Agriculture Committee on May 13th, 2008

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

Mr. White, in your presentation you said that you would have preferred if the federal government kept the date originally set, namely August 1, 2010, in order to eliminate the KVD requirements. What are the primary reasons explaining your preference for this date?

[Ian White]

Just because that would give us more time in the process in terms of getting ready for it. In the event that this isn't the case, I think as has been said, we're working very hard to make sure that all the bases are covered with regard to testing the quality. There's no dispute between the Canadian Grain Commission and us with regard to how we are now coping with that arrangement. We're trying to make the absolute best of that to ensure the quality can be attested to as best we possibly can.

The only issue for us originally was it would have given us more time to try to put systems in place, particularly the development of technologies.

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

You said that changing this date would have given you more time. Do you think that the tight deadline will have a negative impact on your efforts or do you think that you are going to be able to make the necessary changes all the same?

[Ian White]

We are adapting to the new date. As has been said, the committees have been put in place and the industry working group is meeting on a regular basis and has, in my understanding, developed the protocols associated with delivery and quality. Of course, no system is ever without some risk. However, what we're trying to do is make sure we eliminate all the risks associated with this. I think, as has been said, we really are in a reasonable position because there are no new varieties coming along that will have a different kernel identification in any case, at the present time.

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

Thank you.

[The Chair, Conservative, James Bezan]

Mr. Storseth.

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

I would like to thank Mr. Hermanson and his associates for coming again. It's good to see you again. Hopefully this meeting will be a bit more productive than the last one we had with you.

There are a couple of issues that have been raised already. I know you've addressed the issue of liability, but I feel it's imperative that we bring it up once again. I want to ensure that any of the actions that are being taken to ensure, with the declaration process, that liability is not going to fall on our farmers.... That is clear--once the farmer has delivered it, his liability and responsibility is finished at that point in time?

[Elwin Hermanson]

I think I'll ask Mr. Dennis--because he worked on the committee--if he would respond to how that issue was dealt with.

[Randy Dennis, Chief Grain Inspector for Canada, Canadian Grain Commission]

Thank you very much.

The producer declaration is available on our website for those of you around the table to observe and review. The liability for the producer can be mitigated in a number of ways, primarily in knowing the variety that the individual is planting and growing and going to deliver to the elevator itself. That's a key component. The second piece is ensuring that when he does deliver or there is a delivery on his behalf, a sample is collected, and both he and the elevator company have a representative sample.

The only way that liability can come back to the producer is based on the handling systems, the processes that country elevators have. That's a requirement that they have to have put in place, and also the delivery through into the terminal elevator position or transfer elevator position, maintaining those declarations that will go forward to the CGC at those points, but also for those elevators to be able to actually trace that back to an individual producer if an issue is identified at some point in time.

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

I think it's important for us to have some clarification. One of the great things the Canadian Grain Commission is doing—and I'm sure the Wheat Board is doing it as well—is the advertising. They are making sure our farmers understand this new process, the onus that is on them, and how this is all going to work out. I encourage you to do as much of this as possible. As I'm sure you know, Mr. Hermanson, the local coffee shops are talking about you and these issues.

One of the things I often hear is that not having these regulations and changes in place has already cost our producers hundreds of millions of dollars. Is there any idea how much money our producers would have made had this been in place a year or two ago?

[Elwin Hermanson]

The Grain Commission is not in a position to answer that one. We don't focus on the economics of the grain industry; we focus on regulation and assuring grain quality.

But in response to your comments on the advertising, I should mention that we advertised extensively throughout our prairie region, where the KVD issue is relevant. We've gotten roughly fifty responses by telephone and e-mail. Primarily, they were for information. The most common question from producers was whether they would now be required to purchase certified seed or registered seed. Of course they aren't required to purchase certified seed, but they are required to know that their variety fits the class for which they expect payment. So we think the advertising program has worked. It's been effective, and it has sent the right message to producers.

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

I've received fifty phone calls on it, so your advertising is definitely getting out there.

With respect to the technology aspect, it surprises me that this kernel visual distinguishability is being used only in western Canada. Places like Australia have been away from this for quite some time. It surprises me that we don't have the technology at this time.

Mr. White, I understand the Canadian Wheat Board has invested a significant amount of money in developing black box technology. Can you tell us how that's going and whether we are getting positive results from the $1.3 million we've spent?

[Ian White]

There are some positive results coming forward, but, as Mr. Hermanson said, it is still not at a stage where this can be used as a low-cost driveway test in all cases. That's what we're working towards at present.

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

Have you any idea how far away we are?

[Ian White]

It is a little difficult to tell how far away we are, because it's development of technology. All I can say is that the results look relatively promising. I am hopeful that maybe next year we may have something, but it would be hard to determine the exact time.

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

How long have you been developing this technology?

[Ian White]

I'm not sure about that, but I think it's been for a number of years. The Canadian Wheat Board has certainly invested some millions of dollars in this over the last couple of years.

[The Chair, Conservative, James Bezan]

Mr. Atamanenko.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Our committee passed my motion, which recommended that the government abandon its plan to remove KVD. The motion recommended proceeding with its removal only when we had in place a variety identification system that had gained the confidence of those whose interests are protected by the current KVD system. Basically, it's recommending that we take our time. We need to make sure we have a quality system in place. Rather than move too quickly, we should wait until we have a replacement we can be sure of.

I'm hearing in your testimonies that it looks like we're on track. We have all sorts of protocols. We have CFIA on board. But as you said, Mr. Hermanson, we don't have an affordable technology that can be located at delivery points. You mentioned that there's no prediction when it will be in place. Mr. White, you said we don't yet have a low-cost driveway test. At the same time, we have the recommendation of the Wheat Board that we wait until 2010.

Would it not be prudent to proceed cautiously? Things are moving. Would it not be to everybody's advantage to wait, as this motion says, and not move until we have this affordable technology located at delivery points? That way, we could be 100% sure that the quality we're well known for throughout the world is maintained. We don't need to take this risk. I would submit that there is a certain amount of risk in embarking upon this without having something 100% sure in its place.

I'd like you to respond to that, Mr. Hermanson.

[Elwin Hermanson]

Thank you. I'm happy to respond.

First of all, I don't believe you'll ever come to the point where you have eliminated 100% of the risk. We've not done that with ineligible varieties, but we have managed that risk so it has not impeded Canada's reputation for producing reliable product, and so the buyer is getting what they expect when their commodity or their grain is unloaded.

Perhaps I'll ask Mr. Stuart to talk a bit about the history, but I can tell you that this has been an evolution in Canada. My understanding is that KVD has been limited only to the Canadian scene and was removed for red wheats in Ontario. I'm not sure about Quebec. I'm not sure if it ever was there. Perhaps Mr. Stuart knows. But it was eliminated for red wheats in Ontario, I think back in the 1980s, and last year it was removed for white wheat in Ontario. The western region is the last region to undergo the change, and I think there's been industry-wide agreement that it needs to happen.

The discussion, as you have quite rightly pointed out, is over the timetable, which has been accelerated. That decision is not within the ability of the Canadian Grain Commission to make, but we are determined to make sure that we maintain Canada's grain quality assurance. We've worked with our colleagues at the Canadian Wheat Board, the elevator associations, and producers, using models that have worked in the past to ensure that integrity will be there in the future.

Jim, can you add anything to that?

[Jim Stuart, Director, Industry Services, Canadian Grain Commission]

I would just add that the ineligible variety working group approximately three years ago developed a protocol that has worked. It relies on declarations, on grain company quality management systems, and on their own testing and monitoring. As well, the CGC acts as a regulator, testing, monitoring, certifying, and providing the results of that certification back to the exporter, the Canadian Wheat Board, and the grain-handling company involved. At that point, if there is an issue with a particular shipment, again through the ineligible variety working group, the Canadian Wheat Board and the grain handlers have developed a liability protocol.

If there is an issue with the shipment with respect to indistinguishable or ineligible varieties, the grain handler involved needs to demonstrate to the Canadian Wheat Board that they have performed due diligence, that they do have a quality management system, and that they do have testing and monitoring in place. And it's on that presentation that the CWB then decides to take on the responsibility of the liability.

That is the model that we're moving forward into a non-KVD world, and that is the principle we're operating on this coming crop year, knowing that producers, primary elevator handlers, terminal elevator handlers, and the Canadian Grain Commission will still be able to visually determine class, because we are not seeing varieties coming forward through the registration process that are going to present a KVD issue.

[The Chair, Conservative, James Bezan]

Mr. Atamanenko, your time has expired.

Mr. Steckle, you have the floor.

[Paul Steckle, Liberal, Huron—Bruce, ON]

I want to go along the lines of questioning and comments that have already been pursued this morning.

We have such a high level of confidence by the purchasers of Canadian wheat and other products, but particularly of Canadian wheat. This is what we're talking about this morning, the KVD. If we abandon something prematurely, even though there is probably good reason to do that--and I understand that--is that not sending a message to our buyers and the marketplace that somehow we're rushing something a bit?

Coming from the farm community as I do, and being very close to the dairy industry, I know that in the dairy industry there's a lot of trust placed in producers. We're talking about certificates, signing documents, and verifying. People can make mistakes; people can wilfully make mistakes, and it's when they're wilfully done....

We have the largest inland elevators in Canada in a community very close to my home. Farmers will place the wet beans in such a way that they can't be sampled and tested, so that the test that shows, and the test for which they're paid, shows a higher or a drier quality. Similarly, we're going to do the same thing.

In the dairy industry, if we in error milk a cow that shouldn't have her milk going to the milk tank, and that milk goes into the huge tank that comes and picks up our milk at the gate, there is liability. Here we're shifting all the liability back to the Wheat Board, when in fact the decision, as I see it, to some degree has been made by the Grain Commission.

I'm not sure that I quite understand if there were to be such a thing. The final test of the sampling, as I understand it, takes place at port. If you have a shipload of grain going someplace and there is a deficiency found in that grain, it doesn't mean just one farmer is affected; it affects a whole lot of farmers, and it affects the Wheat Board with a huge liability.

I have real difficulty in accepting that we're moving forward on something when we can't give full assurances. There is nothing foolproof, but to do that in that way of thinking somehow doesn't quite resonate in my way of thinking.

I want you to comment on that--and think about the liability, because sooner or later somebody is going to look for an opportunity. Let's not put ourselves into a vulnerable position.

[Elwin Hermanson]

Mr. Chair, I'm not sure if the question was directed at me, but I'll take the first stab at it.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Well, it's wherever it fits.