International Trade Committee on April 19th, 2016

[Randy Hoback, Conservative, Prince Albert, SK]

Where to go? There are so many questions, and I'd like to get into an effective stream here.

I think what I would probably like the committee to hear about is what happens to your industries when you don't have market access. We can look at BSE, for example, and what happened to the Canadian beef sector when all of a sudden they lost market access.

In a scenario where we don't have market access into Japan, how does that impact the canola price, right back to the farm gate, when all of a sudden they say they're not buying and you end up with an extra two million metric tons of supply?

[Greg Sears]

I think you've referenced a very important issue. Farmers are the price-takers. We get what's left after everybody in the value chain has taken their nibble. A lot of the issues regarding biotechnology, phytosanitary concerns, or any risk associated with the trade gets carried in the basis, and eventually comes out of what the producer gets at the end of the day. That's a huge issue.

Mr. Ritz probably knows how much the value of canola dropped with our little blip in China. It was a significant amount. At the farm gate, just the rumour that China might not import canola probably dropped it 50¢ a bushel. Our price dropped probably 5% to 10% from just a rumour. Being able to establish rational, understandable, repeatable methodologies for addressing a lot of those issues takes that risk out, and it all ends up coming back to the Canadian economy.

[Randy Hoback, Conservative, Prince Albert, SK]

That comes back to why you need a diversity of markets. If you do see an issue with one country, you have the other 10 or 11 countries to deal with, plus other areas outside of TPP, to access your product.

Again, more buyers is definitely good for the farmers. Is that fair to say?

[Greg Sears]

Very much so. Especially for canola, and I'm sure for the other products here as well, we see the Asia-Pacific region as one of the great growth opportunities for our product. As I mentioned earlier, Japan has been buying two million tonnes of canola every year for Lord knows how long, and they will continue to do so. However, it's the Vietnams and the Indonesias that are really the opportunity for us to market our products and bring that money back into Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

Let's say the TPP isn't signed. Let's go down that road. I hope it is signed, don't get me wrong, but let's say it's not. What position do you expect the government to be in, if it's not signed, with regard to our relationship with Japan, Malaysia, and other countries in the TPP? With some of them, we do already have bilateral agreements. Do you think it's prudent that we'd be still negotiating a bilateral agreement with Japan at this point in time?

[Greg Sears]

I think, yes, ultimately if the TPP fails to be ratified, we need to continue to pursue bilateral agreements with Japan, but also with a suite of countries in that region. Australia is our primary competitor on the canola market, as is Indonesian palm oil and soybeans from the U.S. We can't be put at a disadvantage with regard to any of those other major oil-producing countries.

[Randy Hoback, Conservative, Prince Albert, SK]

Putting it in a perspective that Canadians can understand, let's say there's a 20% price drop based on a rumour. Roughly 40 bushels an acre is probably.... Well, that's what Terry Youzwa grows. Everybody else grows about 50 or 60 now.

[Voices]

Oh, oh!

[Randy Hoback, Conservative, Prince Albert, SK]

It's roughly $8 an acre, and since the average farmer has about 1,000 to 1,200 acres, bang, in one day they would lose $8,000 to $10,000 to the marketplace. Now, let's take that $10,000, roughly, and put it into the community of Red Deer. Once you multiply it by the many farmers who farm around Red Deer, or in the province of Saskatchewan, or in the province of Alberta, you can see how quickly that impacts the economy.

Is that another justification as to why these types of agreements have to be looked at in terms of a whole sector's net benefit to Canada, because of the trickle-down effect? You can't buy that new Ford truck if you don't get that $10,000.

Is that a fair statement, a fair comment?

[Greg Sears]

I think it's a very fair comment. Somebody once told me that if a farmer has a dollar, he'll spend the dollar. It supports the rural communities. It supports the Saskatchewan potash mining. It supports the seed development companies in Chatham, in Fort Saskatchewan, and all over western Canada and eastern Canada. It's a huge, huge value chain that generates value for the economy.

[Randy Hoback, Conservative, Prince Albert, SK]

Let's look at the other scenario, where you have people who yesterday—

[The Chair, Liberal, Mark Eyking]

I'm sorry, Mr. Hoback. Nice try, wise guy.

[Voices]

Oh, oh!

[The Chair, Liberal, Mark Eyking]

That's okay. We're going to move on to Mr. Peterson for five minutes.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

Thank you, everybody, for your informative presentations, and thanks for being here.

I'm trying to wrap my head around some of the operations of your value chain and your export markets and even looking at margins and things like that.

Currently, obviously, a big component of what you do in getting product to market relies on transportation. Is it just as profitable to take your product to these Asian markets as it is to where you ship them now? Are there some efficiencies there? Is the margin going to go up or down? Will these markets be more profitable for you than your current markets?

[Kevin Bender]

I would say yes. Again, on the tariff front, there will be reduced tariffs, which will provide a higher net price to our bottom line. Just on that front alone, yes, it would be beneficial.

Again, as you alluded to and as has been talked about here, probably the biggest barrier is transportation. We can make all these agreements and have these sales, low tariffs, and good prices, but if we can't get our product to port, we're stuck.

Two years ago, we saw that very evidently, when Canada actually lost wheat sales because we had a bunch of boats at the west coast and couldn't get the grain there to load it. People went to Portland and took some American wheat.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Maybe we need a pipeline for grain to B.C.

D'Arcy, go ahead.

[D'Arcy Hilgartner]

Further to that, we talked about this earlier. In our case, for whole pulses, you're starting to ship fractions, so the protein, starch.... Food ingredients are huge right now, and that's where a lot of the talk is, whether it's using them on their own or in supplementing another product, a local product. That's what they're looking at.

If you can ship a container of a specific portion of that food in grade as opposed to a Panamax freighter of the bulk product, there's always the combination of value-added locally, as well as the opportunity to extract a higher price in those markets.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

What I think I'm hearing—if I'm wrong, correct me—is that by expanding the export market there will arise a possibility of doing more value-added in Canada, which will have, of course, a multiplier effect on the benefits for Canada. Is that fair to say?

[D'Arcy Hilgartner]

Exactly, yes, and like we said, it also opens up those opportunities in countries outside of the TPP. If you're somebody that's not into it, well, you're going to want to get in. You want to make it into the cool kids' club, right? You want to get into the TPP. It creates that culture of free trade and letting business work the way it's designed.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I don't know if Greg or Janelle wanted to pipe in on that.

[Janelle Whitley]

Yes, that's definitely that's how we see it. We see that right now in Japan the seed goes in tariff free, but there's roughly 15% on oil. With the removal of that tariff over five years, we do hope that more of that value-added processing would come back to Canada and that we would move away from being just a primary supplier of a commodity.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

That's on the operation side, but would there be other barriers existing, even with this TPP? What other challenges is the industry facing? Is the TPP going to save all your problems? I presume there will be some residual problems even if the TPP is ratified.

[Janelle Whitley]

I can take a first crack at that.

I think you've heard some of the barriers we're facing right now from the testimony we've had, specifically on crop input products in terms of the different timing of approvals, and some of the problems we're having on the maximum residue limits. Right now, we're dealing with a patchwork of regulations instead of one common standard that would maybe be available through Codex. That's definitely one of the issues we face as an industry.

The second issue is for canola, and more on the biotech side. About 98% of the canola grown in Canada is from a biotech variety, and we have a market access policy in our industry, which means that without prior approval in our export markets, we will not bring it to commercialization in Canada. We will not see that product available.

It's the same thing on the crop input side. We will not see that product available to producers until we secure the regulatory approvals in our export market.

The time it takes to do that is time that farmers don't have access to that technology. It's time that we don't have for the innovations on farms.

Those would probably be the two largest non-tariff barriers that we would be addressing.

[The Chair, Liberal, Mark Eyking]

Your time is up.