Evidence of meeting #136 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 trade.
A video is available from Parliament.
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
I didn't want to put a motion on the table to request—
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
I didn't want to put a motion. I wanted it to be a friendly amendment to prolong the meeting. I just heard that the Liberals won't accept.
Liberal
The Chair Liberal Pat Finnigan
Yes. We have to have everyone, yes.
We shall suspend and return. Thank you.
Liberal
The Chair Liberal Pat Finnigan
We'll start our second panel.
Thanks, everyone, for being here today for our second hour.
I would like to welcome Pierre Murray and William Van Tassel, respectively the president and vice-president of the Producteurs de grains du Saguenay—Lac-Saint-Jean.
Welcome to our meeting this morning.
Also, as an individual, we have Mehgin Reynolds, farmer, LPG Farms. Thank you for being here.
Also, by video conference, we have Terry Youzwa, canola producer.
Liberal
The Chair Liberal Pat Finnigan
You are from Nipawin, Saskatchewan.
We'll start.
Representatives of the Producteurs de grains du Saguenay—Lac-Saint-Jean have six minutes for their presentation.
Pierre Murray President, Producteurs de grains du Saguenay-Lac-Saint-Jean, As an Individual
Good morning.
I have been a grain producer in the Saguenay—Lac-Saint-Jean region since 1987.
We were pleased to accept the invitation to appear before the House of Commons Standing Committee on Agriculture and Agri-Food.
As farmers in Saguenay—Lac-Saint-Jean and canola producers, we are directly affected by the canola crisis.
The first rumours of a canola ship being rejected in China began circulating in mid-February 2019, followed by confirmation by the Chinese authorities on March 1. The impact on canola futures contracts, and therefore on canola prices, is very clear.
Between February 4 and 8, 2019, May canola prices were stable at around $492 per ton. The market decline began during the first week of April. The May contract closed at an average of $457 per ton. That is a price drop of $35 per ton in two months, a loss of more than 7%, due to the closure of the Chinese market.
It is true that Quebec canola is not intended for export. It is mainly used locally by the Bécancour crushing plant, but the local price structure is tied to the future contracts. As a result, Quebec canola producers are being hit hard by the dropping prices.
On top of the measurable exchange prices and losses, we are also affected by the uncertainty surrounding access to the Chinese market. Indeed, China is a major market for Quebec soy beans, both GMO and non-GMO. Despite the statement that the conflict with China is limited to canola, grain trading is undeniably affected by this perception of risk hovering over the Canada-China trade relationship.
Markets dislike uncertainty. We hear from various sources that soy bean trading has slowed down in Quebec, which could result in a substantial increase in end-of-season stocks. It should be noted that Quebec canola producers are also major soy bean producers.
Further collateral damages are looming on the horizon. According to Richardson International's President, canola acreage in Western Canada could decline by 10% this year. This would mean that more than 900,000 hectares normally reserved for canola would be seeded with other grains, mainly cereal grains. That could lead to a surplus in Western Canadian grain production in 2019-2020, which would result in lower grain prices in Quebec, since we operate in a North American free market for grains.
As mentioned earlier, the canola issue must be seen as another layer of problems that are harming canola producers in Quebec.
Thank you very much.
William Van Tassel Vice-President, Producteurs de grains du Saguenay-Lac-Saint-Jean, As an Individual
My name is William Van Tassel. I have been growing canola since 1988 in Lac-Saint-Jean.
The impact on markets only reveals one aspect of the problem. What is also detrimental to Quebec producers is the support given to competitors, particularly in the United States. This support, intended to stabilize the incomes of U.S. grain producers or to offset the effects of trade disputes or discriminatory economic and trade policies, create a significant competitive disadvantage.
In the case of canola, the U.S. PLC Program paid out between $90 and $125CAN per hectare during 2016 and 2017.
For pork, Quebec producers will receive, mostly from the Canadian government, support from the Agri-Invest Program, which amounts to less than $10 per hectare, or 1% of eligible net sales.
One should not underestimate the U.S. crop insurance program, which is very generous in the United States for canola. The average net premium fell between $35 to $40CAN per hectare, from 2016 to 2018. The comparable amount is approximately $8 per hectare in Quebec and we can say across Canada as well.
When it comes to soy beans, the core U.S. programs, the ARC and the PLC, anticipate paying out between $800 million and $900 million per year, over a total area of 34 million hectares. This amounts to between $20 and $26CAN per hectare. In the context of the trade dispute with China, the U.S. government will contribute nearly $9 billionCAN more to soy bean production in 2018 and 2019, which is nearly $269CAN more per hectare. The amounts paid in Quebec—and normally in Canada—under the Agri-Invest Program are between $10 and $12 per hectare for soy beans.
In addition, there is the trade dispute between the United States and Canada over tariffs on steel and aluminum. According to the industry, this trade dispute will add 6% to the price of machinery and parts. Given that depreciation costs are $125 per hectare for canola and $165 per hectare for soy beans, these are additional annual costs of $7 and $10 per hectare, respectively.
In closing, the trade dispute with China over canola has major impacts on production and income, and these impacts may continue. However, they must be put into perspective with regard to all the ongoing trade disputes, which affect grain producers in Quebec and Canada, particularly canola producers. We are seeing that the safety net in place in Canada to deal with these crises is insufficient and threatens the sustainability of our farms. The Government of Canada must adopt, as soon as possible, a farm business risk management policy that reflects the trade disputes, the subsidy policies of competing countries, and the market access restrictions that grain producers face on a daily basis.
Liberal
The Chair Liberal Pat Finnigan
Thank you, Mr. Van Tassel. Your time is up.
Ms. Mehgin Reynolds is next for six minutes.
Mehgin Reynolds Farmer, LPG Farms, As an Individual
I'd like to start by thanking the standing committee for the opportunity to be here today. I'm a grain farmer in southwest Saskatchewan who, like many other producers across Canada, is very concerned about the notices of non-compliance we are seeing from China with regard to our canola seed exports. I'm sure many of you already know that China is the largest market for Canadian canola, accounting for approximately 40% of all canola generated in Canada.
In 2018, canola seed exported to China generated $2.7 billion, and according to the Canola Council of Canada, the Canadian canola crop contributes $26.7 billion annually to the Canadian economy.
Canola is a very important crop for the producers who grow it. Traditionally, it has been one of the main commodities to generate revenue for our operations. Canola is often a crucial part of a crop rotation, allowing for producers to diversify with crops that do not bring in as much revenue but allow for more sustainable farming practices. On my farm, we rotate between cereals, oilseeds and pulses. An example of a four-year crop rotation is lentils, barley, canola and durum wheat.
Farmers are resilient. We are often referred to as eternal optimists. We have worked hard to hedge our bets. We have worked hard to find ways to mitigate the risk that we face day to day. We grow a variety of crops not only to be more sustainable but also to allow us to manage the risk that comes from relying on a global market to sell our product.
If canola were the only commodity we grow that was currently facing a trade barrier—and I'm sorry but I don't believe for a second that this has anything to do with science; this is political retaliation—we would be able to hunker down and take a couple of years of lower prices. The frightening reality is that almost every crop being grown in Canada is currently struggling with one trade barrier or another.
Italy has shut out our durum wheat. India has enforced heavy tariffs on Canadian pulses, effectively shutting their border to our product. Saudi Arabia has cancelled grain imports, affecting approximately 122,000 tonnes of barley feed. Now China is turning away our canola seed. Let's add to this a carbon tax and areas that are heading into their third year of challenging weather, be that extreme drought or excess moisture. What we have brewing are conditions for the perfect storm.
According to Statistics Canada's 2016 census of agriculture report, there are just over 107,000 farms in western Canada. These farms account for approximately 85% of the crop acres in Canada, and approximately 97% of these farms are family owned and operated. Agriculture and crop production are very important to the Canadian economy, so much so that the recent Barton report named agriculture as one of six possible top drivers for the Canadian economy moving forward.
This information was used to create ambitious targets for us to hit both domestically and internationally by 2025. Now, I ask you, how are we in agriculture going to have any hope of meeting these targets when we do not have healthy bilateral trade agreements, relationships or respect on the global trading platform that our country relies on?
There are different possibilities for how this can all play out. I think it's safe to say that we will see some last-minute changes being made to the number of canola acres planted. I stood beside a farmer at the local co-op a couple of days ago and listened to him cancel some of his canola seed order to take 160 acres out of his canola rotation. He's still going to seed that 160 acres, so the question becomes what crop is a safer bet? If he's looking to keep his oilseed rotation, then it's most likely flax or mustard that he will put down. These are more niche markets, and what we can see happening is that these contract prices will drop as supply increases. We also could be looking at other end markets using China's notices of non-compliance to push the canola price lower as we have limited trading options and, quite frankly, are still trying to move 2018's crop.
Farmers are not looking for a handout, nor are we wanting to require a subsidy for cash flow in our operations. That being said, increasing the amount farmers have access to in the cash advance program would help many manage the capital required to get through this year. Many producers are sitting on canola, lentils and other crops from last year in the hopes that prices will go up and trade disputes will be resolved.
We want regulations and policies in place that are science-based allowing us to grow, invest and continue fuelling our sustainability and the Canadian economy. We want a government in power that isn't so internally focused on scandals that it forgets the importance of our global trade. Canada is a nation dependent on global trade and we are at a logistical disadvantage when it comes to our location and the means by which we transport our export goods to market. We need to be very aware of these challenges and put the appropriate level of respect into our trade agreements and partners.
As a grain farmer, I deal with a huge amount of risk and uncertainty because I cannot control the weather. We can control our actions, our relationships and our bilateral trade agreements. Trade should not be the biggest wild card in the deck when it comes to the success of my family farming operation.
Thank you.
Liberal
Canola Producer, As an Individual
Thank you.
Good day.
I'm speaking today as an independent farmer from northeast Saskatchewan. I've represented growers in various capacities for over 25 years. I am a past-chairman of the Canola Council of Canada and I appreciated the opportunity I had to represent growers and be an ambassador for canola by participating in a federal trade mission to China in 2014.
I'll start with some comments on the economic impact and pain on our revenue streams. Then I'll talk about the importance of open and stable trade relationships and finally, I'll offer some solutions and steps on how to work towards solving this important matter.
You've heard a lot about how important canola is. It has been by far Canada's largest cash revenue generating crop for over 10 years now, with 250,000 jobs across the country and 43,000 farmers, roughly speaking. On our farm it has already declined over a dollar a bushel. If it isn't solved soon, it could easily decline by $2 a bushel over the coming months. Let's do some rough math: about 20 million acres, at $2 a bushel and 50 bushels an acre, that's $2 billion. This is only canola we're talking about and it doesn't include current inventory that's in the bin from last year's crop. Let's realize that canola is only one crop we grow, but for many of us, it's our most important and most profitable crop, and it has the largest percentage of acres on our farm.
Farmers would rather receive their revenue from the marketplace. If the government does not play a role in resolving this matter quickly, the need for additional substantial business risk management program increases will be very real. How will that impact your fiscal deficit?
When trade is unpredictable, risk increases and prices decrease. Farmers may reduce inputs to reduce the risk and lower the cost as well. This has ramifications up and down the value stream. Grain companies, processors, railways, economic activity and volumes at ports like Vancouver and the St. Lawrence Seaway will all experience negative impacts as the entire industry contracts because of this risk in the marketplace. What multiple of $2 billion does this contraction of our economy become when all sectors of the canola industry are taken into account? Predictability and planning projections are thrown under a bus for all players up and down the value stream. In this environment capital expenditures both on our farms and throughout the industry contract and reduce as organizations of all sizes reduce risk. This is a troubling trend. We see these non-science-based barriers to trade in multiple markets, like China, India, Saudi Arabia and Italy.
Predictable, stable trade is a vital component to our nation's economy. Actions have consequences. A lack of action is also a decision and not a solution. It allows the problem to fester, grow and exacerbate. We must learn from the past. Trade relationships must be nurtured constantly to maintain functionality and predictability. We rely on our national organizations and our federal government to constantly act on our behalf, to keep trade functioning in a proper, predictable manner.
China, India, Saudi Arabia and Italy are all examples of countries we suddenly have trade issues with. Even getting the CPTPP agreed to was more challenging than it needed to be. This is a troubling trend. Why do we have these issues we've never had before? What have we, as a nation, learned from the recent past? There's a message here that, when dealing with trade agreements and contracts, countries should only be dealing with commerce and specific tolerances must be based on science. Surely we have learned that deviating from this only leads to massive risk and market disruptions.
Actions do have consequences. When countries work and negotiate in good faith, issues can be resolved. We need open, stable trade, and we expect our government to help provide that. It shouldn't be too much to ask. Market access is vital to my bottom line and that of the other 43,000 growers. The ramifications run up and down the entire value chain. They also impact the entire nation when we start talking about the reduced volumes for Canadian National Railway, Canadian Pacific Railway, Vancouver port, Thunder Bay and the St. Lawrence Seaway.
What can we do now that we are in this situation? First of all, let's realize the Asia nations respect people in positions of authority. They also appreciate ongoing stable relationships. Canada has not had an ambassador in China since early January. Why was this important position not filled months ago? What message does that send? Fill this position immediately with an agriculture champion who understands China.
Second, we can learn from past experience with China. There have been trade issues before regarding dockage and blackleg concerns for canola. Through proper negotiation with high-level, technical people from both countries these issues were resolved.
I would suggest high-level negotiations from our country are required. We should strive to obtain a working arrangement immediately with a timeline to resolve the matter. This was done in the past with China where trade was extended allowing enough time for the specific issue to be resolved by a deadline. China has not yet been forthcoming with this information on this occasion. Since they have not proven it is a specific tolerance issue, we are overdue for a high-level political meeting to discuss what is going on and how to resolve it.
I do support the efforts of the relatively new canola working group. Time is of the essence. It is already over a month since this canola issue started and we are no closer to it being resolved. I would also encourage high-level political discussions led by two senior ministers to get this file moving. I am encouraging you to take action on two fronts, one technical and one political. Time is precious and our future and the economy of our nation are at stake.
Third, increase the renewable fuel—
Liberal
Liberal
The Chair Liberal Pat Finnigan
You will have time to answer the questions. I have to be fair to everyone.
Mr. Berthold, you have six minutes.
Canola Producer, As an Individual
This had better not be some study that is put on the shelf. Our very livelihoods are at stake. Market access is vital to the well-being of our nation.
We are proud of the quality of our products. The quality is not in question. Stable and open trade is vital and governments must constantly nurture our trading relationships.
Canada must push back when appropriate with no exceptions. Canada has a team of world-class negotiators with people like Steve Verheul and others who have the ability to effectively negotiate on our behalf.
China is a vital market. They like and need our product. Reach out to them with two high-level groups, one technical and one political. Fill the ambassador position with an ag champion.
This matter needs urgent resolution.
Thank you.
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
Thank you very much, Mr. Youzwa. I think your conclusion was absolutely necessary.
Mr. Van Tassel, since I started working on the canola issue, several people have asked me whether canola is grown in Quebec. You tell us that indeed it is, and that it is mainly sold to the crushing plant in our province.
How big is the canola industry in Quebec?
Vice-President, Producteurs de grains du Saguenay-Lac-Saint-Jean, As an Individual
It is similar to Ontario's. Canola is grown in slightly higher, less central areas where it is cooler. The tonnage is not the same as in Western Canada, but for those growing it, the issue is as important. Canola plays a major role in crop rotation. In my fields, I plant canola every fourth year. I have been growing canola since 1988. My region produces one-third of Quebec's canola.
Of course, our acreage is not the same as out West, but for the regions involved, it is a very significant crop.
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
Thank you very much.
Mr. Chair, in light of the testimony we have heard today, I would like to table a motion. I think it is important. Virtually all the producers who appear before us today agree that the current canola crisis is a major political issue.
The motion reads as follows:
That, in light of today's testimony that this is also a political issue, the committee invite the Minister of Foreign Affairs and the Minister of Agriculture and Agri-Food to appear before the committee on the canola crisis, and that the meeting be televised.
Liberal
The Chair Liberal Pat Finnigan
Mr. Berthold, this motion is virtually identical to your previous motion, which the committee voted down.
