Good morning. My name is Rex Newkirk, and I'm, as mentioned, the director of research and business development at the Canadian International Grains Institute, which is an independent not-for-profit organization that provides ongoing technical support to buyers of Canadian field crops around the world and has done so for 40 years.
Thank you very much for this opportunity to present an understanding of the grain supply chain in Canada. Jim has already done an excellent job of providing information on the canola industry, so I'll focus my attention on other aspects of the grain industry. I will attempt to provide an overview of the grain supply chain with a focus on the issues that affect the system, and in particular, the role of the federal government in addressing these challenges.
Canada has a very efficient and effective supply chain. We have been providing grains to the world for over a century, and it continues to improve and change with globalization. The supply chain includes: plant breeders, who develop varieties that address ongoing needs; a variety registration system that ensures customers' needs are met by the new lines of grain; seed growers, who propagate the seed; farmers, who efficiently produce the grain; primary elevators that collect the grain and transfer it into the rail system; transfer elevators or terminal elevators that move the grain to the end customers; flour milling companies, which convert the grain into food ingredients; and finally bakeries, which produce finished products and deliver them to consumers around the world.
The Canadian system also includes a robust grain grading and quality assurance system through the Canadian Grain Commission. Canada provides technical marketing support, which helps ensure customers are informed of the valuable properties of Canadian grain, and this ultimately encourages them to purchase the product. Research is conducted that develops new products from the grains, which creates new opportunities for the crops in food and industrial applications.
The system in Canada is primarily a bulk handling system, as Canada produces a great deal of high-quality grains that are for the most part exported and must be transported in a very cost-effective and efficient manner. The system has been designed to primarily move a homogenous product and maintain purity and the quality of the grain so the customer ultimately receives the product that they purchased in a timely and cost-effective manner.
There have been numerous changes to the grain industry over the last two decades that have resulted in improved efficiencies. There has been a great deal of consolidation, resulting in larger companies that operate very efficiently and in a cost-effective manner. The old wooden grain elevators have been replaced with much more efficient facilities that collect grain from a wide region and efficiently transfer it to the rail system. Recently, as you are aware, the government made changes to the marketing system for wheat and barley, and now the farmers and companies are selling the wheat directly rather than through a monopoly.
The federal government has some key roles in Canada's supply chain, and as such, supports the best interest of the farmer, the Canadian public, and increases trade. This includes research into the customers' needs and ensuring the products that are produced and delivered are addressing these requirements. It includes investment in research and plant breeding, which results in germplasm and new varieties that address customers' and farmers' needs.
It is important that the federal government maintain investment in this area as there is insufficient investment by private companies in the area. Companies often foresee limited potential for return on investment in these crops because unlike genetically modified crops such as canola, where farmers buy seed and license technology from companies each year, farmers typically do not purchase certified seed for non-GM crops such as wheat, barley, and pulses. Therefore, the return to the plant breeder is relatively small and often too little to entice private companies to make this investment. Without a genetic investment, the advances in genetics will not be made and future production efficiencies are lost. Therefore, it is important that governments, in partnership with producers and private companies, make investments in the development of these genetics.
The federal government conducts research to ensure the grain grading system is efficient and meeting customers' needs and therefore maintaining market share. This is a wise investment as it builds customer trust and supports the entire supply chain.
The Government of Canada plays a pivotal role in ensuring food safety through inspection and oversight of pesticide usage. This system has on the whole been very effective, and the grain industry is well respected worldwide as a result. It must be responsive yet predictable, and so far this has been the balance often achieved in Canada.
The government supports market development through its trade commissioners and organizations such as CIGI that work one on one with customers to ensure they are supported and aware of the products that Canada produces. Farmers cost share this activity with government. This has been very effective, and in conjunction with the grain handling and safety roles previously mentioned, has resulted in Canada being well known for producing some of the highest quality and safest grains in the world. Canada is often the preferred supplier for grain, and long-term success of Canadian grains in the world markets relies upon continued investments in this area.
As you are likely aware, during this time of transition of the grain industry, CIGI made a commitment to maintain the level of customer care, knowledge building, and brand maintenance, and in partnership with the federal government, we have been working diligently to keep that promise.
The Canadian government funds research into innovation that can create or support future markets. Typically, basic research is funded that can identify new products and opportunities. Whenever possible, CIGI uses this research to support customers around the world. This is one area where CIGI believes additional attention from the government is required.
Canada has invested heavily in research, but many express frustration that too few of these research projects become commercially relevant. It is CIGI's experience that the issue is not that the research is not of high quality, but that the funding often ends at the discovery stage and does not take the research and development far enough.
For research to become an innovation with commercial successes, it must be demonstrated well beyond the initial discovery stage and be promoted at a commercial level. Commercial customers are not willing to utilize new products unless a long-term continual demonstration of their production and benefits is supported. To ensure Canada reaps benefits from the research, it is critical that new innovations be demonstrated at a commercially relevant scale directly and consistently with potential users.
CIGI, food centres, and other agencies that are capable of demonstrating commercial pilot-scale production and have long-term trusted relationships with companies are well positioned to help move this research to commercial reality. However, this requires a long-term and conscious effort of government investment to be truly effective.
In an attempt to create awareness of the economic possibilities from effective innovation in agriculture, CIGI is planning a two-day event in Winnipeg in January, where four current examples of innovation will be discussed. During this time, the participants will meet with innovators and be able to discuss government's and industry's role in innovation and develop clearer plans to success.
In summary, the grain supply chain in Canada is very efficient and is one that all Canadians should be proud of. The investments that the Canadian government makes into the supply chain, including plant breeding, grading, food safety, technical market support, and market access, have been very effective and will continue to be so in the future.