Agriculture Committee on March 6th, 2008

[Peter MacLeod]

As you might recognize, this is a global issue. It's not just in Canada. Prices have been rising all over the world. Oil prices are one issue that's coming into play.

I think the overall global demand for a lot of the ingredients that go into the making of pesticides is for use in other products that are non-pesticide related. So there's certainly a lot of competition for demand elsewhere for these products. We've been hearing about a lot of issues across the world related to pesticides and shortages of availability, just because of the demand globally.

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

I'll start with Mr. Orb.

Do you think the lack of competition...? Maybe I missed it, but I don't know whether you commented on the lack of competition—Mr. Qualman talked about fertilizer dealers. Is that causing us problems, especially in Saskatchewan, with less population than other provinces?

[Ray Orb]

I don't know whether it necessarily has a relationship to the population. Saskatchewan has pretty much half the agricultural land in Canada.

I mentioned this before, and I don't know whether it really answers your question, but we are seeing more integration. Some of these companies are buying other companies up; we know that's happening.

Saskferco, one of the biggest producers of nitrogen in western Canada right now, I believe, which is located just out of Regina, is 50% owned by Mosaic, which is, as you know, a fairly big company that is in turn co-owned by IMC Global and Cargill. They're controlling basically from the production state, when they're taking it out of a mine, to the processing end of it, and from there into the retail system.

That also, we think, controls to some extent the price of nitrogen fertilizer, phosphate, and potash. It takes care of all three, which are the main crop ingredients, for sure.

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

We have a dealer at home who buys massive amounts and has huge storage sheds. He's a private businessman. He buys his fertilizer and handles a huge amount. He tends to keep the prices down, yet he doesn't contract with his farmers. We're seeing a lot of farmers in Saskatchewan now contracting their products at the start of the year to a grain company and then using it right through.

Is doing the forward contracting causing a lot of problems to our farm families?

[Ray Orb]

Are you talking about crop prices?

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

Yes.

[Ray Orb]

No, I wouldn't think it's a problem at all. I know for a fact that farmers are doing it this year to try to hang on to the high grain prices. Sooner or later this bubble, we think, is going to break, at least in the short term.

Some producers are doing this with inputs as well, the problem with that being that farmers are generally short of cash because they're trying to catch up from decades of low profits, so the cash isn't out there. They're having to replace worn-out machinery, having to upgrade some buildings as well, and pay off long-term debt.

Believe it or not, even though the grain prices were high, that affects people who have had a good crop, and last year in Saskatchewan not everybody had a good crop. A good part of our grain belt is dry; probably about 40% is below normal right now. We have lobbied the federal Minister of Agriculture for some time on this. There's a severe drought in the northwest area of the province, and that's a big part of our grain belt. There's still a herd out there, believe it or not.

So farmers are trying to do this, trying to save money by pre-buying, but the cash isn't always there.

[The Chair, Conservative, James Bezan]

Time has expired. Thank you very much.

Madame Thaï Thi Lac.

[Ève-Mary Thaï Thi Lac, Bloc, Saint-Hyacinthe—Bagot, QC]

Good morning. I thank you all for coming to meet with us this morning. This is very much appreciated. My first question is for Mr. Orb.

In one of your recommendations to this Committee, you encourage the federal government to keep OUI in place until the efficiency of GROU can be demonstrated. If there are two similar programs in place at the same time, isn't there a risk that the temporary program will influence the efficiency of the new program?

[Ray Orb]

We don't see a danger of it, no. We really believe the OUI program was working before. We realize there were some concerns about the stewardship program to recycle the empty containers, and those, we understand, were taken care of. We had some companies that did this on behalf of farmers, and we thought it was working quite well.

We would see no reason to go through a more cumbersome application form, something that's going to be costly. If it's not cumbersome for farmers but is cumbersome to the retailers, that cost is always passed on to producers. We just think it's a bureaucratic nightmare to put people through that. We think it's totally unnecessary.

[Ève-Mary Thaï Thi Lac, Bloc, Saint-Hyacinthe—Bagot, QC]

My question is for Ms. Maase.

You have explained to us that seven products had already been approved through GROUT, but that six more products were presently under study. I would like to know what is the average approval time period for novel products.

[Peter MacLeod]

The government has set out a time process to evaluate these products. That's a question for them. Our member companies provided the information to the government to evaluate those products, so I'm not really sure why there is a delay. There are seven right now, and my understanding is six other products are still under consideration. I'm not sure where that process is. I know our member companies have provided the government with enough information to make that choice.

The other point I'd like to make is that there's currently one product under the own-use import program, and that product is now currently available for sale in Canada through the normal chain of buying and purchasing pesticides. It's also a candidate under GROU, and I'm not sure why that product would not be available for farmers under GROU for the future either. There should be no reason.

[The Chair, Conservative, James Bezan]

Mr. Wideman would like to get in on that.

[Paul Wideman]

I think there's also some good information in the feed industry for the question that Ms. Skelton asked about the approval time period for novel products. We would have some data we could put forward to the committee comparing how long it takes for the same product to be approved in the United States, Latin America, Brazil, and Europe versus Canada.

I'd like to say we're even in the middle or near the top, but we are at the bottom as far as the number of days it takes. We take longer than any other country to approve feed ingredients.

We'd love to put those comparisons forward, because I think we want to compare ourselves to other countries in the world.

[Ève-Mary Thaï Thi Lac, Bloc, Saint-Hyacinthe—Bagot, QC]

I have no other questions.

[The Chair, Conservative, James Bezan]

Thank you.

Monsieur Bellavance.

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

Mr. Wideman, in your recommendations, you suggest to the government to adopt a biofuels strategy using cellulosic-based feedstocks rather than corn. However, I would like to know if you have an intermediate solution as the technology for ethanol production from cellulosic feedstocks is less developed as it is for corn-based production. Furthermore, fuel price increases are causing problems to your clients and yourself.

When we talk about using biofuel, it is to reduce our dependency to oil. I see a slight contradiction in what you are wishing for. In fact, I can understand what your goal is. Ideally, biofuels should not be made from livestock or human food, but you have certainly been following our discussions on Bill C-33.

What do you suggest until it is really possible to produce ethanol from forestry or agriculture waste? Should we do nothing? Should we wait? What is your opinion?

[Paul Wideman]

I think the one thing we want to state clearly is that we feel the investment that's gone into ethanol to this point has not been thrown away. It accomplished what we had wanted it to accomplish, which was to raise the value of some of the products our Canadian farmers sell.

The halfway solution: I think a wait-and-see approach can be done. The technology does have to catch up. Certainly it even needed to catch up to corn production. I don't know if you're aware of some of the statistics, but today we produce far more ethanol from a bushel of corn than we did when the first plant opened in the United States. Technology quickly catches up. I believe that will also continue in other sources of biofuel materials.

I think the crux of all the input cost issues comes down to a lot of what Darrin has been talking about, which is simply a competition. Farmers need to be able to have as many people buying their products as possible, which certainly the ethanol program did. It created another market for a farmer to sell his corn. On the flip side, though, that farmer needs to have the same opportunity to buy his products in the competitive market, and if that playing field is fair, everything is good.

[The Chair, Conservative, James Bezan]

Thank you very much.

Mr. Lauzon.

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

Thank you very much.

My comments will be directed to Mr. Wideman. But I welcome all of you and thank you for your presentations. They were very helpful.

Mr. Wideman, I notice under “world feed production” you show that Canada produces 15 million tonnes of commercial feed. Then you show 25 million total Canadian feed production. Can you explain the discrepancy there?

[Paul Wideman]

Absolutely. The industry we represent produces commercial feed. The 25 million is the total feed for Canadian meat production. So we only represent 60% of the feed produced in Canada.

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

Like Brian, I have all kinds of questions here. I notice that 10 million tonnes of the 25 million tonnes you produce come from on-farm feed production. In most industries there's economy of scale. Is it costing us a little more to do it on the farm as opposed to in a larger mill?

[Paul Wideman]

That's an excellent question.

On the input cost of feed into livestock, the commercial feed industry is one avenue by which a farmer can purchase his input cost. He can also produce his feed by himself on his farm by using his own grains. As I said to Darrin earlier this morning, if the commercial feed industry was unfairly margining the feed produced and that was contributing to the net losses of farmers across this country, you would see far more farmers grinding their own feed on the farm. Second, farmers who ground their own feed would be more profitable than farmers who bought from commercial feed mills. I haven't seen any statistics to show that's true. So I don't think it's putting us at a competitive disadvantage to grind on the farm versus commercially. It's competition again.

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

Thank you.

I'll ask you this, and maybe I could get an answer from everyone. With the Canadian dollar doing what it has done in the last few months, I guess there are upsides and downsides to everything, and increased input costs are really.... But it seems to be a perfect storm, and a lot of that has to do with the Canadian dollar. If the Canadian dollar wasn't where it is, explain how things would be.

[Paul Wideman]

That is a loaded question. This is not the first time grain prices have hit this level.