Agriculture Committee on Feb. 10th, 2014

[Francine Raynault, NDP, Joliette, QC]

We heard earlier that plants would not receive the canola they need to make oil. Plants will be affected also because they will not have access to their base product, the harvested product they need for production. Will this automatically lead to additional costs for consumers?

[Rick White]

Sooner or later the product has to move, so I guess in terms of our reference to rail service when it comes to the export of oil I'm just trying to articulate that there are problems, even with the commercial movement. There's still movement going out of those facilities. There is still oil being exported, but it's the opportunity that we're being held back from, from expanding that, hitting the market hard when the market is paying for it. We are completely hamstrung right now at average, and we're facing everything but average, not only from a farmer's perspective but from a processor's perspective, and from goods from other industries' perspective as well.

Things are moving, but if we can't move canola oil into the U.S. market, for example, they'll be happy to fill the store shelves with soybean oil. That's a huge opportunity cost for Canadian farmers.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Madame Raynault.

We'll move now to Mr. Lemieux, for five minutes, please.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thanks very much, Chair.

What I'm going to do is finish my previous comment, because the chair so rudely cut me off in the last round. I won't ask you the same question about what impact a strike would have, because it was clear from our earlier witnesses that a strike would have a devastating and catastrophic effect on a situation that is already bad. What I want to say is that we as the government obviously agree with you, which is why we put forward the notice of legislation so quickly. We realize the impact a strike would have on you and on other sectors of the economy.

I want to ask a question about rail caps. On the one side of the argument, they keep rates reasonable and known to farmers; but on the other side of the equation, they could actually undervalue, from a rail point of view, the shipment of grain versus the shipment of other commodities that might pay more for a locomotive to pull cars.

I want to ask your opinion, Allison, on these caps on agricultural products. Do you think they are a good idea? Do you think they might in fact be having an adverse effect right now—I don't have an answer to this question—when a rail company might perhaps earn more revenue from shipping other commodities in other types of cars?

[Allison Ammeter]

No, we as grain growers do not feel that the revenue entitlement—it's really an entitlement, not a cap—is a constraint for grain movements. It's not limiting them. They can haul as much grain as they want. Actually, it's only about 50% of the corridors that even have a cap.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

I'm coming at it from a slightly different perspective.

[Allison Ammeter]

Oh, did I miss the question?

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

I'm coming at it from this perspective. If a locomotive can pull, say, 200 cars and it has a choice of pulling, for the sake of simplicity, 200 grain cars or 200 oil tankers, and it gets more money for pulling oil, would the cap in that case be having an adverse effect on cars being made available for rail shipments?

[Allison Ammeter]

Do you want to take this?

[Rick White]

Yes, sure.

I think I understand the question.

On the issue we've looked at as growers—whether the revenue cap has any bearing on the level of service we're getting—we've come to the conclusion that it has not. We're around the table of the Coalition of Rail Shippers. They pay full-blown commercial rates. They pay through the nose for some of their movements, just as they pay through the nose for commercial shipments of oil from crushers in Canada into the U.S. They pay dearly for that.

We are all experiencing the same low level of performance from the railways. We see no correlation between the revenue cap on grain movement and commercial movements that pay a lot more money. We're all getting very poor service.

In our opinion, the revenue cap is adequate revenue for the railways to get the job done, but as a monopoly they have a profit-maximization scenario aiming to minimize their cost of movement all the time, whether the revenue is there or not. The revenue just allows them to charge what the market will bear, and that will not significantly impact their day-to-day decisions on what gets moved, in our view.

[Allison Ammeter]

I would agree.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

If there is greater profit, you would think that would lead to a business decision in favour of the sector of the economy that offers them greater profit.

[Allison Ammeter]

You would think it would.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

It would be, you would think, just an average sort of business decision.

[Rick White]

You would think so, but in that case grain would be the last commodity to move. We wouldn't get any grain movement. We'd have oil, we'd have cars, we'd have forest products, we'd have everything else moving and no grain. But that doesn't occur, and it's all because of the common level of carrier obligations under the Canada Transportation Act, that the railways must provide suitable and adequate accommodation for all.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Okay. Let me ask a question about farmer payments and the way they work.

Allison, you were explaining that the farmers are paid when they move their product to market—or it goes to the grain elevators and they can move it off to the markets. I'm assuming that year to year that system generally works—generally. You're able to pay off your loans. You're able to take out a new loan for the next growing year.

This is my question. We heard before that really the rail companies were underperforming last year by 5% in rail movement or ability to move tonnage, putting aside any comparison with the crop this year—let's say it was 5% less. But farmers are in fiscal constraint here. Is that because the price of crops is so low this year, then, because of the lack of...? I just want to clarify this, that it's not so much on the volume now, but on the low pricing that results from not being able to ship more product to market.

[Allison Ammeter]

It's actually a perfect storm of several things. It's that our price dived after harvest, largely due to both the volume and the fact that they weren't moving it. It's the fact that the railways not only are not moving enough grain, but they're not moving it representatively. For example, where I am on the Highway 2 corridor, we're close to the Vancouver port. They're taking more of our grain. I heard about an elevator at Tisdale that hadn't had a car since November.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

That was my other question—

[Allison Ammeter]

It's not correctly done, either.

[The Chair, Conservative, Bev Shipley]

Mr. Lemieux—

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

I have many more questions, Chair.

[The Chair, Conservative, Bev Shipley]

I know. You likely have two or three more questions, but our time is up.

Witnesses, I want to take the time to thank you for your great presentations. It is an issue that all parties and all of us have a grave concern about. We will continue with this study on Wednesday. At that time, there will be the rail organizations and other producer organizations here, I believe.

I would ask the committee to just sit tight for a minute, because we have to do a little internal business to pay for this.

Thank you very much, witnesses, and all the best.

This is about the budget. It is moved by Mr. Hoback that we would accept the budget. It's to pay for the witnesses to come in.

(Motion agreed to)

Thank you. Well done, guys.

The meeting is adjourned.