Evidence of meeting #144 for International Trade in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was crop.
A recording is available from Parliament.
President, Canadian Canola Growers Association
I bought a couple of new bins last year, and they were just a little over $3 a bushel. If we use $3 a bushel as that number for a 5,000 bushel bin, it's about $15,000 a bin times 30 bins. It's pretty expensive.
Conservative
John Barlow Conservative Foothills, AB
That's good math; I appreciate that. That again goes to the urgency of this situation. I think there's a misconception that we're talking about canola that you're going to be harvesting this fall coming up. We're actually talking about a commodity that's already been harvested that is in transport trying to get those new contracts. How urgent is this for you, your association, and other producers across western Canada to get resolved as quickly as possible?
President, Canadian Canola Growers Association
Quick, quick all the time. Well, I'll do my best.
President, Canadian Canola Growers Association
It's important, absolutely, without a doubt. Guys are sitting there with grain in the bins, and that grain is cash flow. If it's unpriced, unsold and not moved out of those bins, I don't get paid for it until it gets to the elevator. Once it gets to the elevator, then it turns into cash that I can use to finance my operation for the next production cycle, I'll say, meaning the number of months moving through until fall.
Without being able to move that grain, I'm looking for options. Again one option that CCGA can help the government out with is the advance payments program. I recognize that it's not the silver bullet or long-term answer that we're looking for, but it is very much a short-term solution to an immediate problem with cash flow and making sure that we can adequately finance our operations through this summer's growing period.
Liberal
The Chair Liberal Mark Eyking
Thank you very much. That wraps up our first half of today's meeting.
Thank you very much for coming, gentlemen. It was a very informative and productive first hour. You're welcome to stay if you want to. We're going to have the farmers up in the next round with us.
MPs, we're just going to break for five minutes.
Liberal
The Chair Liberal Mark Eyking
We're going to reconvene our meeting this afternoon of the international trade committee. This is the second half of our second meeting dealing with the challenges that the canola industry is facing on the trade side. We had the ministers and officials at the first meeting. We had people from the industry in our first hour here. We're honoured to have three farmers, one from each province.
Thank you, gentlemen, for getting away from your farms and coming all the way down here to do your presentations.
If this is your first time here, each one of you will have up to five minutes. We're a little flexible with time, but we like to have good dialogue with the MPs. I'll remind MPs to keep their questions short so the farmers can get their answers in.
It's a challenging time as we've heard this afternoon already.
Without further ado, we have, we'll start farthest west. All the way from Alberta we have Leroy Newman from Newman Farms Ltd. Go ahead, Mr. Newman, you have the floor.
Leroy Newman Newman Farms Ltd., As an Individual
Good afternoon, everyone, my name is Leroy Newman, I'm from Blackie, Alberta, just south of Calgary. I'm the fourth generation of my family that's been farming. We grow canola, barley, peas and wheat. We also have a cattle operation. Despite the fact we are in the middle of calving this season, this issue is so important I felt compelled to be here to speak to the committee about the crisis we are facing with canola. I'm here representing farmers on how international trade affects Canadian farmers.
How is the current government going to protect Canadian farmers, not those from my generation, but those who hope to farm in the future, like my kids?
Within weeks, I'll be seeding my crops. As a result of the dispute with China, I'm struggling with whether I can change my acres up or down. The answer is I can, but only about 5%. The canola crisis is devastating to my operation. Price-wise, 2018 was a good year, but for 2019 the price has already dropped close to 20%, which is devastating the canola market. For example, I budgeted on $11.30 a bushel for canola, and due to the trade issues with China, the prices have dropped to $9.20 per bushel and falling. Therefore, my margins have dropped significantly, from $115 an acre to just 14, which is not enough to sustain my farm.
This also impacts the sustainability of my farm. Today's producers follow a sound practice of rotating crops, because maintaining a good crop rotation ensures that we can manage disease...crop protection products. Most importantly, with zero till, my land and soil remain as healthy and productive as they can be. Canola is a vital crop in my rotation, and seed and fertilizer blends have been brought already specifically for canola. Farmers take the risk of planting the crop in the hope it will mature and hit top quality. I take care in managing that throughout the growing season to harvest.
The export market is a lifeline for Canadian farmers. I'd say that most of my crops are sold into the export market. My wheat is destined for flour, my peas for human consumption, mulled barley into great beer and, naturally, my canola into top quality vegetable oil. Over 90% of Canada's grains are exported, and China has always been one of our buyers, and one that we cannot lose.
We producers know that we grow top quality grain. We have the backing of our testing here with CFIA and the science that goes with it. China is demanding more of our products, and they know it is top quality. We see the crisis as purely an artificial trade barrier and expect government officials from agriculture and international trade to take it seriously and work on the solutions.
All this being said, my biggest concern is storage. This summer there will be a large carryover of canola as prices decline and farmers hold on for higher prices. Due to the timing of this crisis and the lack of resolution, most producers will not be able to change their rotation, resulting in more grain in storage. Merchants rely on us to move a lot of grain in the summer and for fall export. Keep in mind there is still only so much storage capacity.
With the loss of China in the market, we run the risk of low prices, no movement in an already bottlenecked transportation system. The current rail transportation [Inaudible--Editor] forecasts another backlog for the fall and winter.
I'm going to save the rest of my time for more questions, if you don't mind.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir.
I hope you're having better weather for your calving than we're having here.
Newman Farms Ltd., As an Individual
It's nicer at home than it is here. Every time I come here it's cold.
Liberal
The Chair Liberal Mark Eyking
We had a beef farm too. We don't mind the cold. It's when you get that rainy, wet weather that it's terrible on the calves and the cattle.
Thank you for your presentation.
We're going to go to Saskatchewan now. We have Brad Hanmer from Hanmer Joint Venture.
Go ahead, sir, you have the floor.
Brad Hanmer Hanmer Joint Venture, As an Individual
Thank you, Mr. Chair and fellow committee members. It's an honour to present to you today.
Once again, my name is Brad Hanmer. Along with my parents, my two brothers and their families, my wife and our children, we operate a fifth-generation farm, which is 115 years old, in central Saskatchewan. We farm in the small community of Govan, Saskatchewan, which is about one hour north of Regina and one hour south of Humboldt, Saskatchewan.
I'm from a part of the country that proudly supplies food and energy to the world. We are facing a lot of economic uncertainty with the current restrictive environment that our products are facing in accessing world markets.
As our family is preparing to participate in one of Canada's greatest, most-celebrated, billion-dollar megaprojects—in the Prairies we call that spring planting—we are coming before this committee with some great concern about significant economic impacts on our businesses, our industry and our nation.
Our industry is known to be dynamic and innovative. We help feed the planet. We are widely regarded as an agricultural powerhouse, and this is only possible with a vibrant trade environment. Our industry urgently needs action to restore international trade relationships.
As Jean-Marc said in a previous panel, we are currently facing four significant trade challenges in addition to canola. We have the Italy durum issue. We have the India pulse tariff, we have the Saudi Arabian government ban on imports of Canadian barley and wheat, and then we have the further fallout that the canola crisis has created in a lot of the uncertainties we've seen with other crops. That risk is uncertainty, and we're starting to see that a lot of the crops we grow into China could be suffering the same impact. As a result, we're seeing a complete sell-off in a lot of the commodities we export into China.
If I may, Mr. Chair, I'm quickly going to go through a few slides. They are at the privilege of the committee, and they are for your privilege when I'm done. I will go quickly.
Hanmer Joint Venture, As an Individual
First of all, canola is our most important crop; it's our wealth creator. Canola has generated over $9 billion in cash farmers' receipts in the past three years, as you can see by my graph. In my own language, canola is the fuel for the velocity of money and for most of western Canadian agriculture.
Farmers have responded over the years to the profitability of this crop by increasing acres, making it Canada's most widely cultivated crop, and now we're seeing in excess of over 20 million acres of production in our country. Not only has production increased, but so have our yields by embracing improvements in cropping systems and genetics. Not only is the output of our crop increasing, but the yield per bushel in acres is also increasing. It's making us one of the most dynamic canola producing areas on the planet.
In my farming career, canola exports have nearly tripled, and here's a celebration of what can happen with open borders and strong trade relationships. Canada's rising production trend has been met by rising export demand mainly from China. We dare not invite China to deviate from its upward trajectory.
We've spoken about this lots at this committee, how important China is. If you look at the magnitude of the top 10 canola countries that we export to, we don't have a lot if we don't have China. Not only do 47% of our canola exports rely on Chinese purchases, but the exports to China are trending up. When we start looking at the exports to China that we've been seeing now, we're in the neighbourhood of 47%. This is where the hardships are starting to occur in our part of the world.
This uncertainty when things get complicated with China has resulted in an export pace slowdown that we're starting to see in these bulk trends. If you look at the five-year trend on on-farm canola, it's starting to trail behind the average, which means that we're starting to have buildup of inventories, and as a result, we're starting to have an impact on prices.
What I want to show you right now is that impact on new crop prices. If you look at this canola futures chart, the value of new crop canola has been reduced by about a billion dollars. If you look at this November 2018 canola contract, this is where new crop prices for canola—and we are about to plant very soon—are derived from. This is what you'd call in our terms a bloodbath. Uncertainty is risk, and risk is calculated into this graph.
I also want to talk very quickly about what's happening on old crop prices. I think that Mr. McClean did a very good job of that, but just to reiterate what he said, since December we've lost about $50 a metric ton on the May 2018 canola futures contract, and this is where the current cash prices are derived from. Since this fallout to our canola prices and the resulting economic pain, the market estimate impact to the farm gate I have estimated from trade sources at $340 million, and this is what the crop in canola farmers has been since it dropped in early December.
When you look at this new price chart, this is what Canadian farmers are looking at right now while trying to make planting decisions. Where I come from, canola is the economic engine of our family businesses and the local economy and fundamentally the most important component of the multiplier of our commerce. It is imperative that Canadian canola, seed oil and meal have access to the Chinese market. Relationships need to be restored immediately.
I am hopeful that this group truly understands the importance of the situation, but I want to remind you that canola is the foundation of our way of life. It's what drives our investment decisions and our capacity to finance and operate our businesses. It has attracted huge domestic and international investments both up and downstream through the value chain. All of this depends on trade. There are some risks of countries like China creating alternative supply channels with other suppliers, and this is coming at a time when the overall economic environment and reduced profitability are already challenging the Canadian commodity agricultural portfolio.
We need this market, ladies and gentlemen.
This is not the first time in my 20-plus years of farming to experience trade concerns and trade conflict. The Chrétien, Martin and Harper governments also had to navigate through some uncertainty in international trade; however, I cannot remember so much conflict of the major crops all at once.
Our Canadian system is far from broken. I think it may be just our approach. We have some of the most talented deputy ministers, trade negotiators and support staff on the globe. They have represented us well in the past and made us all proud.
I'm reaching out to this group to please think of this issue not as a file or a briefing note but to remember that this is our livelihood in western Canada. I strongly encourage this committee to work with industry and commodity groups, but I also challenge this committee. I feel it's time to flip the switch to strategic thinking and political savviness.
When we check the science box, which we've talked about at this committee, we're going to check that box about what this trade dispute is all about. When we do that, we're going to get refocused. As we all know, it is not about science. We all know it's about politics.
This is a disturbing trend, as we seem to have one strained trade relation after another, as it appears that the dominoes of strong trade relationships are starting to fall, and farmers like me are paying the consequences. China played its big card, the canola card. This card hurts, and it hit us fast and hard and it was deliberate. This has been caused by politics, and it can only be solved by politics. Farmers like my family and me live and breathe in an environment with so much uncertainty. Our success relies on facets like trade to operate in a stable and predictable environment. This all starts with our government: We need strategic engagement right now at the political level. In closing, farm families need to be reassured that their elected officials understand the complexity, severity and urgency of the situation.
I thank the committee for your time.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir.
I'm impressed with the presentation. Those are quite the figures. If I look at the paper I have here, I guess Saskatchewan produces almost 50% of the canola in the country.
Hanmer Joint Venture, As an Individual
That's right, and is also the largest pulse grower in the world. Canada is the largest pulse exporter. We're also the largest durum producing exporting nation in the world. Saskatchewan produces about 80%. There is not one jurisdiction in this country that is more affected with international trade disputes right now than my home province of Saskatchewan.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir.
We're going to move over to Manitoba. We have Mr. William Gerrard from Invernorth Ltd.
Thank you, sir, for coming here today. You have the floor.
William Gerrard Invernorth Ltd., As an Individual
Good afternoon. Thanks for inviting me to Ottawa to address this committee on the very important issue of canola seed exports to China.
My name is Will Gerrard. I'm a 35-year-old fourth-generation farmer. My wife Jacquie 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 wheat, canola, soybeans, peas, hemp 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, because you will see that 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's not without its ups and downs. In my short 17-year farming career, I have sold canola at 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—up to 70 bushels per acre when everything clicks just right to produce a bumper crop.
Prior to 2019, three crops we produce faced significant trade and marketing issues. In 2017, low-cost Chinese hemp seed hitting the international market played a significant role, and buyers in the hemp seed exporting and processing industry lost their 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 India's tariffs on pulse crops, which caused the 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. bean imports, has also impacted soybean prices in a negative way for Canadian growers.
Admittedly, hemp and peas were relatively small acreage crops for us, and we were able to shift our acres to larger market crops, such as canola, soybeans and wheat. With the recent blockage of Canadian canola going into China and, in turn, the dollar-a-bushel drop in canola prices, I think I speak for my fellow farmers in Manitoba in expressing concern that we're running out of profitable crops to grow.
The recent drop in canola prices has caused a direct loss to our farm, totalling about $70,000 on the remaining canola inventories from the 2018 production year. I'm concerned that prices will continue to drop as seed inventories build in Canada. Losses next year for our farm would be in the hundreds of thousands of dollars. This money is 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 in 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've already heard talk amongst fellow growers about cancelling machinery orders and cutting back on crop inputs, such as fertilizer and chemicals, for the coming year. When farm profits suffer, the economic well-being of the entire community suffers just as much.
Farmers are constantly striving to become more efficient with our inputs. We have invested in technologies invented by Canadian companies, such as precision seed and fertilizer placement and sectional control technology, to eliminate over-application of pesticides and fertilizers. We have done these things out of necessity to remain competitive in a global marketplace. A worst-case scenario for us is to lose the global markets that 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, reliable and competitive oilseed crop in canola. We need to get a fair value for it.
Thank you.
Liberal
Liberal
The Chair Liberal Mark Eyking
I was wondering about that. It would take a lot of bees to pollinate 20 million acres.
We're going to try to get as many MPs here as we can. Some are splitting their time. We have some visiting MPs from the Prairies, the western provinces, because they represent a lot of canola farmers.
Without further ado, we'll get going here, starting with the Conservatives. Mr. Hoback and Mr. Sopuck are splitting their time.
Go ahead.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, witnesses, for being here. I know you're getting down to the nitty-gritty of getting everything ready for seeding.
I'm going to start with you, Mr. Hanmer. In terms of the financial impacts on your operation, what does this mean for your operation? How does that have a domino effect on the economy as a whole in your community of Govan? Can you give us some insight into that?