Agriculture Committee on Oct. 29th, 2009

[Ken Clancy]

Concerning agricultural chemicals and PMRA, our issues are exactly the same as the issues Jennifer is discussing. We have a great deal of frustration with PMRA in terms of approving agricultural chemicals. I don't think we would agree there should be a world body, but certainly we would agree there should be more integration North America-wide on what products are available to growers and what products are available for our members to sell.

One person in the chemical industry, who put it to me very well, said the United States spills less than what Canada uses in terms of agricultural chemicals. When we have a policy where we want to do as much research on these things as we can in Canada, when we have independent scientific research that shows these products are perfectly efficacious and safe, there's no reason, in my view, why we shouldn't use them.

[The Chair, Conservative, Larry Miller]

Okay, thank you.

Your time has expired, Mr. Valeriote.

Mr. Hoback, five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Again, gentlemen, it's good to see you here, and, Jennifer, it's nice to see you here, too.

I'm going to start off on the fertilizer side of it with you, Ken.

As a retailer yourself, what is your ability to shop around for nitrogen? Can you go to three or four suppliers, or do you have to stick with one supplier?

[Ken Clancy]

Two.

[Randy Hoback, Conservative, Prince Albert, SK]

Two? So if a third party came into the market, let's say offshore, and said they had some very inexpensive product and it's just as good--it's pearled just the same as 46% nitrogen--can you entertain that type of business?

[Ken Clancy]

Not really.

The way the North American fertilizer industry is structured, everything flows up through New Orleans, Louisiana, up the Mississippi and out. Where we are, which is considered by the industry to be in the Pacific Northwest market, there are no import terminals to speak of--except Portland, in the Portland-Vancouver-Washington area, on occasion will get some in. But we haven't seen anything available to us out of there for probably the better part of 10 or 12 years.

[Randy Hoback, Conservative, Prince Albert, SK]

So if I had some nitrogen coming out of Saudi Arabia, for example, that I'm going to bring in containers to you, what would be the ramification if you said you were going to buy that? How would your other suppliers handle that?

[Ken Clancy]

It depends. I don't know. We shop around as best we can and make sure we're buying as competitively as we can. If a competitive situation arose, I would like to think our suppliers would try to meet it. But I guess it depends on how real that situation is.

As an example, we've seen imports coming into Churchill, Manitoba, that have been far below market pricing. We can't access that stuff through Churchill, but suppliers don't meet those prices.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, if you were to take on that business, what would happen to your pricing and discount structure from your suppliers?

[Ken Clancy]

I can't speak on their behalf. I don't know what they would do.

[Randy Hoback, Conservative, Prince Albert, SK]

Would you get a volume discount? Would you lose your volume discount? Would you lose your good dealer bonus? How would your stocking be the next year if that supply wasn't there?

[Ken Clancy]

It depends. We have an affiliation with Agrium--we're an Agrium dealer--and we have an understanding that there's a certain minimum volume of product we're going to get through Agrium. So what would happen? I don't know. We could lose our deal arrangement, which would involve some loyalty rewards and volume discounts and that sort of thing. But those don't amount to much in the long run.

[Randy Hoback, Conservative, Prince Albert, SK]

They don't amount to much?

[Ken Clancy]

No, not really.

[Randy Hoback, Conservative, Prince Albert, SK]

But having the contract with Agrium, that's fairly important to you?

[Ken Clancy]

Yes. Because of our location, we are very dependent on Agrium. We would not be able to function without them, so they do have a lot of.... At certain times of the year, for certain products, we take the price. We don't have the ability to shop around.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

Going back to last fall, what were the practices of the suppliers to you guys when it came to stocking your shelf, for lack of a better word? Back in my riding I heard a lot of pressure was being put on by the suppliers for you guys to fill up at these higher prices or else you wouldn't get it. Is that fair to say?

[Ken Clancy]

Most of what you said is fair. I'm not sure about the “you don't get it” part of it. Last fall we saw a lot of almost panic buying in the fertilizer industry. If you remember, you saw the news, the international media, there were food shortages throughout the world, food production had to increase, inventories were at historic lows. That really caused a dramatic bid-up in the price of fertilizer because people were trying to get more fertilizer to grow more food throughout the world.

So we certainly saw those prices bid up. What happened was suppliers were putting pressure on independents like ourselves to agree to certain tonnages at fixed price, contract tonnages, so we would agree for 1,000 tonnes of urea at x price. And then of course when the prices crashed, those contracts were still in effect.

[Randy Hoback, Conservative, Prince Albert, SK]

There is no compensation or readjustment of your pricing accordingly?

[Ken Clancy]

No.

[Randy Hoback, Conservative, Prince Albert, SK]

It's yours. You're holding the ball, so the best you can do is pass that on to farmers, is that correct?

[Ken Clancy]

Yes. Viterra, I think in early January, wrote down in the neighbourhood of around—I could be wrong—$40 million of their fertilizer inventory because the price bubble on fertilizer burst, and then they just started fresh. Our independent members don't have the ability to do that.

[Randy Hoback, Conservative, Prince Albert, SK]

In July it was kind of interesting, because once all the seeding was done and all the fertilizer was applied, the price of nitrogen went severely down—

[Ken Clancy]

Yes, we're at about four-year lows right now.

[Randy Hoback, Conservative, Prince Albert, SK]

Four-year lows. So on the price per tonnage, is it fair to say it went from roughly $600 a tonne to $350 a tonne?