Evidence of meeting #60 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
Conservative
Bob Zimmer Conservative Prince George—Peace River, BC
How about the Atlantic guys? Can you comment on some positives with reference to the supply chain and some challenges for you in the east?
General Manager, Prince Edward Island Grain Elevators Corporation, Atlantic Grains Council
Some of the positives, obviously, would be that with the soybean acreage expanding greatly down here in the Maritimes, we've had a lot of interest from the larger private firms, which we have never really seen before. We are getting our soybeans over to the Port of Halifax on their large elevator, and the Panamax ships are coming in there to top off. It's a large amount of beans to us. It's small to everyone else, but it's very important to our economy. That's definitely one of the positives.
There's more excitement on shipping from the eastern side. We do have markets down through the Caribbean and to Europe, which we're fairly close to.
One of the challenges, obviously, would be the freight rates, the highway cost to get to Halifax from the Island, and possibly the shortage of trucks, with the trucks all being used at one time. If the flow of soybeans heading to Halifax slows down, the farmers can't combine, and that never works very well for a farmer.
Liberal
Frank Valeriote Liberal Guelph, ON
Thank you, gentlemen, for appearing before the committee this morning.
Neil, you've talked about value-added industry manufacturing. I've heard a lot of discussion around the table about the lack of investment, although there are examples of there being value added, such as crushers in canola, milling, etc. I've always been curious about the lack of investment, particularly out east—and you alluded to it—in value-added industry. You talked about there being a lack of port infrastructure and other reasons.
I see value added as so important, not just in the creation of jobs but in the creation of other benefits, such as biofuels and animal feed. Can you tell me why, in your opinion, there is not more value-added industry being created in the Atlantic provinces? What could be done to help that?
General Manager, Prince Edward Island Grain Elevators Corporation, Atlantic Grains Council
I would say that in the past a lot of our grains and oilseeds were used in the livestock industry. That has changed dramatically in the last four or five years. There are now more opportunities for the larger companies to come in here, purchase product, and ship around the world, so I think you're going to see more investment coming along.
We have a large milling operation in Halifax that is a great example of value added, but we certainly need more of that. The biggest deterrents are probably our volume, our size, and the profitability for these companies. The cost to invest is quite high, but there are a lot of products that can be grown down here that can be used locally.
Would you have any comments on that, Allen?
Chairman, Atlantic Grains Council
Probably one of the comments in particular that we would have is that P.E.I. has moved into the Japanese market. There's quite a bit of interest there. We would like to see some value added there.
One of the things we tried was a local crop of buckwheat. That's going to be exported to Japan. Now, rather than export the raw product, I do believe that we need a mill right here in Prince Edward Island, or somewhere in the Maritimes, that could process it. Then we'd ship the finished product. As for whether the crop is ever going to be successful, this is only the second year that it has been grown here. It looks interesting.
The other thing we're doing is that probably about 20% of our soybean acreage is grown for the Japanese market by a company from Ontario that has invested here with a plant in eastern P.E.I., but again, as a crop that's processed, it has to be shipped to the Port of Halifax. That does not put a whole lot of pressure on at harvest time, because they process it through the whole year, so that's a bit of a help there too.
Liberal
Frank Valeriote Liberal Guelph, ON
Thank you, Mr. Ling.
I want to ask Mr. Otto a question, and you can come to this question at the end, if there's time.
You spoke about the risk of people who are exporting not being paid. Do you have a solution that you might recommend for that, such as some form of bonding, if not insurance, that would make sure our farmers are paid when they export?
Director, Western Barley Growers Association
There's a solution that the Western Barley Growers came up with. We did some work on what we call a clearing house project. That is an idea that we concentrated on. It commits both the seller and the person who is buying a product. It commits them to taking the product and also to paying for it, and the seller also makes a commitment.
Both parties have to put a fee up front when they sign the contract, which guarantees payment for product and also guarantees delivery of the product, so that the contract is executed. We developed this concept about four years ago and introduced it to the industry. We talked to the industry about it. At this point, we don't have any uptake by the industry to—
Liberal
Frank Valeriote Liberal Guelph, ON
How is payment secured, though? Is it a bond, so that if you don't get paid you call on the bonding company and they pay, or is it insurance?
December 4th, 2012 / 9:20 a.m.
Liberal
Director, Western Barley Growers Association
Everything's in place to execute the contract, so the contract is carried out.
Liberal
Frank Valeriote Liberal Guelph, ON
All right.
Can you talk about value-added industry out west and what's happening? I know commitments were made around the time of the Wheat Board transition that weren't fulfilled by, I think, Alliance Grain Traders, and I know there is some extra canola being crushed. Can you give us some other examples of what is impeding the development of value-added out west?
Director, Western Barley Growers Association
I wouldn't say the Alliance project has fallen through. I think it has been put on hold because of economic conditions and the marketplace. That's a big determinant on what's going to happen in value-added processing.
As far as the barley industry goes, of course, Rahr Malting has carried through with its commitment. I've seen pictures of their storage—it's almost completed—where they are hoping to be able to store their needs at harvest time on site, as much as they can, for the year's operation. Certainly that's a step forward in what I call value-adding in the malt industry. I think the move to a more commercial marketing atmosphere encouraged them to make that investment.
I would say the challenges to value-added, especially in the barley industry.... Of course, we have a very, very large feed industry, and I call that value-adding. As to how large it will get, I think it's at its point. Certainly the feed industry is facing some challenges today that they didn't face 10 years ago.
Conservative
The Chair Conservative Merv Tweed
I'll have to stop you there. The time has run out.
Mr. Payne is next.
Conservative
LaVar Payne Conservative Medicine Hat, AB
Thank you, Mr. Chair. Thank you, gentlemen, for coming today, and also those on video conference.
I'm from southeast Alberta. We have a lot of different types of agricultural products grown there, and some pretty good products compared to our fellow folks in British Columbia, I think.
Conservative
LaVar Payne Conservative Medicine Hat, AB
I'm shameless; you're right.
Mr. Otto, I want to touch on a couple of things.
You talked about the rail system and its efficiency at this point in time. I know a couple of years ago all I heard from farmers was that the railways weren't moving their products, so is there anything in particular you've seen that has changed that, or is it simply because of the new commercial opportunities?
Director, Western Barley Growers Association
I think what we've seen, especially in the movement of grain, is that elevator companies have made commitments for export, so they need to get the grain into position and they have worked with the railways. The railways see an opportunity to, in my opinion, move grain more efficiently, so what we have in the marketplace today is targeted deliveries. In other words, when I deliver that barley or that durum or that spring wheat into that elevator, it already has a place to go, to be loaded into cargo somewhere or to a miller anywhere in Canada or down in the United States.
Under this new system, the elevators that have made a lot of these sales are able to arrange their deliveries and their shipments to meet their needs. Railways are able to operate more efficiently because they don't have grain coming from everywhere and going into that terminal. In export terminals, it was no secret that they could get there with a line of rail cars but they didn't all go to the same terminal, and they might not all hold the same grain. What we're seeing today is that as we have targeted deliveries for targeted exports, we have a more efficient use of those facilities, right through transportation and right through grain handling.
Conservative
LaVar Payne Conservative Medicine Hat, AB
Great.
You also talked about rail service agreements. How would that work for your industry? Would the industry itself—for example, the Western Barley Growers Association—have some sort of contract with the railways? How would that work from your point of view?
Director, Western Barley Growers Association
The Western Barley Growers Association is strictly a policy, industry, and producer-grower group.
What we see in having any kind of service agreement between the shippers and the railways is an opportunity for them to work together, but if there's a dispute, there has to be some way to settle that dispute so it works in the best interest of the industry but also in the best interests of both parties. We need to have some mechanism in place for that to happen. Certainly we've seen a lot of uneasiness in the industry because really, quite frankly, there is no way for that to happen today.
We get a lot of pointing of fingers indicating that this is why it's happening, but I don't like to point fingers at anybody, because I'll have three pointing back at me.
I think to have something in place that allows that discussion to happen, to resolve those incidents where we have problems, is much better for the industry.
Conservative
LaVar Payne Conservative Medicine Hat, AB
Thank you.
I'd like to thank you gentlemen from the Atlantic Grains Council.
I don't remember if Mr. Ling or Mr. Campbell talked about the supply-managed market and how important that is for you. Could you give us a little more detail on that from your point of view?
Chairman, Atlantic Grains Council
We saw a decline in the price of beef cattle, not only in the Maritimes but right across Canada, and I believe it started about the time BSE happened. It has never returned to the level it was in 2003 before that happened.
At the same time, the Maritimes produced a large number of hogs. I think we're down to about 18 or 20 producers, with maybe two dozen left in P.E.I. We saw that very large decline in the meat industry in the Maritimes, which forced us to look somewhere else for markets.
Supply management, which is protected, has remained pretty steady; the poultry and the dairy businesses have remained strong. That's why we have that market, and it is very secure at this time, so the Atlantic Grains Council is certainly a supporter of the supply management system as it pertains to the grain and oilseed business in the Maritimes.
Since the decline in the red meat industry, we've seen quite an increase in the oilseed crops in P.E.I., mainly in soybeans and canola. The supply management system would not look after that market here in the Maritimes, so that's why we're in the position of exporting them out of the country.
I think that answers the question.