Agriculture Committee on Sept. 26th, 2006

[Christine Hamblin]

As you know, the report was released last Monday. We are still working through the report ourselves.

In terms of prioritizing, I'm not sure whether we'll be prioritizing specifically or whether we'll be looking at a plan for the future that encompasses many of the recommendations that would move the CGC forward with the industry but accommodate some of the things that are in the COMPAS report. I'm not sure that we will go through them line by line and prioritize them, but we need to spend some more time doing an analysis of those recommendations and making some preliminary costings. I say “preliminary”, because some of them we don't feel are very operationally feasible, so we're not going to spend a lot of time costing something that perhaps is something we don't feel can be easily implemented. But we do need to do a preliminary costing and we need to do some analysis as to how the recommendations fit into a Canadian Grain Commission going forward. We will be working on that in the next few weeks and bringing something back to the minister with our views on that.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Given all of the recommendations and comments that have been made in conjunction with the legislative review, in your opinion, are there any specific objectives that should have been included and that are not? Are there other specific recommendations that should have been made? Or do you feel the review is fairly thorough and agree with the proposals set out?

[Terry Harasym]

Perhaps I could take a whack at that.

As Chris said, there are 102 recommendations or thereabouts in the report. There are many recommendations that have been made. I think we are looking at the recommendations from the perspective of how we would see the Canadian Grain Commission in a comprehensive way move forward into the future to be able to add value to the Canadian grains and oilseeds producers and the rest of the industry.

What we've seen in the COMPAS report is a hundred recommendations, but I think what we are trying to do collectively now is to see how they work together or don't work together in a comprehensive way to address the needs of producers and the rest of their industry as we go forward. So, really, that is work we are trying to do currently in terms of assessing the recommendations that are in front of us.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I'd like to elaborate on what David said. I believe Paul touched on this subject as well.

In your testimony you mentioned optional inward inspections and pointed out that this might not be consistent with one of the other recommendations. I have some concerns about the recommendation that optional inspections be contracted out. Perhaps a little money would be saved in the process, but I'm concerned that product quality and safety would be compromised. Producers and consumers could be affected as well. I foresee a number of risks.

Do you share these concerns and is the apparent contradiction the element you find the most troublesome in the recommendations? Are my concerns justified? Is this something that you considered?

[Christine Hamblin]

I think your concerns are definitely well founded. I'm not sure that what they're recommending would automatically cause issues for safety or for consumers, but I certainly think that while we're making decisions on moving forward that include perhaps contracting out of inward inspections, we need to keep in mind the impacts on the quality assurance system.

Canada has a good reputation for our grains in both the international and the domestic markets because of the historical work that we've done with our lab in helping to set standards and identify some issues, as well as with the work our inspectors do. I think when we're moving forward we need to make sure that the quality assurance system is not compromised and that quality assurance does include the safety of our grains.

[Terry Harasym]

I agree.

Can I add to that?

[The Chair, Conservative, Gerry Ritz]

Yes, certainly, Terry.

[Terry Harasym]

I think there are two issues we're talking about here: one is the notion that inward inspection wouldn't be made optional; and the second is the idea of potentially contracting out or accreditation by the CGC for others to perform some or all of that work.

In terms of the accreditation or contracting out, I think it speaks to your question in the sense that, frankly, I don't know whether in fact that would necessarily be the most efficient mechanism to perform this function. That's precisely why we are thinking our way through the recommendations you're talking about or the question you asked earlier. I think the current structure is probably the most efficient and effective way of doing it.

The issue with respect to being able to perform the function in a manner that is adequate to the needs that are being placed on our inspectors has everything to do with funding and the ability for us to resource our staff appropriately. Contracting out, by itself, does not guarantee reduced costs in any event. Certainly, in any event, there would continue to be an oversight role of the CGC that would have to be added on top in a very direct way.

Again, I think it's probably premature for us to definitively answer your question, but it is a question that we are asking and one we are looking at very directly in terms of its applicability as we move forward.

[The Chair, Conservative, Gerry Ritz]

Good. Thanks, Terry.

Mr. Atamanenko, for seven minutes, please.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Yes. The first question that I have is on structure. In the recommendations, point 4.0, the second one, my understanding is that the commission now has six assistant commissioners. It's my understanding that the farming community in general is happy with that structure.

The recommendation is to create an office of grain farmer advocacy, which will be reviewed in three years or so, to replace the commissioners. In your opinion, do you see this as an advantage or a disadvantage to farmers? In other words, would there be fewer people to advocate on their behalf if we adopted the recommendations of this point?

[Christine Hamblin]

I think the act provides for six appointed assistant commissioners. In the past few years we have had five and they are regionally located. I don't think anyone questions the role they play in communicating some of the Grain Commission issues. They certainly provide an increased awareness in their respective regions for some of the work that the Canadian Grain Commission is doing, and they provide a mechanism for complaint resolution. Producers come to the assistant commissioners to deal with some of their complaints.

The Canada Grain Act is not very clear on what the roles of the Canadian Grain Commission are. One of the challenges is that the activities of the assistant grain commissioners and how they perceive their roles can vary from one region to another. There's probably some merit in looking at that as we move forward.

COMPAS has put forward the suggestion that there be an office of grain farmer advocacy. I think it's one method of dealing with the issue. Obviously, the current structure is another way of dealing with the same issue, and there are probably other methods out there.

I think your concern is a genuine concern and one that needs to be considered. If we are making a change to the structure, we want to make sure we are not in any way putting producers at a disadvantage by putting forward a new structure.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I want to follow up on that question, given the fact that we have to do all we can to help our primary producers who are being hit the hardest in the crisis.

The whole idea in the previous section, the last point, is to enhance the ability of stakeholders to work well with each other. If we put everybody on an equal footing, would that then put the farmers or the farming community at a disadvantage? If this is revised to consider everybody an equal stakeholder, maybe the industry would come out more in favour of the industry. Once again, I guess my concern is that we ensure the primary producer is looked after in this recommendation.

[Christine Hamblin]

I don't have the specific recommendation in front of me, but COMPAS does spend a fair bit of time talking about stakeholder communication and consultation. The structure we have includes a number of ways in which stakeholder communication does occur, and ways in which we receive feedback from various parts of the sector. The assistant commissioner certainly is one avenue for receiving that feedback. We also have our standards committee, which includes a significant portion of producers as well as other industry players. COMPAS has not suggested that the industry and producer players be changed. We also hold meetings throughout the year with various players of the eastern and western industry. We attend numerous producer meetings and trade shows.

We already have in place many ways in which we facilitate consultation and communication with producers and with other industry players. There may be better methods of doing that. I think we always need to be prepared to look for ways to improve the system, but I think the bottom line is that we do a lot of consulting now, and the current structure does allow for ongoing consultations with all members of the sector. We need to be sure that we consider all perspectives when we're making decisions about any changes we make both in terms of the Canada Grain Act, and in terms of policy as we move forward. We must consider the input from many sectors of the industry and the impacts to all of the sectors.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

To follow up on the other question that was asked, regarding contracting out, is that in the report because funding is not as available as it was? Are you finding in your budget estimates that you have to cut back, and that contracting out would therefore be advantageous? Once again, if that's the case, would the quality of the inspection, specifically the inward inspection, be compromised?

[Terry Harasym]

As I said earlier, at times there are resource issues as far as the availability of our inspectors to provide the functions or services that are asked of them goes. Our work is dictated very directly by the amount of grain going through, in particular, terminal elevators. It is also true that in some of the regional offices in western Canada, at all times from all parts of the industry, our ability to actually meet the demands for our service are somewhat constrained. Unless you staff at a level intended for peak periods at all times, you're going to run into times when you cannot do it. Really, I believe the idea is to deal in some way with the inability we now sometimes have to provide the level of service asked for.

I'm not sure that you can ever necessarily get to the point where you can provide service that will be 100% at all moments. The approach we've taken is to work very directly with the industry and other partners, to get them to provide us with as much lead time as possible so we can satisfy their needs. We can move inspectors around, and we do so regularly. We have at times broached ideas with the industry to determine if there are ways we can move the product through more quickly than we currently do, by doing things differently, whether through composite grading or other mechanisms, to allow us to utilize our staff in a more efficient way.

Again, the point is that ultimately you will run into situations where you can not provide the service requested of you, no matter who you are.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Easter, go ahead for five minutes, please.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

To start off where you ended up, you've indicated in your presentation that while this discussion continues to go on, you'll continue to deliver based on your mandate. But the reality really is that the Canadian Grain Commission has been short-funded for a number of years, by the previous government and this one as well, and will probably have to come in with additional moneys for you to do your job.

In the COMPAS report they're saying there are several reasons for believing that the Canadian Grain Commission is funded inadequately and the dilemma is how much the benefiting stakeholders should contribute, meaning the producers. My first question, then, is how are you going to deliver your mandate now, when you already are likely tight on money? Question two: Is the burden of the cost for running the Grain Commission going to end up falling back on the primary producers in contracting out, when it really provides a service to the country, not only primary producers?

[Christine Hamblin]

Those are very big questions and are questions that I think are largely going to fall to the parliamentarians to answer.

Certainly funding has been a challenge for the Grain Commission for a number of years. As most of you are aware, we have not increased fees since sometime before 1991. In 1991 there was a legislative directive that we not increase funds, that there be a freeze placed on any fees that would be turned back to producers. Most of what at that time we were charging in fees was going directly back to producers...perhaps not directly, in some cases indirectly. But producers were paying.

Since 1991 we have not raised fees. What that has meant is that we've had a growing void between what we're able to collect for the services we provide and what it's costing us to administer those services.

Ultimately, that's a decision for government. How much is the government willing to pick up in appropriation and how much is going to be charged in fees and consequently passed back to producers? Those are not easy questions to answer, and I know that is something the government will have to struggle with.

Having said that, that's part of why this review has taken place. It is to look at whether there are some ways of doing things differently that perhaps could streamline the organization and create some efficiencies.

If we contract out, clearly those fees will be turned back to producers. They won't be fees that we will charge. They will be fees that the private agencies will charge, and they will go back to producers. So the decision with contracting out versus the decision with the CGC being involved is still ultimately a decision of whether government should pay or whether producers should pay, and those are difficult questions to answer.

[Wayne Easter, Liberal, Malpeque, PE]

At the end of the day, under the producers pay--and that's a huge problem--our competitors.... I think, Mr. Chair, these kinds of fees or kinds of services are GATT green or allowed under the WTO. Certainly in my view it's the country that should pick them up, not the primary producers, because the country benefits as a whole.

In your opening remarks as well, you quoted the mandate set out in the act, and the key words of it are “in the interests of producers establish and maintain standards of quality”, etc. There's no question, wherever you go worldwide, people who buy our grain swear by Canadian quality, and you're to be congratulated for ensuring that's there.

In terms of looking at this COMPAS report, where the original mandate was in the interests of producers, if many of the recommendations in this report are implemented, will it change that mandate? Will the balance of being primarily there for the interests of producers change to being more so for somebody else?

I know, Mr. Chairman, that I'm running out of time, but the ethanol question that David asked about is key, I think. The key for the primary production sector is that we don't want to lose quality but we have to find a way--and it has to be done fast--of growing other crops for other purposes and not jeopardizing our quality control system. That has to happen and it has to happen now.

[Christine Hamblin]

I was going to say, certainly no arguments on your last statement. That has been discussed already, that we agree there has to be a way to find the tools to accommodate some of the other needs of the industry. Ethanol is one that has been cited. There are likely going to be numerous others that are going to come at us. That's why we've put so much effort into the restructuring of our wheat classes, to accommodate that growing need for an avenue to register other products.

It's not perfect, and we'll be the first to admit it's not perfect. As David mentioned, there are producers who feel that we're still not giving them the flexibility they need. We understand that, but we also need to protect that export market, which is the premium market that has brought back some dollars for producers. We don't want to lose that advantage. So, clearly, we need to continue to do the work.

We are continuing to do the research to find better ways of evaluating grain, from the standpoint of variety identification, which is the underlying pin of our quality assurance system right now. But there are other tools, and we are looking at those as well. We've done some work on looking for tools to quickly identify falling number. With respect to chlorophyll and canola, we're looking at tools that can better evaluate chlorophyll, as opposed to crushing the canola seed and counting green seeds. We're continuing to do that.

COMPAS recommends a significant increase in dollars to the grain research lab, with some of that in mind. Now, I'm not suggesting that we necessarily feel we need the dollars that are suggested in the report, but certainly we need to continue to do the research that better evaluates the quality of grain.

[Terry Harasym]

I have one small comment. Again going back to the ethanol question and the technological solution, Chris is absolutely correct, and I agree with the recommendation that COMPAS has made. If there is a solution to this, it's going to come from the technology side. The only way we're going to get there is with a more concerted effort, one that is going to require more funding in terms of finding a technological solution than we currently have capacity to do.

Going back to your question regarding the funding for the CGC, I think the right approach—and it is really the fundamental question to a large extent—is to decide what it is we think the CGC needs to do, as we move into the future, to deal with the needs of a changing industry, and one that adequately adds value to everybody from farmers throughout the rest of the chain, and then deal with the funding question at the end of that time. How you deal with funding ultimately will become a question of some combination of government appropriation or fees, or either/or. I think that's the last question and I really do believe it's part of the solution to this issue.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Easter.

Mr. Bezan, five minutes.

[James Bezan, Conservative, Selkirk—Interlake, MB]

Thank you, Mr. Chair.

I want to thank both commissioners for coming in today on short notice.

One of the things that we've been talking about here today is this whole issue of inspection, grading, and possibly having a third party involved.

I would recommend that one of the things we look at is what has happened in the beef industry. CFIA has taken the lead in food quality and assurance, on food safety. Grading is being done by the industry through a non-profit, third-party entity. Grading essentially is a process of price discovery. We have to have the flexibility in industry to meet the changing needs of consumers. Allowing that third-party involvement, with industry oversight, I think accomplishes a lot, without giving up anything on food safety, which is a role of government and regulation. I think we need to look at that whole aspect and how that could tie into a whole review of the Canadian Grain Commission.

One of the problems we've had, especially at the farm gate level, is when you're selling your crop off the farm, you're told dockage is going to be this and you're going to be graded this, but then it gets into the elevator system and it's inspected for the second or third time and the grades change. Farmers come in and want to go through a dispute resolution system, while the arbitrator appointed to this is a Canadian grain commissioner who is also the grader involved. We need to have that third-party involvement so that there is a true mediation taking place.

COMPAS did talk about dispute resolution and that there needs to be more of a third-party arm in there, so that we have a true unbiased mediation system. I want your comments on that and how that overall could tie in with what we're talking about in licensing and grading.

[Christine Hamblin]

With regard to the unbiased review of inspections, we already have that system in place. The system is in place for producers who are delivering to a primary elevator. We call it “subject to grade and dockage and protein”, which means that when they deliver to a primary elevator, they can immediately request that the sample be sent to the Grain Commission for an accurate grade. We are the independent party in that position, because the decision of the initial grading is being applied by the primary elevator, so the “subject to grade and dockage” is neutral. We're not inspecting it in the first place and then re-inspecting it. So that is already in place.

The other aspect of our inspection review process is from primary elevator to terminal elevator. You are right, the initial inspection there is done by CGC, and the second level would also be done by CGC. Ultimately we have the Grain Appeal Tribunal, which has inspectors from industry. They are not CGC inspectors who are reviewing it, they are neutral. They're inspectors who are called in to inspect the grain. We have a chairman who reports to the CGC, so there is a link there, but they have a list of inspectors who are brought in. They are getting that third-party look, which is not from CGC inspectors.

[James Bezan, Conservative, Selkirk—Interlake, MB]

So much of this is perception, because there are those linkages. There's still a lot of animosity out there at the industry level and at the farmer level, because they still see it as a biased opinion that's being expressed. As we go through this review process, I think everything we can do to remove those linkages would be in the interest of the entire industry.

One thing we talked about the last time you were here was this whole issue of overtime--the cost that industry undertakes--and how that's impacted the outbound inspections, especially at the ports, and with demurrage, when you have a ship sitting there that needs to be inspected and loaded and sent out. There was recommendation as well from COMPAS about the overtime costs. I just wanted to get your opinion on that specific recommendation.