Thank you, Mr. Chair.
Thank you for the opportunity to present to this important committee. It's a pleasure for me to be here today with my colleagues from the Canadian Soybean Exporters' Association to present our perspectives relating to marketing and trade under Growing Forward 2.
I serve as current chair of the Soybean Exporters' Association, a non-profit association that represents members in all facets of the Canadian soybean industry. Also with me today is our past chair, Sue Robert, and our treasurer, Martin VanderLoo.
The mission of CSEA is to continue to improve the quality and value of Canadian soybeans and promote the export of Canadian soybeans and soy products into world markets.
I'm here today to talk about the value of marketing and trade to the soybean sector and to present our perspectives.
Canada grows approximately 3.8 million acres of soybeans. Manitoba, Quebec, Ontario, and most recently, in the last couple of years, Prince Edward Island were seeded to soybeans for a total production in 2011 of 4.2 million tonnes. Over the years, plant breeders in both the private and public sectors have developed different varieties of soybeans for a multitude of different uses that include industrial products, animal feeds, and food for human consumption. There's a chart in the brief.
Exporters are investing in the growing opportunities for Canadian soybeans. During the 2010 calendar year, Canada exported approximately 2.6 million metric tonnes of soybeans, with an approximate value of $1.3 billion. Of this total, it is estimated that 40% went as food grade—and when I say food grade I mean non-GMO food grade—representing a physical amount of 1.5 million metric tonnes.
These food grade soybeans provide additional revenue to the local Canadian farmer and grower in terms of premiums paid over and above the value of what the domestic oil processors would pay for soybeans—the Chicago Board of Trade pricing. Based on CSEA's recent estimates, an average premium of approximately $1.50 per bushel is paid. This amounts to an additional $87 million in revenue for Canadian soybean growers and it contributes to the local economy of the communities in which the growers reside.
Canada is a global leader when it comes to soybean quality and value. In a number of global markets Canadian soybeans are the first choice of food processors that are at the leading edge of emerging trends in value-added soybean products. Members of CSEA work in collaboration with the seed industry, soybean growers, and a dedicated handling system to ensure that Canada produces the very best soybeans.
Throughout every link in the value chain, from the variety breeder to the soybean grower to the receiving elevator, exporting members play a key role in ensuring the needs of the end-use marketplace. In addition, CSEA was instrumental in assembling the first comprehensive national standard for identity preservation—IP—through the Canadian Grain Commission. There's a chart in the brief as well.
Research is the key to staying ahead of the changing demands of the global markets. Growing Forward 1 offered this research component. The global soybean market is highly competitive, and the soybean specifications of individual soyfood producers evolve as they respond to their consumers' preferences. Soyfood manufacturers may specify traits such as high sugar, special proteins, high and low levels of isoflavones, as well as functional performance when used for the production of soy foods such as tofu and miso.
It is essential that the Canadian soybean industry keep pace with the changing demands for soybeans. Soybean characteristics are addressed during crop breeding and the selection of new soybean varieties. Because new soybean varieties must perform under Canadian field conditions and exhibit the quality characteristics desired by the food grade soybean markets, the development process is complex and resource intensive. Evaluation techniques that can accurately and efficiently identify the best candidate soybeans are critical to success.
Under Growing Forward 1, CSEA has a DIAP in testing procedures for food grade soybean evaluation that helps us overseas. Under the DIAP research initiative, CSEA and AAFC have cooperated to identify soybean characteristics important to the global customers and ensure that these characteristics are incorporated into new varieties. A key component of this strategy has been the development of lab-based evaluation protocols for selection and for monitoring the quality of the Canadian soybean.
I might add that there's another DIAP focused on research through the Canadian Field Crops Research Alliance—producer groups and industry—and it was at $8 million plus. It goes from Manitoba right through to the Atlantic Ocean. It's focused on the breeding of soybeans.
Collectively, these research initiatives and resulting techniques will enhance the capability of the Canadian soybean industry to remain in the forefront of global food grade soybean marketing. This initiative will benefit from the capabilities of CSEA access to market intelligence and AAFC's research team's unique capacity to conduct this research genetics, soybean seed biology, and soy product functionality. It's essential that Growing Forward 2 continue with adequate funding levels to ensure there's no interruption with these research programs. In the case of soybean breeding, it's a 10-year process from the hundreds of initial crosses to get one variety, with the needed food traits, to the growers and then to the market.
Another issue is transportation, which impacts the market competitiveness of Canadian soybeans. Over an extended period of time, CSEA export members have been receiving reports from overseas buyers indicating that the Canadian food grade soybeans are more expensive on a per tonne landed basis than food grade soybeans supplied by our U.S. competitors. Preliminary observations would indicate that this price differential is simply an issue of currency. However, further analysis identifies that competitors can move containerized cargo out of Chicago and Columbus over the U.S. west coast—sometimes over Canadian ports—considerably more cheaply than we can move cargo out of Toronto and Montreal via Vancouver. There's a chart in here.
The informal study of the containerized ocean freight rates comparing Toronto, Chicago, and Columbus, Ohio, reveal that Canadian firms are paying as much as $530 over published freight rates from Chicago or Columbus, and they go to the same destination globally. In discussion with various freight forwarders and oceans carriers, there are sometimes very clear indications that the differential between U.S. freight rates based on Chicago/Columbus versus Toronto is the result of rail rates. The situation has a serious impact on our competitiveness overseas.
CSEA would submit that the issue of the freight rates on eastern Canada containerized traffic must be addressed to ensure the continued competitiveness and access to global markets. This is a very serious issue for the soybean export industry and could have detrimental effects on the livelihoods of Canadian farmers, grain companies, processors, and shippers.
Here are some additional issues impacting marketing Canadian soybeans.
It is imperative that Canada participate and become a member of the Trans-Pacific Partnership. Our overseas customers are asking about this.
The Canadian soybean export sector continues to work with our soybean breeders and researchers, as well as partners within AAFC, to ensure that there's compliance with the Canadian and international regulations on heavy metals and maximum residue levels. It is imperative that regulations by other governments are not put in place that would be an impediment to trade.
My fellow presenter talked about red tape and bureaucracy. CSEA is a small organization with limited financial and staff resources. We're all volunteers in this organization, except for a part-time staff member. Wading through the mounds of paperwork required for submitting a funding request requires both cash funding and commitment of staff to monitor and manage the application. The significant commitment to cash funds and staff time has precluded CSEA from applying for such funding from the current Growing Forward program. CSEA would submit that alternate methods of accessing funds for trade and marketing programs for smaller organizations such as CSEA need to be developed under Growing Forward 2 and still maintain accountability. It is CSEA's observation that larger organizations that are both well funded and well staffed tend to participate in marketing and trade initiatives under Growing Forward. However, smaller organizations like CSEA that are results focused can also play a role in turning marketing and trade initiatives into tangible Canadian success stories.
In summary, the Canadian soybean exporters sector provides employment and generates economic activity throughout all segments of the soybean value chain. While the soybean value chain starts with research and development of soybean varieties, it also includes production and growing of specialized varieties by Canadian producers, the identity preserved handling system and specialized processing activities of the grain elevator sector, and the transportation system that moves soybeans to market via truck, rail, lake freighters, or ocean-going freighters.
Once again, CSEA stresses that public research is pivotal to the continued success Canada has in the identity preserved soybean program. Canada is known around the world for success in breeding non-genetically modified soybeans. The soybean breeding programs have adapted over the years to meet the demands of protein, size, hilum colour, health characteristics, and, most importantly, yield for our growers that both international and domestic buyers are seeking.
The results are in the product. Canadian exporters not only maintain the quality of the soybeans they receive, but they enhance the quality. It is through this commitment that Canada can supply high-quality soybeans to world markets.
My colleagues and I would like to thank you very much and will answer any questions at the end of the session.