Agriculture Committee on March 31st, 2009

[France Bonsant, Bloc, Compton—Stanstead, QC]

Earlier Mr. Easter talked about trying to subsidize agriculture. The Conservatives say that supply management is a subsidized system, which is utterly false, but whatever the case may be, I don't think we could ever compete with the Americans. Without subsidies and without good weather year-round, like what the United States and Brazil have, how could we compete with other countries around the world if we opened our borders? Explain that to me.

[JoAnne Buth]

We compete right now. Canola is a competitive crop. Canola is providing tremendous returns to Canadian farmers. We compete with soy and palm--that's true--and there are some issues in terms of soy in the U.S. and the amount of support and subsidies that soy receives. But canola is a different crop, and because it's 40% oil, we have a different competitive advantage. What's critical for us is that on the world stage, in terms of tariffs, we're not penalized compared to soy. So, for example, when China buys canola, there's a 9% tariff on canola. There's only a 3% tariff on soy, so that works out to $24 a tonne that we're being penalized. Those are the types of things we need in terms of being able to compete.

[France Bonsant, Bloc, Compton—Stanstead, QC]

I have another concern. In Quebec and in Canada, we apply a system to monitor food safety. When mad cow disease, from Alberta, was declared, Quebec and the other eastern provinces were not affected. However, last fall, I believe, it was discovered that little carrots from California contained salmonella. The regulations aren't the same for meat and products leaving Canada as for those that enter it.

How can you justify this difference?

[Gordon Bacon]

I can't really comment on vegetable crops, but I think perhaps you're pointing out the need for what in our view is harmonization as a trading nation. When we have different policies in place with some of our major trading partners, we do end up having trade impacted more by policy than by the economics of supply and demand and quality issues.

I don't know that anyone in this group would do anything but put the highest importance on food safety issues. I think there are those areas we perhaps need to look at, and crop protection products was one of them. Harmonization of policies between the two countries, which both have a strong focus on human health and environmental protection, would help ensure that we can have fair trade in products and have regulations not playing a role in determining what can be exported or what can be imported.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Food safety is important. One need only think of the baby formula from China that contained melamine.

In opening the agricultural market on a global scale, are we going to require the same measures from other countries as we offer them or will it be total permissiveness for everyone? Human health has to take precedence over big profits.

[Gordon Bacon]

One of our focuses in the pulse industry is health and nutrition, and food safety is very much a part of that. Because I'm involved in agriculture, I know it's important in all of these areas. Our industry in Canada wants to ensure that we're providing healthy, safe food products, and we expect the same from products that are going to be traded. Perhaps this is where we get back to my comment about standardizing phytosanitary rules, so that we are able to maintain a high and consistent level across different jurisdictions.

[The Vice-Chair, Liberal, Mark Eyking]

Mr. Richards.

[Blake Richards, Conservative, Wild Rose, AB]

My thanks to all the witnesses for your time today. I appreciate the number of you who have supported our government's efforts to increase market access and to create the market access secretariat. I appreciate your adding your names to the growing chorus of witnesses who have indicated their support for our government's work in this area.

I want to direct my question to the Western Canadian Wheat Growers. Unlike our Liberal opponents across the way, I recognize the detriment to the competitiveness of our growers that the Wheat Board monopoly imposes. It's a barrier for you guys. I hear this from farmers in my riding all the time. They're frustrated at being at the mercy of that monopoly. I'm well aware that Canadian farmers are among the hardest-working and the most innovative and industrious people in the entire world. Yet, in western Canada the profits and the future of the industry are being severely hampered by our inability to market our own products, which is a result of the Wheat Board's monopoly. I'm going to put it on the record: I can assure you and all western Canadian farmers that I will continue to fight for your freedoms.

In the meantime, we're well aware of the millions of dollars of farmers' money—I repeat, farmers' money—that have been lost because of the Wheat Board's poor risk management practices. I'd like your comments on this situation. Do you feel the Wheat Board should be held accountable for the poor management of western Canadian farmers' resources?

[Stephen Vandervalk]

I can give you a real-life example. Last year, I dealt with Anheuser-Busch out of the U.S. on malt barley. It was the first year we were able to do so through the new CashPlus program. There were a lot of headaches, a lot of “you have to go through the Wheat Board”. This year, they would like to contract with me directly, but they have to go through the Wheat Board. We've been working at it for a month. They tried to phone the Wheat Board. No one's around. This week every malt guy on the Wheat Board has gone to Europe for something. You can't deal with anybody there. They have to pay me, say, $5 a bushel, and then they have to pay the Wheat Board, say, $1 a bushel, so they get charged $6 a bushel. They would like to give me $6 a bushel, but they can't. We can't even get a deal done, because there's so much red tape. That's a real-life example.

That's just with malt barley. Mr. Atamanenko was talking about the price of durum, which was way higher than what it was for our U.S. counterparts. Yes, it's more for some people and less for others, but the problem is that we can't forward-contract. This year they had $13 forward-contracts of durum with act-of-God clauses. This year we're getting $8, but those are forward-contracting. I can make a margin; it's a business. But we can't make margins with the Wheat Board because we cannot forward-contract.

[Mike Bast]

Running my farm is like any business—it's all about risk management. I can manage the risk on all the crops I grow outside of the monopoly. I can take my forward-pricing contracts to my bank for my annual review. I can hedge against it. With the CWB, when I get my annual review in the fall, I can't forward-price my wheat contracts till roughly the end of February. The bank won't even look at the PRO price and include that in my annual review.

As a farmer, I look at what I can control in my crops or the systems I have to play with. Mr. Easter mentioned that in 1998 Mr. Goodale changed the act to allow farmers to control the CWB. In a way, they are controlling the CWB. But they are controlling the CWB monopoly. Even if we elected 10 farmers who wanted to get rid of the monopoly, they could not get rid of it under the Canadian Wheat Board Act. We would still have to come back to the Parliament of Canada. So the Parliament of Canada is imposing the Wheat Board on farmers.

[Blake Richards, Conservative, Wild Rose, AB]

Do I have any time?

[The Chair, Conservative, Larry Miller]

You have 30 seconds. That's all you have for a question and answer.

[Blake Richards, Conservative, Wild Rose, AB]

I certainly appreciate those comments, and I'm well aware of many....

I appreciate, Mr. Vandervalk, your comments about specific situations that you were able to provide examples of, because I've heard many examples from western Canadian farmers as to how the Wheat Board is hampering their ability to get the best value for their products.

Thank you.

[The Chair, Conservative, Larry Miller]

Mr. Eyking for five minutes.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chair, and thank you to the witnesses for coming.

Let's try to get off the Wheat Board bashing here and get on to some other questioning.

All of you rely on and use rail quite a bit, and I'm sure you're well aware of the Canada Transportation Act, which deals with the railroads, and how it looks at the competitive side. It has objectives there to keep your rates at a certain level.

My question is around the whole rail issue. Is it improving for you? Do the regulations need to be changed? How serious is the rail issue to your crops, getting them to market? What changes should be made out there with the rail system?

[Mike Bast]

The rail industry to my farm is very important. It's all a part of the chain. It's extremely important. Without the rail, my chain falls apart and my market and my business falls apart.

There are times in the system when the railways are efficient and then there are times when they totally collapse. But the problem is, when they collapse or when they fail to meet the requirements, it reverberates throughout the whole chain and the farmer is usually the one who ends up wearing the penalty at the end of the day. When I'm getting a call from the grain buyer in the middle, whether it be from whatever company, to deliver my grain, it's been timed already to the vessel, so then the railway is part of that chain. That's why it's so key that he needs to meet his targets in between in getting that delivery. If he doesn't, as I said, those costs from the vessel then will be carried all the way back through to me, the farmer, and I have nowhere else to put it but back into my net loss.

[Gordon Bacon]

Pulse Canada, as Barry mentioned in his presentation, has been working to try to find commercial-based solutions that bring all the players together so that everyone from the railways--and I certainly don't want to focus just on them--and from the steamship line, container companies, growers, processors, container stuffers, all recognize how closely interrelated they are. We have transportation problems in the pulse and special crops sector in part because we have a very complicated logistic chain with a lot of players involved.

So as an industry, I think we have to sit down and see if we can't work something out by a little closer communication. That's what Barry was referring to in his comments. Of course, the rail freight service review that will be taking place is also a part of it. But as Barry mentioned, we want to first take a commercially based focus and look for solutions there with the appropriate regulatory backstop for when those commercial systems break down.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

If you know how the act works, and I'm sure you do, there's a penalty or surplus that comes out of that; I think it's 15% right now. I have a number here of $60 million that came back, and it goes to the Western Grains Research Foundation.

To get back to the question, is this a good way to handle this? If they're overcharging, this money comes off. Is this a good way to spend that money, by putting it back into the Grains Research Foundation?

[Stephen Vandervalk]

I think the rail companies...that $2 a tonne was supposed to come back, and they didn't account for that. That's why it was so high, I believe. I think the Western Grains Research Foundation was never set up to get that kind of money.

They're not sure, really, what to do with it quite yet. No, it's not an ideal situation. There should be no penalties for going over. The whole thing is set up wrong. I know you don't want to talk about the Wheat Board, but from a wheat grower's perspective, I have no choice but to use the railway. I can't ship it to the U.S. I can't ship it to a domestic miller. First of all, there isn't any, and even if there was, I can't. I have to use the railway; there's no choice.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Yes, because of your proximity to the U.S. border probably, but I--

[Stephen Vandervalk]

But it's anywhere; we can't ship rail cars south, even if we wanted to ship rail cars south and get out of going through the mountains and get out of going on that cap. So the whole system is set up from the beginning. We wouldn't have those caps; we wouldn't have all that rail traffic going that way if we had more domestic opportunities.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

What are you suggesting we do? If we remove the cap, would you suggest a more free enterprise system with the railroad, and then all of a sudden the government's not involved with the railroad act?

[Stephen Vandervalk]

I guess that's a tough one.

I know from my perspective, I'm close to Shelby, Montana, and they have a monopoly there. There's only one railway there, and the prices aren't any higher...very similar. I don't think they have any worse service. It's not better—don't get me wrong—but it's not worse. It seems to work just fine.

We need an incentive for the railway company to ship out 12 million tonnes of canola. That's our lifeline. We export 80% or more of our products, so we shouldn't be restricted. We need something to get it all out of here, essentially.

[The Chair, Conservative, Larry Miller]

Thank you very much. Your time has expired.

I'd like to thank the witnesses for coming today. I think you had a lot of good answers in responses to questions. Thanks again very much for appearing before the committee. I'm sure we'll see some of you, if not all of you, here at some point in the future.

We are going to have to move in camera for some of this business. Thank you very much.

[Proceedings continue in camera]