in Western Canada, because of this bill?
Mr. Larsen: Everything flows from economics. I cannot tell you what will happen in the future, but I know what happened when the cost base of agriculture went up through the Crow rate. Here we are talking about lowering the net income of farmers. Of course, that will have a big impact on farms. I watched it happen in my own community. We had 53 farmers delivering in my own postal code. When the Crow rate was gone, and all was settled and done, there were 2 of us left — 2 out of 53.
I watched those young people, kids I went to school with, go broke because of the change in the economics imposed upon Western Canada by that change. This is another major change that will bring down the whole grain structure in Western Canada and that will make a big difference. We do not have anywhere else to go now. Cattle were up for a time. They are pretty good again but not where it was before. There are only two packing plants that buy our cattle now. Of course, there will be social disruption from this.
Senator Mercer: Mr. Dennis, in response to the question about democracy, you responded very well. A number of times you outlined the various words that appear in the act, which was very helpful.
When the act was amended in 1998, the then chairman of this committee was Senator Gustafson from Saskatchewan, a man for whom I have a great deal of respect. He had been the former parliamentary secretary to the former prime minister, as well as a long-standing member of Parliament and a long-standing member of the Senate. He stepped out of the chair on the day the committee was considering the amendments to the Canadian Wheat Board Act, which were to change section 47.1 to put it in the condition it is in today. Senator Gustafson put that into the act to protect farmers, so that farmers could have a say in future changes to the Canadian Wheat Board.
I am so frustrated by this. We are talking about the toothpaste being all over the tube. After Royal Assent we will not be able to put it back in and we will be back here in five years' time because the industry will be in crisis due to this legislation.
Is there a possible way to solve the situation as to who the actual voters should be? I ask that because both sides disagree so much on who the voters should be who are consulted under section 47.1.
Mr. Dennis: I am heartened that the Senate did change this to protect our farmer control on our farmer board. I remember the late Reg Alcock when he was responsible for the Canadian Wheat Board. I knew him very well. Reg had proposed in the 2006 election that we move to 15 farmer-elected directors. We would not have the appointed directors. That would give farmers more control. In 1998 the Senate helped us get some control and that was very good. We had some positive changes in tweaking something so it is as good as it can be. Is it perfect? No. Is it the best we have right now? Yes, it is, by far.
That control and those types of things are what we should be doing. We should not be throwing the baby out with the bathwater here. This is too much change too quickly, with no consultation process and no evidence that it is good. The way the trade rules even allowing it proves that it is bad. Some of those types of things are the things we need to do to ensure we will not make the mistakes that were made in the Crow rate debate. That was extremely hard on Western Canada and this will be hard on Western Canada. The Senate needs to look at this in a non-partisan way. If this goes down party lines, I would be very alarmed because that would prove that is the way it is being considered. I am urging and hoping that non-partisan is the way it will be considered.
Mr. Larsen: I believe the question related to the qualification to vote. That is already set out. It indicates an "actual producer." The objection has come from the other side that landlords should not be involved. Karl Marx would have agreed that landlords should not be involved but, as has been outlined, landlords also have a financial interest. Therefore it is defined already.
Senator Mercer: It is exciting when we have witnesses who are young and vibrant, as two of our witnesses are today. I hope that is an indication of the strong future of agriculture.
Senator Tkachuk: To us they are all young.
Mr. Nicholson: Just because we have snow on the roof does not mean the fire is out.
Senator Eaton: Mr. Dennis, you said you went to all seven meetings that were held this summer.
Mr. Dennis: That is correct.
Senator Eaton: How many other people went to all seven meetings, do you think?
Mr. Dennis: I do not think very many. Most of the meetings were pretty well all different people. I went because I wanted to see what was going on. It was me and two or three others who did that.
Senator Eaton: Mr. Sigurdson, did you say most of your customers do not want GM crops?
Mr. Sigurdson: Yes.
Senator Eaton: Who are your customers?
Mr. Sigurdson: Through the Wheat Board we market to Japan and 70 countries around the world. They have consulted with them and they say they do not want GM wheat and if we introduce it that will put all our markets in jeopardy.
Senator Eaton: Do places like China and India want GM-free wheat?
Mr. Sigurdson: I would assume so, yes.
Senator Eaton: You would assume?
Mr. Sigurdson: The Wheat Board consulted with them.
Senator Eaton: Do you know that for a fact?
Mr. Sigurdson: Yes.
Senator Eaton: We know that the EU does not want GM wheat.
Mr. Sigurdson: If we start losing markets because of GM wheat, it will cost us money.
Senator Eaton: I will not argue the point.
Mr. Nicholson, I believe you said in your presentation that you have a right to vote on how you want to market your grain. We have been fortunate this week to have many people appear before us. We had two people who farm in Southern Alberta who went to jail because they are so furious they were fined by the Wheat Board. They want the capacity to sell their own wheat. I appreciate your passion and your conviction. I am not questioning that. However, I saw two witnesses here yesterday who feel exactly differently from the way you feel and they are both hands-on farmers.
Mr. Nicholson: I am glad to answer that question. I have been around the block a time or two.
Senator Eaton: So have they.
Mr. Nicholson: They tried to move their grain into the United States without an export permit.
Senator Eaton: No, it was a much smaller offence than that.
Mr. Nicholson: Their trucks were then seized and impounded in the impound lot and they tried to steal them back. That is the reason they went to jail.
Senator Eaton: According to them, and according to our records, they chose to go to jail rather than pay a fine because they did not approve of the monopoly.
Mr. Nicholson: They could have moved that down if they had gone into the producer buyback program and they could sell it to whoever they want.
Senator Eaton: We have heard lots of testimony on how the producer buyback does not work that well because farmers are always competing against the Wheat Board in the producer buyback. The Wheat Board goes ahead of farmers and cuts them out of the deal.
Mr. Nicholson: I am not saying it is perfect and I am not saying it cannot be modified to work better either.
Senator Peterson: I want to clarify. It was not the Canadian Wheat Board that fined the farmers. They were fined under the Customs Act.
[Translation]
The Chair: The deputy chair, the Honourable Senator Robichaud.
Senator Robichaud: Thank you, Mr. Chair. I have more of a comment.
[English]
I find it deplorable that witnesses have to justify being allowed to answer questions based on the number of acres they farm. That disqualified Mr. Larsen. I do not agree with that measure. Only two of the five directors appointed to this new board are farmers. The witnesses could ask senators here how many acres we farm. I do not farm any, but I am quite willing to listen to what witnesses want to tell us about their involvement in farming, direct or indirect, and how this bill will affect them.
Further, Mr. Chair, when I see all the papers that are circulating from the gallery to some senators, I might wonder whether the questions they are asking originate from them. However, I will not go there.
Senator Duffy: That is a point of order.
Senator Robichaud: It is not a point of order. It is exactly what is happening.
The Chair: Senator Robichaud, have you completed your comments?
Senator Robichaud: I will finish by thanking the witnesses for appearing before us. They have made their points clearly, which is why I have no further questions for them.
The Chair: I wish to indicate that we have exceeded our allotted time with these witnesses by 23 minutes, which I think is very fair.
I also wish to indicate that it is totally appropriate for staff of senators on both sides to bring information to senators.
Senator Plett: Mr. Chair, I think Senator Robichaud was making a comment in regard to what I said, so I think I should have the right to clarify what I said.
The Chair: On the matter of what you raised at the beginning, the clerk has just informed me —
Senator Plett: No, it is with regard to his insinuation that someone had said that someone did not have the right to be here or was not qualified or something along those lines.
The Chair: Do you wish to raise a point of order?
Senator Plett: Yes, please.
The Chair: I will listen to your point of order and then we will conclude with this panel.
Senator Plett: At the point that Mr. Larsen would not answer my question, I said I would no longer ask him questions. That is also my right.
The Chair: Thank you for that clarification.
Senator Robichaud: I did not name anyone. I just had the feeling that in order to validate their answers they had to say how many acres they farm, and I do not think that is right.
The Chair: On behalf of the Standing Senate Committee on Agriculture and Forestry, I thank the witnesses for accepting our invitation to appear here today.
I would like to take this opportunity to introduce our next panel, which includes Mr. Wade Sobkowich, from the Western Grain Elevator Association, and Mr. Phil de Kemp, President of the Malting Industry Association of Canada. Thank you for accepting our invitation.
I would now invite the witnesses to make their presentations.
Wade Sobkowich, Executive Director, Western Grain Elevator Association: Thank you for inviting the Western Grain Elevator Association to appear today about Bill C-18. The Western Grain Elevator Association is an association of seven publicly-traded, private and farmer-owned grain businesses operating in Canada. I think everyone has received a copy of what I will read. At the bottom of the first page, you can see a listing of my members.
Introducing marketing freedom for wheat and barley by August 1, 2012, will significantly impact the operations of grain handlers and exporters. The industry shares the government's goal of ensuring a smooth transition to an open market.
WGEA members currently market wheat, barley, canola, pulses, special crops and other grains and oilseeds into almost 100 countries around the world. Generally, we are prepared for the passage of Bill C-18; however, we need certainty for final planning of the details. Whether acting as a direct agent of the Canadian Wheat Board or others, or in direct partnership with farmers in meeting end-use customer needs, grain companies will be prepared to handle as much wheat and barley as farmers produce within a competitive marketplace. To ensure an orderly transition to an open market, certainty is the most important principle. Any process requiring stakeholders to guess at or interpret their rights and obligations prior to and after August 1, 2012, will lead to significant market confusion and will therefore be detrimental to the transition.
Paragraph 11 of Bill C-18 adds a new section 45(2) to provide this certainty. It clearly states that grain companies, exporters and producers can enter into forward buying and selling agreements, which is of utmost importance. Without such assurance, parties to these agreements will be needlessly exposed to commercial risk of loss. Any doubt that the contract is enforceable or that a party will be able to execute a contract will be reflected in the contract price, which will not be beneficial to any market participants. With the passage of the bill as written, industry participants will have that required certainty and be able to commit resources toward creating the final framework required for an open market. Producers will also be able to determine their seeding and contracting intentions for 2012.
On issues around the Wheat Board's transition to a voluntary marketing agency, the WGEA believes that, if it chooses, the Wheat Board has every opportunity to turn itself into a viable business in an open marketplace. The Wheat Board has a loyal producer customer base and has developed deep relationships and branding with international buyers. The WGEA does not believe that the Wheat Board needs to own and operate grain-handling assets to be successful beyond August 1, 2012. The existing grain-handling network is capable of handling significantly more volume of grain than it currently handles. As a result, and given the high fixed operating costs, there is significant motivation for every grain company to compete for additional tonnes to run through its elevator system. A number of very successful trading companies have operated in Canada for decades without owning grain handling assets, companies such as Tafmer Mitsui, Kramer, Gavilon and JKI. They export millions of tonnes of grain and oilseeds from Canada every year, and they do so through commercial handling agreements negotiated with the various grain companies. There is no reason why the new Canadian Wheat Board could not negotiate similar handling agreements, as they have done in the past with grain companies. Given the fact that there is currently excess capacity in the handling network, grain companies will compete aggressively to win the Wheat Board's business.
Regarding rail service, in March 2011, the federal government announced its plan to introduce legislative amendments to the Canada Transportation Act that will provide shippers with the right to service level agreements with a railway company and binding arbitration on finalizing the terms in situations where negotiations fail. The process stemming from the rail freight service review should proceed under a similar time frame as the removal of the Wheat Board monopoly and should conclude prior to the August 1 2012, date.
On producer cars, the right of producers to access producer cars is provided under the Canada Grain Act and is not dependent on the Wheat Board's monopoly. Grain companies continue to support the producers' right to have access to producer cars, and it is expected that some grain companies will be involved in bidding for producer cars going forward and will set up infrastructure to manage and handle producer cars on commercial terms.
Dependent structures: Bill C-18 provides the perfect opportunity to review the existing structure and funding of a number of research, marketing and policy organizations that have seemingly evolved over time into "wheat board" and "non-wheat board" types of entities. As primary funders of a number of the "non-wheat board" agencies, such as the Canada Grains Council, the Canola Council of Canada and the Flax Council of Canada, there is significant overlap in the mandate of these various organizations that would warrant greater collaboration between them. We see tremendous potential in turning the Canada Grains Council specifically into a council of councils to try to address cross-commodity types of issues. We believe that the most efficient model would be to consolidate other councils to have a cereals council, an oilseeds council and a pulses and special crops type council. Already, Pulse Canada exists and could fill that particular role to deal with commodity specific issues on research and market development.
In the case of the port of Churchill, government assistance will be generous. They will be providing $5 million per year in shipping incentives for each of the next five years. Assuming approximately 500,000 metric tonnes will be moved through Churchill in any given year, this equates to approximately $10 per tonne. If Churchill is a viable option, it will be used and, with a $10 per tonne head start, we expect it to be an attractive port for many shippers.
The Canadian Grain Commission, CGG, will remain in place to ensure Canadian shipments adhere to the Canadian standards of grain quality. However, there is further opportunity to save costs to the system with future revisions to the Canada Grain Act. Several of the CGC's current services and related costs exist only because of the Wheat Board's current operational model, which, in an open market, should no longer be mandatory. Cost savings from reducing the list of mandatory services and offering competitive alternatives for delivery of those services will be significant and will be passed to producers who currently bear the cost of excessive CGC service fees.
In conclusion, this brief summary represents some of our efforts at identifying various issues that may arise and possible or likely scenarios in an open market environment. The economic interests of farmers and the WGEA are consistent. The overall objective of both parties is to help make the entire industry more profitable. A healthy and vibrant value chain must include a profitable producer base. That has always been our approach to problem solving in the grain business as the Western Grain Elevator Association.
Phil de Kemp, President, Malting Industry Association of Canada: Good morning, Mr. Chair and ladies and gentlemen of the committee.
For those of you who are unfamiliar with the significant economic contribution our industry provides to both farmers and the Canadian economy, let me first describe to you who we are and what we do, and provide a brief historical perspective of the evolution of our industry and why, in our view, passage of Bill C-18 is critically important to our industry, our brewing customers and the majority of the farmers we contract with, who support passage of this bill.
Canada's malting industry is comprised of four companies. They include Canada Malting Co., which has plants in Calgary, Thunder Bay and Montreal; Prairie Malt Limited, which is located in rural Saskatchewan in a small town called Biggar, approximately one hour west of Saskatoon; Rahr Malting is situated in a small rural Alberta community located northeast of Red Deer in a town called Alix; and Malteurop, which has a plant located in Winnipeg.
The industry until recently was the second largest exporter of malt in the world, second only to the European Union. Almost two thirds of our value-added production goes into the highly competitive export market destined to brewers in over 20 countries. We are the largest customer for Canadian malting barley and historically purchase approximately 1.1 million metric tonnes annually from farmers via the Canadian Wheat Board. Historically, our industry accounts for almost 60 per cent of all malting barley sold by the Canadian Wheat Board every year.
Today, approximately 70 to 75 per cent of all barley grown in Western Canada is comprised of malting barley varieties with selections and quality parameters greatly influenced by seasonal weather conditions.
We have always maintained that malting barley is a specialty crop and have been concerned for some time about the continued declining acres seeded to barley. Barley acres have declined almost 30 per cent in the past several years.
Between 1985 and 1995, our industry invested over $300 million in building two new plants and greatly increasing capacity at several others. We went from exporting just 40,000 tonnes annually to almost 600,000 tonnes a year in that 10- year time frame.
Since then, we have seen continued positive growth in beer consumption and corresponding malt plant construction in various parts of the world to meet this demand. Some of our members have participated in the construction of these plants. However, what is most unfortunate is, since the mid 1990s, Canadian malt companies have not invested one dollar in new plant expansions or construction of newer facilities here in Canada to capture some of those opportunities and have elected to build elsewhere.
There have been a whole host of reasons why that has happened and I welcome the opportunity to highlight those for you in greater detail after this presentation, and why passage of Bill C-18 will create the environment to at least consider reversing this trend over the next decade and beyond.
In our business, or any business, for that matter, you need certainty, clarity and predictability in knowing how your commercial environment operates. You need the ability to react quickly to address changes in markets and market situations. You would prefer to have continued assurance and reliability in trusting that the rules are clear and do not change and that any future planning decisions, both operational or in terms of capital expenditure, are not continually having to be altered or eliminated because of the political winds of change. The many attempts over the past 20 years to address the fundamental issue of the producers' right to market his or her own barley outside the auspices of the Canadian Wheat Board has had a causal impact on our value-added industry.
In terms of the lack of certainty and clarity in trying to operate our business, consider for a moment what our industry has had to try to manage over the past 20 years. In the late 1980s there was the short-lived continental barley market that was passed by regulation and subsequently challenged in the courts and eliminated by court order. In the late 1990s, the passage of Bill C-4, the amendment to the Canadian Wheat Board Act, was passed and it provided absolutely no ombudsman or arbitration mechanism to address commercial concerns that were deemed to be unfair, uncompetitive or not entirely market-responsive. There was no ability anymore for our industry to have recourse to government and/or policy-makers to address issues that impacted the health and viability of our value-added industry. As some have described it, it was "either the board's way for the highway."
In 2000 and 2001, the European Union eliminated the use of export subsidies for malting barley and malt. This singular event, in our view, created the inability for the existing barley pooling system to meet the needs of the vast majority of both farmers and customers such as ourselves and brewers around the world. I would be more than happy to explain in greater detail how this relates back to Bill C-18 in terms of price transparency and market responsiveness, which is, in our view, at the heart and the most critical positive outcome for farmers and the Canadian malting industry when it becomes law.
A few years later, the Liberal government created various agriculture commodity-specific round tables in an effort for all stakeholders to consider what changes were necessary to increase exports and create additional value-added production opportunities. The only dissenting vote on the barley committee on the recommendations put forth by the secretariat and its members was the Wheat Board. Hence, the barley committee was dissolved. However, today a number of other commodity round tables are still in existence and are addressing and meeting the needs of all stakeholders and their respective industry groups. Finally, only a few years ago came the regulation eliminating the Wheat Board monopoly for barley, and again the subsequent challenge in the courts and the court decision subsequently reversing that regulatory order.
In every single instance, each one of these events and subsequent outcomes has had the resulting negative effect of creating considerable market uncertainty both for ourselves and our customers and, most important, the inability to confidently try to manage our business in terms of future operational planning and new infrastructure investment. To coin a sports phrase, "the goalposts were always being moved and the rules were changed frequently."
As a result of the multitude of circumstances just mentioned, it has been extremely difficult, particularly over the past 10 years, to manage our business in a commercial manner that provides predictability and confidence. We need predictability and clarity. We need an environment that provides our customers the confidence in our ability to meet their needs as reliable, price-competitive and market-responsive suppliers of quality malt. In our view, the current marketing system for malting barley does not and cannot fully address or meet all of those present needs.
In our view, Bill C-18 will address those impediments. Passage of this bill will allow for complete market and price transparency on a daily basis. We will finally have predictability, clarity and certainty in the market. We will be able to manage our assets and plan for the future with no risk of the rules changing or the goalposts being moved on almost an annual basis. We will be able to compete for our farmers' business in a clear and price-transparent basis with true and meaningful market signals that reflect the market on a daily basis.
For those farmers who will wish to participate, it will mean that they will be able to decide for themselves on a daily basis if they want to price and sell their malting barley to us. They will be compensated fully on the day of shipment — no $30 per tonne cash fee holdback as is presently the case with cash-plus; no minimum initial payments only; no planting decisions based on possible 12 or 18 months out projected market returns; no additional CWB overhead and administration costs to deduct; and no sharing of revenues for the additional time, effort and management costs they have to put into growing and looking after their specialty crops.
In closing, we will compete for those acres. We will be price competitive. We will be fully price-transparent and we will earn back our reputation in the global market as reliable suppliers of malt that is price-competitive and market-responsive on a daily basis.
We urge this committee and the Senate to endorse Bill C-18 and pass it into law by the end of the year.
Senator Plett: Mr. Sobkowich, I was particularly interested in the companies that support you — Cargill, Richardson, Viterra, et cetera — large companies. With Bill C-18, would it be your opinion — and I would like you to explain it briefly — that a number of large companies will be competing for grain? Fear-mongering would have us believe that these companies will take over. Richardson will be competing with Cargill and with Viterra. That would in fact bring prices up rather than bring prices down with the elimination of the single desk — not the elimination of the Wheat Board; but the elimination of the single desk should improve market with these large companies competing for the same grain.
Before you answer, I will immediately go to Mr. de Kemp, and you can answer in order.
In the malting industry, you have spoken about the middleman. To me, when there is a middleman, he needs to make a percentage of whatever he is selling. I would like you to explain briefly why eliminating this middleman and allowing farmers to sell their malt barley directly to you is an improvement to their bottom line.
Mr. Sobkowich: That is a good question. You are getting at what the level of competition will be after Bill C-18 passes. That is an important thing to understand.
The way we view it, is we are going from one buyer of wheat and barley to multiple buyers of wheat and barley. Now you have Cargill competing with Weyburn Inland Terminal competing with Richardsons competing with West Central Road and Rail competing with the farmers who want to deliver directly to maltsters, farmers who want to deliver directly into the U.S. There will be multiple competing streams for that grain. Any time you have multiple streams like that competing to try to secure and attract farmers' grain, each of them will be sharpening their pencils and trying to offer the farmer the best price they can. If the farmer shops his grain around, and it will be transparent, he will see all the prices offered via company websites, via the IntercontinentalExchange.
Senator Plett: The prices will be posted for people to see.
Mr. Sabkowich: The prices will be completely transparent for people to see, and he will be able to choose if he wants to deliver to a miller directly or if he wants to go through a Canadian handling company or if wants to contract directly with an exporter that does not have a facility, if he wants to do business with the Canadian Wheat Board, if he wants a shipper/producer car, if he wants to deliver directly to the United States. There will be a vast menu of options for the farmer to choose what is the best for him in a competitive marketplace. I can get into this later, but we really have a competitive marketplace for grains and oilseeds. Within that competition, given the high number of options available to any farmer at any given time, we think that will result in more return to the farmer at the end of the day.
Mr. de Kemp: With respect to middlemen, what is different and unique about malting barley versus wheat, and the discussion over the last 20 to 25 years on that, is that the board does nothing for us except provide the price. It is different than wheat. We have to do the contracting directly with the farmers, of which the vast majority support this legislation. We have to find it. We market ourselves in terms of value-added. There is no market development that they do on our behalf. We are selling malt.
In terms of the overhead costs, you just have to take a look at the Wheat Board annual reports. Administratively, there is $5 to $10 a tonne taken right off the bottom line on 2 million tonnes. We are buying over 50 per cent of that, and all they do is just give us the price. That is it, nothing more, nothing less.
In terms of price transparency and market responsiveness, I alluded earlier to what happened with the export restitutions and to the subsidies being removed in 2000 and 2001. Our industry basically made that happen. We spent three or four years going to the European Commission, saying that you do not need a subsidy for malting barley and malt. I do not want to get into the technical aspects of it, but eventually they agreed. That saved automatically $20 to $40 a tonne on 2 million tonnes a year to the farmer. We did not benefit but what happened as a result of that is, prior to that, the entire world, the beer industry priced their barley all in a matter of six weeks, as soon as the crop was off. No one had to buy barley ahead of time, and the brewers all around the world came in at the same time.
That changed. Brewers wanted their prices, and they priced out 12 to 18 months in advance. The pooling system did not allow that. It does not allow that because of the inherent risk. CashPlus came out in the last few years. As I said, currently, when we contract with a farmer, the board is deducting about $30 a tonne. There is half a million tons of cash plussed on this here, it could effectively be $15 million. Whether that will go back to the farmer or into the contingency fund remains to be seen. The point is that there will be some significant cost savings, absolutely. Again, the board does not do anything pertaining to malting barley. It really is a specialty crop, and we do our own marketing.
Senator Peterson: Mr. Sobkowich, it is my understanding that about three of the private grain companies do 80 per cent of the world grain business.
Mr. Sobkowich: The world grain business?
Senator Peterson: The grain business, they handle it. There are three top companies. I would like some idea of scope.
Mr. Sobkowich: Let me look at some stats here. Let me put it this way: Of my members, one company does about 30 to 35 per cent; another company does about 20 per cent; another company does about 10 per cent, and then other ones do 5 per cent, 6 per cent, that sort of thing. Yes, that would be the percentage handled in a given year. That would be relative to how much grain they are able to attract from the farmer.
Senator Peterson: With respect to transitioning to an open market, you talked about an orderly transition. Beginning January 1 next year, will you start doing forward contracts?
Mr. Sobkowich: We will be starting to forward.
Senator Peterson: You will be doing that. There is no confusion there. That is pretty clear.
Mr. Sobkowich: It is up to the companies to assume a level of risk because we do not know what is going to happen legally here.
You look confused.
Senator Peterson: I do not understand the "legally" bit. You do forward contracts — what is "legally"?
Mr. Sobkowich: We do forward contracts. That is why certainty is the most important thing, like I said earlier. We need to know we can do forward contracts for execution after August 1, 2012.
Senator Peterson: They said that already.
Mr. Sobkowich: Companies are going to enter into contracts. They are designing contracts now. They are going to be forward selling, and they are going to be entering into contracts with farmers for execution after August 1, 2012.
Senator Peterson: Then when August 1, 2012 comes, it is a wide open market. No problems. There is no uncertainty there.
Mr. Sobkowich: Yes.
Senator Peterson: On rail service costs, you seem to have a concern there. It is my understanding that you do not pay the rail service cost. Does the farmer not pay that?
Mr. Sobkowich: There are two components to the rail side that need to be understood. First, there are two ways for the railways to make money. One is that they can increase their fees; and the other one is they can decrease their costs.
We have a revenue cap in the grain business that puts limitations on how much revenue the railways can earn on grain movements. What we do not have is any requirements on the railways pertaining to how much they need to invest in providing good service.
Our focus has been primarily on trying to get very good service from the railways because you can see how there may not be the investments; maybe the equipment is poor and that sort of thing. This ties into the rail freight service review that happened and now the service level agreement facilitation process that is going on under Transport Canada. They appointed Jim Dinning to be the facilitator, and he set up a committee to look at service.
The rates themselves are paid for by farmers. That is why we have the revenue cap. When we do not get good service and we miss a vessel and you end up with vessel demurrage, or you have contract extension penalties or you default on a contract, those are costs that are borne by the entire industry. When you talk about costs of the rail system, there is more to it than just to say the farmers pay all the costs. It is shared among the industry, depending on the circumstances.
Senator Peterson: You just want service. The costs are secondary because you do not incur them. You want to ensure the railways give you service, right?
Mr. Sobkowich: Right. We want to make sure the railways give us service because we view that as being the real potential for generating and retaining wealth in the grain industry.
Senator Peterson: One final question on the Canadian Grain Commission. Does your business plan focus mostly on quantity or quality with your members?
Mr. Sobkowich: Both. Every company wants to turn as much grain in their system as they can. That is the name of the game. It is about turnover when it comes to Wheat Board grains under the current system because you get a handling fee for handling that grain. Therefore, we are interested in moving as much grain through our system as we can.
We also want to make sure that we are supplying the customer with the product he ordered. That is paramount. We do that on board grains and non-board grains. The Grain Commission plays a very strong role in ensuring that we adhere to the Canadian standards of grain quality, on both the board and non-board side. The last thing you want to do is provide a customer with product that he did not order, otherwise you will have big problems. At the end of the day, what we do in Canada is ensure that the customer receives the quality that he ordered.
Senator Peterson: You are supportive of the Canadian Grain Commission in terms of quality, but you would like to see them scale down on other things. Is that right?
Mr. Sobkowich: To get into it a little bit, right now we have an added cost in the system whereby we have mandatory inward weighing and inspection. What that means is when a railcar arrives at a terminal elevator in Vancouver, Prince Rupert, Churchill or Thunder Bay, the Grain Commission is there, and they inspect and weigh that grain when it goes into the terminal elevator. We have official scales that are certified by weights and measures, Measurement Canada, so we would argue that the weighing function is somewhat redundant because we are complying with Measurement Canada's requirements on our scales.
Be that as it may, we have that added cost in the system for the Canadian Grain Commission. The reason we have mandatory inward inspection on the inspection side is that the Wheat Board needs that information in order to settle with the company that shipped the grain to the terminal, as the Wheat Board directs that traffic.
With the Wheat Board ceasing to be a monopoly and operating like another one of these grain companies, an exporter or grain dealer, there would no longer be a need for mandatory inward inspection, which is another cost that we think can be removed from the system.
If anyone wants it, however, it can be there on an optional basis. We see the CGC certifying external agencies and ensuring they are qualified to go in and do inspection whenever you have a transaction between a country shipper and a non-aligned terminal. However, we think that is one area, for example, where we can remove costs from the system.
We know the Canadian Grain Commission has just gone through a review of its service fees, and they have been instructed to become self-sustaining from a financial perspective. That means that they will be tripling and quadrupling their fees on services that we do not really need. We have been advocating that you need to review the Canada Grain Act first, ensure it has been adjusted properly, and then apply user fees to the services that are really required.
That was a long answer, but the long and the short of it is it is one area where we see potential cost savings for farmers within the structure of the Canadian Grain Commission as a result of the removal of the Canadian Wheat Board monopoly.
Senator Eaton: Mr. de Kemp, I think Canadians are known around the world as much for our excellent hockey as our wonderful beer. You do not agree? I like Canadian beer. How have Canadian brewers, up to now, accessed the barley they need?
Mr. de Kemp: Canadian brewers currently access their barley, which is malt, mostly from us. There is some barley coming in right now via the U.S. That happens occasionally, from time to time. However, 90 to virtually, in most years, 100 per cent of all the malt that goes to the Canadian breweries comes from the Canadian malt industry.
Senator Eaton: Which comes through the Canadian Wheat Board to you?
Mr. de Kemp: Yes, when we purchase it via the board.
Senator Eaton: I as a barley farmer will now go directly to you, you will malt it and then sell it? What is the chain of events?
Mr. de Kemp: Presently, that is what happens. The only thing the board does is give the price. It is not like they are selling wheat to China or whatever where they have to work with a lot of companies to —
Senator Eaton: I am sorry. We are just so pressed for time. What will happen if this gets —
Mr. de Kemp: Nothing. Nothing changes.
Senator Eaton: Would I as a barley farmer go directly to you? Can Molson's come directly to me?
Mr. de Kemp: Molson's does not malt barley, we do. The brewers have to come to the maltsters for the malt.
Presently, we deal with the farmers directly. The only thing that will change is we will be able to give them a clear signal every day as to what that price will be. We do that right now with respect to the relationship because we have to do the contracting. We do all of the arrangements with the —
Senator Eaton: What does the Wheat Board do?
Mr. de Kemp: All they do is provide us the price.
Senator Eaton: Do they not take any money for that?
Mr. de Kemp: We have to deduct certain charges to forward to the board when the grain hits the runway, so to speak.
Senator Eaton: What percentage of the price would they take?
Mr. de Kemp: For CashPlus right now, like I said, it is $30 a tonne at 5 per cent. They will take maybe up to 10 per cent up front and then give some of that back. On pool, it is completely different. On the pooling, we have had years where we as an industry have had to guarantee the price for the —
Senator Eaton: You will be able to give the farmer a little more money because you are cutting out the Wheat Board, right?
Mr. de Kemp: We will give it to them all, and there will be additional money in their pocket.
Senator Robichaud: Mr. Sobkowich, in your presentation there was some concern about rail service, which you addressed with Senator Peterson. However, with producer cars, you are saying it is expected that some grain companies will be involved in bidding for producer cars and will set up infrastructure to manage and handle producer cars and commercial. Would you elaborate on that, please?
Mr. Sobkowich: Sure. I will refer to some notes because I anticipated the question.
First, it is important to say that the right of producer cars is provided under the Canada Grain Act, and that is an important thing and something that we support because we are strong advocates of competition. Any time you can have more competition to ensure that everyone is in line, like anything else that happens in any other commercial situation, that is good.
However, producer cars will change at least in terms of how the grain companies deal with them. The Wheat Board has dealt with producer cars in the following fashion: It has been a supply push type of system. They are the biggest administrator of producer cars. Farmers will signal they would like producer cars and the Wheat Board would administer them. They would get filled through a loading facility like West Central Road & Rail, for example. It would then get pushed to a terminal and sit there waiting for a sale. The Wheat Board can continue to do that, if they choose, going forward. In fact, I believe producer cars will be a large part of what the Wheat Board does going forward.
For what will become non-board grains or for companies that are handling wheat and barley going forward, they will want to handle producer cars on a demand pull type of a system.
The first question a terminal operator will ask is, "I will accept your producer car but for what? Where is it going? Where is the sale? What is happening?" It will either be an exporter that is lining up a set of producer cars to meet a sale of wheat, he has made an arrangement with a terminal elevator to accept that and it will be delivered in time, loaded on a vessel and make part of the sale; or it will be the terminal itself calling for that forward. There are different companies that have different places in the marketplace. That is a good thing, because it adds to this element of competition.
However, there are companies that are integrated, in the sense they have country elevators and terminal elevators. They will want to ship their own grain to their terminal elevator first, or add to them. However, if there is a strong demand for producer cars, we have overcapacity in the system.
The name of the game is turnovers, like I said. People will not be turning down incremental tonnes if it is available, so there will be significant motivation for people to deal with the demand for producer cars as it arises and ensure that they are not turning away business. If there is a demand for producer cars, it will be dealt with in a competitive marketplace.
Let me quickly refer to some notes. The other point is that there are a number of port terminals, like Mission Terminal in Thunder Bay, and even Churchill, where this is a topic for discussion. They rely heavily on producer cars. We can expect those terminals to have an aggressive program to try to maintain the producer car business. The Wheat Board has historically been the largest administrator of producer cars, and they can still play that role going forward.
Who knows, but I always come back to it will be a competitive marketplace. If there is strong demand for producers and shipping producer cars, an open marketplace will figure out how to make that work and incorporate it into their sales programs. If there is not a strong desire for producer cars, it means farmers are happy with the alternatives that they have before them, such as selling directly to a company.
We talked about competition. We do not have that same level. The Wheat Board sets the price and the grain company handles it on Wheat Board grains. The farmer can save the elevation by shipping a producer car. In the non- board market the companies are competing aggressively to try to get that grain to move through their facility. They would rather have that grain move through their elevator and make that a more attractive option than having the producers wanting to do a producer car.
If a producer decides this company is giving me a good deal, it is not worth my while to ship a producer car, they will make that choice. My point is that we do not know if it will see more or less producer cars going forward. However, if we do see less, it will not be because producer cars are being shut out in some way. It will be because producers are happy with the alternatives before them, like shipping directly to a maltster or a mill, using a handling company to handle their product. Does that answer your question?
[Translation]
Senator Robichaud: Yes. I have just one more question.
[English]
Mr. de Kemp, you assured us that brewing companies will continue to receive whatever product they buy from you in the new environment, and that we do not have to worry that Moosehead or Alexander Keith's will run out of ingredients to produce the fine beer they do.
Mr. de Kemp: There is a question?
Senator Robichaud: Nothing will change with the new regime? You will still do business about the same way, if I understand correctly.
Mr. de Kemp: Remember, in our industry there are two separate markets here. We have the domestic, North American market and we have the offshore market. As I mentioned in the presentation, over 60 per cent of what we produce is export. A lot of things will change, and they need to.
One is as far as price transparency and market predictability, because once those export restitutions were eliminated in Europe or whatever, brewers wanted to price 12, 18 months out, sometimes two years. You cannot do that in the board or with pools. You can do a little bit with cash-plus. The problem with cash-plus is sometimes it is there, sometimes they pull it back, sometimes it is only one third that we are allowed to buy cash-plus, two thirds. It is all about managing the price and what the projected return outlook is. They have to balance between Pool and CashPlus.
If we had our way it will be virtually all CashPlus, there would be nothing in the Pool, and the signals to farmers, they would not want to deal with the Pool either when they know the kind of prices we are buying through CashPlus.
We cross-subsidize the exports on bulk malt and barley going to China, Colombia and South Africa. Right now the North American prices for malting barley are the highest in the world, absolutely. However, we are competitive with the kind of prices that our own companies that are also south of the border and have to contract with U.S. farmers for Anheuser-Busch or what have you.
Will it still be made here in Canada? The majority of it will be. One of our members lost the business to a certain Canadian brewer because they were not able, with the Wheat Board, to go out as long as that brewer wanted on prices. The board could not guarantee anything because there is no hedge mechanism and you could not do it.
Another member in the industry was able to do something about that. Again, they have plants elsewhere, south of the border, and have different accounts contracts. They will be able to manage a little bit in Canada and a little in the U.S. With one particular plant that was primarily out of the Canadian operation, they could not do it because they could not go out.
We would love to take that risk on and go to the farmer and say we have a possibility here, whether it is a Japanese or South Korean brewer, because they want security of supply.
Frankly, in the overall scheme of things, as far as price, even in a bottle of beer, there is $0.02.5 to $0.03 in a bottle. There is over $.50 a bottle on taxes to provinces and the federal government. It is $2 billion a year on about $100 million worth of barley bought. It is not going to break the bank, so to speak, as far as that.
Reliability of the supply is the key, critical one. Price to a certain extent, but we are talking beer. It is a luxury product. It is something we all enjoy, whether it is $28 a case or $30 a case.
Senator Robichaud: You can go and buy it on other side of the river. You get a good deal.
Mr. de Kemp: I have done that many times.
Senator Mercer: Putting up the price of beer is a sure-fire way to lose an election.
You talked in your presentation about shipping incentives. I have two questions about the Port of Churchill. As I understand, the money that they have put aside in their plan for the Port of Churchill is for maintenance of the infrastructure of the track because of it going over the tundra, as well as perhaps storage facilities in Churchill itself. You make reference to shipping incentives, and I do not know that I have seen that before. Maybe I missed it. Will that not give rise to a challenge to the WTO if we subsidize anything going through any port, whether it be Churchill or Vancouver?
Mr. Sobkowich: It is a very good question, and frankly one that we are not quite pleased with. The decision was to provide $5 million per year for five years in shipping incentives to the Port of Churchill.
I believe the intention was to ensure that Churchill has time to get a business plan in place and ensure that the sustainability of the Port of Churchill is not completely on the shoulders of the grain industry. That is what was promised, was $5 million per year over five years. That is in addition to the infrastructure money you are talking about. There is $4 million on top of that in infrastructure money. The $5 million per year will be in shipping incentives.
If you take a look at historical volumes of grain through Churchill, you can say 500,000 tonnes go through Churchill. It has a shorter shipping season and there are limitations. Some of it has been non-board grain.
Now you have the shipping incentive. I am not sure exactly how it will be organized, but presumably what will happen is anyone who is a shipper will be entitled to about $10 per tonne as a head start against shipping to Vancouver, Prince Rupert, the United States and through the St. Lawrence to ship through the Port of Churchill for five years. That is a very generous gift from the federal government to the Port of Churchill.
There are many companies that do not own or have part ownership in terminal elevators in Vancouver or Thunder Bay. I refer to these as non-aligned companies. It is an attractive point of time deal for them to figure out how to get their grain shipped through the Port of Churchill.
Shipping incentives include multiple car block shipping incentives that the railways offer to grain companies for shipping in 50 and 100 car blocks. If you ship 100 cars of grain from an elevator, you get a shipping incentive for doing it that way. There is a grain monitor company called the Quorum Corporation that measures how shipping incentives are passed through to farmers because farmers are the ones who pay the shipping rates.
Quorum has determined that the shipping incentives, and the trucking premiums paid by grain companies to farmers, for shipping their grain to them are equal or very close to equal all the time. Quorum has concluded that shipping incentives generally get passed through to farmers by the grain handling system. We believe in this case the shipping incentives will be offered to the shippers. They will use that $10 per tonne premium to try and attract farmers' grain to go through the Port of Churchill.
Senator Mercer: Does it make it challengeable under the WTO or the NAFTA agreement?
Mr. Sobkowich: We would rather have not seen that gift, but we are not raising a big deal about it because it creates an unlevel playing field. We have accepted that the Port of Churchill is very important to Canada and to Manitoba, and so we need to accept that that is the way it will be.
I have one concluding point. I believe the incentive artificially ensures the sustainability of Churchill for five years and it gives Churchill five years to sort things out going forward.
The Chair: Witnesses, thank you for sharing your comments with us on Bill C-18.
The committee will now hear from our third panel of witnesses. Mr. Stille is chairman of the Thunder Bay Port Authority. Mr. Stille will be followed by Mr. Brad Chase, president of OmniTRAX.
Honourable senators, the chair has received a document from Mr. Stille. Mr. Stille brought to my attention that because of the lateness he could not have the document translated. Therefore, I need a consensus that the document be distributed and accepted, and we will follow with the translation by the Senate services.
Hon. Senators: Agreed.
Fred Stille, Chair, Thunder Bay Port Authority: On behalf of the Port of Thunder Bay, I appreciate the opportunity to be here. I have one minor correction. My name is pronounced "still." The E is silent. Throughout my life I have had to live with this deceptive appearance of my name.
The Chair: That is the French side of the chair.
Mr. Stille: Basically, the material you have in front of you is designed to indicate the importance of the movement of grain through the Port of Thunder Bay, as well as the importance of the Port of Thunder Bay to the economy of Thunder Bay itself.
The St. Lawrence Seaway, which is our access point to the open sea, was completed in 1959 for $638 million. In today's terms that is about $5 billion.
Thunder Bay is a bulk port. Very little comes into the port; it basically all comes out of Western Canada. In the past we had iron ore coming out of Steep Rock and Atikokan, but the ships come in empty. We can load ships in 18 hours. They can leave the day after they arrive, which is a very positive point.
This year we will move close to 8 million tonnes of various products. There is a breakdown of it in my brief. In the 1980s we were moving 20 million tonnes through the port annually. That was in the good old days when we were selling a lot to Russia, which we are no longer doing. The markets have shifted and our tonnage has decreased, as has our capacity. We had 20 working elevators 30 years ago and we are now down to 8. However, we still have the largest grain capacity in the country and we are in a position to service Europe, Latin America and the Middle East.
Ocean-going vessels are now coming in. The majority of the ships that come in are going down to the mouth of the St. Lawrence where they offload to other elevators for transhipment.
We do have major players. We have roughly 1.25 million tonnes of capacity and for the last year about 25 per cent of that has been idled. In the current year we are operating with about 1 million tonnes of capacity. This year, exclusive of potash and coal, we will move 6.4 million tonnes as opposed to 5.2 million. We have the capacity to move additional tonnage quite easily.
Wheat Board grain going through Thunder Bay averages about 75 per cent of our tonnage. It is very important to us that we get a steady tonnage. We have a chart showing the ups and downs as well as the non-grain. This year we handled close to 1.4 million tonnes of canola or non-grains. We have the ability to put grain through without the Wheat Board.
We are really Saskatchewan's port when you look at where grain is coming from. Manitoba is also a major player in our market, while Alberta is quite small.
If you do not believe in global warming, the extension of the shipping season in Thunder Bay should convince you it is happening. We are now shipping for up to 297 days, and that will continue to extend. We are optimistic about that. We have periodically looked at ways of bringing loaded ships in rather than coming up through the seaway empty, picking up grain and going out. We have had small success with general cargo; windmill parts and components for the oil sands. With a longer season we can look at liner service. There is always the possibility of containers going to Western Canada. It would be far better to bring them up the Seaway and put them on a train in Thunder Bay than to offload them in Halifax or at earlier points.
The Seaway has come a long way. Over the last year, for example, the government has made a major addition to our arsenal with the elimination of the 25-per-cent tariff on imported vessels. As a result of that, we have 12 new vessels coming on stream. These will be the first new vessels in the Seaway since 1985, so it is a big play. We think it makes all the sense in the world. The Seaway is viable and we have the capacity to expand it.
We cannot see any downside for Thunder Bay with the elimination of the Wheat Board. We think we are competitive. We can handle additional grain. Discussions with our users have indicated that to us. We are optimistic about the future.
Brad Chase, President, OmniTRAX: Good morning. It is an honour to be here. I grew up in Carmen, Manitoba, a rural area. I have worked on a farm, but my knowledge is fairly limited about what the impact of Bill C-18 will be on producers.
I represent approximately 300 Canadian employees of OmniTRAX. OmniTRAX owns the Kettle Falls International Railway in British Columbia that goes into the state of Washington, as well as the Carlton Trail Railway in Saskatchewan, the Port of Churchill railway and the Hudson Bay Railway. The latter two are intertwined; one is not sustainable without the other. The issues I will address will almost all relate to the Hudson Bay Railway, which does not have the same notoriety as Churchill.
We are unique in that we are a private organization with a public interest, that interest being that we serve some communities in the North. Some First Nations communities and the town of Churchill would not have ground transportation without the Hudson Bay Railway. For those who do not know, the VIA Rail system goes to The Pas, Manitoba and we operate it from there for VIA Rail.
We have concerns about Bill C-18's implications for us. We talked about them a bit in the press and to those in the political world who have been so kind as to listen. The first concern is grain flow. People are wondering what will happen, fearing that no one will ship grain through the Port of Churchill. The large grain companies own a base of inland and export ports. If the cost is the same to a large grain company to use their own asset or ours, it will be difficult for us. However, there will be a transition period and a whole different market out there, and the federal government has offered some support on that. I can speak more later to what we will do to minimize the impact.
There is another issue about what will happen with the rail industry. There has been much discussion about producer cars and Class I railroads. We connect with CN both in Saskatchewan on the Carlton Trail Railway, where we do a lot of grain business, and on the Hudson Bay Railway. There is no secret that CN is a well run organization that is looking for operating ratio for their shareholders, and operating ratio comes from increase in price, increase in length of haul and better utilization of assets. We see some risk in that relative to us. I will speak more later on what we are doing to minimize that. Ultimately, the producer cars and what the railroad industry will do to service the producers are governed by the Grain Act, which obviously you all know.
Going forward, our focus is clear: It is about diversification and looking north of us at the opportunity with freight and with fuel in Nunavut. There is a fast-growing economy there that we are in a good position to grow with. We also look at industry in Saskatchewan, and specifically the potash industry, where there is about 10 million metric tonne a year of export that we do not participate in at all, and the growth there will be significant. We expect over 100 per cent growth, from what we have seen and heard and understand, in the next five or so years. That export means rail supply and port capacity, and that is good news for us. We are excited about that opportunity.
Turning to the grain business and how it relates to us, historically, it goes back to 1997 when our organization became the owners of the Port of Churchill and the Hudson Bay railroad. They swam in our lane, so to speak. We operate a railroad and a port. Behind us, to the producer, we have not been that engaged in the business because we really have not had to be. In front of us, we have not been that engaged in the business because we have not had to be. That is our own issue and our own fault. We have worked very hard in the last half a year really trying to understand how that market works so that, behind us, we have a valued proposition to producers, especially in northern Saskatchewan and Northern Manitoba, for an alternative to what they see as potentially the large grain companies in a new market. We also see ourselves, in front, in being a partner with companies like ideally a new wheat board where we leverage the global trade and expertise they have to ensure that, from the producer to the consumer, we can complete a string and a deal can be done and we have a rail move and a port service to offer.
We have a lot of work to do. I will say that. With change, there is always a certain amount of nervousness and uncertainty, but we certainly see where we will be in the long-term with industry growth in Western Canada and with the requirement for food globally and the demand growing faster than supply. We see a position long-term in this market to help support industry and be there for the producers as ideally an alternate choice to what Bill C-18 passes, an alternate choice to some of the big grain companies, and even work with some of them as well.
Senator Plett: Mr. Chase, I am so happy that the rumours of your death have been exaggerated and that you are alive and well. You are here, and you will continue to operate in my great province, the province of Manitoba, and, indeed, in the port of Churchill.
I have a few questions for you. We had some testimony earlier today, and I will read part of that, if I could, because I would like your comments on that. You have alluded to some of this. Our government will be providing $5 million per year in shipping incentives for each of the next five years and another $4 million in other incentives. Assuming approximately 500 metric tonnes will be moved through Churchill in any given year, this equates to approximately $10 a tonne. With a $10 a tonne head start, we would certainly expect that it will be attractive. I would like your comment on that and whether or not we can even maybe go beyond these incentives. They may or may not be required. Could you answer that first, please?
Mr. Chase: Yes. First, the need there is we are in a bit of a precarious situation obviously with the large grain companies. What is not clearly understood in the public is we have a significant base of employees that come into Churchill and go out of Churchill. If there is not a consistent flow of grain, retraining and rehiring people that may going be there, let us say if they are not going to be there next year, is a significant blow to the supply chain. Also, the Wheat Board has been fantastic in working with us and in understanding how, in the global market, trade works through Churchill, and others who will play in the market potentially in the future do not have that same understanding and understanding. The protection of the supply chain is critical.
To the question specifically on the $5 million a year incentive for five years, we are still working through the details. We have been asked a number of questions on how this will work, and we have provided a fair amount of input. The incentive itself could be used just to that exact point. It could be used $10 a tonne to certain shippers to incent them to come to Churchill. Again, to use James Richardson, if you have $5 a tonne of opportunity cost difference because you are not using your elevator or your port elevator and, all of a sudden, you have a bit of incentive, we might see grain come our way, and 82.4 per cent has been the large three of volume over the last four or five years through our port. It minimizes the impact to them in their ports and helps support us in a transition period. However, in that transition period, we have to be working on that value proposition and ensuring that year six we are there long term and viable and working right toward the producer and the consumer in the right position.
Senator Plett: You said that you own a few short-line rails. You also mentioned that you would like to get some of the potash that is available, most of that being in the province of Saskatchewan. Yesterday we heard testimony by some farmers from northern Saskatchewan who would like to ship with you, but there were some logistical difficulties because of getting it up. I know there is a rail line up in Northern Saskatchewan that I believe is owned by CN. They have stopped using the rail. The rail line is still there, but I believe, at each end of the rail, whether some are close to The Pas or on the other end, they have taken part of it away so it is not useable. My question is, if you could make a deal with CN in whatever fashion, would that help you in getting possibly potash up, possibly even bringing some of the oil business in through Korea, where a lot of that is manufactured, and maybe bringing that back this way and then shipping up to Alberta through that northern line? How would that impact your business if that were possible for you to do?
Mr. Chase: There are a few things that that would do for us. I do have a picture of this as well that I could supply for the record. I will maybe just submit that for later. The subdivision that has been up for sale by CN has been closed for some time now. We obviously own the Hudson Bay railroad, which terminates at the southern point, at The Pas, and then we own the Carlton Trail railroad, which goes from Prince Albert down into Saskatoon. In between that is a catchment area of great interest to us that has, first, grain producers that, in many ways, are a long ways from the U.S. border to truck their product. They are a little ways away. In that catchment area of Saskatoon alone, we are the closest port. We are 830 miles. Everything else is a bit of a way's away. The second would be Thunder Bay. Prince Rupert, for example, is well over a thousand miles.
In that catchment area, if we were able to work an arrangement with CN, with whom we have met several times on this issue, and do some switching for them, we could potentially serve the smaller producers through the producer car program. The Wheat Board also owns 3,000-plus rail cars; we can potentially work with the Wheat Board in the future to provide the switch service, the entire rail service through a catchment area that would give a strong option to producers in northern Saskatchewan, again through the Port of Churchill.
As it relates to potash, right near Saskatoon is a significant deposit of potash. The Jansen mine for BHP Billiton is not too far away, either. It could give us the opportunity to get in and out of a catchment area and provide a real service to export to support industry in potash, to support the producers. Also, inbound potentially for oil sands products that have come in as well through other ports, there is another option for us to again get a lot closer to the industry.
It is something that we are interested in. We have to make that work for CN as well through reduction in operating costs. There are some commercial arrangements that make sense for them. They will not do something unless there is a positive impact to them as well and we recognize that.
Senator Plett: Fuel up into the Northwest Territories and into much of the north country, I believe, is now going through. I am not afraid of wanting to take business away from the Port of Montreal; certainly if it helps my province I would be happy to do that. Much of the fuel is now being shipped out of the Port of Montreal going into the north country. Given the right circumstances, there is another market for you there that you might be able to pursue. Could you touch on that?
Mr. Chase: That is a great question. There is significant growth in Nunavut. Right above us is the Kivalik region. The fuel requirements for companies such as Agnico-Eagle and the Government of Nunavut in that area are very large and growing. We have not had enough of a supporting role in that. We have worked hard in the last bit as well trying to reconnect that trade corridor that historically has been there. We have a 50-million litre tank farm in Churchill. It is one of the other products that we do ship. Freight and fuel to us straight north is a significant growth opportunity. The Government of Nunavut, as an example, is in the 200-million litre range and Agnico-Eagle consumes about 70 million litres right now. There are other companies coming in to develop in that region. We see that as a growth market and would like to re-attract some of the business that historically has been part of the Manitoba base port support.
Senator Plett: Perhaps we could have the document submitted through the clerk and copies for us at some point, the one about their rail line.
The Chair: Mr. Chase, will you provide that to the clerk?
Mr. Chase: Yes.
Senator Peterson: Mr. Stille, you indicated that 75 per cent of your volume is Canadian Wheat Board now?
Mr. Stille: That is of our grain volume.
Senator Peterson: In my opinion, a voluntary board has little or no chance of success, so the big companies — Cargill, LouisDreyfus, Viterra — will be scrounging to get as much of that as they can. When this happens, what impact will that have on your port? Does it depend which major company gets most of the business that deals with you now, or do any of them?
Mr. Stille: If you look at our list of elevators, the major players all have a significant investment in Thunder Bay. We think it is in their interest to continue to process grain through Thunder Bay.
Senator Peterson: They would have no incentive to go the other way because of their facilities at the coast rather than yours. You are shorter?
Mr. Stille: Realistically, the success of any port will depend on where the sales are going. If it is a sail to Asia, it will not come through Thunder Bay. It is as simple as that. We are dependent entirely on markets that make sense. We look at the expanding markets in, for example, the Middle East and North Africa as areas that will increase, and that is where we think we will see an increase.
Senator Duffy: Mr. Stille, I was intrigued to hear you say that you have some ocean-going vessels going through the Seaway that can carry their cargo on to Europe or to other ports. How big is that trade? Is it growing? What potential threat does it have for maritime ports? It is intriguing to me to see that we always assumed that lakers were for the lakes and not for the oceans.
Mr. Stille: The lakers are staying in the lakes and in the Seaway system, but in any given year we can have approximately 60 or 65 ocean-going vessels coming into Thunder Bay, picking up a load of grain and directly shipping it to its end destination. I have seen Cuban ships and Russian ships. We used to have a lot of Russian ships coming in.
What we have attempted to do in the last few years is what we call project cargo, which is the idea of bringing in cargo destined for Western Canada. We have brought in windmill parts, the big vanes for wind generating plants, large pieces of equipment for the oil sands, as well as recently a large piece of equipment for Timmins for one of the mines. It was manufactured overseas. They brought it in and trucked it from Thunder Bay to Timmons. Initially, it does not make a lot of sense because Timmons is about the same distance from Toronto. However, this piece of equipment was so big that going up the 401 would have caused a major problem.
Where we have had a success, and this is with the non-Wheat Board grain, is getting cargoes lined up with the non- Wheat Board grain for a back-haul, which has made the shipping company quite happy.
Senator Duffy: How much longer does it take an ocean-going vessel to get to your port in Thunder Bay as opposed to stopping in Halifax to load grain there?
Mr. Stille: I would be estimating from Halifax. We are about four to five days from Montreal and, depending on the time, probably the biggest time funnel would be going through the Welland Canal system.
Senator Mercer: To follow up on Senator Duffy's questions, of course, I am not anxious to steal business from Churchill or from Thunder Bay; I am anxious to promote all ports across the country. Obviously, the first one on my list is the Port of Halifax and then the Port of Sydney. A high tide floats all ships. We hope everyone's business will grow.
I have asked this question of others. In the proposed subsidies for Churchill, there is $5 million for shipping incentives and $4 million for other incentives. What will those other incentives be used for, Mr. Chase?
Mr. Chase: The other $5 million was from Transport Canada and the intent of the funding there is infrastructure at the port.
Senator Mercer: That is at the port, not on track maintenance?
Mr. Chase: No, it is the port specifically.
Senator Mercer: What happens to the other money?
Mr. Chase: The $5 million for five years is, again, shipping incentives. The details about that funding have not been released, but it is to incent the flow of grain and other pulses as well up through the Port of Churchill through the transition of what this new market will look like beyond five years.
Senator Mercer: The track maintenance is a major issue because of the tundra; correct?
Mr. Chase: Correct.
Senator Mercer: None of this incentive money is for that; that falls to you as the owner?
Mr. Chase: Correct. There is funding today as well for the Bay Line. We manage that. We manage all the track maintenance. We have an arrangement currently with the province and with the feds for the Bay Line.
Senator Mercer: Mr. Stille, with respect to Thunder Bay, it has always amazed me that it has thrived so well so far away from the ocean.
However, it has been driven by grain and by the shipping of products over the west. You talk about bringing products back into Thunder Bay for transshipping west. How are you marketing that? How are you marketing the Port of Thunder Bay outside of Western Canada? How are you selling the port?
Mr. Stille: We formed a successful partnership with CN, for example, as far as the shipment of large things. We have consultants who advise us on the marketing. We do marketing at every show that we can at various ports; we worked literally with our customer base.
Senator Mercer: Mr. Stille, you mentioned windmills for energy generation. Perhaps the Port of Halifax and the Port of Thunder Bay might get a deal going here because we manufacture windmills in Trenton, Nova Scotia and we can ship out of the Port of Halifax through the port of Thunder Bay.
Mr. Stille: We would be delighted.
Senator Robichaud: The Port of Churchill, where they are looking for diamonds up North, and the mining activity, is there any possibility of an ice road servicing that part of the country that would be through the port? Is that happening?
Mr. Chase: Another good question. There has been a study, to my knowledge, done by Nunavut, as well as the Province of Manitoba, and a look at an option of an all-season road from Gillam through Arviat and up to Rankin Inlet, as well as a study done on an ice road for the winter months that would connect the Port of Churchill with the Kivalliq region in Nunavut. I believe that report is on the edge of release. It will be a potential for the reconnection of the Nunavut trade corridor back into the Manitoba business community.
The Chair: Witnesses, thank you very much for being part of the study of the Standing Senate Committee on Agriculture and Forestry on Bill C-18.
Before we conclude the panel, honourable senators, if you would permit me, there are three items of information. One is to recognize Senator Plett on a document of precision and clarification.
Senator Plett: I started with this earlier. This particular part of the document has now been translated into the other official language and will be available for the clerk to hand out. I will just read the paragraph so that it is on the record.
Mr. Gehl did comment that the Canadian Wheat Board was responsible for about 12,000 jobs that were in danger if this bill were to go through. Again, PricewaterhouseCoopers document says:
The estimated employment and labour income impacts associated with $72.0 million in initial 2004 administrative expenditures by the CWB are substantial. As set out in Tables 5-3 and 5-4, in addition to the approximately 460 jobs directly sustained by the CWB, a further estimated 2,060 full-time, full-year jobs are realized within the economy and are attributable to the CWB's administrative expenditures. Of these, the vast majority (1,951 full-time, full-year jobs) are realized within Manitoba.
Not 12,000, but 2,060 — I think that is a significant difference. Of course, the document has been tabled.
The Chair: Item 2, before we adjourn, senators, I would like to remind you that the committee will be sitting outside of normal time slots on Monday, December 12, from 4 to 8 p.m., to conduct clause-by-clause review of Bill C-18. On this matter, I need to inform you also that for the purpose of efficiency, all honourable senators are encouraged to have any amendments they may wish to propose reviewed by the office of the law clerk and also ensure that they will be available in both official languages before it will be considered by the chair.
The last item is that on behalf of all senators, I want to say a great thank you to the clerks and the staff, even the staff behind the scenes, for the quality service they have provided our committee.
Senator Peterson: You mentioned possible amendments to the law clerk. Is there a time limit on that? We meet at 4:00. What is the time limit?
The Chair: There is no notice required for amendments.
Senator Peterson: We can take them over any time.
The Chair: Yes, and you can talk to the clerk on this.
(The committee adjourned.)