Agriculture Committee on May 13th, 2008

[Elwin Hermanson]

Sure, I'll take the first stab at it.

There is always moral hazard. As I mentioned, you'll never eliminate 100% of the risk, whether it's in the dairy sector, the grain sector, or the social services sector, I suppose, although I'm not an expert to comment on that.

There has been growing pressure among many in the agriculture sectors--including dairy, by the way--calling for the removal of KVD because they want access to higher-yielding feed wheats that may not be visually distinguishable from milling wheats. That's the conundrum that the industry is in. Of course biofuel is another sector that has been calling for the elimination of KVD, and farm organizations have joined in on that call.

All I can add is what I've stated before, unless Mr. Dennis wants to respond: the decision has been made. We didn't make the decision; this is not a Canadian Grain Commission decision, but a decision made by the Government of Canada.

Our challenge, working with our industry partners, is to use the systems that work to maintain the integrity of our grain handling system and make sure that customers receive the product they have requested. We know the tools that we've used for other hazards--ineligible varieties--and we know they've worked, so we're modelling what we're doing in this case on previous success stories.

Did you want to add anything to that, Randy?

[Randy Dennis]

Yes, thank you.

One comment in general is that you're alluding to the spiking of a sample: a truck being delivered and a producer or someone who's handling the grain purposely adulterating it or putting it in the truck so that it would miss a delivery point or a collection point from the sampling system. That opportunity has been there forever and a day. The potential for that to occur is there.

Based on what this committee has done and the driving force behind that, I would strongly suggest that we want to be able to continue to deliver our certificate final, which is a certificate I sign off on for quality at the end of the day. We don't want to have to wait until the vessel completes loading and have the sample come back to the CGC and be tested in the Grain Research Laboratory. On that basis, every individual and organization involved in this working group committee is pulling for that to be delivered again at the time of vessels sailing, because of the commerce involved.

The sampling systems are in place at the terminal elevators, the transfer elevators, and CGC is on site at primary locations. We collect samples of those—railcars going to a terminal position, railcars to Mexico, to the east coast—and we are doing testing on those, as well. We do a random testing, a monitoring program. We don't advise the industry the percentage of cars we are testing. We do it surreptitiously. We don't want to tell people how much we are testing. It keeps everyone on their toes. The companies are also doing this, and everyone knows that. That's one of the tools we will use.

With new varieties coming forward, we have a couple of years in which we are quite confident we will still be able to distinguish visually.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Tweed, the floor is yours.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Thank you, Mr. Chairman.

I have just a couple of comments.

I always find it interesting how the opposition is willing to fight for the status quo for someone other than their own constituents, and I put that in my opening comments about the Wheat Board.

I also find it interesting that Ontario and Quebec have been dealing outside KVD for several years, based on your comment, Mr. Hermanson, and yet they've never raised the question of confidence in the market or the liability issues in those particular cases. It continually amazes me how they're willing to keep western Canadian farmers particularly, as some farmers would say, in the backwoods in delaying their ability to move forward in the industry.

I guess that is my question. With Ontario and Quebec having been outside KVD identification, what liability issues have arisen from that—I understand it's still under your jurisdiction—and do you see that the world's confidence in eastern Canada's marketing of grain has deteriorated because of it?

[Elwin Hermanson]

I'll put this question to my colleague, Mr. Stuart, who has lived through all of that.

[Jim Stuart]

Thank you.

The delivery system in eastern Canada, Ontario and Quebec, is somewhat different from the delivery system in western Canada. It's more a direct delivery from the producer to the grain handler. With the elimination of KVD in eastern red wheat back in the late eighties, I believe, the producer has the option to deliver red wheat as the class or to base as a declaration, say, red winter or red spring, etc. So they have been using a declaration system for quite a number of years, and it's more of a direct produce and grain handler contractual relationship. Issues of misdelivery or issues of the declaration not being what it is supposed to represent are dealt with between the grain handler and the producer.

The CGC's involvement in eastern Canada isn't the same as it is in western Canada, due to the Canada Grain Act and its boundaries of jurisdiction.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Have you seen or heard of any concerns being expressed by people from Quebec or Ontario in that regard, particularly in regard to the confidence in the marketing and the product they're delivering?

[Jim Stuart]

No, I can't say I have.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Thank you.

Mr. White, I just want to ask you a question. I noticed in your opening comments that you talked about the Wheat Board preferring the date of August 1, 2010, and yet we hear comments like “Why not wait another year?” I suggest western Canadian farmers have been waiting for years for this to take place. I would ask if you, in your role in the Canadian Wheat Board, and the Canadian Wheat Board itself are comfortable with the start date of August 2008?

[Ian White]

We've been participating in the working groups. Given the protocols we have in place, we're relatively comfortable that the system will work. We're comforted by the view that we don't have any new varieties coming on that will cause any issue in the course of the next couple of years.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Hermanson, in your opening comments one of your notes was that the decision sent a signal to seed breeders to facilitate the development and registration of new varieties. I think this goes back to what Mr. White said. Obviously there hasn't been a lot of activity in that area in the last several years. I hope we're now going to see a move toward that.

Is that what you're forecasting?

[Elwin Hermanson]

We would expect the market will determine more accurately where wheat breeders will be concentrating their efforts. We have some evidence that Canadian breeders have been trying to register some non-KVD varieties outside of Canada simply because there was no possibility of registering them within Canada. Given the current economy of high price for milling wheats, I would suspect that perhaps that's where they're focused and less on non-KVD varieties. As we know, the marketplace and demands in the agricultural sector change from time to time, and the elimination of KVD will create opportunities for breeders of new varieties of wheat to go after the opportunities where they exist.

[Merv Tweed, Conservative, Brandon—Souris, MB]

If I may, I'll confirm that with you.

The constituency I represent borders on the U.S. My certified seed growers are moving into the U.S. to access an easier market--not necessarily easier, but a quicker approval system. I know they're looking forward to this step forward for their future opportunities.

Thank you for what you're doing.

[The Chair, Conservative, James Bezan]

Thank you.

Monsieur Roy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

My question is for you, Mr. White. You stated that there is new technology for analyzing the wheat delivered to us and you said that it was promising. Do you have any guarantee that this technology will be available in 2010? You said that the technology is promising, but as far as I can see, you have no guarantee right now that this new technology will be operational in 2010 and that it will be affordable.

In your opinion, to what extent, in terms of a percentage, can we be optimistic and believe that this technology will be operating by 2010?

[Ian White]

Our level of optimism is high. However, as I've said, there is no guarantee we will have it available at that stage in the form in which we want it. At this stage, what I'm hearing in terms of the research is that it does look very promising. We would expect to have it available. As I've said, there's no guarantee with that, so I really can't tell you anything more than that.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

So you don't have any guarantee. If I understood correctly, the technology is based on DNA analysis for each wheat category delivered to you. I would also like to know the turnaround times for the analysis. We hear that, obviously, not all of the wheat will be analyzed. Random samples will be analyzed.

Right now, with the technology that you are proposing, what are the analysis turnaround times?

[Ian White]

The technology we're expecting to use in the driveway is not DNA. It's wavelength technology. That is hoped to be a much simpler methodology.

I have to say, I'm not really competent to go into the technical aspects of that at this point. I can certainly go into that afterwards and get someone to provide some information if you want. At this stage, technologies are being developed that are also DNA technologies, but that's for a different purpose. The driveway technology would be one that we expect would be a relatively quick look at a sample in terms of wavelength technology. However, at this stage I think it's mainly a question of making sure we can identify all varieties and that we can make it quick and low cost. We're not quite at that stage yet.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

All right, thank you.

Mr. Dennis, you referred to the mandatory reporting system. Mr. Hermanson talked about errors. To what extent can the mandatory reporting system be viewed as reliable? If indeed the technology is not available and if, for the next four or five years, there is no mandatory reporting system, and the visual identification is removed and there is a percentage of error—that I don't know—will this not damage Canada's reputation? If four or five significant errors were to occur over the next four to five years, Canada's reputation may suffer seriously.

[Randy Dennis]

Thank you for the question.

The industry we're working with and importing countries in general are very familiar with and aware of what is going on with this change in KVD. We take the opportunity to have these discussions with them when they come through the Canadian Grain Commission or come with trade missions. We explain what the process currently is and what these changes are and what we will do to ensure there is a quality assurance system in place so customers can continue to have confidence in the quality of grain they are receiving from Canada.

Is there potential for challenges or for somebody to try to spike a sample? As referred to earlier, that's potential. I truly believe that for the deliveries producers are going to be making, they're doing that with the best of intent and knowledge of what they're actually delivering.

Where you may see a challenge is in the handling system itself, not attributed to the producer but in the handling system. It's going to be very important for those elevator companies to have the quality assurance programs in place that they need to have. Many of them have them now, whether it's HACCP or other quality management systems. It's important to have; it's necessary.

[The Chair, Conservative, James Bezan]

Thank you very much.

Madam Skelton, take us home and bat cleanup.

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

Thank you very much, gentlemen.

To go back to this, my grave concern is I want western Canadian farmers to make as much money as possible, and I don't want the cost of this system going back on the farmers. I have concerns about that.

Mr. White, you talked about the Canadian Wheat Board investing money in developing tests. Do you know how much it's cost, and how long they've been working on this?

[Ian White]

With the two methodologies we're working on, there's been something in the order of just over $3 million invested over a number of years.

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

But you don't know for sure how many years?

[Ian White]

I've got to say, being relatively new to this, I'm not sure of the number of years.