Agriculture Committee on Dec. 9th, 2010

[Frank Valeriote, Liberal, Guelph, ON]

Okay.

Greg, I'm just wondering. As you know, last year about this time we had the railway people up here, and I think everyone around this table was somewhat discouraged with their responses. They closed down sites....comparing them, frankly, to a hamburger stand: they weren't making money, so shut 'em down. We were talking specifically about producer loading sites and the 50-odd sites they were planning to shut down. We even heard stories from people about how the cars are broken, they're losing grain, and the rail line takes no responsibility for it whatsoever.

You just gave a scathing indictment, Greg, in that quote about what the railways do to extort money from farmers who are price-takers now. I'm just curious: are you not kind of subscribing to them? Are you not letting them off the hook by you not demanding right now that there be a cost review? Why aren't you joining the others in demanding this cost review?

[Greg Cherewyk]

First of all, we're not saying that there doesn't need to be a costing review--that there's no merit in a costing review--

[Frank Valeriote, Liberal, Guelph, ON]

Why not now?

[Greg Cherewyk]

It's simply an order of priorities. As I said earlier--I'm not sure if you were here--we have great expectations with respect to improved levels of service. We have huge expectations. We've just been through two years of the most exhaustive review ever conducted in this country on rail freight service. We have telephone books' worth of reports full of data that has undeniable and irrefutable evidence with respect to the level of service that's currently being provided.

It all points to one thing: put in place the policy framework that will ensure that service improves and that it meets the expectations of shippers. Get that done. Get that done first and then let's assess what the appropriate cost is for getting that done.

As I showed you, the costs of unreliable service are huge. They're enormous.

[Frank Valeriote, Liberal, Guelph, ON]

Will you be joining those who are demanding a cost review if this level of performance isn't forthcoming? Within what period of time do you expect this level of astounding performance to arrive? You sound so optimistic. None of us on this side of the table, nor those to your right, are nearly as optimistic.

[Gordon Bacon]

Our organization has said from the beginning that we have to define the service expectation. We're well below what our members feel is reasonable. You have to define the level of service that railways are going to deliver. You cost that service. You measure it. So you cannot, in our view, take a look at costing a service that's underperforming. We need to define the performance level, and then the costs have to be appropriate, given the kind of structure we have with railways. It's in that order.

As Greg pointed out, this is not a difference of opinion. We all agree that we have to enhance the profitability. What we're talking about is the strategy to get there. We're saying to define service and then you can look at the costs to consistently deliver that level of service you've committed to.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Richards, you have the last five minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you, Mr. Chair.

I just have one question. If I have any time remaining, I'm going to let Mr. Shipley ask a question or two as well.

Obviously there are a lot of challenges that farmers face, particularly new farmers who are trying to get into the industry now. If you really want to boil down the main challenge that farmers face nowadays—and I think we have all heard this, because I know I've heard it many times from farmers—it's simply a matter that the costs to do business have increased at rates that are a lot higher over the last, say, 30 or 40 years, than the prices that the farmers have been getting for their product. I guess that's what it really boils down to. When the cost goes up and the price doesn't, it obviously becomes harder and harder to do business.

We're talking about one of those issues here today. Rail costs are certainly one of the issues that farmers face, but I guess what I want to do is ask you to compare it to other issues. Certainly when we look at something like fertilizer costs, it's much the same kind of thing: you have a limited number of places where some of the inputs into fertilizer come from. Similarly with railways, when there's a lack of competition, costs can be driven up, and it's an issue that farmers have to deal with.

We can look at all kinds of issues. Costs for machinery and equipment and the cost of fuel, whatever it might be, have all increased at higher rates. Then, of course, when we're talking about our grain farmers in western Canada, particularly wheat and barley farmers, there is the fact that we have the Canadian Wheat Board monopoly, which also contributes being unable to get a higher price for the products when there are less customers available to them than there might be if they had the opportunity to choose freely. These are all things that I guess we'll call irritants, things that cause issues, whether it be the cost side or the price side that can affect a farmer's bottom line.

I think we all recognize that there's an issue here. We all recognize that there's an issue, whether it be service or costing. I want to get a sense from you where you feel that ranks, for lack of a better way of putting it, in terms of comparing it to some of the other issues, like fertilizer or the lack of competition, when we're talking about wheat and barley. Where does it sit in terms of a ranking, I guess, for lack of a better way of saying it, compared to some of the other issues you face?

[Gordon Bacon]

For our members, the number one issue is transportation, Number two is market access. These are the very visible issues that are creating cost inefficiencies and uncertainty. We're trying to create an environment in which we can be competitive on a global scale. Our members have said that those are the number one and number two issues.

[Allen Oberg]

For many farmers, the highest single cost they have would be rail transportation. Second to that, as you identified, would be input costs. It's something that certainly needs to be addressed.

Let me talk just a bit about the acceptance of this issue. This is an issue among farmers--the need for a costing review--that spans political lines. You mentioned the Canadian Wheat Board in your comments. Farmers have different views on the board, but on a rail costing review, they're pretty much agreed. We survey producers every year. In our last survey, 92% of all farmers supported a costing review. This is something that has broad consensus.

[Blake Richards, Conservative, Wild Rose, AB]

That's what I expected to hear: that railway issues are obviously right near the top or at the top.

Is there time? I'll give it to my colleague.

[The Chair, Conservative, Larry Miller]

You have about 20 seconds, Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I have just a quick question. I thank my colleague.

First of all, Bill C-8 has been a huge step. In May 2006, it came in. This whole service and costing issue, I'm assuming, has been around for a long time, not just since then.

First of all, in any business, you can't determine costs without knowing the level of service. You just can't do that. So the process is right: you can't build your cost on bad service when you're talking about having a service report that's going to raise it. We're there to help you to do that.

Can you tell me, though, how long this servicing issue has been around? Greg?

[Greg Cherewyk]

Well, in our industry, when we go back to the beginnings of the pulse and special crops industry.... You have to understand that it's 25 years old, really, and we went from bit player to big player. I think it's fair to say that in our industry within the last decade... When I look back on the minutes of the trade association's discussions on transportation, it has been a priority for at least a decade or more and it's gotten to the point where transportation committees have been struck. It's really since the kind of privatization era of CN that you start to see issues with respect to service.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Okay. Thanks, folks, for coming out.

[The Chair, Conservative, Larry Miller]

Thank you.

The time has expired. I'd like to again thank you gentlemen for coming in today.

We do have some business here that we have to go in camera for, so I'd ask people to please clear the room.

But before we do that, I'll say thanks again and wish all of you a very merry Christmas and all the best in 2011.

[Proceedings continue in camera]