Good morning, Mr. Chairman and members of the committee. I'll speak to the launch of CWB II and how a competitive grain industry may operate with marketing choice.
The launch of CWB II will require that significant preparation be undertaken by all marketplace participants, as there will be changes to many practices that have existed for years across the spectrum of the grain marketing system. Starting with the CWB, they will have time through periods A and B, as outlined in your report, to ensure they have a business plan in place and that they have the correct staff and skill complement to be successful in the new marketing choice environment.
CWB II will reinvent itself, creating a new vision and some new contacts, designing programs, and providing an outline of its value proposition to farmers to move forward with.
Ensuring that systems are in place for CWB II to access financing in the future, to allow the continuation of pools to farmers, and to access financing for export sales will require some lead time and some document creation, as well as practical experience in the new operating environment.
The federal government will have a number of transition issues to ensure required changes are made to the Canada Grain Act and the Canadian Grain Commission to support the requirements of a change to marketing choice for prairie wheat and barley growers. The changes required will provide certainty around the question of producer cars and will also provide authority to monitor, investigate, access necessary data, publicly report, assist in dispute resolution, and quickly resolve any issues of non-competitive grain handling industry behaviour, for both the benefit of producers and the industry.
In addition, the administration of the current cash advance system, which is now administered by the Wheat Board, would need to be moved to another body.
Finally, the government will need to move forward with measures to enhance rail competition, such as improvements to the shipper protection provisions in the Canada Transportation Act. Consistent concerns were raised regarding effective rail competition. These issues were outside the specific mandate of the task force; however, they are important in ensuring an effective transition to marketing choice. From the commercial industry perspective, we need to be very clear on one point. The marketplace needs certainty through the transition period. Industry will get contracts in place, both privately and at the Winnipeg Commodity Exchange, but certainty of timing is required, and that is part of the lead time provided by the task force recommendations.
New contractual arrangements between industry players will need to be established. This includes port and country terminal operators, exporters, and end-users such as millers and maltsters, both domestically and internationally.
While these changes will likely result in changes to cropping patterns, they may actually provide for more certainty for farmers and for industry and also give Canada additional ability to meet the requirements of end-use customers.
Farmer understanding will be a critical component of a successful transition. While farmers currently market some of their production, such as feed grains, oilseeds, and special crops, outside the CWB, a shift to marketing choice of previously controlled grains will require new risk management protocols for farmers, and they will need to review their sales and marketing strategies to ensure they meet the business needs of their farms in the new marketing choice world.
It's expected that shifts in crop production patterns will occur as the direct impacts of logistics and marketing costs become apparent. This is good for the industry and for farmers in the long term, but there will be a period of adjustment. Grain companies, too, will need to ensure that sufficient financing is in place and that their farm customers understand the new requirements in the marketing choice world. The current CWB contracts have fairly low levels of enforceability due to the ability of the CWB to market the entire western crop.
Wheat and durum growers will have to contract much more accurately than they were previously required to, and this will have collateral impacts on the Canadian grading system, as the current grade standards may no longer fit with the requirements of end-use customers for quality specifications.
While the changes required may seem somewhat daunting, the reality is, if we want to move to a Canadian grains sector that operates with effective competition in marketing, handling, and transportation, that has effective price-discovery and hedging mechanisms, and that has a strong, viable CWB II as an option for farmers, a lot of work will be required. This change should not be expected to be accomplished quickly.
In conclusion, in the package of recommendations provided, the task force sought a balance between giving CWB II financial transition measures and sufficient time to have a high probability of success, while still encouraging existing and new investors to participate in the Canadian grain sector, all within the context of providing farmers with marketing choice.
The task force believes that if marketing choice is introduced in a careful, considered way, but without unnecessary delay, an efficient, effective, and competitive grain marketing system will serve grain producers and the overall grain industry in the long term.
Thank you, Mr. Chairman.