Evidence of meeting #61 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 commission.
A recording is available from Parliament.
Chief Commissioner, Canadian Grain Commission
—there is about $5 million of public good—
Liberal
Frank Valeriote Liberal Guelph, ON
Perhaps I could ask you another question, as I only have a certain amount of time.
You said that protection coverage may improve. We've talked about this before, insurance as opposed to bonding. Perhaps you could quickly explain. Is bonding required? Is it mandatory right now? Where are you headed with insurance? Will it be mandatory or will it be voluntary, in order to secure payment?
Chief Commissioner, Canadian Grain Commission
Security is mandatory now, not always in the form of bonding. There are other financial instruments. We are currently reviewing an insurance model. We haven't finalized that process, but it's our understanding that it will still be mandatory for licensees to make the system work.
Conservative
LaVar Payne Conservative Medicine Hat, AB
Thank you, Chair.
I have so many questions, I almost don't know where to start. We have such a magnanimous chairman, maybe he'll give me an extra minute or so.
Conservative
Conservative
LaVar Payne Conservative Medicine Hat, AB
Thank you, gentlemen, for being here and also by video conference.
My first question is for the Canadian Grain Commission.
What synergies already exist between the CFIA and the Canadian Grain Commission when it comes to variety registrations? What would the benefits be of having the CGC play a greater role in variety registrations?
Chief Commissioner, Canadian Grain Commission
Certainly, we have a long history of cooperation working with the CFIA because, while I won't say our roles overlap, they border each other. We're involved in common phytosanitary issues and, as you mentioned, the variety registration is probably the area where we have to work most closely together.
The CFIA is responsible for the registration of new varieties, but much of the work, and almost all of the work, when it comes to determining end-use functionality and the marketability of new varieties, is under the mandate of the Canadian Grain Commission's research lab. If new varieties, particularly of wheat and barley, are approved, then it's our determination as to which class of wheat or barley those grains would fall into.
The other debate is over seed because seed is part of grain quality assurance. The CFIA is concerned about safety. They're concerned about imports of other varieties. We're concerned about Canadian production and making sure we have that grain quality assurance system in place, and that it works well.
We feel that if we have a better grain quality assurance system than other countries, it offsets somewhat our disadvantage of being farther removed from many of our markets. The Canadian Grain Commission has a greater role, I would say, in market access issues. Variety registration and making sure we monitor variety identification in our grain handling system, which is our responsibility, means we need to be aware and have the DNA maps of new varieties.
We play a significant role. I guess it's up to policy determinators, such as yourselves, as to how that moves forward, whether we play a greater role or not. If we're asked to, we can because we have the scientific expertise. Currently, we try to cooperate and work well with the CFIA.
Conservative
LaVar Payne Conservative Medicine Hat, AB
The Canadian brand has a significant role in this whole process, I take it.
Chief Commissioner, Canadian Grain Commission
The Canadian brand is extremely important. We've been very successful in maintaining that. It's the reason many foreign customers buy Canadian grain, because they can usually get it closer. Oftentimes, they can get it cheaper, but for a lot of the blends that they need for their flour, they need the certain types of quality that we have.
Our variety registration system and our grain grading system means that they can consistently, shipment after shipment, receive exactly what they want, so that they can put it into their mills, into their bakeries, and have a product that their customers will buy.
Conservative
LaVar Payne Conservative Medicine Hat, AB
Another comment we heard was about outbound shipments and the potential for private inspections. From your point of view, would that have an impact in terms of the Canadian brand?
Chief Commissioner, Canadian Grain Commission
I think we have to be very cautious in that area. There may be some possibilities to do some things along that line, but there are a couple of things.
First of all, companies may ask why they have to have the Canadian Grain Commission do outward inspection when the customer says he's happy with an SGS inspection. If there's ever a problem, it's not just companies that become involved; governments become involved. The EU becomes involved or MAF, the ministry of agriculture and forestry, in Japan becomes involved. Suddenly, they're looking at who's on record on the Canadian side. What government body do they look to in order to resolve this issue? They don't go to SGS and they don't go to Intertek. They go to the Canadian Grain Commission. If we have no role, it's very difficult for us to provide the services that we have provided in the past, that offer market access strength to Canada.
This is old news, perhaps not as relevant anymore, as it should be, but the Americans in the 1970s—I don't know the exact year—tried getting out of outbound inspections as a government agency and they had a wreck. Some shippers were adding water to corn, for instance, and it was growing by the time it got to the unload. Why that happened, I don't know. Perhaps there are other checks and balances we could put in place. But we have to be very cautious that we don't tamper with what has given us our Canada brand at the current time.
Conservative
NDP
Francine Raynault NDP Joliette, QC
Thank you, Mr. Chair.
Thank you very much to our witnesses for being here this morning.
My question is for Mr. Gust.
You manage a number of products. We know that a lot of grain is exported around the world, that competition is stiff and that you have to have a good sense of marketing in order to sell your products. What are the greatest challenges faced by your organization?
Chair, Western Canadian Wheat Growers Association
I think the greatest challenges for marketing and international access are knowing what's out there in the world and being very cognizant and very aware of our market advisers. I pay a lot of money to have good market advice to know what's happening around the world.
I also talk to different farmers from Australia and the United States. I talk to other farmers who talk to farmers in South America. It's a very connected world. It's something we all have to be better at, but it's also something in which information overload can happen very quickly.
We all have to be very aware that every farm is unique and so different that there's not a one-size-fits-all solution. We have to have the skill sets and the desire to learn so we can move forward in this business.
NDP
Francine Raynault NDP Joliette, QC
In your presentation, you talked about shipment by boat. You said that sometimes a boat can stay blocked in the port for several days and that the producers pay the price. What are your losses when a boat is idle for several days before departure?
Chair, Western Canadian Wheat Growers Association
I guess the proper term for that is demurrage. That would probably come out of the company's bottom line, but they would try to pass those losses back to me and every other producer filling the next boat. They have to build in extra profit margin to handle uncertain risk. In any business risk certainty and business certainty are crucial. If there is any extra risk, you add that to your margin.
As a primary gross producer, I cannot pass along that margin, so we have to do our very best to get the best price, the best basis at the time.
NDP
Francine Raynault NDP Joliette, QC
Why are the boats waiting in the port? Why don't they depart as soon as they are loaded?
Chair, Western Canadian Wheat Growers Association
I think the best reason would be grain not being in position to be loaded. Something such as a railway strike, an avalanche, or an act of God that was completely unpreventable might have happened, so we have to be aware of those things.
There are also things like the loading of the ships. If it rains in Vancouver—which it does; we checked. In Vancouver, about 20% of the days have over five millimetres of rain. It doesn't rain all day, but you have to be able to address those problems, whether it means putting tarps over the vessels or using smaller spouts. It's a problem which is being addressed around the world. It seems that the safety concern is something of a red herring. You go into work, work for 15 minutes, and it starts to rain, which it does in Vancouver every day, and then you go back to work when it stops raining. It might not stop. All of those costs are passed back to exporting farmers.
NDP
Francine Raynault NDP Joliette, QC
We know that the agrifood chain works differently depending on the sector. What are the weak links in the supply chain of your industry, where international trade is concerned for example?
Chair, Western Canadian Wheat Growers Association
Where are the weaknesses in the supply chain? Market access is always a big one, if we can't go in at an equal or preferential trade rate.
In the case of Japan, soybeans versus canola is a great example. Soybeans have a better import tariff than canola does going in so it simply takes more off the table for an equivalent product. We can expand upon the health benefits of canola, the ease of use, the high Canadian quality, but it's all dollars and cents for these processors. They need so much vegetable oil, and we have to be able to get into those markets at equal or preferential rates.
Conservative
The Chair Conservative Merv Tweed
I have Mr. Richards, but I think Mr. Storseth is going to take the first minute, and that's probably all we're going to have time for.
Conservative
Brian Storseth Conservative Westlock—St. Paul, AB
Thank you very much, Mr. Chair.
I have one quick question for Mr. Hermanson. As I'm having meetings with my producers, the issue of the increase in outward inspection has come up. I do know there will be some cost savings with the elimination of inward inspection, but could you comment on that, please?
Chief Commissioner, Canadian Grain Commission
Certainly, Mr. Storseth.
The Canadian Grain Commission's fees were frozen in the mid-1990s at 1991 levels. You don't have to be a brain surgeon to realize that's going to cause some issues when you're mandated to provide services under the Canada Grain Act. In other words, it's the law of the land.
That's why there's been mounting pressure, first of all, to deal with our fee structure, and second, to deal with the act. Changes to our fee structure would help resolve the imbalance where the taxpayer has been providing an increasingly larger portion of our funding base. The regulatory changes in the act would look at our services to make sure they're relevant to the industry today.
The overall result of these two processes is that some services we are currently providing are deemed with the changes, the rationalization, the changes in marketing, not to be necessary or mandatory, the main one being inward inspection, and that would save about $20 million for the sector. Some of the other cost savings have to do with changing our security program. We have to balance that with the fact that to maintain a grain research laboratory, which I think everyone understands plays a huge beneficial role to the industry, and to preserve the Canada brand, which is again a great asset for producers, much of our funding will come from outward inspection.
To justify having a grain research laboratory, or to pay for a grain research laboratory, and to preserve the Canada brand, we have to charge a fee that provides us with the revenue, with some amount of public good funding as well, to serve the industry. The result of that is while we're saving $20 million, roughly, in streamlining, there is an increased cost to the industry because we can't continue at 1991 levels with taxpayer subsidies for the other services that we must provide. We're seeing an increase in outward inspection fees as being the most significant one.
