Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 21 - Evidence - Meeting of November 27, 2014
OTTAWA, Thursday, November 27, 2014
The Standing Senate Committee on Agriculture and Forestry met this day at
9:02 a.m. to study international market access priorities for the Canadian
agricultural and agri-food sector.
Kevin Pittman, Clerk of the Committee: Honourable senators, as clerk
of your committee, it is my duty to inform you of the unavoidable absence of the
chair and deputy chair and to preside over the election of an acting chair.
I am ready to receive a motion to that effect.
Senator Ogilvie: I understand that today will be the last committee
meeting for Senator Robichaud of New Brunswick. I would therefore like to
appoint him acting chair.
Mr. Pittman: Is it your pleasure, honourable senators, to adopt the
Hon. Senators: Agreed.
Mr. Pittman: I declare the motion carried.
I invite Senator Robichaud to take the chair.
Senator Fernand Robichaud (Acting Chair) in the chair.
The Acting Chair: Honourable senators, thank you for appointing me
chair for this committee meeting, which will be my last. As you know I am
retiring. I am very honoured to preside over this meeting.
We shall get down to business right away. We will introduce the witnesses
once the honourable senators have introduced themselves.
Senator Merchant: Good morning and welcome. I am Pana Merchant from
Senator Tardif: Good morning. Claudette Tardif from Alberta.
Senator Beyak: Good morning. Lynn Beyak from Ontario.
Senator Plett: I am Don Plett, and I am from Manitoba.
Senator Oh: Victor Oh from Ontario.
Senator Enverga: Tobias Enverga from Ontario.
Senator Dagenais: I am Senator Jean-Guy Dagenais from Quebec.
Senator Ogilvie: I double checked my ID, and I am Kelvin Ogilvie from
The Acting Chair: I'm very happy to realize that Senator Ogilvie
remembered his name this morning.
So on we go with the business of the committee. We have before us today, from
the Barley Council of Canada, Mr. Brian Otto, Chair, and Mr. Phil de Kemp,
In addition, we have with us, from the Canadian Canola Growers Association,
Ms. Jan Dyer, Director of Government Relations; and from the Canola Council of
Canada, Mr. Brian Innes, Vice-President.
I'm informed by the clerk that Mr. Otto will be the first to make a
After your presentations, the honourable senators will be invited to ask you
questions. Mr. Otto, you have the floor.
Brian Otto, Chair, Barley Council of Canada: Thank you, Mr. Chair. I'm
Brian Otto, Chair of the Barley Council of Canada, and I'm a farmer from
southern Alberta. I farm about 4,000 acres south of Lethbridge, Alberta. I'd
like to thank the committee for inviting me here today to present on behalf of
the Barley Council of Canada.
The Barley Council of Canada is a national organization that is comprised of
all stakeholders throughout the entire barley value chain. Our members include
all Western Canadian provincial barley producer commissions, Quebec and Maritime
grain producer organizations, the national organization for the feed milling and
cattle feeding industry, the entire Canadian beer and malt industry, the barley
varietal research community and life science industry, and lastly, some of the
major grain procurement and handling facilities. We are effectively national in
our scope and represent the entire barley industry from coast to coast.
On behalf of the Barley Council of Canada, I would like provide you with our
views regarding your study on international market access priorities for the
Canadian agriculture and agri-food sector.
World demand and trade in barley continue to grow. In 2012, Canada exported
$484 million in barley and an additional $265 million in processed malt product
to our international customers. Canada's feed and malt barley exports are mainly
destined for the United States, Japan, China, Saudi Arabia and Colombia.
Free and fair trade is critical to the barley industry in Canada.
International trade agreements are integral to the profitability and
sustainability of all Canadian agriculture sectors.
The Barley Council of Canada would like to commend the federal government for
their ambitious trade agenda and the efforts of our chief negotiators, noting
the recent success in the European and South Korea agreements. In addition to
creating opportunity for Canadian barley, South Korea will serve as a gateway to
help expand free trade with other countries in the Asia-Pacific region.
We know that there is significant opportunity in accessing other countries in
the Asia-Pacific region, and that is why we support the government in their
efforts to conclude the Trans-Pacific Partnership.
The TPP is one of the most significant trading initiatives around the globe.
Collectively, the TPP countries account for 40 per cent of the world's GDP and
over 65 per cent of Canada's $50 billion in agriculture and food trade. This
regional trade deal also has the potential to move beyond its current membership
and draw in additional emerging and developing economies in the Asia-Pacific
Among the TPP member countries, tariffs on agricultural goods are
wide-ranging. For example, Japan maintains an average most-favoured nation
applied tariff of 23 per cent. Malaysia is 11 per cent and Vietnam is 17 per
cent, and this is towards agricultural goods.
Eliminating tariff barriers could help support incremental exports of Western
Canadian quality agricultural products in the lucrative TPP market of 792
million consumers. We need a level playing field with our competitors. With a
pluri-lateral agreement with all countries, perhaps the TPP could reduce the
competitiveness of exporters if some TPP members provide greater access to some
countries than to others.
Japan is the second largest market for Canadian malt. A free trade agreement
with Japan could result in additional exports of high-value Canadian agri-food
products to that country. In vying for Japan's attention, Canada has some tough
competition. Japan has already concluded a trade agreement with Australia and
has entered into negotiations with some of our key competitors, including the
European Union and the United States. Canada learned a tough lesson in the case
of South Korea when we lost half of Canadian agri-food exports in the wake of
the U.S.-Korea free trade agreement and the European agreement. Canada cannot
afford a similar outcome with Japan.
China represents a tremendous opportunity for Canada with its growing middle
class and increased demand for quality products. But the support of the FTA
between Canada and China is low at the moment, while our competitors are
securing market access with China.
Just a week ago, Australia and China announced a free trade agreement. As a
result, Australian barley growers will benefit before we do from greater market
access into China, our second largest export market. Among the key outcomes of
the agreement was the immediate elimination of the 3 per cent barley tariff.
Australia currently sends about 7 million tonnes of grain to China each year
worth about $2.1 billion. This is particularly disconcerting when you consider
that Canada exports between 350,000 and 500,000 metric tonnes of malt barley to
China every year. This 3 per cent reduction for Australia puts Canadian barley
at a $10-per-metric-tonne disadvantage selling into that market.
The Barley Council of Canada supports these and other trade opportunities for
increased market access. We encourage the federal government to continue to work
diligently towards the completion and implementation of these important
agreements. It's not just about addressing market access pertaining to tariffs
because addressing non-tariff barriers — including low-level presence policy and
maximum-residue limits — inconsistent application of regulations and testing,
and encouraging greater adherence to internationally recognized standards could
expand trade and reduce export costs for some exporters.
I would be remiss if I did not take this opportunity to address one of
Canada's greatest challenges when it comes to fulfilling our commitments to
international buyers. Our transportation system is holding us back from
maximizing our potential. We want the grain industry to have fair and equal
access under a transparent system, and we want our industry to grow in
conjunction with other commodities. As a member of the Coalition of Rail
Shippers, we recognize the challenges faced by our shipping partners in other
Following the example of the Barley Council of Canada, we believe that
everyone needs to be at the table to fix transportation in Canada — the entire
value chain. This cannot be the function of cooperation between a couple of
departments. A collective approach will be required to overcome the current
In closing, I'd like to say that Canada's international reputation was built
over time and has required significant investment from a cross-sector of
stakeholders. Canada's national economic security depends on our ability to
respond to growing demand for our quality products. Our competitiveness depends
on Canada's ability to negotiate meaningful and comprehensive trade agreements
that offer significant benefits and maintain our competitive position vis-à-vis
our global competitors.
Thank you for the opportunity to present. I look forward to your questions.
The Acting Chair: Thank you, Mr. Otto. We will now hear from Jan Dyer,
from the Canadian Canola Growers Association.
Jan Dyer, Director of Government Relations, Canadian Canola Growers
Association: Thank you, Mr. Chair.
Good morning, everyone. The Canadian Canola Growers Association thanks you
very much for the opportunity to provide input to your study on international
market access priorities for the Canadian agricultural and agri-food sector. The
topic is critically important to Canadian farmers.
The CCGA is a national association. It represents 43,000 growers from Ontario
west to B.C. It's governed by a farmer board of directors and represents the
interests of canola farmers on national and international issues and policies
that affect the profitability of canola. With 90 per cent of canola seed and
products exported on an annual basis, much of canola's current and future
success is related directly to our ability to access and compete in global
markets. Our industry plans to grow significantly over the next 10 years.
To achieve this growth, we must secure new markets and ensure competitive
terms of trade. We will also need to have a world-class domestic infrastructure
that can deliver top-quality products on time to our international customers. We
have made very good progress by signing the Comprehensive Economic and Trade
Agreement with the European Union and the Canada-Korea Free Trade Agreement.
Implementing these agreements will eliminate tariffs on canola oil and seed to
Korea and canola oil to the EU.
Concluding negotiations with the Trans-Pacific Partnership and with Japan
will be very important to further market access. In particular, the TPP could
establish new commitments to reduce biotechnology-related trade barriers.
Eliminating Japanese oil tariffs, whether through the TPP or directly in a
bilateral agreement with Japan, will encourage more value-added processing and
enable increased market share.
China is an important and growing market for canola. It was worth $2.8
billion last year. Other exporters, as our colleagues have said, are negotiating
free trade agreements with China, and Australia just recently announced an
agreement. However, in China there remain numerous regulatory barriers to that
More broadly, canola growers need relief from delays in regulatory approvals
by our trading partners of new biotech traits and pesticide products. These
delays prevent our farmers from accessing new technology, new seed varieties and
crop input tools that could address and limit profitability losses from
agronomic and disease factors.
In order to capitalize on the new opportunities afforded by new expanded
trade agreements, canola needs a world-class transportation and logistics system
and a regulatory system that assures our customers that canola products are safe
and of the best quality. The canola industry does its part by investing in areas
that impact the profitability of our sector, but we can't do it alone. Public
infrastructure requires a wise investment by government as well.
While an important steward of the Canadian brand and high-quality standards,
the Canadian Grain Commission needs to be modernized. It must be more
cost-effective and responsive to supply chain needs. Changes to the commission
funding structure last year shifted the financial responsibility of the
organization to farmers, particularly growers who sell internationally. If
industry is going to fund the commission, additional reforms are required to
ensure that it's accountable to its stakeholders and operates in the most
cost-effective manner. To do so, a new governance structure and funding model
will be required.
Rail service and capacity must also improve. Last year's rail logistics
challenges adversely impacted growers' ability to move grain and oilseeds to
port and the ability to serve our international customers. In order to get
needed investment and increased capacity of the railways, changes to legislation
must address the imbalance of power along the logistics chain. Better
performance monitoring and more specificity on the railways' obligations to its
shippers are two areas that really need attention.
The ongoing review of the CTA is an opportunity to improve the performance of
the railways if we all work together.
The canola industry has already done its part. It's made significant
investments to make sure that we're export ready. For example, canola is the
only crop that has been certified sustainable in international markets. This
provides access to the EU and U.S. biodiesel markets by demonstrating that
canola complies with their respective renewable fuel directives.
Investments in sustainability indicators at the industry level are also being
developed so that there will be one sustainability standard for all grain and
oilseed industry participants to adopt when customers require it. At the farm
level, canola is investing in the development of an on-farm field calculator
that will let growers know which practices are more sustainable and profitable.
Finally, I would like to stress the importance of a transparent and
science-based regulatory system and policies in Canada and with our trading
partners. The canola industry is built on a foundation of science-based
practices, and this framework is vital to the continued success of our farms. It
allows farmers to access new crop input tools and maintain a competitive,
predictable environment for us to invest in and grow our farms.
Thank you for the opportunity to speak to the committee. I look forward to
The Acting Chair: Thank you, Ms. Dyer. I now invite Brian Innes,
vice-president of Government Relations with the Canola Council of Canada, to
make his presentation.
Mr. Innes, the floor is yours.
Brian Innes, Vice-President, Government Relations, Canola Council of
Canada: Thank you, Mr. Chair.
Good morning, honourable senators. Thank you for the invitation to be here
While canola is made in Canada, our success really depends upon international
markets, and so it's a pleasure to be here today to describe our market access
priorities as an industry.
First, I would like to describe a little bit about the Canola Council and our
strategic plan. The Canola Council is a value chain organization representing
the entire canola industry, from the 43,000 canola producers to the seed
developers and the canola processors that turn canola seed into canola oil and
canola meal, as well as canola exporters who export canola seed for processing
at its destination.
In the last decade, canola has become a leader in Canadian agriculture, and
the world's growing appetite for healthy oil and protein has said that we should
keep it coming.
Earlier this year, our industry launched a strategic plan called "Keep It
Coming.'' "Keep It Coming: 2025'' is the next plan for our growth into the
future. We plan on increasing demand for canola oil, seed and meal, and meeting
this demand through increased productivity and increased yields to produce 26
million metric tonnes of canola by 2025.
Let me put that 26 million tonnes into perspective. In the last 10 years,
we've doubled our production of canola, and in 2014 we produced about 14 million
tonnes. So it's a significant growth opportunity.
We're driven by international demand, and we will keep it coming. However, we
will only be able to do this if we have stable and open market access to the
markets that value our products the most. That is why our strategic plan has
three priorities, one of which is stable and open trade, with the other two
being sustainable production and differentiated value.
That's why market access is so critical for our industry. As Ms. Dyer
mentioned, over 90 per cent of canola is exported as seed, oil or meal. This
provides jobs and economic growth across the country. Access to a variety of
markets is important for us to not only attain the most value but also to have
resiliency should market conditions change.
Canola is exported to about 45 different countries around the world, but most
of it goes to four — the United States, China, Japan and Mexico. South Korea and
the European Union are also important markets.
We have had success in market access, as a canola industry, by working
together, and we have a plan to create more market access for the future.
Efforts by industry and government to improve market access have been successful
and must continue. Whether it's implementing the free trade agreements mentioned
by my colleagues, including Korea, the European Union, and the Trans-Pacific
Partnership, whether it's resolving trade issues or whether it's preventing
trade barriers, the support of market access by the Government of Canada,
especially Agriculture Minister Gerry Ritz and International Trade Minister Ed
Fast, has been instrumental to the success we've achieved to date.
Through all of this effort, we've seen firsthand that market access is truly
a team effort. We've had success when we've worked together, both within and
between government and industry. We've worked closely with the Market Access
Secretariat to maintain market access worth $2.3 billion in 2013. The Market
Access Secretariat in Agriculture Canada brings together resources across
government, including the Canadian Food Inspection Agency, the Pest Management
Regulatory Agency, the Department of Foreign Affairs, Trade and Development,
resources at our embassies abroad, governments across Canada and many more.
Similarly, industry has come together through the Canola Council and worked
collectively with the government to achieve our market access success.
But there is more to be done. The canola industry and the Canola Council have
prioritized the key market access challenges facing our industry. We have a
long-term plan to improve market access, reflecting four areas of priority:
tariffs, sanitary and phytosanitary measures, innovation and biotechnology, and
As Ms. Dyer has touched on, for tariffs, it's about competing fairly with
oilseeds and having competitive access for seed, oil and meal.
For innovation in biotechnology, it's about having science-based regulations
for biotech innovations, as well as for new innovations that come along.
For sanitary and phytosanitary measures, it's making sure that these measures
to protect plant, animal and human health are based on science.
For sustainability, it's about ensuring that the environmental practices of
our growers are reflected, respected and understood by our customers.
Lastly, I'd like to highlight two important areas that my colleagues and
others in the agricultural industry have also touched on: China and the
importance of the government's engagement in regulatory and scientific expertise
China is one of the most important markets for Canadian canola, but we have a
significant number of market access barriers in this market. To take advantage
of the growth opportunities that we see in China means that we have an
increasing amount of market access work to do.
The importance of the Canadian government engaging directly with the
government of China, at all levels, cannot be understated. As my colleagues have
mentioned, enhanced economic cooperation with China, as Australia has done with
their free trade agreement, would provide significant benefits for the Canadian
On the scientific and regulatory expertise of government, we've seen that as
tariffs fall, non-tariff barriers are increasing, and as an industry we're
exporting more canola oil and more canola meal — more processed products — all
the time. These processed products are more prone to non-tariff barriers. These
non-tariff barriers require government expertise in science and in regulatory
affairs to prevent market access issues and deal with issues as they arise. It's
important that our government agencies, such as the Canadian Food Inspection
Agency and Health Canada, who are experts in this area, have the resources and
are properly organized to engage internationally.
In closing, canola has grown to what it is as a competitive exporter. Our
industry contributes $19.3 billion to the Canadian economy each year and
supports 249,000 jobs across the country. Maintaining this prosperity will
require that we successfully overcome many market access barriers in the future.
I thank the committee for bringing attention to this issue, and I look
forward to your questions.
The Acting Chair: I notice that it is Mr. de Kemp's second appearance
before the committee this week, so I would ask him if he has any comments to add
to the three presentations.
Phil de Kemp, Member, Barley Council of Canada: No, not at this point.
The Acting Chair: I'm sure we'll hear from you later.
Senators have indicated they want to ask questions.
Senator Merchant: Thank you, Mr. Chair. I would like to ask questions
regarding a couple of issues.
In this committee, we keep talking about — and we are not in disagreement
with you — scientific-based evidence. With the European Union and their attitude
toward GM products, what role can you play in resolving that issue? Is it just
up to government, because you said they need to have the tools to deal with
this? Is there something you can do differently? Can you make some adjustments
to the way we grow things? How do you see yourselves contributing to get the
results that you want at the end? Both barley and canola can perhaps deal with
this because I feel both are affected by this GM ruling, aren't they?
Ms. Dyer: In terms of the technicalities of how we deal with Europeans
on the biotech issue, Mr. Innes probably has more expertise than me. What we see
from growers as a positive sign is that we have this side letter that goes with
the CETA agreement. So we have, not as part of the agreement but as a parallel
piece of agreement that we have, negotiated with the Europeans to improve the
regulatory process that goes with the approval of genetically modified traits.
We have access to the European market on biofuel, we have access to the
market on feed, and we work very hard with the government to continue to work on
the protocols that allow us to trade those products into those markets. But it's
really up to the European Commission and various European governments to press
for more speedy access of the GM traits that we are approving, and the improved
traits we are approving over the next few years. So the side letter has
committed to much better timely approval of those things, and to move them
through their systems as quickly as they can.
It really is government to government. It is not something we can uniquely
do, but we certainly are present and work on the protocols that need to be in
place to manage to trade those. However, I think Mr. Innes is better placed to
Mr. Innes: To follow up on Ms. Dyer's comments, it's true that through
the Canada-EU Comprehensive Economic Trade Agreement we were able to achieve an
enhanced biotechnology dialogue to speak about these issues and talk about how
we facilitate trade between our governments.
To your specific question about how we as industry can engage in this, one
thing we do is work with our customers in the European Union. I can say that
they would like a steady and predictable supply of products for their crushing
plants and biodiesel plants to which our canola goes in Europe. We help them
work with their own governments to facilitate trade. Europe is large importer of
oilseeds, not just canola but soybeans, proteins and oils from other
Senator Merchant: You talk about a different issue altogether, the
moving of our product here with the rail companies and the issues we have had
over the past year. Has that seed from the previous season all been moved now?
Ms. Dyer: Mr. Otto should answer in terms of barley and other cereal
products, but with regard to canola, going into the last year our inventories
were very thin, so we didn't have a lot of carry-out to move. Last year was a
problem. My understanding is there has been some progress. There is still a very
large crop though, still a very large carry-out; it is much less than it was.
There has been good progress, but I don't think we can let the gas off just
yet because we still need the measures in place, the minimum mandatory volume
movement targets that have been in place for the fall. We still need those into
spring because we are moving product better than we did, but there is still a
very large crop to move.
We will soon be coming up on next year's crop, which is not as big as last
year but it's certainly a good crop.
Mr. Otto: In response to the first question, barley does not have a
problem with GMO technology. It's not in our barley industry, so it's not
something that we get too concerned about. If we did have a problem with that,
certainly we have the whole value chain around the table and we can address it
with our customers. But at this point in time, I've been asked this question
once before and it's certainly not high on our radar screen.
When it comes to the transportation difficulties, we applaud the government
with what they did. It has started to alleviate the problem we experienced last
winter, however there were some unintended consequences of the bill that was put
through. With the barley industry, we had smaller malt barley players that were
affected. We were getting a lot of movement going east and west — west to
Vancouver and east to Thunder Bay — but in the north-south movement, we have one
major player, Anheuser-Busch, and they found it almost impossible to get
movement of Canadian barley into their marketplace. It seriously affected their
business to the point that this year they are having difficulty and they are
going to bring offshore barley into their Eastern Canadian market because they
cannot access Western Canadian product. That's very serious.
The Barley Council of Canada supported the legislation last winter and, yes,
it did accomplish what it set out to do, but certainly it's not working for
industry today. So we don't support extending the order-in-council. We're
probably one of the few that feels we would rather see the marketplace take care
of this. Certainly we feel the minister has served notice to the railways that
if they don't give service to the industries that need their transportation, he
is willing to step in and do that. I think that message is loud and clear.
As we said before, to resolve this whole transportation issue, it's not just
negotiations between elevator companies and railroads. We need all the players
around the table and we should not be pointing fingers at each other. Let's sit
down and work it out so we can get an efficient and transparent transportation
system. That's our position.
Mr. de Kemp: The only thing to add as far as moving last year's crop,
in one particular case, is absolutely. They are getting cars now that they
should have gotten in March. Mr. Otto alluded to the fact that some barley will
be coming from offshore into Canada, which is correct. But in addition, when we
talk about China, one of the members within the Barley Council, which is a very
significant player for malting barley, they have had to go to another
destination to pick up over six-figure tonnages to meet commitments in China. We
cannot get it through Canada. Because of the backlog on wheat, canola and
everything else in the system, there was no confidence in getting assurances
that things would have been cleared up by now. We have to go offshore as opposed
to traditionally buying out of Canada.
Senator Dagenais: Clearly, we are talking about China and Japan. These
are major markets because exports from Japan in 2013 were worth $1.47 billion.
In terms of the canola industry, what are your expectations for a free-trade
agreement with Japan, among others?
Mr. Innes: Thank you for the question.
Japan has been a long-standing and very stable market for the canola
industry; one of our first canola markets, in fact. It's an incredibly good
market for us. We have more than 40 per cent market share there, but we are only
able to sell canola seed to Japan, where it's processed, because there are high
tariffs on canola oil. So our innovative and competitive processing sector here
in Canada cannot compete in that market.
Our main objective in negotiating with Japan is to eliminate the oil tariff
in Japan, which would allow our further processors that employ Canadians in
rural communities across the country to have access to that market. Those are
our primary objectives with Japan. Whether it's achieved bilaterally or achieved
in the context of the Trans-Pacific Partnership is a function of things outside
of industry and government's control, but certainly we value that market a lot
and see opportunities to increase our market share and have more value-added
exports to Japan, in a significant way, I would say.
If we look at the benefits we've achieved from trade agreements negotiated to
date — approximately $80 million in Europe and increased access; approximately
$80 to $90 million in Korea — we're talking numbers that are significantly
larger than those for canola, given the importance of the Japanese market and
how important canola is to them.
Senator Dagenais: What are your expectations for the opening of the
Mr. Innes: Similarly, in China, we have tariffs that disadvantage
canola and disadvantage our products. In China, canola faces a 9 per cent tariff
versus soybeans, which have a 3 per cent tariff. If you look at the quantity of
canola we are exporting there, just on the tariff alone, that's $150 million. If
you look over time, the impact of that has meant that soybean imports have gone
from 10 million tonnes 12 years ago to approximately 70 million tonnes, whereas
canola is approximately 2 or 3 million tonnes in that market. It's not
coincidence, because of that tariff.
We have a number of other regulatory issues, which Ms. Dyer mentioned and I
referred to, specifically in reference to food and feed safety and other
concerns about blackleg, for example, that we have been working through with the
Government of Canada's assistance. These are very technical issues that require
a lot of expertise and investment on behalf of both industry for research and
government to engage directly with the Government of China. It is very much a
government-to-government engagement, but we have provided significant support in
terms of research and helping to move that process forward.
Senator Dagenais: Thank you very much. Are there any comments? Okay?
Thank you, Mr. Chair.
Senator Tardif: Thank you for your presentations.
Ms. Dyer, I would like to come back to something that you mentioned in your
brief. You've indicated that in order to keep Canada's reputation for the Canada
brand and for the high-quality standards that it has, the Canadian Grain
Commission needs to be modernized and be more cost-effective and responsive to
supply chain needs. What are you referring to, and could you elaborate on that,
Ms. Dyer: Sure.
As of last year, the Canadian Grain Commission is now fully cost-recovered by
the industry. There is a very small part of the Canadian Grain Commission with
respect to its research lab that is paid for by the federal government. The rest
is paid for by user fees that are paid for the shipments primarily of exports.
There have been some changes made to the Canadian Grain Commission with respect
to how they fund their services, but farmers have seen a doubling of fees, which
pass through from the grain industry, that they are charged for exporting grain.
So the industry is now paying the full cost of those services, which include
services like inspection for quality, safety, making sure that there are no
insects, no disease, and certifying to our trading partners that Canadian grains
and oilseeds are the quality that they say they are.
Those fees are largely paid for on what we call outward inspections. When a
shipment goes for export, that's when they collect the fees. There are lots of
other services provided domestically, and those services are largely funded by
the export fee.
The cost of the grain commission is really falling on the shoulders of
exporters, not the whole industry, and certainly not all of the services that
are provided domestically, but to the people who export. That, coupled with the
fact that the fees have doubled and are now fully funded by the users, has led
us to say that we do need a rebalancing of how those fees are collected. If the
industry is going to pay fully for the costs and services of the Canadian Grain
Commission, we're happy to pay for the services that we use, but we are not
content to pay for a large amount of government overhead, to put it more
The services of the grain commission with respect to what we actually need in
terms of export certification, we are perfectly fine to have those services
cost-recovered, but we don't feel it's appropriate to download a government
department's overhead directly on to growers and the industry.
Senator Tardif: You have indicated that this change came about in
2013. Who was paying these costs before?
Ms. Dyer: It has been some time that the legislation has been on the
books to fully cost-recover the grain commission, so it goes back a number of
years. Last year was the first year that the government actually moved those
costs forward to the industry. The legislation and regulations have been on the
books for a while, but up until now the government has stepped in on a regular
basis to continue to partially fund some of those services. They've done it by
special allotments when it came to the budget of the grain commission. But last
year was the first year that they haven't funded it by a special allotment in
the fiscal process.
Last year was the first year that farmers actually faced those costs. We know
that the services themselves cost approximately, I think, 50 cents a tonne, but
the costs are $2 a tonne, for example. The difference between what we believe
the services cost and what we are actually charged is the difference that we're
The grain commission started a modernization exercise a few years ago. They
did part of the changes, but they haven't made all of the changes promised by
the government. We think that that needs much more attention and we really do
have to get to work on what other modernization the grain commission needs.
Senator Tardif: Do you see that the financial burden that has been now
put on the producers is going to be limiting the capacity for export?
Ms. Dyer: It's a significant chunk of money that exporters have to pay
for export certification. It's much higher than our competitors. The amount of
money that a grain shipper has to pay for export certification compared to our
competitors like Australia is significant. We pay three or four times higher
than some of our major competitors.
Senator Tardif: Thank you for the clarification.
Senator Oh: Thank you, witnesses. My question is for the Canola
Council of Canada.
Recently, I travelled with the Prime Minister on a state visit to China, and
a contract was signed to import $1 billion worth of canola oil to China. I know
our market was $2.83 billion in China, and I was told the province of Sichuan
has been buying canola meal seed after the oil is extracted. They are buying it
as animal feed in China, and that's good. That's value-added to the farmer. Can
you comment on that?
Mr. Innes: Absolutely, senator. I would like to reflect the importance
of the mission that you were on and the engagement of the Government of Canada
in the meetings in early November around APEC.
As you mention, a significant sale of canola was announced, and I think it
reflects the growing demand for our products in China. We're investing
significantly to develop that market in Beijing and Shanghai, and we've heard
canola is a well-known oil in China. It's something appreciated for its culinary
aspects, and there is an increasing understanding of the health benefits of
consuming canola oil. On the oil side, as you mentioned, there was an incredibly
significant announcement that shows the interest in China for more canola oil.
You also mentioned canola meal and the demand in China for protein. We have
seen that build over the last number of years. Specifically, canola meal works
well in dairy rations for dairy animals and for aquaculture to feed fish.
We have seen that demand increase. We have had market access challenges to be
able to ship our canola meal from Canada to China. Currently, I believe we have
one plant that is able to do that because of those challenges. We hope to have
more plants able to ship the meal that, as you mention, is demanded by our
customers in China.
These are the sorts of food and feed safety issues that I referred to that
require regulatory expertise between our two governments to ensure our plants
are recognized by China according to their standards.
Senator Oh: Thank you.
Senator Enverga: Thank you for the presentations.
I just heard that Australia has just been listed as having a free trade with
China and Japan. What kind of impact will it have on your industry? How much
will we lose? Can we recuperate in case we lose something?
Mr. Otto: Certainly, it will have an impact on our industry. I was in
China in June with Minister Ritz where we had conversations with two significant
malt players. They were looking to access more Canadian malt barley. We talked a
lot about that. As I said, we ship about $350,000 to $500,000 worth of barley to
At this point, can we say how it will affect our barley shipments? No, I
think that remains to be seen, but as I said before, it puts us at a
disadvantage at this point.
I should let Mr. de Kemp talk about it. He is from the malt industry and can
answer your question more clearly.
Mr. de Kemp: Malt barley tariffs into China are 3 per cent. Malt, the
value-added product, has a 10 per cent tariff. The announcement on the immediate
elimination was interesting because the Australians have a number of
implementation periods of four, five or six years, depending on the commodity,
but with respect to barley it was immediate.
Three per cent, as Mr. Otto alluded to in his presentation, is about $10 a
tonne. In Canada, at least in respect to malting barley and malt — we hear a lot
about quality and it was probably referred to a couple of days ago — we do get a
premium in certain markets because of quality. What I mean by quality is there
are certain genetic attributes as far as the proteins and the beta-glucan that
work better, so they refer to Canadian barley as a cooking sherry. It works well
with everything. The Chinese and Japanese will take lower quality malt and or
malting barley and blend it up using Canadian. At a $10 a tonne discount when
you ship it on a 50,000-tonne vessel, that's half a million bucks. You can only
extract so much from the market as far as premiums, rightfully so, depending on
your product, but that starts getting eroded as that basis starts to widen as
far as the price differentials. I have nothing to base that on now, but I
suspect that will have a significant impact as far as malting barley coming out
of Canada is concerned.
As other witnesses mentioned, we've had an aggressive trade agenda with this
government, but as far as barley is concerned with respect to Australia, we seem
to be one step behind as far as the timing, whether it's with the announcements
with Japan or China or Korea.
The Korean deal has been great. The way it is structured for a lot of the
commodities is that by the time of the sunset of the implementation period,
we're going to be as good, if not better, than certainly the Australians with
respect to malt and barley. But, yes, it will have an impact.
Mr. Innes: If I could comment briefly on the impact on canola, as I
mentioned, we have a number of market access issues with China. What we've seen
with the development of the Australia-China FTA is a close working relationship
between the two governments. We've seen, from our perspective, how it is so
important to be able to resolve issues at all levels of government, including
regulatory officials, ministers and prime ministers, even. From our perspective,
I would say that this is relevant to all of the issues I mentioned, in addition
to issues around biotech trade approval, as Ms. Dyer mentioned. We have had
biotech canola traits approved in Canada for two years now, but as our industry
does not grow traits that aren't accepted or approved in our major markets,
those traits are not approved in China and are being delayed because of
regulatory delays in their system. These traits have been approved two years
ago. It may be two, three or four years more before Canadian growers have access
to that technology. We are a country that has a highly developed agricultural
system. It's very innovative and high tech, and without access to those sorts of
technologies, that puts us back and not forward.
To answer your question directly, the impact of that free trade agreement
means that Australia now has closer relations and puts us at a disadvantage to
resolve some of our market access issues, whether it's food and feed safety or
biotech trait approvals, or things to do with maximum residue limits of
pesticides, all of the things that impede our ability to have stable and open
Senator Enverga: We have been really close to Australia; it is one of
the closer countries with Canada. Is there any cooperation between the two
countries as to the industry? Do you talk to each other, or are you just
competing with each other?
Mr. Innes: Certainly, we supply similar products, and so in that sense
we are competitors. I think as industries dealing with the same market access
challenges and markets like China, they have similar concerns from the Chinese
as we do in Canada on issues around blackleg disease and canola. We cooperate
with our colleagues there on issues of common interest because we face similar
market access issues.
There is healthy industry cooperation, but, as I say, the importance of
government-to-government engagement directly from Canada to China is paramount.
Senator Enverga: Thank you.
Senator Beyak: Thank you very much for the excellent presentations.
Mr. Innes, you mentioned the three pillars of your 2025 strategy, which is
very impressive. You said that sustainable production was one and differentiated
value was another. I wonder if you could elaborate on that for us and for the
viewers at home.
Mr. Innes: Absolutely.
Briefly, what that means for us as an industry is helping consumers
understand the health characteristics of canola oil and helping people who are
feeding animals understand the protein value of canola meal, specifically in the
dairy sector, for example, where we've seen significantly increased milk
production from feeding canola meal relative to other proteins.
We do a lot of market development work. I mentioned some of the work we're
doing in Shanghai and Beijing in China. We do market development work in the
United States, Mexico and India as well.
As you may know, canola is a relatively new oil, having only been around for
a couple of decades, and it's mostly a Canadian product internationally. We're
about 65 per cent of world trade. So a lot of our efforts are around market
development and communicating how canola is different from other vegetable oils.
We're about 5 per cent of global vegetable oil trade. While canola is big in
Canada, internationally it is very small, so we need to spend a lot of time
helping people understand what canola is and how it's healthy.
Senator Beyak: Thank you very much. That was very helpful.
The Acting Chair: Would the other witnesses care to add anything?
The time slot for this meeting was from 9 to 10, and if the witnesses could
hear a couple more questions on the second round, Senator Merchant and Senator
Enverga have questions. Are you available? Maybe we will hear the two questions
and then you can answer them at the same time.
Senator Merchant: I have a question for Mr. Innes.
When you talk about environmental sustainability, exactly what do you mean by
that? Again, what role do you people play in that respect?
The Acting Chair: Senator Enverga, do you want to put your question
Senator Enverga: With regard to canola, what percentage of your
exports is being used for the biodiesel market, for fuel, and for food and other
purposes? How will the new prices in the oil market affect your industry?
Mr. Innes: I will start with Senator Merchant's question. Ms. Dyer
will have something to add on the sustainability piece.
I'll start with the question regarding what we mean by sustainability. This
is about meeting the requirements for biodiesel markets in the European Union
and the United States that have mandated levels of inclusion for biodiesel, for
which canola is one of the most sustainable feed stocks. It is being able to
demonstrate to regulators in those markets that the environmental footprint of
what we produce is significantly lower than other sources — for example palm oil
— whether we're talking about greenhouse gas emissions, water use, pesticide use
or energy use. It's about demonstrating to regulated markets how our product is
It is also about demonstrating to our supply chain how our product is
sustainable. Maybe Ms. Dyer will want to add a bit more to that.
Ms. Dyer: In terms of the role and what we're doing globally versus
what farmers are doing, we are developing an on-farm field calculator, which
takes various agronomic factors and puts them into a model that will give
farmers indications of how much water they're using, how much fuel they're
using, how much fertilizer they're putting on the field, and that will tell us
what the environmental footprint of that particular farm is. Then farmers can
use that information to vary the amount of inputs they use and figure out how to
reduce their greenhouse gases and water use, et cetera. So it's a very
micro-oriented, on-farm tool that will help them reduce not only their
environmental footprint, but we hope it will help them with their profitability
because it will reduce their costs.
Just one note: In terms of canola biofuel in general, it reduces greenhouse
gases 95 per cent more than conventional fuel and about 95 per cent more than
other fuel stocks that are used, such as palm oil. So the greenhouse gas
reductions from canola oil are highly significant.
Mr. Innes: If I could answer the senator's question about how much
canola oil is used for biodiesel, it depends on the year. We estimate somewhere
between 1 and 2 million tonnes per year of canola seed. The oil from that would
be used for biodiesel. So we produce about 14 million tonnes, and somewhere
between 1 and 2 million, depending on the year, are used for biodiesel.
Senator Enverga: About 10 per cent?
Mr. Innes: A little bit less than that, yes.
The Acting Chair: Senator Dagenais, do you have a quick question?
Senator Dagenais: I do not have a question, Mr. Chair. Since this
committee meeting is at an end, if our guests would allow me, I would like to
tell you that it is a shame that you are leaving us. You would have made an
excellent chair. I would like to thank you for the wonderful years you have
dedicated to us and that we have spent together. I am sure that our guests would
agree with me. You have done excellent work, and I am convinced that your
abilities will serve you in the future. We are still waiting for your blueberry
The Acting Chair: Thank you, Senator Dagenais. To our witnesses, you
do not have to agree with what Senator Dagenais said.
Mr. de Kemp: Mr. Chairman, seeing you here for the last 27 years off
and on and in your other capacity as a member of Parliament, I want to recognize
on behalf of the malting industry — we met with you before this committee and
when you were at the house committee — I really wanted to say that I found you
to be a real gentlemen, very thoughtful and insightful with respect to your
questions. I recognize that you have represented your constituents in New
Brunswick very well, but more importantly, I would like, on behalf of our
council, to commend you for the service you've done for Canada, particularly
with respect to agriculture. We've seen some pretty contentious issues over the
years, as recently as the Canadian Wheat Board, regardless of what side of the
aisle you're on, but the manner in which you've addressed issues, handled things
and conducted yourself, you are a true gentleman and you have done a real
service to Canada.
On behalf of all of us here, thank you very much. We wish you all the best.
The Acting Chair: Thank you, Mr. de Kemp.
I should close this meeting while I'm still ahead. To the witnesses, I want
to thank you for your presentations and all the information you communicated to
us, as well as for the direct answers you provided to our questions.
I must say that I have really enjoyed working on this committee and receiving
people from the industry because I've learned an awful lot. I really felt part
of a greater team for the betterment of agriculture and the country as a whole.
Senators, I thank you for allowing me to chair this meeting, my last. I will
certainly sometimes turn on CPAC and see how things are going here.
(The committee adjourned.)