Evidence of meeting #14 for Agriculture and Agri-Food in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was railways.
A recording is available from Parliament.
Executive Director, Western Grain Elevator Association
Perhaps I could start again.
They're moving about 5% less than last year at the same time, but our crop is 33% larger. The railways don't do demand forecasting, so they don't size their capacity to take into account the size of the crop, and therein lies the problem.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Okay.
Would anyone else like to comment on that?
Director, Western Grain Elevator Association
It's John Heimbecker. I'd just like to add to that, please.
Because it was 5% less than last year, we shouldn't assume they did a good job last year.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
All right, fair enough. Anyone else?
Levi.
President, Western Canadian Wheat Growers Association
Just in terms of that, Wade did a good job, obviously, of clarifying how much they're actually moving. I think what's important though is that there were a number of challenges for crop development on the prairies last year, if we're talking about 2012. This year was considerably more than last year, but I would certainly suggest that with improved agronomics, improved investment in our distributing facilities and that kind of thing, and especially if western Canadians move more into higher yielding crops, if corn started to grab an impact, the challenge for members is that these yields are going to be increasing in the next few years.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Actually, I will just ask more of a side question here because it's not related to the exact issue at hand. There was of course the potential of a rail strike. We gave notice of motion of legislation to prevent the strike, order workers back to work, if the strike should have happened. Fortunately, a temporary agreement was reached.
I'm wondering what your thoughts were on that. What do you think a strike would have done for your situations today?
Let me start with Greg.
Chief Operating Officer, Pulse Canada
I think quite obviously it would have been catastrophic for our sector. While the grain industry is suffering and while we're 50,000 carloads behind—and I think CN comprised some 47% of that shortfall—to have management running trains would be nothing short of catastrophic. In a sector like the pulse industry, the impact that we feel first when we have a work stoppage is that the majority of small to medium-sized processors are typically last in the queue in terms of service. They have historically received no service during strike periods.
I don't know what more I can add.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
No, that's good. I'm asking the question because I don't want to assume what your response would be. I'd actually like to hear what your response would be. How would a rail strike affect your situation if it were to come to pass?
Wade, how about you?
Executive Director, Western Grain Elevator Association
Just like Greg said, it would have made a devastating situation catastrophic. We are 4.6 million tonnes behind in shipping; we're 51,000 railcars behind in shipping. It would have amplified the current problems we're experiencing. Again, it would have made a devastating situation catastrophic.
Conservative
President, Western Canadian Wheat Growers Association
From a farm perspective, I echo their comments in terms of how damaging it would have been. A strike at that time, when we are basically 50,000 cars behind, which is essentially more than a month at the best capacity at harvest period, would be a problem because I think that every day we lose now moving grain just results in more backlogs, more penalities, and more grain that is just going to end up sitting in the ground and being held over. I think it would exacerbate the issues that way, and also there are some cashflow constraints, I would say, happening on farms in some cases, especially when you see these contracts that are staying out longer and not being delivered on during the contracted period. I would echo their comments that any delay would have been very problematic.
Conservative
Director, Western Grain Elevator Association
I wonder if I could just add something to that.
Conservative
The Chair Conservative Bev Shipley
You'll have to maybe get it picked up on the next question.
I'll be going to Mr. Eyking for five minutes, please.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
Thank you, Chair.
Thank you, guests, for coming on this short notice.
Yes, the situation is a crisis. For the government to pat themselves on the back about the rail strike that never even happened, I think we have to look at how we get the grain moving presently.
The numbers are big. You have a $7-billion crop out there, and you're going to lose $2 billion. It says here, $1.2 billion from wheat and $800 million from canola. These are big numbers.
When I look at the different summations that are here today, the reality is that last June there was a signal that this was going to be a big crop. With the single-desk selling gone, and it states here in an article—
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
It states that “nobody is coordinating grain sales, transportation”—
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
Can you ask the Conservatives to hold back a bit there? They'll have another round. They're using up my precious five minutes.
Liberal
Mark Eyking Liberal Sydney—Victoria, NS
The reality here is that you're losing customers. There was already a mention that you're losing customers in Japan, in China. It's unbelievable. We're even losing customers in the United States. There was a report out that General Mills couldn't even get enough oats from us up here.
At the end of the day, last June the writing was on the wall. There was going to be a big crop. There was some concern. The railway act had no teeth in it so come fall there was nothing in place. There was no monitoring. There were no teeth. In many articles you read that farmers are not happy with the study and the monitoring process that has been put in place. That's not really going to help the grain to move.
I guess my question is this. As soon as the ships have to start waiting because they can't get the grain they need, shouldn't that be where the bell should ring and the government says, okay, look, the farmers are not getting their products to market, they're losing every week that the prices are dropping? Shouldn't there be some sort of watchdog or something with more teeth in it that would automatically hold people accountable if the customers are not getting their product? That's my first question.
My second question is what are the repercussions besides the $2 billion you're going to lose this year? What are the repercussions of losing all those customers? You mentioned how the Australian grains are going to be coming on. The next thing is Argentina. You are losing those customers. What are the repercussions of trying to get your customers back, even if they ever fix this railroad problem?
I'll just leave it to whoever wants to answer.
Executive Director, Western Grain Elevator Association
I'll start.
Thanks for the question.
First of all, I should point out that we have a grain monitor, who does measure certain things in the grain industry that we find very valuable, so there are some measurements in place but you can't have too much good information. The more information we can have, the better we can map out a solution here.
In terms of the impact, when you lose customers, that's the worst type of impact. We want to try to ensure that we're not further damaging our reputation and also to begin the climb to improving our reputation as a reliable supplier. In terms of reputation, losing sales is very difficult to quantify, but it's a major product of the situation we're in. We really need to get our minds together and figure out how to stop that from happening further.
Director, Western Grain Elevator Association
I'm just wondering if I could add to that, please.
I don't think it's necessarily fair to say that we knew in June this was going to be a crop of the magnitude that it was. In fact, I would suggest that in June it was the exact opposite. It was very wet and we were very late in seeding. It's probably fair to say that in late July or early August we finally saw that the crop was going to come off.
But I think what's more important to understand is that the size of the crop this year is not the problem that we experienced in the fall. I would argue that the vast majority of the sales—for instance, in Vancouver—were done long before we even knew that there was a bumper crop coming on. The bumper crop is now the problem, but it wasn't before.
In fact, the railway car offerings made during the fall have never been enough. Nine or ten thousand cars have never been enough to handle the requirements of the shippers and the farmers. It's important that we don't get too focused on the big crop, because it wasn't a question.... That's not what happened this fall. We couldn't even move what we had sold and that had nothing to do with the large crop.
The other thing I would say in terms of losing customers in the long term is that it's not only about losing the customers. It's that Canadian grain becomes devalued over time when our ability to execute is called into question. So it's not necessarily the case that the Philippines won't buy from us. We just have a devalued grain, and that never changes at all. In fact, that's what we're experiencing today. As the price falls, Canadian grain continues to be more and more devalued because we can't execute.