Evidence of meeting #134 for Agriculture and Agri-Food in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was quality.
A recording is available from Parliament.
President and Chief Executive Officer, Richardson International Limited
—and the technical data, and then conversations could expand to our own regulatory agencies that had issued certificates of validation of the quality of the cargo subsequent to that.
That would be the normal process. We haven't had any of that process evident in this circumstance.
President and Chief Executive Officer, Richardson International Limited
The fact that we were alerted basically by our own regulatory agencies, with no communication from either the customer or the Chinese regulator, was indeed quite a surprise to us.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Mr. White, I think we heard mention that there are about 10 million tonnes of canola still in storage right now. I'm thinking long term, worst-case scenario, with farmers about to start the planting season. If this drags on, what kind of a crunch are we going to see in terms of storage and how long can the current crop last? Can you fill us in on that?
Chief Executive Officer, Canadian Canola Growers Association
I guess the short-term impact is that with the 10 million tonnes that are in the system already, there are existing customers out there. We do have other customers, Canadian domestic, U.S., Japan.
China is not in, and that's about a four and a half million tonne seed concern. Theoretically, if we go forward without China, we can expect to have four and a half million tonnes of seed that we don't have a home for. That will end up sticking to farmers' bins. It will end up in a carry-out at the end of this year.
It will cause prices to depress, as well as an abnormally high carry-out at the end of the year. Couple that with the production number coming in off of 22 million to 23 million acres, and we're probably in for maybe another 20 million to 21 million tonne crop on top of this, as well.
However, the real issue is that without China, we don't necessarily have a home for that four and a half million or 4.8 million tonnes of seed.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Mr. Everson, this is my final question.
You mentioned in your statement that we need to use all of the means at our disposal, starting with a delegation. However, I note that currently, Canada has, I think, a $44-billion trade deficit with China.
Are these some of the things that we'll have to start thinking about if this situation is prolonged?
President, Canola Council of Canada
I think the recommendation was that there are issues of quality that have been raised.
I saw on the weekend that the Chinese embassy here indicated they were open to a communications with Canada about the issue. I take that as an invitation, that this delegation would be accepted in China, so that we could get to the bottom of this issue as quickly as possible. I think that's a positive signal, and the faster we can make that happen, the better. If that doesn't lead to a solution very quickly, I think there needs to be additional action taken by the Government of Canada to help us with this.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Mr. White, I want to touch on a couple of points that you mentioned.
I'm assuming your phone is busy and you're chatting with a lot of farmers. I want to talk about crop rotation and the impact for some farmers. It's canola's time, and they have to plant it whether or not they want to.
Can you update this committee on how many farmers are still planning on doing that and how many tonnes you think there will be?
Chief Executive Officer, Canadian Canola Growers Association
Yes.
Farmers at this time of year are making their seeding plans based on long-term rotations of crops on their farms for sustainability reasons. Farmers are typically running a rotation of about one-third canola and two-thirds other grasses, like wheat and barley, durum and other crops, to make sure their farms are sustainable.
There are agronomic reasons for that and for maintaining that going forward. That's why I mentioned they're kind of locked and loaded for this year. What they're going to grow is what they planned on seeding. They can't adjust very much in the short term.
Given that, they're going to be in it with canola, and the question is how long this is going to last. It needs to be resolved quickly. The longer it lasts, the worse it is for everybody. The immediate need for the farmers is going to be cash flow. Cash flow is going to bite them first because they're not going to be able to move as much canola. Canola is the money-maker in that rotation, and without it, or with depressed prices for it, individual farms are going to be pinched pretty quickly.
That's why we're proposing a cash flow option to help farmers at least buy some time until we get this sorted out and to get them through this rough spot. However, we have some longer-term issues to resolve as well, because we don't know how long this will last.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
When do farmers get paid when they export canola? Does it vary from company to company?
Chief Executive Officer, Canadian Canola Growers Association
No. They make a contract for delivery. Once they deliver it and they hand it off to a company like Richardson or Viterra, it's purchased in the country. Then the farmer normally gets paid at that time after they have delivered it and dropped it into the elevator system where it goes off to the export markets from there.
It's typically upon delivery of their product. They don't get paid for their product if it's sitting in their bin on the farm.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Okay.
With regard to the advance payments, I'm assuming you raised this issue with the minister last week.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Mr. Everson, with regard to product diversification, you're working with the whole supply chain of canola. I know that takes time, but if we anticipate the worst-case scenario in China that this issue wouldn't be resolved in the next few months or years, how quickly can the industry turn around?
I'm assuming, Mr. Vossen, you would like to jump in as well.
Are you working with industry right now to try to add value to the product and find new markets?
President, Canola Council of Canada
Sure. I think Mr. Jeworski and Mr. Vossen are probably better placed to answer that question, so I will turn it over to them.
At the beginning of my testimony, I indicated that this market, China, is larger than the next three all put together that we have for seed, so it's a very significant market. Diversifying is a bit of a challenge, but I think the CEOs are much better placed to answer that question for you.
President and Chief Executive Officer, Richardson International Limited
I think there's opportunity. The market is constantly moving and changing, and tastes and relationships are being formed. Some relationships are being lost over the course of time. That will continue to happen with canola or any other commodity.
Canola has a strong place in the usage of oilseeds on a global basis. The increase in demand has been on a global basis around 3% a year, and it has been very consistent.
China has been a big part of that lately. China was irrelevant to Canadian canola exports 20 years ago. Japan was the player. We've developed markets since that time, 20 to 25 years ago, that include China, but also include Mexico, include the U.A.E., include a long-time buyer and a continuing growth market in the United States, and others yet to be done.
The Indian subcontinent is an interesting opportunity. One of the challenges with the Indian subcontinent is execution risk, credit and issues related to that, but these are the questions and opportunities we're going to have to address. Perhaps we address them jointly—private industry and government—over the next period of time if a need is perceived to be a high priority in terms of diversification of this market away from such a predominant buyer.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Thank you.
Do the folks at Viterra want to jump in?
President and Chief Executive Officer, Viterra
Yes.
I would just add that when we talk about market diversification, I think it's important to note on canola it requires a significant amount of capital investment in those destination markets. What canola is being used for in those markets is it's going into crush facilities, significant facilities that are converting the seed into two predominant products, which are oil and meal.
When we talk about diversification and why it's something that can't happen overnight it's that it requires that amount of capital to be put into those markets to be able to handle the canola.
Is there some swing capacity in certain markets today? Yes, there is, but overall it requires a lot of foresight planning to be able to actually talk about diversification. That is more of a medium-term and long-term strategy, not an immediate strategy.
Liberal
Liberal
The Chair Liberal Pat Finnigan
Yes, you're out of time.
Thank you, Mr. Drouin.
I now yield the floor to Mr. Breton.
You have six minutes.
Liberal
