Agriculture Committee on Oct. 3rd, 2006

[Wayne Easter, Liberal, Malpeque, PE]

Should the CGC be more proactive in enforcing the Canada Grain Act? In what areas did you see there might be a shortcoming, and are they covered in the recommendations of the COMPAS report?

[Ken McBride]

The one concern we had was the optional inward weigh. We believe for the production of producers, that should be done inwardly so there is definitely an inward and outward weighing to ensure that transparency is there.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. McBride.

Monsieur Roy, five minutes, please.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. chair.

My first question is for Mr. Reid.

You've told us that it would be impossible in the future to keep the kernel visual xx since it is impossible to identify visually each of the kernels arriving at the elevator. Therefore, this system should be replaced by a seed certification system.

Basically, this means that there will be a considerable increase in the varieties of seeds and that the production we be much more fragmented. In other words, we are moving towards multiple types of productions which will not necessary be at the same level. This fragmentation of the production will come with a fragmentation of the control system and of the transportation system. Indeed, the more production is diversified, the higher the number of different systems you have to manage to ensure that there is no blending. In the end, that's the core of the problem.

At what point could the seed certification system lead to an overfragmentation of the types of seeds? Furthermore, I would like to know if you have looked at how much, in percentage, the seeds developed for the production of ethanol would lead to a reduction or a change of the present production.

[Jeff Reid]

If we look at what's happening with other crops, we can see that the marketplace rapidly sorts out what the optimal number of crop types or varieties needs to be. There are many examples of this across Canada. Even within an organized market like the Canadian Wheat Board, where they run identity-preserved programs, markets seem to function quite well. In eastern Canada, private industry will step up and sort out what is optimal, what makes sense, and what the infrastructure can handle in terms of the number of segregations, railcars and so on. That's something we believe the marketplace should sort out. The market should not be dictated or constrained by artificial means such as, in some cases, KVD requirements. We think this issue will sort itself out fairly rapidly.

As for the impact of ethanol and other potential domestic uses, in just about every case, the less dependent we are on the volatility of export markets, the better off we are. We often see export markets at prices below our domestic cost of production. The more we can use these crops at home, or at least within North America, the better. The U.S. has become very aggressive in its ethanol plans, and this should be a great benefit to Canada, since we're operating largely within a North American market. If we can put more agricultural product to use in Canada or North America, everybody will win.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

I understand your answer. You're telling me that the market would make sure that the number of different types of seeds would be limited. Indeed, because of physical limitations, we will not be able to multiply the various types of seeds in an exponential manner.

Excluding the seeds being used for the production of ethanol -- this would be a separate system in order to avoid blending with seeds used for human or animal consumption -- how many different types of seeds do you think could be used without jeopardizing the quality system for exports? Are we talking of 10, 20 or 30 different types?

[Jeff Reid]

Again, it's hard to predict the free market. Probably the best we can do is look at real life examples where we do have an open market--for example, in soybeans. What we see is that the majority of the commodity will gravitate towards one or two more profitable options, be those eventually in higher-yielding ethanol types or food types. The marketplace will sort that out. And again, the economics of, in additional crops, what's going to be handled and the degree of segregation that's required is dictated by the marketplace.

As with soybeans, you need something that is very strictly identity preserved where you're dealing with non-GMO and that sort of thing. There will be a bigger premium go back to the producer, whereas for some other markets it's marginal value. So the marketplace will sort that out.

In the end, it's hard to predict, but we think there is certainly room for more than there is currently.

[The Chair, Conservative, Gerry Ritz]

Thank you, Monsieur Roy.

Monsieur Thibault, five minutes, please.

[Robert Thibault, Liberal, West Nova, NS]

Merci beaucoup. I have just a couple of quick points.

Mr. Reid, you were talking about the relaxation of the KVD question as to creating more flexibility and the introduction of new products. We hear also that our Canadian wheat is premium in the world, the best. Is there a risk there that if we go too far with this, we'd reduce the reputation and the demand for our wheat internationally?

On the other side, what's happening internationally? Do other countries in our principal markets have the same sort of quality preservation and regulation that we operate on? Who are we competing against out there?

[Jeff Reid]

A significant purchaser of top-quality Canadian wheat right now is a firm in the U.K. by the name of Warburtons, which is actually going beyond the services that are offered traditionally by the Canadian Wheat Board or the Canadian Grain Commission to do their own identity preservation. So in many cases, if we want those very top-quality markets, if they truly demand and truly want the very best product, they're prepared to step up and pay a little bit of a premium for that.

Internationally, in terms of what's happening in other countries, we see that there is excellent-quality wheat being grown, for example, in North Dakota. In many cases they are varieties that are not eligible for registration in Canada due to, in some cases, KVD restrictions. A lot of those varieties offer not just very competitive agronomics, but improved fusarium tolerance and a whole array of additional benefits to growers.

But coming back to the segregation issue within Canada, it's our belief that an affidavit system that's backed up with some form of verification would be adequate to meet the needs of the vast majority of those markets. If any specific markets require that added degree of traceability, we've demonstrated that the industry can certainly do that.

[Robert Thibault, Liberal, West Nova, NS]

Mr. McBride, you talk about the question of inward weighing, and that would be positive; it would help. Can you explain to me the process now? How do producers know they're being paid for what they produce, and how is it segregated by the handler so that you know with reasonable confidence what spoilage is attributed to each producer?

[Ken McBride]

Right now, you have a system where you deliver to an elevator in that particular system, where it's weighed and verified. You can submit a sample. If you have a concern about the grade that's being issued at that particular elevator, you can in fact send that sample to the Canadian Grain Commission, and they will look at it and determine whether it is in fact the grade, the dockage, or whatever. So you have some sort of verification.

That's for the protection of the producer. It's also for the protection of the guy who's buying your grain, so that he can say with all confidence to the next guy, “This is what I'm buying your grain for; this is where it is.” That's important for protection of producers, but also for protection of that grain buyer, that somebody can't say, “Well, no, he told me it was a two, and I have actually sent it away and it's a one.” The other hand is there too to say, “Well, no, I sent it away and it was what I said it was when I graded it.” So it's there for the protection of the industry.

[Robert Thibault, Liberal, West Nova, NS]

Finally, Mr. McBride, there's a lot of debate about the Canadian Wheat Board and its future and how we should be operating it in the future. I understand that you've expressed that there should be a vote of producers. Would you agree that it should be a case of each producer having one vote, independent of the size of their production?

[Ken McBride]

Again, that's a position our organization put forward when there was a review of the election process that took place within the last...probably eighteen months. Our organization at that time recommended that it be one producer, one vote.

[Robert Thibault, Liberal, West Nova, NS]

Thank you very much.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Thibault.

There were a number of recommendations put forward in that report, as I understand it, Mr. McBride. Were any of them ever acted on, do you know? There's an election going on right now. Were any of those put in play for this round of director elections?

[Ken McBride]

Gerry, I can't really confirm one way or—

[The Chair, Conservative, Gerry Ritz]

I just wondered if you knew. You'll get a ballot, I won't.

Mr. Gourde, for five minutes please.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Good morning, gentlemen.

I would like to tell you my thhinking. Being from Quebec, everything relating to Western Canada and grain is a bit too remote for us.

As far as seeds are concerned, I believe that research is vital. I have always been in the farming sector and, through my readings, I have concluded that Agriculture Canada abandoned all research about 10 years ago. Now, it's only paying lip service to it.

We have excellent researchers in Canada but their budgets have been decimated and we are now living with the consequences. I believe that we have a 10-year lag in strategic planning, in research and marketing of farm products, especially for the Western grain industry. This doesn't make things any easier and we are now faced with the consequences and we're having to catch up.

I wonder if you agree with my analysis. We believe that we need to develop a vision to be implemented over the next 10 or 15 years in order to raise the profitability of our producers. We hear a lot of talk about techniques that might lead to savings of up to $2 to $10 per ton. Had we worked in concert 10 years ago, with strategic thinking, we would not be around this table today trying to save 10 $ per ton. We would have a flourishing industry.

What do you think should be done to ensure that the Canadian grain industry become a booming industry over the next 15 years?

[Ken McBride]

I would like to say that I agree that research is extremely important. For that reason, I don't grow Marquis wheat anymore. I've continued to move forward with the innovation that has been put forward in the industry, both through the different varieties that we grow and also in the techniques of how we run our particular operation—minimum till or whatever those are.

We have availed ourselves of a vast amount of research over the last number of years. Some of that research certainly has been stymied because of some regulation, and that research has gone somewhere else. But there still is an important aspect to ensure that the integrity of the system that we have is there. As long as that's maintained, I wholeheartedly believe that research needs to be done.

However, we, as producers, can be as competitive as we want to be, but if I have to compete with somebody else's treasury in order to do that, then that is part of the problem too. So we also have to recognize what's happening in other parts of the world. We can do all we want to do here at home, but we are still in competition globally with other treasuries or whatever. There are other aspects to the reason why agriculture is where it is today, right now; it's not simply always what's happening here at home.

[Jeff Reid]

We would certainly, on behalf of the Canadian seed trade, echo your concerns about where the future of research and development is going in Canada, and I think on both fronts, in terms of the public investment in research and development, and in terms of what we can do to attract innovation and R and D from the private sector.

I think what we're looking at is needing to see that we have some stable, long-term commitment from the federal government to primary research, genetic enhancement, and development. We also need to balance that with an environment that really supports innovation from the private sector in terms of those companies that can go out there and in many cases develop and build upon what the public sector can do, and to deliver that to producers.

So I think there's a lot we can do to strengthen and build on those partnerships, but it's going to require a balance of the right environment for innovation from the private sector as well as a stable, long-term commitment from the public sector.

When we look at the reports that continually state a 10-to-1 or 20-to-1 return to the farmer on research and plant breeding, for example, those are pretty impressive returns. So whatever we can do to stimulate more of that is definitely a good thing.

[The Chair, Conservative, Gerry Ritz]

Thank you, Jeff.

Mr. Atamanenko, do you have any final points to make?

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

I have one question.

In your report and in your presentation, Mr. Reid, you mentioned that since 1989 the Ontario wheat industry has flourished because of the fact that KVD requirements are different. Is this a fair model to transpose to western Canada? I'm asking the question. I don't know. Is it a fair model, given the ratio of export-import? Has it been different? It's a different situation in the west in comparison with Ontario, so I would like to get your opinion on that.

[Jeff Reid]

That's a great question. In the past it has been probably much less of a fair comparison than it is today because we've been pretty much dependent on the same export markets for a long period of time. Now that things are diversifying in western Canada...when we come back to the feed options, for example, and we come back to potential ethanol applications, we see that western Canada is going to diversify and we need some tools to be able to deal with that.

So I think it is starting to look a lot more similar to that diverse kind of marketplace that we've enjoyed in eastern Canada for quite some time. I think the model just needs to change to keep up with the reality of the situation.

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

Thank you.