Agriculture Committee on Dec. 10th, 2007

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

Mr. Reid, I read in your document that you conducted an interesting survey of businesses. They said they are ready to make substantial investments. In fact, they said they are ready to more than double their investments in the next five years. This applies primarily to investments in canola, corn and soybeans.

However, with respect to feed and cereal crops, no major investments are expected, which you suggest could seriously devalue these crops.

Can you explain why there is this disconnect between research being done for some crops and not being done for others? Why do you think that people are less interested in investing in feed and cereal crops?

[The Chair, Conservative, James Bezan]

Mr. Reid.

[Jeff Reid]

Thank you very much.

There's very clearly a major disconnect between the acreage of the crops produced in Canada and the investment going into those crops. First and foremost, I think it comes back to the ability of companies to receive a return on investment when they invest in those crops. That comes back to a couple of things; first of all, their ability to protect intellectual property through hybridization—and thus their achievement of certified seed sales—and/or patenting being available for crops that lend themselves to genetic modification, such as canola and soybeans or corn.

Again, that's very central to our concern about innovation going forward: how do we create the incentives necessary to stimulate private sector investment in those open pollinated crops, and particularly crops that don't lend themselves to modification?

Again, when we look at four of Canada's five major crops in western Canada—wheat, durum, barley, and oats—there are very, very low levels of private investment in them. Hence, we're coming forth with a number of proposals as to how we can spur higher percentage use of certified seed in those crops and generate more returns back to innovation in those areas.

To this point, even the technology that has been developed in the public sector becomes very marginal, in terms of our ability to deliver that, because the return on investment is so marginal on many of those crops.

Again, we echo your concerns there exactly.

[The Chair, Conservative, James Bezan]

Bueno. Good.

Mr. Miller.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you, Chairman.

Gentlemen, thanks very much for coming here today.

Mr. Schwab, you were talking earlier about some of the new innovations your company is making and new directions it's going in. One thing that popped out at me was the different products, including making insulin from safflower. Fill me in a little bit on where you see that taking us. What percentage of the insulin supply can safflower take over today? Will it supply 10% or 50%? What's the goal or potential down the road?

[Dr. Phil Schwab]

I can't speak for the company's business plan goals, but I'm told several hundred acres of this safflower crop could supply a majority of the insulin needs, especially for insulin in the developing world, where it's probably going to be used as an inhaled insulin or in a patch form, something that doesn't have to be refrigerated and injected. That market is still probably going to be fulfilled by the traditional type of insulin.

But SemBioSys is looking at the non-traditional uses, where there are tremendous needs in the developing world. They estimate a couple of hundred acres could supply a majority of that need.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Will it be competitive as far as price, cost-wise, or...?

[Dr. Phil Schwab]

That would be the goal of any good business plan, I suspect.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Certainly. Okay.

To move on, I know there are carpets--I see carpets--and I knew there was some clothing, de-icing. I'm sure there are lots of others, and that's great. But while we're being innovative as a society, and then as companies and as farmers, we have to be cost-effective, which we've already touched on. Society today puts a large emphasis on being environmentally sound.

Where I'm leading on this is at some point there has to be some balance in there, what you're going to use. The ground will only produce so much, no matter what you put into it. At least I think there's a line there somewhere. So when do you get to a point where you're almost getting over the line of cost-effectiveness? At some point, we need to keep a certain amount of our acreage just to feed the population in the world with a growing....

So if you could talk a little about those....

[Dr. Phil Schwab]

Certainly, and David probably has some comments on this as well. We're talking about increasing the volume of yield from our crops, but we're also talking about using more of the total crop we have available.

For instance, right now in ethanol production we're only using the starch component of that seed. Plant breeding companies and biotechnology companies are looking at how we can use more of that seed for ethanol production, so instead of only using 75% of the seed, we're using 80% of that seed. Then we're looking at how we can use some of that leftover cornstalk for these other industrial purposes, how we can take that cornstalk, turn it into simple sugars, and then refine that into our carpets and our clothing.

So we're talking about getting more value, more yield, more product per acre, and part of that is what Performance Plants is doing in terms of increasing the overall biomass, increasing the productivity of those acres. But part of it is also using the total available plant more completely.

[The Chair, Conservative, James Bezan]

Mr. Dennis.

[Dr. David Dennis]

Just a brief comment on SemBioSys. It's a very clever technology. One of the advantages of using a plant over using animal sources for some of these drugs is that plant viruses and diseases are totally different from animal viruses and diseases, so you can very likely produce safer products.

In terms of productivity per acre, we're going to have to dramatically increase productivity per acre, especially if you're going to go into the things you were talking about, like putting hemp into car seats. If you have a Volvo, you've got hemp in your car from Europe. If you're going to do it that way, if you're going to start using crops to produce biofuels.... China is using much more food, and the demands from China are going to be huge. So people have reckoned we're going to have to double or triple food production just to meet the demands of China and India and the less developed nations to let them have a standard of living like our own. Africa, of course, has massive problems in productivity per acre.

If we're also going to use land for biofuels, the challenges are huge. We're going to have to use new technologies. The only way we can do this is by using new technologies.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

On the biofuels and ethanol, that's where I was going to move with my next question. One of you made comment about using cornstalks and what have you, and I think that's great. In farmers' terms, we call that the trash, but at the same time, there's a valuable part to that trash. By ploughing that back down, I don't have to tell you what that does for the soil.

What I see in moving into ethanol, there's going to be a moving away from the livestock industry, which of course takes away manure and straw that gets in there to be put back on for that stuff that helps make the ground.... How do we combat that issue, to get away from that? We can get around strictly chemical fertilizer. I think long term we need something more than that.

[The Chair, Conservative, James Bezan]

Jeff.

[Jeff Reid]

That's certainly something we've been addressing, being in contact with the feed industry. Particularly in Alberta, they have a big concern about drawing more feed grains out of the feed industry at a time when they're hurting to begin with, to say the least, and about those feed grains now having a competing market with ethanol.

I think it comes back to some of David's earlier comments about the real need to increase yield substantially over time. We know, for example, that there are a number of varieties hopefully coming to fruition in the near future in western Canada that are just being held back now by the need for proper regulatory reform, in terms of things like variety registration--opening that up a bit--and kernel visual distinguishability, which we've talked about for some time.

Again, if we look at the Ontario market, where we've had both of those things, we've had some regulatory reform to variety registration, we got rid of KVD back in 1989, and hence, 15 years later, we've made a 62% increase in average yield.

Those are the kinds of real gains that are going to help that ethanol and feed industry in western Canada from the seed industry perspective.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Do I have more time?

[The Chair, Conservative, James Bezan]

No, you're all out.

Mr. Atamanenko.

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

Thank you very much, gentlemen, for being here.

I just want to clarify in my own mind. I thought that in Canada, especially in western Canada, we had a quality of wheat and durum that's second to none, that's valued around the world. Our farmers are efficient. They produce high yields, and the reason they haven't really been making money is not because of them or the quality of their product; it's because of this situation in the world in regard to trade and subsidies.

Now the message I'm getting is that we need more variety, and the more variety we have the more money we can get to farmers. So I don't quite understand that. This is a serious question. I just don't quite understand. We have the quality. We have good wheat. We have the marketing. We can sell it. We're not making money because of certain forces. And yet the message I'm hearing from you folks, and Mr. Reid especially, is that we need more varieties.

How does that coincide with making more money for farmers in that whole area? That's my first question.

[Jeff Reid]

First of all, we definitely do have some of the best wheat in the world, no question about that, in Canadian western red spring and durum wheat, for example. So I guess the question is, at what cost do we develop and deliver that quality? I don't want to harp too much on KVD, but that's certainly been a big cost to the industry over time, because we've constrained all of these varieties into a very narrow slot so that they look similar.

We have developed, certainly, a reputation for a quality product, but at what cost to the farmer in terms of the agronomic trade-off. What we hear from various sources is that only about 7 million tonnes of the 15 million, 16 million, 17 million tonnes of CWRS wheat that's grown in western Canada are actually sold into the most premium markets that demand that level of quality.

The bigger demand that we're seeing evolve now is in these higher-yielding, different quality products. What we really need is a system that allows us to do a better job of segregating and channelling those products so that we can meet that demand for very high-quality, CWRS-type wheats, and do that in coexistence with producing high-yield, ethanol-type wheats, high-yielding, feed-type wheats, higher-yielding CPS-type wheats that are going into, let's say, things like pizza dough, which don't require the high-quality CWRS-type wheat.

So we do very definitely have that reputation for very high quality, but it's come at a very tremendous cost to the industry.

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

Do you feel, if we talk about wheat, that for the future we need to have wheat that is genetically engineered?

[Jeff Reid]

Well, I think that really needs to be based on the scientific evaluation. If there are products that come along that have merit and they're found to be safe, based on a science-based regulatory system, then I think there may be benefits there. I think probably the biggest thing that's going to drive that forward in the short term is to have some output traits that deliver benefits to consumers, such as better fusarium tolerance and so on.

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

Did you want to comment on this, Dr. Dennis?

[Dr. David Dennis]

We are dealing with climate change. There are going to be changes in heat and drought that we're going to have to face, and it's going to be major. Going from 1960 to around this time now, from corn, we went from 30 bushels per acre to 160, 170 bushels per acre, so it's a huge increase. We're going to have to do the same sort of thing.

Yes, the varieties we've developed in Canada are superb. But can we now improve them even further to give higher yields per acre and able to withstand some of the stresses that are going to be put on them as we go through things like heat and drought, and all these massive stresses we're going to be facing? If climate change really is taking place--actually, I think most people agree it is--then we're going to have to develop these new crops.

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

I'd just like to pursue the corn.

I think we have 16 different varieties of genetically engineered corn that are authorized in Canada, and one of these is Monsanto NK603. Studies in France—and I've talked with the research scientist involved in that particular study—have found evidence of toxicity in rats. I believe there is a type of genetically modified corn—and I'm not sure if it's this corn or another one—that France has banned because of perceived effects on health.

What I learned in talking with the scientist is that in order to approve a GM variety in Canada or in the world, it requires a study of three months, and after three months it's approved; whereas when we look at pharmaceuticals, for example, it's two years.

Are we sure that when we have these products as food for consumption by human beings we have made every effort to ensure they are safe? Peer review studies are coming up saying that some of these varieties are not.

I'd like some comments on that, please.

[Dr. David Dennis]

I don't know where the concept of three months is coming from, to be very truthful with you. It usually costs somewhere between $10 million and $20 million at least, per variety, to register a transgenic crop, so it's a huge number of studies. Transgenic crops are the most studied new varieties ever in the history of mankind. They've now been grown on 1.5 billion acres of land worldwide, and there's not been a serious problem reported anywhere, either environmentally or health-wise--or perhaps some minor problems. So they are incredibly well tested.

The crops that we are developing are different from some of the crops that you've been looking at. We're actually altering the plant's own genes, so we're not changing...we're not putting in protein from outside. We're actually modifying the plant's own genes and altering the way the plant grows. We're taking what would be done by normal breeding, which is looking for different...which is a genetic change in the plant. Now, once we find in one plant how to change it so we can produce it so that it's more drought tolerant, we can go to other crops and say that if we do the same thing there, we can produce them to make them drought tolerant as well. This is really quite a different phase of plant biotechnology that's coming in now to allow us to develop these new crops.