Evidence of meeting #12 for Agriculture and Agri-Food in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fertilizer.
A recording is available from Parliament.
9:50 a.m.
Conservative
9:50 a.m.
A voice
It's no longer a crown corporation. It was privatized.
9:50 a.m.
Conservative
The Chair Conservative James Bezan
Fine. That was just a question, which was clarified.
It's the Bloc's turn.
Monsieur Vincent, sept minutes, si'l vous plait.
9:50 a.m.
Bloc
Robert Vincent Bloc Shefford, QC
I would like to welcome you and to thank you for telling us about your concerns. We're addressing the same matters in the Standing Committee on Industry, Science and Technology, and your industry is experiencing the same problems.
The increase in the dollar and the price of oil affects all sectors. In addition, in yours, the price of grain and things of that kind have a definite influence. I heard that the government might have to do this or find solutions to that, but what do you, who are in the sector, think are the solutions that the government could find to assist you?
As regards the rising dollar, of course, the Bank of Canada could lower interest rates by a point, a quarter of a point or a half point, but it isn't moving too much in that regard and is leaving the dollar at parity with the U.S. dollar, which is of no help to our industries. What would be the most concrete way the government could find to help you?
A little earlier you talked about the price of grain that will be sold to produce energy. That will increase the price of corn. Unfortunately, consumers will consequently have to face a price increase. Grain for human consumption will cost more. Give us some ideas. How can we help you in concrete terms? That's for everyone.
9:50 a.m.
Economist, Research and Agricultural Policy Branch, Union des producteurs agricoles
Thank you.
Ultimately, we see two aspects to the solution. There is the adjustment. If we talk more specifically about Quebec's situation, we've experienced it, among other things, with the pork industry and Olymel. That got more media coverage. Honestly, we would need an aggressive program that would help our industries adjust to this new situation regarding the Canadian dollar.
9:50 a.m.
Bloc
Robert Vincent Bloc Shefford, QC
You talk about an aggressive program, but what, in your mind, is this aggressive program that should be put in place?
9:50 a.m.
Economist, Research and Agricultural Policy Branch, Union des producteurs agricoles
I'll answer in two parts.
First, in view of the financial position of farm businesses, hog and cattle producers need income support soon. Various offensives have been launched through the Canadian Federation of Agriculture through its AgriFlex program and other programs.
I also met recently with the Ontario Federation of Agriculture, which has also made demands for an adjustment to the CAIS program margin. Of course you have to be a strategist with regard to countervailing measures, but those measures will send a signal to help people get through the storm. I even think that the ministers of agriculture acknowledged that in October. So we're waiting for a signal.
Then I can tell you about how we work with regard to adjustment programs. I can tell you about our situation. We need support in this effort. We appointed Mr. Coulombe to conduct a full analysis of the entire industry. We expect him to make specific recommendations on the stages that should be put in place to make our sector more competitive and ready to face these new realities.
Once these measures are known, we expect the Government of Canada will push ahead with the Government of Quebec and set the necessary reforms in motion. That's the kind of more concrete action we expect from the government.
9:50 a.m.
Conservative
The Chair Conservative James Bezan
Mr. Caleval, you wanted to get in on this, as did Mr. Phillips.
Mr. Mann first, and then Mr. Phillips.
9:50 a.m.
James Mann President, Farmers of North America Inc.
If I may, Mr. Chairman, I'll comment with regard to the fertilizer situation, as we are actively involved even at this very minute in negotiations on bringing in additional fertilizer.
Amazingly, to add insult to injury, this fertilizer is coming from the U.S., which had been exported from Canada down to the U.S. and it's coming back to Canada. There's something definitely wrong in the state of the situation when you can make that happen, but it revolves around the amount of competition that exists in the industry and the barriers to entering the market, particularly as we get to the season of use, which really becomes a logistical situation: how do we get the product from other markets into Canada?
That freight leverage is used by the companies in Canada uniformly, and we can guess how that collaboration occurs. But certainly they all behave in the same manner, and there isn't proper competition. When you try to get them to compete with each other, there are things that just do not happen.
Certainly Mr. Meyer pointed out a situation that exists nine years out of ten, in that you have lower input prices, particularly in fertilizer, through the summer. The unfortunate part is that we're suggesting farmers start incurring costs for the following crop year when they're still deep into their operating lines for the current year. If we're going to take advantage of the lower prices that exist simply because of the nature of the way fertilizer companies operate—they have shortages of warehouses and what not during the summer, they have to move that product, and there is more competition available during the summer—if farmers had access to capital or a program that would give them access to operating capital a year in advance, they could take advantage of that program. That is one significant thing that could be done, and how it's accomplished I'm not sure.
The big issue, though, is competition. How that occurs, I'm not sure, but I would suggest that perhaps farmers need to own their own fertilizer plant. Perhaps there are some things that could be done on the cost of the tax burden on natural gas, so that our natural gas costs are lower here in Canada, so that we wouldn't have to avail ourselves of natural gas that comes out of the Middle East or from Russia, which is at a lower cost.
The big issue, just to add a bit of relevance in terms of today's market, is that we are acquiring product that will bring product into Canada at about $80 a tonne less than what the market is here in Canada today. That is, if we can get the transportation system to work well for us.
One of the things we've encountered is a barrier not only to capital to build these mines but a barrier to access to the infrastructure to move that product. We find trucking companies and railways that are very close to these companies that have large volumes, and to get access to service, to get access to their resources to get the product where we need it is a challenge we face day in and day out. If there's something that can be done, if we can make the Competition Bureau more accountable to reacting to refusal to supply and to price maintenance issues, to make sure that when we put out requests for quotations, these companies cannot act in collaboration but have to act competitively, then I think we've gone a long way towards finding some solutions.
9:55 a.m.
Executive Director, Grain Growers of Canada
We also want to comment on the transportation, as to what exactly you can do.
I think what we need to see is a level of service review, both for the industrial shippers but also for the grain shippers. That costs, just on the income side, certainly western Canadian farmers. There are premium sales out there in the world, but people can't book those sales because we can't be sure to get the railcars, the engines, and the crews to get stuff to port in time for those sales. So level of service is one.
On costing review, we see them running over their estimates of what they need in terms of money, year after year after year. What are the actual costs of running those railways?
Lastly, on competition, maybe we won't see open running rights because there's a lot of lobbying against that, but there's more that can be done on the short-line end of things. Right now, if the railways, for example, on branch lines, abandon a branch line and put it up, a short line can get it. What they're doing is simply not running anything on the trains, so they're not using them. They're not abandoned, they're going to rot away, and they'll never be put up for sale to where competition can come in.
Those are some specific examples of where I think government could take charge.
9:55 a.m.
Conservative
The Chair Conservative James Bezan
Unfortunately, your time has expired.
We'll go to our next questioner, Mr. Lauzon.
February 5th, 2008 / 9:55 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Thank you very much, Mr. Chair.
Thank you very much for enlightening us, gentlemen. I think you've brought a lot of knowledge to the dilemma.
If I'm getting this message right, increasing competition in transportation and in the production of fertilizers would be very helpful.
Mr. Phillips, you mentioned maybe having more fertilizer produced here in the country, and then you talked about incentives. How can we encourage more competition? What's the big picture that you maybe have in mind?
9:55 a.m.
Executive Director, Grain Growers of Canada
I'm not sure I have the wisdom of the people around this table on that one. I guess that would take some study and work on what exactly the barriers are. Is there property out there that can be mined that's not being mined, and why isn't it? Are people holding onto properties and paying a charge just to keep it under their control so it can't be made available to other people? I don't have those answers.
9:55 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
So you're not aware of a lot of research that's been done on that issue.
10 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
I see Mr. Meyer. I was hoping to ask him a question as well.
10 a.m.
Executive Director, Grain Growers of Canada
Go ahead and ask your question first.
10 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Mr. Meyer, do you have a comment on that?
10 a.m.
Director, Grain Growers of Canada
Yes.
First I would like to point out that in many ways Mr. Mann's comments meet my perspective out there, because we operate on a similar ground floor. It's very important that we realize that when we're discussing this we're not engaging in some type of an artificial engagement and topic in a way that is not possible. So I hope we all come across here and participate in the discussion that is today's reality.
Today's reality is not that small operators can enter the field. What we let happen in the past few years is very simple: a dramatic concentration process. If people were sleeping through that process, welcome to today's reality. The fact is that the concentration process has now brought us here where jurisdictional and regional governments are not able to make much of an impact any more on some of those things.
We deal with global entities, and they apply globalization and global capital. JPMorgan came out a few weeks ago and made a shareholders recommendation globally on Saskatchewan potash. If anybody watched Saskatchewan potash shares go from where they were to the $200-some range after that recommendation, the fact is somebody has to pay for that equity appreciation. In this case it's the people buying the potash.
Potash is probably one of the worst examples. I need to say that at the common level, for some of us to make certain comments, we operate with those entities, so when we use names and what not, we want to say it's to try to make a situation better. We're not on a witch hunt, or whatever we're trying to do.
But on potash, that's probably the saddest thing out there. For 10 to 20 years, potash traded at $150 or $180 a tonne. All of a sudden there's a concentration there. One of the major multinationals bought IMC. Now it's Mosaic, and all of a sudden potash is $400. There isn't that much more expense being incurred to harvest and mine that potash, but one of the crassest examples we see out there is with potash.
With nitrogen we have a different scenario, because natural gas is in abundant supply, unless you talk about offshore factories coming in. The issue there is about shipping and quality control in the shipping process. So we may need to differentiate between increasing production in a different type of nutrient engagement between potash, phosphorous, and nitrogen. It's an issue of transportation and how well those goods can be transported.
