Agriculture Committee on April 9th, 2019

[The Chair, Liberal, Pat Finnigan]

Welcome, everyone. Thanks for being here for this emergency meeting on the official notices of non-compliance from China for exports of Canadian canola seeds.

With us this morning, as individuals, are Mr. William Gerrard, of Invernorth Ltd.; and Mark Kaun, a canola producer.

As well, we have, from the Western Canadian Wheat Growers Association, Stephen Vandervalk, who is the vice-president, Alberta.

Welcome to our committee this morning. Thanks for being here.

Also, I would draw to the attention of fellow MPs that we have present in the audience a delegation from the Prairie Oat Growers Association. Several board members from across the Prairies are attending our meeting and would be grateful to exchange with you after the meeting.

Thank you to the oat growers from the western provinces for being here.

Members, as you know, there is going to be a vote. We have time for the opening statements, and hopefully we'll get back to ask the questions.

Mr. Vandervalk, you have up to six minutes for your opening statement.

[Stephen Vandervalk, Vice-President, Alberta, Western Canadian Wheat Growers Association]

Mr. Chair, members of Parliament, thank you for the opportunity to be with you today.

My name is Stephen Vandervalk, and I'm a fourth-generation farmer from the Fort Macleod area of southern Alberta. I've been farming my whole life. I'm past-president of the Grain Growers of Canada, and current director with the Western Canadian Wheat Growers Association.

Most grain farmers are entrepreneurial. We were pleased when the Wheat Board was disbanded, and we were able to sell our grain competitively on the world market ourselves. We were pleased when the current government said that they wanted to increase agriculture exports by 25% by 2025. We were pleased that the trade agreements, CETA and CPTPP, have been signed.

However, when grain growers are caught as innocent political pawns in events they have no control over, they always pay the price. I currently plant 4,500 acres of canola. Since the announcement in early March by China that they were putting a stop on the importation of Canadian canola, the futures bids have dropped, costing me $50,000 on my old crop, or what I have in the bin today. Looking at the 2019 crop, I potentially could lose another $100,000, or much more if this continues.

The worst-case scenario is there will not be any bids for canola. Multiply that across 43,000 Canadian canola growers in western Canada and we face potential losses in the billions. Yes, let me repeat that: We face potential losses in the billions of dollars. That's real money out of every grain farmer's bottom line. Imagine a loss of that magnitude as it rolls out and impacts machinery and truck dealers, local suppliers, support services and all the ancillary services. The cost is enormous.

The timing of this issue and the timing of my being here could not be worse. I should be at home seeding. Thankfully, my family's able to help cover for me. The season is short, and this issue is weighing heavily on every grain farmer.

You already know that China is the largest end market for Canadian canola, accounting for approximately 40% of all Canadian canola products exported annually. In 2018, canola seed exported to China generated $2.7 billion according to the Canola Council of Canada. That Canadian canola crop contributes $26.7 billion annually to the Canadian economy.

The statement from China that they are not buying our canola because of dangerous pests is ludicrous. Canada is noted for consistently growing and exporting the best grain in the world. This is a political issue, pure and simple. Political problems need political solutions. If we must play the game of grain inspections, so be it, but in the meantime, Canadian grain farmers are the ones paying the price for the political failings.

I remind this committee that this is not the only current agricultural failing that grain farmers are facing. The list of significant trade issues for the Canadian grains industry has grown long.

Italy is no longer importing the world's best Canadian durum due to non-tariff trade barriers. Over the past few years we have usually exported one million tonnes valued at $250 million. The durum market has been decimated. We can't even sell it.

Our sixth-largest market, Peru, has stopped importing Canadian wheat, claiming we have a weed seed issue. At over one million tonnes, that's another $200 million.

Vietnam has stopped importing Canadian wheat, claiming that it has thistle seeds in it. That market was over $4 million.

India has applied massive tariffs on our pulse crops, valued at over $1 billion.

Saudi Arabia is not importing our wheat and barley valued at over $4 million, due to a diplomatic dispute.

In case you weren't adding up these numbers, that's over $4.2 billion in direct export sales annually. Using the multiplier effect of 1.5, this is a potential loss to our economy of $6.3 billion.

Grain farmers aren't looking for financial handouts. We're looking to grow our exports, our crop sales, on a level playing field. We can compete with any country in the world if we don't have one arm tied behind our backs. Unfair non-tariff trade barriers and one-sided taxes, such as the carbon tax, force Canadian grain farmers into impossible situations. We ask you not to force us into uncompetitive situations.

The combined potential loss through export losses to China, Italy, Peru, Vietnam, India and Saudi Arabia is staggering. Canada can feed the world, but not if our government does not act strongly on our behalf, removing non-tariff trade barriers, enforcing existing trade agreements and removing political roadblocks.

This week the Minister of Environment and Climate Change announced $12 million in funding to Loblaws, one of Canada's largest companies, owned by one of Canada's richest families. Frankly, it is embarrassing and a slap in the face to grain farmers when this takes place. If you truly want ingenuity and a clean economy, support agriculture. Support us not through handouts, but by getting out of the way of the modernization and growing practices that we've been developing for the past 20 years. Agriculture has been on the leading edge of environmental protections: sequestering carbon through our low-till and no-till seeding using GPS and AI, minimizing our inputs and carbon footprint, all the while maximizing grain output.

If you want to effectively maximize the benefits of Canadian agriculture, take the steps necessary to reduce and eliminate the barriers that farmers are facing today. We plan our crop rotations in a very scientific manner. Factors such as soil types, markets, history of crops on the piece of land, fertilizer and other inputs are all used to determine what crops we should plant.

We do this every year, well in advance of spring seeding. Now we are faced with a huge disruption that changes everything.

Are farmers concerned? We sure are, and rightly so. Our future depends on these outcomes. These combined issues are already becoming the largest crisis our farms have ever seen in 100 years.

Give us the assurance that you are resolving these issues, not with empty words but with actions. Show us that you mean what you say.

Thank you. We look forward to your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Vandervalk.

Mr. Gerrard, the floor is yours for up to six minutes.

[William Gerrard, Invernorth Ltd., As an Individual]

Thank you for inviting me to Ottawa today to address the committee on this very important issue of canola trade to China.

My name is Will Gerrard. I'm a 35-year-old fourth-generation farmer. My wife Jacqueline and I have three young children. We're partners in a family farm located just south of Riding Mountain National Park in western Manitoba.

We have tried to implement a diverse crop rotation including hemp, wheat, canola, soybeans, peas and grass seed. The invention of canola was a huge boost to farms in western Canada, especially in the cool parkland region where I farm. This is quite evident if you drive through or fly over my area in the summer, as you will see a full 50% of the fields are yellow canola crops in full bloom.

Over the past 40 years of growing canola on our farm, it has evolved from a small acreage specialty crop to become a cornerstone of predictable profits. Of course, as with anything in farming, it is not without its ups and downs. In my short 17-year farming career, we have sold canola for as low as $6.50 a bushel and as high as $15 a bushel. Yields have ranged from 20 bushels per acre, when a disastrous August frost struck in 2004, to up to 70 bushels per acre, when everything clicks just right to produce a bumper crop.

Prior to 2019, three crops we produced faced significant trade and marketing issues. In 2017, low-cost Chinese hempseed hitting the international market played a significant role in buyers in the hempseed exporting and processing industry losing premium markets. This resulted in a price drop of 20% to 30% for this commodity, making it unprofitable for us to produce. Everyone is aware of the impact of the India tariffs on pulse crops, causing prices of peas and lentils to drop significantly for Canadian growers. More recently, the slump in soybean futures prices in the U.S., due in part to China backing away from U.S. soybean imports, has also impacted soybean prices in a negative way for Canadian growers.

Admittedly, peas and hemp were relatively small acreage crops for us, and we were able to shift acres to larger market crops, like soybeans and wheat. With the recent blockage of Canadian canola going into China, and in turn the dollar per bushel drop in canola prices, I think I speak for my fellow farmers in Manitoba in expressing concern that we are running out of profitable crops to grow.

The recent drop in canola prices caused a direct loss to our farm on remaining canola inventories from the 2018 year, totalling about $70,000. If this issue is not resolved, I am concerned that prices will continue to drop as seed inventories build in Canada. Losses next year on our farm could be in the hundreds of thousands and this money would be lost from the local economy forever. Seeded canola acres will most certainly drop this spring, and this acreage will shift to smaller market crops and drive the price of those commodities lower as well.

As you can see, the trickle-down effects of the canola ban to China are numerous and significant.

Where I live in western Manitoba, grain farming creates a massive share of the economic activity in our local communities. Some of the big employers in the area consist of agricultural equipment dealers, crop input retailers and grain purchasing and processing companies. I have already heard talk amongst fellow growers about cancelling machinery orders and cutting back on crop inputs for the coming year. When farm profits suffer, the economic well-being of our entire community will suffer just as much.

Farmers are constantly striving to become more efficient with our inputs. We've invested in technologies invented by Canadian companies, such as precision seed and fertilizer placement and sectional control to eliminate the over-application of pesticides and fertilizers. We have done these things out of necessity to remain competitive in the global marketplace. The worst-case scenario for us is to lose the global markets we have worked so hard to obtain and stay competitive in.

I urge members of Parliament from all parties to work together with industry and farmers. We have worked hard to develop a safe and reliable oilseed crop in canola, and we don't want to lose it.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Gerrard.

Do I have the consent of the committee to continue to hear the third witness?

Okay.

Mr. Kaun, you're up for six minutes.

[Mark Kaun, Canola Producer, As an Individual]

Thank you.

My name is Mark Kaun. I'm a third-generation farmer on the land that I own. I produce wheat, barley, peas and canola—a rotation of crops for the best agronomic practices for minimum disease issues and maximum yield.

I have a GPS precision farming practice of variable rate technology for seed and fertilizer, sectional control of herbicide application to maximize my return on investment and to minimize the environmental impacts. Yield data is collected digitally at time of harvest to build fertility maps for the next year's seed, and fertility variable rate maps.

We have practised minimum tillage for over 30 years.

In our operation, we use consultants for agronomy, fertility and grain marketing.

All seed is treated for soil-borne pathogens. In the case of canola seed, we use up-to-date genetics with resistance to blackleg and clubroot.

I'm a graduate of Olds College, in crop production. I am currently serving in my second term on the board of governors of that college.

I carry an Alberta environment licence to apply agricultural herbicides and seed treatments. I have over 40 years in seed production experience in wheat, barley, peas and canola. I was an authorized seed cleaner and seed grader under the CFIA and the Canadian Seed Institute.

The situation today is that I am holding 500 metric tons of unpriced 2018 crop on my farm. My 2018 production was just over 600 metric tons. My first 100 metric tons was contracted in the summer and sold and delivered in November for $11.30. The first week of February, prices seen were around $11 and I was getting ready to sell the rest of my crop. Then 10 days later, my crop was worth a dollar a bushel less, at the minimum—a cost of $25,000 to my bottom line.

Changing cropping plans really doesn't work to maintain the best agronomic practices in this spring. Canola seed has been purchased. I have 50 bags waiting in the warehouse at $600 a bag. Fertilizer has been bought and booked. Switching to other crops is hard, because cereal seed is in short supply in Alberta. Storage of last year's crop will be tricky. Some of the canola has a green count to it and it is susceptible to heating in the bins. I would like to move that as soon as possible. I don't have room to carry two years of production in my storage facilities. Cash flow is needed for all farmers.

Changing seeding plans impacts seed retailers. Seed purchases are made in January and February and are booked for May. I would hate to phone my seed supplier and tell him that I don't need that $25,000 of seed—now what would he do with it? Then 15 other farmers phone him to do the same thing.

As a Canadian producer, I take pride in producing safe, clean products for export around the world. I have never had a contamination issue with any of my products. I have never been turned away at an elevator.

Unknown factors such as this situation are not foreseeable and cause great disruption in our operations, impacting future production and farm finances. If I were to be hailed out, I have insurance for that. If my canola has not been able to be hauled or delivered, I have no insurance for that.

The diversification of our markets needs improvement. Government intervention is needed and pressure is needed to be put on more forcefully.

Canadian canola is contaminated. It's contaminated with political dirt and bureaucracy. No pathogens or weed seeds are in our canola.

Thank you for your time.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Kaun.

I think we'll probably be back around noon, after the vote. My suggestion is that we do one round with this panel and then hopefully there won't be any other interruptions, and we'll move on with the other one. It might take some time.

[Randy Hoback, Conservative, Prince Albert, SK]

Are you proposing to lengthen the meeting by half an hour to accommodate everybody?

[The Chair, Liberal, Pat Finnigan]

Apparently some members can't stay afterwards. They have other meetings.

I can ask around, but that's what—

[Randy Hoback, Conservative, Prince Albert, SK]

We can stay.

[The Chair, Liberal, Pat Finnigan]

We'll have to—

[Randy Hoback, Conservative, Prince Albert, SK]

They've travelled a long way to appear in front of the committee.

[The Chair, Liberal, Pat Finnigan]

I certainly agree.

Again, I would have to have the consent of the whole committee.

I know some members already have other meetings.

I can ask around, but that's what I've been told by some of the members here.

We'll be back at noon, and we will have a question round.

[The Chair, Liberal, Pat Finnigan]

We might as well get going.

Let's continue with our panel and go right to the questions.

We'll start with Mr. Dreeshen, for six minutes.

Oh, sorry. Mr. Berthold.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I just have a quick question for Mr. Vandervalk.

Just before that, I would like to say something.

Mr. Chair, I am very disappointed. This morning, once again, the House refused to hold an emergency debate on canola. We think all parliamentarians should be involved in this matter and have the opportunity to speak to the concerns of those they represent. I just wanted to express my disappointment.

Mr. Vandervalk, this morning you clearly stated that, in your opinion, this crisis is political. What makes you say that the problems in the current crisis are political?

[Stephen Vandervalk]

It is a tough one because you can speculate that maybe a specific executive could have been tipped off and not taken into custody. Maybe that would be part of what this is. That's all speculation, so it's hard to say.

We know China has done this in the past, but we need to get to the bottom of it. We need to be sending the people over to figure out what their excuse is and tell them that this is not true. The problem with that is they're not taking those people, from what I understand. Is that because of the relationships between the two governments? I don't know. I don't have the answer to that. That's what we're here for and that's what your job is. We're here to grow the crop and it's your job to make sure our markets are there. At least, that's what we feel.

Hopefully, we can do whatever needs to be done to fix that relationship. We need to get that done ASAP. We're almost out of time. Within the next three weeks we'll be out of time.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Well, Mr. Vandervalk, there certainly is a problem.

A request to have that technical meeting was sent over eight days ago. I'm not sure if the request was sent by boat, but, more than eight days later, no answer has been received. That tells you how difficult the relation has become between the two countries.

I will give the floor to my colleague Mr. Dreeshen. He also has some important comments on the issue, Mr. Chair.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Mr. Chair, I appreciate Mr. Vandervalk's points. We more or less said that we have a government that's in crisis management mode. Unfortunately, the crisis is the plight of western Canadian canola producers.

We've heard from CFIA. We've had to go to the trade committee—not ag—in order to speak to the ministers on this and to talk to some of our trade officials. We've also heard from national commodity groups. The point now is to talk to farmers who are being affected—the ones who are going to be out there putting the seed in the ground.

Mr. Kaun, very few people understand the seed business and the things that are associated with it, like insurance, inspections and all of the other things associated with it. When you see seed that is going to be perhaps held over for another year, there are issues associated with that as well.

I wonder if you could give us some insight on that.

[Mark Kaun]

In my case, as I mentioned in my presentation, seed is ordered early on in the year. It has to be because some years it is short. Carrying over seed can cause depletion in germination. Quite often the seed is already treated. I also mentioned that canola seed is about $600 to $700 a bag, which is a big investment to have sitting on your shelves. For a seed retailer to stock and hold this stuff year after year is formidable.

This year, due to the severe fall we had, other seed crops that we could switch to are basically unavailable because of poor germination and things like that. It's fine if one or two farmers change their decisions in your area, but if the whole province all of a sudden doesn't want to grow canola, now there's a shortage on cereals or peas or whatever else. Seed stocks are an expensive thing to keep year after year.

It's really hard to change your rotations in that regard, too, because if there's no seed, you're stuck. I have 50 bags of canola sitting in my warehouse at $600 or $700 a bag and I want to use it. I don't want to change to something else because there's another cost to switching.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Some of the discussion has to do with our being left on the sidelines as far as China's discussions and the U.S. discussions on trade are concerned. Of course, if it is true that something may be happening between those two countries, and the fact that we are on the sidelines because we have chosen to be aggressive with both countries, how likely is it that we're going to find co-operation as we expand through those trade deals?

Stephen, perhaps you could talk about that.

[The Chair, Liberal, Pat Finnigan]

You'll have to do this very quickly because we have only 10 seconds.

[Stephen Vandervalk]

Okay.

It's a huge concern because if tomorrow there is a new deal with China and the United States, there goes potentially 25% of the canola market. They might bring in soybeans or whatnot because they're easily interchangeable. It's a huge concern that we may be on the outs because of something that had nothing to do with us. If they have a new agreement with the U.S., then we could be on the sidelines and not able to sell the canola.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Vandervalk.

Mr. Drouin, you have the floor for six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

I want to thank each of you for making the trip here.

We did get the opportunity to hear from your associations last week, and one of the points made was to raise the advance payments increase to $1 million. Is that something you guys would see as useful? Would it help with cash flow?

I'll start with Mr. Vandervalk.

[Stephen Vandervalk]

I'm not sure I want to dig a deeper hole and take on more debt. Yes, I guess it helps with cash flow, but is that the answer? If you don't have enough money to put your crop in, you just take on more debt and they allow you. Even if it's interest-free, hypothetically, it's not a long-term solution at all. In fact, it may be making the problem worse.

Maybe that's the easy, short-term solution to making everybody feel okay about it, but I don't think that's a long-term solution whatsoever—unless it's something where the money doesn't get paid back. Obviously that's not going to happen.

It's a short-term solution, not a long-term one.