Agriculture Committee on Oct. 31st, 2006

[The Chair, Conservative, Gerry Ritz]

Okay. And as to your queries about witnesses not showing up, I point to the witnesses on Thursday; the second hour was completely off the opposition list. We've tried to maintain a balance. Not every witness on the opposition list or government list is able to come forward at this time. So we're doing the best we can.

If you've got a better way of doing it, I'm certainly open to that.

Having heard all of that, let's move back to why we're here. Could I have a motion from one member of the committee to go in camera?

[Garry Breitkreuz, Conservative, Yorkton—Melville, SK]

I so move.

[The Chair, Conservative, Gerry Ritz]

Is everybody okay with that motion?

(Motion agreed to)

[The Chair, Conservative, Gerry Ritz]

We will now move in camera.

[Proceedings continue in camera]

[Public proceedings resume]

[The Chair, Conservative, Gerry Ritz]

Gentlemen, welcome to the committee this morning.

We have before us today Gary Pike, chief executive officer of Pike Management Group, and Jim Smolick—no stranger to the committee—president of the Grain Growers of Canada. It's good to see you, Jim. Also here is Dr. Al Loyns, appearing as an individual; and with the Canadian Cooperative Association, Herb Carlson, member of the board of directors. Welcome, gentlemen.

We have you each down for about a ten-minute maximum presentation. I'll start waving when you have a minute left. We're trying to squeeze everything into an hour, which is almost impossible.

I'll assess the time at that point. We may have to drop to five minutes for the opening rounds, if that's okay, gentlemen. May I have some consensus on that at this point? It may be all we get.

[Some hon. members]

Agreed.

[The Chair, Conservative, Gerry Ritz]

Okay. Thank you.

We will start with Mr. Pike, please.

[Gary Pike, Chief Executive Officer, Pike Management Group]

Thank you very much, Mr. Chairman.

Pike Management Group is a company operated out of Calgary, Alberta. We work with about 2.5 million acres in western Canada. We represent a lot of grain farms, ranging in size from 5,000 to 70,000 acres, and cow-calf operations of 250 to 3,600 head.

The majority are young, expanding farmers, and our company is actually farmer-owned. PMG provides marketing and management assistance to large, profitable grain farms.

Turning to the Wheat Board, there's an outline I would like to take a look at initially in speaking to whether or not the board is working today. I think this is one of the fundamental things we have to look at initially, and I'll talk a little bit about cashflow, market signals, and what has changed, and then move into the idea of a dual market and discuss the advantages of the board, the advantages to the trade and to the producer, and then summarize with some conclusions.

First, concerning whether the board works today—and you will be getting a handout on this once it's translated—I took the opportunity to look at pricing opportunities out of Unity, Saskatchewan, which is a central Saskatchewan location for No. 1 CWRS 13.5 protein. This was done on October 23, looking at the kind of revenue we can produce under various months of futures contracts and also what kind of revenue we get through the fixed price contract and from the initial price itself.

Looking at an average yield in that area, I must say that the fixed price contract will offer nearly $200 an acre, but the initial price only gets us to about $93 an acre, which is relatively low. At the same time, if we were trading with the same costs off the Minneapolis futures, we would be looking at a potential of $242 an acre, or nearly a full $1 a bushel better than we would get out of anything offered from the Wheat Board today.

Even under the current prices against the December contract, we would be looking at about $218, which again is $20 positive per tonne to the producer.

Not only are the prices stronger than going through the Wheat Board system, but I think the major influence is that there is no cashflow; the system does not provide for cashflow.

Also, for barley right now we're looking at world highs in barley prices, with the drought in Australia and so on. The board is constrained by its own structure from taking advantage of some of these opportunities right now. The initial price for feed barley is absolutely deplorable. If you lived in Unity, Saskatchewan, your initial price at the elevator would net you about $17 a tonne, which doesn't go a long way towards paying any sort of expenses.

If you were to use malt PRO and go to Vancouver, you'd end up with a gross per acre of about $203 or a net of about $53. This is not performing to world standards. Currently, the world export price of barley in malt landed Vancouver is about $270 a tonne, whereas the board's PRO is at $184.

So the opportunities in the spot market are very good right now, and we would expect that producers should be able to take advantage of these. The board is not adding value here.

What are some of the reasons the board is having difficulty in functioning in this environment right now and also in providing market signals? I think pooling is probably one of the real issues. Everyone refers to pooling, and I ask producers in our own group whether they understand how pooling works. It's not grade pooling at all; we're not doing grade pooling. The pooling process is a very sophisticated process, not well written up in the act, and it's the least understood process of any of the processes the board carries on.

To be very honest, the system is not working today because of the changes that have happened. This is a key issue, and it's rarely ever discussed. This is business, not philosophical rhetoric. It is the business about how the money is distributed from the sales, and it's outdated and it's misunderstood. This is something few people are acknowledging.

So what has changed? We've got the number of wheat classes and grades. We've gone from looking at 12, when we started the pooling process, to 48, plus proteins. Overall exports have remained relatively flat. We have not seen huge increases in that. The pooling periods have become outdated and the farms have grown in size and sophistication. So commercial farmers require market flexibility to manage their risk in business operations. All other parts of Canada enjoy the freedom to market their wheat and barley, and that's been covered by the folks prior to me.

Then I wanted to take a look at the dual market and look at the advantages of a dual market to the Wheat Board. First, there's no obligation to pool. Grade pooling can be an option for those who want the board to make the decision for them. The trade is willing to allocate space and work with them. The board can provide excellent pricing signals with the grade pooling. The other thing is that the pool periods can be adjusted to market conditions. This is essential. They've tried it in barley and it's been quite successful. If they had the freedom to go out and do this, this would add a lot of dollars. The board could be very effective in that situation. The opportunity to use all the risk management tools will significantly reduce the risk of any initial prices provided in those pools, so you can use and directly arbitrage against Minneapolis, Kansas City, or Chicago, depending on the quality of wheat. And this offers new opportunities for the board to take advantage of.

One of the things in the past was that the board was too large and couldn't play in those markets. Those markets have changed significantly with the advent of the hedge funds participating in them, so liquidity is not an issue anymore. That did exist at one time.

The other thing this would do is help alleviate the U.S. border tensions with a similar price discovery mechanism. If our basis is open and posted, then the price is open and posted, and it should alleviate some of those types of problems.

Now, let's talk about the advantages to the trade, and by “the trade”, I mean existing grain handlers and everyone else in the system. It will give them a better use of assets in a less regulated environment. They can pursue export markets with the knowledge that they can get the grain, instead of pursuing the market and hoping to get the grain afterward. They can better manage trade credit on inputs with the ability to contract all grains, which they already do, and in many cases they're having to rely on canola or peas or lentils or other products, but it's hard to get money against any of the wheat. And they can offer the same marketing tools for both eastern and western Canada.

If you take the time to look at Cargill's home page, you'll see that they have a western Canadian page and an eastern Canadian page. The options for wheat are very well laid out in the Ontario side of things, and that's a cost reduction.

The advantages to the producer? Cashflow management is the critical one. Pricing signals? There are opportunities for more of that, huge risk management opportunities using the U.S. futures market that you could arbitrage and design to go into. Basis trading on wheat? We have not been able to use any basis trading. Right now, the wheat market has tremendous carry in it, and we have not been able to take advantage of that.

The potential for a more efficient handling system, with all the parties moving together in the same direction, is something I can't emphasize enough. We have to back away and take a look at what the transportation system and the overall regulatory system looks like today, because it does need some revamping. It's going to provide additional opportunities for the value-added sector as well, and this has been mentioned by a number of people prior to me.

In conclusion, I'd say the dual market provides opportunities for all the current participants if they are willing to change with market conditions. The Canadian Wheat Board's stance that they can't operate in a dual market is true if they do not change, but in reality the system's not working today, and change is really, really needed. The business of agriculture is growing, and we're seeing some very good opportunities out there.

The U.S. futures are seen as the world price discovery mechanism, so the change to a dual market can be very smooth and executed relatively rapidly. I think these are real opportunities.

The coming together of food and energy is going to provide many new opportunities for the agricultural sector, and I'm very excited and ready to embrace change.

With that, Mr. Chairman, I conclude.

[The Chair, Conservative, Gerry Ritz]

I have the magic finger. Boy, I just shut him down in a heartbeat there. It's great.

We now go to Mr. Smolick with the Grain Growers of Canada.

Please, Jim, go ahead.

[Jim Smolick, President, Grain Growers of Canada]

Thank you, Mr. Chair.

On behalf of the Grain Growers of Canada, I'd like to thank you for the opportunity to appear before you here today. My name is Jim Smolick, and I'm the current president of our association. I'm a third generation grains and oilseeds farmer from Dawson Creek, British Columbia, and I grow a variety of crops, including common and proprietor varieties of fine seeds. I farm in somewhat of a unique area, where only the Peace River district of B.C. is included in the Canadian Wheat Board jurisdiction. This, in marketing terms, puts my farm at a competitive disadvantage to a producer growing the same crops in other parts of B.C.

Formed in 2000, the Grain Growers of Canada is a national organization representing the interests of grains and oilseeds producers in Canada. The Grain Growers of Canada do not want to see an end to the Canadian Wheat Board; however, we feel the board should not be the only marketing option available to western wheat and barley producers.

Based on Ontario's model, we feel that all grains and oilseeds producers in all regions of Canada require a flexible system, one that allows them to take advantage of marketing opportunities, which would include but not be limited to local farmer-owned value-added processing, niche markets, and identity-preserved marketing programs.

Based on historical data, one can look at the differences in the level of processing between commodities controlled by the Canadian Wheat Board and those that are independently marketed. As an illustration of the impact that these marketing restrictions are having on Canadian value-added processing, only 2% of Canadian barley goes into food and industrial use, 7% of Canadian durum production goes into food and industrial use, and 22% of wheat goes into food and industrial use. Now, compared to the Canadian oilseeds sector from the same database, 76% of Canadian soybeans go into food and industrial use and 53% of Canadian canola production goes into food and industrial use. My final comparison is that 55% of Ontario's wheat production is processed domestically, which is over twice the national average of 22%.

I guess the question must be asked, why is value-added processing in other sectors of the Canadian grains and oilseeds industry so much further advanced than the grains under the Canadian Wheat Board's jurisdiction? We saw the proposed Bill C-300 as an important step in building the value-added industry in Canada, and we need only look at the beef sector and the once untapped value-added potential if it had not been for BSE. Clearly, the BSE issue was extremely devastating to the cattle industry, but it did point out and prove that there are other ways to market their product.

New opportunities are developing in high-value niche markets as well. The potential for increased revenue from value-added processing is growing. Both of these key areas will only become more important in the future as the benefits of the life science industry begin to be realized to a greater degree. As producers, we must be able to move into new and high-valued areas of production if we are expected to compete, especially if we're to consider the growing world production of bulk grains and oilseeds. All Canadian producers need maximum marketing flexibility to accomplish this goal, a flexibility that currently does not exist in western Canada.

A voluntary Wheat Board would quite simply allow the flexibility to producers to choose the appropriate marketing tool. It would allow producers the opportunity to stay with the price pooling methodology if they choose, but it would also allow them the opportunity to enhance returns through their marketing skills. To be clear, as a producer you would choose an appropriate tool each and every year and possibly utilize both methodologies in any given year. This decision by the producers is based on his or her understanding of market forces that will eventually determine price.

I think it's also important that we understand how technology and the transfer of information has changed the way we make management decisions and predict pricing. Now, when my grandfather first started farming, he didn't carry a cellphone or run a computerized horse. His ability to understand crop conditions in the rest of the world was limited at best, so price pooling was an appropriate risk mitigation tool. When I first started farming many years ago, I also did not have a cellphone, or a computer for that matter. The explosion of information that I can obtain now on current crop conditions around the world can help me determine price direction. A case in point was the severe drought in parts of Australia and the United States this summer.

There's a very real concern that in western Canada we will not capture this once-in-a-decade run-up on wheat prices. The Canadian Wheat Board's estimate on pool returns for the 2006-07 crop year is barely above levels a year ago, while U.S. wheat prices are at an average of 47% higher than a year ago. In this unprecedented era of low market returns, it would be unimaginable not to capture the spike in prices to its fullest extent.

I know in the past you've been presented with many comparisons of wheat values between Canada and the United States, but whether that difference is 50¢ a bushel on hard red springs or $1 on winter wheats, it represents a lost opportunity. As producers we struggle to continually become more efficient to survive, and yet at the very end of the selling stage, our property is sold at less than fair market value at times by an entity that has no vested interest in our farms.

As a producer of wheat, I am in control of every decision that controls my crop for sale. As I look around the room today, I see that many of you have been, or are, directly involved in grains or oilseeds production. You understand the management requirements in growing a crop. For me, it starts right after harvest when I decide which fields will grow not only the crop but the variety as well. I decide if the soil nutrient analysis should be done; the blend and quantity of fertilizer to be applied next spring; and when to purchase the fertilizer and other inputs as a price protection measure. I determine when to seed, the type of seeding tool, when to spray, and with what product. Finally, I decide when to harvest. Once I have the wheat in a marketable position, I am then bound by law to market my quality or grading wheat through the Canadian Wheat Board. The overarching question is, why at this point do farmers lose control over their private property?

As you can see, all of the decisions I've just talked about, as well as other factors, will determine my cost to produce that crop. I'm the only one who knows what value I need to achieve from the sale of that crop to cover my costs. Yet the only guarantee I have through the Canadian Wheat Board is for the initial payment, which at present for wheat is less than 50% of the world wheat price.

While I acknowledge that there are other pricing and payment options for a fee, producers still must accept a certain level of risk. It is clearly unacceptable to remove the producers' right to market his property. It is also clear that producers may or may not achieve a better price though their own marketing, but the same can be said about yields, where management decisions will determine the crop. Regardless, they will still be in control of their own destiny.

In closing, there has been a lot of discussion about a producer plebiscite. We would caution that a move to this type of vote will not resolve the issue. Regardless of the outcome, there will always be fault attributed to either the question, the voters' list, or numerous other concerns. The archaic idea of “one person, one vote” methodology gives a disproportionate voice to the majority of producers who produce only a small percentage of the crops, or, in other words, the 80-20 rule. I can only imagine where Microsoft would be today under that system.

I'd like to thank you again for the opportunity to speak to you here today on this issue and would be happy to address any questions you may have later.

[The Chair, Conservative, Gerry Ritz]

Thank you, Jim.

We'll now move to Dr. Loyns, please.

[Dr. Al Loyns, As an Individual]

Thank you, Mr. Chair.

My presentation is made at the invitation of the clerk of this committee, strictly in the context of my role as an agricultural economist, a farmer, and as a Canadian citizen who has long-standing interest and experience in agricultural and food policy. I'm not here to represent any particular interest group or any particular view of the world. I appreciate this opportunity to share what little bit of information an economist and a former professor can squeeze in to ten minutes of presentation. I'll do my best.

I've spent 42 years as a professional agricultural economist in this country, mostly in the area of agricultural marketing, and much of that in the areas of market regulation and institutions in grain marketing. My professional knowledge, and I want to stress this, of the Canadian Wheat Board is based on study, on research—I have an extensive publication record—and on teaching involving this particular marketing institution. Being at a university in Winnipeg, where the Canadian Wheat Board is also located, provided an excellent opportunity for exchange through students, research, and people, and we've been involved in that process to a considerable extent.

As a farmer, our operation has produced and delivered both board and non-board grains. In 2006, for example, we harvested 170 acres of winter wheat.

A professional economist has considerable difficulty establishing credibility in terms of analytic objectivity when dealing with marketing boards, and that includes the Canadian Wheat Board. It's much like establishing credibility and objectivity in analyzing religious beliefs. There's a very strong connection between the style of belief in marketing boards and that of religious beliefs. Religious folks perceive that if your conclusions are not in harmony with their beliefs, you're automatically against those beliefs. One is seen to be either for or against marketing boards; there's nothing in between.

The role and performance of the Canadian Wheat Board are extremely important public policy issues in this country. The Wheat Board has been a major component of agricultural and trade policy from the beginning. Information, therefore, must go beyond the for or against dichotomy, beyond beliefs as the instrument for making determination on these policies, and into actual structure and contribution of the Canadian Wheat Board. Hard economic and business information, it would seem to me, is essential to appropriate public decision-making.

I have attempted to contribute to that process for the last thirty or so years of my professional output. In 1996 and 1998, I was qualified as an expert witness in two court cases involving the Canadian Wheat Board. Therefore, in light of the above information, and through being an expert witness, I claim to have some “expertise” on the board from my various perspectives.

I would submit that there are two fundamental questions that need to be addressed in looking at the present Canadian Wheat Board debate. Number one is exactly what the Canadian Wheat Board, as structured, delivers and to whom. Secondly, I won't say much about barley, because there's not much barley handled by the board, but why is wheat different? In terms of what the board delivers, it is a unique organization in contemporary Canadian legislation. If any side wants to deal with how the debate ought to be resolved, presumably there had better be overwhelming evidence, and indisputable evidence, of the output of the board. For the people who want to retain the board, they had better be able to show net positive benefits. For those who are against the board, they had better be able to show that they would be better off without it.

My conclusion is that there is no indisputable evidence of positive net benefits from the Canadian Wheat Board.

On the second question of why wheat is different, history reveals that this institution has very much been an instrument of national policy. Carter and Loyns, in a Donner Canadian Foundation 1998 publication, show that the other major national and provincial policy instruments that were created in the same time period beginning in the 1930s have disappeared. They've been privatized. CNR is one. TCA--for those who weren't around then, Air Canada--has been privatized, as well as airports, port authorities, and several public utilities, including the prairie telephone systems. Most hog boards have been deregulated. All of the crops that compete for the land base with prairie wheat and barley are open market commodities.

So why is wheat different? The short answer is found in the Canadian Wheat Board Act. But with respect, that begs the fundamental question of why. The question is far from trivial in economic and prairie development terms.

Let me turn quickly to some economic evidence. I really urge the committee, if you pick up on my first point, to at least go to the George Morris 2002 report done for the Province of Alberta. It's available on the website. It's the best source of information on this. I can't cover it respectably in one and a half minutes, but I will try.

There are three approaches that have been taken by economists to produce information on what the board does and what it produces. There have been the benefit studies. Kraft, Furtan, and Tyrchniewicz appeared before you in the past. There was the Schmitz family, and Grey from the University of Saskatchewan has done this work. To make a long story short, they demonstrate at port that $10 to $39 per tonne, depending on circumstances, benefits the existence of the monopoly position of the Canadian Wheat Board. They do not, however, generally analyze what happens at the farm level. They seem to resist doing that and do not consider costs.

The second approach is where I've been involved. Colin Carter, Parsons and Wilson, and the George Morris Institute purport to analyze costs. The costs that have been estimated from the existence of the regulation surrounding the Canadian Wheat Board are in the order of $10 to $25 for wheat and higher for barley.

The other area is the cross-border comparisons. You heard one of them here today. I'm going to swing quickly to that. In my experience and view, these cross-border comparisons, whether they're serious economic analysis or casual observations by responsible individuals, provide robust and credible ongoing information. There's been a lot of it available since the middle 1990s.

The conclusion I reach on the basis of review of this information--and I wish I had more time to justify what I'm saying but I don't--is there is no economic evidence available that would pass the test of definitively demonstrating that the Canadian Wheat Board monopoly produces positive net benefits for wheat and barley growers. As a result, a trade-off argument that a little pain comes with an assured gain does not hold. That's an important conclusion.

I'll reinforce the comments that were just made that none of these studies take into consideration the loss of value-added on the prairies because of Canadian Wheat Board pricing policies. That's also an important conclusion.

I want to swing quickly to court challenges. Why is an economist talking about legal situations? They have important economic implications, that's why. First of all, the Wheat Board does not have duty of care to prairie farmers. That's been established in court many times. It was argued in 2003 in a court case in Regina. I've heard that it's just been argued again by the Wheat Board in a court case in Regina.

The Wheat Board annual report says the corporation is accountable for its affairs to both western farmers and Parliament, etc. Considering the duty of care position and the requirement of the act that directors are responsible to the Wheat Board for their actions, one has to ask where prairie producers end up in that mix.

Second is the lack of economic and property rights. There's a fundamental economic and property rights disconnect in this situation, where Ontario wheat producers have property rights and prairie producers don't.

Finally, the one that's most difficult for economists to believe is the conclusion and the argument in court that if you don't like the regulations of the Wheat Board, you can pick up and move to another province--there's nothing in the act that prevents doing that. That's unbelievable to an economist. The loss of capital resources, skills, and the whole bag in doing that is impractical. It might be something the legal fraternity can live with in logic, but it's not something Canadian citizens, or particularly economists, should have to live with.

Finally, the task force report suggests that we have voluntary pools in the new regime, if there is a new regime. Many of my economist colleagues and other people say you can't have voluntary pools. To reject the notion that voluntary pools, properly constructed and run, won't work is to reject the notion that mutual funds work.

A pool is a mutual fund, or a mutual fund is a pool. If we looked around this room and did a survey, I'll bet that 50% or 80% of us are using mutual funds and we're happy with them. They will work if they're properly run. There is no reason why they won't work.

I have a lot more I'd like to say, but I'll stop at this point.

[The Chair, Conservative, Gerry Ritz]

Thank you, Dr. Loyns.

Mr. Carlson, please.

[Herb Carlson, Member of the Board of Directors, Canadian Cooperative Association]

Thank you very much.

As you know, my name is Herb Carlson. First of all, I'd like to apologize. I was notified of this just a few days ago, so I don't yet have my brief translated into French. That translation will be done in the upcoming days, and we'll have it circulated.

First of all, on my own behalf and on behalf of the Canadian Co-operative Association, I would like to thank you very much for the opportunity to speak to you today. I am a grain and oilseed producer from east central Saskatchewan. I farm with my brother; we grow all the grains, we clean seed, and we do all those sorts of things. I'm also vice-chair of the board of Federated Co-operatives Limited. That is Canada's largest non-financial cooperative, serving about 300 retail co-ops in western Canada; together these retail co-ops serve over 1,000,000 members.

I'm here today, though, to represent the Canadian Co-operative Association. I am a member of their board of directors. The Canadian Co-operative Association is a national association. We represent more than 7,000,000 individual members from over 3,000 organizations. Our members come from many sectors of the economy, including finance, insurance, agriculture, food, supply, wholesale, etc. CCA's mission is to provide leadership to promote, develop, and unite cooperatives for the benefit of Canadians and others.

At our annual general meeting this past June, CCA adopted a resolution on the Canadian Wheat Board. We have recently written a letter to the Minister of Agriculture to inform him of this resolution. The resolution stated that the Canadian Co-operative Association would firmly present to the Canadian government the position that the Canadian Wheat Board, group marketing agencies, and cooperatives be strengthened; that the Canadian Wheat Board remain a single-desk marketer; and that any decision to change the Canadian Wheat Board require the consent of the board of directors of the Canadian Wheat Board.

Agriculture is an important part of the Canadian economy and the backbone of Canada's rural communities. The Canadian agriculture system is also a complex web of institutions that relies on governments, marketing boards, cooperatives, the private sector, and, most importantly, the family farm in order to sustain its continued existence. If we open the door to dismantling the Wheat Board, we risk the futures of other marketing boards. They're already under attack from competing countries through the World Trade Organization negotiations.

The Canadian Wheat Board has helped Canadian wheat producers gain what has been estimated to be an additional $800 million per year in revenue from price premiums, transportation cost control, and other benefits. If the Canadian Wheat Board is no longer the single-desk seller, these additional revenues will be lost to western farmers, who are already hard-pressed. Our members believe a single desk gives prairie grain farmers the power in the marketplace that helps to balance the power of the few large grain companies. In addition, the Canadian Wheat Board's costs are low; some 96% of board revenues are returned to producers.

The Canadian Wheat Board has represented producers' interests in their dealings with railways, and the Canadian Wheat Board's 350,000-odd railcars of grain give it bargaining power. The board has developed marketing relations throughout the world and is a respected seller of high-quality Canadian grain.

I could go on, but defending the business performance of the Canadian Wheat Board is not my primary purpose here today. Rather, I would like to direct my comments to the governance and producer control of the Canadian Wheat Board.

We realize that the present government, as well as some farmer groups, do not agree with the single desk of the Wheat Board and would like to change it. While the Canadian Co-operative Association feels that this would be a mistake, we believe that ultimately the decision to keep or abandon the Canadian Wheat Board must be the result of a democratic process that respects the wishes of the majority of the producer members.

This decision cannot be solely that of the federal government. The Canadian Wheat Board Act indicates, in section 47.1, that:

The minister shall not cause to be introduced in Parliament a bill that would exclude any kind, type, grade or class of wheat or barley...unless

(a) the Minister has consulted with the board about the exclusion or extension; and

(b) the producers of the grain have voted in favour of the exclusion or extension....

The Canadian Wheat Board is a farmer-controlled organization. It is controlled by a fifteen-member board of directors. The government appoints five of these directors, but ten are democratically elected by the western Canadian wheat and barley farmers who use the Canadian Wheat Board. If the majority of these farmers wish to change the mandate of the Canadian Wheat Board, they already have the ability to do so. They may elect directors who favour change. Time and again, however, farmers have voted to elect directors who support the current structure of the CWB. That is not to say that the Canadian Wheat Board has been a stagnant organization. There have been many changes throughout its seventy-year history.

When I started farming on my own in 1974, the Canadian Wheat Board was governed by a panel of commissioners. Soon after, we saw the establishment of a farmer-elected advisory board, and that was replaced by an elected board of directors and a CEO.

Increased farmer-member control has become a driving feature of the Canadian Wheat Board change, especially in its most recent past. The farmer focus has manifested itself in the past few years as the Canadian Wheat Board has responded to farmer concerns about marketing options. While maintaining their right to accept a pool price, farmers can now choose from a variety of other options within the Canadian Wheat Board. This clearly shows that the Wheat Board has and will continue to evolve.

It would appear that the current government is not satisfied that change is happening fast enough. My thirty-plus years as a co-op leader at the local, regional, and now national level have shown me that evolutionary change is the better option in the long run. The structure of grain marketing in western Canada is not something that can be redesigned in four weeks. If farmers want change, they will elect appropriate directors. Today's grain farmers are knowledgeable business people capable of making decisions for themselves.

As a grain farmer myself, I have welcomed some of the initiatives of the current government changes, including changes to the CAIS and the Advance Payments for Crops Act, but I cannot support what has been happening with the Canadian Wheat Board.

Rules of good governance call for appointments of directors to be based on the significant skills they bring to an organization. I hope this thinking will be reflected in any future appointments to the Canadian Wheat Board, but mostly I hope the wishes of western Canadian grain farmers will be respected in any future changes. Elections are currently under way for the five Canadian Wheat Board members who will have responsibility for directing the board's operations.

If this board of directors wishes to make a major change, such as removing the single desk from the Wheat Board's mandate, then as called for in the act, it must call for a plebiscite of producers. Under no circumstances should such a change be made without a vote by producers on a clear question.

We urge the government to respect the democratic wishes of the wheat and barley producers of western Canada.

[The Chair, Conservative, Gerry Ritz]

We'll now move to a question round.

Mr. Easter, you have five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, gentlemen, for your presentations. I'll start with Dr. Loyns. It was interesting. Yesterday's task force report came down with no economic analysis whatsoever. We know the task force heard submissions from Cargill, Agricore United, and the Canadian Wheat Board.

We know the Canadian Wheat Board tabled a presentation saying the net benefit to the producers as a result of the Wheat Board single-desk selling is somewhere between $530 million and $655 million. From those opposed to the Wheat Board, we hear a lot of what ifs, but no data.

Dr. Loyns, you mentioned that we should refer to the George Morris Centre report. If I recall correctly, in terms of the economic data, the George Morris report is really based on the Carter-Loyns report of which you were an author.

I believe I'm correct in this, that your report was not well received by either the academic community or key industry players like the Saskatchewan Wheat Pool or the Canadian Grain Commission, and the calculations in your report were based on comparing farm-gate sales between the two countries without accounting for the distortions caused by bloated American subsidies, including the export enhancement program. Is that how your calculations were calculated?

[Dr. Al Loyns]

Definitely not.

[Wayne Easter, Liberal, Malpeque, PE]

Then how were they?

[Dr. Al Loyns]

It's in the report.

The George Morris report went through several studies. It's the best review of the economic literature there is. That's why I've suggested it to the committee.

It's true when they went back and did their benefits and costs at the end, they used the kind--

[Wayne Easter, Liberal, Malpeque, PE]

If I might interrupt, Mr. Chair, my question was not on the George Morris study; my question was on yours.

[The Chair, Conservative, Gerry Ritz]

Dr. Loyns was framing his answer, Mr. Easter. You're going to have to give him time to do that.

[Wayne Easter, Liberal, Malpeque, PE]

He's going to the George Morris study and other studies. The question is--

[The Chair, Conservative, Gerry Ritz]

You asked him how the data was compiled, so of course he has to go to the study to give you that answer.

[Wayne Easter, Liberal, Malpeque, PE]

Let's hear it.

[Dr. Al Loyns]

We spent three months of analysis on our report. There is no way that I can sit here right now and summarize how we pulled it together. I'd invite you to read our report, and ours, by the way, was peer reviewed. Carter and Loyns have always had their studies peered reviewed. We explain how we do it.

If you want to ask a specific question on a specific item in our report, I'll respond to it, but your question was extremely general on a very broad set of analyses that we did. I'm sorry, I can't answer your question the way you asked it.