Proceedings of the Standing Senate Committee on
Agriculture and
Forestry
Issue 10 - Evidence - Morning sitting
WINNIPEG, Thursday, April 2, 1998
The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-4, to amend the Canadian Wheat Board Act and to make consequential amendments to other Acts, met this day at 8:07 a.m. to give consideration to the bill.
Senator Leonard J. Gustafson (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the meeting to order.
We are pleased to be here in Winnipeg today. As many presenters wanted to appear, we are starting a little earlier than usual this morning.
We have heard from 82 individual farmers to this point, 26 farm groups, and two ministers. My understanding is that we will hear today from the Minister of Agriculture of Manitoba.
I would ask the witnesses to please introduce themselves.
Mr. Carl Ostberg: I am Carl Ostberg, a farmer from southern Manitoba in the Red River Valley.
Mr. Alan Kennedy: I am Alan Kennedy, also a farmer from the Red River Valley in Manitoba.
Mr. Bill Uruski: I am Bill Uruski. I am a farmer from Arborg, Manitoba.
Mr. David Suderman: I am David Suderman, a retired employee of the Canadian Wheat Board.
The Chairman: Our procedure is that you will each make a five-minute presentation and then we will go to questions from senators.
We will begin with Mr. Ostberg.
Mr. Ostberg: Thank you. As the world grows and becomes more prosperous, trade and commerce between countries is opening up and creating a freer world market. However, this is not the case in the Western Canadian wheat and barley grain industry. Bill C-4 and these Senate committee meetings is a political process which, in my opinion, is a prime example of the way in which our industry is being held back from enjoying the growth and prospering from a liberal world economy.
Two years ago, I was involved in meetings with the Western Grain Marketing Panel. I was led to believe that I had a voice in how I was going to market my wheat and barley in Western Canada. A great deal of time and money was spent collecting views and opinions of Western farmers, yet the government of the day has not accepted those views or the report of that committee. How will this Senate committee convince me, a Western Canadian farmer, that this is not another futile process?
Bill C-4 should never have come to be. The root of the problem of Western wheat and barley marketing is the monopoly power which the federal government has entrenched in the Canadian Wheat Board. I loathe the world ``monopoly". Why is it a part of Western Canadian society? Why is the Canadian government involved in a Crown corporation which has exclusive control of commodity and service? What is the need for government control? How can we be a free and democratic society when our government forces a segment of the Canadian population to sell product to a Crown corporation which is empowered with a monopoly?
I have been told not to grow wheat and barley if I do not like the system. Wheat and barley are essential crops in the cropping rotation for Western Canadian farms. Wheat and barley must be grown to break disease and insect cycles which are created when special cash crops like canola are grown in crop rotation. The wheat and barley stubble is a staple of the soil. They are vital to soil conservation. If we wish to continue farming, we must treat our soils with respect. Wheat and barley are a part of that successful farming practice.
The advice I have been given not to grow wheat or barley if I do not like the system, sounds simple. However, there is no choice. We must grow wheat and barley. I am not asking the Canadian Wheat Board to open its books. I am asking only that Western Canadian farmers have the freedom to market their wheat and barley in a free and democratic system.
I am not aware of any other business in Canada with a president, CEO, board members and shareholders, that would allow its product to be expropriated by a Crown corporation with monopoly power. MTS and the Manitoba Hog Marketing Board are two examples of industries which had their monopoly powers removed. One year ago, MTS shares traded at around $13; today they trade at around $22. The Manitoba Hog Marketing Board lost its power. The production of hogs in Manitoba is exploding. The industry has become very healthy with hog barn expansion and a new hog processing plant in Brandon. These two industries prove how government intervention can stifle an industry and create inefficiencies.
I look forward to the day Western Canadian farmers have the freedom to market their wheat and barley as they choose.
Mr. Kennedy: Honourable senators, I wish to express my appreciation for this opportunity to participate in the democratic process. Given that commercial primary producers probably constitute less than 1 per cent of the electorate, direct presentations to legislative committees such as this are our only means of having any input into legislation affecting our industry. Bill C-4 is an opportunity for the Senate to function in its role as the chamber of sober second thought.
The Canadian Wheat Board is a world class agency responsible for a large share of Canada's vital export trade. Change is constant in a dynamic and volatile industry such as agriculture and the accompanying food chain, and the pace and pressure for change from the global economy seems to be increasing ever more rapidly. Not all of these changes are in the best interests of Canada or Canadian primary producers. Bear in mind also that any major changes in the structure and operation of the Canadian Wheat Board will, in practical terms, be irreversible as long as we operate under the terms and conditions of NAFTA.
Some fundamentals in agriculture are constant in spite of change; notably, the steady erosion of agricultural commodity values in constant dollars which has brought us to the absurdly underpriced levels with which we are faced today. This fact is usually overlooked by economists and government agencies who attribute a producer's inability to generate a reasonable income to lack of skill, lack of diversity, poor management, inept marketing, et cetera.
Canadian producers have dealt with the cost-price squeeze by doubling their output on the same land base and reducing their numbers by a factor of 20 since World War II. This process has been accompanied by government cost recovery schemes, off-loading of risks, and huge capital demands for technology and mechanization.
Canadian producers are in no position to handle more risks. When moving from a single-desk pool marketing system to the open market commodity exchange route, the only thing the open market system can guarantee to a producer is the opportunity to assume more risk. The proponents of the open market call this freedom of choice.
I have grown and marketed both board and non-board crops in the Red River Valley of Manitoba for 48 years, and I have never had a Canadian Wheat Board cheque bounce. I wish I could say the same for the private grain trade.
I understand that this committee has heard considerable opposition to the inclusion clause in Bill C-4. Since this clause appears to require more in the way of producer approval to enact than would be the case with the exclusion clause, I fail to see any reason for concern, as long as the performance of the open market is satisfactory. One exception might be the June 19, 1994 canola contract fiasco on the Winnipeg Commodity Exchange. The traders and management of the Winnipeg Commodity Exchange have been tinkering with the terms and conditions of the canola contracts ever since this episode. They do not seem to be happy with the price discovery numbers that the exchange transactions are producing.
I have problems with the potential consequences of shifting the Canadian Wheat Board away from Crown corporation status. If this is to mean that the Canadian Wheat Board will lose its ability to borrow capital at government rates to finance offshore sales, Canada's exports and Canadian producers will be the losers. I would also be concerned about the status of the Canadian Wheat Board support and involvement with the excellent export market and product development by the Canadian International Grain Commission.
The development of a contingency fund might be acceptable if viewed only as a reserve, but if the federal government is going to withdraw its backing of the Canadian Wheat Board pool accounts, the contingency fund is simply another off-load of risks to primary producers. If the federal government is not willing to continue to be involved in backing its financial activities, it has no right to maintain the power to manipulate the Canadian Wheat Board operation for domestic or international political expediency, which it has done in the past and will be able to continue to do as long as it has the power to appoint the CEO and five of the 15 directors on the proposed new board structure.
In closing, I hope that sufficient checks and balances will be built into the procedure for electing directors to the new board. Any democratic election can be hijacked if abuses such as unlimited campaign expenditures are permitted. Witness the final two weeks of the 1988 federal election campaign. If this new governing structure is put in place, it will be interesting to see whether the elected directors will be better able to serve producers than the current Board of Commissioners has done.
Thank you for your attention. I wish you well in your deliberations.
Mr. Uruski: Good morning, senators. I want to cover several points in my submission. One of them deals with process. I received a message by telephone several days that I would appear before this committee. Then, on Tuesday night, I received another phone call informing me that I was not on the list of presenters. On Wednesday morning, I faxed the clerk's office asking to be advised of whether I was on the list. I have yet to receive a response to my fax, although I double-checked this morning as to whether I had sent it to the right number.
Therefore, in terms of process, I am not certain whether some people are being excluded. I am here this morning replacing a gentleman who is ill today.
I want to deal with two areas; one of them being the inclusion clause. I believe that the act should contain a fair and effective mechanism which would allow farmers to trigger a vote on adding grains and oilseeds to the Canadian Wheat Board. As you know, there has just been a vote on putting barley back under the Wheat Board after it was removed by a former minister without consultation or a vote of farmers. The vote in favour of including barley under the Canadian Wheat Board Act was overwhelming.
I think it is hypocritical for opponents of the Canadian Wheat Board to argue against a mechanism to add crops. That is the group that calls themselves justice fighters or freedom fighters. If they believe in democracy, they should be prepared to allow a mechanism for the inclusion of other crops. The existing mechanism is, of course, really not a mechanism at all. In the last 20 years, not one crop has been added to the Canadian Wheat Board Act as a result of lobbying a minister. Not one federal minister of agriculture has allowed a new crop to be included under the act. This legislation proposes this kind of a mechanism.
One of my fellow witnesses this morning has written to the Wheat Board with some interesting ideas on the delegate system and the way in which crops could be added. His suggested approach is one that should be considered.
Although we may not be pleased with how the board of directors will be appointed, another approach would be giving the board of directors the power to conduct surveys and then call for a producer vote. That would mean that the Canadian Wheat Board is in the hands of farmers, which is really the bottom line. If we want the marketing of western grain in the hands of Western Canadian farmers, and we are going to have an elected board, then allow the board to conduct surveys and votes rather than allowing only commodity groups to ask the minister to include another crop. That, I believe, will only politicize the commodity groups.
Some of the commodity groups, such as the canola growers, are industry funded. It would be very difficult to convince some of those boards of directors to ask to have their crops included under the Canadian Wheat Board. That may trigger canola growers who are in favour of orderly marketing to try to get elected to the board of directors. That would politicize a group which should be promoting the agronomics of the crop rather than being involved in the politics of whether it should be under orderly marketing or under the free and open market system.
I also wish to touch on the area of guarantees and cash buying. The two are opposed. In my view, cash buying is dual marketing. Between 1935 and 1941, the Canadian Wheat Board operated a voluntary pooling and dual market system. The results of that are instructive. Because the Wheat Board offered a floor price during falling markets, it incurred huge losses. The total losses between 1935 and 1940 were $131 million. In 1996 dollars, that would be in excess of a $1 billion of losses.
With potential losses of this magnitude, I believe that the federal government could and would remove its guarantee to the Canadian Wheat Board. That is really the nub of this issue. It is opening the door to a dual market and is taking away a guarantee to Western Canadian farmers which I would estimate is worth in excess of $50 million. That guarantee has rarely been used, but once the cash market system is started, it will be the beginning of the end of the orderly marketing system as we know it.
Proponents of the dual market system support pooling, especially when it protects them from low prices, but want the freedom to capture occasional high prices in spot markets. If this were possible, it would indeed be desirable. Unfortunately, it is not possible to operate a price-oriented risk management system alongside cash buying.
In a dual market, during a rising market the private grain companies would get the majority of the grain. The Canadian Wheat Board pool price is an average price. Thus, when prices are rising, the pool price would lag behind. This price lag would make competing cash prices look relatively more attractive even though the rising pool price might eventually outstrip all but the highest cash prices. Because the pool price will tend to lag behind the cash price, most farmers will opt for this price and deliver to the cash market.
In contrast, during a falling market, pool prices will generally be above cash prices. In this circumstance, the Canadian Wheat Board would receive the bulk of the grain. Further, the government guaranteed pool price acts as a floor price option for farmers, and the Canadian Wheat Board would likely incur large losses, as it did in 1930 under the voluntary pooling system.
I have much more information on both of these areas. However, I will simply ask senators to review the bill seriously and consider the question of democracy, because I contend that the democracy proposed in the bill is similar to asking the coyote to look after the hen house.
Mr. Suderman: I wish to express my appreciation for the opportunity to appear before you today and speak to Bill C-4. As I mentioned, I am a former employee of the Canadian Wheat Board. I was director of market development when I retired four years ago. I think it is important that you know this and understand where I am coming from.
As we have already heard today, and as I am sure you will hear in many other presentations, some seek amendments to correct what they perceive to be the flaws and weaknesses of this bill. There may be others who strongly oppose the very concept of single-desk marketing and request that the bill be withdrawn in its entirety.
It is your role to hear these representations. However, it is also important that this committee consider the overriding strength of Bill C-4 when reporting back to the Senate as a whole.
In my opinion, the main strengths are the following: First, Bill C-4 maintains the Canadian Wheat Board as the single-desk marketing agency for prairie grown wheat and barley. I believe this to be absolutely essential to the future vitality of this country's marketing efforts. It ensures that Western grain farmers will continue to reap the financial advantages of producing high quality grain and selling it to consumers around the world.
Second, Bill C-4 places the overall direction of the Canadian Wheat Board into the hands of a board that will be controlled by directors chosen by farmers themselves. This is what farmers said they wanted at the pro Wheat Board rallies held two summers ago. The strong message given then was that farmers want a board of directors that clearly represents their interests and not those of the federal government. This change is long overdue. However, the changeover should not be taken lightly.
Bill C-4 alters the management structure of the Wheat Board in a way that has never been tried before. The new 15-member board of directors, ten of whom are to be chosen by farmers, will have real power and their use of that power will determine whether the Wheat Board has a future in this country.
This is why the selection procedures for the farmer directors must be considered very carefully. The Wheat Board is big business. Its sales, totaling as much as $6 billion a year, represents a very big part of the income prairie grain farmers receive each year. It is important, then, that the system used to select the new directors ensures that those best qualified are chosen.
Third, Bill C-4 maintains the federal guarantees on the Wheat Board's financial operations. This has been an important aspect of farmer-government cooperation since World War I and has provided farmers with a significant degree of income stability for many decades. However, one must ask why these guarantees are now to be limited to the initial payment set at the beginning of each crop year. The change in financial guarantees has set off alarm bells about the government's future intentions.
The only explanation given so far is that this change will enable the Wheat Board to make adjustment payments more quickly because government approval will no longer be required. The minister has said that such a limit in government guarantees is no cause for alarm because adjustments to the initial payment have never resulted in a pool account deficit before. If the government is so certain this will not happen in the future, there is also no reason a full guarantee should not be continued in the future. After all, no additional risks for the federal treasury are supposedly involved, and it is quite certain that most farmers would be willing to wait a few extra weeks for their adjustment payments if that avoids the need to establish a large contingency fund.
Fourth, Bill C-4 will empower the new board of directors to offer farmers more options on how they are paid for their grain. Three options have been suggested. One is to allow farmers to fix the full cash price when taking out forward delivery contracts before seeding in the spring. A second option would enable farmers to take a full cash payment from the Wheat Board at the time of delivery, and a third would allow farmers to take full cash settlements after they have delivered grain and after they have received initial payment.
In each case, the price received by the producer would be based on the most recent Pool Return Outlook released by the Canadian Wheat Board. Each of these options, of course, involves risks, but they would give farmers greater flexibility in managing their cash flow.
I believe those to be the main strengths of this bill. The bill introduces greater flexibility in Wheat Board operations, it puts farmers in the driver's seat with regard to directing Wheat Board operations, it retains an essential element of government backing for Wheat Board borrowings and, above all, it maintains the Wheat Board's marketing strength as a single-desk seller.
It is important to remember that ours is an interconnected industry operating in an interconnected world. With the Wheat Board as the central and principal coordinating body, marketing in the Canadian model includes the plant breeder, the seed grower, the farmer, the elevator manager and his company, the railways, the quality assurance people, the terminal operators and, finally, the processors, millers, maltsters, feed compounders, et cetera.
That is how our grain marketing system works, at least for wheat and barley. There is no other like it anywhere in the world. It has been built and changed over many years to fit our own special circumstances. With the Wheat Board at its centre, it is a closely coordinated, highly integrated system in which all the different parts are closely intertwined. The essential purpose of this system is to satisfy the needs of customers and to serve the best interests of western grain farmers in a highly competitive world.
I am convinced that it will remain that way only as long as the Canadian Wheat Board remains as its central driving force.
Senator Spivak: I wish to welcome the witnesses.
My question is directed particularly to Mr. Uruski. We have conducted hearings across the Prairies. The submission that we have heard repeated most often by those opposed to a single-desk selling system is that they want choice and they want dual marketing. You mentioned briefly why you thought the cash price system could not operate properly with a single-desk selling system. I should like you to elaborate on that.
I am also interested in the views of this panel on what the contingency fund may mean in the future. In my view, it probably has something to do with the upcoming World Trade Organization meetings. It may be that it will be possible for the government to get out of guarantees altogether.
I should like to hear your opinion on those two matters.
Mr. Uruski: I will respond to your first question, Senator Spivak, and I thank you for it. I believe that those who want choice also oppose the inclusion clause for adding new grains. They have been on both sides of that issue.
Senator Spivak: I understood you to say that a cash price system and a single-desk selling system could not coexist. Are you talking about something that would be expanded, or are you talking about the provisions that are actually in the bill? I am not sure about that.
Mr. Uruski: I am not talking about the provisions in the bill.
If we are to move to cash pricing, we must have contractual obligations to ensure that the deliverers will meet their obligations. Given that there are 140,000 potential contractors in Western Canada, there must be very strong guarantees that they will deliver if the market price should change and they have opted for a different regime.
Second, I believe that that system would not provide the Wheat Board with the flexibility to forward contract and price discriminate in markets which may bring in much higher premiums than they would under normal circumstances. As you know, Tyrchniewicz and company have conducted studies which concluded that the single-desk system has netted Canadian Wheat Board producers over $270 million more annually than they would have netted from an open market system.
By moving in that direction, you are trying to get the best of both worlds and putting at risk the fundamentals of achieving the best return for farmers. The bottom line is the best return for farmers, and the single-desk selling system of the Wheat Board is the less expensive marketing system for Western Canadian farmers. I believe it costs them less than 5 cents a bushel to have their grain marketed. There is no other system anywhere in the world as efficient as this one.
Mr. Ostberg: I sit before you as a farmer. Mr. Suderman is a part of the industry that is trying to accomplish something which the industry thinks is good for it. He is not in the trenches where I am. When my wheat is three feet high and ankle-deep in water and it is time to combine it, I have to spend many thousands of dollars on equipment to accomplish that.
He has argued the financial aspect of this. A barley commission in Alberta was told by the courts that it could not argue the financial aspects because the books of the Canadian Wheat Board are not open to the public. Therefore, he must prove his statement that I will get more money because this system is better for me, and he cannot because the books are not open.
I disagree with him questioning how much money we make. He questioned the canola industry. I feel good about what I do and I do not need anyone telling me that I can make more money in another area, because it cannot be proven.
The Chairman: Would you comment on the question of choice, please.
Mr. Ostberg: In regard to what?
Senator Stratton: In regard to opting out or dual marketing.
Mr. Ostberg: I do not wish to call it dual marketing.
Senator Stratton: Is "opting out" better?
Mr. Ostberg: I do not wish to call it opting out. I wish to call it a free and democratic system within which there is a Crown corporation which runs without a monopoly. "Monopoly" means exclusive control of commodity and service. I will be a board supporter and not a board basher if the board can prove that it is doing good for farmers.
I hear that farmers constitute 4 per cent of the population. Let us say it is a 50-50 split and my opinion is worth 2 per cent and this man's opinion is worth 2 per cent. That is fine, but why should his 2 per cent deal with my trade and commerce?
I see the need for rules, regulations and laws. It is the government's responsibility to protect us, but it is infringing on my civil rights as a producer of a commodity which feeds the world. It is not a harmful commodity. I could understand these arguments if I were producing a harmful commodity which needed to be controlled.
This is a political issue based on a $6 billion industry of which I am losing control. The people in the industry are simply taking my freedom away from me. Bill C-4 is taking my right to choice away from me.
Senator Spivak: Could you comment on the contingency fund? What is the necessity of a contingency fund under Bill C-4 as compared to the old system in which the government provided guarantees?
Mr. Suderman: As I understand it, the concept of a contingency fund was introduced for two reasons. One is that under the new provisions the Wheat Board is empowered to offer farmers different payment systems which, if employed to any extent, would put the pool accounts at some risk. Therefore, a contingency fund would be needed to cover losses.
I feel much more comfortable with the provisions of a contingency fund in the present bill than with those in the bill introduced in the previous Parliament. This bill allows the contingency fund to have a negative balance. In the previous bill, there was no provision for a negative balance. Consequently, a very large contingency fund would have to be established to cover worst case scenarios.
Senator Spivak: I am getting at the issue of the contingency fund raised by checkoff.
Mr. Suderman: Yes, that is what I am talking about.
Senator Spivak: Do you think that needs to happen? Why can the government not just put up the contingency fund?
Mr. Suderman: I would much prefer if the government's guarantees were maintained in full as they were before. I see no need for it to be limited to the initial payment and to wheat board borrowings for credit sales.
Senator Stratton: If there were a contingency fund, would you put a cap on it?
Mr. Suderman: I do not know how you can put a cap on it. You cannot predict what market conditions will be. Only a few years ago, the Wheat Board's barley pool suffered a deficit of almost $700 million because of actions by the U.S. government. These things are unpredictable.
I believe very strongly in a single-desk selling system. For one thing, the function that I headed up at the Canadian Wheat Board in market development activities would not exist if it were not for single-desk selling. No other organization anywhere in the world conducts market development activities close to those carried out by the Canadian Wheat Board. Those activities would cease if the Wheat Board became part of a dual marketing system because it could not justify those expenditures under those circumstances.
The Chairman: But what do you say, sir, to the people who are saying that if farmers are not given some choices there will not be a Canadian Wheat Board?
Mr. Suderman: I think this bill allows a considerable amount of flexibility in the manner in which the farmer receives his payments. It also puts the direction of the board in the hands of a majority of farmers.
Senator St. Germain: Thank you, gentlemen, for appearing here this morning. It is nice to be in Manitoba, where I was born.
This committee has traveled across the country. In the Province of Alberta, in particular, we heard vicious opposition to the Canadian Wheat Board in any way, shape or form.
Mr. Suderman, why is it that the Wheat Board operates in such a clandestine way and does not give out financial data to farmers, or am I incorrect in my understanding that this information is not given out? Time and again we have heard from witnesses that the Wheat Board operates a closed shop, that no one really knows what it is doing or how it is doing it, and that there is no financial information that would justify the existence of the operation.
Mr. Suderman: I am not here to speak for the Canadian Wheat Board. I am here as an individual.
Senator St. Germain: Yes, but you have worked there.
Mr. Suderman: This is an annual report issued by the Canadian Wheat Board. It contains detailed financial data on all of its pool accounts. It is probably more extensive than any report issued by any other private trading company. Further, the Canadian Wheat Board holds an extensive series of farm meetings every year, as it has since 1976. It regularly sends letters to all permit holders describing activities that are happening in the grain trade and the marketing system. It has issued extensive reports on its own financial and marketing activities.
However, as a commercial marketing organization, it cannot release the sales figures for individual sales it makes because it is in competition with other trading organizations around the world. Customers would be horrified if the price they paid for Canadian grain were revealed, because they are in a competitive situation in their own markets. If they learned that they paid more for Canadian wheat than a competing mill, they would be very unhappy. I cannot conceive of any trading organization giving out specific sales information. That would totally undermine its credibility in the international market.
The Chairman:I have accompanied this committee to Washington twice. Senators and congressmen there give us information on how much the Canadian Wheat Board has underbid a certain sale. The last time we were there, they indicated that the Canadian Wheat Board had underbid an American challenge by $20 a tonne. They seem to have that information, but we, as farmers, cannot get that information.
Mr. Suderman: I do not know how they get the information and I do not know of the specific examples to which you speak.
The Chairman: I suppose they go back to the original buyer.
Mr. Suderman: I would suggest that you call someone from the Canadian Wheat Board to appear before you and ask that specific question.
Senator St. Germain: We definitely will.
The Chairman: We will.
Senator St. Germain: This has been a real complaint. As you know, there are really no secrets in business anymore as far as pricing is concerned. However, we will ask that question of the Canadian Wheat Board.
Mr. Uruski, I believe you said that cash buying would, in effect, create a dual system.
Mr. Uruski: Yes.
Senator St. Germain: Yet, Mr. Suderman basically approves Bill C-4. Therefore, although there is a bit of conflict between your positions, you agree with each other. Could you clarify this for me?
Mr. Suderman, do you disagree with the position that the cash buying aspect --
Mr. Suderman: I am not sure what he means by "cash buying." The cash buying that I am talking about is one of the payment options that farmers would receive. The grain would still be sold to the Canadian Wheat Board. The farmer could opt to take a cash price at one, two or three different times, but the Wheat Board would maintain control of the grain that is marketed.
Mr. Uruski: The qualifier that I put on that is that the guarantee of delivery would have to be very strong in order that no one could undermine the contract by not delivering. Those guarantees of performance would have to be there to lessen my concern.
Mr. Ostberg: Since we are moving to the Bill C-4 process, I wish to comment on it.
The contingency fund is now going to be funded with my money. I agree that when taxpayers' money is covering the pools, the government must have control of it. In the barley pool, there was recently a $168 million loss which was covered by taxpayers' money. However, as soon as the guarantee is taken off, I should have full control of what I do, rather than having a checkoff system. It is my money that is being used now, not that of the entire Canadian population.
Farmers constitute 2 per cent of the population, and all of a sudden you are going to tell me what you are going to do with my money. The government taxes everyone, and controls us that way. The government backs the pools. We do not have much to say about that because the government covered the losses. However, you cannot take my money and then tell me what is good for me. If the government is going to continue backing the pools, I agree that I must be regulated. However, in my opinion, it is illegal to take my money, for which I worked.
Senator Chalifoux: Mr. Ostberg, you were talking about the buying of shares in the Canadian Wheat Board. What is your opinion on the election of the 10 directors who would be farmers and the control they would have?
Mr. Ostberg: I was saying that there is no other business in Canada with a president, a CEO, board members and shareholders, of which you can buy shares, that is controlled by a Crown corporation. I am not talking about buying shares in the Canadian Wheat Board. If they made a public offering, maybe I would buy shares. MTS was a good deal.
With regard to your question on the election of officers; the CEO, the president, and the other officers will be appointed by the government, and they will have full control. They will be appointed politicians. They are not farmers. I am the farmer; I am in the trenches. I know what is good for the system and for farmers. As soon people are appointed, all responsibility is taken away from the elected board.
Senator Chalifoux: The bill does not say the other five appointees should be politicians. What process would you propose for appointing those other five?
Mr. Ostberg: I think there should be no process for this. I do not want this to happen. If it must happen, it must be a farmer-elected process. The CEO who runs the operation must be elected by the farmers at large period.
Senator Chalifoux: Thank you.
Senator Whelan: As you know, I have had a long association with agriculture. Are any of you aware of how the United States uses its public law? We know that the United States took barley markets in Saudi Arabia away from Canada.
I should like to hear your opinion on some suggestions that were made to us in Alberta yesterday. It was suggested that we have a vote. I am not afraid of a vote. I have stood for election over 39 years in every kind of political organization and every kind of farm organization. Now I have a three-year sentence to the Senate.
With regard to the inclusion and the exclusion clauses, people talk about democracy. Yet, they seem to be afraid of democracy. It is clear that under this bill inclusion and exclusion would be voted upon.
Some people in Alberta yesterday were suggesting that a small producer should have only one vote while a farmer producing 10,000 tonnes, for example, would have perhaps five votes. The principles of democracy as we know them in a democratic country are being pushed aside.
Mr. Uruski:. I, too, have been elected for 21 years by democratic vote -- one person, one vote. As I said earlier, if we are going to give the elected board of directors of the Canadian Wheat Board the power to make those decisions, why do we not allow them to decide whether an additional grain or commodity will be put under the single-desk selling system? They should determine whether it should, and then have a vote. If the farmers disagree with the decision made by the board, they will tell you by ballot.
Senator St. Germain: Would you agree with a fully elected farm board choosing the CEO?
Mr. Uruski: Absolutely.
Senator St. Germain: That is good.
Senator Whelan: From what I have been hearing, I get the feeling that some people think they should be allowed to break laws passed by the most democratic institution in the world, the Parliament of Canada, simply because they do not like them.
Do you think you would be able to export grain to the United States of America if they had a law that said you could not? They have become the least free trading nation that I know. You have seen how protective they are when your trucks go across the border. The congressmen and senators say they will stop the Canadians from bringing their products in.
I feel strongly that we should have a greater understanding of our big neighbour to the south. We buy more from them than any other nation and they are our biggest trading partner. Generally, we get along very harmoniously. What are your feelings on that?
Mr. Ostberg: First, I am not breaking any laws. When one part of society, that being me, decides that they do not like the system, I am referred to as a red neck. I am just fighting for what I believe in. I have not crossed the border with my truck and broken any law. I respect the law. I am a part of the farming society that has done that, but I personally have respected the law.
With regard to American senators saying that we cannot bring wheat across the border, I believe that the Canadian government caused that problem. The Honourable Lorne Hehn stood in my field in 1993, with reporters around him, when we had a problem with a disease called Tombstone or Scab or Fusarium in the Red River Valley. It is an uncontrollable disease that affects the seed which, therefore, cannot be used in bread, et cetera. He said that the government had no duty of care to take our wheat. He said that they would pay a specified amount. I cannot recall the amount right now.
I am sure that you have heard of the buy-back program. He said that we would be able to buy the wheat back at a very low price and haul it to the United States. He said that right on my farm.
We made $1.50 a bushel on a very high protein wheat which the Americans ate up like crazy. I almost got beaten up in an elevator in the United States while peddling my grain there because the Canadian Wheat Board opened up the market.
Who do you think was also peddling the wheat that I sold to the Canadian Wheat Board for $2? What do you think they were doing with that wheat? They were selling it into the market for $1.50 more and telling us they were going to pay us $2 a bushel.
That created a tremendous thorn in their neck because Mr. Hehn stood in my field and told me the government had no duty of care to me.
The Chairman: I would like to thank the witnesses for appearing this morning and making their views known.
Our next witness will be the Honourable Minister of Agriculture, Harry Enns.
We are pleased to have you here this morning, Mr. Enns.
Mr. Harry Enns, Minister of Agriculture, Province of Manitoba: Thank you, Mr. Chairman. I am delighted to have the opportunity to spend some time with your committee this morning. I have with me Deputy Minister Don Zasada of the Manitoba Department of Agriculture and Associate Deputy Minister Craig Lee.
I made a presentation last March to the House of Commons committee on the same subject matter as this, although I believe the bill was then called Bill C-72. Much of my presentation to you this morning will simply underline the concerns of the Province of Manitoba with respect to the bill currently before Parliament for consideration, which concerns are similar to those we had about the previous bill. I would like to focuses on two issues this morning.
I would like to thank the Senate Committee on Agriculture and Forestry for travelling to Western Canada and extending the opportunity for additional consultations on Bill C-4, an act to amend the Canadian Wheat Board Act. The opportunity to participate in these hearings and express the concerns of the Manitoba government is appreciated.
Debate on this legislation has a long history. However, consultations on Bill C-72 last March proved beneficial as subsequent drafts of the legislation improved markedly by incorporating changes requested by the agriculture industry and governments. It is hoped that the current consultative exercise will be as fruitful, as additional amendments to Bill C-4 are still required.
Regardless of what form the legislation will ultimately take, it remains doubtful that changes to the Canadian Wheat Board Act will end the current debate and controversy surrounding the Canadian Wheat Board. However, my government is optimistic that the amendments represent an important step in the evolution of our grain marketing system.
Furthermore, we are confident that the new policy direction followed by Bill C-4 will help the Canadian Wheat Board to better serve the needs of Western Canadian producers as they endeavour to prosper in a new agricultural economy. It is imperative, at this critical time, that we take the appropriate measures to ensure that the legislation emerging from the parliamentary process will provide the most effective tools to carry the Canadian Wheat Board into the next millennium as a strong and competitive player in the world export market accomplishing its mandate of producing the highest returns possible to prairie producers.
I would like to focus my remarks on the clauses of Bill C-4 with which my government has severe reservations.
The concerns of the Government of Manitoba with regard to Bill C-4 are consistent with those expressed in our submissions to the House of Commons Standing Committee on Agriculture and Agri-Food last year. At this time, we would like to address as well the issue of the inclusion clause, which I raised in a letter dated November 4, 1997 to the House of Commons standing committee.
Before addressing the issue of the inclusion clause, I would like to make a few comments about the outstanding accountability issues in the proposed governance structure of the Canadian Wheat Board.
The proposed legislation will remove federal guarantees of adjustments to initial payments and establish a contingency fund for losses resulting from cash trading operations. These actions will reduce the overall risk exposure to the government of Canada, but financial links will remain through the guarantees of initial payment, credit sales to foreign buyers, and operational borrowings.
It is because of these links that the federal government has included provisions that require the submission and approval of the annual Canadian Wheat Board corporate plans and, in some cases, cabinet approval for financial decisions. These measures provide an adequate degree of Canadian Wheat Board accountability to the taxpayers of Canada via Parliament.
However, in my opinion, the federal government has gone one step further than necessary by requiring that the president or CEO of the Canadian Wheat Board be appointed by the federal minister responsible for the Canadian Wheat Board. This action has been defended by the federal government on the grounds that it will ensure appropriate accountability to Parliament. By taking this measure, producer accountability is unduly jeopardized.
I truly believe that that was a big part of the exercise to bring greater accountability of the Canadian Wheat Board and its governance to the producer level. Senator Whelan has a long familiarity with the situation in Ontario. The Ontario Wheat Board elects all its directors. It hires its CEO and it fires its CEO. That is what I call accountability. I believe that western grain farmers ought to be allowed to follow the model of the Ontario Wheat Board in this instance.
We believe that the proposed measure in this bill unduly jeopardizes this accountability. We believe it is imperative that the individual responsible for overseeing the day-to-day operations of the Canadian Wheat Board be accountable, foremost, to the shareholders of that organization; namely, prairie grain farmers. Within the organizational structure of the reformed Canadian Wheat Board, this translates into the board of directors.
Manitoba asserts that this accountability can only be effectively achieved if the board of directors is responsible for choosing the president of the Canadian Wheat Board. This approach would ensure that both Parliament and producers endorse the individual leading the operations of the organization. In addition, it will ensure that the president will feel obliged and accountable to the board and prairie producers as a whole, rather than to the federal government.
Manitoba would be further encouraged if the board of directors were given the ability to terminate the service of the president of the Canadian Wheat Board. It is the power to terminate that will guarantee final control over the executive level of the corporation.
As I said earlier, an appropriate model for the Canadian Wheat Board to follow is that of the Ontario Wheat Board, where the president and the chief executive officer is hired, fired, and responsible directly by and to the board of directors.
In support of that, I refer senators to the report of the panel of experts appointed by Minister Goodale, which was issued on July 1, 1996. On this particular issue, it specifically recommends that the chief executive officer be elected by the board. I ask the Senate committee to gently remind Minister Goodale of his own panel's findings in this regard.
The other issue of concern to Manitoba is the inclusion clause. It is my understanding that the inclusion clause, which could potentially place additional commodities under the authority of the Canadian Wheat Board, was included in an effort to bring balance to the legislation, as the former legislation contained a measure with respect to exclusion.
I have heard that it was a Member of Parliament from Prince Edward Island who recommended this clause. With the greatest of respect, Members of Parliament from Prince Edward Island ought not make fundamental decisions with regard to prairie agriculture.
It is clear that several major commodity organizations across the Prairies requested that the federal government introduce exclusionary provisions that could be utilized if the will of producers warrants. Furthermore, the Western Grain Marketing Panel, appointed by the Honourable Ralph Goodale, recommended that organic wheats and unlicensed wheats be regulated outside the jurisdiction of the Canadian Wheat Board on an identity-preserved basis.
An increasing number of farmers are growing organic material and we in Manitoba can foresee that they would want, for reasons of identity and niche marketing, to be specifically excluded from the pooling arrangements of an organization like the Canadian Wheat Board. The report to which I referred earlier recognizes that and, for that reason, talks about the need for an exclusionary clause to be included in any amendments to the Canadian Wheat Board Act. That is why the exclusion clause is in the bill. We have heard no indication that the inclusion clause exists for any reason other than balance.
It is particularly troubling that no similar request for an inclusion clause has been made by commodity organizations representing non-board grains and oilseeds. Several organizations have indicated to the Government of Manitoba that the inclusion clause may actually jeopardize the marketability of their commodities by introducing uncertainty into the marketplace. It is clear that the clause will likely distort the dynamic price discovery and hedging system of the Winnipeg Commodity Exchange.
Processors have also raised with my government concerns that the clause could be detrimental to the stimulation of value-added opportunities on the Prairies due to the possible future risk exposure. Uncertainty about the future marketing structure may also be a barrier to further investment in value-added activities on the Prairies. The establishment of our pea processing plant in Portage la Prairie, for instance, may have been at risk had there been an inclusion clause in place.
Investment capital is very nervous, senators. Any uncertainty makes it more difficult to raise. Many of the value-added types of processing that we are talking about, particularly in Manitoba, are done on a strictly contractual basis between the producer and the processor. The suggestion that there may be a third party organization interfering with the flow of the commodity creates uncertainty and puts that investment at risk.
In Manitoba, oats has once again become a significant crop. This morning it was reported in the news that a big Saskatchewan wheat organization purchased the multi-million dollar Can-Oat operation in Portage la Prairie. All of that is done with the direct stimulation of value-adding here on the Prairies. That is a relationship which exists between the primary producer and the processor involved. It may be in the interests of grain processors, and it may be in the interests of the industry as a whole, but it may not be in the interests of Manitoba.
The Province of Manitoba was the most severely impacted by a fundamental change that occurred in agriculture. Canada's largest and longest-running agriculture support program was unilaterally withdrawn on August 1, 1995. That has made a fundamental difference to us. The rest of Canada will come to appreciate what that has meant to agricultural development in this country.
I have received heartfelt letters from producers. I received one the other day from a producer in the Swan River Valley who shipped two car loads of premium malting barley for the beer trade. He included his invoices which showed that one entire carload, 50 per cent of his sale, went simply to pay the freight charges. He asked me what I am doing about it. What can I do about it? I can do very little. I cannot even guarantee him that, with further deregulation, next year the freight bill will not be 60 per cent or 65 per cent.
I do, however, want to ensure that Canadian Wheat Board legislation will not interfere with value-added opportunities in the Province of Manitoba. That will allow us to avoid such freight costs as much as possible.
As you may be aware, Manitoba is vigorously pursuing value-added development as a means to successfully adapt to federal transportation policy reforms. We strongly caution against any measure, legislative or otherwise, which could potentially hinder this activity in our province or in our neighbouring provinces to the west. In order to resolve this controversial issue, Manitoba favours the removal of the inclusion clause from Bill C-4, and would support an amendment to this effect. In conclusion, the Government of Manitoba believes that Bill C-4, if amended in accordance with the preceding recommendations, stands to provide prairie farmers with a grain marketing structure that will better meet their needs for the future. It is imperative that the Canadian Wheat Board chart its own course of development in this new era of grain marketing with prairie producers at the helm.
Our industry is rapidly changing, and the Canadian Wheat Board cannot remain isolated. it must evolve to meet the challenges of today and the future. Manitoba will support Bill C-4 if our concerns are addressed, as we believe that the legislation embodies crucial measures that will strengthen the Canadian Wheat Board for the long run.
Once again, I should like to thank the Senate committee for the opportunity to participate in this current review process and present the views of the Government of Manitoba on this very important piece of legislation.
Senator Hays: Thank you, Minister Enns, for a compelling presentation on your concerns about the bill as it is presently drafted. Subject to those concerns being addressed, I interpret your general support for the bill. I should like you to comment on something that is in the broader prairie context, namely, representations that we have heard from, among others, the Minister of Agriculture for Alberta, that this bill should be delayed pending the report of the Estey Commission on Transportation. Your counterpart in Saskatchewan does not take that position, but at least one prairie Minister of Agriculture does.
Mr. Enns: A great deal of discussion and concern was expressed at the time that was leading up to the abandonment of the Crow support program, the western grain freight transportation program. I shared the strongly-held view with the then Alberta minister that reforms to the transportation system and the removal of the Crow should have coincided and taken place at the same time.
At this stage, I separate the two issues. It is more important to amend the Canadian Wheat Board legislation in order for it to become more accountable and compatible to the grain producers here on the Prairies and to separate it from the transportation issue. It is a big issue that is often intertwined with Justice Estey's review, which is currently underway.
I support the Saskatchewan minister, the Saskatchewan government and the Alberta government. While rail line abandonment in the Province of Manitoba is almost complete, I understand that it is just commencing in provinces such as Saskatchewan. A moratorium on that kind of activity should take place until the transportation review by Justice Estey is completed. However, I separate the two issues and do not believe it would be appropriate to hold the considerations for Bill C-4 pending the outcome of Justice Estey's review.
Senator Hays: You have commented on the CEO position, and I listened carefully to you. The committee will look at that at the end of our hearings.
Assuming your concern about the CEO is addressed, do you see the board as an effective governor of the affairs of the Wheat Board, or do you share the Alberta concern that it is a department of the government that must do what the government tells it to do? This is a concept that comes across strongly to us in about 20 or 30 submissions, which are also mirrored identically in the concerns of Mr. Stelmach.
Mr. Enns: It is not inappropriate to suggest that, on occasion, whoever is in government is able to produce public policy and deal with the Canadian Wheat Board through their influence on who conducted the affairs of the Canadian Wheat Board.
In 1945, for example, it was a cabinet decision to extend a five-year wheat agreement with Great Britain as part of our continuing war effort to help that country over a difficult period of time that fixed the price of Canadian wheat that would be sold to them for a five-year period at $1.70 a bushel when the world price was already at $2.40 or $2.50 and moving upwards. That kind of direct governmental direction to exercise the Canadian Wheat Board would be inappropriate today. It would be neither accountable to the grain producers nor necessary, and it would not be possible if that CEO was fully accountable, was hired by the producers, and was able to be removed by the producers at will if a decision contrary to producers were taken.
Senator Spivak: Mr. Minister, thank you for a clear presentation outlining Manitoba's position. I am glad to see it. I think that the government strongly supports improving the Wheat Board and having a strong Wheat Board. It also supports Bill C-4, apart from the things that you have stated here.
I am glad you also mentioned the difficulties that are occurring now that the western grain transportation subsidy has been removed. I reminded people in Alberta that the increase was about 39 per cent -- it might be higher -- and what this means. We have looked at the cost price squeeze in this committee for the farmers. It is very troubling, particularly the input costs.
I have two questions. First, what do you think about the contingency fund and the fact that it would be raised through a check-off for the farmers?
Second, a lot of the people who appeared before us were interested in more choice in marketing. Do you think this question of choice is addressed through the flexible provisions that are contained in Bill C-4? For example, if we heard that farmers could market 25 per cent of their grain themselves, would that kind of hybrid system -- that is, the single-desk selling point and the ability to market some grain -- kill the whole principle of the Canadian Wheat Board as a selling agency or would it improve it?
Mr. Enns: You are asking me to get right into the controversy that has embroiled the issue here on the Prairies for the last number of years.
There are different ways of providing the contingency fund. I would want to be cautious about imposing yet another check off. There already is a check off on grains that is being applied for research purposes, and so on. There is the possibility of other ways of earning that through interest on the difference of borrowings and credits that are made available.
There is always a role. This is where the activities of the Canadian Wheat Board and the government legitimately come together. It is a legitimate role for the Government of Canada to look at wheat from time to time -- and, I hope that they continue to do so -- as a major food commodity and as part of its business around the world. In so doing, it exposes the Canadian wheat producers to some risks. We grant credits to countries that, perhaps, on straight commercial terms, another grain company would not.
Is it fair to place all of that responsibility on the grain producer if it is deemed by the Government of Canada that it is good foreign policy to sell grain to China, as it was in the early sixties? Is it good foreign policy to sell grain to Indonesia, which is currently facing some difficulties? I will not comment on that, but it is in those situations where some ongoing role for public money is legitimate. That is a difficult question for me to answer.
I remind senators that I am neither a turkey farmer nor a chicken farmer. I am merely a modest cattle producer, and I do not present myself to you and this committee as someone with any great expertise in the grain industry.
On the other question, the big question is: Would a partial solution -- and, the buzz word is "dual marketing" -- namely, the creation of more flexible marketing decisions, spell the end of the Canadian Wheat Board? I do not know. I must accept the special circumstances under which we operate at different times in our business. A lot of it is government to government and/or its agencies, and the Canadian Wheat Board is in a better position to move our premium grains.
You are in Manitoba, where that issue was also addressed, although I think it is an apples and oranges argument and I do not advance it here. I was the minister responsible for removing the single-selling desk with respect to the sale of pork and hogs in our province. Much of the same argument flowed and was created while that was being contemplated, and certainly when it was executed. The net result has been that the Manitoba pork agency, which had the legislated authority for a single-selling desk monopoly for 25 years, continues to enjoy the confidence of over 80 per cent of the producers in Manitoba. I am told by individual producers that the agency has rolled up its sleeves and has become an effective marketing body. I see no reason why Manitoba pork would not continue to market and represent a significant number of producers in the Province of Manitoba for their commodity on either a voluntary or a dual market basis.
It is not the position of my government to advance that as a position with respect to the Canadian Wheat Board, nor am I here to do so. I am here on the basis that we must take seriously the concerns about accountability. That is why I commented about the CEO and governance. I accept the fact that this will not satisfy those who are opposed to the Wheat Board, but I think it would help to lower the profile of the argument and the controversy and allow the Canadian Wheat Board a period of time, in a very changing world, to find out just where we are at in the future.
In the Prairies, as my colleagues from Saskatchewan and Alberta will know, a transformation is taking place and I am not really fully aware of it. I am watching with amazement. Millions of dollars are being spent on terminal elevators yet we are not producing any more grain land. I am producing more hogs. We will produce more cattle, more chickens and more turkeys to eat the grain that we have, but every time I turn around another multi-million dollar terminal or grain elevator is being built. I suspect, that a position is being taken on the Prairies for grain to move north and south more than east and west. That could spell all kinds of different problems for an agency such as the Canadian Wheat Board. Those situations will have to evolve.
I am supportive of the Canadian Wheat Board and believe that it should position itself in a more user-friendly position so that it can continue to be the spokesperson for Canadian wheat and barley here on the Prairies.
Senator Stratton: You spoke about the CEO being hired and fired. I, too, believe that the only power a board has is, ultimately, to hire and fire the CEO. The CEO runs the company; therefore, the board's only power is to hire and fire. For example, the CEO is appointed by the minister and five members, as is the current practice under the legislation. Recognizing their large input into the Wheat Board, if the CEO was proposed by the minister, with the approval of the board, to hire; and if the majority of the board subsequently recommended the firing of that CEO, would you agree with that as a transition? In other words, the board not only hires and fires but also works in concert with the minister.
Mr. Enns: I was prepared to accept the linkage between the fact that there is some continuing federal and public support with respect to some of the Wheat Board's operations such as borrowings and foreign credits. I would go along with a number of directors appointed by the government as a trade-off on that.
I am not fully versed with how the Ontario Wheat Board operates, but I understand that a few years ago, for example -- it was mentioned here by another presenter -- there was this area of problems in Ontario with wheat that created financial difficulties for the Ontario Wheat Board. While it took a bit of convincing, in the final analysis, the federal government came to the support of the Ontario wheat growers in a rather significant way and helped to bail them out of that situation.
Using that as an example, I would ask you to amend what I put before you. I am really asking you: Why cannot we accept the Ontario model? It seems to be working for Ontario. Ontario has often held us up as a role model for the rest of the country in any event.
Senator Stratton: If the board is elected and the CEO is appointed by the board, as your model suggests, should the board then have the power to allow choice? Should the board make the decisions on the whole thing -- that is, dual marketing and opting out?Should that be left in the hands of the board to decide rather than the Canadian government?
Mr. Enns: I will get myself in trouble with this answer, but I have been in trouble most of my political life.
I am not a great supporter of referendums. Generally, referendums -- except in very unusual circumstances -- are a copping out for those who, from time to time, are placed in responsible positions to make decisions. They may be difficult or unpopular decisions from time to time. As a practitioner of parliamentary process, I generally believe that.
In this instance, I agree with my colleague, former Minister of Agriculture Mr. Uruski. He indicated that if a board was truly representative of the producers -- and, in my opinion, the majority of the members should be elected by the producers -- it should be empowered to make those kinds of decisions.
Senator Whelan: You have given me many ideas for questions here. First, I wish to thank you for the complement about Ontario. I wish to make a comment about the Ontario Wheat Marketing Board. I was one of the instigators of that board and I was one of the founding directors of it, too.
I am no longer a wheat producer, so I have strong reservations about how the board organizes their meetings and their delegates. It is quite a bit different from what we used to do. There is a big question about what they are doing at the present time. It is not settled, either, in Ontario. It is not a fait accompli as far as that goes.
You said "a new world marketing order". Would you mind elaborating on that? What is so new about the world marketing order?
Mr. Enns: I do not think I talked about a new world marketing order, but I am talking about a continental marketing order.
There are two things that are very true. First, the absence of $750 million taxpayers' dollars helped move my grain from here to Newfoundland or to Vancouver. In Manitoba, that means that my producer of one tonne of barley, on July 31, 1995, could have it placed in Vancouver for $7.50 or $8 a tonne. On August 1, the next day, it was $42 a tonne. Can you imagine anyone doing business with that kind of 300 per cent increase in taxes? This is why, all of a sudden, we cannot ship this grain out of Manitoba. Yet we must continue to produce it.
My non-farm friends sometimes ask me: Why do farmers produce feed barley or high-volume low-cost feed grains, feed wheats, and so on, when it is virtually uneconomical with these new freight regimes?
Senator Whelan, you understand that we do not have a choice. Yes, I am encouraging my farmers to produce more canola or more potatoes or more beans. In fact, this year is the first time that Manitoba will grow more beans than the Province of Ontario. We are doing all these things. But you cannot grow canola, canola, canola or potatoes, potatoes, potatoes.
In the crop rotation, we must come back to the traditional crops for good land husbandry. Often the farmer is targeting for that premium dollar, that premium No. 1 northern milling wheat. Prairie agriculture is high risk. After two or three weeks of snow and wet, rainy weather, that grain is swathed and makes the best No. 1 milling wheat into utility feed wheat, which falls into the category of low-cost and low-feed grain. It is the same thing with barley.
Many of my farmers target their barley production to get the premium beer market. Again, it all depends on our harvest. If we have inclement harvest weather, that premium malt barley turns into feed barley. We will always have huge piles of field grain in this area for which it is my responsibility, plus the responsibility of the Department of Agriculture, to find an outlet. That outlet is expressing itself dramatically in pork production.
Within the next few years we will be, without a doubt, the largest producer of pork in the Province of Manitoba, superseding Quebec and Ontario. Without a doubt, we will be producing considerably more beef animals. We will be taking some of our marginal land, which never should have been brought under the plow and under cultivation, out of production and returning it to forages, grains, and so on, in order to try to eat ourselves out of the market.
I see the Dreyfus people and the Archer-Daniels-Midland people coming into the Prairies and the energetic actions of the Saskatchewan Pool that is building these things. I do not know exactly what is happening. I know we are not growing more grain, but I suspect that they are positioning themselves to move grain north-south.
In a surprising way, the American public will accept a cargo or an Archer-Daniels-Midland or a Dreyfus taking Canadian grain across the border. When we try to do it as farmers, then they threaten to nuke us.
Senator Whelan: I will not get into what I think of Archer-Daniels-Midland, but they say they paid a $100 million fine for improper marketing. They are being sued for $600 million by the U.S. federal government for a couple of other charges.
Mr. Enns: I was making no question about the morality of their marketing.
Senator Whelan: We heard a representative of the Canadian Cattlemen's Association yesterday in Edmonton say that he would make money with his cattle if the grain was cheap.
In Calgary, we heard a wheat producer say, "I do not think those cattlemen should have any say about what we are doing in the grain business. They should have no vote", and so on. It is the old basis of cheap grain on the Prairies meant cheap feed for the livestock. That seems to be quite prevalent when you hear them give their evidence at the meetings.
Mr. Enns: Your question allows me to underline the important difference between Manitoba and Alberta. I mentioned a little while ago what the difference in the loss of the Crow was, namely, from $8 or $9 a tonne to $40 a tonne. In Alberta, that same difference is marginal -- that is, $5 or $6 a tonne. That argument still prevails. Here, there are different forces at work. It is not just a question of the livestock industry expanding on the backs of the grain producer in demanding low prices. If we do it right, I am hopeful that we can come out in a win-win situation, where we have the strength and a viable livestock industry supporting the grain producer.
I can see grain producers contracting to grow grain for our hog operators. I can see a grain producer contracting to grow feed wheats for our expanding feather and broiler industries. Whether we like it or not, in the future we will be producing most of the eggs, chickens and turkeys in this province.
Senator Whelan: You and I have both know how we made the production of those eggs and those chickens prosperous.
At the present time, I would be in favour of leaving the exclusion and inclusion clause in the legislation and letting the producers vote on it. In other words, the board of directors would not render a decision but the legislation would be stengthened before any exclusion or inclusion of crops that the producers have a vote on. I do not fear that form of democracy.
Mr. Enns: Nor do I, Senator Whelan. However, I will tell you who does. I am not saying that "fear" is a strong word, but who reacts to it is the investment broker -- that is, the person with the investment dollar. If there is uncertainty as to how he can access the product, he defers in making a decision.
I was persuaded, for instance -- and there are those who will support me -- that the $112 million investment decision made by Maple Leaf to build a plant and to create 2,000 jobs in Brandon would not have been made if there was uncertainty as to how that organization could contract its supply of hogs. They wanted to be able to do it on a direct processor-to-farmer basis.
The chief principals of that organization indicated publicly and directly to me that without having removed that uncertainty -- and that uncertainty in this case was Manitoba Pork as a third party agency -- they had control of the hogs. The Canadian Wheat Board has absolute monopoly control of that product. If they deem it in their interests, the can redirect it away from a would-be processor or give it to them.
Senator Whelan: When you took the right of single-desk selling for the hogs in Manitoba, did the producers have a vote?
Mr. Enns: No.
Senator Whelan: My records show that in 1953, in the Province of Manitoba, they did have a vote on wheat marketing, and they voted 83 per cent in favour of it at that time.
As you have said, a lot of people are not paying attention to the sale to Indonesia. The government had to guarantee that $250 million. After the meeting in Edmonton, a farmer told me, "If the Wheat Board will not be there to do those things under the new legislation, I do not want to be part of the Wheat Board, either." He was fighting against it.
Something was mentioned yesterday that burns me up a bit. You said that someone who sits in the most democratic institution in Canada as a Member of Parliament from Prince Edward Island has no right to move an amendment. I am shocked about this. This man was a former president of the National Farmers' Union. I have known Wayne Easter for a long time. No one gave me more trouble than he did when he was the president of the union. I sort of resent that your comment. This is a democratic institution. I do not care if he comes from Come by Chance, Newfoundland, as long as is a member and he is there for the good of all of Canada.
Mr. Enns: Senator Whelan, you properly corrected me. I wish to make it absolutely clear that I meant no disrespect to any Member of Parliament. I merely suggested that it is understandable that a member from that part of Canada, which is so different than the Prairies, might not be totally sensitive to what appears to be a relatively innocuous amendment clause or a balancing amendment. Since there was an exclusion clause in the bill, I was told that he said, "For balancing purposes, let us put an inclusion clause in it." That would be fine, but it is my role to point out that including that inclusion clause has some specific impacts in the Province of Manitoba.
Senator Whelan: As a Minister of Agriculture for 11 years -- and, most people used to think that I came from the west but I come from the deep southwest, in southern Ontario -- I challenged anyone to say that because I came from that area, I would not be fair. At that time, the Premier of Manitoba came from Brampton, Ontario; the Premier of Saskatchewan came from Nova Scotia; the Premier of Alberta came from London, Ontario; and the Premier of British Columbia came from Holland. I thought, "I can be as good a Minister of Agriculture for all of Canada as they can be premiers for those areas."I would challenge anyone to say that I put one area ahead of another. I was doing things for agriculture and we work together.
Mr. Enns: I have already given up on that one, Senator Whelan.
The Chairman: There is a great deal of concern about the inclusion- exclusion clause because farmers have always had a crash crop. They have always needed money to deal with their operation. Canola was that cash crop to some; flax was that cash crop to others. Those commodities are outside of the jurisdiction of the Canadian Wheat Board. They put money in the farmers' pocket. Are farmers concerned about inclusion and exclusion because it has been put into their pockets?
Mr. Enns: It would be presumptuous for me to try to give the reasons that the producers give. My premier and I have been directly approached by producer groups such as the canola growers, and others, who have specifically asked us to express this concern wherever we could. Premier Filmon wrote a letter on this matter to the Prime Minister last month, requesting the withdrawal of the inclusion clause. I have attempted to make the broader case for Manitoba because of the impact of the loss of Crow. I have approached this -- and, the Department of Agriculture has done so more strongly -- on the basis that it is a potential impediment to investment in value-added uses of grain.
I wish to tell you a happy story. The first flour mill in 45 years is being built in my constituency, 40 miles from where we sit, in the little town of Elie. Understandably, the flour milling industry virtually all moved to Toronto or to Vancouver. Why would you want to build a flour mill in the Prairies where the wheat is grown if the Canadian taxpayer will subsidize the freight of moving the grain to Ontario? Approximately 85 per cent of the flour that we mill is sold internationally. It is milled right at the waterfront, dropped into ocean-going ships and shipped out.
I had half a dozen farmers who wanted to mill their own wheat here in the little community of Elie. My deputy minister, my senior staff and my cabinet met with the Wheat Board on three different occasions to resolve one issue, namely, to allow them to mill their own wheat without first having to pay the freight as though it went all the way to Vancouver or to the Seaway.
The Wheat Board finally did that. Had they not done so, then Manitoba would have taken a much stronger position with respect to the Canadian Wheat Board. I can see similar issues arising in the future. For example, if we have a group that wants to develop a pasta plant, and the only way they will do so is if they can sign 18- or 24-month contracts with 20 wheat durum producers that will supply that plant in Altona or Winkler with durum wheat for that pasta plant. I do not want a third agency intervening in that business arrangement. For Manitoba, that kind of value adding is important. That is what we must do in the future.
I am prepared to work with the Canadian Wheat Board. In fact, I support the Canadian Wheat Board. I believe some of the amendments that we are bringing forward can make it a better organization. However, it must be very clear that we do have a unique position in Manitoba with the freight question.
Senator St. Germain: I thank you for coming here with your very capable staff. My question refers to Justice Estey's inquiry. While I take a different position, I am very concerned as well about how this inclusion clause was placed in the legislation. Closure was invoked on this particular issue, but the dynamics of politics does not necessarily work to the benefit of the farmer in Western Canada. Ontario may get what it wants because it has 100 MPs to represent it in Ottawa, whereas we have no representation from here.
I am from British Columbia, but I was born near Elie, Manitoba. I know very well how we have been fighting and pushing the string instead of pulling it all our lives in Western Canada. I should like to ensure, Mr. Minister, that you do not back down on these issues. I realize that they are politically sensitive, but I hope that you will continue to pursue them, because value-added is the only way to go when you hear the plight of the farmer over the loss of the WGT and the Crow rate. I encourage you to continue to do so, and I thank you.
Senator Whelan: I want to make a correction. They never went near Ontario wheat producers. They are immune to that kind of thing. They only come to us when they want money, when they have a disease and that type of thing. They have not come to us yet, and they still have to get the Wheat Board permits to export, et cetera. I sat up for 24 hours to pass the master farm products market so that Senator St. Germain could be in the chicken business. If you do not call that railroading, I do not know what you would call it.
Senator St. Germain: I am in the beef business today with Mr. Enns.
The Chairman: Honourable Minister, thank you for appearing here this morning. We have had a lively discussion.
We will now hear from representatives from the Keystone Agricultural Producers. Mr. Don Dewar will make the presentation this morning. Please proceed.
Mr. Donald Dewar, President, Keystone Agricultural Producers: On behalf of our membership, I wish to thank you very much for coming to Manitoba to hear producers' concerns regarding the amendments to Bill C-4. Approximately 7,500 farm operations in Manitoba are members of Keystone Agricultural Producers. This legislation contains amendments to an agency that plays a key role in our livelihoods.
I wish to commend the government for taking the initiative to propose these changes to the Wheat Board. For the most part, our producers are supporters of the Canadian Wheat Board concept. However, it has become increasingly clear over the past number of years that the act needed to be revised to reflect producer concerns over accountability and the need to give the board the tools to be more responsive to producer needs and to market conditions.
We believe that the amendments being proposed in Bill C-4 are a commendable beginning in creating a wheat board which will be effective into the next millennium.
I should now like to propose a few suggestions in relation to a number of the proposed amendments. Concerning director elections, we agree with the proposal for 10 elected members on the board of directors. While we wish to see a democratic process which ensures a fair distribution of representation from across the Prairies, we do not feel that the representation on the board needs to reflect provincial borders. For example, we feel an acceptable distribution would be two directors from within Manitoba and one who represents a geographic region which spans the Manitoba-Saskatchewan border. We do, however, believe that the electoral regions must be defined and must have specific candidates for election rather than an at-large process.
In reference to the four appointed directors, the process should reflect a fair distribution of representation across the Prairies. It is important to clarify that we believe that the position of president and CEO should not be considered one of those four appointed positions and should not be a member of the board of directors.
We believe that the term of office for all directors, appointed or elected, should be four years. In order to establish a staggered election process, one-half of the total board should be elected or appointed for two years initially, and the other half for four years, with all terms lasting four years thereafter. We believe that a four-year term and a staggered election process are important to facilitate continuity and consistency among all directors. We would also suggest that the directors be allowed to serve a maximum of two four-year terms, with two years added to the maximum for those directors elected into the initial two-year term.
KAP believes that the most effective process for electing the Wheat Board directors is through a delegate system, at least for the first election. This system will minimize polarization of opinion and acrimonious debate and will allow the debate on the future of the Canadian Wheat Board to take place in a rational manner. Although many producers may be unfamiliar with the potential directors, most producers will know the local delegates selected. During the election process, delegates can ensure that a director is aware of the concerns in a particular region and discuss possible solutions with him. That is to say, a ready made focus group will provide the director feedback on policy and a direct line of communication between the producers and a director. We are not advocating that this delegate body become a permanent structure but, rather, that it exist solely for the purpose of electing the first board of directors.
We feel that in the long term, a ministerial appointment of the chief executive officer of the Wheat Board will not be in the best interests of our members, but we recognize the need at this initial point in the process for ministerial involvement. We therefore agree that, in the short term, ministerial appointment of the CEO is acceptable. It is critical, however, that the CEO be responsible and answerable to the board of directors of the Canadian Wheat Board, and we emphasize the importance of this point. We do not agree with the amendment which allows the president to hold office at the pleasure and for the term that the Governor in Council may determine.
Given the short time frame, we foresee the need to appoint an interim president and CEO. It is our belief that in the interests of continuity it would be preferable to appoint the present chief commissioner or a team of the present commissioners to fulfil that role.
The Keystone Agricultural Producers agrees with the creation of a contingency fund for the purpose set out in Bill C-4. We also feel that the contingency fund can be used as a reserve fund for developments of Canadian Wheat Board activities identified as priorities by the board. The creation, control, operation and disbursement of the fund should be under the authority of the board. We suggest that the fund should be established from the profits realized from credit operations. We maintain that any reference to profits gained through any activities of the Canadian Wheat Board being directed to the Receiver General for the Consolidated Revenue Fund should be deleted from the bill.
In light of the fact that the minister has described this legislation as enabling legislation, we agree with the inclusion clause which allows producers to decide whether other grains are included in the Canadian Wheat Board's jurisdiction, as well as an exclusion clause to enable the producer-elected board of directors to exclude grains.
We believe that the representative group requesting the inclusion should be the single largest group representing that commodity in the designated area and that such a move can only be made following a positive vote by the producers of the commodity affected.
Both the exclusion and the inclusion clauses must have clear processes. It is important to note that the exclusion clause allows the board the flexibility to exclude varieties, types or grades of grain, while the inclusion clause refers to the commodity as a whole. Both processes are under producer control, whether through a producer vote for inclusion, or producer-controlled process for exclusion.
In the present act, inclusion and exclusion of the listed grains are possible at the sole discretion of the minister responsible for the Canadian Wheat Board.
KAP believes that the Canadian Wheat Board is an agency of the Western Canadian grain producers. Therefore, the Wheat Board has an obligation and duty to always act in the best interests of the farmers of Western Canada whom it serves.
In conclusion, we submit that the Canadian Wheat Board needs the flexibility and mandate to respond to changes in the economic environment in which it operates. Bill C-4 is legislation that will achieve that goal. It creates a producer-elected board of directors and it gives that board the ability to create new marketing tools and techniques to better address the needs of Canadian producers. With flexibility, with a continuing focus on sound business policies, and with these changes to address accountability, the Canadian Wheat Board can be an effective marketing tool for us in the future. However, we must regard the Canadian Wheat Board Act as a living document and we cannot close the door to further improvements once we have accepted these amendments. There will be an ongoing need to re-examine the function of the Canadian Wheat Board and to make improvements that will ensure it remains a viable and relevant marketing agency well into the future.
The Chairman: I have one short question on cash buying. Some of the presenters have indicated that they feel that is just the beginning of dual marketing. What is your comment on that?
Mr. Dewar: That is one of the evolutions that may happen if it is in the best interests of producers. That would be a decision that would be made by the board of directors. They would have the ability to try it and make it work for the best interests of the producers.
Senator Hays: I wish to explore further the way in which the board will represent the Province of Manitoba. You have touched on that but will it represent the provinces or the regions within the provinces that the board now serves, namely, the producers of board grains? When you say that two and one-half should be from Manitoba, you are talking about two and one-half of the 10 directors. Do you think there is any wisdom in being specific on where the appointed directors should come from or who they should represent or what they should represent? I do not know whether you wish to go beyond Manitoba, but you might help us by speculating or suggesting how the other directors might represent the rest of the Prairies.
Mr. Dewar: When we talk about representation, we do have a geographical area. We have had a lot of discussion on the representation. Once that person is elected, as Senator Whelan said earlier, he is working for the good of all producers. You are not really worrying about this area of Manitoba you represent or this area of Alberta. You are there to run a $6 billion export corporation and make it do the best job for the people that it is serving. I should like to think that the people who are elected would go there with that in mind and that producers would elect people with that in mind.
We do not believe that they must necessarily be producers, but they must be elected by producers. If the producers feel that a certain banker or lawyer has the best qualifications in that region to help manage the business, then that is the person who they will elect.
Senator Hays: It seems that it will be difficult for a board member to totally disassociate herself or himself from the issues that concern the region from which the delegates are elected or the director is directly elected.
I am from Alberta. This process of choosing members is probably behind some of Alberta's frustration, as was expressed by the Alberta minister and others -- not only in Alberta but also throughout the Prairies -- who would like to see dual marketing or options or choice come into existence immediately. Given that it will be important, how many will come, say, from Alberta? Inevitably, that will be one of the issues that will drive the election of the directors.
You said that you do not want to answer this question -- and, you can say that again -- but I am interested in response. Obviously, you have given some thought to how we might ensure a fair allocation of the board. I invite you, again, to comment on not only the elected board but also the appointed board, and to answer any criticism that may arise after the fact should someone say, "This thing was stacked against us and we really did not have a chance on an important issue that had a regional aspect to it."
Mr. Dewar: Again, I would hope that the board would act in the best interests of all producers, including Alberta. People will represent the views from their region to some regard anyway. I certainly do. I am from Dauphin, Manitoba, and people know that. We are isolated in northwest Manitoba and I continue to tell people about that. Ultimately, the regions are represented. I hope I am not being naive in suggesting that the Canadian Wheat Board can be and is the best marketing tool. If you have the right people setting those policies, some changes will happen. It may not be the dual market that you envision, but I think it will continue to bring the maximum amount of dollars into Western Canada.
The Chairman: We heard from the Minister of Alberta. There have been numerous court actions, and so on, dealing with the whole issue of control and choices, et cetera, by the province. If the Province of Alberta were to opt out -- and there is certainly a strong view for that; we had heard about it in the last two days -- could the Wheat Board survive?
Mr. Dewar: I am not in a position to answer that question. This is almost like the situation we have in Quebec. If they opt out, it would be torn apart. It may well tear apart. Would you elect people to operate the board in the best fashion it can and to improve the board, or would you elect people that are going there with the intention of tearing it apart?
The Chairman: I am a supporter of the Wheat Board, but if some choices are not given, will we continue to have the Wheat Board?
Mr. Dewar: I think these 14 people will come up with new strategies such as a single-desk seller, which will answer a lot of the questions. I think their hands have been tied for 50 years with the Canadian Wheat Board Act. This is an opportunity to bring this hinge into the 21st century.
Senator St. Germain: I liked your presentation. The fiduciary responsibility in the articles of the corporation dictates that the main responsibility of the members of the board is to the board and not to the shareholders or the growers. That statement has been voiced in public. You sort of respond to it when you stipulate that, in the best interests of our members, the chief executive officer of the Wheat Board may not be a ministerial appointment. Do you fully support that view in an elected board of producers as opposed to any appointed by the government?
Mr. Dewar: Yes; as long as we can maintain the government support that we have in the wheat board now. If the government guarantees the initial prices and does what it did for Indonesia and guarantees credit, then it will have some input into the composition of the board. However, these people would be in the minority and I would hope that they would be appointed according to their abilities to do the job.
Senator St. Germain: Concerns have been brought forward, including those raised by the minister, who I am sure you just heard. The Minister of Agriculture for Alberta told us about the value-added side and how it often involves the interests of the entire province and not just the producers, although it will often benefit the producers. Do you still think there is enough flexibility in the system?
I have been elected as a Member of Parliament and I have represented British Columbia. I know how tough it is trying to represent your region while representing the better interests of the entire country. Often, you are in conflict. This conflict position is important. Manitoba is now faced with a huge freight rate increase. I do not know how you can reconcile this, and whether choice or dual marketing, or what have you, will help. I do not know. That is why I am asking you about it from your experience.
Mr. Dewar: Value-added is good for the province. We agree and we accept that. We need the value added, but we must add value to our product. If value-added does not end up trickling down to the producer of that grain, then it is not good for the producer. It is great for the province, but the producers will not be here.
We are the cheapest place in the world to produce feed grains right now, but that does not help the producer. If you are telling me the best place to build a hog barn is in Manitoba or in eastern Saskatchewan because they have the cheapest feed in the world but I cannot afford to grow the feed for that, I am better off to build the barn and let someone else grow the feed. No one will do it.
The Canadian Wheat Board is looking after the producers that it is serving. Minister Enns pointed out some concerns. There is a problem with farm gate pricing, but we think it can be fixed. In the example he gave, they met and they were able to fix the problem so that it was workable. If we can recognize that some changes can be made, these will happen with Bill C-4.
Senator St. Germain: We are told that Alberta mainly produces barley. In Manitoba and in Saskatchewan, there are different scenarios.
Senator Spivak: Your presentation is very clear and helpful. I like your idea of the staggered election for directors. I wish to ask you a question about the contingency fund.
You say that the fund should be established from profits realized by credit operations. I do not quite understand what you mean. If you support the idea that is presently contemplated, namely, that the fund should come from farmers' check off, what do you think of that as opposed to the guarantees that we have always had from the Government of Canada? I think that the Prairies deserve as much guarantee as anyone else. What do you think of that?
Mr. Dewar: The government guarantee would still be in place for the initial price in Bill C-4, so the contingency fund would be used to backstop any increases in the initial price, which, for example, occurred on Friday. The Canadian Wheat Board asked the government to increase the initial price. Under Bill C-4, they would not have to do that. They could have started cutting the cheques last week.
Senator Spivak: When you say "realized from credit operations", what do you mean?
Mr. Dewar: There are countries paying interest only on grain sales. In fact, -- and, I stand to be corrected -- it is $50 or $60 million a year. This money is going into the general pool. It is not earned by wheat per se, but some of it ends up in wheat and some in barley. A portion of that could be used. If it was needed, one year you could use it or you could put it in to the pool as in the past or $5 or $10 million could be kept per year to build it. That is what we are electing a board of directors to do.
Senator Spivak: I wish to ask you about the cost price squeeze and the fact that the producer is not getting the proper return. It is contemplated that hog production in Alberta will be increased three or four times. I do not know if we will be the biggest producer, but what will happen if we increase our hog production? Do you think the price of barley will go up once there is not enough of it? Do you think that will happen or will producers not be able to produce the wheat, the barley?
Mr. Dewar: It will turn from a world market to a domestic market. Presently, now the domestic price of barley is higher than the world price.
Senator Spivak: Do you think the price will go up so that it will still be a profitable operation?
Mr. Dewar: I think it must be. The hog producers will have to pay us enough to keep us in business or they will not get the grain.
[Translation]
Senator Robichaud: Thank you, Mr. Chairman. I hope, Mr. MacNair and Mr. Dewar, that you won't blame me, since I am from New Brunswick, for asking you a question. I can assure you that it is in the best interest of all producers that I ask this question.
You do not seem to be concerned by the argument put forward by those who oppose the inclusion clause, when they say that it will create a lot of uncertainty in the marketplace.
Here is my question: Concerning the election, you tell us that there should be a delegate system for the first election only. Could you comment further on that?
[English]
Mr. Dewar: First, on the inclusion clause, we have always suggested that the producer should have the control. In any marketing decisions, if changes are to be made, the producers should have the vote on that.
As far as threatening the markets, I read an article in the newspaper last week. I think pigs will fly before Bruce Dalgarno will be asking the Canadian Wheat Board to include canola, for example. The other side says that if that puts some uncertainty into the marketplace -- and the Winnipeg Commodity Exchange has handled both canola and flax -- it is a check for them. That is to say, if the price discovery is not working and the marketplace is not functioning as it should, then producers may question the marketing price discovery mechanism that we have in place. I think it is just another check on the commodity exchange in our domestic pricing structures.
As far as the election using the delegate, again, for the first election only it may continue with a delegate structure, but that would be a decision for the board to make. We would have to see how it works this time. I am not one to write anything in stone today because we might have to change it tomorrow.
Senator Whelan: I met Minister Enns in 1966, when I was Chairman of the Agriculture Committee. We have known one another for a long time.
You mentioned calling for the farmers, how they will be elected, structures of the board, and so on. There is nothing written in the legislation which states that those five appointed directors cannot be, as Senator Hays suggested, chosen from different districts of the wheat producing area or that they cannot all be farmers. A lot of people get the idea that there were no farmers with the Canadian Wheat Board. Lorne Hehn, the present chairman, is a farmer; so is Forrest Hetland. The idea is that they were all bureaucrats, but some of them were capable farmers who I knew for a number of years. What do you think about a recommendation that all the people who are appointed must be farmers?
Mr. Dewar: As I said, we do not necessarily feel that they must be farmers, but they must be the best people. The examples you gave have shown that political appointments can be effective and good people can be chosen. In fact, it is not always about paying political dues.
These people were appointed by governments. They were appointed for their talents and they have done a wonderful job. We are talking about the policy of running this export business. It is important that we have the best business people there, as well as people who understand the industry. Corporations, appoint directors from a broad spectrum such as lawyers, accountants, and other professionals.
Senator Whelan: The members of the National Farm Products Marketing Council are appointed for their knowledge of all the different commodities with which they must deal. No one has suggested that a consumer should be one of the five people who are appointed -- that is, if you are going to appoint them -- but a consumer was appointed to the National Farm Products Marketing Board.
Mr. Dewar: Anyone domestically who will be a consumer would be suitable. We are asking for Canadian citizens. Most of our consumers are offshore. We are looking for the best people, wherever they come from.
Senator Whelan: Under the NAFTA, for instance, there is nothing to prevent states or provinces from providing subsidies. For example, to help a new industry that you need for the pasta plant, there is nothing stopping Manitoba or any province from giving them grants to begin their operation. Ohio and Oklahoma recently gave out huge grants for meat processing and that type of thing. Have you ever discussed that with your members?
Mr. Dewar: Our biggest problem is within Canada. We move industries around. An example we often state in Manitoba is that the Alberta government bought the beef industry and what happened in Manitoba?
Senator Whelan: There is an invisible provincial boundary between you, but you are not on top of oil and they are. You have 7,500 members in your organization, do you not?
Mr. Dewar: Those are farm units as members. Very often, that represents a family. It might be two or three members of a family.
Senator Whelan: But your membership has approved the presentation that you made here with the exclusion and the inclusion clause?
Mr. Dewar: Yes, they have. All our policy is driven from the producers. We go through a delegate structure.
Senator Whelan: I like your idea of a staggered vote, too.
The Chairman: The next witnesses are from the Manitoba Wheat Pool. We have two more presenters after this, so I will ask senators to tighten up their questions and our presenters to be precise with their answers. Please proceed.
Mr. Charlie Swanson, President, Manitoba Wheat Pool: Manitoba Pool Elevators is pleased to have the opportunity to provide input into the development of amendments to the Canadian Wheat Board Act.
Manitoba Pool is the largest agricultural co-operative in our province, with annual sales in excess of $1.3 billion and an active membership of over 16,000 farmers. On an annual basis, we handle about 3 million tonnes of grain and oilseeds through a network of 120 country elevators. We also own a terminal elevator at the Port of Thunder Bay, as well as shares in terminal elevator facilities at the Ports of Vancouver and Prince Rupert.
Manitoba Pool participated in the development of Bill C-72 during the last session. We are pleased with some of the changes made to this legislation prior to its reintroduction as Bill C-4. In particular, the amendments respecting the composition, role and powers of the board of directors go a long way toward addressing our concerns; however, further improvements are required to ensure the effectiveness of the proposed legislation.
Concerning reforming the Canadian Wheat Board, the Manitoba Pool has been a long-standing supporter of the orderly marketing of Western Canadian grain by the Canadian Wheat Board. At the same time, we recognize that global markets and the rules and technology used to access and compete in these markets are changing. The Canadian Wheat Board marketing system must evolve with these changes if it is to effectively meet the needs of prairie producers. Therefore, we support the federal government's stated objective: "To build upon the proven strengths of our existing marketing system while at the same time modernizing the government structure of the Canadian Wheat Board, enhancing its accountability, improving responsiveness to changing producer needs and opportunities, providing more flexibility and faster cash flows through Canadian Wheat Board operations, and minimizing future complications in international trade."
Manitoba Pool believes that single-desk selling, price pooling and government guarantees are critical to the success of the Canadian Wheat Board marketing system. These cornerstones are the proven strengths to which the government's policy statement refers and must be preserved and enhanced throughout the reform process.
Many of the provisions in Bill C-4 strengthen the Canadian Wheat Board's ability to respond to producer's needs without jeopardizing the cornerstones of the Canadian Wheat Board marketing system. However, a number of provisions pose a serious threat to the integrity of the system while others require minor adjustments to ensure that they meet the government's stated objectives. In the following sections, we offer suggestions for improving Bill C-4.
The Canadian Wheat Board must be accountable to Canadian taxpayers for its financial operations because its credit sales, borrowings and initial payments are guaranteed by the federal government. In recognition of this, Manitoba Pool supports the legislative provisions which require the Canadian Wheat Board to submit and obtain ministerial approval of annual corporate plans and to obtain ministerial or cabinet approval of financial decisions. As their marketing agent, the Canadian Wheat Board must also be accountable to prairie wheat and barley producers. To ensure that this occurs, the legislation must empower the Canadian Wheat Board to operate in accordance with the needs and wishes of its producer constituency.
In our view, the financial responsibility provisions of Bill C-4 will ensure that the Canadian Wheat Board is accountable to government for its financial operations. However, the legislation must be amended to ensure that the Canadian Wheat Board is also accountable to prairie producers.
The federal government has recognized the need for accountability to producers by proposing that a board of directors, with the majority of members elected by producers, be responsible for the operations of the Canadian Wheat Board.
Manitoba Pool has participated in numerous discussions with government officials respecting the election of directors. We support many of the election rules being proposed, including a requirement that candidates be Canadian citizens, permit book holders and active producers; that directors have staggered terms; and that the director elected in a multiple-candidate contest have the support of the majority of voting producers. Further, we insist that campaign budgets be limited to no more than $15,000, as financial means should not determine a candidate's success or failure. Consideration should also be given to establishing a delegate structure to facilitate director-producer communication.
We note that prairie producers are anxious to have the Canadian Wheat Board's new governance structure established. Accordingly, we are pleased with the government's commitment to hold director elections at the earliest possible opportunity.
The Manitoba Wheat Pool supports the appointment of a president/chief executive officer to oversee the day-to-day operations of the Canadian Wheat Board. However, to ensure that the Canadian Wheat Board is accountable to prairie producers, the president/CEO must be fully accountable to the corporation's board of directors. In its current form, Bill C-4 does not provide for this.
We do not believe that the president/CEO should be a member of the board of directors as specified in the legislation. We note that in virtually all farmer-based organizations, the pools included, the chief executive officer is fully accountable to but not a member of the board of directors. To ensure the accountability of the Canadian Wheat Board to prairie producers, we recommend that proposed subsections 301(2), 302(1), 302(2), 302(3) and 303(2) be amended to remove reference to the president as a member of the board of directors. We do not believe that the president/CEO should be appointed by the Governor in Council as specified in the legislation. We are concerned that this could result in a conflict between the senior officer of the corporation and the board of directors. Specifically, the senior officer may feel more accountable to the government which made the appointment, than to the board of directors.
Accountability to producers could be achieved by enabling the board of directors to appoint and terminate the president/CEO of the Canadian Wheat Board following consultation with the Minister. Accordingly, we suggest that:
1. The last line of clause 3.02 be replaced with: The president is appointed by the board of directors in consultation with the Minister;
2. Clause 3.09 be amended to read: The president holds office during pleasure of the board of directors for such a term as the board of directors may determine;
3. Clause 3.11(2) pertaining to the appointment of an interim president be removed; and
4. Provided that the other amendments are made, clause 3.05(e) relating to the conditions for termination of the president be removed.
We acknowledge that accountability requirements must flow from the government's guarantee of initial payments. However, as previously indicated, we believe that these requirements are addressed in the financial responsibility provisions of Bill C-4.
Building on the proven strengths: Manitoba Pool has consistently maintained that any changes to the Canadian Wheat Board Act must preserve and enhance the cornerstones of the Canadian Wheat Board marketing system, namely single-desk selling, price pooling, and federal government guarantees. A number of provisions in Bill C-4, for example, allowing the Canadian Wheat Board to issue tradable producer certificates or to make payments to producers to help offset the costs of farm storage, improve the Canadian Wheat Board's ability to respond to producer's needs without jeopardizing the cornerstones of Canadian Wheat Board marketing. However, other provisions will pose a threat to the integrity of the Canadian Wheat Board marketing system, thereby offsetting any perceived improvements in responsiveness or flexibility.
Federal government guarantees: Manitoba Pool appreciates that Bill C-4 provides for the continuation of federal government guarantees of Canadian Wheat Board borrowing and credit grain sales. However, we believe that the government must also continue to guarantee adjustments to the initial price. There has never been a deficit in a pool account caused by an adjustment to the initial price, demonstrating there is virtually no financial risk associated with maintaining this guarantee. There is a risk, however, that the withdrawal of the adjustment payment guarantee will lead to the withdrawal of the initial price guarantee.
The government's stated rationale for removing the guarantee of adjustments to the initial price is to expedite the process of making adjustment payments. On the contrary, we believe that, in the absence of government guarantees, the Canadian Wheat Board will be more cautious, resulting in fewer and slower adjustments to the initial price. More timely adjustments could be achieved by removing the requirement for cabinet approval and simply requiring the approval of the Minister of Agriculture, the minister responsible for the Canadian Wheat Board where different from the Minister of Agriculture, and the Minister of Finance.
In view of the above, we recommend that:
1. Clause 7 of Bill C-4 be amended to remove the proposed subsection (3)(a) and that the original wording of section 7(3)(a) of the Canadian Wheat Board Act remain.
2. The last subclause of clause 18 be amended to read: from time to time afterwards, by order of the Corporation and with the approval of the Minister, the Minister of Agriculture and the Minister of Finance.
Cash purchasing: Manitoba Pool is very concerned with the provisions which enables the Canadian Wheat Board to make cash purchases of wheat and barley directly from producers. Our reasons are twofold: We believe that allowing the Canadian Wheat Board to make purchases at other than the initial price will reduce the effectiveness and ultimately cause the demise of price pooling, one of the cornerstones of the Canadian Wheat Board marketing system. As more producers opt for the cash price, which will likely be higher than the initial price, the potential for a deficit in the pool account will increase. This will result in more conservative initial prices and, hence, less grain being sold to the pool accounts.
The efficiency of the grain forwarding system relies on an effective working partnership between the grain handling industry in acquisition and the Canadian Wheat Board in marketing. If the Canadian Wheat Board is authorized to acquire grain on a cash basis from producers, it will be able to direct deliveries of grain and ultimately influence the configuration of the country elevator system. This could have a negative impact on the efficiency of the grain forwarding system and, as a result, would not serve the best interests of grain companies or prairie producers.
With the availability of tradable producer certificates, producers will have the opportunity to sell the right to a final payment and effectively realize the full return for their grain without waiting until the Canadian Wheat Board makes its final payment. Enabling the Canadian Wheat Board to offer shorter pooling periods will also provide additional flexibility. Together, these features of Bill C-4 will improve the Canadian Wheat Board's ability to source wheat and barley and provide the increased cash flow flexibility being sought by producers without jeopardizing one of the cornerstones of the Canadian Wheat Board marketing system.
In view of the above, we recommend that, in clause 22 of Bill C-4, the new section 39.1, which provides cash purchasing powers, be deleted.
The contingency fund: Bill C-4 provides for the establishment of a contingency fund to replace the government guarantees of adjustments to the initial price and to backstop potential losses from cash purchasing. Manitoba Pool does not believe that this contingency fund is required for the following reasons: We believe that the government should continue to guarantee adjustments to the initial price, which would negate the requirement for a contingency fund. We note that guaranteeing adjustments to initial price represents no real expense to government. However, the replacement of the government guarantee with a contingency fund would represent an expense to producers, who would be required to forego some of the returns from Canadian Wheat Board marketing to build and maintain the fund.
We have identified our concerns with allowing the Canadian Wheat Board to make cash purchases from producers. We do not believe that it would be in the best interests of producers to use the returns from Canadian Wheat Board marketing to finance a measure which could ultimately destroy one of the cornerstones of the Canadian Wheat Board marketing system.
As it is, producers are being increasingly burdened with the costs of government budget reductions. They are required to bear the costs of everything from government inspection and grading to pesticide registration and marine navigational aids, just to mention a few. The accumulation of capital, through deductions from the Canadian Wheat Board pool accounts or gains on borrowings, would represent yet another drain on the farm income.
In view of the above, we recommend that:
1. Proposed section 6(1)(c.3), which gives the Canadian Wheat Board the power to establish a contingency fund, be removed;
2. Clause 6(3), dealing with the accumulation of funds and the size of the contingency fund, be removed; and
3. All references to a contingency fund in clauses 7 and 8 be removed.
Manitoba Pool is strongly opposed to the establishment of a contingency fund. However, if a contingency fund is deemed necessary, it should be created through a one-time injection of government money rather than through producer contributions. In the event that producers are required to forego returns to support a contingency fund, the regulations for the act must prescribe a limit on the moneys that may accumulate in the fund. We believe that this limit should not exceed $30 million.
Changes in mandate: Manitoba Pool recognizes the government's desire to prescribe the conditions under which new crops can be added to, or existing crops deleted from, the marketing jurisdiction of the Canadian Wheat Board. Further, we appreciate the government's efforts to prevent frivolous requests for producer votes by requiring that a vote be recommended by the board of directors and requested by an organization representing producers of the specific commodity.
However, we believe that the mandate change provisions of Bill C-4 could be improved through the following minor amendments:
To prevent the minister from having to decide which organization represents producers and to avoid potential legal battles over representation, we suggest that clause 26 be amended to change the proposed subsection 47.1(2)(a) to read: (a), a written request is sent to the minister by the association which can demonstrate that it is the predominant organization which exists solely to represent the producers of that commodity in the designated area.
To ensure that the affected parties have had adequate opportunities to provide feedback on proposed mandate changes, we also suggest that the minister be required to immediately make public any request to add new crops to or exclude existing crops from the marketing jurisdiction of the Canadian Wheat Board.
In conclusion, in an increasingly competitive global marketplace, the fundamental pillars of the Canadian Wheat Board marketing, namely single-desk selling, price pooling, and government guarantees, are as important as ever.
Manitoba Pool appreciates the federal government's efforts to enhance the effectiveness and accountability of the Canadian Wheat Board through amendments to the Canadian Wheat Board Act. While we support the intent of Bill C-4, we have serious concerns about proposed changes which would threaten the cornerstones of the Canadian Wheat Board marketing system. We believe that the amendments we are recommending will improve the responsiveness and accountability of the Canadian Wheat Board to both producer and government stakeholders while preserving and enhancing the proven strengths of single-desk selling, price pooling, and government guarantees.
Senator Hays: I have a question on the relationship of the new board, assuming C-4 goes through, and the government. In the accountability section of your report, you say that you approve of the provisions which require the board to submit an annual corporate plan and to obtain ministerial or cabinet approval for financial decisions. I wonder if you could elaborate on that. My question is motivated by concerns we heard in Alberta in particular, but also from others, that the government is really running the board, not the board.
Mr. Swanson: Having a board of 15, ten being elected producers, should allay a considerable amount of that concern. Given that we support requiring the continuation of federal government guarantees on both initial prices and price adjustments, the federal government should certainly have some say in okaying the financial plans of the new structure.
Taking that one step further, I was interested in the comments made in the previous presentation regarding the division of how the elections and representation would take place with the proposed ten districts across the Prairies. Hopefully many of those districts would cross provincial boundaries. Those people, while they would be representing a constituency, once they become part of that larger board, would represent their constituency but would leave their hat at home from the point of view of only representing that group. Their responsibility would be to the much larger constituency for which they are responsible, that is, the operations of the Canadian Wheat Board.
The five board appointments, first of all, should be Canadians. In addition to that, they should represent the various expertise they would bring to that board table: finance, transportation, world trade issues, for example, just to name three. That would bring a good balance to the board, and I think it could operate very effectively.
Senator Hays: Thank you for an excellent presentation and a good answer.
Senator Whelan: Your brief, and the way you presented it, has been one of the best that we have received, particularly with your suggestions and recommendations. I could go through the entire thing, but there is hardly anything of which I disapprove. However, you did not mention, as some have, Judge Estey's study on transportation. Some are suggesting that we do not do anything with the bill until Judge Estey's report comes in.
Mr. Swanson: I do not think it is necessary to wait until Judge Estey's report is in. His task is to make recommendations regarding the improvement of transportation in Western Canada and moving our crop to export position and to serve our world markets. We are talking here about the marketing aspect. We certainly must work together, but I think it important that we get on very quickly with approving the new act, the amendments to the act, get on with the elections and get the new structure in place so that they are ready to go to work at the earliest opportunity.
Senator Whelan: You talk about the chief executive officer. I agree with you that he should not be a member of the board. You know of the recent problem we had in the Senate. Senators are appointed, and the board is elected. How do you get rid of a bad director? I do not see anything in the legislation dealing with criminal offences or anything like that. There is nothing here. Perhaps the lawyer has considered that.
Mr. Anders Bruun, Corporate Secretary and Legal Counsel, Manitoba Wheat Pool: There is nothing in the legislation specifically providing for removal of directors. It may be possible to have something in the regulations. It is also possible for the board itself to adopt by-laws governing the conduct of individual directors on matters such as confidentiality and the unity of the board and so forth. There is also the ordinary dynamic of any boardroom situation with 15 people around a table. If one person is completely out of line, I am sure the other 14 will have host of informal measures to control or deal with the problem. I am not certain you need something specific such as a recall type of provision. I think there are some mechanisms that will allow that to be managed.
Senator Whelan: From my experience in dealing with ministers of finance, I would like to see a few more ministers involved in making the decisions required by this act. They should go through a committee before they make that kind of decision. They could be difficult to deal with. When I met the Minister of Finance every morning, I used to bow to him and say, "Good morning, God." We had some difficulties. As I said, I agree with most of your presentation, and I thank you for your brief.
Senator Spivak: You have talked about the inclusion clause here, but there are so difficulties in that clause. Would you like to see it removed? If a producer organization wanted inclusion, could that not be facilitated without specifying that in the legislation because of the difficulties with the producer group? There is also the "political aspect" that it would bring into the elections of the directors.
Mr. Swanson: Certainly we are aware that this clause seems to have drawn a great deal of attention. We think it has been overplayed. We have made suggestions as to the process that a producer group would need to go through, and ultimately a democratic vote would take place in order to determine whether in fact that crop would be added or deleted. I do not think we can argue with democracy.
Senator Spivak: Some concerns were raised in our hearings in other places as to who are the Canola producers, for example. Is it a person who may grow a bit of canola and then does not grow it again? There are many difficult questions around this.
Mr. Swanson: Yes, it does raise questions, but I guess that is no different than you or I as taxpayers having one vote or ten votes regarding the number of tax dollars that we pay.
Mr. Bruun: Much of the debate around Bill C-4 has been debate within the confines of the box, as it were. I would urge senators to give some real consideration to where we end up in Canada if you accept the arguments in support of dual marketing which are based on principles of freedom of choice. It sounds very good in the abstract.
Mr. Swanson's point regarding the income tax is interesting. If a small minority based on principles of freedom of choice can undermine the Wheat Board, then surely a small group of high-income earners who pay a lot of income tax are morally and logically justified in coming to the government and saying, "We should be allowed to opt out of Medicare because we would much rather go it on our own. We do not want to consume government provided medical care, but we do not want to pay for it in our taxes, either, so let us opt out of medical care by ticking a box on our income tax return every year." That argument is logically consistent in every way with the argument that is being made in support of dual marketing and choice. It goes to the very nature of the sort of country we want Canada to be in the future.
The Chairman: At these hearings, we have now heard from the agriculture ministers in all three provinces. There are many companies, and I could go through a long list, which are making new investments in this country. The situation relating to the continental market and the global market is changing. Is there not a major danger if we do not realize that we are in a time of change?
Mr. Bruun: I understand that, and so do farmers, and a large majority of them still prefer the Wheat Board.
The Chairman: This is not a question of Wheat Board or no Wheat Board. I think I would agree.
Mr. Bruun: They prefer the Wheat Board in its current general form.
The Chairman: I would think most farmers would support a Wheat Board, but they are asking for choices so they can react to the changes that are coming.
Mr. Bruun: I am sure the presidents of the five chartered banks would like a choice as to whether they contribute to Canada's medicare system. The logical parallel is on point 100 per cent.
The Chairman: I call the National Farmers' Union, Mr. Fred Tait, director.
Mr. Fred Tait, Director, National Farmers' Union, Manitoba Region: Senators, I will not repeat the things presented in our brief in Saskatoon by our national president.
In reviewing this debate concerning the future of the Canadian Wheat Board, much of the opposition comes in the forms of conspiracy theories, and Mr. Bruun just mentioned this talk about freedom and justice.
We have heard some strange things come forward as fact. We heard that Bedford barley, a Canadian feed variety, is really a malting variety and could be substituted for the U.S. malt variety of robust. We have seen grain companies shedding tears over the lack of freedom that farmers have, denying that they had any self-interest, of course, in seeing that the Canadian Wheat Board was weakened. We saw, most recently, a conspiracy theory involving the Canadian government in the internment in terms of the Japanese and confiscation of farmers' property in the form of their grain.
In reality, though, much of the opposition to the Canadian Wheat Board over the last three, four or five years has been more ideological than factual. In almost every case, if you look at the complaints and follow them through a logical process of close scrutiny, they cannot be sustained.
During this debate over the last four or five years, and particularly during the last two or three years, I have totally withdrawn from discussing those sort of issues or reacting to them because they are not productive. They take public attention away from the real issue. The real issue, of course, is economics.
Two or three years ago, I identified 11 different questions that I thought were very relevant to this debate. The questions were as follows:
Is a dual market an open market?
How would a Canadian Wheat Board function in an open market without owning any grain handling facilities?
Would the Canadian Wheat Board be placed at a competitive disadvantage in an open market by not owning any handling facilities?
In an open market, would Canadian grain companies provide the Canadian Wheat Board with unrestricted access to the use of their facilities to access markets that the grain companies sought to acquire for themselves?
With the establishment of an open market, would the Government of Canada continue to guarantee Wheat Board accounts without the guarantee being considered an unfair subsidy in a competitive market?
What impact would an open market have on prices of malting barley?
Could the Canadian Wheat Board continue to price to market in an open market?
In an open market, would all producers, regardless of size or geographical location, have equal access to the premium cash markets of the world?
If an open market proved to have a negative impact on prairie grain farmers, would the trade agreements, NAFTA and CUSTA, allow the re-establishment of single-desk selling of wheat and barley?
Are the costs of marketing grain in an open market lower than the costs of marketing grain through the Canadian Wheat Board?
Finally, in an open market, what percentage of farmers' grain is marketed in the peak price of that market?
I thought those questions were relevant then. Unfortunately, the debate went on in other dimensions, and I do not think those questions were properly addressed. However, they are the questions.
For the majority of farmers, the debate on grain marketing is an economic argument, not an ideological argument. Ideological arguments can be entertaining, and perhaps they have their place. In reality, ideology is not a medium of exchange. It takes cash to pay your bills.
When I look at this issue from an economic point of view, I look at the study with which you are quite familiar, the one done by Kraft, Furtan, and Tyrchniewicz. They identified that from 1980 to 1984 the average premium above the open market that the Wheat Board was able to acquire was $13.35 a tonne. That came to $265 million annually. As well, they identified another $72 million out of the barley market on which the Canadian Wheat Board was able to gain a premium, largely on malting, but also on the feed barley market that it exported.
That came to an average annual income gain for farmers of $337 million. To this figure of $337 million we also would have to add the interest that the Wheat Board is able to save by it being able to borrow money at the treasury bill rate. In 1997, that came to an additional $60 million. If we add those figures, we come to an annual saving of $397 million.
If we moved to an open market or a partially open market, we would lose part or all of the above benefits that have been identified by Kraft, Tyrchniewicz and Furtan. If we lose those benefits, of course that comes out of our net farm income. There is no other place from which it can come.
We would need to add another cost of doing business, which would be the normal basis that the private industry uses as a risk management tool in handling our grain. We could assume that that would be somewhere in the area of $9 per tonne.
To try and bring all this into some sort of perspective, Manitoba's highest level of net farm income was in 1987, and it was $400 million. The Canadian Wheat Board annually, using the Furtan, Tyrchniewicz study with the interest allowance, is earning us $397 million.
If you remove the Canadian Wheat Board from the system, or damage it, you are basically removing an amount from net farm income that, on the average year, may be two to four times higher than the total net farm income in the province of Manitoba.
What would we do as farmers if this were to happen? We would do as we have always been forced to do. We would do what they call a rationalization. As the income per unit of production decreases the net income, we rationalize our operations into larger and larger farms. There is no other solution. That is the only solution that you can follow. The number of farms would decrease, and it would decrease dramatically.
Net farm income as recently as 1995 in Manitoba was $2,500. This gives you a perspective of what it would be like to pull nearly $400 million out of this system.
The consolidation of farm operations in itself creates some other very serious problems. As the operations become larger, the dependency on the so-called technologies of farming increases. On a certain size scale, you can use livestock and crop rotation and forage, et cetera, to manage your soil. However, as the operation moves into the thousands of acres, a greater dependency is placed upon the chemicals, the fertilizers, the pesticides, and the herbicides. Here we are, doing this on a continual scale, at the very time when the consumers of this country are becoming increasingly suspicious about the safety of our food supply and the wisdom of the agricultural model we are using.
We can add to this agenda genetically altered life forms with plant breeders' rights where corporations design genetically alternate plants with a dependency on the use their chemical in the growing of those crops. The most recent development, announced just last week, is a new chemical which will be sprayed upon the seed and the seed will only germinate once. The offspring from that seed will be neuter. We are becoming dependent upon a system, a system we certainly did not ask for.
We also within this scenario are looking at what they call the rationalization of grain handling delivery and transportation. We are moving from over 1,000 delivery points to, depending whose model you look at, but according to some people, a minimum of 135 delivery units in the three prairie provinces. Others say no, it will be somewhere in the range of 320 delivery points. Do they call that efficiency?
Daryl Kraft from the University of Manitoba takes that one step further. He says in his analysis that the ownership concentration in the grain handling industry will increase, and when it is over he expects there will be a maximum of three grain companies, but possibly only two.
If you take the Canadian Wheat Board out of this, or weaken it in this developing equation, what do you have? You have local monopolies. We, as individual producers, will not have any leverage whatsoever in that scenario. It becomes more complicated.
Last December, the general accounting office of the U.S. Congress sent a delegation to Winnipeg to investigate whether the Canadian Wheat Board was using unfair trade practices and under-pricing markets, et cetera. The National Farmers' Union met with the representatives of the general accounting office. In only one place was I was able to measure that we were having any effect on their perception of reality, and it was this: I pointed out to them our grain handling capacity in Canada. We have one bushel of capacity for every ten bushels of production. In the United States, they have one bushel of capacity for every two bushels of production. A member of the general accounting office said, "Oh, yes, but, Mr. Tait, could you not change that and duplicate the U.S. system?" I said that the U.S. system was built at public expense, and the trade agreements would see that as a subsidy.
If you really want to cause chaos and have grain moved across the border and cause a lot of political problems in the northern states, tinker with our system. Our system was never designed for, nor has it the capacity to meet, surge demands that an open market structure would cause.
If we had a peak in the wheat price today and our system could not handle it, and it could not handle that sort of a system, there would be uncontainable pressure to move that wheat to the closest alternate marketing point, which would be the United States. The general accounting office accepted that argument as being logical.
I will talk a bit about this inclusion clause. It would be my observation in looking at NAFTA and CUSTA and reading the text, and I do not pretend to be an expert, that if we were to try to include a major grain under the Wheat Board, we would be faced with a challenge from the United States in particular. I see a contradiction here.
Mr. Goodale talks about an inclusion clause. In fact, the inclusion clause came into the agreement as a result of pressure from the National Farmers' Union. We saw a lack of balance. You had a clause that allowed the exclusion of grains but no counterbalancing resolution saying you could add grains. Even yet, the process of removing grains is far more generous than the process of adding grains. I ask myself why a minister would be talking about an inclusion clause when a minister of the same government is talking about signing the Multinational Agreement on Investment would make the inclusion clause totally illegal. I suspect we are being played with here. There is no other explanation for this sort of contradiction.
He suggested that we would lobby the minister if we want to add grains to the board. That is interesting. It would save the government from a major embarrassment. If farmers voted to add rye or oats or some other canola to the board and the government came back and said, "Well, we are sorry, we negotiated that away," it would be would be a crisis in democracy.
How would you avoid that? We would change it so that we would then lobby the minister. The minister would probably appoint a panel, and the panel would study and have public hearings, and nothing would ever be done. That is what I suspect would happen.
The Premier of Manitoba and the Chamber of Commerce say that including other grains under the Canadian Wheat Board would cause a reduction of employment within the grain industry here in Winnipeg. Again, that is a double standard. Everything the provincial government has done in the last decade has been dedicated towards greater efficiency and fewer employees. They are applying an opposite standard to grain farmers, saying, "Oh, well, if you added more grain, we would have to employ less people in the sale of that grain." I would say, "Good. Maybe the savings will be passed back to me."
Senators, you probably have some questions. Those are some of my general and specific thoughts as to where we are going with this bill.
Senator St. Germain: Sir, what percentage of your organization is made up of grain growers? How large is your membership?
Mr. Tait: I would not have a breakdown, because our organization is national, right from Prince Edward Island to the Peace River part of the country. We have every discipline, from orchard and organic to beef and poultry. All disciplines in agriculture are members of the National Farmers' Union.
I think you are asking who we represent. I see the National Farmers' Union as no different than a political party. We have a process where we develop policy. We put that policy out before the public. The public makes a decision as to its legitimacy. When you compare the things for which we have stood and the public's opinion expressed through the democratic process, they have supported the position adopted by the National Farmers' Union.
The most recent example of that was the barley plebiscite, transportation, retention of supply management, the attempt to retain the single-desk selling of hogs in Manitoba. We have consistently been on the side of the majority. Although we are not a large organization and we do not have the majority of farmers as members of our organization, I can very confidently say that we consistently have been able to speak on behalf of the majority of farmers.
Senator St. Germain: I asked the question because I have been in agriculture, in chicken farming and seed potatoes and cattle, and I have never seen any information or literature cross my desk on those operations. Have you actual numbers as to categories, hog farmers, grain farmers?
Mr. Tait: It would be broken down in our national office. I do not have that figure off the top of my head. We did a full survey of our membership within the past year, identifying everything from family structure to commodities. It is available.
Senator St. Germain: You mentioned during your presentation something about the pressure Wayne Easter applied that triggered the inclusion clause into the legislation. Did I hear you correctly?
Mr. Tait: In my mind, if there was a point when the inclusion clause became inevitable, it was at the public hearings here in Winnipeg last April on Bill C-4. Presenter after presenter pointed out that democracy would demand that if you have legislation allowing you to weaken a public institution, you should also have a clause allowing you to strengthen that public institution. That is only reasonable.
I think maybe Wayne Easter championed that clause later on, but it was not Wayne Easter's idea. It came from a group of individuals here in Manitoba from within the farmers' union, I would think.
Senator St. Germain: Within in your union?
Mr. Tait: Yes.
Senator Spivak: I wish to ask about the inclusion clause. The problem seems to be in the mechanics of how the vote will take place, the definition of a producer, et cetera. My concern is that since this has become such a hotly-contested issue, it would taint the election into pro and con instead of looking for people that can best run the organization.
Do you still believe it necessary to have this in the legislation, or could you not achieve the same objective by leaving it out of the legislation and allowing the elected board of directors to deal with that issue? It seems to me that if any group really wants their grains to be included, it will be included. I worry about this clause for the reasons that I mentioned.
Mr. Tait: The inclusion clause, after the public hearings in Ottawa last November, was actually weakened. It was weakened as a result of the presentation that Darrin Qualman and I made in Ottawa. We got that feedback. We do not see any reason why a general farm organization like Keystone Agriculture Producers, Wild Rose, or the National Farmers' Union should not been able to trigger a vote on the inclusion clause. We are not babes in the woods. We would only try to trigger something where we felt we would be successful. If the opponents of our position think that we are wrong, I would certainly welcome them, in the free and democratic process, to embarrass us.
You talked about the polarization. Yes, the polarization is there. There is a polarization within the political spectrum. The level of attack on the Canadian Wheat Board could only have the impact of polarization. We have an institution that has been in effect for 60 some years. It is well established within our communities. When people start attacking it with irrational, emotional, ideological arguments, it polarizes the other side equally. It is unfortunate that this happened. That is why I withdrew from that type of debate and tried to focus on the 11 questions. However, I will not accept that a minister should be lobbying the minister. That is a poor substitute for democracy. This is something that affects my community's net farm income. Changes to this board have the potential to totally devastate my community and the general community by the amount of net income we will take out of it.
Senator Whelan: The Ontario Wheat Producers' Marketing Board, the milling industry, has objected. That is where probably some of the smallest and, of course, largest flour milling industries are. There are some small millers there. They are objecting to the suggested two-price system. It has not become law, so it is not a fait accompli.
Mr. Tait: You are exactly right. The Ontario Federation of Millers is not in favour of any form of dual marketing system, they say, which we believe the declared off-board option to be. Their preference would be to retain the status quo agency marketing or a completely free market. That is from their letter. I understand where they are coming from. The uncertainty that this dual marketing that Ontario has now in its wisdom seen to establish gives a great deal of uncertainty to the millers about the availability of future supply. To protect themselves, they will probably need to make some major investments, as have the U.S. maltsters.
Senator Whelan: Also, they do not know what price their competitors will pay, and they will be at a tremendous disadvantage.
Mr. Tait: That is what they say. They say price transparency disappears.
Senator Whelan: They were all treated equally before.
Mr. Tait: That is right, and it is a good point.
The Chairman: Our next presenter will be from the United Grain Growers, Mr. Ted Allen, the president, and Blair Rutter, policy analyst. I understand you have a presentation to make and then we will go to questions.
Mr. Ted Allen, President, United Grain Growers: We will keep our comments brief so as to allow maximum time for your questions.
We are taking a rather broad-brush approach to this legislation at this point. Let me say at the outset that the UGG believes this legislation has huge flaws. Its governance feature really means that the federal government will continue to direct the affairs of the CWB, and the role of its so-called board of directors will be, de facto, mainly advisory in nature.
The fundamental flaw in the legislation, though, is the continued compulsory nature of the CWB. This aspect of the legislation really does fly in the face of a long Western Canadian agrarian tradition of free and voluntary association. One of the fundamental tenets of a liberal, democratic society is the capacity of citizens to associate on a free and voluntary basis.
Western Canadian farmers also have a long and proud tradition of free and voluntary association. It is therefore not surprising that more and more Western Canadian farmers are demanding the same treatment with regard to their wheat and barley marketing.
Numerous polls, including two that UGG commissioned from a professional polling firm in 1993 and 1994, demonstrate that a significant majority of farmers want a voluntary system. The government's own Western Grain Marketing Panel, after an exhaustive series of consultations in Western Canada, came to the same conclusion and recommended to the government a viable compromise.
It is extremely unfortunate that the government and the House of Commons chose to ignore these very clear recommendations.
We note that wheat farmers in Ontario will soon have the ability to opt out of the provincial marketing scheme, at least for sales into the United States. We can think of no other commodity where producers in one part of the country receive preferential access to an export market over producers in another part of the country.
We respectfully ask you, senators, to ensure that this injustice does not prevail. Western farmers must be accorded the same access privileges as farmers in other parts of Canada.
UGG believes that the compulsory provisions of the Wheat Board Act represent an unacceptable intrusion on the rights of farmers to own and enjoy property. The right to own, use and sell private property is one of the key foundations of any democratic society. Farmers are simply demanding the same fundamental freedom that you or I take for granted.
Even if a majority of farmers presently support compulsory marketing, and we do not think this is the case, we do not consider this to be sufficient grounds to impose the will of the majority on the wishes of the minority. Indeed, one of the measures of a civilized society is the manner in which those in a majority treat those who hold beliefs different than their own.
In Canada, we take pride in ensuring that fundamental rights, like the right to own and enjoy property, are not trampled upon by the will of the majority. Let us be clear: UGG does not wish to take anything away from those who wish to market their grain on a collective basis. Those who wish to market their grain in concert with others should be free to do so. Those who wish to market their grain individually should also be free to do so.
Agriculture historians will no doubt view this period of Canadian history with intense interest. We believe that they will find certain aspects of it fascinating. The state's decision to jail, for months on end, normally law-abiding citizens whose only crime was non-violent civil disobedience over laws and regulations which they regarded as unjust is an interesting facet of this period. Likewise, the deafening silence of civil libertarians regarding this activity, simply because it does not fit their preconceived notion of what abuses of civil liberties are all about, will also be of interest.
The thundering dichotomy of a supposedly liberal government, which is willing on the one hand to be painfully careful about the civil liberties of the perpetrators of violent acts against their fellow citizens while at the same time willing to incarcerate for many months non-violent protesters who have perpetrated, at the very worst, near victimless crimes, should also be fascinating.
In conclusion, let us say that we look forward to changes which you and your colleagues may make to this legislation, and we look forward with keen anticipation. You and your colleagues have a unique opportunity to enhance the Senate's reputation as a body for sober second thought. This issue is not particularly political but much more philosophical in nature than most. We believe the Senate's reputation will be enhanced if it returns this legislation to the Commons with significant amendments addressing the major shortfalls to this bill.
Thank you for your time and consideration. We look forward to your questions.
The Chairman: During these hearings, we have heard some 110 to 115 witnesses, many calling for choices. We contract our grain now as farmers to the Wheat Board. If they were to give the farmers the choice to contract a percentage of their wheat or all of their wheat or none of their wheat, whatever the case is, under the contract system, do you think the Wheat Board would survive? I think they would survive. Some would contract all with the Wheat Board, others would not contract any, but some may contract 25 per cent. My understanding is that that is about the way the situation in Ontario will go. They would be allowed to sell into the United States. Would this not open it up to satisfy people on both sides of the argument?
Mr. Allen: Again, as I stated previously, we believe that an absolute minimum on this is to treat farmers the same in all parts of the country. We believe Western Canadian farmers must have the same rights as Ontario farmers in relation to access to those markets.
In terms of the survival of the Canadian Wheat Board, I find it fascinating that the Australian Wheat Board on the domestic market has had a voluntary system for a number of years now, and it is indeed thriving in that marketplace. They hold 60 per cent of that market on the food grain side of the product and 20 per cent on the feed grain side of the market. That system has worked very well. Detractors claim that because Australia is an island it is somehow different. However, I suggest to you that an international border is as effective as the ocean in terms of the way that commerce is conducted.
Senator Hays: I thank you for your presentation. It is very helpful.
Let me follow up from Senator Gustafson's question. We have heard from three Ministers of Agriculture. One, from Alberta, basically says we should do what we can to either delay passage of this or ensure that dual marketing or choices are provided for. The ministers of Saskatchewan and Manitoba say Bill C-4 is a good way to go in terms of the board evolving into something different than it is. Do you think we, as a committee, should suggest to other senators that we should chose the Alberta position over the other two? Would that be a good way for us to go?
Mr. Allen: It is our view, based on the strong and consistent message from our members over many years, that a voluntary system, rather than threatening the Wheat Board, will secure its future more directly. Indeed, that route will be most likely to protect the existence of the Wheat Board because the Wheat Board, like all other institutions and elements of our society, must evolve and adapt over time to meet the changing realities of this world.
Senator Hays: Even though two out of the three do not want that to happen?
Mr. Allen: Well, that is not clear. In fact, I really do not believe it is true. I say that because the question asked in the plebiscite was not, "Do you want a voluntary system," despite many parties pleading with the minister to pose that very question. Instead, the question posed was, "Do you get the Wheat Board totally out of barley marketing, or do you give them total control?"
The third option, which our surveys in 1993 and 1994 showed -- we did not conduct the surveys, but it was done by an independent, professional polling organization -- that a majority of farmers in all three prairie provinces, and even the customers of some entities who were in opposition to some of these changes, were in favour of voluntary systems. That question has never been posed to farmers. The argument that was put forward is that we would not pose the question because it is unworkable. I think that was somewhat presumptuous, because surely that would be part of the question that farmers would think about when they were voting.
Senator Hays: I wanted to avoid getting into that, because there have been many who purport to speak for the majority and have different rationales for it. We have had lengthy discussions of the two plebiscites, plus private polling and so on. Just on the basis of the three ministers, as they interpret their responsibility, one says do not pass it. I guess I am looking to you, and Senator Gustafson raises it, for the rationale to ignore the two and go with the one in the minority.
Mr. Allen: To give you idea of the evolution over time, in those surveys in 1993 and 1994, we asked how many farmers would like the elimination of the board's involvement in the marketing. Ten to 12 per cent of them wanted that. When you consider what the vote was by the time the barley plebiscite took place, I was astonished that there were that many farmers willing to vote to totally remove the board from barley marketing. I thought that indicated a significant shift in public opinion by that time.
Senator Hays: I guess I was impressed by the Manitoba minister's scepticism about plebiscites and votes. He did not say it, but it seems that you would be doing one every year, or maybe two a year, if you wanted to use that as the means of determining whether you had single desk-selling or not.
On the issue of the independence of the board, would you comment on how you see the Canadian Wheat Board as it is now constituted and the Wheat Board as it would be constituted under Bill C-4? I know this is not the case and may not be the case, but let us assume that the CEO is someone that the board has a meaningful role in hiring and firing. Is the Wheat Board, as it is presently constituted and run by the government in your view the same as you would see the Wheat Bboard as governed and responsible to the new board run by the government?
Mr. Allen: The current Wheat Board is fascinating, in that the act says there would be three to five commissioners, none of whom is the CEO, and they are accountable to Parliament. The mechanisms by which they are accountable are somewhat vague. In practice, the Wheat Board and its supporters, when it disagreed with the minister from time to time, said, "We do not respond to a minister; we respond through a minister to Parliament." That mechanism is not clearly defined. I think you have a very unsatisfactory situation now.
This legislation has been an attempt to address it. Unfortunately, the attempt itself is quite flawed. Under the legislation, a CEO, knowing that it will be a ministerial appointment and a ministerial removal, would be less than likely to pay much attention to his board of directors and their wishes in terms of the operation of the entity.
There are also these other clauses which clearly determine that it will be the government that will call the shots on specific items. Also, there is a general clause that says the board will do anything that the government tells it to do. It covers all kinds of contingencies in that regard. I cannot see that board of directors functioning as what people normally perceive a board of directors to be. It is more of an advisory role.
Senator Hays: This is helpful in terms of us posing questions around your concerns to perhaps the minister, or certainly his officials. Just to confirm, the Wheat Board, as presently constituted with its commissioners, has this relationship with the government where they can chose to ignore and have chosen to ignore in terms of taking direction, but under Bill C-4 it would evolve so that the government would be in a situation where they were running the corporation, or do you think they probably will be running the corporation?
Mr. Allen: I would clarify it in this way: There would be a clearer definition of the mechanisms of accountability, but unfortunately the accountability would be very much to the government as opposed to the board of directors.
Senator Hays: I have a quick question on the Auditor General. You would like to see a value-for-money or a comprehensive audit done on the Wheat Board. Is that your position?
Mr. Allen: We believe that there is no reason why the Auditor General should not have access to the Bboard's books to satisfy people that this operation is being managed in a proper and prudent way. It is not a question that people think it is not being managed that way, but let us have some independent third party representing the taxpayer look at that. That is precisely why the Auditor General's office was created in the first place. Why the board is exempted from that is rather bizarre. They should also be subject to requests under the Access to Information Act. When there is a request for access to information, the documents are always circulated to the parties affected, and those parties affected have grounds for exempting certain information from that request, so the idea of commercial confidentiality, for instance, simply would not be an issue in this case. I fail to see why, within the given rules, requests under Access to Information should not be processed by the board just as they are by many other government organizations.
Senator Spivak: I want to know about the United Grain Growers. Is your membership mostly producers or half producers? What other kinds of institutions are in your membership, and how are you funded?
Mr. Allen: Our membership is entirely producers. Our shareholders are partially producers and partially a broad variety of investors in Canada and outside the country.
Senator Spivak: What is your corporate structure?
Mr. Allen: We are a publicly-traded company with a class B voting share, which is one shareholder/one vote. However, we are rather unique. Because we are such an old company, we were created by an act of Parliament. When we went public, we had to go back to Parliament to get that change. Incidentally, I should add a postscript to that. The change to our legislation was initiated in the Senate, and I want to thank the Senate again for being very cooperative in helping us to make that transition.
Anyway, the unique feature of corporation that fall outside of the Canada Business Corporations Act is that 12 of our 15 directors are elected not by the shareholders but by the members at a members' meeting, which is totally comprised of farmers.
Senator Spivak: How many members do you have, approximately?
Mr. Allen: We probably have about 40,000.
Senator Whelan: I followed very closely when United Grain Growers entered into venture with Archer Daniels Midland. What control did they have over you, if any, as the chairman of United Grain Grower?
Mr. Allen: They have two seats on our board of directors. They have some involvement with not a governance group but a management committee in the grain operation side of the business.
Senator Whelan: Was United Grain Growers forced by economics to enter into the joint venture?
Mr. Allen: We had considered for some time that we were an extremely vulnerable company in terms of being very broadly held, but also that we needed some linkages with processors further downstream. We had strong linkages with farmers for originating grain, but we thought we needed to strengthen our arrangements with processors on the other side of the elevator, if you like. Coupled with that, we accelerated that process, if you like, because of a hostile take-over bid that was initiated by a few of our competitors.
Senator Whelan: Were the competitors Canadian?
Mr. Allen: Yes, they were.
Senator Whelan: I knew they were. In reference to your comparison with Australia, as you know, I live right on the border, and big grains growers can run their big semis right across to Ohio if Archer Daniels Midland are not paying them a fair price in Ontario. Your comparison to Australia is a little weird, because no Australian can run their truck into another nation. It is a very difficult position.
Mr. Allen: All I was trying to say is that Australia has a voluntary system in the domestic market, and it seems to be working well. For those who say that a voluntary system cannot work or that a voluntary system will destroy an organization that is supported by a lot of producers and for producers who wish to price pool and who want an honest kind of party to market their products for them, that seems to be working out very well in Australia.
Senator Whelan: In the domestic market, the Australians have no alternative. They cannot use the other one as a threat to cross the border, as they can in Ontario with Michigan and Ohio, and as they can all over the western prairie provinces. It is not a fair comparison, as far as I am concerned. Australians cannot say, "My God, my democratic right is being infringed upon," because they would have a difficult time loading a boat load of grain and saying they were going to export it.
When the Keystone producers appeared here today, they said they represent 7,500 farmers. The Manitoba Pool comes here saying they represent 16,000 people. They said they had the concurrence. Are they all wrong?
Mr. Allen: You harken me back to a fellow who is very near and dear to my heart, Jean-Luc Pépin. I recall in the early 1980s, in the initial debates over the Crow, he used the same kind of argument, but the numbers were magnified and perhaps there were more farmers then. He said you represent X number of farmers, and this organization represents so many, and when he added it up there were half a million farmers in Western Canada, and yet the census data was far fewer than that. Of course, the answer is that many farmers are members of a number of these organizations. It is not a mutually exclusive thing.
When I was on the farm, I was a member of UFA Co-op, I was a member of Uni-Farm, I was a member of United Grain Growers, and on and on. I suppose I was counted a number of times by people who might have been putting forward different points of view. Jean-Luc Pépin dealt with this with a great deal of humour. I thought we had some fun with it.
Senator Whelan: The former Prime Minister to whom he was parliamentary secretary used to ask, "Aren't you a scared a little bit, getting into bed with Archer Daniels Midland, that the elephant might roll over on you some day?"
Mr. Allen:There are no guarantees in life. Those of us who pretend that there are are deluding ourselves. As we see this industry globalize and consolidate -- these are words that people hate and I do not know that I am that crazy about them myself, but we cannot deny that it is happening -- we think United Grain Growers can be a stronger, more viable company by creating these linkages up and down the food chain.
Senator Whelan: Can I ask you about the two directors that Archer Daniels Midland has on your board? Are they Canadians?
Mr. Allen: No, they are not.
The Chairman: I have one question arising from those of Senator Whelan, and it deals with fairness in the grain going south from Ontario but that we in Western Canada cannot move the grain south. Have you have any comment on that situation?
Mr. Allen: Again, when this comes into play, I think you will have a totally untenable situation, not from a grain marketing perspective but just from a fundamental issue of treating citizens equally across the country. That is a very basic issue, I would think, in our democracy.
Senator Whelan: Just to clarify what my co-chairman said, they will not be able to move it freely. They must get a permit from the Wheat Board, et cetera, to go across there, the same as they do when they go across here. They must follow the same procedure. It is not law yet either.
Mr. Allen: The huge difference is that in Ontario, when that come comes into play, the Ontario farmer will not be forced to sell his grain to the Wheat Bboard and then buy it back at a much higher price, as is the case in Western Canada with the buy-back.
Senator Whelan: I agree with that. We are here to listen to that. We could change that, too, you know.
The committee adjourned.