Agriculture Committee on Nov. 2nd, 2006

[Howard Migie]

I'll take the first question.

This is one part of a process. Our task force was given one task, and it's only part of a much broader approach to making a decision. A meeting in Saskatoon was also one step in the process. The government has taken a clear policy direction. It took one step then; this is one step. It is providing some information to people. It's putting flesh on the bones of what marketing choice means and what it does not.

As well, I would certainly expect there will be opportunities for producers to look at the bigger picture of whether the policy is the right policy or not. Should it move or not? That's the forum where I would debate the questions you're asking.

Paul, do you want to comment on the second part?

[Paul Orsak]

On the question of winners and losers and of farmers and their geographic location and those kinds of...?

We all make adjustments everyday on our farm. I do that. Market events happen all around the world that I have to adjust my business plan to accommodate, to try to shelter my farm business from adverse effects or position myself for attaining positive effects.

Business is a dynamic thing; it's not static. You can't predict it. We don't control it. It's what makes it exciting to be a farmer. So farmers at Blaine Lake will adjust differently than farmers at Estevan. There's a different dynamic to them.

But markets arbitrage and find equilibrium, and producers will react accordingly.

Again, to summarize here, I thought long and hard before I put my name on the report, before I signed off on it. If I didn't believe the report was credible and defensible, I wouldn't have signed off on it. And I certainly wouldn't have signed off on it if I thought it was going to have adverse effects on farmers.

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

So you feel that this one-month report that proposes a drastic change in the way of life of agricultural producers has looked into all of the future negative effects on the average primary producers? Do you think it has dealt with that?

[Paul Orsak]

Again, our task force mandate was narrow. It was to answer the technical questions for transition. There's been debate since I was a baby about the value of single desk versus the costs people associate with marketing.

I would say it's not a revolutionary change, not a drastic change. We all face change everyday in our business. It's part of what makes me a farmer. If it was too predictable and too static, I guess I'd be a wage earner.

[The Chair, Conservative, Gerry Ritz]

Mr. Davies, have you got a final point on that?

[Robert Davies]

If I could just speak very quickly to that, the marketplace changes everyday. It creates winners and losers by the very nature of the marketplace.

Two canola crushing plants have been announced for Yorkton. So for people who are within a freight effective area of Yorkton, it fundamentally changes the way they farm, the value of their farm, what they will grow going forward, and their net economic return. Those things have all changed. The marketplace did that.

An ethanol plant will be announced that will create a different marketplace in areas that get drawn to that. Wheat Board or no Wheat Board, those are just commercial impacts. The value of somebody's farm, the way they do business, and how they do business will change.

What that does is displace other areas. So in our specific area in southern Saskatchewan, as people grow less durum in some other areas because they're not freight effective, it opens the door to a greater durum marketing opportunity for us.

So it's very difficult to say there will be winners here and losers there.

I've been to Blaine Lake as well, and there are some unique marketplace effects in Blaine Lake. Perhaps that will get to more livestock because they're going to be close to an ethanol plan, and they'll be able to get distillers' grain to feed their livestock cheaper. It would be incredibly difficult to try to evaluate all of the impacts of the marketplace within this.

You're correct. We created a template to move forward with, but we can't investigate each of those possible impacts.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Atamanenko.

We'll move to Mr. Steckle, for five minutes, please.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Thank you very much, gentlemen, for being here this morning.

I've come to the conclusion that in the absence of evidence, you are working in a bubble of faith. That puts us in that same realm, because we have to accept in faith what you've told us.

But I have some difficulty understanding how in one month's time, under the mandate you were given—and I have to put some faith in the fact that you guys are experts; at least, you were called to be experts. You have brought together all this knowledge, all this material, and have been able to put together a model for removing yourselves from single-desk selling and putting in place a model for transition, all in one month. Now that's a record. So we'll have to see where the future leads us.

But I really have a problem in understanding how we're going to move these assets, which belong to the Government of Canada, and it's now going to become farmer-owned. Farmers are broke, we're told, and they're going to now own $100 million, or whatever the assets are.

And you expect the government that is now providing credit for the Wheat Board to provide credit to this agency. Does the government have an opportunity to have some representation on this board of directors? Who owns the shares? You have outlined at $1 a share up to 2,000 shares, but you haven't indicated whether somebody in Illinois could own those shares also.

There are a lot of things I don't know about it. Is this going to be Canadian-owned, or is this another subsidiary of Cargill? What are we facing down the road? This is where my faith becomes rather weak.

[Howard Migie]

Maybe I can start, just to say it's proposed to start as a 100% prairie-farmer-owned entity. That's the start, and it's that way for at least the first couple of years. Then the board of directors of the day would have some flexibility to move partway down the path of being less than 100%, depending on what was put in the legislation. There may be limits that would make sure it was always a certain percentage, as was done in other instances.

[Paul Steckle, Liberal, Huron—Bruce, ON]

How do you come up with $100 million, if that's what it is?

[Howard Migie]

Just in terms of assets, if you look at the numbers, you'll see there's a proposal that roughly a little over $100 million, which could be supplemented up to $200 million, be transferred to this entity.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Yes, but Canadian taxpayers have paid for that. Why should Ontario and Quebec taxpayers pay the west?

[Howard Migie]

If you look carefully at the numbers, that's not the case. We would have a lot of assets in liabilities. The ones we're proposing to be transferred, whether it's the hopper cars or the building...these over time have been paid for by prairie farmers as a group. They've contributed to those assets through a deduction that shows up, in the case of hopper cars. In effect, a slightly lower initial payment or final payment system through the years has meant there's an asset for the cars. The contingency fund was built up a slightly different way, but those are not the Government of Canada.

Where the Government of Canada becomes involved is in the continuation of the borrowing guarantee that we provided up to this point. We would continue it for a period of time to be determined, up to a $200 million limit for operating purposes. It's just for operating credit, to keep the same situation during the transition period, and then it would be gone after that.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Would that be fair for the competition, for the government to guarantee for CWB II and not for other regions?

[Howard Migie]

That's what we've balanced, that for the period of the transition we would continue to provide a guarantee of borrowing, which really means that the Wheat Board would be getting great interest rates on their borrowings, as they do now, for a period of years, up to $200 million, which would allow them to cover all their operating expenses for that period. We're concerned with both, that there's a balance between giving a high probability that CWB II will be successful in the marketplace, not a guarantee but giving a reasonably high chance of success to all the other people who have made investments in the industry...that the Government of Canada is not providing an unfair advantage. We think we've provided a balance.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Not very long ago we had farmers at this table. The Farmer Rail Car Coalition wanted to buy railway cars, and in many cases these are the same people who said then that farmers shouldn't own the railway cars. Now these same farmers are saying they should own the Wheat Board. Something seems to have gone off the rails here.

[Howard Migie]

The Government of Canada would take over the liabilities. The assets that farmers, in effect, have paid for over the years would be transferred. Then we'd put two items in the window--one is up to $75 million, if needed, that would be transferred to give it a boost, plus there'd be, for a period of transition, the $200 million of guaranteed borrowings for operating purposes. There's no magic to it. It's not the case that somebody may feel it's more or less. It was our judgment that this was being fair to others in the marketplace while giving CWB II a pretty good chance of success.

[The Chair, Conservative, Gerry Ritz]

Thank you, Paul.

Mr. Gourde.

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

In my opinion, the Canadian Wheat Board is an working tool for farmers. Let me tell you a little story, to put the issue into perspective.

Because my father was 44 years old when I was born, we often had differences of opinion, given the generation gap. We both worked on the farm. The time came for us to replace a withering tool and some old tools with newer, faster and better performing ones available on the market. After talking about it for a year or two, my father went out and bought a new piece of equipment. However, when he came home, I realized that he had bought the exact same old model. He observed that it would save us time, since we would now have two identical pieces of equipment.

A year later, I bought the farm from him. The first thing I did was to go and buy some modern equipment. My father said he would never use it. In deference to his wishes, I kept the old equipment so that he could use it. The next morning, I hitched up the new piece of equipment to my tractor. My father reluctantly gave it a go and later admitted to me: Son, you were right: we have to change with the times.

In this era of global markets, we need to ask ourselves if our competitors -- for example, the United States and Brazil -- have better performing marketing tools than we do. Are we impeding our own growth? If we fail to renew our marketing tool, will Canadian producers be adversely affected in the medium and long term?

[Paul Orsak]

Thank you, Mr. Chairman. I think you make a compelling case for how business needs to evolve and modernize to remain competitive. It's a belief I share. So while there may be some resistance to change, I embrace change. It's a balancing act that we each do as individual businessmen.

But one thing I've come to believe as a farmer is that change forces me to focus on my business better and more intently. Very often, when I'm really fearing change, once I get through it I wish it had happened sooner.

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

Let's suppose that I grow organic wheat for specific markets and that I'm aware of other producers who grow the same variety of wheat. If the opportunity arose to sign a contract for 25,000 tonnes with a flour mill requiring this particular variety of wheat, would the Canadian Wheat Board allow us to access these value-added markets?

[Robert Davies]

Certainly the CWB II would have every opportunity to help those producers, as would many other commercial interests. Practically, an end-user who has a flour mill and wants organic wheat could deal directly with the farmer. There may need to be nobody in the middle of that transaction.

So if enough producers saw the benefit of having somebody manage that transaction for them, if they saw value, they may pay my company, the Canadian Wheat Board II, or anybody who wants to participate in the middle of that transaction. But that's going to become very much value-based. There's no reason why the Wheat Board couldn't be involved in it, and there's no reason why they would have to be involved in it—if that answers your question.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Gourde.

Our time has expired, gentlemen. Thank you so much for your presentations here today.

Mr. Easter has a point of order.

[Wayne Easter, Liberal, Malpeque, PE]

What about the request for information? Am I going to get the list of witnesses, locations, and briefs that were presented?

You usually remind the witnesses, Mr. Chair, and I don't want you to forget.

[The Chair, Conservative, Gerry Ritz]

Well, they look very intelligent, so I didn't think they needed to be reminded.