Thank you.
I'm the president of the National Farmers Union. For those who aren't familiar with it, it's a voluntary, national, direct membership organization composed of farmers from across Canada. We're the largest voluntary national farm organization. Farmers actually have to pay directly and become members. We're wholly financed by memberships and donations from members. There's very little outside financing.
We believe that small and medium-sized family farms should be the fundamental food-producing units in Canada. Our mandate is to work for economic and social justice for those farmers.
In reference to today's committee hearings, I'd like to introduce the topic in a couple of ways. Part of it is a historical reference. At settlement time, particularly in the prairie west, essentially we had an adversarial grain handling system: farmers and this monopoly of railways—CP was a monopoly at the time. They colluded with their own grain company, Ogilvie Mills, and farmers were regularly cheated on grade, stockage, etc.
As a function of that, farmers agitated, and in recognition that it was in the general interest of the economy of the country as a whole, there was essentially a mildly forced collaboration system created, in which all sectors of the handling system collaborated. An important part of that were: the Manitoba Grain Act, and then the Canada Grain Act of 1912, the creation of the Canadian Grain Commission, and other institutions later on, such as the Wheat Board. The cooperative grain elevator systems created their own pooling system and central selling agency to mitigate the effects of those who would extract excess revenues from farmers.
Now we're systematically dismantling that collaborative system, under the guise of buzzwords like “modernization”, “rationalization”, and an assortment of pieces along that line, and really are recreating an adversarial system where farmers fundamentally end up paying for all of the costs in the system, as they always have. In that system, it allows for the maximization of profits at the farmers' expense, on the rail side, on the grain handling side, etc.
We've seen rationalization take place where, in the Prairies, we've gone from approximately 5,000 elevators to which farmers could deliver—Mr. Hursh can probably give the exact number—to approximately 200 delivery points. At the same time, we've seen the costs for elevating the grain, taking it from farmers, elevating it and placing it on rail cars, rise substantially. We've seen transportation costs rise substantially, even though we've had a rationalized rail system and branch lines abandoned.
One of the key factors in maintaining profitability and the reputation of Canadian grains and oilseeds has been the Canadian Grain Commission, because it has a reputation in its assorted auditing processes, of which inward inspection is one of them, of making sure we have quality product, dependable product, as the mandate states, for domestic and export purposes.
Now, how do you maximize profits in the system? Well, you reduce costs; you eliminate competition; you create guaranteed revenue streams through legislated protection; and you externalize costs. In the so-called value chain, there are a number of factors both on the input side and on the marketing side that farmers deal with. Those include machinery, fertilizers, chemicals, fuel, seeds, seed cleaning, land, education, and organization costs. On the output side from the farm, they include on-farm storage, trucking, grain handling, the Canadian Grain Commission, rail transport, terminals, exporters, and ocean freight.
Essentially, there are costs in the system regardless of how you organize it, but there are inefficiencies and oligopolistic behaviour which ultimately cost the farmer more.
My colleague, Mr. Hursh, cited the issues with railway service. That has been an ongoing problem, although we take a little bit of a different tack. We feel that the statutory requirements—the statutory obligations, the railway service obligations—are important and that if we move into a totally commercial arrangement and ultimately the two railways are the only game in town, our negotiating ability will be diminished, and they will establish a fee for service that again will transfer costs to farmers.
I mentioned legislative protections. In the past, we have had, and still have for the moment have, the Canadian Grain Commission and other institutions, but what we're increasingly doing is creating profit centres, particularly in seed, by the utilization of plant breeders' rights, patents, and an assortment of modifications to the variety registration system that create a very successful shift from a public good varietal development and seed system to a private system, at a great cost.
I'll cite one example. The Roundup Ready patent that Monsanto has is now over 20 years old. If you look at just the prairie canola crops, just those, you'll see that they've been achieving approximately $100 million annually over the last 16 to 17 years for that patent. Surely we could create much more innovation by investing that money, maybe in public research institutions, etc. That's coming directly out of farmers' pockets.
We've seen consolidation take place in the grain handling system and the trucking system options, the machinery companies, the fertilizer companies, the chemical companies, and the seed companies. That has all led to increased costs for farmers. Again, this has been part and parcel of a competition policy that hasn't been very aggressive in Canada and that seems to think one or two players is adequate competition. Farmers, at the end of the day, pay for that.
The balancing of power has been critically important. The Canada Grain Act was one of those pieces. At the Canadian Grain Commission, we used to have the car allocation policy group and an assortment of mechanisms that actually created efficiencies in the system, but they have been jettisoned for so-called modernization. Again, if you look at the balance sheet, costs go up. These costs have been externalized. Farmers are carrying tremendous amounts of debt; this figure is a bit dated, but it's $65 billion.
We've talked about the Canadian Grain Commission. We believe the inward inspection piece should remain mandatory. The fundamental reason we believe it should remain mandatory is that if we look at the past, we'll see that often grain was bought in the country and, miraculously, when it got to terminal position, it became a better grade. In 1909, there was a million-bushel differential in the crop. That isn't of the scale that we produce now. Grain bought as number two or three in the countryside became number one at the terminals.
What it also does is it acts as a quality assurance mechanism, both internationally and domestically, in detecting contamination, whether it be animal feces in the crops, chemical contamination, treated grain perhaps, admixtures, etc. This has been very important, because we have several disadvantages in Canada, including the distance to tidewater, and quality has been our ace in the hole in marketing. On outward inspection, one of the key pieces about the Canadian Grain Commission is that it's mandated to act in the interests of the grain producers.
Private companies like SGS, etc., would not see the interests of the grain producers in their transactions as being key to the services that they provide.