Proceedings of the Standing Senate Committee on Agriculture and
Issue 39 - Evidence
OTTAWA, Thursday, June 3, 1999
The Standing Senate Committee on Agriculture and Forestry met this day at 9:00
a.m. to study the present state and future of agriculture in Canada,
consideration of the impact of international trade issues on farm income.
Senator Joyce Fairbairn (Acting Chairman) in the Chair.
The Acting Chairman: We have three groups today representing the barley growers,
the oilseed processors and the canola growers. We thank you very much for
making the effort to come here.
We have been having a series of meetings on trade issues, their effect on farm
income and other related issues. We are hoping we can produce a paper as a
result of these hearings that would be of some assistance and interest to the
two ministers chiefly involved in the World Trade Organization negotiations.
The talks will begin in the fall with Mr. Vanclief and Mr. Marchi, and what you
have to tell us today will be of great interest and certainly help us in
preparing this document.
We will proceed with each of you giving a presentation and then the senators can
raise their questions at the end of those presentations.
Mr. Greg Rockafellow, President, Western Barley Growers Association: On behalf
of the Western Barley Growers Association, I should like to express our thanks
to the Standing Senate Committee on Agriculture and Forestry for this
opportunity to express our views regarding what outcomes of the negotiations of
the WTO would further the growth of the Canadian industry.
I think a more realistic question should be asked: How is Canadian agriculture
going to have to adapt and change to remain competitive in this changing world?
As we move forward towards a world that has no global boundaries, will the
adaptation and evolution of the Canadian agriculture industry be modelled on
internal cooperation or external conflict?
Over the past year, the world has seen a glimpse of what the two largest
signatories to the WTO are going to bring to the table. With Agenda 2000, the
European Union will remove export subsidies and replace them with direct
payments to producers, which allows them to be more aware of the world price
and perhaps to be legitimately able to trade on the world market. Reforms will
also attempt to force the EU definitions of environmentalism and animal welfare
onto the rest of the world in order to secure much needed taxpayer funds to
finance agriculture and to force the rest of the world to play with a new set
of rules that may hinder our competitiveness.
North American producers are going to be jeopardized when the world's consumers
are given the choice between a subsidized European food system that disallows,
by their definition or perception, over-fertilization and the use of GMOs,
hormones in beef and other technological advances, and our use of technology,
which does provide the world with a safe, low cost food source. Sound science
may have nothing to do with what type of food system the world's consumers are
willing to pay for. Perception may be more important than reality when we start
discussing environmental issues.
During the last year and a half, Mr. Meyer and I were able to sit in a meeting
with Dr. Fischler, Commissioner for agriculture for the European Union, when he
was in Winnipeg last July. Although he has been farming heavily in Canada for
over 25 years, Mr. Meyer has a European background, and I think he has had a
taste of European culture and has a good sense of the beliefs and thinking
regarding agriculture of consumers and farmers in other parts of the world.
I think as we go through our report here we want to generate the impression that
difficulties in agriculture are not just Canadian: they are global. Perhaps Mr.
Meyer would help me out here and participate with some of his thoughts.
Mr. Leo Meyer, Vice-President, Western Barley Growers Association: Honourable
senators, thank you for inviting us to be here with the committee. We
appreciate the opportunity to have an open dialogue with you. Mr. Rockafellow
and I just barely parked our seeders. Of course, some of us facing difficult
weather are still seeding in Western Canada. We want you to understand that even
though we are engaged in whatever we do on a daily basis on our farms, we come
here because we are very concerned about this issue.
As we move forward, more trade is probably one of the single most important
issues we have to deal with. However, that topic also includes GMOs, the
environment, sustainability in agriculture and the question of how we produce
the food. Those are, in essence, the most important things you face in
agriculture for the future.
I think things are going to be significantly different for agriculture in the
future. I think we are going to have a much more consumer-driven agricultural
system than we have had in the past. In other words, in the future, the
consumer will tell us what they want to eat. The situation will not be that
farmers produce food and then somebody has to sell that food to consumers who
may be unwilling to buy it because of certain circumstances involved in the
production of that food.
We want you to look at us as people who understand or are beginning to
understand that. We are not here to tell you that this or that has to happen;
nobody has those definite, final answers right now. We are very open-minded, we
are here to engage in this dialogue and we want you to see us as willing
participants in this.
Earlier, Mr. Rockafellow mentioned European subsidies. In Europe, what exactly
constitutes a subsidy can be difficult to define, as I guess it can be in
different places around the globe. We said that Europe is willing to reduce
their subsidies, but what they are actually doing under Agenda 2000 is lowering
the level of their intervention price, what we would call a floor price, to a
different plateau. They are lowering it in the neighbourhood of 20 per cent.
Actually, it will be less than 20 per cent. When we met recently, Mr. Fischler
said that they will have to compromise on that in order to keep everybody at
the table, so it is not going to be what the Agenda 2000 initially had in mind.
As you know, in Europe it is very difficult to reach an agreement. You know the
discussions we have in Canada with some of our regions not happy about this and
others not happy about that. Imagine the problems in Europe with all those
different nations are sitting around the table. Right now there are 15
different nations. In the future there will be 22 nations, and in the further
future I think there will be more than 22 different nations sitting around that
To keep everybody in the discussion and keep everybody at the table, especially
in agriculture, is not an easy task. Agriculture is and will for the time being
remain one of the most difficult issues to deal with throughout the globe, and
that is why it has such a high profile as we enter the next round of WTO
For instance, when the Europeans say that they are willing to eliminate
subsidies, what they are actually doing is reallocating. They are reducing the
intervention price, but they are increasing proportionately support payments to
farmers. In fact, they are increasing support payments in other areas.
Their policy is very clear: they want to keep farmers on their land and they
want agriculture to continue its traditional role. That is, they want farmers
to be viewed not just as producers of agricultural goods, but also as the
maintainers of the environment, the stewards of that land. As fewer and fewer
people in the world are engaged in agriculture, that part of agriculture is
becoming much more important.
In the future, agriculture will not be just about the production of food: it
will be about the maintenance and the stewardship of the most important thing
we have on this earth, and that is the topsoil. We have to cherish that soil. A
farmer who does not cherish his land is really missing the point. The most
important thing in agriculture is that top layer of the ground. It is not always
treated with the respect it deserves.
The issue of European agriculture is really very complex. The question of vision
is significantly different from the question of production. In North America,
agriculture is much more production-driven than it is beginning to be in
Europe. Under Agenda 2000, there is starting to be shift in Europe. In the
past, Europeans used more fertilizers and pesticides, but they realized that
that is wrong and they are changing.
As you know, right now the European Commission is somewhat in limbo. In fact,
there really is no commission at the moment, and I think it will be September
before a new commission is established. However, Mr. Fischler remains in charge
of agriculture for the time being, and under his guidance I think that shift
What has been even more significant than the shift from the policy side, the
government side, is the shift from the consumer side. If consumers say that
they do not want this type of food, then that has to be respected. You cannot
disregard that. Do not go and produce food in a way the consumer does not want.
If General Motors produced a car that nobody wanted to buy, they would not
produce it for very long, would they?
Here we are in agriculture arguing about certain production ways and methods,
and the consumers say, "No, we do not want this; we do want that."
Some people have asked me if it is just politics, if it is just the politicians
in Europe who say that they do not want GMOs, if it is just the European Union
that says they do not want hormone beef in Europe. I have to say to them, "Sorry,
no, it is the 300 million to 500 million people. The majority of them are
saying, `No, we do not want that.'"
I would be prepared to comment further on that later on, but I just want to tell
you that I feel quite emotional about this, as do many of us today in
agriculture, because we are beginning to be much more conscious about the
environment and about the sustainability of agriculture, rather than being
production-driven. It is not going to help us to produce more bushels if we
cannot sell them and if the customer who buys them is not happy to buy them.
Mr. Rockafellow: Through the recent U.S.-Canada trade dispute, we have been
shown the teeth of the Americans, and I do not think there is any doubt that
absolute free and fair trade is going to be an unattainable goal through the
next round of the WTO. The Canadian agriculture industry must continue to
strive for a level playing field for all trade participants but, more important,
it must make the necessary internal policy changes that will help us be more
reactive to consumer concerns and the realities of the marketplace.
Last summer the Agri-Industry Trade Group held a series of focus group meetings
throughout Alberta, and there were some consistent opinions voiced by all
working groups. The top three opinions were the following: first, Canada's
domestic policies block international trade success more than international
trade barriers and trade rules; second, Canada's tax regulatory and standards
systems are anti-business and anti-competitive; third, the industry's systems
and institutions continue to focus on primary production and commodity trading,
while statistics clearly show that our best trade opportunities lie in
value-added niche markets.
The barley industry can identify first-hand with the points outlined above,
given their experience with the anti-dumping suit brought by R-CALF, the
American Ranchers-Cattlemen Action Legal Foundation, against the Canadian
cattle industry. The preliminary ruling was favourable to Canada, but the point
is that even though this case is against the Canadian cattle industry, the
lion's share of the complaint is based on the American view of the Canadian
Wheat Board and state trading agencies. This situation has the potential of
causing serious damage not only to the livestock sector, but also to the feed
grain industry if the final ruling is not in favour of Canada.
Policy changes have to be made in Canada when you consider that the Canadian
Wheat Board will likely market only around 300,000 metric tonnes of feed barley
this year out of a 12-million ton feed barley crop. Canadian grain standards
are seriously flawed when producers can consistently produce a much higher
quality product than we are exporting. New varieties of barley today are often
harvested at 55 to 58 pounds per bushel, with 0.5 per cent to 1 per cent foreign
matter or dockage. Yet, Canadian export standards are exporting a
47-pounds-per-bushel product with 2.5 per cent foreign matter, or relatively up
to five times the amount of debris in the product.
How can feed barley producers in Canada earn any respect in the world market
when they have limited influence on the quality of export standards and no way
of delivering a higher quality product?
In 1994 we had a continental barley market that exported more feed barley out of
Western Canada then we had ever seen. That market was halted only after
Canadian grain companies took the federal government to court and had the
continental barley market overturned.
Since 1998, those same grain companies have been responsible for importing
American barley into the southern Alberta cattle feeding industry. That appears
to be contrary to any positive goals this country should have on trade
Malt barley is another industry in Canada that is going through some very
difficult times. Cheap European supplies have made it very difficult for Canada
to compete in the international arena, but the fact is that Canadian malt
companies and exporters cannot procure product because initial prices were set
too high to compete in the world market, and the livestock feeding industry is
paying a premium in some circumstances to malt barley. If we want our malt
industry to survive in this country, we are going to have to let malt companies
contract for their supply. That in turn will allow producers to use risk
management tools, which is essential for profitability in today's agri-business
While recent trade settlements have made contributions to Canadian agriculture,
it is recognized that current trade agreements are inadequate. In particular,
they continue to permit considerable room for countries to support and protect
their agricultural sectors and distort production and marketing decisions. As a
result, the pace of liberalization among signatories varies widely, and it is
that variation that produces negative spillover effects within the
international economy. Most unfortunate is the fact that these negative effects
tend to be concentrated on countries that are leaders, those that have
surpassed their minimal commitments in the liberalization process, like Canada
For instance, excessive export subsidies employed by the European Union have
severely depressed the barley market this crop year. For Canadian barley
producers, the price premium between feed and malting barley has narrowed, and
the overall returns generated from barley have sunk. This year it has been made
most clear that Canadian producers are forced to grapple with low prices brought
on by policies of foreign governments, which again reinforces the facts that
global decisions have local effects and that multilateral solutions are
However, for reasons of fiscal constraint, along with a desire to develop an
efficient, market-oriented agriculture at home, Canada's retaliatory and
support instruments are virtually non-existent. Canada should not be
considering the tempering of trade liberalization through increased support
and/or protection. Instead, the recent experience with trade agreements should
serve as a reason to quicken the pace of trade liberalization, and in this
regard Canada must pursue complete liberalization of trade of barley and barley
An agreement that provides for the complete liberalization of trade for a
particular commodity has been coined a "zero-for-zero agreement," and
it is that type of the agreement that the Canadian barley industry supports. In
addition, the committee should recognize that the Canadian barley industry has
joined with other members of the international barley and malt industry to
support a zero-for-zero trade agreement on barley and barley products.
The International Barley and Malt Coalition For Free Trade is a coalition of
barley growers and malting organizations drawn from barley exporting nations.
The coalition has come together to support the conclusion of a zero-for-zero
agreement for trade in barley and barley products. The coalition seeks a
zero-for-zero agreement that completely liberalizes trade in barley and malt by
eliminating all distorting measures, whether they are import restricting or
export enhancing policies or institutions.
The coalition's current membership includes major barley producers and malting
organizations from the United States and Canada, two of the four major barley
and malt exporting nations in the world. Discussions are currently under way
with Australian barley growers and maltsters, which will bring membership up to
include three of the four major exporters. The coalition will continue
discussions with other Cairns Group members as well.
The committee should take confidence in the fact that while we are building the
breadth in the coalition's membership to include major stakeholders in other
countries, it already possesses the depth within Canada. Indeed, all major
barley producers and malting organizations in Canada share support in this
objective for future trade negotiations. Therefore, the zero-for-zero objective
for trade in barley and barley products must be included in Canada's
negotiating mandate for future trade discussions and must be included in any
final agreement, especially the upcoming WTO and Free Trade Agreement of the
The International Barley and Malt Coalition For Free Trade has objectives and a
mission statement that I should like to share with you quickly. Our mission
statement is that through multilateral negotiations, world barley and malt
trade will be liberalized by January 1, 2002, with the following zero-for-zero
objectives: to complete the elimination of import tariffs, import quotas, import
licences and other non-tariff barriers on barley and malt; to allow sanitary
and phyto-sanitary restrictions subject to internationally accepted scientific
review; and to constrain the monopoly powers of importing state trading
entities by making the import of barley and malt subject to progressively
greater levels of competition with private trade.
On the export side, we want simultaneous implementation of the following
liberalizations: overt export subsidies must be completely eliminated; export
taxes on barley and malt must be prohibited; export state trading entities must
operate at the risk of the market and eliminate monopoly and monopoly powers;
and, finally, if a phase-out schedule for export subsidies is agreed to, barley
and malt should be disaggregated so that each is separately disciplined
according to the original base period used in the Uruguay Round. Scheduled
reductions on each product will be taken as if disaggregated reductions had
been in place since Uruguay Round implementation.
On domestic income support, domestic support program disciplines cannot be
allowed to circumvent the intent of the market access or export measures
section of this mission. Continuation of efforts to de-couple farm income
support from trade and product decisions will greatly enhance the goals of free
trade in barley and malt.
The coalition's objectives comprise an interdependent package of liberalization
actions that our negotiators should pursue with regard to export subsidies,
import quotas and tariffs, and state trading enterprises engaged in/or
affecting trade in barley and barley products.
The coalition recognizes that all of these instruments distort the international
marketplace and must be liberalized and reformed simultaneously through
international trade agreements. For example, some major trading nations,
primarily the European Union, continue to apply various export subsidies that
have a negative impact on the prices received by Canadian producers. This past
year saw the European Union export subsidies reach more than Can. $100 per
metric tonne for barley and Can. $130 for malt.
Furthermore, most regions of the world apply restrictive tariff rate quotas,
severe over-quota tariffs and escalating tariffs that which artificially govern
the movement of Canadian barley and barley products into the foreign market.
Japan and China, for instance, currently charge higher tariffs on malt than on
imports of malting barley.
Finally, exporting STEs, or state trading enterprises, can and do practice
non-commercial discretionary pricing, while importing STEs through special
import powers can regulate domestic demand for a given product or force prices
Recognizing that all of these instruments are inconsistent with fully
liberalized agricultural trade, which should be the ultimate intent of all
trade agreements currently in effect, the coalition proposes that all of these
distortions must be eliminated and/or liberalized simultaneously under the
From a Canadian barley grower perspective, there is compelling evidence on which
to base the pursuit of completely liberalized trade in barley and barley
products. A 1999 study conducted by the George Morris Centre concluded that
eliminating barriers to trade would bring approximately $4.7 billion over 20
years back to Canadian barley producers. The result of completely free trade,
those benefits would be reduced or disappear altogether if trade were slowly
liberalized. That provides evidence of the opportunity cost at stake for our
Similar results have been found in studies focusing on feed barley. For
instance, a 1996 study conducted at North Dakota State University on world feed
barley trade estimated that Canada's feed barley exports would increase by 27
per cent under a completely free trade environment. The Canadian domestic
prices would increase in response to stronger export opportunities. Malt barley
prices would likely improve as well, if only to compete with rising feed barley
prices. In addition, elimination of tariff differentials between malting barley
and malt would help bolster our malt exports, which in turn would stimulate
domestic demand for malting barley and contribute to further value-added
production. Indeed, it may be the case that Canada would export the further
processed wort product used in the brewing industry as opposed to malt.
Perhaps the particular results of the economic forecasts are not as important as
the trends these studies identify. Across most studies, the trends are
positive. Indeed, it seems to be conventional wisdom that the Canadian barley
sector, along with other cereals, will benefit from full liberalized trade; not
reaching the completely free trade environment soon simply exposes our barley
industry to mounting opportunity losses. This fact emphasizes the need to
increase the pace of trade liberalization with the conclusion of a
zero-for-zero agreement on barley and barley products.
The degree of support for this objective, both in Canada and abroad, and the
potential benefits that completely free trade would bring to Canadian barley
producers and industry should be recognized. The committee should support the
coalition's zero-for-zero objective for barley and barley products and advocate
that the federal government include this position in Canada's negotiating
It is imperative that Canada align itself with the trading allies to combat the
huge global influences that a growing European Union is going to have on world
trade. It was proven at the Canada-U.S. grain summit held in Banff last year
that when producers are placed together to discuss issues, many misunderstood
beliefs are reconciled. Willingness to move forward with industry harmonization
was clearly demonstrated then in such areas as pesticide regulation, grain and
beef grading standards, and transportation regulations regarding truck, weights
and load restrictions.
The past three years have been examples of a disaster for prairie grain
producers. In 1996, we had difficulty getting product to port because of snow
and cold weather, with the railways eventually being held responsible for the
lack of grain movement. We are not sure that that was exactly the problem; it
was more of a logistics problem. In 1997, deer droppings found their way into
Western Canadian barley supplies. That eventually became an international
incident and a black eye for Canada's reputation as a supplier of high quality
products. The following year, 1998, was disastrous because of the financial
crash in many markets around the world, which has caused a decrease in demand
for almost all commodities. This year, 1999, is also a financial disaster.
With world record low grain prices, producers can no longer afford inflexible
agriculture policies that are unable to react to the ever-changing marketplace.
We can no longer accept excuse after excuse every year. Profitability
industries and businesses recognize that instant and constant information has
to flow from the consumer to the producer. That is an absolutely essential
reality in today's business environment.
There are many positive examples of agriculture industries that recognize that
fact. The cattle industry will soon be able to track a beef carcass all the way
back to the birth of the animal, while providing all relevant information
pertaining to the care and management of that animal. When the rapidly growing
export hay market sends a container of product to the Asian market, that
container can be tracked right back to the hay producer's field that grew the
product. Information access of this nature allows producers and industry to
adjust rapidly to the needs of the marketplace.
There are many positives in Canadian agriculture today. Oat producers have
received barley prices for a high quality crop that yields 40 per cent higher
than barley with a lower cost of production and the export hay producers are
receiving about four time the gross dollar of their malt barley neighbour, with
The farm income crisis is not just a local or regional reality, but is of global
concern. Before we go to WTO to achieve what we can, let us make sure that our
internal policies are giving the Canadian producer every advantage possible to
be competitive in the world marketplace. As globalization moves forward at
unprecedented speed, our internal policies must be addressed, for they will be
the concern of the rest of the world, not just the producers at home.
Mr. Robert Broeska, President, Canadian Oilseed Processors Association: I will
not read the presentation, but I should like to paraphrase some parts of it for
you because I think there are issues that should be highlighted. In listening
to Mr. Rockafellow and Mr. Meyer speak, I am amazed that there is such a strong
parallel between the position of the barley industry in Canada and the position
of the oilseed industry in Canada. Our industry believes that the level playing
field and the zero-for-zero objective in the WTO is necessary in order for the
Canadian producer and processor to reap the benefits of expanding trade in
oilseeds and oilseed products. That is strongly consistent with the position of
the barley growers.
The forthcoming WTO agriculture trade negotiations are a matter of great
importance to the oilseed processing industry in Canada. Approximately 75 per
cent of all oilseeds produced annually is traded to the export market -- half
in the form of unprocessed seed and 25 per cent in the form of vegetable oil
The terms of trade established for oilseeds by members of the World Trade
Organization are significant in determining both the balance, that is seed
versus products that are exported, and the profitability of the industry in
In the Uruguay Round, through membership in the International Association of
Seed Crushers, the oilseed industry in Canada was active in pursuing the level
playing field, zero-for-zero trade policy and we were very nearly successful.
Canada continues to maintain its support for this objective. Both the producers
and the processors are consistent in their support for the level playing field
and zero-for-zero trade policy, as are our Minister of Trade, Mr. Marchi and
our Minister of Agriculture, Mr. Vanclief. We have had a great deal of strong
support from the negotiators and the policy-makers in both of those
The Canadian oilseed processing industry has established and fostered
relationships with its counterpart processing organizations around the world,
and we continue to maintain that relationship and consistency going into this
WTO round for liberalized trade in oilseed products.
The oilseed production and processing sector in Canada is a growth sector, both
for agriculture and for the Canadian economy in general. With the demise of the
subsidized rail rates for grain, the oilseed industry is responding with
expanded investment in the production of oilseed and industrial processing
capacity. Additionally, the first steps towards trade liberalization through
CUSTA and NAFTA, as well as the initial phasing under the Uruguay Round, have
been strongly supportive of further investments in oilseed production and
In 1998, Canadian farmers produced 11 million tonnes of oilseeds -- canola,
soybeans, sunflower and flaxseed -- with a farm gate value of approximately
$3.7 billion. The processing industry will process about 5 million tonnes of
that, worth about $1.7 billion to farmers, in the processing plants located
across Canada. I have appended on the back of my submission the location of the
processing plants in the Canadian industry and the activities carried out at
The economic value of the oilseed processing industry in Canada is significant
and it is expanding. Economic benefits to Canada from oilseed processing will
total $3.6 billion for 1998. Combined with the export of seed, the direct
economic value of the oilseed industry in Canada is about $6 billion a year.
The industry's contribution to the national balance of payments is large at $2.5
billion, and combined with the value of seed exports, the oilseed industry in
Canada contributes about $6.5 billion annually to the Canadian balance of
payments. Trade policy is critical in maintaining this economic engine of
Perhaps I can highlight what our industry sees as emerging industry patterns. We
characterize the industry in Canada and around the world as having five main
drivers. The first of these can be described as the rapid developments in
biotechnology, specifically the development of the genetically modified seed,
and you heard from Mr. Meyer earlier about the implications and the importance
of that. We are only at the beginning phases of dealing with that issue. In
fact, it will become not only a major scientific issue and a consumer issue,
but a trade issue as well.
The second driver is the combined effects of population expansion, income growth
and per-capita consumption, especially in the high-level consuming regions in
Asia and Africa and also in China. It is a trade driven by market demand.
The third driver in the industry is the changing nature of consumer demand
internationally. There is a rising demand for more safe, nutritional and
healthy food products. Demand for decommoditized, value-added products presents
some challenges to Canada but also some positive points, because Canada is an
economically efficient producer of those main commodities that are in demand and
for which there is a growth in demand internationally.
Fourth, the gradual liberalization of trade in oilseeds and oilseed products is
increasing market access for imports. Production of seed and processing of seed
and oil will occur in regions of competitive cost advantages, and that
definitely includes Canada. Distribution of both production resources and
population concentration dictates that trade in the oilseed products sector will
expand if the trade regimes and the trade rules allow it.
Finally, the pattern of changing competition, especially occurring because of
globalization and liberalization, is the tendency towards increasing
concentration in the industry. Smaller numbers of large trade units, large
companies, more concentrated with higher economic power -- that is the pattern
that is dominating internationally in the oilseed business. It is especially
common to what has happened in Canada since the mid-1980s.
Regarding the Uruguay Round and subsequent developments, that round produced a
body of commitments and disciplines for trade in agricultural products that
provide WTO members with a legitimate expectation, a legal right, to expect
implementation and continuing commitments to honour the same. This was a first
for the agri-food business. The results of the Uruguay Round enable more
discipline and more transparent trade rules for trade in agriculture and
especially oilseed and oilseed products.
All told, the agreement on agriculture contributes to a sense of stability,
security, predictability and transparency. That encourages investment in the
sector, and the oilseed business in Canada is an example of that. However,
major barriers to market access, such as high tariffs and escalating tariffs on
higher-value food products, remain a problem for the Canadian industry, and that
is what we address our attention to in the next WTO round.
I should like touch briefly on some of the main points addressed in my brief
regarding our industry's objective in this round. First, the upcoming round
should provide a reasonable expectation that there will be an extension of the
liberalization process that was established in the Uruguay Round.
Second, there is much agreement that the round should take less than the seven
years to negotiate, and the common thought, not only in the industry but, I
think, amongst negotiators, is that a three-year time frame would be
Third, there is a lot of support for the idea that the Uruguay Round phasing
should continue while the next round is being negotiated to serve as sort of a
driver, so to speak, to ensure that the 1999 round accomplishes an extension of
what was achieved in the last round.
Finally, most in the international oilseed community believe that the level
playing field, zero-for-zero proposal that was introduced late in the Uruguay
Round can be introduced at the 1999 round and progressed rapidly towards an "early
harvest." In other words, it could be fast-tracked somewhat like the early
voluntary sector liberalization that is being proposed by the APEC forum.
I will not get into any detail on export subsidies, market access or domestic
supports. I believe Mr. Rockafellow covered those when he spoke in terms of the
barley grain area. They are common to the issue facing the oilseed industry. A
zero-for-zero level playing field contemplates the complete elimination of
export subsidies, the complete removal of market access barriers and the
minimization of domestic supports that are influencing, in terms of trade
However, I should like to make a couple of comments on one of the most important
areas of concern to the oilseed industry in Canada, and that is the terms of
accession for China's membership in the WTO. The Canadian government has
recently been quite successful in negotiating what we perceive as some very
major advances in terms of market access into China as the basis for their terms
of accession to the WTO, and we would encourage that to continue. However, the
oilseed industry adopts the position that Canada must not agree to WTO
accession for China until their oilseed and products offer is based on fair and
equitable, non-discriminatory tariffs, TRQs and administrative import controls.
On the issue of state trading enterprises, our industry's concern is mainly the
use of STEs in the administration of imports for oilseed and oilseed products.
We believe that in a zero-for-zero world, the state trading enterprise is
redundant; it is an administrative barrier and therefore there is a case that
it should be phased to elimination.
I should like to turn now to the industry impact under liberalized trade. A
number of studies have been completed recently on the potential growth for the
industry under a zero-for-zero level playing field. One of those studies was
done by Agriculture Canada. It addresses the issue of benefits for both
producers and processors under a liberalized trade regime, and it also plays to
the Canadian Agri-food Marketing Council, or CAMC, which has made an
appropriate proposal that Canada move to 4 per cent of the world trade in
value-added agricultural products of $40 billion a year.
Rabobank International economists have concluded that the gross prospects for
the oilseed industry in Canada are also positive under a level playing field.
There is also the study done by the George Morris Centre, which Mr. Rockafellow
mentioned as well. That study has predicted very positive prospects for
benefits to producers and to processors under a liberalized trade regime.
Our industry has projected that the benefits to the industry under a liberalized
oilseed trade regime could amount to as much as $3 billion per year, an added
$1 billion worth of seed export, that is both the volume of seed and the value
of seed enhanced under a zero-for-zero level playing field, and the value of
oilseed products exported of up to $2 billion a year. That would allow the
oilseed industry to provide up to 17 per cent or almost 17 per cent of the
Agri-food Marketing Council's estimated $40 billion target for value-added
agricultural exports annually.
Mr. Wayne Bacon, Canadian Canola Growers Association: I should like to thank you
for giving me the opportunity to represent the Canadian Canola Growers
Association. I am going to condense our presentation and make it really short
because my partner and I agree with what Mr. Rockafellow and Mr. Meyer said.
The zero-for-zero is very important to us. We must eliminate something. It is
really affecting the producers, whom I represent.
Regarding GMOs, I prefer to use the word enhanced organism rather than modified
because I think we are enhancing the production for canola and other
commodities. I think that is very important.
Of course, China is now coming into the picture, but I believe we have gone
through that already. When we are done here I am going to photocopy this little
brief and give it to all of you, and I think it will answer a lot of your
questions about the canola industry.
Senator Spivak: My first question is to Mr. Broeska. I have looked at charts
that compare export revenues and producers' revenues. Some of the grain farmers
are seeing prices that are lower than in the 1930s, so when you are talking
about zero-for-zero and all of this, you are talking about $4 billion a year.
What share of that goes to processors and what share goes to producers? What is
a fair share, because without producers you do not have an industry?
Mr. Broeska: Your last point is the key issue for our industry. The processors
and the producers move in lock step, and without an adequate return to the
producer there is no commodity and there is no basis for investment in
value-added processing, so it is a partnership.
Your question is a very fair question and it is exactly the issue that the
oilseed industry, not only in Canada but also internationally, is facing right
now. We have seen oilseed prices decline significantly at the producer level,
and that is a huge concern to producers and to government policy persons and to
members of your committee, I am sure, because its declining income is not
helping. That is especially true if we look at the increased trade
opportunities internationally and know that many of those opportunities are
being captured by exporters who have access to subsidized prices. It is exactly
that issue that we are attempting to address by dealing with the zero-for-zero
level playing field.
In our industry, there are challenges such as differential export taxes, which
are employed by palm oil exporters in Southeast Asia and by soybean exporters
in Argentina. We face the issue of export restitutions, which are applied on
the export of oilseed products from Europe because of the very heavily
subsidized oilseed industry that exists there.
Along with the low prices in oilseed, we are currently facing the lowest
vegetable oil prices internationally in 20 years. We are approaching 16 cents a
pound for soybean oil on the Chicago exchange, which is a benchmark for
vegetable oil. The margins for processing oilseeds in North America are very
minimal, and in some cases are at the point where the industry is considering
If you follow the trade statistics, and I take it you do, you will note that the
oilseed crushing capacity in Canada, which is on the canola side, is somewhere
in the mid 80,000-tonnes-per-week level; it has been operating between 45,000
and 55,000 tonnes. That level is not adequate for a longer-term investment, and
it is not a level at which the industry will survive in the long run. Unless we
get the international policies on trade for export subsidies and import
barriers removed, there is no long-term basis for the industry.
Senator Spivak: There is nothing more basic than the survival of producers. Mr.
Meyer, regarding your comment about the necessity of environmental stewardship,
taking care of the soil and keeping farmers on the land, given the world
situation, how are you going to do that without subsidies?
I wonder if we are going about this backwards. I know that free trade would be
great, but who is going to suffer and who is going to win? The objective of the
European policies, which is to protect their farmers, is not incorrect,
although their means might be incorrect. We should be doing more to protect our
We have all kinds of inequalities in income in this country. Due to such things
as budget reduction, not necessarily trade issues, farmers are now not very
subsidized. The consumer is saying, "We do not want policies about
genetically modified organisms set by Monsanto. We want choices, such as
Some technology is good, some is bad. We do not want an incident like mad cow
disease; it would kill the industry in Canada. The problem with GMOs is that
nobody has calculated the risk of trans-genetics. Sound science demands that we
examine the risk. What is the equation that would protect the farmers, give the
consumers what they want and liberalize trade, because those are not
contradictory, or are they?
There are three issues here. We want to protect the farmers. The European Union
is doing a great job of that, while we are not. We want liberalized trade, and
we want sound science, but not as a code word used against environmental trade
barriers, because that is not accurate, and the more you use that the more you
will antagonize people. How do we reconcile those three issues?
Before you answer that question, I want to tell you something. We have done a
study on rBST here, and in all my years in the Senate I have never had more
letters. Thousands of letters have come in, so we seem to have hit a chord,
because people want a choice in what they eat. Monsanto is modifying canola so
that they can sell more Roundup. The perception might be inaccurate, but that
feeling is out there.
Mr. Meyer: I think you have highlighted the areas of concern. You laid it right
on the table. You are absolutely right. Some of my colleagues a year or so ago
said, "No, there is no farm crisis; some people have problems." They
have now changed their tune. There is a farm crisis, and the crisis is severe.
It affects everyone who has a farm here.
I am 100 per cent engaged in farming. It gives me my income, my livelihood, and
it supports my family. I want to carry on for the next generation, and I
represent many other farmers with the same concern. There is no question about
it, around the globe right now, not just Canada, many farmers and farm families
are wondering whether the next generation will be able to farm.
Mr. Rockafellow and I discussed what we would say on the way here. As I
initially indicated, we had just come from the seed field and we did not have
much time to elaborate on what we were going to tell you. We want to stress to
you that we are always engaged in this, that we really believe what we are
However, what is the WTO? Who says that the WTO is right? I do not want to
offend anybody, but I am saying that yes, we should have that level and fair
playing field, but we are not getting it, are we? For years now, as long as I
have been engaged in this, we have been trying to establish that through the
WTO, but I do not see any of it. The United States is the biggest advocate of
free trade -- and I am a friend of the United States and am not in any way
attacking it - but with their farm deal, for instance, their farmers have never
received more payments than last year. Meanwhile, here we are arguing to get
rid of subsidies.
I attended the WTO conference on April 20, as did others around this table, and
took part in those working groups. It was a very good conference and I
congratulate the organizers of that conference, mainly Mr. Vanclief and his
office and Mr. Marchi's office. Many people came here somewhat suspiciously and
wondered if anything could come out of 400 or 500 people getting together like
that. Most of us left feeling that it was excellent, that it was one of the best
We stated that we want to get rid of subsidies. Canada, New Zealand and
Australia are very much in the forefront. Those are probably the forerunners of
this effort, and we are basically standing here and watching the United States
and the European Union get serious about dealing with this issue of how to keep
farmers on their land. We cannot argue that for reasons of international trade
our safety net portfolio or safety net support programs cannot go over $6
million, or that we cannot do so because of GATT greed, or because we have to
stay within GATT or WTO rules.
Right now, some farmers around the globe are getting support and some are not. A
lot of people, specifically in Canada and other places, are therefore in a
situation where they are extremely concerned about their livelihood. There is a
crisis. I would not want to leave here without telling you that there is a very
Mr. Broeska made an excellent presentation on canola, but I want to speak as a
farmer about how important canola is in Western Canada.
Canola provided the most significant portion of the net income in Western Canada
last year, there is no question. Mr. Broeska is right to say that recently
canola prices have collapsed. Prices are about 25 per cent lower than they were
and are still going down. There is no hope of them rising unless we get a
A few years ago we used to say that it is going to get better, that prices will
go up. Otherwise, we have a problem somewhere. However, because of better
varieties, better systems of food production, we seem to be able to constantly
fill those gaps, of which there are a lot as a result of problems in some parts
of the globe.
We are beginning to be very sophisticated about moving the supplies around the
globe, and I think it has a lot to do with the increased population and more
and more influence from multinational concerns. It does not matter anymore
where they get their food from, they just fill that gap. They are so big and so
well organized that the mechanisms for establishing commodity prices in Chicago
or wherever are at times beginning to be questioned.
We are having a questionable futures market, where cash premiums are attached to
future prices. Future prices, and what we used to call the futures or the
exchanges, are price discovery mechanisms. Those price discovery mechanisms are
completely out of whack right now; they are completely crazy. They have nothing
to do with reality anymore. I am a very big supporter of price discovery. I
think I made a presentation to your committee on this. I stressed how important
price discovery is, and how important it is to farming or processing. We have
situations where mutual funds, because billions and billions of dollars
establish a trend, are on the short side, and they keep on pushing and making
more and more money. The new market world price is not determined by how much it
cost to produce that food. That situation is baloney. We will all go broke.
Now, when we all go broke, who will produce that food?
Senator Spivak: Are you saying that the market manipulates the future price,
which may be because a lot of mutual funds are selling short, that price
differs from what it ought to be if it were based on cost? Is that what you are
Mr. Meyer: Investment perspectives are not related to commercial interest in
food production. So much money can be moved in one direction that the markets
move this way and that way. Futures markets are smaller than stock markets. You
know how stock markets go up and down and how volatile they are.
Some major concerns can actually take control of certain future markets and just
keep pushing it one way or the other way. Do not get me wrong -- I am not
saying that they are not important -- but right now we have a situation where
some of those futures markets are so unrealistically low that they have nothing
to do with reality anymore. We get $2.50 for wheat in the U.S. and at the end of
1995 and 1996 we got $7.50. What does that have to do with reality when we know
that the break-even point is probably $4.00? We are $1.50 below production
Senator Stratton: Looking at the next round of the WTO, it has been said that we
gave up too much in the last round. Being the Boy Scouts of the world, we will
go in there with clean hands and demand that other countries do as we have
done. While that is all fine and dandy, you and I know that that is not the way
the world works.
We have talked about subsidies in Europe as being quite high, and we actually
looked at farms in Italy. They want to protect their way of life, so we know
that it will be hard to decrease European Union subsidies. There will be some,
I would expect, but they will be hard to attain. They are being held on to
quite strongly. Even though Dr. Fischler told us that they are going to push for
the removal of subsidies and a level playing field, I think no one really
believes that, particularly the folks from Great Britain. They are probably the
one nation over there that believes that subsidies have to be reduced, whereas
in France and Italy they told us right to our face that they want to protect
their way of life through subsidies.
Then the United States, watching what happens in Europe says, "If you are
going to do that, so are we. We have room and we are going to demand to do
that." With those two issues sitting on the table we know that no country
in its right mind is going to give up the sovereign right to help its farmers in
the end, particularly the Europeans.
If we are going to ask the European Union and the United States to give up
something to create the level playing field, what are we going to give up? You
agree with the agriculture minister that we do not have to give up a thing, and
that is fine and dandy, but being Boy Scouts, you know that that is not going
to be the outcome.
The United States has targeted our Wheat Board and our marketing boards. They
tell us that if we want a level playing field we must get rid of our marketing
boards and our Wheat Board. How do you respond to that?
Mr. Rockafellow: Obviously, we have already given everything up. I am not going
to speak in favour of supply management because we are basically prairie grain
producers and I do not think that it would be proper. I do see not a scenario
where we have supply management against the market forces, but the fact is that
if you go back 10 or 15 years, we have had the CROW, we still have NISA, but we
had a more enhanced crop insurance before. We had Western grain stabilization
payments, we had SAM I and SAM II.
In the past, significant income came from something other than production
agriculture, and it is not there today. We have already given everything up.
The Wheat Board does not benefit barley producers. We average 12.5 to 15 million
tonnes a year and they are selling 300,000 tonnes of feed barley this year. We
have imported more feed barley into Alberta than what has been exported this
year. Just in Alberta alone we probably each have half a dozen feed lots that
consume more barley than the Wheat Board is going to sell out of this country.
It is not a player in the market anymore.
The reality is that yes, things are happening. We talked about the $100 metric
tonne of payment, and $130 on malt, but even the malting industry cannot
procure barley anymore. I mentioned that in the paper that we presented.
The fact is that farmers cannot hold on to a product for a year or eight months
or 10 months, and then deliver it and find out that it does not meet the
qualifications of the board or of the grain companies. They end up selling it
for feed. Now, deals are being struck between producers and malting companies,
bypassing the elevator and transportation system. The Assistant Deputy Minister
of Agriculture asked at a forum how many times grain goes up and down an
elevator between the farm and the port, and was told that it is between eight
and 24 times. How can you protect the integrity of any product when you do
that? You absolutely cannot.
We can do things to enhance the quality of the product, and I think that is our
advantage. Regarding harmonization with the Americans, I am all for trade
liberalization with the WTO and global harmonization on many of these issues,
and we have been involved in some of the pesticide discussions, but I am not so
sure that I want to lock myself into an American production mentality when we
pay the same cost but they get the support from the government. Everything is
harmonized except what I get paid. We are not going to be in agriculture, nor
is this country, if we go down the road.
Senator Spivak: What is the difference between the price of barley or feed, like
malt barley and feed barley? What is the issue there?
Mr. Rockafellow: In the past, malt barley has been significantly higher in
Senator Spivak: And now?
Mr. Rockafellow: Seventy-five per cent of the barley that gets planted in
Western Canada is planted in the hope that it will be malt barley; 10 per cent
to 15 per cent actually makes it. It is a lottery. You often have to wait up to
18 months before you get your final payment on the product, and you have no
idea what you are going to get paid what you put that seed in the ground.
Mr. Bacon: The difference in the price today is basically zero. It is maybe 20
Mr. Rockafellow: It depends on the market. Last year, I sold about 80 per cent
of my barley, and it is all feed barley, 10 months before I put it in the
ground, at $2 a bushel. At harvest time I was about $1 a bushel higher than
what the market was. It was profitable for me to do that, and quite frankly I do
not care if it went to $5 or $6, I was still able to pay my bills, but I cannot
do that in a regulated system. There is no mechanism there to allow me to
protect my bottom line, none whatsoever.
On barley and wheat in particular, there is no way a farmer can manage his
books. He has nothing to give his banker to show that he projected a profit. In
the oilseed business, that can be done. We are looking at 16 cents or 17 cents
for soybean oil with my exchange right now, but at times they have been up over
$20 and you can do some things there that we cannot do on Wheat Board grains.
Senator Stratton: I get the sense from your answers that you feel that we should
not give up anything. If anything, perhaps you would suggest that it be the
Wheat Board for a period of time. You have to realize though that a lot of
people in this country support the Wheat Board.
Senator Spivak: Most do.
Senator Stratton: But I did not get the sense, apart from that, that we should
give anything else up. You did not want to get into the marketing board issue,
and I can understand that. With the European Union and then the United States
following along, are you optimistic that we can achieve this?
I am stuck, having been there and seen the mental attitude, the mindset. It is
the mindset that scares me because I do not see it changing; I do not see it
budging. I can see it diminishing somewhat, but I will tell you, it is rock
solid. I should like to be optimistic, I should like to think that something is
going to happen, but it may well extend 20 years, and even then they are going
to protect it because it is what they want; it is called a cultural thing. How
do you resolve that? Do you ask for a complete de-coupling, and suggest that if
they are going to support their farmer he be paid directly?
Again, when I was in Europe I met a dairy farmer from New Zealand, I believe. He
was a fairly large dairy farmer who had been to Sweden and had talked to a
dairy farmer there who farmed at an elevation of 3,500 feet. The size of his
herd was around 18 cows. He was subsidized by the community to the tune of
about $20,000 a year. They wrote him a cheque for $20,000 to stay there. That
is a cultural thing.
We cannot possibly afford that; we do not have the population base for it. Is
your view therefore the same as mine, that this is going to take time? How can
we sit and say we are going to go boom, boom, boom, when we realize the
enormity of this cultural mindset?
Mr. Broeska: I think that there are probably a couple of answers, or at least
some different facets in answering your question on subsidies. Senator Stratton
and Senator Spivak, I think that we were coming up to the same issue on
The key issue of course is the level to which national policy supports the
producer's way of life and supports agriculture in terms of a living. Senator
Stratton nailed that word "de-coupling" that we have used and that
has been used significantly throughout the last round and that continues to be
The WTO, which is a trade rules or trade discipline organization, has not tried
to eliminate or annihilate agricultural subsidies. It has merely tried to
establish some rules for governing the use of those subsidies. Governments will
continue forever to subsidize agriculture to maintain a way of life. The issue
in the WTO is whether or not the use of those subsidies to producers or to
processors, or to whatever level of the agriculture industry, affect trade. We
try to put rules around subsidies so that they do not affect efficient
producers in other regions of the globe who have comparative advantages or
levels of efficiency that allow them to export at what would be termed fair
I see it as an ongoing debate; I do not think that it will end with this round.
I think the Uruguay Round was momentous in that agriculture finally came into
an international rule-making body and that the green box, blue box and amber
box anti-dumping provisions were established. I do not think that it is going
to end with this round; I think it is going to be continuous.
I think that the producers and processors in Canada are frustrated in that the
depth of subsidy is very shallow compared to the depth of subsides in other,
perhaps more mature, agricultural producing regions, like Europe and U.S.,
where treasuries are larger and the agricultural base is more politically
powerful. I do not think that it is realistic to say that we are going to
eliminate subsidies. Disciplines that will allow countries like Canada that
have a surplus capacity and a huge dependence on export trade to export at fair
market prices is the key issue for our industry.
In answer to Senator Stratton's question, I think that it is going to be a huge
challenge to try to get this kind of commitment from other players because we
do not have that much to give, and that is a huge problem.
Mr. Rockafellow: I agree with you on the Wheat Board issue on barley. It is very
clear that the board is not able to sell barley; that is truly a market
condition right now. There is no question that it is not working for barley
anymore. In fact, just two weeks ago, the board, for the first time ever, made a
domestic sale of barley to the domestic feed industry. They took export barley
and dumped it into the Alberta feed industry. About 10 per cent of their sales
this year will take place in Alberta. We cannot participate in that export
market at all, other than going through their venue.
It is going to be difficult to give and take when we go to the WTO, but the gist
of what we are trying to say is this: Why can we not sell some on our own,
without regulation, within our own province? Internally, we can make some of
the changes that are necessary in order to make ourselves more competitive.
I am watching these crazy Timothy hay guys in my country. I keep bringing this
up and I should not. But Timothy hay growers have Japanese buyers following
their balers around the field, and quite honestly they are stacking the stuff
and the guys tell them, "Go away," and they say, "I want to get a
cheque for you." They are paying him 60 per cent of the value of the crop
as it is coming out the back of the baler, and these guys are making about $800
an acre. That land was not worth $400 an acre four years ago.
Senator Spivak: Are you talking about hay?
Mr. Rockafellow: I am talking about Timothy export hay.
Senator Spivak: Why is hay so valuable?
Mr. Rockafellow: It is so valuable because they have a small land base. They are
growing other crops. It has to be premium quality. It is incredible what sort
of intuition and thinking producers are coming up with, and what markets they
are finding by going around the regulatory marketplaces that exist today.
Mr. Meyer: I should like to add one additional point to a question you asked
previously about the benefits of all those trends and tendencies we see in
agriculture. Many farmers are increasingly of the view that even though we seem
to be part of this growing agri-business, and everybody talks about how much
bigger agri-business will be, they are seeing less and less themselves. That is
a very good point.
We do not have time here to go into great depth, but I would urge you to follow
up on that because it is very important. How does agriculture interact overall
in biotechnology with the consumers, with governments, with multinational
concerns, and so on? We do not have enough time here to discuss all that, but I
would urge you to do so. We would certainly be willing to be part of that debate
because we are greatly concerned about that.
Senator Stratton, you asked a question about giving up. There is no question
that some supply management will have to be given up. I may not be diplomatic
enough when I say what I am saying. Dr. Fischler indicated that to us. He said
that Europe is going to demand the discussion of 350 per cent TRQ dairy
products. There is no question about it.
I do not want to offend anybody, but the Wheat Board issue is for me less and
less of an issue. Most of us are beginning to work around the Wheat Board if we
do not like to work with them. For instance, I am a significant barley
producer, and none of my barley goes to the Wheat Board.
My barley is produced in such a way that it goes directly from my farm through
our transportation link to the customer. That customer pays me a premium based
on the production. In a way, from a multinational and global perspective, I
guess that that will happen more and more all food products in the future.
With respect to malting barley, do you realize that, for instance, if I am a
producer of malting barley in Alberta, and let us say that I live near a
malting plant and that I ship my barley myself to that malting plant, I have to
pay freight first to Vancouver before I get paid? That is ridiculous. That is
what has to change. If I am willing to produce oats or barley that do not touch
the Wheat Board for that process, I get rewarded for whatever I do, including
That aspect in respect of malt has to change. When the malt industry can procure
malt directly from producers or grain companies, that will significantly help
the malt business to regain momentum.
Mr. Rockafellow and I are specifically here for barley and barley issues, but
the malt producers are not very happy with what is happening right now. We have
a Wheat Board, but it cannot get the malting barley because the initial price
is so low. The feed industry is paying more for the barley than for the initial
price of the malt, and with subsidized international malt prices, they can buy
the malt cheaper internationally. However, they cannot because they have to buy
it from the Wheat Board. It is a Catch-22 situation.
Senator Spivak: The whole issue of future pricing is something that I think we
should pursue because I can see how everything is changing in that area. The
Wheat Board has various roles, one of which is that it is supposed to give you
an idea of what the market is like. If they are not going to do that anymore,
or if they are not doing that properly, are you saying here that the individual
farmer, through the computer, the Internet, or whatever, is better able to
judge the market and therefore to decide what to grow?
I cannot figure out what you are saying in that area of future marketing. In
other words, are you saying that each farmer knows better what to grow, what
the market and the pricing will be?
Mr. Rockafellow: He has to. Some can, some cannot.
Senator Spivak: How should the system be changed to improve marketing and target
growing for the farmers? Forget that there is a Wheat Board.
Mr. Rockafellow: If we, as Canadian farmers, do not have direct income support
from Canada -- I am not going to use the word government, just because it is
not going to happen -- we live by the avails of the marketplace. We live by
nothing else but that. The Wheat Board this year made a decision to withhold
much of their wheat stock because they felt the price was going to go up towards
the end of the year.
Senator Spivak: Did it?
Mr. Rockafellow: No, it backfired and they jeopardized every farmer in the
system because of that decision. It should not be up to the Wheat Board to make
that decision for us; I should make that decision for me.
Senator Spivak: The Wheat Board was set up years ago at the behest of the
farmers precisely to cushion the ups and downs of the market. That, along with
marketing grain, is the most important job of the Wheat Board. What would have
happened if the Wheat Board had not been there? Would you have been better off?
How would you hedge that?
Mr. Rockafellow: I have well over half my canola priced at $2 over the current
market per bushel because I locked it in. I grow wheat, but I do not have a
permit book anymore. Every bit of it goes into the domestic feeding industry. I
have my bases already covered through a major grain company. I have protected
that side of my wheat. I have not done my barley yet, but the majority of my
crop is already managed.
Senator Spivak: Would that be true if every farmer did that? That is your
situation; how about the rest of it? In other words, if you get a better price
for malt barley, why should you be in a situation where all your barley goes
into beef if malt barley is more valuable? What is the mechanism and do you
think that the Department of Agriculture understands this well enough to look at
these solutions, or should we get a market analyst here?
Mr. Rockafellow: The majority of malt barley that is planted is of one variety
called Harrington barley, it is one single variety that has been in the
marketplace for over 20 years. The feed-derived variety that the producers are
using today probably has not been in the pipeline for more than three to five
years. They have agronomic packages that offer disease resistance and a whole
bunch of other things that Harrington barley does not offer.
These feed varieties are generating 30 per cent to 40 per cent more yield. You
could have that stuff into the marketplace and have a cheque that day; so there
are agronomic and marketing benefits for leaving malt. The system is archaic;
it does not work for the very thin-boned agriculture that we are living on
Mr. Broeska: I should just like to make an observation. I cannot answer Senator
Spivak's question because I think that only a producer can answer it, but I
would compare what has happened on the oilseed industry side with what is
happening on the cereals and coarse grain side. The major difference is that
oilseeds are priced in the open marketplace and that producers are able to
market either directly to export through the line elevator system or directly
to processors in the domestic processing industry. In each of the last three
decades, the 1970s, 1980s and 1990s, the oilseed industry in Canada has doubled
in size. More importantly and significantly for producers, when we had a
fledgling domestic processing industry in the 1970s there was an imbalance in
terms of the demand for oilseed and the nature of the pricing impact.
With the elimination of such things as the subsidized freight rates and access
to the U.S. market, the domestic processing industry has become about equal in
size to the export of raw seed. Therefore, you have that balance of competition
between domestic processors and the export marketplace in which no central
agency has played a role other than the commodity markets as reflected through
open pricing on the Chicago and Winnipeg exchanges. I think that the producers
would support the statement that prices are depressed now, commodity prices
fluctuate, but in general the international market opportunities have been
reflected directly in the producer's decision to expand his investment and his
acreage in the crop.
Senator Spivak: That is fine, but the market is not a free market; it is
controlled by five or six major players, is it not? It is a huge concentration.
Do you see that as a problem in the future?
Mr. Broeska: That is right. It is not exactly a free market; there is highly
concentrated control in the oilseed processing industry. However, there are
checks and balances in the system that make the ADMs and Cargills of the world
vulnerable to price competition themselves. You cannot have prices of oilseeds
in Canada moving that far out of whack because ADM and Cargill want to set the
price of seed or the price of oil at a certain level, because the competition
from soybean oil and soybeans and the production centre in the U.S. or in South
America is always there to take market share.
Senator Spivak: You mean that you are not buying the whole market? It seems to
me that there are so many mergers and acquisitions.
Mr. Broeska: I do not want to answer a question with a question, but who do you
think buys the raw seed from Canada and processes it in Japan or Korea? The
huge multinationals do. The Mitsubishi Corporation, which is bigger than
Cargill and ADM, does. The question is where you want that balance to rest. Do
you want it to rest invested in processing and production in Canada or in some
Senator Spivak: We want it to rest here, but my major concern is with the
beginning of the chain, the producer. The whole health of the industry is
important, but we are looking at what the producer is going to gain out of
this. We are looking at the whole system: government, Wheat Board, corporation
Mr. Broeska: My observation is that the structure on the oilseed side of the
industry has its problems with concentration of power and commodity market
vulnerability and hedge funds and whatnot. However, over the long term, it has
been positive for our producers, the Canadian balance of payments, investment
in Canada and trade, and I think our producer friends would support that.
They have invested more in terms of machinery, equipment and land dedicated to
oilseed on a steadily increasing pattern over the years under the existing
market structure than they have in certain other commodities.
Mr. Meyer: Senator Spivak, I really appreciate your questions because they are
sincere and I want to tell you this. On my farm, the most significant crop is
oats. As a young producer, I went to the Wheat Board and I used to get an
initial price, as is now done with barley. It was not really anything major and
the Wheat Board did not treat it as a significant thing. Eventually, of course,
in 1988 or 1989, oats came off the Wheat Board. Oats are not, in size and
overall economic importance, as big as canola, but oats have a similar history.
Today, we have probably one of the highest quality oats production and
processing in Canada.
The moment the Wheat Board left the field in oats, that huge investment flowed
into processing. Today, in comparison to the United States, we have
dramatically increased the processing of oats in Canada, and we are now a
significant, if not a major, player when it comes to global oat processing and
quality food products around the globe. Finally, I want to tell you that oats,
of course, is a health product.
Senator Spivak: As long as you do not fill it with pesticides.
Mr. Meyer: Unlike canola, we have recognized that to keep the health product
associated with oats, we must reduce spraying. For instance, we do not use
Roundup on oats, as we do on canola.
Monsanto came to us a few years ago and asked if we would be interested in
Roundup-ready oats? We told them that we would not be interested until we asked
the consumers. I do not want to speak for the canola industry here, but Europe
was very upset when Canada came with Roundup-ready canola. I do not want to
upset anybody, but all we said was, "If you think that is what you want to
do, then do it, but we will not buy it. We will only buy it if we have to. We
will not make it a purchase of choice anymore."
Mr. Rockafellow was right when he spoke about how you price that stuff. We
produce a significant amount of oats, and we would discuss things with the most
significant processor, which is ConAgra. We would sit together and consider
what to work on next.
Sometimes those negotiations go on for several months, and at a certain time we
would lock in the price or simply make a price based on the market, but in that
case we would lock in the price. Last year, by November 13, I had sold all my
oats to ConAgra. Within eight days they were exported to the United States as
baby food. It was the highest quality value that you can have in processing, and
for a price that was very attractive, and the price was set, like in Mr.
Rockafellow's case, about six or seven months before we actually made the sale.
I agree with you that in any market, even though there is concentration, which
I emphasized earlier, there are always checks and balances.
For instance, the other day Cargill, one of the most significant processors
today, paid a $30 premium over future prices to farmers because they need the
canola. That amounts to 70 cents a bushel. Just because they are big and
integrated does not necessarily mean that they control the farmers. Sometimes
they need to pay because farmers are holding back or because there is not enough
product in the system. I guess that does not exist in the Wheat Board system.
We do not have that incentive to make those special efforts, and when we do make
special efforts we do not get paid for doing it, and that is what needs to
change. That is one of the major changes that will come out of the STE process.
Mr. Bacon: I do want to upset Mr. Meyer here, but we keep coming back to GMOs
and, as I said before, I like to call it genetically enhanced product.
Mr. Meyer is talking about oats, and I know that there is oat spray, and we are
talking about Roundup that we spray on our canola. How do we know which is
safer -- the half litre of roundup or the half litre of whatever they might
spray on oats or other crops?
I am a consumer of the products I grow so I think the consumers have to be
educated about GMOs. I think there are misconceptions out there about GMOs and
what they do. I think all we are actually doing is speeding up nature, because
I can remember when we used to spray Avadex or something on wild oats and it
could kill them. Well, today we cannot kill with Avadex. It has taken maybe 20
years to do that.
Senator Spivak: But there is a difference between the traditional kinds of
breeding and trans-genetic breeding. Putting a gene from a fish into a plant
has never happened in nature before, so that is an experiment. It might be
good, it might be bad -- we do not know.
To return to the question of the Wheat Board and that whole business of
marketing, I understand what you are saying. However, we heard from the chicken
producers in the United States, and compared to our supply management system,
they are practically serfs. Their prices and wages are completely controlled
and they are not happy with the system.
If I understand, you are telling me that the system is fine, that it would be a
very optimal system as long as you can retain some control. You do not want to
be controlled, because then they will control your prices. That is only
natural, because the objective of any business is to make the most profit, not
necessarily to make sure that the whole system benefits everybody. That is the
I think we should probably address this whole area, because there seems to be a
lot of change in the way things are marketed, and things are priced as a way to
combat this global avalanche that is coming at us. We should be able deal with
it, not just react to it. I hope that the Department of Agriculture has skilled
people who understand what is happening and who can be ahead of the game and
not behind it, because otherwise we are going to be in big trouble in Canada.
The Acting Chairman: I should like to ask just one general question. We have had
a number of witnesses here from various parts of the agriculture industry. We
know that positions have been prepared and that, perhaps unlike any other time
in our history, the Canadian Federation of Agriculture and others have managed,
with the help of individual groups and associations, to pull together a degree
of consensus on certain specific issues. Certainly, it is unlike anything that
was there before in the last round. I believe your organizations are part of
that as well.
You have also spoken of the recent so-called summit as a very positive
experience, and I should like to know, for the purpose of our own efforts here,
if you feel that your access to government in advance of these talks has been
sufficient. Have you had problems? Is there a message that we ought to be
sending to the ministries most directly involved in this? Should we be telling
them that we have heard around this table that they should be taking a
different slant in terms of access to your concerns? That is important to us.
We can only go so far, but as a parliamentary committee we can hold these
hearings, which are enormously useful, as this one today has been -- a
free-wheeling discussion of a conundrum for which it is not easy to see a short
term solution -- and we have our own means of access, which is why we want your
I think efforts have been made on both sides, the agriculture side and the trade
side, to have a better relationship going into these talks.
Mr. Rockafellow: As far as the Western Barley Growers Association is concerned,
we have had no problems communicating with Minister Vanclief's office, and
during the Canada-U.S. trade dispute that was going on some months ago I
thought he had excellent communication with organizations. We do not have any
regrets at this point; we just hope the outcome is positive.
The Acting Chairman: That is part of the step toward the best conclusion we can
Mr. Meyer: I certainly should like to add that at no time have I ever seen the
different levels of government more concerned about engaging the producers and
agriculture concerns into at least preparing a Canadian platform for the
upcoming negotiations. There was a sincere effort being made on all levels. In
Alberta, we established a trade group two or two and a half years ago to deal
with that and to prepare a position, which has just been passed on to the
federal negotiators. Of course, we were also part of the WTO conference here in
Ottawa on April 20, which I commented on earlier. It was an excellent
To summarize, anybody in agriculture who had a reason to be involved in this
discussion was given a chance to participate, including even people who were
not aligned with organizations, and everybody was interested to listen to the
different concerns and opinions.
Mr. Bacon: I have to agree with what Mr. Meyer said earlier. We certainly had no
problems participating in any of the process. We were invited to all levels and
we learned a lot, and I hope the outcome is positive for us, even though I do
not think we are going to get zero-for-zero.
Mr. Broeska: This is my thirtieth year involved in trade policy issues on behalf
of my industry, and I can say without a doubt that I have never seen such an
elevated level of both communication and understanding of the issue at all
levels. It is a quantum leap from what occurred in the late 1960s and early
1970s in terms of the understanding of trade issues on the part of the producer
and processor sectors. The educational process has been fostered largely by
trade policy people in the Department of Agriculture. I compliment what this
current government is doing in terms of assisting industry and also allowing
them to participate in the debate.
The Acting Chairman: I thank you for that because that is important for us to
know. In a certain sense, perhaps, we live in a technological world of
information and communications now, and these kinds of negotiations have taken
on quite a different structure.
I guess from our perspective that puts an onus on all parts of government and
industry to open up more in a cooperative way than they have done before, and I
appreciate your comments on that. Certainly, we will do anything we can do to
encourage a continuation of this.
It has been a good morning and we have learned, as we always do, and I want to
thank you all for making the trip and certainly making the effort in the
preparations that underscored your participation here.