Agriculture Committee on May 13th, 2008

[The Chair, Conservative, James Bezan]

I call the meeting of the Standing Committee on Agriculture and Agri-Food to order.

Today we're pleased to have as a witness Ian White, who's the new president and CEO of the Canadian Wheat Board. We're going to spend an hour with Mr. White. We'll find out a bit more about his background and his role at the Wheat Board.

Mr. White.

[Ian White, President and Chief Executive Officer, Canadian Wheat Board]

Thank you, Mr. Chairman and members of the Standing Committee on Agriculture and Agri-Food. It's an honour for me to appear before you today as president and chief executive officer of the Canadian Wheat Board.

You'll notice that my accent isn't quite the same as yours, but I'm told that across Canada there are varying accents, so mine might eventually fit somewhere in the spectrum.

I've come to Winnipeg, which is a long way from Australia, where I was last employed as CEO of Queensland Sugar Ltd. It's also a few degrees cooler in Winnipeg, I have to say.

I'm very pleased to have this opportunity to visit the beautiful city of Ottawa to meet all of you and to spend some time talking about the grain industry in western Canada. I look forward to a thoughtful and stimulating exchange.

I would like to tell you a bit about myself and what I hope to bring to the position entrusted to me by CWB's board of directors. I was born and raised in Australia and have been fortunate to work in a wide array of agriculture-based industries—from cotton, to grain, to sugar. I have worked at the CEO level for about 20 years, and I come to the CWB with what I think is a great deal of corporate and commercial experience in agri-business.

Some have attempted to read a great deal into the fact that I was involved in the deregulation of Australia's sugar industry. However, as I have pointed out on a number of occasions, Queensland Sugar Ltd. still maintains a 95% share of today's Australian market. In the context of the Australian sugar industry, it was a decision that made sense. But I wish to make it clear to all members of the standing committee that I have not come on a deregulation agenda. Rather, I have come determined to work with the CWB's board of directors in providing the most value possible to the farmers of western Canada, whatever that might be.

It is not my first time working in Canada. From 1987 to 1991 I was employed by Elders Grain in their Canadian offices and by AgPro Grain, a subsidiary of the former Saskatchewan Wheat Pool. Much has changed in the intervening years. The Crow rate has gone, and the wheat pools and UGG have disappeared, along with a thousand prairie elevators and miles of rail branch lines.

On the other hand, much has remained the same, and western grain producers still face the same challenges they did 20 years ago. Because of their location, the majority of producers are captive to grain-handling and transportation systems with relatively high costs. And in spite of today's high grain prices, farmers are still caught in the price-cost squeeze caused by the dramatic increases in fuel, fertilizer, and equipment prices. They face intense competition in the marketplace from a host of rival grain exporters, some of whom are much closer to the major buyers than we are in western Canada.

Happily, a number of strengths have endured as well. Western Canadian wheat remains the gold standard by which all others are measured. Its reputation for consistency, reliability, and quality is recognized throughout the world.

You could say the same about the Canadian Wheat Board. Some of the issues it faces have changed little over 20 years, but the CWB itself has changed in a fundamental way. There is no doubt from what I have now seen and heard first-hand that the CWB of today is very different from the institution I remember from 20 years ago. Most important, it is now overseen by and answers to a board of directors, the majority of whom are elected by grain producers. This change, made almost ten years ago, is very significant. It put control of the organization in the hands of the people who are most directly affected by its operations and who ultimately pay its bills.

Led by farmer representatives, the board has introduced sweeping changes in response to producers' needs. This has been an evolutionary process based on a solid business strategy and vision of the future. Most notably, it has included the creation of many payment and pricing options designed to give farmers choices far beyond price pooling. More changes have been added each year, with another new slate of pricing and delivery options set to be rolled out over the next few weeks. This process has been carried out carefully to ensure that the core value and strength of the CWB remains in keeping with its primary mission—to maximize farmer returns.

I'm accountable to the board of directors for providing real and tangible value to the farmers of western Canada. I take this commitment very seriously and I see it as my top deliverable.

If prairie grain producers can be clearly shown how their marketing agent adds value to their bottom lines, I think many of the other issues that have continued to swirl around the CWB will slowly lift and dissipate.

I thank you for your time and attention and I look forward to your questions and comments.

Thank you, Chairman.

[The Chair, Conservative, James Bezan]

Thank you, Mr. White.

I want to remind committee members that Mr. White is appearing under Standing Order 108(2), which isn't a review of an appointment, but as a committee we're looking at the operations and management of the Canadian Wheat Board as it applies to our responsibility as a committee.

Also, I'll reference page 864, under chapter 20 of "Committees”, in Marleau and Montpetit:

...public servants have been excused from commenting on the policy decisions made by the government. In addition, committees will ordinarily accept the reasons that a public servant gives for declining to answer a specific question or series of questions which involve the giving of a legal opinion, or which may be perceived as a conflict with the witness’ responsibility to the Minister, or which is outside of their own area of responsibility or which might affect business transactions.

I simply wanted to remind everyone of that.

With that, Mr. Easter, I think we'll go with five-minute rounds so we can get in as many people as possible in our one hour with Mr. White. You have the floor.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you.

I believe, Mr. White, the chair is suggesting what we may ask and what we may not.

In any event, welcome to the committee and welcome to Canada. We do wish you well in your job.

We'll see whether the chair allows this or not, but the reason you were originally requested to appear was because of the concern in the country and by committee members and certainly by myself about the great suspicion around your appointment. I think you've alleviated that in your remarks and in your performance to date at the board, to be honest with you. But there was great suspicion around your appointment that you may be appointed to achieve the Prime Minister's objective, which is to undermine the Canadian Wheat Board. There's a lot of evidence to lead us to that point, the relentless attack on the board.

We've seen directives to the Canadian Wheat Board from the minister's office directing the board to do certain things that we've never seen from previous ministers. We've seen gag orders on the elected board members—and that's one of the questions I will be raising to you—gag orders that were originally placed on the board under threat of two years in jail and huge fines.

I would like to know if those gag orders are still on the board--in other words, that they can't defend themselves and can't promote the board in terms of its policies and really challenge the government. We've seen manipulated elections by one minister, and it seems the other one may follow suit.

The key is that we've seen the firing—

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

A point of order, Mr. Chair.

[The Chair, Conservative, James Bezan]

We have a point of order.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

There was only one election as to the Wheat Board.

[Wayne Easter, Liberal, Malpeque, PE]

That's true, that's what I've said, by one minister.

We've seen the firing of the former CEO, Adrian Measner. He was basically told that if he broke the law he could keep his job, and if he obeyed the law he'd be basically fired. And he was, because he was taking his direction from the board of directors. That naturally led us to some fairly strong suspicions on what the government might be involved in doing, in terms of your appointment.

My question, really, to you—and I think you've outlined it in your remarks, and I appreciate that very much—is where do you anticipate, as CEO, taking your direction from? Is it from the board of directors or from the Minister of Agriculture?

[Ian White]

I shouldn't comment on a lot of the things you've referred to, other than to say that it might be worth my going through the process that came to my appointment.

I was contacted by a search firm that asked me to send my CV to them. I heard back from them that they wanted to talk to me further. The search firm talked to me. Then there was an interview by video conference, since I was in Australia, by a committee of directors of the CWB and some other representatives from government who were on a joint search committee. Finally, the board of the Canadian Wheat Board asked me to meet with them. I met with them in Calgary. It was just the board of directors.

Following that, the chairman of the Canadian Wheat Board indicated to me that they wanted to appoint me. We negotiated a contract between me and the Canadian Wheat Board. There was then obviously the requirement for me to be appointed by the government. So the minister held a very short teleconference with me. He didn't indicate to me any direction and really wanted to talk to me about my credentials before he appointed me. From an outsider's point of view, I regarded that as a fairly proper process.

Coming to the point of your question, I work for the Canadian Wheat Board. I work for the directors of the Canadian Wheat Board. That's where I have my contract, and I take my direction from them.

Having said that, of course, we work in an environment where there is an act of Parliament associated with us, and the minister and the government do have the ability to do some things associated with that. I suppose I take it that if I act properly and commercially in all circumstances, then I won't really have any great trouble.

[The Chair, Conservative, James Bezan]

Thank you.

Time has expired.

If you want to put on your interpretation device, channel one would be the interpretation.

[Ian White]

My apologies. I'm not trying to waste time. I might be some things, but I'm not technically very competent when it comes to mechanical things.

[The Chair, Conservative, James Bezan]

There you go.

Mr. Bellavance, you have five minutes.

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

Thank you very much.

I wanted to tell you not to worry about your accent; mine is worse in English.

[Ian White]

Thank you. I'm hearing English.

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

Did you understand my joke?

[Ian White]

Yes, I understand your accent.

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

I wanted to welcome you. You assumed this position on March 31. Since we are talking about your curriculum vitae and your abilities, I would like you to tell us what you did when you were in charge of Queensland Sugar. We know that Australia deregulated the sugar industry and abolished the export monopoly, so I think that Minister Ritz would have been interested in that aspect of your career in your curriculum vitae.

Could you tell us exactly how you proceeded when you were in charge of Queensland Sugar, what impact this had and how things are working today? Australia is quite far from us. You are probably in a better position than we are to explain the situation following deregulation and the elimination of the export monopoly.

[Ian White]

Thank you.

I was the chief executive officer and managing director of Queensland Sugar Limited from 2000 to March 30 of this year, 2008—about eight years. When I started at Queensland Sugar, it was a new company set up by an agreement with the industry.

In the sugar industry in Australia, there are sugar cane farmers and sugar millers, and there's an interplay between them associated with the returns for sales of sugar. The government at that stage had an act of Parliament that meant there was a single desk in place for all the sales of raw sugar in Queensland. It was an acquisition act.

The company was just moving from being a government-owned corporation, the Queensland Sugar Corporation, to being a public company, Queensland Sugar Limited. This was a company that was owned by guarantee by the growers and millers of Queensland. When we say “by guarantee”, we mean it was a construct of a company, an ownership structure that was not for profit and didn't have shareholders as we know them in the public shareholder sense, but it certainly reported on an annual basis to a group of members who were farmers and sugar millers.

The act of Parliament continued, and it had a review date associated with it. There was in fact an early review of the single-desk arrangement by agreement among all the parties: the sugar millers, the government, and the sugar cane farmers. After five years, that review took place. It was decided that there could be a deregulation.

It was state government legislation; the Government of Queensland was the government. Their view was that they wanted to basically get away from the sort of regulation that had been associated with the sugar industry, and they were prepared to move away from it if the industry agreed on that movement.

After a process of negotiation between the government and the sugar cane farmers and sugar millers, it was agreed that they would move. However, there was one particular arrangement that just about everybody agreed on. This was that because the customer base, particularly the export customer base, was a relatively few large sugar refineries, predominantly in Asia, which had significant market power in terms of where they purchased their raw sugar or their ingredient from—I suppose a bit like a large flour mill—it was still sensible to continue to sell the product through a single sales channel and logistical channel; otherwise, there would be multiple sellers from Queensland trying to sell to what is a relatively small customer base.

It didn't make sense to them in principle that this would be a good idea, so there was an agreement that if 85% of the potential export product could be signed up to continue to be marketed with Queensland Sugar Limited on a commercial basis, the government would be prepared to take legislation away.

My role in this was really to advise the group that was contemplating this about the consequences and the implications associated with the move they were planning, and then to negotiate commercial contracts with the sugar milling companies to take the product they produced to the export market. We achieved 95% of the total tonnage going into those contracts. That was in about 2005.

As I left Queensland, we were having a further discussion, about the future of the company more than about the single-desk arrangement. There are some proposals being put forward now, particularly about the board of directors of Queensland Sugar Limited, which was a company that had four growers, four millers, and four independents including myself on the board—a board of twelve. They are now contemplating a much smaller board, of independent directors only and the managing director.

[The Chair, Conservative, James Bezan]

Thank you. Time has expired, unfortunately. We're over by a minute and a half already.

Mr. Storseth, you have the floor for five minutes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much for coming forward, Mr. White. It's a pleasure to hear from you. I have heard a lot about you. You are a topic of discussion at local coffee shops in my riding, that's for sure.

One of the things I find is that our western Canadian producers are fairly in tune with what's going on up here. They hear things sometimes before I do.

One of the things I am hearing a lot about is that you and the Canadian Wheat Board survey regularly. Would you have some information on your surveys with regard to the increase in demand among western Canadian farmers for barley freedom?

[Ian White]

We have done a survey. We haven't had the opportunity yet to put it to the board of directors. We will be doing so later this month. I'm sure after that we could contemplate talking about it more publicly, but at this stage it is something that hasn't gone to our board of directors. I think it is appropriate that, as they have commissioned it, they should see the results first.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

But after it goes to your board of directors, will it be something that's public for our western Canadian farmers to access?

[Ian White]

That is something that the board of directors will have to decide, yes.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

I'll move on. The contingency fund is another topic I often hear about. It is pretty much common knowledge that in the 2006-07 year, the contingency fund lost about $38 million. Do you have any idea what the losses are as of this point in time this year?

[Ian White]

That's something as well that we need to be talking about with the Canadian Wheat Board directors, but what I can tell you is that the contingency fund is designed to float up and down; it's designed to absorb surpluses and deficits and is designed, I suppose, to be in balance over time. That's certainly what my aim will be: to keep it in balance over time.

There is no doubt that if a market moves and you have a particular product in the marketplace, particularly such as some of the cash, producer payment-option types of product, when they're compared with the pool pricing—and we always compare everything back to pool pricing—there ultimately, as we reported last year, may be differences in the way the execution of those contracts works, particularly in a market that is very volatile, as we've seen with the grain markets over the course of the last 12 months.

My aim will be to keep that fund in relative balance over years. There is no doubt that there will be deficits in some years and surpluses in other years. We've seen that in the past, situations in which the fund has varied between $30 million and $40 million, plus or minus, over a number of years.