Evidence of meeting #15 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 canola.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

JoAnne Buth  President, Canola Council of Canada
Kurt Klein  Professor, Department of Economics, University of Lethbridge
Travis Toews  Director and Vice-Chair, Domestic Agricultural Policy, Canadian Cattlemen's Association

10:30 a.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Mr. Chair, on a point of order, would the parliamentary secretary outline all the others that are opposed to this, as well, including the grain industry, which is worried about our export position, in that a decision would be made without any impact analysis on August 1, 2008, when they're saying August 1, 2010?

10:30 a.m.

Conservative

Brian Storseth Conservative Westlock—St. Paul, AB

That's not a point of order, Mr. Chair.

10:30 a.m.

Conservative

The Chair Conservative James Bezan

It's an issue of debate.

Mr. Lauzon.

10:30 a.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Ms. Buth, just very quickly, because I have a few other comments, you mentioned that for a 2% biodiesel inclusion rate, the amount of canola needed would be 1.3 million tonnes. Could you explain how you arrived at that figure?

10:30 a.m.

President, Canola Council of Canada

JoAnne Buth

A 2% inclusion rate would mean that the amount of biodiesel needed would be 600 million litres. If you figure out the amount of oil in canola that's required to make biodiesel, it's 385 litres per tonne, so it works out to 1.3 million tonnes. That's assuming that we would take all of the 2%, and obviously we wouldn't take all of the 2%. If we took 70%, it would be 1 million tonnes.

10:30 a.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Thank you very much.

Dr. Klein, with all due respect, like Mr. Miller, I don't necessarily agree with your pessimism. All of us around the table here--most of us represent rural areas--I think as members of Parliament do our darndest to try to create economic growth in our rural areas. Most of the witnesses we've had, many of the people I've spoken with, say just the opposite of what you're thinking--this is an economic generator; this is going to create quite a bit of wealth and quite a bit of growth in our rural areas. We've had witnesses sit right where you are and explain that.

Most economists will say if you can create one job, usually there's a spinoff, and I think it's three or four additional jobs that result from that. You seem to be so negative about this. I just can't understand. You say you're a farmer from rural Saskatchewan, I believe. Isn't this so needed in the very area you come from? Most people are saying this could be our salvation.

10:35 a.m.

Professor, Department of Economics, University of Lethbridge

Dr. Kurt Klein

I've seen many economic studies that have been done on this, and it's from them that I'm taking my information. Yes, if I could get it organized so that there would be an ethanol plant right in Canwood, Saskatchewan, I think the people of Canwood would be very happy, because there would be jobs there. But what I'm saying is that the overall effects of this will probably be to reduce industry in some other rural sectors. You cannot just take the gross gain in employment from a single plant.

10:35 a.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Surely the solution is not to set up the plants in Iowa or across the border. Is that what you're suggesting? That seems to be your solution.

10:35 a.m.

Professor, Department of Economics, University of Lethbridge

Dr. Kurt Klein

No, that's not what I'm suggesting. I'm saying that the proponents of the biofuels industry have, I think, to some extent exaggerated the level of economic activity that will be taking place. If you listen to Mr. Toews and others from the cattle industry or from the pig industry, particularly in Manitoba, you will hear a lot of worries about this; that in fact employment might go down in their sectors as a result of this.

That's all I'm saying: that we have to be careful with these. I've seen a lot of quotations that show a large number of jobs, but when you examine those carefully in economic studies, they're generally much fewer than what had been suggested.

10:35 a.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

I'll read a quote here for both Mr. Toews and you, Dr. Klein, from a couple of people in the very business you're in, Mr. Toews.

Kevin Hursh, who is a consulting agrologist and farmer, said:

Even though Canadian ethanol will make little if any difference to world price levels, the George Morris Centre notes it will keep Canadian feed grain prices relatively high as compared to U.S. prices.

What do we have against grains and oilseeds people making a living?

Clare Schlegel said:

We are not complaining about the increase in grain prices.... What we had seen before was unsustainable and our grain farmers were not going to survive.

Mr. Toews, you need grain to survive. We have to keep the grains and oilseeds people in business. This is another opportunity for them. What's the matter with giving them an option?

10:35 a.m.

Director and Vice-Chair, Domestic Agricultural Policy, Canadian Cattlemen's Association

Travis Toews

I'd like to be clear. We're not opposed to the biofuels industry. We are concerned when we have a competitor for feed grains with whom we compete on an unlevel playing field. Our suggestion is, let's see this biofuels industry created based on market fundamentals, which will ensure that growth is at a more manageable pace, that feed grains supply increases will be able to keep up with demand, and that at the end of the day we don't replace one value-added industry with another, the latter being created in large part on government policy. There we may find ourselves in a difficult position.

10:35 a.m.

Conservative

The Chair Conservative James Bezan

Thank you. Time has expired.

I want to jump in here briefly. I'm a Manitoba cattle producer, as Mr. Toews knows, and I know, Dr. Klein, that you're a good teacher. I have one of your students working for me, and she's fantastic; I can tell you that.

You talk about a level playing field. I lived through all the Alberta subsidies, buying up the packing industry and the cattle business, moving all the feedlots over into southern Saskatchewan—

10:35 a.m.

A voice

That's socialism.

10:35 a.m.

Conservative

The Chair Conservative James Bezan

It definitely wasn't a level playing field. I'm sure the Alberta government would say that sometimes you need those incentives to start off a business, and that's essentially what Bill C-33 is about. It's about providing short-term incentives to start off an industry.

Dr. Klein, you're right down on feedlot alley, and Travis and I benefit from those feedlot guys getting all those dollars to start off their businesses, the packing plants intended to start there. They buy our calves and put us in a better fiscal position, because they can be more aggressive in the marketplace than the poorer feedlot operators in other parts of the country.

Do you believe government incentives to start off those types of businesses that are so close to your area are wrong?

10:35 a.m.

Professor, Department of Economics, University of Lethbridge

Dr. Kurt Klein

Generally, I don't like to see passing the hat among the taxpayers to help out any particular sector, if they can't make it on their own. However, I'm not against giving some kind of help to get started.

I guess what I would like to have seen is this kind of assistance given to the development of the biofuels industry, but without a mandate, because it forces this becoming the first use of that feed. The feed has to go for that, because Shell Canada and all the other oil companies must have this 5%; that comes first.

If they were just producing ethanol because the Canadian consumers wanted it and there was a market for it at the price at which they could produce it, and we were to give them a little help to get started, I have nothing against that. But this could become a continuing source of subsidy and certainly a distortion in the economy, when there's this mandate.

10:40 a.m.

Conservative

The Chair Conservative James Bezan

Mr. Toews, do you have any comments? You talk about the level playing field, and I know you didn't benefit from all the irrigation development that happened in southern Alberta. It didn't happen in Peace River, so I know you kind of feel there wasn't a level playing field within the province of Alberta.

10:40 a.m.

Director and Vice-Chair, Domestic Agricultural Policy, Canadian Cattlemen's Association

Travis Toews

There's no doubt there have been incentives in the beef industry in Alberta at various times. I'm not going to be an apologist for the Government of Alberta on that issue. However, our first policy point is that we recommend that the biofuels industry transition to market-based fundamentals. We recognize that this government would like to help kick-start the biofuels industry in Canada. Our recommendation is that, as quickly as possible and on a transparent timeline, that sector be adjusted over, moved over, to be based on market fundamentals.

10:40 a.m.

Conservative

The Chair Conservative James Bezan

I'm glad to see, Dr. Klein, that you mentioned the Manitoba hog industry. There is an industry that was developed based upon market fundamentals. Manitoba is one of the cheapest areas in which to produce livestock. That's why we've seen such an increase in the industry there, although there are moratoriums and stuff in place now because of the province of Manitoba.

I never entered politics to advocate a cheap food policy. I want to make sure that all farmers can get a return from the marketplace. I do take exception to some of the comments that were made about wanting to keep food prices down. We have to remember that what's happening here in the grain industry--and I think it's been unfairly laid on the shoulders of the biofuels industry--is that we had some very difficult growing conditions around the world this past year. There were grain shortages across Europe because of bad harvest conditions. There was drought in South America. There have been tough growing years for a few years now in Australia. That's creating the shortage that we have and driving up these prices. It's not the biofuels industry that's going to be driving market prices and forcing grassland out of production to put it into grain production for the biofuel industry. It's going to be converted over because there's such a high value in crop prices, and farmers are always going to respond to the marketplace. I think that is fundamental. I'm just going to leave it at that.

Mr. Atamanenko, do you want to follow up with some supplementary questions?

10:40 a.m.

NDP

Alex Atamanenko NDP British Columbia Southern Interior, BC

Chair, how much time do I have--ten minutes?

10:40 a.m.

Conservative

The Chair Conservative James Bezan

I'll give you five minutes, because Mr. Easter wants back in here as well.

10:40 a.m.

NDP

Alex Atamanenko NDP British Columbia Southern Interior, BC

Thank you.

I just want to make a comment on food. I talked about the environment. There's an article called “The Looming Food Crisis”, by John Vidal, inThe Guardian, August 29, 2007. He starts off by saying:

Land that was once used to grow food is increasingly being turned over to biofuels. This may help us to fight global warming--but it is driving up food prices throughout the world and making life increasingly hard in developing countries. Add in water shortages, natural disasters and an ever-rising population, and what you have is a recipe for disaster.

Then he goes on to talk about the United States. He says that this is “bringing new money to rural America”, and we see that, but it's “also helping to push up the price of bread in Manchester, tortillas in Mexico City and beer in Madrid. As a direct result of what is happening in places like Nebraska, Kansas, Indiana and Oklahoma, food aid for the poorest people in southern Africa, pork in China and beef in Britain are all more expensive”.

He goes on to say that the Americans “are patriotically turning the corn belt of America from the bread basket of the world into an enormous fuel tank”. He goes on to talk about corn that used to go to cattle feed and food aid now going to ethanol, and the fact that this will have a devastating effect on developing countries.

We tend to be kind of insular. We look at what's happening here, and we look at the prices our farmers are getting, and we say that it's good and that we're much better off. But in a sense, is what we're doing, then, changing what's happening in the world?

Later on we see that the UN World Food Programme predicts that the demand for biofuels will grow by 170% in the next three years, so food prices are going to rise between 20% and 50%. For us, maybe we can handle that, but for a developing country and poor people, this is devastating, and we've seen that in Mexico.

I'm wondering whether we are going in the right direction with regard to what is happening in the world. That's the first question.

I have three specific questions, then I'll stop.

Mr. Toews, you mentioned biotech. Do you foresee that the accelerated push for biofuels will increase the pressure to get GM wheat? That's a question for you.

Ms. Buth, Manitoba, in its policy, has a 10% limit on crops that are going to be used for ethanol. That's the policy. They've decided to limit it. Should we be setting a limit for canola in Canada, or in other words, designating just 10% of our arable land for biofuels and the rest for food?

Dr. Klein, you said that fundamentally, this could change the face of agriculture. I'd like to know how. And if that's the case, should we be adopting this?

I'll start with Mr. Toews.

10:45 a.m.

Director and Vice-Chair, Domestic Agricultural Policy, Canadian Cattlemen's Association

Travis Toews

Okay, the answer's yes. I expect that the emergence of the biofuels industry and its quick increase is going to accelerate calls for GM wheat.

10:45 a.m.

President, Canola Council of Canada

JoAnne Buth

The question was whether we should have a limit in terms of canola that goes into biofuels. Well, the 2% will be the limit. If there's a 2% mandate, that's essentially what will go in. One of the reasons we need a mandate is that this won't happen without it. The petroleum industry, yes, is interested in it to some extent, but unless there is a mandate, it won't happen.

I think the 2% will be fine. As I indicated, as of last year it would be 14% of the crop. We see the crop increasing in size, so in the long term, I would say that we're looking at maybe 10% of the crop for canola.

10:45 a.m.

Professor, Department of Economics, University of Lethbridge

Dr. Kurt Klein

Yes, I worry that this could change the fundamental nature of agriculture production in Canada and in the United States and around the world, really. It will go from being for food and feed production to being for more biofuel production.

I think it's certainly going to exasperate the differences in incomes in agriculture. Those who own farmland will gain significantly from this. Those who are renters, tenants, or labourers--the labour resource--will get very little out of this.

There is likely to be a big impact on the livestock sector. As I mentioned in my comments, I'm quite worried about the pig industy in Manitoba and whether we can even retain that. Across the prairies, really, we're seeing a lot of pressure on it now and on the cattle industry across the west, but particularly in southern Alberta. I don't know. We have not done studies on this. We don't know what's going to happen, but I fear that it could have lasting impacts on that sector as well.

10:45 a.m.

Conservative

The Chair Conservative James Bezan

Thank you. Your time has expired.

Mr. Easter.