Evidence of meeting #12 for Agriculture and Agri-Food in the 40th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was competitiveness.
A recording is available from Parliament.
Conservative
The Chair Conservative Larry Miller
I call this meeting to order and thank all of our guests for being here today.
We're continuing our review of competitiveness in Canadian agriculture, and we have witnesses here today from the Canola Council of Canada, the Western Canadian Wheat Growers Association, Pulse Canada, and the Canadian Seed Trade Association.
First, we have Ms. JoAnne Buth from the Canola Council of Canada.
JoAnne Buth President, Canola Council of Canada
Thank you, Mr. Chair. My thanks to the committee for inviting the Canola Council here today to provide input to your study on competitiveness in Canadian agriculture.
I will give you a little background on the Canola Council. We're the only fully integrated industry association where seed and input companies, growers, exporters, and crushers all sit at the same table to develop a common platform for growth. Although I didn't bring a grower with me today, growers have four seats around our table and are very important in our discussions and our steps forward. Growth is very important to our industry. Even though the canola sector in Canada was worth $14 billion in economic activity in 2008, our strategy is to grow the crop and the industry. We hope to reach 15 million tonnes of sustained demand and supply by the year 2015. When we reach that target, the canola sector will be bringing another $12.5 billion of economic activity to Canadians.
Our mission is simple; to enhance the industry's ability to profitably produce and supply seed, oil, and meal products that offer superior value to customers throughout the world. The key to our success is the profitability of the entire value chain, but especially growers. Without growers we have no product for Canadians, no product to process or export.
We want to congratulate the committee for taking on this issue. We are a very trade-dependent country and a trade-dependent commodity. One of every three Canadian jobs is dependent on trade, and Canada is the world's fourth largest agriculture and agrifood exporter. So reviewing the competitiveness of our economy and ensuring that we're taking the steps to stay ahead of our competition is key to helping our producers and our entire agriculture sector.
This is certainly relevant to the canola sector. For the past three years, canola was the most profitable crop for producers. In 2008, it delivered $4.9 billion in cash receipts, with most of those dollars coming from export markets. Canada produces only 20% of the world's canola and rapeseed, but we're responsible for 80% of the canola trade globally.
In recent years, Canada's canola producers have relied on export markets for 85% of their sales, including canola seeds, oil, and meal. This past year, canola farmers produced a record 12.6 million tonnes. We anticipate total exports to be at or close to 90% of this year's production. This equates to nearly $5 billion in economic value from export markets. So for Canada's 50,000 canola growers, the competitiveness of our exports is critically important.
Our competitive advantage is the quality of our product. Canola is the healthiest oil on the market. It is free of transfat and cholesterol, has the least amount of saturated fat, and contains essential fatty acids like omega-3 and omega-6 in a unique ratio that health professionals say is the best for healthy eating.
On top of that, the further development of high oleic canola varieties have improved the industry's ability to supply heat-stable canola, which is best for the frying oil industry. Canola was invented in Canada and maintains its international advantage through continued investment in innovation. Access to technologies like herbicide tolerance, hybrids, and modified oil profiles is keeping our farmers ahead of their competitors. Recognizing its health attributes, the U.S. Food and Drug Administration authorized a qualified health claim for canola for its ability to reduce the risk of coronary heart disease.
Canola meal has its own unique qualities. Canola meal in the diet of a dairy cow increases milk production by a litre of milk per day. It's increasingly used in dairy rations in Canada and the U.S. Beyond food uses, canola is the best feed stock for biodiesel production, owing to its cold-flow properties, which are important in cold weather and also improve engine lubricity.
But this strategic advantage didn't just happen. Targeted investments, strategic research and innovation, trade agreements, and market promotion have been essential to building and maintaining our competitive advantage, and we need to continue to work at it to keep our competitors from overtaking us. Our competitors are not typically other countries, but other vegetable oils. The U.S. soybean and Asian palm oil industries are working to improve their products' nutritional profiles, along with their cooking and frying attributes. While canola has a strong presence in international markets, our resources are modest compared with those of the soy and palm industries. Soy and palm developers are also making improvements in the productivity of their crops. Canada's not going to be the low-cost producer, but continued gains in yield and oil content of canola are critical to maintaining our access to international markets.
Our recommendations fall into four categories. The first category is research and innovation, and I will start with the health aspect.
Continuing to enhance and differentiate canola's position as the healthiest oil is the most important aspect of maintaining our competitiveness. Through our canola product research fund, we continue to pursue coordinated research projects that address customer needs. Increasingly, our priority is nutritional research on the beneficial role canola can play with heart health and diabetes.
Partnership with government, and especially with Agriculture and Agri-Food Canada's research division, is critical in this regard. Canada needs to focus its resources, both private and public, to yield results internationally.
In the area of productivity improvements, access to innovation is key for current and future producer profitability. A regulatory system that allows new products and traits to smoothly and predictably move into commercialization is needed to ensure the future competitiveness of our canola producers. Reforms to variety registration, resourcing, and the refining of regulations on plants with novel traits, novel food, and novel feed are critical for farmers to access new technology. Attention to reasonable intellectual property rules is also necessary to keep new products moving into canola producers' hands.
New tools require new management techniques. While canola is not a new crop any longer, better genetics, herbicide tolerance, and hybrids have all significantly changed producers' management practices. Ongoing investment into developing on-farm processes for using these tools and understanding how to get the most production from them is necessary to improve producers' competitiveness and profitability. Research on management techniques is also necessary to ensure that Canadian canola is clearly recognized as being grown under environmentally sustainable cropping systems.
Our second area of recommendation is trade. The committee heard just last week from CAFTA, of which the Canola Council is a member, so we'll not spend a lot of time on this. But neither do we want to miss the opportunity to stress the importance of a comprehensive, multilateral agricultural trade agreement. The current Doha Round draft would result in substantial reductions in tariffs, elimination of export subsidies, and disciplines on trade-distorting support. We urge the committee to endorse the WTO negotiations, and we urge the government to lead efforts to conclude a deal.
Bilaterally, we urge the government to make improved trade relations with China a priority. China is a substantial and growing market for canola, but we face a competitive disadvantage on tariffs with U.S. soybeans. China, with its enormous population and increasing wealth, is an important market for Canadian agriculture generally. We ask the committee to recommend steps to improve our trade relations there.
We support plans for discussions on a new economic relationship with the European Community. Canola has essentially been barred from Europe by biotechnology regulations. It took 12 years to obtain the approvals for herbicide-tolerant canola. It took two years in all of our other export markets. A new relationship provides an opportunity to develop new solutions in this area.
We welcome the tabling of legislation to implement free trade deals with Peru and Colombia. These are very modest markets for canola, but a tariff-free environment provides the opportunity for growth.
Finally on trade, we welcome the announcement of a market access secretariat from Minister Ritz. We look forward to working with him on its further development. Technical barriers to trade are becoming more substantial roadblocks in the international marketplace. We agree that governments and industry in Canada need to improve their capability in this area.
Our number three recommendation is in the area of regulation. A subcommittee of this committee is looking into food safety issues, as are the federal and provincial ministers of agriculture, who've committed to coming forward with a food safety action plan. This is also an issue getting much attention south of the border.
Given our level of trade with the U.S. and the high quality of our food security and consumer protection systems on both sides of the border, we believe Canada should be working closely with U.S. regulators on any food safety action plan that is developed. Common approaches and shared science is better for both consumers and business rather than separate strategies and a thickening of the Canada-U.S. border when it comes to trade.
Our final recommendation surrounds biodiesel--the last time I had the opportunity to appear before this committee it was on that topic--and the development of the biodiesel sector in Canada. This is something the Parliament of Canada supported almost a year ago with Bill C-33, but it's being held up by the process of creating regulations. This will affect our competitiveness.
Regulations are required from Environment Canada to set the 2010 start date for the renewable fuels standard for both ethanol and biodiesel fuels to be blended into Canada's gasoline and diesel. The positive economic rural development and environmental benefits of building this market are well understood. In addition, much technical work and testing has been successfully completed. We only need to get the regulations passed in a timely manner. We urge the committee to recommend immediate action on this, before its final report on the current study.
In summary, competitiveness and what the government can do to improve competitiveness for canola growers and the industry are key to the continuing success of this important Canadian crop.
Thank you very much for your attention today. I look forward to any questions you may have.
Conservative
The Chair Conservative Larry Miller
Thank you very much, Ms. Buth.
Now we have, from the Western Canadian Wheat Growers Association, Mr. Bast and Mr. Vandervalk. You have 10 minutes.
Mike Bast Chair, Western Canadian Wheat Growers Association
Thank you, Mr. Chairman and members of the committee.
I'm here with Steve Vandervalk, another director. I'll be sharing my time with Steve.
The Wheat Growers welcome this opportunity to provide our thoughts on policies and measures needed to improve the competitiveness of Canadian farmers. We will focus our comments on three main areas: innovation, trade, and free markets.
We first wish to emphasize the importance of innovation. Our willingness to embrace new ideas in new technology allows Canadian farmers to be among the most productive in the world. It is the key driver of growth and profitability in our industry.
On the seed side, the introduction of biotechnology in canola has led to dramatic yield improvements and reduced pesticide use. It is one of the reasons we've seen such tremendous growth in canola acreage and production in western Canada in the past 15 years. The advent of specialty canola varieties has also contributed to human health by reducing the transfat component of cooking oil. The premium prices available on these varieties have given us an opportunity to improve our profit margins.
These are just two examples of how innovation and our willingness to be early adopters of new technology have kept Canadian farmers ahead of producers in competing nations.
However, we cannot be complacent. The emergence of low-cost producers in countries such as Ukraine, Russia, Kazakhstan, Argentina, and Australia means we must always be open to ways to boost our yields, improve quality, or lower costs.
These new competitors on the world stage have captured an increasing share of the world's wheat trade. Our share of the global wheat market has dropped from 23% 15 years ago to under 15% today. In the past 20 years, our declining competitiveness in wheat has caused prairie wheat acreage to decline by 12 million acres.
Last year's elimination of the kernel visual distinguishability criterion in our wheat variety registration system was one important step in regaining our competitiveness in wheat. Plant breeders in western Canada have indicated to us that the removal of this constraint has already sped up the development of cultivars with higher yield potential and better agronomic traits. The Wheat Growers want to thank this committee for its work in helping to remove this innovation constraint.
A greater research effort is needed. We see a far greater potential for improvements in wheat and other cereals, whether through conventional breeding techniques or modern biotechnology. In Canada, biotechnology has led to dramatic yield gains for soybeans, corn, and canola. We believe this technology can offer the same sort of yield and quality improvements in wheat. We are in need of varieties to help control insect problems, such as midge and sawfly.
We also face a number of plant diseases, such as Fusarium head blight, rust, and leaf diseases. While some progress in meeting these challenges is being made through conventional breeding methods, we believe that modern biotechnology holds the key to overcoming them.
Research is also under way that would allow plants to improve their uptake of nitrogen and other nutrients. This technology, if adopted, would allow us to reduce our fertilizer use without compromising yields.
Another promising opportunity is the development of drought-tolerant wheat. Researchers in Australia are leading the charge here; however, we believe these varieties could be very beneficial in dry regions of the Prairies. The Wheat Growers also look forward to the development of traits that could improve the nutritional quality of wheat or meet the needs of consumers with allergies or other health issues.
Increasing funding for public research is part of the solution. We also need a regulatory environment that encourages private investment. Our regulatory approval system must remain science-based and not act as an impediment to the commercial introduction of new varieties.
Towards this goal, our regulator should be working closely with regulators in other countries to ensure that Canadian approvals for new seed and chemical technologies are obtained at the same time as regulatory approvals in competing countries. We cannot be left in a position whereby producers in other countries have access to new technology that is not available to us.
We urge your committee to ensure that research remains a high priority in agriculture, especially in cereals and crops such as oats, peas, lentils, flax, mustard, chick peas, and canary seed, where acreage levels are generally not sufficient to attract significant private sector investment. Ensuring that our regulatory system embraces a culture of innovation will go a long way to ensuring that Canadian farmers maintain our competitive advantage.
Stephen Vandervalk Alberta Vice-President, Western Canadian Wheat Growers Association
Market access. Another important measure to improve our competitive position is to promote open and free trade in both crop inputs and outputs. On the input side, we remain very concerned about our inability to access crop protection products registered in other countries that are chemically equivalent to products registered in Canada. The GROU program was intended to improve access to imported chemicals; however, the approval process at the PMRA has been slow, with many equivalent products not yet being authorized for import.
The Wheat Growers respect intellectual property rights, so we were not suggesting that we have access to products that are not equivalent to products registered here. What we are suggesting is that the minor formulation and label differences often hold up approvals. We need a regulatory system that facilitates the free trade in chemicals, not the one that imposes artificial barriers. We ask your committee to ensure that cross-border approval processes are harmonized to the greatest extent possible so that farmers on both sides of the border have access to crop protection products on equal footing.
With respect to international trade, the Wheat Growers remain deeply disappointed at the ongoing failure of world trade talks to reach an agreement that would improve market access for farmers who are depending on export markets for a significant portion of their income. The lack of market access, particularly for processed grain products, lowers our farm gate returns. With talks expected to return later this year, we ask the Canadian government to promote freer trade as a means to increase prosperity, not only here at home but throughout the world. The recent introduction of COOL regulations in the U.S. reinforces the need for Canada to take a strong stance against protectionism in all of its various forms.
We support the federal government's efforts and success in striking bilateral trade deals. In particular, we see the committee's support of the proposed Canada-EU agreement. Currently, we face significant tariff and non-tariff barriers for our grain and processed grain products into Europe. This is especially the case for wheat. To improve our competitive position, we ask you to ensure our negotiators obtain better access into this important market.
Chair, Western Canadian Wheat Growers Association
The committee is examining what measures are restricting competition in Canadian agriculture and limiting our competitiveness. The most obvious and harmful barrier to the competition is the imposition of the Canadian Wheat Board monopoly by the Parliament of Canada on western Canadian farmers. As mentioned, wheat acreage in western Canada has declined by 12 million acres, or more than 30%, over the past 20 years. In contrast, wheat acreage in Ontario has increased by more than 60% since the Ontario Wheat Board monopoly ended six years ago. The contrast is quite stark. Maintain a closed market, acres go down; introduce a free market, acres go up.
The captivity of western Canadian farmers to the CWB monopoly means we have no escape valve. For other crops, the ability to ship grain directly to processers and to export markets keeps Canadian grain-handling costs in check. That is not the case in wheat and barley.
The CWB monopoly is a significant impediment to value-added processing on the Prairies. Less than 5% of the wheat produced on the Prairies is processed for food markets. In contrast, approximately 40% of our canola is processed, and with the recent new builds and expansion, this proportion is expected to reach 50%.
Growing oats is another shining example of how farmers can flourish and compete more effectively under an open market. Since the removal of oats from the CWB monopoly in 1989, oat acreage has increased by approximately 25% on the Prairies. We've also seen a dramatic rise in oat processing on the Prairies. Can-Oat Milling, with plants in Saskatoon, Portage La Prairie, and Barrhead, is now the world's largest industrial supplier of oat products.
Canada is a net importer of pasta products even though we are by far the world's largest producer of durum wheat. Quite simply, companies are reluctant to invest in those areas where they are captive to one supplier. As long as the CWB monopoly remains in place, there will be little investment in new milling or malting capacity. In 2005, one of the malting companies built a new $75 million malting plant in Montana, bypassing the better malt barley regions in Canada. The $75 million should have been invested in western Canada. It's a malting plant that prairie farmers are unable to access directly.
We believe reducing regulatory barriers, including the Wheat Board monopoly, would also lead to much greater private sector investment in wheat research. As it stands now, private seed developers are reluctant to invest in wheat research in Canada, given the high degree of uncertainty over whether a new variety will be accepted by the CWB. A 2007 survey undertaken by the Canadian Seed Trade Association found that 74% of all private seed research and development was devoted to canola, followed by corn and soybeans. Less than 5% was devoted to wheat research, even though it represents the largest crop in Canada in terms of acreage. Making the CWB voluntary would go a long way to attracting greater private research in wheat breeding and development.
Alberta Vice-President, Western Canadian Wheat Growers Association
In summary, western Canadian farmers are among the most competitive in the world. It is our willingness to embrace innovation that keeps us profitable and ahead of emerging competitors. For the most part, we face good competition in our input markets. A key concern, however, is our inability to gain access to imports of many of the crop protection products that are equivalent to products registered in Canada. We also urge Canada to continue to seek greater market access for all our products, whether through multilateral or bilateral trade negotiations.
Going forward, the key to improving our competitiveness will be the implementation of a voluntary Canadian Wheat Board. Creating a free market in wheat and barley would eliminate our captivity and improve competition in the grain handling and transportation sector. It would lead to greater processing of our grain here at home. More processing facilities would mean farmers have more choices and more competition for their grain.
Moving to a free market in wheat and barley would also encourage greater private investment in research and development of new varieties. Newer wheat varieties with disease- or insect-resistant traits, or improved nutrition traits, would allow us to reverse the downward trend in our global market share. Being among the first to adopt new technology gives us the best chance to compete against emerging global competition.
Lastly, freeing up the wheat and barley markets would improve farm margins and unleash the entrepreneurial energies of prairie farmers. We have seen the wheat market in Ontario flourish following removal of the wheat monopoly. We look forward to the day when we can see a similar success story repeated in western Canada.
Conservative
The Chair Conservative Larry Miller
Thank you.
Now I have Mr. Bacon and Mr. Grabo from Pulse Canada, for 10 minutes.
Barry Grabo Chair, Pulse Canada
Thank you, Mr. Chairman.
Good morning to all the members of Parliament.
My name is Barry Grabo, and I'm the chair of the Pulse Canada board. My farm is in Strathmore, Alberta, which is about 35 minutes northeast of Calgary. We grow wheat, barley, canola, and pulses on my farm. I'm also a member of the board of the Alberta Pulse Growers. This is my first appearance before the agriculture standing committee, and as chair of Pulse Canada, it's an honour to represent Canada's great industry.
The pulse industry is proud of the successes it has achieved over the last 30 years. Pulse production in Canada has continued to grow to the point where Canada now accounts for 40% of the global pulse trade. Canadian pea exports account for 58% of global trade and Canadian lentil exports account for over 40% of global trade. Edible beans are an important industry in the irrigation district of southern Alberta, in Manitoba, in southern Ontario, and also in parts of Quebec. Canada is a top-five global exporter of beans. The area seeded to chickpeas in Canada is currently at a low level, but in recent years Canada has been the world's second-largest exporter. The growth in pulses proves that we have been and are a competitive industry.
The question before us today is this. How do we remain competitive and how do we improve our competitiveness? The global economic situation has taught many industries that business models have to adjust with changing times, otherwise the downfall can be rapid and dramatic. Agriculture is not exempt from the risks of a changing market.
The pulse industry has released a vision paper. It outlines our strategy to remain strong and to continue to be a world leader. This industry document is comprehensive. Each province or trade can offer you specific provincial or industry priorities, but I can summarize the pulse strategy in five points.
One, agriculture has to continually build on the core strengths of breeding and agronomy.
Two, we have to reduce costs by addressing problems with transportation and market access.
Three, we have to look after the markets we have. In the pulse industry, our customers are spread over more than 150 countries.
Four, we also need to have a vision for growth that includes a strategy of diversification. The pulse industry believes we can play a much bigger role within the processed food industry. The demand for pulses will be driven by the contribution pulses can make to improvements in health and nutrition.
Finally, we see the demand for pulses increasing even more, due in part to the contribution that pulses make to the environmental footprint of crop production. Growing and consuming pulses will help Canadian agriculture to produce healthy people and a healthy planet.
Let me now summarize the three key areas of action that will improve our competitiveness.
One area that both growers and the trade have stated is a top priority is the issue of transportation. When Mr. Bezan, the former chair of this committee, announced the federal funding that would support Pulse Canada's transportation strategy in February 2008, we promised to use a solutions-based approach to address transportation challenges. We've done exactly that through some very innovative work.
In a little over a year, Pulse Canada designed software that will measure the performance of the transportation system and help to isolate the defects that require both commercial and/or regulatory solutions. We have shortlisted areas where infrastructure investments would create efficiencies. We formed a transportation technical working group consisting of the railways, major steamship lines, freight forwarders, transloaders, and shippers from across the country. This group is looking to improve the process by employing a multi-organizational approach to problem solving and asking everyone with a stake in moving pulses to work together to find a solution that benefits everyone.
From day one, the stakeholders within the industry demanded that the approach focus on the identification of challenges and the search for solutions. Agriculture and Agri-Food Canada should be commended for supporting these efforts. We expect that the government will continue to partner with industry to address transportation issues under the Growing Forward framework. The government can continue to support work that strengthens the development of commercial solutions to transportation challenges.
These solutions will need to encourage value-added processing. They will need to support the shipment of identity-preserved products and encourage differentiation in products that can enhance our competitiveness. This is one of the key components of keeping agriculture competitive. We must be engaged at every level to ensure that commercial solutions are being sought and an appropriate regulatory framework is in place as a backstop when the commercial system fails.
Let me now turn to trade. A global agreement on trade at the WTO remains the best hope to address the underlying problems of production and export supports that distort trade. But while this goal remains a work in progress, we can't afford to ignore the importance of signing and ratifying bilateral trade agreements that keep pace with those of our competitors.
It's simple. To be competitive, we have to be able to export pulses and to have the same import tariff as enjoyed by other exporting nations. While we are pleased that Canada has signed trade agreements with Peru and Colombia that provide the same access as was negotiated by the United States, these Canadian agreements have not yet been ratified.
The U.S. agreement with Peru entered into force on the first of February of this year, and as of right now, Canadian pulses are at a 25% trade disadvantage going into Peru. We face the same threat in Colombia. In 2008, Canadian pulse exports to Peru and Colombia were worth nearly $80 million. Colombia is Canada's second-largest market for green lentils, and Peru is an important market for both peas and lentils.
The Dominican Republic is a top five market for Canadian dry beans, but as in Peru, a U.S. agreement is already making us uncompetitive. Unfortunately, we aren't as far along in these negotiations, and Canada needs to complete the negotiations currently under way and ensure tariff parity for Canadian beans to ensure that we can be competitive in this market. We also face a significant competitive threat for Canadian lentils in Morocco, where a U.S. agreement with Morocco will result in a 50% tariff disadvantage for Canadian pulses. We strongly urge the Canadian government to commit to pursue negotiations with Morocco to benefit the lentil and durum wheat grower.
Traders in all of these above-mentioned countries have told us they want these deals done. Pulses are a poor man's food and high tariffs make his food more expensive.
Now, Mr. Chairman, I'll make a brief comment on crop protection products in Canada.
Pulse Canada works closely with regulators in the crop protection industry to ensure that we have access to all of the new crop protection products, in part because all new registrations take us further in the direction of improvements in health and in environmental protection. We also work to ensure that Canadian farmers have access to existing products at competitive prices.
The replacement of the own-use import program had four parts, and I want to give you a report card on the performance of three of these parts that are of greatest importance to the pulse sector.
On the issue of NAFTA registration and labelling, there has been a total of six products registered, but this small number only hints at the great potential for NAFTA labelling to level the field on price and availability and to speed up the process required to have regulators undertake joint reviews. PMRA should be commended for going even further than NAFTA and collaborating on the review of new products with the EU, Australia, and the U.S.
Changes to the process of registration for generic crop products has been a positive improvement, but this success has also made it an area of action to address, because there is a backlog of some 60 generics in the system now. Included in this backlog are numerous generic glyphosates--the product that started all of this debate--as well as important products for grassy weed control in pulses.
So what can be done? More resources and a sharper focus for existing resources and some process changes should reduce these delays. Pulse Canada has been an advocate for changes at PMRA that would streamline work and maintain their focus on health and safety and change the review of their efficacy of products to free up resources to bring their reviews into the timeline that is their own goals. To enhance agriculture's competitiveness, ensuring PMRA has adequate resources and a streamlined process to get these generics to the market as quickly as possible is of the highest importance. We believe that delays with the registration of generics could become a high-visibility problem as we head into seeding and see price disparities between Canada and the U.S. in key products like glyphosates.
The third area, or the GROU program itself, now has 15 products eligible for import from the U.S. GROU has not been without glitches in the importation of products on that list. I know many farmers expect there should be more. This is a disappointment, but we have to recognize that GROU depends on company participation and cooperation as well as speed and efficiency with which PMRA processes these resources.
My time is up, but let me conclude by giving you a success story that embodies Wayne Gretzky's famous line that a good hockey player plays where the puck is and a great hockey player plays where the puck is going to be. In April a human clinical trial, funded through the federal government contribution to the Pulse Innovation Project, will be presented at the prestigious experimental biology conference in New Orleans. Our board has been made privy to the research results, and we expect that Dr. Zahradka's work with pulses will create a great deal of interest.
Let me give you a hint of what's to come. The farmer with pulses might be able to play a better role than the pharmacist with pills in addressing vessel health problems common to diabetes and cardiovascular disease.
More importantly, our farm solutions show promise in going further than treating the problem. This is just one example of where the pulse industry is working to build on our success. I want to be careful in saying this, but let's get the puck out of our feet. Let's get to work. Parliamentarians can do their part, and when Growing Forward funding is up and running, the pulse industry will continue its part by focusing not just on being good, but on being great.
Thank you.
Conservative
The Chair Conservative Larry Miller
Thank you very much. I like your Wayne Gretzky analogy. That's good. We all can relate to that.
Mr. Reid, from the Canadian Seed Trade Association, for 10 minutes.
Jeff Reid President, Canadian Seed Trade Association
Thank you very much, and thank you for the opportunity to present again today to the committee.
I'd like to note as well that we've made a formal submission in both official languages. That's been presented.
First, I have a few words about the Canadian Seed Trade Association. We represent about 130 member companies from across Canada, ranging from small farm-based operations to large multinational corporations. These organizations are involved in all aspects of plant breeding, marketing, distribution, production, and sale of over 50 different crop species and hundreds of varieties, including grains, oilseeds, forages, turf, vegetables, and flowers. CSTA's mission is to foster an environment that contributes to the success of our members and their customers.
I'd like to interject a word of thanks to the committee. I had a couple of opportunities to speak previously, particularly about the issue of KVD, and I'd just like to note that after six years of not having any new winter wheat varieties brought forth, we had three new ones registered this year, largely as a direct result of the removal of the KVD requirement. That is proof that the committee is doing some real things that are having real benefits out there in the industry.
We believe there is a very strong link between innovation and competitiveness. That was recognized by Agriculture and Agri-Food Canada as it began the process to develop this generation of the agriculture and agrifood policy. The document on innovation and competitiveness states it clearly. Productivity is no longer able to sustain Canada's comparative advantage. Innovation is the key to enhancing competitiveness and has the potential to improve the future of the sector while benefiting producers.
Innovation in agriculture starts with seed. We've heard some evidence of that already today from the canola and wheat growers. We believe that plant breeding and research has and continues to deliver benefits to farmers, processors, and consumers around the world. The CSTA submits that if we are to enhance and increase Canada's agricultural competitiveness, the creation of an environment that fosters innovation is critical.
Before I go on to talk about competitiveness, I want to take just a minute to address the issue of competition, as this was identified in the invitation to appear here today. Our sector is definitely highly competitive. There are close to 1,000 registered seed establishments across Canada involved in handling, distributing, processing, and selling seed. This is what we could describe as just about as close to perfect competition as we see in any industry where the price of the seed approaches the minimum cost of production.
Farmers have access to thousands of varieties of over 50 different crop types from which to choose, and literally hundreds of new products are introduced each year. We submit that even more could be introduced with an improved regulatory system.
We have full disclosure of product performance as well, which also increases the competitiveness of the industry, through official testing and official performance trials that are run across the country. This is published for growers as well. Given more flexible regulatory and intellectual property regimes, we believe our industry could be even more competitive internally.
The Canadian seed industry is also competitive from an international perspective. This is demonstrated by the importance of exports to our market sector. Fifteen per cent of the seed sold in Canada by value is exported. Canada consistently exports more seed than we import. In fact, over the past number of years Canada's trade surplus in seed has been steadily increasing from 4% in 2002 to over 40% in 2007.
The seed industry makes a very significant contribution to the Canadian economy overall as well. In 2007 it contributed a total of $3.95 billion, and our sector employed over 14,000 Canadians.
The private sector, which comprises the membership of the Canadian Seed Trade Association, makes a substantial contribution to the success of farmers. In fact, at 39% of total research and development investment, the private sector is now the largest single investor in plant breeding and research in Canada. That compares to Agriculture and Agri-Food Canada's A base, which makes up 21% of plant breeding and research, with provincial investment at 6% and check-offs at about 4%.
CSTA's members invested over $56 million in plant breeding in 2007, and that is 26% of their combined operating budget. They plan to almost double that investment to $106 million by 2012.
However, there is also a sub-story to tell here. In 2012, 96% of the private sector's investment will be in three crop kinds, those being, canola, corn, and soybeans. Investment in cereals, forages, and other crops will actually decline before 2012.
There is a direct link between the level of private sector investment and the regulatory and intellectual property environments—which obviously directly affect the use of certified seed.
First, regarding the regulatory environment, seed is one of the most regulated sectors in Canada. Before introducing new innovations for farmers, our industry can be faced with three different departments administering five different acts and the associated regulations. But let's look at one of the biggest problems we are currently facing, and that is variety registration.
For over 20 years, the seed industry has been working to modernize Canada's system of seed variety registration. The latest round of consultations has been ongoing for the last 10 years. The goal is now to make the system more flexible and to allow faster and more efficient registration of varieties for farmers. In June 2008, we thought we finally had some progress, when proposed regulatory changes for putting in place a three-part registration system were published in part 1 of the Canada Gazette. The comment period ended in August 2008, but we have heard nothing since then.
Even if we get this framework in place for a registration system, it won't mean that registration will be faster or more efficient. Other than a couple of minor crops, no crop kinds have been placed in their tiers, and that will take yet more regulatory change.
The three crop kinds in which private sector investment is high have been able to deal with this, either within or outside the system. Canola and soybean structures have a strong link to the value chain and as a result have been more willing to adapt within the system to streamline the registration process. Corn is not subject to variety registration, and other crops like non-oilseed soybeans are also not subject to variety registration. This has allowed these sectors to grow and return substantial premiums to farmers.
Conversely, forage crop kinds are still subject to all of the strict requirements of variety registration, often requiring a recommendation for registration from a recommending committee where one does not even exist. Investment in forage breeding and research by the private sector is now under 1% of the total sector's investment.
There are other cases where we can make it clear to you that the regulatory system our sector operates in is cumbersome and slow to adapt. Many of our members continue to struggle with the process of approval of novel foods and feeds. Approval systems for seed treatments need to be more closely linked, particularly with the United States, to ensure that our farmers are not at a competitive disadvantage.
The crops with the highest share of private sector R and D investment—canola, corn, and soybeans—share, among other things, an enhanced system of intellectual property protection. Canada is at a very strong disadvantage when it comes to most of our other crops. I can speak to this from firsthand experience, as general manager of SeCan, located here in Ottawa. We distribute the majority of the open-pollinated crop seed into cereals in western Canada. I can tell you that in four out of five of Canada's largest crops, we have little to no private sector investment.
Wheat, as we've heard from the wheat growers, is also declining as a result of this lack of investment, whereas canola, on the other hand, is increasing.
Another area where we see an opportunity to increase the use of certified seed is through the use of a certified seed tax incentive. This tax incentive would see the cost of seed on a farmer's tax return inflated by 155%, which would make them indifferent to the use of certified seed versus their own saved seed. We feel this would also be a tremendous step forward in enhancing competitiveness, by increasing the amount of private sector investment.
Thank you very much.
Conservative
The Chair Conservative Larry Miller
Thank you very much.
We move to questioning.
Before we do that, I have to remind the members that we do have a bit of housekeeping business we must do at the end of the meeting, so I'll be saving time.
Mr. Eyking.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
Chair, on a point of order, if we have housekeeping to do and we don't want to go past one, maybe we should go to five-minute rounds.
Conservative
The Chair Conservative Larry Miller
There's a suggestion that we go to five-minute rounds. Is that okay with everyone?
Conservative
Liberal
Frank Valeriote Liberal Guelph, ON
Mr. Bast, thank you for your presentation. Thank you, everyone, for your presentations and for coming up to make them.
Some time ago, not too long ago, I had an opportunity to visit one of the largest, if not the largest, manufacturing plants for pasta--Delverde and De Checco--in the Maiella mountains on the west coast of Italy. What I learned there is that what is important to the production of pasta is fresh water. They have an absolute abundance, a free supply, of fresh water from the melting snows of the Maiella. My understanding is that fresh water is as important to them as the cost of wheat.
In fact, as I understand it, a Wheat Board model doesn't exist in the United States either, and they're not manufacturing pasta. I don't mean to put you on the spot, but on what grounds do you make the comment that it's because of the existence of the Wheat Board that pasta makers are not in the Canadian west making pasta, when in fact my understanding is that it's more an issue of water than it is of wheat?
Chair, Western Canadian Wheat Growers Association
Thank you, Frank.
In regard to the United States, they don't grow durum. They're not in the durum-making business. That's why you're not seeing the processing side there.
In regard to fresh water, western Canada has large supplies of fresh water, whether it comes out of the Rocky Mountains or out of aquifers. We will find the water we need for the processing side to match any quality. I'm confident of that. I'm not an expert on water sourcing, but speaking as a producer, and from what I know of water traits I look for, whether it be for irrigation or drinking water, we can match anything we need for that processing side.
We look at wheat simply on the production side. For every other crop we see production and processing. For wheat, we don't see it. Why would it be any different if we were to open that up? In terms of efficiency, why would I want to ship a product all the way around the world to have it processed and then have it shipped all the way back again for me to eat? The logical efficiency just doesn't play there. That's the largest reason I see. If we're growing it here, why can't we be processing it here?
Liberal
Frank Valeriote Liberal Guelph, ON
Okay, thank you.
Ms. Buth, you talked about the Doha Round and your impression of the government's position at the Doha Round. Can you express with a little more clarity whether you think the position of this government is contrary to the interests of the canola industry you represent and whether they can be doing something more meaningful on behalf of your industry?
President, Canola Council of Canada
Thank you very much for the question.
We support the government's position at the WTO Doha Round in terms of reducing tariffs and reducing domestic support. We understand that Canada has a two-pronged approach to the Doha Round and that it is trying to protect supply-managed commodities in Canada at the same time as it is trying to open up trade. Of course, our emphasis is on reducing tariffs, reducing domestic support in our export markets, and reducing export subsidies. We would like to see a stronger position taken by our government in terms of reducing tariffs and reducing domestic support. We have worked quite closely with them to ensure that our messages, essentially, are getting across in the negotiations.
Liberal
Frank Valeriote Liberal Guelph, ON
You also spoke of research and innovation. I'll start with you, and if there's any time left, I'll go to the others as well. It's so critical, I agree with every one of you, to the future of our industries.
Are you in favour of increasing research funding—I know that everybody always is—as much as you are of redesigning current programs? In other words, is there something that could be improved in the current programs available to each of your industries when it comes to research as opposed to just throwing more money at them?
Mr. Buth, I'll start with you.
President, Canola Council of Canada
We have a research strategy within the canola industry. There is a piece of it that's focused on production. But as I mentioned earlier, canola is a crop that has been grown for a while. Our focus in terms of research is on the health side for humans--on human nutrition--and on the meal side in terms of improving the meal quality. Those are the two primary areas. In terms of canola research on production and new varieties, I think it's been mentioned several times that we have quite a bit of private sector support. That's been really key for us in keeping up in terms of competition with other oilseed crops.
My recommendation would be--and I think Agriculture Canada, in Growing Forward, is looking at this--that it needs to be a collaborative approach with industry. We need to look at it as the entire value chain and determine what that industry needs to move forward on research. It might not be something that's perhaps done at an Agriculture Canada station. It might be something that we might have to do at the University of Toronto. So it needs to be a collaborative approach between both public universities and private research. Our recommendation is based on the need for taking a value chain approach to looking at what's needed.
Conservative
Bloc
France Bonsant Bloc Compton—Stanstead, QC
Thank you, Mr. Chairman.
Mr. Reid, I have some reservations about transgenic seeds. When I was young, not so long ago, my farmer neighbour used his harvest and processed it. The following year, he took the same seeds to grow wheat, corn or whatever.
In what way do you think transgenic seeds are better than these organic and natural seeds?