Agriculture Committee on April 1st, 2014

[Rick White]

For the canola industry we are very far behind. I don't have the most recent statistics regarding canola, but what we are showing right now is that by the end of the crop year, canola will still have a 3.3 million tonne carry-out even at the current rate of movement. So we are going to be behind, no question about it. We should not be carrying out 3.3 million tonnes of canola.

Last year it was 600,000 tonnes. We have at least three to four times higher carry out projections just for canola alone.

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

Thank you. What is it for pulse?

[Greg Cherewyk]

We produced about 3.8 million tonnes of peas, 1.8 million tonnes of lentils, just over 200,000 tonnes of beans, nearly 200,000 tonnes of chickpeas. Into the special crops you have 165,000 tonnes of mustard, 130,000 tonnes of canary seed, and 52,000 tonnes of sunflower.

I can't tell you exactly today how much of that has moved and how much is still yet to move, but I can tell you projections for carry-outs extend anywhere between 800,000 tonnes and beyond a million tonnes. Any one of those projections would put us in the range of a record level carry-out, certainly more than we carried out last year.

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

All right, thank you.

What is it on the barley side?

[Matt Sawyer]

I don't have those figures in front of me either, but certainly what I can say is there will be lots of carry-out on barley, I'm sure. I don't have the number in front of me. I certainly did hear from a couple customers I deal with on the way in today, and they wanted to voice their concerns as well. They're having problems getting their product and even having the possibility of looking at importing barley to satisfy their needs. There is lots of barley out there and hopefully the cows will eat up as much of it as they can.

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

I just wanted to get a snapshot on that because, as I said, we've been usually talking in terms of the overall gross tonnage that came in with the harvest. It leads me to the question, then, just about the one million tonnes a week. Certainly we feel that after consultation with stakeholders in the industry, including rail, that this was considered to be an ambitious target, but an achievable target, and one which does not compromise the ability of other commodities to move by rail. So, in other words, we feel it is pushing on the grain side, but not to the point that it would adversely and detrimentally affect in some large, quantitative way other commodities. I would like to ask your opinion on the one million tonnes per week as a goal.

I may as well start with canola. What are your thoughts on that?

[Rick White]

Well, even if we get the one million tonnes a week, when you look at the aggregate numbers, if we can maintain a one million tonne a week movement, we're still going to have a 23 million tonne carry-out overall. We'll still have a 3.3 million tonne carry-out of canola. And on the barley number you're asking for, they're looking at 2.4 million tonnes, alone, for barley on carry-out. Again, that's under the assumption that rail capacity increases to the million tonnes a week.

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

Okay.

What is it on the barley side?

[Matt Sawyer]

Thanks, Rick, for coming out with that. That's exactly where we are, too. We certainly do welcome this as shedding light on the subject, but we're looking forward to the long term and moving this forward. We realize there is going to be a carry-out with the current shipping if it does move ahead, but basically this is what we have, and we're looking forward, and at least we're going to get some movement going.

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

Let me just ask on the pulse crop side. Greg.

[Greg Cherewyk]

I think later today you're going to hear from Wade Sobkowich from the Western Grain Elevator Association, who has put together some very comprehensive figures for you with respect to what still needs to move and what would be required over the course of the next few months. From a pulse and special crops perspective, one of the things we'll want to stress is as we aim to hit these targets, as we aim to put 5,500 cars per railway per week out into the Prairies and start moving product, that this product is allocated, or the allocation and distribution of those cars ensures that there is fair and equitable treatment for all shippers of all sizes moving all commodities through all corridors. That will be the most critical measure.

[The Chair, Conservative, Bev Shipley]

Thank you very much for your time.

I'll go now to Mr. Goodale of the Liberal Party, for five minutes, please.

[Ralph Goodale, Liberal, Wascana, SK]

Thank you, Mr. Chairman, and thank you for your welcome.

I'm glad to be here tonight with Mark Eyking and other colleagues, and certainly with these witnesses who are providing us with some very helpful and important information.

I have three basic areas that I'd like to question on. Perhaps I'll ask all three questions at once and then leave the maximum time for the witnesses to answer.

First of all, would it be helpful as we're dealing with Bill C-30 to actually see what the draft regulations might look like? For the most part the act creates the authority to create regulations, but the regulations are not yet in the public domain. I wonder if that would be useful to actually see at an early stage what the government has in mind for the drafting of those regulations.

Second, with respect to the contracts between grain companies and farmers, which are referred to in the legislation, and the possibility of regulations being promulgated under the Canada Grain Act,should those regulations spell out damages or penalties to be paid to farmers if and when specified delivery opportunities are not provided by the grain companies as had been contracted for? Should there be consequences if you can't deliver when your contract says you ought to be able to deliver, and what would those consequences be? As well, should there be regulations that would impose some kind of transparency and potential limits on the calculation of the so-called basis, the deductions that appear, anecdotally at least, to be consuming about 50% of the international price of grain? That's being absorbed before it even gets to the farmer, so how can you bring transparency and some kind of limit on this calculation called basis.

Third, with respect to the other type of contract that's referred to in the legislation, the service level agreements between shippers and railways under the Canada Transportation Act, do regulations there need to be very clear in specifying the service levels that the railways are expected to provide? Do the regulations also need to be clear in specifying the way in which performance is to be measured, have the railways in fact provided it or not, and about the payment of damages to farmers if the service isn't what was specified in the service level agreement?

Should those three things, first, definition of service, second, how do you measure it, and third, what is the consequence if service fails, be in regulations or should they in the act itself?

Finally, with respect to the Canada Transportation Act, beyond this vague phrase that's been there for a hundred years, “adequate and suitable accommodation”, are our witnesses telling us here—and I think this is what I heard—that railway service obligations need to be defined as performing in such a way that the railways actually meet the needs of their customers? In other words, the rules are designed to service customers, not service railways. That would certainly change the paradigm in Canada of the last 143 years.

I wonder if I could just leave those questions, Mr. Chairman, and see what our witnesses have to comment.

[The Chair, Conservative, Bev Shipley]

They might have to answer them really quickly because most of the time was eaten up in the questions, so I'll leave that to whoever wants to speak first.

Greg.

[Greg Cherewyk]

I'll tackle that and I'll bounce around a bit. Perhaps I'll start with the last question and connect it to the first one.

The last question was whether “adequate and suitable” adequate and suitable in the definition of service. Our view has been and the view of the Coalition of Rail Shippers has been, for the last three years as we've been discussing these issues, that it is not. We need to modernize the language of the act. We need to bring it into the 21st century. There needs to be more clarity and definition with respect to what the service obligations of the railways are.

We'd begin with a clear statement, as I said in my opening remarks, that the system is in place to meet the needs of its users, full stop. That's where we'd start.

With respect to the first question, would it be helpful to see draft regulations, as we get into the process of drafting regulations, I think there is a whole shipping community within agriculture and beyond agriculture that's prepared to participate in that expedited and focused review of the regulations. We would certainly want to be part of that discussion so that we could ensure that the things you've mentioned there with respect to characterizing and defining the service obligations of the railway are addressed through regulation. We would want to ensure that it picks up on things like performance measurement, so that when we establish a service obligation, when we establish a standard for performance against that service obligation, we're then measuring service effectiveness against that standard, and then ultimately and very importantly for the agriculture community, that we establish a financial consequence for failing to adhere to those commitments.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We will now move back to the Conservatives.

Mr. Payne, for five minutes, please.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you to the witnesses for appearing tonight. As said by my colleagues, it's a very important bill that we're looking at to try to move the grain.

What you said in your opening remarks was interesting, Mr. Cherewyk. You talked about CN's third-quarter report and that they managed to deliver 5,000 railcars a week. To me, that's not outside already of what the order in council...and the request, so to me, that seems quite interesting.

You also talked about the railway and suggested that maybe you're not going to get the service because they now have to move all of these cars. Having said that, I've talked to one of my constituents who has a fertilizer company, who said the very same thing, that CP had said that they were not going to be able to move as much product because of this.

I'd just like to hear any further comments you might have on that. Then I'd open that up also to the canola growers and the barley growers, if they have actually heard that information as well.

[Greg Cherewyk]

Yes, I'll reiterate what I said in my opening comments, and that is, our members—pulse and special crop shippers—are being told that their service will suffer. They will suffer because of the nature of the move, the corridor that they want to move it through. They're feeling very threatened right now by the actions and the words of the railways, and it is both. There's a threat out there, and then there is actual evidence that this has already started to take hold.

I would also add, though, that we are very close with many other shippers in other sectors and we are hearing the exact same thing, from mining, forestry, and others. The very same concern is being expressed that the orders are going to result in a deterioration of service to other sectors and movement through various corridors, which is why I keep coming back to the fact that we need to go a step beyond establishing the target and start defining what our expectations are with respect to movement through corridors, movement of all commodities, to ensure that all shippers, small, medium, and large, moving product through to all destinations are treated fairly and equitably through this process.

[LaVar Payne, Conservative, Medicine Hat, AB]

Canola growers, have you any comment on that?

[Rick White]

Yes, the unintended consequence of the order in council is to create a demand push by the railways to move as much product in as short a time as they possibly can, and they're starting to bung up certain corridors, particularly the west coast ones. Even though they are pushing hard to move the grain, which is very much appreciated, it is not a demand pull system, and we have to get away from that as soon as we possibly can. That's where “suitable and adequate” comes in. If we can get that redefined so that the railways understand that they need to accommodate what the demands are of the shippers and where those shippers need their product, we'll have taken a very large step forward in the industry.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you.

Mr. Sawyer, do you have any comment?

[Matt Sawyer]

Yes, the losses we've been experiencing in the last year alone certainly makes it almost look plausible that you're grasping for ideas for how to put your own train on the tracks. This certainly is where we need to look at building the capacity, competition, and service. As an exporting country, we all rely so heavily on the rails, and if we want to continue to feed the world, by the year 2050 we're going to have to rely on the rails even more than we have this year. They say, as you've all heard before, in the year 2050 we will have to produce as much food as we have in the last 10,000 years to meet global demand, and Canada will be in the position to do that.

The bottom line is we need to work with the rails and make sure that they are expanding for competition and service, but also we need to have these agreements in place. There have to be the teeth in the agreements so that they're encouraged to do it; otherwise we need more competition on the rails.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay, it's interesting because I come from a background in the private sector. I worked for an international petrochemical company in Medicine Hat. I've heard from grain farmers. When I worked for that company, the railway was the problem all the time. This is not new. Certainly, I think what they need to do is fairly straightforward in terms of being able to figure out...all of these products that they're supposed to be supplying and shipping for our producers.

I think Mr. Sawyer mentioned in his comments what he could do to tell the railway to help in that process.

How much time do I have left, Chair?

[The Chair, Conservative, Bev Shipley]

You are about done.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Mr. Chair.