Agriculture Committee on Dec. 6th, 2012

[Kevin Hursh]

Yes, and the best examples would be some livestock pelleting plants, and some specialty crop processing and cleaning operations.

The ethanol plant, especially the one at North West Terminal Ltd. at Unity, does very well. It's not a large ethanol plant, but it provides ethanol and there's an incentive for smaller plants.

There are also some things in the woodwork that I can't comment on, but I know there's some investment being made in further processing by one of the players that will come to light in the next while.

Since those terminals are majority farmer owned, that value-added processing does directly benefit producers.

[Blake Richards, Conservative, Wild Rose, AB]

Well, I certainly appreciate those examples.

In your opinion, do you think that the changes that we've made in terms of the Canadian Wheat Board, obviously, creating an open market rather than that monopoly, increases those kinds of opportunities for farmers? Do you think it makes them more feasible?

[Kevin Hursh]

I don't expect a great increase in malting production with barley or a great increase in flour milling.

I think many of the processors would prefer to deal in an open market and that might slightly lever in favour of more operations. However, I don't think the Canadian Wheat Board was as large an impediment to value-added as some people believe. Although, the main value-added function is canola crushing. About half of our canola is going to domestic crushers. That has been where we have made the most progress. But I think that's just a case of the economics being right. I don't think the Canadian Wheat Board being involved seriously impeded those economics.

I do believe that potential processors would prefer to deal directly with farmers in an open market. I should also note that among the ITAC membership and the farmer directors, there was a wide variance of opinion as to whether the CWB monopoly was a good thing, or whether its time had passed. There was a wide divergence, and ITAC did not have a position on how the Canadian Wheat Board should evolve.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

Mr. Hursh and Mr. Boehm, thank you.

Kevin, thank you for that balanced answer. I remember hearing about the Alliance Grain Traders who were going to suddenly open up a plant out west, and as soon as the Canadian Wheat Board was dismantled, all of a sudden there was no opportunity out there to open up a plant to make pasta.

Having said that, Kevin, I am getting a mixed reaction and mixed messages from farmers and lobbying groups about the rail service agreement. On the one hand, I hear cars are still damaged, there's leakage, and they are not showing up on time. Then, I hear that at this particular point in time, things are running very well and the trains and cars are on time. There may not be such a concern expressed. Could you enlighten us—briefly, because I only have so much time—on the issue of the railcars and the railway again?

[Kevin Hursh]

Certainly. The system has worked reasonably well this fall, but this fall has been a little different. We had a very good harvest season, so we have a fairly narrow grade. We don't have this wide proliferation of grades and a bunch of grain that's damp. That helps the system. We didn't grow a monster crop either. Crop yields were trimmed back, so the volume to be moved is somewhat down. Probably shipments of other commodities such as potash are down as well, which allows more room in the system to move commodities such as grain.

We're really pleased that grain movement has been relatively good. We don't want an unbalanced system. We just want a balanced accountability. In any agreement between parties usually each has obligations and if they don't fulfill their obligations, there are penalties or reasons to push them back into compliance. That's what we would like.

[Frank Valeriote, Liberal, Guelph, ON]

May I interrupt? The stakeholders have been able to come to their own agreement on a rail service agreement or on a dispute resolution clause. I'm wondering, has anybody indicated to you the expectation of when the government will present legislation to impose one on the stakeholders?

[Kevin Hursh]

It's my understanding from the news I've seen that the government is ready to introduce its rail service legislation, and that we will get a first chance to see it by the middle of this month. You're in Ottawa, and I am not. I'm sure you have much better information than I do.

[Frank Valeriote, Liberal, Guelph, ON]

Actually, we don't have any better information. We're very much looking forward to the introduction of that agreement.

Terry, I'll ask you something. It's very interesting, the public good versus private profit. We're moving away from the public good. I hear that on the issue of innovation, less money being spent on public research. You seem to allude to it when you talk about outward and inward inspection. Is there a risk to the determination of quality of our grain through the changes to inward or outward inspection?

[Terry Boehm]

The quality aspect parameters are established by the Canadian Grain Commission. The question is if you don't have an auditing process to ensure those parameters are indeed respected, which inward and outward inspection does, then you can very quickly run into quality issues.

Even with our system of inward inspection, we have run into that where boatloads have been rejected due to contamination with deer feces, etc. If you catch these things before they contaminate large lots, which inward inspection offers the possibility to do, you prevent those issues, and you maintain a reliable quality product. You can still maintain quality, but reliability may be an issue. That's one of the issues the Americans have with their system, which isn't as robust as ours. It's actually competing with us on quality and reliability.

[Frank Valeriote, Liberal, Guelph, ON]

Okay. Finally, on the issue of public research which I alluded to earlier, a number of people have expressed a concern that the government is withdrawing its investment in public research, the public good versus private interest. Can you expand a little on that? Do you share that concern?

[Terry Boehm]

Absolutely. We've seen at all sorts of the institutions, particularly in plant breeding, cutbacks taking place. Breeders are leaving institutions for other pastures, and we put ourselves at peril. When we talk about innovation, it's innovation to what end? We feel that publicly financed innovation that's equitably and cheaply distributed to farmers and to the economy as a whole generates the maximum value for Canadians. If you allow it to be financed up to a point and then transfer it over to the private sector to be sold back to us, again, with intellectual property regimes which are going to be strengthened in the Canada-European trade agreement drastically with enforcement provisions that make one pale, that comes at a cost. That costs not just farmers but it costs the economy as a whole.

The question is whether you think it's appropriate to allow that amount of money to go to the largest players in the seed industry—the Monsantos and Bayers and DuPonts, etc.—or whether you want to develop that and shift it to farmers and benefit Canadians as a whole through the activities of farmers.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Storseth.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much, Mr. Chair.

I have to apologize for the overly partisan comments from my colleague from the Liberal Party, a kind of Johnny-come-lately to the whole shipping issue.

I have to clarify a couple of points. The level-of-service discussion actually emanates from the shippers' bill of rights, which Mr. Hursh will be very familiar with and which I was working with ITAC on back in 2007. The legislation eventually passed in 2008, under the expert guidance of our chairman of the transport committee at that point in time, who today is the chairman of the culture committee. From there we discovered the level-of-service agreement issues that needed to be done, and have been moving forward from that point in time. I think this is a very important aspect of the transportation industry, about how the supply chain works for our grains and oilseeds producers.

Mr. Hursh, in regard to the level-of-service agreement, further to the comments of the Liberal Party, our government has been very clear that we would put forward legislation before the new year. Those are public statements that have been made in the media. I know that your organization, as well as many other shippers, have been dealing with the government, and have been part of the process with Mr. Dinning.

Could you talk about some of the important aspects of the level-of-service agreement that you are hoping to see come forward, such as the ability to have certain elements brought forward? Could you talk about some of those issues, Mr. Hursh, that are most important to ITAC terminals?

[Kevin Hursh]

I guess it will be interesting to see how it rolls out and whether each individual shipper has to do their own negotiation, or whether groups of shippers or a whole industry will be able to use some sort of template agreement to come to some resolution when dealing with the railways, that these are our obligations, and these are their obligations, and how this will be monitored and what the system will be in place if one or the other side believes that their partner is not living up to their agreement. ITAC is a—

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

If I could just interrupt for one second, just so we can dig down a little bit, would you agree that one of the most important aspects is that every shipper has the ability to get a level-of-service agreement from the railways?

[Kevin Hursh]

Correct. That's the problem. The railways basically walked away from the table in the Dinning process, saying that they were not going to play this game, that they were not going to voluntarily enter into agreements with shippers. That's why the hammer was legislation saying that they will have to sit down and come to a commercial arrangement.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

You would also agree, then, that the second most important part of that is that there is some accountability mechanism put in place so that the railways will have to abide by the level-of-service agreement that they agreed to with each shipper, recognizing that every shipper is not going to get the same level of service, but that the agreement they get needs to have some mechanism of enforcement. Would you agree with that?

[Kevin Hursh]

For sure, there has to be some level of enforcement. The difficulty will be to make it timely and accessible so that it doesn't take six months or a year and a great deal of cost to try to get to the point at which there's a resolution.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Cost-effectiveness, of course, is another aspect. We don't want to have to go back to group FOA, or some of those other aspects that were required in the past.

Would you also agree that one of the concerns the shippers had.... I'm trying to gauge what you feel for ITAC users would be the most important aspects. You've identified the need for a level-of-service agreement for every shipper, understanding that the actual details will be different with each shipper, because not every shipper has the same ability to provide their details or commitments moving forward, and they need to have an easy mechanism by which to hold railways accountable to that level-of-service agreement.

There's another aspect I would like to raise that I have some concerns with, and which shippers raised with me, and I'm not sure it's even plausible. I am referring to the level of service or the standards that we, as Canadians, put on, being enforced as our grain goes across other borders. I'm not sure it's even possible for us to impose our rules on, say, the Americans or the Mexicans. Would you agree with that?

[Kevin Hursh]

I would, in principle. I'm not quite sure what you're getting at there.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

It has been one of the statements I've heard as I sit down with shippers. They often say if they could get everything, they would like these rules to be set across the board. Of course, in our first commitment we make here to shippers, I'm not sure that's going to be possible.

Do you think that's as important as making sure we have accountability and level-of-service agreements in the first place?

[Kevin Hursh]

I think level-of-service agreements are really what we're after.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Okay, perfect.

The last thing I'd like to quickly mention is the fleet. You have suggested there is a deterioration of the fleet, and we've heard that in the ag committee before. Could you confirm whether you're talking about only the railway's fleet of grain cars, or are you talking about the government's fleet as well?

[Kevin Hursh]

Generally, I'm not sure it matters whether it's a government-owned car or a railway-owned car. You do hear complaints about those not being in good repair. I don't have any statistics or anything quantitative to really put an edge on that at all.