Bill C-18 Committee on Nov. 2nd, 2011

Ian McCreary

Thank you.

First, I'll deal with grain quality very quickly and very simply.

The Canadian Grain Commission sets the grades, but ultimately the value that's created for the different grades happens because the single desk can price discriminate. It's that simple, but that's a big part of where the piece goes. When you look at the marketplace, you say we've got grades for No. 1 and No. 2 peas, we've got grades for No. 1 and No. 2 lentils, but we only get paid for No. 2 or better. There's no premium for No. 1 lentils and No. 1 peas. That's because there's no single desk to price discriminate in those crops. There is in wheat. That's where part of the market premium comes from.

In terms of producer cars and a single desk system, there are two really important ties. The key for a producer car shipper is they have to have a liquid market that allows grain to change ownership in port position, because instead of selling it on the basis of the elevator, they sell it on the basis of the port position.

Canada tried to have price discovery in port in canola in the seventies and eighties, and we didn't have the capacity to manage price discovery in port in canola, which was a 2 million tonne crop. There are 20 million tonnes of wheat, so price discovery can't happen. The value goes out of the producer cars and, ultimately, if you don't get value, you don't ship them, because it's a lot easier to just deliver the grain to a local elevator. There's no work involved in that, and that's why there are ultimately no producer cars or very few producers cars. Less than 3% are non-board grains.

Ian McCreary

Yes, without question, the economics comes off the table. The value is no longer there and, ultimately, the government is creating a train wreck for a lot of short-line railways and a lot of infrastructure in Saskatchewan.

Ian McCreary

The difficulty is that in order to protect it, you have to have a transparent mechanism for price discovery in port position and there's nothing in the legislation that provides that, among other pieces. Ultimately, the producer car shipper has a transaction that happens beyond the farm gate and they need a mechanism to establish value, and there's no price discovery in port at this time that's transparent.

Allen Oberg

Okay, thank you, Mr. Valeriote.

One of the issues you mentioned, Mr. Hoback, was durum, and I think by your comments you were suggesting that the Canadian Wheat Board is a deterrent to value-adding here in Canada. I'm here to tell you that certainly isn't true. To give you just a few numbers, western Canada has nearly 40% of Canadian durum capacity; North Dakota, just across the way, has 29% of U.S. durum milling capacity. If you look at the numbers on a per capita basis, they just don't add up. On a per capita basis there's more milling capacity, more malting capacity, here in Canada than there is in the U.S., which has never ever had a wheat board to my knowledge.

Allen Oberg

Let me finish. Even if that were true—just assume for a minute that it were detrimental to establishing value-adding—the primary reason that maltsters and millers want producers out of the way is so they can access their raw product more cheaply.

Let me quote from the annual report of the Alliance Grain Traders, who just announced or passed a plan in Regina: “Margin erosion is combated by negotiating lower prices from growers....” That's from their own report.

I'll tell you that as a farmer, selling my grain for less to support value-adding doesn't make me very excited.

Allen Oberg

I don't have the exact numbers, but my constituents and Minister Ritz's constituents are in the same area. He was elected as a Conservative candidate. I was elected as a single desk director. Obviously, many farmers who voted Conservative also support the Canadian Wheat Board.