Transport Committee on Sept. 12th, 2017

[Norm Hall]

With the harvest that we're seeing right now in western Canada.... Maybe I'll back up just a little bit. Wade talked about the higher volumes of harvest that we've had over the last five to 10 years. A lot of that is because we actually had moisture. We had rainfalls over the last 10 years that were higher than normal. He's right that technological advances and genetic advances in crops have increased our crop yields, but the current year we're in, a lot of the prairies are in a drought cycle again. We're going to see a much lower number than we've had in the past.

We still have concerns. You heard in the last panel that CN moved a record amount of grain last year, but CP's grain movement was worse than what they did in 2013-14. If CN had worked like that last year as well, we would have been in a worse predicament this past year than we were in 2013-14.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

I would like to bring up something else with you.

Progress over 100 years has resulted in bigger harvests, but also in a greater variety of agricultural products. Should Bill C-49 contain a mechanism to specifically review schedule II on a regular basis? For example, I don't understand why soya is not in that schedule.

What is the mechanism to add a product to that schedule? Has it been explained to you at all? If not, do you have a solution to propose?

[Chris Vervaet]

I can take that one.

I think that's a good question and a very good point. We're also a little bit miffed in terms of why soybeans and soy products weren't included in schedule II. To your point about an opportunity for a regular review of that schedule, I think that's a fair proposal and a good proposal, because we do see a shifting agricultural landscape in western Canada.

Using canola as a primary example, 20 years ago we saw almost no canola planted in western Canada. Now we're up to 20 million acres at 20 million tonnes. It's a real success story. We need to have flexible policies and opportunities in place to address issues when they arise, and I think there's an opportunity to review schedule II to include soy. Right now with soy in particular, but I'm sure there are other examples down the road as well, we see a tremendous opportunity for expansion in acres and movement of that particular commodity.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

Do I still have a minute, Madam Chair?

[The Chair, Liberal, Judy Sgro]

No, you don't.

The questions and answers sometimes become very interesting.

We'll go to Mr. Sikand.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Thank you, Madam Chair.

To follow up on Mr. Aubin's question, Mr. Sobkowich, you mentioned soy in your opening remarks. I'd like to understand the rationale behind excluding it. Could you describe the product volumes to give us a better understanding?

[Wade Sobkowich]

I have some statistics on soy. In our package of technical amendments, we say that soybeans represent 3.14 million acres in western Canada. Production is growing in leaps and bounds year over year. In 2016, acreage was 1.88 million. In 2015, it was 1.66 million. Other commodities, such as flax, canary seed, and buckwheat, represent a smaller acreage but are included in schedule II. Soybeans and soy products should be included as well.

Soybeans started in Ontario. They were a growing crop there, and they've since migrated to Manitoba. They've surpassed the volume of other crops. We have a certain amount of arable land in Canada. If you're growing more soybeans, it means you're growing less of something else. That something else is covered under the MRE. When you have expanded soybean acres, you have reduced acreage of other crops. Therefore, the MRE is becoming less effective for farmers because they're growing soybeans instead of these other products.

There are many uses for soybeans. They're looking at it for crushing, for turning into oil here in Canada. They're looking at doing the same for abroad. It's probably the fastest-growing crop right now in Canada and the one that holds the most potential for us. We definitely see a need to have this added to schedule II or to have some sort of process by which it can be added by regulation.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

I'm going to share my time.

Forgive my ignorance, but is soy a pulse? Is it a grain? What's the classification for that?

[Wade Sobkowich]

It's a good question. Some people consider it a pulse. We consider it an oilseed.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Okay.

Madam Chair, I'd like to give the remainder of my time to Mr. Graham.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you.

The railways talked to us about what a captive client is and suggested that if you have access to a road, if you have access to trucks, you would not be captive. How do you feel about that?

[Wade Sobkowich]

I suppose you can come up with a solution to anything that doesn't have the railways involved. It's going to sound silly, but you could load grain into backpacks and carry them across the mountains with Sherpas. It's not a viable alternative. When it comes to the cost of trucking grain and all the implications for our roads and everything like that.... Farmers truck grain from their farms to the elevators, but when it comes to shipping grain over long distances from the elevator network to the port terminal facilities, railways are really the only viable solution economically.

[David Graham, Liberal, Laurentides—Labelle, QC]

How has the loss of the Canadian Wheat Board affected your movement?

[Wade Sobkowich]

The Canadian Wheat Board was a third entity involved in grain logistics. It was difficult. It made it really cloudy. You couldn't tell where the problem lay. Was it the grain company? Was it the railway? Was it the Canadian Wheat Board? Now that it's been removed, it's allowed each grain company to plan its logistics for its entire pipeline.

The Canadian Wheat Board would plan logistics for wheat. The grain company would plan logistics for canola and flax. It made it more complicated. Now, with the removal of the Wheat Board, it's really revealed where the problems in the system lie. We have the shipper and we have the railway. It's created efficiencies for the grain shippers to manage their own pipelines. We need to de-bottleneck the system and make sure we have adequate service and capacity on the rail side of things.

[David Graham, Liberal, Laurentides—Labelle, QC]

You also talked about better access to the U.S. markets being created through the interswitch rules. The large railways both claim to have lost traffic because of these rules. Do you agree that you send fewer cars overall via CN and CP as a result of the U.S. interswitches, as you have described them? Would you ever send domestic traffic across the U.S.? Would that ever happen?

[Wade Sobkowich]

When you say domestic traffic...?

[David Graham, Liberal, Laurentides—Labelle, QC]

Would you send Canada-to-Canada traffic through the U.S.? Would that ever happen?

[Wade Sobkowich]

I don't know. Chris, has that ever happened?

[Chris Vervaet]

Not to my knowledge.

[Wade Sobkowich]

Not to my knowledge.

The only point I'd like to make is that they only lose business when they're non-competitive. If they're competitive with rates and service, in each and every case the grain elevator is going to want to stick with the primary carrier.

[David Graham, Liberal, Laurentides—Labelle, QC]

Okay, am I out of time?

[The Chair, Liberal, Judy Sgro]

Yes, that's it.

Mr. Badawey.

[Vance Badawey, Liberal, Niagara Centre, ON]

I'm going to take the opportunity to ask the same question I asked the last panel. I expected the answer I received from the last panel. I'm not expecting the same answer from you folks, so I'm going to move on with the intent...as you had mentioned.

We came a week early to the Hill to get this job done, and I'm sure you're anxious to get it done as well. Our intent is to listen and learn, and with that, respond accordingly.

Bills like C-49 are expected to be an enabler for folks like yourselves to work in an environment that, quite frankly, is going to provide the stakeholder the returns they're expecting. With that said, we're trying to create a balance. That balance we're trying to create between the shippers, the providers of the service in terms of transport, was mentioned earlier. You mentioned that you want to ensure you have that value established for all Canadians, in terms of their returns.

Again, being an enabler, we're expecting our GDP to keep rising, as it has in the last few months, and to continue to rise. By utilizing the movement of product, which contributes to our overall enhancement of global economic performance, a lot of that is done by integrating our distribution logistics systems. Bill C-49 is being put forward to provide a platform for good and fair service.

My question is very simple, and I'm going to open up the floor for all three of you to dive in, as I did with the last panel. How can Bill C-49 ultimately contribute to satisfying the objectives contained within your business plans?

[Chris Vervaet]

I'll start with that.

That's a good question. Really, for Bill C-49 to work for processors in particular it's the long-haul interswitch. Out of all the grain shippers in western Canada, processors were probably the biggest utilizers of the extended interswitch.

Again, similar to my testimony, it breathed some semblance of competition into the marketplace and provided an opportunity for many of my members, not just to leverage better service but also to access markets that we previously weren't able to access, primarily into the United States. Seventy per cent of our vegetable oil and protein meal produced in western Canada ends up in the United States. To have a level of competition and access to carriers that can move our products to markets that were previously untapped has generated invaluable benefits to our member companies, but also down the value chain to our growers as well.

Access to new markets means new growth potential for our processing facilities as well. That competitive element drives business, profitability, and it drives value throughout the entire value chain.

[Vance Badawey, Liberal, Niagara Centre, ON]

If I can just interject, you made a point that access to carriers obviously makes your margins more robust and, therefore, that's reinvested back for growth in your area.