Agriculture Committee on Nov. 6th, 2012

[Humphrey Banack]

When I was in the office today, we were looking over some of these fee changes. One of the things I did notice is that there would be a fee issued upon companies of $500-and-some per month for the bonding side of this. The fee, I noticed, for the inward inspections for the third-party inspectors was $147 a year. So in the uptake, it's going to take us some time. As you mentioned, we get the fees...we saw this on November 1. Today is November 6, so that's five days, and there was a weekend that most of us enjoyed. So it allows us four days to have a look at this. It's very hard for our office staff to have a look at this and put something out.

We will, as an organization, use our member organizations across the country—KAP, APAS, and Wild Rose in Alberta—to have a good look at this, because they are the biggest people hit by this in the prairie provinces. I'm sure we'll have something coming forward, but as I said, it's not going to be very quick. It's going to take a little time, as Gordon said, until we understand a lot of the costs around the insurance of producer support. I think it's a very important part of that.

We will be there. Thirty days is a very short turnaround time for anyone. We realize the time is upon us and we will do our best to make that time work.

[LaVar Payne, Conservative, Medicine Hat, AB]

Mr. White.

[Richard White]

Yes, we're analyzing it right now. We have the document and we're going through it with a fine-tooth comb. We'll be prepared to have our input and our acknowledgement of it, and probably more importantly our views on it, through that process within the 30 days. So we're not worried about a time crunch here. I think it's adequate. But, again, there's a lot of stuff to think through and we're just analyzing it right now.

We're confident we can provide some valuable feedback through the process.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay. I'm glad to hear you're all getting ready to get your submissions in. That's really important.

Mr. White, I'm still a bit confused around how you arrived at the 25%. Why is it 25%, and why is it not 15% or 50%? I'm quite confused around how you arrived at that. Maybe you could help me out a little bit.

[Richard White]

I don't want any confusion.

When you go back on those items that I identified as being public-good components of the CGC...we got some estimates on what those components cost. Basically it was just an adding up of what those costs were to maintain those services that are for the public good. We had an estimate through the consultation document about what the new CGC cost structure overall was going to look like. We just knew it was going to take $20 million to $25 million to continue with those public-good initiatives, and that just worked out as a percentage of the anticipated operating costs overall, going forward.

[LaVar Payne, Conservative, Medicine Hat, AB]

So we're heading down this path. Certainly I know Mr. Hoback indicated that there is potential for more changes down the road that he hopes to see, as well as you.

I guess what I'm looking at here is this. The Wheat Board monopoly has gone, farmers have that option, we're moving into the 21st century, and we need to do something with the Grain Commission. I guess this is the start of it. I'm assuming that you're in favour of moving forward with this to really help the economics, and certainly to make sure that it becomes an efficient organization as well.

[The Chair, Conservative, Merv Tweed]

Do you want to make a very brief comment?

[Gordon Bacon]

I think you've nailed the point I was making. We have to continue the evolution of the Canadian Grain Commission, especially because we are moving to cost recovery. When there are going to be mandatory charges, we have to make sure we've minimized the charges across the board to the degree that we can, and we've taken a 21st century approach to dealing with some of these issues.

[The Chair, Conservative, Merv Tweed]

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair, and thanks to all of you.

I hear the comments being made primarily by Mr. White, but also by Mr. Bacon and Mr. Banack, around how this thing evolved. Quite frankly, the dilemma for us as a committee is that we don't have control of this piece of legislation. We can't amend it; we're not allowed to. This has to go back to the finance committee. It's part of what in the jargon is called OB 2, omnibus bill number two.

I hear your request for hopefully going forward. Mr. Hoback is suggesting maybe it is, but I wouldn't hold your breath, because it will probably be in OB 3, in which case you will still be dealing with the finance committee, not us.

Inasmuch as you are here, and I appreciate your being here, the reality is that the finance committee makes the amendments, not us. We don't have the ability.

I hear my colleagues across the way saying whoa, but it's true. Their instructions to us were very specific as to what we were allowed to do. We can hold the hearing, we can hear you, and it gets it on the record. That's important, believe you me. It's very important that we hear from you and that you are on the record. That's a big part of what this is going to be.

The difficulty for us is that we can only make suggestions, and we're hearing a lot. Let me put that political piece out there. Hopefully the next piece comes to us, so that when we hear from you, we're making the amendments based on what your input is and we're crafting the legislation for agriculture through the agriculture committee, because I think that's where we should do it.

Let me go back to the bonding issue. I'm hearing from the three pieces of the chain here: Mr. Banack for the farm side, Mr. Bacon on the other piece of things, about the security of the issue.

Mr. Banack, is it fair to say that until you get some sense of security, you'd like to see it where it is, and let's not rush out of it?

[Humphrey Banack]

We had a PSRMP program from Agriculture, Growing Forward 1, that we did study in western Canada as to the different rules. We looked at producer payment. We looked at the bonding system, insurance-based proposals, producer funded. Each of the organizations took their time. Many of the organizations sitting here were involved in that. I know the general farm organizations were, and it was very difficult to come up with an answer because we don't understand it.

Our biggest concern is we have to have payment producer security. That has to be there at a level that covers those sales they make every week. When I'm making those sales and I expect them to be covered, if they're not covered, or only to a certain level, I have to know what level that is and what risk I'm having to handle going anyplace. Clarity is the biggest point out of the thing in the end.

[Malcolm Allen, NDP, Welland, ON]

Mr. Bacon, you talked about the insurance model and the uncertainty of it, and perhaps unlevelling the competitive playing field from the perspective of...as we have now said, we mandate it be this way. We're mandating something else.

What I am struggling with is...I'm not sure where you want to take it. If you had a magic wand, what would you do? Would it be an insurance program, or would it simply be to deal directly with this person, so that it's a commercial relationship? What do you do between individuals? I want you to answer that.

[Gordon Bacon]

The view of the members of the Canadian Special Crops Association is that a range of payment options are out there. Many of us use electronic transfer whereby funds are transferred immediately. The question we are raising is, are we dealing with a 20th century problem in a 21st century piece of legislation?

In our presentation we raised the question as to whether that element that Rick referred to in subclause 45(1) should be implemented, whereby you are moving from bonding to insurance to lower costs. We're raising the concern of whether the insurance will now unlevel the playing field between companies, perhaps disadvantaging some of the smaller companies. The bigger the sale, the bigger the bond you had to have, so it was in proportion to the size of the business. When you change to a risk system, the questions we have are, what does that do from a premium perspective, and is that the role of government?

Because I am also a farmer, I understand that farmers want payment security. We have just raised the question about whether the insurance model is the pinnacle of policy development or whether there are 21st century options that could be looked at that could perhaps drive even more cost out of the system.

[Malcolm Allen, NDP, Welland, ON]

Mr. White, this is a separate question about the public good, because I think you're sort of in that play as well, and you estimate that 25% should be the piece the taxpayer should actually put in.

Do you feel that's a finite cap at 25%, or is it a sliding piece? Is it 20% to 30%, or could it be 35% that we take on? By the way, I don't disagree with you. I think the public good is indeed a piece that plays out here, and I appreciate your organization taking the time to try to quantify that, because throwing the dart with the blindfold on doesn't really work all that well. So kudos to you and your organization for trying to quantify it, because it's not an exact science, clearly, but it's close.

I ask, do you have a scale or are you locked in at the 25%?

[Richard White]

No, I wouldn't lock it at 25%, because the Grain Commission's cost structure could change over time and all of a sudden the percentage would be out. That was simply to point out what we think is right and what is being proposed—9% versus 25%—and it was trying to compare those apples to apples for the here and now. It's not an absolute 20% or 25% going forward. It's more that here are the items we think the public purse should pay for, and if it totals $20 million, that's $20 million the government needs to support going forward, regardless of the CGC's cost structure around that for other services.

[Malcolm Allen, NDP, Welland, ON]

It could be like an accordion; it could go in and out, depending.

Thanks. I appreciate the opportunity. No doubt I'm out of time, am I?

[The Chair, Conservative, Merv Tweed]

A little bit.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

[The Chair, Conservative, Merv Tweed]

Mr. Richards.

[Blake Richards, Conservative, Wild Rose, AB]

Thanks, Mr. Chair.

Thanks to all of you. I know that in my previous time on the agriculture committee in the last Parliament I had a chance to meet with you and talk with all of you, but it's been a little while. It's nice to see you all again, and I appreciate you being here tonight—well into the evening—to share your thoughts and views with us. They're important to us, and we appreciate you being here to share them.

I have a couple of questions, and I'll start with you, Mr. White.

As I said to the earlier panel, I think many farmers—and I certainly agree—would see this as another step in the modernization of our grain system, especially in western Canada. Obviously, last year, with the changes to the Canadian Wheat Board introducing voluntary marketing and giving farmers that choice, that marketing freedom in terms of where they'll market their grain, whether it be through the Wheat Board or otherwise, that was a very big first step. I know that for farmers in my area that was something they were seeking for many years, and they are very excited about the opportunities they now have as a result of that.

I think this is the next step in that modernization process. I know, Mr. White, you've indicated that you'd like to see further changes, further streamlining of the Canadian Grain Commission, and that's appreciated. I think there will probably be opportunities to hear more about that at some point as well.

Obviously, we're here tonight to talk about the changes that are being made in Bill C-45. I noted that in a recent press release you called it a good first step in updating an organization that has not seen any significant changes in over 25 years, so you obviously tend to agree with me that this is a good step.

I would like to hear a little bit more from you in terms of what you see as long-term benefits for the industry in these changes that are being made here. Could you elaborate a bit on your reasons for saying it's a good step, and what you see as some of the long-term benefits for the industry as a result?

[Richard White]

That's a good question.

It is a good first step. It does start to reduce costs, and, more importantly, get rid of some duplication, because there is some serious duplication that's wasteful, quite frankly. At least this first step gets rid of that kind of excess cost.

Going forward, the long-term benefit we would like to see is a more extensive approach to the Grain Commission's modernization agenda, and that would be the governance. If we can get the governance right, then the longevity of that organization will serve farmers and our customers much better than if we put in solid legislation that doesn't allow the organization to move or fluctuate according to market demands and customer needs. It needs to be flexible and it needs to be nimble to be able to adjust the services it provides, because the world market is constantly changing. Farmers themselves change as well.

Going forward, I think the next steps that we would strongly recommend be taken in the near term will set it on a much more relevant path to serving us in terms of ensuring that our quality assurance parameters are still there and the food safety parameters are still there. Those are all key features that keep us competitive in the world marketplace. We don't need an organization that's bogged down and locked into a process that can't be changed because of legislation. It needs to be more flexible and move as a business to provide efficient and effective low-cost service, because that is a competitive wedge that can emerge and knock us out of some export markets if our costs get too high.

[Blake Richards, Conservative, Wild Rose, AB]

You mentioned duplication in your response. I assume you were talking about the inward inspections there. Is that what you were talking about?

[Richard White]

Yes. There is other duplication as well. It was subtle, but in my presentation we are going so far as to say that, on outward inspection and weighing—not just weighing, but on outward inspection and weighing—there should be a provision that an accredited third party could do the job.

We are aware of international customers that are dealing with a standardizing inspection company called SGS. It's global. It's well known. It has a reputation second to none. We have international customers that require SGS and they want SGS certification, but because CGC has to provide its outward inspection and weighing, they're both doing it. The customer wants SGS, and the grain company throws the CGC final certificate in the garbage at a waste of about $75,000 on a big boat.

There is other duplication that is occurring that we think could be accommodated as well.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

[The Chair, Conservative, Merv Tweed]

With that, I'll thank our committee for the questions and our guests for the answers. Thank you for being here.

We do have a brief five-minute organizational meeting at the end of this one, so I will ask our guests at the back of the room to clear the room as quickly as possible.

We'll have a three-minute recess, and then we will go in camera to discuss committee business.

[Proceedings continue in camera]