Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 14 - Evidence - Meeting of June 5, 2008
OTTAWA, Thursday, June 5, 2008
The Standing Senate Committee on Agriculture and Forestry, to which was
referred Bill S-228, An Act to amend the Canadian Wheat Board Act (board of
directors), met this day at 8:03 a.m. to give consideration to the bill.
Senator Joyce Fairbairn (Chair) in the chair.
The Chair: Good morning honourable senators, witnesses and all of you
watching this meeting of the Standing Senate Committee on Agriculture and
Today, the committee is continuing its study of Bill S-228. A number of bills
on the Wheat Board issue are currently under consideration by Parliament. One of
them, Bill S-228 has been introduced in the Senate by the Honourable Grant
Mitchell, from Alberta.
The bill proposes to enhance the powers of the board of directors on policy
changes to the Canadian Wheat Board. It proposes to reduce the number of
government appointees to the board of directors from five to three. It also
amends the voting process and the question to be asked for the consultation
required when government wants to make changes to the Canadian Wheat Board's
jurisdiction. These are very difficult issues to debate these days.
We are pleased to have Larry Hill, Chair of the Board of Directors of the
Canadian Wheat Board with us today to share their views on the bill. Welcome,
Mr. Hill, we are happy to have you here.
Larry Hill, Chair of the Board of Directors, Canadian Wheat Board:
Good morning. I would like to thank the members of the Standing Senate Committee
on Agriculture and Forestry for inviting me here this morning to share the
Canadian Wheat Board's, CWB's, perspectives on Bill S-228.
I farm in the Swift Current area of Southwestern Saskatchewan, and I am also
the chair of the CWB's board of directors. This is a position I assumed this
March taking over from Ken Ritter, who had been the chair for 10 years. I am
elected by and represent producers in Wheat Board District 3, which encompasses
Southern Alberta and Southwestern Saskatchewan.
For obvious reasons, Bill S-228 is a piece of legislation that is of interest
to the CWB. We have examined the legislation and have a number of thoughts that
I plan to share with you this morning.
First, as a farmer and a producer-elected director of the CWB, I freely admit
my bias toward any measures that strengthen the level of control that grain
producers exercise over this organization. Whether it is in informal
conversations or looking at the results of our producer survey, it is evident
that grain producers want the final say in how the CWB is run and how their
money is spent.
I believe they have that right. Farmers supply the crops that the CWB sells,
pay the CWB's costs and stand to lose or gain depending on how the CWB is
managed. The CWB does not buy grain. It sells grain on behalf of producers. It
is a grain-marketing agent that farmers control through the people they elect to
the board of directors.
That is not to say that the federal government does not have an interest in
the grain-marketing agency. Because the CWB has a federally legislated mandate
and because the Government of Canada continues to provide financial guarantees
for the CWB's payments and borrowing, it is fair and reasonable that Ottawa
maintain some level of involvement in ensuring that the CWB is properly managed.
As chair of the board of directors, one of my priorities is to find
constructive ways to work with the federal government and Minister Ritz toward a
common goal of improving the profitability and sustainability of western farms.
The bottom line is that the CWB is a shared-governance corporation and that the
Canadian Wheat Board Act must find ways to delineate the powers of both parties,
namely, farmers and government, and where they begin and end.
The changes to the Canadian Wheat Board Act that were implemented in 1998
marked a turning point in that relationship. They enabled farmers to take a more
active role in overseeing the organization and setting its strategic direction.
I have had the privilege to be involved with the CWB's board of directors since
I am proud to say that, under the leadership of farmers who sit on the board,
our directors and the organization has undertaken important initiatives, such as
the review of the operations of the CWB by the Auditor General of Canada, the
introduction of producer payment options and various advocacy efforts, including
intervening on farmers' behalf on important transportation issues.
Overall, the CWB supports the general thrust of Bill S-228 because it gives
farmers more control on a number of fronts. In clause 21 of the bill, proposed
section 47(1) tightens the requirements of existing section 47(1) of the
Canadian Wheat Board Act that pertain to how crops can be added or removed from
the CWB's mandate. It proposes changes to the director appointment process to
give more of a role to the producer-elected directors. It also requires the
government to consult and even seek approval from the CWB board before
undertaking certain actions contemplated under the act.
However, our support is tempered by certain concerns that we have with the
proposed legislation and by the need to address certain weaknesses. I would now
like to take a closer look at each of these areas.
In clause 21 of Bill S-228, the proposed changes would clarify that
consultation with the board of directors must occur prior to the introduction of
legislation adding or removing a crop from the CWB's jurisdiction. Board
approval would be required for such an extension or exclusion. Affected
producers would be required to vote by secret ballot and the wording of the
question would be required to reflect as closely as possible the wording of a
question set out in a new schedule to the act.
The CWB is generally in favour of these changes, especially since the
question proposed in the schedule uses wording that is very similar to that
proposed by several farm groups prior to the government's 2007 barley
consultation. A clear question with binding result is important for farmers.
In terms of the appointment process for non-elected directors of the CWB,
Bill S-228 proposes that two of them be appointed by the 10 elected directors.
This is certainly a step in the right direction. However, we think the
legislation could go further. For example, the CWB had proposed to the current
government that all appointed directors be selected from a short list of
suitable candidates recommended by the CWB. This would increase farmer control
and would send a clear message that producers themselves are more in charge than
ever of their marketing organization.
The proposed changes, in clause 2 of the bill, would also include a
requirement that the government-appointed directors bring with them "outside
expertise that may not be otherwise available.'' This would be an expectation
that is not placed on proposed appointees of the farmer-elected directors.
The CWB finds this wording problematic. We would prefer wording to the effect
that additional directors "shall be appointed for the purpose of bringing to the
board expertise that may not otherwise be available among elected directors.''
We offer this simply because it avoids creating two categories of directors;
namely, farmer-elected directors and their appointees and appointees of the
government. We are also unsure of the need to specify that the two government
appointees be named by the minister rather than the cabinet as is currently the
Lastly, Bill S-228 would add a requirement to a large number of provisions of
the Canadian Wheat Board Act for the federal government to consult with the
CWB's board of directors before undertaking certain actions, such as passing
regulations and issuing orders. A requirement that board approval be obtained
prior to cabinet or the minister taking action was added in another five
instances. I will not attempt to comment on each and every one of these.
In general, however, I would say that the intent is to make it clear that, in
dealing with the CWB, the government should not act unilaterally. That having
been said, the effect of these amendments varies from provision to provision and
the specific intent behind the changes is not immediately clear.
For example, the term "consult'' would only require the government to take
the board's views into account. It would not require the government to act upon
those views. This is in light of the additional obligation to seek board
approval in a number of bill's clauses. For example, clause 9(1) of the bill
would add the words "following consultation with the board'' to section 18(1) of
the act, which sets out the government's ability as follows:
. . . direct the Corporation with respect to the manner in which any of
its operations, powers and duties under this Act shall be conducted,
exercised or performed.
This if edition is meant to clarify the government's ability to direct the
CWB, we would only comment that, perhaps, there are better ways to amend this
section of the bill.
In summary, the CWB can support the spirit of the amendments being proposed
in Bill S-228. It is a piece of legislation that would serve to further the
cause of farmer control over the grain-marketing organization that they own. At
the same time, the bill could certainly be strengthened in a number of areas.
This concludes my opening remarks. I would be pleased to answer any questions
you may have.
Senator Peterson: According to the minister, Bill C-46 — another bill
that is out there as well — came out of a plebiscite that was conducted
recently. Do you agree that this was the ultimate wish of the participants? Do
you have any comment on that?
Mr. Hill: When Minister Strahl conducted this vote, he called it a
"consultation'' not a plebiscite. Therefore, it was not binding. When you look
at the results — and I know the quote is that 62 per cent of producers want
change — you should look at another side. During this whole process, the CWB was
promoted as a strong alternative in option 2. That means that 86 per cent of the
producers who voted want the CWB to have a significant role in barley.
As directors, we looked at the results and said that yes, producers want
change, want the CWB involved and want marketing freedom. The question is how we
The board of directors and staff came up with a program called CashPlus in
response to the plebiscite to give producers ability to deal directly with
maltsters and selectors. In recent polling, we saw results that said that 73 per
cent of producers think that CashPlus does deliver on this requirement. We see
that we have attempted to address this. The board of directors is made up of
farmers, and we want to address the needs of farmers.
Senator Peterson: Do you believe the Canadian Wheat Board could remain
effective and operational if barley was taken out of the responsibility of the
Mr. Hill: In my opinion, the question is whether the CWB could add
value. The reason for the CWB existing is to potentially add value to farmers'
grain. The single desk is one of the major factors that allow the CWB to add
Its effectiveness would be greatly reduced were barley to be removed. The
board does not have facilities. Therefore, it would be in a weak competitive
position with other companies. I prefer to think that marketing choice would
mean flexibility under the single desk. The board can add value in that
Senator Peterson: You talked about the government guarantees. Have
they been drawn in the past?
Mr. Hill: In a few occasions, the government guarantees have been
drawn upon. These were situations where dramatic things happened. The last time
it happened, the dollar rose close to 16 per cent in one year and grain prices
fell approximately 30 per cent. At that point, the total pool return on spring
wheat — the only one of the board's crops that incurred deficit — meant that
returns were less than what had been advanced to producers and the government
did back stop that.
This has only occurred on three occasions, I believe, and it is not a large
amount of money in terms of the total amount that producers have received from
Senator Peterson: If the Canadian Wheat Board is abolished, what is
the process for producers to market their products?
Mr. Hill: They would have to market all of their crops in the open
market as we do other grains. It is possible. However, is it as good or would
farmers have as much money? I believe it is not, and they would not. My bottom
line here is "returns to producers.''
Senator Peterson: Would they have to sell to line companies out there
Mr. Hill: That is right. I would say that we would go to a situation
similar to that of the U.S. where the large grain companies would purchase the
majority of the grains. These companies already have a presence in Canada. They
would be prepared to step in.
Senator Callbeck: Bill S-228 really enhances the powers in regard to
policy changes for the Canadian Wheat Board and reduces the government powers.
I would like to know some examples of those powers, such as the examples that
you gave of policy changes currently requiring board consultation.
Mr. Hill: The Canadian Wheat Board Act that is in place now
contemplates cooperation between the government and the board of directors.
"Consultation'' is a very loose word. You can phone the chair of the board of
directors and say that you are thinking of doing something or that you will do
something, or you can ask what they think would happen if you did a particular
thing. It is hard to define exactly what "consultation'' means.
I hope that consultation is real consultation where you have give and take on
an issue before any actions are taken.
Senator Callbeck: Can you give examples of policy changes that do not
currently require board consultation but would under Bill S-228?
Mr. Hill: An example would be that the minister can change regulations
to the voting procedures. We have director elections coming this fall. The
minister can make changes to the regulations around the voting. In fact, this
happened in the last set of CWB elections where the minister made changes to the
election procedure as to who received an eligible ballot; that was done at the
Senator Callbeck: That was done, but with this legislation would it
not be possible?
Mr. Hill: This legislation would dramatically change that, I believe.
I am not certain of exactly what all of these clauses would mean legally. Most
legislation is difficult to completely interpret until it has been in force for
some period of time, but my belief is that it would change that.
Senator Callbeck: The minister was here on Tuesday night, and he was
asked if the CWB would have a problem competing with the large multinationals in
an open market. He stated that they would have no problem. Do you agree with
Mr. Hill: I do not agree with that, no. The sales of large
multinational companies are many times the sales of the CWB. The Canadian Wheat
Board sells $6 billion to $8 billion a year. That is not a huge amount compared
to large companies. The single desk is what gives the board leverage to deal
with these large organizations and put Canada's farmers and grains on the world
marketplace at a premium. I just might add here that Canada's grain system has
the best reputation, bar none, in the world. If we go to an American-like
system, I think we would enjoy the reputation of the Americans. That would not
be as good as we currently have.
A dramatic change in producers' powers in the marketplace would occur if the
single desk was taken away.
Senator Segal: In your opening comments, you mention that the CWB had
done a survey of western producers. Was there a question in that survey about
taking barley out and, if there was, what were the results?
Mr. Hill: Yes, there was a question about barley. For barley
marketing, the answers were that 43 per cent would choose a single desk and
obviously then 57 per cent would prefer an open market.
Senator Segal: Your say that you do your own farming near Swift
Current. Why would the farmers who want an open market have that view? Why do
you think there is a slight majority but nevertheless a definitive one on that
Mr. Hill: The programs of the past have been frustrating for farmers.
We have had low initial payments. We are sending our initial payment
recommendations to the government now. We are in a very tumultuous marketplace.
We cannot ask the government to guarantee 100 per cent of what we think the
return will be. Therefore, we have to take a risk factor.
For barley, the risk factor has been high, and the initial price has been
low. In Western Canada, there is an open domestic market for feed. The
Lethbridge market is the leading market for feed barley in the world. Here you
have a very high-priced market. The initial price for premium malt barley is
often below what you can take for feed. If a producer needs cash flow, open
market feed is a good choice.
As directors, we tried to buffer this with pricing options where producers
can capture more money upfront and compete with this. However, these are new
options and many producers have not used them yet. Many have, and they are happy
with them. The frustration with the low initial payments is one of the biggest
Senator Segal: I want to get your sense, as chair, if you are
satisfied with the level of transparency for farmers in the activities of the
board. You have disclosure obligations which, as far as I know, you meet
extremely well. You indicated that the Auditor General had been invited in. That
is an excellent step ahead. Do you make your operational numbers available to
farmers on a quarterly or annual basis now? What is the present practice?
Mr. Hill: It is in the annual report in detail, but we do have a grain
matters publication in which we put interim results. The bulk of the information
waits for the annual report. These have to be audited, of course. Given the
closing of the year and that sort of thing, they are not delivered until several
months after the close of the crop year.
That is the published transparency. To our board of directors, the sales
books are in the corner of our boardroom. Therefore, when we get many phone
calls saying, "The price of durum is $14 a bushel in the U.S.,'' I come to the
board and look at the last sales to see what the Canadian Wheat Board is selling
durum into the U.S. for. All of our directors are able to see that on a regular
basis, so the transparency to the board of directors is complete. Our job, since
we are responsible for two producers, is to give this information back to them.
We do that through a series of meetings throughout the year.
Senator Segal: Living and farming in Saskatchewan, you will recall
some years ago that we did see events, which I know many Canadians found
troubling, of farmers who were in some difficulty because they tried to move
their own wheat across the border, et cetera. I want to get your sense, both as
a person in the business and as a chair, whether you see any of those pressures
building now. Are we doing all we can to ensure that those sorts of pressures do
not produce the type of intense difficulty and sense of aggrievement that people
felt at that time?
It seemed it was a divisive and problematic period for the farming community.
Senator Gustafson, being an active grain oilseeds farmer himself, would mention
the increase in input costs, which are escalating massively if he was here. Just
to fill the tractor in the morning is almost a thousand dollar bill. Because of
the very volatility that you referenced earlier in your comments, do you get a
sense of those pressures building in some fashion that might not be as easily
managed as we might hope?
Mr. Hill: Cross-border pressure will always result when prices
dramatically rise, as they have done. Right now, there is no cross-border
pressure on barley. In fact, the situation that we face now is that it would be
more difficult to export grain into the United States.
Just to give you a bit of background on the market, we can sell about 10 to
15 per cent of our grain into the United States. You have to remember, they are
a net exporter of grain as well.
Senator Segal: It is because of their subsidies and demand.
Mr. Hill: That is correct. However, they have a large production base
there. You drive for days through the grain growing area of the United States.
To sell into that market, we have to do a few things: We have to be disciplined,
and we have to obey their trade law. There is no permanent solution to sending a
lot of grain into the United States, unless it is in a disciplined manner. If
you want to ship your grain to the United States now, you can get an export
permit through the CWB by using one of our pricing options, a producer direct
sales option, and the CWB would do the paperwork so that you could take your
grain across the border.
If you can sell your grain in the United States for more than the CWB is
selling it for, you can capture that spread. Therefore, if you can find an
elevator with a demand to fill a few cars and a need and willingness to buy your
grain at premium, you can keep it. With respect to the prices I spoke to you
about earlier, when U.S. elevators were offering $14 a bushel for durum, the CWB
was selling for $16 to $18. That is how it is. The board does not sell to
elevators in the United States; the board sells to mills. We bypass that piece,
and we sell train load lots or multiple car lots to processors in the U.S. at
prices that are significantly higher than the elevator prices.
Therefore, a producer would have to find an elevator prepared to pay that
premium. That can happen, and it has happened. Now, if a producer finds that
situation, the ability is there.
Given the difficulties of getting a product into the United States, having an
export permit would be the way to go if you wanted to sell grain there.
Senator Segal: Can you give us your own assessment of how our grain
handling capacity and shipping is bearing up to demand?
I am thinking of the Port of Vancouver, the Port of Thunder Bay and the rail
system. Is it timely and engaged in getting what you want done or are there
inappropriate delays costing farmers or yourselves demurrage and other problems?
Mr. Hill: There are challenges; there is no question about that. That
is one of the dilemmas that refers back to Senator Peterson's question.
In order for us to market our product, our system has to run flat out
throughout the year. We cannot simply shut down, sell all the barley this month
and ship nothing but barley. If we do that, we will have a big problem. Our
system must run in an orderly manner to make maximum use of the facilities that
The West Coast is certainly taxed. There is no doubt about that. However, we
have an excellent port at Prince Rupert that is probably underutilized. That is
also an issue.
The issue of demurrage is one that is widely misunderstood. From our point of
view, as the board of directors, if we just measured staff on demurrage, we
would be making a mistake. If we do not want to incur demurrage, we slow the
throttle to ensure that we are safe and have no capacity problems. We want them
to run the system flat out.
The other side of demurrage is dispatch. If a ship comes to Vancouver and is
loaded early, the CWB earns dispatch on that. Since I have been a director,
demurrage exceeded dispatch in only one year out of the nine.
Farmers need the system to run flat out. We have to accept a little
demurrage. It is not a bad thing.
Senator Segal: If you ranked our markets now based on present
activity, what would our five largest export markets be for Canadian grains?
Mr. Hill: Although it is not export, the Canadian domestic market is
the best one of course. The United States, Japan, China and India are all an
excellent markets. They are all big and growing markets.
Senator Callbeck: Mr. Hill, you mentioned export permits. If a
producer has an opportunity to sell to the United States at a premium, the CWB
will do the paperwork and he or she must get an export permit. Is this often
done, and is it difficult to obtain that export permit?
Mr. Hill: It is often done. It is done a lot in organic production
because much of our organic grain goes to the United States, and producers ship
it themselves. The export permit is not onerous. It is certainly possible. The
farmer takes more risk doing that because he or she is taking on the risk that
the buyer in the United States will pay. Given the volatility in the markets
recently, a lot of elevators in the United States face certain difficulty.
In other sales, the Wheat Board often sells at prices higher than the
American elevators close to the border. Therefore, there is not as much
possibility of capturing a premium there.
Senator Callbeck: Is there a cost for that export permit?
Mr. Hill: Absolutely. One of the controversial issues is that the
Canadian Wheat Board uses its standard selling price to the United States on the
export permit. Therefore, the producer would have to earn more than the price
that the CWB is selling at in the U.S. market to gain a benefit. That is why it
is very popular in organic production because organic products carry a large
Senator Mahovlich: With the price of wheat being so high right now, a
lot of farmers question why they need the CWB. They can sell wheat in the open
However, would they change their minds five years from now if the price of
wheat went down 30 per cent or 40 per cent?
Mr. Hill: That goes back, in part, to my response to Senator Segal on
When grain prices are rising, the pool returns are always behind the day's
price. Prices are based on a backward- looking average. It is a fact of life.
That is how it is.
If you look at what farmers did in the United States, the North Dakota Wheat
Commission said that their farmers sold their entire crop at about half of what
the market value rose to.
In Canada, because of the CWB and the grain that stayed in the pool,
producers that stayed there will receive much more than American producers
received. Durum farmers in my area will receive approximately $12 per bushel
according to our pool return outlook. According to the North Dakota Wheat
Commission, most of their growers sold out in the $8 per bushel range or less.
The returns can be very good, but it is always frustrating when prices are
rising rapidly to see that you will not get as much as today's price.
Senator Mahovlich: The dollar is a factor as well.
Mr. Hill: There is no question about that; it is a big factor. We have
gone through the adjustment where our grain prices relative to the U.S. prices
have dropped dramatically with our dollar rising.
Senator Mahovlich: We have to be careful. It is similar to the
situation in transportation where we dismantled our train tracks and suddenly
trains may be coming back. However, we have thrown everything away.
Senator Peterson: The existing Canadian Wheat Board Act makes
allowances for dealing with many of these issues that we are discussing today.
If there is a problem, you consult with producers, hold a meaningful plebiscite
and then take it to Parliament to change the act. It is there. Why are we not
following that process?
Mr. Hill: That process is certainly there. It would be our preference
that if a change will be made, the producers have a binding plebiscite on a
clear question and then put it in the hands of our legislators to deal with the
Senator Peterson: What impact will the removal of the current visual
identification have on producers?
Mr. Hill: It will make a significant difference in some respects.
I have had the opportunity to attend many meetings of U.S. grain producers.
They have a concern that their grain is seen as inferior to Canadian grain on
the world markets, and they see that as a challenge. They do not have kernel
visual distinguishability, KVD. It is inexpensive and has been a fairly simply
way for producers and grain companies to identify the grain that they have.
Now, producers will have to sign a declaration, and they will have to know
what their seed is. That declaration will confirm that they have delivered a
certain variety of grain. I think it will mean that producers have to maintain
samples because that is the only way they will be sure something will not come
back on them that will cost money and damages.
There is no simple way at this time to guarantee varietal purity at the
elevator at the time of delivery. That is the dilemma. We got rid of all the
small elevators and the small grain bins. Everything is now big terminals. Many
trucks are unloading at the terminals at the same time and grain is commingled.
If my grain is a problem in that big bin, the whole bin is a problem and I may
have caused it. If it is traced back to me, I am liable. That is a new situation
that did not previously exist.
Senator Peterson: If the Canadian Wheat Board was dismantled, I heard
that, under NAFTA, it could never be reinstated.
Mr. Hill: That is my understanding. It is a one-way move.
Senator Segal: Mr. Hill, you were good enough in your opening comments
to reflect on some of the provisions in the legislation in front of the
Do you ever worry about paralysis? In other words, if you structure a
statutory consultation process but do not define it in great detail, a dispute
can arise over what constitutes effective consultation. I assume one could take
legal action if one thought the ministry or Crown was acting in some fashion
that was cavalier.
At some point, surely it is in the interest of grain farmers, oilseeds and
the rest, to have some nimbleness, both on the part of the board to make its own
decisions in how it sees the marketplace and also on behalf of the Crown. The
farmers and the members of the larger co-op called the Canadian Wheat Board and
participants in the pool are also voters and taxpayers. They have political
rights in that people who are accountable to them politically ought to act on
Do you worry this bill might tilt the balance in the wrong direction, or are
you comfortable that it deals with the balance in a way that is reasonably fair?
Mr. Hill: It is difficult to assess that. We have legal actions right
now in which we do not agree with the government. That occurs already.
The key here is that, no matter what legislation we have, we must have a
spirit of cooperation. The current act implies that. I think these changes would
imply that that would still have to be there. In order for a consultation to be
effective, it must be in advance and in a questioning manner, not a directive
manner. That would have to be established regardless of the legislation. As to
paralysis, I do not know whether it would change. The key issue is that there
must be cooperation.
Senator Segal: Some time ago, in some administrations in North America
and Europe, sunset provisions were brought in with respect to new bodies created
or existing bodies operating differently because assuming any body of government
continues in perpetuity simply because it is already there may not necessarily
liberate folks to determine what a better approach might be.
Accepting Senator Peterson's concern about a grandfathered agency such the
Canadian Wheat Board having a special protected status under NAFTA, which you
would not want to lose, do you or your colleagues on the board ever have that
type of discussion? I do not mean just in terms of how you are running the shop,
and what you are doing for your farmer members — which is your primary
obligation. Do you ever have a discussion about whether this is the best way in
today's global market to be doing this? Should we have a more fundamental view
about a better way of doing this?
Is the pressure of time, operational issues and sales such that it is not a
practical discussion for you to have?
Mr. Hill: We do have planning sessions. When every one of our 10
elected directors meets with their constituents, they are given advice. It is
direct. I have held six of my meetings in Lethbridge in the last eight years.
The Chair: It is a wonderful city.
Mr. Hill: It is a very nice city. It is part of my district, and I am
pleased to represent the producers there.
I have found that the advice that I hear from that area is not different from
the advice I hear where I come from in Southwestern Saskatchewan; the Swift
Current area. We are in the heart of durum country in both places, and producers
are concerned about receiving the bottom-line dollar.
We are constantly faced with World Trade Organization, WTO, talks and how
that might affect our mandate. We have debate around that. I have represented
our board of directors at the WTO.
Our competitors do not like to see the CWB. They have mounted many
challenges. As directors, we have had to decide whether or not we will defend.
It costs money to defend. When the North Dakota Wheat Commission challenged the
Canadian Wheat Board, we had to make the decision whether to spend producers'
money. We did an analysis of the situation and decided that the market was
valuable to us and that we needed to defend; we cannot have a duty placed upon
We do that type of planning all the time. We are just into a new era of
products to give producers flexibility within the single desk. We will continue
to look to ensure that we are relevant.
In fact, given today's situation, the CWB is more relevant than it was in the
past. When you look at the world, you are looking at mergers and acquisitions at
an alarming rate. To fill one Panamax vessel takes seven trains. Regardless of
how farm sizes are increasing, seven train loads is a lot of grain. A customer
buys that much grain at one time.
In today's world, an organization that can assemble that much grain and move
producers up the value chain is invaluable. That is what the Canadian Wheat
Board does; the wheat board keeps the grain in the farmer's hands until it
reaches the customer's hands. In the American system, the wheat board is not
there, and the grain becomes the company's grain the minute it goes through the
chute at the receiving facility.
I think we have an ability here to add value to producers and that, of
course, is our goal as directors and farmers.
Senator Segal: I will ask one final question in the context of your
many years of farming in, I take it, the durum wheat business.
Do you have any wisdom to share with us on the instant food prices that we
now appear to be facing around the world? In your judgment, is it due to supply,
diversion of supply, transportation or hoarding on the part of commercial
interests? What, in your view, is actually taking place?
Mr. Hill: We have had weather events that have decreased production in
some areas. However, it is a question of our reserves; our stocks above what is
being used have been declining. There is no question about that. The situation
has been getting tighter.
We have moved to a just-in-time delivery system where customers know that if
they order grain now, they will receive it in time for their use.
We are almost to the point where that is not so obvious. We are also getting
to the point where funds are in the marketplace in a very dramatic way; there is
large participation in the markets. They are not there to consume grain; they
are there to make money for their investors. We have to understand that. We need
All of these factors have tended to drive the price up rather dramatically. I
do not think there is a shortage of product. However, in order to ensure that we
do have enough grain, we need to allow farmers to be profitable.
We have not produced much less wheat over the last 10 years. The world
consumption has increased so our share of the world market has dropped a little
bit. However, our production has been pretty flat. This is under poor prices. If
you put a good price in front of producers, my prediction is that there will be
Senator Segal: Let us assume you are a betting person, which I am sure
you are not.
Mr. Hill: I am a farmer.
Senator Segal: Nobody lays bigger bets than a farmer. Would you
conclude, based on the present price profile, that we have a shot in seeing more
production and more producers engaging?
Mr. Hill: Absolutely. I made a decision this spring. I purchased my
fertilizer requirements in the fall. I paid about $600 a tonne for my phosphate
fertilizer last fall. I have this bin, and I go out and seed my pulse crops. At
the end, I always need a little more, so I would run into town with a truck and
pick up 5 tonnes of phosphate fertilizer. The size of the pile did not even
touch the edges of the box. That totalled $1,350 a tonne, but I paid it. I
thought lentils will be worth money, and I need to put this fertilizer on.
Senator Peterson: This apparent turmoil that we are going through
right now, what impact is it having on the CWB, on the operational side and for
Mr. Hill: When there is a lot of noise out there, you are distracted.
We would prefer to deal with marketing grain and looking after farmers'
business. If we did not have to deal with turmoil, it would be simpler to do
that. We would still be looking at every possible way that we could to give
producers the options that they want.
That is one way to get change. If you have pressure and turmoil, people look
at change. It is a driver of change. However, turmoil is a certainly distraction
and will have an effect. I do not know how large it will be, but it is having an
Senator Mahovlich: Hog farmers have been having a real problem with
input costs and are getting out of the business. This is happening across the
world. The hog farmers were demonstrating in front of Buckingham Palace. Where
does this end? Will it eventually come back?
Mr. Hill: Absolutely. Hog prices and beef prices run in cycles. I
believe it will come back. People need to eat. People will want pork. The issue
is how to balance pork supply with feed grain supply and the price. We cannot
have producers losing money on every hog that goes out the door. That is not
sustainable. They will get out of the business.
However, in my opinion, this will turn around in time. The question is when
that will be and what the turnaround will mean. My sincere hope is that it does
not mean that grain prices have tanked and grain producers will get beat up
again. We have just come through a long cycle where it has been pretty tight on
the farm. In many areas, producers have made the biggest subsidy to agriculture
there is, and that is off-farm income going into the farm. People have been
working off the farm in order to keep it going. In that way, they are
subsidizing the consumption of grain. I do not think that is right or fair.
Producers need a good price for their product.
The Chair: This was a very good discussion. Thank you very much for
appearing, Mr. Hill.
Also joining us this morning to share his views of the Bill S-228 is Humphrey
Banack, Member of the National Advisory Council of the Canadian Federation of
Agriculture. We are delighted that you are here.
Humphrey Banack, Member of the National Advisory Council, Canadian
Federation of Agriculture: I would like to thank the members of the Standing
Senate Committee on Agriculture and Forestry for inviting me to appear this
morning to provide the Canadian Federation of Agriculture's perspective on Bill
My wife and I operate a grain and oilseeds farm about 100 kilometres
southeast of Edmonton, Alberta near the hamlet of Round Hill. I am here this
morning on behalf of the Canadian Federation of Agriculture, CFA, as a citizen
advisory board member and as president of the Wild Rose Agricultural Producers,
the general farm organization in Alberta.
This legislation is of great interest to all members at CFA, but it is of
significant importance to its western members. One of the main objectives of CFA
is to promote empowerment of farmers in the marketplace. Much of this bill does
exactly what we propose in our mandate and around the board table.
I believe the Canadian Wheat Board lays out a path forward for empowering
producers and providing them with more control over the future of their
marketing organization. Many of the changes propose only consultation with the
board of directors on any changes to the operation of the CWB. We feel some
should require board approval to proceed. The board of directors represents
producers involved and should have the final say in most or all policy changes.
Government does have a role in the operation of the CWB with respect to
guarantees of payments and borrowing and, as such, must have a board presence.
We feel the proposal that changes the method to appoint directors is balanced
and provides both producers and government assurances that their interests will
be represented on the board.
We are please that the bill lays out a plebiscite question that is close to
the wording proposed by our organization when the barley plebiscite was held
last year. We feel the process must be clear and concise so that producers
clearly understand the implications of this action when they vote.
Finally, we believe that any changes to the Canadian Wheat Board governance
that show a clear distinction between the arm's length status from the
government will provide a perspective that the CWB is producer-managed and
operated. It is very important that that is understood by everyone.
In closing, I believe this bill will empower farmers in the marketplace. As a
producer, I feel that marketplace empowerment will sustain my operation.
Thank you for your time. I would be happy to answer any questions.
Senator Callbeck: Bill S-228 has three parts: the powers of the board,
the directors and the voting process. I assume that you, the voters, are happy
with what is outlined in this bill; in other words, there will be a question
that lays it out, and it is clear.
Mr. Banack: Yes, the CFA proposed a question to the government when
the plebiscite was held on barley, and the wording of the plebiscite proposed in
the bill is very close, if not exactly, the wording that we had proposed. The
question must be clear and concise and producers must clearly understand where
they are going.
Senator Callbeck: You are happy with the legislation in that regard.
Mr. Banack: Absolutely.
Senator Callbeck: Are you happy with the proposals on the board of
Mr. Banack: Yes, it should be a farmer-empowered board. Anything we
can do to show the public that it is a farmer-operated and managed board rather
than an arm's length extension of the government will provide a public
perspective that it is not a government-managed board. The more farmers we have
on the board and the more farmer input we have into the board will provide that
perspective to the people who are not involved in the management and daily
operations of the CWB.
Senator Callbeck: Your concern with this particular piece of
legislation is in regard to the powers of the board. The bill says that the
government will consult. Do you feel that the government should have your
agreement before they make changes?
Mr. Banack: Yes, "consult'' can be a very loose word. Many times,
people will be consulted on something and consultations will be held. It often
leaves the producer with the feeling that the consultations were held only to
say that farmers were consulted.
I think the operation of something such as the CWB has to be
farmer-empowered. Consulting is very important, but sometimes the final say has
to come from the actual people involved.
Senator Callbeck: That is where your major concern is with this
Mr. Banack: Yes, that is one of our major concerns.
Senator Callbeck: What are your other major concerns?
Mr. Banack: The plebiscite question was good. The change in the number
of elected directors to the board from two to four is good. We have no major
concerns other than that we want the CWB to be farmer-empowered. That is huge
Senator Peterson: I am struggling to define what a "producer'' is. A
panel looked at it, and they talked about varying levels of production from 40
tonnes to 120 tonnes to qualify. What do you feel is the proper definition of a
producer vis-à-vis the act?
Mr. Banack: The legislation in Parliament presently to change the
definition has created discussions around our board table. We are fairly
receptive of the proposal of 120 tonnes over any of two years to qualify as a
producer. In my particular part of the country, that is approximately 120 acres;
we grow approximately one tonne per acre.
In that respect, we have people making those decisions who are involved in
the marketing of grain and making that their livelihood. Wild Rose Agricultural
Producers supports those changes to move to 120 tonnes and to empower the people
involved in the operation.
Senator Peterson: What is your comment on the removal of kernel visual
Mr. Banack: The industry, along with government, was moving toward the
removal of KVD in 2010. KVD was very important to us. When I haul my wheat to
the elevator, the grader could tell what type of wheat it is, whether it is
flour wheat, Canadian prairie spring wheat for pasta, et cetera. Until we have
something to protect our grain industry and to ensure that the grain we deliver
to our end buyers is of the quality and purpose that it is meant to be, I
believe that KVD should be used or an alternative method to replace it.
We are working with industry to find a way around that. Minister Ritz's
announcement to remove it by 2008 came as a surprise. We would have preferred
the 2010 implementation. It would have given everyone time.
The grain companies I deal with have no way to go forward with this right
now. Last week, I was speaking with the manager of my local elevator, and he has
no idea how to proceed as of August 1, whether via a declaration system or
The grain companies are coming up with something, but it really pushed the
issue ahead. As producers, we would have liked to see it happen in a timely
fashion rather than it moving ahead as quickly as it did.
Senator Peterson: In your opinion, with the removal, the advantage
would go to the grain company as opposed to the producer, or it could?
Mr. Banack: The question is, if any of the wheat is commingled, how
long we are on the hook for liability? When I deliver wheat to the terminal, how
long am I responsible for that wheat being of the variety or the class that I
Some people will take advantage of the system as they do in anything.
However, it is detrimental to have that liability laid on my operation for any
period of time. As Mr. Hill mentioned, someone can contaminate a whole container
of wheat, so farmers want to know how far that liability goes down the chain and
for how long.
With respect to the legal aspects of it, the sampling and such that we have
to do as producers to ensure that we are not unfairly blamed for a ruined
container of wheat will be onerous.
Senator Peterson: On the certainty that we are moving ahead with this
for producers, how difficult has it been for them to manage their affairs with
respect to what they should or should not plant?
Mr. Banack: The marketplace is telling us to plant a lot of acres this
year. However, we always have to look at costs. Two of our costs have risen
significantly over the last few months.
If we all had a crystal ball, we would know exactly what to plant.
Agricultural, as a whole, has been taking a more business-like attitude where we
have to look at the crop that will provide the greatest return for the fewest
inputs or risks. There are some very good-return crops out there, but the risks
may be too high for some of us.
It is a very onerous job to come up with a plan on acres to seed; and
disease, costs and returns all come into the picture.
Senator Mahovlich: Who makes a decision on what crop to choose or is
it just a gamble?
Mr. Banack: In our operation, my wife and I and my brother farm
together. I basically decide. The producer will decide what crop he or she wants
My wife always has a vote.
Who makes the decision? We, as producers, always decide what we want to seed.
When I plant hard red spring wheat in the spring, I made the decision at that
time to deal with the Canadian Wheat Board to market that grain.
Senator Mahovlich: Does the Canadian Wheat Board advise you on the
crop to choose?
Mr. Banack: No, but they do provide us with some marketing expertise.
They provide us with a pool-return outlook for that coming crop year where they
can best come to a price, and they will tell us the levels. I will take the
numbers along with my production numbers, subtract expenses and determine a
We look at all the different crops, the four different crops — peas, barley,
canola and wheat — and look at the different options and how they fit into our
rotations. We try to make the largest bottom line while being environmentally
and economically sustainable.
The decisions today are made on the farm based upon the marketing tools we
have, whether from the elevators, the CWB or some of the pre-pricing and the
futures contracting that we use out of the elevators for the non-board grains.
The Canada Wheat Board has no say in what I plant. They will provide a market
outlook and signal, and, through that, they will try to sway me to plant wheat
or others. They will only provide a market signal, which is no different from
any other grain company.
Senator Mahovlich: The world competition right now is higher than it
has ever been before. A lot of countries are getting into farming, especially
Asian countries. Do you feel confident that, if farmers have more control over
the CWB, the farmers will be able to compete with these other countries?
Mr. Banack: Yes, the marketing is a huge part of our operation. The
input costs are huge, too, as are the regulations that are involved when we
compete with foreign countries.
I believe the CWB does provide a premium on our grain because they are
farmer-empowered. A grain company answers to board of directors and
shareholders. The Canadian Wheat Board answers to farmers. I believe that,
through the cooperative marketing, we can provide the biggest return to my
pocket and to those of producers across Western Canada.
Co-ops are popular today. I believe that the Canadian Wheat Board is part of
that cooperative marketing, and, as I said, we do not have to deal with them. I
can grow an entire crop year without growing a CWB grain. I can grow all
open-market grains. When I put the crops in the ground is when I have make my
decision to deal with the Canadian Wheat Board in the fall or not.
Senator Mahovlich: Are you in the favour of the bill?
Mr. Banack: Yes, I am.
Senator Segal: Can we step back from this bill and talk about the
Canadian Wheat Board, generally?
I am sure from the point of view of the federation, and also from your own
point of view as an individual running a family farming business, that there are
areas where the CWB could be doing better; where they might be more responsive
to your needs and interests.
What might they be? If we were sitting here with a magic wand and not just
this piece of legislation, and we had the capacity to improve it in a way that
was really responsive to the federation's and farmers' views, what would be some
of those improvements be that might make it much more helpful than it currently
Mr. Banack: The CWB is a fairly large organization. When we deal with
large organizations of any type, whether input suppliers or whatever, it is hard
to feel that we are talking with the people who make the decisions. The Canadian
Wheat Board works on that daily, trying to arrive at the openness of farmers and
They are providing us with many marketing tools that we can use to forward
price our grain throughout the year. Understanding some of them can be difficult
and the open-market system is difficult, too. Typically, every year, one smaller
farmer will quit farming because of paperwork and marketing tools. It is turning
into a business. We have farmers and we have business people. Some of farmers
are quitting the industry today because they feel the paperwork and business
side has become too onerous for them to handle. Anything the CWB can do to
reduce that would be appreciated. Open, clear and concise market signals are
important to us. The CWB does a fairly decent job at that.
We could have it opened up to deliver grain. We have an aspect that, if we
need to have quicker cash flows, I can trade my grain deliveries with a fellow
neighbour. That has been important to some of us.
We also would like to have different marketing opportunities. However, even
when dealing with the cooperative aspect through the CWB, we always have to
remember that they cannot hurt the co-op for one producer. Their hands are tied.
The CWB does a great deal, and I believe this legislation will allow them to
be better viewed as producer-operated and managed. That can be a huge step
forward. Many producers feel the government has a big hand in the Canadian Wheat
Board and producer education would be huge.
Senator Segal: How long have you been in the farming business?
Mr. Banack: I have been in the business for thirty years.
Senator Segal: Let us talk about the last five or 10 years. If you had
to circle with a big red pen the biggest mistakes government has made with
respect to oilseeds, grains and wheat producers, what would the two biggest ones
be? What are the sorts of things you would not want to see us do in the future,
regardless of the government of the day?
Mr. Banack: From a freight rate perspective, as we on the Prairies are
landlocked, it is very tough for us to get our product to a port and to a
customer. The losses of some of the control over the railroads, their
monopolistic attitude and the way we have to deal with them have been a thorn in
our side. The way that transportation has eroded over time has been a stumbling
block for the development of Western Canada. We still have to get our grain to
ports, and the railroads are very tough to deal with. No checks and balances
exist to ensure that they provide us with the service necessary to move our
grain off the Prairies.
Personally, I received financing when I started farming — we can see the
issues in some of our housing — and too much is now financed and held by the
government, which is driving up our housing market. When I started farming, a
lot of help was given by the Alberta government, and I went broke once for it.
Sometimes we have to stand back and let the markets play those things. Rail
freight is a big thing. Sometimes we have to let the markets play things out.
Senator Callbeck: If we go to an open market, will the CWB be able to
compete with multinationals?
Mr. Banack: I have talked to people from Ontario where there is no
wheat board, or they have a voluntary wheat board. I believe, in Western Canada,
we grow some of the best wheat in the world. With that top quality wheat, to
have many marketers can only do one thing. When we have a top quality product
across the world, we can demand a premium from a single desk. If we have many
desks selling that product, that premium will be eroded. The CWB does provide us
Senator Callbeck: If we continue to have more grain products go on to
the open market, do you think the CWB will continue to exist?
Mr. Banack: The CWB will have a hard time existing in an open-market
situation because they have no way to move their grain from the terminal to port
or to the boat because they rely upon the grain companies to move it for them.
It would be hard for the CWB to compete with the any of the multinational
companies on the sales end when the multinational company has to handle the
grain in the middle. It would be tough competition. It would come down to trying
to sell for service or lowering the price. No one wants to see that happening,
where we provide better service for less money or provide less money for
producers. As soon as we have multiple sellers of a top-quality product, our
prices will come down.
Senator Callbeck: If the CWB is gone, what will happen to the little
Mr. Banack: The little fellow will have more and more paperwork to do.
It is coming down through environmental things as well. No one has a crystal
ball. If we all could see the future, we would be smarter today. I believe the
small producers will see a demographic change of agricultural producers in
Western Canada without the Canadian Wheat Board. From my perspective, with 4,000
acres, when I walk into the elevator, I have much more marketing clout than the
guy with 400 or 500 acres. If the CWB were to be removed, that marketing power
would change even more drastically in the favour of big producers.
Senator Peterson: Are the two bills that are before us now, Bill C-57
and Bill S-228, exclusive or complementary? Do you have an opinion of one over
Mr. Banack: Bill S-228 provides more marketplace empowerment to
farmers than Bill C-57 does. One of the building blocks of the Canadian
Federation of Agriculture is market empowerment to farmers. I believe this bill
does provide us with more of that than Bill C-57 does.
The Chair: Thank you, Mr. Banack. This has been a very helpful morning
for us all. Everyone around this table knows that in parts of our country this
is a huge issue. We are keeping track of how it is getting along. It was very
helpful to have you here today and to have the discussion we have had all
We thank you all for coming. It is good to see you again.
The committee adjourned.