Agriculture Committee on Feb. 14th, 2008

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

It kind of concerns me in some ways, Dr. Klein. Do you advocate a cheap food policy?

[Dr. Kurt Klein]

A cheap food policy?

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

Yes.

[Dr. Kurt Klein]

Well, I'm not advocating anything. I look at myself as doing what I can for the agriculture industry. I'm an agriculturalist. I'm a farmer. I still have my farm in Saskatchewan. I was a practising farmer before I went back to university. I look at myself as having no vested interest except to try to help position the Canadian agricultural industry to be as competitive as it can be.

Yes, as a citizen of the world, I am concerned about food costs. I see, now, rapidly escalating food prices in some areas of the world. I see the problem in Mexico, where they don't even produce any ethanol to speak of, and the price of tortillas has jumped four times within a month, and they've had to put caps on. I see the prices in China. I just got back from China last month, and there the price of pork has gone up by 55% and the price of cooking oil by 35%.

This is going to happen to all the people around the world, and it will affect mostly the people with the lowest incomes, including the people with the lowest incomes here in Canada. If anything interferes with that, I think there should be a good reason for it. I don't see a good reason here for this. I don't think it's going to help us.

It will help the owners of farmland. If you have a farm, like I have, yes, farmland is going to be worth a lot more, just like houses in Calgary and Saskatoon are. But it's not helping the industry, I don't believe.

[The Chair, Conservative, James Bezan]

Thank you, Mrs. Skelton.

It's the Bloc's turn. We'll go to Monsieur Bellavance.

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

Thank you.

Dr. Klein, you talked a lot about jobs. You say that the agricultural energy system would not create a lot of jobs. This week, the Commission sur l'avenir de l'agriculture et de l'agroalimentaire québécois submitted its report. You may not have read it yet, but I can quote some of its contents relating to biofuel development.

It is estimated that the ethanol industry in the United States generated revenue of $41.1 billion and created 160,000 jobs in 2006. In the European Union, it is estimated that for each percentage point by which oil is replaced with biofuel, 45,000 to 75,000 jobs were created, 50% of which were in agriculture.

Are you familiar with these figures? Do you think this would be possible? Why do you think it would not be to Canada's advantage to develop the biofuel system, if only for the job creation aspect? I understand that there are other aspects to this. Not a lot gets said about them. You get credit for telling us about them this morning. So I would like to hear what you have to say about this.

[Dr. Kurt Klein]

Yes, thank you.

I'm not aware exactly of those studies, but I've seen many studies like those, and I think you must be wary. I do not deny that there are jobs created. All I'm saying is that the proponents often have exaggerated, I think, the number of jobs that come with this. Detailed studies by well-respected economists have shown, generally, that there are a limited number of jobs and a limited number of spinoff benefits.

The big spinoff benefit is during the construction phase. But after it gets going, it's very limited. Certainly there still can be more, but then you have to go back and ask, at what price? The creation of these jobs has been extremely expensive in Germany, for example, and also in the United States. Detailed economic studies show that it's very expensive to create these kinds of jobs, and the number of extra jobs is somewhat limited. But there can be, and if you spend more, you can get even more.

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

I am finding it a little difficult to understand your logic. You say that in any event, we are an oil exporter. You know, however, that oil is not a renewable energy source. Sometimes there are situations in which we think that previous governments should have taken action and done something a few years ago to avoid the situation we now find ourselves in.

Because oil is not a renewable energy source, we are going to have to consider alternatives at some point. We have to recognize that there are numerous countries that already have a head start on us in terms of renewable energy, including Europe, Brazil and the United States. I think that reducing our dependence on oil is beneficial not only for the economy but also for the environment.

In my opinion, if we do nothing, we will one day be dependent on the world market situation and what is happening at that point. As well, we may no longer have those resources. We have to think about developing them now, and obviously choose the right ones. What I understand from the commission's report, and it is being talked about a lot in Quebec, at least, is that what has to be done is to emphasize developing renewable energy like biomass — agricultural and forestry residues. That may also interest Mr. Toews. There is also a lot of discussion of slaughterhouse residues. I understand that our livestock producers' main purpose is to produce food, but there may be a market there that would be worthwhile for them.

[Dr. Kurt Klein]

Yes, I completely agree with that.

There are many opportunities for getting renewable fuels. I don't believe using food stocks that are for human and animal feed is the best way. Yes, we can get some fuel that way, but for the amount of corn that it takes to feed one person a 2,000-calorie-per-day diet for a whole year, you only get enough fuel from that to fill up your tank one time, and we burn it. That's food for people or for animals.

We can get a lot of renewable energy if we use forest stock, if we use grasses, if we use landfill waste. We don't have a big lobby group to generate interest and support for that policy. It will take a lot of money to that and we, as Canadian citizens, may well vote to do that—I would—and not touch our food and feed supply. We can use forest scraps, grasslands that are not being used for livestock feed, landfill, slaughterhouse remnants. All of those sorts of things--the food waste, the organic waste--generate biogas, which can be used for electricity. They're doing that all over Germany, Austria, and places in Europe.

I led a group of Canadians to look at many biogas plants in Bavaria and Austria two years ago. I think that's a good possibility, because it doesn't use food products, but it's expensive. And if we do that, it will cost.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Bellavance. Time has expired.

I ask that all responses are kept fairly brief, because we are in five-minute rounds here.

Mr. Miller.

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

Thank you, Mr. Chairman, and thanks to the witnesses for coming here today.

There have been a lot of good comments, some interesting. Mr. Klein, to say it straight up, a lot of your comments are pretty negative. It's a good thing that I'm an upbeat kind of guy, or I'd be pretty depressed by now.

Nothing is ever perfect. There's always a negative side. If you want to dwell on that, I guess you can choose to. But right now, with the environment, and what have you, there are societal pressures out there. This is something they want to see. Governments have a tendency to listen to the electorate.

What I'm saying is that it's here to stay. Grain prices go in cycles—they go through hills and valleys. I believe they were starting to rebound, but this has no doubt had an impact on the high grain prices.

It's good to see that they're profitable now after five or six years. This has had some effect on the other sectors, which we recognize. But no sector of agriculture out there—and I think this is an honest statement—wants to be profitable at another sector's expense.

I suggest that we look for ways to address the profitability in all the other sectors. What research have you done, Mr. Klein, to move toward that? You talk about poor use of canola—I'm going to use canola as an example—and claim that there are better uses. Could you suggest another use for canola that would get the same profit? I'm using canola because Ms. Buth is here representing them. What kind of research have you done? Do you have any suggestions?

[Dr. Kurt Klein]

I don't want to leave the impression that I'm completely negative on this. I'm trying to show what the impacts are going to be. I'm only a voter. I try to be as objective as I can in my research, and I think I'm correct about the impacts.

I have not done research on canola. I don't know what the answer is. I observe what's going on in the livestock industry now. By the way, I'm not beholden to the livestock industry. But I have noticed the economic vigour in rural areas as the livestock sector started to move back into western Canada after the removal of the WGTA, or maybe a little earlier.

At the end of the 1980s, Canada was almost self-sufficient in beef production. We were small net exporters in some years and small net importers in other years. By the time of the BSE crisis, we were 40% net exporting.

The pig sector has grown rapidly also. This has generated all kinds of economic activity throughout the rural prairie provinces. I think it's in some jeopardy now.

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

Are you suggesting that we shouldn't be exporting our products?

[Dr. Kurt Klein]

No, I'm not suggesting that at all.

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

Okay, but you're getting away from my question.

[Dr. Kurt Klein]

I'm suggesting that we shouldn't interfere too much in the economy. In my career—and almost all of my economist friends will agree with this—nothing this big has ever happened in agriculture. This is going to produce a fundamental change in agriculture.

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

You really didn't answer my question.

I'm going to go on to Mr. Toews. It's good to see you here again, Travis. What can we do to help out, to increase profitability? Even though we're talking about Bill C-33, there must be a connection to your industry, or you wouldn't be here.

What kinds of things can we look at here? With respect to SRMs, for example, is there any research that would generate some gold at the end of a rainbow, a huge profit? That's one example. Maybe you could comment on some other ways to make it profitable.

[Travis Toews]

Thanks for that question.

I'll maybe just put forward three quick suggestions.

One, of course, is that we like to operate on a level playing field, firstly. I think that's why I am here today.

Secondly, there is some opportunity, I think, in the longer term with SRM disposal and for some actual value creation. We are now faced with extra regulatory costs and burdens with the enhanced feed ban. We are bearing the burden of disposal costs, which we have asked for some assistance on for the industry in the short term to help offset those regulatory costs. So that is one action that would help us directly, if the Government of Canada acted on that recommendation, which we have put forward in the past and continue to put forward.

Thirdly, as feed grain users, we need our feed grains industry in Canada to be as competitive as possible. There are regulatory barriers to the new variety approval process that need to be addressed, particularly the issue of KVD—which I actually commend this government on for moving quickly—but also the plant novel trait issue. We need to ensure that the Canadian grains industry has access to the best and most expeditious technology and biotechnology that it can....

[The Chair, Conservative, James Bezan]

Thank you. Your time has expired.

Mr. Boshcoff, the floor is yours.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you very much.

I'm just wondering, in terms of Canada's production of grain, we probably are in the range of 50-plus million tonnes. Is that pretty accurate in terms of the numbers? So if we have a mandate of 10% for ethanol, and we have that much capacity, how would that either force prices or be so competitive that we couldn't supply the industry, if that comes to eight or nine million tonnes for that particular product?

The second part of that question—and I know that the canola people would rather it be canola—is that in my tours of my regional agricultural research stations and from having demonstrations of things like switchgrass, and given the interest they have in northwestern Ontario for other biofuels, such as what they call wood waste.... And I hate to use the word “waste”, but we know that in Canada, regrettably, we burn and slash it, and other forms of things. So I'm just questioning the capacity issue. It seems to me that the industry has been very clear about not being able to impact. So the debate today seems to be that we're either going to be forcing the cattle and pork industry, or it will be priced at a level that will actually make it reasonable in terms of those questions.

If maybe all of you take a quick slam at that one, it will probably run out our clock.

[JoAnne Buth]

Just on the biodiesel side of things, when you take a look at something for producing oil, the research that is going on right now is for things like algae, which would produce oil. Any of the other waste products are really a stream for cellulosic ethanol. So on the biodiesel side, what is likely to happen is that it will go from biodiesel to a hydro-treated product, which will still use oil; and then the research will come along in terms of perhaps other feedstocks on the biodiesel side.

You mentioned grains and oilseeds and the amount that is being used right now. It's a small amount of our total canola crop, obviously. Our focus is on premium markets. We're not a food crop that frequently goes into lower-priced markets. We're a premium product because of the healthy profile that we have, so we're always looking for opportunities for premium markets and for utilization at home, in addition to the exports we have.

[Dr. Kurt Klein]

We live in a market society and a market economy, and the markets will clear. No matter how much wheat or corn or canola is taken out of the market to produce biofuels, the price will adjust upwards and somebody will buy it. It will just become more and more expensive as more is taken out.

What we must realize, and what Mr. Toews mentioned earlier, is that the worldwide supply and demand for cereals has been going down. Six years out of the last seven, production has been less than consumption. So we are now at a point less than 60 days, less than 57 days, of worldwide consumption in stock across the world. It's the first time since the early 1970s, when we had the great Russian grain robbery, that this has happened. This is why grain prices have spiked.

Now, of course, all the uses of grain are taken out, but the big new one is particularly ethanol in the United States, but also the ethanol and biodiesel in other countries. When we get such a short situation, just a small crop failure or even a reduction in crop yields almost anywhere in the world is going to have the same impact. It doesn't matter where. This is a worldwide market, and all of our producers are going to be affected by that.

I agree that Canada's impact here is going to be rather minor--we don't have that big a production--but certainly in specific local areas it could be important.

[Travis Toews]

I would agree with that concern. Again, our concern is really in the year of shortage. With a 5% renewable fuel standard, under normal reasonable growing conditions in North America, the Canadian mandate could be fulfilled, but there is concern for a year of drought, for a year of shortage, in any of the major grain-growing areas of the world, but particularly in one of the areas within North America's jurisdiction.

At this point in time, we feel the livestock industry could be devastated, and in fact the grains industry could see one of the major customers of their product lose significant infrastructure in a very short period of time, which I would suggest would not be advantageous to that industry in the long term.

[The Chair, Conservative, James Bezan]

Thank you. Time has expired.

Mr. Lauzon.

[Guy Lauzon, Conservative, Stormont—Dundas—South Glengarry, ON]

Thank you very much, Mr. Chair.

Mr. Toews, I listened with interest when you mentioned that the elimination of KVD would certainly help the situation for new crops. The Wheat Board is on record as resisting this. If you have any contacts at the Wheat Board, I wonder whether you have any influence to be able to convince them of your approach. We've been trying for some time. It doesn't seem to be getting through.