Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 26 - Evidence - Meeting of November 20, 2012
OTTAWA, Tuesday, November 20, 2012
The Standing Senate Committee on Agriculture and Forestry met this day at 5:18 p.m. to study the subject matter of those elements contained in Division 19 of Part 4 of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, I call the meeting to order.
[English]
I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I am Percy Mockler, a senator from New Brunswick, and chair of the committee. I will ask the senators to introduce themselves, please.
Senator Mercer: I am Senator Terry Mercer from Nova Scotia.
Senator Callbeck: Catherine Callbeck, Prince Edward Island.
Senator Mahovlich: Frank Mahovlich, Ontario.
Senator Plett: Don Plett, and I am from Manitoba.
Senator Buth: JoAnne Buth, Manitoba.
Senator Eaton: Nicky Eaton, Ontario.
Senator Duffy: Mike Duffy, Prince Edward Island.
[Translation]
Senator Maltais: Ghislain Maltais, Quebec.
Senator Rivard: Michel Rivard, Quebec.
[English]
The Chair: Honourable senators, before I ask the witnesses to make their presentations, due to the factor of time and also in order to permit all witnesses to have time for their presentations — I know we are going beyond the two- hour limit — I would like to ask honourable senators to be as precise and accurate as possible in asking questions. I would also ask the same of the witnesses when answering.
We will have three hours. The first hour will be a panel that we now welcome. Thank you for accepting the invitation to join us and share your opinions with the committee.
Today, honourable senators, the committee will continue its study relating to the subject matter of Division 19 of Part 4 of Bill C-45.
The first panel is composed of Mr. Laurence Nicholson, Member of the Canadian Wheat Board Alliance; Mr. Mark Brock, 2nd Vice Chair and Director of the Grain Farmers of Ontario; and we also have, by video conference, Mr. Terry Boehm, President of the National Farmers Union.
Thank you again for accepting our invitation. Before I ask the witnesses to make their presentations, to be followed by questions from the senators, I do see that Senator Plett wants to make a comment. The chair will recognize Senator Plett before we ask Mr. Terry Boehm to make his presentation.
Senator Plett: Thank you, chair. I have a little bit of housekeeping, if we could. As we are all aware, we have not been able to have steering committee meetings to approve all our witnesses. We discussed this at an earlier meeting, that there may be other witnesses coming forward. I would like to propose to the committee that we have one more witness on Thursday morning. That witness would be the Grain Growers of Canada and they would be the Thursday morning 8 a.m. to 9 a.m. time slot.
The Chair: Any other questions? If not, the chair will accept what is being put forward. Thank you, Senator Plett.
Mr. Terry Boehm, please proceed with your presentation.
Terry Boehm, President, National Farmers Union: Thank you. My understanding is that I have approximately 10 minutes. Is that correct?
The Chair: Yes.
Mr. Boehm: I can tailor my remarks somewhat.
The National Farmers Union welcomes the opportunity to respond to the proposed changes to the Canada Grain Act that would affect the Canadian Grain Commission and ultimately grain producers. The NFU is Canada's largest voluntary direct-membership farm organization and it is financed entirely by membership dues and member donations. The NFU is made up of members from across the country, many of whom are grain producers, and the NFU works for economic and social justice for family farmers.
The Canadian Grain Commission, as you know, celebrates its one-hundredth anniversary this year, along with the Canada Grain Act. The CGC has been an extremely important institution for Canada's grain producers throughout this time period. Its importance remains undiminished at this time, and there is no reason to expect that that would change in the future, except, of course, if changes are made that destroy the rationale for its existence. There is a very real danger of this if the changes considered are implemented.
The CGC was the result of long agitation by prairie grain producers who were regularly cheated on grades, dockage and weights for their grain. They were also disadvantaged by favouritism and conditions that discriminated as to who got access to elevators and rail transport services. Farmers, as individuals, had little power dealing with oligopolistic grain companies and railways. They understood that they needed an independent agency to act in their interests to balance the large power differentials that existed between them and the previously mentioned grain companies and railways. They needed an institution that regulated the grain trade and whose decisions would be binding on both the trade and farmers.
As a consequence, the CGC governance was carefully constructed, both to balance powers in the institution as well as to balance powers externally, outside of the institution, in the trade itself. The structure of three commissioners was created to settle any disputes at the head of the organization by majority decision, and to ensure that the commission was not taken in directions that either harm farmers or for which it was not intended.
The terms of office originally were longer than the terms of office in government to prevent the threat of dismissal with each change of government, and the source of funding for commissioners is also outside the Ministry of Agriculture in order to prevent interference from the minister. They are paid by the public service administration.
In addition, to ensure that the chief commissioners fulfilled their duties, the assistant commissioners were appointed, who were paid separately from the commission and had therefore the independence to raise issues if chief commissioners were acting outside the mandate of the CGC. Of course, in recent years these assistant commissioners have not been appointed and their funding has been eliminated, which we think has been unfortunate for farmers and the grain system as a whole.
The mandate under the Canada Grain Act is that the commission act in the interests of grain producers, establish and maintain standards of quality for Canadian grain, and regulate grain handling in Canada to ensure a dependable commodity for domestic and export markets.
The commission has done very well in the past. We feel that with Canadian quality and our ability to export and sell dependably, Canada's reputation has been built in no small part by the function of the Canadian Grain Commission and its dedicated employees.
It is also important that we have a somewhat collaborative system in our grain handling system. We had the grain commission working in the interests of farmers but also working with the grain trade and ultimately benefiting the entire economy of this country, for a very low cost. The annual budget of the grain commission is in the neighbourhood of $80 million, up or down a little bit per year, and it works out to be approximately 5 cents per bushel in terms of cost to grain producers.
To deal specifically with Division 19, a number of changes are being called for. The first one I would like to address is the elimination of the inward inspection. We have always maintained that this was an important piece of the Canadian grain handling system, Western Canadian in particular, in that it provided a continuous audit of grain moving from the country elevator system into terminal position. It avoids large-scale contamination of grain, either from chemicals or animal feces. It catches it before it is blended into larger quantities. It also corrects any misgrading that may have taken place in the railcars inside the country. It was also an essential component for the proper functioning of the producer-car system. It also makes sure there is a correlation between what is bought in the country and what arrives at the terminal.
I want to quote an example from 1909, prior to the Canadian Grain Commission, from A History of the Canadian Grain Commission by J. Blanchard: "In 1909, in an audit of grain terminals at the Lakehead it was discovered that stocks and shipments of No. 1 Northern," which at the time was the highest grade of wheat in Western Canada, "in the case of two terminals, exceeded receipts by over 1 million bushels. There were corresponding shortages in the lower grades." What that clearly shows is that farmers were being paid and graded in the country lower than the actual value of their grain once it got to terminal position. There is nothing that would indicate that this could not happen in the future without that auditing process taking place from inward inspection.
Now, with respect to inward inspection, these changes are being touted as an attempt to modernize the system, to reduce costs, et cetera. Again, it is a very low-cost quality assurance system that brings some fairness to farmers in the system, and the loss of inward inspection would eliminate the jobs of many dedicated CGC employees. By the 1880s it was felt that grain inspectors should be government employees as they would be unduly influenced by those who paid the fees.
One of the problems with moving toward an accreditation system is that the CGC is mandated to act in the interests of grain producers. To farm that outside would make it unclear to the employees exactly whom their allegiance was to. Quite likely they would see their employer as either the private service providers or the grain company they were working for, which would reflect on the conduct of activities and how they made their decisions.
The other elimination proposed in the bill is the end of weigh-overs at the elevator system. This is an important system to ensure that accurate weights are taken when farmers deliver their grain into the elevator system; that there is a verification between what is bought from farmers and what is actually inside the elevator system; and that there are not excess overages from improper scale calibrations and dockage; and an assortment of other possibilities. This brings fairness and integrity to the system. Its very low cost actually benefits the entire system, not just farmers, although grain companies may argue otherwise.
The next proposed changes are in security, licensing and bonding. The proposal is to shift to an insurance-based scheme to protect farmers in the event of bankruptcy. One of the issues with an insurance-based scheme is that under the current system, grain companies post a bond of the approximate value of their average monthly transactions. In the event of bankruptcy, the company, and the farmers affected in particular, look at the root causes of that bankruptcy. Often it is an issue with access to rail transport service or some other factor, such as the clogging of the ports, et cetera. By its nature, it causes people to scrutinize the system and to correct it. We fear that an insurance-based system would mask that to a certain extent because parties would be paid — it would have a certain cost — and the fact of looking at the root causes of systemic inefficiencies would be lost in the process.
The other piece in this is that farmers are being told that this is a modernization and a cost savings; and the federal government wants the CGC to move to full cost recovery. However, we are not convinced that the cost savings actually will translate to farmers at anywhere near the level that would be required to compensate for the loss of quality and reputation that some of these proposals would bring.
I would like to raise the example of the consolidation of the prairie grain elevator system that took place in the last 20 years, particularly in the last 10 years. We went from 5,000 elevators to fewer than 200. At the time, it was argued that this would be a more efficient system and that elevation costs would go down. Indeed, the costs have gone up by a factor of 4 and 5 in spite of the fact that farmers are delivering to much greater distances to a much consolidated elevator system. Efficiencies promised often do not show up in the bottom line.
The last proposal is the shift of the Canadian Grain Commission in reference to the Financial Administration Act. This is an important shift in terms of the independence of the agency, because it becomes a department of the ministry under the FAA and is no longer a quasi-independent institution. Rather than reporting on its activities from the year past, it has to make projections for the year in the future, which possibly it would tailor to a specific minister's preferences and demands.
The Chair: Mr. Boehm, I will ask you to conclude, please, given the time that we have.
Mr. Boehm: Yes.
Farmers really pay thrice through the weakening of the CGC with, first, higher user fees; second, the loss of current protections and benefits; and, third, the refusal to pass potential savings on to farmers as grain companies capture the blending premiums of the grain entirely without any monitoring or auditing in that system. This is exacerbated by the loss of farmer grain-handling co-ops, as has happened in the last decades as well.
Thank you for your time.
The Chair: Thank you, Mr. Boehm.
Mark Brock, 2nd Vice Chair and Director, Grain Farmers of Ontario: Grain Farmers of Ontario welcomes this opportunity to speak to the Standing Senate Committee on Agriculture and Forestry about the proposed amendments to the Canada Grain Act effected by Division 19 of Bill C-45. Grain Farmers of Ontario, GFO, is the province's largest commodity organization, representing Ontario's 28,000 corn, soybean and wheat producers. The crops they grow cover 5 million acres of farmland across the province, generate over $2.5 billion in farmgate receipts, result in over $9 billion in economic output, and are responsible for over 40,000 jobs in the province of Ontario. Although the proposed changes to the Canada Grain Act will affect the western grain industry more than the industry in Ontario, Ontario is still a significant grain and oilseed producer, third largest by value, and the CGC is an important and valued part of certain aspects of our marketing system.
As I am sure it is for many other industry organizations and associations, GFO's main concern with the proposed amendments to the Canada Grain Act is the fact that it will make the CGC almost totally reliant on user fees. This, combined with the CGC's proposed increases in fees over the next four years, would significantly increase industry's costs to market our grain.
We believe that the change will have two main implications. First, it will cause prices paid to farmers to be lower than they otherwise would be. Regardless of who the first payer of the fee is, ultimately the fees are reflected in the price paid to farmers. The higher the fee is, the lower the price is to the farmer. Second, it could reduce our competitiveness vis-à-vis our major competitors, primarily the United States. In this regard, I note that the U.S. Federal Grain Inspection Service will continue to have about 37 per cent of its funding provided by the federal government.
To illustrate the impact of the proposed fee increases, I would note that the outward inspection fees on bulk soybean or corn exported by ship will rise from 51 cents per tonne in the current crop year to $1.60 per tonne on August 1, 2013, and will rise to $1.70 per tonne in 2017. For a 30,000-tonne shipment of soybeans, this means that the CGC inspection cost will rise from $15,300 this year to $48,000 next year and to $51,000 in 2017.
In addition to the proposed increases in fees for mandatory CGC services, we are concerned about the proposed increases for certain non-mandatory services. Of particular note is that the identity preserved service known as CIPRS, Canadian Identity Preserved Recognition System, offered by the CGC, will be fully cost recovered. This service is used extensively in Ontario to ensure that food grade soybean shipments do not contain genetically modified soybeans. An increase in fees for this service would erode the price premium for this product and eliminate the incentive to produce them. About half of Canada's soybean exports of 2.5 million tonnes are food grade soybean.
We understand that these increases in fees ultimately borne by farmers may seem minor in the context of the current grain prices. However, history has taught us that prices a year from now, let alone five years from now, may be substantially below current levels. We do applaud the government's initiative to streamline and modernize the CGC, and it is long overdue. We urge the government to make the other required changes to the Canada Grain Act that are not monetary in nature, such as governance changes. However, we believe that the scale of cost recovery being proposed must be revisited.
Thank you for your time.
Laurence Nicholson, Member, Canadian Wheat Board Alliance: It is certainly a pleasure for me to be here and talk to you about the Canadian Grain Commission. As to my background, I spent 30 years with Alberta Pool, eight of those years as an elevator manager, buying grain and loading it, and 22 years as a pool rep. In the role as a pool rep I organized sessions on the Canadian Wheat Board, Canada Grains Commission, the Winnipeg Commodity Exchange and OceanFreight. I spent four years as a director with Alberta Canola Producers Commission, Canola Growers of Canada four years, Canola Council of Canada four years, 20 years of farming and four years as Director of Wild Rose Agricultural Producers.
The area I want to talk about is several-fold and I certainly look forward to any discussion and questions. If you look at the bonding of the grain companies, as well as the elevator manager, it is crucial that that continue. I can say here that I was involved in some of those instances where elevator managers got sticky fingers and put their finger in the till, and court cases were held on those kinds of things.
As a manager, you have a quarter of 1 per cent over, and if you are over that, then you are in trouble with the Canadian Grain Commission. If you are a quarter per cent under in your weights, then you are in trouble with the bond company. That keeps the elevator managers quite honest in the system. We must continue to do that or we will be turning the clock back to the 1920s, when you had to go along with a bottle of whisky, as my dad used to say, in order to get a decent rate at the elevator. I do not think we want to go back to that.
If you look at the weighing and inspection into the terminals at Vancouver and Thunder Bay, that car is inspected by the Canadian Grain Commission to see if it has leaks from the primary elevator to the terminal, and of course some of those cars do leak in transit. The commission then weighs and inspects the cargo unloaded and pays on the outturn to whoever shipped that car. That again keeps the elevator managers honest. He gets a report back of the car unload, and if it is downgraded or upgraded, he can adjust his files accordingly and know where he is at as an elevator manager in the primary elevator system.
The other thing I want to talk briefly about is the bonding of the elevator companies. I will go back to an article I read in the paper and I hope it is accurate. Between 2002 and 2008 farmers received 77 per cent of their money after the buyer failed to pay them. Out of these cases, farmers were 100 per cent compensated in six and in one they received 99.8 per cent of the value of their commodity. In two cases the farmers were fully refunded, receiving 28 cents and 51 cents on the dollar. The report says that since 1982, 20 CGC licences have failed. Payments of $9.3 million were paid to the security held by the Canada Grains Commission. The Canada Grains Commission was ordered by the federal government to pay farmers for another $3.1 million, bringing the total payout to $12.4 million to an estimated 700 to 1,000 farmers. Other grain buyers have failed, but there have been no reported data on the extreme failures. The report also said that the CCG has made considerable improvements in recent years, doing a better job of monitoring and auditing the grain companies. One of these criticisms of the current program is cost hidden.
I had a neighbour last June ask me who he could market some of his spring wheat to because it had ergot in it. I advised him to contact Newco Grain of Lethbridge. He phoned them and sent a super B load to Newco and within a week Newco declared bankruptcy. He got paid for 95 per cent of the value of that cargo just last week.
I believe it is there and it needs to be kept there. Yes, it is expensive, but it is a cost of doing business to the grain companies and the grain industry. I would hate to see that being lost.
I will now leave it open for discussion and I hope we have a good discussion on the CGC. Thank you.
Senator Plett: Thank you, gentlemen, for coming out this evening. We certainly appreciate you being here.
My first question will be for Mr. Brock, and it might be hypothetical. Do you think farmers in Western Canada should have the same marketing freedom as those in the rest of Canada?
Mr. Brock: I can only speak to Ontario and I appreciate how I can market my grain. I would say it is really not my place to say what a Western producer should or should not do. I enjoy the freedoms that I have in terms of marketing my commodities in Ontario.
Senator Plett: As a Canadian, it is my duty to make sure that all Canadians have the same freedoms. Do you not believe in that?
Mr. Brock: I will not argue that point. Western producers know what they need and want. It is not for me to speak for a Western producer.
Senator Plett: I am surprised. I would have thought you would encourage Western producers as you do Ontario producers.
Do farmers in Ontario have producer payment protection when selling their grain?
Mr. Brock: Yes, we do. We have a system that is called the Grain Financial Protection Board. We pay a licence fee as a producer and a portion of the licence fee that we pay to our organization, the Grain Farmers of Ontario, goes to a fund that is maintained that we have in the case of a situation where an elevator goes into default. It is made up of a board on which I am actually a member. I have not been to a board meeting yet, but it is made up of farmers and industry people, and we evaluate the situations that result from a default. There is a fund in place. We make sure it is actuarially sound and we have a process in place to ensure if there is a default that there is something there for producer protection.
Senator Plett: Mr. Nicholson and Mr. Boehm, you were both witnesses here a few months back when we dealt with the freedom and marketing choice for farmers in Western Canada. You were pessimistic, to say the least, about the success of that program. Many of us on this committee were in Western Canada a week ago. We travelled through Western Canada and visited farmers, producers, elevators, canola crushing plants and so on. We visited a certain farmer by the name of Jim Janzen, Windy Creek Farms, St. Francois Xavier. He told us that he had never experienced a year as he had this year, getting over $9 a bushel for his wheat. It can be argued that this was due to the drought in the United States. That probably played a part in it.
However, he also said he had gotten his cheque. He said, "I have in my lifetime not delivered a $1 million cheque to the bank and I could do that this year." Our chair asked Mr. Janzen, "What should government do down the road for farmers?" He said, "Stay the course. What you have done is a remarkable thing for Western Canadian farmers. Stay the course."
This is further staying the course. This is a continuation of what we have done.
What would you say to Mr. Janzen when he says that this has been good for Canada and furthering this will be good for Canada? "My grain will be graded and docked by the primary elevator when I deliver my grain to them, and if there is a disagreement, I can submit a sample to the Canadian Grain Commission for final binding on an official grade." That is all the checks and balances. There are efficiencies in place here, and yet you say, "Saving money is not good; yes, things are expensive, but spend it anyway."
What would you say to Mr. Jansen? I would like both of you to give me a short answer.
Mr. Nicholson: Mr. Chair, do you really want me to get into this?
The Chair: What we have before us is Division 19 of Part 4 of Bill C-45, which is comprised of proposed amendments to the Canada Grain Act. I will welcome comments if you have comments on the proposed amendments before us, Mr. Nicholson.
Mr. Nicholson: First, you need to look at what is currently happening right now on the West Coast. We have approximately 24 vessels waiting in English Bay for grain. We no longer have at the terminals at Vancouver the pooling of Canadian Wheat Board grain within the terminals. Just these last few weeks, there have been multi-car loadings, and that means that the cars shipped in there are shipped to a specific terminal. If you look at the Burrard Inlet and the terminals on the North Shore, which are owned now by Cargill and Pioneer Grain, they have to cross the bridge called Burlington Northern Railway Bridge and there is a cost of $150 a car. There is also a real bottleneck in getting grain unloaded because of it.
Is the system efficient? No, it is not. My understanding is — and I was told this somewhat confidentially — that the Canadian Wheat Board has agreements with two of the grain companies for pooling of grain. In other words, if the Canadian Wheat Board has sold a cargo of grain and are short and do not have it in the terminal, they can switch stocks around between these two companies. The rest of the companies are reluctant to do that. That is causing major problems at the port.
If you look at the whole system of marketing, it has been told to me and I have it in black and white that the farmers in Western Canada have only committed about 25 per cent of their stocks or inventory that they have on the farm. When we have transportation capacity and terminal capacity, if we do not get signed contracts through that system, then come July 31, a third of the grain could be carried forward into the next crop year and not be able to be marketed.
If you look at costs, my costs have gone up. The primary elevator costs now run from $1.53 to $1.74 a bushel. When I hauled grain in a couple of weeks ago, the deductions were put near one third of my cheque. They vary between primary elevators on what they call "basis," and that is transportation, as well as handling and cleaning. They do vary on the Prairies on wheat, for example, from $56 or $58 per tonne to $64 per tonne. That variance is very expensive to me as a farmer.
Yes, Senator Plett, I can honestly say that as a farmer I got more money this year than I have ever gotten. However, when I have to start paying $616 a bushel for my canola seed, $1,000 a tonne for my anhydrous ammonia, $1 a litre for my fuel — and repairs have gone up — my bottom line will be worse this year than it was last year. My costs have gone up dramatically.
The Chair: Thank you, Mr. Nicholson.
Are there any witnesses who would like to comment?
Mr. Boehm: I will, very briefly. The grain handling and transportation system is complex, and there are all sorts of places where problems can arise. Mr. Nicholson pointed out a number of them. Those demurrage costs of those ships waiting at port and the fact that grain is sitting on the Prairies and will need to be pumped through a constricted system will lead to higher basis levels and reduced payments to farmers.
The unique situation that we have now is the function of droughts, not just in the U.S. but in Russia and somewhat in Europe. Very quickly with these sorts of costs that we pay — the transport costs, et cetera — if we lose our quality market that the grain commission helps very much to maintain by its insertion in the system, our returns will drop drastically. Therefore, I think it is much more complex than what Senator Plett has reiterated from his farmer in Manitoba.
Senator Mercer: I will not try to dwell on what has happened in the past. The Canadian Wheat Board bill passed and we admit it has been a great year for the price of grain. It has also been a great year for the price of apples because of the failure of crops elsewhere. It may be a little too early to celebrate victory; one good season does not make the whole thing successful. We will be here a long time, and history will judge whether it was right or wrong.
Mr. Nicholson, you talk about the bonding issue. In your story, I was concerned about the farmer who sold his grain in Lethbridge and the company went bankrupt. You say it is expensive. When farmers start the process of planning their year and their seasons — and they do this well in advance — part of the plan has always been to factor the cost of bonding into your operational costs, has it not? It does come back to the producer at some point.
Mr. Nicholson: That is a very good question. I look at the grains and oilseed business and how it contributes billions of dollars to the balance of payments for Canada, which helps us keep our dollar and inflation under control; therefore, the taxpayers should help pay for the costs of the commission.
I look at the check-offs, and we get check-offs right now on our cheques for weighing and inspection of grain. That is only part of the cost. I thought about this and talked with a lot of people about who should pay the cost of the commission. I think a fair cost to the producer as well as to the Government of Canada would be fair. We are in this together; we are not in this alone. If something happens to the export of grain and oilseeds out of Vancouver, it will come back. Instead of Canada being in a trade surplus position, we will be in a trade deficit and you do not want to be there. We have been there in the past few months, and that has certainly hurt our dollar and our balance of payments.
Senator Mercer: Mr. Brock, you talked about the increase of fees by $1.19 per unit as it escalates. Can you give us an idea of what that would mean in terms of total dollars for your average Ontario grain farmer?
Mr. Brock: Basically what it comes down to is that when I go to market my grain, based on the Chicago Board of Trade for corn, soybeans and wheat, there is adjustment in there of a basis price that is either plus or minus. In the last few years, it has been a negative to the price I see at the Chicago Board of Trade.
As these fees increase, you have the first person that pays it and it whittles down to the system where, ultimately, a farmer sees a greater negative basis because of those costs borne by the people and the processes I sell my grain to. Since their costs are increased, they have less ability to pay for my commodity that I have to sell. It results in just a lower basis and a lower price to me as a producer.
Senator Mercer: Simple cost accounting means you will add that in to the cost of the base price of a bushel of grain down the road.
Mr. Brock: Yes.
Senator Mercer: Obviously, of course, if you can find someone who is willing to pay the price. This is a good year for everyone, for grain producers at least. In other parts of Ontario, apple crops, for example, were terrible this year.
You suffer, as a producer; and a consumer, at the very end of the chain, who is buying the product, is paying more, because we know that the people in the middle are not going to suffer. They are going to pass that on to the next person in the chain until it gets to the final consumer.
Mr. Boehm, you talked about the savings that have been projected and that you do not think the savings will be passed on to the producers, which I think is a concern. What changes do you think should be made to accommodate for that?
Mr. Boehm: In the first part, producers, when these proposed amendments and changes take place, at the end of the day, if there is not any sort of auditing process that determines whether there was actually a true cost-benefit taking place, the volatility of grain prices, basis levels shifting, et cetera, who will really know? All we will know is that, again, this relatively low-cost valuable system that assured quality for our market is being eroded, and this will cost the entire Canadian economy.
In terms of how you translate this directly back to producers, we are seeing something translated directly back through fee increases. I have the financial statements of the Canadian Grain Commission for the past couple of years. There was an annual budget of around $80 million. Twenty-six million to thirty-six million dollars were the federal contributions until this year. That is not very expensive when you think about all the millions of tonnes of grain that are shipped out of this country as a federal contribution to maintain a robust system.
Senator Mercer: Thank you.
The problem Mr. Nicholson has brought up about the Port of Vancouver, Mr. Chair, is one that needs to be monitored closely for future reference, separate from our discussion tonight.
How many ships did you say were in the stream, Mr. Nicholson?
Mr. Nicholson: Twenty-four in English Bay for grain and oilseeds.
Mr. Chair, I would like to make one comment about something that aggravates me.
The Chair: One minute, please.
Senator Mercer: Go ahead. I want to hear what he has to say.
Mr. Nicholson: One thing I was part and parcel of was to clean the grain on the Prairies and save the freight to Vancouver and feed it here on the Prairies. I am very disappointed that I now pay my freight on the dockage to Vancouver. They clean it here on the Prairies and give it to someone to make feed out of. I am paying for a commodity out of my pocket that never gets shipped. Now, if that is not highway robbery by the grain companies, I would like someone to tell me what it is. That freight rate is damn high. It is $47 a tonne. You want us to trust the system and the grain companies? I am afraid I worked for one for 30 years; I do not trust them at all.
The Chair: Mr. Nicholson, thank you.
Senator Mercer: Thank you very much. I appreciate that.
Senator Callbeck: Thank you for your presentations.
Mr. Brock, you talked about the fees and the increases we are going to have. Under the amendments to the Canada Grain Act, it means the Canadian Grain Commission will be pretty well totally reliant on user fees. In the States, the inspection service gets 37 per cent of their funding from the federal government. What about the fees in the States? What are they compared to what we have here, or will have?
Mr. Brock: I cannot speak to the fees. I do not know what the amount is. Really, our point here is that there is value in having a piece of paper that is stamped "Canadian" and that is inspected when it goes overseas. There is value to that brand. We believe in that brand. When we ship our IP soybeans to Japan or some Asian country, it is good to have the Canadian stamp on there. It is a brand that we sell, it is part of our marketing, and it is a well-trusted brand.
We look at it from the standpoint of saying we understand fiscal restraint, but there is a shared cost there. Producers are willing to absorb some of the costs, but we still think, from a public standpoint, that government should have some financial input into this and carry some of the costs, just because of that brand recognition.
Senator Callbeck: Does anyone else want to comment on that?
Mr. Nicholson: If you compare Canada with the United States, we, as Canadians, consume about 20 per cent of what we produce in the wheat sector. Seventy per cent of our wheat goes into the export market and about 10 per cent goes into the U.S. market.
If you look at the United States, they consume 70 per cent of what they produce down there and export 30 per cent. However, their 30 per cent is 10 times higher than our 70 per cent. They are so much bigger than we are, and that has a great bearing on what the costs will be.
Senator Callbeck: I have a question about the Grain Appeal Tribunal. I do not believe any of you addressed that directly in your opening remarks. The government, of course, has said that it is no longer necessary. Are you concerned about your members' right of appeal in the event that there is a disagreement?
The Chair: As chair, I will take full responsibility. When I look at the other two panels, this will be the last question. On this, witnesses, would you please keep your answers short. The chair now recognizes Mr. Boehm.
Mr. Boehm: I think that the Grain Appeal Tribunal is a very important part of the system. What is important about it is that the system functions for farmers and for grain companies without having the expense of going to the courts where there are disputes. This agency acts as an independent agency and its decisions are final. Is a low-cost system that puts producers on the same footing as grain companies. That is very important. If you diminish that, then it disadvantages producers in particular.
The Chair: Any further comments?
Mr. Nicholson: If you look at the tribunal and past history, as an elevator manager, if a car gets downgraded, he has the right to appeal that. It then goes up to inspectors, and they will either agree or disagree with the grade. The manager then has the right to go to the appeal tribunal, as well as producer cars. When producer cars are shipped to the terminal and the producer is not satisfied with the grade, dockage or protein, he has the right to appeal it and go right up to the appeal tribunal. I think it is an exercise that needs to be there to ensure that we know where the grades are, for all parties involved, including the buyer of Canadian grain as well as the producer.
The Chair: Mr. Nicholson, Mr. Brock and Mr. Boehm, thank you very much for your comments.
Our second panel comprises four witnesses, whom I thank for accepting our invitation to look at Division 19 of Part 4 of Bill C-45 and the proposed amendments to the Canada Grain Act.
We have with us Mr. Rick White, General Manager of the Canadian Canola Growers Association; Mr. Blair Rutter, Executive Director of the Western Canadian Wheat Growers Association; Mr. Matt Sawyer, Chairman of the Alberta Barley Commission; and Mr. Doug McBain, Director of the Western Barley Growers Association.
The clerk advises the chair that the presentations will start with Mr. White, to be followed by Mr. Rutter, Mr. Sawyer and Mr. McBain. After the presentations, we will proceed to questions.
Rick White, General Manager, Canadian Canola Growers Association: Thank you, Mr. Chair, and good evening to members of the committee. Thank you for inviting me here today to speak to Bill C-45 and proposed changes to the Canada Grain Act and the Canadian Grain Commission. I am here in my capacity as General Manager of the Canadian Canola Growers Association, but I am also a farmer actively involved in our family grain farm in southeast Saskatchewan.
Canola is grown by well over 43,000 farmers from coast to coast. The canola industry is an incredibly important economic and agronomic contributor to the farms of Canada and to the broader Canadian economy, creating jobs, growing exports and improving the health of Canadians. Canola is a Canadian success story going from minimal acres in the early 1980s to the largest cash crop in Canada today. To continue this path of innovation, canola farmers need a reliable regulatory system that ensures our products meet the quality standards and product specifications required by our customers. Reforms to the Canada Grain Act and the Canadian Grain Commission are necessary to maintain a world class institution that is efficient, cost-effective and respected by not only our producers but also by our customers around the world.
This year, the government announced that the CGC would be moving to a cost recovery model fully funded by farmers through increases in user fees. As the national voice for canola farmers, we strongly contend that reforms must be made to the CGC before implementation of the increased fees on August 1, 2013. The changes proposed in Bill C-45 are a good first step, but more needs to be done. Removing the mandatory requirement for the CGC to conduct inward weighing and inspection is necessary and will help to reduce the CGC's operating costs. Providing new options around security is also a positive move, but there are a number of areas that the bill fails to address, including governance and licensing.
Changes to the CGC governance structure is imperative and should be included in legislation that strives to modernize the CGC. Therefore, the CCGA supports a modernized governance structure that maintains strong ties and accountability to both industry and farmers. In our submission to the CGC, we advocated for a governance model that includes vice-presidents reporting to a president, all of whom would be appointed by the Government of Canada. Additionally, our proposed model would eliminate the position of chief operating officer.
Changes to licensing are also needed. One of the provisions in the act gives farmers the right to ask the CGC to determine the grade and dockage of their grain delivered to a primary elevator if they disagree with the grade and dockage received from the elevator. The service is known as Subject to Inspector's Grade and Dockage and is not currently available at process facilities such as crush plants. With a significant portion of the canola crop being delivered directly to crush plants, this provision should be extended to process facilities so that canola farmers are afforded the same rights, whether delivering to a processing elevator or a primary elevator.
The CCGA would also like to see flexible language included in the bill that would allow for a third party to conduct outward weighing and inspection. While the bill allows for a CGC accredited third party to conduct outward weighing, the CCGA would like to see it extended to outward inspection as well.
A final important area that needs to be considered is public versus private good. The CGC provides a large number of services that benefit the good of Canada, and these costs should not be included in the proposed increased user fees, which will be paid solely by farmers. For example, the grain research laboratory, policy development and the maintenance of grain quality standards and assurance system, to name a few, should continue to be funded by the government as we believe they are for the public good, not just for the benefit of farmers. In our estimation, at least 25 per cent of the CGC's budget should be funded from tax dollars as these services benefit all Canadians. It is currently at only 9 per cent, which equates about $5.4 million dollars a year.
While we are pleased that the government has taken a step forward with this bill, we urge it to introduce another bill this spring to complete the CGC's progress toward modernization. In the end, it is farmers who will be paying the majority of the costs for the CGC, so they should have an institution that is lean, modern, efficient and advocates for them and understands their business.
Thank you for your time and I look forward to answering your questions.
Blair Rutter, Executive Director, Western Canadian Wheat Growers Association: I wish to thank senators for the opportunity to provide our views on amendments in Bill C-45 that relate to the Canada Grain Act.
The Western Canadian Wheat Growers Association is a voluntary farm organization that is dedicated to improving the profitability and sustainability of our industry. For the past 43 years we have advocated open and competitive markets, innovation and liberalized trade.
The wheat growers are supportive of the changes proposed in Bill C-45. A key change is the elimination of mandatory Canadian Grain Commission weighing and grading of railcars at port. This will result in a substantial saving to farmers, and yet ensure that farmers and grain companies who want to have their grain graded at unload will still enjoy that right.
The wheat growers also support changes in the legislation that will provide greater flexibility in how payments to farmers are secured. For example, the changes allow for the introduction of an insurance model, which offers the potential for farmers to have better payment coverage at a reduced cost.
While these are positive changes, we would like to see even further changes that would reduce the regulatory cost imposed on farmers. As you may know, the Canadian Grain Commission is scheduled to operate on a full cost- recovery basis, effective August 2013. Currently, the federal government covers over $35 million of the commission's annual costs. The government appropriation is scheduled to be reduced to $5.5 million annually.
While the amendments proposed in Bill C-45 will reduce commission costs somewhat, farmers are still facing a significant increase in fees. If no further amendments are made, then the fees paid by industry and ultimately by farmers are projected to rise by 44 per cent, from $38 million to over $54 million. To avoid this cost increase, the wheat growers would like to see further changes that enable the commission to be more market responsive. For example, CGC weighing and inspection on offshore exports should be made optional. At present, there is no equipment for CGC inspection on grain shipments to domestic flour mills and malt plants. There is also no requirement for CGC inspection on grain shipments to U.S. markets. It is only on offshore shipments where this mandatory provision remains.
This provision represents a double standard, and it disadvantages those grain companies that ship primarily to offshore markets. While there are certainly some customers who value the inspection services provided by the commission, there are other customers who prefer to use private inspection agencies. In our view, customers should only be required to pay for services where they see value.
We also ask the committee to review the degree to which the services provided by the Canadian Grain Commission benefit all Canadians. For example, the work of the grain research laboratory helps to ensure Canada maintains a safe grain supply. The costs of the lab are approximately $10 million per year. We are not saying all costs of the lab should be necessarily be paid by the public purse, but we do believe a greater portion of these costs, together with some of the administration costs of the commission, serve the public interest and should therefore be funded by all Canadians.
While we realize it may not be possible to amend Bill C-45 to address these concerns, we ask your committee to recommend that the government introduce and pass further legislation prior to August 2013 so that farmers do not face an excessive increase in service fees.
Thank you for your consideration.
Matt Sawyer, Chairman, Alberta Barley Commission: Mr. Chairman and members of the Senate, I appreciate the opportunity to speak with you today. I am a fourth generation farmer from central Alberta. I am fortunate to be supported by my wife Tara and our three children, Emmett, Cassidy and Quin. Emmett is also here with me today.
I represent the Alberta Barley Commission as their chairman. The commission is a grassroots organization that represents Alberta's barley farmers. I am pleased to be appearing here today with my colleagues from the Western Barley Growers Association, the Western Canadian Wheat Growers Association and the Canadian Canola Growers Association.
Barley, wheat and canola make up the majority of my crop rotation. One thing I would like to emphasize today is that any change to the Canada Grain Act will affect the livelihoods of farmers who, like me, want to do the best job possible in an increasingly complex international marketplace. That said, changes to the Canada Grain Act are overdue and I am pleased that the Government of Canada is working to update and, to some extent, streamline an organization that I believe remains relevant to farmers in these changing times.
In order to be profitable, our farm strives for efficiency, reducing costs and duplication, while ensuring that we provide the best possible product to the marketplace as one of our goals. We are committed to our work and truly believe that it contributes to the strength of Canada as a nation, as well as to our country's place in the international marketplace.
This is one reason I am excited about the marketing changes that took place over the past year, as well as the upcoming changes to the Canada Grain Act. I strongly encourage further change to this act — and the Canadian Grain Commission — in order to ensure Canada maintains a leadership role as a major agricultural exporter. By cutting the red tape and ensuring the services left behind provide real value to farmers and the industry, we are able to increase efficiencies at all levels while still maintaining our competitive edge.
In the past, over-regulation has created inefficiencies that were a burden to farmers and the industry. Sometimes enforced compliance is just another way of creating a bureaucracy that works to maintain its and not to improve the industry. This is why the proposed changes are important to the future success of the industry. Removing the mandatory requirement for the CGC to conduct inward weighing and inspection, as well as introducing increased flexibility for security requirements, will help make the CGC more effective through cost reduction. It is in farmers' best interests for inspections to be handled effectively and without duplication, and I believe this work is best left to the marketplace to decide.
More change is needed. In particular, when I look at the actual costs associated with the implementation of cost recovery fees next fall, I support the idea of this model, in that the CGC must run efficiently and on budget. However, I think more public dollars should be used towards supporting a service that ultimately benefits all Canadians.
When it comes to the public good, we all have a stake in making sure the system works. That is why I believe more thought needs to be given to the cost recovery model. Canadians rely on farmers for safe, healthy food, and the work we do helps the Canadian economy through increased trade and job creation. As Canadians, we are in this together.
However, with farmers slated to pay the entire bill for the CGC, or at least 85 per cent of it, we need to be more involved in the CGC and its governance. Strong farmer representation at the CGC will help keep the organization on track and will make us part of the decision-making process for the organization we are ultimately paying for.
Simplification of outward inspection also makes sense. Although I personally think disagreements on grain quality are best left to buyers and sellers and should be market driven, I also understand the government's concern regarding the linkage between outward inspection and the ability to guarantee the Canadian brand to ensure consistent quality. We are all proud of the work we do on farm, but we also understand that sometimes guarantees are needed to ensure access to international markets.
I am also in favour of a third party option for both outward weighing and inspection.
My colleague Doug McBain from the Western Barley Growers Association will address our concerns on the insurance side.
Aside from these issues, I believe the Canadian Grain Commission still has important work to do. If the CGC can be more effective, more cost efficient and more responsive to the needs of the farmers, it will become a true advocate for our industry. Many farmers rely on the CGC to handle disputes over quality, and that is a service that provides value and results.
Thank you for your consideration and I appreciate the opportunity today.
Doug McBain, Director, Western Barley Growers Association: Members of the Senate, I thank you for this opportunity to appear before you today. I am a director and at present the treasurer with the Western Barley Growers Association. I was president from 2003 to 2005. I am a third generation farmer on the farm where my grandparents took up homestead in 1905 northwest of the Calgary. In those days it was a long day on a horse to Calgary. Today it is 35 minutes in my Prius.
Not long after my grandparents homesteaded, the Canadian Grain Commission was formed under the Canadian Grain Act of 1912. It has become an iconic Canadian institution and has greatly served farmers in the grain industry with uncompromised integrity for 100 years. The CGC has moved a long way from the horse and wagon, but they are not quite the fuel-efficient hybrid that they need to be. As Chief Commissioner Hermanson stated to this committee, "It is a start." There is a need to continue to keep updating the legislation to make the CGC as efficient and effective as possible. The amendments we are discussing today are to streamline the process and to bring the legislation in line with the credit facilities that are available today.
I would like to focus on the changes to the security requirements of the changes to the legislation. I will comment on the changes to inward inspection in that it is redundant for the most part, as the grain in the terminal elevator is owned by the grain company. Therefore, I am paying inspection and the weighing of company grain to the same company. Where the grain is non-owned, the option exists to have third-party inspectors available, including the Canadian Grain Commission.
The specific terms for the insurance that is now available for the security under the Canada Grain Act and monitored by the Canadian Grain Commission is called credit insurance. It was designed by a company called Atradius, an international credit insurance company, specifically to satisfy the security requirements of the Canadian Grain Commission. This product has been approved by the grain commission and was originally available to large grain companies. As of last year, Atradius had a credit insurance plan for any size grain company or even individuals trading any crop commodity to anywhere.
From what I have gathered from several meetings with Atradius and the Western Barley Growers Association, and from the presentation Mr. Douglas Roff from Atradius gave to the convention last February, the cost of credit insurance is about one-tenth the cost of a bond. This is obviously a significant reduction of the cost to grain companies but it also frees up credit and capital.
It is also significantly better than the security of a bond. A bond covers the grain liability of a licensed grain company. The only time the Canadian Grain Commission will revoke the licence and pull the bond on the grain company is when it has not posted sufficient security to cover grain liability. Therefore, if the bond is insufficient, unless there are sufficient unsecured assets somewhere else in the company, then the payment to creditors will obviously be less than 100 per cent.
In the case of insolvency, the bond may or may not cover the grain liability, depending on the day, because reporting and posting of the bond are a month behind. Other secured and unsecured creditors have tried to claim the bond, but the courts have established that it is only available to grain liabilities.
Credit insurance covers each transaction or multiple transactions between the same companies in an ongoing trading business. Both sides of the transaction must agree to supply detailed financial information to Atradius. They will determine the creditworthiness of each party and an insurance rate is established accordingly. If for whatever reason the buyer defaults on the payment, Atradius assumes the liability, pays the seller and is responsible for recovering the payment from the buyer.
How does this affect me as a farmer? For the vast majority of transactions, it is payment on delivery. In the case where an agreed payment is deferred, it is incumbent on farmers to ask for proof of security, such as an irrevocable letter of credit or credit insurance.
I have tried to be brief but thorough in my statements and look forward to answering any questions. I have reviewed the presentations by Minister Ritz and Chief Commissioner Hermanson. If there are any further questions from that session, I could give the perspective from ground level.
The Chair: Thank you very much, Mr. McBain.
Senator Plett: Thank you, gentlemen, for great presentations. There was some consistency in your presentations in so far as you all seem to think this was a good first step and that other things need to be done. I appreciate that. I will ask three questions. I would like all of you to comment, if you have comments.
In light of the fact that this is a first step, I would also contend that the removal of the Canadian Wheat Board monopoly started this step; that was the first step in this. Could the removal of the mandatory inward inspection have happened without the removal of the Canadian Wheat Board monopoly? That would be my first question.
At least a few of you are significant farmers in addition to your positions with the associations. Therefore, second, did farmers ultimately pay for mandatory inward inspections?
My third question is around producer payment protection, and you spoke a little bit about it, Mr. McBain. Is it a priority for you as farmers or indeed for other farmers?
Those are my three questions. Please, if you all have comments on them, I would like to hear them.
Mr. White: Thank you, Senator Plett. Those are excellent questions.
Regarding whether the removal of inward could happen without removal of the CWB, it certainly paved the way for that. When the CWB was part of the system as the marketing monopoly, they actually owned the grain as it moved through the system. They are more of a customer now that they may not have nearly as much grain in that system. Therefore there is not nearly as much interest in what is happening between the primary elevator and terminal elevator. Most of the time now, in the new world, it is the grain company to the grain company anyway. The farmers have delivered. The farmers are out of the equation — they have been paid — and it is up to the grain company that has bought that grain to get it to port and to the customer they sold it to. It did pave the way for that to happen.
Do you want to do the first question first?
Senator Plett: Sure, go ahead. Is that okay, Mr. Chair?
The Chair: Please answer the three questions.
Mr. White: On the second one, did farmers pay for those inwards? Absolutely. It comes out of the system somewhere, and someone has to pay for it. More often than not, the producers are at the end of the chain, and therefore it all comes out in the wash in the end. Sooner or later, it is either reflected in the basis or a lower grade or whatever the case may be, but rest assured that in the end it ultimately shakes out competitively at the farm level.
Regarding on the third question on producer payment security, yes, it is very important. We need to maintain producer security. We are very happy to see that will be maintained in the new bill. We are equally happy to see that there are options that still protect the interests of farmers in terms of getting paid while also giving flexibility to the industry to pick and choose which one fits their business model best. In the end, farmers are protected and let the industry figure out whether commercial insurance is the answer to protect their receivables in the new world.
Mr. Rutter: On the issue of inward weighing and inspection, it could have been removed with the Canadian Wheat Board monopoly in place, but the removal of the monopoly makes this easier to facilitate. It is important to recognize that companies that are receiving grain, like the Canadian Wheat Board, for example, or producer-car shippers, still have the right to have their grain inspected by a third party. That is why we say it is optional. A company shipping to their own facilities will not see a need for that inspection, but if you are a company that does not have a terminal at the port, you will want a third party to inspect your grain. That provision is there, and so anyone that wants to have grading will still have that right to have it.
Farmers did pay for all the inward inspection costs. It was the grain companies that paid it, but ultimately that is reflected in cost to farmers.
Regarding producer payment protection, yes, that is an important feature for many farmers. I think some farmers would be prepared; when they are dealing with some companies, they know that the risk is very minimal. Down the road, this paves the way for farmers to be able to elect their insurance coverage, just like many things where individuals have the right to decide how much protection they want. Down the road, I can see where farmers have the option to choose the level of protection they want.
The value of this moving to this insurance model is that there will be certainty as to the payment in that the farmer will be covered. It may not be fully 100 per cent. The industry may decide 95 per cent is adequate, but whatever is decided, farmers will be fully covered, whereas under the bonding system, there were instances where a farmer would get less than 50 cents on a dollar.
There is greater certainty here and, from what we understand from the grain commission, the costs should be substantially lower, not just for the commission but also for all the licencees. Better protection, lower cost. That is a path to go down.
Mr. Sawyer: I want to emphasize that I am a farmer first. The chairman of the Alberta Barley Commission could end tomorrow if they do not decide to re-elect me, so I am a farmer first.
Second, I am not going to discredit Mr. Rutter, but I personally did not think that the removal of the mandatory inward weighing inspection could have happened if the monopoly was not removed. Speaking from the heart, I remember going down to the ports a few times and the mandatory inward weighing and inspection was explained to me. I looked to myself and said, "Those 102 cars or whatever they left, Viterra and Crossfield, you mean that after we have identified how much weight goes into those cars and they are graded, they have to be weighed and graded again?" That does not make sense. Well, that is the way it is, in case those 102 cars show up in a different spot.
You would think they could coordinate that a bit better. From a grassroots perspective, it drove me nuts that they would do that all the time.
The second question, mandatory inspection: Yes, I would have paid for that and it would have come out of my pocket. I never agreed with it in the first place. I could see, if you are doing some inter-trading and a car showed up and it was leaking — they say sometimes the cars leaked — then you could say yes, those cars need to be reweighed.
As far as protection goes, I would also like to suggest being aware of who you are selling your grain to. Yes, it is comforting to know that you are protected, but if you are dealing with a company that has a certain reputation, I would say it is up to us as individuals to ensure that you are looking into what is the basis of this company and whether we going to get paid. Yes, having different options available, and what degree of security you need should be up to the producer to decide.
Mr. McBain: In terms of the first question on eliminating inward inspection without the CWB monopoly, the Wheat Board relied on the inward inspection to determine the type and grade of grain that they were getting. There was so much blending and commingling that they demanded, and that was their way of keeping track of what went in and what went out.
Did farmers pay? Yes. It was a line item on my cheque. I knew exactly what I was paying.
Protection, yes, is important to producers, especially going forward, and your question is looking forward. When I have that opportunity to have security for forward contracting, it gives me a broader market to go to. Now I can go directly to an international customer and say, "Here is my product." They are interested in it. We can come to an agreement on price. We both go to a credit insurance and supply our credit information. I am covered and they are covered, where before I would be an unsecured creditor as soon as I crossed the pit and I would be the last guy to get paid.
There were previous questions in the last session about container movement. It is a huge opportunity now for container shipments, of all commodities, to international markets, where you can get payment insurance that did not exist before. It is a huge change coming in the industry.
Senator Mercer: What I am hearing is that you all support the changes but that you have concerns about the cost, and your concern that maybe the changes do not incorporate everything that should be changed. Would it not make more sense if we took this out of Bill C-45 and introduced a separate bill, dealing specifically with the subject, where we could then address all the issues? We continue to hear concerns about the full cost recovery. Even though you people are supportive of it, you all did express some concern about the costs.
Indeed, Mr. Sawyer, you used the term about the importance of the Government of Canada being involved financially because it was in the public good. It is not just a benefit to farmers; it is a benefit to the entire country to have the government involved in some way financially, because the decrease from $35 million to $5.5 million over the time period is a pretty steep decline, and for farmers to pick up that slack is a pretty hefty thing. It does not look so bad this year, with the price of grain, but I have been here when the price of grain was $1.50, too. Hopefully we will never go back there, but those are the realities of the marketplace.
What do you think? Should we have taken this as a stand-alone bill and done the total fix instead of the partial fix?
Mr. McBain: I think that may be beyond our scope, as farmers, to question how the government introduces legislation. My concern is this: Did they get the job done? As long as they get the job done, it is up to them to decide. We voted the government in to do the job. They do the job. At the end of the day, that is all I am concerned about.
Mr. White: That is an excellent question. The proposed changes, as we see them right now in Bill C-45, are estimated to reduce costs to the industry, and farmers included, of $20 million. We will take that now. Although the job is not done, we will take it now, and we really want another bill this spring to finish the job. We will take the $20 million savings. We know we have it. We will take it and we will keep pushing for another bill to come forward.
Senator Mercer: You realize we have no commitment for the second bill. I am hoping that your discussion here tonight will prompt that.
Mr. White: Yes. We will take the $20 million now because that is in hand. If we can get this bill passed, we will lock that one down. Yes, there is the possibility of another bill not coming. If that were the case, we would not have $20 million in savings; it would be $20 million for farmers come August 1.
Mr. Rutter: I would echo what Mr. White had to say. In politics, a bird in the hand is worth quite a bit, so we will take this. If we were to deal with this with a separate bill, there is no assurance that it would be passed prior to August of next year, and we would be left with nothing. Yes, there is a bigger, tastier bird out there, but we will take the bird in the hand for now.
The Chair: Mr. Sawyer, do you want to comment?
Mr. Sawyer: All my colleagues have covered it fairly well. I know that one thing to speak on is that I sure am appreciative of the government for giving me marketing freedom. Next there will be some more savings down the road. Making things more streamlined and cost-effective, that is the bottom line. That is what everyone is shooting for. I am happy for that.
Senator Buth: Thank you very much, gentlemen, for being here this evening. You represent wheat, barley and canola. Can you estimate and tell me what percentage of Western Canadian crops the three commodity groups sitting here would represent in terms of volume across the West, in terms of crops that the Canadian Grain Commission would be dealing with, essentially?
Mr. White: I am not sure what the exact percentage would be, but it is the vast majority, sitting at this table, for grains and oilseeds affected by this legislation. Would it be 90 per cent, 80 per cent? It is high. I do not know the exact number.
Senator Buth: I am saying that because we had two previous witnesses who were concerned about the inward inspection and weighing, but you have all commented that you see the elimination of mandatory inward inspection and weighing — and I appreciate your comment, Mr. Rutter, about the fact that companies can still have inspection and weighing done; it is just not on a mandatory basis anymore — as very positive and saving dollars for farmers. Then you go on to the next step, where you say, "Well, maybe we should be allowing third-party inspectors for outward inspection and weighing." Can you expand on what benefits you would see from having third-party inspection and weighing for outward inspections? How do we protect the Canada brand in those cases?
Mr. Rutter: Companies have the right to inspect and farmers also have the right to have their grain inspected upon delivery. If they have a disagreement with the grade given to them by the grain company, they have the right to go to the grain commission and have their grain assessed. That provision is not used much because there is good competition in the grain sector. Farmers today are seeing even better grades than they were seeing previously. The provision exists, and we certainly recommend that it stay there, but it is not being used that much because competition is taking care of the issue.
On outward inspection, currently some companies hire a private inspection firm because they want various specifications and are happy to have a private inspector. In fact, they discard the Canadian Grain Commission final certificate. Certain customers do not see the value in having a CGC inspection, which is fine. However, other customers certainly see tremendous value in the CGC. We are saying that it should be up to the buyer and the seller whom they use to inspect the grain. As I said in my presentation, shipments to the U.S. do not require CGC inspection, so there must be offshore customers as well that would be quite willing to accept other parties as inspectors of their grain.
Mr. White: I will be very brief because Mr. Rutter covered 99 per cent of what I was going to comment on. I can add that sometimes an international customer will request a third party, such as SGS, to do the inspection because it is not interested in the CGC inspection. Under the current legislation, the CGC has to inspect it, even though the customer does not want it. Both inspections are done by CGC and SGS. If the customer just wants the SGS inspection, they throw the CGC inspection in the garbage, which is a lot of money because a vessel holds a lot of grain. It could be that tens of thousands of dollars are thrown in the garbage — pure waste.
Senator Callbeck: I have a brief question on cost recovery.
Mr. White, in your brief you talked about services that the grain commission provides for the common good. You feel that it is about 25 per cent compared to what is proposed at 9 per cent. Another brief says that the government would provide 15 per cent. Where does the 9 per cent come from? What is the government proposing to cover?
Mr. White: The government is proposing to cover $5.4 million, which is a fixed rate going forward without any consideration for inflation. The $5.45 million as a percentage of the CGC's budget is roughly 9 per cent. We would argue that the costs for these public good services that we are talking about, such as the grain research laboratory, the quality assurance system, food safety initiatives, policy development, et cetera, are much higher than $5.4 million. We think the cost is closer to between $15 million and $20 million, as a rough estimate. Those are the things that we think the government should be picking up. That is where the 25 per cent figure comes from. It is a much higher number than what the government is proposing.
Senator Callbeck: Do you know how the government arrived at the figure of $5.45 million? Were you given a breakdown on what they were proposing to pay for or were you just given a figure?
Mr. White: I do not have any details on how that $5.45 million was generated, I am sorry. It is not a very large number, but we know that it is a fixed constant number that does not rise to inflation; and we know that the grain commission's costs will inflate over time. Everyone's costs do that.
Senator Callbeck: Mr. McBain said that the cost of credit insurance will be about one tenth the cost of the bond. I have no idea whether this is a major cost or a minor cost. Can you give us some idea of the dollars we are talking about?
Mr. McBain: No, you would have to ask the grain companies directly what their costs are. It is not a cost that farmers pay but is a grain company cost. We have been told that it is one tenth. It ties up your line of credit or you have to provide cash to the bond company to cover the cost. It is a significant cost, but I could not tell you what it is.
Senator Eaton: Educate me a bit, Mr. Rutter. You were saying that some customers do not want a CGC inspector and would prefer a private inspector. Surely a CGC inspector would not have a conflict of interest.
Mr. Rutter: I do not think anyone questions the objectivity of the CGC inspector. It is just a question of customer preference. Some international firms do this in many countries, and I think some firms are very comfortable with a private provider of service. When they are getting grain from Canada, to be consistent with other jurisdictions where they may acquire grain, they want to have the same inspector. Canada should be meeting the needs of all its customers and providing the service that they require.
Senator Eaton: I suppose there is the issue of the Canada brand and consistency.
The Chair: I thank the witnesses for sharing their comments and vision on the proposed amendment to the Canada Grain Act.
The committee will now hear our final panel. The two witnesses present are Mr. Brad Chase, President of OmniTRAX and Mr. Lonney McKague, Director of Red Coat Road and Rail. I wish to thank you for accepting our invitation to share your opinions, recommendations and experience.
Mr. Chase, please make your presentation.
Brad Chase, President, OmniTRAX: It is an honour to be here and a privilege. Thank you. I will give some background and then information on this subject and our perspective based on our involvement in the supply chain in the grain business.
I am the President of OmniTRAX and in this discussion I represent three entities. One is the Carleton Trail Railway, which is a short line that originates a significant amount of grain in Saskatchewan, and also the Hudson Bay Railway, which moves a significant amount of grain in Manitoba, up to the Port of Churchill and then, of course, the Port of Churchill. In those three entities we move about 7,500 rail cars of grain. At the Port of Churchill, over the last five years we had about 550,000 metric tonnes of export, where obviously we are doing inward and outward and have a touch with the CGC.
Our organization has been a part of these discussions and fairly well briefed as it relates to our touch. We have staff that have been a part of discussions on this and appreciate the openness of having that opportunity.
We certainly recognize the system that is in place, which requires movement from a producer car or truck to an inland terminal where there is a touch. There is a touch that comes up to the port and a touch when it leaves the port, so there is a role that has been played in the grading and the settlement between the parties in the present system.
We also understand the need for the dispute mechanism to be in place so that those parties, where there may be a dispute over a grade or a weight, et cetera, there must be a formula to come up with an answer that is acceptable to parties and then continue on in business.
We have had a significant amount of discussion about this in trying to determine the next steps. In the end, our focus is on coming up with commercial arrangements that are acceptable to the customers. Those customers could be a producer that we offer to purchase from or it could be the grain handling company or, in the outward position, settlement to what is going on the vessel.
From a standpoint of the touches, we certainly have looked to the different entities that are out there that are, I will say, more global, the SGS system and Intertek and there are some that are starting to crop up now in Canada as well. We look at this not unlike the other segments of business in which we operate. In the freight business in which we operate and in which I have a significant amount of background, there has to be a mechanism to handle dispute or a challenge between those two parties that are transacting a trade.
As far as the other significant consideration for us, and maybe more so, there is the weigh-over as part of this. The weigh-over for us has always been a mechanism to settle with the Canadian Wheat Board and settle what was on the GIS or the record from the CGC to what is actually in the house at the Port of Churchill. That situation has changed considerably because for us it has been predominantly one entity's stocks in the house. At present we have the entities of six stocks in the house so weigh-overs are really of little relevance because those stocks are also mixed. For us, again, it is the same thing: We have to have a means to dispute any commercial discrepancy between us and those who hold stocks up there. For example, if company ABC on record, on theirs and ours, has 1,000 tonnes of a certain commodity, we are on the hook for that. Whether it is there in shippable status or not, we are responsible for that company grain to grain.
In this case, this year we have had three of the main companies up there going through the physical facility with us just to ensure that we are both comfortable with the stocks that are in-house.
From the standpoint of OmniTRAX, those three entities of the Carleton Trail, the Hudson Bay Railway and the Port of Churchill are the real touches. Not unlike other areas of business where we transact between other entities, where there are disputes, we need mechanism and we do not see a huge challenge going forward; we see change and then, in the end, coming up with the best entity that will be commercially acceptable to our customers.
Lonney McKague, President, Red Coat Road and Rail: Thank you for the opportunity to be here today to present some of my concerns about this legislation. I represent Red Coat Road and Rail, a small short line railway in southern Saskatchewan. It runs 114 kilometres from the town of Pangman to an interchange point just outside of the town of Assiniboia. From there, Canadian Pacific Railway transports our producer cars all across Canada.
With the changes to the former Canadian Wheat Board and their monopoly, we are struggling to find willing partners to assist us to date in moving producer cars. Contrary to what we were told, we have no white knights coming forward from the grain companies. We have a lot of money invested in our company by our 164 shareholders; also, many of us have purchased loading facilities which are operating along the tracks to assist farmers in loading their producer cars. These facilities operate at a very low cost and pass the savings on directly to the local farmer. These savings do not come without risk. Farmers try to mitigate the risk and capture those savings. Our ability to do this is greatly decreased when inward inspection and weighing by the CGC is eliminated. One of the key components to shipping a producer car has been the Canadian Grain Commission, from authorizing the producer car to dispute resolution, when the grain company and the farmer have a difference of opinion or a problem with the grade, dockage or weight of the grain at unload.
We believe that paying a small fee on every car is like an insurance policy to prevent a disaster. However, with the changes to the act, no one can tell us what the new costs will be and whether they will be affordable to producer car shippers. We have had figures thrown out and have been told that the service costs will go up by about 100 per cent and maybe even by a 400 per cent increase to farmers who wish to or need to maintain the same services. History has shown that without the intervention of an independent third party, the farmer is always at a disadvantage. History has also shown that in the grain industry, competition does not keep the companies honest.
Short line railways' first choice would be the legislation to be reversed, but that is not likely to happen. The Port of Churchill received some transition money when the Wheat Board legislation was in, and that may be an option for short line railways to protect their investment with the change in this legislation.
Another option, and I think some of the other presenters touched on it earlier, may be to freeze some inspection costs for producer cars where they are today or at least phase in any increase over a longer period of time.
This is about the survival of short line railways and the survival of small-town Saskatchewan. Contrary to some belief, small-town Saskatchewan is worth saving. If Red Coat Road and Rail was an American company, under the free trade act, we could get compensation for our losses by the changes that are occurring in the legislation. Because we are a Canadian company, I do not believe that relieves the government of its responsibilities. I am very worried that some of the changes in services are moving too fast. I believe if the changes continue at this pace, the viability of short lines moving producer cars of grain will be gone. This will be a direct result of the changes to legislation by this government that favours the grain company over producer cars and short line rail lines.
In closing, I ask you, honourable senators, to take up our cause.
The Chair: Thank you. The first questioner will be Senator Plett.
Senator Plett: Thank you, gentlemen, for coming out. We certainly appreciate that. I have a few fairly basic questions.
Mr. McKague, I will first agree with you that small-town Saskatchewan is certainly worth saving, as is small-town Manitoba. We are about the same size province, and I certainly endorse what you said. Was inward inspection a valuable mandatory regulation in your opinion?
Mr. McKague: For producer-car shippers, yes.
Senator Plett: It was?
Mr. McKague: Yes, it was an insurance policy to protect us, and when you put a car on the rails in Ogema, Saskatchewan, and you ship it to Vancouver or Thunder Bay to a grain company at the other end, you need the third party to grade your grain in order to have some assurance that everything is on the up and up.
Senator Plett: In your opinion, what further logistical improvements should happen in the grain supply chain? Maybe you can both touch on that if you have comments on it.
Mr. McKague: I agree with earlier panels that the grain supply chain, with some the changes we have seen in legislation recently, will be an evolving target. There will be some changes that I do not think any of us will be able to predict. What we have to keep in mind, and what I need to present to you today is that in doing that, and with these changes, we need to keep the farmers in mind.
The previous presenters all seemed to align themselves with selling to a grain company and have the grain company market their grain. We eliminate that third party. We put those savings back directly to the farmers. I do not have a lot of compassion for the grain companies' bottom lines; I have a lot of compassion for my neighbours and my farmers. When the earlier presenters aligned themselves with grain companies and said that is the industry they need to protect and save money for, I do not accept that. I only accept that the fact that I am trying to protect the costs and savings of my local farmers.
Mr. Chase: In answer to your question, all the touches and the requirement, the insurance policy and the settlement are important. My perspective on your question is focused more on the management of the rail network. If we are concerned about oligopoly in the grain industry, I do not think it will even be close to the extent of what we have in the rail system. For a short line railroad and for farmers in Manitoba or Saskatchewan, the management through the Canada Grain Act and the governance of ensuring a reasonable rail network — a switch, for example, to a short line railroad and their ability to get service from the class 1 — will be as fundamental to their viability as any other part of the supply chain. That needs close governance in not just the next year or two but in the long term. I think it is important to keep our eye on that.
Senator Plett: Further to that, Mr. Chase, have grain shipments remained consistent on your rail line this year through the Port of Churchill?
Mr. Chase: We had a little bit of a slow start because of the date, so for the Port of Churchill, the August 1 transition to the market freedom delayed our start a little bit, but we had a very strong October. We had a pretty good season in Churchill this year.
Senator Plett: Mr. McKague made some excellent points that this legislation may affect his short line. Do you see this affecting your short line, OmniTRAX, either negatively or positively?
Mr. Chase: If anything, almost positively because in the transition from the Wheat Board to an open market system, it will be about making commercial arrangements that work with all parties. We have a number of customers up there who work through the Port of Churchill this year and will have to go through some change, but in the end those are the folks we need to work with to ensure we have arrangements that are positive for them and for us.
As for the weigh-over, we would prefer not to see it; it does not really do a lot for us.
Senator Mercer: Thank you, gentlemen, for being here. We appreciate it. I know you are taking time away from your busy schedule.
Mr. Chase, you said that you have had a good year, which is good news. I hope I am wrong, but I am one who still is skeptical about the long-term future of the Port of Churchill after the subsidy that was built into the Wheat Board legislation disappears. I hope things go well and I hope we have bumper crops. I hope everyone is working in Churchill, but I am still a little skeptical.
Mr. McKague, when the Canadian Wheat Board legislation was passed, built into the process was a concern for the Port of Churchill and the short line going up to Churchill. Was it an oversight by Parliament not to build in some other protection for the other short line railroads that exist in Western Canada, similar to your own?
Mr. McKague: Credit has to go to Senator Plett and some of his colleagues from Manitoba for ensuring the Port of Churchill or the Hudson Bay route authority had some transition money built into that legislation. We did not have that same support in Saskatchewan from our senators and MPs because there was too much excitement of getting rid of the bill, and some of us got left behind.
Short line rail lines had none of that transition money, such as the Hudson Bay route authority does, and we are off to a very slow start, also. The transition has not been easy for us. We may make it; time will tell. We are a very strong and determined group of people, but it has not been easy, senator.
Senator Mercer: You said you had 164 shareholders. I do not want to get into the corporate structure, but I assume many of those would be suppliers.
Mr. McKague: The vast majority are local farmers. The odd local resident or the father of a local farmer has bought into the company, but the vast majority are local farmers.
Senator Mercer: Everyone has a vested interest in the survival of the railroad, do they?
Mr. McKague: Yes.
Senator Mercer: You are concerned about the costs going up. You used terms of 100 to 400 per cent. We have not heard those numbers before but we have heard of costs going up.
Your cars go from point A to point B, and then they go on the CP Rail line, right?
Mr. McKague: That is right.
Senator Mercer: Then you have to pay CP for the rest of the transport. Has CP taken advantage of the situation and increased their rates?
Mr. McKague: The CP rates went up 9 per cent this year, but I am not sure it is to directly take advantage of this situation. However, they had an opportunity and they did increase their rates by 9 per cent, which directly affects the price that we would pay them to transport our grain from the interchange point to Thunder Bay or Vancouver.
Senator Mercer: Is that a premium that you have to pay that others may not have to pay?
Mr. McKague: There was a direct 9 per cent increase at the start of this crop year, yes.
Senator Mercer: You said you had a slow start. Mr. Chase said they had a slow start but a good recovery in October. In the Port of Churchill it is important to have a good October because you do not have many months after that. Have you been able to make a recovery in October-November?
Mr. McKague: October, no, not at all. We saw some shipments here these last couple weeks that were back onto pace for November, but we have not had our August-September-October cars allocated — the cars we would have normally moved in those three months. I presume we will be about 25 to 40 per cent down in car movement this year, and the transition from one marketing system to another is the major influencing factor for our slow start.
Senator Mercer: Mr. Chase, the producers are all south of you, so help me and the audience: Where does your railroad start as it goes north?
Mr. Chase: The segment that we own starts in The Pas, right on the border of Manitoba and Saskatchewan, and connects with CN.
Senator Mercer: Has CN increased their rates this year?
Mr. Chase: Yes, they have, but it was not by 9 per cent. I would have to go back and check. There was an increase. We look at it more against the other alternatives. For example, if the rate goes up 9 per cent but is consistent with Thunder Bay and Vancouver, frankly it is not an issue for us because we are a receiving not an originating railroad.
Senator Mercer: If the competition is paying the same thing —
Mr. Chase: It will not influence the market and we are fine.
Senator Mercer: I understand what you mean. One of the issues that is probably not pertinent to this evening is the change in management at CP and the aggressiveness of the pricing, but I will try to avoid getting into that discussion.
How many employees do you have, Mr. McKague?
Mr. McKague: We contract out and hire another company to supply us with rail service, so we only have office staff in our company. Under contract, the people that supply us with car haul service would probably have 15 to 20 employees. They are another short line rail that we work very closely with.
Senator Mercer: Mr. Chase, how many employees do you have?
Mr. Chase: In Canada, about 300 — about 100 at the port and 200 that work railroad.
Senator Mercer: Your railroad is not exclusively freight though, is it?
Mr. Chase: Grain is the largest commodity we move, and then we originate a significant amount of other products — frac sand, mining materials. Then we have a freight train that carries freight to the town of Churchill and also supplies the Kivalliq region of Hudson Bay, Nunavut.
The Chair: Before going to Senator Duffy, Senator Mercer asked Mr. Chase if he had an increase of freight with CN and he could not answer the question.
Mr. Chase, could you please provide the clerk with that precise information if you have had an increase and what the amount was, so that we can compare it with Mr. McKague?
Mr. Chase: No, I just mentioned that. Again, we do not ship outbound or contract the rates; the customers do directly with CN. The inbound, if it is relating to the grain, will be a number of origin points all across Western Canada. I can give you some examples, but it will be a very wide range of points.
Senator Mercer: That is a good point, Mr. Chair, but I think Mr. Chase is probably right. We are trying to compare apples to apples and we may not be able to do that, but it would be interesting to have any information you could give.
Mr. McKague: I can provide some information.
Senator Mercer: I want to acknowledge that I cannot expect you to produce something that you cannot.
The Chair: For clarity, Mr. McKague, could you also provide us with the number of direct employees you have in your operation?
Mr. McKague: Sure; absolutely. We hire three employees by Red Coat Road and Rail. They are all part-time or contract employees. I will get back to you with the exact number of employees that Great Western Rail provides.
The Chair: We can do the balance. Thank you very much.
Senator Duffy: I want to thank both of you gentlemen for coming. I well remember your previous appearance here. It was enlightening and also educational for our viewers at home.
There was a time when the view was that the railway was dead in Western Canada and "woe is me" and "the sky is falling." I think you two represent the best of the entrepreneurial spirit.
Mr. McKague, hearing your story in the past, it is really marvellous how your community came together and to hear the work you have done together and how you have worked with other small businesses to take on a chore that all the experts said could not be done. I urge you tonight, after hearing that it has been a tough year, to hang in there.
Mr. Chase, I see on your side of the equation the possibility of shipping petroleum out through Churchill. Times change, crops change, values change — things change. We do not know what is coming in the future, but with the Port of Churchill, it looks to me like the gloom and doom days are gone. All I can see looking forward is potential for great progress there.
Mr. Chase: We are clearly focused on diversification. I hope we will always have a significant foothold in our catchment area and in supporting the producers to get their grain to market, and have that as our base business, but we are looking at a number of different alternatives to help diversify our portfolio on our railroad and at our port.
We are unique in that anything that moves through our port facility is significant. It is 510 miles of railroad revenue and port fees. If we can move unrefined petroleum product out, which we are focused on right now, it would be a significant help, because in our catchment area you can have good and bad years. To have another product take up a good portion of the overall output of the port would be significant. We are looking at a number of different alternatives to diversify the port and ensure that we have long-term viability.
Mr. McKague: Thank you, Senator Duffy, for the kind words. I want to tell you that we are a very resilient bunch, and our group has been very resilient. We have done some things that have set precedents within Canada, which we are proud of. You can be assured that we will not quit.
Being here tonight is part of the process of saying to you that we may need time to adjust. We are not opposing changes that are coming to us that we cannot do anything about. We will have to deal with them. What we are asking you senators tonight is to let us deal with them in an appropriate amount of time so that we are not broke and have no other options prior to the new opportunities that would come along.
Senator Eaton: I wanted to pursue the issue of the Port of Churchill and the railway. What about tourism? I have been to Churchill and I know what an attractive place it is, and the polar bears, of course. Do you have the money to fix up the rail line? Was not that an issue at one point, that it is a very fragile rail line because it goes over the tundra?
Mr. Chase: We have an ongoing challenge. We are looking at alternatives to try to mitigate the challenge we have. Discontinuous permafrost zones from the town of Gillam to the Port of Churchill cause us grief. We spend a significant amount of capital each year to maintain that line.
We have just finished a program of rehabbing the line and bringing it up to a much better standard. Our turn time on our cars, for example, back to CN to ensure that they are happy with our performance has been very good. We have worked very hard, and in support of both the provincial and federal governments as well, built that line up into a much better condition.
Without that, we risk the grain business in not turning cars fast enough and frustrating the class I in this case and not being served well; and then, very important, we risk not being able to move products, such as unrefined oil, in a timely manner, to turn cars back again, which are a precious commodity, and to be reliable and safe.
Senator Eaton: Unrefined oil would come to you from Alberta or through a pipeline? How would you get it up there?
Mr. Chase: By rail. The focus we have at this point is Alberta, potentially heavy in bitumen, but most likely the product that would come and move through the port is the Bakken light sweet, which properties are very similar to diesel.
Senator Eaton: Of course, as the Northwest Passage opens more and more, if it continues to do so, you will have more and more freight runs to Iqaluit, once you are in Nunavut.
Mr. Chase: The Northwest Passage is an opportunity for us to move more product into China and Asia, but the bigger issue for us is having the season properly recognized for the actual empirical data that is there, which shows that it should be longer than it is, recognized by both Transport Canada and Lloyd's of London, the insurer, which charges the vessel owners to come in and out of Hudson Bay.
Senator Eaton: That is your next battle, getting your season made longer?
Mr. Chase: That is a very important battle for us. Four weeks means an awful lot. Two weeks would mean an awful lot to us, especially after harvest.
Senator Eaton: Do you expect to get that battle won?
Mr. Chase: We would like to think that we could, yes. We are working on it now.
Senator Eaton: I would imagine with free trade going up now in India and China, there will be more of a push to elongate the season. Thank you, Mr. Chair.
The Chair: As we consider the proposed amendments to the Canadian Grain Act, Mr. McKague, do you have any other comments subject to questions from Senator Eaton?
Mr. McKague: Just that tourism is also something we have touched on in our little shortline. We now operate the only tourist train in Saskatchewan on our tracks, originating in my hometown. We touched on it last time. I invited Senator Plett to come, but he has not come to Ogema yet.
Mr. Chair, we would be happy to have a Senate train chartered when you need to go down and look at shortline rail lines. We have refurbished a 1922 Pullman car to its original state. Over 5,000 hours of volunteer labour went into it. We invite you, as the Senate, to come down and participate.
The Chair: Since we have the invitation to come down, Mr. McKague, we will now close. Before I say that the meeting is adjourned, there is no doubt that Senator Plett will take it under advisement.
Senator Plett has only one last question with respect to the proposed amendment to the Canada Grain Act.
Senator Plett: Absolutely, and my question is absolutely related.
Thank you again for the invitation. I still plan on taking you up on that, either personally or with the committee. Thank you very much.
I have a question of clarification, Mr. McKague. I certainly appreciate your optimism in saying you do not want to be jumping down someone's throat too quickly, that you want to give it a chance, and hopefully things will work out. I certainly echo that and hope they will.
Producer cars were allocated by the Canadian Grain Commission based on the demand from farmers previously, and I understand that is still the case. I am wondering why the difference for you this year, if really that part of the process has not changed. The Canadian Grain Commission, based on farmer demands, was supplying the producer cars, and they are still doing that. Could you briefly, for the record, explain that?
Mr. McKague: Very quickly, Mr. Chair, the reason producer cars were off to a slow start this year was not for lack of demand; it was lack of clarity within the new marketing system. In order to ship a producer car, we have to have an end-user. We have to have someone purchase our grain.
We have had grain companies that absolutely refuse to deal with producer cars; they will not. Our only option in the last few years has been the Canadian Wheat Board. The new CWB farmers were reluctant to sign up because of some of the uncertainties with the new company, and so that is slow to catch on. I think the uncertainty with the new CWB is the reason we are off to a slow start. I think some of the sign-ups on producer cars have been very heavy with them since that time. If the CWB remains for five, six, or seven years, I think we will be fine. The grain companies really have not come forward to take up the challenge to bid for that 12,000 cars of grain or try for that market share without putting it through their handling facilities. They do not want the farmers to retain that handling money.
Senator Plett: Thank you for that clarification.
The Chair: Mr. Chase and Mr. McKague, thank you very much for your presentation and for sharing your experience with us.
(The committee adjourned.)