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.