Agriculture Committee on April 19th, 2007

[Roger Gaudet, Bloc, Montcalm, QC]

Producers are interested. Mr. Dickson said he was concerned you would use too much corn or other feedstocks and that farmers would produce less. This is why I am wondering if—

[Roy Eyjolfson]

I'll just comment on the canola meal that results from the pressing operation to make the oil we need to convert to biodiesel. Most of the resulting meal will be put directly back into the hog market. I think Mr. Dickson can talk to this. Canola meal is a very attractive feed component in his industry.

[The Chair, Conservative, James Bezan]

Andrew.

[Andrew Dickson]

My remarks were based essentially on the biofuels that are extracted from things like corn and cereal grains. We have no problems with the meal that comes from oilseeds like canola. In fact, right now we use canola meal in the ration.

[Roger Gaudet, Bloc, Montcalm, QC]

Mr. Dickson, in Saskatchewan, they are closing down their factories. Maple Leaf wanted four or five-year contracts, but there were problems, mainly about transportation, which could cost $4 to $6 for each pig.

Did you sign any contracts with Maple Leaf?

[Andrew Dickson]

We have producers who have individual contracts with Maple Leaf Foods, and others have contracts with the Morrell company in Sioux Falls, for example. So it's an open market.

My understanding is that Maple Leaf is trying to sign up producers in Saskatchewan to ensure that they have a flow of pigs moving into their Brandon plant. They're offering multi-year contracts, and so forth.

[Roger Gaudet, Bloc, Montcalm, QC]

Olymel and Maple Leaf have slaughterhouses and export part of their production. Are you concerned that this operation can become a monopoly? You would then be in the care of these companies.

[Andrew Dickson]

I'm somewhat familiar with the situation in Quebec. You essentially have a marketing board that sells the finished animals to companies like Olymel. They will also occasionally sell to Maple Leaf or Quality Meat in Ontario.

In Manitoba it's a little different because producers are on their own. They sell their animals to whichever processing company they can access. One company, for example, sells to Hormel Foods in Minnesota. I know a number of companies that sell directly to Morrell in Sioux Falls, and we have producers who ship directly to Maple Leaf.

There's no question that Maple Leaf dominates the situation here in Manitoba. But when you look at prices, the Maple Leaf price is essentially made in the mid-west, backed by transportation costs. We would like to see more competition here in the local market so we can pull back those transportation costs and give producers the potential for an increased return on their sales. The numbers vary from $5 per head, or whatever, but it's in that ballpark.

[Le président, Conservative, James Bezan]

Thank you very much, Monsieur Gaudet.

Mr. Miller, the floor is yours.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thanks, Mr. Chairman.

Gentlemen, thanks for being here today.

There's one thing I'd like to clarify here. Mr. Hamilton, your organization is an arm of the Manitoba government technically—it's not private.

[Neil Hamilton]

Yes. We are a provincial crown corporation. There are similar entities. Alberta has a crown corporation, and it is very similar in function to ours.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

I just wanted to clarify that.

You talked about adopting an insurance-first plan. Are you suggesting in any way that crop insurance should be mandatory? Should there be some kind of process where there are two levels of government assistance—one if you have crop insurance, and one if you don't? I just want to get an idea of where you're headed with that.

[Neil Hamilton]

I'm not at all suggesting that it be mandatory. In fact, we'd prefer a voluntary program, because the worst thing you can do is force someone into a program. All kinds of things tend to unravel.

I think it would work if we told farmers, “If there's an effective insurance program out there,” and we would have to define what that was, “you're expected to take it if you want it. If you don't take it, don't expect to be paid under CAIS or some other program for a loss you could have insured yourself for.”

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

That's the point I wanted to get.

Mr. Dickson, you made a comment that I guess troubled me a bit. I'm a farmer too, a beef farmer. You made the comment that you can't be expected to pay competitive prices. That's a hard one to sell to the taxpayer when you say that. I understand the problems and the complexities in it, but if I say to somebody, “I want to buy a Lincoln, but I really can't afford it”, then the answer is going to be, “Buy a smaller car”. I know there are complex changes in there, and maybe you would want to enlarge on it. Maybe I'm taking it out of the context of what you said, but that is a comment that I think needs to be very explanatory.

[Andrew Dickson]

In ten minutes, I'm trying to cover a whole host of topics here. I apologize.

What I'm saying is we're prepared to pay competitive prices for grains. That's been an argument made in the press, for example, that we don't want to pay the right price for grain. That's not right. We will pay a competitive price for grain. Our fear is that government policies will distort the marketplace for grains in order to encourage the use of things like alcohol, and then we're in the situation of having to pay more for grain as a result of that government money entering into the marketplace and distorting it. What we're saying is let's be careful in this thing. There's a public good; we understand that from the fuel situation. What we're saying is be careful we don't distort it the same way.

There are huge concerns right now in the United States, in the midwest, about the amount of corn—which is essentially the livestock feed basis for most of the livestock production in North America—by their fuel policy. When we were down there this year, in Minnesota and Iowa and South Dakota and Nebraska—It's a major discussion point among all the livestock groups right now about the sheer volume of corn that's going to go into the fuel industry. It's massive, and it's going to have a huge impact all the way through the whole price-setting system for various livestock products—eggs, chicken, beef, to some extent, but definitely on pork. Somehow we're saying back to the processing industry that we need to ratchet up the price in the supermarkets because somehow somebody's got to pay for this increased cost of feeding these animals.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

I understand, and I agree with that, as a beef guy. We always said that we take the bottom of the shelf.

Public sentiment changes and what have you, and as you indicated, you understand, as most of us do here, that there's a big push on. We have to do something with the environment. So I think the key words there are “have to”. Government is expected to. So, yes, there are going to be some problems in there and somehow government has to be involved in that transition to compensate for that, and part of the reason we're having these meetings here and having speakers in like you is to try to get solutions to that. I know we're limited for time here, and I am too, but what are some of the solutions to help government do it? Is government expected or the taxpayer expected to fund that transition forever? It's not an easy one.

[Andrew Dickson]

No. There are about seven or eight different policy tools you can use in government. The expenditure of funds in terms of doing something to achieve a public policy good is a useful tool. There are other means. Education, for example, is a critical tool as well. When we brought in seat belt legislation, there were years of public education to try to get people to use them without having to have policemen at every mile stopping people to see if they had their seat belts on. We did bring in regulations later on about seat belts, but the bulk of the public saw the value of them and did it. Also, you worked with car manufacturers to ensure that seat belts were available in cars, so you did a lot of work prior to this.

So what we're saying in the fuel business, for example, is let's make sure our research program is marching on really fast here and we can come up with wheat varieties that are designed to produce 70 bushels of wheat per acre, not 35 bushels, because they're designed for the human flour industry. There's nothing wrong with the flour industry, it's a great industry, and we want to see that expand and grow and develop as much as anybody else does. But be careful is what we're saying here.

The government's made some good moves on this. On this KVD issue, it looks as though we have some targets in here to resolve this matter, but at the same time let's make sure we have everything locked in step here. It takes time for research to flow through in terms of new crop varieties, the registration process, and so forth. We know there are varieties on the shelf right now that produce 70 bushels an acre. We know that; it's a fact. So how do we make sure that those things come onstream quickly into the marketplace so farmers have some options here? They grow a variety of grains—for the flour business and for the fuel business and for the livestock industry. The fuel industry is probably not very keen on low-phytate barley, for example, but we are. So can we combine high yields with low phytate? Phytate is a phosphorus thing in the grain. Those are the sorts of options that we'd like to see the cereal grower have in front of him so we can get that release of entrepreneurial energy.

[The Chair, Conservative, James Bezan]

You're out of time, Mr. Miller.

I just want to follow up. Mr. Dickson, you made a comment that you want a biofuel strategy that was a win-win. With biodiesel, in my opinion, that is a win-win. It's using canola. It's producing value added and rural development in Manitoba and across the prairie region, and it's producing a protein supplement that can be used in both the hog and cattle industries.

Your issue, and I believe Martin said it too, is with the price of feed grains as it relates to ethanol production. My comment is, even if we change the approach here in Canada, would that affect the price of feed grains when you have the U.S. driving toward 20% ethanol content and subsidizing that industry so dramatically? Can we, as the government, change the price of feed grains just because we might decide that we're not going to do it here in Canada?

Martin, do you want to talk, or Andrew?

[Andrew Dickson]

There is no question that the demand on feed grains in the United States is going to pull up the demand for feed grains from Canada. They are ratcheted together.

What we're saying here is let's not exacerbate that in terms of Canadian or provincial government policies and so forth. We can't nullify that issue that's coming out of the U.S. That might change dramatically too. You could get a push-back in the U.S. on this thing at some point or other, but do we have to repeat the experience here?

[The Chair, Conservative, James Bezan]

Mr. Unrau, do you have any comment on that?

[Martin Unrau]

I'd just like to add that the ethanol and biodiesel industry is a good industry to get into for the grain growers at this time, but I think feedstocks in the near future will change for ethanol and biodiesel, so we're talking about a short-term, temporary feedstock here for ethanol and biodiesel. When you look around the world, there are much better feedstocks for producing ethanol and biodiesel than grain. An example is in New Zealand. They've done it. They have lagoons with algae in them and they're producing 200 times the amount from the same acre as canola for biodiesel. We see ethanol switchgrass as a much better than feedstock than grain itself.

We are dealing with a short-term problem here in the cattle and hog industry. I wouldn't want to put all my eggs in one basket as to producing ethanol and biodiesel from grain itself.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Atamanenko, the floor is yours.

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

Thank you very much, gentlemen.

Mr. Eyjolfson, just a bit of clarification: is it a different type of canola that's used for biodiesel, or is it the same that we use for food?

[Denis Kaprawy, President, Bifrost Bio-Blends]

It's basically the same canola as foodstock, same thing.

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

Then it is not a question of trying to get a different type to produce for fuel?