Agriculture Committee on Nov. 28th, 2013

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Hoback.

[A voice]

I would just add to Richard's comments, Mr. Hoback—

[A voice]

I have a question.

[The Chair, Conservative, Bev Shipley]

We'll now go to Mr. Allen, for five minutes, please.

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

Absolutely ruthless.

[The Chair, Conservative, Bev Shipley]

This is a non-partisan committee.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

I noticed our panel, actually.... I got the forefinger and thumb, “I have one more small bit to add”, so go ahead. I'm being nice to Randy today. I saw you wanted to do that, so go ahead.

You don't get the question; you get the answer. I don't give you my questions; I let him answer things for you. It was not your thumb and forefinger; it was our guest's.

[Wade Sobkowich]

So you're giving me the opportunity to answer. Is that what's happening?

[Malcolm Allen, NDP, Welland, ON]

Yes.

[Wade Sobkowich]

I just wanted to add that when we talked to the railway companies about the capacity that they're providing for the grain industry, they tend to look at past capacity and say they're doing well, and if you compare it to past capacity, they are. What we would like to see them do more of is compare the capacity that they're providing to the demand, and we are well short of that.

We're really looking at a paradigm shift. We're talking about increasing the amount of grain we're moving as the years go on. If we're talking about better agronomic practices and about higher-yielding varieties and about feeding the world, then we really are looking at a paradigm shift, and we really need to look at how we move this grain to the export terminal facilities and out of the country on a grander scale.

[Malcolm Allen, NDP, Welland, ON]

I hear what you're saying. I guess there's a sense of looking at a 10-year history in the past. When we have, as you said, an increase in yield, in acreages planted, etc., you may not actually have the capacity to move what's in front of you. The service provider needs to start thinking about if this looks like a permanent trend, then perhaps the rail system needs to invest in new cars. I know a good place in Hamilton they should buy cars from, a good unionized outfit that makes great steel cars.

Let me go to Mr. Holmes. Thank you for that, by the way. You talked about the sense that you're the fastest growing component of agriculture, not just in the sense of the number of farmers. What I'm fascinated by is the age. Do you have any sense, Mr. Holmes, of the differential in the ages between folks we might consider to be non-organic versus organic? I don't want to call folks “conventional” or “GM” or whatever. What are the age differentials?

[Matthew Holmes]

Yes, we do, actually. We've just been mining the census of agriculture for some of that. As I said, I just came from a production conference last week on the east coast, for mostly small mixed farms. What was striking was they had a child care program. I can't tell you how many people they had in the room under the age of 30. It was really incredible. What we are seeing is that organic farming is attracting a new generation of farmers. What the data shows us is that while 8% of farmers in Canada are under 35, 12% of organic farmers are under 35.

As we all know, the farm age is not approaching a crisis yet, but we're definitely seeing the farming age getting older and we worry about succession planning in farming. Farm operators are generally 55 years or older. That's about 48% of the total farms in Canada, so about half; in organic it's about 40%. There's about a 10 percentage point difference. What we see is generally a younger farmer.

That brings its own pressures, though. It means there are a lot of new entrants; a much higher need for knowledge transfer; a need sometimes for some infrastructure supports as they're maybe not inheriting the farm so much as starting a new farm. It has its own complex mix of issues with it. It's a very positive message as well that there are many new farmers coming to organic and looking at organic as an opportunity.

[Malcolm Allen, NDP, Welland, ON]

Again, I didn't quite catch the number before, but what's fascinating about this sector is that a lot of folks think this is a basically homegrown sector that feeds only the domestic market down the street.

Could you refresh my mind around the kind of numbers we're talking about? We're talking not only primary producers but processors and exporters. We're talking about a whole value chain here, if you will.

[Matthew Holmes]

It is a whole value chain and it's very vertically oriented. My colleagues here are from western Canada and the Prairies. That's our largest concentration of organic farms in the country. Their product doesn't typically only sell to the local consumer. It's a commodity product. It's wheat, oilseeds, pulses, and those need to go to other markets, so there's a vertical value chain, but a tremendous market opportunity both here at home and abroad.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Allen, and Mr. Holmes.

Now I'll go to Mr. Lemieux for five minutes.

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

Thank you, Chair. I'm going to give the first question to my colleague, Randy Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you. What a great colleague in the Christmas spirit.

I want to follow up with the Western Grain Elevator Association. I'll tell you about the situation I'm hearing on the Prairies right now in regard to movement.

We have guys who have signed contracts in July and August for delivery in, let's say, October and November. It comes up to October and November where they expect to deliver that grain and all of a sudden you're plugged. You have no space. You have no ability of movement. They've planned their cash flows around their delivery date.

What's happening now is they're getting bumped into December and January for delivery, and yet there's no compensation and there's no interest. There's no storage payment. How do you handle that? There's nothing in the system I can see that prevents you from signing up thousands and thousands of tonnes of grain if there's no commitment for you to say that's going to be delivered on such and such a date, or at least in that month.

How do you figure we should get around that? How do I tell farmers that there's a system in place so that when you do a contract for November and you don't meet the contract on your end, they get paid or something happens so that they can receive the financial reward accordingly?

[Carsten Bredin]

This is Carsten Bredin with Richardson International. I can speak to that question.

I think it's a relevant question and a very important one. As a company we contract grain with farmers. We contract it for particular delivery periods. We manage that very well. We watch it closely, because we definitely want to honour all of our delivery commitments.

Of course, it's an estimate in terms of what we can move on a monthly basis, because we do rely on the railways and their performance, and sometimes the railways do slow down, but we manage that and we try to make sure that we don't fall behind in our deliveries.

Each and every company has to manage that individually on their own. I can't speak for other companies, but I know it's something we try to adhere to as closely as we possibly can.

[Randy Hoback, Conservative, Prince Albert, SK]

Let's say you want to grab 10% more market share in July, or for, let's say, a November delivery, but all of you grab 10% more. There's no mechanism to see who's grabbed more, so there's a lot more grain being pulled forward. If there's no penalty on your not being able to move it, what's the incentive to say, “You know, guys, we've got to pull our brakes down here and control this a little bit closer”?

Right now, I can see everybody being aggressive. Really if there's no penalty on the contract on your side, there's nothing stopping you from doing that.

[Carsten Bredin]

I think the penalty in the contract is that you can't service your farmer by telling him you're going to move his grain and then not move it. We have a relationship with the growers in western Canada and we respect that. That's the livelihood of our business. Those companies that perform well and move the grain when they tell the farmer they're going to move it are going to get that farmer's business year after year. Those who carry it because they can't move it because they oversubscribed to what they could move are going to pay the price for that. That's the way I think the system is checked today.

[Randy Hoback, Conservative, Prince Albert, SK]

Is that an effective check? If you have four or five line companies oversubscribing at the same time, they have no way of knowing what each other is doing, first of all, and second, the farmer is still sitting there looking for a cheque because he has to pay his bills. As I said, he's not getting the cash flow because he hasn't delivered. He's not getting a storage payment. He's not getting an interest payment. Is that fair?

[Wade Sobkowich]

I think one thing we've been asking the government for, for a long time, is reciprocal penalties with the railways. That's something that can flow through the system. If we can receive penalties from the railways for their failure to provide railcars and spot them in a timely way, etc., then there's room to talk about penalties through the system. But it's very, very difficult when you're talking about a situation where we have no control over the logistics system. We have no way of holding the railways accountable, and that's really where the bottleneck is in the system—

[Randy Hoback, Conservative, Prince Albert, SK]

To be fair to the railways, here, Mr. Sobkowich, they're actually running at peak capacity. If you look at CP's numbers, for example, the number of cars per week, they're exceeding what they've ever done before. They're exceeding what they've done before, and then you still don't have enough capacity. Maybe CN's that much worse, I'm not sure, but how do the railways give you visibility as to what they can handle?

[Wade Sobkowich]

They are. They're comparing it to the history, though, just as you said, Mr. Hoback. They're comparing it to what they've done before. We've been complaining about rail service, which is in the “what they've done before” category for the last five years, so we're still not getting the capacity that we need. We can't compare current rail service to what they've done before. We need to compare rail service to what we need and what the demand is, and that really needs to be the measurement.

[The Chair, Conservative, Bev Shipley]

I want to thank our witnesses. Obviously, it is Christmas and you gave away all your time, Mr. Lemieux.