Evidence of meeting #21 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 prices.
A recording is available from Parliament.
Liberal
Lloyd St. Amand Liberal Brant, ON
I have only five minutes, Mr. Haney, so I don't want you to consume it, but with respect to Mr. Easter's questions and what I assume was a desire on your part to flesh out an answer—I can't remember the context—did you want 30 seconds or so to expound on what you were going to say?
Manager, , AgroCentre Belcan inc.
Yes. At the beginning Mr. Easter mentioned that it's not up to the agri-retailer to go to the farm to finance their operations. I take total offence to that.
We're in business too, as the farmer is. There are lots of programs for the farmer. We have to purchase and store the product, follow the regulations, and make sure it's on time for that short season in the spring that the farmer has to apply it. Mr. Easter knows well enough from his constituents on Prince Edward Island that patience is not necessarily a virtue with most of them.
That's all I have to say about that.
Liberal
Lloyd St. Amand Liberal Brant, ON
Well, that was enough.
To Mr. Graham or Mr. Larson, in your presentations, both verbal and written, you talked about Farm Credit and posed the suggestion that the current lending programs don't provide farmers with flexibility. The way it's phrased, you're certainly making it sound as if there should be something better or more flexible.
What specifically would you recommend in terms of Farm Credit lending programs?
Vice-President, Strategy and Alliances, Canadian Fertilizer Institute
We're echoing what some of the farm groups said when they appeared before the committee earlier this year. In the years I've spent dealing with farmers, getting between farmers and their finances is a difficult thing. I think the arrangement they need is something that farmers should be sitting down and discussing with the government. I think the specifics of that is something the government would want to discuss with farmers.
What we're talking about with the general concept of flexibility is whether farmers have the flexibility they need to time their purchases, to take advantage of buying opportunities if they present themselves. That might be in October, in January, or it might be at the last minute. We don't know how the market is going to unfold in any given year, but I think having that flexibility to make purchases and commitments on supply throughout the year would be advantageous to farmers.
It's a complex question. It's part of the whole assistance package that the government has. There are many levers the government has with farmers. I think it's something that needs to be assessed carefully, and obviously there's a public purse to consider.
I would say the same thing related to Farm Credit Canada. There are excellent programs at Farm Credit Canada, but they need to be reviewed on a regular basis. Are they responding to very different market conditions?
There has been a change in agriculture internationally. This is fundamental. The world has changed. China and India are influencing agricultural markets in the way they never have before.
Liberal
Lloyd St. Amand Liberal Brant, ON
Maybe I'm yearning for something more precise and it's just not possible.
I know Mr. Storseth discussed with you, Mr. Larson, the cash advances made available to farmers. It seems to me that the problem's been identified: farmers are feeling the pinch, they need more flexibility, and they need more cashflow at certain times of the year. What, in a nutshell, should the government be doing to assist farmers?
Manager, , AgroCentre Belcan inc.
If you don't mind, I'll take 30 seconds on that. Farm Credit Canada has a great program for helping out or providing assistance to farmers. They provide the loans to finance their input costs, and we administer the program for, basically, a very small percent of interest. This is in effect. Right now they offer prime plus 2%. They take the CIBC prime rate plus 2% and offer it to them. A majority of our farmers, when we go in there early to offer this money, will take it up, take that money and purchase their inputs early. It puts them in a position that is much more competitive.
If they were to wait, some—those who refuse it—go to their bank margin and pay. What we like about it is that they have no real excuse not to pay you on time either.
Thank you.
Conservative
Conservative
Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK
Mr. MacKay, I find what you were talking about this morning, the dumping across the border, very interesting. I want to know if you agree with me that agriculture over the last five to six years has changed tremendously in Canada—and Mr. Haney will understand that very well.
When Mr. Easter talked about agri-retailers, I looked at the differences in the provinces. I know a lot of our agri-retailers do a lot of, shall we say, financing for a lot of our agriculturalists. In the province of Saskatchewan, we saw the change in the cropping patterns. I want to know if you're seeing this right across the country. Because of the cost of fertilizer, the changing of herbicides and pesticides, a lot of farmers in Saskatchewan have picked up on the pulses to put the nutrients back into the ground, so they can cut back a little bit on their fertilizer, etc.
Are you seeing that, and can you explain a bit more about the dumping? It is something I hadn't realized until you started talking about it. I think it's something we have to make known to Canadians.
Executive Director, Canadian Association of Agri-Retailers
There's no question that there's a new dynamic at play. The rules have changed. I would maybe refer crop allocation to Mr. Haney, in terms of his customers and where the crop allocation is going. Of course, it is matching inputs. Adaptations are being made strategically to maximize yields and revenues.
However, on the dumping side it's a unique, one-time snapshot. Again, it's anecdotal. I don't know how we could measure it. It's interesting. North Dakota retailers know they have a very good market with Manitoba retailers and farmers, so they tend to take advantage of it. We often don't even see a border there. We're probably closer to North Dakota than we are to any other part of Canada, so there's a lot of active trade that goes across the border.
Dumping is not something that I think would go on for long. I think the markets have to reach equilibrium at some point. I would not be surprised if pricing has changed substantially in the last month or two—closer together, the gap has certainly narrowed—but I'm not sure how we might further study the dumping issue. Right now the only way I can relate it to you is anecdotally.
Conservative
Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK
Mr. Haney, did you want to comment on this?
The one thing I'll go on to is that it's interesting hearing you talk about the safety of the tanks. We have regulations in this country on slip tanks in the back of a half-ton. What are we doing allowing anhydrous tanks to go back and forth across the border? That's a grave concern to me.
Mr. Storseth talked about the Redwater plant. Who owns that? Does anyone know who owns that plant? Roger.
Conservative
Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK
Agrium owns it. So we manufacture it in Redwater, it's shipped into the United States, and then we pay to have it shipped back up. Is that correct?
President, Canadian Fertilizer Institute
I don't know if very much of the Redwater product would actually go to the U.S. It would probably serve northern Alberta and northwestern Saskatchewan and maybe the eastern Saskatchewan market area. The product that would be moved into the U.S. probably comes from Canadian Fertilizers in Medicine Hat; from Joffre, which is another Agrium plant; from Saskferco; and from Koch Nitrogen in Brandon.
Conservative
Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK
So in northern Saskatchewan, let's say in Saskatchewan and Alberta, we shouldn't really have to pay that much freight on it. Right?
President, Canadian Fertilizer Institute
No, the freight is very substantial, very expensive. We've seen rail freight rates in the last two years for anhydrous ammonia increase by 100%. The railways are basically doubling the rail freight cost. They're introducing requirements for a complete change-out in the anhydrous ammonia railcar fleet.
We're probably going to have less than 10 years to replace tank cars that were originally designed to have a 40-year life. There is a huge depreciation cost, a writeoff cost, on those railcars. And as an industry, we've been making substantial investments in the anhydrous ammonia industry in western Canada.
Every one of those g-bullets that you see at retail locations across western Canada has been picked up, taken to Calgary, mag-particle inspected, which is a black light inspection, heated, and retempered and repaired to correct stress corrosion cracking. It's a hugely expensive undertaking that the industy in western Canada has undertaken for safety and to stay in business in the long term.
So the kind of transportation and distribution costs you're looking at are very high.
Conservative
Conservative
The Chair Conservative James Bezan
I'm sorry, Ms. Skelton.
I wanted to say to Mr. MacKay that you used the term “dumping”. I think it is the wrong term. It is competition you're seeing from the U.S. agri-retailers. Manufacturers dump if they're dumping into a market to steal market share or to liquidate product below the cost of production. I think what retailers down there are doing is offering a sale, but it's not necessarily at dumping prices. I think they are just reducing prices.
Also, the comment you made in your anecdotal evidence is that soybean acreage is increasing. Actually, to the contrary, all the cropping reports I'm seeing out of the U.S. say that wheat and corn are stealing away soybean acres, including in Minnesota and North Dakota. So just for the members' sake, I don't think that type of information, because it is anecdotal, is useful.
With that, I give the floor to Madame Thi Lac, s'il vous plaît.
Bloc
Ève-Mary Thaï Thi Lac Bloc Saint-Hyacinthe—Bagot, QC
Good morning. Thank you for being here this morning to testify before us regarding your concerns.
I have a few questions. We know there is greater competition among fertilizer suppliers in the United States than among suppliers here in Canada and Quebec. Could that explain the price difference to a large extent? Do you think that the competition among suppliers favours farmers?
Vice-President, Strategy and Alliances, Canadian Fertilizer Institute
I would just say that Canada does have a very competitive fertilizer market. Not only do we have many large fertilizer companies in Canada, but there are many companies that are importing fertilizer products into Canada.
I would point out that when Keystone Agricultural Producers did their report on Canada-U.S. prices and submitted that to the Competition Bureau, it was Keystone Agricultural Producers that said that the Competition Bureau said there was no need to investigate.
So I think the assumption that there isn't competition in Canada is simply wrong.
President, Canadian Fertilizer Institute
I'd like to add to that. I don't necessarily agree that there is less competition in Canada in terms of the number of companies. There's quite a significant overlap in the companies that operate in Canada and the companies that operate in the U.S. Many of them are Canadian companies or Quebec companies. Many of them are U.S. companies, but there's a great correspondence.
When you consider that the Canadian market is five million tonnes and the U.S. market is about 40 million tonnes, certainly there are more companies in the U.S. per se. But in any particular market region I think you would find that with an open border, the competition is comparable.
Bloc
Ève-Mary Thaï Thi Lac Bloc Saint-Hyacinthe—Bagot, QC
Some time ago, a number of associations came to meet with us. My colleague asked a question about the possibility of buying fertilizer earlier, before spring planting. The answer given to him was that that strategy had been considered by farmers, that it could work in the very short term and that suppliers would adjust quickly, as a result of which farmers would benefit from greater competition when they bought their products.
What do you think of that statement?
Manager, , AgroCentre Belcan inc.
Mr. Chairman, may I answer that?
I agree with you. As I said earlier, in the past five years, farmers' incomes have been very low in Quebec and the rest of Canada. We can't earn enough money to live and operate the business. We're forced to borrow against invested capital. If, for example, we have a house and we have to pay taxes and credit cards, we can't do it. What do we do? We go to the bank and we borrow against invested capital in order to have cash. However, things will eventually settle down. Time works in our favour, given the price of goods. I'm also speaking as an agricultural producer, because I farm as well. It's hard.
Executive Director, Canadian Association of Agri-Retailers
Let me add that I've spoken with a number of members within our association. It's a new dynamic insofar as we are becoming very strategic about how we buy. We now have to buy longer-term, in larger quantities. We know that we have to lock in pricing for our growers and we have to be able to educate our growers about how to buy as well.
Gone are the days when you buy as you're seeding. You don't do that. It may mean more storage of fertilizers in our location, and it may even mean more on-farm storage of fertilizer, but the growers are getting very attuned to adapting to the new system of pre-purchasing, and it is having a price-regulating effect. I think this is a very important dynamic that plays well in suppressing pricing.
Conservative