Agriculture Committee on June 13th, 2006

[Ken Ritter]

I disagree with the premise of the question. First of all, the U.S. does not provide their farmers with higher returns; they have numerous subsidy programs, including loan rate programs. They simply don't do that.

As a matter of fact, if you are a farmer in western Canada now, we have an option, the daily price contract, where if you as a farmer think that's accurate, you can access that daily price contract and get exactly what the U.S. farmer is getting. So through the single desk, we're able to provide the same opportunities you would get in the U.S.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Easter.

We'll move to Mr. Bellavance. Seven minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you, sirs, for your presentations.

As you know, Quebec is home to a number of collective marketing organizations for, among other things, milk, pork and beef. There is one such organization in my riding of Bois-Francs--L'Érable and the surrounding region that markets maple syrup. Two years ago, the Quebec federation of cash crop growers even moved to establish a wheat marketing board in Quebec. However, it does not operate in the same way as the Canadian Wheat Board. The federation does not own the crops. That's the major difference between the Quebec board, and the federal organization.

However, over the years, the Quebec experience has revealed that collective marketing is not an efficient system. Voluntary collective marketing pilot projects were launched. This seems to be the direction favoured by the Conservative government in the case of the Canadian Wheat Board.

I'm interested in hearing your views, Mr. Ritter, on the Conservative government's proposal to set up a voluntary collective marketing organization. Judging from past experience, this approach has not proven successful. Cérégrain, Pomexpan and Pomexpert are just a few examples that come to mind. These collective organizations did not operate efficiently.

[Ken Ritter]

Thank you for the question.

Yes, we've been closely following the developments in Quebec, and we have noted, with considerable interest, that farmers in Quebec have opted for a single-desk seller for wheat. Farmers in Ontario have opted otherwise, but it was their choice. We're saying that it should be our choice in western Canada as well.

On the marketing effectiveness, I think it's very clear that when you have a very small, select group of huge companies buying grain, obviously they're going to try their best to pit the sellers against each other and thereby lower the prices. Farmers need the significant marketing power to match that in order for it to be an effective and reasonable contract. Actually, in contract law they have that kind of a principle.

That's really all we're doing. We're empowering farmers so they can engage in a marketplace on a level playing field with the buyers, who are generally very large players. We are assessing that process, seeing if it makes sense, and adding value to the farmers' bottom line.

Adrian, do you have anything further to add?

[Adrian Measner]

Our view on creating an open market is that the Canadian Wheat Board would not exist in that environment. As we have this debate and that discussion, I think that's very important. It's a very focused, concentrated marketplace. There are five or six companies that actually dominate that marketplace. They have ownership in Canada. They have ownership around the world--the facilities, processing plants, and so forth. It would virtually be impossible to compete in that marketplace if you were to stick a player in there, such as the Canadian Wheat Board, without the single desk.

It's not just the Canadian Wheat Board, it's any other Canadian company, any other U.S. company, any other European country. It's too concentrated and focused an environment, with some very large companies dominating that environment. We feel very strongly that this organization would not exist without the single desk.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Anderson, did you give any consideration at all to what transpired in Quebec in the case of these collective marketing organizations? Since this approach was deemed to be inefficient, a decision was made not to go this route in future. Has the government considered Quebec's experience at all? If not, does it intend to review actions taken elsewhere before making a decision with respect to the Canadian Wheat Board?

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Gourde would obviously be more familiar with this situation than I am. We've talked about it a little. Again, we want to make the point that we want to give western Canadian farmers the same opportunity that the farmers in other parts of this country have had.

We think Mr. Ritz's bill is a great initiative in that, but farmers are telling us they want to go further. They want to have the opportunity to be able to market their own grain; they want to be able to make those choices themselves. We've been listening to that. We think the board can continue to function in that environment. The Ontario wheat board has done well, and it has received increased support over the last couple of years. The Australian Wheat Board is another model where they don't have a domestic monopoly; they almost have an export monopoly. They've been able to very well, as well.

[Ken Ritter]

I would like to briefly respond on the issue of Mr. Ritz's bill and the concept of value added.

You've seen from our survey that 85% of the farmers believe that value-added processing is important and that the CWB should work with producers to ensure that this happens. It's right in our survey.

The second point I want to make is that as an organization we feel that this is a farmer's right, through the elected director structure, to ensure that we find the right place for this to all function. Secondly, this is also not a turf war. We are going to be talking to Mr. Ritz about his bill and will look at areas where perhaps there need to be some refinements and some common sense in certain areas. I point specifically to issues around trade, so that we don't set up any kind of structure that would affect trade, and also that all processors in the country are at a reasonably level playing field.

We're looking forward to this kind of common-sense discussion with Mr. Ritz and the bill he has put before the House.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Earlier, Mr. Anderson, you stated that producers wanted freedom of choice. I'd like to come back to a question raised earlier by Mr. Easter. In fact, he has even tabled a motion to that effect in committee. I think the Canadian Wheat Board would agree to the holding of a referendum or plebiscite to decide on a course of action.

As the Minister responsible for the Canadian Wheat Board, and as a member of this government, do you think this is the best way to find out what producers really want? Are you in favour of holding this kind of referendum?

While we're on the subject of producers, I'd like some explanations. Quite understandably, opinion is divided. Perhaps if a referendum or plebiscite were held, the government would have a clear answer.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bellavance.

Mr. Anderson, a short reply.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm not the person who is in charge of the Canadian Wheat Board in the government, but I have some responsibilities for that. The minister will be making the decisions, but it's been my opinion all along that farmers individually should be free to make their own choices as to whether they want to participate in the grain marketing system we have. I have said to people that the difference between the board's position and our position is it depends on where you put the apostrophe in farmers' or farmer's choice.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Bellavance.

As the chair, following up on Mr. Ritter's point that the Wheat Board goes head to head with the five major multinationals on a daily basis for market share and you need the single desk in order to do that, how then do the canola growers maintain their profitability going head to head with those same five major groups without the single desk? How do they do it?

[Adrian Measner]

It's very similar. A lot of that canola is marketed by those large multinationals, so they are in that environment and those multinationals are doing a lot of that marketing. The canola market, the bulk of it, goes to one market, Japan, and there are relationships there. There are only three or four other markets, and those markets are basically dominated by the larger companies.

So they are in that environment and they're doing it through the multinationals. I guess that without the Wheat Board, the grain in Canada, the wheat and the durum and the barley, would also be marketed through the multinationals. That would be the change.

[The Chair, Conservative, Gerry Ritz]

Mr. Anderson, do you have a point on that?

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Yes, one point on that. Half the grain right now is marketed by those companies. They have to go through the Wheat Board, but they do the selling. They are the accredited exporters for the Canadian Wheat Board.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Menzies, seven minutes.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

I want to correct a bit of misinformation about the term “single-desk seller” that's being used by some of the questioners. In actuality the Canadian Wheat Board is a single-desk buyer. When it goes into the international market, it has no more power than anybody else; in fact, it's inhibited in that the rest of the world knows what it has for sale, and there are lots of other options out there

The fact that it's a single-desk buyer limits my opportunities as a farmer. If I decide to grow wheat or barley for human consumption, I have one place to sell. If we had presented that option to the auto industry when they were moving into this country, they would never have entered this country. They would not build automobiles if there was only one buyer for their product. That's a plain and simple fact. Why it can't be transposed and why it can't be understood that it's ineffective in agriculture, I don't know.

Your binders--Mr. Ritter, I find your binders very fascinating. The binders that you are presented with have sensitive information. Your competitors that you're being compared to are constrained by the fact that they're dealing with the Canadian Wheat Board; those sales are contingent on selling board grain, so their sales--and I'm assuming these are net, or they're absolutely worthless numbers--have been absolutely constrained. I look at that with a great deal of questioning in my mind, because what I'm hearing from my farmers, from my neighbours, is that their bins are full. To me, that's selective selling.

You can easily keep your numbers up if you don't sell grain--if you sell only into a high-end market. Your mandate, Mr. Ritter and Mr. Measner, is to market those grains. I'm not saying I agree with it, but that's your mandate as of today--to market wheat and barley for human consumption. Why are my farmers' bins full of wheat? If you're not in the market and selling, which is what your mandate is, does that not skew the numbers you're talking about in those binders?

[Ken Ritter]

Thank you, Mr. Menzies.

To clarify a few of the facts, I'll have our CEO speak to where we are in terms of the marketing of last year's crop.

[Adrian Measner]

I'm going to start a bit earlier, Mr. Chairman. I want to comment on the seller-buyer issue. We are a single-desk seller, not a buyer; I disagree with that statement. Basically, we are competing in a very focused international environment.

On the wheat side, we're a small player. We're around 15% of that international wheat market, so our focus is trying to achieve premiums for the wheat we sell versus the competition. Those are the values that Ken sees on a regular basis, as all board members see when they come in to the regular board meetings. We look at what we've sold at versus what the competition has, and it's those premiums that we focus on. They're not available in all markets, but they are available in some markets, and that's the strength of the single desk.

When you go to a commodity like durum, we're 50% of the international market. We are the prominent seller on that side, and we can influence that overall price level; if we're very aggressive out there, we can drive those durum values down to feed levels. We take a very disciplined approach on that, the same way we do on the malting barley side, on the export side.

When we look at our marketing plan--and this comes to the grain in the bins--on the wheat side, we have taken 90% of the wheat that farmers have offered to us as of today. We are making a decision on the series C contract, the final 10%, later this week. We haven't made that decision at this point in time.

If there's a lot of wheat in the bins and it needs to be delivered--there's 50% space in the system right now--there are lots of opportunities. I can't see that there are burdensome wheat supplies out there, because we have taken the bulk of it and ultimately we'll probably take almost all of it.

On the durum side, we've taken a more disciplined approach because we don't want to drive those values down to feed. It's difficult enough on the farm, as you know, and it doesn't make a lot of sense to us to aggressively push those values down from an international perspective. We have discussed this with the board of directors, with the farmers who were elected to be on that board. They have agreed with that strategy. Even with that disciplined selling this year, we intend to be very close to a record year on the durum side; we're going to be very close to 4.2 or 4.3 million tonnes.

It's a very good year on durum, but there is still additional durum. Farmers have grown a lot of durum recently, and we know that, but our focus has been making sure we get a reasonable return for those farmers, and not flooding the market with it.

[Ken Ritter]

Just to add to that, at all times, farmers who deliver grain through the CWB are the beneficial owners of that grain. The CWB doesn't keep any retained earnings or anything like that. So the benefit for the sale of the grain clearly goes to farmers on all occasions, which in my judgment makes us a seller and not a buyer.

[Ted Menzies, Conservative, Macleod, AB]

I'd like a quick answer from all of you, if I could. There has been a lot of talk around this table about a plebiscite. Like David, I'm not instructing or giving any direction on how this will go forward.

If and when there is a plebiscite, we would have to have it based on the volume of production, not on the number of permit books, like we did last time, because it absolutely gives you a skewed result. For example, on my farm, I had one permit book when I was farming 6,000 acres. One person who owns a quarter section has a permit book. So my vote was negated by someone who owned a quarter section and rented it out.

So I would like your comments. If and when there is a plebiscite, I would like your assurance that you see the value in that vote being weighted by production, by delivery to the board.

[Ken Ritter]

There are a couple of things I'd like to say before I get to the answer.

First of all, there was an election review commission to look at how CWB directors are elected, and it goes to the word “producer”. Producer is defined in the act, as it stands now, and that's the only way you can get a vote.

Secondly, as I understand the legislation, the Minister of Agriculture is the one who calls for the vote. Obviously one of the debates will be who is eligible. Under the present act, the same people are eligible, as I understand it, as those who can vote in CWB elections. If there is another eligibility criterion that is considered, it would have to involve a change in legislation. That's where we're at right now.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Does anyone else wish to comment on that issue?

Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I guess Ted understands this as well as anybody, but we've talked about this with the board as well. There have been problems in the past elections because of those voters lists and who's involved with them. There's an attempt through that electoral review, which is going through the government now, to deal with that situation. But I think Ken is right, that if we go to a producer vote, we're back to that same list that we've had the problems with in the past because of the way the legislation was written when it was passed.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Menzies.

We'll move to Mr. Atamanenko, for seven minutes, please.