Agriculture Committee on Oct. 5th, 2006

[Dr. Brian Fowler]

I am not all that familiar with the Ontario situation. I've worked with people from Ontario, and the plant breeders who I've been involved with, I know, are much happier with the system they have right now.

I am much more familiar with the system they have in the U.S. In fact, because of KVD, because I couldn't establish the market potential of material that was coming out of my breeding program, I have moved a lot of that to the U.S., simply because that's the only place I could establish the market potential. KVD prevented the varieties I was producing from coming into the system in western Canada.

I have had testing in Ontario. None of my varieties has been adapted to Ontario. At least, it has never been released there. But there has never been any question as to whether farmers could grow them or not. It's completely the acceptability of a variety, any of my varieties, in Ontario and Quebec. There was more interest in Quebec than there was in Ontario, because of the extra cold hardiness. But the only questions that were asked was whether they were productive and whether they would fit the quality requirements of the local market. It had nothing to do with KVD, and that's the way it should be in western Canada.

[The Chair, Conservative, Gerry Ritz]

Conrad or Vicki, do you have a comment on that?

[Conrad Johnson]

Sure, I will.

Even for millers in western Canada—there aren't that many—KVD has no relevance to them. They go on falling numbers; that's where you get your baking quality. For buyers in the U.S. or other markets we go to, KVD has no relevance to them. Again, they want to buy on the physical attributes of the grain, not what it looks like. It's simply a system that's in place in western Canada that really bothers us. It's the only place in the world it's used.

It could be eliminated tomorrow I think and really not affect anyone outside of the CGC. That's my personal opinion.

[The Chair, Conservative, Gerry Ritz]

Vicki, do you have a short comment?

[Vicki Dutton]

Yes, basically on the cost to farmers. It always comes down to that.

If the system isn't functioning, the farmer is the one who pays. So if the value of your grain is similar or the same...it's almost as if you age a bit and have a few wrinkles, you would be worth less under the grading system for people. So it's important. I've just heard the most convincing.... It has always been an irritant to us farmers, but when I hear scientific proof, it is even more annoying.

[The Chair, Conservative, Gerry Ritz]

Mr. Bellavance.

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

Mr. Johnson, you raised an interesting point with respect to assistant commissioners. Based on the testimony we've heard, these commissioners can act as a counterweight or insurance policy under the current configuration of the Canadian Wheat Board. One recommendation of the Compas Report is to abolish the role of assistant commissioners by appointing a single commissioner or CEO.

You said that it's very important to keep the current system. I would like you to expand on that. Why would it be problematic for agricultural producers if the Compas Report recommendations with respect to assistant commissioners were to be implemented?

[Conrad Johnson]

We didn't want to get hung up on the semantics of whatever you call a person. The current deputy commissioners were appointees. We wanted these people—basically call them field people—hired by the Grain Commission out in the field. With our producer-car sites, there are always problems. People like Donna Welke, who was assistant commissioner, were in the field all the time, face to face with these problems.

We're not adamant that you need six, but we would like to get them out of Winnipeg, out in the field, whether it's two or three. I'm not sure what that workload would be, but I think there should be those field reps out in the field. Whether you call them assistant commissioners or field reps, whatever, we don't care, but it needs someone to take some of the work that the assistant commissioners were supposed to do. We think it's important.

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

Do you have any comment?

[Vicki Dutton]

Obviously we support the removal of patronage appointments. Qualifying for a job and doing the job is an important part of a job description in most fields of work, and certainly in the Grain Commission. I'm not saying we haven't had some very good commissioners, but in the world of today we should be moving toward a hired position.

With the structure as we see it--the CEO that is being recommended and this advisory panel or board--I would expect it to perform tasks similar to what it has done in the past. I don't have problems with the structural changes as I see them.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bellavance.

Mr. Anderson, you have seven minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

There are a number of different directions I'd like to go, and I'm not sure I have enough time here.

Dr. Fowler, I appreciated some of your comments. When you were talking about winter wheat and spring wheat being mixed together, it reminded me that it's been done for years. Elevators have had many bushels of winter wheat delivered to them, but all of it has gone out as hard red spring wheat. So I think that confirms the point you were making about KVD not working effectively.

Another issue is HVK, the hard vitreous kernels in durum wheat that we've had an issue with for years. The third thing I understand is that brown on barley is not necessarily a negative factor either, and we've always been discounted for that as well.

I think the points have been made well this morning that we need to move away from that system.

I only have seven minutes, but could you give us the short version on how varieties are registered in Canada? Where do you run into the problem with registering your varieties?

[Dr. Brian Fowler]

To get a variety registered in western Canada it has to go through the cooperative testing system. That involves Agriculture Canada, universities, and private companies that do testing. Lines have to be tested before they are allowed to get into the cooperative testing system to make sure they come up to the minimum standards.

So these varieties are grown across western Canada. The information accumulated is on agronomic disease and grain quality. What used to be the prairie registration recommending committee has been modified slightly in the past year, but all the interested parties who were members of that committee get together and a decision is made on whether the candidate variety will meet the standards for disease, agronomic performance, and quality.

You need to have three years of data for the test, and generally by the time it gets to that point the only candidates put forward will be the ones that have questions about quality. No breeding company is going to put forward a variety that has very poor disease resistance, because no farmer is going to buy it. It's the same thing with agronomic performance. If your variety is a dog, no farmer is going to buy it.

After it's recommended, it goes in for government approval.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

At what point does KVD kick in?

[Dr. Brian Fowler]

In order for a variety to be considered for the grain quality characteristics, it has to meet the standards of KVD. If it does not meet the KVD standards, the Canadian Grain Commission will not do the necessary quality analysis on it and it will not be considered.

In the last four years there hasn't been a single winter wheat variety that has successfully gone through that system. In essence, we might just as well shut down all the winter wheat breeding programs in western Canada if the issue of KVD is not dealt with.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

Con, I want to talk a little bit about inward inspection. You've suggested that it continue to be made mandatory. The report suggests that it be optional.

You deliver your grain to the elevator companies. You get a grade at the time. You accept the grade or you can appeal it if you choose to. Terminals use these inspectors to blend into cars and those kinds of things.

Where in the producer-car loading process do you feel that you need to have the CGC do a mandatory weigh-in and inspection of the grain? It's done at the coast as well when those cars are unloaded, I understand, so at what point or where do you see the CGC having a role if that's mandatory?

[Conrad Johnson]

Some of us get our samples tested inland and loaded in the producer car, but that really has no relevance to what they unload because that will switch. It's got to be unloaded at port. We're optional where we were. When you put that in, we were looking at it as a short-line business. If they're optional, it gives the larger grain companies we compete against a little more ability to blend.

In our area, some of them are offering up to ninety miles of free trucking to get the grain in there, and it's been a real detriment to our line. For now, we'd like to keep it mandatory in the current system. It's self-serving, but....

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I had a concern as to whether that's good for the industry in the long run, because I know the bigger companies and terminals using it are using CGC inspectors to blend into the cars anyway. I'm just wondering about the advantages to you of inward mandatory inspection.

[Conrad Johnson]

We were looking to make sure we have that for the producer cars, and to take off the option for someone else and make it the same right across the board.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Vicki, you were talking about bonding and licensing, and you seem to think the Ontario insurance system is a very good one. My question is, how do we deal with companies who blow their bonds? I assume the insurance company would keep that from happening, but in the past we've had companies who've blown their bonds, the company folds, nobody's responsible, farmers are stuck, and CGC is not responsible. Do you have any thoughts on that or how we set up the system so that we can protect the producers? Is that insurance system going to be good enough?

[Vicki Dutton]

When growers deliver to us, we fill out a grain receipt for them. It would immediately be entered into the system and insurance would be applied for. Failure to submit a load could create a problem, but I'm sure there would be a provision for that. So you'd be submitting your insurance. Ontario people would be better to answer this for you, but I understand they submit their list of purchases at the end of each day, and that insurance is flexed every day with every load.

It could be applied to most commodities. The industry is changing. We're producing many different commodities. For example, canary seed is outside the jurisdiction of the Grain Commission. I believe they've voted to keep it that way. So products are grown outside the bonding restrictions. You would never have a situation where you'd be outside because you'd constantly be reporting it.

The problem with the bond right now is your volumes are changing on any given day, so the necessity of staying within your bond is an exercise of restraint and compliance. You have to make sure you're within it.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Those insurance premiums are low enough that there's a considerable difference between those and the cost to you of the bond. For example, I've insured purebred animals, and you're paying 10% premium on the insurance. Is there enough of a difference?

[Vicki Dutton]

In the Ontario model, the insurance cost started out almost up to 2% higher, I believe. Of course, you're insuring a larger volume. Also, in the current scenario with the Canadian Wheat Board, a lot of grain is obviously already banked by the Government of Canada, so your risks are somewhat different.

Ontario used a fund. The cost of administration was deducted, the fund built, and as the fund built up to cover, premium costs were lowered. It is a very functional, bankable system and simple to administer. So the case of blowing your bond or being over it, as we've seen with Naber Seed, no longer applies.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Anderson.

Mr. Atamanenko, seven minutes, please.