Proceedings of the Standing Senate Committee on Agriculture and
Issue 10 - Evidence - Afternoon sitting
WINNIPEG, Thursday, April 2, 1998
The Standing Senate Committee on Agriculture and Forestry, to which was referred
Bill C-4, to amend the Canadian Wheat Board Act and to make consequential
amendments to other Acts, met this day at 1:05 p.m. to give consideration to
Senator Leonard J. Gustafson (Chairman) in the Chair.
The Chairman: Our next witness is Mr. Alex McWilliams. Welcome and please
Mr. Alex McWilliams: Honourable senators, ladies and gentlemen, this is the
first time in my memory that senators have come to Western Canada to listen to
the public on anything. I welcome you and thank you for doing so.
The Chairman: Thank you.
Mr. McWilliams: First, I apologize for the typing in my submission. I am more
skilled with a pitchfork than with a typewriter. This is a very serious matter
you are dealing with today. The first few pages of my submission contain photos
of truck convoys and show some of the problems that farmers have been having. I
will start by giving you the context of these convoys.
Senator Hays: I do not mean to interrupt, Mr. Chairman, but I do not have a copy
of the presentation.
Senator Chalifoux: Nor do I.
The Chairman: Continue, Mr. McWilliams.
Mr. McWilliams: I should mention that colleagues who were scheduled to be here
today -- and there were to have been several -- have not arrived. There is a
reason for that, as there has been some contention within the group following
the Farmers for Justice presentation at Saskatoon at which the paper was
approved. I have a copy of it here, and while the press said it had been
approved as presented, I am sure the intent was that any approval was on the
basis of there being amendments injected into it. That has caused some
controversy, and some people who were scheduled to be here have not come.
The contents of this paper illustrate marketing problems that grain producers
have been having for many years -- such as grain not being sold in years when
there was no oversupply of grain in the world; and Canadian grain prices in
some years being far out of line with prevailing world market prices, which in
many cases forced grain producers to use illegal means of finding a market in
the U.S. for their crops in order to be able to service their debt, only to be
challenged by Canadian Customs and the Wheat Board, after which they found
themselves in a worse financial position than before.
The matter before you today is a very serious one as you will be making
decisions affecting the future of agriculture for generations not yet born.
In the picture on the first page, you can see a convoy of 38 trucks hauling
barley to Bottineau, North Dakota, to meet an 85 car unit train. This meeting
was scheduled and a larger train was put in because the Canadians were coming
that day. The price being paid that day for malting barley was $3.30 above the
Canadian price, and for feed barley, it was $2.20 above the Canadian price.
I might mention that one of our people was across the border two or three weeks
ago and brought back a price of malting barley of $3.37 US, which, when you add
the exchange, is in the vicinity of $5 Canadian. Our price today is $2.40. I
suggest you compare those prices.
The next page is rather self-explanatory. The RCMP were very sympathetic to the
farmers. Customs and the Wheat Board seem to have no end of funds with which to
fight the farmers.
On page 3 we see fellows holding their coats over their heads to protect
themselves from the cold wind that particular day. They were struggling to
retain their trucks. Customs had been instructed to take the first two trucks
in tow but the farmers negotiated, held out and said, "No, if you are going
to take any, you are going to take them all."
Page 4 shows the oldest truck in the convoy. It is probably not too well known
but this was another very expensive day for Canadian taxpayers because 13 very
large tow trucks were commandeered from Regina and other places in Saskatchewan
to tow these vehicles. Almost all of the heavy tow trucks in southern
Saskatchewan were in use that day. It was originally thought that there were 13
farmers' grain trucks; however, six trucks had taken a different road so only
seven were seized by the RCMP and taken into tow near Whitewood.
Visibility must have been poor that day, as one of the tow-truck drivers did not
see an oncoming train, and the farmer's truck tractor, which was loaded on a
low-bed trailer, was struck dead-on and totally destroyed. As it happened, the
RCMP had not taken time to check out the registration of the tow truck
involved, which turned out not to be licensed nor insured. As a result, the
taxpayers of our country paid the truck tractor's owner $40,000 for his rig, on
top of which are the costs for replacing the low-bed trailer plus the cost of
repairs to the train.
One thing of interest, at least to me, is that the oldest driver in the convoy
that day was a 74-year-old farmer from southern Saskatchewan. He was a veteran
of the Second World War. He stated, "When we put our life on the line in
Normandy, France and Holland, I certainly never thought I would see in Canada
what I have seen today." Twenty per cent of the farmers in Western Canada
are 70 years of age or older, with the average being somewhere in the fifties.
We had a very bizarre seizure in my home area, which I would like to discuss. I
had expected this man would be present today to describe the event himself.
This type of thing has happened on many farms.
On the morning of April 10, 1996, the Desrochers family were amazed at 5:15 a.m.
when mounties and Customs officials entered their house without knocking and
without a search warrant. A total of ten Customs officials, six mounties and
two tow trucks had arrived with a warrant to seize two grain trucks which were
loaded and ready to join a convoy to North Dakota. Conditions in the farmyard
were muddy as frost was thawing. The large 18-wheeler could not be moved but the
smaller 10-wheeler, loaded with barley, was taken to the Customs compound at
Emerson, Manitoba. Unknown to the Desrochers, the compound was inundated by the
Red River flood of 1996. In August, after they had paid to have their truck
released to bring it home, they learned that the load of barley on it had
disappeared. No one knew where it had gone. It had been tarped over and should
have been safe. They only got a few miles on the way home when the truck motor
seized. Examination by a laboratory showed that water had flooded the engine
and that it was ruined. The Desrochers have placed a judgment against Canada
Customs for the price of the engine that was needlessly destroyed. What a waste
of taxpayers' money.
Canada Customs and the RCMP could only have timed their raids by using telephone
On another occasion later, their son Clayton was charged because he was driving
the truck. He served seven days in jail and was released only after a heavy
fine was paid. Their truck tractor was surrendered to Customs, and they must
pay a fine of $34,400 before their tractor will be returned. I would ask you
take note of the size of the fines and penalties that are involved here.
The Desrochers have farmed for at least 12 years without a Wheat Board permit
and would never want one again. I have not had a Wheat Board permit for the
last four or five years and I do not want one either. The Desrochers have been
growing oilseeds, barley and so on.
Now I should like to discuss our own experience in 1992. We grew 600 acres of
durum which produced around 18,000 bushels. By January we had delivered our
quota of five bushels per acre. We were then advised that there would be no
further quotas for durum in the current crop year. We had heard about grain
moving into the U.S., so we took a sample to the grain elevator at Clyde, North
Dakota, which is approximately 40 miles across the border from where we are. The
sample weighed 59.5 pounds and graded 3 CW. The U.S. grain buyer was satisfied
with the grain, said it would grade number 1 and that he would take all we had.
I might mention that their grading system is different from ours. Our grades 1,
2 and 3 would all go as number 1 in the U.S., but then it is further subdivided
on the basis of protein.
We learned that an export permit was required from the board. In conversation
with the board, we learned we would be required to go through the buy-back
process. The U.S. price for the grain was $5.35 Canadian and the buy-back price
would be $5.45. We would be required to post the money up-front, which for us
meant borrowing the money at the bank and repaying it later from the returns
from the grain. Our banker would not go for it.
Up to that point, we had realized about $2.20 per bushel, or $6,000. No one can
operate a farm on $11 per acre, so we were forced to take out a cash advance.
During the winter of 1993, we made many phone calls to the Wheat Board office
in Winnipeg asking them to change the rules so that we could market our grain
in the U.S. They did not seem at all concerned about the fact that they had a
responsibility to market our grain or give us the right to market it ourselves.
This experience caused us to lose any confidence we had had in the Wheat Board.
We later learned that many other grain producers had similar experiences and
difficulty with the buy-back marketing process.
We calculated that we lost $50,000 that year on that barley by comparing the
$2.20 we received against the $5.35 that we could have got in the U.S. In
addition, we would have had the use of the money at the time rather than having
to wait for a final payment. We also learned that the buy-back process required
a big loss.
I might mention that during the David Bryan court case, which took place here in
February, an employee of the Wheat Board who was on the witness stand verified
that there is a $2-per-bushel disappearance when the buy-back process is used.
Another farmer in my neighbourhood who did grow durum in 1994 and went through
the buy-back process ended up with $3.50 per bushel when the price in the U.S.
was about $5.60, so he lost more than the $2.
What about the option to bypass the Wheat Board if your grain has not been moved
to market near the end of the crop year?
I had lunch with one of our MLAs about two years ago and I complained to him
about that problem and suggested that if there is any Wheat Board grain not
sold by June 1, the farmer should have the option to bypass the Wheat Board and
be able to market this unsold grain wherever he can. He deserves that right and
needs the proceeds from the sale of that grain. His reply was, "You are not
the only one. In fact, every year in April we get dozens of letters and
hundreds of phone calls from farmers with the same problem."
A banker told me it is a major problem. The banks' policy is that a farmer clean
up last year's loans before setting up next year's line of credit, so farmers
are forced, if they want to continue, to bypass the banking rules so they have
the means to plant in the next crop year.
The main problem is that in many years, the majority of the crop goes to market
at the end of the crop year, June or July, instead of during the fall months.
We wonder what is the reason for this. I think the Senate should investigate as
to why there is this delay of many months.
I should now like to mention the experience of a neighbour. Mr. McCannell, the
senior partner in the family operation, told me of their experience starting in
1991. They grew a fairly good crop of durum and were only able to market a
limited amount. I think it was maybe seven bushels an acre. They had a
carryover to the following year and again were only able to fill a small amount
of their quota. By the summer of 1993, they could see that all of their bins
would be needed for the new crop. This carryover durum must go somewhere. They,
too, had considered marketing in the U.S. but were stonewalled by the
complexity of the Wheat Board buy-back and so decided to dump it as feed grain.
They ended up accepting the best offer they could find in Canada. Even though
their durum weighed 64 pounds, which is heavy, and graded as 2 CW, the only
market they could find was as a number 5, which is feed grain. A producer car
was ordered and filled, with a destination somewhere in Quebec. They realized a
net price of $2 per bushel. The U.S. price that summer was around $5.60
Canadian. I did some calculations, and I believe they would have realized
somewhere about $8,000 had they been able to market the grain in the U.S. at
In this debate about shipping grain to the U.S., some people argue that the U.S.
border could be closed to Canadian grain at any time. We have seen it happen in
the past. This is true. Back about 30 years ago, the U.S. border was closed to
Canadian grain for a time. Under the Free Trade Agreement, grain should be free
to move in either direction, with the cost of shipping being the determining
factor. Even if the U.S. changed the free-trade rules, we would still have the
rest of the world as a potential market. This global market should always be
foremost in the minds of planners, to secure our children's future.
My next topic is the marketing of malting barley. We have never had a proper
marketing system, with proper access to the world market, for farmers' barley.
The existing system, as near as I can remember, came into regular use around
the time of the Second World War, and it has always appeared to favour the
malting companies, giving them ready access to the first pick of the barley.
While that system certainly gave these companies the opportunity to produce the
world's top-quality malt, it did nothing for the farmer who produced very good
malting barley but whose barley was not accepted. I might mention that the
barley going across the U.S. border in the convoys which have been mentioned
was nearly always malting barley that had been turned down, was not accepted, in
The experience of recent years of trucking barley to U.S. has certainly
illustrated to us what we have been missing and has shown us that the world is
anxious to buy our barley. Much of the barley that we have been trucking to the
U.S. gets resold to off-continent markets. The U.S. companies which paid large
sums for our grain turned around and re-sold it at comfortable profits. Where
was our Canadian Wheat Board all this time, and why were we not capturing these
markets? That is a question your committee might ask.
My next topic is feed barley. We are all well aware that Ottawa has manipulated
the pricing policy for feed barley to benefit to poultry and livestock
industries in other parts of Canada. Until recently this was not an issue that
worried Western farmers, since most of our feed barley was used here on the
Prairies and went south in the form of beef or hogs. However, in the last few
years, we have watched with concern as the Wheat Board price for feed barley
has been getting lower in relation to the price of other grains.
Mr. Lorne Hehn of the Wheat Board stated in a small town meeting in Alberta
during the barley vote debate that before large export shipments of barley were
considered, we must be able to meet domestic demand. It is one thing to
subsidize our consumers at home, as we have done in the past, but with the
great expansion being planned for the hog industry in the prairie provinces, an
industry based on the price of feed barley, we fear that we will be subsidizing
consumers in all the countries to which our hogs are shipped. Do we want to
hang the economics of the hog industry on the necks of western barley growers?
I just do not think so.
If feed barley is open to market on the world stage, the price will soon find
its own level, and both hog producers and barley growers will benefit. When
barley prices increase, production will increase accordingly and the world
price of pork will find its own level.
The views I have expressed are my own but I believe they are in keeping with the
views of the membership of Farmers for Justice.
The next issue I should like to address is that of value-added industries.
Manitoba has had the recent fortune of obtaining a value-added industry with
the building of the Can-Oat processing plant at Portage La Prairie. This plant,
I believe, removes the hulls from oats and makes a more marketable product.
Removal of the hulls reduces weight, saving freight charges, and for the milling
company purchasing these oats, an expensive part of the processing has already
been done. This new industry has created new jobs in trucking and so on, and
the new cash crop has provided increased income for farmers.
The main point I would like you to consider is that this new plant could never
have happened under the Wheat Board monopoly. Companies just will not put up
with interference from government agencies. New companies must have the right
to choose the quality of grain they want and to choose the timing of the use of
different quality grains best suited to their marketing strategy.
We are fortunate that the marketing of oats was removed from the Wheat Board
when it was. Manitoba needs a new industry for the processing of durum into
pasta and macaroni products. North Dakota has 14 pasta plants; we have none. We
grow durum quite well in much of southern Saskatchewan and Manitoba. We hear
that one or more companies would consider locating in Manitoba if they had the
right to bypass the Wheat Board and select grains according to their market
strategy. It is our understanding that we will never have world-class pasta
plants in our province as long as the Wheat Board has its present monopoly.
Your committee has now heard our submission and learned about our experiences.
Over the past few days, you have heard presentations from other regions of
Western Canada. We sincerely hope that you will take back to Ottawa the firm
conviction that the future of western grain production requires more freedom
from the Wheat Board monopoly than is offered in Bill C-4.
We further request that you return this bill to the House of Commons with
instructions to return to the drawing board and to deliver a new bill that
includes the rights of all grain producers, so that those wanting to market
through the Wheat Board and those wanting to market or export elsewhere will
have the legal right to choose the market of their choice.
The new board must no longer be secretive. It must be answerable to Parliament
and to directors elected from the agriculture industry who must be fully
informed as to all grain sales, operating costs, purchasing, and sales
strategy. The new Wheat Board's only objective should be to realize the best
price for grain producers, including by selling through the U.S. grain exchanges
if better prices can be obtained in this way.
Senator Spivak: You mentioned the hog industry as an industry that is based on
the economics of the price of feed barley. We have heard that before. I am
wondering what you think the future of that will be? We will be increasing our
hog production here by perhaps a factor of 10.
Mr. McWilliams: Yes.
Senator Spivak: In Alberta, it has been increased by a factor of three or four.
What do you think we could do about that situation? Can you suggest any changes
to the legislation before us that would help that situation?
Mr. McWilliams: Going all the way back to World War II, when I was a student,
Canada has had feed grain assistance going to Eastern Canada, which has really
been a subsidy to livestock producers there. It is a result of pricing of feed
grain purposely low, well below the world market. That has become very evident
to us in the last five years since people have had computers and have been able
to tune in on the markets around the world, particularly the U.S. market. I was
talking with a man the other day who was having his lunch and watching the
prices on the Chicago Stock Exchange at the same time. If we are going to have
a sustainable livestock industry, it will have to be based on the world price
of feed grain. I argue that our present method of supporting that industry on
the backs of our barley producers is not the way it should be done, and I
suppose you heard the same argument in Alberta.
Senator Spivak: A variation of it. I would like you to comment on the Wheat
Board role in the feed barley issue. It appears that farmers' net incomes from
1971 to 1997 have not gone up, whereas their gross receipts are way up, in the
range of $3 billion. Obviously, something is wrong. In regard to this
particular problem, could you comment on the role of the Wheat Board, which some
witnesses have told us is in keeping the price of feed barley low?
Mr. McWilliams: I am aware there is a policy established by the federal
government -- although I stand to be corrected -- to retain 2 million tonnes of
feed grain in reserve.
Senator Stratton: Yes.
Mr. McWilliams: That policy has the effect of depressing the price in total.
There is a ready market out there. We know this. We see it. If our livestock
industry is to be viable for the long haul, we need a price structure that
includes a profit for the feedlots and the hog barns, but we also need a profit
for the poor fellows who are growing the barley. As to how to go about that, I
do not think I can add anything to what I have already said.
Senator St. Germain: I am quite intrigued by the name of your organization,
Farmers for Justice, and I do not say this facetiously or sarcastically. I
support much of what you have said here today, but could you explain to me what
you would see as real justice?
Mr. McWilliams: Ending the Wheat Board monopoly has been the only justice
objective that we have. We want the freedom to bypass the Wheat Board monopoly
and market our grain at the best price we can find.
Senator St. Germain: I would think that at one time the Wheat Board had a role
to play, and it maybe still has. What role that should be is a matter of
opinion. That is what we are trying to determine by listening to all of you. I
just wanted to know what your version of justice was.
Mr. McWilliams: I am well aware that there is a sizable number of people,
particularly the farmers in the northern portions of our provinces where the
farmers' union is strong, that have a legitimate argument on the other side.
They are faced with losing their railways. The elevators on many of those rail
lines are Pool Elevators that came into being during World War II or
thereabouts, because that region was bush country originally and was developed
later and is different from the plains area. They are taking their position of
supporting the Wheat Board, thinking that by so doing they stand a better
chance of preserving their railways and their country elevators. That is one
thing that I am sure of.
Senator St. Germain: So in other words what you are basically saying to the
committee here, sir, is that a farmer's position often depends on where his
farm is located. A farmer at Emerson or Altona would face a totally different
situation from that faced by a farmer in Meadow Lake, Saskatchewan.
Mr. McWilliams: That is right. Meadow Lake is very remote. Their cause is very
Senator St. Germain: How do you think we should deal with this, then? The
anomaly is there. As you point out, perhaps the Canadian Wheat Board has a role
to play in Teulon or Arborg or other places up north here.
Mr. McWilliams: Yes. The Wheat Board has a role to play here, in a dual
marketing capacity, providing a market for those people who want to use it.
Senator St. Germain: There are proponents of the Canadian Wheat Board who say
that a dual system will destroy it. What do you say to that?
Mr. McWilliams: I question that very strongly. I have done very little since the
new year except research this issue and attend court sessions of farmers versus
the Wheat Board, and I have not read anything that has convinced me that dual
marketing cannot work. It will have to be scaled down. Certainly our hog
marketing boards here in Manitoba have had to make big changes but they are
still handling 75 to 80 per cent of the hogs. I believe that co-operatives and
other organizations around the country similar to the Wheat Board are still
functioning quite well.
Senator St. Germain: When I hear of the drastic changes in freight rates that
have occurred as a result of the demise of the WGTA and the Crow rates, I can
understand why some would want to keep the Canadian Wheat Board. They feel that
it provides the possibility of government involvement and assistance which they
may require for survival. That is the dilemma that we face.
Senator Spivak: You mentioned the problem with transportation, particularly the
rail lines that are being abandoned. Have you made any submission to the Estey
commission review of transportation? We had some requests to delay dealing with
this bill until the Estey commission had made its report. Concerns about
transportation are certainly well-evidenced and well-known in this province. I
think even the minister said earlier that transportation costs have just gone
Mr. McWilliams: Yes.
Senator Spivak: Have you made any representation to the commission?
Mr. McWilliams: No. I have to admit I do not have much knowledge about that.
Certainly, the economics of rail lines will be easily evident. The ones that
can pay their way will survive, and the ones that cannot, I am afraid, will be
Senator Stratton: You are representing Farmers for Justice, correct?
Mr. McWilliams: Yes.
Senator Stratton: I think the transportation issue is as significant to the
survival of the Manitoba farmer as is Bill C-4. With that in mind, would your
organization not want to put a submission into the Estey commission? I would
think you would, although I am not trying to put words in your mouth.
Mr. McWilliams: It is not something I had considered, but if someone wants to
give me the address and some information, I will take it to our organization
and see where we go from there.
Senator Stratton: We will see that that is done.
Senator Whelan: I hope you are not advocating breaking the laws of the land. We
have laws against growing and using marijuana; some people think those laws are
bad. You talked about this veteran saying he never knew he fought for that kind
of thing. I just gently remind you that the laws are passed by Parliament, the
most democratic institution in our land, and if people break any of those laws,
they are generally prosecuted.
Mr. McWilliams: Even a Second World War veteran?
Senator Whelan: That makes no difference. I had two brothers who were veterans
and they obeyed the laws. The law of the land is something that you just do not
break. You abide by it until the law is changed. That is why we are here. We
are reviewing the law now. We do not yet know what we are going to recommend to
Mr. McWilliams: Someone asked a while back about my interpretation of justice,
and I think our group might echo the thought that just laws are needed, too,
and I am not so sure that the Wheat Board has been too good.
Senator St. Germain: Hear, hear.
Senator Stratton: I agree.
Senator Spivak: We might not agree on which laws are just.
The Chairman: Our next witnesses are from the Winnipeg Commodity Exchange. Would
you begin with your presentation and then we will go to questions from the
Mr. Bennett J. Corn, President and Chief Executive Officer, Winnipeg Commodity
Exchange: I should like to thank you for the opportunity to express the
Winnipeg Commodity Exchange's concerns regarding Bill C-4. I should like to
focus your attention specifically on clause 26, known as the inclusion clause.
The proposed inclusion clause would have an adverse impact on the exchange's
marketplace and its participants by introducing uncertainty. If accepted, the
inclusion clause will create the mechanics for providing the Canadian Wheat
Board with single-selling-desk authority for grains currently not under its
mandate. This clause would therefore allow one segment of the industry to impose
a fundamental change in the marketing structure for non-Canadian Wheat Board
crops without the input of the rest of the industry or consideration of what is
best for Canada as a whole.
The proposed inclusion clause is a move in the opposite direction from the
global, national and provincial trend toward a more open market structure. The
exchange's marketplace for futures and options is essential for an industry
competing in this global marketplace. Producers, processors and others around
the world rely on the exchange's marketplace. The exchange's marketplace depends
on stability and certainty in the marketing structure underlying its
derivatives to ensure their relevance in the marketplace both within and
outside of Canada. The continued ability of the exchange's marketplace to
discover prices and transfer price risk is a critical component of a
competitive agriculture industry. Therefore, the inclusion clause would
undermine the relevance of the exchange's marketplace and adversely affect a
broad range of market participants, ranging from value-added processors to
I should now like to discuss the role of the futures market. Futures markets are
essential to a competitive marketing system for agricultural products. These
markets allow the risks inherent in agriculture to be borne as efficiently as
possible, without the need for government participation and intervention. They
also improve the competitiveness of markets by providing timely, reliable and
visible prices that level the playing field between buyers and sellers.
Producers are major beneficiaries of futures markets because they have access
to accurate price information that reflects the market value for their
The WCE is Canada's only commodity exchange providing price discovery and
risk-management tools for the agricultural industry. The exchange offers
trading in both futures and options contracts, using the open outcry system.
Its mission is to provide a public marketplace for responsive price discovery
and risk transfer of commodities with efficiency and integrity.
The exchange is a not-for-profit membership corporation regulated by the
Canadian Grain Commission. Its members represent all sectors of the industry
and include major international grain trading companies, elevator companies,
domestic merchants, exporters, processors, international brokerage firms from
around the world, financial institutions, producers, and independent traders.
Futures contracts traded at the exchange include those for canola, flaxseed,
domestic feed wheat, western domestic feed barley, oats, and feed peas. Options
on canola, flaxseed, feed wheat, and feed barley are also offered.
The exchange is the world's leading marketplace for futures and options on
canola and the only marketplace for flaxseed and feed peas. The exchange is an
international marketplace attracting buyers and sellers of Canadian grains and
oilseeds from around the world. Buyers from countries such as Japan, Mexico,
the U.S., Germany, Poland, Australia and many others use the market.
Beyond the direct economic activity occurring at WCE, trade in its products
supports a brokerage industry, specialized trading and support staff, and
foreign investment. This represents a large investment in trading the WCE's
contracts and supporting the trade in those products. Therefore, any
limitations to the exchange's products would have a direct impact on the
economic activity it creates.
The proposed inclusion clause represents a fundamental change to the exchange's
underlying markets. If used to grant authority over canola to the Canadian
Wheat Board, it would allow for the price discovery process supporting the
canola contract to change from an open market system to a closed, regulated
system and eliminate the relevance of the contract as an international pricing
and risk-management tool. The futures price for canola reflects the world value
of this commodity.
This change in the underlying market, or even the introduction of the potential
for the change, will significantly reduce the efficiencies and competitiveness
that have been developed in the marketplace for non-Canadian Wheat Board grains
and oilseeds. This runs counter to domestic and global trends toward open
markets. Governments around the world are being encouraged to move towards an
open market structure.
Domestically, the federal government has been moving toward deregulation in the
agricultural industry. In support of this trend, the government has contributed
significantly toward the development and training associated with the
implementation of an options market at the exchange. This training program
focused on how to use the exchange's markets to manage price risk, enabling the
farmer to become more self-reliant.
The move to open markets is further supported by the move towards more
liberalized trade seen in the Canada-U.S. Free Trade Agreement, the North
American Free Trade Agreement, and ongoing negotiations aimed at including
additional countries. Even broader in scope, the General Agreement on Tariffs
and Trade was focused on opening world markets, and the next round of the World
Trade Organization talks is likely to pay a significant amount of attention to
dealing with state trading. These agreements clearly define the trend to
deregulating of markets. In a less regulated environment, market participants
must manage their risks more efficiently if they are to remain competitive.
Futures markets provide the ability to manage risks.
This bill would eliminate a marketing system that allows for a selection of
prices. The exchange's current products allow for a large selection of
cost-effective pricing alternatives that would not exist without a viable
futures market. The exchange's futures market allows producers to hedge and
price their production at any time. This enables the producer to respond to
price signals and to allocate resources efficiently, particularly when deciding
which crops to produce.
Similarly, a well-functioning futures market allows the customer to send price
signals to the marketplace and to direct the production of what is needed. Only
a futures market allows all interested parties to participate equally in
This bill would increase the risk to all segments of the Canadian grain
industry. This proposed inclusion clause would introduce great uncertainty and
discourage future capital investment in product development, processing and
handling of non-Canadian Wheat Board grains. For example, the canola processing
industry has made a significant investment based on the current open market
structure, which could be changed under the proposed inclusion clause without
any input from that industry.
This bill could affect an entire industry without adequate representation. The
proposed amendment would introduce a mechanism for the producer to impose a
fundamental change in the exchange's market and affect all its participants
without the appropriate input from everyone involved. The strength of Canada's
agricultural industry includes a growing value-added sector. This value-added
sector relies on accurate price signals, a dependable market upon which to hedge
its price risk, and a predictable market structure for the future. Furthermore,
the exchange's marketplace extends well beyond the borders of Canada to offer a
universally accepted marketplace to determine prices and to hedge price risks
on similar products produced around the world. It is this characteristic of the
market that results in relevant price information being available to domestic
participants. The inclusion clause will enable one segment of the industry to
impose a change that could adversely affect the entire industry and its related
In conclusion, the adverse impacts of the proposed inclusion clause include: a
fundamental change in the market upon which the exchange's current and
potential products would be based in the future, thereby creating uncertainty
for participants in the exchange's products; a contradiction to the domestic
and global trend towards more open markets, including significant federal
government investment in supporting a more open, self-reliant Canadian
agricultural industry; increased uncertainty regarding the future market
structure of Canadian agriculture, thereby representing a significant
disincentive regarding investment and product development for Canadian
grains-based and oilseeds-based industry; and the introduction of an
opportunity for one segment of the market to make a fundamental change to the
market structure without adequate representation from all interested parties
and without adequate consideration of the best interests of Canada as a whole.
The inclusion clause would damage the well-being of our free and open markets.
Furthermore, the Winnipeg Commodity Exchange believes it would be detrimental
to the Canadian agricultural industry and the economy, and strongly recommends
that this inclusion clause in Bill C-4 be removed.
Mr. Chairman, I thank you and respectfully submit this on behalf of the Winnipeg
Commodity Exchange and its many members.
Senator St. Germain: You have focused on this inclusion clause. You most likely
targeted this because it is so critical, but is there anything else in the bill
that concerns you?
Mr. Corn: I do not believe the exchange has a submission on the other parts of
the bill. I think it is better left to other segments of the industry to deal
with the various issues we have been following over the last several months,
regarding structure of the board and things of that nature. I am sure you have
heard from the other segments of the industry. We have concentrated on the one
area that will have a major impact to the users of our market, both
domestically and worldwide. We feel comfortable in presenting that to the
committee but really do not have views, either personal or institutional, on
the other aspects of the bill.
Senator St. Germain: So if the inclusion clause were removed completely, you
would be satisfied?
Mr. Corn: That is correct, sir.
Senator Stratton: Limiting yourself to the inclusion and exclusion clause is, I
think, appropriate, and I thank you for restricting yourself. Your submission
is well done and quite clear.
Senator Whelan: I think my views on grain exchanges are well-known. I have often
said that in Winnipeg the biggest casino is not the one down at the hotel, it
is the one we call the Winnipeg Grain Exchange.
How long have you been head of the grain exchange? Has it been five years, 10
Mr. Corn: No, no. I have been the president and CEO for one year. I have been in
the futures industry for a little over 30 years. Prior to my present position,
I was president and CEO of the coffee, sugar and cocoa exchange in New York.
Senator Whelan: Your 30 years of experience was not in Canada, then?
Mr. Corn: No.
Senator Whelan: Are you a Canadian?
Mr. Corn: No, I am not.
Senator Whelan: You are not. How many directors do you have in the grain
Mr. Corn: Right now there are approximately 20 people on the board.
Senator Whelan: Do they hire and fire you?
Mr. Corn: Do they hire and fire me?
Senator Whelan: Yes.
Mr. Corn: They have the ability to do that, yes.
Senator Whelan: There is a lot of talk about the chief executive officer under
this proposed legislation, whether that person should be appointed by the
government or by the directors.
Mr. Corn: The directors are elected by the membership and they are
representative of every segment of the membership. As well, there is a public
sector on the board right now, of which there are three farmers.
Senator Whelan: Going to the inclusion clause, I have the feeling that having it
in there will keep them on their toes, keep them aware, ensure that nobody
would ever want to invoke the inclusion clause if the trade was being fair to,
say, the canola producers or the flax producers or whomever.
Mr. Corn: I do not know exactly what you mean.
Senator Whelan: If that clause it was there, it would be a tool, a guarantee,
that things would be operated fairly. After all, it was unfair marketing that
brought the Wheat Board into existence in the first place.
Mr. Corn: I guess you are referring to whether the exchange was operating fairly
or not. In that respect, it is a very competitive environment. No exchange has
a monopoly on the products it trades. If it does not provide fair and open
markets, those markets will cease to exist or they will go elsewhere.
Just as point of information with canola, there was a rapeseed contract in the
MATIF traded in Paris, and there is to be an electronic contract started in
Frankfurt, Germany, probably in the next year, which will trade agricultural
products, including wheat, hogs and canola. This market can shift anywhere in
the world. If you put this under the Wheat Board and the industry feels that
they cannot compete properly, then you will see a shift of activity. We are
getting investment activity coming into this country from around the world.
That activity could go anywhere else and trade on any other market that is
either already established or could be established. So it is self-regulating in
the sense that it is a very competitive industry for all these products and
will continue to be. It is becoming more competitive.
Senator Whelan: You say the Winnipeg Commodity Exchange's marketplace extends
well beyond the borders of Canada to offer a universally accepted marketplace
to determine prices and to hedge price risk on similar products produced around
Mr. Corn: Right.
Senator Whelan: Do you have a percentage figure on that, comparing it to what is
done around the world?
Mr. Corn: I do not know if we can put an exact number on it but it has been
growing, in Australia, the U.S., and over in Europe, particularly in Germany.
There is a lot of arbitrage activity that goes on between the markets here and
in the United States. There is some arbitrage that is now developing between
the canola contract here and the rapeseed contract that trades in Paris.
In fact, at a futures industry convention a few weeks ago, a gentleman I have
known for over 20 years, who started the DTB for the bank which is starting
this Frankfurt exchange, expressed interest in doing something with our
exchange with respect to arbitrage trading. The industry is growing. I would
say most of the trading activity is done by companies that are here in Canada or
close by, but there is significant growth around the world.
Dr. Love, who does our marketing and education every year, meets with these
people and is finding that they have an increasing interest in and more need to
use our marketplace.
Clearly, the oilseeds industry in Canada has been a big success. It is a
relatively small market when you compare it to other futures markets, but it is
a developing market that has yet to reach its full potential.
Markets are often based on emotion, and when people see something like the
proposals under this bill when they have to make long-term investment
decisions, they start to worry about the potential set of rules under which
they will be operating. One can draw an analogy with the developments in the
milling industry for durum wheat which are beginning now in the Dakotas. That is
an industry that could very easily be right here in Canada if there was a free
and open market.
Senator Whelan: We spent millions of dollars on researching and developing
canola, and our scientists said it was one of the purest food oils that you
could use for your health, and so on. I remember distinctly the United States
of America held up approval for five years on health reasons until a big
laboratory in Chicago finally gave it a clean bill of health. They held it up
until after the 1984 election. I have a strong suspicion that they were
interfering in our domestic political situation. We spent millions developing
canola, and we hired an American to come up and breed the lentils that would
grow it, and we are now the lentil capitol of the world. We spent government
money doing that kind of thing and we did it without the big companies being
involved. They were not really interested in it at that time.
We did a lot by working with the producers and with the provinces to develop
those crops that allowed diversification of agriculture, hoping that some of
these plants for further processing would be in Canada.
Senator St. Germain: Trading in these commodities knows no boundaries, does it?
Mr. Corn: For the most part, there are no boundaries. When I started in this
industry, there were 10 million contracts in total trading in the U.S. They now
trade over a billion. The rest of the world was trading maybe 10 per cent of
what the U.S. was trading in futures. Now the other markets in the world
probably trade 60 per cent of the total futures and options in the world. There
are 85 futures and option markets around the world now. A lot are financial and
many are agricultural. The big international ones tend to be in the larger
industrialized countries, because that is where there is the critical mass.
There are some regional markets, but most of them are international. There is a
lot of competition, they are self-regulated, and they are very heavily
regulated. The markets have to continue to provide facilities and services that
are competitive with what the market users are used to having in other markets.
That is what we are doing right now at Winnipeg. We are making significant
changes to our market structure and dealing a lot with other exchanges, making
sure we are providing the best that we can possibly provide. We want to see
these markets grow and prosper, because we think they are of significant
economic benefit to the Canadian economy. The value-added industry adds a lot
to that. As you keep getting more economic infrastructure here in Canada, it is
a big plus for the Canadian economy. That is why we are here and why we are
concerned. However, you are right, there are no boundaries anymore. This is a
Senator St. Germain: Some of our colleagues have contributed greatly to the
development of these things, but they are having a bit of a tough time
accepting the Free Trade Agreement and NAFTA, and I can well understand that.
Senator Whelan: You should too, as a chicken farmer.
Senator St. Germain: Regardless of where you are from, I appreciate your
submission and your presence here.
The Chairman: There has been a lot of concern about the inclusion and exclusion
clause simply because of the cash crops, which are called cash crops because
they have allowed many of our Western farmers to make a dollar and keep their
farms. On my own farm, we have grown canola and that has been the only cash
crop we have had. What do you see as the future for canola? We will have the
canola growers appearing before us shortly, but I should like an answer from you
because you have an insight into the international market situation. Canada has
had a special place in the canola market. Because of our cold climate, some
newer varieties are being developed and planted in North Dakota. Many of my
neighbours in North Dakota are starting to grow canola. What do you see for the
future and how far can this develop? We have nervous farmers out there.
Mr. Corn: In general, many of the markets we currently trade here have
significant potential for further growth. There is a lot of infrastructure work
we are doing on the exchange right now, things that are not really germane to
the bill before you. If I may give you a brief overview, we have made
significant changes in our whole governance structure. We are a not-for-profit
membership organization but we feel we can still operate more efficiently, make
better decisions, and have a more representative board. That will occur with
the next election in November, but a lot of those rules are now going into
We are in a process of changing our whole clearing structure, so there will be
centralized clearing for all options and derivatives in Canada for the first
time. That will be a big plus for the whole industry. Whether it is trading
financial products or agricultural products, we will have a very strong,
well-recognized, international clearing organization which will clear them all,
which will achieve some cost efficiencies by cross-marketing, and which will be
able to reach out to other people to bring commerce -- money -- into the
With respect to canola, we have been reviewing all of our contracts. You have to
keep reviewing constantly and making changes to your markets as things change
in the cash side.
We are liberalizing our markets and expanding them. As transportation and other
things change, we are considering broadening delivery points to keep in step
with the changes in the cash markets. I think there is a bright future for
these products. After getting our infrastructure in place for our core
products, we are then to see if we can branch out in some other products.
There are other raw materials or energy products that are being considered in
other parts of the world. Energy will probably be the biggest single traded
commodity in the world, if it is not already, yet no one here in Canada is
trading in energy product. We would very much like to study that.
We are putting a lot of effort into reviewing new technology, because people
want markets to operate beyond normal trading hours so they can reach out into
other time zones. We are not the biggest exchange so we are trying to be
prudent when we spend our dollars in those areas.
Senator Spivak: I note that your argument about the inclusion clause is based on
the premise that the mere existence of that clause in the legislation is enough
to threaten investment. We know we need investment. We know about value-added.
However, the net income of the primary producer has not increased since 1971.
It is basically at the same level. In your opinion, what impact will all this
activity and investment and value-added have on the income of the primary
Mr. Corn: The fact that we trade products that are not under the Wheat Board
allows farmers certain opportunities for marketing his product directly, and
that translates into cash in his pocket. I do not want to get into the bigger
issue of free markets, but I think the more competition and the more choices
the farming community has up here in Canada, the better it will be for them. It
will be very competitive. I think the more things you can do to breed
competition as opposed to monopolies will be a big plus for the farmers in the
long term, but like in anything, every culture is different.
Agriculture worldwide has been long been supported to a great extent by
governments, but that is changing at different rates in different countries.
Each country now is doing a self-inspection as to what it can continue to
protect and what needs to be changed. We are getting into a very global
competitive marketplace where people can go and get product anywhere they need
it around the world. I think you want to make your industry as competitive as
it can be. I have no crystal ball, but I think one day people are going to wake
up and see major changes that will have occurred through market forces.
Senator Spivak: I cannot disagree with what you are saying. The puzzlement I
have is that even though those input prices keep going up, the commodity prices
keep going down.
Mr. Corn:It is not the case with our markets. I do not want to get involved with
the other markets.
Senator Whelan: You do not want to take on OPEC and how they set their prices?
Mr. Corn: Not yet. I have only been here a year.
The Chairman: Our next witnesses are from the Canadian Canola Growers
Association. Welcome, and please proceed.
Mr. Bruce Dalgarno, Past President, Canadian Canola Growers Association: I would
like to take this opportunity to first clear up a little misconception. We
actually have two organizations here, the Manitoba Canola Growers Association
and the Canadian Canola Growers Association. They are two separate
organizations, but the Manitoba group does belong to the Canadian association.
On behalf of the Manitoba Canola Growers we have Mr. Jonothon Roskos, their
president. With me is Mr. Ernie Sirski, who is a director of the Canadian
To start, Mr. Jonothon Roskos will make the submission on behalf of the Manitoba
Canola Growers Association.
Mr. Jonothon Roskos, President, Manitoba Canola Growers Association: The
Manitoba Canola Growers Association appreciates this opportunity to present our
views on Bill C-4 to your committee.
The Manitoba Canola Growers Association represents some 10,000 canola growers
throughout the province. Our purpose is to represent the interests of the
canola growers of Manitoba in the areas of research, market development and
extension, and to liaise with other organizations and government.
Canola has become the main cash crop for growers in Manitoba, with acreage
increasing over two-fold in the past decade, from just under 1 million acres in
1987 to over 2.3 million in 1997. Our canola production is destined for both
export and domestic processing, with a division of approximately half between
the two. The open market system has contributed greatly to the success of the
Canola is currently marketed in the open market where anyone can buy, sell, or
process canola. This allows producers to sell any amount of their production at
any time to a range a buyers. With this flexibility, the producers can meet
their pricing needs, satisfy cash-flow requirements and use competition between
buyers to maximize their returns. The current situation allows farmers to
pre-sell for new crop, speculate on the cash market, or hedge using the futures
market. This provides the producer with the option of profit-taking when they
feel the market is in their favour. It also gives producers the ability to
better manage their operations since they can budget on expected financial
return and not on initial payment.
Manitoba canola growers are very concerned about provisions of Bill C-4 which
have the potential to bring canola marketing under the jurisdiction of the
Canadian Wheat Board.
Specifically, our concerns are with the inclusion clause. The clause will allow
for any other grain to be included under the board's jurisdiction, because
under the Canadian Wheat Board Act, grain will be defined as including wheat,
oats, barley, rye, flaxseed, canola, and rapeseed.
Under the proposed legislation, before any grain can be included under the Wheat
Board's jurisdiction, the following conditions must be met.
First, a written request must be sent to the minister by a producer association
which represents the producers of the grain throughout the designated area.
Second, the extension must be recommended by the board.
Third, a vote in favour of the extension by producers of the grain must have
been held in a manner determined by the minister after consultation with the
These conditions do not clearly define the term "producer association"
nor do they spell out who exactly represents the producer. More than one group
may claim to be representing the producers of a given grain in the designated
area. This could lead to lengthy disputes, as producer associations have
Under the proposed legislation, Canadian Wheat Board directors would make the
recommendation to extend the board's jurisdiction into canola. These directors
will be elected by wheat and barley producers, and it would not be appropriate
for them to be making recommendations for canola growers. These directors would
be neither elected by canola growers, nor represent them, so it would not be
proper for them to make representations on their behalf.
State trading enterprises are considered to be a trade irritant in the WTO
negotiations. The possibility of bringing canola under the board's jurisdiction
would only further compromise Canada's situation and hamper future trade
negotiations. We are currently experiencing liberalized trade with oilseeds. We
do not want to see that situation threatened.
The canola industry has expanded and flourished in the past decade in an open
market. It has grown rapidly. Our domestic processing has doubled over the past
ten years. The presence of the inclusion clause will cause uncertainty among
investors, and investment will dwindle with the lack of free enterprise. We do
not want to see our future growth limited, nor the economic activity that is
associated with it.
The Manitoba Canola Growers Association strongly recommends the deletion from
Bill C-4 of the inclusion clause as it relates to canola and rapeseed, so that
there will be no risk of canola being included under the Canadian Wheat Board's
We thank the committee for the opportunity to express our views today.
Mr. Ernie Sirski, Director, Canadian Canola Growers Association: Mr. Chairman,
distinguished members of the committee, the Canadian Canola Growers Association
is a national organization representing five provincial canola producer
organizations. In the interests of time, I will just summarize our
presentation. That will leave a few more minutes for questioning.
Canadian canola growers are concerned about the provisions of Bill C-4 regarding
the possibility of canola being marketed under the Canadian Wheat Board. We
agree with the prestigious individuals in the Western Grain Marketing Panel who
recommended that there be "no fundamental change" in the marketing
system for other grains, oilseeds and special crops.
Why is an open market system better?
First, it is open to all participants: producers, processors, and exporters.
Second, it provides competition, thus maximizing returns to producers.
Third, contract arrangements allow for flexible pricing and risk management.
Fourth, cash flow is predictable, and thus marketing can be done based on the
needs of the producer rather than on quotas as with the Canadian Wheat Board
Fifth, the majority of our customers support an open market system.
Mr. Dalgarno: Some of the concerns that the Canadian Canola Growers Association
has with the inclusion provisions of Bill C-4 are itemized in our brief. We
have a problem understanding what is meant by the term "producer
association." That needs to be clarified. We are also concerned with the
fact that the Canadian Wheat Board directors will make recommendations regarding
the possible inclusion of canola in the Canadian Wheat Board.
The Canadian Canola Growers Association is made up of members from five
provinces. Would the designated area of the Canadian Wheat Board be expanded
beyond the present borders to include the canola growers in Ontario, Quebec,
and New Brunswick?
CCGA is also concerned about the implication of the inclusion clause to our
trading partners. The value of exports of canola seed, oil and meal to the
United States in 1996 was $716 million, whereas the value of wheat exports to
the U.S. in 1996, including durum, flour and pasta, was only $446 million. I
question whether we should be jeopardizing this market by giving the Wheat Board
jurisdiction over canola.
Also, the investment in the canola processing industry could also be affected by
this change in marketing. Ten years ago, we crushed approximately 1.5 million
metric tonnes in Canada. This year we will crush very close to 3.3 million
Since the Canadian Canola Growers Association is a canola growers association,
we try to deal only with canola issues. Therefore our recommendations are that
the Senate committee recommend that the definition of "grain" in the
Canadian Wheat Board Act be amended to specifically exclude canola and
rapeseed, and/or that the inclusion clause as it pertains to canola be deleted
from Bill C-4.
The effect of this recommendation is to ensure that the inclusion clauses, if
they remain, do not affect canola and rapeseed. Eliminating canola and rapeseed
from the definition would mean that these crops are not in any way associated
with the Canadian Wheat Board, and this may be beneficial in future trade
negotiations. Regardless of the pressure that may be brought to bear against the
Canadian Wheat Board in the next round of WTO talks, we could then be safe and
secure in the knowledge that canola and rapeseed would not be affected.
I thank the committee for this opportunity to present our views.
Senator St. Germain: I have some questions relating to value-added. Are we
building facilities to add value to the product in Canada in proportion to the
increase in production that is taking place?
Mr. Dalgarno: Yes. The processing industry most certainly is developing capacity
in Canada. Cargill has a new plant, probably a year old, on stream in
Saskatchewan. CanAgra has a plant just south of Winnipeg, which I think is
supposed to start up around the end May. We have very good processing in Canada
right now. As I said, we will probably be crushing 3.3 million tonnes, which is
a little over probably 60 per cent of our production.
Senator St. Germain: Are you concerned about the fact that the huge corporations
are coming in and not creating the competition that is necessary to get the
producer the maximum price?
Mr. Dalgarno: I think that is one of the benefits of having canola in the open
market system. There are contractual arrangements with a great number of
companies. There is also the Winnipeg Commodity Exchange, through which the
farmer can price his crop at any time or take an options contract. There are
several options available to producers to be able to lock in profits at
particular times throughout the year.
Senator St. Germain: How big is this market? Are we just scratching the surface
with canola and its by-products? How mature is that market?
Mr. Dalgarno: In Canada, canola oil is the primary vegetable oil being used. We
are just now getting into the U.S. market. We cannot produce enough product in
Canada at this point to meet requirements for canola in the United States,
Mexico, Japan, and elsewhere.
Senator St. Germain: There must be a point of saturation somewhere. Do you know
where you are along that spectrum, or is that too tough a question?
Mr. Dalgarno: Perhaps you should ask the plant breeders how they are coming
along with new traits in canola, because, of course, different companies are
looking for specific traits for their particular brand names. I think there are
still significant inroads that can be made, particularly into the U.S. market,
with our very healthy canola oil as compared to some of the oils that are higher
in saturated fats.
Senator Stratton: I have a question. We have heard from many people,
particularly from canola growers. How is the Manitoba Canola Growers
Mr. Roskos: The Manitoba Canola Growers Association is made up of members that
are canola growers within Manitoba. There are no affiliate organization of
Manitoba canola growers, but we are a member of the Canadian Canola Growers
Senator Stratton: Do you represent all growers?
Mr. Roskos: We represent all canola growers of Manitoba.
Senator Stratton: Are you aware that other organizations and individuals feel
that a permit holder should have the right to vote as to whether or not canola
falls under the jurisdiction of the Wheat Board?
Mr. Roskos: Our views on that would be that the people or the growers that are
growing canola currently should be the ones voting on its future, as the
producers that are not growing it can greatly skew the results of that vote.
Senator Stratton: I was hoping you would say that you should get rid of the
exclusion-inclusion clause for that reason.
Senator Spivak: Canola is a wonderful product. It might be called a wonder
product, however, I should like to find non-hydrogenated canola margarine.
We are very familiar with the arguments against having the inclusion clause in
the legislation. We have heard a great deal about that. Your case is very well
made. Could you provide some information as to the spread between the highest
and the lowest average price, in 1997, and the distribution of producers? Do
you have that information?
Mr. Dalgarno: No, we would not have that kind of information. I do not know if
some of the commercial enterprises, such as grain companies, would have that or
not. It would depend on when they marketed their grain and what price they
Senator Spivak: I am basically interested in knowing the average price of canola
per tonne would be to a producer and what the spread is. Perhaps if you do not
have that information we could get it through questioning another agency.
Mr. Sirski: Senator, we must consider what a producer actually receives for a
product, and whether or not it is profitable for them when they sell it.
Further to that, we must look at this past year. What happened in the canola
market specifically, going back over the last 12 to 18 months, is that the
canola producers directly influenced the price of canola on the Winnipeg
Commodity Exchange. In listening to farm market reports that come out every day
from the commodity exchange, the reports would read something like, the price
of canola has gone up because producers have stopped selling. The reason they
stopped selling is because they thought there would be a higher price in the
Senator Spivak: That information would not be valuable to us, because you are
looking at comparisons and best price. Perhaps we can get that from somebody
Senator Whelan: You must be happy that past governments have spent so much money
on research to develop such a wonderful crop.
Mr. Dalgarno: On behalf of the growers, I most certainly am. We had canola
transformed from rapeseed with the likes of Dr. Baldur Stefansson from here in
Manitoba, and Dr. Keith Downey. It was to a large extent with the dollars that
the federal government pumped into their programs to get this transformation to
canola. From a growers' perspective, we certainly do appreciate the input that
the federal government had at that time.
Senator Whelan: Many of the growers' organizations now have a proportion of
their members' fees which goes to research. Does your organization follow a
Mr. Dalgarno: The canola producers in British Columbia, Alberta, Saskatchewan,
Manitoba and Ontario all do have a check-off type of deduction. To a large
extent approximately 40 per cent to 50 per cent of those dollars go back into
some type of research, whether it is agronomic or germ plasma or whatever. They
are turning many of those dollars back into research.
Senator Whelan: Your association is also financed in this fashion, is it not? Is
it compulsory for every seller of canola to contribute a portion of what they
Mr. Dalgarno: The Canadian Canola Growers Association is not funded through a
check-off process. Our membership is comprised of the individual producer
organizations, but each of the individual provincial producer groups in
Saskatchewan, Manitoba and Alberta may ask for a refund of this amount. The
check-off is 50 cents per tonne, and they can ask for that back. In Ontario, it
is $3 per tonne and it is non-refundable. In British Columbia, I believe it is
one-half of 1 per cent of the receipts.
Senator Whelan: I have strong reservations about what you said about the
inclusion clause. You probably heard me say before that I thought it was a good
idea to have it there, just to keep people on their toes. I do not believe it
is going to affect the trade one iota. When the Japanese indicate their
displeasure, this means that the Japanese might have to pay more. They will not
be concerned about paying less for it, that is for sure.
Mr. Dalgarno: The Japanese are certainly very astute businessmen. They can price
their canola at any time of the year through the Winnipeg Commodity Exchange
or, as Mr. Corn said, through the exchange in Paris. They also have the option
of purchasing their canola from Australia and, to a certain extent, from
Europe. So they do have some leeway as to where they want to buy their canola.
They are quite happy with Canadian canola. We have been price competitive in the
Senator Whelan: The five years that Canadian scientists in Agriculture Canada
argued with bureaucrats in the United States about the safety of canola oil was
costly. As you pointed out, canola is now a large export because it is
considered to be one of the most healthy oils that humans can consume. Can you
compare the American situation with the one Canada is currently engaged in with
the European Union on the issue of genetic cross-breeding?
Mr. Dalgarno: The situation in Europe is a political decision. It is past the
scientific level. This issue is now sitting on the politicians' desks. They are
not willing to move forward with it.
We hear a significant amount of cross-border shipment rhetoric from the American
Senator Dorgan in regard to $440 million worth of wheat being exported to the
United States. However, he does not complain about the $716 million of canola
It is very important that we are cognizant of what the American consumer
desires. The inclusion clause would put a non-tariff barrier in place for
canola going across the line.
The Chairman: I just have one question. My understanding is that canola in the
Prairies is about the third largest crop now produced. Are those numbers right?
Mr. Dalgarno: For the dollar value it will be number two behind wheat.
The Chairman: Thank you for your presentation.
Our next group of witnesses is from the Coalition Against C-4. Would you
introduce yourselves, please.
Mr. Kevin Archibald, Member, Coalition Against C-4: Honourable senators, for
this afternoon's purposes, let me introduce Mr. Dan Kelly from the Canadian
Federation of Independent Business, who is also a member of the Coalition
Against C-4. Mr. Paul Earl will also be assisting us.
The members of the Coalition Against C-4 wish to thank the Standing Senate
Committee on Agriculture and Forestry for holding hearings on Bill C-4 and for
allowing to us express, once again, the objections we have to this piece of
legislation. The coalition is a group of 16 farm and industry organizations,
representing the interests of both farmers and industry across Canada.
Specifically, our members represent the views of 30,000 individual farmers who
are members of commodity groups which belong to the Coalition Against C-4;
17,000 individual enterprises in the prairie provinces which are members of the
Canadian Federation of Independent Business, 2,000 of which are either farms or
agri-business; 250 grain-related enterprises which are members of the Winnipeg
Commodity Exchange and the Canadian Oilseed Processors Association; growers of
virtually all commodities in Western Canada; and canola growers across Canada in
You have heard from many groups that are members of our coalition already, and I
know you will hear from more. We are united as a coalition and this submission
The coalition rejects any suggestion that it represents a small minority of
grain farmers or is composed of marginal groups. Both as a coalition and as
individual organizations we have presented our views to the federal government,
and have raised serious objections to the bill. However, until your hearings
began, our views have been ignored. Bill C-4 has been called the "National
Energy Policy of Agriculture," and it is true that there has not been such
a blatant disregard of the will of an industry or a region since the energy
policy was implemented.
The members of the coalition are not the only organizations to oppose Bill C-4.
The United Grain Growers, the Canadian Wheat Board Advisory Committee and the
National Farmers Union have all opposed the bill. The federal government has
managed to unite all factions of the grain industry against it. On the other
side, the bill has received a weak endorsement from several organizations whose
credentials to represent either the grain industry or the undiluted views of
grain farmers are highly questionable.
We suggest to the committee that the allegation that there is a silent majority
in favour of this bill is wrong. We ask: Why does the government not have the
courage of its convictions on this bill? Bill C-4 proposes that producer votes
be held on any changes to the Canadian Wheat Board mandate. Moreover, the
federal government claims that the intent of the bill is to allow farmers the
maximum control over grain marketing. Why does the federal government not put
Bill C-4 to a plebiscite with a clear question such as: "Do you wish Bill
C-4 to be passed or withdrawn?" We respectfully suggest that Bill C-4
would not command the support of a majority of farmers.
In order to ram this bill through Parliament over the advice and desires of
those who will be affected by it, the government has grossly misrepresented
this bill. Attached to our submission is a fact sheet produced by the
coalition, which lists the erroneous and misleading statements made by the
federal government in relation to the bill. The government rushed the bill
through the Standing Committee on Agriculture and Agri-Food, and had to resort
to closure to push the bill through the House of Commons. The members of the
coalition were appalled at the flagrant disregard for Parliament and democratic
process which the government displayed in dealing with this bill.
The individual members of the coalition have many objections to this bill. Many
of them have made or are making separate presentations to the Senate committee.
However, the focus of the coalition is the so-called inclusion clause, under
which additional crops could be brought under the Canadian Wheat Board's
jurisdiction. The members of the coalition, individually and collectively, have
stated that the inclusion clause will threaten investment, Canada's trade
relationships, jobs and economic growth, will pit Western farmers against each
other in bitter plebiscite battles and bring into question the very existence
of the Canadian Wheat Board.
All these potential impacts have been explained in the individual submissions of
coalition members to the House of Commons Standing Committee on Agriculture and
Agri-Food in letters and in answers to questions during our appearances before
the committee. I shall outline the main points of argument that lead us to our
No current buyer of non-board grains wants to deal with a centralized marketing
organization. Accordingly, the threat created by the inclusion clause that
these crops may be placed under the Canadian Wheat Board's control will
discourage investors from locating processing plants in Canada where they could
be forced to deal with the Canadian Wheat Board.
None of Canada's current trading partners purchasing non-board grains wish to
deal with the Canadian Wheat Board for these grains. The Japanese, who are our
largest buyers of canola, have made it clear that they do not want to buy
canola from a single desk seller. Hence, the threat of including canola under
the board will cause these countries to seek other sources of supply.
The inclusion clause runs counter to Canada's stance in trade liberalization. It
will be interpreted internationally as a signal that we are not serious about
our trade position. Moreover, state trading enterprises like the Canadian Wheat
Board will be an issue in the next round of negotiations. The inclusion clause,
by setting up the possibility of enlarging the scope of Canadian Wheat Board
selling, will send the wrong message, and could harm our trade prospects.
The canola industry particularly, through its crushing plants and through the
importance of the Winnipeg Commodity Exchange as a worldwide pricing point for
canola, is an important source of jobs. With the threat of inclusion, and even
the threat of major public disputes over inclusion such as the bill
contemplates, these jobs will be threatened. Investors and marketers will seek
Regardless of whether the inclusion clause is ever successfully invoked, even if
it is triggered, we face the possibility of a plebiscite. As the barley vote
showed, plebiscites are disruptive and bitter. Such an exercise will deepen
divisions among farmers, cause a bitter public battle and, at the same time,
create uncertainties which will discourage investment, jobs and economic growth.
In our opinion, if Bill C-4 is passed, this provision will be tested. Some
organizations have already made statements indicating that they will use the
legislation to attempt to get more crops under the Canadian Wheat Board's
The existence of the inclusion clause will turn CWB director elections into a
contest between pro and anti-central market forces, rather than the selection
of the most qualified candidates to run a multi-billion-dollar enterprise. The
Canadian Wheat Board boardroom is not the appropriate place for policy debates
to be fought. By making it so, the bill will eventually destroy the CWB.
The inclusion clause will be a destabilizing factor in markets, particularly in
canola markets. Markets tend to be risk averse, and are easily affected by
anything that threatens price or supply of a commodity. Any threat that the
inclusion clause might be triggered would impact markets, likely with negative
effects on farm prices.
Members of the House of Commons Standing Committee on Agriculture and Agri-Food
repeatedly asked the coalition how, if the majority of farmers oppose
inclusion, it could ever happen, and why, under these circumstances, the
inclusion clause is a matter of concern. This question misses three key points:
First, the mere existence of the clause will be interpreted as a signal to our
trading partners that we have an agenda which is at odds with our trade stance;
second, there will be an uncertainty overhanging investors' decision-making and
will act to our economic detriment; and third, regardless of the ultimate
success of a bid for inclusion, the act of triggering the process will be
disruptive and will threaten trade and investment.
The coalition recognizes that the inclusion clause was introduced into the bill
to provide balance against the exclusion procedure which the bill contains. In
recognition of that argument, we make the following recommendations, and I will
ask Mr. Kelly to present that part of our brief.
Mr. Dan Kelly, Representative, Coalition Against C-4: The recommendation is that
the inclusion and exclusion clauses of Bill C-4 be removed from the bill. We
understand that clause 25 of the bill, repealing section 46(b) of the existing
Wheat Board Act, would also have to be removed to leave the inclusion and
exclusion provisions of the existing act intact.
We also wish to bring to the attention of the committee the potential impact of
the passage of Bill C-4 on the Estey review of grain transportation. There is a
strong possibility that the Estey review will recommend changes to the Canadian
Wheat Board's mandate in transportation. We suggest, after the dissension that
this bill has caused, the re-opening of the CWB Act will not be politically
possible in the near future and the implementation of the Estey recommendations
may be forestalled.
We also note that Ministers Ralph Goodale and David Collenette have called for a
moratorium on branch line abandonment until after the Estey review is complete.
We respectfully suggest that the implications of Bill C-4 are far greater than
the implications of a handful of abandonments that the railways could effect by
the end of Mr. Estey's review. Accordingly, the coalition also recommends that
further consideration of Bill C-4 be delayed until after the Estey review is
complete. This recommendation also has the advantage of allowing the
controversy over Bill C-4 to cool and for all parties to reassess their
We close this submission with the message which we have tried repeatedly to
impress upon the federal government. The government will be making a grave
error if it passes Bill C-4 against the united opposition which has been
mounted against it. Bill C-4 addresses the needs and aspirations of no one in
Western Canada, and no one in the canola industry, east or west.
We urge the Senate to exercise its constitutional responsibility in its role as
the chamber of sober second thought. It has been some time since a piece of
legislation more in need of sober second thought than Bill C-4 has come before
the upper house.
The Chairman: What is the combined membership of the coalition? I understand
there are 16 associations here. Have you got a number on that?
Mr. Kelly: As is on the first page of the brief, we talk about the numbers that
are part of the coalition. The 16 groups comprise 30,000 individual farmers. My
organization has, in the prairie provinces alone, 17,000 members; 2,000 of
which are either agri-businesses or farmers. We have 250 grain-related
companies, part of the Winnipeg Commodity Exchange and also canola growers in
all parts of Canada, across all provinces that grow canola. At the bare
minimum, the coalition represents 30,000 individual grain farmers.
Senator Stratton: I know this is the end of the sixth day of hearings, and I do
not know how many representations we have heard, but this document looks
awfully familiar. Have we seen it before in Brandon?
Mr. Archibald: Not this one. Definitely not.
Mr. Kelly: The reason it would appear familiar is that a great deal of the
content is echoed by the 16 members of the coalition. This is a brand-new
presentation on behalf of the coalition as a whole.
Senator Stratton: Obviously, you have presented before.
Mr. Archibald: Yes, I have, on behalf of myself in Brandon.
Senator Stratton: That is what I thought. Mr. Kelly, who do you represent?
Mr. Kelly: The Canadian Federation of Independent Business.
Senator Stratton: Have you also presented?
Mr. Kelly: In Brandon, yes.
Senator Whelan: I just have a couple of questions. On page two, you write: "The
Japanese, who are our largest buyers of canola, have made it clear that they do
not want to buy canola from a single desk seller." Do you have that in
writing from any Japanese buyer?
Mr. Archibald: Yes, we do. Minister Goodale conducted what turned out to be an
excellent review of the grain marketing system in 1996. The Western Grain
Marketing Panel report encompassed surveys of all the buyers of board and
non-board crops. What they found during their extensive research was that the
Japanese did not prefer the single desk selling system. They did tolerate it
with regard to wheat because it was already in existence. They import 90 per
cent of their canola from Canada. They made it very clear that they prefer the
system for non-board crops that is in place. As a result of that, the Western
Grain Marketing Panel recommended that those crops be left under the marketing
system that was in place.
Senator Whelan: Could we have a copy of that, or does Mr. Goodale have a copy of
Mr. Archibald: Mr. Goodale does have a copy of it. It was his panel that
commissioned the report and he would have, hopefully, several copies for you.
Senator Whelan: It might be easier to get it from you.
Mr. Archibald: We can certainly supply it. You might get it quicker, if our
experience shows anything.
Senator Whelan: You say on the last page, "The bill addresses the needs and
aspirations of no one in Western Canada." We met quite a few people that
think it is pretty good, with some amendments. You had the Manitoba Pool today.
You had the farm organization from Manitoba, more or less not endorsing it
completely. There have been many people saying to get on with it. Even the
minister in Saskatchewan says it may not be perfect, but get on with it and
pass it. I would dispute your statement there about no one, because we have
been hearing from people who think they are someone.
Mr. Archibald: Senator Whelan, those are very interesting observations. I would
have to add to it that although the Keystone Ag producers claim to represent a
large group of Manitoba farmers, if their members knew some of the things that
they are presenting to you as support for this bill, I suggest that their
membership would drop to the point where they would have been delisted as a
Most farmers that I have spoken to who are members of Keystone Ag Producers, are
not aware that Keystone supports the inclusion clause. This is just an example
of how groups can support something on principle, but yet their members do not.
Manitoba Pool is a fine example. I have been a member of Manitoba Pool. I have
been an employee of Manitoba Pool. My family has always been members of
Manitoba Pool, yet we feel exactly the opposite as far as this marketing
question goes, as do many of their members. When it comes to saying I support
it or I do not support it, we really must question where some of this support
Mr. Kelly: One of the observations that we have been struck by is that the
opposition to Bill C-4 seems to have united farmers on both sides of the
equation. Both the NFU and the farmers that might be typically part of the
member groups of the coalition have spoken out in opposition to this bill albeit
for different reasons. However, that also demonstrates to you that the
statement that the bill pleases no one is the case, because both sides of the
monopoly debate are united in their opposition to this bill.
Senator Whelan: I disagree with you. There are many people who approve of this
bill. The Minister of Agriculture in Saskatchewan, the biggest grain-producing
province in Canada, says to get on with the process and pass the bill.
Mr. Paul Earl, Representative, Coalition Against C-4: Attached to our brief is a
fact sheet that we put together that lists various things that have been said
about this bill. On page 4 of that document, it indicates:
The government says that groups opposing Bill C-4 are doing so for different
reasons and there is no consensus between them.
That is absolutely wrong. It is true that right and left have different views
about the CWB; however, there is consensus among them on one issue. Both sides
feel that Bill C-4 politicizes the CWB, and neither want that to happen.
Farmers want the CWB to be focused on the business of the corporation, not
paralyzed in policy debates.
When you made your statement that there are some organizations that support Bill
C-4, the phrase that stood out was "with changes". Certainly with
changes Bill C-4 could command some support. However, this is one issue upon
which both right and left are united.
Senator Robichaud: Your argument is primarily based on your opposition to the
inclusion clause. Would it be fair to say that if the inclusion/exclusion
clause were withdrawn from Bill C-4, you would be prepared to support it?
Mr. Archibald: The position of the coalition is, if the inclusion clause was
dropped, that would satisfy the coalition, per se. As was stated earlier,
individual members of the coalition may have their own opposition to other
parts of the bill; however, our 16-member coalition, would give tentative
support to this proposed legislation if the inclusion clause was dropped.
Mr. Kelly: The coalition was formed around the inclusion clause and the
inclusion clause alone. At the very beginning, all of the member groups; some
of them with diverse comments with respect to Bill C-4 -- and there are
definitely provisions that were more to the liking of certain groups and
perhaps less to the liking of others -- but every single member of 16-member
coalition was opposed to the inclusion clause. It would be fair to say that the
coalition is agreed that we will not take a position towards the bill as a
whole, other than in regard to the inclusion clause.
If the inclusion clause were removed, the purpose for the coalition would
disappear and the individual groups would bring forward their individual
positions on the other provisions of the bill. My organization is before you.
There are representatives from the wheat growers. You have met with many of
them throughout the process of the hearings. However, the coalition as a whole
is focused on the inclusion clause and that element alone.
Senator Robichaud: Do you believe that by appearing twice before this committee,
we will give more weight to what you have to say?
Mr. Kelly: I am not sure of whom you are speaking, however both Mr. Archibald
and myself have made presentations as representatives of our respective
organizations to this committee. We were also elected by the coalition as the
people to bring forward our recommendations to you. Being based in Manitoba, we
have the opportunity to do that. There are certainly many other people who could
have come before you as representatives of the coalition. For example, I am
paid to do this kind of work on a full-time basis, whereas individual farmers
and individual business people are out there trying to earn a living. My living
is doing stuff like this. I have the time and resources available to do that.
Mr. Archibald: I do not have the same time or resources, but this issue is of
such vital importance to our farm that I do make the commitment. The strength
of the coalition is showing that the crops that are affected by the inclusion
clause have banded together to show the extreme opposition to it. Canola
groups, flax groups and oat growers do not have experience with this area. They
have been functioning very nicely in the open market scenario that they have
been working with. They have not had to go through marketing panel debates and
plebiscites for a number of years.
There was a canola vote in Manitoba several years ago which was defeated quite
soundly. The people in our commodity groups thought that by banding together
and presenting in this fashion we could show you the extreme amount of
opposition to this clause and the threat it represents to their industry.
Senator Robichaud: I would like to reassure people that we have made every
possible effort to hear all viewpoints on this bill.
The Chairman: We will now call the Concerned Farmers Saving the Wheat Board.
Please introduce yourselves.
Mr. Bill Toews, Chair, Concerned Farmers Saving the Wheat Board: My name is Bill
Toews. With me today are Keith Ryan and Tim Groening.
After listening to a fair amount of the discussion up until now, I have decided
to change my presentation slightly. I will not be sticking strictly to the
presentation I have prepared. It was interesting to hear how the numbers of
farmers in Western Canada is growing quickly. I suppose I could come in front
of you and suggest that I represent 70,000 farmers across Western Canada. I will
not do that.
Senator Spivak: How could we check it out?
Mr. Toews: How could you check it out?
The Chairman: How long has your association been formed?
Mr. Toews: We formed it in 1996. I would like to give you a bit of a preview. I
was being a bit facetious since the last panel of witnesses apparently
represent me as well.
When various groups throw numbers around, there is a certain amount of caution
that should be required, whether it is the Manitoba Canola Growers Association
or a coalition.
There has been no method, for example, in the Canola Growers Association, to
determine what the opinion of canola growers really is on this issue. I want to
back away from that, though, and give you an overview of what we are going to
Our written presentation describes who we are. There is a preamble on the
Canadian Wheat Board marketing system. There are some suggestions about Bill
C-4, about things that we have concerns about, on governance, on the
contingency fund, on operational flexibility and on the inclusion and exclusion
I have put forward in this presentation a suggestion about the future of the
Canadian Wheat Board and then, finally, a summary. I will tell you right at
this moment that my summary includes a request to pass this bill quickly. Put
it through as quickly as you can, unless you feel in your wisdom that there are
some serious problems. I believe the problems will become more serious if this
bill is not passed as soon as possible.
We have added appendices to our written presentation. We include some commentary
on the dual marketing issue and the value-added issue and how the term "status
quo" is used.
Finally, we include the concluding statements about the audits that were done on
the Wheat Board marketing of wheat and barley. There is an impression that
there has never has been an investigation to evaluate the performance of the
Canadian Wheat Board and the numbers are there. I have added the summary pages
from the reports that were done on wheat and on barley.
I have also included a table from the Western Grain Marketing Panel report which
puts Canada's position in the wheat trade essentially in perspective with the
other exporting countries. The information in these appendices is fairly
straightforward and clear cut. It does not require a significant amount of
explanation. I would point out in the table of the rating by grain exporters in
that appendix that Canada is seen by the buyers to be the most expensive wheat
but also provides the best service and consistency. All of the things that go
into marketing grain are achieved by the Canadian system, which includes the
Canadian Wheat Board, but also includes our quality control system. I wanted to
ensure that this perspective was expressed.
Finally, the final appendix describes who we are. I thought it best to take the
front page of the Winnipeg Press and reproduce it and put it in front of you,
which describes what really happened on a particular day in August of 1996 when
there was so much commotion and so much media attention on the people who were
concerned and running the border. We polled in short order about 1,000 people
across the province to demonstrate that there is a significant support for the
single desk selling system that we are now using under the Canadian Wheat
Board. I wanted to ensure that you understood what was in here and more about
who we are.
I wish to address some of the points set out in the last presentation, but
before I do that I should like to put the wheat industry in perspective. Wheat
is not like canola, flax nor oats in the international markets. Wheat is a
commodity that has not been enhanced by the political process.
Farm bills in the United States have constantly addressed wheat through things
such as acreage controls in order for farmers to receive payments. U.S.
producers historically have had significantly higher equivalent subsidy units
relative to Canadian producers. During the period from 1985 to 1995, a program
in the U.S. called the Export Enhancement Program was set up specifically to
raise domestic prices in the U.S. by providing subsidies in the export market.
Of course, the Canadian Wheat Board was functioning in the export market.
Since we export something like 70 to 80 per cent of our wheat production every
year, competing in a subsidized market was very difficult to do. On the other
hand, the prices in the U.S. were raised artificially because of that very
thing. Therefore, there was a discrepancy in the market system where the
attractiveness of the U.S. market was fundamentally increased because of the
political system. That did not happen with canola, flax nor oats. I would
suggest to the committee that it is a dangerous game to compare commodities. We
must deal specifically with the commodity of wheat.
There are certain people in the industry who appear to have said, "We will
develop farm policy, we will do it by throwing as much dirt at the wall as we
can and hopefully some of it will stick." That is part of what is
happening in this game right now. That is very troublesome because it does
attract media attention.
Unfortunately, even the CBC reporters now on the farm program do not have the
resources to investigate the news releases that come across the desk. They
simply become mouthpieces for people who want to put out a press release. Any
small group of people that decides to make noise or put out a press release
will receive full media attention. Trying to separate fact and fiction can
sometimes be difficult.
I was recently in North Dakota where I made a presentation in Minot to the North
Dakota Farm Bureau. A senator was there, as well as some of the people from the
North Dakota State Wheat Commission. Their impression of how Canadians function
and the concern they have about wheat entering into the U.S. is interesting
because they are quite convinced that we are either being subsidized or that
the Wheat Board is undercutting prices even though any audits that have been
done have shown that to be absolutely false.
In the U.S. spring wheat growing area, the acreage this year will be reduced
from something like 19.5 million acres to 16.5 million acres. That reduction is
a result of market forces. Wheat is now less attractive in North Dakota than it
was a year ago in comparison to alternative crops that they can grow there. It
is the same in Canada. Unfortunately, in North Dakota, that is a market force.
The market forces are at play. When the Wheat Board delivers that message to
Canada, it becomes the Wheat Board's fault and the response is: "Let us
shoot the messenger". I am trying to put this whole game in perspective.
It is easy to point to the messenger and say there must be something wrong here,
you are responsible.
Turning to the export enhancement program, the U.S. was applying during the
years when the European Union was heavily subsidizing their exports as well. We
suffered significantly during that period as a result.
Some of you are familiar with the program that we call GRIP, the Gross Revenue
Insurance Program, which was in place in the Prairies, from at least 1991 to
1995. During that period, there was a support system put in place for which we
were very appreciative. The audit of the Wheat Board that was done recently
demonstrated significant advantages that the board had in the single desk
selling mechanism. If it the board's had not been able to extract money from
the export market, both the federal and provincial coffers would have been
lower as a result of additional payments made to producers under the GRIP
program. No one has really picked up on that, and it is something about which
some of the politicians and certainly the taxpayer should be appreciative.
With that introduction, I should like to address the actual presentation and
where we are stand on Bill C-4.
There is no doubt that there are questions and some concerns. There are risks
attached to everything you do when you make a change. The outcomes are somewhat
uncertain. However, at the end of the day you must have some confidence in the
people who are either representing us in Parliament, in the Senate, or those
regulations that are formed, or those people that we elect to run an
organization like the board.
I will not go through the whole bill. At the bottom of the first page, under "concerned
farmers" and "preamble", what we are stating is Bill C-4 is
enabling legislation. We must keep that in mind. It presents us with some
opportunities, along with challenges and risks. We have to weigh them and see
whether or not we want to go in this direction.
There is a considerable onus on the minister responsible for the legislation to
ensure that there are adequate regulations in place to maintain the integrity
of the board operations. Not all of those regulations are in place; there is
work to be done.
When this bill is passed and the first slate of directors is elected, this newly
elected and appointed board of directors has an opportunity to set policy
within the enabling framework, and also within the regulations in a manner that
strengthens the CWB and will serve all producers in the designated area. We
must have confidence in the ability of producers to elect the people who will
make that happen.
As far as the exclusion and inclusion clauses are concerned, certainly there are
some concerns and we have heard about those concerns for the last two weeks. In
the end, however, there must be a mechanism to make these things happen. The
mechanism to be put in place should provide for the commodity organizations
that are referred to in the bill to have financial audits available to all the
producers. Through communicating with the producers of a particular commodity,
and having a mechanism for gathering opinion from all producers of that
commodity, there is some reason to forecast success for this legislation.
Unfortunately, I do not believe there is one organization that represents a
commodity that is in that position at this particular time. Some work is
required for this to occur.
At first glance operational flexibility appears necessary. It would provide for
the directors to determine policy within the board to make certain things
happen, however there are risks attached to that. There is no question that
enabling legislation will expose people to risk. On balance, some decision must
be made and, again, it goes back to the confidence that we have in our producers
to elect the right people to ensure that this board runs efficiently and with
The contingency fund is probably one of the most disliked parts of the bill,
although I have not heard very much about it here today. There is a sense that
a contingency fund is not necessary from a producer or treasury point of view
because adjustments to initial payments for which this is intended to apply
have never cost the treasury anything. Most producers see this as the first
phase of providing a contingency for actual establishment of initial payments,
and that is where the real concern arises. When we are suggesting to you that
this bill should be passed quickly through the Senate, there is an
understanding with the minister in charge that this contingency fund issue will
be put aside and not applied until we have had some additional ability to
determine whether or not this is a good thing.
Governance is the most important aspect of Bill C-4 and we have made some
suggestions on this subject. The most important suggestion that we have is that
there needs to be a delegate structure set up in order to do a proper job of
getting the election process going. This has general support, or at least
support in many areas. It is going to allow us as producers to evaluate our
candidates more thoroughly, to have a truly democratic process in putting this
forward. We have had enough of the rhetoric of campaigns. We need some solid,
thorough thinking about how we are going to make this legislation work. I
should like you to put before the minister not changing the bill, but ensuring
that this issue of the delegate structure is put before him and is emphasized
as being an important way of ensuring that farmers actually feel they have
ownership of the corporation.
Finally, I see a strong future for the CWB. Many producers in the current and
past environment have blamed the wheat production problems and the marketing
problems on the board. I am not going to suggest that the board has done
everything perfectly over the years. Obviously, there have been some problems
and there have been some policy issues that have not been handled completely
correctly. However, I see a future board with an elected board of directors
where the board and the producers actually feel as if they are taking charge of
the organization; they are taking responsibility as well as ownership.
In that setting, I would hope that there would be an opportunity with future
legislation to widen the mandate of the board. I have listed three or four
areas where this should be looked at. There should be a more direct involvement
in research funding and setting of priorities for the wheat industry and a
direct involvement in the seed trade to ensure options for producers as a
potential area for the board's involvement.
At this moment the seed trade issue and the issue surrounding how genetics are
being dealt with in agriculture is one of the most talked about issues in the
farm coffee shops at this particular time.
In the future, the CWB could be making investments in processing, whether in
Singapore or elsewhere, but to engage markets for Canadian producers in other
parts of the world. This was something that was part of the Western Grain
Marketing Panel report, by the way, but somehow it has not been raised again. I
wanted to raise it here as something in which the Wheat Board could be
Finally, there is no reason why the CWB could not provide other services for
other commodities on a contract basis in the long term. This could occur not
necessarily through direct marketing, but perhaps with sophisticated market
analysis division or weather surveillance division. These things have a place
in the entire industry.
It is important to pass this bill. There are factions of opinion on both sides
of the issue, but the concerns about the inclusion clauses are a bit of a red
herring. The threat of having another commodity in this type of an organization
has always been there in the sense that it just required Parliament to make
that happen. It is not as if that threat were not there before. The so-called
threat to the industry is not nearly as huge as certain groups may like,
however I return to the idea that things change.
The marketing environment is changing all the time; some things more slowly than
others. The point is that we do not know whether or not the Winnipeg Commodity
Exchange will be around in five years' time, not because there is a threat of
canola being applied under the single-desk selling system, but for other
reasons. The agriculture industry is consolidating. Strategic alliances are
being formed. Smaller institutions may close down and bigger ones may gobble
them up. I am not suggesting this is imminent or necessarily going to happen,
but anything is possible. Things may change in the feed barley or in the oat
industry. That is why producers must have an option to determine how they are
going to market their grains. It is not a question of whether you should or you
should not, it is just a question of do you have the opportunity to do that.
I will close and be open to any and all questions.
The Chairman: You mentioned the word "option." Are you suggesting that
you would give choices to the farmers?
Mr. Toews: With reference to what?
The Chairman: You just mentioned the word "option".
Mr. Toews: I am mentioning that in the sense of a two-sided coin. You either
have a single desk selling system or you have an open market. You cannot have
both. I would love to have an opportunity to spend some time on that if you
wish. A dual market is essentially an open market and that is the option.
The Chairman: I will not belabour it, but I beg to differ with you. If there are
not choices given to the farmers, you will not have a Canadian Wheat Board.
Mr. Toews: I would offer the other side of it, and that is, within the single
desk selling system, there are some aspects of the open market that can be
included. For example, that is the whole purpose of this enabling legislation.
There are possibilities of providing options for farmers within that single
desk selling system. Things will not necessarily stay the same, particularly
with an elected board of directors from the farm community. However, that is
where the risk is. If you go too far in undermining the single desk selling
system, you lose all the advantages that have been presented in the audits on
both wheat and barley. That marketing advantage is essentially why we have the
single desk selling system.
The Chairman: In Saskatchewan, where we produce 65 per cent of the grain grown,
we have ConAgra coming in and building three large plants, one at Corinne, one
at Yorkton and one in central Saskatchewan. They can load out 45,000 bushels an
hour, a 100-car train in eight hours. We now have Dreyfus Canada coming in with
three plants that they are going to put into Saskatchewan. We know of the
situation with ADM. Most of the canola that is grown in my area, whether it is
Saskatchewan Wheat Pool or Pioneer Grain, or whether it comes right from my
farm, goes directly to ADM in North Dakota. One would have to have their head
in the sand not to realize that we are in a time of change. I fear that we are
polarizing in two different camps here and it has become a political thing if
we do not have some form of compromise that might save the Canadian Wheat Board.
Enough said, I am the chairman and I have said very little today.
Mr. Toews: May I respond to that?
The Chairman: I think we must give consideration to this reality regardless of
which camp we are in.
Mr. Toews: I agree with you. It is a terrible situation to be polarized in the
way we are. We must face reality, and one of the realities is that CWB, under a
new governance structure, may be able to find different ways under which
producers can operate. I am not going to suggest any at this time, but
obviously there are ways and that is what the enabling legislation is all about.
I emphasize that you cannot run the single desk and open market at the same
time. They are mutually exclusive. I am sorry, that is just the way it is.
Senator Stratton: Have any of you presented to this committee before?
Mr. Toews: No.
Senator Stratton: Thank you.
Mr. Toews: I am sorry. There is a concerned farmers' group independent of us in
Saskatchewan that presented to you in Saskatoon.
Senator Stratton: I look at the paper and it is very familiar.
Mr. Toews: We did no collaboration whatsoever.
Senator Stratton: My question is: If you have inclusion and exclusion, who would
get the vote on the inclusion?
Mr. Toews: Are you referring to a particular commodity?
Senator Stratton: Yes.
Mr. Toews: It would have to be a record of the growers. For example, the barley
plebiscite was not a big deal in terms of saying anyone that grew barley in the
last five years was eligible to vote. You would find it quite easy to sort that
issue out if it had to be canola or flax.
Senator Stratton: Did it have to be a producer of the commodity?
Mr. Toews: Yes.
Mr. Keith Ryan, Representative, Concerned Farmers Saving the Wheat Board: A
great fuss was made a little while ago by the canola growers that sort of left
one with the feeling that they are a sort of individual group that just grew
canola. I wish to point out to you that it is an agronomic fact that one can
only grow canola once every four years on the same land. What do you do with the
other years? You grow wheat, oats, barley or other crops. Therefore, a canola
grower is a wheat grower is an oat grower is a flax grower. We are all the same
and it may be one year you miss out not growing, that does not make you not a
Senator Stratton: I appreciate and understand that. One thing I have learned
about in this session is crop rotation.
Senator Spivak: Almost every group which has appeared before us has supported
the Wheat Board. There is a numbers game being played, as you said at the
beginning of your presentation.
I know you are not going to tell me exactly how many members are in your
organization, but can you tell me perhaps a little bit more about it and how
you obtained the opinions of the people that you represent?
Mr. Toews: We feel we are representing the 1,000 producers who came to the rally
at Oak Bluff. We have been asked from time to time by them to continue doing
what we are doing. We are not a formal organization in the sense that we elect
directors and so forth. We have communication with the people from time to time
that were at the rally. We have kept a registration list and so forth.
Senator Spivak: My concern about the inclusion-exclusion clause has nothing to
do with the substance of the clause, it has to do with the clause becoming a
lightning rod for the election of the directors. It appears to me that an
election might not be fought on who was going to be the best person for the
job, but whether that person was for or against a certain position. There are
other things in this bill that could trigger that reaction, but the inclusion
clause has somehow become the major focus.
If the inclusion-exclusion clause were removed, what is your opinion as to the
ability of a producer group, a commodity group, if they were really strongly in
favour, to come under the umbrella of the Canadian Wheat Board in any case? The
minister has certain powers and the board of directors will have their by-laws
and their regulations. I cannot see an elected board of directors not listening
to a strongly organized group that wishes inclusion of whatever item, even
Mr. Toews: I would answer your first question, but I have forgotten what it was.
As far as the second question is concerned, I do not know what the other
possibilities are. However, if the bill remains the way it is, it would force
the organizations that are seen to represent a commodity to actually represent
that commodity. I suggested earlier that that may not be what is happening now
in terms of communication and so forth.
Senator Spivak: I am sure you are right. I have more questions but I will yield
in the interests of time.
Senator Whelan: When the Coalition Against C-4 was making their presentation,
they talked about a vote in Manitoba. Do you disagree with what they said about
a vote, the group for Coalition Against C-4? Also, do you have any members
which are organizations? They have the Canadian Federation of Independent
Business, the oat growers, the Saskatchewan Canola Growers, the barley growers
and the Winnipeg Commodity Exchange.
Mr. Toews: No. I described our group as a broad-based group of producers of all
political stripes. It was quite clear at the Oak Bluff meeting that that was
the case. These are people essentially that are producers with affiliations
perhaps with other organizations. We all have affiliations of one sort or
another independently, but certainly not as a group. We are an independent
Senator Stratton: The Coalition Against C-4 listed all the canola growers and
the flax growers, et cetera, and they stated quite clearly with the deletion of
the inclusion-exclusion clause that they would support the bill. It is not that
they are against the Wheat Board, but this seems to be the most contentious
For the sake of coming together to reduce this emotional debate, splitting
groups into one or another camp, would you not support the deletion of the
inclusion-exclusion for that reason?
Mr. Toews: I have made our position quite clear. The assumption that suddenly
this animosity, mud slinging and antagonism will go away because of that clause
being removed is not the case.
Senator Stratton: You do not think that will happen?
Mr. Toews: No.
Senator Whelan: Can you clarify my question about the vote in Manitoba that was
Mr. Toews: I guess I was shaking my head in a sense that if the result was, as
it was said to be, soundly defeated, I cannot see what the concern is with
having the inclusion clause. I mean, there does not really seem to be a threat
there if that poll was correct. Therefore, what is all the fuss about?
Senator Whelan: I agree with you on the inclusion or exclusion clause. If you
are going to have a vote of producers, it cannot be put into effect unless you
do that. I would think there may be a problem as you are saying you only
produce canola, some producers would not produce it every year, if I understood
you correctly, because they must rotate it. They can only have it on their land
every three or four years. They have to rotate their crops so they may not be
in a position that they can grow canola every year. How would they vote, that
type of thing? You would have to define a pretty fair system for voting, who is
eligible and who is not eligible to vote.
Mr. Ryan: Senator, if for whatever reason I cannot grow canola for just one
year, does that not make me a canola grower? There have been funny numbers
thrown around here today. The canola growers got up and told you that they
represented me. They represent me because they automatically take some money
out of my pockets every time I deliver some grain to the elevator, but they have
never once consulted me about anything. I support them only in the sense that I
like the research that they are doing. If they keep up this nonsense, I will
not support them anymore.
The Chairman: Just on that subject, we grow about one quarter of our farm in
canola every year, about 15 quarter sections of canola every year, and it is
also a rotation. There are many farms in that same type of rotation. They grow
peas, wheat durum and canola, but there are many farmers that grow canola every
Mr. Ryan: They do not do so on the same piece of land.
The Chairman: Not on the same piece of land, but in rotation. Thank you for your
We now call the Canadian Oilseed Processors Association. We welcome Mr. Robert
Broeska, president. Will you make your presentation, which you have given to
us, and then we will go to questions from the senators.
Mr. Robert Broeska, President, Canadian Oilseed Processors Association: I wish
to thank the Senate Committee for inviting me to speak to our concerns
regarding Bill C-4. You have my written presentation, and if it is appropriate,
Mr. Chairman, I wish to paraphrase the position of our industry in a verbal
statement to you.
I represent the Canadian Oilseed Processors Association and I serve as president
of COPA. The member companies of COPA are ADM, Agri-Industries Ltd., CanAmera
Foods, Canbra Foods Ltd. and Cargill Limited. These companies own and operate
facilities located in the Prairies, Ontario and Quebec that account for 100 per
cent of the oilseed processing capacity and about 85 per cent of the edible oil
refinancing capacity in Canada.
Members of COPA are actively involved with oilseed growers, exporters and crop
input companies in directing and managing a highly organized industry in all
aspects of crop production and research programs, the development of a
disciplined marketing system for seed and products and involvement with the
federal trade policy negotiators in establishing liberalized rules of trade for
oilseeds and products.
By way of background, the oilseed processing industry in Canada was severely
impeded in its economic endeavours under the period of the mid to late 1980s.
Trade policies of competing nations that limited export market access and
encouraged subsidized competition severely hindered Canada's export trade in
oilseed products. As well, a domestic freight rate subsidy, the CROW rate,
encouraged the export of unprocessed oilseeds but discouraged the export trade
in processed oilseed products. The creation of the Canada-United States trade
agreement and the North American Free Trade Agreement and determination of the
CROW rate and later the repeal of the WGTA have resulted in a radical change in
the market dynamics for oilseeds in Canada and as the basis for substantial
capital investment in the industry in the 1990s.
Canada now has a world competitive oilseed processing industry capable of
competing with the most efficient competition anywhere in the world. Canadian
Oilseed farmers now have a domestic processing market for more than half their
oilseed crop production. This processing industry provides billions of dollars
of economic contribution to the Canadian economy every year. The oilseed
processing industry does not rely on government subsidies, but rather it looks
to government for the development of commercial policies that foster industry
growth and a level playing field in the rules of trade for oilseeds and
The members of COPA have serious concerns about the government's Wheat Board
legislation that would provide for the marketing of oilseeds under that agency.
We have expressed our opposition to the inclusion clause in a statement
presented to the House Standing Committee on Agriculture and we had earlier
made a statement on oilseed marketing to the minister's Grain Marketing Review
Panel. The members of COPA are opposed to the inclusion clause as contained in
Bill C-4 and continue to request that it be removed from the proposed
In this regard I have several points that clarify the rationale for our
industry's position. First, the inclusion clause is without constructive merit.
The inclusion clause proposes to substantially alter the commerce of oilseed
trade in Canada while failing to address the fundamental problems facing this
business, those being the challenge of crop competitiveness in the farm field
and the protectionist trade barriers in offshore markets. In fact, the
legislation sends the message that protectionism rather than liberalization
would enshrine the oilseed marketing regime of the future. There is no future
for oilseeds or oilseed processing in this scenario. Our industry has faced
protectionism and has experienced the benefits of liberalization. Only the
latter fosters growth and investment.
Second, the inclusion clause lacks the support of the industry. The minister's
Grain Marketing Panel accurately reflected the oilseed industry position on
this issue; that is, no fundamental change in the marketing system for oilseeds
is recommended. No producer or processor substantially invested in the oilseed
business in Canada is in support of the inclusion clause; all are opposed.
Third, the inclusion clause imposes an impediment to the industry. It places
market progress at risk. Market achievement for oilseeds and products in
continental North America since the advent of CUSTA, NAFTA and the repeal of
the WGTA are significant, from a market value of $100 million in 1985 to $1.2
billion in 1997, and most of this is because of market access to the U.S. food
and feed market. The U.S. marketplace is highly sensitized to our CWB
single-desk selling and we can state with certainty that the inclusion clause
is a matter of concern to both investors in this industry and the major
user/consumer groups within the U.S.A.. The threat of the CWB monopoly marketing
of oilseeds in Canada puts at risk both existing market gains and future plans
for expansion and growth of investment.
Fourth, the inclusion clause jeopardizes industry goals for trade
liberalization. The oilseed industry in Canada has struggled for more than two
decades in working with the Canadian trade negotiators in positioning a policy
of trade liberalization in oilseeds into those relevant negotiating forums, some
of those being the Cairns group, the APEC, the OECD, the World Trade
Organization. Together this industry and the Government of Canada are on the
verge of seeing those efforts materialize into world support for a global
proposal for a level playing field in oilseeds and products. The government's
proposal to provide for central desk selling of oilseeds represents a
redirection of Canada's intended trade policy in oilseeds and a potential
destabilizing challenge to Canada's trade negotiators.
Fifth is the producer-processor alliance. The oilseed industry in Canada has
been developed by a close working relationship between growers, processors and
exporters. This has been fundamental to the progress achieved in developing the
soybean business in Ontario and the canola, flax and sunflower business in the
Prairies. Personnel and industry funding has been provided in substantial
amounts to bring this industry to its current position as a world leader. The
inclusion clause, if activated, would superimpose the Canadian Wheat Board in
between all major participants in this business and compromise the essence of
those working relationships which are the success of the oilseed industry.
Sixth, we see an erosion of value-added processing. The oilseed industry in
Canada has attracted substantial investment in capital-intensive plant
operations in many provinces. As earlier indicated, more than 50 per cent of
all oilseed crops are processed domestically and sold locally or to export as
value-added vegetable oil and protein meal. This industry submits that this
would not have happened under the CWB single-desk selling monopoly. The
Canadian Wheat Board is all about the export of offshore sale of large volumes
of homogeneous supplies of unprocessed grain to foreign processors. Less than
10 per cent of all wheat produced here is also processed in Canada. The oilseed
industry is about the production and processing of higher value products with
increasingly distinct biotechnical and nutritional characteristics for exacting
market requirements, and mainly within North America for the significant
financial benefit of the entire Canadian economy. The two systems are clearly
Senator St. Germain: I gather all these major corporations that are listed here
are American corporations?
Mr. Broeska: They are not all American corporations. CanAmera Foods is 50 per
cent owned by Central Soya U.S.A. and 50 per cent in partnership with Manitoba
Pool Elevators and Saskatchewan Wheat Pool. Canbra Foods is a Canadian
corporation traded publicly on the Toronto Stock Exchange. ADM and Cargill have
head offices based in the U.S.A.
Senator St. Germain: I am not fearful of that. I am more concerned about the
legislation that we have, that should we narrow it down to two, say, as opposed
to having just four, that we have stronger legislation in regards to
competition tribunals and what have you. I am not fearful of this at all. I just
asked you that for straight information, sir.
Mr. Broeska: I can address that issue in a couple of ways. Of course, your
concern with competition and monopoly control is dealt with under different
legislation, but in terms of the existing ownership of this industry I can tell
you that all of the plants in Canada that came through the l970s and the 1980s
were either sold in financial duress or in desperation because those companies
were not large enough to face world competition.
We now have investors in this industry who are world-competitive. They own
processing facilities in the U.S.A., in Europe and in Asia. They are there for
the long term. They have invested substantially into Canada. They employ
Canadians and they buy Canadian oilseeds. They are fully invested for the
benefit of the Canadian economy.
Senator St. Germain: I agree with you; however, I feel we are a little bit weak
compared to our American neighbours in the area of necessary legislation to
control cartels, monopolies and what have you.
Basically, sir, if the inclusion clause was not part of this legislation, would
you be here today?
Mr. Broeska: No, sir, I would not.
The Chairman: Do you think it is possible that wheat prices some day may go up
to where the specialty crops are? Could competition achieve that?
Mr. Broeska: I am not a commodity price speculator. We can only hope, for the
benefit of our producers, that prices of those grains do rise to those levels.
The fear in the oilseed processing side of the industry is that at the farm
level of production, we are not competitive in terms of yield and in terms of
net return to producers. That is our greatest fear. In early 1996 we saw wheat
and barley prices spike and, disappointingly, saw canola acres drift away
because they were not capable of competing for that acreage and giving
producers that net return. That tells us that competitiveness at the field
level is not yet there.
Second, if you want to compare, say, the Canadian canola situation to the U.S.
soybean situation, soybeans in the U.S. and in southern Ontario are infinitely
more competitive at the farm level than is canola. The yield levels of soybeans
are such that the amount of oil production per acre from soybeans, which are
comprised of only 18 to 20 per cent oil, is equal to the oil that is being taken
off of the canola acres in Western Canada. But then when you combine that with
the revenue from the meal earned from the soybeans, it is an indication of how
aggressive and marginally competitive soybean growers are versus canola
The Chairman: You represent the flax industry as well?
Mr. Broeska: Our industry processes flax, but I do not represent the flax
industry as such. There are several organizations, the Flax Growers and the
Flax Council which represent the flax side of things.
The Chairman: Flax just last week hit the highest that I have heard of for a
long time at $11 a bushel.
Mr. Broeska: Yes, that is certainly right.
The Chairman: It is a much sought-after commodity on the Prairies right now for
Mr. Broeska: It most certainly is, and the acreage this year is expected to be
Senator Whelan: Just to follow up on Senator St. Germain's question, I know who
Archer Daniel Midland is and I know who Cargill is. Can you give me the
breakdown of the CanAmera Foods and ADM and Canbra Foods Ltd., what percentage
do they crush?
Mr. Broeska: CanAmera Foods is the largest processor in Canada. It processes
over 50 per cent of the soybeans and canola that is processed in Canada. They
have plants in the west and the east. They also have a very extensive refinery
CanAmera was formed by joint partnership of Central Soya U.S.A. which, in turn,
incidentally, is owned by the Eridania Beghin-Say of Paris. Central Soya Group
went into partnership with Manitoba Pool and Saskatchewan Wheat Pool to form
CanAmera. In so doing they not only combined the eastern and western crushing
capacity, they also purchased the edible oil division of what was formerly
Canada Packers. They essentially bought their marketplace and so rationalized
the industry from processing right through to the end refined product.
Canbra Foods is a publicly traded company. I believe that it is owned
approximately 50 per cent by Peter Pocklington in Alberta. The other 50 per
cent would be publicly traded on the Toronto Stock Exchange.
Cargill and ADM are private U.S. companies. ADM is traded publicly on the New
York Stock Exchange. Cargill is privately owned by the family.
Senator Whelan: Cargill can never be taken over by anybody?
Mr. Broeska: I would doubt that in their present structure.
Senator Whelan: Archer Daniel Midlands have the one plant that I know of in
Ontario, in Windsor.
Mr. Broeska: They have a crushing plant in Windsor and they have a vegetable oil
refinery in Windsor and, as you also know, they own a very extensive grain
collection system throughout the soybean and corn country in southern Ontario
as well. They are also developing port facilities in the St. Lawrence River
system for import and export of not only their processed product but also raw
Senator Whelan: How many oil crushers are there, say in Ontario, for canola that
is grown there and also the soybeans?
Mr. Broeska: There are two companies that process in Ontario, and there now are
only two plants, the CanAmera plant at Hamilton and the ADM plant at Windsor.
Both plants are dual line plants; that is, they will process both soybeans and
canola. Both Windsor and Hamilton process canola grown in Ontario, canola grown
in Western Canada, canola imported from the U.S.A., and canola imported from
Senator Whelan: You have heard me say this before, but your expressions that
regarding the inclusion-exclusion clause, and indeed my own first reaction, may
be somewhat unwarranted. I cannot believe that clause would someone to extent
of affecting their decision to come here. If the companies were doing such a
good job in marketing processing, et cetera, I can see that any producer group
would want to be included.
Mr. Broeska: That is our understanding of the position of the producers today.
They do not want to be included under the Wheat Board marketing legislation.
Senator Whelan: You probably have heard some discussion about the wheat
producers in Ontario?
Mr. Broeska: Yes.
Senator Whelan: The flour millers are not that big in that area. Archer Daniel
Midland is in there but the others are mostly small operators. They want to be
kept in the system. They do not want a two-price system. I can understand that.
If they know they will all receive the same price, there will be no outbidding
each other and forcing cheaper prices.
Mr. Broeska: That is the essence of the crushing side of the industry, too.
Currently, this industry processes not only Canadian canola grown from seed on
the Prairies and in Ontario but from seed which is imported from Europe and
from the U.S.A. So there is cross-border movement of seed and product. Some
have said that we have captured this large vegetable oil market in the U.S., and
it is true we have now taken over 7 per cent of the edible oil market in the
U.S. with our canola.
Do we not fear some form of retaliation from the soy industry? We do. However,
Canada is also a huge import market for U.S. canola grown in the Dakotas,
Montana, Idaho, Michigan. We are also a huge importer of soybean meal from the
U.S.A., 800,000 tonnes in 1997. Those kinds of trade flows, I think, keep the
balance in perspective in terms of free border market access.
Our fear under a controlled system is that we might impose some kind of border
controls on the import of oilseeds to, you know, protect the Canadian industry.
That I can tell you would cause more concern from the U.S. than any canola that
is being exported down there now.
Senator Whelan: I can remember when the United States of America had to impose
export controls because the Russians had bought soybeans, corn and everything,
with no controls, no knowledge of what was being exported, and the market was
shorted. They even put export controls on soybean meal to Canada at that time,
when we had been a steady customer. We were not going up and down, et cetera,
and we did negotiate a deal with United States of America to lift the export
control, but that was the closest I ever came to witnessing physical combat at
the Canadian Feed Manufacturers Association annual meeting here in Winnipeg.
The representative there was furious with us because we were trying to protect
our own producers. We had to do it because of what the United States of America
Mr. Broeska: The feed industry in Canada, despite the surplus canola meal and
the soybean meal that is grown here and produced here, is still highly
dependent on U.S. soybean meal imports.
The Chairman: In terms of the crushing plants, there seems to be some concern by
the producers here that not enough canola is grown to keep the plants going,
for instance, the Cargill plant near Saskatoon. Is that in operation now?
Mr. Broeska: The Cargill plant at Saskatoon is in operation now.
The Chairman: It is in operation?
Mr. Broeska: Yes.
The Chairman: Last fall it is was closed down?
Mr. Broeska: There have been some periodic closures. I believe the closure last
fall was also due to partly a rail problem. A train had derailed in their
unload house and caused a problem. Plants will choose periods of time for
maintenance when board and cash margins are narrow or slim or when, as they are
right now, board margins are quite negative. You will see extensive closures
from this point until the new crop is harvested but that is sort of the normal
Our concern is that if we want to build this industry, we must expand this crop.
Six million tonnes of canola will not do it with the crushing plants that are
in position now and with present export requirements. We need an
8-million-tonne crop. So we need at least a 25 to 30 per cent expansion in this
industry for the existing market demands and this is not counting our friends in
China who we expect will have a big impact on not only the Canadian but the
world oilseed market demand.
The Chairman: So security of supply is very, very important?
Mr. Broeska: It is very significant now.
Senator Spivak: Did you say that the net income to the producer is not yet what
you think it should be? I do not want to ask you what the return on investment
has been to any of these companies, but the Chairman points out periodically
that the return on investment for the producer has been 3 per cent and the net
income of the producer has not gone up. Since 1971 it is basically the same. I
wonder if you could comment on how through this wonderful activity and
investment and so forth, we could get a fairer share for the producer?
Mr. Broeska: That is a question that I can tell you is of foremost concern to
our industry. We are members on the canola side of the business, of the Canola
Council of Canada, along with all of the provincial canola-grower organizations
and all the groups which provide crop inputs. We work with plant breeders. We
work with agronomists and extension people. Our real concern is that, to
continue growing the industry, we must continue to get access to acres. In
order to continue to get access to acres, producers must be convinced there is
return in this business for them.
As I was saying to Mr. Whelan, the yield levels of our canola are not
competitive. They are not competitive at all ranges of prices with cereal
grains with which they have to compete for acres and they are not competitive
with soybeans, which is the major commodity with which we compete in North
America and in most offshore-traded markets. The ability to make our producers
competitive is going to require increased investment in plant breeding,
biotechnology, in agronomic extension work, so that producers can get more out
of their investment at the farm level.
Senator Spivak: That is true. I am sure that is accurate, but in terms of the
competitive aspect here, competition is supposed to be the best possible
solution. I mean we are discussing this whole question, but it must produce
better per tonne. Sure, it would be great if they would be more productive and
use all this new technology, but per tonne are they getting their fair share? I
know that the net income to processors and others has gone up substantially
more than the income to producers, and producers are certainly taking a risk.
Mr. Broeska: In the commodity business, of course, anybody who takes a position
takes a risk. That is the nature of oilseeds and vegetable oil and protein
meal. The prices that processors pay are the prices that are reflected on our
publicly traded exchanges. The Winnipeg Commodity Exchange reflects the value
of the seed. The Chicago Board of Trade reflects the value of the vegetable oil
and the protein meal. It is in those markets that producers and processors
trade and hedge and where the buyers also hedge their purchases. Those are the
price-determining boards that are used by buyers, whether North American or
world-wide and, basically, that is the price that people pay.
Senator Spivak: Sure, I understand that. I guess my comment is that the working
of the free market is not perfect if it does not yield a proper return to the
Mr. Broeska: I guess if we could get more out of the consumers, then of course
there would be more in it for processors and for producers. How do you do that
when you are competing against palm oil, soy oil, cottonseed oil, sun oil and
the whole range of vegetable oils in the marketplace.
Senator St. Germain: I look at the oil companies and the way they have dealt
with the price of gasoline. I am not thoroughly convinced that when we are
dealing strictly with a bunch of majors, be they Canadian, Polish German or
American, that the benefits ever feed back down to the producer level. I have
been in the beef business long enough to know that the price of meat keeps going
up in Safeway, but the price of my cattle, my calves, goes at about a buck per
pound no matter what is going on at the consumer level. I take issue with you
on that, sir.
Mr. Broeska: I know these processors personally and individually, and I know for
a fact that while they all belong to the Canadian Oilseed Processors
Association, they cut each other up intensively to get both seed for their
plant and market share for their oil and meal. There is not much doubt in my
mind that they are competitors because if they do not do the business then
somebody else will.
It is true that there is a substantial amount between the marketplace on the
shelf and what the consumer gets. I, too, was a producer at one point in my
dark history. It is a fact that there are costs in between, not the least of
which is our transportation cost. As we all know, after the Crow rate was gone
the cost of transporting product essentially doubled. That has been a
significant factor in what the producer chooses to grow or to attempt to grow
and the activity of processors in investing in these plants.
Senator Whelan: What Senator St-Germain did not tell you is that his chicken
prices do not reflect that in the same way as his beef prices.
Mr. Broeska: His chickens are a big market for our soybean meal and our canola
meal so I do not want to say anything about that.
Senator Whelan: I am responsible for an estate that has about 50 tonnes of
soybean in storage. I should have sold it last December but I was not paying
enough attention to it. I was looking after my duties as a senator for which we
are being counted absent by being here today. We are bad boys and girls, being
out here in the west hearing about Bill C-4!
I wanted to point out that I lost money on those soybeans because of APEC and,
how do you say, the corrupt financial world over there. We have lost millions
of dollars in the oilseed and grain businesses. The United States has lost
heavily because of mismanagement of their economics. So we have no control over
Mr. Broeska: That is very true. This industry, not only the oilseed industry but
the entire grain industry, should be looking very carefully at the Asia-Pacific
and the implications down the road. We have all pitted some very significant,
long-term plans on the basis of expansion in Asian markets and especially with
expectations about where China may go. That, I can tell you, is very seriously
impeding some of the investment decisions in the oilseed processing in this
Senator Whelan: I noticed in The Globe and Mail last week, that in Manitoba,
Agri-Foods Inc. has signed a $390-million deal to sell all of the crude canola
oil produced by its Ste. Agathe, Manitoba plant over the next 36 months. That
agreement has been signed with a company in Singapore.
The Chairman: That is very good news.
Senator Whelan: I thought it was good because we did the research and made it
The Chairman: Regarding competition, I would point out that we do have people
phoning from elevator companies, from oilseed crushers, asking for canola. I
wish somebody would be phoning to ask for some wheat.
The Chairman: Thank you, Mr. Broeska.
Our next group of witnesses are ready to proceed.
Mr. Kenneth Sigurdson: Mr. Chairman, my wife and I farm in the Swan River area
of Manitoba. We grow wheat, barley, canola, oats. I am a Manitoba Pool
Elevators' delegate. I am active in the National Farmers' Union. I am a strong
supporter of the Canadian Wheat Board, as I believe are most farmers in Western
Mr. Edward Cook: Mr. Chairman, I farm just east of Winnipeg at Dugald, Manitoba.
I am a fourth-generation farmer on a family farm that was established in 1878
by my great-grandfather.
Ms Lois Edie: We operate Edie Farms just east of Winnipeg. I operate a family
farm in partnership with my husband and my son. The farm has been operation
since 1873. We have raised dairy cattle, but now we are a straight grain
producer with wheat, canola and oats.
Ms Carol Masse: My husband Alec and I farm at Fannystelle, Manitoba. We raise
wheat, oats, barley, canola, field peas, flax and broiler chickens. We also run
a small business off our farm.
Mr. Andy Baker: I am from Beausejour, just north-east of Winnipeg. I farm with
my brother and our wives. We operate a grain farm producing wheat, oats,
canola, sunflower and flax. The farm will be 100 years old this year, its
Mr. Brad Mroz: My wife Tracy and I have three children. We farm about 5,100
acres of grain and oilseeds with my parents, my brothers and their families.
Our farm is located at Beausejour, Manitoba. All of our wheat and approximately
80 per cent of our barley is marketed through the Canadian Wheat Board.
I support the Canadian Wheat Board as a single seller for pure economic reasons.
I believe that the Canadian Wheat Board system, price-pooling, single-desk
selling, and the Canadian government guaranteed borrowings, along with our
Canadian system of quality control gives me the highest returns for my grain.
Mr. Sigurdson: In preparing this brief, I looked first at where we are now. The
orderly marketing system for grain has been an alliance between farmers,
government and co-operatives. That system has served both the nation and the
farmers very well. With the current government agenda of free trade,
deregulation and privatization, we see that system crumbling. The Western Grain
Transportation Act has been eliminated, rail transportation is being
deregulated, and railways can abandon branch lines at their discretion.
Large trans-nationals, such as ADM and ConAgra, are entering Canada. We, as well
as Saskatchewan Wheat Pool, are being privatized. We are left with real reasons
for concern after recent statements by the parliamentary secretary to
agriculture Mr. Harvard and by Mr. Goodale himself about the future of the
Canadian Wheat Board with Bill C-4. It seems to me that, by their actions, the
government is no longer committed to the Canadian Wheat Board.
Bill C-4 puts the Canadian Wheat Board at risk for a number of reasons. One is
loss of Crown agency status. With the election of a board of directors, the
Canadian Wheat Board loses its Crown agency status. There are no Crown agencies
with an elected board of directors. I believe this will allow the government to
withdraw its financial and political commitment to the Canadian Wheat Board.
We have already seen in the bill the lack of support for the adjustments to
initial payments. When the Canadian Wheat Board makes sales with other
countries, it will no longer be able to say it has the backing of the
Government of Canada behind it. I believe this is the first step in cutting
loose the Canadian Wheat Board.
The cash-buying provisions were mentioned by the pool elevators today, among
other organizations. I believe these provisions will destroy the producers'
confidence in price-pooling. The Wheat Board would be allowed to purchase grain
on a daily basis from farmers, grain companies or overseas sources. The
Canadian Wheat Board Commissioner, Lorne Hehn, estimated the contingency fund
could range in size to around $600 million annually. Certainly with this kind of
a tax on producers, the board will experience less and less political support
in the farming community. Really none of that is necessary because the
government could simply not have cash trading and continue to guarantee the
adjustments to the initial system.
With the inclusion-exclusion clause, I think it is highly unlikely that, under
the terms of NAFTA, grain will ever be added to the board. However, I believe
that the exclusion makes it very easy for the government or the board of
directors to exclude grains from the board. So the inclusion clause cannot be
used in my opinion to strengthen the Canadian Wheat Board, and the exclusion
provisions only serve to weaken and destroy the Canadian Wheat Board.
Regarding pooling periods of less than one year, certainly farmers will have
less confidence as they try to decide which pool to enter. It is currently run
on a yearly basis.
Much has been said about the powers of the elected board of directors. This
provision would give farmers some control, but Manitoba hog producers learned
how much control they had when the government simply pulled the monopoly away
from them. It is the government that signs the trade deals. It is the
government that is deregulating transportation, and it is the government that is
pulling their financial guarantees from the board. It is the same government
that is welcoming trans-nationals into Canada.
Certainly an elected board of directors will not be a harmonious group working
for the betterment of the Canadian Wheat Board or producers. Elections will be
highly politicized events with third-party advertising by the National Citizens
Coalition and some of the groups which have come before you at these hearings.
The board of directors will have access to market information that will be of a
highly confidential nature, and it would be very easy for those wanting to
destroy the board to use that marketing information for their own benefit or to
pass that information onto the trade. The board could be very easily undermined
I do not believe we should be holding elections with the potential of selling
out the multi-billion-dollar industry which is the Western Canada grain
industry. That is what will take place through such an election process. It
would only take one director to undermine the whole Canadian Wheat Board
operation if he so desired. What I see is that the government is making farmers
responsible for the board's ultimate failure.
I believe there are a number of environmental implications for where we are
heading in agriculture. In Manitoba we see corporate agriculture in the hog
operations such as Maple Leaf. The resulting sewage lagoons are threatening not
only our rural environment but our family farms. Corporations such as Cargill
and Monsanto are actively working to genetically alter crops and they want to
contract production directly with farmers.
The arrival of several large U.S.-based grain-handling giants with their system
of inland terminals means the abandonment of many branch lines. It seems ironic
that the government is signing agreements to cut fossil fuels and yet allowing
the railways to simply abandon lines.
At the back of my brief you will see printed the results of motions made at our
Grain Days meetings to seek withdrawal of Bill C-4. These are the meetings held
by the Canadian Wheat Board where farmers vote on various matters. You will see
that the motions against Bill C-4 were passed by a large majority at most of
the meetings. I will also point out that the meetings were supportive of the
Canadian Wheat Board in many cases.
In conclusion, many organizations have requested a major overhaul of this
legislation and have been ignored. Very few changes have been made. History
tells us that when government makes such fundamental changes to the nature of a
marketing agency, they conduct a plebiscite with producers to determine what
they think and what they feel. I believe that this is a fundamental change.
I know Mr. Whelan used to conduct votes to determine if farmers wanted a certain
marketing plan. I believe this is a fundamental change that should require a
I believe the trade policy and deregulation of transportation will continue to
undermine the Canadian Wheat Board. The Senate has a responsibility to see that
the Canadian Wheat Board, which is envied by other countries' farmers, is not
undermined by this legislature. Bill C-4 is flawed legislation that really
should be withdrawn.
Mr. Cook: I want to give the committee some of my thoughts on how Bill C-4 will
affect my farming operation. Bill C-4 shows the total disrespect the government
towards the agriculture industry in Western Canada. Even though the government
was presented with views and opinions and suggestions by the industry, it never
implemented any of the suggested changes. Farmers have been treated with
contempt throughout the whole process.
Second, I am concerned that the inclusion clause threatens my ability to manage
the financial risk of my farm business. When I talk about financial risk, I am
talking about the ability to forward-sell my non-board crops, such as canola,
flax, oats and rye.
For example, I have the ability to forward-sell part or all of my oat production
into the future through the futures market or deferred delivery contracts. This
gives me many options, such as using the commodity exchanges of Winnipeg and
Chicago or any number of the major line companies. I can sell directly to a
processor whether it be in Western Canada, the U.S. or any other part of the
The inclusion clause could potentially be used to put oats back under the
control of the CWB. If that happened, I would lose my option to market my oat
crop where, when and how I choose. If I lose that option, it becomes extremely
hard for me to manage my financial risk in my oat production. It takes away my
ability to go to my financial institution and tell them that I have pre-sold a
certain value of oats for delivery during a specific time period. I would lose
all of my marketing options. If oats are put under the control of the board,
then I must wait for the CWB to tell me when I can deliver and how much I can
deliver. I will also have to wait to receive all of my money since the board
only pays a portion up front when delivery occurs, with the remainder being
paid sometime in the future. The problem is that I never know for sure how much
I will actually receive for my production.
Another problem with the inclusion clause is the risk that a group which does
not represent the majority of farmers who grow a particular crop, may try to
bring that crop under the CWB monopoly. This could result in a fight between
individual farmers that could be lengthy and bitter with no real winners. If
the question comes to a vote, the voting procedures may skew the results in
favour of the Canadian Wheat Board.
Regarding monopoly, I feel there should be a weighted vote to account for the
greater impact on some farmers who produce more of a particular crop than on
other farmers for whom the production of that crop represents a small part of
In closing, I would say that, on my farm, I need all the options that are
presently available. I cannot afford to be restricted in any way that affects
my ability to manage my financial risk.
M Edie: Honourable senators, I want to review a little history to see where we
are now and what that history tells us. I farm in Springfield from where, in
1876, 857 bushels of Fife wheat went by barge to Duluth. Another 4,000 bushels
of American wheat went into Ontario to re-establish the wheat crop there; that
was a complete failure. That is a little reminder now of that helping hand from
Springfield to Ontario.
Wheat, in 1886, was 90 cents per bushel. In 1998, it is $3.23 net per bushel
after elevator costs. I ask the question, have we come a long way? From 90
cents to $3.23?
In 1920, the United Farmers of Manitoba were organized. The farmers' desire to
be heard and the requirements for a voice in the development of government and
agricultural fiscal policies was imperative. That was 1920. We are still asking
In Springfield, wagons of wheat were loaded into rail boxcars from a loading
platform to save the cost of elevator handling. This was 1920. We are still
trying to save costs.
In 1935, honeybees became the mortgage lifters when, through dry years, clover
grew in abundance and honey was 8 cents per pound. Today, honey brings 17 times
that much in the marketplace. Wheat brings 3.5 times as much.
Why has honey done so much better than wheat in the marketplace in the last 50
years? It is not under monopoly marketing by the federal government. It does
not pay freight costs to seaport nor demurrage costs for ships. It does not pay
for expensive export permits for the United States' market, as is required for
wheat in Manitoba, Saskatchewan, Alberta, and the Peace region. It does not have
its company books so confidential that the accountant's information cannot be
shared with its silent shareholders or be scrutinized by public audit. All
those requirements are made of the wheat industry.
In 1935, the Canadian Wheat Board Act was passed in Ottawa. It provided
marketing control of wheat in Western Canada, encouraging the exporting of
large volumes of grain with little emphasis on flour mills and value-added
industry. The mills were built in Eastern Canada and Ontario producers were
given the privilege of direct-sell to the mills. Later, the Ontario producers
formed the Ontario Wheat Producers Marketing Board. They had direct authority
for domestic marketing of wheat with the Canadian Wheat Board authority for
export only. That was not so in Western Canada.
During the years following World War II, the federal government realized that
western wheat and barley provided an extra-cheap food source with which to
barter in the international market and to subsidize these markets with a food
commodity where they deemed it necessary. The grain companies became the
collection agencies and were treated under Canadian Wheat Board jurisdiction
with accredited export permit privileges and interest rate advances in grain
movements. Those who moved the greatest volume in rail cars were favoured in
car allocation. This still has not been resolved. It is important to know that
in the Canadian Wheat Board Act, there is an "A" division governing
Manitoba, Saskatchewan, Alberta and the Peace, and a "B" division
governing Ontario producers.
In Ontario there are no primary elevator and handling/collecting charges. In the
Winnipeg area today, per tonne of grain, elevation adjustments are: Less
elevation, $10.09; less cleaning, $3.40; less rail freight, Thunder Bay,
$18.40; Thunder Bay to seaport -- this is a new one -- less freight adjustment
factor, $11.55. Those costs total at $43.44 for every tonne of wheat that is
moved in Winnipeg.
In this heavily regulated, over-$6.6-billion industry with administration costs
over $1 million per year and no permitted input by the shareholders, there is
an increasing producer dissatisfaction. Existing federal government monopoly
regulations inhibit producers in Western Canada from acquiring the best price
in the marketplace. This also prevents growth in value-added processing of
wheat. We still have very little here in the west.
We now exist in a global community where product can be priced by computer.
Honourable senators, Bill C-4 should be tabled until Justice Estey's Grain
Transportation Review is presented. He will have transportation recommendations
that will affect the act in a positive way.
The minister of the Canadian Wheat Board continues to be appointed by the
federal government with total jurisdiction and final authority. There is no
change here. This person requires an agriculture degree. That should be the top
of the list. The additional appointed and elected directors will create an
additional $1.5 million to $2 million in administrative costs. The present
advisors have stated that they represent the many permit-holders in their area.
It is too large. Other companies are reducing boards. Why is this a necessary
With amendments to Bill C-4, the inclusion and exclusion clauses must be
removed. The western farm economy has been able to sustain itself with a "honey"
of a crop -- canola, for one. Today it is the "mortgage lifter."
Oats, no longer under the Wheat Board jurisdiction, have become a value-added
crop without severe restrictions. They can be marketed at the producer's
timetable and are finding their way into the world marketplace. Oats also feed
our hungry children in our cities.
The NAFTA agreement now dictates the grain economy of Western Canada. Future
Canadian Wheat Board jurisdiction should be drafted to offshore
responsibilities. The price of wheat is a monitor for the Canadian agriculture
economy. It dictates progress and the economic well-being in the communities.
Present low producer prices with increasing input costs mean fewer machinery
sales, fewer jobs and more farm bankruptcies.
By the year 2000 the new Canadian Wheat Board should become a private company
with a highly qualified CEO like Chrysler, and five boards of directors. The
shareholders would be the farmers of Ontario and Western Canada who acquire
shares through their permit books and production. They would have an actual say
in the decision process. The computer department would package marketing
hardware. The weather forecast department would sell six-month advance
forecasting packs, and the transport division would specialize in satellite
communication, rather than expensive legal costs.
In future decisions, the major preference of actual producers as expressed by a
democratic vote is no longer a reality. We remember the barley and the Quebec
votes. Remember, Springfield saved Ontario wheat producers in 1876. The bottom
line -- if it is good enough for Ontario, it is good enough for Manitoba,
Saskatchewan, Alberta and the Peace. There should be no difference in wheat
marketing regulations. We must get real.
Ms Masse: The area we farm in, the Red River Valley, is considered a very
successful area for grain farming with good soil and very progressive and
skilled farmers. Yet it is very rare to find a farm family that does not have
an additional business and/or one or two adults working off the farm. This
double and triple workload has been very hard on farm families and on women in
particular. They usually have an outside job, work on the farm, and spend a lot
of time and energy transporting children to various activities.
Because the farm alone cannot support families, no matter how smart and how hard
the family works at farming, people are burning out. You do not meet them at
your hearings and you do not get letters from them. They are just too busy
trying to survive another day. The young people look at their parents' life and
decide that, although many of them love farming itself, they cannot make a
living doing it and they leave. Of course, they are not willing to work two
jobs and only be paid for the off-farm one.
In Manitoba the loss of the Crow has further greatly lowered the price of grain
and the marketing options. People who live on farms are human beings who are
under unbearable stress. The majority need and want a strong and secure
Canadian Wheat Board.
The Canadian Wheat Board has provided cost-effective risk management, stability,
and fair and equal access to the export market for Canadian farm families. For
less than 5 cents a bushel we have been able to hire an excellent team of
experts to maximize our profits and minimize our risk. The Canadian Wheat Board
is a rock that farm families desperately need in these difficult times of rapid
change. World grain trade is dominated by four or five large multinational
companies. The individual family farm cannot compete with these giants unless
we continue to do it together using the power of our own marketing agency, the
Canadian Wheat Board. Bill C-4 weakens the Canadian Wheat Board in the
Cash buying will destroy price-pooling, an essential component to an effective
wheat board and essential for some level of financial stability on the family
farm. It is a de facto dual market. The current system of price-pooling is
supported by the majority of farmers. Together with forward selling,
price-pooling is an effective and inexpensive risk management tool. Commodity
marketing hedging is more expensive, and therefore price-pooling should be the
risk management tool used.
The contingency fund -- whoever thought of this must have thought that farmers
grow money trees in their shelter belts. Farmers do not have any money to put
into a contingency fund. It is estimated a contingency fund would cost farmers
between $50 million to $100 million. The government has never had to pay on a
guarantee on an interim payment, so the government would not be saving any
money. Why place this unreasonable burden on farmers?
The pamphlet "Changing the Canadian Wheat Board" put out by the
government suggests that having the flexibility to cash out of the market pool
early and to cash-sell seems to me a short-term gain for long-term pain. The
farmer gets a lower price and the long-term profit goes down. To be willing to
do so reflects the tremendous financial burden farmers are already under.
As growers of oats, we are pleased to see the inclusion clause in Bill C-4. We
have been aware of the advantages of single-desk selling and have felt the
disadvantage since oats were removed from the Canadian Wheat Board. As farmers,
we never got to vote on this, so we are pleased to see a recognition of the
democratic rights of farmers in this bill.
The pamphlet states that these new provisions are balanced and fair in both
ways, either for exclusion or inclusion and that, in either case, the authority
rests where it belongs, with the farmers.
I would urge the senators to use their experience and knowledge to see that the
formal wording of the bill can deliver this promise in practice.
In conclusion, I would ask the senators to reflect the wishes and needs of farm
families to have a strong and effective Canadian Wheat Board by amending Bill
C-4 to keep our traditional price-pooling system, with no cash-buying, and to
have the Canadian government continue to guarantee initial adjusted prices with
no direct or indirect farmer-funded contingency fund.
Mr. Baker: I did not say at the outset that I was a big supporter of the
Canadian Wheat Board, but I am. I did not want to use anybody else's figure to
tell you why so, in a rush, I went back and took my net farm income figures for
nine years. A study was done of the wheat board; you are all familiar with it, I
am sure. Several professors from universities in Saskatchewan and Alberta went
into the Wheat Board's books and looked at their sales for the previous 15
years and compared them to the open market. They found there was a net benefit
of $13.35 per tonne on wheat sold through the board.
I then compared that to what I had sold, which was relatively easy. I just went
to my Wheat Board permit book, multiplied the numbers by the benefit, and then
put that down as a percentage of the net farm income. It resulted in a 17.4 per
cent increase in my net farm income. That is why I am here today.
I am here to tell you that the added 17.4 per cent in my net farm income is
extremely important to me and it should be to you as legislators sitting in the
Senate. It should be important to all Canadians because that money did not come
from Canadians. It did not come from the Government of Canada. It came from an
export market and it was brought into the country. If we lost that money,
obviously it would have to come from somewhere or I would have that much less
money to spend.
Some of the earlier presenters talked about what things are like in the U.S. I
was at my parents' home in town the other day, watching a program on cable
television all about the American farmers in the Red River Valley. About 50 per
cent of them will have trouble getting operating credit from their bankers this
year. The Red River Valley is a perfect place to look for comparisons because
we, too, farm the same valley. However, we have something they do not have and
that is the Wheat Board. Obviously it is a major benefit to us. I do have the
numbers here and I have enough copies to pass them around to you.
I did not want to be the one to come here and say that I am against change, that
we should scrap the bill and to ask what was wrong with the way the board was
operating. Sure, I may not like some of the appointments that are made, but
when it comes down to it, this is one of the world's largest exporters of
wheat. Their biggest competitor, Cargill, is one of the world's largest
exporters of wheat. We have been told the board operates unlike any other and
that we must change it; it is not the same as some board of directors here or
Cargill is not also totally different from other companies. If you want to find
out what is in Cargill's books, though, it is totally impossible.
I did not come here to say scrap the bill, but everybody else seems to be saying
that, so maybe it is not such a bad thing to scrap it. Personally I do not
think it will happen. We will see some change in the way farmers are elected to
the board. Then let us do that. Why are we arguing about inclusion and
exclusion and a contingency fund? Let us elect the board. They will decide
whether we need a contingency fund. They will decide what gets included. If
there are enough farmers there to vote to include something, we will include
it. If there are enough farmers to get rid of wheat from the board, we will get
rid of wheat from the board.
It is plain and simple. Why are we spending all this energy arguing over things
that we can settle by doing just one or two things? We can either leave the
board the way it is now -- and it is operating just fine; they are returning a
heck of a pile to my pocket -- or we can make the changes to the board of the
We have to keep the government guarantee; there is no question. We will have
five appointed government directors, from what I have heard, but let us keep
the government guarantee. Let us elect that board of directors and they can
make changes to the Wheat Board. Why are we looking at legislation and spending
time arguing with each other about how it should or should not be?
Mr. Mroz: Honourable senators, Bill C-4 revokes the federal government
guarantees on Canadian Wheat Board initial price adjustments. The setting up of
a contingency fund to replace this government guarantee only adds to farmers'
costs and puts farmers at greater risk during global trade wars, similar to
those which devastated Western Canadian agriculture from 1985 until the early
The United States Government and the European Union still have and will continue
to use taxpayer-funded export subsidies. The government guarantee of Canadian
Wheat Board prices borrowings, operations and credit sales are vital to the
Canadian Wheat Board and will save farmers millions of dollars annually.
The Canadian Wheat Board's partnership with the federal government earns farmers
over $60 million annually. This savings more than covers the total cost of
operating the Canadian Wheat Board each year in administration costs. Each year
the Canadian Wheat Board borrows about $6 billion that it uses to pay farmers
for their wheat while it waits for payments from the customers. To put this
into perspective, consider that the entire Canadian money market is worth about
$30 billion to $35 billion. The Canadian Wheat Board's $2 billion worth of
borrowings on New York money markets make it the second biggest Canadian
borrower behind only the federal government and it borrows at federal
The initial price adjustments have not incurred a deficit in the Canadian Wheat
Board's 61-year history. Based on this performance, there is very little risk
to the Government of Canada, therefore Bill C-4 should not amend this section
of the Canadian Wheat Board Act. As well, the section of Bill C-4 which allows
for the creation of a contingency fund should be deleted.
On the issue of governance, as far as elections go, the only way to elect
directors who run for the Canadian Wheat Board should be through a delegate
system. I believe that those directors would make the right decisions as far as
changes to the Wheat Board if any are required. I also believe trying to make
the changes here ahead of time, before these farmers are elected, is not the
right way to do things.
I support the issue of the inclusion clause. In a democratic way, it would be
the only way for farmers to decide which crops should be marketed through the
Canadian Wheat Board. The Canadian Wheat Board is their marketing agency, and
those producers elected should have the right, when representing farmers
properly, to use the inclusion clause to include crops if they so wish. Without
that inclusion clause, I do not think this legislation would provide a fair way
to go about making changes.
Senator Whelan: A comment to the representative from Swan River, I visited there
in 1974 and I have been famous ever since for my green Stetson which I received
there. I like to brag about how well I know my country Canada.
Five members of your panel are supporting the principle of the Canadian Wheat
Board. Of course, I have always been a strong supporter that farmers should
have some say or should elect someone to have a say for them in supporting
their product in the marketplace.
Your comments have been refreshing. You are individuals, explaining your own
thoughts. To the young man who wants the free market to look after itself, that
may be commendable, too. You said that the head of the Wheat Board should at
least have a degree from an agriculture college. I have never had one but I do
not think I have done too badly for Canada.
Ms Edie: That was my comment. We feel that position is very important and the
person should have some agricultural knowledge. Today a doctor would not be
allowed to practise without his degree in medicine. Within education today,
people are required to have university degrees. Why not expect a knowledge of
agriculture from the person who holds this important position. That is why that
statement was made.
Senator Whelan: I agree. But Lorne Hehn, who is head of the Canadian Wheat
Board, is a farmer. I knew Forrest Hetland, who was a farmer, et cetera. He
went all over the world representing the Canadian Wheat Board, as have other
people there who have had agriculture backgrounds. I do not want to downgrade
agriculture degrees. I was very lucky as a first-year Minister of Agriculture
that every one of my officials were agriculture college graduates. Some of them
had their Ph.D. from Michigan or Wisconsin, but they knew agriculture. They
were not from Treasury Board. They were not from Finance. They loved
When I first went to the FAO, the Food and Agriculture Organization of the
United Nations, I was the only Minister of Agriculture who had an agriculture
background out of 131 representatives present.
Mr. Sigurdson: The last time I remember Senator Whelan coming to Swan River, he
was in a parade and it rained about more than two inches that day. He was
thoroughly soaked. He knows the kind of downpours we can get in Swan River.
About giving the farmers more power, I see that farmers with the current system
have a lot of power. We have had a system which has operated between
co-operatives. It has been an alliance with the federal government. As I see
it, that alliance is now being broken down by deregulation of transportation,
by the loss of the WGTA, by rail line abandonment and so on. In the new WTO
talks, the government may have already given up things like differential
pricing and state trading agencies.
Simply putting people on a board does not give them power. The trade deals, the
government policies on transportation, those are the things that will affect
the board, not simply putting people on the board. I believe farmers really
could be put on that board and take the fall for the board's failure.
The Chairman: Mr. Sigurdson, I understood you suggesting we kill the bill.
Mr. Sigurdson: Yes. It is like I said, organizations have made presentations
asking for a major overhaul of this legislation, such as the advisory committee
to the Canadian Wheat Board. The government simply views those who ask for
changes as supporters of the legislation and they go on their merry way. They
make no changes.
I do not want to be classified as a supporter of the legislation by asking for
changes to it. That is the game the government is being playing. I do not see
support in the farm community for this bill. As I pointed out, at the advisory
committee meetings, at the Grain Days meetings, farmers voted overwhelmingly to
withdraw the bill, as has been suggested by groups such as the National Farmers'
Union and the advisory committee.
Senator Spivak: I share the concern of those who are worried about this bill,
particularly in the areas that you have mentioned, Mr. Sigurdson, being the
World Trade Organization agreements, the guarantees, and the divisiveness that
might result in the election of directors when there is a minority who are
opposed to the Wheat Board and its current operation. They want dual marketing
against those who want to support the Wheat Board.
The chances of killing this bill are probably zero -- not probably; they are
zero. We are looking at how we can improve it. The majority of people here
support the Wheat Board, including the senators, but we may have different
opinions as to how that operation could be improved.
What particular elements do you see that could save this piece of legislation or
could mitigate the effects of what is happening. You have mentioned the
contingency fund, and I agree the contingency is just a terrible thing.
Mr. Sigurdson: The major thrust of this legislation, in my view, contains bad
effects. I outlined them in my brief. One is the loss of Crown agency status.
If the Wheat Board can no longer go to the government or if the government is
cutting the board loose from government, then the board, when it makes sales,
can no longer claim the support of the Government of Canada.
There may be ways to cover that. You could probably elect delegates and have the
minister appoint a board of directors from the delegates and then it would
still remain a Crown corporation under those terms.
I believe the cash-buying provisions do not need to be there. They are not
supported by anyone whom I have heard here today. On the contingency fund,
there will be an uproar in rural Canada when farmers find that cost is being
deducted from their income.
On inclusion and exclusion, I really do not feel that is the big deal it has
been blown up to be. With the present direction of government policy toward
deregulation, privatization and free trade and NAFTA, we would have to provide
compensation to multi-national grain traders if we were to include grain under
the board. So I do not think grain will be included under the board, even though
I would see that as a good thing personally. I see the exclusion provisions as
being very harmful.
You could remove any kind, class or quality of grain out of the board. It would
not require a vote under this legislation. So you could take unregistered
wheats, for instance, and not have them under board jurisdictions. So you would
have a dual market set-up in that situation.
Pooling periods of less than a year will destroy confidence in the whole concept
of pooling. If you have quarterly pools, then farmers do not deliver to the
board because they think the prices may be low in that quarter. They will try
to jump into another pooling. I believe pooling should remain on an annual
Those are the major concerns. I do not see the need for negotiable producer
certificates. I think the board could issue advances on the final payment and
get money out to farmers in a quicker fashion in that way.
I do not know if you can tackle all those areas and I do not think you can claim
to have fixed a piece of this legislation by fixing one part of it.
Mr. Baker: I did not make myself clear when I was talking about the elected
board of directors, that they can choose to include a grain in the Wheat Board.
Obviously, I should have said they can decide to hold a plebiscite so the
farmers will decide. That is a major decision to make and the farmers can do
On this legislation, why do we need to decide anything now as far as a
contingency fund? I agree it is totally unnecessary. I do not even know why it
was put in there. Was it designed to start this argument? We are arguing
unnecessarily. We should concentrate on something that will be productive. If
we do have to go the route of electing a board of directors or the delegate
system, let us figure out the best way to do that and let us get it done. Give
the directors some time to get used to operating under their new function at
the Wheat Board and then they can start making the changes that farmers may
Mr. Edie: For information at the table, today Sask Pool bought all of the shares
of CanAmera. Also, Ontario producers have asked for cash in their negotiations,
which is rather interesting. We are sitting here at the table talking about
what we have been doing for the last 30 years in Canada. The two women, it is
rather interesting, are also saying how difficult it is on the farm with the
economy at the present time.
I am saying let us look at the economy. Has it worked well? I disagree with this
gentleman to my left very much. My books certainly are different than his in
the wheat marketing process that we have at the present time. We must have
changes. It has been pointed out that the Canadian Wheat Board has served us
well. These changes will be made in final analysis by the minister. We will be
the recipients of the decisions, as we have been in the past.
While I am speaking, I remember Mr. Whelan as Minister of Agriculture. He was
one of our best, but I also remember that he put canola crushing plants in
Ontario when we wanted them in Western Canada. That is just canola.
Senator Whelan: I remember the Manitoba co-operative. I wrote them a letter
because we did not put one penny in that crushing plant. We helped the united
co-operatives build the grain elevator, but we never put a penny in the
crushing plant in Windsor. That was built by Unilever and Maple Leaf at the
time. Now it belongs to Archie Daniel Midland. His prime minister sold the grain
elevator to Archie Daniel Midland, too.
The Chairman: We can all bring numbers. For point of interest, the Saskatchewan
rural municipalities did a comparison on an 1,100 acre farm in Saskatchewan
producing wheat and durum, with 1,100 acre farm in North Dakota producing wheat
and durum. The net benefit to the North Dakota farmer was $40,000 more than the
Canadian. That was done by the SARM of Saskatchewan. If we can get those kinds
of prices on wheat -- I live right next to the border -- I will be very
The Chairman: There may be flood problems down in Grand Forks.
Senator Stratton, if historically your return on your investment since 1972 has
been and is 3 per cent, would you not want to try something else to improve
that bottom line?
Mr. Edie: That is right.
Senator Stratton: That is fundamentally my question. If we have not gone
anywhere in 25 or 26 years, surely it is time to try something else.
Mr. Sigurdson: It is ironic that people are suggesting we try something
different. Organizations such as the Western Wheat Growers were advocating the
elimination of the Western Grain Transportation Act, for example. On my farm,
with the pooling changes and so on,, it now costs me an additional 85 to 95
cents per bushel to ship out my grain. In many years, that is my whole net
income. So trying something different is good if it is beneficial and not
I would imagine that SARM study would include a lot of government money in the
North Dakota figures. I understand with the new farm program in the United
States, when a farmer puts his crop in the ground he gets about $30 an acre in
government support just to do that. I do not think it is meaningful to compare
some of these things. There is a huge domestic U.S. market that consumes about
50 per cent of the product. If you had some kind of an open border between
Canada and the U.S., it would simply cause the price to drop down; there really
would be no advantage. The very large trans-nationals of this world would be
the ones doing the trading, the companies like ADM and ConAgra who are now
setting up in Canada, anticipating that to happen in the future.
Senator Stratton: Sask Pool is doing the same.
Mr. Sigurdson: Sask Pool is no longer a co-operative. It is now a private
company. Yes, that is true, they are doing the same.
Mr. Baker: About the numbers from my farm, I used the study that is readily
available. You can pick it up and you can look at it. Then I applied my
numbers. I will give them to you. If you want to check my books, that is not a
problem. You can come to my place and I would be more than happy to open my
books. That is all I was saying about my numbers.
The numbers you are using include many program benefits received by U.S. farmers
which we do not have. I said that we have something here that the U.S. farmers
do not have, and it is the Canadian Wheat Board, and it is a benefit to us.
We also talked about the votes and the weighted vote issue. I was kind of unsure
about weighted votes. Were we talking about the number of acres you have
produced or the number of acres you have that makes you a successful farmer? Or
is it the debt-equity ratio on your farm that makes you successful?
This argument about weighted votes could become just that -- a big argument. You
are a producer; you get a vote.
Senator Spivak: It seems to me that, in Manitoba particularly, changes in the
rail transportation are having more of an impact than anything that could be
done to change the Wheat Board. There has been tremendous impact. I wondered
whether anybody had made a presentation to the Estey commission?
Mr. Sigurdson: I do not know how to do that, for one thing. I guess the whole
process will not be a public one. You can simply send a written presentation to
Mr. Estey. I understand that he has had all the meetings he wants with farm
Senator Spivak: I did not realize that.
Mr. Sigurdson: It is a very serious issue. I live on a branch line off of which
there are produced something like 15 million bushels of grain. If we start
trucking that grain out of the Swan River Valley we will pound out the roads
and use tremendous amount of fossil fuels. None of this is making any sense.
Mr. Mroz: Yes, I would make a presentation to Mr. Estey if he would come out to
Western Canada and give us the opportunity. I came to this hearing. I came to
the Bill C-72 hearings. I would come to see Mr. Estey if he would come out to
listen to us. I cannot afford to go to Ottawa, but if he would come out here,
yes, I would see him.
As far as raising our net income, it is ironic to see that the industry, the
grain commodity exchange, and everyone is here, and all they are doing is
complaining about the inclusion clause. That tells me that the Wheat Board, if
it had a chance and if farmers wanted it, would give farmers the right to
decide to include a crop under their jurisdiction, to be sold through the Wheat
Board. Possibly they could get more money selling these crops to the industry.
I think industry is a little worried that farmers might make more money and that
the industry might lose some money. Possibly that is one way for us to increase
our net profits. Whatever you do, do not take out that inclusion clause because
then we have no hope of standing up to these multi-nationals and these
You can see them all lined up here. Every one of them is paid to write speeches.
Every one is paid to represent somebody. It all comes out of my canola cheque
and my flax cheque and my oats cheque. I have not got time to pay for all these
people. Let us get rid of them. Let the Wheat Board sell my grain. I will have
less administration costs. They will borrow money and pay for the administration
charges. All these people are worried about their jobs and about whether I, as
a farmer, will possibly charge them an extra dime per bushel and it will come
out of their net return. I think that might work.
Senator Spivak: They are not getting a 3 per cent return on their investment.
The Chairman: Thank you all for appearing today. To this point we have heard 92
individual presentations from farmers. We have heard from 37 organizations and
the three Ministers of Agriculture. It may not be an easy job to bring all of
these different ideas to conclusion, but we certainly have listened.