Agriculture Committee on March 19th, 2018

[Tyler Bjornson]

There is an extraordinary amount of interaction between the shippers, the customers, and the railways on projecting what future volumes are going to be, both at an individual company level as well as at a group level. Recently we've had one of the railways interacting with the crop logistics working group, which is the full collection of industry associations in agriculture talking directly to the railways about the challenges we're facing.

There are also groups within Transport Canada, multisectoral groups including the ag sector, that talk about forecasting and demand into the future. That's taking place right now. I think what's missing is the accountability if the railways don't put into place the capacity needed in order to meet those demands.

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

Do you guys meet at the end of the year to discuss what went wrong and how to fix it? Is there that opportunity as well, or is it just about projections?

[Tyler Bjornson]

I think there's always a desire to see that sort of a discussion take place and be able to reflect on opportunities to do better. We'd certainly welcome that. I don't think it always happens. I don't know that the door was always open to do that, but I don't see any reason we wouldn't want to meet and discuss how we can improve for next year and how we can make sure that it doesn't take public scrutiny and a scolding essentially in order to get the grain moving.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Bjornson.

Thank you, Mr. Drouin.

Now, Mr. MacGregor, you have six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Chair.

Mr. Bjornson, in your opening statement you had made mention of how international customers had reacted to the previous crisis, to the delays and some of the damage it did to our reputation. I was wondering if you could maybe elaborate a little bit on that. How long did it take us to recover? Have we fully recovered, and what's this current crisis going to do to the efforts that were made over the past four years?

[Tyler Bjornson]

Thank you very much for the question.

We know it's an issue with our customers internationally because a number of the commodity associations nationally that are responsible for canola, wheat, and pulse crops go around the world when there's a new crop that comes out and discuss with our international customers some of the quality issues and any of the challenges that we might be facing, any opportunities, and have just a general regular conversation with our customer base as well to make sure that we're establishing a good relationship. My colleagues who do those missions abroad have told me that their customers, especially in high margin, high-value markets and especially in Asia, raise this question every single year around whether or not we're going to be able to deliver the crop. That's still happening this year, five years afterward. Even before we knew of the challenges back in October, we were hearing that from customers. It's hard to judge how long it's going to be before we stop getting those questions, and it's hard to judge how many sales and opportunities we missed as a result of customers not wanting to take a chance on doing business in January, February, March because they're worried we're not going to be able to deliver.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. White, do you have anything to add?

[Rick White]

I was just going to give an example. Japan is our longest-standing, most important customer for canola. We meet with them formally twice a year. Every time we've met since 2013, they've brought up the reliability of delivery of their product—our canola—to them in Japan. It's a concern. We really shook the relationship substantially with the crisis back in 2013, and they haven't forgotten. Every meeting it comes up.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I'd like both of you to comment again. This government has set the goal of increasing our agricultural exports to $75 billion by 2025. Are you optimistic that we can reach that goal, given what we're still going through?

[Rick White]

On the production side, definitely we can reach it. The question is whether we'll have the infrastructure to sell it and get it out of port.

[Tyler Bjornson]

With the ability to continue to innovate and adopt new technologies at the production level as well as the handling and grain processing levels, we definitely see the potential to reach those levels. In terms of our ability to deliver on that, there are still a lot of question marks. That is why the remedies in Bill C-49 are so critical, from our point of view.

[Ron Bonnett]

I have just one point to add. We're talking about the rail system right now, but if we're going to be going after export markets, that will include the regulatory systems, the docking systems, the rail systems—a whole number of things. It's about value-added processing. There has to be an overall strategy to deal with this. This is one component. We know the bottleneck right now is rail, but we have to make sure that the system operates fluidly and that all the pieces fit together.

I think that ties in with some of the comments that were made about sharing data and information, because if we don't know what all of the partners are doing, it's pretty hard to design a system that works fluidly.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Mr. Bonnett, I'll continue with you for my next question. I believe you were in the room listening to CN's and CP's testimonies. You heard their statements and how they responded to questions from this committee. What was your takeaway from what they stated? Are you happy with their plans, or is it too late?

[Ron Bonnett]

The initial reaction is that I think we got their attention. The frustrating thing is that it's taken a lot of pressure from government officials, individual MPs, and farm organizations, as well as an almost crisis situation that developed in February, when Manitoba didn't have any cars delivered in one week. Some of what we're hearing sounds so similar to what we heard in 2013 and 2014. There is a need to make sure we have some type of system so that proper planning takes place, but it has to go beyond that. There have to be some teeth, and Bill C-49 provides part of that, to ensure there's compliance.

It's not the same as trucking grain. In that case you can go hire another trucker if one isn't performing. You're stuck with those railroads, so you don't have the flexibility to do that. That's why the regulatory system has to be in place to ensure there's compliance.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I've heard all of you talk about Bill C-49. It was my colleague Robert Aubin, the NDP transport critic, who moved the motion to split the rail provisions off of Bill C-49, create a new bill, Bill C-51, and refer it directly to the transport committee. Unfortunately, we were not successful, but it was our hope at the time that those particular clauses of Bill C-49 could make a speedy passage. In hindsight, that might have been the best option. Unfortunately, as a House body we have no control over the other place, but I hope they are hearing the message loud and clear that those provisions need to get the attention they deserve.

Thank you, Chair.

[The Chair, Liberal, Pat Finnigan]

Thank you.

Go ahead, Mr. Longfield, for six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Mr. Chair. Thank you all for coming and giving your perspective on things.

This is not to relive the old debates that we had in the House of Commons before the summer that looked at an integrated transportation program, but what we're seeing now is that part of that integration—and it includes all the intermodals, including air traffic as well as rail and truck transportation—is also financial.

Mr. White, the previous time we were facing problems, in 2013 and 2014, there was a spike in requests for APP funding. We knew that we were in trouble because of that spike in requests, but this time we didn't get the same warning signals. Could you comment on the financial warning signals that could have helped us react quickly?

[Rick White]

During the crisis of 2013, the cash advance spiked quite substantially. We put probably an extra $300 million out the door in the last two months or so before the new program. We knew farmers were desperate at that time. This year the data doesn't show that yet—and I underscore “yet”. That's why in my testimony I suggested that as a proactive measure, we should be looking at this aspect. The data doesn't show it yet, but we're not through this situation yet either. The financial issue could be coming and it could be coming very quickly, because spring is coming, inputs are going out, and bills are going to have to be paid. I hold judgment as to whether or not we're seeing it yet, but we need to be ready.

[Lloyd Longfield, Liberal, Guelph, ON]

Yes. Thank you. From the farmers' perspective, we need to make sure that they can purchase their seeds and other inputs.

FCC is playing a role this time. It's doing that as part of a stopgap measure. Would you see that as more of a permanent solution that could provide access to more funding if we're not able to change the APP limits?

[Rick White]

We see the permanent solution as just changing the limits. We don't see that as ad hoc, because farmers have been asking for limit increases in an ongoing way regardless of the situation. Now would be a great time to do it, because it would be a much more proactive measure to take.

[Ron Bonnett]

Don't forget as well that if you extend the payment period, farmers are paying interest on that money as well. If they had the payment, they wouldn't have to pay that extra interest. The solution is to make sure they sell the grain when it's due to be sold.

[Lloyd Longfield, Liberal, Guelph, ON]

That's a good point. You always have the good points.

FCC, I understand, is giving them 30 days interest free, to get their cash flow going.

I'm also thinking in terms of Mr. Dyck. I'm really interested in the change of movement of grain on the Prairies. I grew up with the old elevators, the small elevators. When you go into Saskatchewan and Manitoba now, you see these super-elevators with high throughput. Do we have the road infrastructure to get to these elevators? There are further distances to get to these elevators.

I'll be speaking in the House on the budget in a few minutes, so I'll have to rely on one of my colleagues to cover for me, but infrastructure deficit is one of the major deficits that we have that we're trying to address through our provincial and territorial partners. Where are we at in terms of road infrastructure to match the high-throughput grain handling services that you're providing?

[Mark Dyck]

That's a great question.

Road infrastructure is essential, for sure. We're actually in the process of building four brand new elevators. We have two more under construction that are going to be completed this summer, with more to come.

One of the key things we look at when we build an elevator is the road infrastructure. We're trying to build on class 1 highways. You can have a lot of grain in a dryer, but if the farmers can't access it.... You want to be on class 1 highways so you can avoid road restrictions during certain times of year. It is essential in the long term for farmers to have the proper infrastructure to deliver to our facilities.

[Lloyd Longfield, Liberal, Guelph, ON]

In terms of—

[Tyler Bjornson]

I would just like to add to that, if I could.