Public Accounts Committee on Nov. 29th, 2012

[The Chair, NDP, David Christopherson]

I know, I know.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

—I would love to carry on.

[The Chair, NDP, David Christopherson]

You went right through there, as best you could, without feeling too guilty.

Thank you very much. I appreciate that.

Monsieur Giguère, you have the floor, sir.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much, Mr. Chair.

[The Chair, NDP, David Christopherson]

Very well.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

My question is for Mr. Williamson.

Currently, the directors of your commission come from the dairy industry. Some are still active within that industry, in fact. Your commission has a purchasing power of $189 million. It manages many contracts that it contracts out, as well as dairy industry initiatives that amount to $3 million. In light of the amounts at stake and in light of the fact that members of your commission are still active in the industry, why has the commission not yet deemed it necessary to establish a process that would allow board members to declare and manage conflicts of interest in an ongoing way, in a way that will not cause difficulties in achieving quorum within your board?

[Randy Williamson]

Well, I suppose a difficulty arises from the fact that we have a three-member board. That's the starting point for the issue of conflict of interest.

As I said earlier, the requirement, if you like, is that we have producer expertise and processor expertise. We have put in place in our bylaws a requirement that we declare any conflicts of interest, and we act—and I think this is as important as anything—in a completely and absolutely impartial way. I do that personally, and I have a very high level of comfort that the other two board members act in exactly the same way.

We seek input. As an example, when we establish our support prices, we seek input from all stakeholders across Canada: producers, processors, consumer associations, retailers, food service people. We use a number of factors in determining how we establish our support prices and other decisions within the organization. With a requirement that we have producer and processor expertise, and believe me, with a system like supply management, as complex as it is, that is an important factor, but with a three-member board, it creates some difficulty.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

You are referring to the complexity of your tasks, particularly with respect to supply management. In previous reports it was said that you have 12 key resource persons who play a major role in the work done by your commission. The Auditor General noted that in the coming years, you will be having to deal with a wave of retirements. At the same time, we know that the government is making major budget cuts. Given these budget cuts, how will you replace your key staff members?

[Randy Williamson]

That's an excellent question.

We do have some very capable, very skilled individuals within the organization. I suggest the number is probably accurate.

Twelve people are in very key positions. In some of those key positions, their potential to retire is imminent. We have been aware of that for a number of years. We have been taking steps over the last few years to ensure that individuals who work at, I suggest, lower levels within that organization have the education, the training, and the familiarity with the systems to ensure that when those retirements occur, we are in a position where we move seamlessly to continue to provide excellent services to the industry. I have a level of confidence of that.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Even with the budget cuts.

[Randy Williamson]

Yes, we were provided with an indication, I believe it was three years ago, that budget cuts were imminent. It was made very clear to us as to the nature and the size of those budget cuts. We have been very diligent in pursuing and identifying how we are going to achieve that. It will not compromise our expertise within the organization, and we will achieve those budget cuts.

[The Chair, NDP, David Christopherson]

You just have a few moments.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I have a question concerning risk management.

Many reports stated that risk management is particularly crucial with regard to liquidities and the value of stocks, and that your board does not have the skills and qualifications needed to perform all of these complex tasks. In light of these major points that represent a risk for your commission, do you really intend to significantly increase the number of members on your board in order to solve these problems?

[Randy Williamson]

It's not to avoid the question, but I think I'd need a little more precision on what point of risk you would believe we may not be able to meet.

[The Chair, NDP, David Christopherson]

Sorry, we're well over time, so perhaps in the future rounds that question can be picked up by the official opposition, if they wish.

We now move to Mr. Shipley.

You have the floor, sir.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, witnesses. We appreciate your taking the time to be here.

Mr. Williamson, I have to commend you for your directness in your answers, and more so for the way you have run a crown corporation. You have a budget of $8 million, and half of which is in government appropriations. I know there's some difficulty with the CDC, in terms of the act and the three members. If there's a template to follow in terms of how crown corporations might structure themselves, I would suggest this is one of them. The Auditor General basically concurred with that, which is a significant compliment for your organization.

To follow up, I know there are questions for every organization about the budget cuts, and I thank you for answering that. One thing about people in agriculture, with the nature of our business, we're able to adapt to changes in how we operate. I think you would agree.

I'm glad to hear that because you were notified, you're preparing a plan and you will take that responsible action. Quite honestly, others will do that throughout our government, to make this an effective government, but also to look after our economic responsibilities.

I may be commenting more than asking a question, Mr. Chair, and I hope that's okay, but I will get to one.

It is important to understand that CDC is part of supply management. I was a dairy farmer, so I have the greatest respect for supply management and also for free markets. When you look at the interests of the stakeholders across the board who are involved, you include producers, processors, exporters, consumers, and the government. There isn't much that has that breadth when you're establishing prices, legislation, regulations, or your structure, or that involvement across the general public of Canada. It's important that we recognize that, and my question follows from it.

You mentioned that it's important that you direct fair returns. We continually hear from organizations and some groups—unfortunately some agricultural groups—that say supply management can't provide fair returns, they provide exponential returns to our producers, and these are paid for at exponentially high prices by our consumers. I don't know if you're in a position to make a comment on it. I read an article this morning that indicates in fact it isn't fair because consumers are paying two to three times because a product comes out of supply management. I know that's truly false, and I think you do also.

Could you expand a bit about that comment they had in terms of fair return for the producers and how that rolls out across the general public?

[Randy Williamson]

That's an interesting question.

On the whole issue of fair returns, I think people with a financial designation will tell you that's not a simple issue to answer in any case.

The Canadian Dairy Commission, on a year-over-year basis, as a starting point identifies the cost of raw milk, in terms of a support price, from the previous year. We collect data across a wide range of dairy farms across Canada—in excess of 220 dairy farms across all of Canada—and a wide range of sizes and scope and scale of dairy farms. We collect data on every component of managing and running a dairy operation. That provides us with a cost of production. In terms of a statistical analysis, we then remove two standard deviations, remove the outliers, and what remains is a weighted average. A weighted average moves from year to year. It moves as the Canadian dairy farms improve their efficiencies.

The number on cost of production that we receive and use as a starting point, and it is just a starting point, is one that reflects efficiencies. I think that's an important starting point. We then consult, as I indicated earlier, with as many components of the dairy industry as we can, whether it's producers or consumers or retailers, to determine what they believe is in the best interests of their organizations. From that, we determine a support price.

To answer your question, the starting point for us, focusing on efficient producers and a fair return, comes from our cost-of-production formula, which focuses on improving efficiencies in Canada.

[The Chair, NDP, David Christopherson]

Thank you both very much.

Mr. Byrne, you have the floor, sir.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you very much. Thank you, gentlemen, for appearing before us. It's always good to see the Auditor General here and you as well, Mr. Williamson.

Could you confirm, Mr. Williamson, that the core mandate of the Canadian Dairy Commission is vested in supply-managed dairy production? Is your core mandate vested in that?

[Randy Williamson]

I don't believe that's in the purview of the Canadian Dairy Commission. The determination of whether our core mandate is achieved by supply management is determined by government.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Could you repeat that?

[Randy Williamson]

If this is the direction of your question, the determination of whether or not supply management is the system that meets the needs of our core mandate is not the decision of the CDC. The CDC simply follows the mandate. Supply management has been decided in areas other than the CDC.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

That's good. I appreciate the clarification on that.

In your analysis, your expertise is obviously within the supply-managed system and you provide forecasts within the supply-managed system. Would that be correct? Do you provide forecasts based on the existing system as well?

[Randy Williamson]

What we forecast are the milk requirements to meet the needs of the Canadian consumer market in Canada, the core raw milk requirements off the farm to meet the needs of the Canadian consumers from sea to sea.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Are your recommendations or advice on prices included?