Thank you, Mr. Chairman.
Good afternoon to the members of the committee. Thank you for inviting me here today to speak to you about the grain logistics system here in Canada.
CCGA represents 43,000 canola growers and is governed by a board of directors who are farmers. We represent all provinces from Ontario west to B.C. With 85% to 90% of canola grown in Canada being shipped to export market by rail, canola growers rely heavily on the service of Canada's railways to market their grain. The competitiveness of our industry, which contributes $19 billion annually to the Canadian economy, is highly dependent on the railways' providing timely and efficient service.
This year the canola industry celebrated a milestone. Our goal of reaching 15 million tonnes of production by 2015 was well surpassed when canola farmers harvested a record 18 million tonnes of canola this fall. This, coupled with relatively high prices for canola, meant that canola farmers were feeling very optimistic about their future this fall. However, to fully realize the economic benefits of this bumper crop, farmers required the opportunity to market their crops, and unfortunately, this is an opportunity they have not been able to fully realize this year.
Canada's railways are the linchpin in our grain handling and transportation system, and this year they have failed. The inability of the railways to incrementally respond to the service demand is troubling and has had serious implications for farmers. We are now in a situation where most country elevators are congested and not accepting deliveries, while terminals are under capacity and vessels are waiting offshore to be loaded. Many farmers with contracted grain for the fall of 2013 have been told that they will not be able to deliver their crop until spring or summer of 2014 at the earliest. Farmers with uncontracted grain may not be able to deliver their grain before the next crop is harvested.
This situation is causing serious cashflow issues for many farmers. CCGA is an administrator of Agriculture and Agri-Food Canada's advance payment program, and we are seeing evidence of this cashflow crunch reflected in the current demand for cash advances. This year we have seen a substantial increase in the total amount of money advanced to farmers compared to last year.
The inability of producers to deliver their crops to the country elevators is costing farmers in other ways as well. The backlog means prices have fallen, basis levels have widened, and opportunities for sales have been lost. Equally concerning, particularly over the long run, is the impact our underperforming logistics system has on our industry's reputation as a consistent and reliable supplier of canola. Farmers and the entire canola industry are gravely concerned that our competitiveness in the global market is being seriously undermined by our inability to deliver on our sales commitments. Clearly, real solutions are urgently required to address this issue, and CCGA continues to advocate for reciprocal penalties to bring a framework of accountability into the commercial relationship between the shippers and the railways.
In the Canadian rail system, the railways have established loading and unloading performance benchmarks that grain shippers are financially accountable to through the use of penalties. These penalties have been quite effective in holding grain shippers accountable for their performance. However, on the reciprocal side, the railways are not subject to the same types of penalties for providing poor service once they have committed to spotting cars. This creates a very unbalanced system that does not provide the railways with adequate incentive to meet service.
Performance measurements should be established for the railways that are as well defined and measurable as they are for grain shippers. CCGA proposes that through legislation—because it won't happen voluntarily—the railways be subject to performance penalties in circumstances where they have failed to perform. Issues with rail service have plagued the grain industry for years and directly impact the bottom line of Canadian farmers. While solutions have been proposed and even implemented in the past, they have not been able to resolve the ongoing issues associated with poor rail service. Legislated, reciprocal penalties are the only way we see these issues being remedied in a meaningful and lasting way.
This will not help many farmers who need help immediately to address their cashflow needs and allow them to get next year's crop planted. In the short term, the government could help farmers by increasing the limit on the cash advance program and applying the limit in the same way as the $100,000 interest-free limit is applied, with overlap between program years.
This would allow farmers who are already at or near the current $400,000 maximum under the program to take a new advance that would be applied against the crop they will be planting this spring. This change would be at low cost to the government and would go a long way towards easing the marketing problems many farmers are currently facing.
In closing, canola and the agricultural sector are poised to continue to increase yields and volumes into the future. The canola industry has set a new goal of producing 26 million tonnes by 2025. That's a 40% increase over this year's record production.
A reliable and efficient rail system will play a fundamental role in our ability to reach this goal. Strengthening and modernizing the contractual relationship between grain shippers and the railways is how a more functional, responsive, and reliable system will be created.
Thank you for the opportunity to speak to you today. I look forward to your questions.