Agriculture Committee on Feb. 10th, 2014

[Stuart Person]

I do not think bringing the Wheat Board back would do any good, and it's an unrelated issue. Last year was the first year without the Wheat Board and we moved our grain just fine. It is a logistics issue. It's between the railroads and the line companies. At this point it's looking as if the railroads are the guilty party.

I agree you need to put some sort of oversight committee in place, whether that's private or public, and there should be penalties put in place for lack of delivery. If you look at the United States system, those grain shipping companies are self-regulating because there are penalties. They fear the U.S. government. They do not want to be forced with more regulations.

I have had discussions with the gentleman from Edmonton, Mark Hemmes who works for Quorum, and he says those grain shipping companies regularly send cheques to their customers for lack of performance. The only reason they are willing to do that is that they don't want the U.S. government coming in and telling them to smarten up. Obviously the U.S. government has some sort of big stick they can wave, and I think we need something similar.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Madam Brosseau.

We'll now move to Mr. Hoback.

You have five minutes, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, gentlemen and ladies, for being here this afternoon. It's always good to have farmers and people representing the farming community in front of the ag committee.

I often think about this when I look at the days when I was farming. I can remember the days when we loaded trucks on a Friday and a Saturday, had them go off to North Battleford, only to find out the train didn't show up, and then we'd try to figure out what do we do with 10 or 15 trucks sitting at a grain elevator that's already full. I definitely know what it feels like, and it looks as if it's going on again, even more so.

In the nineties, we made our system more efficient. We got rid of branch lines, got rid of the small town elevators, went to these high-throughput 100-car spots, 125-car spots, to gain efficiencies. In the canola sector, I think we even did more. We went to the next level. We did more processing on the prairies. With the crush plants we've added over the last five years, a substantial amount of volume goes through crush.

I'm curious. When we just look at the movement of grain, I know it's a problem, but when I talk to other people, for example, a plywood plant up on Hudson Bay, they have a problem. They're going down to three days now instead of five days of work. We talked to members of a steel mill in Regina that has given layoff notices because their steel's sitting in the yard instead of going to the customer.

Coming back to the canola oil side of things, what's the oil movement like as far as the crush plants are concerned? Are we going to see some slowdown there because of oil not moving after it's been crushed?

[Rick White]

It is effecting canola oil movement as well. There are a couple of plants in particular that have had to cut back on crush. You'll see, if you look at the statistics, crush here to date is a little bit behind last year. There's no reason for that other than they're having difficulty, even on the tanker side. It's not only seed coming in the front door, but it's getting the oil out the back door in the tankers. That's a commercial movement and that is problematic as well. So yes, it is having a negative impact on the crush.

[Randy Hoback, Conservative, Prince Albert, SK]

Let's just follow this through the system then. Here we have a scenario.... One of the other scenarios I'm facing with a lot of producers in the area is that they grow lots of oats. Those oats aren't going to the west coast. They are actually going to the U.S. The story I'm hearing is that there's one mill down there that is actually sourcing oats from out of North America into Europe because they can't get oats from 500 miles north of them.

Ms. Ammeter, are you hearing the same types of stories?

[Allison Ammeter]

We have oats on our farm.

The futures price on oats this week, I think it was Wednesday or Thursday when I looked at it, was $4.75. It was higher than it had been in five years. We can't sell them for anywhere near $2.50 anywhere near us because they can't move them. So they've made the basis just super wide.

[Randy Hoback, Conservative, Prince Albert, SK]

In fact, if we looked at the producer cars—it would be nice to have CGC in here—I think producer cars that are on order are somewhere in the excess of 10,000 producer cars, which is a reflection of the basis widening so much. Farmers say, "Okay, I'm going to load it myself and save some of that handle."

Let's trickle that through.

Mr. Person, you work with a lot of farmers out of your accounting firm, MNP, out of Prince Albert. I know you handle a lot of accounts. You touched on the cashflow situation, but I'm kind of concerned because road bans are going to be hitting here in a month or month and a half. A combination of fertilizer has to be put onto farm, plus grain has to be moved within the next month or month and a half. How do you see the cashflow going into spring's planting season, which really, when you start looking at the days, isn't that far away? How would you say that is represented right across the number of customers you deal with?

[Stuart Person]

A lot of producers that are going to significant...[Technical difficulty].

But you know what, Mr. Hoback? The situation right now is that if you haven't contracted grain you won't be able to ship it until some time after harvest. This is what we're being told from the line companies at this point. You have a lot of grain sitting there that won't be movable, whether you wanted to move it or not, road bans or no road bans. The road bans will be a problem because we can probably only ship grain for about another month to month and a half, and then we're shut down for a month to a month and a half while the frost is coming out. Even once we get into summer it sounds like the system is still quite congested, unless something significant happens between now and then to end the situation.

Does that answer your question?

[Randy Hoback, Conservative, Prince Albert, SK]

Yes it does.

You kind of touched on a little bit about the cashflow. I know the FCC has gone around talking to their customers saying that they're going to give them some help. I know their biggest problem is trying to figure out a date to extend loans out to. Do you extend it out for two months, or six months, or eight months, or is this something that has to be extended out for a year?

I know, Mr. White, you talked about the cash advance program, looking at that and how we can maximize that.

One concern I have is the AgriInvest accounts, Mr. Person. Are they being liquidated now? This is the rainy day fund. Is that actually being used? Because it is pouring out there right now....

[Stuart Person]

The AgriInvest account would be a nice fund to dip into if you needed it. The problem is that with the system we're in right now, they just haven't been around long enough to accumulate to anything significant. It's too bad we don't have a bit of a higher cap on those. Right now we're capped at about $15,000 per farm. If you look at that on a 5,000 to 10,000 acre farm, even if they've been maxing it out for the last few years, we're not going to see a significant source of cash there.

It would help, but really what we need is an increase in the cash advance limits, especially for our big producers to get their hands on money, to get them through. Yes, we need FCC, Scotiabank, and anyone else who's been financing for input loans from last year to push those deadlines probably well into the summer, if not into next fall, without this 18% interest being applied, because that's going to be absolutely devastating. You're talking about adding 20% to your input costs just because you weren't able to pay those off by the required—

[Randy Hoback, Conservative, Prince Albert, SK]

Even if you had a contract sitting there that would have paid it off if they would have taken delivery of it—

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Hoback. Your time is up.

Those were good questions.

Now we go to Mr. Eyking, for five minutes please.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Chair, and guests, thank you very much for coming.

We heard quite a bit this afternoon about the situation out in the prairies. When I was out there last fall, there was nothing better than seeing farms with good crops. The prices were good and everything looked good. I think if this committee were to visit them now, we'd find a bunch of angry farmers out there.

The reality we're hearing today is that this could be a norm. Allison, I think you mentioned how our farmers are doing a great job with new varieties. This could be a norm. This could be the normal crop that we're going to have in the future. Then for that to be a normal crop, I think it was mentioned there could be 20 million tonnes carried over? This is unbelievable.

I guess it has been brought up again and again that there are no teeth in this railroad act, and because there are no teeth, the railroads are not really taking the government seriously. When you look at the U.S., somehow there's an understanding that the U.S. government has teeth, whether it's a hidden threat or whatever, and the railroads take them seriously.

I'm afraid that these rail companies are not going to switch overnight. They're not going to switch over the next couple of weeks because either they have commitments from other products or they're not going to bring in new locomotives overnight.

Sometimes I'm fearful that maybe some of their locomotives will be heading south more. What's stopping them because many of them have lines down to the United States? So you know, it could get worse unless that stick.... The NDP said we need that stick and they have to be fined millions of dollars if they don't do their job.

I wanted to talk a little bit more, Mr. White, about something I think you alluded to. You mentioned frameworks and various things, but you know, unless somebody says, “Okay, guys, the boats are waiting out there and it's going to cost the railroads a million dollars a day”, unless they hear that or know that, the railroads are not going to change. I don't see them changing. I think that's my first question. What is the stick going to be, and how much should it be?

[Rick White]

I think the stick needs to be built into the contract because right now there's a lack of accountability. There are major players in the chain, starting with the farmer and then the shipper, the grain company itself, then the railway, to the terminal, and onto the boat. That contractual chain needs to be all linked up with reciprocal penalties between each one of those parties, each link in the chain, with each one being accountable to the other, with actual penalties and repercussions for not living up to the commitments under the contract.

So if the ships are waiting and the railways are at fault, the ship demurrage comes and sticks to the railways. If the grain companies are beholden to the farmer, then the grain companies hold the railway accountable. That whole chain needs to be tightened up with reciprocal penalties all the way through it to bring accountability to the system. I think that is the stick that is required.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

My second question is this. Tomorrow's the budget and the agriculture piece is going to come out there. I hope the grain just moves in the next couple of months and everybody has empty bins in the spring, but I'm afraid that's not going to happen and the value of the grain is going to go down. There are going to be unhappy customers.

I guess the government's going to have to have more money put into the agriculture budget in order to somehow help these farmers get through. It's bad enough if you lose a crop with crop insurance in the field, but if you have it all harvested and brought in and stored, the cost is even higher.

I know there are various programs that the government has, some with the provinces, but at the end of the day, is that really going to be putting enough cash in their pockets if they have to dump that grain going forward?

Maybe Stuart can answer that too.

[Stuart Person]

In terms of programming, the...[Technical difficulty--Editor]...program has been cut back a bit since the last go-around. The timing couldn't be worse, I guess, if you're a producer who's facing this exact situation. That program may have put some money in. I'm not saying the changes were all bad, but at the same time, it won't be the same level of compensation coming through there.

Really, the program that you need to look at, at the moment, is the cash advance program for the situation we're in. I still think there's potential for profits to be made if we can get things moving and get these wide basis levels removed. I really think every farm in western Canada that had the bumper crop will make excellent money, if we could just get the grain moving and get the price that the futures are offering.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Eyking, for your questions.

I'll move now to Mr. Dreeshen for five minutes, please.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thank you very much, Mr. Chair.

Thank you to all of the witnesses.

I'd like to tie in a little bit to what we had heard earlier from Mr. Heimbecker regarding port issues and take a look at some of the issues that are there, and also kind of tie in to what has been said about cashflow issues, because there are two or three different aspects to this. We have local processors who have or are going to have cashflow issues. We have shippers who, if there's no turnaround, are in the same situation because they are only making money when they are elevating grain and doing that type of thing. Of course, there are farmers who have cashflow issues as well.

I think one of the things we've talked about has, of course, been taking a look at the flexibility that there is around cash advances, but with a small amount—or 40% is the last number I had heard—of people taking cash advances.

Mr. White, your organization is responsible for that. The first thing I'd like to ask you on that side of it is about the process as far as applying for cash advances. You need to get the details—because those details haven't come to your organization—so you can manage them. I'm wondering if you have found any efficiencies as to your ability to get those cash advances out quicker.

[Rick White]

Thank you very much for the question. It's a great opportunity to explain that process.

When a farmer wants to take an advance on the program, they come to us as one of the major administrators of the program. We offer several different ways that a farmer can apply. They can phone us and talk to a person, and in about 15 minutes the person, one of our account managers within CCGA, will take down the information over the phone. The farmer gives the information, we fax that to them immediately, get the signature, and it's faxed back. That is a very quick and painless process, and we can sometimes have a cheque, if the farmer phones in today, in his or her account tomorrow. It's a maximum of five business days.

Our turnaround times have improved greatly. They can log in and do our online application process 24 hours a day, 7 days a week. They can download the applications off our website if they want to do them by hand. We offer everything, back and forth service, by fax. We can take fax signatures now. This is all in an effort over the last number of years to improve the service and get that money the farmers want and deserve through the program into their hands as quickly as possible. So we've made very strong increases in our levels of services, and we've been administering the program for almost 30 years now.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thank you very much for that. I think that's an important aspect of it.

The other aspect, and something that was mentioned, is the fact that farmers are dealing with lines of credit as well. These are important aspects, and that was one of the things that was discussed earlier about it being a dual year, 2013 and 2014 crop years, and trying to get some sort of a match there. But I'm sure you'll be able to kind of tie those things in if that's a decision that is made in order to help out under those circumstances.

There is another aspect dealing with the railways, and I've always said this. I know I heard earlier today that maybe in June they didn't quite know what the crops were going to be, but it's hard to get lost when you're driving a train. If you're taking a look at the kinds of crops that we had in July and August, I think there should have been some thought that we were going to have these issues. If the grain companies hadn't already brought it to their attention, I think it was important for that.

We're trying to find some solutions to this. We've talked about other commodities, potash, coal, oil, and other kinds of products that are being shipped at this point in time. But the grain sector is one that is losing a great amount at this point because of the fact that they're just widening the basis because there are no opportunities for sales. Do you see any types of cooperations that could exist between the different shippers of different types of commodities that you might, as an organization, want to be able to talk to them about?

[Rick White]

I guess as shippers we do belong—and grain growers belong as well—to the Coalition of Rail Shippers. That is a multi-commodity and cross-industry group of shippers who have gotten together for a number of years now to discuss rail issues in a cooperative effort, to figure out what's happening to the shippers and what can the shippers do about some of the service that is coming about.

That level of cooperation is very high among that group, coming up with ideas and solutions that work for everybody and going forward to the railways with a united voice, going forward to members of Parliament with a united voice, to give some clear direction from a shipper's perspective. That coordination effort is there and it continues to be there, and we still are actively involved with the Coalition of Rail Shippers.

[Earl Dreeshen, Conservative, Red Deer, AB]

Okay, thank you.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Dreeshen.

Now I'll go to Madame Raynault for five minutes, please.

[Francine Raynault, NDP, Joliette, QC]

Thank you, Mr. Chair.

I am very moved by the problems facing farmers. I have been a farmer myself and have had to take out a line of credit in the spring to restart my business. I am very moved by what you have said. I know all about the financial worries you will face over the next few weeks. If the grain harvested in the fall is not sold now, you and other farmers will lose significant amounts of money because grain quality will have decreased due to periods in storage.

If you have to rely on lines of credit and loans for longer and therefore pay more interest, will you be able to make ends meet and start planting a new crop this spring or in spring 2015? Your debt will increase while the satisfaction you get from farming may decrease.

What do you think? I would like to repeat what you said earlier so that people know what is happening. We often idealize life on the farm or on the land, but there are problems and concerns that can also touch your family.

Mr. White or Ms. Ammeter, would you like to answer?

[Allison Ammeter]

I would love to speak to that, thank you.

I see a deeper issue here. We're here to talk about the trains and the cashflow and cash advances and the solutions, but I would have to add that if this continues, it's not just farmers. If farmers have a very restricted cashflow, we're going to concentrate on getting a crop in and paying the basics. You're going to find that in the small towns around the prairies the restaurants are going to suffer because there's not going to be a lot of disposable income, the car dealerships, the bowling alleys, the clothing stores. Pick one, right? You will find that it is not just the farmers who will struggle if we're short on cash, not because we need a handout but because we're in a crunch of money because our product can't be sold. It is going to start affecting the entire economy. When you start seeing things like processing plants that can't get supply laying off employees, this is serious. This is a crisis that very quickly could become a catastrophe.

In answer to your question, I've heard people talk about not planting their crop. I hope that doesn't happen. I've heard people talk about planting a crop and putting very little fertilizer with it. I hope that doesn't happen. I've heard people finding very creative loans. There are a lot of people suggesting a lot of things, but it's a crazy amount of money to put in a new crop. We rely on the previous harvest to pay for it, so there are a lot of ideas being talked about. This is February. Ask me that question again in April. I'm really hoping in April we'll say, wow, did they ever come through, and all that grain moved.